EXHIBIT (8)(u)
PARTICIPATION AGREEMENT
AMONG
ML LIFE INSURANCE COMPANY OF NEW YORK,
XXX XXXXXX EQUITY TRUST, XXX XXXXXX
XXXXXXXX FUND, XXX XXXXXX EQUITY AND INCOME FUND, AND
XXX XXXXXX FUNDS INC.
THIS AGREEMENT, dated as of the 11th day of October, 2002, by and among
ML Life Insurance Company of New York (the "Company"), a New York life insurance
company, on its own behalf and on behalf of each segregated asset account of the
Company set forth on Schedule A hereto as may be amended from time to time
(hereinafter referred to individually and collectively as the "Account"), the
Xxx Xxxxxx Equity Trust, Xxx Xxxxxx Xxxxxxxx Fund and the Xxx Xxxxxx Equity and
Income Fund (each a "Fund," collectively the "Funds"), each a Delaware business
trust, and Xxx Xxxxxx Funds Inc. (the "Underwriter"), a Delaware company.
WHEREAS, the shares of beneficial interests of the Funds are divided
into series of shares, each designated a "Portfolio" and representing the
interest in a particular managed portfolio of securities and other assets;
WHEREAS, the Funds are each registered as an open-end management
investment company under the Investment Company Act of 1940, as amended, (the
"1940 Act") and shares of the Portfolios are registered under the Securities Act
of 1933, as amended (the "1933 Act");
WHEREAS, Xxx Xxxxxx Asset Management Inc., a Delaware company, is an
investment adviser duly registered under the Investment Advisers Act of 1940
that serves as investment adviser to the Xxx Xxxxxx Equity and Income Fund, the
Xxx Xxxxxx Xxxxxxxx Fund and certain Portfolios of the Xxx Xxxxxx Equity Trust,
and Xxx Xxxxxx Investment Advisory Corp., a Delaware company, is an investment
adviser duly registered under the Investment Advisers Act of 1940 that serves as
investment adviser to certain Portfolios of the Xxx Xxxxxx Equity Trust;
WHEREAS, the Underwriter, which serves as distributor to the Funds, is
registered as a broker-dealer with the Securities and Exchange Commission (the
"SEC") under the Securities Exchange Act of 1934, as amended (the "1934 Act"),
and is a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD");
WHEREAS, the Account is duly established and maintained as a segregated
asset account, duly established by the Company, on the date shown for such
Account on Schedule A hereto, to set aside and invest assets attributable to
variable annuity contracts set forth in
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Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Contracts");
WHEREAS, each Portfolio may issue shares to the general public and to
the separate accounts of insurance companies ("Participating Insurance
Companies") to fund variable annuity contracts sold to certain qualified pension
and retirement plans;
WHEREAS, the Company intends to purchase shares of other open-end
management investment companies that offer shares to the general public to fund
the Contracts;
WHEREAS, the Funds and the Underwriter know of no reason why shares in
any Portfolio may not be sold to Participating Insurance Companies to fund
variable annuity contracts sold to certain qualified pension and retirement
plans; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios (and
classes thereof) listed in Schedule B hereto, as it may be amended from time to
time by mutual written agreement (the "Designated Portfolios") on behalf of the
Account to fund the aforesaid Contracts, and the Underwriter is authorized to
sell such shares in the Designated Portfolios, and classes thereof, to the
Account at net asset value.
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Funds, and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. Each Fund has granted to the Underwriter exclusive authority
to distribute Fund shares, and has agreed to instruct, and has so instructed,
the Underwriter to make available to the Company for purchase on behalf of the
Account shares of the Designated Portfolios and classes thereof listed on
Schedule B to this Agreement (the "Shares"). Pursuant to such authority and
instructions, and subject to Article IX hereof, the Underwriter agrees to make
the Shares available to the Company for purchase on behalf of the Account, such
purchases to be effected at net asset value in accordance with Section 1.3 of
this Agreement. Notwithstanding the foregoing, the Board of Trustees of a Fund
(the "Board") may suspend or terminate the offering of Shares of any Designated
Portfolio or class thereof or liquidate any Designated Portfolio, if such action
is required by law or by regulatory authorities having jurisdiction or if, in
the sole discretion of the Board acting in good faith and in light of its
fiduciary duties under federal and any applicable state laws, suspension or
termination is necessary in the best interests of the shareholders of such
Designated Portfolio.
