PARTICIPATION AGREEMENT
Among
OFFITBANK VARIABLE INSURANCE FUNDS, INC.,
OFFIT FUNDS DISTRIBUTOR, INC.
OFFITBANK
C.M. LIFE INSURANCE COMPANY
CONNECTICUT MUTUAL LIFE INSURANCE COMPANY
CONNECTICUT MUTUAL FINANCIAL SERVICES, L.L.C.
THIS AGREEMENT, made and entered into as of the 30th day of November,
1995 by and among CONNECTICUT MUTUAL LIFE INSURANCE COMPANY ("CML"), C.M. LIFE
INSURANCE COMPANY, ("C.M. Life"), each a Connecticut corporation, on its own
behalf and on behalf of certain validly existing segregated asset separate
accounts, together with any other segregated asset separate account established
by either Company and which the parties may agree to add to this Agreement from
time to time, (referred to herein as the "Separate Accounts"). CONNECTICUT
MUTUAL FINANCIAL SERVICES, L.L.C., (hereinafter referred to as "CMFS") a limited
liability company organized under the laws of the state of Connecticut,
OFFITBANK VARIABLE INSURANCE FUNDS, INC., a corporation organized under the laws
of the State of Maryland (hereinafter the "Fund") OFFIT FUNDS DISTRIBUTOR, INC.,
(hereinafter the "Underwriter"), a corporation organized under the laws of the
State of Delaware, and OFFITBANK, a trust company organized under the laws of
the State of New York.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by the C.M. Life and/or CML, as well as other affiliated and
unaffiliated life insurance companies, (collectively the "Participating
Insurance Companies"); and
WHEREAS, the common stock in the Fund is divided into several series of
shares, each designated and referred throughout as a "Portfolio" and
representing an 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 (hereinafter the
"1940 Act") and its shares are registered under the Securities Act of 1933, as
amended (hereinafter the "1933 Act"); and
WHEREAS, OFFITBANK, is a Trust company organized under the banking laws
of the State of New York, (hereinafter the "Adviser"); and
WHEREAS, CML and C.M. Life (collectively the "Companies") will be the
issuers of certain variable annuity insurance contracts and variable life
insurance policies (collectively, the "Contracts") as set forth in Schedule B
hereto, as the Parties hereto may amend from time to time, which Contracts, if
required by applicable law, will be registered under the 1933 Act; and
WHEREAS, each separate account of the Companies listed on Schedule A
attached hereto (collectively the "Separate Accounts") is duly organized under
applicable state insurance law and authorized by resolutions of the respective
Boards of Directors of the Companies to set aside and invest assets attributable
to the aforesaid Contracts; and
WHEREAS, the parties to this agreement acknowledge that Contracts using
segregated asset separate accounts may be developed in the future, and such
segregated asset accounts may by agreement of the parties hereto, also purchase
shares of the Fund; and
WHEREAS, the Companies have registered or will register the Separate
Accounts as unit investment trusts under the 1940 Act to the extent required by
law; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission (hereinafter "SEC") under the Securities
Exchange Act of 1934, as amended (hereinafter the "1934 Act"), and is a member
in good standing of the National Association of Securities Dealers, Inc.
(hereinafter "NASD"); and
WHEREAS, CMFS is also registered as a broker-dealer under applicable
state and federal laws, is a member in good standing of the NASD, and it will
enter into principal underwriting agreements with the Companies to distribute
the Contracts; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Companies intend to purchase shares of the Portfolios on behalf
of the Separate Accounts to fund the Contracts, and the Underwriter is
authorized to sell such shares to unit investment trusts such as each Separate
Account at net asset value; and
WHEREAS, the Contracts may also make available as funding vehicles
thereunder shares of certain other management investment companies shares under
the Contracts (the "CML Funds"), in addition to the Portfolios.
-2-
NOW, THEREFORE, in consideration of their mutual promises, the Parties
hereto agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Underwriter agrees to sell to the Companies on behalf of the
Separate Accounts those shares of the Portfolios which a Separate Account
orders, executing such orders on a daily basis at the net asset value next
computed after receipt by the Fund or its designee of the order for the shares
of the particular Portfolios. For purposes of this Section 1.1, the Company so
acting shall be the designee of the Fund for receipt of such orders from the
Separate Account and receipt by such designee shall constitute receipt by the
Fund; provided that the Fund receives notice of such order on the next following
Business Day. . "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Fund calculates its net asset
value pursuant to the rules of the SEC. The Company shall use its best efforts
to communicate such orders to the Fund by 11:00 a.m. Eastern Standard Time.
1.2 The Fund agrees to make shares of the Portfolios available
indefinitely for purchase at the applicable net asset value per share by the
Companies and their Separate Accounts on those days on which the Fund calculates
its net asset value pursuant to rules of the SEC and the Fund shall calculate
such net asset value on each day on which the New York Stock Exchange is open
for trading. Notwithstanding the foregoing, the Board of Directors of the Fund
(hereinafter the "Board") may refuse to sell shares of any Portfolio to any
person, or suspend or terminate the offering of shares of any Portfolio if such
action is required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the 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.
1.3 The Parties hereto may agree, from time to time, to add other
Portfolios to provide additional funding media for the Contracts, or to delete,
combine, or modify existing Portfolios, by amending Schedule C hereto. Upon such
amendment to Schedule C, any applicable reference herein to a Portfolio, the
Fund, or its shares shall include a reference to any such additional Portfolio.
The Companies agree that if a decision is made to add a Portfolio, it will take
all actions required under state and federal insurance and securities laws in
connection with making the Portfolios available. These actions may include, but
are not limited to:
(i) amending an existing registration statement filed with the
SEC for a Contract;
(ii) obtaining the approval of applicable state insurance
regulatory authorities; and
(iii) notifying and/or obtaining Contract Owner approval.
