See All of This Company's Exhibits
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0000950109-96-008175.txt : 19961211
0000950109-96-008175.hdr.sgml : 19961211
ACCESSION NUMBER: 0000950109-96-008175
CONFORMED SUBMISSION TYPE: 485BPOS
PUBLIC DOCUMENT COUNT: 23
FILED AS OF DATE: 19961210
EFFECTIVENESS DATE: 19961210
SROS: NONE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
CENTRAL INDEX KEY: 0000880793
STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000]
STATE OF INCORPORATION: AR
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 485BPOS
SEC ACT: 1933 Act
SEC FILE NUMBER: 033-43773
FILM NUMBER: 96678021
FILING VALUES:
FORM TYPE: 485BPOS
SEC ACT: 1940 Act
SEC FILE NUMBER: 811-06459
FILM NUMBER: 96678022
BUSINESS ADDRESS:
STREET 1: 800 SCUDDERS MILL RD
CITY: PLAINSBORO
STATE: NJ
ZIP: 08536
BUSINESS PHONE: 6092821429
485BPOS
1
POST-EFFECTIVE AMENDMENT NO. 10 TO FORM N-4
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 9, 1996
REGISTRATION NO. 33-43773
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-4 [_]
REGISTRATION STATEMENT UNDER THESECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. [_]
[X]
POST-EFFECTIVE AMENDMENT NO. 10
AND
REGISTRATION STATEMENT UNDER THE [_]
INVESTMENT COMPANY ACT OF 1940
[X]
AMENDMENT NO. 11
(CHECK APPROPRIATE BOX OR BOXES)
----------------
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
(EXACT NAME OF REGISTRANT)
MERRILL LYNCH LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(609) 282-1429
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
----------------
BARRY G. SKOLNICK, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
MERRILL LYNCH LIFE INSURANCE COMPANY
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
COPY TO:
STEPHEN E. ROTH, ESQ.
SUTHERLAND, ASBILL & BRENNAN, L.L.P.
1275 PENNSYLVANIA AVENUE, NW
WASHINGTON, D.C. 20004-2404
----------------
The Registrant has registered an indefinite amount of securities pursuant to
Rule 24f-2 under the Investment Company Act of 1940. The Rule 24f-2 notice for
fiscal year 1995 was filed on February 28, 1996.
It is proposed that this filing will become effective (check appropriate
space):
[X]immediately upon filing pursuant to paragraph (b) of Rule 485
[_]on pursuant to paragraph (b) of Rule 485
(date)
[_]60 days after filing pursuant to paragraph (a) of Rule 485
[_]on pursuant to paragraph (a) of Rule 485
(date)
EXHIBIT INDEX CAN BE FOUND ON PAGE C-7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495(A) UNDER THE 1933 ACT)
N-4 ITEM NUMBER AND CAPTION LOCATION
--------------------------- --------
PART A
1. Cover Page................ Cover Page
2. Definitions............... Definitions
3. Synopsis.................. Fee Table
4. Condensed Financial
Information............... Accumulation Unit Value Table; Yields and
Total Returns
Part B: Calculation of Yields and Total
Returns
5. General Description of
Registrant, Depositor,
and Portfolio Companies... Merrill Lynch Life Insurance Company; The
Accounts; Investments of the Accounts
6. Deductions and Expenses... Capsule Summary of the Contract (Fees and
Charges; Transfers; Withdrawals); Charges
and Deductions; Description of the
Contract (Accumulation Units; Transfers;
Withdrawals and Surrenders; Payments to
Contract Owners)
7. General Description of
Variable Annuity
Contracts................ Capsule Summary of the Contract (The
Accounts; The Funds; Premiums; Annuity
Payments; Transfers; Withdrawals, Ten Day
Review); The Accounts; Description of the
Contract; Other Information (Voting
Rights; State Regulation)
8. Annuity Period............ Capsule Summary of the Contract (Annuity
Payments); Description of the Contract
(Annuity Date; Annuity Options)
9. Death Benefit............. Capsule Summary of the Contract (Death
Benefit); Description of the Contract
(Death Benefit; Death of Annuitant);
Federal Income Tax (Taxation of Annuities)
10. Purchases and Contract
Value..................... Capsule Summary of the Contract (The
Accounts; Premiums); Description of the
Contract (Premiums; Premium Investments;
Accumulation Units); Other Information
(Reports to Contract Owners)
Part B: Other Information (Principal
Underwriter)
11. Redemptions............... Capsule Summary of the Contract (Ten Day
Review); Charges and Deductions;
Description of the Contract (Issuing the
Contract; Ten Day Right to Review;
Withdrawals and Surrenders; Payments to
Contract Owners; Annuity Options)
12. Taxes..................... Capsule Summary of the Contract (Fees and
Charges; Withdrawals) Charges and
Deductions (Premium Taxes; Other Charges);
Description of the Contract (Accumulation
Units; Death Benefit; Withdrawals and
Surrenders; Annuity Options); Federal
Income Taxes
N-4 ITEM NUMBER AND CAPTION LOCATION
--------------------------- --------
13. Legal Proceedings.......... Other Information (Legal Proceedings)
14. Table of Contents of the
Statement of Additional
Information................ Table of Contents of the Statement of
Additional Information
PART B
15. Cover Page................. Cover Page
16. Table of Contents.......... Table of Contents
17. General Information and
History.................... Part A: Merrill Lynch Life Insurance
Company; The Accounts; Investments of the
Accounts
Part B: Other Information (General
Information and History)
18. Services................... Part A: Other Information (Experts)
Part B: Administrative Services
Arrangements
19. Purchase of Securities
Being Offered.............. Part A: Other Information (Selling the
Contract)
20. Underwriters............... Part A: Other Information (Selling the
Contract)
Part B: Other Information (Principal
Underwriter)
Calculation of Performance
21. Data....................... Part A: Yields and Total Returns
Part B: Calculation of Yields and Total
Returns
22. Annuity Payments........... Part A: Capsule Summary of the Contract
(Annuity Payments); Description of the
Contract (Annuity Date; Annuity Options)
23. Financial Statements....... Other Information (Financial Statements);
Financial Statements of Merrill Lynch
Variable Annuity Separate Account A;
Financial Statements of Merrill Lynch Life
Variable Annuity Separate Account B;
Financial Statements of Merrill Lynch Life
Insurance Company.
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered in Part C to this Registration Statement.
PROSPECTUS
DECEMBER 9, 1996
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
AND
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT B
FLEXIBLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
ALSO KNOWN AS
MODIFIED SINGLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY
MERRILL LYNCH LIFE INSURANCE COMPANY
Home Office: Little Rock, Arkansas 72201
Service Center: P.O. Box 44222,
Jacksonville, Florida 32231-4222
4804 Deer Lake Drive East,
Jacksonville, Florida 32246
Phone: (800) 535-5549
OFFERED THROUGH
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
The individual deferred variable annuity contract described in this Prospectus
(the "Contract") is designed to provide comprehensive and flexible ways to
invest and to create a source of income protection for later in life through
the payment of annuity benefits. The Contract is issued by Merrill Lynch Life
Insurance Company ("Merrill Lynch Life") both on a nonqualified basis, and as
an Individual Retirement Annuity ("IRA") that is given qualified tax status.
Premiums will be allocated as the contract owner directs into one or more
subaccounts of Merrill Lynch Life Variable Annuity Separate Account A
("Account A") and/or Merrill Lynch Life Variable Annuity Separate Account B
("Account B"), (together, the "Accounts"). The assets of each of the
subaccounts will be invested in a corresponding mutual fund portfolio of the
Merrill Lynch Variable Series Funds, Inc.; AIM Variable Insurance Funds, Inc.;
Alliance Variable Products Series Fund, Inc.; and MFS Variable Insurance Trust
(each portfolio, a "Fund"; collectively, the "Funds"). Currently, there are
seventeen subaccounts available through Account A and one subaccount available
through Account B. Three additional subaccounts previously available though
Account A are no longer available for the allocation of premiums or contract
value. Other subaccounts and corresponding investment options may be added in
the future. The value of a contract owner's investment in each subaccount will
vary with investment experience, and it is the contract owner who bears the
full investment risk with respect to his or her investments.
The Contract provides a choice of fixed annuity payment options. On the
annuity date, the entire contract value, after the deduction of a charge for
any applicable premium taxes, will be transferred to Merrill Lynch Life's
general account, from which the annuity payments will be made. Prior to the
annuity date, the contract owner may make transfers among Account A
subaccounts, limited transfers from Account A into Account B, and full or
partial withdrawals from the Contract to suit investment and liquidity needs.
Withdrawals may be taxable and may be subject to a contingent deferred sales
charge.
This Prospectus contains information about the Contract and the Accounts that
a prospective contract owner should know before investing. Additional
information about the Contract and the Accounts is contained in a Statement of
Additional Information, dated December 9, 1996, which has been filed with the
Securities and Exchange Commission and is incorporated herein by reference.
The Statement of Additional Information is available on request and without
charge by writing to or calling Merrill Lynch Life at the Service Center
address or phone number set forth above. The table of contents for the
Statement of Additional Information is included on page 38 of this Prospectus.
THE PURCHASE OF THIS CONTRACT INVOLVES CERTAIN RISKS. BECAUSE IT IS A VARIABLE
ANNUITY, THE VALUE OF THE CONTRACT REFLECTS THE INVESTMENT PERFORMANCE OF THE
SELECTED INVESTMENT OPTIONS. INVESTMENT RESULTS CAN VARY BOTH UP AND DOWN AND
CAN EVEN DECREASE THE VALUE OF PREMIUM PAYMENTS. THEREFORE, CONTRACT OWNERS
COULD LOSE ALL OR PART OF THE MONEY THEY HAVE INVESTED. MERRILL LYNCH LIFE
DOES NOT GUARANTEE THE VALUE OF THE CONTRACT. RATHER, CONTRACT OWNERS BEAR ALL
INVESTMENT RISKS.
AN ANNUITY IS INTENDED TO BE A LONG TERM INVESTMENT. WITHDRAWALS OR SURRENDER
OF THE CONTRACT PREMATURELY MAY RESULT IN SUBSTANTIAL PENALTIES. CONTRACT
OWNERS SHOULD CONSIDER THEIR INCOME NEEDS BEFORE PURCHASING THE CONTRACT.
ALL WITHDRAWALS FROM AND SURRENDER OF THE CONTRACT ARE SUBJECT TO TAX, AND IF
TAKEN BEFORE AGE 59 1/2 MAY ALSO BE SUBJECT TO A 10% FEDERAL PENALTY TAX.
THIS CONTRACT PROVIDES A GUARANTEED DEATH BENEFIT THAT IS PAYABLE ONLY UPON
THE DEATH OF THE CONTRACT OWNER. THE 5% GROWTH GUARANTEED ON CERTAIN PREMIUMS
FOR DEATH BENEFIT PURPOSES IS NOT A GUARANTEE OF CONTRACT VALUE, NOR IS IT
APPLICABLE TO ANY OTHER FEATURE OF THE CONTRACT.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS ATTACHED
TO CURRENT PROSPECTUSES FOR THE FUNDS WHICH SHOULD ALSO BE READ AND KEPT FOR
REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
TABLE OF CONTENTS
PAGE
----
DEFINITIONS............................................................ 4
CAPSULE SUMMARY OF THE CONTRACT........................................ 5
FEE TABLE.............................................................. 9
ACCUMULATION UNIT VALUES............................................... 13
YIELDS AND TOTAL RETURNS............................................... 15
MERRILL LYNCH LIFE INSURANCE COMPANY................................... 16
THE ACCOUNTS........................................................... 16
INVESTMENTS OF THE ACCOUNTS............................................ 17
Merrill Lynch Variable Series Funds, Inc. ........................... 17
Domestic Money Market Fund......................................... 18
Prime Bond Fund.................................................... 18
High Current Income Fund........................................... 18
Quality Equity Fund................................................ 18
Equity Growth Fund................................................. 18
Natural Resources Focus Fund....................................... 19
American Balanced Fund............................................. 19
Global Strategy Focus Fund......................................... 19
Basic Value Focus Fund............................................. 19
Global Bond Focus Fund............................................. 19
Global Utility Focus Fund.......................................... 19
International Equity Focus Fund.................................... 20
Government Bond Fund............................................... 20
Developing Capital Markets Focus Fund.............................. 20
Reserve Assets Fund................................................ 20
Index 500 Fund..................................................... 20
AIM Variable Insurance Funds, Inc. .................................. 20
AIM V.I. Capital Appreciation Fund................................. 21
AIM V.I. Value Fund................................................ 21
Alliance Variable Products Series Fund, Inc. ........................ 21
Premier Growth Portfolio........................................... 22
MFS Variable Insurance Trust......................................... 22
Emerging Growth Series............................................. 22
Research Series.................................................... 22
Purchases and Redemptions of Fund Shares; Reinvestment............... 22
Material Conflicts, Substitution of Investments and Changes to
Accounts........................................................... 22
CHARGES AND DEDUCTIONS................................................. 23
Contract Maintenance Charge.......................................... 23
Mortality and Expense Risk Charge.................................... 23
Administration Charge................................................ 24
Contingent Deferred Sales Charge..................................... 24
Premium Taxes........................................................ 25
Other Charges........................................................ 25
DESCRIPTION OF THE CONTRACT............................................ 26
Ownership of the Contract............................................ 26
Issuing the Contract................................................. 26
Ten Day Right to Review.............................................. 26
Contract Changes..................................................... 26
Premiums............................................................. 27
Premium Investments.................................................. 27
Accumulation Units................................................... 27
Death Benefit........................................................ 28
Death of Annuitant................................................... 29
Transfers............................................................ 29
Dollar Cost Averaging................................................ 30
2
PAGE
----
Merrill Lynch Retirement Plus Advisor SM................................. 30
Withdrawals and Surrenders............................................... 31
Payments to Contract Owners.............................................. 32
Annuity Date............................................................. 32
Annuity Options.......................................................... 33
Unisex................................................................... 34
FEDERAL INCOME TAXES....................................................... 34
Introduction............................................................. 34
Merrill Lynch Life's Tax Status.......................................... 34
Taxation of Annuities.................................................... 35
Internal Revenue Service Diversification Standards....................... 36
IRA Contracts............................................................ 37
Transfers, Assignments, or Exchanges of a Contract....................... 37
Withholding.............................................................. 37
Possible Changes in Taxation............................................. 38
Other Tax Consequences................................................... 38
OTHER INFORMATION.......................................................... 38
Voting Rights............................................................ 38
Reports to Contract Owners............................................... 38
Selling the Contract..................................................... 39
State Regulation......................................................... 39
Legal Proceedings........................................................ 39
Experts.................................................................. 40
Legal Matters............................................................ 40
Registration Statements.................................................. 40
Table of Contents of the Statement of Additional Information............. 40
3
DEFINITIONS
Accounts: Two segregated investment accounts of Merrill Lynch Life Insurance
Company, named Merrill Lynch Life Variable Annuity Separate Account A and
Merrill Lynch Life Variable Annuity Separate Account B. (See page 15.)
account value: The value of a contract owner's interest in a particular
Account.
accumulation unit: An index used to compute the value of the contract owner's
interest in a subaccount prior to the annuity date. (See page 26.)
annuitant: The person on whose continuation of life annuity payments may
depend.
annuity date: The date on which annuity payments begin. (See page 31.)
beneficiary: The person to whom payment is to be made on the death of the
contract owner.
Contract: The variable annuity offered by this Prospectus.
contract anniversary: The same date each year as the date of issue of the
Contract.
contract owner: The person entitled to exercise all rights under the Contract.
(See page 25.)
contract value: The value of a contract owner's interest in the Accounts.
contract year: The period from one contract anniversary to the day preceding
the next contract anniversary.
date of issue: The date on which an initial premium is received and required
contract owner information is approved by Merrill Lynch Life. (See page 25.)
due proof of death: A certified copy of the death certificate, Beneficiary
Statement, and any additional paperwork necessary to process the death claim.
Funds: The mutual funds, or separate investment portfolios within a series
mutual fund, designated as eligible investments for the Accounts. (See page
16.)
Individual Retirement Account or Annuity ("IRA"): A Contract issued in
connection with a retirement arrangement that receives favorable tax status
under Section 408 of the Internal Revenue Code.
monthiversary: The same date of each month as the date on which the Contract
was issued.
net investment factor: An index used to measure the investment performance of
a subaccount from one valuation period to the next. (See page 22.)
nonqualified contract: A Contract issued in connection with a retirement
arrangement other than a qualified arrangement described under Section 401,
403, 408, 457 or any similar provisions of the Internal Revenue Code.
premiums: Money paid into the Contract. (See page 26.)
subaccount: A division of each of the Accounts consisting of the shares of a
particular Fund held by that Account.
valuation period: The interval from one determination of the net asset value
of a subaccount to the next. Net asset values are determined as of the close
of business on each day the New York Stock Exchange is open. (See page 27.)
variable annuity: A contract with a value that reflects investment experience
prior to the annuity date, and provides periodic payments of set amounts after
the annuity date.
4
CAPSULE SUMMARY OF THE CONTRACT
The following capsule summary is intended to provide a brief overview of the
Contract. More detailed information about the Contract can be found in the
sections of this Prospectus that follow, all of which should be read in their
entirety.
THE ACCOUNTS
Premiums will be allocated to Merrill Lynch Life Variable Annuity Separate
Account A ("Account A") and/or Merrill Lynch Life Variable Annuity Separate
Account B ("Account B") segregated investment accounts (together, the
"Accounts"), as directed by the contract owner. The Accounts are divided into
subaccounts corresponding to the Funds in which contract value may be
invested. Premiums are not invested directly in the underlying Funds. For the
first 14 days following the date of issue, all premiums directed into Account
A will be allocated to the Domestic Money Market Fund Subaccount. Thereafter,
the account value will be reallocated to the Account A subaccounts selected.
In the Commonwealth of Pennsylvania, all premiums will be invested as of the
date of issue in the subaccounts selected by the contract owner. Account A
account value may be periodically transferred among Account A subaccounts,
subject to certain limitations. Currently, a contract owner may allocate
premiums or contract value among a total of eighteen subaccounts. The contract
value and annuity payments will reflect the investment performance of the
Funds selected. (See THE ACCOUNTS on page 15 and TRANSFERS on page 28.)
THE FUNDS
The Funds are separate investment mutual fund portfolios of the Merrill Lynch
Variable Series Funds, Inc. ("Merrill Variable Funds"); AIM Variable Insurance
Funds, Inc. ("AIM V.I. Funds"); Alliance Variable Products Series Fund, Inc.
("Alliance Series Fund"); and MFS Variable Insurance Trust ("MFS Insurance
Trust") (each portfolio, a "Fund"; collectively, the "Funds"). The following
eighteen Funds are currently available for contract owner investment
(seventeen available through Account A and one available through Account B),
each with a different investment objective: Domestic Money Market Fund, Prime
Bond Fund, High Current Income Fund, Quality Equity Fund, Equity Growth Fund,
Global Strategy Focus Fund, Basic Value Focus Fund, Global Bond Focus Fund,
International Equity Focus Fund, Government Bond Fund, Developing Capital
Markets Focus Fund, Index 500 Fund, and Reserve Assets Fund, each of Merrill
Variable Funds; AIM V.I. Capital Appreciation Fund and AIM V.I. Value Fund,
each of AIM V.I. Funds; Premier Growth Portfolio of Alliance Series Fund; and
Emerging Growth Series and Research Series, each of MFS Insurance Trust.
(Subaccounts investing in the Natural Resources Focus Fund, the American
Balanced Fund, and the Global Utility Focus Fund of Merrill Variable Funds
were closed to allocations of premiums and contract value following the close
of business on December 6, 1996.) Other investment options may be added in the
future. (See INVESTMENTS OF THE ACCOUNTS on page 16.)
Detailed information about the investment objectives of the Funds can be found
under INVESTMENTS OF THE ACCOUNTS on page 16 and in the attached prospectuses
for the Funds.
PREMIUMS
The Contract generally allows contract owners the flexibility to make premium
payments as often as desired. The Contract is purchased by making an initial
premium payment of $5,000 or more on a nonqualified Contract and $2,000 or
more on an IRA Contract. Subsequent premium payments generally must be $300 or
more and can be made at any time prior to the annuity date. Maximum annual
contributions to IRA Contracts are limited by federal law. Under an automatic
investment feature, subsequent premium payments can be systematically made
from a Merrill Lynch, Pierce, Fenner & Smith Incorporated brokerage account. A
Financial Consultant should be contacted for additional information. Merrill
Lynch Life reserves the right to refuse to accept subsequent premium payments,
if required by law. (See PREMIUMS on page 26.)
FEES AND CHARGES
A charge is made to reimburse Merrill Lynch Life for expenses related to
maintenance of the Contract. A $40 contract maintenance charge will be
deducted from the contract value on each
5
contract anniversary that occurs on or prior to the annuity date. It will also
be deducted when the Contract is surrendered, if it is surrendered on any date
other than a contract anniversary. This charge will be waived on all Contracts
with a contract value equal to or greater than $50,000 on the date the charge
would otherwise be deducted, and in certain circumstances where multiple
contracts are owned. It is not deducted after the annuity date.
A mortality and expense risk charge is imposed on the Accounts. It equals
1.25% annually for Account A and 0.65% annually for Account B and is deducted
daily from the net asset value of the Accounts. Of this amount, 0.75% annually
for Account A and 0.35% annually for Account B is attributable to mortality
risks assumed by Merrill Lynch Life for the annuity payment and death benefit
guarantees made under the Contract. The remainder, 0.50% annually for Account
A and 0.30% annually for Account B, is attributable to expense risks assumed
by Merrill Lynch Life should the contract maintenance and administration
charges be insufficient to cover all Contract maintenance and administration
expenses.
An administration charge is made to reimburse Merrill Lynch Life for costs
associated with the establishment and administration of the Contract. A charge
of 0.10% annually will be deducted daily only from the net asset value of
Account A. No administration charge is imposed on the assets of Account B.
A contingent deferred sales charge may be imposed on withdrawals and
surrenders from Account A. The maximum contingent deferred sales charge is 7%
of premium withdrawn during the first year after that premium is paid,
decreasing by 1% annually to 0% after year seven. No contingent deferred sales
charge will be imposed on withdrawals or surrenders from Account B. In
addition, no contingent deferred sales charge will be imposed on withdrawals
or surrenders from Contracts purchased by employees of Merrill Lynch Life or
its affiliates or from Contracts purchased by the employees' spouses or
dependents, where permitted by state regulation.
A charge for any premium taxes imposed by a state or local government will be
deducted from the contract value on the annuity date. Premium tax rates vary
from jurisdiction to jurisdiction and currently range from 0% to 5%. In those
jurisdictions that do not allow an insurance company to reduce its current
taxable premium income by the amount of any withdrawal, surrender or death
benefit paid, Merrill Lynch Life will also deduct a charge for these taxes on
any withdrawal, surrender or death benefit effected under the Contract.
Merrill Lynch Life reserves the right, subject to any necessary regulatory
approval, to charge for assessments or federal premium taxes or federal, state
or local excise, profits or income taxes measured by or attributable to the
receipt of premiums. Merrill Lynch Life also reserves the right to deduct from
the Accounts any taxes imposed on the Accounts' investment earnings. (See
MERRILL LYNCH LIFE'S TAX STATUS on page 33.)
Detailed information about fees and charges imposed on the Contract can be
found under CHARGES AND DEDUCTIONS on page 22.
ANNUITY PAYMENTS
The Contract provides a choice of fixed annuity payment options. On the
annuity date, the entire contract value will be transferred to Merrill Lynch
Life's general account, from which the annuity payments will be made. The
amount of each payment is predetermined.
The contract owner selects an annuity date when annuity payments will begin.
Contract owners may change the annuity date up to 30 days prior to that date.
However, the annuity date for nonqualified Contracts may not be later than the
annuitant's 85th birthday. The annuity date for IRA Contracts will not be
later than when the owner/annuitant reaches the age of 70 1/2 unless the
contract owner selects a later annuity date.
If the contract value on the annuity date after the deduction of any
applicable premium taxes is less than $5,000 (or a different minimum amount,
if required by state law), Merrill Lynch Life
6
may pay the annuity benefits in a lump sum, rather than as periodic payments.
If any annuity payment would be less than $50 (or a different minimum amount,
if required by state law), Merrill Lynch Life may change the frequency of
payments so that all payments will be at least $50 (or the minimum amount
required by state law). All annuity payments will be directly transferred to
the contract owner's designated Merrill Lynch, Pierce, Fenner & Smith
Incorporated brokerage account, unless otherwise specified.
Details about the annuity options available under the Contract can be found
under ANNUITY OPTIONS on page 32.
TRANSFERS
Once each contract year, contract owners may transfer from Account A to
Account B an amount equal to any gain in account value and/or any premium not
subject to a contingent deferred sales charge. Where permitted by state
regulation, once each contract year, contract owners may transfer all or a
portion of the greater of that amount or 10% of premiums subject to a
contingent deferred sales charge (minus any of that premium already withdrawn
or transferred). Additionally, where permitted by state regulation, periodic
transfers of all or a portion of the greater amount, determined at the time of
each periodic transfer, are permitted, on a monthly, quarterly, semi-annual or
annual basis.
This is the only amount which may be transferred from Account A to Account B
during that contract year. There is no charge imposed on the transfer of this
amount. No transfers are permitted from Account B to Account A.
Prior to their annuity date, contract owners may transfer all or part of their
Account A value among the subaccounts of Account A up to six times per
contract year without charge. Additional transfers among Account A subaccounts
may be made at a charge of $25 per transfer. Contract owners may elect a
Dollar Cost Averaging feature in which Account A value invested in the
Domestic Money Market Subaccount may be systematically transferred among the
other Account A subaccounts on a monthly basis without charge, subject to
certain limitations. In addition, through participation in the Merrill Lynch
RPA SM program, contract owners may have their Account A values allocated in
accordance with an investment program consistent with the contract owner's
investment profile. (See TRANSFERS on page 28; DOLLAR COST AVERAGING on page
29; and MERRILL LYNCH RETIREMENT PLUS ADVISOR SM on page 29.)
Effective following the close of business on December 6, 1996, transfers may
no longer be made to the Natural Resources Focus Subaccount, the American
Balanced Subaccount, or the Global Utility Focus Subaccount.
WITHDRAWALS
Contract owners may make up to six withdrawals from the Contract per contract
year. Value withdrawn from Account A is generally subject to a contingent
deferred sales charge. (See CONTINGENT DEFERRED SALES CHARGE on page 23.)
However, a contingent deferred sales charge will not be applied to the first
withdrawal in any contract year out of Account A to the extent that the
withdrawal consists of gain and/or any premium not subject to such a charge.
Where permitted by state regulation, a contingent deferred sales charge will
not be applied to that portion of the first withdrawal from Account A in any
contract year that does not exceed the greater of any gain in account value
and/or any premium not subject to a contingent deferred sales charge and 10%
of premiums subject to a contingent deferred sales charge (minus any of that
premium already transferred out of Account A). Additionally, where permitted
by state regulation, the amount withdrawn may be elected to be paid on a
monthly, quarterly, semi-annual or annual basis.
The first withdrawal of the contract year out of Account A will be treated as
withdrawing gain in account value first, followed by premium not subject to a
contingent deferred sales charge, then followed by premium subject to such a
charge. If the amount withdrawn is paid on a monthly, quarterly, semi-annual
or annual basis, all such payments will be treated in the same way. All
subsequent withdrawals in a contract year will be treated as withdrawing
premium accumulated the longest first. (See WITHDRAWALS AND SURRENDERS on page
30.)
7
Value withdrawn from Account B is not subject to any contingent deferred sales
charge. In addition, no contingent deferred sales charge will be imposed on
withdrawals from Contracts purchased by employees of Merrill Lynch Life or its
affiliates or from Contracts purchased by the employees' spouses or
dependents, where permitted by state regulation.
In addition to the six withdrawals permitted each contract year, the value in
Account B may be automatically withdrawn on a monthly, quarterly, semi-annual,
or annual basis. These automatic withdrawals are not subject to any contingent
deferred sales charge. (See WITHDRAWALS AND SURRENDERS on page 30.)
Withdrawals will decrease the contract value. Withdrawals from either Account
A or Account B are subject to tax and prior to age 59 1/2 may also be subject
to a 10% federal penalty tax. (See FEDERAL INCOME TAXES on page 33.)
DEATH BENEFIT
The Contract provides a death benefit feature that guarantees a death benefit
if the contract owner dies prior to the annuity date, regardless of investment
experience. A Contract's death benefit is equal to the greater of (a) the sum
of the excess, if any, of premiums paid into Account A with interest on them
from the date received at an interest rate compounded daily to yield 5%
annually, over transfers to Account B and withdrawals from Account A
multiplied by a rate compounded daily from the date of transfer or withdrawal
to yield 5% annually, plus the value of Account B; or (b) the contract value.
There are limits on the period during which interest will accrue for purposes
of this calculation. For Contracts issued beginning June 1, 1995 (or later as
state approvals are obtained), interest shall accrue only until the earliest
of the last day of the 20th contract year, the last day of the contract year
in which the contract owner (annuitant when the contract owner is not a
natural person) attains age 80, or the date of the contract owner's
(annuitant's when the contract owner is not a natural person) death. For
Contracts issued prior to June 1, 1995, and for Contracts issued on or after
that date but before state approvals are obtained, interest shall accrue only
until the last day of the 20th contract year. If the contract owner dies prior
to the annuity date, Merrill Lynch Life will pay the Contract's death benefit
to the owner's beneficiary. (See DEATH BENEFIT on page 27.)
TEN DAY REVIEW
When the contract owner receives the Contract, it should be reviewed carefully
to make sure it is what the contract owner intended to purchase. Generally,
within 10 days after the contract owner receives the Contract, it may be
returned for a refund. Some states allow a longer period of time to return the
Contract. The Contract must be delivered to Merrill Lynch Life's Service
Center or to the Financial Consultant who sold it for a refund to be made.
Merrill Lynch Life will then refund to the contract owner the greater of all
premiums paid into the Contract or the contract value as of the date the
Contract is returned. For contracts issued in the Commonwealth of
Pennsylvania, Merrill Lynch Life will refund the contract value as of the date
the Contract is returned. The Contract will then be deemed void. (See TEN DAY
RIGHT TO REVIEW on page 25.)
8
FEE TABLE
A.Contract Owner Transaction Expenses
1. Sales Load Imposed on Premium...................................... None
2. Contingent Deferred Sales Charge
COMPLETE YEARS ELAPSED SINCE CONTINGENT DEFERRED SALES CHARGE AS A
PAYMENT OF PREMIUM PERCENTAGE OF PREMIUM WITHDRAWN
---------------------------- -------------------------------------
0 years 7.00%
1 year 6.00%
2 years 5.00%
3 years 4.00%
4 years 3.00%
5 years 2.00%
6 years 1.00%
7 or more years 0.00%
3. Transfer Fee........................................................ $25
The first 6 transfers among Separate Account A subaccounts in a contract
year are free. A $25 fee may be charged on all subsequent transfers. These
rules apply only to transfers among Separate Account A subaccounts. They do
not apply to transfers from Separate Account A to Separate Account B. No
transfers may be made from Separate Account B.
B. Annual Contract Maintenance Charge...................................... $40
The Contract Maintenance Charge will be assessed annually on each
contract anniversary, only if the contract value is less than $50,000.
C. Separate Account Annual Expenses (as a percentage of account value)
SEPARATE ACCT A SEPARATE ACCT B
--------------- ---------------
Mortality and Expense Risk Charge......... 1.25% .65%
Administration Charge..................... .10% .00%
---- ---
Total Separate Account Annual Expenses.... 1.35% .65%
D. Fund Expenses for the Year Ended December 31, 1995 (a)(b)(c) (as a
percentage of each Fund's net assets)
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
-----------------------------------------------------------
HIGH NATURAL GLOBAL
RESERVE PRIME CURRENT QUALITY EQUITY RESOURCES STRATEGY
ANNUAL EXPENSES ASSETS BOND INCOME EQUITY GROWTH FOCUS* FOCUS(D)
--------------- ------- ----- ------- ------- ------ --------- --------
Investment Advisory
Fees................... .50% .45% .50% .46% .75% .65% .65%
Other Expenses.......... .11% .05% .05% .05% .06% .13% .07%
Total Annual Operating
Expenses............... .61% .50% .55% .51% .81% .78% .72%
MERRILL LYNCH VARIABLE SERIES FUNDS, INC. (CONT'D)
-------------------------------------------------------------
DOMESTIC BASIC GLOBAL GLOBAL INTERNATIONAL
AMERICAN MONEY VALUE BOND UTILITY EQUITY
ANNUAL EXPENSES BALANCED* MARKET (A) FOCUS FOCUS(D) FOCUS* FOCUS
--------------- --------- ---------- ----- -------- ------- -------------
Investment Advisory
Fees................... .55% .50% .60% .60% .60% .75%
Other Expenses.......... .06% .05% .06% .08% .06% .14%
Total Annual Operating
Expenses............... .61% .55% .66% .68% .66% .89%
ALLIANCE
VARIABLE
MERRILL LYNCH PRODUCTS
VARIABLE SERIES AIM VARIABLE SERIES MFS VARIABLE
FUNDS, INC. (CONT'D) INSURANCE FUNDS, INC. FUND, INC. INSURANCE TRUST
----------------------------------- --------------------- ------------ -------------------
DEVELOPING AIM V.I.
CAPITAL CAPITAL AIM V.I. PREMIER EMERGING
GOVERNMENT MARKETS INDEX 500 APPRECIATION VALUE GROWTH GROWTH RESEARCH
ANNUAL EXPENSES BOND (A)(B)(D) FOCUS (C) FUND(B) FUND FUND PORTFOLIO(E) SERIES(F) SERIES(F)
--------------- -------------- ---------- --------- ------------ -------- ------------ --------- ---------
Investment Advisory
Fees................... .50% 1.00% .30% .65% .65% .76% .75% .75%
Other Expenses.......... .16% .25% .23% .10% .10% .19% .50% .50%
Total Annual Operating
Expenses............... .66% 1.25% .53% .75% .75% .95% 1.25% 1.25%
- --------
* Closed to allocations of premiums or contract value following the close of
business on December 6, 1996.
9
EXAMPLES OF CHARGES
If the Contract is surrendered at the end of the applicable time period:
The following cumulative expenses would be paid on each $1,000 invested,
assuming 5% annual return on assets:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Separate Account B subaccount investing
in:
Reserve Assets Fund.................... $84 $ 94 $106 $166
Separate Account A subaccount investing
in:
Prime Bond Fund........................ $90 $112 $137 $231
High Current Income Fund............... $91 $114 $140 $236
Quality Equity Fund.................... $90 $113 $138 $232
Equity Growth Fund..................... $93 $122 $153 $264
Natural Resources Focus Fund*.......... $93 $121 $152 $260
Global Strategy Focus Fund............. $92 $119 $148 $254
American Balanced Fund*................ $91 $116 $143 $243
Domestic Money Market Fund............. $91 $114 $140 $236
Basic Value Focus Fund................. $92 $117 $145 $248
Global Bond Focus Fund................. $92 $118 $146 $250
Global Utility Focus Fund*............. $92 $117 $145 $248
International Equity Focus Fund........ $94 $124 $157 $272
Government Bond Fund................... $92 $117 $145 $248
Developing Capital Markets Focus Fund.. $98 $135 $176 $308
Index 500 Fund......................... $90 $113 $139 $234
AIM V.I. Capital Appreciation Fund..... $93 $120 $150 $257
AIM V.I. Value Fund.................... $93 $120 $150 $257
Premier Growth Portfolio............... $95 $126 $160 $278
Emerging Growth Series................. $98 $135 $176 $308
Research Series........................ $98 $135 $176 $308
If the Contract is annuitized, or not surrendered, at the end of the applicable
time period:
The following cumulative expenses would be paid on each $1,000 invested,
assuming 5% annual return on assets:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Separate Account B subaccount investing
in:
Reserve Assets Fund.................... $14 $ 44 $ 76 $166
Separate Account A subaccount investing
in:
Prime Bond Fund........................ $20 $ 62 $107 $231
High Current Income Fund............... $21 $ 64 $110 $236
Quality Equity Fund.................... $20 $ 63 $108 $232
Equity Growth Fund..................... $23 $ 72 $123 $264
Natural Resources Focus Fund*.......... $23 $ 71 $122 $260
Global Strategy Focus Fund............. $22 $ 69 $118 $254
American Balanced Fund*................ $21 $ 66 $113 $243
Domestic Money Market Fund............. $21 $ 64 $110 $236
Basic Value Focus Fund................. $22 $ 67 $115 $248
Global Bond Focus Fund................. $22 $ 68 $116 $250
Global Utility Focus Fund*............. $22 $ 67 $115 $248
International Equity Focus Fund........ $24 $ 74 $127 $272
Government Bond Fund................... $22 $ 67 $115 $248
Developing Capital Markets Focus Fund.. $28 $ 85 $146 $308
Index 500 Fund......................... $20 $ 63 $109 $234
AIM V.I. Capital Appreciation Fund..... $23 $ 70 $120 $257
AIM V.I. Value Fund.................... $23 $ 70 $120 $257
Premier Growth Portfolio............... $25 $ 76 $130 $278
Emerging Growth Series................. $28 $ 85 $146 $308
Research Series........................ $28 $ 85 $146 $308
- --------
* Closed to allocations of premiums or contract value following the close of
business on December 6, 1996.
10
The preceding Fee Table and Examples are intended to assist investors in
understanding the costs and expenses that a contract owner will bear, directly
or indirectly. The Fee Table and Examples include expenses and charges of the
Accounts as well as the Funds. The Examples also reflect the $40 contract
maintenance charge as .089% of assets, determined by dividing the total amount
of such charges collected by the total average net assets of the subaccounts.
See the CHARGES AND DEDUCTIONS section in this Prospectus and the Fund
prospectuses for a further discussion of fees and charges.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR ANNUAL RATES OF RETURN OF ANY FUND. ACTUAL EXPENSES AND ANNUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE ASSUMED FOR THE PURPOSE OF THE
EXAMPLES.
The Fee Table and Examples do not include charges to contract owners for
premium taxes. Premium taxes may be applicable. Refer to the PREMIUM TAXES
section in this Prospectus for further details.
NOTES TO FEE TABLE
(a) The Fee Table does not reflect any fees waived or expenses assumed by
Merrill Lynch Asset Management, L.P. ("MLAM") during the year ended
December 31, 1995 with respect to any Fund because such waivers and
assumption of expenses were made on a voluntary basis and MLAM may
discontinue or reduce any such waiver or assumption of expenses at any
time without notice. During the fiscal year ended December 31, 1995, MLAM
waived management fees and reimbursed expenses totaling 0.66% for the
Intermediate Government Bond Fund and 0.95% for the International Bond
Fund after which each such Fund's total expense ratio, net of
reimbursement, was 0.00% for the Intermediate Government Bond Fund, and
0.00% for the International Bond Fund. See also notes (b) and (c).
(b) "Other Expenses" and "Total Annual Operating Expenses" shown for
Government Bond Fund and Index 500 Fund are based on expenses estimated
for the current fiscal year.
(c) MLAM and Merrill Lynch Life Agency, Inc. have entered into a Reimbursement
Agreement that limits the operating expenses paid by each Fund of the
Merrill Variable Funds in a given year to 1.25% of its average net assets.
This Reimbursement Agreement is expected to remain in effect for the
current year. Pursuant to this Reimbursement Agreement, the Developing
Capital Markets Focus Fund was reimbursed for a portion of its operating
expenses for 1995. Absent the reimbursement, "Other Expenses" for this
Fund would have been 0.36%. Expenses shown for all other Funds of the
Merrill Variable Funds do not reflect any reimbursement under the
Reimbursement Agreement.
(d) Effective following the close of business on December 6, 1996, (i) the
International Bond Fund was merged with and into the former World Income
Focus Fund; the World Income Focus Fund was renamed the Global Bond Focus
Fund and its investment objective was modified; (ii) the Flexible Strategy
Fund was merged with and into the Global Strategy Focus Fund; and (iii)
the Intermediate Government Bond Fund was renamed the Government Bond Fund
and its investment objective was modified. See the accompanying prospectus
for Merrill Variable Funds for additional information regarding these
changes.
(e) The Fee Table reflects fees waived or expenses assumed by Alliance Capital
Management L.P. ("Alliance") during the year ended December 31, 1995. Such
waivers and assumption of expenses were made on a voluntary basis and
Alliance may discontinue or reduce any such waiver or assumption of
expenses at any time without notice; however, Alliance intends to continue
such reimbursements for the foreseeable future. During the fiscal year
ended December 31, 1995, Alliance waived management fees totaling 0.24%
for the Premier Growth Portfolio. Without such reimbursements, "Investment
Advisory Fees" would have been 1.00% and "Total Annual Operating Expenses"
would have been 1.19%.
11
(f) Massachusetts Financial Services Company ("MFS") has agreed to bear,
subject to reimbursement, expenses for each of the Emerging Growth Series
and Research Series such that each Series's aggregate operating expenses
shall not exceed, on an annualized basis, 1.00% of the average daily net
assets of the Series from November 2, 1994 through December 31, 1996,
1.25% of the average daily net assets of the Series from January 1, 1997
through December 31, 1998; and 1.50% of the average daily net assets of
the Series from January 1, 1999 through December 31, 2004; provided
however that this obligation may be terminated or revised at any time.
Absent this expense arrangement, "Other Expenses" for the Emerging Growth
Series and Research Series would be 2.16% and 3.15%, respectively, and
"Total Operating Expenses" would be 2.91% and 3.90%, respective for these
Series for the year ending December 31, 1995.
12
ACCUMULATION UNIT VALUES
(CONDENSED FINANCIAL INFORMATION)
SUBACCOUNTS
------------------------------------------------------------------------------
DOMESTIC MONEY MARKET PRIME BOND
-------------------------------------- --------------------------------------
1/1/95 1/1/94 1/1/93 1/1/95 1/1/94 1/1/93
TO TO TO TO TO TO
12/31/95 12/31/94 12/31/93 12/31/95 12/31/94 12/31/93
------------ ------------ ------------ ------------ ------------ ------------
(1)Accumulation
unit value at
beginning of
period........ $10.64 $10.37 $10.20 $11.21 $11.94 $10.80
(2)Accumulation
unit value at
end of
period........ $11.09 $10.64 $10.37 $13.29 $11.21 $11.94
(3)Number of
accumulation
units
outstanding at end of period..25,642,773.0 32,396,626.5 15,662,277.0 31,553,814.4 29,135,349.6 20,094,427.0
QUALITY EQUITY EQUITY GROWTH
-------------------------------------- --------------------------------------
1/1/95 1/1/94 1/1/93 1/1/95 1/1/94 1/1/93
TO TO TO TO TO TO
12/31/95 12/31/94 12/31/93 12/31/95 12/31/94 12/31/93
------------ ------------ ------------ ------------ ------------ ------------
(1)Accumulation
unit value at
beginning of
period........ $11.38 $11.67 $10.33 $9.90 $10.82 $9.31
(2)Accumulation
unit value at
end of
period........ $13.77 $11.38 $11.67 $14.25 $9.90 $10.82
(3)Number of
accumulation
units
outstanding at end of period..39,846,415.5 33,600,288.0 19,415,425.1 21,157,583.8 14,844,233.7 7,108,268.0
AMERICAN BALANCED NATURAL RESOURCES FOCUS
-------------------------------------- --------------------------------------
1/1/95 1/1/94 1/1/93 1/1/95 1/1/94 1/1/93
TO TO TO TO TO TO
2/31/95 12/31/94 12/31/93 12/31/95 12/31/94 12/31/93
------------ ------------ ------------ ------------ ------------ ------------
(1)Accumulation
unit value at
beginning of
period........ $11.21 $11.86 $10.60 $11.30 $11.29 $10.36
(2)Accumulation
unit value at
end of
period........ $13.37 $11.21 $11.86 $12.56 $11.30 $11.29
(3)Number of
accumulation
units
outstanding at end of period..13,988,384.1 12,253,488.1 7,844,224.7 3,136,512.9 3,158,540.0 1,052,692.5
BASIC VALUE FOCUS WORLD INCOME FOCUS
-------------------------------------- --------------------------------------
1/1/95 1/1/94 7/1/93* 1/1/95 1/1/94 7/1/93*
TO TO TO TO TO TO
12/31/95 12/31/94 12/31/93 12/31/95 12/31/94 12/31/93
------------ ------------ ------------ ------------ ------------ ------------
(1)Accumulation
unit value at
beginning of
period........ $10.98 $10.88 $10.00 $9.94 $10.52 $10.00
(2)Accumulation
unit value at
end of
period........ $13.60 $10.98 $10.88 $11.45 $9.94 $10.52
(3)Number of
accumulation
units
outstanding at end of period..20,468,571.0 13,875,148.9 3,847,716.5 6,621,174.7 6,989,051.9 4,305,872.9
--------------------------------------
HIGH CURRENT INCOME
--------------------------------------
1/1/95 1/1/94 1/1/93
TO TO TO
12/31/95 12/31/94 12/31/93
------------ ------------ ------------
(1)Accumulation
unit value at
beginning of
period........ $12.18 $12.80 $11.01
(2)Accumulation
unit value at
end of
period........ $14.08 $12.18 $12.80
(3)Number of
accumulation
units
outstanding at end of period..23,078,926.0 18,784,994.7 10,628,528.5
FLEXIBLE STRATEGY
--------------------------------------
1/1/95 1/1/94 1/1/93
TO TO TO
12/31/95 12/31/94 12/31/93
------------ ------------ ------------
(1)Accumulation
unit value at
beginning of
period........ $11.22 $11.87 $10.39
(2)Accumulation
unit value at
end of
period........ $13.00 $11.22 $11.87
(3)Number of
accumulation
units
outstanding at end of period..19,761,710.2 18,841,816.9 10,396,852.3
GLOBAL STRATEGY FOCUS
--------------------------------------
1/1/95 1/1/94 1/1/93
TO TO TO
12/31/95 12/31/94 12/31/93
------------ ------------ ------------
(1)Accumulation
unit value at
beginning of
period........ $11.78 $12.12 $10.15
(2)Accumulation
unit value at
end of
period........ $12.85 $11.78 $12.12
(3)Number of
accumulation
units
outstanding at end of period..39,315,443.7 40,759,049.2 20,198,586.7
GLOBAL UTILITY FOCUS
--------------------------------------
1/1/95 1/1/94 7/1/93*
TO TO TO
12/31/95 12/31/94 12/31/93
------------ ------------ ------------
(1)Accumulation
unit value at
beginning of
period........ $9.58 $10.61 $10.00
(2)Accumulation
unit value at
end of
period........ $11.75 $9.58 $10.61
(3)Number of
accumulation
units
outstanding at end of period..11,837,175.7 12,374,137.9 8,953,967.1
13
INTERNATIONAL
EQUITY FOCUS RESERVE ASSETS
------------------------------------- -----------------------------------
1/1/95 1/1/94 7/1/93* 1/1/95 1/1/94 1/1/93
TO TO TO TO TO TO
12/31/95 12/31/94 12/31/93 12/31/95 12/31/94 12/31/93
------------ ------------ ----------- ----------- ----------- -----------
(1)Accumulation unit value at
beginning of period......... $10.87 $10.96 $10.00 $10.76 $10.43 $10.22
(2)Accumulation unit value at
end of period............... $11.31 $10.87 $10.96 $11.29 $10.76 $10.43
(3)Number of accumulation
units
outstanding at end of period..21,726,485.8 21,157,145.1 6,329,646.2 1,002,197.4 1,286,558.6 1,173,856.5
INTERMEDIATE DEVELOPING CAPITAL
INTERNATIONAL BOND GOVERNMENT BOND MARKETS FOCUS
--------------------- ----------------------- -----------------------
1/1/95 5/16/94* 1/1/95 5/16/94* 1/1/95 5/16/94*
TO TO TO TO TO TO
12/31/95 12/31/94 12/31/95 12/31/94 12/31/95 12/31/94
----------- --------- ----------- ----------- ----------- -----------
(1)Accumulation unit value at
beginning of period......... $9.93 $10.00 $10.08 $10.00 $9.38 $10.00
(2)Accumulation unit value at
end of period............... $11.40 $9.93 $11.42 $10.08 $9.16 $9.38
(3)Number of accumulation
units
outstanding at end of period..1,191,641.1 464,604.1 3,417,936.4 1,484,500.1 4,912,543.0 2,702,530.7
- -----
* Commencement of business
14
YIELDS AND TOTAL RETURNS
From time to time, Merrill Lynch Life may advertise yields, effective yields,
and total returns for the Account A subaccounts and the Account B subaccount.
These figures are based on historical earnings and do not indicate or project
future performance. Merrill Lynch Life also from time to time may advertise
performance of the subaccounts relative to certain performance rankings and
indices. More detailed information as to the calculation of performance
information, as well as comparisons with unmanaged market indices, appears in
the Statement of Additional Information.
Effective yields and total returns for a subaccount are based on the
investment performance of the corresponding Fund. A Fund's performance in part
reflects that Fund's expenses. Merrill Lynch Asset Management, L.P. ("MLAM")
and Merrill Lynch Life Agency, Inc. (see SELLING THE CONTRACT on page 39) have
entered into a Reimbursement Agreement that limits the operating expenses paid
by each Fund of the Merrill Variable Funds in a given year to 1.25% of its
average net assets.
The yields of the Domestic Money Market Subaccount and the Reserve Assets
Subaccount refer to the annualized income generated by an investment in each
subaccount over a specified 7-day period. The yield is calculated by assuming
that the income generated for that 7-day period is generated each 7-day period
over a 52-week period and is shown as a percentage of the investment. The
effective yield is calculated similarly but, when annualized, the income
earned by an investment in the subaccount or Account is assumed to be
reinvested. The effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment.
The yield of an Account A subaccount (other than the Domestic Money Market
Subaccount) refers to the annualized income generated by an investment in the
subaccount over a specified 30-day or one-month period. The yield is
calculated by assuming that the income generated by the investment during that
30-day or one-month period is generated each period over a 12-month period and
is shown as a percentage of the investment.
The average annual total return of a subaccount refers to return quotations
assuming an investment under a Contract has been held in each subaccount for
1, 5 and 10 years, or for a shorter period, if applicable. The average annual
total return quotations represent the average compounded rates of return that
would equate an initial investment of $1,000 under a Contract to the
redemption value of that investment as of the last day of each of the periods
for which return quotations are provided. Average annual total return
information shows the average percentage change in the value of an investment
in a subaccount (including any contingent deferred sales charge that would
apply if an owner terminated the Contract at the end of each period indicated,
but excluding any deductions for premium taxes).
Merrill Lynch Life may, in addition, advertise or present yield or total
return performance information computed on different bases. Merrill Lynch Life
may present total return information computed on the same basis as described
above, except the information will not reflect a deduction for the contingent
deferred sales charge. This presentation assumes that an investment in the
Contract will persist beyond the period when the contingent deferred sales
charge applies, consistent with the long-term investment and retirement
objectives of the Contract. Merrill Lynch Life may also advertise total return
performance information for the Funds, but this information will always be
accompanied by average annual total returns for the corresponding subaccounts.
Merrill Lynch Life may also present total return performance information for a
subaccount for periods prior to the date the subaccount commenced operations
based on the performance of the corresponding Fund and the assumption that the
subaccount was in existence for the same periods as those indicated for the
corresponding Fund, with a level of fees and charges approximately equal to
those currently imposed under the Contracts. Merrill Lynch Life may also
present total performance information for a hypothetical Contract assuming
allocation of the initial premium to more than one subaccount or assuming
monthly transfers from the Domestic Money Market Subaccount to designated
subaccounts under a dollar cost averaging program. This information will
reflect the performance of the affected subaccounts for the duration of the
allocation under the hypothetical Contract. It also will reflect the deduction
of charges described
15
above except for the contingent deferred sales charge. This information may
also be compared to various indices.
Advertising and sales literature for the Contracts may also compare the
performance of the subaccounts and Funds to the performance of other variable
annuity issuers in general or to the performance of particular types of
variable annuities investing in mutual funds, or series of mutual funds, with
investment objectives similar to each of the Funds corresponding to the
subaccounts.
Performance information may also be based on rankings by services which
monitor and rank the performance of variable annuity issuers in each of the
major categories of investment objectives on an industry-wide basis. Some
services' rankings include variable life insurance issuers as well as variable
annuity issuers, while others' rankings compare only variable annuity issuers.