1.2. The Funds shall redeem, at the Company's request, any full or
fractional Shares held by the Company on behalf of the Account, such redemptions
to be effected at net asset value in accordance with Section 1.3 of this
Agreement. Notwithstanding the foregoing, (i) the
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Company shall not redeem Shares attributable to Contract owners except in the
circumstances permitted in Section 9.3 of this Agreement, and (ii) the Funds may
delay redemption of Shares of any Designated Portfolio to the extent permitted
by the 1940 Act, and any rules, regulations, or orders thereunder.
1.3. Purchase and Redemption Procedures
The Funds hereby appoint the Company as an agent of the Funds for the limited
purpose of receiving purchase and redemption requests from the Account (but not
with respect to any Fund Shares that may be held in the general account of the
Company) for the Shares made available hereunder, based on allocations of
amounts to the Account or subaccounts thereof under the Contracts and other
transactions relating to the Contracts or the Account. Under no circumstances
will the Company change, alter or manipulate any instruction received by it in
good order. All transactions in Account Shares shall be executed through the
Omnibus Accounts of Company's affiliate Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx,
Inc. ("MLPF&S") ("Omnibus Accounts"). Any such request (or relevant
transactional information therefor) received by the Company on any day 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 (a "Business Day") prior to the
time that the Fund ordinarily calculates its net asset value as described from
time to time in the Fund Prospectus (which as of the date of execution of this
Agreement is 4:00 p.m. Eastern Time) shall be executed by the Fund or its
transfer agent at the net asset value determined as of the close of trading on
that same Business Day, provided that the Fund or its transfer agent receives
notice of such request by 6:50 a.m. Eastern Time on the next following Business
Day, or in the event of systems issues necessitating later delivery of such
purchase and redemption requests, by 11:00 a.m. Eastern Time on the next
following Business Day. Company will provide to the Fund or its transfer agent
or its designee via the NSCC Fund/SERV DCC&S platform (which utilizes the "as
of" record layout within Fund/SERV) one or more files detailing the instructions
received with respect to each Account prior to 4:00 p.m. Eastern Time on the
prior Business Day for each of the Funds. If for any reason the Company or its
affiliate is unable to transmit the file(s) with respect to any Business Day,
the Company or its affiliate will notify the Fund or its transfer agent or its
designee by 11:00 a.m. Eastern Time on the next following Business Day and
provided that such notification is received the value of such Shares shall be
calculated at the net asset value determined as of the close of trading on that
prior Business Day. Such notification shall be by facsimile or phone (confirmed
by facsimile), including all relevant information about the purchase or
redemption order. Each purchase and redemption order transmitted by the Company
will constitute a representation by the Company that such order was based on
instructions and Contract owner level transactions that the Company received and
accepted as being in good order no later than the close of trading on the prior
Business Day, and that the order included all instructions and Contract owner
level transactions so received by the Company.
(b) The Company shall pay for Shares on the same day that
it notifies a Fund of a purchase request for its Shares. Payment for Shares
shall be made in federal funds transmitted to the Fund via the NSCC Fund/SERV
DCC&S platform to be received by the Fund by 6:30 p.m. Eastern Time on the day
the Fund is notified of the purchase request for Shares
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(unless the Fund determines and so advises the Company that sufficient proceeds
are available from redemption of Shares of other Designated Portfolios effected
pursuant to redemption requests tendered by the Company on behalf of the
Account). Upon receipt of federal funds transmitted via the NSCC Fund/SERV DCC&S
platform, such funds shall cease to be the responsibility of the Company and
shall become the responsibility of the Fund. Subject to Section 1.1, Company and
the Fund shall settle purchase instructions with respect to any Shares of a Fund
via the NSCC Fund/SERV platform settlement process on the next Business Day
following the effective trade date. The Fund or the Underwriter will provide to
Company a daily transmission of positions and trading activity taking place in
the Omnibus Accounts using Company's affiliate's proprietary Inventory Control
System ("ICS").
(c) Payment for Shares of a Fund redeemed by the Account
or the Company shall be made in federal funds transmitted via the NSCC Fund/SERV
DCC&S platform to the Company or any other designated person on the next
Business Day after the Fund is properly notified of the redemption order of such
Shares (unless redemption proceeds are to be applied to the purchase of Shares
of other Designated Portfolios in accordance with Section 1.3(b) of this
Agreement), except that the Funds reserve the right to redeem Shares in assets
other than cash and to delay payment of redemption proceeds to the extent
permitted under the 1940 Act and any regulations or orders thereunder, and in
accordance with the procedures and policies of the Funds as described in their
then current prospectuses. The Funds shall not bear any responsibility
whatsoever for the proper disbursement or crediting of redemption proceeds by
the Company; the Company alone shall be responsible for such action.