-3-
1.4 For a period of three years from the date hereof, the Company, the
Fund, and the Underwriter agree that shares of the Fund will not be sold to any
other similarly situated, segregated asset separate account for the purpose of
providing an investment vehicle for variable annuity Contracts with features
that are substantially similar to those of the Contracts. The parties to this
agreement understand, however, that the Fund may sell shares to variable life
insurance separate accounts, including the Separate Account(s) listed on
Schedule A.
1.5 The Fund agrees to redeem for cash, at the Companies' request, any
full or fractional shares of the Fund held by a Company, executing such requests
on a daily basis at the net asset value next computed after receipt by the Fund
or its designee of the request for redemption. The Fund will use its best
efforts to pay and transmit the redemption proceeds the next business day after
redemption. For purposes of this Section 1.5 the Companies shall be the designee
of the Fund for receipt of requests for redemption from a Separate Account and
receipt by such designee shall constitute receipt by the Fund; provided that the
Fund receives notice of such request from a Company on the next following
Business Day.
1.6 The Companies agree to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund available to a
Separate Account and in accordance with the provisions of such prospectus.
Amounts received under the Contracts may also be invested in other investment
companies available to a Separate Account.
1.7 Payments with respect to purchase and redemption orders for each
Portfolio shall be netted and each Company or the Fund, as applicable, shall
transmit one net payment per Portfolio. In the event of net purchases, each
Company shall pay for Fund shares in federal funds transmitted by wire on the
next business day after an order to purchase Fund shares is made in accordance
with the provisions of Section 1.1 hereof. In the event of net redemptions, the
Fund shall pay the redemption proceeds in federal funds transmitted by wire on
the next business day after an order to redeem Fund shares is made in accordance
with the provisions of Section 1.5 hereof. Each Company may elect to receive a
credit for shares of any Portfolio in lieu of receiving net redemption proceeds.
Upon receipt by a Company or the Fund of federal funds, such funds shall cease
to be the responsibility of the Party transmitting such funds and shall become
the responsibility of the Party receiving such funds.
1.8 Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to a Company or to any Separate
Account. Shares ordered from the Fund will be recorded in an appropriate title
for the Separate Account or an appropriate sub-account of a Separate Account.
1.9 The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Companies of any income dividends or
capital gain distributions payable on the Fund's shares. The Companies, both
individually and on behalf of its respective Separate Account(s), hereby elect
to receive all such income dividends and capital gain distributions as are
payable on the Portfolio shares in additional shares of the particular
-4-
Portfolio receiving such income dividend or distribution. The Companies each
reserve the right to revoke this election and to receive all such income
dividends and capital gain distributions in cash. The Fund shall notify the
Companies of the number of shares so issued as payment of such dividends and
distributions.
1.10 The Fund shall make the net asset value per share for each
Portfolio available to the Companies on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and the Fund shall
use its best efforts to both calculate and make such net asset value per share
available by 4:15 p.m. Eastern Time. If the Fund provides incorrect share net
asset value information, a Company, either on behalf of itself or on behalf of a
Separate Account(s), shall be entitled to an adjustment to the number of shares
purchased or redeemed to reflect the correct net asset value per share (and, if
and to the extent necessary, a Company shall make adjustments to the number of
units credited and/or unit values for the Contracts for the periods affected).
Any error in the calculation or reporting of net asset value per share, dividend
or capital gains information greater than or equal to $.0l per share shall be
reported immediately upon discovery to a Company. Such errors shall be corrected
as soon as is reasonably practical. Any error of a lesser amount shall be
corrected in the next business day's net asset value per share.
ARTICLE II. Representations and Warranties
2.1 The Companies each represent and warrant that the Contracts are, or
will be, registered under the 1933 Act to the extent required thereby and that
the Contracts will be issued in compliance in all material respects with all
applicable federal and state laws and regulations. The Companies further
represent and warrant that each is an insurance company duly organized and in
good standing under applicable law and that it has (or will have) legally and
validly established each Separate Account thereof as a segregated asset account
under applicable state insurance law and has registered or, prior to any
issuance or sale of the Contracts, will register each Separate Account as a unit
investment trust to the extent required by and in accordance with the provisions
of the 1940 Act to serve as a segregated investment account for the Contracts.
In addition, each Company represents and warrants that its Contracts are
currently or will be treated as endowment, annuity or life insurance contracts,
under applicable provisions of the Internal Revenue Code of 1986, as amended,
(the "Code") and that it will make every effort to maintain such treatment and
that it will notify the Fund and the Underwriter immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so treated
or that they might not be so treated in the future. Moreover, each Company
represents and warrants that each Separate Account is a "segregated asset
account" and that interests in each Separate Account are offered exclusively
through the purchase of or transfer into a "variable contract," within the
meaning of such terms under Section 817 of the Code and the regulations
thereunder. The Company will use its every effort to continue to meet such
definitional requirements, and it will notify the Fund and the Underwriter
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.
-5-
2.2 The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act to the extent required by
law on the form prescribed by such Act (hereinafter referred to as the
"Registration Statement"). The Fund further represents and warrants that its
shares are duly authorized for issuance and are sold in compliance with all
applicable federal and state 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 if and to the extent required by law.
2.3 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter warrants that it is lawfully organized and validly existing under
the laws of the State of Delaware. The Underwriter further represents that it
will sell and distribute Fund shares in accordance with all applicable state and
federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 0000 Xxx.
2.4 CMFS represents and warrants that it is a member in good standing
of the NASD and is registered as a broker-dealer with the SEC. CMFS warrants
that it is lawfully organized and validly existing under the laws State of
Connecticut. CMFS further represents that it will sell and distribute the
Contracts in accordance with all other applicable state and federal securities
laws, including without limitation the 1933 Act, the 1934 Act, and the 0000 Xxx.
2.5 The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and that its organization and
operations will comply in all material respects with the 0000 Xxx.
2.6 The Adviser represents and warrants that it is and shall remain
duly registered in all material respects under all applicable federal and state
securities and banking laws and regulations and that it shall perform its
obligations for the Fund in compliance in all material respects with any
applicable state and federal securities and banking laws and regulations.
