DEFERRED COMPENSATION PLAN BUSINESS AGREEMENT
This Agreement is entered into by and between the Minnesota State Board of
Investment (hereinafter the "SBI"), the Minnesota State Retirement System
(hereinafter the "MSRS") and The Minnesota Mutual Life Insurance Company
(hereinafter "Minnesota Mutual"), this first day of July, 1994 (hereinafter the
"Effective Date"), to amend and supplement Group Deferred Variable Annuity
Contract Number 0844049.
The SBI, the MSRS and Minnesota Mutual, in consideration of the mutual
agreements contained herein, do hereby agree as follows:
I. DEFINITIONS
A. The PLAN - The "Plan" as defined in Section 1.01 of Group Deferred Variable
Annuity Contract Number 0844049.
B. The PRIOR CONTRACTS - Collectively, Group Deferred Annuity Contract Number
0844047, issued by Minnesota Mutual and Northwestern National Life
Insurance Company (individually, the "Prior Fixed Contract") and Group
Accumulation Annuity Contract Number 0844048, issued by Minnesota Mutual
(individually, the "Prior Variable Contract"), which Prior
Page 1
Contracts where issued for the purpose of underwriting certain of the fixed
and variable annuity options under the Plan.
C. The NEW CONTRACT - A new Group Deferred Variable Annuity Contract (Number
0844049) developed and issued by Minnesota Mutual and offering both fixed
and variable options for use in connection with the Plan.
D. MSRS - The Minnesota State Retirement System, which, acting through its
executive director with the advice and consent of its board of directors,
administers the Plan.
E. PRODUCT PROVIDER(S) - A life insurance company appointed by the SBI which
offers annuity contracts to be used in conjunction with underwriting
certain of the fixed and variable annuity options under the Plan.
F. PLAN MARKETING ORGANIZATIONS - Marketing Organizations which have entered
into agreements with MSRS, which have been approved by the SBI, and
pursuant to which such marketing organizations offer to participants in the
Plan both the investment options managed by the SBI and the annuity
contracts issued by the Product Providers.
Page 2
G. SUPPLEMENTAL INVESTMENT FUND - The investment options available under the
Plan which are managed by the SBI.
II. APPOINTMENT OF MINNESOTA MUTUAL AS PRODUCT PROVIDER
The SBI hereby appoints Minnesota Mutual as a Product Provider to the Plan
for the purpose of making available to the participants in the Plan the New
Contract and the options available thereunder, and Minnesota Mutual hereby
accepts such appointment subject to the terms and conditions set forth
herein. In the performance of its responsibilities under this Agreement,
the relationship of Minnesota Mutual to the SBI and/or MSRS is solely that
of an independent contractor. Nothing contained herein shall be construed
as establishing an employment, joint venture or partnership relationship
between Minnesota Mutual and the SBI and/or MSRS. Minnesota Mutual's
obligations and the relationship between Minnesota Mutual and the SBI shall
be governed solely by the terms of this Agreement, the Prior Contracts and
the New Contract. SBI also acknowledges that Minnesota Mutual shall have
no responsibility for the establishment or operation of the Plan, except as
provided by the terms of this Agreement.
III. CLOSING OF THE PRIOR CONTRACTS
Page 3
A. Closing Date
Except as otherwise provided in this Section III, the Prior Contracts shall
be closed with respect to the Plan beginning on the later of the Effective
Date or the date on which the registration statement covering the New
Contract is declared effective by the United States Securities and Exchange
Commission, but in no event later than September 30, 1994, or such later
date as may be agreed to by the SBI (the "Closing Date"). On and after the
Closing Date all salary deferrals and/or purchase payments allocated to the
general account of Minnesota Mutual shall be credited to the general
account under the New Contract rather than the Prior Fixed Contract. With
regard to salary deferrals and/or purchase payments which are being
allocated to a separate account of Minnesota Mutual under the Prior
Variable Contract, such salary deferrals and/or purchase payments shall
continue to be allocated to the Prior Variable Contract for up to 90 days
after the Closing Date or until such earlier date as Plan participants have
provided new purchase payment allocation instructions to Minnesota Mutual
for use in connection with the New Contract. Beginning 90 days after the
Closing Date, or such later date as Minnesota Mutual may determine, all
salary deferrals and/or purchase payments allocated to a separate account
shall be credited to the New Contract.