1.4. Each Fund shall use its best efforts to make the closing net
asset value per Share for its Designated Portfolio available to the Company by
6:30 p.m. Eastern Time each Business Day via the NSCC Profile 1 platform, and in
any event, as soon as reasonably practicable after the closing net asset value
per Share for such Designated Portfolio is calculated, and shall calculate such
closing net asset value, including any applicable daily dividend factor, in
accordance with the subject Designated Portfolio's current prospectus. In the
event that a Designated Portfolio's net asset value per Share is not made
available to the Company by such time on a given Business Day ("Day 1"), and the
Company is unable to calculate purchase and redemption orders for the
Portfolio's Shares received on Day 1 ("Day 1 Trades") for transmission to the
Fund or its transfer agent within the timeframes identified in Section 1.3, as
applicable, the Company agrees to calculate such Day 1 Trades in the next cycle
based on the Designated Portfolio's net asset value per Share when received and
transmit such orders to the Fund or its transfer agent, either separately or
along with the purchase and redemption orders received on the next Business Day
("Day 2 Trades"), within the timeframes identified in Section 1.3 for Day 2
Trades. In such event, provided that Day 1 Trades are segregated from Day 2
Trades when transmitted to the Fund or its transfer agent, the Fund agrees to
effect Day 1 Trades at the Designated Portfolio's net asset value per Share for
Day 1. Neither the Funds, any Designated Portfolio, the Underwriter, nor any of
their affiliates shall be liable for any information provided to the Company
pursuant to this Agreement which information is based on incorrect information
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supplied by the Company to a Fund or the Underwriter. Any material error (as
determined by the subject Fund's Board in accordance with SEC guidelines) in the
calculation of the closing net asset value per Share shall be reported
immediately upon discovery to the Company. If a Fund provides the Company with
materially incorrect net asset value information, through no fault of the
Company, the Company shall be entitled to an adjustment to the number of Shares
purchased or redeemed to reflect the correct closing net asset value per Share.
The correction of any such errors shall be made by the subject Fund at the
separate account level and shall be made pursuant to the SEC's recommended
guidelines regarding such errors and the Fund shall bear the cost of correcting
such errors at the separate account level.
1.5. Subject to Section 1.1, each Fund will make available for
purchase by the Company on behalf of the Account a class of Shares available at
net asset value which are not subject to a contingent deferred sales charge or
redemption fee. In addition, no exchange fees will be applicable to Shares of
the Funds purchased by the Company on behalf of the Account. The Funds shall
furnish notice (via the NSCC Profile II platform to the Company as soon as
reasonably practicable of any income dividends or capital gain distributions
payable on any Shares. The form of payment of dividends and capital gains
distributions will be determined in accordance with the Company's operational
procedures in effect at the time of the payment of such dividend or
distribution. At this time, the Company, on its behalf and on behalf of the
Account, hereby elects to receive all such dividends and distributions as are
payable on any Shares in the form of cash. Company will reinvest such cash in
additional Shares of that Designated Fund through a trade processed via the NSCC
platform. The Company reserves the right, on its behalf and on behalf of the
Account, to revoke this election and to receive all such dividends and capital
gain distributions in the form of additional Shares. The parties understand and
agree that all transactions of Account Shares contemplated herein shall be
executed through the Omnibus Accounts and that MLPF&S will receive all such
dividends and distributions in the form of cash which Company, in turn, will
immediately reinvest in the form of additional Shares of that Designated
Portfolio. The subject Fund or its transfer agent shall notify the Company
promptly of the number of Shares so issued in consideration for reinvested cash
dividends and distributions.
1.6. Issuance and transfer of Shares shall be by book entry only
and executed through the Omnibus Accounts. Share certificates will not be issued
to the Company or the Account. Purchase and redemption orders for Fund Shares
shall be recorded by Company in an appropriate ledger for the Account or the
appropriate subaccount of the Account.
