Exhibit 8(e)
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made as of the 30th day of April, 1999, between Mercury
Asset Management V.I. Funds, Inc., a Maryland corporation (the "Fund"), on
behalf of its series as described below, and American International Life
Assurance Company of New York, a life insurance company organized and domiciled
under the laws of the state of New York (the "Insurance Company"), on its own
behalf and on behalf of each segregated asset account of the Insurance Company
set forth on Schedule A as attached hereto, as such schedule may be amended from
time to time (the "Accounts," as used herein, the term "Account" shall, where
applicable, be deemed to include any sub-account of an Account)
WITNESSETH:
WHEREAS, the Fund has, or by May 1, 1999, will have, an effective
registration statement with the Securities and Exchange Commission ("SEC") to
register itself as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and to register the
offer and sale of its shares under the Securities Act of 1933, as amended (the
"1933 Act"); and
WHEREAS, the Fund desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and/or variable
annuity contracts to be offered by insurance companies that have entered into
participation agreements with the Fund (the "Participating Insurance
Companies"); and
WHEREAS, Mercury Funds Distributor, a division of Princeton Funds
Distributor, Inc. (the "Underwriter") is registered as a broker-dealer with the
SEC under the Securities Exchange Act of 1934, as amended (the "1934 Act"), is a
member in good standing of The National Association of Securities Dealers, Inc.
(the "NASD") and acts as principal underwriter of the shares of the Fund; and
WHEREAS, the capital stock of the Fund is divided into several series of
shares, each series representing an interest in a particular managed portfolio
of securities and other assets; and
WHEREAS, each series of the Fund is divided into Class A Shares (the
"Class A Shares") and Class B shares (the "Class B Shares"), which represent
identical ownership rights with respect to each series' portfolio of securities
and other assets, except that the Class B Shares exclusively bear certain
expenses relating to distribution-related services incurred in connection with
the Class B Shares; and
WHEREAS, the several series of shares of the Fund offered by the Fund to
the Insurance Company and the Accounts are set forth on Schedule B attached
hereto (each, a "Portfolio," and collectively, the "Portfolios"); and
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WHEREAS, the Fund has received, or will receive, an order from the SEC
granting Participating Insurance Companies and their Accounts exemptions from
the provisions of Sections 9(a), 13(a), 15(a) and 15(b) and of the 1940 Act, and
Rules 6e-2(b) (15) and 6-e3(T) (b) (15) thereunder, to the extent necessary to
permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of both affiliated and unaffiliated
life insurance companies-and certain qualified pension and retirement plans (the
"Shared Fund Exemptive Order"); and
WHEREAS, Mercury Asset Management International Ltd. including any
successor, (the "Adviser") is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, any applicable state securities
laws and is regulated by the Investment Management Regulatory Organization, a
self-regulating organization recognized under the Financial Services Act of 1986
of the United Kingdom ("IMRO"), and acts as the Fund's investment adviser; and
WHEREAS, the Insurance Company has registered or will register under the
1933 Act certain variable life insurance policies and/or variable annuity
contracts funded or to be funded through one or more of the Accounts which
policies or contracts are set forth on Schedule A attached hereto, as it may be
amended from time to time (the "Contracts"); and
WHEREAS, the Insurance Company has registered or will register each
Account as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurance Company intends to purchase shares in one or more of
the Portfolios (the "Shares") on behalf of the Accounts to fund the Contracts,
and the Fund intends to sell such Shares to the relevant Accounts at such
Shares' net asset value.
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE 1
Sale of the Fund Shares
1.1 Subject to Section 1.3 of this Agreement, the Fund shall cause the
Underwriter to make Shares of the Portfolios available to the Accounts at such
Shares' most recent net asset value provided to the Insurance Company prior to
receipt of such purchase order by the Fund (or the Underwriter as its agent), in
accordance with the operational procedures mutually agreed to by the Underwriter
and the Insurance Company from time to time and the provisions of the then
current prospectus of the Fund. Shares of a particular Portfolio of the Fund
shall be ordered in such quantities and at such times as determined by the
Insurance Company to be necessary to meet the requirements of the Contracts. The
Board of Directors of the Fund (the "Board") may refuse to sell Shares of any
Portfolio to any person (including the Insurance Company and the
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Accounts), 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.