Page 4
B. Accumulation Values In Prior Contracts
Accumulation values in the Prior Contracts on and after the Closing Date
shall continue to be subject to and controlled by the terms and provisions
set forth in the Prior Contracts, and by the provisions of the Plan and the
rules thereunder.
Accumulation values in the Prior Variable Contract may be left therein and
may be transferred between the various sub-accounts available thereunder.
Such accumulation values may also be transferred, without restriction, to
any other investment option available under the Plan, including the New
Contract, or withdrawn or annuitized subject to rules and restrictions
under the Plan and the Prior Variable Contract. Accumulation values in the
Prior Fixed Contract may also remain in such contract until withdrawn or
transferred to another investment option under the Plan, including options
under the New Contract. Any provision in the Prior Fixed Contract not
withstanding, accumulation values remaining in the Prior Fixed Contract
after the Closing Date shall be subject to the same portability rights and
restrictions as general account accumulation values held under the New
Contract (see Paragraph C of Section IV of this Agreement); provided,
however, during the six-month period beginning on
Page 5
the Closing Date, a Plan participant may transfer all or any portion of
such accumulation values, without restriction, to any other variable
investment option available under the New Contract.
IV. THE NEW CONTRACT
A. Generally; Availability
The form of the New Contract has been provided to and approved by the SBI.
The terms and conditions of the New Contract are incorporated herein by
reference and made a part of this Agreement except as otherwise provided.
The New Contract shall be available for use in connection with the Plan on
the Effective Date of this Agreement or as soon thereafter as the
registration statement covering the New Contract shall have been declared
effective by the United States Securities and Exchange Commission, but in
no event later than September 30, 1994, or such later date as may be
approved by the SBI. Salary deferrals and/or purchase payments received
prior to such date shall continue to be allocated to the Prior Contracts.
B. Allocations Options
Page 6
The New Contract will offer one general account or fixed annuity option.
The New Contract will also provide, with respect to purchase payments
allocated to a separate account of Minnesota Mutual and its various sub-
accounts, variable investment funds in which such purchase payments may be
invested. The investment funds available to the New Contract's sub-
accounts shall be as follows:
1. Money Market Portfolio of MIMLIC Series Fund, Inc.
2. Index 500 Portfolio of MIMLIC Series Fund, Inc.
3. Vanguard/Wellington Fund, Inc.
4. Long-Term Corporate Portfolio of Vanguard Fixed Income Securities
Fund, Inc.
5. Xxxxxxx International Fund, a series of Xxxxxxx International
Fund, Inc.
6. Fidelity Contrafund
Page 7
7. Janus Twenty Fund, a series of the Janus Investment Fund
The continued use of these investment funds is contingent upon their
availability for purchase by Minnesota Mutual and the sub-accounts of its
separate account. Substitute or additional investment funds may be made
available under the New Contract only with the consent of the SBI.
C. Provisions Of New Contract Amended By This Agreement
(1) Portability
Transfers of accumulation values held in the general account and the
separate account shall be permitted in accordance with the provisions of
the New Contract; provided, Section 5 and any other provision in the New
Contract notwithstanding, Plan participants may annually, in each calendar
year, transfer up to 20% of accumulation values held in the general account
and may also transfer 100% of such accumulation values at termination of
employment or at retirement.
(2) Deferred Sales Charge
Page 8
The deferred sales charge described in Sections 3.01 and 5 of the New
Contract shall not apply to the Plan or its participants, nor shall it
apply to any withdrawals or transfers described in such sections of the New
Contract.
(3) Termination
Section 7.02 of the New Contract is amended to provide that the New
Contract shall also terminate:
(i) in the event that Minnesota Mutual fails to comply with or perform any
provision of this Agreement, subject to Minnesota Mutual's right to
cure such failure within 90 days after receipt of written notice
thereof; and
(ii) on June 30, 1999 or upon the earlier termination of this Agreement.