1.7 Fund Information.
(a) The Funds will provide (or cause to be provided) to Company the
information set forth in Schedule C hereto. In addition, notwithstanding
anything contained in this Agreement to the contrary, each Fund hereby agrees
that Company may use such information in communications prepared for the
Contracts, including, but not limited to, application, marketing, sales and
other communications materials. The Funds will use their best efforts to provide
timely notification to Company of any
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change to their respective information described in Part I of Schedule C
including without limitation any change to the CUSIP number or symbol
designation of the Fund. If practicable, such notification shall be given to
Company at least ten (10) Business Days prior to the effective date of the
change, or the effect of the change with respect to transactions by the Account
in any affected Fund shall be delayed for a reasonable time following
notification hereunder.
(b) Notwithstanding anything to the contrary in this Agreement, upon
request, each Fund will provide Company with prospectuses, proxy materials,
financial statements, reports and other materials relating to such Fund in
sufficient quantity for each Contract owner invested in the Fund.
(c) With the exception of (i) listings of product offerings; (ii)
materials in the public domain (e.g., magazine articles and trade publications);
and (iii) materials used by Company on an internal basis only, Company agrees
not to furnish or cause to be furnished to any third parties or to display
publicly or publish any information or materials relating to the Funds, except
such written materials and information as may be distributed to Company by a
Fund or approved for distribution by the Fund upon Company's request.
1.8. The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive; each Fund's Shares may be sold
to other non-insurance product (retail) investors as well as purchasers for
insurance products such as Company, and the cash value of the Contracts may be
invested in other investment companies.
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ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts (a)
are, or prior to issuance will be, registered under the 1933 Act, or (b) are not
registered because they are properly exempt from registration under the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under the 1933 Act. The Company further represents and warrants
that the Contracts will be issued and sold in compliance in all material
respects with all applicable federal securities and state securities and
insurance laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law, that it has legally and validly established
the Account prior to any issuance or sale thereof as a segregated asset account
under Arkansas insurance laws, and that it (a) has registered or, prior to any
issuance or sale of the Contracts, will register the 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, or alternatively (b) has not
registered the Account in proper reliance upon an exclusion from registration
under the 1940 Act. The Company shall register and qualify the Contracts or
interests therein as securities in accordance with the laws of the various
states only if and to the extent deemed advisable by the Company.
2.2 The Company represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage, in an amount equal to the greater of $5 million or any
amount required by applicable federal or state law or regulation. The aforesaid
includes coverage for larceny and embezzlement issued by a reputable bonding
company. The Company agrees to make all reasonable efforts to see that this bond
or another bond containing these provisions is always in effect, and agrees to
notify the Fund and the Underwriter in the event that such coverage no longer
applies.
2.3. Each Fund represents and warrants that its Shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with applicable state and federal
securities laws and that the Fund is and shall remain registered under the 1940
Act. Each 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. Each Fund shall register and qualify the
Shares for sale in accordance with the laws of the various states only if and to
the extent deemed advisable by the Fund, VKAM or VKIA (as the case may be), or
the Underwriter.
2.4. Each Fund and the Underwriter agree to furnish information not
otherwise available to the Company which is required by state insurance law to
enable the Company to obtain the authority needed to issue the Contracts in any
applicable state, and including cooperating with the Company in any filings of
sales literature for the Contracts, to the extent notified thereof in writing by
the Company.
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2.5. Each Fund represents that it is lawfully organized and validly
existing under the laws of the State of Delaware and that it does and will
comply in all material respects with the 1940 Act.
2.6. 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 further represents that it will sell and distribute the Fund Shares
in accordance with any applicable state and federal securities laws.
2.7. The Company and the Underwriter each warrant and represent
that it is a member in good standing of the National Securities Clearing
Corporation and will abide by its rules and regulations.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company with as many copies
of the Funds' current prospectuses as the Company may reasonably request. The
Fund or the Underwriter shall bear the expense of printing copies of the current
prospectuses for the Fund that will be distributed to Contract owners, and the
Company shall bear the expense of printing copies of the Contract prospectuses
that are used in connection with offering the Contracts issued by the Company.
If requested by the Company in lieu thereof, the Funds shall provide such
documentation (including a final copy of the new prospectus on diskette at the
Fund's or Underwriter's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
for the Fund is amended) to have the prospectus for the Contracts and the Funds'
prospectuses printed together in one document (such printing of the Funds'
prospectuses for Contract owners to be at the Fund's or Underwriter's expense).