Performance analysis prepared by services may rank such issuers on the basis
of total return, assuming reinvestment of distributions, but do not take sales
charges, redemption fees or certain expense deductions at the separate account
level into consideration. In addition, some such services prepare risk-
adjusted rankings, which consider the effect of market risk on total return
performance. This type of ranking provides data as to which funds provide the
highest total return within various categories of funds defined by the degree
of risk inherent in their investment objectives. Ranking services Merrill
Lynch Life may use as sources of performance comparison are Lipper, VARDS,
CDA/Weisenberger, Morningstar, MICROPAL, and Investment Company Data, Inc.
Advertising and sales literature for the Contracts may also compare the
performance of the subaccounts to the Standard & Poor's Index of 500 Common
Stocks, the Morgan Stanley EAFE Index, the Russell 2000 Index and the Dow
Jones Indices, all widely used measures of stock market performance. These
unmanaged indices assume the reinvestment of dividends, but do not reflect any
"deduction" for the expense of operating or managing an investment portfolio.
Other sources of performance comparison that Merrill Lynch Life may use are
Chase Investment Performance Digest, Money, Forbes, Fortune, Business Week,
Financial Services Weekly, Kiplinger Personal Finance, Wall Street Journal,
USA Today, Barrons, U.S. News & World Report, Strategic Insight, Donaghues,
Investors Business Daily, and Ibbotson Associates.
Advertising and sales literature for the Contracts may also contain
information on the effect of tax deferred compounding on subaccount investment
returns, or returns in general, which may be illustrated by graphs, charts or
otherwise and which may include a comparison at various points in time of the
return from an investment in a Contract (or returns in general) on a tax-
deferred basis (assuming one or more tax rates) with the return on a currently
taxable basis.
MERRILL LYNCH LIFE INSURANCE COMPANY
Merrill Lynch Life Insurance Company ("Merrill Lynch Life") is a stock life
insurance company organized under the laws of the State of Washington in 1986
and redomesticated under the laws of the State of Arkansas in 1991. Merrill
Lynch Life is an indirect wholly owned subsidiary of Merrill Lynch & Co.,
Inc., a corporation whose common stock is traded on the New York Stock
Exchange.
Merrill Lynch Life's financial statements can be found in the Statement of
Additional Information and should only be considered in the context of its
ability to meet any obligations it may have under the Contract.
All communications concerning the Contract should be addressed to Merrill
Lynch Life's Service Center at the address printed on the first page of this
Prospectus.
THE ACCOUNTS
Contract owners may direct their premiums into one or both of two segregated
investment accounts available to the Contract (the "Accounts"). The Merrill
Lynch Life Variable Annuity Separate Account A ("Account A") offers a variety
of investment options, each with a different
16
investment objective, through its subaccounts. The Merrill Lynch Life Variable
Annuity Separate Account B ("Account B") offers a money market investment
through its subaccount.
The Accounts were established on August 6, 1991, as separate investment
accounts. They are registered with the Securities and Exchange Commission as
unit investment trusts pursuant to the Investment Company Act of 1940. Their
registration does not involve any supervision by the Securities and Exchange
Commission over the investment policies or practices of the Accounts. The
Accounts each meet the definition of a separate account under the federal
securities laws. The Accounts' assets are segregated from all of Merrill Lynch
Life's other assets.
Obligations to contract owners and beneficiaries that arise under the Contract
are obligations of Merrill Lynch Life. Merrill Lynch Life owns all of the
assets in the Accounts. With respect to each Account, income, gains, and
losses, whether or not realized, from assets allocated to that Account are, in
accordance with the Contracts, credited to or charged against the Account
without regard to other income, gains or losses of Merrill Lynch Life. As
required, the assets in each Account will always be at least equal to the
reserves and other liabilities of the Account. If the assets exceed the
required reserves and other Contract liabilities (which will always be at
least equal to the aggregate contract value allocated to the Account under the
Contracts), Merrill Lynch Life may transfer the excess to its general account.
Arkansas insurance law provides that each Account's assets, to the extent of
its reserves and liabilities, may not be charged with liabilities arising out
of any other business Merrill Lynch Life conducts nor may the assets of either
Account be charged with any liabilities of the other Account.
There are seventeen subaccounts currently available through Account A and one
subaccount currently available through Account B. Effective following the
close of business on December 6, 1996, three additional subaccounts previously
available through Account A (the Natural Resources Focus Subaccount, the
American Balanced Subaccount, and the Global Utility Focus Subaccount) were
closed to allocations of premiums and contract value. All subaccounts invest
in a corresponding mutual fund portfolio of the Merrill Variable Funds; AIM
V.I. Funds; Alliance Series Fund; or MFS Insurance Trust. Additional
subaccounts may be added in the future.
The Accounts' financial statements can be found in the Statement of Additional
Information.
INVESTMENTS OF THE ACCOUNTS
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
The Merrill Lynch Variable Series Funds, Inc. ("Merrill Variable Funds") is
registered with the Securities and Exchange Commission as an open-end
management investment company. It currently offers the Accounts sixteen of its
separate investment mutual fund portfolios. The Reserve Assets Fund is
available only to Account B. The fifteen remaining Funds of Merrill Variable
Funds (three of which were closed to allocations of premiums and contract
value) are available only to Account A. These Funds' shares are currently sold
only to separate accounts of Merrill Lynch Life, ML Life Insurance Company of
New York (an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc.),
and several insurance companies not affiliated with Merrill Lynch Life or
Merrill Lynch & Co., Inc. to fund benefits under certain variable annuity and
variable life insurance contracts. Shares of each of these Funds may be made
available to separate accounts of additional insurance companies in the
future.
Merrill Lynch Asset Management, L.P. ("MLAM") is the investment adviser to the
Funds of Merrill Variable Funds. MLAM is a worldwide mutual fund leader with
more than $145.7 billion in assets under management. It is registered as an
investment adviser under the Investment Advisers Act of 1940. MLAM is an
indirect subsidiary of Merrill Lynch & Co., Inc. MLAM's principal business
address is 800 Scudders Mill Road, Plainsboro, New Jersey 08536. As the
investment adviser, MLAM is paid fees by these Funds for its services. The
fees charged to each of these Funds are set forth in the summary of investment
objectives below.
MLAM has entered into an agreement with Merrill Lynch Insurance Group, Inc.
("MLIG"), an affiliate of Merrill Lynch Life, with respect to administration
services for the Funds of Merrill Variable Funds in connection with the
Contracts and other variable life insurance and variable annuity contracts
issued by Merrill Lynch Life. Under this agreement, MLAM pays compensation to
MLIG in an amount equal to a portion of the annual gross investment advisory
fees paid by
17
these Funds to MLAM attributable to contracts issued by Merrill Lynch Life.
Details about these Funds, including their investment objectives, management,
policies, restrictions, their expenses and risks associated with investments
therein (including any risks associated with investment in the High Current
Income Fund), and all other aspects of these Funds' operation can be found in
the attached prospectus for the Merrill Variable Funds and in their Statement
of Additional Information, which should also be read carefully before
investing. There is no guarantee that any Fund will meet its investment
objective. Meeting the objectives depends upon how well these Funds'
management anticipates changing economic conditions.
DOMESTIC MONEY MARKET FUND. This Fund seeks preservation of capital,
liquidity, and the highest possible current income consistent with the
foregoing objectives by investing in short-term money market securities. The
Fund invests in short-term United States government securities; government
agency securities; bank certificates of deposit and bankers' acceptances;
short-term corporate debt securities such as commercial paper and variable
amount master demand notes; repurchase agreements and other domestic money
market instruments. MLAM receives from the Fund an advisory fee at the annual
rate of 0.50% of the average daily net assets of the Fund.
PRIME BOND FUND. This Fund seeks to obtain as high a level of current income
as is consistent with the investment policies of the Fund and with prudent
investment management, and capital appreciation to the extent consistent with
the foregoing objective. The Fund invests primarily in long-term corporate
bonds rated in the top three ratings categories by established rating
services. MLAM receives from the Fund an advisory fee at the annual rate of
0.50% of the first $250 million of the combined average daily nets assets of
the Fund and High Current Income Fund; 0.45% of the next $250 million; 0.40%
of the next $250 million; and 0.35% of the combined average daily net assets
in excess of $750 million. The reduction of the advisory fee applicable to the
Fund is determined on a uniform percentage basis as described in the Statement
of Additional Information for the Merrill Variable Funds.
HIGH CURRENT INCOME FUND. This Fund seeks to obtain as high a level of current
income as is consistent with the investment policies of the Fund and with
prudent investment management, and capital appreciation to the extent
consistent with the foregoing objective. The Fund invests principally in
fixed-income securities that are rated in the lower rating categories of the
established rating services or in unrated securities of comparable quality
(commonly known as "junk bonds"). Because investment in such securities
entails relatively greater risk of loss of income or principal, an investment
in the High Current Income Fund may not be appropriate as the exclusive
investment to fund a Contract. In an effort to minimize risk, the Fund will
diversify its holdings among many issuers. However, there can be no assurance
that diversification will protect the Fund from widespread defaults during
periods of sustained economic downturn. MLAM receives from the Fund an
advisory fee at the annual rate of 0.55% of the first $250 million of the
combined average daily net assets of the Fund and Prime Bond Fund; 0.50% of
the next $250 million; 0.45% of the next $250 million; and 0.40% of the
combined average daily net assets in excess of $750 million. The reduction of
the advisory fee applicable to the Fund is determined on a uniform percentage
basis as described in the Statement of Additional Information for the Merrill
Variable Funds.
QUALITY EQUITY FUND. This Fund seeks to attain the highest total investment
return consistent with prudent risk. The Fund employs a fully managed
investment policy utilizing equity securities, primarily common stocks of
large-capitalization companies, as well as investment grade debt and
convertible securities. Management of the Fund will shift the emphasis among
investment alternatives for capital growth, capital stability, and income as
market trends change. MLAM receives from the Fund an advisory fee at the
annual rate of 0.50% of the first $250 million of average daily net assets;
0.45% of the next $50 million; 0.425% of the next $100 million; and 0.40% of
the average daily net assets in excess of $400 million.
EQUITY GROWTH FUND. This Fund seeks to attain long-term growth of capital by
investing in a diversified portfolio of securities, primarily common stocks,
of relatively small companies that management of the Fund believes have
special investment value and emerging growth companies regardless of size.
Such companies are selected by management on the basis of their long-term
potential for expanding their size and profitability or for gaining increased
market recognition for
18
their securities. Current income is not a factor in such selection. MLAM
receives from the Fund an advisory fee at the annual rate of 0.75% of the
average daily net assets of the Fund. This is a higher fee than that of many
other mutual funds, but management of the Fund believes it is justified by the
high degree of care that must be given to the initial selection and continuous
supervision of the types of portfolio securities in which the Fund invests.
NATURAL RESOURCES FOCUS FUND. This Fund seeks to attain long-term growth of
capital and protection of the purchasing power of capital by investing
primarily in equity securities of domestic and foreign companies with
substantial natural resource assets. MLAM receives from the Fund an advisory
fee at the annual rate of 0.65% of the average daily net assets of the Fund.
Merrill Lynch Life and Account A reserve the right to suspend the sale of
units of the Natural Resources Focus Subaccount in response to conditions in
the securities markets or otherwise.
The subaccount corresponding to this Fund was closed to allocations of
premiums and contract value following the close of business on December 6,
1996.
AMERICAN BALANCED FUND. This Fund seeks a level of current income and a degree
of stability of principal not normally available from an investment solely in
equity securities and the opportunity for capital appreciation greater than is
normally available from an investment solely in debt securities by investing
in a balanced portfolio of fixed income and equity securities. MLAM receives
from the Fund an advisory fee at the annual rate of 0.55% of the average daily
net assets of the Fund.
The subaccount corresponding to this Fund was closed to allocations of
premiums and contract value following the close of business on December 6,
1996.
GLOBAL STRATEGY FOCUS FUND. This Fund seeks high total investment return by
investing primarily in a portfolio of equity and fixed income securities,
including convertible securities, of U.S. and foreign issuers. The Fund seeks
to achieve its objective by investing primarily in securities of issuers
located in the United States, Canada, Western Europe and the Far East. MLAM
receives from the Fund an advisory fee at the annual rate of 0.65% of the
average daily net assets of the Fund.
Effective following the close of business on December 6, 1996, the Flexible
Strategy Fund was merged with and into the Global Strategy Focus Fund.
BASIC VALUE FOCUS FUND. This Fund seeks to attain capital appreciation, and
secondarily, income by investing in securities, primarily equities, that
management of the Fund believes are undervalued and therefore represent basic
investment value. Particular emphasis is placed on securities which provide an
above-average dividend return and sell at a below-average price/earnings
ratio. MLAM receives from the Fund an advisory fee at the annual rate of 0.60%
of the average daily net assets of the Fund.
GLOBAL BOND FOCUS FUND (FORMERLY, THE WORLD INCOME FOCUS FUND). This Fund
seeks to provide high total investment return by investing in a global
portfolio of fixed income securities denominated in various currencies,
including multinational currency units. The Fund seeks to achieve this
objective by investing in fixed income securities, which have a credit rating
of A or better by Standard & Poor's or by Moody's or commercial paper rated A-
1 by Standard & Poor's or Prime-1 by Moody's or obligations that MLAM has
determined to be of similar creditworthiness. MLAM receives from the Fund an
advisory fee at the annual rate of 0.60% of the average daily net assets of
the Fund.
Effective following the close of business on December 6, 1996, the
International Bond Fund was merged with and into the Global Bond Focus Fund.
GLOBAL UTILITY FOCUS FUND. This Fund seeks to obtain capital appreciation and
current income through investment of at least 65% of its total assets in
equity and debt securities issued by domestic and foreign companies which are,
in the opinion of management of the Fund, primarily engaged in the ownership
or operation of facilities used to generate, transmit or distribute
electricity, telecommunications, gas or water. MLAM receives from the Fund an
advisory fee at the annual rate of 0.60% of the average daily net assets of
the Fund.
19
The subaccount corresponding to this Fund was closed to allocations of
premiums and contract value following the close of business on December 6,
1996.
INTERNATIONAL EQUITY FOCUS FUND. This Fund seeks to obtain capital
appreciation and, secondarily, income by investing in a diversified portfolio
of equity securities, of issuers located in countries other than the United
States. Under normal conditions, at least 65% of the Fund's net assets will be
invested in such equity securities. MLAM receives from the Fund an advisory
fee at the annual rate of 0.75% of the average daily net assets of the Fund.
GOVERNMENT BOND FUND (FORMERLY, THE INTERMEDIATE GOVERNMENT BOND FUND). This
Fund seeks to achieve the highest possible current income consistent with the
protection of capital. It invests in debt securities issued or guaranteed by
the United States Government, its agencies or instrumentalities. MLAM receives
from the Fund an advisory fee at an annual rate of 0.50% of the average daily
net assets of the Fund.
DEVELOPING CAPITAL MARKETS FOCUS FUND. This Fund seeks long-term capital
appreciation by investing in securities, principally equities, of issuers in
countries having smaller capital markets. For purposes of its investment
objective, the Fund considers countries having smaller capital markets to be
all countries other than the four countries having the largest equity market
capitalizations. The Developing Capital Markets Focus Fund has established no
rating criteria for the debt securities in which it may invest, and will rely
on the investment adviser's judgment in evaluating the creditworthiness of an
issuer of such securities. In an effort to minimize the risk, the Fund will
diversify its holdings among many issuers. However, there can be no assurance
that diversification will protect the Fund from widespread defaults during
periods of sustained economic downturn. Because investment in the Developing
Capital Markets Focus Fund entails relatively greater risk of loss of income
or principal, an investment in the Fund may not be appropriate as the
exclusive investment to fund a Contract. MLAM receives from the Fund an
advisory fee at an annual rate of 1.00% of the average daily net assets of the
Fund.
RESERVE ASSETS FUND. This Fund seeks preservation of capital, liquidity, and
the highest possible current income consistent with the foregoing objectives
by investing in short-term money market securities. The Fund invests in short-
term United States government securities; government agency securities; bank
certificates of deposit and bankers' acceptances; short-term corporate debt
securities such as commercial paper and variable amount master demand notes;
repurchase agreements and other money market instruments. MLAM receives from
the Fund an advisory fee at the annual rate of 0.50% of the first $500 million
of the Fund's average daily net assets; 0.425% of the next $250 million;
0.375% of the next $250 million; 0.35% of the next $500 million; 0.325% of the
next $500 million; 0.30% of the next $500 million; and 0.275% of the average
daily net assets in excess of $2.5 billion.
INDEX 500 FUND. This Fund seeks investment results that, before expenses,
correspond to the aggregate price and yield performance of the Standard &
Poor's 500 Composite Stock Price Index (the "S&P 500 Index"). MLAM receives
from the Fund an advisory fee at an annual rate of 0.30% of the Fund's average
daily net assets.
AIM VARIABLE INSURANCE FUNDS, INC.
AIM Variable Insurance Funds, Inc. ("AIM V.I. Funds") is registered with the
Securities and Exchange Commission as an open-end management investment
company. It currently offers Account A two of its separate investment
portfolios. Shares of the Funds of AIM V.I. Funds are currently offered only
to insurance company separate accounts to fund the benefits of variable
annuity contracts and variable life insurance policies. Shares of these Funds
may be offered, in the future, to certain pension or retirement plans.
A I M Advisors, Inc. ("AIM"), 11 Greenway Plaza, Suite 1919, Houston, Texas
77046-1173, serves as the investment adviser to each of the Funds of AIM V.I.
Funds. AIM was organized in 1976, and, together with its affiliates, manages
or advises 43 investment company portfolios (including these Funds). As of
December 5, 1996, the total assets of the mutual funds advised or managed by
AIM and its affiliates were approximately $62 billion. AIM is a wholly-owned
subsidiary of AIM Management, a holding company. As the investment adviser,
AIM is paid fees by these Funds for its services. The fees charged to each of
these Funds are set forth in the summary of investment objectives below.
20
AIM V.I. Funds has entered into an Administrative Services Agreement with AIM,
pursuant to which AIM has agreed to provide certain accounting and other
administrative services to these Funds, including the services of a principal
financial officer and related staff. As compensation to AIM for its services
under the Administrative Services Agreement, these Funds reimburse AIM for
expenses incurred by AIM or its affiliates in connection with such services.
AIM has entered into an agreement with Merrill Lynch Life with respect to
administrative services for these Funds in connection with the Contracts.
Under this agreement, AIM pays compensation to Merrill Lynch Life in an amount
equal to a percentage of the average net assets of these Funds attributable to
the Contracts.
AIM V.I. CAPITAL APPRECIATION FUND. This Fund seeks to provide capital
appreciation through investments in common stocks, with emphasis on medium-
sized and smaller emerging growth companies. AIM will be particularly
interested in companies that are likely to benefit from new or innovative
products, services or processes that should enhance such companies' prospects
for future growth in earnings. As a result of this policy, the market prices
of many of the securities purchased and held by this Fund may fluctuate
widely. Any income received from securities held by the Fund will be
incidental, and a contract owner should not consider a purchase of shares of
the Fund as equivalent to a complete investment program. The Capital
Appreciation Fund's portfolio is primarily comprised of securities of two
basic categories of companies: (1) "core" companies, which AIM considers to
have experienced above-average and consistent long-term growth in earnings and
to have excellent prospects for outstanding future growth, and (2) "earnings
acceleration" companies which AIM believes are currently enjoying a dramatic
increase in profits. AIM receives from the Fund an advisory fee at an annual
rate of 0.65% of the Fund's average daily net assets.
AIM V.I. VALUE FUND. This Fund seeks to achieve long-term growth of capital by
investing primarily in equity securities judged by AIM to be undervalued
relative to the current or projected earnings of the companies issuing the
securities, or relative to current market values of assets owned by the
companies issuing the securities or relative to the equity markets generally.
Income is a secondary objective. The Subaccount investing in this Fund should
not be selected by contract owners who seek income as their primary investment
objective. AIM receives from the Fund an advisory fee at an annual rate of
0.65% of the Fund's average daily net assets.
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Alliance Variable Products Series Fund, Inc. ("Alliance Series Fund") is
registered with the Securities and Exchange Commission as an open-end
management investment company. It currently offers Account A one of its
separate investment portfolios. This Fund is intended to serve as the
investment medium for variable annuity contracts and variable life insurance
policies to be offered by the separate accounts of certain insurance
companies.
Alliance Capital Management L.P. ("Alliance"), a Delaware limited partnership
with principal offices at 1345 Avenue of the Americas, New York, New York
10105 serves as the investment adviser to each Fund of the Alliance Series
Fund. Alliance is an international investment manager supervising client
accounts with assets of March 1, 1996 totaling more than $156 billion (of
which approximately $48 billion represented the assets of investment
companies). Alliance Capital Management Corporation ("ACMC"), the sole general
partner of Alliance, is an indirect wholly-owned subsidiary of The Equitable
Life Assurance Society of the United States, which is in turn a wholly-owned
subsidiary of the Equitable Companies Incorporated, a holding company which is
controlled by AXA, a French insurance holding company. As the investment
adviser, Alliance is paid fees by this Fund for its services. The fees charged
to this Fund are set forth in the summary of investment objective below.
Alliance Fund Distributors, Inc. ("AFD"), an affiliate of Alliance, has
entered into an agreement with Merrill Lynch Life with respect to
administrative services for these Funds in connection with the Contracts.
Under this agreement, AFD pays compensation to Merrill Lynch Life in an amount
equal to a percentage of the average net assets of these Funds attributable to
the Contracts.
21
PREMIER GROWTH PORTFOLIO. This Fund seeks growth of capital by pursuing
aggressive investment policies. Since investments will be made based upon
their potential for capital appreciation, current income will be incidental to
the objective of capital growth. Because of the market risks inherent in any
investment, the selection of securities on the basis of their appreciation
possibilities cannot ensure against possible loss in value. This Fund is
therefore not intended for contract owners whose principal objective is
assured income and conservation of capital. Alliance receives from the Fund an
advisory fee at an annual rate of 1.00% of the Fund's average daily net
assets.
MFS VARIABLE INSURANCE TRUST
MFS Variable Insurance Trust ("MFS Insurance Trust") is registered with the
Securities and Exchange Commission as an open-end management investment
company. It currently offers Account A two of its separate investment
portfolios. The Funds of MFS Insurance Trust are intended to serve as the
investment medium for variable annuity contracts and variable life insurance
policies to be offered by the separate accounts of certain insurance
companies.
Massachusetts Financial Services Company ("MFS"), a Delaware corporation, 500
Boylston Street, Boston, Massachusetts 02116, serves as the investment adviser
to each of the Funds of MFS Insurance Trust. MFS is America's oldest mutual
fund organization. MFS and its predecessor organizations have a history of
money management dating from 1924 and the founding of the first mutual fund in
the United States, Massachusetts Investors Trust. Net assets under the
management of the MFS organization were approximately $45.7 billion as of
April 30, 1996. MFS is a subsidiary of Sun Life of Canada (U.S.), which, in
turn, is a wholly-owned subsidiary of Sun Life Assurance Company of Canada. As
the investment adviser, MFS is paid fees by each of these Funds for its
services. The fees charged to these Funds are set forth in the summary of
investment objectives below.
MFS has entered into an agreement with MLIG with respect to administrative
services for these Funds in connection with the Contracts and certain
contracts issued by Merrill Lynch Life. Under this agreement, MFS pays
compensation to MLIG in an amount equal to a percentage of the average net
assets of these Funds attributable to such contracts.
EMERGING GROWTH SERIES. This Fund seeks long-term growth of capital by
investing primarily (i.e., at least 80% of its assets under normal
circumstances) in common stocks of emerging growth companies. Emerging growth
companies include companies that MFS believes are early in their life cycle
but which have the potential to become major enterprises. Dividend and
interest income from portfolio securities, if any, is incidental to the Fund's
objective of long-term growth of capital. MFS receives from the Fund an
advisory fee at an annual rate of 0.75% of average daily net assets of the
Fund.
RESEARCH SERIES. This Fund seeks to provide long-term growth of capital and
future income. The portfolio securities of this Fund are selected by the
investment research analysts in the Equity Research Group of MFS. The Fund's
assets are allocated to industry groups (e.g., pharmaceuticals, retail and
computer software). The allocation by industry group is determined by the
analysts acting together. Individual analysts are then responsible for
selecting what they view as the securities best suited to meet the Fund's
investment objective within their assigned industry group. MFS receives from
the Fund an advisory fee at an annual rate of 0.75% of average daily net
assets of the Fund.
PURCHASES AND REDEMPTIONS OF FUND SHARES; REINVESTMENT
The Accounts will purchase and redeem shares of the Funds to the extent
necessary to provide benefits under the Contract or for such other purposes as
may be consistent with the Contract. The Accounts will purchase and redeem
shares of the Funds at net asset value. Fund distributions to the Accounts are
automatically reinvested in additional shares of the Funds at net asset value.
MATERIAL CONFLICTS, SUBSTITUTION OF INVESTMENTS AND CHANGES TO ACCOUNTS
It is conceivable that material conflicts could arise as a result of both
variable annuity and variable life insurance separate accounts investing in
the Funds. Although no material conflicts
22
are foreseen, the participating insurance companies will monitor events in
order to identify any material conflicts between variable annuity and variable
life insurance contract owners to determine what action, if any, should be
taken. Material conflicts could result from such things as (1) changes in
state insurance law, (2) changes in federal income tax law or (3) differences
between voting instructions given by variable annuity and variable life
insurance contract owners. If a conflict occurs, Merrill Lynch Life may be
required to eliminate one or more subaccounts of Separate Account A or
Separate Account B or substitute a new subaccount. In responding to any
conflict, Merrill Lynch Life will take the action which it believes necessary
to protect its contract owners.
Merrill Lynch Life may substitute a different investment option for any of the
current Funds. Substitution may be made with respect to both existing
investments and the investment of future premiums. However, no such
substitution will be made without any necessary approval of the Securities and
Exchange Commission and applicable state insurance departments. Contract
owners will be notified of any substitutions. Additional investment options
may be added in the future as eligible investments through the Accounts.
In addition, Merrill Lynch Life may make additional subaccounts available to
either Account, eliminate subaccounts in either Account, deregister either or
both of the Accounts under the Investment Company Act of 1940 (the "1940
Act"), make any changes required by the 1940 Act, operate either or both
Accounts as a managed investment company under the 1940 Act or any other form
permitted by law, transfer all or a portion of the assets of a subaccount or
account to another subaccount or Account pursuant to a combination or
otherwise, and create new accounts. No such changes will be made without any
necessary approval of the Securities and Exchange Commission and applicable
state insurance departments. Contract owners will be notified of any changes.
CHARGES AND DEDUCTIONS
CONTRACT MAINTENANCE CHARGE
A charge is made to reimburse Merrill Lynch Life for expenses related to
maintenance of the Contract. These expenses include issuing Contracts,
maintaining records, and performing accounting, regulatory compliance, and
reporting functions. This $40 maintenance charge will be deducted from the
contract value on each contract anniversary that occurs on or prior to the
annuity date. It will also be deducted when the Contract is surrendered if it
is surrendered on any date other than a contract anniversary. The contract
maintenance charge will be deducted on a pro rata basis from among all
subaccounts in which contract value is invested. (See ACCUMULATION UNITS on
page 27 for a discussion of the effect the deduction of this charge will have
on the number of accumulation units credited to a Contract.)
This charge will be waived on all Contracts with a contract value equal to or
greater than $50,000
on the date the charge would otherwise be deducted. It is not deducted after
the annuity date.
Currently, a contract owner of three or more Contracts will be assessed no
more than $120 in Contract Maintenance Charges annually, regardless of the
number of Contracts owned. Once Contract Maintenance Charges in an amount
equal to $120 have been paid in a calendar year by a contract owner, remaining
Contract Maintenance Charges to which the contract owner would otherwise be
subject in the same calendar year will be waived. Merrill Lynch Life reserves
the right to discontinue this waiver at any time.
Merrill Lynch Life does not expect to profit from this charge. The contract
maintenance charge will never increase.
MORTALITY AND EXPENSE RISK CHARGE
A mortality and expense risk charge is imposed on the Accounts. It equals
1.25% annually for Account A and 0.65% annually for Account B deducted daily
from the net asset value of the Accounts. Of this amount, 0.75% annually for
Account A and 0.35% annually for Account B is attributable to mortality risks
assumed by Merrill Lynch Life for the annuity payment and death benefit
guarantees made under the Contract. These guarantees include making annuity
payments unaffected by mortality experience and providing a minimum death
benefit under the Contract.
23
Additionally, of the total mortality and expense risk charge, 0.50% annually
for Account A and 0.30% annually for Account B is attributable to expense
risks assumed by Merrill Lynch Life should the contract maintenance and
administration charges be insufficient to cover all Contract maintenance and
administration expenses.
The mortality and expense risk charge is greater for Account A than for
Account B because a greater death benefit and higher administrative expenses
are attributable to Account A. If the mortality and expense risk charge is
inadequate to cover the actual expenses of mortality, maintenance, and
administration, Merrill Lynch Life will bear the loss. If the charge exceeds
the actual expenses, the excess will be added to Merrill Lynch Life's profit.
The mortality and expense risk charge will never increase.
ADMINISTRATION CHARGE
An administration charge is made to reimburse Merrill Lynch Life for costs
associated with the establishment and administration of Account A. This charge
covers such expenses as optional contract transactions (for example,
processing transfers and Dollar Cost Averaging transactions). A charge of
0.10% annually will be deducted daily only from the net asset value of Account
A. Merrill Lynch Life does not expect to profit from this charge. The
administration charge will never increase.
CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge may be imposed on withdrawals and
surrenders from Account A. This charge reimburses Merrill Lynch Life for
expenses relating to the sale of the Contract, such as commissions,
preparation of sales literature, and other promotional activity. The charge is
imposed only on premium withdrawn or surrendered from Account A that was held
for less than seven years. However, where permitted by state regulation, up to
10% of this premium will not be subject to such a charge if withdrawn or
surrendered from Account A during the first withdrawal of the contract year,
whether paid in a lump sum or elected to be paid on a monthly, quarterly,
semi-annual or annual basis. In addition, where permitted by state regulation,
no contingent deferred sales charge will be imposed on any premium withdrawn
or surrendered from Contracts purchased by employees of Merrill Lynch Life or
its affiliates or from Contracts purchased by the employees' spouses or
dependents.
The maximum contingent deferred sales charge is 7% of the premium withdrawn
during the first year after that premium is paid, decreasing by 1% annually to
0% after year seven, as shown below.
NUMBER OF COMPLETE YEARS
ELAPSED SINCE PREMIUM WAS PAID CONTINGENT DEFERRED SALES CHARGE
------------------------------ --------------------------------
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
Contingent deferred sales charges are calculated on total premiums withdrawn
or surrendered from Account A, but not to exceed the account value. Gain in
account value is never subject to a contingent deferred sales charge. (See
page 31 for a discussion of the rules for determining whether a withdrawal is
considered to come from premiums or gain for contingent deferred sales charge
purposes.) For example, if a contract owner made a $5,000 premium payment to
Account A and withdrew the entire $5,000 three years later when there had been
no gain or loss on that premium, a 4% contingent deferred sales charge would
be imposed on the $5,000 withdrawal. If that contract owner had made a $5,000
premium payment to Account A and due to negative investment experience only
$4,500 remained in Account A when the contract owner withdrew it
24
three years later, a 4% contingent deferred sales charge would be imposed only
on $4,500 of the original premium. If instead the $5,000 premium payment the
contract owner made to Account A grew to $5,500 due to positive investment
experience, and the contract owner withdrew $200 of gain in account value as
the first withdrawal three years later, and thereafter withdrew the remaining
$5,300 in a subsequent withdrawal that same year, no contingent deferred sales
charge would be imposed on the $200 first withdrawn (as it represents gain in
account value and not premium) and a 4% contingent deferred sales charge would
be imposed only on $5,000 of the $5,300 subsequent withdrawal (as $300 of that
amount represents gain in account value).
When imposed, the contingent deferred sales charge will be deducted on a pro
rata basis from among the subaccounts in which the contract owner has
invested, on the basis of the contract owner's interest in each subaccount to
the Account A account value. (See WITHDRAWALS AND SURRENDERS on page 31 and
ACCUMULATION UNITS on page 27 for a discussion of the effect the deduction of
this charge will have on the number of accumulation units credited to a
Contract.)
To the extent that the contingent deferred sales charge is inadequate to
recover all sales expenses associated with the Contract, the deficiency will
be met by Merrill Lynch Life's surplus, which may be partly derived from the
mortality and expense risk charge on the Contract.
No contingent deferred sales charge will be imposed on withdrawals or
surrenders from Account B.
PREMIUM TAXES
Various states and municipalities impose a premium tax on annuity premiums
when they are received by an insurance company. In other jurisdictions, a
premium tax is paid on the contract value on the annuity date.
Premium tax rates vary from jurisdiction to jurisdiction and currently range
from 0% to 5%. Merrill Lynch Life will pay these taxes when due, and a charge
for any premium taxes imposed by a state or local government will be deducted
from the contract value on the annuity date. (See ACCUMULATION UNITS on page
27 for a discussion of the effect the deduction of this charge will have on
the number of accumulation units credited to a Contract.) In those
jurisdictions that do not allow an insurance company to reduce its current
taxable premium income by the amount of any withdrawal, surrender or death
benefit paid, Merrill Lynch Life will also deduct a charge for these taxes on
any withdrawal, surrender or death benefit effected under the Contract.
Premium tax rates are subject to change by law, administrative
interpretations, or court decisions. Premium tax amounts will depend on, among
other things, the contract owner's state of residence, Merrill Lynch Life's
status within that state, and the premium tax laws of that state.
OTHER CHARGES
Contract owners may make up to six transfers among Account A subaccounts per
contract year without charge. Additional transfers may be permitted at a
charge of $25 per transfer. (See TRANSFERS on page 29.)
Merrill Lynch Life reserves the right, subject to any necessary regulatory
approval, to charge for assessments or federal premium taxes or federal, state
or local excise, profits or income taxes measured by or attributable to the
receipt of premiums. Merrill Lynch Life also reserves the right to deduct from
the Accounts any taxes imposed on the Accounts' investment earnings. (See
MERRILL LYNCH LIFE'S TAX STATUS on page 34.)
In calculating the net asset values of the Funds, advisory fees and operating
expenses are deducted from the assets of each Fund. Information about those
fees and expenses can be found in the attached prospectuses for the Funds and
in the Statement of Additional Information for each Fund.
Fees associated with participation in the Merrill Lynch RPA SM program are
paid by the participating contract owner and are not deducted from the
contract value or imposed on the Accounts. (See MERRILL LYNCH RETIREMENT PLUS
ADVISOR SM on page 30.)
25
DESCRIPTION OF THE CONTRACT
OWNERSHIP OF THE CONTRACT
The contract owner is entitled to exercise all rights under the Contract.
Unless otherwise specified, the purchaser of the Contract will be the contract
owner. The contract owner may designate a beneficiary. The beneficiary will
receive all outstanding Contract benefits if the owner dies. The contract
owner may also designate an annuitant. The annuitant may be changed at any
time prior to the annuity date. If no annuitant is selected, the contract
owner will be the annuitant. If the annuitant is changed on a contract owned
by other than a natural person, the change will be treated as the death of the
contract owner for purposes of the Internal Revenue Code. Merrill Lynch Life
will then pay to the owner's beneficiary the contract value, less any
applicable fees and charges.
The Contract may be assigned to another owner upon notice to Merrill Lynch
Life's Service Center. The Contract may only be assigned to another owner in
full, not in part. An assignment to a new owner cancels all prior beneficiary
designations except for those prior beneficiary designations that have been
made irrevocably. Assignment of the Contract may have tax consequences or may
be prohibited on certain IRA Contracts, so the contract owner should consult
with a qualified tax adviser before assigning the Contract. (See FEDERAL
INCOME TAXES on page 34.)
Only spouses may be co-owners of the Contract. When co-owners are established,
they exercise all rights under the Contract jointly unless they elect
otherwise. Co-owner spouses must each be designated as beneficiary for the
other. Co-owners may also designate a beneficiary to receive benefits on the
surviving co-owner's death. IRA Contracts may not have co-owners.
ISSUING THE CONTRACT
A nonqualified Contract may generally be issued to contract owners who are
less than 85 years of age. Annuitants on nonqualified Contracts must also be
less than age 85 at issue. For IRA Contracts owned by natural persons, the
contract owner and annuitant must be the same person. Therefore, contract
owners and annuitants on IRA Contracts must be less than age 70 1/2 at issue.
Before issuing the Contract, Merrill Lynch Life requires certain information
from the prospective contract owner. Once that information is reviewed and
approved, and the prospective contract owner submits an initial premium, a
Contract will be issued. Generally, this review and approval process is
completed and the premium invested within two business days, but if any
necessary information has not been obtained within five business days, Merrill
Lynch Life will offer to return the premium and no Contract will be processed.
If the prospective contract owner instead consents, Merrill Lynch Life will
hold the premium until all necessary information is obtained, and will then
invest the premium within two business days after obtaining the information.
The initial premium will be invested as described under PREMIUM INVESTMENTS on
page 27.
The date of issue will be the date the required information and initial
premium are received at Merrill Lynch Life's Service Center.
TEN DAY RIGHT TO REVIEW
When the contract owner receives the Contract, it should be reviewed carefully
to make sure it is what the contract owner intended to purchase. Generally,
within 10 days after the contract owner receives the Contract, he or she may
return it for a refund. Some states allow a longer period of time to return
the Contract. The Contract must be delivered to Merrill Lynch Life's Service
Center or to the Financial Consultant who sold it for a refund to be made.
Merrill Lynch Life will then refund to the contract owner the greater of all
premiums paid into the Contract or the contract value as of the date the
Contract is returned. For contracts issued in the Commonwealth of
Pennsylvania, Merrill Lynch Life will refund the contract value as of the date
the Contract is returned. The Contract will then be deemed void.
CONTRACT CHANGES
Requests to change the owner, beneficiary, annuitant, or annuity date of a
Contract will take effect as of the date such a request is signed by the
contract owner, unless Merrill Lynch Life has
26
already acted in reliance on the prior status. Such changes may have tax
consequences. See FEDERAL INCOME TAXES on page 34. See also OWNERSHIP OF THE
CONTRACT on page 26.
PREMIUMS
Initial premium payments must be $5,000 or more on a nonqualified Contract and
$2,000 or more on an IRA Contract. Subsequent premium payments generally must
be $300 or more and can be made at any time prior to the annuity date. (The
$300 minimum may be waived in connection with premiums paid under IRA
Contracts that are held in Retirement Plan Operations (RPO) accounts of
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), in order to
transfer any existing cash balance of such account, in full, into a Contract.)
Merrill Lynch Life reserves the right to refuse to accept subsequent premium
payments, if required by law.
Premium payments can be made directly by the contract owner or debited from
his or her MLPF&S brokerage account and must be transmitted to Merrill Lynch
Life's Service Center at the address printed on the cover of this Prospectus.
Under an automatic investment feature, premium payments can also be made
systematically on a monthly, quarterly, semi-annual or annual basis from a
MLPF&S brokerage account. Subsequent premium payments made under the automatic
investment feature are subject to a $100 (not $300) minimum. A Financial
Consultant should be contacted for additional information. The automatic
investment feature may be canceled by the contract owner at any time. Once
canceled, it can not be activated again until the next contract year. Maximum
annual contributions to IRA Contracts are limited by federal law.
PREMIUM INVESTMENTS
For the first 14 days following the date of issue, all premiums directed into
Account A will be held in the Domestic Money Market Subaccount. Thereafter,
the account value will be reallocated to the Account A subaccounts selected.
In the Commonwealth of Pennsylvania, all premiums will be invested as of the
date of issue in the subaccounts selected by the contract owner. Subsequent
premiums allocated to Account A will be directly placed in the subaccounts
selected as of the end of the valuation period in which they are received at
Merrill Lynch Life's Service Center. Premiums directed into Account B will be
directly placed in the Reserve Assets Subaccount on the issue date. Subsequent
premiums allocated to Account B will be directly placed in its Reserve Assets
Subaccount as of the end of the valuation period in which they are received at
Merrill Lynch Life's Service Center. Currently, a contract owner may allocate
his or her premium among eighteen subaccounts (seventeen available through
Account A and one available through Account B); allocations must be made in
increments that are even multiples of 10%. For example, 10% of a premium
received may be allocated to the Prime Bond Fund, 40% allocated to the High
Current Income Fund, and 50% allocated to the Quality Equity Fund. However, a
contract owner may not allocate 33 1/3% to the Prime Bond Fund and 66 2/3% to
the High Current Income Fund. If allocation instructions are not given with
subsequent premiums received, Merrill Lynch Life will allocate those premiums
according to the allocation instructions last received from the contract
owner. Merrill Lynch Life reserves the right to modify the limit on the number
of subaccounts to which future allocations may be made.
ACCUMULATION UNITS
Each subaccount has a distinct value, called the accumulation unit value. The
accumulation unit value varies daily, as described below. This value is used
to determine the number of subaccount accumulation units represented by a
contract owner's investment in a subaccount. When a contract owner invests a
premium or transfers an amount to a subaccount, accumulation units in that
subaccount are purchased and credited to the Contract. Conversely, when a
contract owner withdraws contract value or transfers an amount from a
subaccount, accumulation units credited to the Contract in that subaccount are
redeemed. Similarly, when a deduction is made under a Contract for the
contract maintenance charge, any contingent deferred sales charges, any
transfer charge and any premium taxes due, accumulation units credited to the
Contract in the subaccounts are redeemed. (See CHARGES AND DEDUCTIONS on page
23 for a discussion concerning the
27
allocation of charges to subaccounts.) The number of accumulation units in a
subaccount so purchased or redeemed for a Contract is based on the
subaccount's accumulation unit value as of the end of the valuation period
during which the purchase or redemption is made. It is determined by dividing
the dollar value of the amount of the purchase or redemption allocated to the
subaccount by the value of one accumulation unit for that subaccount for the
valuation period in which the transfer is effected. The number of accumulation
units in each subaccount credited to a Contract will therefore increase or
decrease as these transactions are effected.
The number of subaccount accumulation units credited to a Contract will not
change as a result of investment experience or the deduction of mortality and
expense risk and administration charges. Instead, these charges and investment
experience will be reflected in the accumulation unit value.
For each subaccount, the value of an accumulation unit was arbitrarily set at
$10 when it was established. Accumulation unit values may increase or decrease
from one valuation period to the next. A valuation period is the interval from
one determination of the net asset value of a subaccount to the next, measured
from the time each day the Funds are valued. The Funds are valued at the close
of business on each day the New York Stock Exchange is open. An accumulation
unit value for any valuation period is determined by multiplying the
accumulation unit value for the last prior valuation period by the net
investment factor for the subaccount for the current valuation period. The
Funds' investment performance, expenses, and the deduction of asset-based
charges affect the accumulation unit value.
The net investment factor is an index used to measure the investment
performance of a subaccount from one valuation period to the next. For any
subaccount, the net investment factor is determined by dividing the value of
the assets of the subaccount for that valuation period by the value of the
assets of the subaccount for the preceding valuation period, and subtracting
from the result the valuation period equivalent of the annual administration
and mortality and expense risk charges. Merrill Lynch Life may adjust the net
investment factor to make provisions for any change in the law that requires
it to pay tax on capital gains in the Accounts or for any assessments or
federal premium taxes or federal, state or local excise, profits or income
taxes measured by or attributable to the receipt of premiums. (See OTHER
CHARGES on page 25).
The net investment factor may be greater or less than one. Therefore, the
value of an accumulation unit may increase or decrease.
DEATH BENEFIT
Prior to the annuity date, the Contract provides a death benefit feature that
guarantees a death benefit if the contract owner dies, regardless of
investment experience. A Contract's death benefit is equal to the greater of
(a) the sum of the excess, if any, of premiums paid into Account A with
interest on them from the date received at an interest rate compounded daily
to yield 5% annually, over transfers to Account B and withdrawals from Account
A multiplied by a rate compounded daily from the date of transfer or
withdrawal to yield 5% annually, plus the value of Account B; or (b) the
contract value. There are limits on the period during which interest will
accrue for purposes of this calculation. For Contracts issued beginning June
1, 1995 (or later as state approvals are obtained), interest shall accrue only
until the earliest of the last day of the 20th contract year, the last day of
the contract year in which the contract owner (annuitant when the contract
owner is not a natural person) attains age 80, or the date of the contract
owner's (annuitant's when the contract owner is not a natural person) death.
For Contracts issued prior to June 1, 1995, and for Contracts issued on or
after that date but before state approvals are obtained, interest shall accrue
only until the last day of the 20th contract year. If the contract owner dies
prior to the annuity date, Merrill Lynch Life will pay the Contract's death
benefit to the owner's beneficiary. Unless the beneficiary has been
irrevocably designated, the contract owner may change the beneficiary at any
time prior to the annuity date.
If the owner's beneficiary is his or her surviving spouse, the spouse may
elect to continue the Contract in force on the same terms as applicable before
the owner's death, and the spouse will then become the contract owner and the
beneficiary until a new beneficiary is named.
28
The death benefit will be paid in a lump sum unless the beneficiary chooses an
annuity payment option available under the Contract. (See ANNUITY OPTIONS on
page 33.) However, if the contract owner dies before the annuity date, federal
tax law generally requires the entire contract value to be distributed within
five years of the date of death. Special rules may apply to the surviving
spouse. (See FEDERAL INCOME TAXES on page 34.)
The death benefit is determined as of the date Merrill Lynch Life receives due
proof of death at its Service Center. Due proof of death is received as of the
date Merrill Lynch Life receives a certified copy of the contract owner's
death certificate, the Beneficiary Statement, and any other paperwork
necessary to process the death claim. If other documents have not been
received by the 60th day following receipt of the certified death certificate,
due proof of death will be deemed to have been received and the death benefit
will be paid in a lump sum.
DEATH OF ANNUITANT
If the annuitant dies prior to the annuity date, and the annuitant is not the
contract owner, the owner may designate a new annuitant. If a new annuitant is
not designated, the contract owner will become the annuitant unless the owner
is not a natural person. If the contract owner is not a natural person, no new
annuitant may be named and the death benefit will be paid.
If the annuitant dies after the annuity date, while guaranteed amounts remain
unpaid, the contract owner may either (a) have payments continue for the
amount or period guaranteed; or (b) receive the present value of the remaining
guaranteed payments in a lump sum. If the contract owner dies while guaranteed
amounts remain unpaid, his or her beneficiary may either (a) have payments
continue for the amount or period guaranteed; or (b) receive the present value
of the remaining guaranteed payments in a lump sum.
TRANSFERS
Once each contract year, contract owners may transfer from Account A to
Account B an amount equal to any gain in account value and/or any premium not
subject to a contingent deferred sales charge, determined as of the date the
request is received. Where permitted by state regulation, once each contract
year, contract owners may transfer from Account A to Account B all or a
portion of the greater of that amount or 10% of premiums subject to a
contingent deferred sales charge determined as of the date the request is
received (minus any of that premium already withdrawn or transferred).
Additionally, where permitted by state regulation, periodic transfers of all
or a portion of the greater amount, determined at the time of each periodic
transfer, are permitted, on a monthly, quarterly, semi-annual or annual basis.
Periodic transfers may be canceled by the contract owner at any time. Once
canceled, they can not be activated again until the next contract year.
Generally, the amount transferred will be deducted on a pro rata basis from
among the affected Account A subaccounts, on the basis of the contract owner's
interest in each subaccount to the Account A account value, unless the
contract owner requests otherwise. However, if the amount will be transferred
on a monthly, quarterly, semi-annual or annual basis, it must be deducted on a
pro rata basis. This is the only amount which may be transferred from Account
A to Account B during that contract year. There is no charge imposed on the
transfer of this amount. No transfers are permitted from Account B to Account
A.
Prior to the annuity date, contract owners may transfer all or part of their
Account A value among the subaccounts of Account A up to six times per
contract year without charge. Additional transfers among Account A subaccounts
may be made at a charge of $25 per transfer. Currently, there is no charge for
additional transfers. The transfer charge will be deducted on a pro rata basis
from among the subaccounts from which account value is being transferred.
Merrill Lynch Life reserves the right to change the number of additional
transfers permitted each contract year, as appropriate.
Transfers among subaccounts may be made in specific dollar amounts or as a
percentage of Account A value. Requests to transfer dollar amounts must be for
at least $300 or the total value of a subaccount, if less. Requests to
transfer a percentage of Account A value are also subject to a
29
$300 minimum, with allocations in increments that are even multiples of 10%.
For example, 20% of the $1,500 Account A value in the Prime Bond Fund may be
transferred to the High Current Income Fund, but 15 1/2% may not.
Contract owners may make transfer requests in writing or by telephone, once
Merrill Lynch Life receives proper telephone transfer authorization. Transfer
requests may also be made through a Merrill Lynch Financial Consultant, once
Merrill Lynch Life receives proper authorization. Transfers will take effect
as of the end of the valuation period on the date the request is received at
Merrill Lynch Life's Service Center. Telephone transfer requests received
after 4:00 p.m. (ET) will be deemed to have been received the following
business day.
DOLLAR COST AVERAGING
The Contract offers an additional optional transfer feature called Dollar Cost
Averaging. This feature allows contract owners to reallocate value from the
Account A Domestic Money Market Subaccount to any of the remaining Account A
investment options. Amounts will be transferred monthly to the subaccounts
specified by the contract owner. Amounts of $1,000 or more must be allotted
for transfer each month in the Dollar Cost Averaging feature. Allocations must
be designated in percentage increments that are even multiples of 10%. No
specific dollar amount designations may be made. Merrill Lynch Life reserves
the right to change these minimums.
Contract owners may apply for the Dollar Cost Averaging feature at any time
prior to the annuity date. Dollar Cost Averaging transfers may continue for
anywhere from 12 to 36 months (or to the annuity date, if earlier), subject to
availability of Domestic Money Market Subaccount value for this purpose. When
the Dollar Cost Averaging feature is elected, an amount equal to the total to
be transferred during the term of the feature must have been deposited into
the Domestic Money Market Subaccount. Should the owner's interest in the
Domestic Money Market Subaccount drop below the selected monthly transfer
amount, Merrill Lynch Life will notify the contract owner that an additional
premium payment will be necessary in that subaccount if he or she wants to
continue in the Dollar Cost Averaging feature.
The first Dollar Cost Averaging transfer will be effected on the first
monthiversary date after Merrill Lynch Life receives the contract owner's
election at its Service Center. Subsequent Dollar Cost Averaging transfers
will take effect as of the end of the valuation period on each of the
Contract's monthiversary dates.
The main objective of the Dollar Cost Averaging feature is to shield
investment from short term price fluctuations. Since the same dollar amount is
transferred to selected subaccounts each month, more accumulation units are
purchased in a subaccount when their value is low and fewer accumulation units
are purchased when their value is high. Therefore, a lower than average cost
of purchasing accumulation units may be achieved over the long term. This plan
of investing allows contract owners to take advantage of investment
fluctuations, but does not assure a profit or protect against a loss in
declining markets.
There is no charge imposed on Dollar Cost Averaging transfers. These transfers
are in addition to the annual transfers permitted under the Contract, as
described above.
Dollar Cost Averaging is an investment strategy and does not guarantee an
investment gain, nor will it protect against an investment loss when markets
have declined.
MERRILL LYNCH RETIREMENT PLUS ADVISOR/SM/
Subject to certain eligibility requirements, a contract owner may elect to
participate in the Merrill Lynch Retirement Plus Advisor SM ("RPA") program.
Through RPA, premiums and Account A values are allocated and transferred
periodically among the subaccounts of Account A, in accordance with an
investment program developed by Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S") that is consistent with the contract owner's
investment profile. MLPF&S is registered as an investment adviser under the
Investment Advisers Act of 1940.
Prior to participating in this program, a contract owner must complete an RPA
profiling questionnaire and client agreement for each contract under which
Account A values will be allocated pursuant to the RPA program.
30
If premiums and Account A values under a contract are being invested pursuant
to the RPA program, then Dollar Cost Averaging is not available for the
contract. In addition, the contract owner's participation in the RPA program
may be terminated in the discretion of MLPF&S if a contract owner requests a
transfer while the RPA program is in effect; such contract owner-initiated
transfers may be inconsistent with investment strategies being implemented
through the program.
RPA program transfers of Account A values are not subject to any transfer
charge. Fees associated with participation in the RPA program, which are
imposed by MLPF&S are paid by the participating contract owner directly
through the contract owner's Merrill Lynch brokerage account, and are not
deducted from the contract value or imposed on the Accounts.
A contract owner wishing to participate in the RPA program should consult with
his or her Financial Consultant for additional information regarding the
availability of the program and specific eligibility requirements.