2.7 The Fund and Underwriter each represents and warrants that all of
their respective 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
minimal coverage as required currently by Rule 17g-1 of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid Bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company acceptable to the Fund.
2.8 The Fund and the Underwriter each represent and warrant that each
will notify the Companies of any federal, state or other regulatory inquiries,
disciplinary actions, stop
-6-
orders, or customer complaints that could impact sales of either the Fund shares
or the Contracts. The Companies and CMFS each agree that they shall likewise
notify the Underwriter of any such actions, inquiries, stop orders or complaints
that could impact sales of either the Fund shares or the Contracts.
2.9 The Fund represents that it has obtained all necessary or customary
orders of exemption or approval from the SEC to permit sales of Fund shares to
the Separate Accounts, and that it agrees to obtain any exemption or approval as
may be required in the future.
2.10 The Companies each represent that they have (or will) obtained all
necessary and customary orders of exemptions or approval from the SEC to permit
sales of the Contracts and each agrees to obtain any exemption or approval as
may be required in the future.
2.11 The Fund represents and warrants that all financial statements
contained in the Registration Statement for the Fund or to be furnished in
connection with amendments thereto, or annual or semiannual reports to
shareholders present or will present fairly the financial position of the Fund
on the dates indicated, and that such financial statements have been or will be
prepared in conformity with generally accepted accounting principles.
2.12 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,
although it may make such payments in the future. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes to
have a Board or Directors, a majority of whom are not interested persons of the
Fund, formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
ARTICLE III. Prospectuses and Proxy Statements: Voting
3.1 Each Company shall prepare and provide the Fund or its designee
with a copy of the current prospectus (and any supplement thereto) for each
Contract, either in "camera ready" form or on a computer diskette in a form
ready for immediate use, and such other assistance as may be reasonably
necessary in order for the Fund once each year (or more frequently if the
prospectus for the Contracts is supplemented or amended) to have the prospectus
for the Contracts and the prospectus for the Fund's shares printed together in
one document and delivered in a timely manner to existing or prospective
Contract owners. The expense of such printing and distributing shall be borne by
the Fund or its Adviser, as appropriate, in accordance with applicable law.
3.2 The Fund's prospectus shall state that the Statement of Additional
Information ("SAI") for the Fund is available from the Underwriter (or in the
Fund's discretion, the Prospectus shall state that the SAI is available from the
Fund).
-7-
3.3 Each Company shall provide the Fund or its designee with copies of
the SAI (including any supplement thereto), voting instruction forms, and other
communications to the Contract owners with respect to the Contracts either in
"camera ready" form or on a computer diskette in a form ready for immediate use,
and such other assistance as may be reasonably necessary in order for the Fund
to print and distribute such materials in a timely manner to existing or
prospective Contract owners, as the case may be. Such materials may be, but are
not required to be printed together with the SAI, proxy materials, and other
communications or materials of the Fund. The expense of such printing and
distributing shall be borne by the Fund or its Adviser, as appropriate, in
accordance with applicable law.
3.4 If and to the extent required by law the Companies each agree that
they will:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with timely instructions
received from Contract owners; and
(iii) vote Fund shares for which: (a) no instructions have been
received, and (b) Fund shares not attributable to a
particular Contract owner, in the same proportion as shares
of such Portfolio for which instructions have been received,
so long as and to the extent that the SEC continues to
interpret the 1940 Act to require pass-through voting
privileges for variable contract owners. Each Company
reserves the right to vote Fund shares held in any Separate
Account in its own right, to the extent permitted by law.
The Companies shall be responsible for insuring that each of their Separate
Accounts participating in the Fund calculates voting privileges in a manner
consistent with other Participating Insurance Companies.
3.5 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings 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 Directors and with whatever rules the SEC
may promulgate with respect thereto.
3.6 As set forth in Section 7.1 it is understood and agreed that,
except for information regarding the Companies, the Separate Accounts, CMFS, or
the Contracts provided by them to either the Fund or Underwriter, the Companies
are not responsible for the content of either the Fund's prospectus or its
statement of additional information. As set forth in Section 8.2 and 8.3, it is
also understood and agreed that, except with respect to information regarding
the Fund, Adviser or the Portfolios, neither the Fund, nor the Adviser,
-8-
nor the Underwriter are responsible for the content of the prospectus or SAI for
the Contracts.
ARTICLE IV. Sales Material and Communications
with Contract Owners
4.1 The Companies shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or the Adviser or the Underwriter is named, at least
fifteen Business Days prior to its use (or such different period as the parties
hereto may, from time to time, agree to in writing). No such material shall be
used if the Fund or its designee reasonably objects to such use within fifteen
Business Days after receipt of such material, or such different period as the
parties hereto may, from time to time, agree to in writing. All such materials
will, if necessary, be filed with the NASD or any applicable state regulatory
authority. Such materials will be presented in a form consistent with NASD rules
and applicable state insurance or security advertising laws and regulations.
4.2 The Companies and CMFS shall not give any information or make any
representations or statements on behalf of the Fund, or concerning the Fund, the
Adviser, or the Underwriter in connection with the sale of the Contracts other
than the information or representations contained in the Registration Statement
or prospectus 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, the Adviser or the Underwriter or designee thereof, except
with the permission of the Fund or the Underwriter or the designee of either.
4.3 The Fund, Underwriter, or their respective designee(s) shall
furnish, or shall cause to be furnished, to each Company or its designee, each
piece of sales literature or other promotional material in which the Company
and/or its Separate Account(s) and/or the Contract(s), is named at least fifteen
Business Days prior to its use, or such different period as the parties hereto
may agree upon from time to time in writing. No such material shall be used if
either Company or its designee reasonably objects to such use within fifteen
Business Days after receipt of such material, or such different period as the
parties hereto may agree upon from time to time in writing. All such materials
will, if necessary, be filed with the NASD or any applicable state regulatory
authority. Such materials will be presented in a form consistent with NASD rules
and applicable state insurance or security advertising laws and regulations.