3.2. Each Fund's prospectus shall state that the current Statement
of Additional Information ("SAI") for the Fund is available, and the Underwriter
(or the Fund), at its expense, shall provide a reasonable number of copies of
such SAI free of charge to the Company for itself and for any owner of a
Contract who requests such SAI.
3.3. Each Fund shall provide the Company with reasonable
information regarding the Fund's expenses, which information may include a table
of fees and related narrative disclosure for use in any prospectus or other
descriptive document relating to a Contract.
3.4. Each Fund, at its or the Underwriter's expense, shall provide
the Company with copies of its proxy material, reports to shareholders, and
other communications to shareholders in such quantity as the Company shall
reasonably require for distributing to Contract owners.
3.5. The Company shall:
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(i) solicit voting instructions from Contract owners;
(ii) vote the Shares in accordance with instructions
received from Contract owners; and
(iii) vote Shares for which no instructions have been
received 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 or to the
extent otherwise required by law. The Company will vote Shares held in any
segregated asset account in the same proportion as Shares of such portfolio for
which voting instructions have been received from Contract owners, to the extent
permitted by law.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to
the Funds or their designee, each piece of sales literature or other promotional
material that the Company develops and in which such Fund (or a Designated
Portfolio thereof) or its investment adviser or the Underwriter is named. No
such material shall be used until approved by the subject Fund or its designee.
A Fund or its designee shall review such sales literature or promotional
material as soon as practicable after receipt, but in any event within ten (10)
Business Days after receipt of such material. Each Fund or its designee reserves
the right to reasonably object to the continued use of any such sales literature
or other promotional material in which the Fund (or a Designated Portfolio
thereof) or its investment adviser or the Underwriter is named, and no such
material shall be used if the Fund or its designee so object.
4.2. The Company shall not give any information or make any
representations or statements on behalf of a Fund or concerning the Fund or its
investment 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 or SAI for the Fund Shares, as such
registration statement and prospectus or SAI may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund, or in written
sales literature or other written promotional material approved by the Fund or
its designee or by the Underwriter, except with the permission of the Fund or
the Underwriter or the designee of either.
4.3. The Funds and the Underwriter, or their designee, shall
furnish, or cause to be furnished, to the Company, each piece of sales
literature or other promotional material that it develops and in which the
Company, and/or its Account, is named. No such material shall be used until
approved by the Company. The Company will be deemed to have approved such sales
literature or promotional material unless the Company objects or provides
comments to the
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subject Fund, the Underwriter, or their designee within ten (10) Business Days
after receipt of such material. The Company reserves the right to reasonably
object to the continued use of any such sales literature or other promotional
material in which the Company and/or its Account is named, and no such material
shall be used if the Company so objects.
4.4. The Funds and the Underwriter shall not give any information
or make any representations on behalf of the Company or concerning the Company,
the Account, or the Contracts other than the information or representations
contained in a registration statement and prospectus (which shall include an
offering memorandum, if any, if the Contracts issued by the Company or interests
therein are not registered under the 1933 Act), or SAI for the Contracts, as
such registration statement, prospectus, or SAI may be amended or supplemented
from time to time, or in published reports for the Account which are in the
public domain or approved by the Company for distribution to Contract owners, or
in sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company or as otherwise required by
law.
4.5. The Funds or Underwriter will each provide to the Company at
least one complete copy of all prospectuses, SAIs, reports, proxy statements,
relevant sales literature and other promotional materials, and all amendments to
any of the above, that relate to the Fund or its Shares, promptly after the
filing of such document(s) with the SEC or other regulatory authorities. The
Funds or the Underwriter will provide a copy of the registration statements,
relevant sales literature and other promotional materials as exist, upon request
from time to time.
4.6. The Company will provide to the Funds at least one complete
copy of all registration statements, prospectuses (which shall include an
offering memorandum, if any, if the Contracts issued by the Company or interests
therein are not registered under the 1933 Act), SAIs, reports, solicitations for
voting instructions, sales literature and other promotional materials, and all
amendments to any of the above, that relate to the Contracts or the Account,
promptly after the filing of such document(s) with the SEC or other regulatory
authorities. The Company shall provide to the Funds and the Underwriter any
complaints received from the Contract owners pertaining to the Funds or the
Designated Portfolio.