Participation in the program does not guarantee that a contract owner will
attain his or her investment goals. In addition, the program does not
guarantee investment gains, or protect against investment losses.
WITHDRAWALS AND SURRENDERS
Withdrawals may be made from the Contract up to six times per contract year
prior to the annuity date. The first withdrawal from Account A in any contract
year will be effected as if gain in account value and premium not subject to a
contingent deferred sales charge is withdrawn first, followed by premium on a
"first-in, first-out" basis. A contingent deferred sales charge will not be
applied to the first withdrawal in any contract year out of Account A to the
extent that the withdrawal consists of gain and/or any premium not subject to
such a charge. Where permitted by state regulation, a contingent deferred
sales charge will not be applied to that portion of the first withdrawal from
Account A in any contract year that does not exceed the greater of (a) or (b)
where (a) is 10% of total premiums paid into Account A that are subject to a
contingent deferred sales charge determined as of the date the request is
received, less any prior amount withdrawn or transferred from Account A to
Account B in the contract year, and (b) is the gain in Account A plus premiums
allocated to Account A as of the date the request is received that are not
subject to a contingent deferred sales charge.
Additionally, where permitted by state regulation, the amount withdrawn may be
paid on a monthly, quarterly, semi-annual or annual basis, if the contract
owner so elects. Withdrawals are subject to tax and prior to age 59 1/2 may
also be subject to a 10% federal penalty tax. (See PENALTY TAXES on page 36.)
All subsequent withdrawals from Account A in the same contract year will be
effected as if premium is withdrawn on a "first-in, first-out" basis before
any gain in account value is withdrawn. Therefore, premium accumulated the
longest will be withdrawn first. These withdrawals are subject to a contingent
deferred sales charge. (See CONTINGENT DEFERRED SALES CHARGE on page 24.)
There are no contingent deferred sales charges imposed on any withdrawals from
Account B. In addition, no contingent deferred sales charge will be imposed on
withdrawals from Account A on a Contract purchased by an employee of Merrill
Lynch Life or its affiliates or purchased by the employee's spouse or
dependents, where permitted by state regulation.
In addition, the contract owner may request monthly, quarterly, semiannual, or
annual automatic withdrawals from Account B. This optional automatic
withdrawal program can be activated or canceled by the contract owner once
each contract year. Once canceled, the program can not be activated again
until the next contract year. Withdrawal amounts may be increased or decreased
at any time, once Merrill Lynch Life receives a proper request at its Service
Center. There are no contingent deferred sales charges imposed on automatic
withdrawals from Account B. These withdrawals are in addition to the annual
withdrawals permitted under the Contract, as described above. Automatic
withdrawals may be included in the contract owner's gross income in
31
the year in which the withdrawal occurs. (See DISTRIBUTIONS on page 35.)
Withdrawals may be taxable and subject to a 10% tax penalty. (See PENALTY
TAXES on page 36.)
If the contract owner has elected both the automatic withdrawal program and a
withdrawal from Account A on a monthly, quarterly, semi-annual or annual
basis, both forms of withdrawal must be paid out on the same date(s).
The minimum amount that may be withdrawn is $300. At least $2,000 must remain
in the Contract after a withdrawal is made. Merrill Lynch Life reserves the
right to change these minimums. Withdrawals will be effected as of the end of
the valuation period on the date the request is received at Merrill Lynch
Life's Service Center. Unless otherwise directed by the contract owner,
withdrawals will be taken from subaccounts in the same proportion as the
owner's contract value bears to the subaccounts of the Accounts from which the
withdrawal is made. A withdrawal may be effected by telephone, once a proper
authorization form is submitted to Merrill Lynch Life's Service Center, if the
amount withdrawn is to be paid into a Merrill Lynch, Pierce, Fenner & Smith
Incorporated brokerage account. Otherwise, a withdrawal request must be
submitted by the contract owner in writing to Merrill Lynch Life's Service
Center. Telephone withdrawal requests received after 4:00 p.m. (ET) will be
deemed to have been received the following business day.
The Contract may be surrendered at any time prior to the annuity date. To
surrender the Contract through a full withdrawal, the Contract must be
delivered to Merrill Lynch Life's Service Center. The surrender will be
effected as of the end of the valuation period on the date the Contract is
received at Merrill Lynch Life's Service Center. The amount payable on
surrender is the contract value as of the end of the valuation period when the
surrender is effected, less any applicable contingent deferred sales charge,
less the contract maintenance charge if the contract value is less than
$50,000 and that valuation period is not a contract anniversary, less any
applicable charge for premium taxes. (See CHARGES AND DEDUCTIONS on page 23.)
Withdrawals will decrease the contract value. Withdrawals from either Account
A or Account B are subject to tax and prior to age 59 1/2 may also be subject
to a 10% federal penalty tax. (See FEDERAL INCOME TAXES on page 34.)
PAYMENTS TO CONTRACT OWNERS
Merrill Lynch Life will generally pay the amount of any withdrawal or
surrender, any annuity payment or death benefit, minus any applicable charges,
premium taxes or tax withholding, within seven days of receipt of a proper
request at its Service Center. However, Merrill Lynch Life may delay the
payment of any withdrawal, surrender, or death benefit, or the processing of
any annuity payment or transfer request if (a) the New York Stock Exchange is
closed, other than for a customary weekend or holiday; (b) trading on the New
York Stock Exchange is restricted by the Securities and Exchange Commission;
(c) the Securities and Exchange Commission declares that an emergency exists
such that it is not reasonably practical to dispose of securities held in the
Accounts or to determine the value of their assets; (d) the Securities and
Exchange Commission by order so permits for the protection of security
holders; or (e) payment is derived from a check used to make a premium payment
which has not cleared through the banking system.
ANNUITY DATE
The contract owner selects an annuity date when the Contract is applied for.
The annuity date may be changed by telephone or by written notice submitted to
Merrill Lynch Life's Service Center, up to 30 days prior to that date.
Generally, the annuity date for nonqualified Contracts may not be later than
the annuitant's 85th birthday. For IRA Contracts, the annuity date may not be
later than when the owner/annuitant reaches the age of 70 2/3 unless the
contract owner selects a later annuity date. If no annuity date is chosen, the
annuity date will automatically be the date on which the annuitant reaches age
85 or 70 1/2, as outlined above.
The first annuity payment will be made on the annuity date, and payments will
continue thereafter according to the schedule of the annuity option selected.
Contract owners may select from a variety of fixed annuity payment options, as
outlined below in ANNUITY OPTIONS on page 33.
32
ANNUITY OPTIONS
The Contract provides a choice of fixed annuity payment options. If an annuity
option is not chosen by the contract owner, Merrill Lynch Life will
automatically effect the Life Annuity with Payments Guaranteed for 10 Years
annuity option when the contract owner reaches age 85 (age 70 1/2 for an IRA
Contract). The annuity option may be changed up to 30 days prior to the
annuity date. Merrill Lynch Life reserves the right to limit annuity options
available to IRA contract owners to comply with provisions of the Internal
Revenue Code or regulations thereunder. On the annuity date, the entire
contract value, after a deduction for the cost of any applicable premium
taxes, will be transferred to Merrill Lynch Life's general account, from which
the annuity payments will be made. The amount of each payment is
predetermined.
The dollar amount of annuity payments is determined by the contract value on
the annuity date, applied to Merrill Lynch Life's then current annuity
purchase rates. These rates will be furnished on request. The rates will never
be less favorable than those shown in the Contract.
If the age and/or sex of the annuitant was misstated to Merrill Lynch Life,
resulting in an incorrect calculation of annuity payments on a Contract,
future annuity payments on that Contract will be adjusted to reflect the
correct age and/or sex. Any amount Merrill Lynch Life overpaid as the result
of a misstatement will be deducted from future payments with 6% annual
interest charges. Any amount Merrill Lynch Life underpaid as the result of a
misstatement will be paid in full with the next payment made with 6% annual
interest credited.
If the contract value on the annuity date, after the deduction for the cost of
any applicable premium taxes, is less than $5,000 (or a different minimum
amount, if required by state law), Merrill Lynch Life may pay the annuity
benefits in a lump sum, rather than as periodic payments. If any annuity
payment would be less than $50 (or a different minimum amount, if required by
state law), the frequency of payments may be changed so that all payments will
be at least $50 (or the minimum amount required by state law). Otherwise, the
contract owner has the following annuity payment options. Merrill Lynch Life
reserves the right to permit additional annuity payment options.
. PAYMENTS OF A FIXED AMOUNT--Equal payments in an amount chosen by the
contract owner will be guaranteed until the sum of all annuity payments
equals the contract value transferred to Merrill Lynch Life's general
account on the annuity date, adjusted for interest credited as shown in the
Contract. The amount chosen must provide for payments for at least five
years. Payments are guaranteed irrespective of the annuitant's life. If the
annuitant dies before the end of the guarantee period, the contract owner
may elect to receive the present value of the remaining guaranteed payments
in a lump sum. If the contract owner dies while guaranteed amounts remain
unpaid, his or her beneficiary may elect to receive the present value of
the remaining guaranteed payments in a lump sum.
. PAYMENTS FOR A FIXED PERIOD--Payments will be made for five years or a
longer period if selected by the contract owner. Payments are guaranteed
irrespective of the annuitant's life. If the annuitant dies before the end
of the guarantee period, the contract owner may elect to receive the
present value of the remaining guaranteed payments in a lump sum. If the
contract owner dies while guaranteed amounts remain unpaid, his or her
beneficiary may elect to receive the present value of the remaining
guaranteed payments in a lump sum.
. *LIFE ANNUITY--Payments will be made for the life of the annuitant.
Payments will cease with the last payment due before the annuitant's death.
. LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 OR 20 YEARS--Payments will be
made for the life of the annuitant. In addition, even if the annuitant dies
before the guarantee period ends, payments will be guaranteed for either 10
or 20 years as selected by the contract owner. If the annuitant dies before
the end of the guarantee period, the contract owner may elect to receive
the present value of the remaining guaranteed payments in a lump sum. If
the contract owner dies while guaranteed amounts remain unpaid, his or her
beneficiary may elect to receive the present value of the remaining
guaranteed payments in a lump sum.
. LIFE ANNUITY WITH GUARANTEED RETURN OF CONTRACT VALUE--Payments will be
made for the life of the annuitant. In addition, even if the annuitant dies
beforehand, payments will be
33
guaranteed until the sum of all annuity payments equals the contract value
transferred to Merrill Lynch Life's general account on the annuity date,
adjusted for interest credited as shown in the Contract.
. *JOINT AND SURVIVOR LIFE ANNUITY--Payments will be made for the lives of
the annuitant and a designated second person. Payments will continue as
long as either one is living.
. INDIVIDUAL RETIREMENT ACCOUNT ANNUITY--This annuity option is available
only to IRA contract owners. Payments will be made annually based on either
(a) the life expectancy of the owner/ annuitant; (b) the joint life
expectancy of the owner/annuitant and his or her spouse; or (c) the life
expectancy of the surviving spouse if the owner/annuitant dies before the
annuity date. Each annual payment will be equal to the remaining contract
value transferred to Merrill Lynch Life's general account, divided by the
then current life expectancy chosen, as defined by Internal Revenue Service
regulations. Payments will be made on each anniversary of the annuity date.
If the measuring life or lives dies before the remaining value has been
distributed, that value will be paid to the contract owner in a lump sum.
* These options are life annuities. Therefore, it is possible for the payee to
receive only one annuity payment if the person (or persons) on whose life
(lives) payment is based dies after only one payment or to receive only two
annuity payments if that person (those persons) dies after only two
payments, etc.
UNISEX
Generally, the Contract provides for sex-distinct annuity purchase rates for
life annuities. However, in those states that have adopted regulations
prohibiting sex-distinct rates, blended unisex annuity purchase rates for life
annuities will be applied, whether the annuitant is male or female. Unisex
annuity purchase rates will provide the same annuity payments for male or
female annuitants that are the same age on their annuity dates.
Employers and employee organizations considering purchasing the Contract
should consult with their legal adviser to determine whether purchasing the
Contract based on sex-distinct annuity purchase rates is consistent with Title
VII of the Civil Rights Act of 1964 or other applicable law. Merrill Lynch
Life may offer such contract owners Contracts based on unisex annuity purchase
rates.
FEDERAL INCOME TAXES
INTRODUCTION
The Contracts are designed for use in connection with retirement plans that
are not qualified plans under the provisions of the Internal Revenue Code and
also Individual Retirement Annuities (IRAs). The ultimate effect of federal
income taxes on contract value, on annuity payments, and on the economic
benefit to the contract owner, depends on the type of retirement plan for
which the Contract is purchased, on whether the investments of the Accounts
meet Internal Revenue Service diversification standards (discussed below) and
on the tax status of the individual concerned. The following discussion is
general in nature and is not intended as tax advice. This discussion is not
intended to address the tax consequences resulting from all situations in
which a person may by entitled to or may receive a distribution under the
Contract. Contract owners should consult a competent tax adviser before
initiating any transaction. This discussion is based on the Company's
understanding of current federal income tax laws as currently interpreted by
the Internal Revenue Service and generally does not discuss or consider any
applicable state or other tax laws. No representation is made as to the
likelihood of continuation of current federal income tax laws or of the
current interpretations by the Internal Revenue Service. MERRILL LYNCH LIFE
DOES NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY CONTRACT OR ANY
TRANSACTION INVOLVING THE CONTRACTS.
MERRILL LYNCH LIFE'S TAX STATUS
Merrill Lynch Life is taxed as a life insurance company under the Internal
Revenue Code. The Accounts are not a separate entity and for tax purposes
their operations are part of the
34
Company's. Therefore, the Company will be liable for any taxes attributable to
the Accounts. Under existing federal income tax law the investment income of
the Accounts is includable in the Company's gross income. Merrill Lynch Life
currently incurs no income taxes on this income. Merrill Lynch Life reserves
the right, however, to deduct from the Accounts any such taxes which are
imposed on the investment earnings or taxes measured by or attributable to the
receipt of premium.
TAXATION OF ANNUITIES
In General
Section 72 of the Internal Revenue Code governs taxation of annuities in
general. With respect to contracts held by natural persons, Merrill Lynch Life
believes that the contract owner is not taxed on increases in the value of the
Contract until distribution occurs, either in the form of a withdrawal or as
annuity payments under the annuity option elected. The taxable portion of a
distribution (in the form of a single sum payment or an annuity) is taxable as
ordinary income. Additionally, certain transfers of a Contract for less than
full consideration, such as a gift, will trigger tax on the excess of the net
contract value over the contract owner's investment in the Contract.
Required Distributions
In order to be treated as an annuity contract for federal income tax purposes,
section 72(s) of the Code requires any nonqualified Contract to provide that
(a) if any contract owner dies on or after the annuity commencement date but
prior to the time the entire interest in the Contract has been distributed,
the remaining portion of such interest will be distributed at least as rapidly
as under the method of distribution being used as of the date of that contract
owner's death; and (b) if any contract owner dies prior to the annuity
commencement date, the entire interest in the Contract will be distributed
within five years after the date of the contract owner's death. These
requirements will be considered satisfied as to any portion of the contract
owner's interest which is payable to or for the benefit of a "designated
beneficiary" and which is distributed over the life of such "designated
beneficiary" or over a period not extending beyond the life expectancy of that
beneficiary, provided that such distributions begin within one year of that
owner's death. The contract owner's "designated beneficiary" (referred to
herein as the "Owner's Beneficiary") is the person designated by such contract
owner as a beneficiary and to whom ownership of the Contract passes by reason
of death and must be a natural person. However, if the contract owner's
"designated beneficiary" is the surviving spouse of the contract owner, the
Contract may be continued with the surviving spouse as the new owner. Solely
for purposes of applying the provisions of Section 72(s) of the Code, when
nonqualified Contracts are held by other than a natural person, the death of,
or change of, the annuitant is treated as the death of the contract owner.
The nonqualified Contracts contain provisions which are intended to comply
with the requirements of section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. The Company intends to
review such provisions and modify them if necessary to assure that they comply
with the requirements of Code section 72(s) when clarified by regulation or
otherwise. Other rules may apply to IRAs.
Non-natural Owners
Nonqualified contracts held by other than a natural person generally are not
treated as annuities, and the contract owner generally must include in income
any increase in the excess of the contract value over the contract owner's
investment in the Contract. This is not applicable to trusts or other entities
acting as an agent for a natural person, and there are certain other
exceptions to this rule. Prospective contract owners who are not natural
persons should consult a competent tax adviser.
Distributions
The taxable portion of annuity payments is generally determined by a formula
that establishes the ratio that the cost basis of the contract bears to the
expected return under the contract. After
35
such time as the sum of the nontaxable portion of annuity payments received
equals the sum of premium payments (adjusted for any withdrawals or
outstanding loans), all subsequent annuity payments are fully taxable as
ordinary income. With respect to nonqualified Contracts, partial withdrawals
of contract value are treated as taxable income to the extent that the
contract value just before the withdrawal exceeds the investment in the
Contract. The assignment or pledge (or agreement to assign or pledge) of any
portion of the value of the Contract shall be treated as a withdrawal subject
to this rule. Full withdrawals are treated as taxable income under section
72(e) of the Internal Revenue Code to the extent that the net amount received
exceeds the investment in the Contract. (For the tax treatment of any premium
paid prior to August 14, 1982, under another annuity contract, which contract
has been exchanged for this Contract, consult your tax adviser.) Amounts may
be distributed from a Contract because of the death of the owner. Generally,
such amounts are includable in the income of the recipient as follows: (1) if
distributed in a lump sum, the amount is taxed in the same manner as a full
withdrawal; or (2) if distributed under a payment option, the amounts are
taxed in the same manner as annuity payments. For both withdrawals and annuity
payments under IRAs, there may be no cost basis in the contract within the
meaning of Section 72 of the Internal Revenue Code, and the total amount
received may be taxable as ordinary income.
Multiple Annuity Contracts
All nonqualified annuity contracts entered into after October 21, 1988 that
are issued by Merrill Lynch Life (or its affiliates) to the same owner during
any calendar year are treated as one annuity contract for purposes of
determining the amount includable in gross income under Section 72(e) of the
Internal Revenue Code. In addition, the Treasury Department has specific
authority to issue regulations that prevent the avoidance of Section 72(e)
through the serial purchase of annuity contracts or otherwise. Congress has
also indicated that the Treasury Department may have authority to treat the
combination purchase of an immediate annuity contract and a separate deferred
annuity contract as a single annuity contract under its general authority to
prescribe rules as may be necessary to enforce the income tax laws.
Penalty Taxes
A penalty tax may be imposed equal to 10% of the taxable income portion of a
withdrawal. The penalty tax applies to both nonqualified Contracts and IRAs,
with different exceptions for each. The exceptions applicable to both
nonqualified Contracts and IRAs include (a) distributions made at or after the
contract owner attains age 59 1/2, (b) distributions made on or after the
contract owner's death, (c) distributions attributable to the contract owner's
disability, and (d) substantially equal periodic payments for the contract
owner's life or life expectancy (or joint life or joint life expectancy of the
contract owner and a second designated person). In certain circumstances,
other exceptions may apply. Other tax penalties may apply to certain
distributions loans and other transactions under IRAs.
INTERNAL REVENUE SERVICE DIVERSIFICATION STANDARDS
The Internal Revenue Service has published regulations prescribing
diversification standards to be met by nonqualified variable annuity contracts
as a condition to being taxed as annuities under Section 72 of the Internal
Revenue Code. The standards provide that investments of a subaccount of the
Accounts are adequately diversified if no more than (a) 55% of the value of
its assets is represented by any one investment, (b) 70% is represented by any
two investments, (c) 80% is represented by any three investments, and (d) 90%
is represented by any four investments. Each Fund is obligated to comply with
the diversification standards imposed by the Internal Revenue Service.
The Treasury Department has announced that the diversification regulations do
not provide guidance concerning the extent to which contract owners may direct
their investments to particular subaccounts of a separate account. Such
guidance will be included in regulations or Revenue Rulings under Section
817(d) of the Internal Revenue Code relating to the definition of a variable
contract. It is unknown what standards will be adopted in such regulations.
Merrill Lynch Life, however, believes that according to current law the
Contract will be treated as an
36
annuity for federal income tax purposes and that the Company, not the contract
owner, will be treated as the owner of the contract investments.
The ownership rights under the Contract are similar to, but different in
certain respects from, those described by the Internal Revenue Service in
rulings in which it determined that the owners were not owners of separate
account assets. For example, the owner of the Contract has additional
flexibility in allocating premium payments and account values. These
differences could result in the owner being treated as the owner of the assets
of the Accounts. Merrill Lynch Life reserves the right to modify the Contract
as necessary to prevent the contract owner from being considered the owner of
the assets of the Accounts for federal tax purposes. Any such changes will
apply uniformly to affected contract owners and will be made with such notice
to affected contract owners as is feasible under the circumstances.
IRA CONTRACTS
Section 408 of the Internal Revenue Code permits eligible individuals to
contribute to an individual retirement program known as an Individual
Retirement Annuity ("IRA"). IRAs are subject to limits on the amount that may
be contributed, the contributions that may be deducted from taxable income,
the persons who may be eligible, and on the time when distributions may
commence and the duration of those distributions. Also, distributions from
certain other types of qualified plans may be "rolled over" on a tax-deferred
basis into an IRA. The ultimate effect of federal income taxes on the amounts
contributed to and held under a Contract, on annuity payments, and on the
economic benefit to the contract owner, the annuitant, or the beneficiary
depends on the tax and employment status of the individual concerned and on
Merrill Lynch Life's tax status. In addition, certain requirements must be
satisfied in purchasing an IRA with proceeds from a tax qualified retirement
plan and receiving distributions from an IRA in order to continue receiving
favorable tax treatment. Sales of the Contract for use with IRAs may be
subject to special disclosure requirements of the Internal Revenue Service.
Purchasers of the Contract for use with IRAs will be provided with
supplemental information required by the Internal Revenue Service or other
appropriate agency. Such purchasers will have the right to revoke the Contract
within seven days of the earlier of the establishment of the IRA or the
purchase of the Contract. Purchasers should seek competent tax advice as to
the suitability of the Contract for use with or as an IRA. The Internal
Revenue Service has not reviewed the Contract for qualification as an IRA, and
has not addressed in a ruling of general applicability whether a death benefit
provision such as the provision in the Contract comports with IRA
qualification requirements.
TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF A CONTRACT
A transfer of ownership of the Contract, the designation of an annuitant who
is not also the owner, or the exchange of the Contract may result in certain
tax consequences to the contract owner that are not discussed herein. A
contract owner contemplating any such transfer, assignment, or exchange should
contact a competent tax adviser with respect to the potential tax effects of
such a transaction.
WITHHOLDING
Unless the contract owner elects to the contrary, the taxable portion of any
amounts received under the Contract will be subject to withholding to meet
federal and state income tax obligations. The rate of withholding on annuity
payments will generally be determined on the basis of the withholding
certificate filed by the contract owner with Merrill Lynch Life. If no such
certificate is filed, the contract owner will be treated, for purposes of
determining the withholding rate, as a married person with three exemptions.
The rate of withholding on all other payments made under the Contract, such as
amounts received upon withdrawals, will generally be 10%. Thus, if the
contract owner fails to elect that there be no withholding, Merrill Lynch Life
will withhold from every withdrawal or annuity payment the appropriate
percentage of the amount of the payment that is taxable. Merrill Lynch Life
will provide the contract owner with forms and instructions concerning the
right to elect that no
37
amount be withheld from payments. Generally, there will be no withholding for
taxes until payments are actually received under the Contract.
POSSIBLE CHANGES IN TAXATION
In past years, legislation has been proposed that would have adversely
modified the federal taxation of certain annuities. For example, one such
proposal would have changed the tax treatment of non-qualified annuities that
did not have "substantial life contingencies" by taxing income as it is
credited to the annuity. Although, as of the date of this prospectus, Congress
is not actively considering any legislation regarding the taxation of
annuities, there is always the possibility that the tax treatment of annuities
could change by legislation or other means (such as IRS regulations, revenue
rulings, judicial decisions, etc.). Moreover, it is also possible that any
change could be retroactive (that is, effective prior to the date of the
change).
OTHER TAX CONSEQUENCES
Merrill Lynch Life does not make any guarantee regarding the tax status of the
Contract or any transaction regarding the Contract. As noted above, the
foregoing discussion of the income tax consequences under the Contract is not
exhaustive and special rules are provided with respect to other tax situations
not discussed in the Prospectus. Further, the income tax consequences
discussed herein reflect the Company's understanding of current law and the
law may change. Federal estate and state and local estate, inheritance, and
other tax consequences of ownership or receipt of distributions under the
Contract depend on the individual circumstances of each contract owner or
recipient of the distribution. A competent tax adviser should be consulted for
further information.
OTHER INFORMATION
VOTING RIGHTS
Merrill Lynch Life is the legal owner of all Fund shares held in the Accounts.
As the owner, it has the right to vote on any matter put to vote at the Funds'
shareholder meetings. However, Merrill Lynch Life will vote all Fund shares
attributable to Contracts according to instructions received from contract
owners. Shares attributable to Contracts for which no voting instructions are
received will be voted in the same proportion as shares in the respective
subaccounts for which instructions are received. Shares not attributable to
Contracts will also be voted in the same proportion as shares in the
respective subaccounts for which instructions are received. If any federal
securities laws or regulations, or their present interpretation, change to
permit Merrill Lynch Life to vote Fund shares in its own right, it may elect
to do so.
Contract owners have voting rights prior to their annuity date. They may give
voting instructions concerning (1) the election of the Funds' Board of
Directors; (2) ratification of the Funds' independent accountant; (3) approval
of the investment advisory agreement for a Fund corresponding to the contract
owner's selected subaccounts; (4) any change in the fundamental investment
policy of a Fund corresponding to the contract owner's selected subaccounts;
and (5) any other matter requiring a vote of the Funds' shareholders. The
number of shares for which a contract owner may give voting instructions prior
to the annuity date is determined by dividing the contract owner's interest in
a subaccount by the net asset value per share of the corresponding Fund. The
number of shares for which contract owners may give voting instructions will
be determined as of a record date chosen by Merrill Lynch Life. The record
date will be no earlier than 90 days prior to the shareholders meeting.
After the annuity date, contract owners no longer have voting rights, since
their contract value has then been moved out of the Funds.
Contract owners will receive periodic reports relating to the Funds in which
they have an interest including proxy material and voting instruction forms.
REPORTS TO CONTRACT OWNERS
At least once each contract year prior to the annuity date, contract owners
will be sent a statement that provides information pertinent to their own
Contract. The statement will outline
38
all Contract transactions during the year, the Contract's current number of
accumulation units, the value of each accumulation unit, and the total
contract value.
Contract owners will also be sent an annual and a semiannual report containing
financial statements and a list of portfolio securities of the Funds, as
required by the Investment Company Act of 1940.
SELLING THE CONTRACT
Merrill Lynch, Pierce, Fenner & Smith Incorporated is the principal
underwriter of the Contract. It was organized in 1958 under the laws of the
state of Delaware and is registered as a broker-dealer under the Securities
Exchange Act of 1934. It is a member of the National Association of Securities
Dealers, Inc. ("NASD"). Merrill Lynch, Pierce, Fenner & Smith Incorporated's
principal business address is World Financial Center, 250 Vesey Street, New
York, New York 10281.
Contracts are sold by registered representatives (Financial Consultants) of
Merrill Lynch, Pierce, Fenner & Smith Incorporated who are also licensed
through various Merrill Lynch Life Agencies as insurance agents for Merrill
Lynch Life. Merrill Lynch Life has entered into a distribution agreement with
Merrill Lynch, Pierce, Fenner & Smith Incorporated and companion sales
agreements with the Merrill Lynch Life Agencies through which agreements the
Contracts are sold and the Financial Consultants are compensated by Merrill
Lynch Life Agencies and/or Merrill Lynch, Pierce, Fenner & Smith Incorporated.
The maximum commission paid to the Financial Consultant is 2.0% of each
premium allocated to Separate Account A. In addition, on the annuity date, the
Financial Consultant will receive compensation of no more than 1.4% of
contract value not subject to a contingent deferred sales charge. Additional
annual compensation of no more than 0.50% of contract value may also be paid
to the Financial Consultant. Commission may be paid in the form of non-cash
compensation. No commission or annuity date compensation will be paid on
Contracts purchased by employees of Merrill Lynch Life or its affiliates or
Contracts purchased by the employees' spouses or dependents.
The maximum commission Merrill Lynch Life will pay to the applicable insurance
agency to be used to pay commissions to Financial Consultants is 5.0% of each
premium allocated to Separate Account A.
Merrill Lynch, Pierce, Fenner & Smith Incorporated may arrange for sales of
the Contract by other broker-dealers who are registered under the Securities
Exchange Act of 1934 and are members of the NASD. Registered representatives
of these other broker-dealers may be compensated on a different basis than
Merrill Lynch, Pierce, Fenner & Smith Incorporated registered representatives.
STATE REGULATION
Merrill Lynch Life is subject to the laws of the State of Arkansas and to the
regulations of the Arkansas Insurance Department. It is also subject to the
insurance laws and regulations of all jurisdictions in which it is licensed to
do business.
An annual statement in the prescribed form is filed with the insurance
departments of jurisdictions where Merrill Lynch Life does business disclosing
the Company's operations for the preceding year and its financial condition as
of the end of that year. Insurance department regulation includes periodic
examination to verify Contract liabilities and reserves and to determine
solvency and compliance with all insurance laws and regulations. Merrill Lynch
Life's books and accounts are subject to insurance department review at all
times. A full examination of Merrill Lynch Life's operations is conducted
periodically by the Arkansas Insurance Department and under the auspices of
the National Association of Insurance Commissioners.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Accounts are a party or to which
the assets of the Accounts are subject. Merrill Lynch Life and Merrill Lynch,
Pierce, Fenner & Smith Incorporated are engaged in various kinds of routine
litigation that, in the Company's judgment, is not material to its total
assets. No litigation relates to the Accounts.
39
EXPERTS
The financial statements of Merrill Lynch Life as of December 31, 1995 and
1994 and for each of the three years in the period ended December 31, 1995 and
of the Accounts as of December 31, 1995 and for the periods presented in the
Statement of Additional Information have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their reports appearing therein, and
are included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing. Deloitte & Touche LLP's
principal business address is Two World Financial Center, New York, New York
10281-1420.
LEGAL MATTERS
The organization of the Company, its authority to issue the Contract, and the
validity of the form of the Contract have been passed upon by Barry G.
Skolnick, Merrill Lynch Life's Senior Vice President and General Counsel.
Sutherland, Asbill & Brennan, L.L.P. of Washington, D.C. has provided advice
on certain matters relating to federal securities laws.
REGISTRATION STATEMENTS
Registration statements have been filed with the Securities and Exchange
Commission under the Securities Act of 1933 and the Investment Company Act of
1940 that relate to the Contract and its investment options. This Prospectus
does not contain all of the information in the registration statements as
permitted by Securities and Exchange Commission regulations. The omitted
information can be obtained from the Securities and Exchange Commission's
principal office in Washington, D.C., upon payment of a prescribed fee.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
The contents of the Statement of Additional Information for the Contract
include the following:
OTHER INFORMATION
Principal Underwriter
Financial Statements
Administrative Services Arrangements
CALCULATION OF YIELDS AND TOTAL RETURNS
FINANCIAL STATEMENTS OF MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE
ACCOUNT A
FINANCIAL STATEMENTS OF MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE
ACCOUNT B
FINANCIAL STATEMENTS OF MERRILL LYNCH LIFE INSURANCE COMPANY
40
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 9, 1996
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT A
AND
MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE ACCOUNT B
FLEXIBLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
ALSO KNOWN AS
MODIFIED SINGLE PREMIUM INDIVIDUAL DEFERRED
VARIABLE ANNUITY CONTRACT
ISSUED BY
MERRILL LYNCH LIFE INSURANCE COMPANY
HOME OFFICE: LITTLE ROCK, ARKANSAS 72201
SERVICE CENTER: P.O. BOX 44222,
JACKSONVILLE, FLORIDA 32231-4222
4804 DEER LAKE DRIVE EAST,
JACKSONVILLE, FLORIDA 32246
PHONE: (800) 535-5549
OFFERED THROUGH
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
This individual deferred variable annuity contract (the "Contract") is
designed to provide comprehensive and flexible ways to invest and to create a
source of income protection for later in life through the payment of annuity
benefits. An annuity is intended to be a long term investment. Contract owners
should consider their need for deferred income before purchasing the Contract.
The Contract is issued by Merrill Lynch Life Insurance Company ("Merrill Lynch
Life") both on a nonqualified basis, and as an Individual Retirement Annuity
("IRA") that is given qualified tax status.
This Statement of Additional Information is not a Prospectus and should be
read together with the Contract's Prospectus dated December 9, 1996, which is
available on request and without charge by writing to or calling Merrill Lynch
Life at the Service Center address or phone number set forth above.
TABLE OF CONTENTS
PAGE
----
OTHER INFORMATION........................................................ 3
Principal Underwriter.................................................... 3
Financial Statements..................................................... 3
Administrative Services Arrangements..................................... 3
CALCULATION OF YIELDS AND TOTAL RETURNS.................................. 3
FINANCIAL STATEMENTS OF MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE
ACCOUNT A............................................................... S-1
FINANCIAL STATEMENTS OF MERRILL LYNCH LIFE VARIABLE ANNUITY SEPARATE
ACCOUNT B............................................................... S-22
FINANCIAL STATEMENTS OF MERRILL LYNCH LIFE INSURANCE COMPANY............. G-1
2
OTHER INFORMATION
PRINCIPAL UNDERWRITER
Merrill Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of Merrill
Lynch Life, performs all sales and distribution functions regarding the
Contracts and may be deemed the principal underwriter of Merrill Lynch Life
Variable Annuity Separate Account A and Merrill Lynch Life Variable Annuity
Separate Account B (the "Accounts") under the Investment Company Act of 1940.
The offering is continuous. For the years ended December 31, 1995, 1994, and
1993, Merrill Lynch, Pierce, Fenner & Smith Incorporated received $24.2
million, $59.1 million and $51.9 million respectively, in commissions in
connection with the sale of the Contracts.
FINANCIAL STATEMENTS
The financial statements of Merrill Lynch Life included in this Statement of
Additional Information should be distinguished from the financial statements
of the Accounts and should be considered only as bearing upon the ability of
Merrill Lynch Life to meet any obligations it may have under the Contract.
ADMINISTRATIVE SERVICES ARRANGEMENTS
Merrill Lynch Life has entered into a Service Agreement with its parent,
Merrill Lynch Insurance Group, Inc. ("MLIG") pursuant to which Merrill Lynch
Life can arrange for MLIG to provide directly or through affiliates certain
services. Pursuant to this agreement, Merrill Lynch Life has arranged for MLIG
to provide administrative services for the Accounts and the Contracts, and
MLIG, in turn, has arranged for a subsidiary, Merrill Lynch Insurance Group
Services, Inc. ("MLIG Services"), to provide these services. Compensation for
these services, which will be paid by Merrill Lynch Life, will be based on the
charges and expenses incurred by MLIG Services, and will reflect MLIG
Services' actual costs. For the years ended December 31, 1995, 1994 and 1993,
Merrill Lynch Life paid administrative services fees of $43.0 million, $44.2
million, and $55.8 million respectively.
CALCULATION OF YIELDS AND TOTAL RETURNS
MONEY MARKET YIELDS
From time to time, Merrill Lynch Life may quote in advertisements and sales
literature the current annualized yield for the Domestic Money Market
Subaccount of Account A and the Reserve Assets Subaccount of Account B for a
7-day period in a manner that does not take into consideration any realized or
unrealized gains or losses on shares of the underlying Funds or on their
respective portfolio securities. The current annualized yield is computed by:
(a) determining the net change (exclusive of realized gains and losses on the
sales of securities and unrealized appreciation and depreciation) at the end
of the 7-day period in the value of a hypothetical account under a Contract
having a balance of 1 unit at the beginning of the period, (b) dividing such
net change in account value by the value of the account at the beginning of
the period to determine the base period return; and (c) annualizing this
quotient on a 365-day basis. The net change in account value reflects: (1) net
income from the Fund attributable to the hypothetical account; and (2) charges
and deductions imposed under the Contract which are attributable to the
hypothetical account. The charges and deductions include the per unit charges
for the hypothetical account for: (1) the mortality and expense risk charge;
(2) the administration charge in the case of the Domestic Money Market
Subaccount; and (3) the annual contract maintenance charge. For purposes of
calculating current yields for a Contract, an average per unit contract
maintenance charge is used, as described below. Current yield will be
calculated according to the following formula:
Current Yield = ((NCF - ES/UV) X (365/7)
Where:
NCF= the net change in the value of the Fund (exclusive of realized gains
and losses on the sale of securities and unrealized appreciation and
depreciation) for the 7-day period attributable to a hypothetical
account having a balance of 1 unit.
ES= per unit expenses for the hypothetical account for the 7-day period.
UV= the unit value on the first day of the 7-day period.
3
Merrill Lynch Life also may quote the effective yield of the Domestic Money
Market Subaccount or the Reserve Assets Subaccount for the same 7-day period,
determined on a compounded basis. The effective yield is calculated by
compounding the unannualized base period return according to the following
formula:
Effective Yield = (1 + ((NCF - ES)/UV))/365/7/ - 1
Where:
NCF= the net change in the value of the Fund (exclusive of realized gains
and losses on the sale of securities and unrealized appreciation and
depreciation) for the 7-day period attributable to a hypothetical
account having a balance of 1 unit.
ES = per unit expenses of the hypothetical account for the 7-day period.
UV = the unit value for the first day of the 7-day period.
The effective yield for the Domestic Money Market subaccount for the 7-day
period ended December 31, 1995 was 3.89%. The effective yield for the Reserve
Assets subaccount for the 7-day period ended December 31, 1995 was 4.66%.
Because of the charges and deductions imposed under the Contract, the yield
for the Domestic Money Market Subaccount and the Reserve Assets Subaccount
will be lower than the yield for the corresponding underlying Fund.
The yields on amounts held in the Domestic Money Market Subaccount or the
Reserve Assets Subaccount normally will fluctuate on a daily basis. Therefore,
the disclosed yield for any given past period is not an indication or
representation of future yields or rates of return. The actual yield for those
subaccounts is affected by changes in interest rates on money market
securities, average portfolio maturity of the underlying Fund, the types and
qualities of portfolio securities held by the Fund and the Fund's operating
expenses. Yields on amounts held in the Domestic Money Market Subaccount and
Reserve Assets Subaccount may also be presented for periods other than a 7-day
period.
OTHER SUBACCOUNT YIELDS
From time to time, Merrill Lynch Life may quote in sales literature or
advertisements the current annualized yield of one or more of the Account A
subaccounts (other than the Domestic Money Market Subaccount) for a contract
for 30-day or one-month periods. The annualized yield of a subaccount refers
to income generated by the subaccount over a specified 30-day or one-month
period. Because the yield is annualized, the yield generated by the subaccount
during the 30-day or one-month period is assumed to be generated each period
over a 12-month period. The yield is computed by: (1) dividing the net
investment income of the Fund attributable to the subaccount units less
subaccount expenses for the period; by (2) the maximum offering price per unit
on the last day of the period times the daily average number of units
outstanding for the period; then (3) compounding that yield for a 6-month
period; and then (4) multiplying that result by 2. Expenses attributable to
the subaccount include the mortality and expense risk charge, the
administration charge and the annual contract maintenance charge. For purposes
of calculating the 30-day or one-month yield, an average contract maintenance
charge per dollar of contract value in the subaccount is used to determine the
amount of the charge attributable to the subaccount for the 30-day or one-
month period; as described below. The 30-day or one-month yield is calculated
according to the following formula:
Yield = 2 X ((((NI - ES)/(U X UV)) + 1)/6/ - 1)
Where:
NI= net investment income of the Fund for the 30-day or one-month period
attributable to the subaccount's units.
ES= expenses of the subaccount for the 30-day or one-month period.
U = the average number of units outstanding.
UV= the unit value at the close of the last day in the 30-day or one-
month period.
4
Currently, Merrill Lynch Life may quote yields on bond subaccounts within
Account A. The yield for those subaccounts for the 30-day period ended
December 31, 1995 was:
NAME OF SUBACCOUNT YIELD
------------------ -----
Prime Bond 4.52%
High Current Income 8.62%
Global Bond Focus (formerly, World
Income Focus) 7.36%
Government Bond (formerly,
Intermediate Government Bond) 4.16%
Because of the charges and deductions imposed under the contracts, the yield
for an Account A subaccount will be lower than the yield for the corresponding
Fund.
The yield on the amounts held in the Account A subaccounts normally will
fluctuate over time. Therefore, the disclosed yield for any given past period
is not an indication or representation of future yields or rates of return. A
subaccount's actual yield is affected by the types and quality of portfolio
securities held by the corresponding Fund, and its operating expenses.
Yield calculations do not take into account the declining contingent deferred
sales charge under the Contract of amounts surrendered or withdrawn under the
Contract deemed to consist of premiums paid within the preceding seven years.
A contingent deferred sales charge will not be imposed on the first withdrawal
in any Contract year to the extent that it is deemed to consist of gain on
premiums paid during the preceding seven contract years and/or premiums not
subject to such a charge.
TOTAL RETURNS
From time to time, Merrill Lynch Life also may quote in sales literature or
advertisements, total returns, including average annual total returns for one
or more of the subaccounts for various periods of time. Average annual total
returns will be provided for a subaccount for 1, 5 and 10 years, or for a
shorter period, if applicable. For the year ended December 31, 1995, returns
were:
NAME OF SUBACCOUNT RETURN
------------------ ------
Prime Bond 11.34%
High Current Income 8.62%
Quality Equity 14.29%
Equity Growth 36.80%
Natural Resources Focus* 5.22%
American Balanced* 12.29%
Global Strategy Focus 2.27%
Basic Value Focus 17.62%
Global Bond Focus (formerly, World
Income Focus) 8.28%
Global Utility Focus* 16.45%
International Equity Focus -2.08%
Government Bond (formerly,
Intermediate Government Bond) 6.15%
Developing Capital Markets Focus -7.92%
Performance information for the Index 500, AIM V.I. Capital Appreciation, AIM
V.I. Value, Premier Growth, Emerging Growth, and Research Subaccounts are not
included because they had not commenced operations as of December 31, 1995.
Total returns assume the Contract was surrendered at the end of the period
shown, and are not indicative of performance if the Contract were continued
for a longer period.
- --------
* Closed to allocations of premiums or contract value following the close of
business on December 6, 1996.
5
Average annual total returns for other periods of time may also be disclosed
from time to time. For example, average annual total returns may be provided
based on the assumption that a subaccount had been in existence and had
invested in the corresponding underlying Fund for the same period as the
corresponding Fund had been in operation. The Funds commenced operations as
indicated below:
COMMENCED
FUND OPERATIONS
---- ----------
Prime Bond April 20, 1982
High Current Income April 20, 1982
Quality Equity April 20, 1982
Equity Growth April 20, 1982
Natural Resources Focus* June 1, 1988
American Balanced* June 1, 1988
Global Strategy Focus February 14, 1992
Basic Value Focus July 1, 1993
Global Bond Focus (formerly, World
Income Focus) July 1, 1993
Global Utility Focus* July 1, 1993
International Equity Focus July 1, 1993
Government Bond (formerly,
Intermediate Government Bond) May 1, 1994
Developing Capital Markets Focus May 1, 1994
Average annual total returns represent the average annual compounded rates of
return that would equate an initial investment of $1,000 under a contract to
the redemption value or that investment as of the last day of each of the
periods. The ending date for each period for which total return quotations are
provided will generally be as of the most recent calendar quarter-end.
Average annual total returns are calculated using subaccount unit values
calculated on each valuation day based on the performance of the corresponding
underlying Fund, the deductions for the mortality and expense risk charge, the
administration charge (in the case of Account A subaccounts), and the contract
maintenance charge, and assume a surrender of the Contract at the end of the
period for the return quotation. Total returns therefore reflect a deduction
of the contingent deferred sales charge for any period of less than seven
years. For purposes of calculating total return, an average per dollar
contract maintenance charge attributable to the hypothetical account for the
period is used, as described below. The total return is then calculated
according to the following formula:
TR = ((ERV/P)/1/N/) - 1
Where:
TR = the average annual total return net of subaccount recurring charges
(such as the mortality and expense risk charge, administration
charge, if applicable, and contract maintenance charge).
ERV= the ending redeemable value (net of any applicable contingent
deferred sales charge) at the end of the period of the hypothetical
account with an initial payment of $1,000.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
From time to time, Merrill Lynch Life also may quote in sales literature or
advertisements, total returns that do not reflect the contingent deferred
sales charge. These are calculated in exactly the same way as average annual
total returns described above, except that the ending redeemable value of the
hypothetical account for the period is replaced with an ending value for the
period that does not take into account any contingent deferred sales charge on
surrender of the Contract. In addition, such nonstandard returns may also be
quoted for other periods.
- --------
* The subaccount corresponding to this Fund was closed to allocations of
premiums or contract value following the close of business on December 6,
1996.
6
From time to time, Merrill Lynch Life also may quote in sales literature or
advertisements total returns or other performance information for a
hypothetical Contract assuming the initial premium is allocated to more than
one subaccount or assuming monthly transfers from the Domestic Money Market
Subaccount to one or more designated subaccounts under a dollar cost averaging
program. These returns will reflect the performance of the affected
subaccount(s) for the amount and duration of the allocation to each subaccount
for the hypothetical Contract. They also will reflect the deduction of charges
described above except for the contingent deferred sales charge. For example,
total return information for a Contract with a dollar cost averaging program
for a 12-month period will assume commencement of the program at the beginning
of the most recent 12-month period for which average annual total return
information is available. This information will assume an initial lump-sum
investment in the Domestic Money Market Subaccount at the beginning of that
period and monthly transfers of a portion of the contract value from that
subaccount to designated subaccount(s) during the 12-month period. The total
return for the Contract for this 12-month period therefore will reflect the
return on the portion of the contract value that remains invested in the
Domestic Money Market Subaccount for the period it is assumed to be so
invested, as affected by monthly transfers, and the return on amounts
transferred to the designated subaccounts for the period during which those
amounts are assumed to be invested in those subaccounts. The return for an
amount invested in a subaccount will be based on the performance of that
subaccount for the duration of the investment, and will reflect the charges
described above other than the contingent deferred sales charge. Performance
information for a dollar cost-averaging program also may show the returns for
various periods for a designated subaccount assuming monthly transfers to the
subaccount, and may compare those returns to returns assuming an initial lump-
sum investment in that subaccount. This information also may be compared to
various indices, such as the Merrill Lynch 91-day Treasury Bills index or the
U.S. Treasury Bills index and may be illustrated by graphs, charts, or
otherwise.
7
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a)Financial Statements
(1)Financial Statements of Merrill Lynch Life Variable Annuity Separate
Account A as of December 31, 1995 and for the two years ended
December 31, 1995 and the Notes relating thereto appear in the
Statement of Additional Information (Part B of the Registration
Statement)
(2)Financial Statements of Merrill Lynch Life Variable Annuity Separate
Account B as of December 31, 1995 and for the two years ended
December 31, 1995 and the Notes relating thereto appear in the
Statement of Additional Information (Part B of the Registration
Statement)
(3)Financial Statements of Merrill Lynch Life Insurance Company for the
three years ended December 31, 1995 and the Notes relating thereto
appear in the Statement of Additional Information (Part B of the
Registration Statement)
(b)Exhibits
(1)Resolution of the Board of Directors of Merrill Lynch Life Insurance
Company establishing the Merrill Lynch Life Variable Annuity
Separate Account A and Merrill Lynch Life Variable Annuity Separate
Account B.
(2)Not Applicable
(3)Underwriting Agreement Between Merrill Lynch Life Insurance Company and
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
(4)(a)Individual Variable Annuity Contract issued by Merrill Lynch Life
Insurance Company.
(b)Merrill Lynch Life Insurance Company Contingent Deferred Sales Charge
Waiver Endorsement.
(c)Individual Retirement Annuity Endorsement.
(d)Merrill Lynch Life Insurance Company Endorsement.
(e)Individual Variable Annuity Contract (revised) issued by Merrill Lynch
Life Insurance Company (ML-VA-002) (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 7 to Form N-4,
Registration No. 33-43773 Filed April 26, 1995).
(f)Merrill Lynch Life Insurance Company Endorsement (ML008) (Incorporated
by Reference to Registrant's Post-Effective Amendment No. 7 to Form
N-4, Registration No. 33-43773 Filed April 26, 1995).
(g)Merrill Lynch Life Insurance Company Individual Variable Annuity
Contract (ML-VA-001) (Incorporated by Reference to Registrant's
Post-Effective Amendment No. 7 to Form N-4, Registration No. 33-
43773 Filed April 26, 1995).
(5)Not Applicable
(6)(a)Articles of Amendment, Restatement and Redomestication of the
Articles of Incorporation of Merrill Lynch Life Insurance Company.
(b)Amended and Restated By-laws of Merrill Lynch Life Insurance Company.
(7)Not Applicable
(8)(a)Amended General Agency Agreement (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 5 to Form N-4,
Registration No. 33-43773 Filed April 28, 1994).
(b)Indemnity Agreement Between Merrill Lynch Life Insurance Company and
Merrill Lynch Life Agency, Inc.
(c)Management Agreement Between Merrill Lynch Life Insurance Company and
Merrill Lynch Asset Management, Inc.
(d)Agreement Between Merrill Lynch Life Insurance Company and Merrill Lynch
Variable Series Funds, Inc. Relating to Maintaining Constant Net
Asset Value for the Reserve Assets Fund.
(e)Agreement Between Merrill Lynch Life Insurance Company and Merrill Lynch
Variable Series Funds, Inc. Relating to Maintaining Constant Net
Asset Value for the Domestic Money Market Fund.
(f)Agreement Between Merrill Lynch Life Insurance Company and Merrill Lynch
Variable Series Funds, Inc. Relating to Valuation and Purchase
Procedures.
(g)Amended Service Agreement Between Merrill Lynch Life Insurance Company
and Merrill Lynch Insurance Group, Inc. (Incorporated by Reference
to Registrant's Post-Effective Amendment No. 5 to Form N-4,
Registration No. 33-43773 Filed April 28, 1994).
C-1
(h)Reimbursement Agreement Between Merrill Lynch Asset Management, Inc. and
Merrill Lynch Life Agency.
(i)Form of Participation Agreement Between Merrill Lynch Variable Series
Funds, Inc., Merrill Lynch Life Insurance Company, Merrill Lynch
Life Insurance Company, and Family Life Insurance Company
(Incorporated by Reference to Registrant's Post-Effective Amendment
No. 5 to Form N-4, Registration No. 33-43773 Filed April 28, 1994).
(j)Form of Participation Agreement Between Merrill Lynch Variable Series
Funds, Inc. and Merrill Lynch Life Insurance Company.
(k)Form of Participation Agreement Among AIM Variable Insurance Funds,
Inc., Merrill Lynch Life Insurance Company, and AIM Distributors,
Inc.
(l)Form of Participation Agreement Among Merrill Lynch Life Insurance
Company, Alliance Capital Management L.P., and Alliance Fund
Distributors, Inc.
(m)Form of Participation Agreement Among MFS Variable Insurance Trust,
Merrill Lynch Life Insurance Company, and Massachusetts Financial
Services Company.
(9)Opinion of Barry G. Skolnick, Esq. and Consent to its use as to the
legality of the securities being registered.
(10)(a)Written Consent of Sutherland, Asbill & Brennan, L.L.P.
(b)Written Consent of Deloitte & Touche LLP, independent auditors.
(11)Not Applicable
(12)Not Applicable
(13)Schedule for Computation of Performance Quotations.
(14)(a)Power of Attorney from Joseph E. Crowne, Jr. (Incorporated by
Reference to Registrant's Post-Effective Amendment No. 4 to Form N-
4, Registration No. 33-43773 Filed March 2, 1994).
(b)Power of Attorney from David M. Dunford (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 4 to Form N-4,
Registration No. 33-43773 Filed March 2, 1994).
(c)Power of Attorney from John C.R. Hele (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 4 to Form N-4,
Registration No. 33-43773 Filed March 2, 1994).
(d)Power of Attorney from Allen N. Jones (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 4 to Form N-4,
Registration No. 33-43773 Filed March 2, 1994).
(e)Power of Attorney from Barry G. Skolnick (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 4 to Form N-4,
Registration No. 33-43773 Filed March 2, 1994).