1.2 Subject to Section 1.3 of this Agreement, the Fund will redeem any
full or fractional Shares of any Portfolio when requested by the Insurance
Company on behalf of an Account at such Shares' most recent net asset value
provided to the Insurance Company prior to receipt by the Fund (or the
Underwriter as its agent) of the request for redemption, as established in
accordance with the operational procedures mutually agreed to by the Underwriter
and the Insurance Company from time to time and the provisions of the then
current prospectus of the Fund. The Fund shall make payment for such Shares in
the manner established from time to time by the Fund, but in no event shall
payment be delayed for a greater period than is permitted by the 1940 Act
(including any Rule or order of the SEC thereunder)
1.3 The Fund shall accept purchase and redemption orders resulting from
investment in and payments under the Contracts on each Business Day, provided
that such orders are received prior to 9:00 a.m. New York Time on such Business
Day and reflect instructions received by the Insurance Company from Contract
holders in good order prior to the time the net asset value of each Portfolio is
priced in accordance with its prospectus (such Portfolio's "valuation time") on
the prior Business Day. Any purchase or redemption order for Shares received, on
any Business Day, after such Portfolio's valuation time on such Business Day
shall be deemed received prior to 9:00 a.m. on the next succeeding 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 the net asset value of its
Portfolios pursuant to the rules of the SEC. Purchase and redemption orders
shall be provided by the Insurance Company to the Underwriter as agent for the
Fund in such written or electronic form (including facsimile) as may be mutually
acceptable to the Insurance Company and the Underwriter. The Underwriter may
reject purchase and redemption orders that are not in proper form. In the event
that the Insurance Company and the Underwriter agree to use a form of written or
electronic communication which is not capable of recording the time, date and
recipient of any communication and confirming good transmission, the Insurance
Company agrees that it shall be responsible (i) for confirming with the
Underwriter that any communication sent by the Insurance Company was in fact
received by the Underwriter in proper form, and (ii) for the effect of any delay
in the Underwriter's receipt of such communication in proper form. The Fund and
its agents shall be entitled to rely, and shall be fully protected from all
liability in acting, upon the instructions of the persons named in the list of
authorized individuals attached hereto as Schedule C, or any subsequent list of
authorized individuals provided to the Fund or its agents by the Insurance
Company in such form, without being required to determine the authenticity of
the authorization or the authority of the persons named therein.
1.4 Purchase orders that are transmitted to the Fund in accordance with
Section 1.3 of this Agreement shall be paid for no later than 12:00 noon New
York Time on the same Business
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Day that the Fund receives notice of the order. Payments shall be made in
federal funds transmitted by wire. In the event that the Insurance Company shall
fail to pay in a timely manner for any purchase order validly received by the
Underwriter on behalf of the Fund pursuant to Section 1.3 of this Agreement
(whether or not such failure is the fault of the Insurance Company), the
Insurance Company shall hold the Fund harmless from any losses reasonably
sustained by the Fund as; the result of acting in reliance on such purchase
order.
1.5 Issuance and transfer of the Fund's Shares will be by book entry only.
Share certificates will not be issued to the Insurance Company or to any
Account. Shares ordered from the Fund will be recorded in the appropriate title
for each Account.
1.6 The Fund shall furnish prompt notice to the Insurance Company of any
income, dividends or capital gain distribution payable on Shares of any
Portfolio. The Insurance Company hereby elects to receive all such income
dividends and capital gain distributions as are payable on a Portfolio's Shares
in additional Shares of that Portfolio. The Fund shall notify the Insurance
Company of the number of Shares so issued as payment of such dividends and
distributions.
1.7 The Fund shall make the net asset value per share for each Fund
available to the Insurance Company on a daily basis as soon as reasonably
practical after such net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 6:30 p.m.,
New York Time.
1.8 The Insurance Company agrees that it will not take any action to
operate any Account as a management investment company under the 1940 Act
without the Fund's and the Underwriter's prior written consent.
1.9 The Fund agrees that its Shares will be sold only to Participating
Insurance Companies and their separate accounts. No Shares of any Portfolio will
be sold directly to the general public. The Insurance Company agrees that Fund
Shares will be used only for the purposes of funding the Contracts and Accounts
listed in Schedule A, as such schedule may be amended from time to time.
1.10 The Fund agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and conflicts
of interest corresponding to those contained in Section 2.11 and Article 4 of
this Agreement.
