EXHIBIT (8)(s)
PARTICIPATION AGREEMENT
AMONG
ML LIFE INSURANCE COMPANY OF NEW YORK,
▇▇▇▇▇▇▇▇ VALUE FUND SERIES, INC., AND
▇▇▇▇▇▇▇▇ ADVISORS, 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"),
▇▇▇▇▇▇▇▇ Value Fund Series, Inc. (the "Fund"), a Maryland corporation, and
▇▇▇▇▇▇▇▇ Advisors, Inc. (the "Underwriter"), a Delaware corporation.
WHEREAS, the shares of beneficial interests of the Fund are divided
into several series of shares, each designated a "Portfolio" and representing
the interest in a particular managed portfolio of securities and other assets;
WHEREAS, the Fund is 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, J. & ▇. ▇▇▇▇▇▇▇▇ & Co., Incorporated (the "Adviser"), a
Delaware company, which serves as investment adviser to the Fund, is duly
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended;
WHEREAS, the Underwriter, which serves as distributor to the Fund, 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 Schedule A hereto, as it may be amended
from time to time by mutual written agreement (the "Contracts");
WHEREAS, each Portfolio issues shares to the general public and
pursuant to this Agreement, will issue shares to the separate accounts of
insurance companies ("Participating Insurance Companies") to fund variable
annuity contracts sold to certain qualified pension and retirement plans;
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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 Fund 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 Fund, and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund has granted to the Underwriter exclusive authority to
distribute the Fund's shares, and pursuant to a written agreement between the
Fund and the Underwriter, the Underwriter is authorized to make available to the
Company for purchase on behalf of the Account Fund 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 Directors of the Fund (the "Board") may suspend or
terminate the offering of Shares of any Designated Portfolio or class thereof,
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 Fund 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 Company shall not redeem
Shares attributable to Contract owners except in the circumstances permitted in
Section 9.4 of this Agreement, and (ii) the Fund may delay redemption of Shares
of any Designated Portfolio to the extent permitted by the 1940 Act, and any
rules, regulations, or orders thereunder.
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1.3. Purchase and Redemption Procedures
(a) The Fund hereby appoints the Company as an agent of the Fund
for the limited purpose of receiving purchase and redemption requests on behalf
of 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. All
transactions in Account shares shall be executed through the Omnibus Accounts of
Company's affiliate ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. ("Omnibus
Accounts"). Receipt of any such request (or relevant transactional information
therefor) 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") by the Company as such limited agent of the Fund 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 constitute receipt by the Fund on
that same Business Day, provided that the Fund receives notice of such request
by 10 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 a.m. Eastern Time on the next following Business Day. Company
will provide to the 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 Plan prior
to 4:00 p.m. Eastern Time on the prior Business Day for each of the Funds. If
for any reason Company or its affiliate is unable to transmit the file(s) with
respect to any Business Day, Company or its affiliate will notify the Transfer
Agent or its designee by 11:00 a.m. Eastern Time on the next following Business
Day and provided that Company or its affiliate notify the Transfer Agent or its
designee, 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.
(b) The Company shall pay for Shares on the same day that it
notifies the Fund of a purchase request for such 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 (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. Notwithstanding any provision of this Agreement to
the contrary, for purchase and redemption instructions with respect to any
Shares, Company and the Fund will settle the purchase and redemption
transactions referred to herein, via the NSCC Fund/SERV platform settlement
process on the next Business Day following the effective trade date. The Fund or
its designee 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").
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(c) To the extent practicable, payment for Shares 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 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
Fund reserves the right to redeem Shares in assets other than cash and to delay
payment of redemption proceeds to the extent permitted under Section 22(e) of
the 1940 Act and any Rules thereunder, and in accordance with the procedures and
policies of the Fund as described in the then current prospectus. The Fund 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.
(d) Any purchase or redemption request for Shares held or to be
held in the Company's general account shall be effected at the closing net asset
value per share next determined after the Fund's receipt of such request as set
forth in Section 1.3(a) herein.