(f)Power of Attorney from Anthony J. Vespa (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 4 to Form N-4,
Registration No. 33-43773 Filed March 2, 1994).
(g)Power of Attorney from Gail R. Farkas (Incorporated by Reference to
Registrant's Post-Effective Amendment No. 8 to Form N-4,
Registration No. 33-43773 Filed April 25, 1996).
C-2
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR*
NAME PRINCIPAL BUSINESS ADDRESS POSITION WITH DEPOSITOR*
- ------------------ -------------------------- --------------------------------
Joseph E. Crowne, 800 Scudders Mill Road Director, Senior Vice President,
Jr. Plainsboro, NJ 08536 Chief Financial Officer, Chief
Actuary and Treasurer.
David M. Dunford 800 Scudders Mill Road Director, Senior Vice President
Plainsboro, NJ 08536 and Chief Investment Officer.
Gail R. Farkas 800 Scudders Mill Road Director and Senior Vice
Plainsboro, NJ 08536 President.
Barry G. Skolnick 800 Scudders Mill Road Director, Senior Vice President,
Plainsboro, NJ 08536 General Counsel and Secretary.
Anthony J. Vespa 800 Scudders Mill Road Director, Chairman of the Board,
Plainsboro, NJ 08536 Chief Executive Officer and
President.
Deborah J. Adler 800 Scudders Mill Road Vice President and Actuary.
Plainsboro, NJ 08536
Robert J. Boucher 1414 Main Street Senior Vice President, Variable
Springfield, MA 01102 Life Administration.
Charles J. Cava- 800 Scudders Mill Road, Vice President.
naugh Plainsboro, NJ 08536
Michael P. Cogs- 800 Scudders Mill Road Vice President and Senior
well Plainsboro, NJ 08536 Counsel.
Edward W. Diffin, 800 Scudders Mill Road Vice President and Senior
Jr. Plainsboro, NJ 08536 Counsel.
Eileen Dyson 4804 Deer Lake Drive East Vice President and Assistant
Jacksonville, FL 32246 Secretary.
Diana Joyner 1414 Main Street Vice President.
Springfield, MA 01102
Peter P. Massa 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
Kelly A. O'Dea 800 Scudders Mill Road Vice President and Senior
Plainsboro, NJ 08536 Compliance Officer.
Shelley K. Parker 1414 Main Street Vice President and Assistant
Springfield, MA 01102 Secretary.
Julia Raven 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
Lori M. Salvo 800 Scudders Mill Road Vice President and Senior
Plainsboro, NJ 08536 Counsel.
John A. Shea 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
Frederick H. 800 Scudders Mill Road Vice President.
Steele Plainsboro, NJ 08536
Thomas J. Thatcher 4804 Deer Lake Drive East Vice President and Assistant
Jacksonville, FL 32246 Secretary.
Robert J. Viamari 1414 Main Street Vice President and Assistant
Springfield, MA 01102 Secretary.
Chester Westergard 425 West Capital Avenue, Vice President
Capital Towers, Suite 200
Little Rock, AR 72201
Denis G. Wuestman 800 Scudders Mill Road Vice President.
Plainsboro, NJ 08536
- ---------------------
* Each director is elected to serve until the next annual shareholder meeting
or until his or her successor is elected and shall have qualified.
C-3
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
Merrill Lynch Life Insurance Company is an indirect wholly-owned subsidiary
of Merrill Lynch & Co., Inc.
A list of subsidiaries of Merrill Lynch & Co., Inc. appears below.
MLCOSUBO395
SUBSIDIARIES OF THE REGISTRANT
The following are subsidiaries of ML & Co. as of March 24, 1995 and the
states or jurisdictions in which they are organized. Indentation indicates the
principal parent of each subsidiary. Except as otherwise specified, in each case
ML & Co. owns, directly or indirectly, at least 99% of the voting securities of
each subsidiary. The names of particular subsidiaries have been omitted because,
considered in the aggregate as a single subsidiary, they would not constitute,
as of the end of the year covered by this report, a "significant subsidiary" as
that term is defined in Rule 1.02(v) of Regulation S-X under the Securities
Exchange Act of 1934.
STATE OR
JURISDICTION
NAME OR ENTITY
- -------------------------------------------------------------------------------------- --------------------------
Merrill Lynch & Co., Inc. ............................................................ Delaware
Merrill Lynch, Pierce, Fenner & Smith Incorporated(1)............................... Delaware
Broadcort Capital Corp. .......................................................... Delaware
Merrill Lynch & Co., Canada Ltd. ................................................. Ontario
Merrill Lynch Canada Incorporated/Incorporee.................................... Nova Scotia
Merrill Lynch Life Agency Inc.(2)................................................. Washington
Merrill Lynch Princeton Incorporated.............................................. Delaware
ROC Denver, Inc. ................................................................. Delaware
R.O.C. Florida, Inc. ............................................................. Florida
ROC Texas, Inc. .................................................................. Texas
Wagner Stott Clearing Corp.(3).................................................... Delaware
Green Equity, Inc. ................................................................. New Jersey
Merrill Lynch Bank & Trust Co. ..................................................... New Jersey
Merrill Lynch Capital Services, Inc. ............................................... Delaware
Merrill Lynch Derivative Products, Inc.(4).......................................... Delaware
Merrill Lynch Government Securities Inc. ........................................... Delaware
Merrill Lynch Government Securities of Puerto Rico S.A. .......................... Delaware
Merrill Lynch Money Markets Inc. ................................................. Delaware
Merrill Lynch Group, Inc. .......................................................... Delaware
HQ North Company, Inc. ........................................................... New York
Investor Protection Insurance Company............................................. Vermont
Merrill Lynch Capital Partners, Inc. ............................................. Delaware
Merrill Lynch Fiduciary Services, Inc. ........................................... New York
Merrill Lynch Futures Inc. ....................................................... Delaware
Merrill Lynch, Hubbard Inc.(5).................................................... Delaware
Merrill Lynch Insurance Group, Inc. .............................................. Delaware
Merrill Lynch Life Insurance Company............................................ Arkansas
ML Life Insurance Company of New York........................................... New York
Merrill Lynch International Finance Corporation................................... New York
Merrill Lynch International Bank Limited........................................ England
Merrill Lynch Bank (Suisse) S.A. ............................................. Switzerland
Merrill Lynch Trust Company (Jersey) Limited.................................. Jersey,
Channel Islands
Merrill Lynch L.P. Holdings, Inc. ................................................ Delaware
Merrill Lynch MBP Inc. ........................................................... Delaware
Merrill Lynch Mortgage Capital Inc. .............................................. Delaware
Merrill Lynch National Financial.................................................. Utah
Merrill Lynch Private Capital Inc.(6)............................................. Delaware
Merrill Lynch Trust Company....................................................... New Jersey
Merrill Lynch Business Financial Services Inc. ................................. Delaware
Merrill Lynch Credit Corporation................................................ Delaware
Merrill Lynch Home Equity Acceptance, Inc. ................................... Delaware
STATE OR
JURISDICTION
NAME OR ENTITY
- -------------------------------------------------------------------------------------- --------------------------
Merrill Lynch & Co., Inc.
Merrill Lynch International Incorporated (cont'd)
Merrill Lynch Trust Company....................................................... Florida
Merrill Lynch Trust Company of America............................................ Illinois
Merrill Lynch Trust Company of California......................................... California
Merrill Lynch Trust Company of Texas.............................................. Texas
Merrill Lynch/WFC/L, Inc. ........................................................ New York
ML Futures Investment Partners Inc. .............................................. Delaware
ML IBK Positions Inc. ............................................................ Delaware
Merrill Lynch Capital Corporation(7)............................................ Delaware
ML Leasing Equipment Corp.(8)..................................................... Delaware
Merlease Leasing Corp. ......................................................... Delaware
Merrill Lynch Venture Capital Inc. ............................................. Delaware
Princeton Services, Inc.(9)....................................................... Delaware
Merrill Lynch International Incorporated............................................ Delaware
Merrill Lynch GFX, Inc. .......................................................... Delaware
Merrill Lynch International (Australia) Limited................................... New South Wales
Merrill Lynch International Bank.................................................. United States
Merrill Lynch International Holdings Inc. ........................................ Delaware
Merrill Lynch Bank (Austria) Aktiengesellschaft A.G. ........................... Austria
Merrill Lynch Bank and Trust Company (Cayman) Limited........................... Cayman Islands,
British West Indies
Merrill Lynch International & Co.(10)......................................... Netherlands Antilles
Merrill Lynch Capital Markets A.G. ............................................. Switzerland
Merrill Lynch Europe Limited.................................................... England
Merrill Lynch International Limited........................................... England
Merrill Lynch Capital Markets PLC............................................. England
Merrill Lynch, Pierce, Fenner & Smith (Brokers & Dealers) Limited............. England
Merrill Lynch Europe Ltd. ...................................................... Cayman Islands,
British West Indies
Merrill Lynch Holding GmbH(11).................................................. Fed. Rep. of Germany
Merrill Lynch Bank A.G. ...................................................... Fed. Rep. of Germany
Merrill Lynch GmbH............................................................ Fed. Rep. of Germany
Merrill Lynch Holding S.A.F. ................................................... France
Merrill Lynch Capital Markets (France) S.A. .................................. France
Merrill Lynch Hong Kong Securities Limited...................................... Hong Kong
Merrill Lynch Japan Incorporated.................................................. Delaware
Merrill Lynch Specialists Inc. ..................................................... Delaware
- ------------------------
(1) MLPF&S also conducts business as "Merrill Lynch & Co."
(2) Similarly named affiliates and subsidiaries that engage in the sale of life
insurance and annuity products are incorporated in various other
jurisdictions.
(3) The preferred stock of the corporation is owned by an unaffiliated group of
investors.
(4) ML & Co. owns 100% of this corporation's outstanding common voting stock.
100% of the outstanding preferred voting stock is held by outside parties.
The board of directors consist of 10 members, 9 of which are ML & Co.
employees and 1 of which represents outside parties.
(5) This corporation has more than 30 direct or indirect subsidiaries operating
in the United States and serving as either general partners or associate
general partners of real estate limited partnerships.
(6) This corporation has 12 subsidiaries which have engaged in direct principal
lending and investment management.
(7) This company has 10 subsidiaries holding or having a direct or indirect
interest in specific investments on its behalf.
(8) This corporation has more than 45 direct or indirect subsidiaries operating
in the United States and serving as either general partners or associate
general partners of limited partnerships.
(9) This corporation is the general partner of Merrill Lynch Asset Management,
L.P. (whose limited partner is ML & Co.).
(10) A partnership among subsidiaries of ML & Co.
(11) ML & Co. holds a 50% interest in this corporation, with the remaining 50%
interest held by an outside party.
ITEM 27. NUMBER OF CONTRACTS
The number of contracts in force as of October 31, 1996 was 68,255.
ITEM 28. INDEMNIFICATION
There is no indemnification of the principal underwriter, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, with respect to the Contract.
The indemnity agreement between Merrill Lynch Life Insurance Company
("Merrill Lynch Life") and its affiliate Merrill Lynch Life Agency, Inc.
("MLLA"), with respect to MLLA's general agency responsibilities on behalf of
Merrill Lynch Life and the Contract, provides:
Merrill Lynch Life will indemnify and hold harmless MLLA and all
persons associated with MLLA as such term is defined in Section
3(a)(21) of the Securities Exchange Act of 1934 against all claims,
losses, liabilities and expenses, to include reasonable attorneys'
fees, arising out of the sale by MLLA of insurance products under the
above-referenced Agreement, provided that Merrill Lynch Life shall not
be bound to indemnify or hold harmless MLLA or its associated persons
for claims, losses, liabilities and expenses arising directly out of
the willful misconduct or negligence of MLLA or its associated persons.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registration pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Merrill Lynch, Pierce, Fenner & Smith Incorporated also acts as
principal underwriter for the following additional funds: CBA Money Fund; CMA
Government Securities Fund; CMA Money Fund; CMA Tax-Exempt Fund; CMA Treasury
Fund; CMA Multi-State Municipal Series Trust; Corporate Income Fund; Equity
Income Fund; The Fund of Stripped ("Zero") U.S. Treasury Securities; The GNMA
Investment Accumulation Program; Government Security Income Fund;
International Bond Fund; The Merrill Lynch Fund of Stripped ("Zero") U.S.
Treasury Securities; Merrill Lynch Trust for Government Securities; Municipal
Income Fund; and Municipal Investment Trust Fund.
Merrill Lynch, Pierce, Fenner & Smith Incorporated also acts as principal
underwriter for the following additional accounts: Merrill Lynch Life Variable
Annuity Separate Account B; Merrill Lynch Life Variable Life Separate Account;
Merrill Lynch Life Variable Life Separate Account II; Merrill Lynch Life
Variable Annuity Separate Account; ML of New York Variable Life Separate
Account; ML of New York Variable Life Separate Account II; ML of New York
Variable Annuity Separate Account; ML of New York Variable Annuity Separate
Account A; and ML of New York Variable Annuity Separate Account B.
C-4
(b) The directors, president, treasurer and executive vice presidents of
Merrill Lynch, Pierce, Fenner & Smith Incorporated are as follows:
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES WITH UNDERWRITER
------------------------ --------------------------------------
Herbert M. Allison, Jr.* Director and Executive Vice
President
Barry S. Friedberg* Executive Vice President
Edward L. Goldberg* Executive Vice President
Stephen L. Hammerman* Director and Chairman
Jerome P. Kenney* Executive Vice President
David H. Komansky* Director, President and Chief
Executive Officer
Theresa Lang* Senior Vice President and Treasurer
Daniel T. Napoli* Senior Vice President
Thomas H. Patrick* Executive Vice President
George A. Schieren General Counsel
Winthrop H. Smith, Jr.* Executive Vice President
John L. Steffens* Director and Executive Vice
President
Daniel P. Tully* Director
Roger M. Vasey* Executive Vice President
- ---------------------
*World Financial Center, 250 Vesey Street, New York, NY 10281
(c) Not Applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books, and records required to be maintained by Section 31(a)
of the 1940 Act and the rules promulgated thereunder are maintained by the
depositor at the principal executive offices at 800 Scudders Mill Road,
Plainsboro, New Jersey 08536 and the Service Center at 4804 Deer Lake Drive
East, Jacksonville, Florida 32246.
ITEM 31. Not Applicable
ITEM 32. UNDERTAKINGS AND REPRESENTATIONS
(a) Registrant undertakes to file a post-effective amendment to the
Registrant Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16
months old for so long as payments under the variable annuity contracts may be
accepted.
(b) Registrant undertakes to include either (1) as part of any application
to purchase a contract offered by the prospectus, a space that an applicant
can check to request a statement of additional information, or (2) a postcard
or similar written communications affixed to or included in the prospectus
that the applicant can remove to send for a statement of additional
information.
(c) Registrant undertakes to deliver any statement of additional information
and any financial statements required to be made available under this Form
promptly upon written or oral request.
(d) Merrill Lynch Life Insurance Company hereby represents that the fees and
charges deducted under the Contract, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and
the risks assumed by Merrill Lynch Life Insurance Company.
C-5
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Merrill Lynch Life Variable Annuity Separate Account A,
certifies that this Post-Effective Amendment meets all the requirements for
effectiveness under paragraph (b) of Rule 485, and accordingly, has caused
this Amendment to be signed on its behalf, in the City of Plainsboro, State of
New Jersey, on the 3rd day of December, 1996.
Merrill Lynch Life Variable Annuity
Separate Account A
(Registrant)
Attest: /s/ Sandra K. Domingues By: /s/ Barry G. Skolnick
------------------------------- ----------------------------------
Sandra K. Domingues Barry G. Skolnick
Assistant Vice President Senior Vice President of Merrill
Lynch Life Insurance Company
Merrill Lynch Life Insurance Company
(Depositor)
Attest: /s/ Sandra K. Domingues By: /s/ Barry G. Skolnick
------------------------------- ----------------------------------
Sandra K. Domingues Barry G. Skolnick
Assistant Vice President Senior Vice President
As required by the Securities Act of 1933, this Post-Effective Amendment No.
10 to the Registration Statement has been signed below by the following
persons in the capacities indicated on December 3, 1996.
SIGNATURE TITLE
--------- -----
* Chairman of the Board, President and
- ------------------------------------- Chief Executive Officer
Anthony J. Vespa
* Director, Senior Vice President, Chief
- ------------------------------------- Financial Officer, Chief Actuary and
Treasurer
Joseph E. Crowne, Jr.
* Director, Senior Vice President, and
- ------------------------------------- Chief Investment Officer
David M. Dunford
* Director and Senior Vice President
- -------------------------------------
Gail R. Farkas
*By: /s/ Barry G. Skolnick
--------------------------------- In his own capacity as Director,
Barry G. Skolnick Senior Vice President, General
Counsel, and Secretary and as
Attorney-In-Fact
C-6
EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE
------- ----------- ----
(1) Resolution of the Board of Directors of Merrill Lynch Life
Insurance Company establishing the Merrill Lynch Life Variable
Annuity Separate Account A and Merrill Lynch Life Variable
Annuity Separate Account B.................................... C-
(3) Underwriting Agreement Between Merrill Lynch Life Insurance
Company and Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................................. C-
(4)(a) Individual Variable Annuity Contract issued by Merrill Lynch
Life Insurance Company........................................ C-
(b) Merrill Lynch Life Insurance Company Contingent Deferred Sales
Charge Waiver Endorsement..................................... C-
(c) Individual Retirement Annuity Endorsement...................... C-
(d) Merrill Lynch Life Insurance Company Endorsement............... C-
(6)(a) Articles of Amendment, Restatement and Redomestication of the
Articles of Incorporation of Merrill Lynch Life Insurance
Company....................................................... C-
(b) Amended and Restated By-Laws of Merrill Lynch Life Insurance
Company....................................................... C-
(8)(b) Indemnity Agreement Between Merrill Lynch Life Insurance
Company and Merrill Lynch Life Agency, Inc. .................. C-
(c) Management Agreement Between Merrill Lynch Life Insurance
Company and Merrill Lynch Asset Management, Inc. ............. C-
(d) Agreement Between Merrill Lynch Life Insurance Company and
Merrill Lynch Variable Series Funds, Inc. Relating to
Maintaining Constant Net Asset Value for the Reserve Assets
Fund.......................................................... C-
(e) Agreement Between Merrill Lynch Life Insurance Company and
Merrill Lynch Variable Series Funds, Inc. Relating to
Maintaining Constant Net Asset Value for the Domestic Money
Market Fund................................................... C-
(f) Agreement Between Merrill Lynch Life Insurance Company and
Merrill Lynch Variable Series Funds, Inc. Relating to
Valuation and Purchase Procedures............................. C-
(h) Reimbursement Agreement Between Merrill Lynch Asset Management,
Inc. and Merrill Lynch Life Agency............................ C-
(j) Form of Participation Agreement Between Merrill Lynch Variable
Series Funds, Inc. and Merrill Lynch Life Insurance Company... C-
(k) Form of Participation Agreement Among AIM Variable Insurance
Funds, Inc., Merrill Lynch Life Insurance Company, and AIM
Distributors, Inc. ........................................... C-
(l) Form of Participation Agreement Among Merrill Lynch Life
Insurance Company, Alliance Capital Management L.P., and
Alliance Fund Distributors, Inc. ............................. C-
(m) Form of Participation Agreement Among MFS Variable Insurance
Trust, Merrill Lynch Life Insurance Company, and Massachusetts
Financial Services Company.................................... C-
(9) Opinion of Barry G. Skolnick, Esq. and Consent to its use as to
the legality of the securities being registered............... C-
(10)(a) Written Consent of Sutherland, Asbill & Brennan, L.L.P. ....... C-
(10)(b) Written Consent of Deloitte & Touche LLP, independent
auditors...................................................... C-
(13) Schedule for Computation of Performance Quotations............. C-
C-7
EX-99.B1
2
EXHIBIT (1)
EXHIBIT (b)(1)
--------------
MERRILL LYNCH LIFE INSURANCE COMPANY
Board of Directors Consent to Corporate Action
Pursuant to Article III of the By-Laws
August 6, 1991
--------------
The Board of Directors of Merrill Lynch Life Insurance Company
("Company"), desiring to establish two variable annuity separate accounts and
adopt and establish Standards of Conduct and Standards of Suitability in
connection thereto, hereby approves and adopts the following resolutions and
hereby consents to the certification thereof as resolutions valid and effective
as if they had been adopted at a meeting of the Board of Directors duly called
and constituted as of the date hereof:
RESOLVED, that the Company establishes two separate accounts, Merrill
Lynch Life Variable Annuity Separate Account A and Merrill Lynch Life
Variable Annuity Separate Account B (collectively "Separate Accounts");
FURTHER RESOLVED, that the Separate Accounts be established for the
purpose of providing for the issuance of individual variable annuities
("Contracts"), which Contracts shall provide that part or all of the
payments and benefits will reflect the investment experience of one or more
underlying security;
FURTHER RESOLVED, that the officers of the Company be authorized and
empowered to perform all such acts and do all such things as may in their
judgment and discretion be necessary or desirable to give full effect to
these resolutions to enable the Company to establish the Separate Accounts
and issue the Contracts, including, without limitation: (a) the preparation
and execution of service agreements, custodian agreements, underwriting
agreements and other agreements and documents respecting such Separate
Accounts as they may deem necessary or desirable; (b) the determination of
the terms and conditions of the Contracts being authorized; (c) the
determination of the jurisdictions in which appropriate action shall be
taken to obtain the requisite qualification, registration and authorization
for the sale of the Contracts as such Officers may deem advisable;
FURTHER RESOLVED, that the President, any Vice President or the
General Counsel, and each of them, with full power to act without the
others, be, and each of them is, hereby authorized to cause the Company to
allocate and contribute to the Separate Accounts, for a limited period and
without the purpose of funding Contracts, funds which the Company might
otherwise invest, if necessary to comply with the Insurance Law for the
purpose of commencing the Separate Accounts' operation;
FURTHER RESOLVED, that the Board of Directors of the Company reserves
the right to change the designation of the Separate Accounts hereafter to
such other designation as it may deem necessary or appropriate;
FURTHER RESOLVED, that the President, any Vice President or the
General Counsel, and each of them, with full power to act without the
others, with such assistance from the Company's independent certified
public accountants and independent consultants or others as they may
require, be, and each of them is, hereby authorized and directed to take
all action necessary to: (a) register the Contracts in such amounts, which
may be an indefinite amount, as the said officer of the Company shall deem
appropriate pursuant to one or more registration statements in an offering
made under the Securities Act of 1933, as amended (the "Registration
Statements"); (b) register the Separate Accounts as an investment company
pursuant to the Investment Company Act of 1940 as amended; (c) file such
request for exemptive relief from or other orders pursuant to, provisions
of the Investment Company Act of 1940 as the said officer shall deem
necessary or appropriate; and, (d) take all other actions which are
necessary or appropriate in connection with the offer and sale of the
Contracts and the operation of the Separate Accounts in order to comply
with the Securities Act of 1933, as amended, the Investment Company Act of
1940, as amended, and all other applicable federal, state or local laws and
the rules and regulations promulgated thereunder, including the filing of
any amendments or supplements to the Registration Statements;
FURTHER RESOLVED, that the President, and Vice President or the
General Counsel, and each of them, with full power to act without the
others, be, and each of them is, hereby authorized on behalf of the
Separate Accounts and on behalf of the Company to take any and all action
that such officer may deem necessary or appropriate in connection with the
offer and sale of the Contracts, including the preparation and filing of
any registrations or qualifications, whether in respect of the Company, its
officers, agents and employees, or of the Contracts, under the insurance
and securities laws of any of the states of the United States of America
and any other necessary or appropriate jurisdictions, and in connection
therewith to prepare, execute, deliver and file all applications, reports,
undertakings, resolutions, consents to service of
-2-
process and other documents and instruments as may be necessary or
appropriate under laws of any such jurisdiction and to take any and all
other actions which the said officers or legal counsel of the Company may
deem necessary or appropriate (including entering into whatever agreements
and contracts may be necessary) in order to establish or maintain such
registrations or qualifications or exemptions therefrom;
FURTHER RESOLVED, that the President, any Vice President or the
General Counsel, and each of them, with full power to act without the
others, be, and each of them is, hereby authorized on behalf of the Company
to execute and file irrevocable written consents in connection with the
Separate Accounts to be used in such states wherein such consents to
service of process may be required under applicable laws in connection with
said registration or qualification of the Contracts and to appoint the
appropriate state official, or such other person as may be allowed by said
insurance or securities laws, agent of the Company for the purpose of
receiving and accepting process;
FURTHER RESOLVED, that the President, any Vice President or the
General Counsel, and each of them, with full power to act without the
others, be, and each of them is, hereby authorized to execute such
agreement or agreements in such form and with such terms as such officer
may deem necessary or appropriate with Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill") or any other entity approved by the Company
pursuant to which Merrill or such other entity will be appointed to act as
principal underwriter and distributor of the Contracts on such terms and
conditions as said officer, in his sole discretion, may deem appropriate;
FURTHER RESOLVED, that the President, any Vice President or the
General Counsel, and each of them, with full power to act without the
others, be, and each of them is, hereby authorized to execute and deliver
such agreements and other documents and to do all such acts and things as
may be deemed necessary or appropriate to carry out the foregoing
resolutions and the intent and purposes thereof;
FURTHER RESOLVED, that in establishing the Separate Accounts the
Company shall meet the requirements of Section 4240 of the Insurance Law;
FURTHER RESOLVED, that the Company adopts and establishes the
following Standards of Conduct for its officers, directors, employees and
affiliates (collectively "Employee") regarding the conduct of business of
the Company's Separate Accounts:
No Employee shall, in the handling of an account, investment or claim
for or on behalf of any other person of the Company:
-3-
1. Employ any device, scheme or artifice to defraud such person or
the Company;
2. Make any untrue statement of a material fact to such person or
Company or omit to state to such person or Company a material
fact necessary in order to make the statements made, in light of
the circumstances in which they were made, not misleading;
3. Engage in any act, practice or course of business which operates
or would operate as a fraud or deceit upon such person or
Company;
4. Engage in any manipulative practice with respect to such person
or Company;
5. Sell to, or purchase from, the Separate Accounts established by
the Company any securities or other property other than life and
annuity insurance policies;
6. Purchase or allowed to be purchased for the Separate Accounts any
securities of which the Company or an affiliated company is the
issuer;
7. Accept any compensation other than a regular salary or wages from
the Company or an affiliated company for the sale, or purchase,
of securities to or from the Separate Accounts except to the
extent permitted under applicable laws, rules or regulations of
any government, agency or self-regulatory organization;
8. Engage in any joint transaction, participation or common
undertaking whereby the Company or an affiliated company
participates with the Separate Accounts in any transaction in
which the Company or an affiliated company obtains an advantage
in the price or quality of the item purchased, the service
received or in the cost of such service, and the Company or any
other affiliated company is disadvantaged in any of these
respects by the same transaction; or
9. Borrow money or securities from the Separate Accounts other than
under a policy loan provision; and
FURTHER RESOLVED, that the Company adopts and establishes the
following Standards of Suitability for its Employee regarding the conduct of
business of the Separate Accounts:
1. No recommendation shall be made to an applicant to purchase a
variable life or variable annuity
-4-
insurance policy (collectively "Policy"), and no Policy shall be
issued, in the absence of reasonable grounds to believe that the
purchase of the Policy is suitable for the applicant on the basis
of information furnished after reasonable inquiry of the
applicant concerning the applicant's insurance and investment
objectives, financial situation and needs, and any other
information known to the Company or to the agent making the
recommendation;
2. The Company, through its agents, will use diligence to learn the
essential facts relative to each applicant of a Policy;
3. The Company's primary policy is that the customer's interest
comes first. In any areas where there are conflicts between the
customer's interests and the interests of the Company or its
agents, the customer's interests must always take precedence; and
4. The Company, through its agents will give each customer the time
and attention needed to find the products and services most
suitable for the customer's needs and will provide timely and
accurate information that is not in any way misleading.
Additionally, the Company's agents, as registered representatives, are
subject to supervision respecting suitability and other sales practices under
rules of the New York Stock Exchange and the National Association of Securities
Dealers, Inc.
MERRILL LYNCH LIFE INSURANCE COMPANY
Board of Directors
/s/ DAVID M. DUNFORD
- --------------------
David M. Dunford
/s/ JOHN C.R. HELE
- ------------------
John C.R. Hele
/s/ KENNETH W. KACZMAREK
- ------------------------
Kenneth W. Kaczmarek
/s/ THOMAS H. PATRICK
- ---------------------
Thomas H. Patrick
-5-
/s/ BARRY G. SKOLNICK
- ---------------------
/s/ Barry G. Skolnick
- 6 -
EX-99.B3
3
EXHIBIT (3)
EXHIBIT (b)(3)
UNDERWRITING AGREEMENT
----------------------
AGREEMENT made this 1st day of November, 1991, by and between Merrill
--- --------
Lynch Life Insurance Company ("Merrill Lynch Life"), an Arkansas corporation,
and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a Delaware
corporation.
W I T N E S S E T H :
-------------------
WHEREAS, Merrill Lynch Life has established two separate accounts
entitled the Merrill Lynch Life Variable Annuity Separate Account A and Merrill
Lynch Life Variable Annuity Separate Account B for the purposes of issuing
certain variable annuity contracts ("Contracts");
WHEREAS, Merrill Lynch Life wishes to arrange for the underwriting of
the Contracts in conformity with the requirements of the Securities Exchange Act
of 1934 ("1934 Act"); and
WHEREAS, MLPF&S is registered with the Securities and Exchange
Commission ("SEC") as a broker-dealer under the 1934 Act and is a member of the
National Association of Securities Dealers, Inc. ("NASD");
NOW, THEREFORE, the parties hereto agree as follows:
1. Merrill Lynch Life hereby appoints MLPF&S as its exclusive
representative for the distribution of the Contracts, and MLPF&S hereby agrees
to use its best efforts to sell and distribute the Contracts through its
registered representatives; provided, that with the approval of Merrill Lynch
Life, MLPF&S may arrange with other broker-dealers for the sale of the Contracts
and execute agreements relating thereto upon such terms and conditions as MLPF&S
deems appropriate.
2. Unless otherwise permitted by applicable law, each person
engaged in the sale of the Contracts must be both an agent of Merrill Lynch Life
and a person associated with a broker or dealer" as that term is defined in
Section 3(a)(18) of the 1934 Act. With respect to all persons associated with it
who will be engaged in the sale of the Contracts, MLPF&S will be responsible for
their training, qualification, registration, supervision and control in the
manner and to the extent required by the applicable rules of the SEC and NASD
and by any applicable securities laws or rules of the various states relating to
the sale of the Contracts. Merrill Lynch Life reserves the right to refuse to
appoint any person proposed to be associated with MLPF&S as an agent, or if
appointed, to terminate such
appointment in its sole discretion. From time to time as requested by Merrill
Lynch Life, MLPF&S will furnish to it a list of all persons associated with it
authorized to sell the Contracts.
3. MLPF&S will prepare and maintain all books and records relating to
the Contracts which are required to be maintained by it under the 1934 Act.
4. MLPF&S will not accept or receive on behalf of Merrill Lynch Life
any Contract purchase payment except the first. Any first payment received by
MLPF&S will be made payable to Merrill Lynch Life and will be forwarded promptly
to Merrill Lynch Life, or the service office designated by it. Merrill Lynch
Life reserves the right to reject any contract request in its sole discretion.
5. Merrill Lynch Life will furnish MLPF&S currently effective
prospectuses relating to the Contracts in such numbers as MLPF&S may reasonably
require from time to time. MLPF&S will use its best efforts to obtain any
approvals or clearances required from the NASD with respect to all sales
materials relating to the Contracts. Any sales materials relating to the
Contracts prepared by MLPF&S must be approved by Merrill Lynch Life prior to
their use.
6. All commissions payable by Merrill Lynch Life in connection with
Contract sales will be payable to the appropriate general agent affiliated with
MLPF&S in accordance with terms of the agreement with such general agent then in
effect. If any provision of any such agreement applicable to the Contracts
conflicts with any provision of this Agreement, the provision of this Agreement
shall govern.
7. This Agreement may be terminated at any time by either party
hereto on sixty (60) days' written notice.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
MERRILL LYNCH LIFE INSURANCE COMPANY
By: /s/ BARRY G. SKOLNICK
-------------------------------------
Barry G. Skolnick
ATTEST
/s/ TERRY L. RAPP
- -----------------------------
Terry L. Rapp
-2-
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ FRANK T. VAYDA
-----------------------
Frank T. Vayda
ATTEST
/s/ KAREN M. NADEAU
- ----------------------------
Karen M. Nadeau
-3-
EX-99.B4A
4
EXHIBIT (4)(A)
EXHIBIT (b)(4)(a)
MERRILL LYNCH LIFE INSURANCE COMPANY
Home Office: Little Rock, Arkansas
Service Center: P.O. Box 44222
Jacksonville, Florida 32231-4222
MERRILL LYNCH LIFE INSURANCE COMPANY will make monthly annuity payments for the
life of the Annuitant or as otherwise provided in this Contract. Payments will
be made to the Owner starting on the annuity date.
This is a legal contract between you and us. PLEASE READ THE CONTRACT
CAREFULLY.
EXCEPT FOR FIXED ANNUITY PAYMENTS, VALUES PROVIDED BY THIS CONTRACT ARE BASED ON
THE INVESTMENT EXPERIENCE OF SEPARATE ACCOUNTS, ARE VARIABLE AND ARE NOT
GUARANTEED AS TO FIXED-DOLLAR AMOUNT.
TEN DAY RIGHT TO REVIEW CONTRACT: You may cancel this Contract within ten days
after its receipt. Simply return or mail it to us or your Financial Consultant.
We will refund the greater of the Contract Value or all of your premiums.
- ------------------------------------------------------------------
TABLE OF CONTENTS
Section Page
DEFINITIONS................................................... 2
CONTRACT SCHEDULE............................................. 3
1. GENERAL PROVISIONS........................................ 5
2. PREMIUMS.................................................. 7
3. THE VARIABLE ACCOUNTS..................................... 7
4. CHARGES AND DEDUCTIONS.................................... 9
5. TRANSFERS................................................. 10
6. WITHDRAWALS FROM CONTRACT................................. 11
7. PAYMENT AT DEATH.......................................... 12
8. ANNUITY PROVISIONS........................................ 14
9. ANNUITY OPTIONS........................................... 14
- ------------------------------------------------------------------
Merrill Lynch Life Insurance Company is a stock
life insurance company.
/s/ THOMAS H. PATRICK /s/BARRY G. SKOLNICK
---------------------- -----------------------
Thomas H. Patrick Barry G. Skolnick
President Secretary
Individual Variable Annuity Contract
Flexible Premiums - Nonparticipating
DEFINITIONS
1. ACCUMULATION UNIT: An index used to compute the value of your interest in
the Variable Accounts prior to the annuity date.
2. ANNUITANT: Annuity payments may depend upon the continuation of a person's
life. That person is called an annuitant.
3. ANNUITY DATE: The date on which annuity payments are to start.
4. COMPANY: Merrill Lynch Life Insurance Company. Also referred to as "we"
or "us." CONTRACT VALUE: The sum of the value of your interest in the
Variable Accounts.
5. CONTRACT VALUE: The sum of the value of your interest in the Variable
Accounts.
6. DATE OF ISSUE: The date shown on the Contract Schedule as the date the
Contract was issued.
7. INDIVIDUAL RETIREMENT ACCOUNT OR ANNUITY ("IRA"): A retirement arrangement
meeting the requirements of Section 408 of the Internal Revenue Code under
which any appreciation is tax deferred.
8. NONQUALIFIED CONTRACT: A retirement arrangement other than a qualified
plan described under Section 401, 403, 408, 457 or any similar provisions
of the Internal Revenue Code.
9. OWNER: The person entitled to exercise all rights under the Contract. In
this Contract, "you" means Owner.
10. PREMIUMS: The money you pay us for this Contract.
11. VARIABLE ACCOUNTS: This Contract is funded by two separate accounts of the
Company called Merrill Lynch Life Variable Annuity Separate Account A and
Merrill Lynch Life Variable Annuity Separate Account B (together the
"Variable Accounts"). Variable Account A has multiple subaccounts as shown
in the Contract Schedule. Variable Account B has one subaccount also shown
in the Contract Schedule.
12. VARIABLE ANNUITY: A contract with a value that reflects investment
experience prior to the Annuity Date and provides periodic payments of set
amounts after the Annuity Date. 12.
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CONTRACT SCHEDULE
Merrill Lynch Life
Insurance Company Contract Number: ML-910123456
Administrative Offices: Date of Issue: March 15,
1990
P.O. Box 44233 Current Date: August 15,
1991
4655 Salisbury Road
Jacksonville, FL
1-800-535-5549
- --------------------------------------------------------------------------------
OWNER INFORMATION ANNUITANT INFORMATION
Owner Name: John Q. Client Annuitant: John Q. Client
Owner Age: 55 Age: 55 Sex: M
Co-Owner Name: Co-Annuitant: Jane M. Client
Address: Age: 55 Sex: F
123 Maple Street Annuity Date: August 1, 2011
- --------------------------------------------------------------------------------
Owner's Beneficiary: Mary A. Client
CONTRACT INFORMATION
Contract Type: Flexible Premium Individual Variable Annuity
Initial Premium: $100,000.00
Premium Allocation:
SEPARATE ACCOUNT A Premium: $50,000.00
Invested In:
% Domestic Money Market
Fund % Flexible Strategy Fund
25 % Prime Bond Fund 25 % Natural Resources Focus
Fund
% High Current Income Fund % American Balanced Fund
50 % Quality Equity Fund % Global Strategy Focus
Fund
% Equity Growth Fund 100 % TOTAL
SEPARATE ACCOUNT B Premium: $50,000.00
-3-
Invested In:
100% Allocated to Reserve Assets
- --------------------------------------------------------------------------------
Financial Consultant: Joe Broker
-4-
1. GENERAL PROVISIONS
1.1 BENEFICIARY: A beneficiary is the person designated by you in writing
to receive payment under Section 7, on death of the Owner.
You may change the beneficiary while you are alive.
You may name a beneficiary irrevocably. If you do so, a change can be made
later only with the beneficiary's written consent.
If a beneficiary does not survive you, the estate or heirs of such beneficiary
have no rights under this Contract. If no beneficiary survives you, payment
will be made to your estate.
1.2 OWNERSHIP OF CONTRACT: Unless another Owner is named by the
purchaser, the purchaser is the Owner.
Upon notice to us you may assign the Contract to a new Owner. The assignment
terminates all prior beneficiary designations. The new Owner's age must be less
than 85 years.
Only spouses may be co-owners. The beneficiary of the co-owner spouses must be
the surviving spouse. The age of the oldest co-owner must be less than 85
years. Ownership rights must be exercised by the co-owners jointly. Co-owners
are deemed to be joint tenants with right of survivorship unless they indicate
otherwise.
1.3 ANNUITANT: The Annuitant may be changed at any time prior to the
Annuity Date. When an Annuity Option is elected, the amount payable as of the
Annuity Date is based on the age (and sex where permissible) of the Annuitant,
as well as the Option selected and the Contract Value. The Annuitant's age must
be less than age 85 at issue or when a new Annuitant is named.
1.4 NOTICES, CHANGES AND CHOICES: To be effective, all notices, changes
and choices you may make under this Contract must be in writing, signed and
received by us at our administrative office, except that account transfers and
premium allocations may be made by telephone by you or your representative if
authorized by you in writing. If acceptable to us, notices, changes, and
choices relating to beneficiaries, ownership, Annuitants, and Annuity Date will
take effect as of the date signed unless we have already acted in reliance on
the prior status. We are not responsible for their validity.
1.5 RESTRICTIONS ON IRAS: If this Contract is issued as or as part of an
IRA, it may not be assigned, pledged, or transferred unless permitted by law.
-5-
1.6 MISSTATEMENT OF AGE OR SEX: If the age or sex of the annuitant is
misstated, annuity payments will be adjusted to reflect the correct age and sex.
Any amount we have overpaid as the result of such misstatement will be deducted
from the next payments made by us under this Contract. Interest on the
overpayment will be charged at the rate of 6% per year. Any amount we have
underpaid will be paid in full with the next payment made by us under this
Contract. We will pay interest on the underpayment at the rate of 69% per year.
1.7 PROOF OF AGE, SEX, OR SURVIVAL: We may require satisfactory proof of
age, sex, or survival of any person on whose continued life any payment under
this Contract depends.
1.8 INCONTESTABILITY: We will not contest this Contract.
1.9 THE CONTRACT: This Contract, and any endorsements or riders are the
entire Contract. It is issued in consideration of the payment of the first
premium.
Only our President, a Vice President, Secretary, or Assistant Secretary may
change the Contract. Any change must be in writing.
At any time we may make such changes in this Contract as are required to make it
conform with any law, regulation, or ruling issued by a government agency.
1.10 NONPARTICIPATING: This Contract is nonparticipating. It does not
share in our surplus.
1.11 DATES: Contract years and anniversaries are measured from the Date of
Issue.
1.12 CONTRACT PAYMENTS: All sums payable to or by us are payable at our
administrative office. We may require return of this Contract prior to making
payment. Paid-up annuity benefits, Contract withdrawal values and death
benefits are not less than the minimum required by any statute of the state in
which the Contract is delivered.
1.13 PROTECTION OF PROCEEDS: Payments under this Contract may not be
assigned by the payee prior to their due dates. To the extent allowed by law,
payments are not subject to legal process for debts of a payee.
1.14 PERIODIC REPORTS: At least once a year prior to the annuity date we
will furnish you a report of your Contract Value. It will show the current
number of Accumulation Units, the value per Accumulation Unit and the total
Variable Account(s) value. To the extent that a person has voting rights in the
Variable
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Accounts that person will be furnished reports required by the Investment
Company Act of 1940.
1.15 PAYMENTS UNDER THE CONTRACT: Payment generally will be made within
seven days, but we may defer payment if:
(a) The New York Stock Exchange is closed;
(b) Trading on the New York Stock Exchange is restricted;
(c) An emergency exists such that it is not reasonably practical to
dispose of securities in the applicable Variable Account or to
determine the value of its assets;
(d) The Securities and Exchange Commission by order so permits for the
protection of security holders; or
(e) Payment is derived from a check used to pay a Premium which has not
cleared through the banking system.
Conditions (b) and (c) will be decided by or in accordance with rules of the
Securities and Exchange Commission. Transfers also may be deferred upon the
occurrence of any of the events descAbed above.
2. PREMIUMS
2.1 ADDITIONAL PREMIUMS: The minimum additional Premium is $300.
Premiums may be paid at any time prior to the Annuity Date without prior notice
to us. We reserve the right to refuse to accept a Premium.
2.2 PREMIUM ALLOCATION: Your Premiums will be allocated to the
subaccounts of the Variable Accounts as you direct. However, for the first 14
days following the date of issue, all Premiums will be allocated to the money
market subaccounts of the Variable Accounts. If allocation instructions are not
given with subsequent premiums received, we will allocate those premiums
according to the allocation instructions last received from you.
3. THE VARIABLE ACCOUNTS
3.1 VARIABLE ACCOUNTS: The Variable Accounts are named in the Definitions
Section of this Contract. They are separate investment accounts of Merrill
Lynch Life Insurance Company. With respect to each Variable Account, income,
gains, and losses, whether or not realized, from assets allocated to that
Variable Account are credited to or charged against the Variable Account without
regard to other income, gains, or losses of the Company. Assets allocated to
the Variable Accounts remain our property but
-7-
are separate from our general account and any other separate accounts we may
have and may not be charged with liabilities from any other business we conduct.
3.2 ELIGIBLE INVESTMENTS: Current eligible investments are shown on the
Contract Schedule. We reserve the right to limit the number of subaccounts in
which you may invest.
3.3 CHANGES TO THE VARIABLE ACCOUNTS: We may make additional subaccounts
available. We reserve the right, subject to obtaining any necessary regulatory
approvals; to eliminate subaccounts; to substitute a new portfolio for the
portfolio in which a subaccount invests; to deregister either or both of the
Accounts under the Investment Company Act of 1940 (the "1940 Act"); to make any
changes required by the 1940 Act; to operate either or both Accounts as a
managed investment company under the 1940 Act or any other form permitted by
law; to transfer all or a portion of the assets of a subaccount or variable
account to another subaccount or variable account pursuant to a combination or
otherwise; and to create new variable accounts.
3.4 NUMBER OF ACCUMULATION UNITS: For each subaccount of the Variable
Accounts, the number of your Accumulation Units is the sum of:
- Each Premium or transfer allocated to the subaccount
Divided by
- The value of an Accumulation Unit for that subaccount for the
valuation period in which we received the Premium or transfer.
The number will be adjusted for transfers from each subaccount, withdrawals and
charges. Adjustments will be made as of the valuation period in which we
receive all requirements for the transaction, as appropriate.
3.5 VALUE OF EACH ACCUMULATION UNIT: For each subaccount of the Variable
Accounts, the value of an Accumulation Unit was arbitrarily set at $10 when the
subaccount was established. The value may increase or decrease from one
valuation period to the next. For any valuation period the value is:
- The value of an Accumulation Unit for the last prior valuation period
Multiplied by
- The Net Investment Factor for that subaccount for the current
valuation period.
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3.6 NET INVESTMENT FACTOR: This is an index used to measure the
investment performance of a subaccount of the Variable Accounts from one
valuation period to the next. For any subaccount, the Net Investment Factor is
determined by dividing the value of the assets of the subaccount for that
valuation period by the value of the assets of the subaccount for the preceding
valuation period, and subtracting from the result the valuation period
equivalent of the annual administration (if applicable), mortality and expense
charges.
We may adjust the Net Investment Factor to make provision for any change in tax
law that requires us to pay tax on capital gains in the Variable Accounts and
any charge that may be assessed against the Accounts for assessments or federal
premium taxes or federal, state or local excise, profits or income taxes
measured by or attributable to the receipt of premiums.
3.7 VALUATION PERIOD: This is the interval from one determination of the
net asset value of a subaccount to the next. Net asset values are determined as
of the close of business on each day the New York Stock Exchange is open.
3.8 VARIABLE ACCOUNT VALUE: This is the sum of the value of the
Accumulation Units allocated to your Contract in each subaccount of a Variable
Account.
4. CHARGES AND DEDUCTIONS
4.1 CONTRACT MAINTENANCE CHARGE: A charge of $40 will be deducted on each
Contract anniversary that occurs on or prior to the annuity date. It will also
be deducted when the Contract Value is withdrawn in full if withdrawal is not on
a Contract anniversary. This charge will never increase. We will waive this
charge for Contracts with Contract Values of $50,000 or more at the time the
deduction would otherwise be made.
4.2 VARIABLE ACCOUNTS EXPENSE AND MORTALITY RISK CHARGES: These charges
are made to compensate us for guaranteeing that the Contract maintenance charge
and Variable Account A administration charge will never increase and for the
mortality guarantees we make under this Contract. On an annual basis, they
equal 1.25% of the daily net asset value of Variable Account A and 0.65% of
Variable Account B.
4.3 VARIABLE ACCOUNT A ADMINISTRATION CHARGE: This charge compensates us
for expenses we incur in the establishment and administration of Variable
Account A. On an annual basis it equals 0.10% of the daily net asset value of
Variable Account A.
4.4 CONTINGENT DEFERRED SALES CHARGE: A charge will be made at withdrawal
from Variable Account A prior to the Annuity Date. The contingent deferred
sales charge is calculated
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separately for each Premium. The first withdrawal from Variable Account A in a
Contract year is made under Section 6.2. For other withdrawals, Premium
payments are withdrawn on a "first-in, first-out" (FIFO) basis, and all premiums
are withdrawn before earnings are withdrawn.
Contingent deferred sales charges are calculated as a percentage of the Premiums
withdrawn but not to exceed the value of your interest in Variable Account A.
This percentage is based on the number of complete years elapsed from the date
the Premium is paid to the date of the surrender or withdrawal as shown in the
following schedule:
Number of Complete Years Elapsed Percent
-------------------------------- -------
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
4.5 TAXES, FEES, AND ASSESSMENTS: Any charges made by us attributable to
premium taxes imposed by a state or other government will be deducted at the
annuity date. We may also deduct a charge for assessments or federal premium
taxes or federal, state, or local excise, profits, or income taxes measured by
or attributable to the receipt of Premiums. We also reserve the right to deduct
from the Variable Accounts any taxes imposed on the Variable Accounts'
investment earnings.
4.6 PAYMENT OF DEDUCTIONS: The mortality and expense risk charge, and
administration charge will be computed and deducted from each subaccount of the
applicable Variable Account for each day the Contract is in force. The transfer
charge described in Section 5.2 will be deducted pro rata from the subaccounts
from which Variable Account A value is being transferred. The contingent
deferred sales charge will be deducted from Variable Account A subaccounts in
the same proportion as the withdrawal from each subaccount is to the total
withdrawal. Other applicable charges will be deducted from each subaccount of
the Variable Accounts in the ratio of your interest in each to your Contract
Value.
5. TRANSFERS
5.1 TRANSFERS FROM VARIABLE ACCOUNT A TO VARIABLE ACCOUNT B: Once each
Contract year upon notice to us you may transfer from Variable Account A to
Variable Account B all or part of your gain in Variable Account A plus Premiums
allocated to Variable
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Account A that are not subject to a contingent deferred sales charge. The
minimum amount which may be transferred is $300. No other transfers may be made
from Variable Account A to Variable Account B.
Unless you notify us otherwise, transfers made under this Section 5.1 will be
deducted from each subaccount of Variable Account A in the ratio of your
interest in each subaccount to the total value of your interest in Variable
Account A.
The gain in Variable Account A is the excess, if any, of (ii) over (i), where
(i) is the sum of all your Premiums paid into Variable Account A, less any prior
withdrawals or transfers from Variable Account A of these Premiums, and (ii) is
your Contract's Variable Account A value at the time we receive notice of the
transfer.
5.2 TRANSFERS AMONG SUBACCOUNTS OF VARIABLE ACCOUNT A: Six times per
Contract year you may transfer all or part of your Variable Account A value
among the Variable Account A subaccounts without a charge. For additional
transfers, we will charge $25 for each transfer. The minimum amount which may
be transferred from any subaccount in any transaction is $300 or your entire
interest, if less.
5.3 DOLLAR COST AVERAGING: You may transfer all or part of your interest
in the money market subaccount in Variable Account A to one or more of the other
Variable Account A subaccounts, pursuant to a Dollar Cost Averaging Plan. To
participate in such a Plan, you must transfer a minimum of $1000 per month for
12 to 36 months. When participation begins your Contract's interest in the
money market subaccount in Variable Account A must be at least equal to the
amount you wish to transfer each month times the number of months elected.
Allocations to a subaccount must be in 10% increments of each amount
transferred. Transfers will take place each month on the same date of each
month as the date on which your Contract was issued. For example, if your
Contract was issued on the 15th day of the month, transfers will take place on
the 15th day of each month for which transfers are to be made. There is no
charge for Dollar Cost Averaging transfers. Dollar Cost Averaging transfers are
in addition to those permitted in Section 5.2.
5.4 TRANSFERS FROM VARIABLE ACCOUNT B TO VARIABLE ACCOUNT A: Transfers
from Variable Account B to Variable Account A are not permitted.
6. WITHDRAWALS FROM CONTRACT
6.1 WITHDRAWALS FROM VARIABLE ACCOUNTS: Up to six times in a Contract
year, you may withdraw all or part of your Contract Value. Notice must be
received by us prior to the Annuity Date.
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For full withdrawal, this Contract must be surrendered to our administrative
office. For partial withdrawals, the withdrawal must be at least $300, and the
remaining Contract Value must be at least $2,000.
6.2 SPECIAL WITHDRAWAL FROM VARIABLE ACCOUNT A: The first withdrawal from
Variable Account A in any Contract year will be a withdrawal of all or part of
the gain in Variable Account A, as defined in Section 5.1, before withdrawal of
premium as described in Section 4.4. The remaining Contract Value must be at
least $2,000. This withdrawal shall count as one of the six permitted by
Section 6.1.
6.3 AUTOMATIC WITHDRAWAL PROGRAM: If you are age 59 1/2 or more, you may
have automatic withdrawals of a specified dollar amount made monthly, quarterly,
semi-annually, or annually from your interest in Variable Account B. Such
withdrawals must be deposited directly into a Merrill Lynch, Pierce, Fenner &
Smith Inc. brokerage account specified by you and acceptable to the Company.
You may change the specified dollar amount or stop automatic withdrawals at any
time upon notice to us. Once automatic withdrawals are stopped, you may not
begin them again until the next Contract year. Each automatic withdrawal must
be at least $300, and the remaining Contract Value must be at least $2,000.