1.11 So long as it shall be the intention of the Fund to maintain the net
asset value per share of any Portfolio at $1.00, on any day on which (a) the net
asset value per share of the Shares is determined, (b) the Adviser determines,
in the manner described in the then current prospectus of the Fund, that the net
income of such Portfolio on such day is negative, and (c) the Adviser delivers a
certificate to the Insurance Company setting forth the reduction in the number
of outstanding Shares to be effected as described in the then current prospectus
of the Fund in
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connection with such determination, the Insurance Company, on behalf of itself
and the Accounts, agrees to return to the Fund its pro rata share of the number
of Shares to be reduced and agrees that, upon delivery by the Adviser to the
Insurance Company of such certificate, (a) the Insurance Company's ownership
interest in the Shares so to be returned shall immediately cease, (b) such
Shares shall be deemed to have been canceled and to be no longer outstanding,
and (c) all rights in respect of such Shares shall cease.
ARTICLE 2
Obligations of the Parties
2.1 The Fund shall prepare and be responsible for filing with the SEC and
any state securities regulators requiring such filing, all shareholder reports,
notices, proxy materials (or similar materials such as voting instruction
solicitation materials), prospectuses and statements of additional information
of the Fund. The Fund shall bear the costs of registration and qualification of
its Shares, preparation and filing of the documents listed in this Section 2.1
and all taxes to which an issuer is subject on the issuance and transfer of its
shares.
2.2 At least annually, the Fund or its designee shall provide the
Insurance Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios) for the Shares as the Insurance Company may
reasonably request for distribution to existing Contract owners whose Contracts
are funded by such Shares. The Fund or its designee shall provide the Insurance
Company, at the Insurance Company's expense, with as many copies of the current
prospectus for the Shares as the Insurance Company may reasonably request for
distribution to prospective purchasers of Contracts. If requested by the
Insurance Company in lieu thereof, the Fund or its designee shall provide such
documentation (including a "camera ready" copy of the new prospectus as set in
type) and other assistance as is reasonably necessary in order for the parties
hereto once each year (or more frequently if the prospectus for the Shares is
supplemented or amended) to have the prospectus for the Contracts and the
prospectus for the Shares printed together in one document. The expenses of such
printing shall be borne by the Insurance Company. In the event the Insurance
Company requests that the Fund or its designee provide the Fund's prospectus in
a "camera ready" format, the Fund shall be responsible solely for providing the
prospectus in the format in which it is accustomed to formatting prospectuses
and shall bear the expense of providing the prospectus in such format (e.g.,
typesetting expenses), and the Insurance Company shall bear the expense of
adjusting or changing the format to conform with any of its prospectuses.
2.3 The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Fund or its
designee. The Fund or its designee, at its expense, shall print and provide such
statement of additional information to the Insurance Company (or a master of
such statement suitable for duplication by the Insurance Company) for
distribution to any owner of a Contract funded by the Shares. The Fund or its
designee, at the Insurance Company's expense, shall print and provide such
statement to the Insurance Company
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(or a master of such statement suitable for duplication by the Insurance
Company) for distribution to a prospective purchaser who requests such
statement.
2.4 The Fund or its designee shall provide the Insurance Company free of
charge copies, if and to the extent applicable to the Shares, of the Fund's
proxy materials, reports-to Shareholders and other communications to
Shareholders in such quantity as the Insurance Company shall reasonably require
for distribution to Contract owners.
2.5 The Insurance Company shall furnish, or cause to be furnished, to the
Fund or its designee, a copy of each prospectus for the Contracts or statement
of additional information for the Contracts in which a Portfolio, the Fund or
the Adviser is named prior to the filing of such document with the SEC. The
Insurance Company shall furnish, or shall cause to be furnished, to the Fund or
its designee, each piece of sales literature or other promotional material in
which a Portfolio, the Fund or the Adviser is named, at least five Business Days
prior to its use. No such prospectus, statement of additional information or
material shall be used if the Fund or its designee reasonably objects to such
use within five Business Days after receipt of such material.