D. Interest Rates And Expenses
The minimum rate of interest credited to accumulation values in the general
account, as well as all expenses applicable to the general and separate
accounts, shall be as set forth in the New Contract. Minnesota Mutual
agrees that it will not report rates of return on general or separate
account
Page 9
accumulation values to Plan participants except on a basis which takes into
account all applicable expense factors. Minnesota Mutual agrees to provide
30 days notice of any change in separate account expense factors.
V. DUTIES OF MINNESOTA MUTUAL
A. Minnesota Mutual shall accept purchase payments allocated to the New
Contract in connection with the Plan in whatever frequency they are
transmitted. Minnesota Mutual shall apply such purchase payments to the
appropriate New Contract participant's accumulation value in accordance
with the instructions received from the appropriate employer directing the
amount of purchase payment to be applied to each participant account.
Purchase payments shall be credited to a New Contract participant's
accumulation value in accordance with the terms of the New Contract upon
receipt of such purchase payments by Minnesota Mutual at its home office
with appropriate allocation instructions.
B. When making any benefit payments in accordance with the Plan, Minnesota
Mutual shall report to the Internal Revenue Service the amounts of such
payments in accordance with Internal Revenue Service requirements.
Page 10
C. Minnesota Mutual agrees to withhold federal and state income taxes from
benefit payments in accordance with instructions from the Plan
participant's employer as to the amounts to be withheld, or as is otherwise
required by the Internal Revenue Service or by appropriate state tax
authorities.
D. Minnesota Mutual agrees that, with respect to matters relating to the Plan,
Minnesota Mutual will make information from its participant account records
available to the SBI, MSRS and the Plan Marketing Organizations upon
request. Minnesota Mutual shall provide, at its expense, software to allow
the Plan Marketing Organizations and MSRS access to Minnesota Mutual's
system of Plan participant information relating to the Prior Contracts and
the New Contract. Minnesota Mutual also agrees that Plan participant
records are private and that only Minnesota Mutual, the SBI, MSRS, and the
Plan Marketing Organizations where necessary, shall have access to such
records.
E. Minnesota Mutual agrees to comply in all areas with:
1. Rules of the Plan which have been approved by the SBI, to the extent
required by Minnesota Statutes, Section 352.96, subd.
Page 11
3 (1993 Supp.), and filed with the Minnesota Secretary of State and
Revisor of Statutes;
2. Minnesota Statutes 1992, Section 352.96 (1992 and 1993 Supp.), and any
amendments thereto, provided such amendments do not impair a material
provision of the New Contract and this Agreement; and
3. Section 457 of the Internal Revenue Code of 1986, as amended, or any
rules and regulations thereunder.
VI. MARKETING AND ADMINISTRATIVE SERVICES
A. Plan Marketing Organizations
Minnesota Mutual understands and agrees that MSRS may enter into separate
agreements with Plan Marketing Organizations which will enroll and provide
service to participants in the Plan. Subject to the approval of the SBI,
MSRS, not Minnesota Mutual, is responsible for hiring, directing and
supervising, terminating, and determining the compensation or other
emoluments payable to these Plan Marketing Organizations. Minnesota Mutual
agrees that, except as provided in this Agreement, it will not provide any
compensation or other emoluments to any Plan Marketing Organization, or to
any
Page 12
individual agent employed by a Plan Marketing Organization, in connection
with services provided to the Plan unless such compensation or emolument
has been approved by MSRS and the SBI.
B. Cooperation With Plan Marketing Organizations
Minnesota Mutual (and its broker-dealer affiliate) agrees to make the New
Contract available to the Plan Marketing Organizations for offer to Plan
participants. In that regard, Minnesota Mutual (and its broker-dealer
affiliate) will enter into such selling agreements as are necessary to make
the New Contract available to the Plan Marketing Organizations and will
also appoint as its agents such employees of the Plan Marketing
Organizations as are necessary. Nothing in this Agreement or in any
agreement between MSRS and a Plan Marketing Organization shall preclude or
limit Minnesota Mutual, or its broker-dealer affiliate, from exercising its
rights, duties or obligations under any law or regulation to supervise the
offer and sale of the New Contract and the persons or individuals it has
authorized or appointed to offer and sell the New Contract. Failure to
cooperate with Plan Marketing Organizations, subject to Minnesota Mutual's
right to cure such failure within 90 days after receipt of written notice
thereof, is grounds for termination under both
Page 13
Section IX of this Agreement and Section 7.02 of the New Contract.