Automatic withdrawals are in addition to other withdrawals permitted from the
Contract.
6.4 PAYMENT OF WITHDRAWALS: Unless you notify us otherwise, partial
withdrawals will be deducted from each subaccount of the applicable Variable
Account from which you are making a withdrawal in the ratio of your interest in
each subaccount to the total value of that Variable Account. Withdrawals, other
than automatic withdrawals, will be based on values for the valuation period in
which the notice (and Contract if required) is received at our administrative
office. Automatic withdrawals will be based on values for the valuation period
of the date of each withdrawal.
7. PAYMENT AT DEATH
7.1 DEATH OF OWNER
(Including an Annuitant Who is Also an Owner)
7.1.1 DEATH PRIOR TO ANNUITY DATE: On the death of an Owner prior to the
Annuity Date, we will pay to the beneficiary the death benefit representing the
entire interest in the Contract, unless Section 7.1.3 is chosen. The death
benefit is determined as of the date we receive due proof of death at our
administrative office. It is the greater of:
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(a) The sum of (i) the excess, if any, of (a) your premiums paid into
Variable Account A with interest on them from the date received at an
interest rate compounded daily to yield 5% annually, over (b)
transfers to Variable Account B, and withdrawals from Variable Account
A with an interest rate on them to yield 5 % annually when compounded
daily from the date of transfer or withdrawal; plus, (ii) the value of
your interest in Variable Account B; or,
(b) The Contract Value.
Payment will be made in a lump sum unless Section 7.1.2 or Section 7.1.3 is
chosen. For purposes of the calculation in "(a)," interest shall accrue during
the first 20 Contract years only. No interest shall accrue thereafter.
7.1.2 CONTRACT CONTINUATION OPTION: If the surviving spouse of the
deceased Owner is the beneficiary, such spouse may choose to continue this
Contract in force on the same terms as before such Owner's death, and the spouse
shall thereafter become the "new" Owner and the beneficiary until a new
beneficiary is named.
7.1.3 ANNUITY OPTION: If the beneficiary is the surviving spouse of the
deceased Owner, he or she may choose to receive payments under any of the
annuity options of this Contract. For any other beneficiary, only those options
are available that provide for full payment of such Owner's interest in the
Contract:
(a) Within five years of the date of such Owner's death;
(b) Over the lifetime of such beneficiary of this Contract; or
(c) Over a period that does not exceed the life expectancy, as
defined by Internal Revenue Service regulations, of such
beneficiary of this Contract.
Subparagraphs (b) and (c) apply only to individuals, and such payments must
start within one year of the date of such Owner's death. For IRAs, any annuity
option chosen must meet the requirements of the Internal Revenue Code.
7.1.4 DEATH AFTER ANNUITY DATE: See Section 9.
7.2 DEATH OF ANNUITANT WHO IS NOT AN OWNER
7.2.1 If the Annuitant dies prior to the Annuity Date and the Annuitant is
not the Owner, the Owner may designate a new
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Annuitant. If one is not designated, the Owner will be the Annuitant provided
the Owner is a natural person. If the owner is a non-natural person, the death
of the Annuitant shall be treated as the death of the owner.
8. ANNUITY PROVISIONS
8.1 ANNUITY DATE: The Annuity Date may not be later than the Annuitant's
85th birthday. If you have not chosen an Annuity Date, it will be the date of
the Annuitant's 85th birthday. For an IRA, if you have not chosen an Annuity
Date, it will be the date the Annuitant reaches age 70 1/2. You may change the
Annuity Date up to 30 days prior to the Annuity Date.
8.2 AMOUNT OF ANNUITY PAYMENTS: Charges made by us for premium taxes will
be deducted from your Contract Value at the Annuity Date. The remaining value
will be transferred to our General Account and applied to the annuity option
chosen at our then current annuity purchase rates, which will be furnished on
request. The annuity purchase rates will assume interest of not less than 4%.
They will not be less favorable than those shown in the annuity tables in this
Contract. The tables show the minimum guaranteed amount of each monthly payment
for each $1,000 so applied, according to the sex and age at the Annuity Date of
the Annuitant. The tables are based on the 1983 Table "a" for Individual
Annuity Valuation with interest at 4%.
8.3 ANNUITY OPTIONS: If you have not chosen an annuity option described
in Section 9, Option 4 will apply with a 10-year guarantee period. You may
change options only up to 30 days prior to the Annuity Date. An option not set
forth in the Contract may be chosen if acceptable to us.
8.4 MINIMUM ANNUITY, PAYMENT: If the Contract Value to be applied at the
Annuity Date is less than $5,000, we may pay such amount in a lump sum. If any
payment would be less than $50, we may change the frequency so payments are at
least $50 each.
9. ANNUITY OPTIONS
9.1 OPTION 1-PAYMENTS OF A FIXED AMOUNT: Equal payments in the amount
chosen will be made until the amount of your Contract Value transferred to our
General Account adjusted for interest credited of at least 4% is exhausted. The
term over which such payments are made must be at least five years.
9.2 OPTION 2--PAYMENTS FOR A FIXED PERIOD: Payments will be made for the
period chosen. The period must be at least 5 years.
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9.3 OPTION 3--LIFE ANNUITY: Payments will be made for the life of the
Annuitant. Payments will cease with the last payment due prior to the
Annuitant's death.
9.4 OPTION 4--LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 or 20 YEARS:
Payments will be made for the guaranteed period chosen (10 or 20 years) and as
long thereafter as the Annuitant lives.
9.5 OPTION 5--LIFE ANNUITY WITH GUARANTEED RETURN OF CONTRACT VALUE:
Payments will be made until the sum of the annuity payments equals the amount of
your Contract Value transferred to our General Account at the Annuity Date, and
as long thereafter as the Annuitant lives.
9.6 OPTION 6--JOINT AND SURVIVOR LIFE ANNUITY: Payments will be made
during the lifetimes of the Annuitant and a designated second person. The
amount of such payments will not change by reason of the death of the first
joint Annuitant to die.
9.7 OPTION 7--IRA: This option is available only for IRAs. Annuity
payments may be based on (a) the life expectancy of the Annuitant, (b) the joint
life expectancy of the Annuitant and his or her spouse, or (c) the life
expectancy of the surviving spouse if the Annuitant dies before the annuity
date. Payments will be made annually. Each annual payment will be equal to the
remaining value on that January 1, divided by the applicable current life
expectancy, as defined by Internal Revenue Service regulations. Each subsequent
payment will be made on the anniversary of the Annuity Date. Interest will be
credited at our current rate for this option. The rate will not be less than
4%. On the death of the measuring life or lives prior to full distribution of
the remaining value, the remaining value will be paid to the beneficiary in a
lump sum.
9.8 DEATH OF ANNUITANT: On the death of the Annuitant while guaranteed
amounts remain unpaid under Option 1,2,4, or 5, the Owner may choose either:
(a) To have payments continue for the amount or period guaranteed; or
(b) To receive the present value of the remaining guaranteed payments
in a lump sum.
If an Owner dies while guaranteed amounts remain unpaid, the present value may
be paid in a lump sum to the beneficiary, if the beneficiary so elects.
Present values will be computed at the interest rate that was used to compute
the amount of the initial annuity payment.
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9.9 PAYMENT: Except for Option 7, payment will be made on the Annuity
Date, but prior to the Annuity Date you may choose a less frequent payment
interval instead. The amount of each payment on an annual, semiannual, or
quarterly basis will be not less than the monthly payment computed from the
annuity tables in this Contract multiplied by the appropriate factor:
Annual Semiannual Quarterly
------ ---------- ---------
11.787 5.951 2.990
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10. ANNUITY OPTION TABLES
MINIMUM GUARANTEED MONTHLY ANNUITY PAYMENT FOR EACH $1,000 APPLIED UNDER OPTION
OPTION 2 (Payments for a Fixed Period)
Years Each Years Each Years Each Years Each
Payable Payment Payable Payment Payable Payment Payable Payment
- --------- ------- ------- ------- ------- ------- ------- -------
5 18.32 9 10.97 13 8.17 17 6.71
6 15.56 10 10.06 14 7.72 18 6.44
7 13.59 11 9.31 15 7.34 19 6.21
8 12.12 12 8.69 16 7.00 20 6.00
- --------------------------------------------------------------------------------
OPTION 3 (Life Annuity), OPTION 4 (Life Annuity with 10 or 20 Years Guaranteed)
and OPTION 5 (Return of Contract Value Guaranteed)
*Adjusted Life 10 Years 20 Years Return of *Adjusted Life
Male Age Annuity Guaranteed Guaranteed Net Value Female Age Annuity
- ----------- ------- ---------- ---------- --------- ---------- -------
56 5.29 5.20 4.94 5.05 56 4.89
57 5.39 5.29 5.00 5.13 57 4.92
58 5.49 5.38 5.06 5.21 58 5.00
59 5.61 5.48 5.12 5.30 59 5.09
60 5.73 5.59 5.18 5.40 60 5.19
61 5.88 5.70 5.24 5.50 61 5.29
62 6.00 5.82 5.31 5.60 62 5.40
63 6.16 5.85 5.37 5.72 63 5.52
64 6.32 6.08 5.43 5.83 64 5.65
65 6.49 6.21 5.48 5.96 65 5.78
66 6.68 6.35 5.54 6.09 66 5.82
67 6.88 6.50 5.59 6.23 67 6.08
68 7.09 6.65 5.64 6.38 68 6.24
69 7.31 6.81 5.69 6.53 69 6.42
70 7.56 6.97 5.73 6.69 70 6.61
71 7.82 7.14 5.77 6.86 71 6.81
72 8.09 7.31 5.81 7.04 72 7.04
73 8.39 7.48 5.84 7.23 73 7.28
74 8.71 7.65 5.87 7.43 74 7.54
75 9.05 7.83 5.89 7.64 75 7.93
76 9.41 8.00 5.91 7.86 76 8.14
77 9.81 9.17 5.93 8.10 77 8.47
78 10.33 8.34 5.95 8.34 78 8.83
79 10.68 8.50 5.96 8.60 79 9.23
80 11.16 8.66 5.97 8.87 80 9.65
81 11.68 8.81 5.98 9.16 81 10.12
82 12.23 8.95 5.99 9.45 82 10.62
83 12.81 9.09 5.99 9.76 83 11.16
84 13.44 9.21 5.99 10.09 84 11.76
85 14.09 9.32 6.00 10.44 85 12.39
10 Years 20 Years Return of
Guaranteed Guaranteed Net Value
---------- ---------- ---------
4.80 4.67 4.71
4.87 4.73 4.77
4.95 4.79 4.85
5.03 4.85 4.92
5.12 4.91 5.00
5.22 4.98 5.09
5.32 5.05 5.18
5.42 5.11 5.27
5.53 5.18 5.37
5.65 5.25 5.48
5.77 5.32 5.59
5.90 5.39 5.71
6.04 5.45 5.83
6.19 5.51 5.97
6.34 5.58 6.11
6.50 5.63 6.26
6.67 5.69 6.42
6.84 5.73 6.58
7.02 5.76 6.77
7.21 5.82 6.97
7.40 5.85 7.17
7.60 5.88 7.39
7.80 5.91 7.62
7.99 5.93 7.86
8.19 5.94 8.13
8.38 5.96 8.40
8.57 5.97 8.69
8.74 5.98 9.01
8.91 5.99 9.34
9.06 5.99 9.68
- --------------------------------------------------------------------------------
OPTION 6 (Joint and Survivor Life Annuity)
*Adjusted *Adjusted Male Age *Adjusted
Female Female
Age 50 55 60 65 70 75 80 85 Age
- ------- ---- ---- ---- ---- ---- ---- ---- ---- ---
50 4.15 4.22 4.28 4.33 4.37 4.40 4.41 4.42 50
55 4.27 4.39 4.49 4.57 4.64 4.68 4.71 4.73 55
60 4.39 4.56 4.71 4.85 4.96 5.04 5.10 5.14 60
65 4.50 4.72 4.94 5.16 5.35 5.50 5.61 5.68 65
70 4.59 4.86 5.16 5.48 5.78 6.05 6.25 6.39 70
75 4.66 4.97 5.34 5.78 6.24 6.68 7.06 7.34 75
80 4.71 5.05 5.49 6.03 6.66 7.33 7.98 8.53 80
85 4.74 5.11 5.59 6.21 7.00 7.91 8.90 9.86 85
- --------------------------------------------------------------------------------
Information for ages not shown will be furnished on request.
"Adjusted Age" means attained age at last birthday adjusted as follows:
Annuity Date Adjusted Age
------------ ------------
Before 2000 Actual Age
2000-2009 Subtract 1 year from actual age
2010-2019 Subtract 2 years from actual age
2020-2029 Subtract 3 years from actual age
2030 and after Subtract 4 years from actual age
-17-
EX-99.B4B
5
EXHIBIT (4)(B)
EXHIBIT (b)(4)(b)
MERRILL LYNCH LIFE INSURANCE COMPANY
CONTINGENT DEFERRED SALES CHARGE
WAIVER ENDORSEMENT
The contract is amended as follows:
The Contingent Deferred Sales Charge described in the Contract to which
this Endorsement is attached is not imposed on withdrawals or surrenders
from the Contract when the Contract is issued to an active employee of
Merrill Lynch Life Insurance Company or its affiliates or is issued to an
active employee's spouse or dependents.
This endorsement controls over any contrary provisions of the contract.
MERRILL LYNCH LIFE INSURANCE COMPANY
By:_________________________________
Secretary
EX-99.B4C
6
EXHIBIT (4)(C)
EXHIBIT (b)(4)(c)
-----------------
Merrill Lynch Life Insurance Company
INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
This endorsement is part of the Contract. The Contract as amended is intended
to qualify as an individual retirement annuity under Section 408(b) of the
Internal Revenue Code of 1986, as amended (the "Code"). The following
provisions apply and replace any contrary provisions of the Contract:
1. The Contract Owner shall be the Annuitant. Any provision of the Contract
that would allow joint ownership, or that would allow more than one person
to share distributions, is deleted.
2. The Contract is not transferrable or assignable (other than pursuant to a
divorce decree in accordance with applicable law) and is established for
the exclusive benefit of the Contract Owner and his or her beneficiaries.
It may not be sold, assigned, alienated, or pledged as collateral for a
loan or as security.
3. The Contract Owner's entire interest in the Contract shall be
nonforfeitable.
4. Premium payments shall be in cash. The Contract Owner shall have the sole
responsibility for determining whether any premium payment qualifies as a
permissible contribution subject to favorable tax treatment under the Code.
The Contract Owner also has the sole responsibility for determining whether
such amount qualifies as a permissible rollover contribution for income tax
purposes.
5. This Contract does not require fixed premium payments. Any refund of
Premiums (other than those attributable to excess contributions) will be
applied before the close of the calendar year following the year of the
refund toward the payment of additional Premiums or the purchase of
additional benefits.
6. The Annuity Date is the date the Contract Owner's entire Contract Value
will be distributed or commence to be distributed to him or her. The
Annuity Date shall be no later than April 1 of the calendar year following
the calendar year in which he or she attains age 70 1/2.
7. With respect to any amount which becomes payable under the policy during
the Contract Owner's lifetime, such payment shall commence on or before the
Annuity Date and shall be payable in substantially equal amounts, no less
frequently than annually. Payment shall be made in the manner as follows:
a. in a lump sum, or
b. over the Contract Owner's life, or
c. over the lives of the Contract Owner and his or her designated
beneficiary, or
d. over a period certain not exceeding the Contract Owner's life
expectancy, or
e. over a period certain not exceeding the joint and last survivor
expectancy of the Contract Owner and his or her designated
beneficiary.
If the Contract Owner's entire interest is to be distributed in other than
a lump sum, then the minimum amount to be distributed each year (commencing
with the calendar year following the calendar year in which he or she
attains age 70 1/2 and each year thereafter) shall be determined in
accordance with Code Section 408(b)(3) and the regulations thereunder.
8. If the Contract Owner dies after distribution of his or her interest has
commenced, the remaining portion of such interest will continue to be
distributed at least as rapidly as under the method of distribution being
used prior to his or her death.
If the Contract Owner dies before distribution has begun, the entire
interest must be distributed no later than December 31 of the calendar year
in which the fifth anniversary of the Contract Owners death occurs.
However, proceeds which are payable to a named beneficiary who is a natural
person may be distributed in substantially equal installments over the
lifetime of the beneficiary or a period certain not exceeding the life
expectancy of the beneficiary provided such distribution begins not later
than December 31 of the calendar year in which your death occurred. If the
beneficiary is the Contract Owner's surviving spouse, the beneficiary may
elect not later than December 31 of the calendar year in which the fifth
anniversary of the Contract Owner's death to receive equal payments over
the life or life expectancy of the surviving spouse commencing at any date
prior to the date on which the Contract Owner would have attained age 70
1/2. Minimum payments will be calculated in accordance with Code Section
408(b)(3) and the regulations thereunder.
For the purposes of this requirement, any amount paid to any of the
Contract Owner's children will be treated as if it had been paid to the
surviving spouse if the remainder of the interest becomes payable to the
surviving spouse when the child reaches the age of majority.
If the Contract Owner dies before his or her entire interest has been
distributed, no additional Premiums will be accepted under this policy
after his or her death unless the beneficiary is the Contract Owner's
surviving spouse.
9. If the Contract Owner's spouse is not the named beneficiary, the method of
distribution selected will assure that at least 50% of the present value of
the amount available for distribution is paid within the Contract Owner's
life expectancy and that such method of distribution complies with the
requirements of Code Section 408(b)(3) and the regulations thereunder.
10. For purposes of the foregoing provisions, life expectancy and joint and
last survivor expectancy shall be determined by use of the expected return
multiples in Tables V and Vl or Treasury Regulation section 1.72-9 in
accordance with Code Section 408(b)(3) and the regulations thereunder. In
the case of distributions under paragraph (7) of this endorsement, the life
expectancy of the Contract Owner and his or her beneficiary will be
initially determined on the basis of his or her attained age in the year he
or she reaches 70 1/2. In the case of a distribution under paragraph (8)
of this endorsement, life expectancy will be initially determined on the
basis of the beneficiary's attained age in the year distributions are
required to commence. If the Contract Owner (or his or her spouse) so
elects prior to the time distributions
are required to commence, the Contract Owner's life expectancy and, if
applicable, his or her spouse's life expectancy will be recalculated
annually based on your attained ages in the year for which the required
distribution is being determined. The life expectancy of a nonspouse
beneficiary will not be recalculated.
The annual distribution required to be made by the Annuity Date is for the
calendar year in which the Contract Owner reaches age 70 1/2. Annual
payments for subsequent years, including the year in which the Annuity Date
occurs, must be made by December 31 of that year. The amount distributed
for each year shall equal or exceed the annuity value as of the close of
business on December 31 of the preceding year, divided by the applicable
life expectancy or joint and last survivor expectancy.
11. Merrill Lynch Life Insurance Company reserves the right to amend this
Contract or endorsement to the extent necessary to qualify as an Individual
Retirement Annuity for federal income tax purposes.
12. This endorsement is effective as of the Contract Date.
This endorsement is subject to all the exclusions, definitions and
provisions of the Contract which are not inconsistent herewith.
MERRILL LYNCH LIFE INSURANCE COMPANY
By: /s/ BARRY G. SKOLNICK
--------------------------------
Barry G. Skolnick
Secretary
ML004 SPECIMEN
EX-99.B4D
7
EXHIBIT (4)(D)
EXHIBIT (b)(4)(d)
Merrill Lynch Life Insurance Company
ENDORSEMENT
The first paragraph of Section 5.1 of the contract is amended to read as
follows:
5.1 TRANSFERS FROM VARIABLE ACCOUNT A TO VARIABLE ACCOUNT B: Once each
Contract year upon notice to us you may transfer from Variable Account A to
Variable Account B an amount not to exceed the greater of (a) or (b) where:
(a) is the lesser of (i) 10% of total Premiums paid into Variable
Account A that are subject to a contingent deferred sales charge
determined as of the date of the request less any prior amount
withdrawn from Variable Account A in the Contract year and
(ii) your Variable Account A value and
(b) is your gain in Variable Account A plus Premiums allocated to
Variable Account A that are not subject to a contingent deferred
sales charge.
The minimum amount which may be transferred is $300. No other transfers
may be made from Variable Account A to Variable Account B during the
Contract year.
AND
Section 6.2 is amended in its entirety to read as follows:
6.2 SPECIAL WITHDRAWAL FROM VARIABLE ACCOUNT A: The contingent deferred sales
charge described in Section 4.4 will not be applied to that portion of the
first withdrawal from Variable Account A in any contract year which does
not exceed the greater of (a) or (b) where:
(a) is 10% of total Premiums paid into Variable Account A that are
subject to a contingent deferred sales charge determined as of
the date of request less any prior amount transferred from
Variable Account A to Variable Account B in the Contract year and
(b) is your gain in Variable Account A, as defined in Section 5.1,
plus Premiums allocated to Variable Account A that are not
subject to a contingent deferred sales charge.
The first withdrawal from Variable Account A in any Contract year will be
effected as if gain is withdrawn first, followed by Premium on a "first-in"
"first-out" (FIFO) basis. The remaining Contract Value must be at least
$2,000. This withdrawal shall count as one of the six permitted by
Section 6.1.
This endorsement controls over any contrary provisions of the Contract.
MERRILL LYNCH LIFE INSURANCE COMPANY
By: /s/ BARRY G. SKOLNICK
---------------------------------
Barry G. Skolnick,
Secretary
- 1 -
EX-99.B6A
8
EXHIBIT (6)(A)
EXHIBIT (b)(6)(a)
ARTICLES OF AMENDMENT,
RESTATEMENT, AND REDOMESTICATION
OF THE
ARTICLES OF INCORPORATION
OF
MERRILL LYNCH LIFE INSURANCE COMPANY
A Stock Insurance Company Redomesticated from the
State of Washington to the State of Arkansas
Merrill Lynch Life Insurance Company (the "Corporation"), by
its President and Secretary, does hereby certify that upon the written
authorization of its sole shareholder on August 6, 1991, the Amended and
--------
Restated Articles of Incorporation set forth below were adopted in order
to effect the redomestication of the Corporation from the State of Washington to
the State of Arkansas, thereby amending and restating in their entirety the
original Articles of Incorporation of the Corporation which became effective on
January 27, 1986 and all amendments thereto. Such Amended and Restated Articles
of Incorporation and such redomestication shall be effective on the date these
Articles are endorsed with the "approval" of the Arkansas Insurance Commissioner
and placed on file in his office.
The text of the Articles of Incorporation are amended and
completely restated so as to provide as follows:
Page 1 of 7 Pages
ARTICLE I - NAME
The name of the corporation shall be Merrill Lynch Life Insurance
Company.
ARTICLE II - LOCATION
The home office and principal place of business of the Corporation in
this state shall be located in Little Rock, Pulaski County, Arkansas.
The Corporation may establish or discontinue, from time to time, such
other offices and places of business within or without this state as the
Corporation may deem proper for the conduct of the Corporation's business.
ARTICLE III - PURPOSES AND POWERS
(a) The general nature of the business to be transacted by the
Corporation is to act as an "insurer" as defined in A. C. A. (S)(S) 23-60-102
for the kinds of insurance identified as "life" in A. C. A. (S) 23-62-102,
including but not limited to, annuities and variable life insurance and variable
annuities, and "disability" in A. C. A. (S) 23-62-103, and to conduct such other
business or perform such other acts as are necessary or incidental to conducting
such insurance business.
(b) The Corporation shall have all of the general and special powers
granted by the State of Arkansas and any other state or jurisdiction in which it
may be authorized to do business.
The Corporation shall also have power to invest and reinvest its
funds; to prosecute suits, actions, and other
Page 2 of 7 Pages
proceedings to protect its property, assets and rights; to lend upon, purchase,
hold, guarantee, endorse, mortgage, encumber, pledge, hypothecate, sell, assign,
transfer, convey, lease or otherwise dispose of, mortgage or deal in any
personal property, real property or rights or interests in either, including the
establishment of separate accounts and allocating thereto amounts to provide for
life insurance or annuities payable in fixed or variable amounts or both; to
secure, mortgage, pledge or borrow on any corporate assets or property other
than trusts or fiduciary property; to compromise claims, to lend money,
negotiate loans, buy and sell bonds, debentures, coupons and other securities
not prohibited by law, to issue bonds and promissory notes either secured or
unsecured; and to pay dividends to stockholders.
The Corporation shall also have power to indemnify the officers and
directors during their term of office or thereafter for actions arising during
their term of office, either directly or through the purchase of insurance, for
expenditures as parties to suits by or in the right of the Corporation or other
than by or in the right of the Corporation to the extent permitted by the
Statutes of Arkansas and as shall be provided in the By-laws.
ARTICLE IV - DIRECTORS
The Board of Directors shall conduct the affairs of the Corporation
and may adopt, alter, amend or repeal By-Laws for the governance and management
of the affairs and business of the Corporation. The number of directors of the
Corporation shall
Page 3 of 7 Pages
from time to time be fixed by or otherwise provided for in the By-laws, but
shall never number less than three. The initial Board of Directors of the
Corporation consisted of Messrs. Fenwick J. Crane, Gerald F. Fehr, D. McKay
Snow, Robert J. Newell and Dakin B. Ferris. The current Board of Directors, who
shall serve until re-elected or replaced by the stockholders in accordance with
the Bylaws are:
David Marshall Dunford John Carroll Ramsey Hele
376 Carter Road 304 Trinity Court, Apt. 6
Princeton, NJ 08540 Princeton, NJ 08540
Kenneth Wayne Kaczmarek Thomas Harold Patrick
89 Lambert Drive 122 Brinker Road
Princeton, NJ 08540 Barrington, IL 60010
Barry Gordon Skolnick
120 Woodview Drive
Belle Mead, NJ 08502
ARTICLE V - DURATION
This Corporation shall have perpetual existence.
ARTICLE VI -- CAPITAL STOCK
The authorized capital stock of the Corporation shall be ten
million dollars ($10,000,000), divided into one million shares (1,000,000) of
nonassessable common stock with a par value of ten dollars ($10.00) per share.
The common stock shall have voting rights for the election of directors and for
all other purposes, each holder of common stock being entitled to one vote for
each share thereof held by such holder, except as otherwise required by law.
Page 4 of 7 Pages
ARTICLE VII - AMENDMENT
These Articles may be amended by written authorization of the holders
of a majority of the voting power of the Corporation's outstanding capital stock
or by affirmative vote of a majority voting at a lawful meeting of stockholders
of which the notice given to stockholders included due notice of the proposal to
amend.
ARTICLE VIII - MEETINGS OF STOCKHOLDERS
Meetings of stockholders of the Corporation shall be held in the city
or town of its principal office or place of business in Arkansas or in such
other place within the State of Arkansas as shall be designated by the Board of
Directors of the Corporation.
ARTICLE IX - ORIGINAL INCORPORATORS
The names and resident addresses of the original incorporators of the
Corporation, which at that time was incorporated under the laws of the State of
Washington, were:
Fenwick J. Crane Gerald F. Fehr
1571 Parkside Drive East 8615 Inverness Drive N.E.
Seattle, Washington 98112 Seattle, Washington 98115
D. McKay Snow Robert J. Newell
13011 N.E. First 16312 Inglewood Lane N.E.
Bellevue, Washington 98005 Bothell, Washington 98011
Craig F. Likkel
23591 27th Place West
Brier, Washington 98036
IN WITNESS WHEREOF, the undersigned President and Secretary of Merrill
Lynch Life Insurance Company do hereby declare and
Page 5 of 7 Pages
certify that the statements set forth hereinabove are true and have hereunto set
their hands this 6th day of August, 1991.
--- ------
MERRILL LYNCH LIFE INSURANCE COMPANY
By: /s/ THOMAS H. PATRICK
--------------------------------
Thomas H. Patrick, President
[SEAL]
ATTEST:
By: /s/ BARRY G. SKOLNICK
--------------------------------
Barry G. Skolnick, Secretary
Page 6 of 7 Pages
STATE OF NEW JERSEY )
) ss: ACKNOWLEDGMENT
COUNTY OF MIDDLESEX ) --------------
On this 6 day of August, 1991, before me, the undersigned, a Notary
- ------
Public, (or before any officer within this State or without the State now
qualified under existing law to take acknowledgments), duly commissioned,
qualified and acting, within and for said County and State, appeared in person
the within named Thomas H. Patrick and Barry G. Skolnick, (being the person or
persons authorized by said corporation to execute such instrument, stating their
respective capacities in that behalf), to me personally well known, who stated
that they were the President and Secretary of the Merrill Lynch Life Insurance
Company, and were duly authorized in their respective capacities to execute the
foregoing instruments for and in the name and behalf of said corporation, and
further stated and acknowledged that they had so signed, executed and delivered
said foregoing instrument for the consideration, uses and purposes therein
mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal this 6th day of August, 1991.
--- ------
/s/ SANDRA K. KELLY
-------------------------------
Sandra K. Kelly
Notary Public
My Commission Expires: Stamp
SANDRA K. KELLY
- --------------------------------
A Notary Republic of New Jersey
My Commission Expires: April 3, 1994
Page 7 of 7 Pages
EX-99.B6B
9
EXHIBIT (6)(B)
EXHIBIT (b)(6)(b)
AMENDED AND RESTATED
BY-LAWS
OF
MERRILL LYNCH LIFE INSURANCE COMPANY
(AN ARKANSAS CORPORATION)
TABLE OF CONTENTS
Page
----
ARTICLE I
OFFICES
Section 1. Registered Office....................................... 1
Section 2. Other Offices........................................... 1
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meetings.............................. 1
Section 2. Annual Meetings......................................... 1
Section 3. Notice of Annual Meetings............................... 1
Section 4. Special Meetings........................................ 1
Section 5. Notice of Special Meetings.............................. 1
Section 6. Quorum.................................................. 2
Section 7. Organization............................................ 2
Section 8. Order of Business....................................... 2
Section 9. Voting.................................................. 2
Section 10. List of Stockholders.................................... 3
Section 11. Inspectors of Vote...................................... 4
Section 12. Actions Without a Meeting............................... 4
ARTICLE III
BOARD OF DIRECTORS
Section 1. Powers.................................................. 4
Section 2. Number, Qualification, Election and Term
of Office.............................................. 5
Section 3. Resignations............................................ 5
Section 4. Removal of Directors.................................... 5
Section 5. Vacancies; Newly Created Directorships.................. 5
MEETINGS OF THE BOARD OF DIRECTORS
Section 6. Place of Meetings....................................... 6
Section 7. Annual Meetings......................................... 6
Section 8. Regular Meetings........................................ 6
Section 9. Special Meetings; Notice................................ 6
Section 10. Quorum and Manner of Acting............................. 6
COMMITTEES OF DIRECTORS
Section 11. Executive Committee; How Constituted and
Powers................................................. 7
Section 12. Organization............................................ 7
Section 13. Meetings................................................ 7
Section 14. Quorum and Manner of Acting............................. 8
Section 15. Other Committees........................................ 8
Section 16. Minutes of Committees................................... 8
-i-
GENERAL
Section 17. Actions Without A Meeting............................... 9
Section 18. Presence at Meetings by Means of
Communications Equipment............................... 9
ARTICLE IV
NOTICES
Section 1. Type of Notice.......................................... 9
Section 2. Waiver of Notice........................................ 9
ARTICLE V
OFFICERS
Section 1. Elected and Appointed Officers.......................... 10
Section 2. Time of Election or Appointment......................... 10
Section 3. Term.................................................... 10
Section 4. Duties of the Chairman of the Board..................... 10
Section 5. Duties of the President................................. 11
Section 6. Duties of Vice Presidents............................... 11
Section 7. Duties of the Secretary................................. 11
Section 8. Duties of the Treasurer................................. 12
Section 9. Duties of the Controller................................ 12
ARTICLE VI
INDEMNIFICATION
Section 1. Actions Other Than by or in the Right of
the Corporation........................................ 13
Section 2. Actions by or in the Right of the
Corporation............................................ 13
Section 3. Right to Indemnification................................ 13
Section 4. Determination of Right to Indemnification............... 14
Section 5. Advancement of Expenses................................. 14
Section 6. Other Rights and Remedies............................... 14
Section 7. Insurance............................................... 14
Section 8. Definition of Corporation............................... 14
Section 9. Other Terms Defined..................................... 15
Section 10. Continuation of Indemnification......................... 15
ARTICLE VII
CERTIFICATES REPRESENTING STOCK
Section 1. Right to Certificate.................................... 15
Section 2. Facsimile Signatures.................................... 16
Section 3. Lost, Stolen, or Destroyed Certificate.................. 16
Section 4. Transfers............................................... 16
Section 5. Record Date............................................. 16
Section 6. Registered Stockholders................................. 17
ARTICLE VIII
-ii-
GENERAL PROVISI0NS
Section 1. Dividends............................................... 17
Section 2. Signatures on Negotiable Instruments.................... 17
Section 3. Fiscal Year............................................. 17
Section 4. Corporate Seal.......................................... 17
ARTICLE IX
AMENDMENTS.................................................................. 18
-iii-
ARTICLE I
OFFICES
Section 1. Registered Office. The address of the registered office of the
--------- -----------------
Corporation shall be such location in the State of Arkansas as may be determined
by the Board of Directors from time to time.
Section 2. Other Offices. The Corporation may also have offices at such
--------- -------------
other place or places, both within and without the State of Arkansas, as the
Board of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meetings. All meetings of the stockholders
--------- --------------------------
for the election of directors shall be held at such time and place within the
State of Arkansas, as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting. Meetings of stockholders for
any other purpose may be held at such time and place within the State of
Arkansas as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2. Annual Meetings. Annual meetings of stockholders shall be held
--------- ---------------
on such date and time as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting, at which the stockholders
shall elect by a plurality vote by written ballot a Board of Directors and
transact such other business as may properly be brought before the meeting.
Section 3. Notice of Annual Meetings. Written notice of the annual
--------- -------------------------
meeting, stating the place, date, and hour of the meeting, shall be given to
each stockholder of record entitled to vote at such meeting not less than 10 or
more than 60 days before the date of the meeting.
Section 4. Special Meetings. Special meetings of the stockholders for any
--------- ----------------
purpose or purposes, unless otherwise prescribed by statute or the Articles of
Incorporation, may be called at any time by order of the Board of Directors and
shall be called by the Chairman of the Board, the President, or the Secretary at
the request in writing of a majority of the Board of Directors. Such request
shall state the purpose or purposes of the proposed special meeting.
Section 5. Notice of Special Meetings. Written notice of a special
--------- --------------------------
meeting, stating the place, date, and hour of the meeting and the purpose or
purposes for which the meeting is called, shall be given to each stockholder of
record entitled to vote at
- 1 -
such meeting not less than 10 or more than 60 days before the date of the
meeting.
Section 6. Quorum. Except as otherwise provided by statute or the
--------- ------
Articles of Incorporation, the holders of stock having a majority of the voting
power of the stock entitled to be voted thereat, present in person or
represented by proxy, shall constitute a quorum for the transaction of business
at all meetings of the stockholders. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time without notice (other than
announcement at the meeting at which the adjournment is taken of the time and
place of the adjourned meeting) until a quorum shall be present or represented.
At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than 30 days, or if after
the adjournment a new record date is fixed for the adjourned meeting, notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 7. Organization. At each meeting of the stockholders, the
--------- ------------
Chairman of the Board or the President, determined as provided in Article V of
these By-Laws, or if those officers shall be absent therefrom, another officer
of the Corporation chosen as chairman by those stockholders present in person or
by proxy and entitled to vote thereat, or if all the officers of the Corporation
shall be absent therefrom, a stockholder holding of record shares of stock of
the Corporation so chosen, shall act as chairman of the meeting and preside
thereat. The Secretary, or if he shall be absent from such meeting or shall be
required pursuant to the provisions of this Section 7 to act as chairman of such
meeting, the person (who shall be an Assistant Secretary, if an Assistant
Secretary shall be present thereat) whom the chairman of such meeting shall
appoint, shall act as secretary of such meeting and keep the minutes thereof.
Section 8. Order of Business. The order of business at all meetings of
--------- -----------------
stockholders shall be as determined by the chairman of the meeting or as is
otherwise determined by the vote of the holders of a majority of the shares of
stock present in person or by proxy and entitled to vote without regard to class
or series at the meeting.
Section 9. Voting. Except as otherwise provided in the Articles of
--------- ------
Incorporation, each stockholder shall, at each meeting of the stockholders, be
entitled to one vote in person or by proxy for each share of stock of the
Corporation held by him and registered in his name on the books of the
Corporation on the date fixed pursuant to the provisions of Section 5 of Article
VII of these By-Laws as the record date for the determination of stockholders
who shall be entitled to notice of and to vote at such meeting. Shares of its
own stock belonging to the
- 2 -
Corporation or to another corporation, if a majority of the shares entitled to
vote in the election or directors of such other corporation is held directly or
indirectly by the Corporation, shall not be entitled to vote. Any vote by stock
of the Corporation may be given at any meeting of the stockholders by the
stockholder entitled thereto, in person or by his proxy appointed by an
instrument in writing subscribed by such stockholder or by his attorney
"hereunto duly authorized and delivered to the Secretary of the Corporation or
to the secretary of the meeting; provided, however, that no proxy shall be voted
or acted upon after three years from its date, unless said proxy shall provide
for a longer period. Each proxy shall be revocable at will and this provision
cannot be waived unless expressly provided otherwise by statute. At all meetings
of the stockholders all matters, except where other provision is made by law,
the Articles of Incorporation, or these By-Laws, shall be decided by the vote of
a majority of the votes cast by the stockholders present in person or by proxy
and entitled to vote thereat, a quorum being present. Unless demanded by the
holders of a majority of the shares present in person or by proxy at any meeting
of the stockholders and entitled to vote thereat, or so directed by the chairman
of the meeting, the vote thereat on any question other than the election or
removal of directors need not be by written ballot. Upon a demand of any such
stockholder for a vote by written ballot on any question or at the direction of
such chairman that a vote by written ballot be taken on any question, such vote
shall be taken by written ballot. On a vote by written ballot, each ballot shall
be signed by the stockholder voting, or by his proxy, if there be such proxy,
and shall state the number of shares voted.
Section 10. List of Stockholders. It shall be the duty of the Secretary
---------- --------------------
or other officer of the Corporation who shall have charge of its stock ledger,
either directly or through another officer of the Corporation designated by him
or through a transfer agent appointed by the Board of Directors, to prepare and
make, at least 10 days before every meeting of the stockholders, a complete list
of the stockholders entitled to vote thereat, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least 10 days before said meeting, either at
a place within the city where said meeting is to be held, which place shall be
specified in the notice of said meeting, or, if not so specified, at the place
where said meeting is to be held. The list shall also be produced and kept at
the time and place of said meeting during the whole time thereof, and may be
inspected by any stockholder of record who shall be present thereat. The stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, such list or the books of the Corporation, or to vote
in person or by proxy at any meeting of stockholders.
- 3 -
Section 11. Inspectors of Vote. At each meeting of the stockholders, the
---------- ------------------
chairman of such meeting may appoint two Inspectors of Votes to act thereat,
unless the Board of Directors shall have theretofore made such appointments.
Each Inspector of Votes so appointed shall first subscribe an oath or
affirmation faithfully to execute the duties of an Inspector of Votes at such
meeting with strict impartiality and according to the best of his ability. Such
Inspectors of Votes, if any, shall take charge of the ballots, if any, at such
meeting and, after the balloting thereat on any question, shall count the
ballots cast thereon and shall make a report in writing to the secretary of such
meeting of the results thereof. An Inspector of Votes need not be a stockholder
of the Corporation, and any officer of the Corporation may be an Inspector of
Votes on any question other than a vote for or against his election to any
position with the Corporation or on any other question in which he may be
directly interested.
Section 12. Actions Without a Meeting. Any action required to be taken at
---------- -------------------------
any annual or special meeting of stockholders of the Corporation, or any action
which may be taken at any annual or special meeting of stockholders, may be
taken without a meeting, without prior notice, and without a vote if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereat were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Powers. The business and affairs of the Corporation shall be
--------- ------
managed by its Board of Directors, which shall have and may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute, the Articles of Incorporation, or these By-Laws directed or required to
be exercised or done by the stockholders.
Section 2. Number, Qualification, Election and Term of Office. The number
--------- --------------------------------------------------
of directors which shall constitute the whole Board of Directors shall not be
less than three (3) nor more than twenty (20). Within the limits above
specified, the number of directors that shall constitute the whole Board of
Directors shall be determined by resolution of the Board of Directors or by the
stockholders at any annual or special meeting or otherwise pursuant to action of
the stockholders. Directors need not be stockholders. The directors shall be
elected at the annual meeting of the stockholders, except as provided in
Sections 4 and 5 of this Article III, and each director elected shall hold
office until the next annual meeting of the stockholders or until
- 4 -
his successor is duly elected and qualified, or until his death or retirement or
until he resigns or is removed in the manner hereinafter provided. The Board of
Directors or the stockholders may fix, from time to time, such qualifications,
if any, for elections as a director or the continued holding of such office as
they deem appropriate in view of the Corporation's business.
Section 3. Resignations. Any director may resign at any time by giving
--------- ------------
written notice of his resignation to the Corporation. Any such resignation
shall take effect at the time specified therein, or if the time when it shall
become effective shall not be specified therein, then it shall take effect
immediately upon its receipt by the Secretary. Unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
Section 4. Removal of Directors. Any director may be removed, either with
--------- --------------------
or without cause, at any time, by the affirmative vote of a majority in voting
interest of the stockholders of record of the Corporation entitled to vote,
given at an annual meeting or at a special meeting of the stockholders called
for that purpose. The vacancy in the Board of Directors caused by any such
removal shall be filled by the stockholders at such meeting or, if not so
filled, by the Board of Directors as provided in Section 5 of this Article III.
Section 5. Vacancies; Newly Created Directorships. Any directorship
--------- --------------------------------------
created by an increase in the number of directors or any vacancy resulting from
the removal or resignation of any director may be filled by a majority of the
directors then in office though less than a quorum, or by a sole remaining
director, or pursuant to the affirmative vote of a majority of the shares of
capital stock of the Corporation entitled to vote thereon, either at an annual
meeting of the stockholders or at a special meeting of such holders called for
that purpose. The director so elected shall hold office until the next annual
meeting of stockholders and until a successor is elected and qualified, unless
sooner displaced.
MEETINGS OF THE BOARD OF DIRECTORS
Section 6. Place of Meetings. The Board of Directors of the Corporation
--------- -----------------
may hold meetings, both regular and special, either within or without the State
of Arkansas.
Section 7. Annual Meetings. The first meeting of each newly elected Board
--------- ---------------
of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting to the newly elected directors shall
be necessary in order legally to constitute the meeting, provided a quorum shall
be present. In the event such meeting is not held immediately following the
annual meeting of stockholders, or if the latter meeting is handled by written
consent, the meeting may be held at such time and place as shall be specified in
a notice given as hereinafter provided for special meetings of the Board of
- 5 -
Directors, or as shall be specified in a written waiver signed by all of the
directors.
Section 8. Regular Meetings. Regular meetings of the Board of Directors
--------- ----------------
may be held without notice at such time and at such place as shall from time to
time be determined by the Board of Directors.
Section 9. Special Meetings; Notice. Special meetings of the Board of
--------- ------------------------
Directors may be called by the Secretary at the request of the Chairman of the
Board or the President on 24 hours' notice to each director, either personally
or by telephone or by mail, telegraph, telex, cable, wireless, or other form of
recorded communication; special meetings shall be called by the Secretary in
like manner and on like notice on the written request of any director. Notice
of any such meeting need not be given to any director, however, if waived by him
in writing or by telegraph, telex, cable, wireless, or other form of recorded
communication, or if he shall be present at such meeting.
Section 10. Quorum and Manner of Acting. At all meetings of the Board of
---------- ---------------------------
Directors, a majority of the directors at the time in office (but not less than
one-third of the whole Board of Directors, but in any event not less than two
directors) shall constitute a quorum for the transaction of business, and the
act of a majority of the directors present at any meeting at which a quorum is
present shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Articles of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
COMMITTEES OF DIRECTORS
Section 11. Executive Committee; How Constituted and Powers: The Board of
---------- -----------------------------------------------
Directors may in its discretion, by resolution passed by a majority of the whole
Board of Directors, designate an Executive Committee consisting of two or more
of the directors of the Corporation. Subject to any applicable statutes, the
Articles of Incorporation, and these By-Laws, the Executive Committee shall have
and may exercise, when the Board of Directors is not in session, all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have the power to authorize the seal of
the Corporation to be affixed to all papers which may require it; but the
Executive Committee shall not have the power to fill vacancies in the Board of
Directors, the Executive Committee, or any other committee of directors or to
elect or approve officers of the Corporation. The Executive Committee shall
have the power and authority to authorize the issuance of common stock and grant
and authorize options and other rights with respect to such issuance. The Board
of Directors shall have the power at any time, by resolution passed by a
majority of the whole Board of Directors, to change the membership of the
- 6 -
Executive Committee, to fill all vacancies in it, or to dissolve it, either with
or without cause.
Section 12. Organization. The Chairman of the Executive Committee, to be
---------- ------------
selected by the Board of Directors, shall act as chairman at all meetings of the
Executive Committee and the Secretary shall act as secretary thereof. In case
of the absence from any meeting of the Executive Committee of the Chairman of
the Executive Committee or the Secretary, the Executive Committee may appoint a
chairman or secretary, as the case may be, of the meeting.
Section 13. Meetings. Regular meetings of the Executive Committee, of
---------- --------
which no notice shall be necessary, may be held on such days and at such places,
within or without the State of Arkansas, as shall be fixed by resolution adopted
by a majority of the Executive Committee and communicated in writing to all its
members. Special meetings of the Executive Committee shall be held whenever
called by the Chairman of the Executive Committee or a majority of the members
of the Executive Committee then in office. Notice of each special meeting of the
Executive Committee shall be given by mail, telegraph, telex, cable, wireless,
or other form of recorded communication or be delivered personally or by
telephone to each member of the Executive Committee not later than the day
before the day on which such meeting is to be held. Notice of any such meeting
need not be given to any member of the Executive Committee, however, if waived
by him in writing or by telegraph, telex, cable, wireless, or other form of
recorded communication, or if he shall be present at such meeting; and any
meeting of the Executive Committee shall be a legal meeting without any notice
thereof having been given, if all the members of the Executive Committee shall
be present thereat. Subject to the provisions of this Article III, the Executive
Committee, by resolution adopted by a majority of the whole Executive Committee,
shall fix its own rules of procedure.
Section 14. Quorum and Manner of Acting. One third of the members of the
---------- ---------------------------
Executive Committee, but in no event less than two members, shall constitute a
quorum for the transaction of business, and the act of a majority of those
present at a meeting thereof at which a quorum is present shall be the act of
the Executive Committee.
Section 15. Other Committees. The Board of Directors may, by resolution
---------- ----------------
or resolutions passed by a majority of the whole Board of Directors, designate
one or more other committees, including an Investment Committee to be charged
with the supervision and making of investments and loans of the Corporation,
consisting of one or more directors of the Corporation, which, to the extent
provided in said resolution or resolutions, shall have and may exercise, subject
to any applicable statutes, the Articles of Incorporation, and these By-Laws,
the powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation, and shall have the power to authorize
the seal of the Corporation
- 7 -
to be affixed to all papers which may require it; but no such committee shall
have the power to fill vacancies in the Board of Directors, the Executive
Committee, or any other committee or in their respective membership, to appoint
or remove officers of the Corporation, or to authorize the issuance of shares of
the capital stock of the Corporation, except that such a committee may, to the
extent provided in said resolutions, grant and authorize options and other
rights with respect to the common stock of the Corporation pursuant to and in
accordance with any plan approved by the Board of Directors. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors. A majority of all the members
of any such committee may determine its action and fix the time and place of its
meetings and specify what notice thereof, if any, shall be given, unless the
Board of Directors shall otherwise provide. The Board of Directors shall have
power to change the members of any such committee at any time to fill vacancies,
and to discharge any such committee, either with or without cause, at any time.
Section 16. Minutes of Committees. Each committee shall keep regular
---------- ---------------------
minutes of its meetings and proceedings and report the same to the Board of
Directors at the next meeting thereof.
GENERAL
Section 17. Actions Without A Meeting. Unless otherwise restricted by the
---------- -------------------------
Articles of Incorporation or these By-Laws, any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
the committee.
Section 18. Presence at Meetings by Means of Communications Equipment.
---------- ---------------------------------------------------------
Members of the Board of Directors, or of any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting conducted pursuant to this Section 20 shall
constitute presence in person at such meeting.
ARTICLE IV
NOTICES
Section 1. Type of Notice. Whenever, under the provisions of any applicable
--------- --------------
statute, the Articles of Incorporation, or these By-Laws, notice is required to
be given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, in person or by mail,
addressed to such director or stockholder, at his address as it appears on the
records of the Corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time
- 8 -
when the same shall be deposited in the United States mail. Notice to directors
may also be given in any manner permitted by Article III hereof and shall be
deemed to be given at the time when first transmitted by the method of
communication so permitted.
Section 2. Waiver of Notice. Whenever any notice is required to be given
--------- ----------------
under the provisions of any applicable statute, the Articles of Incorporation,
or these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto, and transmission of a waiver of notice by a
director of stockholder by mail, telegraph, telex, cable, wireless, or other
form of recorded communication may constitute such a waiver.
ARTICLE V
OFFICERS
Section 1. Elected and Appointed Officers. The elected officers of the
--------- ------------------------------
Corporation shall be a President (who shall be a director, one or more Vice
Presidents, with or without such descriptive titles as the Board of Directors
shall deem appropriate, a Secretary, and a Treasurer, and, if the Board of
Directors so elects, a Chairman of the Board (who shall be a director) and a
Controller. The Board of Directors or the Executive Committee of the Board of
Directors by resolution also may appoint one or more Assistant Vice Presidents,
Assistant Treasurers, Assistant Secretaries, Assistant Controllers, and such
other officers and agents as from time to time may appear to be necessary or
advisable in the conduct of the affairs of the Corporation.
Section 2. Time of Election or Appointment. The Board of Directors at its
--------- -------------------------------
annual meeting shall elect or appoint, as the case may be, the officers to fill
the positions designated in or pursuant to Section 1 of this Article V. Officers
of the Corporation may also be elected or appointed, as the case may be, at any
other time.
Section 3. Term. Each officer of the Corporation shall hold his office
--------- ----
until his successor is duly elected or appointed and qualified or until his
earlier resignation or removal. Any officer may resign at any time upon written
notice to the Corporation. Any officer elected or appointed by the Board of
Directors or the Executive Committee may be removed at any time by the
affirmative vote of a majority of the whole Board of Directors. Any vacancy
occurring in any office of the Corporation by death, resignatiOn, removal, or
otherwise may be filled by the Board of Directors or the appropriate committee
thereof.
Section 4. Duties of the Chairman of the Board. The Chairman of the Board,
--------- -----------------------------------
if so elected in accordance with Section 1. of Article V., shall be the Chief
Executive Officer of the Corporation and, subject to the provisions of these By-
Laws,
- 9 -
shall have general supervision of the affairs of the Corporation and shall have
general and active control of all its business. He shall preside, when present,
at all meetings of shareholders and at all meetings of the Board of Directors.
He shall see that all orders and resolutions of the Board of Directors and the
shareholders are carried into effect. He shall have general authority to execute
bonds, deeds, and contracts in the name of the Corporation and affix the
corporate seal thereto; to sign stock certificates; to cause the employment or
appointment of such officers, employees, and agents of the Corporation as the
proper conduct of operations may require, and to fix their compensation, subject
to the provisions of these By-Laws; to remove or suspend any employee or agent
who was employed or appointed under his authority or under authority of an
officer subordinate to him; to suspend for cause, pending final action by the
authority that elected or appointed him, any officer subordinate to the Chairman
of the Board; in coordination with the other officers and directors of the
corporation, to develop the Corporation's basic strategic and long-range plans,
including marketing programs, expansion plans, and financial structure; and, in
general, to exercise all of the powers and authority usually appertaining to the
chief executive officer of a corporation, except as otherwise provided in these
By-Laws.
Section 5. Duties of the President. In the absence of a Chairman of the
--------- -----------------------
Board, the President shall be the Chief Executive Officer of the Corporation,
and shall have the duties and responsibilities and the authority and power of
the Chairman of the Board. The President or a designated Vice President shall be
the Chief Operating Officer of the Corporation and as such shall have, subject
to review and approval of the Chairman of the Board, the responsibility for the
day-to-day operations of the Corporation and long-range plans, including
marketing programs, expansion plans, and financial structure; and, in general,
to exercise all of the powers and authority usually appertaining to the chief
executive officer of a corporation, except as otherwise provided in these By-
Laws.