4.4 The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Companies or concerning the Companies, the
Separate Accounts, the CML Funds or the Contracts other than the information or
representations contained in the then current registration statement(s) or
prospectus(es) for the Contracts or the CML Funds, as such registration
statement(s) and prospectus(es) may be amended or
-9-
supplemented from time to time, or in published reports for the Separate
Accounts which are in the public domain or approved by the Companies for
distribution to Contract Owners (or offerees), or in sales literature or other
promotional material approved by the Companies or their designee, except with
the permission of the Companies.
4.5 The Fund will provide to the Companies at least one complete copy
of all registration statements, annual and semiannual reports, prospectuses,
SAIs, reports, proxy statements, sales literature or other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities. If any such filings directly discuss the Companies, the
Separate Accounts, the Contract, or the CML Funds, the Fund shall obtain the
approval, which approval shall not be unreasonably withheld, of such party
concerning the statements relating to such party prior to filing or distributing
such document(s).
4.6 The Fund shall provide the Companies with copies of its annual and
semiannual reports to shareholders as required by Section 30 of the 1940 Act, in
a timely manner, and: (i) for annual reports, within a reasonable time after the
end of each calendar year but prior to the time such reports are required to be
mailed to shareholders by applicable law or regulation; and (ii) for semiannual
reports, within a reasonable time after the end of the second fiscal quarter of
each year. The Fund and the Company understand that the annual and semiannual
reports may be consolidated with any Separate Account annual or semi-annual
report to Contract Owners and printed in one booklet and that such booklet will
be forwarded to Contract Owners and the SEC as required by Section 30 of the
0000 Xxx.
4.7 The Companies will provide to the Fund at least one complete copy
of all registration statements, prospectuses, SAIS, reports, solicitations for
voting instructions, sales literature or other promotional materials,
applications for exemptions, requests for no action letters, and all amendments
to any of the above, that relate to the Contracts or a Separate Account,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities. If any filing directly discusses the Fund, the Adviser
or the Underwriter, the Company or its designee shall obtain the approval of
such party concerning the statements relating to such party prior to filing or
distributing such documents.
4.8 CMFS will, at all times, conduct its distribution activities in
compliance with applicable state and federal rules and regulations concerning
the distribution of variable life and annuity contracts. CMFS will require the
same of other distributors with whom it enters into agreements to sell the
Contracts.
4.9 For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion
-10-
pictures, or other public media), sales literature (i.e., any written
communication distributed or made generally available to customers or the
public, including brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts of any other advertisement, sales
literature, or published article), so called "broker-dealer only" material and
registration statements, prospectuses, proxy materials, SAIs, annual and
semiannual reports and any other shareholder reports or any other communications
with the public that are designed to solicit sales of the Contracts.
4.10 Each Party will provide the other Parties hereto with as much
advance notice as is reasonably practicable and, if possible, with at least
ninety (90) days advance notice, of any material change affecting that Party
(including, but not limited to, any material change in its registration
statement or prospectus and in the case of the Fund, any proxy solicitation) and
shall consult with the other Parties in order to implement any such change in an
orderly manner, recognizing the expenses of changes and attempting to minimize
such expenses by implementing them whenever possible in conjunction with regular
annual updates of the prospectuses for the Contracts and the Fund.
ARTICLE V. Fees and Expenses
5.1 The Fund and Underwriter shall pay no fee or other compensation to
the Company under this agreement, except that if the Fund or any Portfolio, if
permitted to do so, adopts and implements a plan pursuant to Rule 12b-1 to
finance distribution expenses, then the Underwriter may make payments to the
Companies or to CMFS if and in amounts agreed to by the Underwriter in writing
and such payments will be made out of existing fees otherwise payable to the
Underwriter or other resources available to the Underwriter. Although no such
payments are currently contemplated, if such payments are made in the future,
such payments shall not be made directly by the Fund.
5.2 Except as otherwise specifically provided herein, each Party will
bear all expenses incident to its performance under this agreement. The Fund
shall see to it that all its shares are registered and authorized for issuance
in accordance with applicable federal law and in accordance with applicable
state laws (if required) prior to their sale.
5.3 The Fund shall bear the expenses for the cost of registration and
qualification of the Fund's shares, preparation and filing of the Fund's
prospectus and registration statement, proxy materials and reports, setting the
prospectus in type, printing and distributing the prospectus to the Contract
owners, setting in type and distributing the proxy materials and annual and
semiannual reports to shareholders, the preparation of all statements and
notices required by any federal or state law, and all taxes on the issuance or
transfer of the Fund's shares.
-11-
ARTICLE VI. Diversification and Qualification
6.1 The Fund and the Adviser represent and warrant that the Fund will
at all times sell its shares and invest its assets in such a manner as to enable
the Contracts to be treated as variable contracts under the Code, and the
regulations issued thereunder. Without limiting the scope of the foregoing, the
Fund and Underwriter represent and warrant that the Fund and each Portfolio
thereof will at all times use their best efforts to comply with Section 817(h)
of the Code and Treasury Regulation 1.817-5, as amended from time to time, and
any Treasury interpretations thereof, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts and
any amendments or other modifications or successor provisions to such section or
regulation. In the event that any Portfolio is not so diversified, the Fund will
notify the Companies and will use reasonable efforts to adequately diversify the
Portfolio so as to achieve compliance within the grace period afforded by
Treasury Regulation 1.817-5.
6.2 No shares of any series or portfolio of the Fund will be sold to
the general public.
6.3 The Fund and the Adviser represent and warrant that the Fund and
each Portfolio are or will be qualified as a Regulated Investment Company under
Subchapter M of the Code, and that best efforts will be used to maintain such
qualification (under Subchapter M or any successor or similar provisions) as
long as shares of any Portfolio are held by the Separate Account.
6.4 The Fund or the Adviser will notify the Companies immediately upon
having a reasonable basis for believing that the Fund or any Portfolio has
ceased to comply with the aforesaid Section 817(h) diversification or Subchapter
M qualification requirements or might not so comply in the future.