1.4. The Fund shall use its best efforts to make the closing net
asset value per Share for each 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 Fund's 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 Fund, 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 supplied by the Company to
the Fund or the Underwriter. The Underwriter agrees to notify the Company
promptly whenever an error is made in the pricing of shares of the Fund and to
indemnify and hold the Company harmless against any and all losses, claims,
damages,
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liabilities or expenses (including, but not limited to, any direct
losses (but not any indirect or consequential damages) suffered by our clients
and any additional costs and expenses related to the price correction, such as
research costs, expenses related to developing computer software specifically
for the price correction, processing overtime and notices to customers) to which
we may become subject insofar as any such loss, claim, damage, liability or
expense arises out of or is based on any material error made in the pricing of
shares of the Fund. To the extent such costs and expenses are expected to exceed
$15,000 in respect of any one pricing error the Company shall give the
Underwriter notice of such expectation. Payment shall be made by the Underwriter
promptly upon the receipt of a ▇▇▇▇ from the Company stating the indemnifiable
costs of the price correction and the expenses related thereto. In determining
materiality for the purposes of this provision, the Company agrees to follow the
pricing error guidelines that the Securities and Exchange Commission has
accepted for the net asset value materiality standard.
1.5. Notwithstanding anything to the contrary contained in this
Agreement, the Fund will make available for purchase by the Company, on its
behalf and 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 its behalf and on behalf of the Account. The Fund
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 additional Shares of that Designated
Portfolio. Company will reinvest the 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 cash.
The parties understand and agree that all transactions of Account shares
contemplated herein shall be executed through the Omnibus Account and that
Company's affiliate, ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇, Inc. 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 Transfer Agent or its designee shall notify the Company promptly
of the number of Shares so issued as payment of such dividends and
distributions.
1.6. Issuance and transfer of Shares shall be by book entry only
and executed through the Omnibus Accounts. Stock certificates will not be issued
to the Company or the Account. Purchase and redemption orders for Fund shares
shall be recorded in an appropriate ledger for the Account or the appropriate
subaccount of the Account.
1.7 Fund Information.
(a) The Underwriter or its designee 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,
the Underwriter 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
Underwriter or its
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designee will provide timely notification to Company of any change to the CUSIP
number or symbol designation of a Fund. 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 and if necessary, shall be delayed for a reasonable time
following notification hereunder. The Underwriter agrees to provide notification
of changes to other information described in Part I of Schedule C at such times
and in such a format as the Underwriter and the Company reasonably agree.
(b) Notwithstanding anything to the contrary in this Agreement,
upon request, the Underwriter will provide Company with prospectuses, proxy
materials, financial statements, reports and other materials relating to each
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 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
materials and information as may be distributed to Company by Underwriter or
approved for distribution by Fund upon Company's request.
1.8. The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive; the Fund's shares may be sold
to other investors and the cash value of the Contracts may be invested in other
investment companies. The Company acknowledges that shares of the Fund are
offered and sold directly to members of the general public, and are not and will
not be sold directly to insurance companies and their separate accounts and
certain qualified retirement plus in accordance with Section 817 (h)(4) of the
Internal Revenue Code of 1986, as amended, and Treasury Regulation 1.817-5.
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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 Fund represents and warrants that Shares sold pursuant to
this Agreement shall be registered under the 1933 Act and, 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 ▇▇▇▇ ▇▇▇. The
Fund shall amend the registration statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund, the Adviser, or the Underwriter.
2.3. The Fund and the Underwriter agree to comply in all material
respects with any applicable state insurance laws or regulations (including the
furnishing of 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; provided that such compliance
is not inconsistent with any other laws or regulations applicable to the Fund or
the Underwriter.
2.4. The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Maryland 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
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that it will sell and distribute the Fund shares in compliance with all material
respects with any applicable state and federal securities laws.