Section 6. Duties of Vice Presidents. In the absence of the President or in
--------- -------------------------
the event of his inability or refusal to act, the Vice President (or in the
event there be more than one Vice President, the Vice Presidents in the order or
manner designated, or in the absence of any designation, then in the order of
their election) shall perform the duties of the President and, when so acting,
shall have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall perform such other duties and have such
other powers and designations as the Board of Directors or the President may
from time to time prescribe.
Section 7. Duties of the Secretary. The Secretary shall attend all meetings
--------- -----------------------
of the Board of Directors and all meetings of the stockholders and record all
the proceedings of the meetings of the Corporation and of the Board of Directors
in a book to be kept for that purpose and shall perform like duties for the
Executive Committee or other standing committees when required.
- 10 -
He shall give, or cause to be given, notice of all meetings of the stockholders
and special meetings of the Board of Directors, and shall perform such other
duties as may be prescribed by the Board of Directors or the President, under
whose supervision he shall be. He shall have custody of the corporate seal of
the Corporation, and he, or an Assistant Secretary, shall have authority to
affix the same to any instrument requiring it, and when so affixed, it may be
attested by his signature or by the signature of such Assistant Secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the Corporation and to attest the affixing by his signature. The
Secretary shall keep and account for all books, documents, papers, and records
of the Corporation, except those for which some other officer or agent is
properly accountable. He shall have authority to sign stock certificates and
shall generally perform all the duties usually appertaining to the office of the
secretary of a corporation.
Section 8. Duties of the Treasurer. The Treasurer shall have the custody of
--------- -----------------------
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings or
when the Board of Directors so requires, an account of all his transactions as
Treasurer and of the financial condition of the Corporation. If required by the
Board of Directors, he shall give the Corporation a bond (which shall be renewed
every six years) in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement, or removal from office, of all books, papers,
vouchers, money, and other property of whatever kind in his possession or under
his control belonging to the Corporation. The Treasurer shall perform such other
duties as may be prescribed by the Board of Directors, the President, or any
such Vice President in charge of finance.
Section 9. Duties of the Controller. The Controller, if one is appointed,
--------- ------------------------
shall have supervision of the accounting practices of the Corporation and shall
prescribe the duties and powers of any other accounting personnel of the
Corporation. He shall cause to be maintained an adequate system of financial
control through a program of budgets and interpretive reports. He shall initiate
and enforce measures and procedures whereby the business of the Corporation
shall be conducted with the maximum efficiency and economy. If required, he
shall prepare a monthly report covering the operating results of the
Corporation. The Controller shall be under the supervision of the Vice
President in charge of finance, if one is so designated, and he shall perform
such other
- 11 -
duties as may be prescribed by the Board of Directors, the President, or any
such Vice President in charge of finance.
ARTICLE VI
INDEMNIFICATION
Section 1. Actions Other Than by or in the Right of the Corporation. The
--------- --------------------------------------------------------
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation) by reason of the fact that he
is or was a director, officer or employee of the Corporation, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section 2. Actions by or in the Right of the Corporation. The Corporation
--------- ---------------------------------------------
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Corporation to procure a judgment in its favor by reason of the fact that
he is or was a director, officer or employee of the Corporation, against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interest of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the Court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other Court shall deem proper.
Section 3. Right to Indemnification. To the extent that a director,
--------- ------------------------
officer of employee of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Sections 1
and 2 of this
- 12 -
Article, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
Section 4. Determination of Right to Indemnification. Any indemnification
--------- -----------------------------------------
under Sections 1 and 2 of this Article (unless ordered by a Court) shall be made
by the Corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, or employee is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Sections 1 and 2 of this Article. Such determination shall be made (i)f by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (ii) if such a quorum is
not obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders.
Section 5. Advancement of Expenses. Expenses incurred by an officer or
--------- -----------------------
director in defending a civil or criminal action, suit or proceeding may be paid
by the Corporation, in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article.
Such expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate.
Section 6. Other Rights and Remedies. The indemnification and advancement
--------- -------------------------
of expenses provided by or granted pursuant to the other Sections of this
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office.
Section 7. Insurance. The Corporation may purchase and maintain insurance
--------- ---------
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article.
Section 8. Definition of Corporation. For purposes of this Article,
--------- -------------------------
references to "the Corporation" shall include, in addition to the resulting
Corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person
- 13 -
who is or was a director, officer, employee, or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee, or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article with respect to the resulting or surviving
Corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
Section 9. Other Terms Defined. For purposes of this Article, references to
--------- -------------------
"other enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee, or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article.
Section 10. Continuation of Indemnification. The indemnification and
---------- -------------------------------
advancement of expenses provided by, or granted pursuant to, this Article shall
continue as to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors and administrators
of such person.
ARTICLE VII
CERTIFICATES REPRESENTING STOCK
Section 1. Right to Certificate. Every holder of stock in the Corporation
--------- --------------------
shall be entitled to have a certificate, signed by, or in the name of the
Corporation by, the Chairman of the Board, the President, or a Vice President
and by the Secretary or an Assistant Secretary of the Corporation, certifying
the number of shares owned by him in the Corporation. If the Corporation shall
be authorized to issue more than one class of stock or more than one series of
any class, the powers, designations, preferences, and relative, participating,
optional, or other special rights of each class of stock or series thereof and
the qualifications, limitations, or restrictions of such preferences or rights
shall be set forth in full or summarized on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock;
provided, that, except as otherwise provided by any applicable statute, in lieu
of the foregoing requirements, there may be set forth on the face or back of the
certificate which the Corporation shall issue to represent such class or series
of stock a statement that the Corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences, and relative,
participating, optional, or other special rights of each class of
- 14 -
stock or series thereof and the qualifications, limitations, or restrictions of
such preferences or rights.
Section 2. Facsimile Signatures. Any of or all the signatures on the
--------- --------------------
certificate may be facsimile. In case any officer, transfer agent, or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent, or registrar at the date of issue.
Section 3. Lost, Stolen, or Destroyed Certificate. The Board of Directors
--------- --------------------------------------
may direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation and alleged to
have been lost, stolen, or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen, or
destroyed. When authorizing such issue of a new certificate or certificates, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen, or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require or to give the Corporation a bond in such sum
as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed or the issuance of such new certificate.
Section 4. Transfers. Upon surrender to the Corporation or the transfer
--------- ---------
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation, or authority to
transfer, and with proof of authenticity of signature, it shall be the duty of
the Corporation, subject to any proper restrictions on transfer, to issue a new
certificate to the person entitled thereto, cancel the old certificate, and
record the transaction upon its books.
Section 5. Record Date. In order that the Corporation may determine the
--------- -----------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be less than 10 or more than 40 days before the date of such
meeting or any other action. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
Section 6. Registered Stockholders. The Corporation shall be entitled to
--------- -----------------------
recognize the exclusive right of a person registered
- 15 -
on its books as the owner of shares to receive dividends, and to vote as such
owner, and to hold liable for calls and assessments a person registered on its
books as the owner of shares, and shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any other
person, whether or not provided by the laws of the State of Arkansas.
ARTICLE VIII
GENERAL PROVISI0NS
Section 1. Dividends. Dividends upon the capital stock of the Corporation,
--------- ---------
if any, subject to any applicable statutes and the provisions of the Articles of
Incorporation, may be declared by the Board of Directors (but not any committee
thereof) at any regular meeting, pursuant to law. Dividends may be paid in cash,
in property, or in shares of the capital stock, subject to any applicable
statutes and the provisions of the Articles of Incorporation.
Section 2. Signatures on Negotiable Instruments. All bills, notes, checks
--------- ------------------------------------
or other instruments for the payment of money shall be signed or countersigned
by such officers or agents and in such manner as, from time to time, may be
prescribed by resolution whether general or special of the Board of Directors,
or may be prescribed by any officer or officers, or any officer and agent
jointly, thereunto duly authorized by the Board of Directors.
Section 3. Fiscal Year. The fiscal year of the Corporation shall end on the
--------- -----------
final Friday of December in each year and the succeeding fiscal year shall begin
on the day next succeeding the last day of the preceding fiscal year.
Section 4. Corporate Seal. The corporate seal shall have inscribed thereon
--------- --------------
the name of the Corporation, the year of incorporation of the Corporation, and
the word, "Arkansas." The seal may be used by causing it or a facsimile thereof
to be impressed, affixed, reproduced, or otherwise.
ARTICLE IX
AMENDMENTS
These By-Laws may be altered, amended, or repealed or new By-Laws may be
adopted by the stockholders or by the Board of Directors at any regular meeting
of the stockholders or the Board of Directors or at any special meeting of the
stockholders or the Board of Directors if notice of such alteration, amendment,
repeal, or adoption of new By-Laws be contained in the notice of such special
meeting.
Secretary's Certificate
-----------------------
I, Barry Gordon Skolnick, being the duly elected, authorized and acting
Secretary of Merrill Lynch Life Insurance Company, do
- 16 -
hereby certify that the forgoing By-Laws were duly adopted by the Board of
Directors as of the 6th day of August, 1991.
--- ------
IN WITNESS WHEREOF, I have hereunto set my hand this 13th day of September,
---- ---------
1991.
/s/ BARRY G. SKOLNICK
------------------------------
Barry Gordon Skolnick
- 17 -
EX-99.B8B
10
EXHIBIT (8)(B)
Exhibit (b)(8)(b)
INDEMNITY AGREEMENT
In consideration for the agreement of Merrill Lynch Life Agency, Inc.
("MLLA") to enter into the General Agent's Agreement ("Merrill Lynch Life") and
other good and valuable consideration, Merrill Lynch Life hereby agrees as
follows:
Merrill Lynch Life will indemnify and hold harmless MLLA and all
persons associated with MLLA as such term is defined in Section 3(a)(21) of
the Securities Exchange Act of 1934 against all claims, losses, liabilities
and expenses, to include reasonable attorneys' fees, arising on or after
the date of this Indemnity Agreement out of the sale of MLLA of insurance
products under the above referenced Agreement, provided that Merrill Lynch
Life shall not be bound to indemnity or hold harmless MLLA or its
associated persons for claims, losses, liabilities and expenses arising on
or after the date of this Indemnity Agreement directly out of the willful
misconduct or negligence of MLLA or its associated persons.
This indemnification shall survive the termination of the Agreement for any
claims arising thereunder for sales on or after termination.
MERRILL LYNCH LIFE INSURANCE COMPANY
Dated: 1/27/92 By: /s/ BARRY G. SKOLNICK
------------- -------------------------------
Barry G. Skolnick
MERRILL LYNCH LIFE AGENCY, INC.
Dated: 1/27/92 By: /s/ WILLIAM A. WILDE
------------- -------------------------------
William A. Wilde
EX-99.B8C
11
EXHIBIT (8)(C)
EXHIBIT (b)(8)(c)
MANAGEMENT AGREEMENT
AGREEMENT made as of this 30th day of August, 1991, by and between
---- ------
MERRILL LYNCH LIFE INSURANCE COMPANY, an Arkansas corporation (hereinafter
referred to as the "Client"), and MERRILL LYNCH ASSET MANAGEMENT, INC. a
Delaware corporation (hereinafter referred to as the "Manager").
W I T N E S S E T H
WHEREAS, the Client is engaged in business as an insurance company
subject to regulation under the laws of each state in which it does business;
and
WHEREAS, the Manager is engaged principally in rendering management
and investment advisory services and is registered as an investment adviser
under the Investment Advisers Act of 1940; and
WHEREAS, the Client desires to retain the Manager to provide
investment advisory services to the Client in the manner and on the terms
hereinafter set forth; and
WHEREAS, the Manager is willing to provide investment advisory
services to the Client on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Client and the Manager hereby agree as follows:
1. APPOINTMENT AND DUTIES OF MANAGER
The Client hereby appoints the Manager as investment manager of such
portion of the Client's investment portfolio as is
designated from time to time by the Client to the Manager in writing (the
"Portfolio") and to furnish, or arrange for affiliates to furnish, the
investment advisory service describe below, on the terms and conditions set
forth in this Agreement. The Manager hereby accepts such appointment and agrees
during such period, at its own expense, to render, or arrange for the rendering
of, such services and to assume the obligations herein set forth for the
compensation provided for herein. Except as limited below and in the Statement
of Investment Policy and Guidelines attached hereto, the Manager shall have full
discretion, as the Client's agent and attorney-in-fact to make purchases and
sales of investments on the Client's behalf and otherwise to act at the
Manager's discretion in the management of the Portfolio.
The Manager shall provide (or arrange for affiliates to provide) the Client
with such investment research, advice and supervision and written reports as the
latter may from time to time (but no less frequently than monthly) consider
necessary for the proper supervision of the assets of the Client, shall furnish
continuously an investment program for the Client and shall have full discretion
as the Client's agent and attorney-in-fact, to determine from time to time which
securities shall be purchased, sold, modified or exchanged and what portion of
the assets of the Client shall be held in (i) the various securities in which
the Client invests, (ii) options, (iii) futures, (iv) options on futures or (v)
cash, subject only to the restrictions of applicable law and the Client's
investment objectives, investment policies and investment restrictions as the
same are in each case
-1-
advised in writing by the Client to the Manager. Without limiting the
foregoing, the Manager shall have authority to approve the restructuring of
investments held in the Portfolio, either through changes in the terms of the
security (including changes in voting rights, dividend rights, interest rates,
maturity, conversion rights or other rights or preferences relating to the
security) or through the substitution of new securities, having such terms and
provisions as may be deemed appropriate by the Manager in light of the
prevailing circumstances, for securities held in the Portfolio. The Manager
shall make decisions for the Client as to foreign currency matters and make
determinations as to foreign exchange contracts, foreign currency options,
foreign currency futures and related options on foreign currency futures. The
Manager shall make decisions for the Client as to the manner in which voting
rights, rights to consent to corporate action and any other rights pertaining to
the Client's Portfolio securities shall be exercised and shall have the
authority, as the Client's agent and attorney-in fact, to exercise such rights
on behalf of the Client. The Manager may temporarily invest the Client's cash in
a money market fund which employs the Manager or an affiliate as its investment
adviser.
2. PORTFOLIO TRANSACTIONS
The Client authorizes the Manager to establish accounts in the
Client's name with Brokerage Firms that are members of the National Association
of Security Dealers and/or members of the Regional or National Securities
Exchanges including the Manager's
-2-
affiliate MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED (MERRILL LYNCH) and
to buy, sell or otherwise effect transactions in stocks, bonds and any other
securities for the Client's accounts and in the Client's name and the Client
empowers such firms to follow the Manager's instructions.
The Client agrees that, if Merrill Lynch effects investment
transactions-for the Client, it may act as principal, or as agent for both sides
of a transaction, in accordance with applicable law. When Merrill Lynch acts as
agent for both sides of a transaction, it may be paid commissions from, and has
duties to, the opposing ideas. If Merrill Lynch effects transactions on the
Client's behalf on a stock exchange, it may retain the compensation it is paid
for such services, in accordance with applicable law. The Manager is required
by Section 11(a) of the Securities Exchange Act of 1934 to include the preceding
sentence in this agreement for clients who are companies, governments and other
institutions.
Investment firms, including Merrill Lynch, may be compensated from the
Client's Portfolio at their standard rates for effecting investment transactions
on the Client's behalf.
3. ADMINISTRATION
The Manager is a registered investment adviser under the Investment
Advisers Act of 1940.
The Client acknowledges that it has received the Manager's disclosure
statement. The Client represents that the person entering this agreement on the
Client's behalf has full power and authority to do so and that it is binding.
-3-
The Client agrees to notify the Manager prior to giving any
instruction to an investment firm or custodian regarding the commitment,
withdrawal or investment of the Portfolio. The Manager is under no duty to
enter into any transaction with respect to assets which are not readily
available for delivery.
The Client will instruct any investment firm or custodian to transmit
simultaneously to the Client and to the Manager all confirmations and periodic
statements.
The Manager will send the Client current valuations of the Client's account
at least four times annually.
Employees of the Manager's affiliates may receive credits or compensation
for transactions effected on the Client's behalf.
The Client acknowledges that the Managers affiliates may have investment
banking relationships with publicly traded companies and that employees of the
Manager's affiliates may act as directors of publicly traded companies, which at
times may preclude the Manager from effecting transactions on the Client's
behalf in securities of such companies.
4. LIMITATION OF LIABILITY
The Manager will not be liable for the consequences of any investment
decision or related activities made or omitted in accordance with Section 1
hereof, except for loss incurred as a result of the Manager's gross-negligence
or willful or reckless misconduct. The Manager will not be liable for loss
incurred by any other person or as a result of any person other than the
Manager, whether or not its affiliate. These limitations of
-4-
liability also apply to the Manager's directors, officers, employees and agents.
5. CHOICE OF LAW
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT AS MAY BE PREEMPTED BY FEDERAL
LAW.
6. CUSTODY
Seattle First National Bank will act as custodian of the Portfolio. The
Manager will never receive or physically control the Portfolio. The Client's
money market fund shares may be recorded in the Client's name at a transfer
agent.
The Manager will not be responsible for making any tax credit or similar
clam or any legal filing on the Client's behalf.
7. FEES
In compensation for the Manager's services hereunder, the Client shall
periodically pay to the Manager, upon demand of the Manager (but no less
frequently than annually), a fee equal to the sum of (i) the Manager's costs,
expenses and disbursements incurred during such period in connection with its
services hereunder and (ii) 10% of the amount calculated pursuant to clause (i)
hereof.
8. TERMINATION
-5-
This agreement shall remain in force until further notice. The Client
will be entitled to terminate this agreement at any time, effective from the
time the Manager receives written notification or such other time as may be
mutually agreed upon, subject to the settlement of transactions in progress.
There will be no penalty charge on termination. This agreement will also be
terminated on the fifth day after the Manager ends the Client notice in writing
of the Manager's intent to terminate this agreement or such other time as may be
mutually agreed upon, also subject to the settlement of transactions in
progress. The Manager may not assign this agreement without the Client's prior
consent.
IN WITNESS WHEREOF, the parties hereto have executed an delivered this
Agreement as of the date first above written.
MERRILL LYNCH LIFE INSURANCE COMPANY
By: /s/ BARRY G. SKOLNICK
------------------------------------------
Barry G. Skolnick
Senior Vice President
Date of Execution: August 30, 1991
--------------------
MERRILL LYNCH ASSET MANAGEMENT, INC.
By: /s/
-----------------------------------------
Senior Vice President
Date of Execution: August 30, 1991
----------------------
-6-
STATEMENT OF
INVESTMENT POLICY AND GUIDELINES
FOR THE MLIG INVESTMENT PORTFOLIOS
I. Investment Goal
Merrill Lynch Insurance Group policy regarding investments supporting its
insurance in force is currently, and will remain, one of maximizing value
for its policyholders and equity owners, consistent with concern for the
safety of investments over the long and short term.
MLIG Investment Management group will pursue this objective by allocating
the policy premiums and the investment income among a broad array of asset
types and asset classes and by choosing appropriate investment management
corporations to manage such investments.
Assets will be segregated into individual portfolios, so that the
investments within each such portfolio are optimal to support the
individual product line, and so as to satisfy all legal and regulatory
requirements.
The MLIG Investment Management group will set portfolio policies that
govern such investments; set appropriate risk levels, normal asset mixes
and the ranges within which the portfolio managers can deviate from those
sector levels or risk measures. The MLIG Investment Management group will
take efforts to hedge away any excess risks beyond the tolerance levels, so
that the portfolios achieve the desired results, while staying within the
appropriate risk parameters.
In addition, the MLIG Investment Management group will closely monitor the
performance of the portfolio managers to ensure that there is appropriate
asset/liability match, and that the actions of the portfolio managers are
commensurate with maximizing the value of owners' equity.
The MLIG Investment Management group will continue to play an active role
in ensuring that the risks and rewards of all available investment choices
are fully factored into the design and pricing of new MLIG products.
II. Portfolio Risk Levels
A major objective in investment management is to have necessary and
sufficient assets to satisfy insurance liabilities at all times.
The investment risks in meeting such an objective can be categorized as
either interest rate risk (duration, convexity and volatility) or credit
risk (default and yield spread risk).
Managing interest rate risk remains one of the key functions of the MLIG
Investment Management group. Significant changes in interest rates, the
shape of the yield curve or in interest rate volatility can have pronounced
impact on the assets of the insurance company. "Immunizing" the insurance
company's wealth against substantial shifts in interest rates therefore
remain a major objective.
Since MLIG insurance products are "customized" liabilities, the Investment
Management group will periodically meet with the actuaries to assess the
key risk attributes of the liabilities (i.e. duration, convexity) of the
MLIG products, the underlying cash flows of the liabilities and the
sensitivity of the liability market values to changes in interest rates
(both parallel and non-parallel yield curve shifts).
These liability risk measures will be updated monthly, reflecting the
influx of new business and the aging of old policies. Such information
will be provided to the appropriate investment managers by the MLIG
Investment Management Group on a monthly basis.
The risk parameters (i.e. duration and convexity) for the assets will be
established in accordance with the same measures for liabilities, so that
under normal conditions changes in interest rates will have offsetting
impact on the firm's assets and liabilities.
Portfolio managers, however, may be allowed to deviate from the risk
guidelines, depending on their interest rate outlook and yield curve
perspective. Deviations beyond +/-1 of the effective duration, however,
require the approval of the Investment Committee and the involvement of the
Investment Management group in adequately hedging the interest rata risk.
Credit risk is to be controlled by adhering to the sector exposure in
accordance with the guidelines established for various asset classes. The
portfolio managers, however, may deviate from those norms based on their
relative value perspective, subject to maximum limits imposed by the
following portfolio guidelines.
III. Asset Classes/Instruments
Federal, State and other local laws that govern insurance companies
stipulate "eligible investments" for insurance companies. Not withstanding
anything listed below, those laws take precedence in what may be termed as
viable investment alternatives for the insurance company assets:
In general, portfolio managers can invest in following assets subject to
limitations listed in following paragraphs:
-2-
- Short-term instruments including Certificates of Deposits, Commercial
Paper, Bankers Acceptances, Medium-Term Notes, Euro CDs, Treasury
Bills, Repurchase and Reverse Repurchase agreements
- U.S. Treasury and Agency debt obligations
- Mortgage-backed securities (including collateralized mortgage
obligations) and Asset-Backed Securities of any federal agency or
private issuers.
- Both publicly- and privately-placed Corporate Debt Securities,
including convertible bonds, of Domestic, Euro and Foreign issuers
- Equity securities including preferred stocks, stock warrants and
equity options.
- Equity and fixed-income derivative securities, including futures,
options, options on futures, interest rate caps, floors and index-
linked securities.
- Swap agreements including interest rate, currency and derivative swap
products.
- Commercial mortgages including equity interest in real properties.
IV. Limitations of Investments
Portfolio managers will be allowed to invest in following asset classes,
subject to certain limitations as set forth below. Size limitations apply
to individual issuers in aggregate, irrespective of the differences among
individual issues of the same issuer or their seniority in claims.
A. Securities issued by the United States Treasury or an agency of the
United States Government which are backed by the full faith and credit
of the United States Government in any amount are authorized.
B. Mortgage-backed securities issued by the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage Association or the
Government National Mortgage Association in any amount are authorized.
C. Mortgage-backed securities collateralized by single family residential
mortgage loans (i.e., collateralized mortgage obligations, private
participations) shall conform to the following size limits per issuer
as rated by either Moodys or Standard and Poors.
Rating Maximum per Issuer
______ __________________
AAA $100 Million
-3-
AA $ 75 Million
A $ 50 Million
BAA $ 25 Million
Federally sponsored agencies' REMIC CMOs, however, are not subject to
such size limits.
D. Interest rate sensitive derivative mortgage-backed securities such as
Interest-Only and Principal-Only securities (IO/PO) or residual CMO
tranches shall conform to a size limit per issuer of $50 million and
shall in no case exceed 5% of the book value of the portfolio.
E. Commercial mortgages may be included, not exceeding a total of $500
million. No single mortgage shall exceed $10 million without prior
authorization of the Investment Committee. Investments in undeveloped
or under-developed properties, investments where the LTV (loan-to-
value) ratio exceeds 80% or investments where the occupancy rate is
less then 75% also require the explicit prior approval of the
Investment Committee.
F. Securities collateralized by other assets (credit cards, auto loans,
mobile homes, and other loans or receivables) may be purchased only if
investment grade. Per issuer maximums shall conform to those in place
for investment grade securities.
G. Investment grade corporate bond size limits per issuer are as follows:
Rating Maximum per Issuer
______ __________________
AAA $100 Million
AA $ 75 Million
A $ 50 Million
BAA $ 25 Million
H. Non-investment grade bond size limits are as follows:
Rating Maximum per Issuer
______ __________________
BB $ 8 Million
B and lower $ 5 Million
The percentage of bonds below investment grade should be targeted to
be maintained at a level below 10% of the book value of the portfolio.
I. Private placements may be included, not exceeding a total of $2
billion. Per-issuer maximums shall conform to those in place for
investment grade and non-investment grade holdings.
-4-
J. Investments in Convertible bonds or other forms of equity
participation are allowed subject to a maximum of $100 million.
Individual investments in excess of $5 million require prior approval
of the Investment Committee.
K. Investments in International bonds, Currencies or Swaps are allowed
subject a maximum of $250 million. Individual investments in excess
of $10 million require prior approval of the Investment Committee.
L. Investments in Financial Futures, Options, Options on Futures,
Interest rate Caps or Floors are allowed for hedging purposes only,
subject to guidelines approved by the Investment Committee.
M. Investments with durations longer than 10 years, or those whose
durations change by more than 50% for 200 basis point change in
interest rates in either direction require notification to the
Investment Committee.
N. Notwithstanding the above guidelines, all investments will comply with
the appropriate State and other legal regulations.
V. Operating Guidelines
In order to comply with the Portfolio Guidelines and to achieve
efficiencies in controlling the investment function, the following
operating guideline will apply to all portfolio managers.
A. Available funds must be promptly invested. This normally means two
weeks, with the exceptions of situations where securities are
purchased with advance settlement dates.
B. Trades must be reported to MLIG no later than the next business day
following the day the trade is made.
C. Mortgage security purchases shall in all aspects qualify as good
delivery under Public Security Association standards.
D. The investment managers will notify MLIG of any changes in rating of
MLIG holdings by established rating agencies, on a monthly basis.
E. Quarterly review shall be conducted by investment managers
investigating all Watch List issues for continued credit worthiness.
All other credit positions shall be reviewed manually or as
circumstances dictate.
-5-
F. All portfolios will be managed with the objective of asset/liability
duration and convexity within previously agreed upon bounds.
VI. Hedging interest rate risks
In addition to interest rate risks of the asset portfolios, certain MLIG
products may have embedded options (such as guaranteed renewal rates) that
may expose MLIG to significant changes interest rates.
To hedge the risks of the overall asset portfolio and those inherent in
MLIG products, the MLIG Investment Management group will, from time to
time, be involved in hedging programs using both exchange-traded and over-
the-counter options, futures, options on futures, interest rate caps or
floors in sizes approved by the Investment Committee.
The hedges will be reviewed by the Investment Committee periodically for
its intended purpose and its cost effectiveness.
VII. Performance Measurement
The true gauge of the performance of the insurance portfolios should be its
periodic total return, that implicitly and fairly accounts for all the
risks assumed by the portfolio managers. (While yield enhancement is an
important component of successful portfolio management, it is not a true
measure of investment performance.)
Total returns will be measured on a time weighted basis (since portfolio
managers have no control over the timing of cash inflows and outflows) and
will include capital appreciation, paydown return and income return for the
period.
All portfolios will be marked-to-market at the end of each month, and total
returns will be computed for the month. (Monthly returns will be "chain-
linked" to calculate quarterly and annual total return performance)
The total return performance of the asset portfolios will then be measured
against a benchmark index, which would reflect the risk and return
characteristics of the liabilities.
The benchmark index will be created by the Investment Management group with
the help of MLIG actuaries and the investment managers, and will be
reviewed monthly to ensure that it continues to reflect the risk and return
characteristics of the firm's liabilities.
VIII. Reporting
-6-
Detailed analysis of the periodic total returns and risk attributes (i.e.
duration, convexity etc.) of each portfolio and the overall insurance
investment portfolio will be made available through a performance
attribution report for management reporting by the MLIG Investment Group
each month.
In addition, the following periodic meetings will be scheduled to monitor
investment activities of the investment managers.
A. Quarterly Portfolio Status Update
Four conferences per year will be held to review portfolio structure
(interest rate risk, sector diversification etc.), investment
strategy, transaction and portfolio performance.
B. Quarterly Credit Status Update
Four conferences per year will be held to review appropriate financial
and operating data on each credit Watch List issue.
C. Other Reporting as Required
Brief summaries stating opinion about continued credit worthiness and
outlook for an issuer, whenever holding a position in this company
becomes questionable.
-7-
EX-99.B8D
12
EXHIBIT (8)(D)
EXHIBIT (b)(8)(d)
A G R E E M E N T
AGREEMENT, dated as of November 1, 1991, between Merrill Lynch
----------
Variable Series Fund, Inc., a Maryland corporation (the "Company"), and Merrill
Lynch Life Insurance Company, a State of Arkansas corporation ("Merrill Lynch
Life").
WHEREAS, through Merrill Lynch Funds Distributor, Inc. (the
"Distributor"), the Company proposes to issue to Merrill Lynch Life shares of
the Common Stock of the Company's Reserve Assets Fund (the "Shares");
WHEREAS, it is anticipated that on any particular day on which the net
asset value per share of the Shares is determined, the net income of the Reserve
Assets Fund (the "Fund") may be negative; and
WHEREAS, if the net income of the Fund is negative, it may be
necessary to reduce the number of outstanding Shares and, accordingly, it may be
necessary for Merrill Lynch Life to return to the Company a certain number of
Shares held by it to effect such reduction;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto hereby agree:
1. The Company shall cause the Distributor to sell the Shares to
Merrill Lynch Life.
2. As long as it shall be the intention of the Company to
maintain the net asset value per share of the Fund at $1.00, on any day on which
(a) the net asset value per share of the Shares is determined, (b) Merrill Lynch
Asset Management, Inc. ("MLAM") determines, in the manner described in the then
current Prospectus of the Company (the "Prospectus"), that the net income of the
Fund on such day is negative, and (c) MLAM delivers a certificate to the
Transfer Agent (as defined in the Prospectus) setting forth the reduction in the
number of outstanding Shares to be effected as described in the Prospectus in
connection with such determination, Merrill Lynch Life agrees to return to the
Company its pro rata share of the number of Shares to be reduced and agrees
that, upon delivery of such certificate, (a) its ownership interest in the
Shares so to be returned shall immediately cease, (b) such Shares shall be
deemed to have been cancelled and to be no longer outstanding, and (c) all
rights in respect of such Shares shall cease.
3. It is hereby agreed that, notwithstanding that the
Distributor no longer sells Shares to Merrill Lynch Life, as long
as Merrill Lynch Life shall hold Shares, it shall be bound by the terms of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first above
written.
MERRILL LYNCH VARIABLE SERIES
FUNDS, INC.
By: /s/ ARTHUR ZEIKEL
--------------------------------
Arthur Zeikel
Attest:
/s/ MICHAEL J. HENNEWINKEL
- ------------------------------
Michael J. Hennewinkel
MERRILL LYNCH LIFE INSURANCE
COMPANY
By: /s/ BARRY G. SKOLNICK
--------------------------------
Barry G. Skolnick
Attest:
/s/ GRETA L. ULMER
- ------------------------------
Greta L. Ulmer
-2-
EX-99.B8E
13
EXHIBIT (8)(E)
EXHIBIT (b)(8)(e)
A G R E E M E N T
AGREEMENT, dated as of November 1, 1991, between Merrill Lynch
Variable Series Fund, Inc., a Maryland corporation (the "Company"), and Merrill
Lynch Life Insurance Company, a State of Arkansas corporation ("Merrill Lynch
Life").
WHEREAS, through Merrill Lynch Funds Distributor, Inc. (the
"Distributor"), the Company proposes to issue to Merrill Lynch Life shares of
the Common Stock of the Company's Domestic Money Market Fund (the "Shares");
WHEREAS, it is anticipated that on any particular day on which the net
asset value per share of the Shares is determined, the net income of the
Domestic Money Market Fund (the "Fund") may be negative; and
WHEREAS, if the net income of the Fund is negative, it may be
necessary to reduce the number of outstanding Shares and, accordingly, it may be
necessary for Merrill Lynch Life to return to the Company a certain number of
Shares held by it to effect such reduction;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto hereby agree:
1. The Company shall cause the Distributor to sell the Shares to
Merrill Lynch Life.
2. As long as it shall be the intention of the Company to
maintain the net asset value per share of the Fund at $1.00, on any day on which
(a) the net asset value per share of the Shares is determined, (b) Merrill Lynch
Asset Management, Inc. ("MLAM") determines, in the manner described in the then
current Prospectus of the Company (the "Prospectus"), that the net income of the
Fund on such day is negative, and (c) MLAM delivers a certificate to the
Transfer Agent (as defined in the Prospectus) setting forth the reduction in the
number of outstanding Shares to be effected as described in the Prospectus in
connection with such determination, Merrill Lynch Life agrees to return to the
Company its pro rata share of the number of Shares to be reduced and agrees
that, upon delivery of such certificate, (a) its ownership interest in the
Shares so to be returned shall immediately cease, (b) such Shares shall be
deemed to have been cancelled and to be no longer outstanding, and (c) all
rights in respect of such Shares shall cease.
3. It is hereby agreed that, notwithstanding that the
Distributor no longer sells Shares to Merrill Lynch Life, as long
as Merrill Lynch Life shall hold Shares, it shall be bound by the terms of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the day and year first above
written.
MERRILL LYNCH VARIABLE SERIES
FUNDS, INC.
By: /s/ ARTHUR ZEIKEL
-----------------------------------
Arthur Zeikel
Attest:
/s/ MICHAEL J. HENNEWINKEL
--------------------------------
Michael J. Hennewinkel
MERRILL LYNCH LIFE INSURANCE
COMPANY
By: /s/ BARRY G. SKOLNICK
-----------------------------------
Barry G. Skolnick
Attest:
/s/ GRETA L. ULMER
----------------------------
Greta L. Ulmer
-2-
EX-99.B8F
14
EXHIBIT (8)(F)
EXHIBIT (b)(8)(f)
A G R E E M E N T
AGREEMENT dated November 1, 1991, by and between Merrill Lynch Life
----------
Insurance Company ("Merrill Lynch Life"), a State of Arkansas corporation, on
its own behalf and on behalf of its Merrill Lynch Life Variable Annuity Separate
Account A and Merrill Lynch Life Variable Annuity Separate Account B (the
"Variable Annuity Accounts"), and Merrill Lynch Variable Series Funds, Inc. (the
"Company").
W I T N E S S E T H:
WHEREAS, the Variable Annuity Accounts are separate accounts
established and maintained by Merrill Lynch Life pursuant to the laws of the
State of Arkansas for variable annuity contracts issued by Merrill Lynch Life;
WHEREAS, the Variable Annuity Accounts are registered as unit
investment trusts under the Investment Company Act of 1940 ("Investment Company
Act");
WHEREAS, the Company is registered as an open-end management company
organized as a series fund under the Investment Company Act;
WHEREAS, the Company is now comprised of ten funds but may add
additional funds;
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, Merrill Lynch Life intends to purchase shares of such funds as are
authorized by the Company on behalf of the Variable Annuity Accounts to fund
benefits under the variable annuity contracts;
NOW, THEREFORE, Merrill Lynch Life and the Company hereby agree as
follows:
1. Merrill Lynch Life shall pay for the costs of printing the
Company's semi-annual and annual shareholder reports, registration statements,
prospectuses and statements of additional information.
2. On each day on which the net asset value of the shares of any
portfolio of the Company is required to be calculated pursuant to the
requirements of the Investment Company Act, the Company shall provide Merrill
Lynch Life with the net asset values of such funds by 5:00 p.m. (New York time).
The Company shall also provide Merrill Lynch Life with reports of dividends
declared for each portfolio, by 5:00 p.m. (New York time) on each day on which
a dividend is declared.
3. A redemption of the Company's shares shall be settled regular way.
4. This Agreement shall remain in effect until terminated by the
mutual written consent of the parties hereto .
5. This Agreement shall be subject to the provisions of the
Investment Company Act, the Securities Act of 1933 and the Securities Exchange
Act of 1934 and the rules, regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant, and the terms hereof shall be interpreted and
construed in accordance therewith.
6. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
MERRILL LYNCH LIFE INSURANCE COMPANY
By: /s/ BARRY G. SKOLNICK
--------------------------------
Barry G. Skolnick
Attest:
/s/ GRETA L. ULMER
- ----------------------------
Greta L. Ulmer
MERRILL LYNCH VARIABLE SERIES FUNDS,
INC.
By: /s/ ARTHUR ZEIKEL
--------------------------------
Arthur Zeikel
Attest:
/s/ MICHAEL J. HENNEWINKEL
-----------------------------
Michael J. Hennewinkel
-2-
EX-99.B8H
15
EXHIBIT (8)(H)
EXHIBIT (b)(8)(h)
REIMBURSEMENT AGREEMENT
Agreement, dated as of February 3, 1992 between Merrill Lynch
Investment Management, Inc., doing business as Merrill Lynch Asset Management,
("MLAM") and Merrill Lynch Life Agency, Inc. ("MLLA").
WHEREAS, MLAM is the investment adviser for Merrill Lynch Variable
Series Funds, Inc. (the "Fund"), a series fund presently consisting of ten
separate portfolios and which may consist of additional portfolios in the future
(the "Portfolios"); and
WHEREAS, shares of the Fund are held by various separate accounts to
fund benefits under variable annuity contracts issued by Family Life Insurance
Company, Merrill Lynch Life Insurance Co. and ML Life Insurance Co. of New York
(the "Contracts"); and
WHEREAS, MLLA is one of the principal distributors of the Contracts;
and
WHEREAS, MLAM and the Fund are parties to investment advisory
agreements with respect to the Portfolios which provide for an expense
limitation which, in general terms, requires that MLAM reimburse the Fund for
ordinary operating expenses to the extent required under the most restrictive
expense limitation set forth in state securities laws or regulations thereunder
(the "Investment Advisory Agreements"); and
WHEREAS, MLLA and MLAM desire to further limit such ordinary operating
expenses of the present Portfolios of the Fund and Portfolios which may be
created in the future;
NOW, THEREFORE, in consideration of the premises and the mutual
promises and covenants hereinafter set forth, it is hereby agreed that:
1. Commencing on February 10, 1992, MLLA shall:
a. reimburse the Fund with respect to each Portfolio in an amount
equal to the amount by which the aggregate operating expenses of such Portfolio
during such period less interest, taxes, brokerage fees and commissions and
extraordinary charges such as litigation costs during such period exceed 1.25%
of the average daily net assets of such Portfolio; and
b. indirectly reimburse the Fund, by reimbursing MLAM, with
respect to any amounts MLAM is required to pay and does pay to the Fund by
reduction of its fee pursuant to the expense limitation provisions of the
Investment Advisory Agreement.
2. This Agreement may not be amended, modified or terminated except
pursuant to a writing executed on behalf of each of the parties hereto.
MERRILL LYNCH INVESTMENT MANAGEMENT, INC.
By: /s/ TERRY K. GLENN
--------------------------------------
Terry K. Glenn
MERRILL LYNCH LIFE AGENCY, INC.
By: /s/ WILLIAM A. WILDE
--------------------------------------
William A. Wilde
-2-
EX-99.B8J
16
EXHIBIT (8)(J)
EXHIBIT (8)(j)
FORM as of 12-4-96
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made as of the ___ day of ____________, 1996, between
MERRILL LYNCH VARIABLE SERIES FUNDS, INC., an open-end management investment
company organized as a Maryland corporation (the "Fund"), and MERRILL LYNCH LIFE
INSURANCE COMPANY, a life insurance company organized under the laws of the
state of Arkansas (the "Company"), on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A as attached
hereto, as such schedule may be amended from time to time (the "Accounts").
W I T N E S S E T H:
--------------------
WHEREAS, the Fund has an effective registration statement with the
Securities and Exchange Commission to register itself as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and to register the offer and sale of its shares under the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Fund desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Fund (the "Participating Insurance
Companies"); and
WHEREAS, Merrill Lynch Funds Distributors, Inc. (the "Underwriter") 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"),
is a member in good standing of The National Association of Securities Dealers,
Inc. (the "NASD") and acts as principal underwriter of the shares of the Fund;
and
WHEREAS, the capital stock of the Fund is divided into several series of
shares, each series representing an interest in a particular managed portfolio
of securities and other assets; and
WHEREAS, the several series of shares of the Fund offered by the Fund to
the Company and the Accounts are set forth on Schedule B attached hereto (each,
a "Portfolio," and, collectively, the "Portfolios"); and
1
FORM as of 12-4-96
WHEREAS, the Fund has received an order from the SEC granting Participating
Insurance Companies and their separate accounts exemptions from the provisions
of sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and rules 6e-2(b) (15)
and 6e-3(T) (b) (15) thereunder, to the extent necessary to permit shares of the
Fund to be sold to and held by variable annuity and variable life insurance
separate accounts of both affiliated and unaffiliated life insurance companies
and certain qualified pension and retirement plans (the "Shared Fund Exemptive
Order");
WHEREAS, Merrill Lynch Asset Management, L.P. ("MLAM") is duly registered
as an investment adviser under the Investment Advisers Act of 1940, as amended,
and any applicable state securities law, and acts as the Fund's investment
adviser and
WHEREAS, the Company has registered or will register under the 1933 Act
certain variable life insurance policies and/or variable annuity contracts
funded or to be funded through one or more of the Accounts (the "Contracts");
and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios (the "Shares") on behalf of the Accounts to fund the Contracts, and
the Fund intends to sell such Shares to the relevant Accounts at such Shares'
net asset value.
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE 1
Sale of the Fund Shares
-----------------------
1.1 Subject to Section 1.3 of this Agreement, the Fund shall cause the
Underwriter to make Shares of the Portfolios available to the Accounts at such
Shares' most recent net asset value provided to the Company prior to receipt of
such purchase order by the Fund (or the Underwriter as its agent), in accordance
with the operational procedures mutually agreed to by the Underwriter and the
Company from time to time and the provisions of the then-current prospectus of
the Fund. Shares of a particular Portfolio of the Fund shall be ordered in such
2
FORM as of 12-4-96
quantities and at such times as determined by the Company to be necessary to
meet the requirements of the Contracts. The Directors of the Fund (the
"Directors") may refuse to sell Shares of any Portfolio to any person (including
the Company and the Accounts), or suspend or terminate the offering of Shares of
any Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Directors acting in
good faith and in light of their fiduciary duties under federal and any
applicable state laws, necessary in the best interests of the shareholders of
such Portfolio.
1.2 Subject to Section 1.3 of this Agreement, the Fund will redeem any
full or fractional Shares of any Portfolio when requested by the Company on
behalf of an Account at such Shares' most recent net asset value provided to the
Company prior to receipt by the Fund (or the Underwriter as its agent) of the
request for redemption, as established in accordance with the operational
procedures mutually agreed to by the Underwriter and the Company from time to
time and the provisions of the then current-prospectus of the Fund. The Fund
shall make payment for such Shares in the manner established from time to time
by the Fund, but in no event shall payment be delayed for a greater period than
is permitted by the 1940 Act (including any Rule or order of the SEC
thereunder).
1.3 The Fund shall accept purchase and redemption orders resulting from
investment in and payments under the Contracts on each Business Day, provided
that such orders are received prior to 9:00 a.m. on such Business Day and
reflect instructions received by the Company from Contract holders in good order
prior to the time the net asset value of each Portfolio is priced in accordance
with its prospectus (such Portfolio's "valuation time") on the prior Business
Day. Any purchase or redemption order for Shares of any Portfolio received, on
any Business Day, after such Portfolio's valuation time on such Business Day
shall be deemed received prior to 9:00 a.m. on the next succeeding Business Day.
"Business Day" shall mean any day on which the New York Stock Exchange is open
for trading and on which the Fund calculates its net asset value pursuant to the
rules of the SEC. Purchase and redemption orders shall be provided by the
Company to the Underwriter as agent for the Fund in such written or electronic
form (including facsimile) as may be mutually acceptable to the Company and the
Underwriter. The Underwriter may reject purchase and redemption orders that are
not in proper form. In the event that the Company and the Underwriter agree to
use a form of written or electronic communication which is not capable of
recording the time, date and recipient of any communication and confirming good
transmission, the Company agrees that it shall be responsible (i) for confirming
with the Underwriter that any communication sent by the
3
FORM as of 12-4-96
Company was in fact received by the Underwriter in proper form, and (ii) for the
effect of any delay in the Underwriter's receipt of such communication in proper
form. The Fund and its agents shall be entitled to rely, and shall be fully
protected from all liability in acting, upon the instructions of the persons
named in the list of authorized individuals attached hereto as Schedule C, or
any subsequent list of authorized individuals provided to the Fund or its agents
by the Company in such form, without being required to determine the
authenticity of the authorization or the authority of the persons named therein.
1.4 Purchase orders that are transmitted to the Fund in accordance with
Section 1.3 of this Agreement shall be paid for no later than 2:00 p.m. on the
same Business Day that the Fund receives notice of the order. Payments shall be
made in federal funds transmitted by wire. In the event that the Company shall
fail to pay in a timely manner for any purchase order validly received by the
Underwriter on behalf of the Fund pursuant to Section 1.3 of this Agreement
(whether or not such failure is the fault of the Company), the Company shall
hold the Fund harmless from any losses reasonably sustained by the Fund as the
result of acting in reliance on such purchase order.
1.5 Issuance and transfer of the Fund's Shares will be by book entry only.
Stock certificates will not be issued to the Company or to any Account. Shares
ordered from the Fund will be recorded in the appropriate title for each
Account.
1.6 The Fund shall furnish prompt notice to the Company of any income,
dividends or capital gain distribution payable on Shares of any Portfolio. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's Shares in additional Shares of
that Portfolio. The Fund shall notify the Company of the number of Shares so
issued as payment of such dividends and distributions.
1.7 The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
such net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available by 6:30 p.m., New York time.
1.8 The Company agrees that it will not take any action to operate any
Account as a management investment company under the 1940 Act without the Fund's
and the Underwriter's prior written consent.
4
FORM as of 12-4-96
1.9 The Fund agrees that its Shares will be sold only to Participating
Insurance Companies and their separate accounts. No Shares of any Portfolio will
be sold directly to the general public. The Company agrees that Fund Shares will
be used only for the purposes of funding the Contracts and Accounts listed in
Schedule A, as such schedule may be amended from time to time.
1.10 The Fund agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and conflicts
of interest corresponding to those contained in Section 2.10 and Article 4 of
this Agreement.
1.11 So long as it shall be the intention of the Fund to maintain the net
asset value per share of any Portfolio at $1.00, on any day on which (a) the net
asset value per share of the Shares is determined, (b) MLAM determines, in the
manner described in the then-current prospectus of the Fund, that the net
income of such Portfolio on such day is negative, and (c) MLAM delivers a
certificate to the Company setting forth the reduction in the number of
outstanding Shares to be effected as described in the then-current prospectus of
the Fund in connection with such determination, the Company, on behalf of itself
and the Accounts, agrees to return to the Fund its pro rata share of the number
of Shares to be reduced and agrees that, upon delivery by MLAM to the Company of
such certificate, (a) the Company's ownership interest in the Shares so to be
returned shall immediately cease, (b) such Shares shall be deemed to have been
canceled and to be no longer outstanding, and (c) all rights in respect of such
Shares shall cease.
ARTICLE 2
Obligation of the Parties
-------------------------
2.1 The Fund shall prepare and be responsible for filing with the SEC and
any state securities regulators requiring such filing, all shareholder reports,
notices, proxy materials (or similar materials such as voting instruction
solicitation materials), prospectuses and statements of additional information
of the Fund. The Fund shall bear the costs or registration and qualification of
its Shares, preparation and filing of the documents listed in this Section 2.1
and all taxes to which an issuer is subject on the issuance and transfer of its
shares.
2.2 At least annually, the Fund or its designee shall provide the Company,
free of charge, with as many copies of the current prospectus (describing only
the Portfolios) for the
5
FORM as of 12-4-96
Shares as the Company may reasonably request for distribution to existing
Contract owners whose Contracts are funded by such Shares. The Fund or its
designee shall provide the Company, at the Company's expense, with as many
copies of the current prospectus for the Shares as the Company may reasonably
request for distribution to prospective purchasers of Contracts. If requested
by the Company in lieu thereof, the Fund or its designee shall provide such
documentation (including a "camera ready" copy of the new prospectus as set in
type or, at the request of the Company, a diskette in the form sent to the
financial printer) and other assistance as is reasonably necessary in order for
the parties hereto once each year (or more frequently if the prospectus for the
Shares is supplemented or amended) to have the prospectus for the Contracts and
the prospectus for the Shares printed together in one document; the expenses of
such printing to be borne by the Company. In the event that the Company
requests that the Fund or its designee provide the Fund's prospectus in a
"camera ready" or diskette format, the Fund shall be responsible solely for
providing the prospectus in the format in which it is accustomed to formatting
prospectuses and shall bear the expense of providing the prospectus in such
format (e.g., typesetting expenses), and the Company shall bear the expense of
adjusting or changing the format to conform with any of its prospectuses.
2.3 The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Fund or its
designee. The Fund or its designee, at its expense, shall print and provide
such statement of additional information to the Company (or a master of such
statement suitable for duplication by the Company) for distribution to any owner
of a Contract funded by the Shares. The Fund or its designee, at the Company's
expense, shall print and provide such statement to the Company (or a master of
such statement suitable for duplication by the Company) for distribution to a
prospective purchaser who requests such statement.
2.4 The Fund or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Fund's proxy
materials, reports to Shareholders and other communications to Shareholders in
such quantity as the Company shall reasonably require for distribution to
Contract owners.
2.5 The Company shall furnish, or cause to be furnished, to the Fund or its
designee, a copy of each prospectus for the Contracts or statement of additional
information for the Contracts in which the Fund or its investment adviser is
named prior to the filing of such document with the SEC. The Company shall
furnish, or shall cause to be furnished, to the Fund or its designee, each piece
of sales literature or other promotional material in which the Fund or its
investment
6
FORM as of 12-4-96
adviser is named, at least five Business Days prior to its use. No such
prospectus, statement of additional information or material shall be used if the
Fund or its designee reasonably objects to such use within five Business Days
after receipt of such material.
2.6 The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund or its investment
adviser in connection with the sale of the Contracts other than information or
representations contained in and accurately derived from the registration
statement or prospectus for the Fund Shares (as such registration statement and
prospectus may be amended or supplemented from time to time), reports of the
Fund, Fund-sponsored proxy statement, or in sales literature or other
promotional material approved by the Fund or its designee, except with the
written permission of the Fund or its designee.
2.7 The Fund shall not give any information or make any representations or
statements on behalf of the Company or concerning the Company, the Accounts or
the Contracts other than information or representations contained in and
accurately derived from the registration statement or prospectus for the
Contracts (as such registration statement and prospectus may by amended or
supplemented from time to time), or in materials approved by the Company for
distribution including sales literature or other promotional materials, except
with the written permission of the Company.
2.8 The Company shall amend the registration statement of the Contracts
under the 1933 Act and registration statement for each Account under the 1940
Act from time to time as required in order to effect the continuous offering of
the Contracts or as may otherwise be required by applicable law. The Company
shall register and qualify the Contracts for sale to the extent required by
applicable securities laws and insurance laws of the various states.
2.9 The Company shall be responsible for assuring that any prospectus
offering a Contract that is a life insurance contract where it is reasonably
probable that such Contract would be a "modified endowment contract," as that
term is defined in Section 7702A of the Internal Revenue Code of 1986, as
amended (the "Code"), will identify such Contract as a modified endowment
contract (or policy).