6.5 Without in any way limiting or restricting any other remedies
available to the Companies, the Adviser will pay all costs associated with or
arising out of any failure, or any anticipated or reasonably foreseeable
failure, of the Fund or any Portfolio to comply with Sections 6.1 or 6.3 hereof,
including all reasonable costs associated with correcting or responding to any
such failure; such costs may include, but are not limited to, the costs involved
in creating, organizing, and registering a new investment company as a funding
medium for the Contracts and/or the costs of obtaining whatever regulatory
authorizations are required to substitute shares of another investment company
for those of the failed Portfolio (including but not limited to an order
pursuant to Section 26(b) of the 1940 Act), such costs are to include, but are
not limited to, fees and expenses of legal counsel and other advisors to the
Companies and any federal income taxes or tax penalties or amounts paid in
settlement incurred by the Company in connection with any such failure or
anticipated or reasonably foreseeable failure.
-12-
6.6 The Companies agree that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review of the
Companies or, to either of the Companies' knowledge, of any Contract owner, that
any Portfolio has failed to comply with the diversification requirements of
Section 817(h) of the Code or the Companies otherwise become aware of any facts
that could give rise to any claim against the Fund or its affiliates as a result
of such a failure or alleged failure: (i) the Companies shall promptly notify
the Fund of such assertion or potential claim; (ii) the Companies shall consult
with the Fund as to how to minimize any liability that may arise as a result of
such failure or alleged failure, (iii) the Companies shall use its best efforts
to minimize any liability of the Fund or its affiliates resulting from such
failure, including, without limitation, demonstrating, pursuant to Treasury
Regulations Section 1.8175(a), to the Commissioner of the IRS that such failure
was inadvertent; (iv) the Companies, to the fullest extent practical, shall
permit the Fund, its affiliates and their legal and accounting advisors to
participate in any conferences, settlements, discussions or other administrative
judicial proceedings or contests (including judicial appeals thereof) with the
IRS, any Contract Owner or any other claimant regarding any claims that could
give rise to liability to the Fund or its affiliates as a result of such a
failure or alleged failure; and (v) any written materials to be submitted by the
Companies to the IRS, any Contract Owner or any other claimant in connection
with any of the foregoing proceedings or contests (including, without
limitation, any such materials to be submitted to the IRS pursuant to Treasury
Regulations Section 1.817-5(a)(2), (a) shall be provided by the Company to the
Fund (together with any supporting information or analysis) at least five (5)
business days prior to the day on which such proposed materials are to be
submitted, and (b) shall not be submitted by the Companies to any such person
without the express written consent of a Fund officer and an Advisor officer
which shall not be unreasonably withheld, (vi) the Companies shall provide the
Fund or its affiliates and their accounting and legal advisors with such
cooperation as the Fund shall reasonably request (including without limitation,
by permitting the Fund and its accounting and legal advisors to review the
relevant books and records of the Companies) in order to facilitate review by
the Fund or its advisors of any written submissions provided to it pursuant to
the preceding clause or its assessment of the validity or amount of any claim
against its arising from such a failure of alleged failure; (vii) the Companies
shall not with respect to any claim of the IRS or any Contract owner that would
give rise to a claim against the Fund 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 the
Fund or its affiliates, which shall not be unreasonably withheld, provided that
no Company shall be required to appeal any adverse judicial decision unless the
Fund or its affiliates shall have provided an opinion of independent counsel to
the effect that a reasonable basis exists for taking such appeal; and (viii) the
Fund and its affiliates shall have no liability as a result of such failure or
alleged failure if either Company fails to comply with any of the foregoing
clauses (i) through (vii), and such failure is determined by a panel of
arbitrator(s) acting under the Commercial Arbitration Rules of the American
Arbitration Association to have materially contributed to the liability. Should
the Fund or any of its affiliates refuse to give its written consent to any
compromise or settlement of any claim or liability hereunder, each Company may,
in it discretion authorize the Fund or its affiliates to act in the name of the
-13-
Company in, and to control the conduct of, such conferences, discussions,
proceedings, contests or appeals and all administrative or judicial appeals
thereof, and in that event the Fund or its affiliates shall bear the fees and
expenses associated with the conduct of the proceedings that it is so authorized
to control; provided further that in no event shall any liability to the Company
exceed the amount which would have otherwise attached had the proposed
settlement or compromise been accepted by the Fund.
ARTICLE VII. Potential Material Conflicts
7.1 The Board of Directors of the Fund (the "Board") will monitor for
the existence of any material irreconcilable conflict between the interests of
the Contract Owners of all Separate Accounts investing in the Fund. An
irreconcilable material conflict may arise for a variety of reasons, including:
(a) an action by any state insurance regulatory authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or regulations,
or a public ruling, private letter ruling, no-action or interpretative letter,
or any similar action by insurance, tax, or securities regulatory authorities;
(c) and administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investments of any Portfolio are being managed; (e) a
difference in voting instructions given by variable annuity contract and
variable life insurance contract owners; or (f) a decision by a Participating
Insurance Company to disregard the voting instructions of Contract Owners. The
Board shall promptly inform each Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2 Each Company will immediately report any potential or existing
conflicts of which it is aware to the Board and, in addition, provide the Board
with a quarterly written statement that they know of no conflicts. Each Company
will assist the Board in carrying out its responsibilities under the Shared
Funding Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues so raised. This includes, but is
not limited to, an obligation by each Company to inform the Board whenever
Contract Owner voting instructions are disregarded. Each Company agrees to carry
out these responsibilities with a view only to the interest of Contract Owners.