2.6 At the request of the Fund or its designee, the Insurance Company
shall furnish, or shall cause to be furnished, to the Fund or its designee
copies of the following reports:
(1) the Insurance Company's annual statement (prepared under
statutory accounting principles ("statutory")) and annual report (prepared
under generally accepted accounting principles ("GAAP"), if any);
(2) the Insurance Company's quarterly statements (statutory and
GAAP, if any);
(3) any financial statement, proxy statement, notice or report of
the Insurance Company relating to the Portfolio(s) sent to shareholders
and/or policyholders:
(4) any registration statement (without exhibits) and financial
reports of the Insurance Company relating to the Portfolio(s) filed with
the SEC or any state insurance regulator; and
(5) any other public report submitted to the Insurance Company by
independent accountants in connection with any annual, interim or special
audit made by them of the books of the Insurance Company relating to the
Portfolio(s)
2.7 The Insurance Company shall not give any information or make any
representations or statements on behalf of a Portfolio or the Fund or concerning
any of them or the Adviser in connection with the sale of the Contracts other
than information or representations contained in and accurately derived from the
registration statement or prospectus for the Fund Shares (as such registration
statement and prospectus may be amended or supplemented from
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time to time), or in materials approved by the Fund or its designee for
distribution, including sales literature or other promotional materials, except
with the written permission of the Fund or its designee.
2.8 The Fund shall not give any information or make any representations or
statements on behalf of the Insurance Company or concerning the Insurance
Company, the Accounts or the Contracts other than information or representations
contained in and accurately derived from the registration statement or
prospectus for the Contracts (as such registration statement and prospectus may
be amended or supplemented from time to time), or in materials approved by the
Insurance Company for distribution including sales literature or other
promotional materials, except with the written permission of the Insurance
Company.
2.9 The Insurance Company shall amend the registration statement of the
Contracts under the 1933 Act and registration statement for each Account under
the 1940 Act from time to time as required in order to effect the continuous
offering of the Contracts or as may otherwise be required by applicable law. The
Insurance Company shall register and qualify the Contracts for sale to the
extent required by applicable securities laws and insurance laws of the various
states.
2.10 The Insurance Company shall be responsible for assuring that, where
it is reasonably probable that such Contract would be a "modified endowment
contract," as that term is defined in Section 7702A of the Internal Revenue Code
of 1986, as amended (the "Code"), will identify such Contract as a modified
endowment contract (or policy)
2.11 Solely with respect to Contracts and Accounts that are subject to the
1940 Act, so long as, and to the extent that, the SEC interprets the 1940 Act to
require pass-through voting privileges for variable policy owners: (a) the
Insurance Company will provide pass-through voting privileges to owners of
Contracts or policies whose cash values are invested, through the Accounts, in
Shares of the Fund; (b) the Fund shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Insurance
Company shall be responsible for assuring that the Accounts calculate voting
privileges in the manner established by the Fund; (c) with respect to each
Account, the Insurance Company will vote Shares of the Fund held by the Account
and for which no timely voting instructions from Contract or policy owners are
received, as well as Shares held by the Account that are owned by the Insurance
Company for its general account, in the same proportion as the Insurance Company
votes Shares held by the Account for which timely voting instructions are
received from Contract or policy owners; and (d) the Insurance Company and its
agents will in no way recommend or oppose or interfere with the solicitation of
proxies for Fund Shares held by Contract owners without the prior written
consent of the Fund, which consent may be withheld in the Fund's sole
discretion.
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ARTICLE 3
Representations and Warranties
3.1 The Insurance Company represents and warrants that it is an insurance
company duly organized and in good standing under the laws of the State of
Delaware and has established each Account as a segregated asset account under
such law on the date set-forth in Schedule A.
3.2 The Insurance Company represents and warrants that it has registered
or, prior to any issuance or sale of the Contracts, will register each Account
as a unit investment trust in accordance with the provisions of the 1940 Act to
serve as a segregated investment account for the Contracts.
3.3 The Insurance Company represents and warrants that the issuance of the
Contracts will be registered under the 1933 Act prior to any issuance or sale of
the Contracts; the Contracts will be issued and sold in compliance in all
material respects with all applicable federal and state laws; and the sale of
the Contracts shall comply in all material respects with state insurance
suitability requirements.
3.4 The Insurance Company represents and warrants that, provided the
Fund's representations and warranties made pursuant to Section 3.7 of this
Agreement are true, the Contracts are currently and at the time of issuance will
be treated as annuity contracts or life insurance policies, whichever is
appropriate, under applicable provisions of the Code. The Insurance Company
shall make every effort to maintain such treatment and shall 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.