2.10 Solely with respect to Contracts and Accounts that are subject to the
1940 Act, so long as, and to the extent that, the SEC interprets the 1940 Act to
require pass-through voting
7
FORM as of 12-4-96
privileges for variable policyowners: (a) the Company will provide pass-through
voting privileges to owners of Contracts - or policies whose cash values are
invested, through the Accounts, in Shares of the Fund; (b) the Fund shall
require all Participating Insurance Companies to calculate voting privileges in
the same manner and the Company shall be responsible for assuring that the
Accounts calculate voting privileges in the manner established by the Fund; (c)
with respect to each Account, the Company will vote Shares of the Fund held by
the Account and for which no timely voting instructions from Contract or
policyowners are received, as well as Shares held by the Account that are owned
by the Company for its general account, in the same proportion as the Company
votes Shares held by the Account for which timely voting instructions are
received from Contract - or policyowners; and (d) the Company and its agents
will in no way recommend or oppose or interfere with the solicitation of proxies
for Fund Shares held by Contract owners without the prior written consent of the
Fund, which consent may be withheld in the Fund's sole discretion.
ARTICLE 3
Representations and Warranties
------------------------------
3.1 The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of Arkansas and
has established each Account as a segregated asset account under such law on the
date set forth in Schedule A.
3.2 The Company represents and warrants that it has registered or, prior
to any issuance or sale of the Contracts, will register each Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts.
3.3 The Company represents and warrants that the issuance of the Contracts
will be registered under the 1933 Act prior to any issuance or sale of the
Contracts; the Contracts will be issued and sold in compliance in all material
respects will all applicable federal and state laws; and the sale of the
Contracts shall comply in all material respects with state insurance suitability
requirements.
3.4 The Company represents and warrants that, provided the Fund's
representations and warranties made pursuant to Section 3.7 of this Agreement
are true, the Contracts are currently and at the time of issuance will be
treated as annuity contracts or life insurance policies, whichever is
appropriate, under applicable provisions of the Code. The Company shall make
8
FORM as of 12-4-96
every effort to maintain such treatment and shall notify the Fund and the
Underwriter immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
3.5 The Fund represents and warrants that it is duly organized and validly
existing under the laws of the State of Maryland.
3.6 The Fund represents and warrants that the sale of the Fund Shares
offered and sold pursuant to this Agreement will be registered under the 1933
Act and that the Fund is registered under the 1940 Act. The Fund shall use its
best efforts to amend its registration statement under the 1933 Act and the 1940
Act from time to time as required in order to affect the continuous offering of
its shares. The Company shall advise the Fund of any state requirements to
register Shares for sale in such states. If the Fund determines registration is
appropriate, the Fund shall use its best efforts to register and qualify its
Shares for sale in accordance with the laws of all fifty states, the District of
Columbia, Virgin Islands and Puerto Rico and such other jurisdictions reasonably
requested by the Company.
3.7 The Fund represents and warrants that the investments of each
Portfolio will comply with Subchapter M of the Code and the diversification
requirements set forth in section 817(h) of the Code and the rules and
regulations thereunder.
9
FORM as of 12-4-96
ARTICLE 4
Potential Conflicts
-------------------
4.1 The parties acknowledge that the Fund's Shares may be made available
for investment to other Participating Insurance Companies. In such event, the
Directors will monitor the Fund for the existence of any material irreconcilable
conflict between the interests of the contract owners of all Participating
Insurance Companies. An irreconcilable material conflict may arise for a
variety of reasons, including: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter ruling, no-
action or interpretative letter, or any similar action by insurance, tax, or
securities decision in any relevant proceeding; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Directors shall promptly inform the
Company if they determine that an irreconcilable material conflict exists and
the implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Directors. The Company will assist the
Directors in carrying out their responsibilities under the Shared Fund Exemptive
Order by providing the Directors with all information reasonably necessary for
the Directors to consider any issues raised including, but not limited to,
information as to a decision by the Company to disregard Contract owner voting
instructions.
4.3 If it is determined by a majority of the Directors, or a majority of
the Fund's Directors who are not affiliated with Merrill Lynch Asset Management,
L.P. or the Underwriter (the "Disinterested Directors"), that a material
irreconcilable conflict exists that affects the interests of Contract owners,
the Company shall, in cooperation with other Participating Insurance Companies
whose contract owners are also affected, at its expense and to the extent
reasonably practicable (as determined by the Directors) take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict, which
steps could include: (a) withdrawing the assets allocable to some or all of the
Accounts from the Fund or any Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another Portfolio of
the Fund, or submitting the question of whether or not such segregation should
be implemented to a vote of all affected Contracts owners and, as appropriate,
segregating
10
FORM as of 12-4-96
the assets of any appropriate group (i.e., annuity contract owners, life
insurance contract owners, or variable contract owners of one or more
Participating Insurance Companies) that votes in favor of such segregation, or
offering to the affected Contract owners the option of making such a change; and
(b) establishing a new registered management investment company or managed
separate account.
4.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's or
Accounts' investment in the Fund and terminate this Agreement with respect to
such Account(s); provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the Disinterested Directors. Any such
withdrawal and termination must take place within 30 days after the Fund gives
written notice that this provision is being implemented, subject to applicable
law but in any event consistent with the terms of the Shared Fund Exemptive
Order. Until the end of such 30 day- period, the Fund shall continue to accept
and implement orders by the Company for the purchase and redemption of Shares of
the Fund.
4.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's (or Accounts') investment in the Fund and terminate this
Agreement with respect to such Account(s) within 30 days after the Fund informs
the Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the Disinterested
Directors. Until the end of such 30- day period, the Fund shall continue to
accept and implement orders by the Company for the purchase and redemption of
Shares of the Fund.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a majority
of the Disinterested Directors shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Company be required to establish a new funding medium for the Contracts if
an offer to do so has been declined by vote of a majority of Contract owners
materially adversely affected by the irreconcilable material conflict. In the
11
FORM as of 12-4-96
event that the Directors determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
affected Account's (or Accounts') investment in the Fund and terminate this
Agreement with respect to such Account(s) within 30 days after the Directors
inform the Company in writing of the foregoing determination; provided, however,
that such withdrawal and termination shall, subject to applicable law but in any
event consistent with the terms of the Shared Fund Exemptive Order, be limited
to the extent required by any such material irreconcilable conflict as
determined by a majority of the Disinterested Directors.
4.7 The Company shall at least annually submit to the Directors such
reports, materials or data as the Directors may reasonably request so that the
Directors may fully carry out the duties imposed upon them by the Shared Fund
Exemptive Order, and said reports, materials and data shall be submitted more
frequently if deemed appropriate by the Directors.
4.8 If and to the extent that (a) Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the application for the Shared Fund Exemptive Order) on
terms and conditions materially different from those contained in the
application for the Shared Fund Exemptive Order, or (b) the Shared Fund
Exemptive Order is granted on terms and conditions that differ from those set
forth in this Article 4, then the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary (a) to
comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to
the extent such rules are applicable, or (b) to conform this Article 4 to the
terms and conditions contained in the Shared Fund Exemptive Order, as the case
may be.
ARTICLE 5
Indemnification
---------------
5.1 Indemnification by the Company. The Company agrees to indemnify and
------------------------------
hold harmless the Fund and each of its Directors, officers, employees and agents
and each person, if any, who controls the Fund within the meaning of Section 15
of the 1933 Act (collectively the "Indemnified Parties" for purposes of this
Article 5) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith)
12
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(collectively, "Losses"), to which such Indemnified Parties may become subject
under any statute or regulation, or common law or otherwise, insofar as such
Losses:
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in a registration
statement or prospectus for the Contracts or in sales literature generated
or approved by the Company on behalf of the Contracts or Accounts (or any
amendment or supplement to any of the foregoing) (collectively, "Company
Documents" for the purposes of this Article 5), or arise out of or are
based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this indemnity shall not apply as to
any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was accurately derived
from written information furnished to the Company by or on behalf of the
Fund for use in Company Documents or otherwise for use in connection with
the sale of the Contracts or Shares; or
(b) arise out of or result from statements or representations (other
than statements or representations contained in and accurately derived from
Fund Documents (as defined in Section 5.2(a) below) or wrongful conduct of
the Company or persons under its control, with respect to the sale or
acquisition of the Contracts or Shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Fund Documents or the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading if such statement or omission was made in reliance upon and
accurately derived from written information furnished to the Fund by or on
behalf of the Company; or
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under the terms of
this Agreement; or
13
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(e) 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.
5.2 Indemnification by the Fund. The Fund agrees to indemnify and hold
---------------------------
harmless the Company and each of its directors, officers, employees and agents
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
Article 5) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Fund) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage liability or expense and reasonable legal counsel fees incurred in
connection therewith) (collectively, "Losses"), to which such Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or alleged
untrue statement of any material fact contained in the registration
statement or prospectus for the Fund (or any amendment or supplement
thereto) or in sales literature approved by the Fund (but solely with
respect to statements regarding the Fund), (collectively, "Fund Documents"
for the purposes of this Article 5), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement
or omission was made in reliance upon and was accurately derived from
written information furnished to the Fund by or on behalf of the Company
for use in Fund Documents or otherwise for use in connection with the sale
of the Contracts or Shares; or
(b) arise out of or result from statement or representations (other
than statements or representations contained in and accurately derived from
Company Documents) or wrongful conduct of the Fund or persons under its
control, with respect to the sale or acquisition of the Contracts or
Shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Company Documents or the
omission
14
FORM as of 12-4-96
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon and accurately derived from
written information furnished to the Company by or on behalf of the Fund;
or
(d) arise out of or result from any failure by the Fund to provide
the services or furnish the materials required under the terms of this
Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Fund.
5.3 Neither the Company nor the Fund shall be liable under the
indemnification provisions of Section 5.1 or 5.2, as applicable, with respect to
any Losses incurred or assessed against any Indemnified Party to the extent such
Losses arise out of or result from such Indemnified Party's willful misfeasance,
bad faith or negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement.
5.4 Neither the Company nor the Fund shall be liable under the
indemnification provisions of Section 5.1 or 5.2, as applicable, with respect to
any claim made against an Indemnified Party unless such Indemnified Party shall
have notified the party against whom indemnification is sought in writing within
a reasonable time after the summons, or other first written notification, giving
information of the nature of the claim shall have been served upon or otherwise
received by such Indemnified Party (or after such Indemnified Party shall have
received notice of service upon or other notification to any designated agent),
but failure to notify the party against whom indemnification is sought of any
such claim or shall not relieve that party from any liability that it may have
to the Indemnified Party in the absence of Sections 5.1 and 5.2.
5.5 In case any such action is brought against the Indemnified Parties, the
indemnifying party shall be entitled to participate, at its own expense, in the
defense of such action. The indemnifying party also shall be entitled to assume
the defense thereof, with counsel reasonably satisfactory to the party named in
the action. After notice from the indemnifying party to the Indemnified Party
of an election to assume such defense, the Indemnified Party shall bear the
15
FORM as of 12-4-96
fees and expenses of any additional counsel retained by it, and the indemnifying
party will not be liable to the Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other than reasonable costs
of investigation.
16
FORM as of 12-4-96
ARTICLE 6
Termination
-----------
6.1 This Agreement may be terminated by either party for any reason by six
(6) months' advance written notice to the other party, and may be terminated by
either party pursuant to Sections 6.2 through 6.7 below upon written notice to
the other party.
6.2 This Agreement may be terminated at the option of the Fund upon
institution of formal proceedings against the Company by the NASD, the SEC, the
insurance department 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 the Account, the administration of the Contracts or the
purchase of the Shares, or an expected or anticipated ruling, judgment or
outcome that would, in the Fund's reasonable judgment, materially impair the
Company's ability to meet and perform the Company's obligations and duties
hereunder.
6.3 This Agreement may be terminated at the option of the Fund if the
Contracts cease to qualify as annuity contracts or life insurance policies, as
applicable, under the Code, or if the Fund reasonably believes that the
Contracts may fail to so qualify.
6.4 This Agreement may be terminated by the Fund, at its option, if the Fund
shall determine, in its sole judgment exercised in good faith, that either (1)
the Company shall have suffered a material adverse change in its business or
financial condition or (2) the Company shall have been the subject of material
adverse publicity that is likely to have a material adverse impact upon the
business and operations of either the Fund or the Underwriter.
6.5 This Agreement may be terminated at the option of the Company upon
institution of formal proceedings against the Fund by the NASD, the SEC, the
insurance department of any state, or any other regulatory body regarding the
Fund's duties under this Agreement or related to the sale of Fund shares or the
operation of the Fund, or an expected or anticipated ruling, judgment or outcome
that would, in the Company's reasonable judgment, materially impair the Fund's
ability to meet and perform the Fund's obligations hereunder.
6.6 This Agreement may be terminated at the option of the Company if the Fund
ceases to comply with Subchapter M of the Code, or Section 817(h) of the Code
and the rules and
17
FORM as of 12-4-96
regulations thereunder, or if the Company reasonably believes that the Fund may
fail to so comply.
6.7 This Agreement may be terminated by the Company, at its option, if the
Company shall determine, in its sole judgment exercised in good faith, that
either (1) the Fund shall have suffered a material adverse change in its
business or financial condition or (2) the Fund shall have been the subject of
material adverse publicity that is likely to have a material adverse impact upon
the business and operations of the Company.
6.8 Notwithstanding any termination of this Agreement pursuant to this
Article 6, the Fund and the Underwriter may, at the option of the Fund, continue
to make available additional Fund Shares for so long after the termination of
this Agreement as the Fund desires pursuant to the terms and conditions of this
Agreement as provided in Section 6.9 below, for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred to as
"Existing Contracts"). Specifically, without limitation, if the Fund or
Underwriter so elects to make additional Shares available, the owners of the
Existing Contracts or the Company, whichever shall have legal authority to do
so, shall be permitted to reallocate investments in the Fund, redeem investments
in the Fund and/or invest in the Fund upon the making of additional purchase
payments under the Existing Contracts.
6.9 In the event of a termination of this Agreement pursuant to this Article
6, the Fund and the Underwriter shall promptly notify the Company whether the
Underwriter and the Fund will continue to make Shares available after such
termination; if the Underwriter and the Fund will continue to make Shares so
available, the provisions of this Agreement shall remain in effect except for
Section 6.1 hereof and thereafter either the Fund or the Company may terminate
the Agreement, as so continued pursuant to this Section 6.9, upon prior written
notice to the other party, such notice to be for a period that is reasonable
under the circumstances but, if given by the Fund, need not be greater than six
months.
6.10 The provisions of Article 5 shall survive the termination of this
Agreement, and the provisions of Article 4 and Sections 2.4 and 2.10 shall
survive the termination of this Agreement so long as Shares of the Fund are held
on behalf of Contract owners in accordance with Section 6.8.
ARTICLE 7
Notices
-------
18
FORM as of 12-4-96
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:
Merrill Lynch Variable Series Funds, Inc.
c/o Merrill Lynch Asset Management, L.P.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Attention: General Counsel
19
FORM as of 12-4-96
If to the Company:
Merrill Lynch Insurance Group, Inc.
Administrative Offices
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Attention: Barry Skolnick, Esq.
ARTICLE 8
Miscellaneous
-------------
8.1 The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of New York, shall be subject
to the provisions of the 1933, 1934, and 1940 Acts, and the rules, regulations
and rulings thereunder, including such exemptions from those statutes, rules and
regulations as the SEC may grant and the terms hereof shall be interpreted and
construed in accordance therewith.
8.5 The parties to this Agreement acknowledge and agree that all liabilities
of the Fund arising, directly or indirectly, under this Agreement, of any and
every nature whatsoever, shall be satisfied solely out of the assets of the Fund
and that no Director, officer, agent, or holder of shares of beneficial interest
of the Fund shall be personally liable for any such liabilities.
8.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD, and
state insurance regulators) and
20
FORM as of 12-4-96
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.
8.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
8.8 The parties to this Agreement acknowledge and agree that this Agreement
shall not be exclusive in any respect.
8.9 Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the other party.
8.10 No provisions of this Agreement may be amended or modified in any manner
except by a written agreement properly authorized and executed by both parties.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers to
execute this Fund Participation Agreement as of the date and year first above
written.
MERRILL LYNCH LIFE INSURANCE COMPANY
By:
Name:
Title:
MERRILL LYNCH VARIABLE SERIES FUNDS, INC.
By:
Name:
21
FORM as of 12-4-96
Title:
22
FORM as of 12-4-96
Schedule A
Segregated Accounts of MERRILL LYNCH LIFE INSURANCE COMPANY
Participating in Portfolios of Merrill Lynch Variable Series Funds, Inc.
Name of Separate Account Date Established
- ------------------------
1
FORM as of 12-4-96
Schedule B
Portfolios of Merrill Lynch Variable Series Funds, Inc.
Offered to Segregated Accounts of MERRILL LYNCH LIFE INSURANCE COMPANY
1
FORM as of 12-4-96
Schedule C
Persons Authorized to Act on Behalf of MERRILL LYNCH LIFE INSURANCE COMPANY
---------------------------------------------------------------------------
The Fund, the Underwriter and their respective agents are authorized to
rely on instructions from the following individuals on behalf of MERRILL LYNCH
LIFE INSURANCE COMPANY on its own behalf and on behalf of each Account:
Name Signature
---- ---------
______________________________
______________________________
______________________________
1
EX-99.B8K
17
EXHIBIT (8)(K)
EXHIBIT (8)(k)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS
AND
NAME OF UNDERWRITER OF VARIABLE CONTRACTS AND POLICIES
TABLE OF CONTENTS
Description Page
- ----------- ----
Section 1. Available Funds...................................................2
1.1 Availability....................................................2
1.2 Addition, Deletion or Modification of Funds.....................2
1.3 No Sales to the General Public..................................2
Section 2. Processing Transactions...........................................2
2.1 Timely Pricing and Orders.......................................2
2.2 Timely Payments.................................................3
2.3 Applicable Price................................................3
2.4 Dividends and Distributions.....................................4
2.5 Book Entry......................................................4
Section 3. Costs and Expenses................................................4
3.1 General.........................................................4
3.2 Registration....................................................4
3.3 Other (Non-Sales-Related).......................................5
3.4 Other (Sales-Related)...........................................5
3.5 Parties To Cooperate............................................5
Section 4. Legal Compliance..................................................5
4.1 Tax Laws........................................................5
4.2 Insurance and Certain Other Laws................................8
4.3 Securities Laws.................................................8
4.4 Notice of Certain Proceedings and Other Circumstances...........9
4.5 Life Co. To Provide Documents; Information About AVIF..........10
4.6 AVIF To Provide Documents; Information About Life Co...........11
Section 5. Mixed and Shared Funding.........................................12
5.1 General........................................................12
5.2 Disinterested Directors........................................12
5.3 Monitoring for Material Irreconcilable Conflicts...............13
5.4 Conflict Remedies..............................................13
5.5 Notice to Life Co..............................................15
5.6 Information Requested by Board of Directors....................15
5.7 Compliance with SEC Rules......................................15
5.8 Other Requirements.............................................15
Section 6. Termination......................................................15
6.1 Events of Termination..........................................15
i
Description Page
- ----------- ----
6.2 Notice Requirement for Termination.............................16
6.3 Funds To Remain Available......................................17
6.4 Survival of Warranties and Indemnifications....................17
6.5 Continuance of Agreement for Certain Purposes..................17
Section 7. Parties To Cooperate Respecting Termination......................17
Section 8. Assignment.......................................................18
Section 9. Notices..........................................................18
Section 10. Voting Procedures...............................................19
Section 11. Foreign Tax Credits.............................................19
Section 12. Indemnification.................................................20
12.1 Of AVIF by Life Co. and Underwriter...........................20
12.2 Of Life Co. and Underwriter by AVIF..........................22
12.3 Effect of Notice..............................................24
12.4 Successors....................................................24
Section 13. Applicable Law..................................................24
Section 14. Execution in Counterparts.......................................25
Section 15. Severability....................................................25
Section 16. Rights Cumulative...............................................25
Section 17. Headings........................................................25
Section 18. Confidentiality.................................................25
Section 19. Trademarks and Fund Names.......................................26
Section 20. Parties to Cooperate............................................27
ii
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the ____ day of _________, 1996
("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"); ____________________________________________Life Insurance
Company, a [STATE] life insurance company ("LIFE COMPANY"), on behalf of itself
and each of its segregated asset accounts listed in Schedule A hereto, as the
parties hereto may amend from time to time (each, an "Account," and
collectively, the "Accounts"); and [NAME OF SEPARATE ACCOUNT UNDERWRITER], an
affiliate of LIFE COMPANY and the principal underwriter of the Contracts
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of nine separate series ("Series"), shares
("Shares") of each of which are registered under the Securities Act of 1933, as
amended (the "1933 Act") and are currently sold to one or more separate accounts
of life insurance companies to fund benefits under variable annuity contracts
and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto
as the Parties hereto may amend from time to time (each a "Fund"; reference
herein to "AVIF" includes reference to each Fund, to the extent the context
requires) available for purchase by the Accounts; and
WHEREAS, LIFE COMPANY will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts") as set forth on
Schedule A hereto, as the Parties hereto may amend from time to time, which
Contracts (hereinafter collectively, the "Contracts"), if required by applicable
law, will be registered under the 1933 Act; and
WHEREAS, LIFE COMPANY will fund the Contracts through the Accounts, each of
which may be divided into two or more subaccounts ("Subaccounts"; reference
herein to an "Account" includes reference to each Subaccount thereof to the
extent the context requires); and
WHEREAS, LIFE COMPANY will serve as the depositor of the Accounts, each of
which is registered as a unit investment trust investment company under the 1940
Act (or exempt therefrom), and the security interests deemed to be issued by the
Accounts under the Contracts will be registered as securities under the 1933 Act
(or exempt therefrom); and
1
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase Shares in one or more of the Funds
on behalf of the Accounts to fund the Contracts; and
WHEREAS, UNDERWRITER is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
Section 1. Available Funds
---------------------------
1.1 Availability.
------------
AVIF will make Shares of each Fund available to LIFE COMPANY for purchase
and redemption at net asset value and with no sales charges, subject to the
terms and conditions of this Agreement. The Board of Directors of AVIF may
refuse to sell Shares of any Fund to any person, or suspend or terminate the
offering of Shares of any Fund if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of the
Directors acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, such action is deemed in the best
interests of the shareholders of such Fund.
1.2 Addition, Deletion or Modification of Funds.
-------------------------------------------
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 No Sales to the General Public.
------------------------------
AVIF represents and warrants that no Shares of any Fund have been or will
be sold to the general public.
Section 2. Processing Transactions
-----------------------------------
2.1 Timely Pricing and Orders.
-------------------------
(a) AVIF or its designated agent will use its best efforts to provide LIFE
COMPANY with the net asset value per Share for each Fund by 5:30 p.m. Central
Time on each Business Day. As used herein, "Business Day" shall mean any day on
which (i) the New York Stock Exchange is open for regular trading, (ii) AVIF
calculates the Fund's net asset value, and (iii) LIFE COMPANY is open for
business.
2
(b) LIFE COMPANY will use the data provided by AVIF each Business Day
pursuant to paragraph (a) immediately above to calculate Account unit values and
to process transactions that receive that same Business Day's Account unit
values. LIFE COMPANY will perform such Account processing the same Business
Day, and will place corresponding orders to purchase or redeem Shares with AVIF
by 9:00 a.m. Central Time the following Business Day; provided, however, that
AVIF shall provide additional time to LIFE COMPANY in the event that AVIF is
unable to meet the 5:30 p.m. time stated in paragraph (a) immediately above.
Such additional time shall be equal to the additional time that AVIF takes to
make the net asset values available to LIFE COMPANY.
(c) With respect to payment of the purchase price by LIFE COMPANY and of
redemption proceeds by AVIF, LIFE COMPANY and AVIF shall net purchase and
redemption orders with respect to each Fund and shall transmit one net payment
per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value
information (as determined under SEC guidelines), LIFE COMPANY shall be entitled
to an adjustment to the number of Shares purchased or redeemed to reflect the
correct net asset value per Share. Any material error in the calculation or
reporting of net asset value per Share, dividend or capital gain information
shall be reported promptly upon discovery to LIFE COMPANY.
2.2 Timely Payments.
---------------
LIFE COMPANY will wire payment for net purchases to a custodial account
designated by AVIF by 1:00 p.m. Central Time on the same day as the order for
Shares is placed, to the extent practicable. AVIF will wire payment for net
redemptions to an account designated by LIFE COMPANY by 1:00 p.m. Central Time
on the same day as the Order is placed, to the extent practicable, but in any
event within five (5) calendar days after the date the order is placed in order
to enable LIFE COMPANY to pay redemption proceeds within the time specified in
Section 22(e) of the 1940 Act or such shorter period of time as may be required
by law.
2.3 Applicable Price.
----------------
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions under
Contracts (collectively, "Contract transactions") and that LIFE COMPANY receives
prior to the close of regular trading on the New York Stock Exchange on a
Business Day will be executed at the net asset values of the appropriate Funds
next computed after receipt by AVIF or its designated agent of the orders. For
purposes of this Section 2.3(a), LIFE COMPANY shall be the designated agent of
AVIF for receipt of orders relating to Contract transactions on each Business
Day and receipt by such designated agent shall constitute receipt by AVIF;
provided that AVIF receives notice of such orders by 9:00 a.m. Central Time on
the next following Business Day or such later time as computed in accordance
with Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by LIFE COMPANY will be
effected at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the order therefor, and such orders
will be irrevocable.
3
2.4 Dividends and Distributions.
---------------------------
AVIF will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to LIFE COMPANY of any income
dividends or capital gain distributions payable on the Shares of any Fund. LIFE
COMPANY hereby elects to reinvest all dividends and capital gains distributions
in additional Shares of the corresponding Fund at the ex-dividend date net asset
values until LIFE COMPANY otherwise notifies AVIF in writing, it being agreed by
the Parties that the ex-dividend date and the payment date with respect to any
dividend or distribution will be the same Business Day. LIFE COMPANY reserves
the right to revoke this election and to receive all such income dividends and
capital gain distributions in cash.
2.5 Book Entry.
----------
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to LIFE COMPANY. Shares ordered from AVIF will
be recorded in an appropriate title for LIFE COMPANY, on behalf of its Account.
Section 3. Costs and Expenses
------------------------------
3.1 General.
-------
Except as otherwise specifically provided herein, each Party will bear all
expenses incident to its performance under this Agreement.
3.2 Registration.
------------
(a) AVIF will bear the cost of its registering as a management investment
company under the 1940 Act and registering its Shares under the 1933 Act, and
keeping such registrations current and effective; including, without
limitation, the preparation of and filing with the SEC of Forms N-SAR and
Rule 24f-2 Notices with respect to AVIF and its Shares and payment of all
applicable registration or filing fees with respect to any of the foregoing.
(b) LIFE COMPANY will bear the cost of registering, to the extent
required, each Account as a unit investment trust under the 1940 Act and
registering units of interest under the Contracts under the 1933 Act and keeping
such registrations current and effective; including, without limitation, the
preparation and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices with
respect to each Account and its units of interest and payment of all applicable
registration or filing fees with respect to any of the foregoing.
4
3.3 Other (Non-Sales-Related).
-------------------------
(a) AVIF will bear, or arrange for others to bear, the costs of preparing,
filing with the SEC and setting for printing AVIF's prospectus, statement of
additional information and any amendments or supplements thereto (collectively,
the "AVIF Prospectus"), periodic reports to shareholders, AVIF proxy material
and other shareholder communications.
(b) IDS Life of New York will bear the costs of preparing, filing with
the SEC and setting for printing each Account's prospectus, statement of
additional information and any amendments or supplements thereto (collectively,
the "Account Prospectus"), any periodic reports to Contract owners, annuitants,
insureds or participants (as appropriate) under the Contracts (collectively,
"Participants"), voting instruction solicitation material, and other Participant
communications.
(c) LIFE COMPANY will print in quantity and deliver to existing
Participants the documents described in Section 3.3(b) above and the prospectus
provided by AVIF in camera ready or computer diskette form. AVIF will print
the AVIF statement of additional information, proxy materials relating to AVIF
and periodic reports of AVIF.
3.4 Other (Sales-Related).
---------------------
LIFE COMPANY will bear the expenses of distribution. These expenses would
include by way of illustration, but are not limited to, the costs of
distributing to Participants the following documents, whether they relate to the
Account or AVIF: prospectuses, statements of additional information, proxy
materials and periodic reports. These costs would also include the costs of
preparing, printing, and distributing sales literature and advertising relating
to the Funds, as well as filing such materials with, and obtaining approval
from, the SEC, NASD, any state insurance regulatory authority, and any other
appropriate regulatory authority, to the extent required.
3.5 Parties To Cooperate.
--------------------
Each Party agrees to cooperate with the others, as applicable, in arranging
to print, mail and/or deliver, in a timely manner, combined or coordinated
prospectuses or other materials of AVIF and the Accounts.
Section 4. Legal Compliance
----------------------------
4.1 Tax Laws.
--------
(a) AVIF represents and warrants that each Fund is currently qualified as
a regulated investment company ("RIC") under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and represents that it will use
its best efforts to qualify and to maintain qualification of each Fund as a RIC.
AVIF will notify LIFE COMPANY immediately upon having a reasonable basis for
believing that a Fund has ceased to so qualify or that it might not so qualify
in the future.
5
(b) AVIF represents that it will use its best efforts to comply and to
maintain each Fund's compliance with the diversification requirements set forth
in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under
the Code. AVIF will notify LIFE COMPANY immediately upon having a reasonable
basis for believing that a Fund has ceased to so comply or that a Fund might not
so comply in the future. In the event of a breach of this Section 4.1(b) by
AVIF, it will take all reasonable steps to adequately diversify the Fund so as
to achieve compliance within the grace period afforded by Section 1.817-5 of the
regulations under the Code.
(c) LIFE COMPANY agrees that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review of LIFE
COMPANY or, to LIFE COMPANY's knowledge, of any Participant, that any Fund has
failed to comply with the diversification requirements of Section 817(h) of the
Code or LIFE COMPANY otherwise becomes aware of any facts that could give rise
to any claim against AVIF or its affiliates as a result of such a failure or
alleged failure:
(i) LIFE COMPANY shall promptly notify AVIF of such
assertion or potential claim (subject to the Confidentiality
provisions of Section 18 as to any Participant);
(ii) LIFE COMPANY shall consult with AVIF as to how to minimize any
liability that may arise as a result of such failure or alleged
failure;
(iii) LIFE COMPANY shall use its best efforts to minimize any
liability of AVIF or its affiliates resulting from such
failure, including, without limitation, demonstrating, pursuant
to Treasury Regulations Section 1.817-5(a)(2), to the
Commissioner of the IRS that such failure was inadvertent;
(iv) LIFE COMPANY shall permit AVIF, its affiliates and their legal
and accounting advisors to participate in any conferences,
settlement discussions or other administrative or judicial
proceeding or contests (including judicial appeals thereof)
with the IRS, any Participant or any other claimant regarding
any claims that could give rise to liability to AVIF or its
affiliates as a result of such a failure or alleged failure;
provided, however, that LIFE COMPANY will retain control of the
conduct of such conferences discussions, proceedings, contests
or appeals;
(v) any written materials to be submitted by LIFE COMPANY to the
IRS, any Participant or any other claimant in connection with
any of the foregoing proceedings or contests (including,
without limitation, any such materials to be submitted to the
IRS pursuant to Treasury Regulations Section 1.817-5(a)(2)),
(a) shall be provided by LIFE COMPANY to AVIF (together with
any supporting information or analysis); subject to the
confidentiality provisions of Section 18, at least ten (10)
business days or such shorter period to which the Parties
hereto agree prior to the day on which such proposed materials
are to be submitted, and (b) shall not be submitted by
6
LIFE COMPANY to any such person without the express written
consent of AVIF which shall not be unreasonably withheld;
(vi) LIFE COMPANY shall provide AVIF or its affiliates and their
accounting and legal advisors with such cooperation as AVIF
shall reasonably request (including, without limitation, by
permitting AVIF and its accounting and legal advisors to review
the relevant books and records of LIFE COMPANY) in order to
facilitate review by AVIF or its advisors of any written
submissions provided to it pursuant to the preceding clause or
its assessment of the validity or amount of any claim against
its arising from such a failure or alleged failure;
(vii) LIFE COMPANY shall not with respect to any claim of the IRS or
any Participant that would give rise to a claim against AVIF or
its affiliates (a) compromise or settle any claim, (b) accept
any adjustment on audit, or (c) forego any allowable
administrative or judicial appeals, without the express written
consent of AVIF or its affiliates, which shall not be
unreasonably withheld, provided that LIFE COMPANY shall not be
required, after exhausting all administrative penalties, to
appeal any adverse judicial decision unless AVIF or its
affiliates shall have provided an opinion of independent
counsel to the effect that a reasonable basis exists for taking
such appeal; and provided further that the costs of any such
appeal shall be borne equally by the Parties hereto; and
(viii) AVIF and its affiliates shall have no liability as a result of
such failure or alleged failure if LIFE COMPANY fails to comply
with any of the foregoing clauses (i) through (vii), and such
failure could be shown to have materially contributed to the
liability.
Should AVIF or any of its affiliates refuse to give its written consent to
any compromise or settlement of any claim or liability hereunder, LIFE COMPANY
may, in its discretion, authorize AVIF or its affiliates to act in the name of
LIFE COMPANY in, and to control the conduct of, such conferences, discussions,
proceedings, contests or appeals and all administrative or judicial appeals
thereof, and in that event AVIF or its affiliates shall bear the fees and
expenses associated with the conduct of the proceedings that it is so authorized
to control; provided, that in no event shall LIFE COMPANY have any liability
resulting from AVIF's refusal to accept the proposed settlement or compromise
with respect to any failure caused by AVIF. As used in this Agreement, the term
"affiliates" shall have the same meaning as "affiliated person" as defined in
Section 2(a)(3) of the 1940 Act.
(d) LIFE COMPANY represents and warrants that the Contracts currently are
and will be treated as annuity contracts or life insurance contracts under
applicable provisions of the Code and that it will use its best efforts to
maintain such treatment; LIFE COMPANY will notify AVIF immediately upon having a
reasonable basis for believing that any of the Contracts have ceased to be so
treated or that they might not be so treated in the future.
(e) LIFE COMPANY represents and warrants that each Account is a
"segregated asset account" and that interests in each Account are offered
exclusively through the purchase of or
7
transfer into a "variable contract," within the meaning of such terms under
Section 817 of the Code and the regulations thereunder. LIFE COMPANY will use
its best efforts to continue to meet such definitional requirements, and it will
notify AVIF immediately upon having a reasonable basis for believing that such
requirements have ceased to be met or that they might not be met in the future.
4.2 Insurance and Certain Other Laws.
--------------------------------
(a) AVIF will use its best efforts to comply with any applicable state
insurance laws or regulations, to the extent specifically requested in writing
by LIFE COMPANY, including, the furnishing of information not otherwise
available to LIFE COMPANY which is required by state insurance law to enable
LIFE COMPANY to obtain the authority needed to issue the Contracts in any
applicable state.
(b) LIFE COMPANY represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing under the laws of
the State of New York and has full corporate power, authority and legal right to
execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains each
Account as a segregated asset account under Section 4240 of the New York
Insurance Law and the regulations thereunder, and (iii) the Contracts comply in
all material respects with all other applicable federal and state laws and
regulations.
(c) AVIF represents and warrants that it is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Maryland
and has full power, authority, and legal right to execute, deliver, and perform
its duties and comply with its obligations under this Agreement.
4.3 Securities Laws.
---------------
(a) LIFE COMPANY represents and warrants that (i) interests in each
Account pursuant to the Contracts will be registered under the 1933 Act to the
extent required by the 1933 Act, (ii) the Contracts will be duly authorized for
issuance and sold in compliance with all applicable federal and state laws,
including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and New
York law, (iii) each Account is and will remain registered under the 1940 Act,
to the extent required by the 1940 Act, (iv) each Account does and will comply
in all material respects with the requirements of the 1940 Act and the rules
thereunder, to the extent required, (v) each Account's 1933 Act registration
statement relating to the Contracts, together with any amendments thereto, will
at all times comply in all material respects with the requirements of the 1933
Act and the rules thereunder, (vi) LIFE COMPANY will amend the registration
statement for its Contracts under the 1933 Act and for its Accounts under the
1940 Act from time to time as required in order to effect the continuous
offering of its Contracts or as may otherwise be required by applicable law, and
(vii) each Account Prospectus will at all times comply in all material respects
with the requirements of the 1933 Act and the rules thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant to this
Agreement will be registered under the 1933 Act to the extent required by the
1933 Act and duly authorized for issuance and sold in compliance with Maryland
law, (ii) AVIF is and will remain registered under the 1940 Act to the extent
required by the 1940 Act, (iii) AVIF will amend the registration statement for
its Shares under the 1933 Act and itself under the 1940 Act from time to time as
8
required in order to effect the continuous offering of its Shares, (iv) AVIF
does and will comply in all material respects with the requirements of the 1940
Act and the rules thereunder, (v) AVIF's 1933 Act registration statement,
together with any amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and rules thereunder, and (vi)
AVIF's Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale in
accordance with the laws of any state or other jurisdiction if and to the extent
reasonably deemed advisable by AVIF.
(d) AVIF currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
AVIF undertakes to have its Board of Directors, a majority of whom are not
"interested" persons of the Fund, formulate and approve any plan under Rule 12b-
1 to finance distribution expenses.
(e) AVIF represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having access to
the funds and/or securities of the Fund are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less than the minimal coverage as required currently by
Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
4.4 Notice of Certain Proceedings and Other Circumstances.
-----------------------------------------------------
(a) AVIF will immediately notify LIFE COMPANY of (i) the issuance by any
court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to AVIF's registration statement under the 1933 Act
or AVIF Prospectus, (ii) any request by the SEC for any amendment to such
registration statement or AVIF Prospectus that may affect the offering of Shares
of AVIF, (iii) the initiation of any proceedings for that purpose or for any
other purpose relating to the registration or offering of AVIF's Shares, or (iv)
any other action or circumstances that may prevent the lawful offer or sale of
Shares of any Fund in any state or jurisdiction, including, without limitation,
any circumstances in which (a) such Shares are not registered and, in all
material respects, issued and sold in accordance with applicable state and
federal law, or (b) such law precludes the use of such Shares as an underlying
investment medium of the Contracts issued or to be issued by LIFE COMPANY. AVIF
will make every reasonable effort to prevent the issuance, with respect to any
Fund, of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.
(b) LIFE COMPANY will immediately notify AVIF of (i) the issuance by any
court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to each Account's registration statement under the
1933 Act relating to the Contracts or each Account Prospectus, (ii) any request
by the SEC for any amendment to such registration statement or Account
Prospectus that may affect the offering of Shares of AVIF, (iii) the
9
initiation of any proceedings for that purpose or for any other purpose relating
to the registration or offering of each Account's interests pursuant to the
Contracts, or (iv) any other action or circumstances that may prevent the lawful
offer or sale of said interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not registered and, in
all material respects, issued and sold in accordance with applicable state and
federal law. LIFE COMPANY will make every reasonable effort to prevent the
issuance of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.
4.5 LIFE COMPANY To Provide Documents; Information About AVIF.
---------------------------------------------------------
(a) LIFE COMPANY will provide to AVIF or its designated agent at least
one (1) complete copy of all SEC registration statements, Account Prospectuses,
reports, any preliminary and final voting instruction solicitation material,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to each Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) LIFE COMPANY will provide to AVIF or its designated agent at least
one (1) complete copy of each piece of sales literature or other promotional
material in which AVIF or any of its affiliates is named, at least five (5)
Business Days prior to its use or such shorter period as the Parties hereto may,
from time to time, agree upon. No such material shall be used if AVIF or its
designated agent objects to such use within five (5) Business Days after receipt
of such material or such shorter period as the Parties hereto may, from time to
time, agree upon. AVIF hereby designates A I M as the entity to receive such
sales literature, until such time as AVIF appoints another designated agent by
giving notice to LIFE COMPANY in the manner required by Section 9 hereof.
(c) Neither LIFE COMPANY nor any of its affiliates, will give any
information or make any representations or statements on behalf of or concerning
AVIF or its affiliates in connection with the sale of the Contracts other than
(i) the information or representations contained in the registration statement,
including the AVIF Prospectus contained therein, relating to Shares, as such
registration statement and AVIF Prospectus may be amended from time to time; or
(ii) in reports or proxy materials for AVIF; or (iii) in published reports for
AVIF that are in the public domain and approved by AVIF for distribution; or
(iv) in sales literature or other promotional material approved by AVIF, except
with the express written permission of AVIF.
(d) LIFE COMPANY shall adopt and implement procedures reasonably designed
to ensure that information concerning AVIF and its affiliates that is intended
for use only by brokers or agents selling the Contracts (i.e., information that
is not intended for distribution to Participants) ("broker only materials") is
so used, and neither AVIF nor any of its affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone
10
or tape recording, videotape display, signs or billboards, motion pictures, or
other public media, (e.g., on-line networks such as the Internet or other
electronic messages), sales literature (i.e., any written communication
distributed or made generally available to customers or the public, including
brochures, circulars, research reports, market letters, form letters, seminar
texts, reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees,
registration statements, prospectuses, statements of additional information,
shareholder reports, and proxy materials and any other material constituting
sales literature or advertising under the NASD rules, the 1933 Act or the 1940
Act.
4.6 AVIF To Provide Documents; Information About LIFE COMPANY.
---------------------------------------------------------
(a) AVIF will provide to LIFE COMPANY at least one (1) complete copy of
all SEC registration statements, AVIF Prospectuses, reports, any preliminary and
final proxy material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to AVIF or the
Shares of a Fund, contemporaneously with the filing of such document with the
SEC or other regulatory authorities.
(b) AVIF will provide to LIFE COMPANY camera ready or computer diskette
copies of all AVIF prospectuses and printed copies, in an amount specified by
LIFE COMPANY, of AVIF statements of additional information, proxy materials,
periodic reports to shareholders and other materials required by law to be sent
to Participants who have allocated any Contract value to a Fund. AVIF will
provide such copies to LIFE COMPANY in a timely manner so as to enable LIFE
COMPANY, as the case may be, to print and distribute such materials within the
time required by law to be furnished to Participants.
(c) AVIF will provide to LIFE COMPANY or its designated agent at least
one (1) complete copy of each piece of sales literature or other promotional
material in which LIFE COMPANY, or any of its respective affiliates is named, or
that refers to the Contracts, at least five (5) Business Days prior to its use
or such shorter period as the Parties hereto may, from time to time, agree upon.
No such material shall be used if LIFE COMPANY or its designated agent objects
to such use within five (5) Business Days after receipt of such material or such
shorter period as the Parties hereto may, from time to time, agree upon. LIFE
COMPANY shall receive all such sales literature until such time as it appoints a
designated agent by giving notice to AVIF in the manner required by Section 9
hereof.
(d) Neither AVIF nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning LIFE COMPANY,
each Account, or the Contracts other than (i) the information or representations
contained in the registration statement, including each Account Prospectus
contained therein, relating to the Contracts, as such registration statement and
Account Prospectus may be amended from time to time; or (ii) in published
reports for the Account or the Contracts that are in the public domain and
approved by LIFE COMPANY for distribution; or (iii) in sales literature or other
promotional material approved by LIFE COMPANY or its affiliates, except with the
express written permission of LIFE COMPANY.
(e) AVIF shall cause its principal underwriter to adopt and implement
procedures reasonably designed to ensure that information concerning LIFE
COMPANY, and its respective
11
affiliates that is intended for use only by brokers or agents selling the
Contracts (i.e., information that is not intended for distribution to
Participants) ("broker only materials") is so used, and neither LIFE COMPANY,
nor any of its respective affiliates shall be liable for any losses, damages or
expenses relating to the improper use of such broker only materials.
(f) For purposes of this Section 4.6, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (e.g., on-
line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
Section 5. Mixed and Shared Funding
-----------------------------------
5.1 General.
-------
The SEC has granted an order to AVIF exempting it from certain provisions
of the 1940 Act and rules thereunder so that AVIF may be available for
investment by certain other entities, including, without limitation, separate
accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with LIFE
COMPANY, and trustees of qualified pension and retirement plans (collectively,
"Mixed and Shared Funding"). The Parties recognize that the SEC has imposed
terms and conditions for such orders that are substantially identical to many of
the provisions of this Section 5. Sections 5.2 through 5.8 below shall apply
pursuant to such an exemptive order granted to AVIF. AVIF hereby notifies LIFE
COMPANY that, in the event that AVIF implements Mixed and Shared Funding, it may
be appropriate to include in the prospectus pursuant to which a Contract is
offered disclosure regarding the potential risks of Mixed and Shared Funding.
5.2 Disinterested Directors.
-----------------------
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
Rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board; (b) for a period of sixty (60) days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
12
5.3 Monitoring for Material Irreconcilable Conflicts.
------------------------------------------------
AVIF agrees that its Board of Directors will monitor for the existence of
any material irreconcilable conflict between the interests of the Participants
in all separate accounts of life insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in AVIF ("Participating
Plans"). LIFE COMPANY agrees to inform the Board of Directors of AVIF of the
existence of or any potential for any such material irreconcilable conflict of
which it is aware. The concept of a "material irreconcilable conflict" is not
defined by the 1940 Act or the rules thereunder, but the Parties recognize that
such a conflict may arise for a variety of reasons, including, without
limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax or securities
regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive orders
of the type referred to in Section 5.1 hereof, LIFE COMPANY will assist the
Board of Directors in carrying out its responsibilities by providing the Board
of Directors with all information reasonably necessary for the Board of
Directors to consider any issue raised, including information as to a decision
by LIFE COMPANY to disregard voting instructions of Participants.
5.4 Conflict Remedies.
-----------------
(a) It is agreed that if it is determined by a majority of the members of
the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, LIFE COMPANY will, if it is a
Participating Insurance Company for which a material irreconcilable conflict is
relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, which
steps may include, but are not limited to:
13
(i) withdrawing the assets allocable to some or all of the Accounts
from AVIF or any Fund and reinvesting such assets in a different
investment medium, including another Fund of AVIF, or submitting
the question whether such segregation should be implemented to a
vote of all affected Participants and, as appropriate, segregating
the assets of any particular group (e.g., annuity Participants,
life insurance Participants or all Participants) that votes in
favor of such segregation, or offering to the affected
Participants the option of making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "management company" in Section 4(3) of the 1940 Act
or a new separate account that is operated as a management
company.
(b) If the material irreconcilable conflict arises because of LIFE
COMPANY's decision to disregard Participant voting instructions and that
decision represents a minority position or would preclude a majority vote, LIFE
COMPANY may be required, at AVIF's election, to withdraw each Account's
investment in AVIF or any Fund. No charge or penalty will be imposed as a result
of such withdrawal. Any such withdrawal must take place within six (6) months
after AVIF gives notice to LIFE COMPANY that this provision is being
implemented, and until such withdrawal AVIF shall continue to accept and
implement orders by LIFE COMPANY for the purchase and redemption of Shares of
AVIF.
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to LIFE COMPANY conflicts with
the majority of other state regulators, then LIFE COMPANY will withdraw each
Account's investment in AVIF within six (6) months after AVIF's Board of
Directors informs LIFE COMPANY that it has determined that such decision has
created a material irreconcilable conflict, and until such withdrawal AVIF shall
continue to accept and implement orders by LIFE COMPANY for the purchase and
redemption of Shares of AVIF. No charge or penalty will be imposed as a result
of such withdrawal.
(d) LIFE COMPANY agrees that any remedial action taken by it in resolving
any material irreconcilable conflict will be carried out at its expense and with
a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Contracts. LIFE
COMPANY will not be required by the terms hereof to establish a new funding
medium for any Contracts if an offer to do so has been declined by vote of a
majority of Participants materially adversely affected by the material
irreconcilable conflict.
14
5.5 Notice to LIFE COMPANY.
----------------------
AVIF will promptly make known in writing to LIFE COMPANY the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 Information Requested by Board of Directors.
-------------------------------------------
LIFE COMPANY and AVIF (or its investment adviser) will at least annually
submit to the Board of Directors of AVIF such reports, materials or data as the
Board of Directors may reasonably request so that the Board of Directors may
fully carry out the obligations imposed upon it by the provisions hereof or any
exemptive order granted by the SEC to permit Mixed and Shared Funding, and said
reports, materials and data will be submitted at any reasonable time deemed
appropriate by the Board of Directors. All reports received by the Board of
Directors of potential or existing conflicts, and all Board of Directors actions
with regard to determining the existence of a conflict, notifying Participating
Insurance Companies and Participating Plans of a conflict, and determining
whether any proposed action adequately remedies a conflict, will be properly
recorded in the minutes of the Board of Directors or other appropriate records,
and such minutes or other records will be made available to the SEC upon
request.
5.7 Compliance with SEC Rules.
-------------------------
If, at any time during which AVIF is serving as an investment medium for
variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable,
6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with
respect to Mixed and Shared Funding, AVIF agrees that it will comply with the
terms and conditions thereof and that the terms of this Section 5 shall be
deemed modified if and only to the extent required in order also to comply with
the terms and conditions of such exemptive relief that is afforded by any of
said rules that are applicable.
5.8 Other Requirements.
------------------
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
Section 6. Termination
----------------------
6.1 Events of Termination.
---------------------
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of any party, with or without cause with respect to the
Fund, upon six (6) months advance written notice to the other parties, or, if
later, upon receipt of any required exemptive relief from the SEC, unless
otherwise agreed to in writing by the parties; or
(b) at the option of AVIF upon institution of formal proceedings against
LIFE COMPANY or its affiliates by the NASD, the SEC, any state insurance
regulator or any other
15
regulatory body regarding LIFE COMPANY's obligations under this Agreement or
related to the sale of the Contracts, the operation of each Account, or the
purchase of Shares, if, in each case, AVIF reasonably determines that such
proceedings, or the facts on which such proceedings would be based, have a
material likelihood of imposing material adverse consequences on the Fund with
respect to which the Agreement is to be terminated; or
(c) at the option of LIFE COMPANY upon institution of formal proceedings
against AVIF, its principal underwriter, or its investment adviser by the NASD,
the SEC, or any state insurance regulator or any other regulatory body regarding
AVIF's obligations under this Agreement or related to the operation or
management of AVIF or the purchase of AVIF Shares, if, in each case, LIFE
COMPANY reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse consequences on LIFE COMPANY, or the Subaccount corresponding to the
Fund with respect to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares
are not registered and, in all material respects, issued and sold in accordance
with any applicable federal or state law, or (ii) such law precludes the use of
such Shares as an underlying investment medium of the Contracts issued or to be
issued by LIFE COMPANY; or
(e) upon termination of the corresponding Subaccount's investment in the
Fund pursuant to Section 5 hereof; or
(f) at the option of LIFE COMPANY if the Fund ceases to qualify as a RIC
under Subchapter M of the Code or under successor or similar provisions, or if
LIFE COMPANY reasonably believes that the Fund may fail to so qualify; or
(g) at the option of LIFE COMPANY if the Fund fails to comply with
Section 817(h) of the Code or with successor or similar provisions, or if LIFE
COMPANY reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Contracts issued by LIFE COMPANY cease
to qualify as annuity contracts or life insurance contracts under the Code
(other than by reason of the Fund's noncompliance with Section 817(h) or
Subchapter M of the Code) or if interests in an Account under the Contracts are
not registered, where required, and, in all material respects, are not issued or
sold in accordance with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this
Agreement.
6.2 Notice Requirement for Termination.
----------------------------------
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Party
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of
Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at
least six (6) months in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
16
(b) in the event that any termination is based upon the provisions of
Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at
least ninety (90) days in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of
Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written
notice shall be given as soon as possible within twenty-four (24) hours after
the terminating Party learns of the event causing termination to be required.
6.3 Funds To Remain Available.
-------------------------
Notwithstanding any termination of this Agreement, AVIF will, at the option
of LIFE COMPANY, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts will be permitted to reallocate investments in
the Fund (as in effect on such date), redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 6.3 will not apply to
any terminations under Section 5 and the effect of such terminations will be
governed by Section 5 of this Agreement.
6.4 Survival of Warranties and Indemnifications.
-------------------------------------------
All warranties and indemnifications will survive the termination of this
Agreement.
6.5 Continuance of Agreement for Certain Purposes.
---------------------------------------------
If any Party terminates this Agreement with respect to any Fund pursuant to
Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, this
Agreement shall nevertheless continue in effect as to any Shares of that Fund
that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date
as of which an Account owns no Shares of the affected Fund or a date (the "Final
Termination Date") six (6) months following the Initial Termination Date, except
that LIFE COMPANY may, by written notice shorten said six (6) month period in
the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or
6.1(i).
Section 7. Parties To Cooperate Respecting Termination
-------------------------------------------------------
The Parties hereto agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Fund, or otherwise
terminating participation by the Contracts in such Fund.