C. Equality Of Presentation
MSRS shall have sole responsibility for ensuring that the Plan Marketing
Organizations provide fair and equal presentations of all investment
options available under the Plan and that the compensation and emoluments
paid to the Plan Marketing Organizations represents the entire compensation
and emoluments received by any Plan Marketing Organization with regard to
the Plan. Upon request by Minnesota Mutual, SBI shall request MSRS to
provide reasonable assurances to Minnesota Mutual that such fair and equal
presentations are being made. The Agreements with the different Plan
Marketing Organizations shall be substantially identical in form and
content and the requirements of the MSRS shall be consistently applied to
all Plan Marketing Organizations.
Disputes, if any, between the Product Providers, SBI and/or MSRS over the
presentation of products or rates of return and materials prepared by the
Plan Marketing Organizations shall be resolved by a Plan consultant
retained by the SBI. Costs of any such consultant shall be borne by the
Product Provider or Providers initiating such dispute resolution process.
Such
Page 14
costs shall not be counted as part of the $50,000 maximum applicable to
monitoring costs which are to be reimbursed by Minnesota Mutual in
accordance with Section VII of this Agreement.
D. Reimbursement To MSRS
Minnesota Mutual agrees to make payments to MSRS to reimburse it for
administrative services provided in connection with the Plan. At the end
of each calendar month, Minnesota Mutual will remit to MSRS in the first
year a payment which is equal, on an annual basis, to .07% of the then
current accumulation values (estimated monthly and reconciled to actual
accumulation values quarterly) held under both the Prior Contracts and the
New Contract. Accumulation values for this purpose shall not include
amounts which have been applied to purchase any annuity option, but shall
include amounts held for systematic withdrawal. In subsequent years the
amount of this monthly payment, with respect to accumulation values under
the Prior Contracts and the New Contract, may be adjusted from time to time
by the SBI.
The SBI agrees that the percentage rate of reimbursement to MSRS for
administration services shall be identical for the Product Providers.
Page 15
E. Payments to Plan Marketing Organizations
Minnesota Mutual agrees to make payments monthly to each Plan Marketing
Organization, or, where necessary, to the broker-dealer with which the
employees of the Plan Marketing Organization are registered, for marketing
services provided in connection with the Plan, which are equal, on an
annual basis, to a percentage, which shall be the percentage rate set forth
in Section 5 of the applicable agreements between MSRS and the Plan
Marketing Organization, of the then current accumulation values held under
both the Prior Contracts and the New Contract and attributable to the
marketing efforts of such Plan Marketing Organization. Accumulation values
for this purpose shall not include amounts which have been applied to
purchase any annuity option, but shall include amounts held for systematic
withdrawal.
Whenever accumulation values held under either the Prior Contracts or the
New Contract are applied to provide any annuity option, which for this
purpose shall not include amounts held for systematic withdrawal, Minnesota
Mutual shall make a one-time payment to the Plan Marketing Organization to
which such accumulation values are attributable, or, where necessary, to
the broker-dealer with which the employees of
Page 16
the Plan Marketing Organization are registered, in an amount equal to 1.5%
of the amount applied to provide such annuity option.
Any agreement between Minnesota Mutual and a Plan Marketing Organization,
or a broker-dealer with which the employees of such Plan Marketing
Organization are registered, with respect to such compensation or other
emoluments shall be subject to prior approval by MSRS and the SBI.
Minnesota Mutual shall not pay compensation or other emoluments to any Plan
Marketing Organization or broker-dealer without first providing
documentation of the amount and method of computation of such compensation
or other emoluments to, and receiving approval from, MSRS. The SBI agrees
that the percentage rate of compensation or other emoluments to Plan
Marketing Organizations shall be identical for all Product Providers.