4.7. The Funds will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Designated Portfolio,
and of any material change in a Fund's registration statement, particularly any
change resulting in a change to the registration statement or prospectus for any
Account. The Funds will work with the Company so as to enable the Company to
solicit proxies from Contract owners, or to make changes to its prospectus or
registration statement, in an orderly manner. Company acknowledges that periodic
release of the Fund prospectuses and shareholder reports do not necessarily
coincide with Contract prospectus annual updates.
4.8. For purposes of this Article IV, the phrase "sales literature
and other promotional materials" includes, but is not limited to, any of the
following that refer to a Fund:
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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 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, reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available with
regard to the Fund, and registration statements, prospectuses, SAIs, shareholder
reports, proxy materials, and any other communications distributed or made
generally available with regard to the Fund; provided however, "sales literature
and other promotional materials" shall not include information not deemed
relevant by Underwriter to sale of the Funds to the Accounts.
ARTICLE V. Fees and Expenses
5.1. All expenses incident to performance by a Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
Shares are registered and authorized for issuance in accordance with applicable
federal securities law and, if and to the extent deemed advisable by the Fund,
in accordance with applicable state securities laws prior to their sale. Except
as otherwise provided for herein, 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, setting in type and printing the proxy
materials and reports to shareholders (including the costs of printing a
prospectus that constitutes an annual report), the preparation of all statements
and notices required of management investment companies by any federal or state
law, and all taxes on the issuance or transfer of the Fund's Shares.
5.2. The Company shall bear the expenses of distributing the Funds'
prospectuses to owners of Contracts issued by the Company and of distributing
the Funds' proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification and Qualification
6.1. Each Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Code, and that it will
notify the Company immediately upon having a reasonable basis for believing that
it has ceased to so qualify or that it might not so qualify in the future.
Company acknowledges that the Funds and Portfolios are management investment
companies generally sold to retail investors and not insurance-dedicated funds;
the Funds are not diversified or qualified to be sold exclusively to insurance
companies as provided by IRC Section 817(h).
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ARTICLE VII. Indemnification
7.1. Indemnification By the Company
7.1(a). The Company agrees to indemnify and hold harmless the
Funds and the Underwriter and each of their trustees/directors and officers, and
each person, if any, who controls the Funds or the Underwriter within the
meaning of Section 15 of the 1933 Act or who is under common control with the
Underwriter (collectively, the "Indemnified Parties" for purposes of this
Section 7.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue statement
or alleged untrue statements of any material fact contained in
the registration statement, prospectus (which shall include a
written description of a Contract that is not registered under
the 1933 Act), or SAI for the Contracts or contained in sales
literature for the Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein 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
written information furnished to the Company by or on behalf
of a Fund for use in the registration statement, prospectus or
SAI for the Contracts or in the Contracts or sales literature
(or any amendment or supplement) 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, SAI, or
sales literature of a Fund not supplied by the Company or
persons under its control) or wrongful conduct of the Company
or its agents or persons under the Company's authorization or
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, SAI, or sales literature of a 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 furnished to a Fund by or on behalf
of the Company; or
12
(iv) arise as a result of any material failure by the
Company to provide the services and furnish the materials
under the terms of this Agreement; or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company;
as limited by and in accordance with the provisions of Sections 7.1(b) and
7.1(c) hereof.
7.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of its obligations or
duties under this Agreement.
7.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Company in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim 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 Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, the Company shall be entitled to participate, at
its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
13
7.2. Indemnification by the Underwriter
7.2(a). The Underwriter agrees to indemnify and hold harmless
the Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other 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:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in
the registration statement or prospectus or SAI or sales
literature of a Fund (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with
information furnished to the Underwriter or a Fund by or on
behalf of the Company for use in the registration statement,
prospectus or SAI for a Fund or in 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, SAI or
sales literature for the Contracts not supplied by the
Underwriter or persons under their control) or wrongful
conduct of a Fund or the Underwriter or persons under their
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, SAI or sales literature covering the
Contracts, 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 a Fund or the
Underwriter; or
(iv) arise as a result of any failure by a Fund or the
Underwriter to provide the services and furnish the materials
under the terms of this Agreement; or
14
(v) (v)arise out of or result from any material breach of
any representation and/or warranty made by a Fund or the
Underwriter in this Agreement or arise out of or result from
any other material breach of this Agreement by a Fund or the
Underwriter;
as limited by and in accordance with the provisions of Sections 7.2(b) and
7.2(c) hereof.
7.2(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 or such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Account, whichever is applicable.