7.3 If it is determined by a majority of the Board, or a majority of
its disinterested Directors, that a material irreconcilable conflict exists,
each Company and any other Participating Insurance Companies whose Contract
Owners are also affected shall, at their 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, up to and including (a) withdrawing the assets allocable to some or
all of the Separate Accounts from the Fund or any Portfolio and reinvesting such
assets in a different investment medium, including (but not limited to) another
Portfolio of the Fund, or submitting the question whether such segregation
should be implemented to a vote of all affected Contract Owners and, as
appropriate, segregating the assets of any appropriate group (e.g., life
insurance Contract Owners or variable Contract Owners of any
-14-
Participating Insurance Companies) that votes in favor of such segregation, or
offering to any of the affected contract owners the option of making such a
change; and (b) establishing a new registered management investment company or
managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision
by a Company to disregard Contract Owner voting instructions, and that decision
represents a minority position or would preclude a majority vote, each Company
may be required, at the Fund's election, to withdraw the affected Separate
Account's investments in the Fund and terminate this agreement with respect to
such Account; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. No
penalty or charge will be imposed as a result of such withdrawal. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six (6) month period the Underwriter and the Fund shall continue to
accept and implement orders by each Company for the purchase (and redemption) of
shares of the Fund.
7.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to a Company conflicts with the
majority of other state regulators, then the Company will withdraw the affected
Separate Account's investment in the Fund and terminate this Agreement with
respect to such Separate Account within six (6) months after the Board informs
the Company in writing that it has determined that such decision has created a
material irreconcilable conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. Until the end of the foregoing six (6) month period, the
Underwriter and the Fund shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund.
7.6 For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested Directors of the Board shall determine whether any
proposed action by a Company adequately remedies any material irreconcilable
conflict, but in no event will the Fund or its affiliates be required to
establish a new funding medium for the Contracts. No Company shall be required
by Section 7.3 to establish a new funding medium for the Contracts if an offer
to do so has been declined by a vote of a majority of Contract owners materially
affected by the material irreconcilable conflict. In the event that the Board
determines that any proposed action does not adequately remedy any material
irreconcilable conflict, then each Company with withdraw the Separate Account's
investment in the Fund and terminate this Agreement within six (6) months after
the Board informs the Company in writing of the foregoing determination;
provided, however, that such withdrawal and termination shall be limited to the
extent required by any such material irreconcilable conflict as determined by a
majority of the disinterested members of the Board.
-15-
Each Company agrees that any remedial action taken by it in resolving
any material irreconcilable conflict will be carried out at its expense and with
a view only to the interest of Contract owners.
7.7 Each Company shall at least annually submit to the Board such
reports, materials or data as the Board may reasonably request that so it may
carry out the obligations imposed on it by the Shared Funding Exemptive Order,
and said reports, materials and data shall be submitted at any reasonable time
deemed appropriate by the Board.
7.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then: (a) the Fund or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with Rules 6e-2
and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable; and (b) Sections 3.4, 3.5, 7.1 through 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
8.1 Indemnification By The Companies
8.1(a) The Companies agree to Indemnify and hold harmless the Fund, the
Adviser, the Underwriter, and each Officer and Director of the Board and
Directors and officers of the Adviser and the Underwriter and each person, if
any, who controls the Adviser or the Underwriter within the meaning of Section
15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of either of the Companies)
or litigation (including reasonable legal and other related expenses), to which
the Indemnified Parties may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in any
Registration Statement or prospectus for the Contracts or contained in
the Contracts or sales literature for the Contracts prepared by or on
behalf of either of the Company (or any amendment or supplement to any
of the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify
-16-
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 Companies by
or on behalf of the Underwriter or the Fund for use in any
Registration Statement or prospectus for the Contracts or in the
Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the Fund not
supplied by the Companies, CMFS, or persons under its control) or
wrongful conduct of the Companies, CMFS, or persons under the control
of either Company or CMFS, with respect to the sale or distribution of
the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Fund or any amendment thereof
or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading if such a statement or
omission was made in reliance upon information famished to the Fund by
or on behalf of the Companies; or
(iv) arise as a result of any material failure by the Companies
or CMFS 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 Companies or CMFS in this
agreement or arise out of or result from any other material breach of
this agreement by the Companies or CMFS,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b) The Companies shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this agreement or to
the Fund or to the Underwriter or to the Adviser, whichever may be applicable.
8.1(c) The Companies shall not be liable under this indemnification
provision with respect to claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Companies 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
-17-
on any designated agent), but failure to notify the Companies of any such claim
shall not relieve the Companies from any liability which each 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 Companies shall be entitled to participate, at
their own expense, in the defense of such action. The Companies also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Companies to such party of the
Companies' election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d) The Indemnified Parties will promptly notify the Companies of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund shares or the Contracts or the operation
of the Fund.
8.2 Indemnification by the Underwriter
8.2(a) The Underwriter agrees to indemnify and hold harmless each
Company and CMFS and each of its Directors and officers (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter) or litigation (including reasonable
legal and other related expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts, and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus or in sales literature prepared
by or on behalf 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 statement therein not
misleading, provided that this agreement to indemnify shall not apply
as to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Underwriter or Fund by or
on behalf of the Companies for use in the Registration Statement or
prospectus, or sales literature for the Fund (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in any
Registration Statement, prospectus or
-18-
sales literature for the Contracts not supplied by the Underwriter,
Fund, or Adviser or persons under its control) or wrongful conduct of
the Underwriter or persons under its control, with respect to the sale
or distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
prospectus, or sales literature covering the Contracts and/or the
Separate Account, or any amendment thereof or supplement thereto, or
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or omission was
made in reliance upon information furnished to the Company by or on
behalf of the Fund or Underwriter; or
(iv) arise as a result of any material failure by the Underwriter
to provide the services and furnish the materials under the terms of
this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
agreement or arise out of or result from any other material breach of
this agreement by the Underwriter; as limited by and in accordance
with the provisions of Sections 8.2(b), 8.2(c), and 8.2(d) hereof.
8.2(b) The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance 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 a Separate Account, whichever is applicable.