3.5 The Fund represents and warrants that it is duly organized and validly
existing under the laws of the State of Maryland.
3.6 The Fund represents and warrants that the sale of the Fund Shares
offered and sold pursuant to this Agreement will be registered under the 1933
Act and that the Fund is registered under the 1940 Act. The Fund shall use its
best efforts to amend its registration statement relating to each Portfolio
under the 1933 Act and the 1940 Act from time to time as required in order to
affect the continuous offering of its Shares. The Fund shall use its best
efforts to make Shares available in all fifty states, the District of Columbia,
Virgin Islands and Puerto Rico.
3.7 The Fund represents and warrants that the investments of each
Portfolio will comply with the diversification requirements set forth in section
817(h) of the Code and the rules and regulations thereunder.
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3.8 The Fund represents and warrants that Fund officers, directors, and
employees are covered by a fidelity bond in the form and amount required by Rule
17(g)(1) under the 1940 Act.
ARTICLE 4
Potential Conflicts
4.1 The parties acknowledge that the Funds Shares may be made available
for investment to other Participating Insurance Companies. In such event, the
Board will monitor the Fund for the existence of any material irreconcilable
conflict between the interests of the Contract owners of all Participating
Insurance Companies. An irreconcilable material conflict may arise for a variety
of reasons, including: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial decision in
any relevant proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting instructions given by
variable annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of Contract owners.
The Board shall promptly inform the Insurance Company if they determine that an
irreconcilable material conflict exists and the implications thereof.
4.2 The Insurance Company agrees to promptly report any potential or
existing conflicts of which it is aware to the Board. The Insurance Company will
assist the Board in carrying out their responsibilities under the Shared Fund
Exemptive Order by providing the Board with all information reasonably necessary
for the Board to consider any issues raised including, but not limited to,
information as to a decision by the Insurance Company to disregard Contract
owner voting instructions.
4.3 If it is determined by a majority of the Board, or a majority of the
Fund's Directors who are not affiliated with the Adviser or the Underwriter (the
"Disinterested Directors"), that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Insurance Company shall, in
cooperation with other Participating Insurance Companies whose Contract owners
are also affected, at its expense and to the extent reasonably practicable (as
determined by the Board), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, which steps could include: (a)
withdrawing the assets allocable to some or all of the Accounts from the Fund or
any Portfolio, and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Fund, or submitting the
question of whether or not such segregation should be implemented to a vote of
all affected Contracts owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
Contract
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owners the option of making such a change; and (b) establishing a new registered
management investment company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a decision by
the Insurance Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Insurance Company may be required, at the Fund's election, to withdraw the
affected Account's or Accounts' investment in the Fund and terminate this
Agreement with respect to such Account(s); 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 Board. Any such withdrawal and termination must take place within
30 days after the Fund gives written notice that this provision is being
implemented, subject to applicable law but in any event consistent with the
terms of the Shared Fund Exemptive Order. Until the end of such 30-day period,
the Fund shall continue to accept and implement orders by the Insurance Company
for the purchase and redemption of Shares of the Fund.
4.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Insurance Company
conflicts with the majority of other state regulators, then the Insurance
Company will withdraw the affected Account's (or Accounts') investment in the
Fund and terminate this Agreement with respect to such Account(s) within 30 days
after the Fund informs the Insurance Company in writing that it has determined
that such decision has created an irreconcilable material conflict; provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the Disinterested Directors. Until the end of such 30-day period,
the Fund shall continue to accept and implement orders by the Insurance Company
for the purchase and redemption of Shares of the Fund.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a majority
of the Disinterested Directors shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Insurance Company be required to establish a new funding medium for the
Contracts if an offer to do so has been declined by vote of a majority of
Contract owners materially adversely affected by the irreconcilable material
conflict. In the event that the Board determines that any proposed action does
not adequately remedy any irreconcilable material conflict, then the Insurance
Company will withdraw the affected Account's (or Accounts') investment in the
Fund and terminate this Agreement with respect to such Account(s) within 30 days
after the Board informs the Insurance Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination shall,
subject to applicable law but in any event consistent with the terms of the
Shared Fund Exemptive Order, be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
Disinterested Directors.
4.7 The Insurance Company shall at least annually submit to the Board such
reports, materials or data as the Board may reasonably request so that the Board
may fully carry out the
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duties imposed upon them by the Shared Fund Exemptive Order, and said reports,
materials and data shall be submitted more frequently if deemed appropriate by
the Board.