F. Costs Of Forms And Marketing Materials
The costs of developing and printing enrollment and/or application forms,
beneficiary designation forms, transfer forms, brochures describing the
Plan, products and investment options, brochures containing performance and
risk comparison, or any other materials required in connection with the
Plan shall be borne by the Product Providers and MSRS for the
Page 17
Supplemental Investment Fund. The percentage of such costs which the
Product Providers shall bear shall be equal to the percentage of total
assets then held under the Plan by such Product Provider.
Minnesota Mutual agrees to provide developmental and printing services to
MSRS to the extent permitted by law, subject to control by MSRS, in
connection with such forms, brochures and materials. If such services are
provided by Minnesota Mutual, the cost of such services shall be subject to
verification by MSRS and billed directly to MSRS by Minnesota Mutual and
then re-billed by MSRS to the Product Providers and MSRS.
VII. REIMBURSEMENT FOR MONITORING COSTS
Minnesota Mutual agrees to make payments to the SBI to reimburse the SBI
for Minnesota Mutual's share of the SBI's costs in monitoring the
performance of the investment options under the Plan. The SBI agrees to
provide to Minnesota Mutual a statement of its monitoring costs, in
reasonable detail, prior to the making of such payment by Minnesota Mutual.
The portion of such costs due hereunder in any year from Minnesota Mutual
shall be determined by dividing the total of such costs by the number of
Product Providers. In no event, however, shall the total amount of all
reimbursement payments by
Page 18
Minnesota Mutual under this Section VII exceed $50,000 during the term of
this Agreement, without the prior consent of Minnesota Mutual. Payments
shall be made on an invoice from the SBI. The invoice schedule will be
determined by the SBI but Minnesota Mutual shall not receive an invoice
more frequently than quarterly. Payments are due 30 days from the date of
receipt by Minnesota Mutual of the invoice.
VIII. AUDIT OF MINNESOTA MUTUAL
Minnesota Mutual agrees to provide annually to the SBI a copy of its
financial statements which shall have been examined and certified by
independent auditors. In addition, Minnesota Mutual agrees to allow such
of its books and records and accounting procedures and practices as are
directly relevant to the Plan and this Agreement to be examined in such
manner as may reasonably be required by the SBI or the Legislative Auditor
of the State of Minnesota.
IX. TERMINATION OF AGREEMENT
This Agreement will terminate on June 30, 1999, unless terminated earlier
hereunder. This Agreement will also terminate in the event the New
Contract is terminated pursuant
Page 19
to Section 7.02 thereof, as amended by Section IV, paragraph C(3), of this
Agreement.
X. AMENDMENTS TO THIS AGREEMENT
No amendment to this Agreement shall be effective unless such amendment
shall be in writing and signed by all of the parties hereto.
XI. NOTICE
Any notice under this Agreement must be in writing and may be given by or
on behalf of Minnesota Mutual by delivering the same to the SBI or by
mailing it to the SBI at its address of record with Minnesota Mutual, and
any notice to Minnesota Mutual given by the SBI shall be in writing and
mailed to Minnesota Mutual at its Home Office. Any such notice shall be
effective on the date of receipt unless the terms of this Agreement dictate
otherwise.
XII. GOVERNING LAW
This Agreement shall be construed according to the laws of Minnesota.
Page 20
XIII. INDEMNIFICATION AND DEFENSE
Minnesota Mutual hereby agrees to indemnify and hold harmless the State of
Minnesota, the Minnesota State Board of Investment (in this section, the
"Board"), each member of the Board individually, the officers, agents and
employees of each and every of the above, their successors, and any combination
thereof, from all claims, demands, or causes of action arising out of an act or
omission of Minnesota Mutual related to this Agreement or an act or omission of
Minnesota Mutual related to Minnesota Mutual's sales activities in connection
with the Plan; provided, however, that such acts or omissions of Minnesota
Mutual shall not include acts or omissions of Plan Marketing Organizations
related to sales activities in connection with the Plan where the MSRS has
directed or assumed responsibility for the supervision of such sales activities
as described in Section VII of this Agreement.