2.7. The Fund represents and warrants that all of its
trustees/directors, officers, employees, investment advisers, and other
individuals or entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimum coverage as required currently by Rule 17g-1 of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company with as many copies
of the Fund's current prospectus as the Company may reasonably request. The Fund
or the Underwriter shall bear the expense of printing copies of the current
prospectus for the Fund that will be distributed to existing and prospective
Contract owners whose contracts are funded by the Fund's shares, and the Company
shall bear the expense of printing copies of the Contract's prospectus that are
used in connection with offering the Contracts issued by the Company. If
requested by the Company in lieu thereof, the Fund 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 Fund's
prospectus printed together in one document (such printing of the Fund's
prospectus and profiles for existing and prospective Contract owners whose
contracts are funded by the Fund's shares to be at the Fund's or Underwriter's
expense). In such event, the Underwriter or its designee shall reimburse the
Company for the pro-rata share of the printing costs (excluding any non-printing
costs such as composition and document layout costs) for those pages that
contain the Fund's prospectus or periodic reports to shareholders that the
Company may reasonably print for distribution to existing and prospective
Contract owners whose Contracts are funded by Shares of the Fund.
3.2. The 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. Upon the reasonable request of the Company, the Fund shall
provide the Company with 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.
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3.4. The 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:
(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 for it's own 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 Fund, the Underwriter, or their designees, each piece of sales literature or
other promotional material that the Company develops and in which the Fund (or a
Designated Portfolio thereof) or the Adviser or the Underwriter is named. No
such material shall be used until approved by the Fund, the Underwriter or their
designees. The Fund, the Underwriter, or their designees will be deemed to have
approved such sales literature or promotional material unless the Fund or its
designee objects or provides comments to the Company within ten (10) Business
Days after receipt of such material. The Fund, the Underwriter, or their
designees reserve 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 the Adviser or the Underwriter is named, and no
such material shall be used if the Fund, the Underwriter or their designees so
object.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund or
the Adviser or the Underwriter in connection with the sale of the Contracts
other than the information or representations contained in the registration
statement or profiles or prospectus or SAI for the Fund shares, as such
registration statement and profiles and prospectus or SAI may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
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4.3. The Fund 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 Fund, the Underwriter, or their designee within ten 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 Fund 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.
4.5. The Fund will provide to the Company at least one complete
copy of all registration statements, profiles, prospectuses, SAIs, shareholder
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, promptly after the
filing of such document(s) with the SEC or other regulatory authorities.
4.6. The Company will provide to the Fund or the Underwriter 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, applications for exemptions, requests for no-action
letters, 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 Fund and the
Underwriter any complaints received from the Contract owners pertaining to the
Fund or the Designated Portfolio.
4.7. The Fund 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 the Fund's registration statement, particularly
any change resulting in a change to the registration statement or prospectus for
any Account. The Fund 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.
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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 the Fund or any affiliate of the Fund: 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 to
some or all agents or employees, and registration statements, prospectuses,
SAIs, shareholder reports, proxy materials, and any other communications
distributed or made generally available with regard to the Fund.
ARTICLE V. Fees and Expenses
5.1. All expenses incident to performance by the 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 law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. As set forth in
Section 3.1 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 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 Fund's
prospectus to owners of Contracts in connection with the offer of Contracts,
issued by the Company and of distributing the Fund's proxy materials and reports
to such Contract owners.
ARTICLE VI. Diversification and Qualification
6.1. The Fund represents that it is or will be qualified as a
Regulated Investment Company under Subchapter M of the Code, and that it will
use its best efforts to maintain such qualification (under Subchapter M or any
successor or similar provisions) 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.
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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 Fund and
the Underwriter and each of its trustees/directors and officers, and each
person, if any, who controls the Fund 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
information furnished to the Company by or on behalf of the
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) 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 of the 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 the Fund or
any amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading if such a statement or omission was made in
reliance upon information furnished to the 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.
7.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund shares or the Contracts or the operation
of the Fund.
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 profile or prospectus or SAI or
sales literature of the Fund (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to
make the 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 the Fund by or on
behalf of the Company for use in the registration statement,
profile, prospectus or SAI for the 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 the 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 the Fund or the
Underwriter; or
(iv) arise as a result of any failure by the Fund or the
Underwriter to provide the services and furnish the materials
under the terms of this Agreement (including a failure of the
Fund, whether unintentional or in good faith or
14
otherwise, to comply with the qualification requirements
specified in Section 6.1 of this Agreement); or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the Fund or the
Underwriter in this Agreement or arise out of or result from
any other material breach of this Agreement by the Fund or the
Underwriter; or
(vi) arise out of or result from the materially incorrect
or untimely calculation or reporting of the daily net asset
value per share or dividend or capital gain distribution rate;
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.