7.2(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
on account of this indemnification provision. In case any such action is brought
against the Indemnified Party, 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.
ARTICLE VIII. Applicable Law
8.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
8.2. This Agreement shall be subject to the provisions of the 1933,
1934, and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules, and regulations as the SEC
may grant and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE IX. Termination
15
9.1. This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party, for any reason with respect
to some or all Designated Portfolios, by ninety (90)
days advance written notice delivered to the other
parties; or
(b) termination by the Company by written notice to a
Fund and the Underwriter based upon the Company's
determination that Shares of the Fund are not
reasonably available to meet the requirements of the
Contracts; or
(c) termination by the Company by written notice to a
Fund and the Underwriter in the event any of the
Shares are not registered, issued, or sold in
accordance with applicable state and/or federal law
or such law precludes the use of such Shares as the
underlying investment media of the Contracts issued
or to be issued by the Company; or
(d) termination by a Fund or the Underwriter in the event
that formal administrative proceedings are instituted
against the Company by the NASD, the SEC, the
Insurance Commissioner, or like official of any state
or any other regulatory body regarding the Company's
duties under this Agreement or related to the sale of
the Contracts, the operation of any Account, or the
purchase of the Shares; provided, however, that the
Fund or the Underwriter determines in its sole
judgment exercised in good faith, that any such
administrative proceedings will have a material
adverse effect upon the ability of the Company to
perform its obligations under this Agreement; or
(e) termination by the Company in the event that formal
administrative proceedings are instituted against a
Fund or the Underwriter by the NASD, the SEC, or any
state securities or insurance department, or any
other regulatory body; provided, however, that the
Company determines in its sole judgment exercised in
good faith, that any such administrative proceedings
will have a material adverse effect upon the ability
of the Fund or the Underwriter to perform its
obligations under this Agreement; or
(f) termination by the Company by written notice to the
subject Fund and the Underwriter with respect to any
Designated Portfolio in the event that such Portfolio
ceases to qualify as a Regulated Investment Company
under Subchapter M as specified in Section 6.1
hereof, or if the Company reasonably believes that
such Portfolio may fail to so qualify or comply; or
16
(g) termination by a Fund or the Underwriter by written
notice to the Company, if the Fund or the Underwriter
respectively, shall determine, in their sole judgment
exercised in good faith, that the Company has
suffered a material adverse change in its business,
operations, financial condition, or prospects since
the date of this Agreement or is the subject of
material adverse publicity; or
(h) termination by the Company by written notice to the
subject Fund and the Underwriter, if the Company
shall determine, in its sole judgment exercised in
good faith, that the Fund, its investment adviser, 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; or
(i) termination by the Company upon any substitution of
the shares of another investment company or series
thereof for Shares in accordance with the terms of
the Contracts, provided that the Company has given at
least 45 days prior written notice to the subject
Fund and the Underwriter of the date of substitution.
9.2. Notwithstanding any termination of this Agreement, the subject
Fund and the Underwriter shall, at the option of the Company, continue to make
available additional Shares 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"), unless the
Underwriter requests that the Company seek an order pursuant to Section 26(c) of
the 1940 Act to permit the substitution of other securities for the Shares. The
Underwriter agree to split the cost of seeking such an order, and the Company
agrees that it shall reasonably cooperate with the Underwriter and seek such an
order upon request. Specifically, the owners of the Existing Contracts may be
permitted to reallocate investments in the subject Fund, redeem investments in
the Fund, and/or invest in the Fund upon the making of additional purchase
payments under the existing Contracts (subject to any such election by the
Underwriter). The parties agree that this Section 9.2 shall not apply to any
terminations under Section 9.1(i) of this Agreement.
9.3. The Company shall not redeem Shares attributable to the
Contracts (as opposed to Shares attributable to the Company's assets held in the
Account) except (i) as necessary to implement Contract owner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"), (iii) upon 45 days
prior written notice to the Subject Fund and Underwriter, as permitted by an
order of the SEC pursuant to Section 26(c) of the 1940 Act, but only if a
substitution of other securities for the Shares is consistent with the terms of
the Contracts, (iv) as permitted under the terms of the Contract, or (v) upon
the liquidation of a Designated Portfolio in accordance with Section 1.1. Upon
request, the
17
Company will promptly furnish to the Fund and the Underwriter reasonable
assurance that any redemption pursuant to clause (ii) above is a Legally
Required Redemption. Furthermore, except in cases where permitted under the
terms of the Contacts, the Company shall not prevent Contract owners from
allocating payments to a Portfolio that was otherwise available under the
Contracts without first giving the subject Fund or the Underwriter 45 days
notice of its intention to do so.