4.8 If and to the extent that (a) 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 application for the Shared Fund Exemptive Order) on
terms and conditions materially different from those contained in the
application for the Shared Fund Exemptive Order, or (b) the Shared Fund
Exemptive Order is granted on terms and conditions that differ from those set
forth in this Article 4, then the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary (a) 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, or (b) to conform this Article 4 to the
terms and conditions contained in the Shared Fund Exemptive Order, as the case
may be.
4.9 Each Portfolio may, in the future, operate as a "feeder" in a
"master/feeder" structure. As a "feeder," a Portfolio would invest all of its
assets in another open-end registered investment company that has the same
investment objective and fundamental policies as such Portfolio (the "master"
fund), and other "feeder" funds may also invest in the "master" fund. If and to
the extent a Portfolio operates as a "feeder" in a "master/feeder" structure,
then the parties hereto shall monitor the entire "master/feeder" structure for
the matters contained in this Article 4 as if the entire "master/feeder"
structure were described herein. The Fund represents and warrants that the
"master/feeder" structure will at times meet the diversification requirements
set forth in section 817(h) of the Code and the rules and regulations
thereunder.
ARTICLE 5
Indemnification
5.1 Indemnification by the Insurance Company. The Insurance Company agrees
to indemnify and hold harmless the Fund and each of its Directors, officers,
employees and agents and each person, if any, who controls the Fund within the
meaning of Section 15 of the 1933 Act (collectively the "Indemnified Parties"
for purposes of this Article 5) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the indemnifying party) or expenses (including the reasonable costs of
investigating or defending any alleged loss, claim, damage, liability or expense
and reasonable legal counsel fees incurred in connection therewith)
(collectively, "Losses"), to which such Indemnified Parties may become subject
under any statute or regulation, or common law or otherwise, insofar as such
Losses:
(1) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in a registration
statement or prospectus for the Contracts or in the Contracts themselves
or in sales literature generated or approved by the Insurance Company on
behalf of the Contracts or Accounts (or any amendment or supplement to any
of the foregoing) (collectively, "Insurance Company Documents" for the
purposes of this Article 5), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, provided that this indemnity shall not
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apply as to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and was accurately
derived from written information furnished to the Insurance Company by or
on behalf of the Fund for use in Insurance Company Documents or otherwise
for use in connection with the sale of the Contracts or Shares; or
(2) arise out of or result from statements or representations (other
than statements or representations contained in and accurately derived
from Fund Documents (as defined in Section 5.2(a) below)) or wrongful
conduct of the Insurance Company or persons under its control, with
respect to the sale or acquisition of the Contracts or Shares; or
(3) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Fund Documents or the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading if such statement or omission was made in reliance upon and
accurately derived from written information furnished to the Fund by or on
behalf of the Insurance Company; or
(4) in the event the Insurance Company has adjusted or changed the
format of the Fund's prospectus, arise out of or result from any such
adjustment or change, including without limitation, any alteration of
text; or
(5) arise out of or result from any failure by the Insurance Company
to provide the services or furnish the materials required under the terms
of this Agreement; or
(6) arise out of or result from any material breach of any
representation and/or warranty made by the Insurance Company in this
Agreement or arise out of or result from any other material breach of this
Agreement by the Insurance Company.
5.2 Indemnification by the Fund. The Fund agrees to indemnify and hold
harmless the Insurance Company and each of its directors, officers, employees
and agents and each person, if any, who controls the Insurance Company within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Article 5) against any and all Losses, to which
such Indemnified Parties may become subject under any statute or regulation, or
at common law or otherwise, insofar as such Losses:
(1) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement or prospectus for the Fund (or any amendment or supplement
thereto) or in sales literature approved by the Fund (but solely with
respect to statements regarding the Fund), (collectively, "Fund Documents"
for the purposes of this Article 5), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required
to be stated
12
therein or necessary to make the statements therein not misleading,
provided that this indemnity 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 was accurately derived from written information
furnished to the Fund by or on behalf of the Insurance Company for use in
Fund Documents or otherwise for use in connection with the sale of the
Contracts or Shares; or
(2) arise out of or result from statements or representations (other
than statements or representations contained in and accurately derived
from Insurance Company Documents) or wrongful conduct of the Fund or
persons under its control, with respect to the sale or acquisition of the
Contracts or Shares; or
(3) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Insurance Company
Documents or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in reliance
upon and accurately derived from written information furnished to the
Insurance Company by or on behalf of the Fund; or
(4) arise out of or result from any failure by the Fund to provide
the services or furnish the materials required under the terms of this
Agreement; or
(5) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Fund.