8.2(c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
in connection with this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
-19-
8.2(d) In no event shall the Underwriter be liable under the
indemnification provisions contained in this agreement to any individual or
entity, including without limitation, the Companies, CMFS, or any Contract
Owner, with respect to any losses, claims, damages, liabilities or expenses that
arise out of or result from: (i) the failure by the Fund or any Portfolio to
quality or maintain its qualification as a regulated investment company under
Subchapter M of the Code; or (ii) the failure by the Fund or any Portfolio to
comply with the diversification requirements of Section 817(h) of the Code.
8.2(e) The Companies agree to promptly notify the Underwriter (or cause
CMFS to notify the Underwriter), and to cause the Fund to be notified, of the
commencement of any litigation or proceedings against it or any of its
indemnified parties in connection with the issuance or sale of the Contracts or
the operation of the Separate Accounts.
8.3 Indemnification By the Fund
8.3(a) The Fund agrees to indemnify and hold harmless each Company
(including CMFS), 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
reasonable legal and other related expenses) to which the Indemnified Parties
may become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements result 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:
(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;
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), 8.3(e) and 8.3(d) hereof, as limited by
and in accordance with the provisions of sections 8.3(b), 8.3(c) and
8.3(d) hereof.
8.3(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this agreement.
8.3(c) The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal
-20-
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
in connection with this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Fund will be entitled to
participate, at its own expense, in the defense thereof. The Fund also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Fund to such party of the Fund's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Fund will
not be liable to such party under this agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d) In no event shall the Fund be liable under the indemnification
provisions contained in this agreement to any individual or entity, including
without limitation, the Companies or any Contract Owner, with respect to any
losses, claims, damages, liabilities or expenses that arise out of or result
from: (i) the failure by the Fund or any Portfolio to qualify or maintain its
qualification as a regulated investment company under Subchapter M of the Code;
or (ii) the failure by the Fund or any Portfolio to comply with the
diversification requirements of Section 817(h) of the Code.
8.3(e) The Company agrees 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 Contracts, with respect to the operation of the Separate
Accounts, or the sale or acquisition of shares of the Fund.
8.4 Indemnification by the Adviser
8.4(a) The Adviser agrees to indemnify and hold harmless each Company,
and each director and officer of each Company and each person, if any, who
controls each 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 Adviser) 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 and:
(i) arise as a result of any failure by the Fund or any Portfolio of
the Fund to qualify or maintain its qualification as a regulated
investment company under Subchapter M of the Code or to comply
with the diversification requirements of Section 817(h) of the
Code; or
-21-
(ii) arise out of or result from any material breach of any
representation or warranty made by the Adviser in this agreement
or arise out of or result from any other material breach of this
agreement by the Adviser, as limited by and in accordance with
the provisions of Sections 8.4(b), 8.4(c), and 8.4(d) hereof.
8.4(b) The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's 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 under this
Agreement or to the Adviser, the Fund, the Underwriter, or each Account,
whichever may be applicable.
8.4(c) The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the 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 the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Adviser shall be entitled to participate,
at its own expense, in the defense thereof. The Adviser 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 this action, which approval shall not be unreasonably withheld. After notice
from the Adviser to such Indemnified Party of the Adviser's election to assume
the defense thereof, the Indemnified Party shall cooperate fully with the
Adviser and shall bear the fees and expenses of any additional counsel retained
by it, and the Adviser shall 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.
8.4(d) In no event shall the Adviser be liable under the
indemnification provisions contained in this agreement to any individual or
entity, including without limitation, the Companies or any Contract owner, 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 a Company hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations, warranties and
covenants; (ii) the failure by a Company or any Participating Insurance Company
to maintain its segregated asset account (which invests in any Portfolio) as a
legally and validly established segregated asset account under applicable state
law and as a duly registered unit investment trust under the provision of the
1940 Act (unless exempt therefrom); or (iii) the failure by a Company or any
Participating Insurance Company to maintain its variable
-22-
annuity and/or variable life insurance contracts (with respect to which any
Portfolio serves as an underlying funding vehicle), as life insurance, endowment
or annuity contracts under applicable provisions of the Code.
8.4(e) Each Company agrees to notify promptly the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with this agreement, the issuance or sale of Fund
shares or the Contracts, or the operation of any 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 Maryland.
9.2 This agreement shall be subject, to the extent applicable, 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 grant and the terms hereof shall be interpreted and
construed in accordance therewith.
9.3 The Fund and the Companies acknowledge that the Separate Accounts
and the Fund may be subject to laws and regulations that restrict the investment
activities of Separate Accounts. Should either of the Companies become aware of
any such law or regulation, in particular those laws and regulations concerning
insurance laws or rules, the Companies shall notify the Fund of any such
investment restriction, and the Fund agrees that it will cooperate with the
Companies to assist them in taking reasonable measures to comply with any such
rule or regulation.
ARTICLE X. Termination
10.1 This agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by six (6) months advance
written notice delivered to the other parties; or
(b) termination by either of the Companies by written notice to the
Fund, the Adviser, and the Underwriter with respect to any Portfolio
based upon the particular Company's determination that shares of such
Portfolio are not reasonably available to meet the requirements of the
Contracts; or
(c) termination by either of the Companies by written notice to the
Fund, the Adviser, and the Underwriter with respect to any Portfolio
in the event that any of the Portfolio's shares are not registered,
issued or sold in accordance with applicable state
-23-
and/or federal law or such law precludes the use of such shares as the
underlying investment media of the Contracts issued or to be issued by
the Companies; or
(d) termination by the Companies by written notice to the Fund, the
Adviser, and the Underwriter with respect to any Portfolio in the
event that such Portfolio ceases to qualify as a Regulated Investment
Company under Subchapter M of the Code or under any successor or
similar provision, or if the Companies reasonably believe that the
Fund may fail to so qualify; or
(e) termination by the Companies by written notice to the Fund, the
Adviser, and the Underwriter with respect to any Portfolio in the
event that such Portfolio fails to meet the diversification
requirements specified in Article VI hereof; or
(f) termination by either the Fund, the Adviser, or the Underwriter by
written notice to the Companies, if any of the Fund, the Adviser, or
the Underwriter respectively, shall determine, in its sole judgment
reasonably exercised in good faith, that either Company and/or its
affiliated companies has suffered a material adverse change in its
business, operations, financial condition or prospects since the date
of this Agreement or is the subject of material adverse publicity and
that such change or publicity will have a material adverse effect on
the ability of either Company to perform its obligations related to
the Contracts; or
(g) termination by the Companies by written notice to the Fund, the
Adviser, and the Underwriter, if any of the Companies shall determine,
in its sole judgment reasonably exercised in good faith, that either
the Fund, the Advisor, or the Underwriter has suffered a material
adverse change in its business, operations, financial condition or
prospects since the date of this agreement or is the subject of
material adverse publicity and that such change or publicity will have
a material adverse effect on the ability of the Fund, the Adviser, or
Underwriter to perform its obligations related to the Fund's shares.