Minnesota Mutual shall reimburse the Board for all reasonable expenses incurred
to defend and legal proceedings that may be brought against the State of
Minnesota, the Minnesota State Board of Investment, each member of the Board
individually, the officers, agents and employees of each and every of the above,
their successors, and any combination thereof, on any claim or demand effected
by this section, and shall satisfy any judgment
Page 21
that may be rendered against such party or parties in respect to any such claim
or demand. The Board shall notify Minnesota Mutual upon receipt of any such
claim or demand which it receives. Pursuant to Minnesota Statutes section 8.06,
the Minnesota Attorney General (or its designee) shall be the legal counsel for
the State of Minnesota, the Board, the members of the Board individually, and
the officers, agents and employees of the Board or the State of Minnesota.
XIV. EMPLOYMENT PRACTICES
Minnesota Mutual certifies that it has received a certificate of compliance from
the Commissioner of Human Rights pursuant to Minnesota Statutes section 363.073.
XV. DATA CONFIDENTIALITY
To the extent that Minnesota Mutual has access to data of the Plan which is
classified as private, nonpublic or confidential pursuant to the Minnesota
Government Data Practices Act, Minnesota Statutes chapter 13, Minnesota Mutual
agrees to comply with the requirements of Minnesota Statutes chapter 13 in
providing services under this Agreement. Minnesota Mutual agrees to indemnify,
save and hold harmless the State of Minnesota, the Minnesota State Board of
Investment, each member of the Board
Page 22
individually, the officers, agents and employees of each and every of the above,
from all claims arising out of, resulting from any act or omission of Minnesota
Mutual or in any violation by Minnesota Mutual of any provision of the Minnesota
Government Data Practices Act, Minnesota Statutes chapter 13, including legal
fees and disbursements paid or incurred to enforce this provision of the
Agreement. In the event Minnesota Mutual subcontracts any or all of the work to
be performed under this Agreement, Minnesota Mutual shall retain responsibility
under this paragraph for compliance with the Minnesota Government Data Practices
Act.
XVI. WAIVER
Any waiver at any time by either party hereto of any right with respect to any
matter arising in connection with this Agreement shall not be deemed to be a
waiver with respect to any subsequent matter.
XVII. ANTITRUST
Minnesota Mutual shall assign to the State of Minnesota any and all claims for
overcharges as to goods and/or services provided in connection with the
Agreement resulting from antitrust violations
Page 23
which arise under the antitrust laws of the United States and the antitrust laws
of the State of Minnesota.
XVIII. SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable, such
invalidity or enforceability will not affect the validity or enforceability of
any provision hereof, all of which provisions are hereby declared severable.
XIX. ONGOING OBLIGATION
The provisions of (1) Paragraphs B, C and D of Section IV, (2) Paragraphs B, C,
D and E of Section V, (3) Paragraphs D and E of Section VI, (4) Section VIII,
(5) Section XIII and (6) Section XV herein shall survive any termination of this
Agreement; provided, however, that the provisions of Paragraphs D and E of
Section VI shall not survive a termination of this Agreement prior to June 30,
1999.
IN WITNESS WHEREOF, the parties have, by their duly authorized officers or
representatives, executed ______ counterparts of the Agreement, intending to be
bound thereby.
MINNESOTA STATE BOARD OF INVESTMENT
Page 24
By:
-----------------------------------------
Title:
--------------------------------------
MINNESOTA STATE RETIREMENT SYSTEM
By:
-----------------------------------------
Executive Director
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
By:
-----------------------------------------
Title:
--------------------------------------
By:
-----------------------------------------
Title:
--------------------------------------
STATE OF MINNESOTA
THE OFFICE OF THE ATTORNEY GENERAL
By:
-----------------------------------------
Assistant Attorney General
STATE OF MINNESOTA
DEPARTMENT OF ADMINISTRATION
By:
-----------------------------------------
Title:
--------------------------------------
STATE OF MINNESOTA
DEPARTMENT OF FINANCE
Page 25
By:
-----------------------------------------
Title:
--------------------------------------
Page 26