5.3 Neither the Insurance Company nor the Fund shall be liable under the
indemnification provisions of Section 5.1 or 5.2, as applicable, with respect to
any Losses incurred or assessed against any Indemnified Party to the extent such
Losses arise out of or result from such Indemnified Party's willful misfeasance,
bad faith or negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement.
5.4 Neither the Insurance Company nor the Fund shall be liable under the
indemnification provisions of Section 5.1 or 5.2, as applicable, with respect to
any claim made against an Indemnified Party unless such Indemnified Party shall
have notified the party against whom indemnification is sought in writing within
a reasonable time after the summons, or other first written notification giving
information of the nature of the claim shall have been served upon or otherwise
received by such Indemnified Party (or after such Indemnified Party shall have
received notice of service upon or other notification to any designated agent),
but failure to notify the party against whom indemnification is sought of any
such claim shall not relieve that party from any liability that it may have to
the Indemnified Party in the absence of Sections 5.1 and 5.2.
13
5.5 In case any such action is brought against the Indemnified Parties,
the indemnifying party shall be entitled to participate, at its own expense, in
the defense of such action. The indemnifying party also shall be entitled to
assume the defense thereof, with counsel reasonably satisfactory to the party
named in the action. After notice from the indemnifying party to the Indemnified
Party of an election to assume such defense, the Indemnified Party shall bear
the fees and expenses of-any additional counsel retained by it, and the
indemnifying party will not be liable to the Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such
Indemnified Party independently in connection with the defense thereof other
than reasonable costs of investigation.
ARTICLE 6
Termination
6.1 This Agreement may be terminated by either party for any reason by six
(6) months' advance written notice to the other party, and may be terminated by
either party pursuant to Sections 6.2 through 6.7 below upon written notice to
the other party.
6.2 This Agreement may be terminated at the option of the Fund upon
institution of formal proceedings against the Insurance Company by the NASD, the
SEC. the insurance department of any state, or any other regulatory body
regarding the Insurance Company's duties under this Agreement or related to the
sale of the Contracts, the operation of the Account, the administration of the
Contracts or the purchase of the Shares, or an expected or anticipated ruling,
judgment or outcome that would, in the Fund's reasonable judgment, materially
impair the Insurance Company's ability to meet and perform the Insurance
Company's obligations and duties hereunder.
6.3 This Agreement may be terminated at the option of the Fund if the
Contracts cease to qualify as annuity contracts or life insurance policies, as
applicable, under the Code, or if the Fund reasonably believes that the
Contracts may fail to so qualify.
6.4 This Agreement may be terminated by the Fund, at its option, if the
Fund shall determine, in its sole judgment exercised in good faith, that either
(1) the Insurance Company shall have suffered a material adverse change in its
business or financial condition, (2) the Insurance Company shall have been the
subject of material adverse publicity that is likely to have a material adverse
impact upon the business and operations of either the Fund or the Underwriter,
or (3) the Insurance Company breaches any obligation under this Agreement in a
material respect and such breach shall continue unremedied for thirty (30) days
after receipt of notice from the Fund of such breach.
6.5 This Agreement may be terminated at the option of the Insurance
Company if (A) if the Internal Revenue Service determines that any Portfolio
fails to qualify as a "Regulated
14
Investment Company" under the Code or fails to comply with the diversification
requirements of Section 817(h) of the Code, or (B) the Insurance Company shall
determine, in its sole judgment exercised in good faith, that either (1) the
Fund or the Underwriter shall have been the subject of material adverse
publicity that is likely to have a material adverse impact upon the business and
operations of the Insurance Company, or (2) the Fund breaches any obligation
under this Agreement in a material respect and such breach shall continue
unremedied for thirty (30) days after receipt of notice from the Insurance
Company of such breach.