9.4. Notwithstanding any termination of this Agreement, each
party's obligation under Article VII to indemnify the other parties shall
survive.
ARTICLE X. 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.
If to a Fund: Fund Name (Company to insert)
Attn: Xxxx Xxxxxxxx
Treasurer
Xxx Xxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Copy to: Xxx Xxxxxx Investments Inc.
Attn: General Legal Counsel
Xxx Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
18
If to the Company: Xxxxx X. Xxxxxxxx, Esq.
Senior Vice President and General Counsel
ML Life Insurance Company of New York
0 Xxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
If to the Underwriter: Xxx Xxxxxx Funds Inc.
Attn: Xxxxxx Xxxxxxx
Executive Director
Xxx Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Copy to: Xxx Xxxxxx Investments Inc.
Attn: General Legal Counsel
Xxx Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
ARTICLE XI. Miscellaneous
11.1. All persons dealing with a Fund must look solely to the
property of the subject Fund, and in the case of a series company, the
respective Designated Portfolios listed on Schedule B hereto as though each such
Designated Portfolio had separately contracted with the Company and the
Underwriter for the enforcement of any claims against the Fund. The parties
agree that neither the Board, officers, agents, or shareholders of a Fund assume
any personal liability or responsibility for obligations entered into by or on
behalf of the Fund.
11.2. 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 without the express written consent
of the affected party until such time as such information has come into the
public domain.
11.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
11.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
19
11.5. 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.
11.6. Each party hereto shall cooperate with each other party and
all appropriate governmental authorities (including without limitation the SEC,
the NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Arkansas Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable contract
operations of the Company are being conducted in a manner consistent with the
Arkansas variable annuity laws and regulations and any other applicable law or
regulations.
11.7. 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.
11.8. 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.
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 of the date
specified below.
ML LIFE INSURANCE COMPANY OF NEW YORK:
By its authorized officer
By:______________________________
Name: Xxxx X. Xxxxx
Title: Vice President & Secretary
XXX XXXXXX EQUITY TRUST:
By its authorized officer
By: __________________________
Name: __________________________
Title: __________________________
00
XXX XXXXXX XXXXXXXX XXXX:
By its authorized officer
By: __________________________
Name: __________________________
Title: __________________________
XXX XXXXXX EQUITY AND INCOME FUND:
By its authorized officer
By: __________________________
Name: __________________________
Title: __________________________
XXX XXXXXX FUNDS INC.
By its authorized officer
By: __________________________
Name: __________________________
Title: __________________________
21
SCHEDULE A
Dated: October 11, 2002
SEPARATE ACCOUNTS OF THE COMPANY
Xxxxxxx Xxxxx Life Variable Annuity Separate Account D
XXXXXXXXX
Xxxxxxxx # XX-XX-000
00
XXXXXXXX X
DESIGNATED PORTFOLIOS AND CLASSES
Dated: October 11, 2002
FUND CLASS
---- -----
Xxx Xxxxxx Equity Trust
- Xxx Xxxxxx Aggressive Growth Funds A
Xxx Xxxxxx Xxxxxxxx Fund A
Xxx Xxxxxx Equity and Income Fund A
23
SCHEDULE C
FUND MATERIALS
PART I. Fund Description
- Each Fund or the Underwriter will provide to Company or a common
service provider designated by Company within ten (10) days of the end
of each month, the Fund's average annual return for the 1, 5, and 10
year periods ending the current month on a Net Asset Value basis.
- Subject to policies and procedures of the subject Fund, upon its
reasonable request each Fund or the Underwriter will provide to Company
a description of the Fund including holdings, portfolio composition,
largest sectors and US/foreign allocation and a statement of objective
in a mutually acceptable format.
Part II. Fund Information and Materials
Each Fund or the Underwriter will use best reasonable efforts to
provide to Company the following information and materials as relate to the Fund
on an as needed basis, as requested by Company:
- A supply of materials relating to the Fund (prospectuses and
shareholder reports) to include with contract application
sales, marketing and communication materials.
- Specific investment performance information that may be
requested that cannot be obtained from the prospectus. This
would include specific calculations on various performance
parameters and will require an aggressive turnaround time
(usually 5 business days).
24