7.2(d). The Indemnified Party will promptly notify the Underwriter of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of the Account.
15
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
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 three (3)
months advance written notice delivered to the other
parties; or
(b) termination by the Company by written notice to the
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 the
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 the 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 the
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
16
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
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
(g) termination by the 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
Fund and the Underwriter, if the Company shall
determine, in its sole judgment exercised in good
faith, that the Fund, the 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 Fund and
the Underwriter of the date of substitution; or
(j) transaction by any party upon another party's failure
to cure a material breach of any provision of this
Agreement within thirty (30) days after written
notice thereof.
9.2. (a) Notwithstanding any termination of this Agreement, the
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"), provided the
Company continues to pay the costs set forth in Section 5.2 and 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
17
and seek such an order upon request. Specifically, the owners of the Existing
Contracts may 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 (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.
(b) In the event of a termination of this agreement pursuant to
Section 9.1 ( other than 9.1(i)), the Company shall promptly
notify the Fund and the Underwriter whether the Fund and the
Underwriter will be required to continue to make shares
available after such termination; in such circumstances, the
provisions of this Agreement shall remain in effect except for
Section 9.1 hereof, and thereafter any party may terminate the
Agreement ( the "Final Termination"), as so continued pursuant
this Section 9.2,upon prior written notice to the other
parties, such notice to be for a period this reasonable under
the circumstances but, if given by the Fund or the
Underwriter, need not be greater than six months.
(c) The Company, the Fund and the Underwriter agree to cooperate
in respect of the measures that are necessary or appropriate
to effect the Final Termination of this Agreement, and will
give reasonable assistance to each other in that regard,
including steps necessary or appropriate to ensure that an
Account owns no shares of the Fund after the Final Termination
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 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,
or (iv) as permitted under the terms of the Contract. Upon request, the 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 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 and the
Company's obligation under Section 3.5 regarding pass-through and voting shall
survive.
18
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 the Fund: ▇▇▇▇▇▇▇▇ Value Fund Series, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
If to the Company: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Senior Vice President and General Counsel
ML Life Insurance Company of New York
▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
If to the Underwriter: ▇▇▇▇▇▇▇▇ Advisors, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
ARTICLE XI. Miscellaneous
11.1. All persons dealing with the Fund must look solely to the
property of the 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 nor any member thereof, officers, agents, or shareholders of the 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.
19
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.
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. The Company agrees to pay the reasonable documented costs and
expenses incurred by the Fund or the Underwriter in connection with responding
to such a request.
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.
20
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 COMPANYOF NEW YORK:
By its authorized officer
By:
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President & Secretary
▇▇▇▇▇▇▇▇ VALUE FUND SERIES, INC.
By its authorized officer
By: ______________________________
Name: ______________________________
Title: ______________________________
▇▇▇▇▇▇▇▇ ADVISORS, INC.
By its authorized officer
By: ______________________________
Name: ______________________________
Title: ______________________________
21
SCHEDULE A
SEPARATE ACCOUNTS OF THE COMPANY
Dated: October 11, 2002
▇▇▇▇▇▇▇ ▇▇▇▇▇ Life Variable Annuity Separate Account D.
22
SCHEDULE B
DESIGNATED PORTFOLIOS AND CLASSES
Dated: October 11, 2002
▇▇▇▇▇▇▇▇ Small-Cap Value Fund Class A
23
SCHEDULE C
FUND MATERIALS
Part I. Fund Description
- The Fund 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.
- The Fund will provide to Company a description of the Fund
including holdings, portfolio composition, largest sectors and
geographical allocation and a statement of objective in a
mutually acceptable format.
Part II. Fund Information and Materials
The Fund will provide to Company the following information and
materials on an as needed basis, as requested by Company:
- A supply of materials relating to the Funds (prospectuses,
quarterly reports and other brochures) 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