6.6 Notwithstanding any termination of this Agreement pursuant to this
Article 6, the Fund and the Underwriter may, at the option of the Fund, continue
to make available additional Fund Shares for so long after the termination of
this Agreement as the Fund desires pursuant to the terms and conditions of this
Agreement as provided in Section 6.7 below, for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred to as
"Existing Contracts"). Specifically, without limitation, if the Fund or
Underwriter so elects to make additional Shares available, the owners of the
Existing Contracts or the Insurance Company, whichever shall have legal
authority to do so, shall be permitted to reallocate investments in the Fund,
redeem investments in the Fund and/or invest in the Fund upon the making of
additional purchase payments under the Existing Contracts.
6.7 In the event of a termination of this Agreement pursuant to this
Article 6, the Fund and the Underwriter shall promptly notify the Insurance
Company whether the Underwriter and the Fund will continue to make Shares
available after such termination; if the Underwriter and the Fund will continue
to make Shares so available, the provisions of this Agreement shall remain in
effect except for Section 6.1 hereof and thereafter either the Fund or the
Insurance Company may terminate the Agreement, as so continued pursuant to this
Section 6.7, upon prior written notice to the other party, such notice to be for
a period that is reasonable under the circumstances but, if given by the Fund,
need not be greater than six months.
6.8 The provisions of Article 5 shall survive the termination of this
Agreement, and the provisions of Article 4 and Sections 2.4 and 2.11 shall
survive the termination of this Agreement so long as Shares of the Fund are held
on behalf of Contract owners in accordance with Section 6.7.
ARTICLE 7
Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
15
If to the Fund:
Mercury Asset Management V.I. Funds, Inc.
c/o Mercury Asset Management International Ltd.
000 Xxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: General Counsel
If to the Insurance Company:
American International Life Assurance Company of New York
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxx
ARTICLE 8
Miscellaneous
8.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York,
shall be subject to the provisions of the 1933, 1934, and 1940 Acts, and the
rules, regulations and rulings thereunder, including such exemptions from those
statutes, rules and regulations as the SEC may grant and the terms hereof shall
be interpreted and construed in accordance therewith.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Fund arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the relevant Portfolio(s) of the Fund and that no Director, officer, agent,
or holder of shares of beneficial interest of the Fund shall be personally
liable for any such liabilities. The obligations of each Portfolio shall be
limited to the assets of such Portfolio, shall be separate from the obligations
of any other Portfolio of the Fund, and the Portfolio shall not be liable for
the obligations of any other Portfolio of the Fund.
16
8.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD, IMRO
and state insurance regulators) and shall permit such authorities reasonable
access to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby. Each party
shall use its best efforts to provide the other party with reasonable notice of
any governmental investigation or inquiry relating to this Agreement or the
transactions contemplated hereby of which it has knowledge.
8.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
8.8 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect.
8.9 Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the other party.
8.10 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
8.11 No failure or delay by a party in exercising any right or remedy
under this Agreement will operate as a waiver thereof and no single or partial
exercise of rights shall preclude a further or subsequent exercise.
17
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Fund Participation Agreement as of the date and year first above
written.
American International Life Assurance Company of
New York
By: /s/ Xxxxxxx X. Xxxxxxxxx
-------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Vice President
MERCURY ASSET MANAGEMENT V.I.
FUNDS, INC.
By: /s/ Xxxxxx X. Xxxxx
-------------------------
Name: Xxxxxx X. Xxxxx
Title: Treasurer
18
SCHEDULE A
Segregated Accounts of American International Life Assurance Company of New York
Participating in the
Mercury Asset Management V.I. Funds, Inc.
Name of Separate Account and Contracts Date Established
-------------------------------------- ----------------
Variable Account I June, 1986
19
SCHEDULE B
Share Classes and Portfolios of Mercury Asset Management V.I. Funds, Inc.
Offered to Accounts
Mercury V.I. U.S. Large Cap Fund, Class A shares
20
SCHEDULE C
Persons Authorized to Act on Behalf of American International Life
Insurance Company
The Fund, the Underwriter and their respective agents are authorized to
rely on instructions from the following individuals on behalf of American
International Life Insurance Company on its own behalf and on behalf of each
Account:
Name Signature
---- ---------
Xxxxxxx X. Xxxxxxxxx /s/ Xxxxxxx X. Xxxxxxxxx
------------------------
Xxxxxx Xxxxx ________________________
Xxxxxxx Xxxxxx ________________________
Xxxxxx Xxxxxx ________________________
Xxxxx Xxxxx ________________________
21