10.2 Notwithstanding any termination of this agreement, the Fund and
the Underwriter shall at the option of the Companies, continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
agreement, for all Contracts in effect on the effective date of termination of
this agreement (hereinafter referred to as "Existing Contracts"). Specifically,
wtihout limitation, the owners the Existing Contracts shall be permitted to
reallocate investments in the the Fund, redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts. The Parties hereto agree that this Section 10.2 shall not
apply to any termination under Article VII and the effect of such Article VII
terminations shall be governed by Article VII hereof.
10.3 Except (a) as necessary to implement Contract owner-initiated
transactions, (b) as required by state insurance laws or regulations, (c) as
required pursuant to the
-24-
conditions of any SEC order governing mixed and shared funding, or (d) with
respect to any Portfolio as to which this Agreement has terminated pursuant to
Section 9.1 hereof, neither of the Companies shall: (i) redeem Shares
attributable to Contracts (as opposed to Shares attributable to the Company's
assets held in each Separate Account), or (ii) prevent Contract owners from
allocating payments to or transferring amounts from a Portfolio that was
otherwise available under the Contracts, until six (6) months after the Company
shall have notified the Fund of its intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
cerified mail to the other party at the address of such party set forth below or
at such other address as such party may from time to time specify in writing to
the other party.
If to the Fund or the Adviser:
OFFITBANK
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxx
If to the Companies, the Separte Accounts and/or CMFS:
C.M. Life Insurance Company
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: General Counsel
If to the Underwriter
OFFIT Funds Distributors, Inc.
c/o The OFFITBANK Variable Insurance Fund
000 Xxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
-25-
ARTICLE XII. Miscellaneous
12.1 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.2 The captions in this agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.3 This agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.4 If any provision of this agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the agreement
shall not be affected thereby.
12.5 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, state insurance regulators, and designee of the California Insurance
Commission) 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.
12.6 The rights, remedies and obligations contained in this agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.7 Neither the Underwriter nor the Fund nor the Companies nor CMFS or
any of their respective agents will knowingly induce or cause, or attempt to
induce or cause either directly or indirectly, any Contract owner to lapse,
terminate, surrender, or exchange a Contract or to discontinue making payments
thereunder.
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; provided, however, that the Underwriter upon prior written notice to the
Companies, may assign this agreement or any rights or obligations hereunder to
any affiliate of or company under common control with the Underwriter, if such
assignee is duly licensed and registered to perform the obligations of the
Underwriter under this agreement, (b) CMFS may, upon prior written notice to the
Fund, assign this agreement or any rights or obligations hereunder to any
affiliate or company under common control with CMFS, if such assignee is duly
licensed and registered to perform the obligations of CMFS under this Agreement,
(c) the parties
-26-
hereto agree that this Agreement shall survive and the current rights and
obligations of the parties shall continue, notwithstanding a merger between
Massachusetts Mutual Life Insurance Company and Connecticut Mutual Life
Insurance Company.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as the date specified
below.
CONNECTICUT MUTUAL LIFE INSURANCE CO.,
ON BEHALF OF ITSELF AND ITS SEPARATE
ACCOUNT
By: /s/ Xxxxx X. Xxxx, Xx.
----------------------
Xxxxx X. Xxxx, Xx.
Title: President and Chief Executive Officer
Date: 1/31/96
C.M. LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND ITS SEPARATE
ACCOUNTS
By: /s/ Xxxxx X. Xxxx, Xx.
----------------------
Xxxxx X. Xxxx, Xx.
Title: President
Date: 1/31/96
-27-
OFFITBANK VARIABLE INSURANCE FUND, INC.
By: /s/ Xxxxxx Xxxxxxxxx
------------------------
Xxxxxx Xxxxxxxxx
Title: Assistant Treasurer
Date: 1/30/96
OFFIT FUNDS DISTRIBUTOR, INC.
By: /s/ Xxxxxx Xxxxxxxxx
------------------------
Xxxxxx Xxxxxxxxx
Title: Vice President
Date: 1/31/96
OFFITBANK
By: /s/ Xxxxxxx Xxxxx Xxxxx
---------------------------
Xxxxxxx Xxxxx Xxxxx
Title: Managing Director
Date: 1/30/96
CONNECTICUT MUTUAL FINANCIAL
SERVICES, L.L.C.
By: /s/ Xxxxxxx Xxxx
--------------------
Xxxxxxx Xxxx
Title: Vice President
Date: 1/31/96
-28-
SCHEDULE A - Separate Accounts
C.M./OFFITBANK Variable Annuity Separate Account
CML/OFFITBANK Variable Annuity Separate Account
-29-
SCHEDULE B
Variable Annuity Contracts
CM/OFFITBANK Variable Annuity Contract
CM/OFFITBANK Variable Annuity Contract (NY)
-30-
SCHEDULE C
Portfolios offered by the Fund
(1.) OFFITBANK VIF -- HIGH YIELD
(2.) OFFITBANK VIF -- Investment Grade Global Debt Fund
(3.) OFFITBANK VIF -- Emerging Markets Fund
(4.) OFFITBANK VIF -- Total Return Fund
(5.) OFFITBANK VIF -- Global Convertible Fund
-31-