17
Section 8. Assignment
----------------------
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
Section 9. Notices
-------------------
Notices and communications required or permitted by Section 9 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
UNDERWRITER
LIFE COMPANY
Street Address
City, State Zip Code
Facsimile:
Attn.: [NAME OF PERSON]
AIM Variable Insurance Funds, Inc.
11 Greenway Plaza, Suite 1919
Houston, TX 77046
Facsimile: 713-993-9185
Attn.: Nancy L. Martin, Esquire
Section 10. Voting Procedures
------------------------------
Subject to the cost allocation procedures set forth in Section 3 hereof,
LIFE COMPANY will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. LIFE COMPANY will vote
Shares in accordance with timely instructions received from Participants. LIFE
COMPANY will vote Shares that are (a) not attributable to Participants to whom
pass-through voting privileges are extended, or (b) attributable to
Participants, but for which no timely instructions have been received, in the
same proportion as Shares for which said instructions have been received from
Participants, so long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass through voting privileges for Participants. Neither
LIFE COMPANY nor any of its affiliates will in any way recommend action in
connection with or oppose or interfere with the solicitation of proxies for the
Shares held for such Participants. LIFE COMPANY reserves the right to vote
shares held in any Account in its own right, to the extent permitted by law.
LIFE COMPANY shall be responsible for assuring that each of its Accounts holding
Shares calculates voting privileges in a manner consistent with that of other
Participating Insurance Companies or in the manner required by the Mixed and
Shared Funding
18
exemptive order obtained by AVIF. AVIF will notify LIFE COMPANY of any changes
of interpretations or amendments to Mixed and Shared Funding exemptive order it
has obtained. AVIF will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular, AVIF either will provide for annual
meetings (except insofar as the SEC may interpret Section 16 of the 1940 Act not
to require such meetings) or will comply with Section 16(c) of the 1940 Act
(although AVIF is not one of the trusts described in Section 16(c) of that Act)
as well as with Sections 16(a) and, if and when applicable, 16(b). Further, AVIF
will act in accordance with the SEC's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors and with whatever
rules the SEC may promulgate with respect thereto.
Section 11. Foreign Tax Credits
--------------------------------
AVIF agrees to consult in advance with LIFE COMPANY concerning any decision
to elect or not to elect pursuant to Section 853 of the Code to pass through the
benefit of any foreign tax credits to its shareholders.
Section 12. Indemnification
----------------------------
12.1 Of AVIF by LIFE COMPANY and UNDERWRITER.
---------------------------------------
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below,
LIFE COMPANY and UNDERWRITER agree to indemnify and hold harmless AVIF, its
affiliates, and each person, if any, who controls AVIF or its affiliates within
the meaning of Section 15 of the 1933 Act and each of their respective directors
and officers, (collectively, the "Indemnified Parties" for purposes of this
Section 12.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of LIFE COMPANY
and UNDERWRITER) or actions in respect thereof (including, to the extent
reasonable, legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise;
provided, the Account owns shares of the Fund and insofar as such losses,
claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's
1933 Act registration statement, any Account Prospectus, the
Contracts, or sales literature or advertising 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 LIFE COMPANY or UNDERWRITER by or on behalf of AVIF
for use in any Account's 1933 Act registration statement, any
Account Prospectus, the Contracts, or sales literature or
advertising or otherwise for use in connection
19
with the sale of Contracts or Shares (or any amendment or
supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations contained
in AVIF's 1933 Act registration statement, AVIF Prospectus, sales
literature or advertising of AVIF, or any amendment or supplement
to any of the foregoing, not supplied for use therein by or on
behalf of LIFE COMPANY, UNDERWRITER or their respective affiliates
and on which such persons have reasonably relied) or the negligent,
illegal or fraudulent conduct of LIFE COMPANY, UNDERWRITER or their
respective affiliates or persons under their control (including,
without limitation, their employees and "Associated Persons," as
that term is defined in paragraph (m) of Article I of the NASD's
By-Laws), in connection with the sale or distribution of the
Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933 Act
registration statement, AVIF Prospectus, sales literature or
advertising of AVIF, or any amendment or supplement to any of the
foregoing, 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 and in conformity with
information furnished to AVIF or its affiliates by or on behalf of
LIFE COMPANY, UNDERWRITER or their respective affiliates for use in
AVIF's 1933 Act registration statement, AVIF Prospectus, sales
literature or advertising of AVIF, or any amendment or supplement
to any of the foregoing; or
(iv) arise as a result of any failure by LIFE COMPANY or UNDERWRITER to
perform the obligations, provide the services and furnish the
materials required of them under the terms of this Agreement, or
any material breach of any representation and/or warranty made by
LIFE COMPANY or UNDERWRITER in this Agreement or arise out of or
result from any other material breach of this Agreement by LIFE
COMPANY or UNDERWRITER; or
(v) arise as a result of failure by the Contracts issued by LIFE
COMPANY to qualify as annuity contracts or life insurance contracts
under the Code, otherwise than by reason of any Fund's failure to
comply with Subchapter M or Section 817(h) of the Code.
(b) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this Section
12.1 with respect to any losses, claims, damages, liabilities or actions to
which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that Indemnified Party's
reckless disregard of obligations or duties (i) under this Agreement, or (ii) to
AVIF.
(c) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this Section
12.1 with respect to any action against an Indemnified Party unless AVIF shall
have notified
20
LIFE COMPANY and UNDERWRITER in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify LIFE COMPANY and UNDERWRITER of any such action
shall not relieve LIFE COMPANY and UNDERWRITER from any liability which they may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this Section 12.1. Except as otherwise provided herein, in case
any such action is brought against an Indemnified Party, LIFE COMPANY and
UNDERWRITER shall be entitled to participate, at their own expense, in the
defense of such action and also shall be entitled to assume the defense thereof,
with counsel approved by the Indemnified Party named in the action, which
approval shall not be unreasonably withheld. After notice from LIFE COMPANY or
UNDERWRITER to such Indemnified Party of LIFE COMPANY's or UNDERWRITER's
election to assume the defense thereof, the Indemnified Party will cooperate
fully with LIFE COMPANY and UNDERWRITER and shall bear the fees and expenses of
any additional counsel retained by it, and neither LIFE COMPANY nor UNDERWRITER
will be liable to such Indemnified Party under this Agreement for any legal or
other expenses subsequently incurred by such Indemnified Party independently in
connection with the defense thereof, other than reasonable costs of
investigation.
12.2 Of LIFE COMPANY and UNDERWRITER by AVIF .
----------------------------------------
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e), below, AVIF agrees to indemnify and hold harmless LIFE COMPANY,
UNDERWRITER, their respective affiliates, and each person, if any, who controls
LIFE COMPANY, UNDERWRITER or their respective affiliates within the meaning of
Section 15 of the 1933 Act and each of their respective directors and officers,
(collectively, the "Indemnified Parties" for purposes of this Section 12.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of AVIF ) or actions in respect thereof
(including, to the extent reasonable, legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law, or otherwise; provided, the Account owns shares of the Fund and insofar as
such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933 Act
registration statement, AVIF Prospectus or sales literature or
advertising of AVIF (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 AVIF or its affiliates by
or on behalf of LIFE COMPANY, UNDERWRITER or their respective
affiliates for use in AVIF's 1933 Act registration statement, AVIF
Prospectus, or in sales literature or advertising or otherwise for
use in connection with the sale of Contracts or Shares (or any
amendment or supplement to any of the foregoing); or
21
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations contained
in any Account's 1933 Act registration statement, any Account
Prospectus, sales literature or advertising for the Contracts, or
any amendment or supplement to any of the foregoing, not supplied
for use therein by or on behalf of AVIF or its affiliates and on
which such persons have reasonably relied) or the negligent,
illegal or fraudulent conduct of AVIF or its affiliates or persons
under its control (including, without limitation, their employees
and "Associated Persons" as that Term is defined in Section (n) of
Article 1 of the NASD By-Laws), in connection with the sale or
distribution of AVIF Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's
1933 Act registration statement, any Account Prospectus, sales
literature or advertising covering the Contracts, or any amendment
or supplement to any of the foregoing, or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
if such statement or omission was made in reliance upon and in
conformity with information furnished to LIFE COMPANY, UNDERWRITER
or their respective affiliates by or on behalf of AVIF for use in
any Account's 1933 Act registration statement, any Account
Prospectus, sales literature or advertising covering the Contracts,
or any amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF to perform the
obligations, provide the services and furnish the materials
required of it under the terms of this Agreement, or any material
breach of any representation and/or warranty made by AVIF in this
Agreement or arise out of or result from any other material breach
of this Agreement by AVIF.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e)
hereof, AVIF agrees to indemnify and hold harmless the Indemnified Parties from
and against any and all losses, claims, damages, liabilities (including amounts
paid in settlement thereof with, the written consent of AVIF) or actions in
respect thereof (including, to the extent reasonable, legal and other expenses)
to which the Indemnified Parties may become subject directly or indirectly under
any statute, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or actions directly or indirectly result from or arise out
of the failure of any Fund to operate as a regulated investment company in
compliance with (i) Subchapter M of the Code and regulations thereunder, or (ii)
Section 817(h) of the Code and regulations thereunder, including, without
limitation, any income taxes and related penalties, rescission charges,
liability under state law to Participants asserting liability against LIFE
COMPANY pursuant to the Contracts, the costs of any ruling and closing agreement
or other settlement with the IRS, and the cost of any substitution by LIFE
COMPANY of Shares of another investment company or portfolio for those of any
adversely affected Fund as a funding medium for each Account that LIFE COMPANY
reasonably deems necessary or appropriate as a result of the noncompliance.
(c) AVIF shall not be liable under this Section 12.2 with respect to any
losses, claims, damages, liabilities or actions to which an Indemnified Party
would otherwise be subject by
22
reason of willful misfeasance, bad faith, or gross negligence in the performance
by that Indemnified Party of its duties or by reason of such Indemnified Party's
reckless disregard of its obligations and duties (i) under this Agreement, or
(ii) to LIFE COMPANY, UNDERWRITER, each Account or Participants.
(d) AVIF shall not be liable under this Section 12.2 with respect to any
action against an Indemnified Party unless the Indemnified Party shall have
notified AVIF in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the action shall have
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but failure to
notify AVIF of any such action shall not relieve AVIF from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this Section 12.2. Except as otherwise provided
herein, in case any such action is brought against an Indemnified Party, AVIF
will be entitled to participate, at its own expense, in the defense of such
action and also shall be entitled to assume the defense thereof (which shall
include, without limitation, the conduct of any ruling request and closing
agreement or other settlement proceeding with the IRS), with counsel approved by
the Indemnified Party named in the action, which approval shall not be
unreasonably withheld. After notice from AVIF to such Indemnified Party of
AVIF's election to assume the defense thereof, the Indemnified Party will
cooperate fully with AVIF and shall bear the fees and expenses of any additional
counsel retained by it, and AVIF will not be liable to such Indemnified Party
under this Agreement for any legal or other expenses subsequently incurred by
such Indemnified Party independently in connection with the defense thereof,
other than reasonable costs of investigation.
(e) In no event shall AVIF be liable under the indemnification
provisions contained in this Agreement to any individual or entity, including,
without limitation, LIFE COMPANY, UNDERWRITER or any other Participating
Insurance Company or any Participant, with respect to any losses, claims,
damages, liabilities or expenses that arise out of or result from (i) a breach
of any representation, warranty, and/or covenant made by LIFE COMPANY or
UNDERWRITER hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations, warranties and
covenants; (ii) the failure by LIFE COMPANY or any Participating Insurance
Company to maintain its segregated asset account (which invests in any Fund) as
a legally and validly established segregated asset account under applicable
state law and as a duly registered unit investment trust under the provisions of
the 1940 Act (unless exempt therefrom); or (iii) the failure by LIFE COMPANY or
any Participating Insurance Company to maintain its variable annuity or life
insurance contracts (with respect to which any Fund serves as an underlying
funding vehicle) as annuity contracts or life insurance contracts under
applicable provisions of the Code.
12.3 Effect of Notice.
----------------
Any notice given by the indemnifying Party to an Indemnified Party referred
to in Sections 12.1(c) or 12.2(d) above of participation in or control of any
action by the indemnifying Party will in no event be deemed to be an admission
by the indemnifying Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
12.4 Successors.
----------
23
A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.
Section 13. Applicable Law
---------------------------
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
Section 14. Execution in Counterparts
--------------------------------------
This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.
Section 15. Severability
-------------------------
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
Section 16. Rights Cumulative
------------------------------
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, that the Parties are entitled to under federal and state
laws.
Section 17. Headings
---------------------
The Table of Contents and headings used in this Agreement are for purposes
of reference only and shall not limit or define the meaning of the provisions of
this Agreement.
Section 18. Confidentiality
----------------------------
AVIF acknowledges that the identities of the customers of LIFE COMPANY or
any of its affiliates (collectively, the "LIFE COMPANY Protected Parties" for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
LIFE COMPANY Protected Parties or any of their employees or agents in connection
with LIFE COMPANY's performance of its duties under this Agreement are the
valuable property of the LIFE COMPANY Protected Parties. AVIF agrees that if it
comes into possession of any list or compilation of the identities of or other
information about the LIFE COMPANY Protected Parties' customers, or any other
information or property of the LIFE COMPANY Protected Parties, other than such
information as may be independently developed or compiled by AVIF from
information supplied to it by the LIFE COMPANY Protected Parties' customers who
also maintain accounts directly with AVIF, AVIF
24
will hold such information or property in confidence and refrain from using,
disclosing or distributing any of such information or other property except:
(a) with LIFE COMPANY's prior written consent; or (b) as required by law or
judicial process. LIFE COMPANY acknowledges that the identities of the customers
of AVIF or any of its affiliates (collectively the "AVIF Protected Parties" for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
AVIF Protected Parties or any of their employees or agents in connection with
AVIF's performance of its duties under this Agreement are the valuable property
of the AVIF Protected Parties. LIFE COMPANY agrees that if it comes into
possession of any list or compilation of the identities of or other information
about the AVIF Protected Parties' customers or any other information or property
of the AVIF Protected Parties, other than such information as may be
independently developed or compiled by LIFE COMPANY from information supplied to
it by the AVIF Protected Parties' customers who also maintain accounts directly
with LIFE COMPANY, LIFE COMPANY will hold such information or property in
confidence and refrain from using, disclosing or distributing any of such
information or other property except: (a) with AVIF's prior written consent; or
(b) as required by law or judicial process. Each party acknowledges that any
breach of the agreements in this Section 18 would result in immediate and
irreparable harm to the other parties for which there would be no adequate
remedy at law and agree that in the event of such a breach, the other parties
will be entitled to equitable relief by way of temporary and permanent
injunctions, as well as such other relief as any court of competent jurisdiction
deems appropriate.
Section 19. Trademarks and Fund Names
--------------------------------------
(a) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of
AVIF, owns all right, title and interest in and to the name, trademark and
service mark "AIM" and such other tradenames, trademarks and service marks as
may be set forth on Schedule B, as amended from time to time by written notice
from AIM to LIFE COMPANY (the "AIM licensed marks" or the "licensor's licensed
marks") and is authorized to use and to license other persons to use such marks.
LIFE COMPANY and its affiliates are hereby granted a non-exclusive license to
use the AIM licensed marks in connection with LIFE COMPANY's performance of the
services contemplated under this Agreement, subject to the terms and conditions
set forth in this Section 19.
(b) The grant of license to LIFE COMPANY and its affiliates (the
"licensee") shall terminate automatically upon termination of this Agreement.
Upon automatic termination, the licensee shall cease to use the licensor's
licensed marks, except that LIFE COMPANY shall have the right to continue to
service any outstanding Contracts bearing any of the AIM licensed marks. Upon
AIM's elective termination of this license, LIFE COMPANY and its affiliates
shall immediately cease to issue any new annuity or life insurance contracts
bearing any of the AIM licensed marks and shall likewise cease any activity
which suggests that it has any right under any of the AIM licensed marks or that
it has any association with AIM, except that LIFE COMPANY shall have the right
to continue to service outstanding Contracts bearing any of the AIM licensed
marks.
25
(c) The licensee shall obtain the prior written approval of the licensor
for the public release by such licensee of any materials bearing the licensor's
licensed marks. The licensor's approvals shall not be unreasonably withheld.
(d) During the term of this grant of license, a licensor may request that a
licensee submit samples of any materials bearing any of the licensor's licensed
marks which were previously approved by the licensor but, due to changed
circumstances, the licensor may wish to reconsider. If, on reconsideration, or
on initial review, respectively, any such samples fail to meet with the written
approval of the licensor, then the licensee shall immediately cease distributing
such disapproved materials. The licensor's approval shall not be unreasonably
withheld, and the licensor, when requesting reconsideration of a prior approval,
shall assume the reasonable expenses of withdrawing and replacing such
disapproved materials. The licensee shall obtain the prior written approval of
the licensor for the use of any new materials developed to replace the
disapproved materials, in the manner set forth above.
(e) The licensee hereunder: (i) acknowledges and stipulates that, to the
best of the knowledge of the licensee, the licensor's licensed marks are valid
and enforceable trademarks and/or service marks and that such licensee does not
own the licensor's licensed marks and claims no rights therein other than as a
licensee under this Agreement; (ii) agrees never to contend otherwise in legal
proceedings or in other circumstances; and (iii) acknowledges and agrees that
the use of the licensor's licensed marks pursuant to this grant of license shall
inure to the benefit of the licensor.
Section 20. Parties to Cooperate
---------------------------------
Each party to this Agreement will cooperate with each other party and all
appropriate governmental authorities (including, without limitation, the SEC,
the NASD and state insurance regulators) and will permit each other and such
authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
---------------------------------------------------------
26
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: ________________________ By: ____________________________
Nancy L. Martin Name: Robert H. Graham
Assistant Secretary Title: President
LIFE INSURANCE COMPANY, on behalf of
itself and its separate accounts
Attest: ________________________ By: ____________________________
Name: ________________________ Name: ____________________________
Title: ________________________ Title: ____________________________
SEPARATE ACCOUNT UNDERWRITER
Attest: ________________________ By: ____________________________
Name: ________________________ Name: ____________________________
Title: ________________________ Title: ____________________________
27
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
- -----------------------------------
. AIM VARIABLE INSURANCE FUNDS, INC.
[LIST APPLICABLE PORTFOLIOS]
SEPARATE ACCOUNTS UTILIZING THE FUNDS
- -------------------------------------
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
- -----------------------------------------
.
28
SCHEDULE B
. A I M VARIABLE INSURANCE FUNDS, INC.
AIM_________________________________________________________ Fund
. AIM and Design
29
EX-99.B8L
18
EXHIBIT (8)(L)
EXHIBIT (8)(l)
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the _____ day of __________,
1996 ("Agreement"), by and among Merrill Lynch Life Insurance Company, an
Arkansas life insurance company ("Insurer") (on behalf of itself and its
"Separate Account," defined below); Alliance Capital Management L.P., a Delaware
limited partnership ("Adviser"), the investment adviser of the Fund referred to
below; and Alliance Fund Distributors, Inc., a Delaware corporation
("Distributor"), the Fund's principal underwriter (collectively, the "Parties"),
WITNESSETH THAT:
WHEREAS Insurer, the Distributor, and Alliance Variable Products Series
Fund, Inc. (the "Fund") desire that shares of the Fund's Portfolio(s) as set
forth on Schedule A hereto as may be modified from time to time (each a
"Portfolio"; reference herein to the "Fund" includes reference to the
Portfolio(s) to the extent the context requires) be made available to serve as
the underlying investment medium for variable annuity contracts of Insurer (the
"Contracts"), and
WHEREAS the Contracts provide for the allocation of net amounts received by
Insurer to separate series (the "Divisions"; reference herein to the "Separate
Account" includes reference to each Division to the extent the context requires)
of the Separate Account for investment in the shares of corresponding underlying
investment media, such as the Portfolio;
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Fund and Distributor will make shares of the Portfolio
available to Insurer for this purpose at net asset value and with no sales
charges, all subject to the following provisions:
Section 1. Additional Portfolios
---------------------------------
The Fund has and may, from time to time, add additional Portfolios, which
will become subject to this Agreement, if, upon the written consent of each of
the Parties hereto, they are made available as investment media for the
Contracts and, in accordance with such written consent, Schedule A hereto is
modified.
2
Section 2. Processing Transactions
-----------------------------------
2.1 Timely Pricing and Orders.
-------------------------
The Adviser or its designated agent will provide closing net asset value,
dividend and capital gain information for the Portfolio to Insurer (usually as
of the close of the New York Stock Exchange) as soon as reasonably practicable
after calculation on each day (a "Business Day") on which (a) the New York Stock
Exchange is open for regular trading, (b) the Fund calculates the Portfolio's
net asset value pursuant to rules of the SEC and (c) Insurer is open for
business. The Fund or its designated agent will use its best efforts to provide
this information by 6:30 p.m., New York time. Insurer will use these data to
calculate unit values, which in turn will be used to process transactions that
receive that same Business Day's Separate Account Division's unit values. Such
Separate Account processing will be done the same evening, and corresponding
orders with respect to Fund shares will be placed by facsimile the morning of
the following Business Day. Insurer will use its best efforts to place such
orders with the Fund by 9:00 a.m., New York time.
3
2.2 Timely Payments.
---------------
Insurer will transmit orders for purchases and redemptions of Fund shares
to Distributor, and will wire payment for net purchases to a custodial account
designated by the Fund on the day the order for Fund shares is placed to the
extent practicable. Payment for net redemptions will be in federal funds wired
by the Fund to an account designated by Insurer on the same day as the order is
placed, to the extent practicable, and in any event be made within five calendar
days after the date the order is placed in order to enable Insurer to pay
redemption proceeds within the time specified in Section 22(e) of the Investment
Company Act of 1940, as amended (the "1940 Act") or such shorter period of time
as may be required by law.
2.3 Applicable Price.
----------------
The Parties agree that Portfolio share purchase and redemption orders
resulting from Contract owner purchase payments, surrenders, partial
withdrawals, routine withdrawals of charges, or other transactions under
Contracts will be executed at the net asset values as determined as of the close
of regular trading on the New York Stock Exchange on the Business Day that
Insurer receives such orders and processes such transactions, which, Insurer
agrees, shall occur not earlier than the Business Day prior to Distributor's
receipt of the corresponding orders for purchases and redemptions of Portfolio
shares. For the purposes of this section, Insurer shall be deemed to be the
designee of the Fund for receipt of such orders from holders of or applicants
for Contracts, and receipt by Insurer shall constitute receipt by the Fund. All
other purchases and redemptions of Portfolio shares by Insurer will be effected
at the net asset values next computed after receipt by Distributor of the order
therefor, and such orders will be irrevocable. The
4
Adviser or its designee shall furnish same day notice (by facsimile followed by
written confirmation) to the Insurer of all purchases or redemptions by the
Insurer. If the Adviser provides materially incorrect net asset value
information, the Insurer shall be entitled to an adjustment to the number of
Shares purchased or redeemed to reflect the correct net asset value per Share
(and, if and to the extent necessary, the Insurer shall make adjustments to the
number of units credited or and/or unit values for the Contracts for the periods
affected). Any error in the calculation or reporting of net asset value per
Share, dividend or capital gains information greater than or equal to $.01 per
share shall be reported immediately upon discovery to the Insurer. The Adviser
or its designee shall furnish same day notice (by facsimile followed by written
confirmation) to the Insurer of all dividends or capital gains distributions
paid by the Portfolio(s). Insurer hereby elects to reinvest all dividends and
capital gains distributions in additional shares of the corresponding Portfolio
at the record-date net asset values until Insurer otherwise notifies the Adviser
in writing, it being agreed by the Parties that the record date and the payment
date with respect to any dividend or distribution will be the same Business Day.
Section 3. Costs and Expenses
------------------------------
3.1 General.
-------
Except as otherwise specifically provided herein, each Party will bear all
expenses incident to its performance under this Agreement.
5
3.2 Registration.
------------
The Fund will bear the cost of its registering as a management investment
company under the 1940 Act and registering its shares under the Securities Act
of 1933, as amended (the "1933 Act"), and keeping such registrations current and
effective; including, without limitation, the preparation of and filing with the
Securities and Exchange Commission (the "SEC") of Forms N-SAR and Rule 24f-2
Notices respecting the Fund and its shares and payment of all applicable
registration or filing fees with respect to any of the foregoing. Insurer will
bear the cost of registering the Separate Account as a unit investment trust
under the 1940 Act and registering units of interest under the Contracts under
the 1933 Act and keeping such registrations current and effective; including,
without limitation, the preparation and filing with the SEC of Forms N-SAR and
Rule 24f-2 Notices respecting the Separate Account and its units of interest and
payment of all applicable registration or filing fees with respect to any of the
foregoing.
6
3.3 Disclosure Documents.
--------------------
The Fund will bear the costs of preparing, filing with the SEC and setting
for printing the Fund's prospectus, statement of additional information and any
amendments or supplements thereto (collectively, the "Fund Prospectus"),
periodic reports to shareholders, Fund proxy material and other shareholder
communications and any related requests for voting instructions from
Participants (as defined below). The Fund or the Distributor will bear the costs
of printing in quantity and delivering to existing Participants the Fund
Prospectus and other documents set forth above in this Section 3.3. Insurer will
bear the costs of preparing, filing with the SEC and setting for printing, the
Separate Account's prospectus, statement of additional information and any
amendments or supplements thereto (collectively, the "Separate Account
Prospectus"), any periodic reports to owners, annuitants or participants under
the Contracts (collectively, "Participants"), and other Participant
communications. The Fund will deliver camera ready copy of its documents to
Insurer. If requested by Insurer, the Fund will provide text to Insurer on
diskette to facilitate printing and binding with the Separate Account documents.
In the event that such documents are printed and bound together, the expenses of
such printing shall be apportioned between the Insurer, and the Fund or the
Distributor, in proportion to the number of pages of the Separate Account
Prospectus and the Fund Prospectus, taking into account other relevant factors
affecting the expense of printing, such as covers, columns, graphs and charts;
the Fund or the Distributor to bear the cost of printing the Fund Prospectus
portion of such document for distribution to owners of existing Contracts funded
by the Portfolio(s) and the Insurer to bear the expenses of printing the
Separate Account Prospectus; provided, however, that the Insurer shall bear all
printing expenses of such combined documents where used for distribution to
7
prospective purchasers of Contracts or to owners of existing Contracts not
funded by the Portfolio(s).
3.4 Distribution Expenses.
---------------------
Expenses of distributing the Contracts will be paid by Insurer.
3.5 Parties to Cooperate.
--------------------
The Adviser, Insurer and Distributor each agrees to cooperate with the
others, as applicable, in arranging to print, mail and/or deliver combined or
coordinated prospectuses or other materials of the Fund and Separate Account.
Section 4. Legal Compliance
----------------------------
4.1 Tax Laws.
--------
(a) The Adviser will qualify and maintain qualification of the Portfolio
as a regulated investment company ("RIC") under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and the Adviser or Distributor
will notify Insurer immediately upon having a reasonable basis for believing
that the Portfolio has ceased to so qualify or that it might not so qualify in
the future.
(b) Subject to Sections 4.1(a) and 4.1(c) hereof, Insurer represents that
it believes, in good faith, that the Contracts will be treated as annuity
contracts under applicable provisions of
8
the Code and that it will make every effort to maintain such treatment. Insurer
will notify the Fund and Distributor immediately upon having a reasonable basis
for believing that any of the Contracts have ceased to be so treated or that
they might not be so treated in the future.
(c) The Fund and the Adviser will comply and maintain the Portfolio's
compliance with the diversification requirements set forth in Section 817(h) of
the Code and Section 1.817-5(b) of the regulations under the Code, and the Fund,
Adviser or Distributor will notify Insurer immediately upon having a reasonable
basis for believing that a Portfolio has ceased to so comply or that a Portfolio
might not so comply in the future. In the event that a Portfolio is not so
diversified at the end of any applicable quarter, the Adviser and Distributor
will make every effort to adequately diversify the Portfolio so as to achieve
compliance within the grace period afforded by Treas. Reg. 1.817.5, and notify
Insurer in accordance with this Section 4.1(c).
(d) Subject to Sections 4.1(a) and 4.1(c) hereof, Insurer represents that
it believes, in good faith, that the Separate Account is a "segregated asset
account" and that interests in the Separate Account are offered exclusively
through the purchase of or transfer into a "variable contract," within the
meaning of such terms under Section 817(h) of the Code and the regulations
thereunder. Insurer will make every effort to continue to meet such definitional
requirements, and it will notify the Fund and Distributor immediately upon
having a reasonable basis for believing that such requirements have ceased to be
met or that they might not be met in the future.
9
(e) The Adviser will manage the Fund as a RIC in compliance with
Subchapter M of the Code and will manage the Fund to ensure its in compliance
with Section 817(h) of the Code and regulations thereunder. The Fund has adopted
and will maintain procedures for ensuring that the Fund is managed in compliance
with Subchapter M and Section 817(h) and regulations there under.
(f) Should the Distributor or Adviser become aware of a failure of Fund,
or a Portfolio, to be in compliance with Subchapter M of the Code or Section
817(h) of the Code and regulations thereunder, they represent and agree that
they will immediately notify Insurer of such in writing.
4.2 Insurance and Certain Other Laws.
--------------------------------
(a) Insurer represents and warrants that (i) it is an insurance company
duly organized, validly existing and in good standing under the laws of the
State of Arkansas and has full corporate power, authority and legal right to
execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains the
Separate Account as a segregated asset account under Arkansas State law, and
(iii) the Contracts comply in all material respects with all other applicable
federal and state laws and regulations.
(b) Insurer represents and warrants that Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Contracts Distributor"), the principal underwriter with
respect to the Contracts, is
10
a business corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware and has full corporate power, authority
and legal right to execute, deliver, and perform its duties.
(c) Distributor represents and warrants that it is a business corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and has full corporate power, authority and legal right to
execute, deliver, and perform its duties and comply with its obligations under
this Agreement.
(d) Adviser represents and warrants that it is a limited partnership, duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full power, authority, and legal right to execute, deliver, and
perform its duties and comply with its obligations under this Agreement.
(e) The Adviser and the Distributor represent and warrant that the Fund is
a corporation duly organized, validly existing, and in good standing under the
laws of Maryland and has full power, authority and legal right to execute,
deliver, and perform its duties.
(f) The Adviser and the Distributor represent that the Fund's investment
policies, fees and expenses are and shall at all times remain in compliance with
applicable state securities laws, if any, and with the insurance laws of the
state of Arkansas and California, and that their respective operations are and
shall at all times remain in material compliance with applicable state
11
securities laws and with the insurance laws of the states of Arkansas and
California to the extent required to perform this Agreement. In addition, the
Portfolio(s) will comply with any additional applicable state insurance laws or
regulations to the extent specifically requested in writing by the Insurer.
4.3 Securities Laws.
---------------
(a) Insurer represents and warrants that (i) interests in the Separate
Account pursuant to the Contracts will be registered under the 1933 Act to the
extent required by the 1933 Act and the Contracts will be duly authorized for
issuance and sold in compliance with applicable law, (ii) the Separate Account
is and will remain registered under the 1940 Act, to the extent required by the
1940 Act, (iii) the Separate Account does and will comply in all material
respects with the requirements of the 1940 Act and the rules thereunder, (iv)
the Separate Account's 1933 Act registration statement relating to the
Contracts, together with any amendments thereto, will at all times comply in all
material respects with the requirements of the 1933 Act and the rules
thereunder, and (v) the Separate Account Prospectus will at all times comply in
all material respects with the requirements of the 1933 Act and the rules
thereunder.
(b) The Adviser and Distributor represent and warrant that (i) Fund
shares sold pursuant to this Agreement will be registered under the 1933 Act to
the extent required by the 1933 Act and duly authorized for issuance and sold in
compliance with applicable law, (ii) the Fund is and will remain registered
under the 1940 Act to the extent required by the 1940 Act, (iii) the Fund will
amend the registration statement for its shares under the 1933 Act and for
itself
12
under the 1940 Act from time to time as required in order to effect the
continuous offering of its shares, (iv) the Fund does and will comply in all
material respects with the requirements of the 1940 Act and the rules
thereunder, (v) the Fund's 1933 Act registration statement, together with any
amendments thereto, will at all times comply in all material respects with the
requirements of the 1933 Act and rules thereunder, and (vi) the Fund Prospectus
will at all times comply in all material respects with the requirements of the
1933 Act and the rules thereunder.
(c) Distributor represents and warrants that it is registered as a broker-
dealer with the SEC under the Securities Exchange Act of 1934, as amended, and
is a member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD").
(d) Insurer represents and warrants that Contracts Distributor is
registered as a broker-dealer with the SEC under the Securities Exchange Act of
1934, as amended, and is a member in good standing of the NASD.
13
4.4 Notice of Certain Proceedings and Other Circumstances.
-----------------------------------------------------
(a) Distributor or the Fund shall immediately notify Insurer of (i)
the issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to the Fund's registration statement
under the 1933 Act or the Fund Prospectus, (ii) any request by the SEC for any
amendment to such registration statement or Fund Prospectus, (iii) the
initiation of any proceedings for that purpose or for any other purpose relating
to the registration or offering of the Fund's shares, or (iv) any other action
or circumstances that may prevent the lawful offer or sale of Fund shares in any
state or jurisdiction, including, without limitation, any circumstances in which
(x) the Fund's shares are not registered and, in all material respects, issued
and sold in accordance with applicable state and federal law or (y) such law
precludes the use of such shares as an underlying investment medium of the
Contracts issued or to be issued by Insurer. Distributor and the Fund will make
every reasonable effort to prevent the issuance of any such stop order, cease
and desist order or similar order and, if any such order is issued, to obtain
the lifting thereof at the earliest possible time.
(b) Insurer shall immediately notify the Fund of (i) the issuance by
any court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to the Separate Account's registration statement
under the 1933 Act relating to the Contracts or the Separate Account Prospectus,
(ii) any request by the SEC for any amendment to such registration statement or
Separate Account Prospectus, (iii) the initiation of any proceedings for that
purpose or for any other purpose relating to the registration or offering of the
Separate Account interests pursuant to the Contracts, or (iv) any other action
or circumstances that may prevent the lawful
14
offer or sale of said interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not registered and, in
all material respects, issued and sold in accordance with applicable state and
federal law. Insurer will make every reasonable effort to prevent the issuance
of any such stop order, cease and desist order or similar order and, if any such
order is issued, to obtain the lifting thereof at the earliest possible time.
4.5 Insurer to Provide Documents.
----------------------------
Upon request, Insurer will provide to the Fund and the Distributor one
complete copy of SEC registration statements, Separate Account Prospectuses,
reports, any preliminary and final voting instruction solicitation material,
applications for exemptions, requests for no-action letters, and amendments to
any of the above, that relate to the Separate Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
4.6 Fund to Provide Documents.
-------------------------
Upon request, the Adviser or the Fund will provide to Insurer one
complete copy of SEC registration statements, Fund Prospectuses, reports, any
preliminary and final proxy material, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate to the
Fund or its shares, contemporaneously with the filing of such document with the
SEC or other regulatory authorities.
The Adviser or its designee shall provide the Insurer with as much notice
as is reasonably practicable of any proxy solicitation for a Portfolio (but in
any event, such notice shall be
15
provided at least forty-five days prior to the anticipated date of such
solicitation), and of any material change in the Fund Prospectus or registration
statement, particularly any change resulting in a change to the Separate Account
Prospectus or registration statement relating to the Contracts.
The Adviser or its designee shall also provide to the Insurer, within
five Business Days after the end of a calendar month, the following information
with respect to each Portfolio, each as of the last Business Day of such
calendar month: the Portfolio's ten largest portfolio holdings (based on
percentage of the Portfolio's net assets); the five industry sectors in which
the Portfolio's investments are most heavily weighted; the relative proportion
of the Portfolio's net assets invested in equity, bond, and cash instruments,
respectively; the geographic regions in which the Portfolio's investments are
most heavily weighted; and year-to-date SEC standard performance data. In
addition, the Adviser or its designee agrees to provide to the Insurer, within
fifteen Business Days after the end of a calendar quarter, the following
information with respect to each Portfolio, each as of the last Business Day of
such quarter: a market commentary from the portfolio manager of such Portfolio;
a complete list of the Portfolio's portfolio holdings; and access to the
portfolio manager of such Portfolio for the purposes of preparing audio and
video tapes relating to the Portfolio's management and performance. Also, the
Adviser or its designee agrees to provide to the Insurer within fifteen Business
Days after a request is submitted to the Adviser by the Insurer, the following
information with respect to each Portfolio, each as of the date or dates
specified in such request: net asset value; net asset value per Share; and other
Share information. The Fund, the Adviser, and the Distributor acknowledge that
such information may be furnished to the Insurer's internal or independent
auditors and to the insurance departments
16
of the various jurisdictions in which the Insurer does business.
4.7 Sales Material and Information.
------------------------------
(a) The Insurer shall furnish, or shall cause to be furnished, to the
Distributor or its designee, each piece of sales literature or other promotional
material in which the Fund, the Adviser, or the Distributor, or any affiliate
thereof, are named, at least ten (10) Business Days prior to its use. No such
material shall be used if the Distributor or its designee reasonably objects to
such use within ten (10) Business Days after receipt of such material.
(b) The Insurer shall not give any information or make any representations
or statements on behalf of the Fund, the Adviser, or any affiliate thereof or
concerning the Fund or any other such entity in connection with the sale of the
Contracts other than the information or representations contained in the
registration statement, prospectus or statement of additional information for
the Fund, as such registration statement, prospectus and statement of additional
information 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 Distributor or its designee, except with the permission
of the Distributor or its designee. The Distributor and its respective designees
each agrees to respond to any request for approval on a prompt and timely basis.
(c) The Adviser, the Distributor, or their respective designees shall
furnish, or shall cause to be furnished, to the Insurer or its designee, each
piece of sales literature or other
17
promotional material in which the Insurer, the Contracts Distributor, or any
affiliate thereof, are named, at least ten (10) Business Days prior to its use.
No such material shall be used if the Insurer or its designee reasonably objects
to such use within ten (10) Business Days after receipt of such material.
(d) The Adviser and the Distributor shall not give any information or
make any representations or statements on behalf of the Insurer, the Contracts
Distributor, or any affiliate thereof or concerning the Insurer or any other
such entity in connection with the sale of shares of the Portfolio(s) or the
Contracts other than the information or representations contained in the
registration statement, prospectus or statement of additional information for
the Separate Account, as such registration statement, prospectus and statement
of additional information may be amended or supplemented from time to time, or
in reports for the Separate Account, or in sales literature or other promotional
material approved by the Insurer or its designee, except with the permission of
the Insurer or its designee. The Insurer and its respective designees each
agrees to respond to any request for approval on a prompt and timely basis.
(e) The parties hereto agree that this Section 4.7 is not intended to
designate or otherwise imply that the Insurer is an underwriter or distributor
of the Fund's shares.
18
Section 5. Mixed and Shared Funding
------------------------------------
5.1 General.
-------
The Fund has obtained an order exempting it from certain provisions of
the 1940 Act and rules thereunder so that the Fund is available for investment
by certain other entities, including, without limitation, separate accounts
funding variable life insurance policies and separate accounts of insurance
companies unaffiliated with Insurer ("Mixed and Shared Funding").
5.2 Disinterested Directors.
-----------------------
The Fund agrees that its Board of Directors shall at all times consist
of directors a majority of whom (the "Disinterested Directors") are not
interested persons of Adviser or Distributor within the meaning of Section
2(a)(19) of the 1940 Act.
5.3 Monitoring for Material Irreconcilable Conflicts.
------------------------------------------------
The Fund agrees that its Board of Directors will monitor for the
existence of any material irreconcilable conflict between the interests of the
participants in all separate accounts of life insurance companies utilizing the
Fund, including the Separate Account. Insurer agrees to inform the Board of
Directors of the Fund of the existence of or any potential for any such material
irreconcilable conflict of which it is aware. The concept of a "material
irreconcilable conflict" is not defined by the 1940 Act or the rules thereunder,
but the Parties recognize that such a conflict may arise for a variety of
reasons, including, without limitation:
19
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax or securities
regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Portfolio are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract participants or by participants of
different life insurance companies utilizing the Fund; or a decision by a life
insurance company utilizing the Fund to disregard the voting instructions of
participants.
Insurer will assist the Board of Directors in carrying out its
responsibilities by providing the Board of Directors with all information
reasonably necessary for the Board of Directors to consider any issue raised,
including information as to a decision by Insurer to disregard voting
instructions of Participants.
20
5.4 Conflict Remedies.
-----------------
(a) It is agreed that if it is determined by a majority of the members
of the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, Insurer and the other life insurance
companies utilizing the Fund will, at their own expense and to the extent
reasonably practicable (as determined by a majority of the Disinterested
Directors), take whatever steps are necessary to remedy or eliminate the
material irreconcilable conflict, which steps may include, but are not limited
to:
(i) withdrawing the assets allocable to some or all of the separate
accounts from the Fund or any Portfolio and reinvesting such assets in
a different investment medium, including another Portfolio of the
Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected participants and, as
appropriate, segregating the assets of any particular group (e.g.,
annuity contract owners or participants, life insurance contract
owners or all contract owners and participants of one or more life
insurance companies utilizing the Fund) that votes in favor of such
segregation, or offering to the affected contract owners or
participants the option of making such a change; and
(ii) establishing a new registered investment company of the type defined
as a "Management Company" in Section 4(3) of the 1940 Act or a new
separate account that is operated as a Management Company.
(b) If the material irreconcilable conflict arises because of Insurer's
decision to
21
disregard Participant voting instructions and that decision represents a
minority position or would preclude a majority vote, Insurer may be required, at
the Fund's election, to withdraw the Separate Account's investment in the Fund.
No charge or penalty will be imposed as a result of such withdrawal. Any such
withdrawal must take place within six months after the Fund gives notice to
Insurer that this provision is being implemented, and until such withdrawal
Distributor and the Fund shall continue to accept and implement orders by
Insurer for the purchase and redemption of shares of the Fund.
(c) Insurer agrees that any remedial action taken by it in resolving any
material irreconcilable conflict will be carried out at its expense and with a
view only to the interests of Participants. Insurer understands that the Fund
reserves the right to pay any portion of a redemption in kind of portfolio
securities if the Board of Directors determines that it would be detrimental to
the best interests of shareholders to make a redemption wholly in cash.
(d) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will the Fund or Distributor be
required to establish a new funding medium for any Contracts. Insurer will not
be required by the terms hereof to establish a new funding medium for any
Contracts if an offer to do so has been declined by vote of a majority of
Participants materially adversely affected by the material irreconcilable
conflict.
22
5.5 Notice to Insurer.
-----------------
The Fund will promptly make known in writing to Insurer the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 Information Requested by Board of Directors.
-------------------------------------------
Insurer and the Fund will at least annually submit to the Board of
Directors of the Fund such reports, materials or data as the Board of Directors
may reasonably request so that the Board of Directors may fully carry out the
obligations imposed upon it by the provisions hereof, and said reports,
materials and data will be submitted at any reasonable time deemed appropriate
by the Board of Directors. All reports received by the Board of Directors of
potential or existing conflicts, and all Board of Directors actions with regard
to determining the existence of a conflict, notifying life insurance companies
utilizing the Fund of a conflict, and determining whether any proposed action
adequately remedies a conflict, will be properly recorded in the minutes of the
Board of Directors or other appropriate records, and such minutes or other
records will be made available to the SEC upon request.
23
5.7 Compliance with SEC Rules.
-------------------------
If, at any time during which the Fund is serving an investment medium for
variable life insurance policies, 1940 Act Rules 6e-3(T) or, if applicable, 6e-2
are amended or Rule 6e-3 is adopted to provide exemptive relief with respect to
Mixed and Shared Funding, the Parties agree that they will comply with the terms
and conditions thereof and that the terms of this Section 5 shall be deemed
modified if and only to the extent required in order also to comply with the
terms and conditions of such exemptive relief that is afforded by any of said
rules that are applicable.
Section 6. Termination
-----------------------
6.1 Events of Termination.
---------------------
Subject to Section 6.4 below, this Agreement will terminate as to a
Portfolio:
(a) at the option of Insurer or Distributor upon at least six (6) months
advance written notice to the other Parties, or
(b) at the option of the Distributor upon institution of formal
proceedings against Insurer or Contracts Distributor by the NASD, the SEC, any
state insurance regulator or any other regulatory body regarding Insurer's
obligations under this Agreement or related to the sale of the Contracts, the
operation of the Separate Account, or the purchase of the Fund shares, if, in
each case, the Distributor reasonably determines that such proceedings, or the
facts on which such proceedings would be based, have a material likelihood of
imposing material adverse
24
consequences on the Portfolio to be terminated; or
(c) at the option of Insurer upon institution of formal proceedings
against the Fund, Adviser, Distributor, or their affiliates by the NASD, the
SEC, or any state insurance regulator or any other regulatory body regarding the
Fund's, Adviser's, Distributor's, or affiliate's obligations under this
Agreement or related to the operation or management of the Fund or the purchase
of Fund shares, if, in each case, Insurer reasonably determines that such
proceedings, or the facts on which such proceedings would be based, have a
material likelihood of imposing material adverse consequences on Insurer,
Separate Account, Contracts Distributor or the Division corresponding to the
Portfolio to be terminated; or
(d) at the option of any Party in the event that (i) the Portfolio's
shares are not registered and, in all material respects, issued and sold in
accordance with any applicable state and federal law or (ii) such law precludes
the use of such shares as an underlying investment medium of the Contracts
issued or to be issued by Insurer; or
(e) upon termination of the corresponding Division's investment in the
Portfolio pursuant to Section 5 hereof; or
(f) at the option of Insurer if the Portfolio ceases to qualify as a RIC
under Subchapter M of the Code or under successor or similar provisions or the
Insurer reasonably believes that the Portfolio may fail to so comply; or
25
(g) at the option of Insurer if the Portfolio fails to comply with
Section 17(h) of the Code or with successor or similar provisions or the Insurer
reasonably believes that the Portfolio may fail to so comply; or
(h) at the option of any party to this Agreement, upon another party's
failure to cure a material breach of any provision of this Agreement within
thirty (30) days after written notice thereof; or
(i) at the option of the Insurer upon receipt of any necessary regulatory
approvals and/or the vote of owners of Contracts having an interest in the
Separate Account to substitute the shares of another investment company for
shares of the corresponding Portfolio in accordance with the terms of the
Contracts for which those Portfolio shares serve as underlying funding media.
The Insurer will give thirty (30) days' prior written notice to the Distributor
of the date of any proposed vote or other action taken to substitute shares of
the Portfolio; or
(j) at the option of the Fund, the Adviser or the Distributor by written
notice to the Insurer, if the Fund, the Adviser, and/or the Distributor shall
conclude, in their sole judgment exercised in good faith, that the Insurer 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
(k) at the option of the Insurer by written notice to the Fund, if the
Insurer shall
26
conclude, in its sole judgment exercised in good faith, that the Fund, Adviser,
or Distributor 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
(l) upon the assignment of this Agreement, unless made with the written
consent of each party hereto.
6.2 Funds to Remain Available.
-------------------------
Except (i) as necessary to implement Participant-initiated transactions,
(ii) as required by state insurance laws or regulations, (iii) as required
pursuant to Section 5 of this Agreement, or (iv) with respect to any Portfolio
as to which this Agreement has terminated, Insurer shall not (x) redeem Fund
shares attributable to the Contracts, or (y) prevent Participants from
allocating payments to or transferring amounts from a Portfolio that was
otherwise available under the Contracts, until thirty (30) days after Insurer
shall have notified the Fund or Distributor of its intention to do so.
6.3 Survival of Warranties and Indemnifications.
-------------------------------------------
All warranties and indemnifications will survive the termination of this
Agreement.
27
6.4 Continuance of Agreement for Certain Purposes.
---------------------------------------------
Notwithstanding any termination of this Agreement, the Distributor shall
continue to make available shares of the Portfolios pursuant to the terms and
conditions of this Agreement, for all Contracts in effect on the effective date
of termination of this Agreement (the "Existing Contracts"), except as otherwise
provided under Section 5 of this Agreement. Specifically, and without
limitation, the Distributor shall facilitate the sale and purchase of shares of
the Portfolios as necessary in order to process premium payments, surrenders and
other withdrawals, and transfers or reallocations of values under Existing
Contracts.
Section 7. Parties to Cooperate Respecting Termination
-------------------------------------------------------
The other Parties hereto agree to cooperate with and give reasonable
assistance to Insurer in taking all necessary and appropriate steps for the
purpose of ensuring that the Separate Account owns no shares of a Portfolio
after the Final Termination Date with respect thereto.
Section 8. Assignment
----------------------
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
28
Section 9. Notices
-------------------
Notices and communications required or permitted by Section 2 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
Merrill Lynch Insurance Group, Inc.
Administrative Offices
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Attn: Barry G. Skolnick, Esq.
Fax: (609) 282-1247
Alliance Fund Distributors. Inc.
1345 Avenue of the Americas
New York NY 10105
Attn.: Edmund P. Bergan
FAX: (212) 969-2290
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York NY 10105
Attn: Edmund P. Bergen
FAX: (212) 969-2290
29
Section 10. Voting Procedures
------------------------------
Insurer will distribute all proxy material furnished by the Fund to
Participants and will vote Fund shares in accordance with instructions received
from Participants. Insurer will vote Fund shares that are (a) not attributable
to Participants or (b) attributable to Participants, but for which no
instructions have been received, in the same proportion as Fund shares for which
said instructions have been received from Participants. Insurer agrees that it
will disregard Participant voting instructions only to the extent it would be
permitted to do so pursuant to Rule 6e-3(T)(b)(15)(iii) under the 1940 Act if
the Contracts were variable life insurance policies subject to that rule. Other
participating life insurance companies utilizing the Fund will be responsible
for calculating voting privileges in a manner consistent with that of Insurer,
as prescribed by this Section 10.
30
Section 11. Indemnification
----------------------------
11.1 Of Fund, Distributor and Adviser by Insurer.
-------------------------------------------
(a) Except to the extent provided in Sections 11.1(b) and 11.1(c), below,
Insurer agrees to indemnify and hold harmless the Fund, Distributor and Adviser,
and each of their directors and officers, (collectively, the "Indemnified
Parties" for purposes of this Section 11.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of Insurer) or actions in respect thereof (including, to the extent
reasonable, legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or actions are related to
the sale, acquisition, or holding of the Fund's shares and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Separate Account's
1933 Act registration statement, the Separate Account Prospectus or,
to the extent prepared by Insurer or Contracts Distributor, sales
literature or advertising 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
Insurer or
31
Contracts Distributor by or on behalf of the Fund, Distributor or
Adviser for use in the Separate Account's 1933 Act registration
statement, the Separate Account Prospectus, the Contracts, or sales
literature or advertising (or any amendment or supplement to any of
the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations contained
in the Fund's 1933 Act registration statement, Fund Prospectus, sales
literature or advertising of the Fund, or any amendment or supplement
to any of the foregoing, not supplied for use therein by or on behalf
of Insurer or Contracts Distributor) or the negligent, illegal or
fraudulent conduct of Insurer or Contracts Distributor or persons
under their control (including, without limitation, their employees
and "Associated Persons," as that term is defined in paragraph (m) of
Article I of the NASD's By-Laws), in connection with the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Fund's 1933 Act
registration statement, Fund Prospectus, sales literature or
advertising of the Fund, or any amendment or supplement to any of the
foregoing, 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 and in conformity with information
furnished to the Fund, Adviser
32
or Distributor by or on behalf of Insurer or Contracts Distributor
for use in the Fund's 1933 Act registration statement, Fund
Prospectus, sales literature or advertising of the Fund, or any
amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by Insurer or Contracts Distributor
to perform the obligations, provide the services and furnish the
materials required of them under the terms of this Agreement.
(b) Insurer shall not be liable under this Section 11.1 with respect to
any losses, claims, damages, liabilities or actions to which an Indemnified
Party would otherwise be subject by reason of willful misfeasance, bad faith, or
gross negligence in the performance by that Indemnified Party of its duties or
by reason of that Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to Distributor or to the Fund.
(c) Insurer shall not be liable under this Section 11.1 with respect to
any action against an Indemnified Party unless the Fund, Distributor or Adviser
shall have notified Insurer in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify Insurer of any such action shall not relieve
Insurer from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this
33
Section 11.1. In case any such action is brought against an Indemnified Party,
Insurer shall be entitled to participate, at its own expense, in the defense of
such action. Insurer also shall be entitled to assume the defense thereof, with
counsel approved by the Indemnified Party named in the action, which approval
shall not be unreasonably withheld. After notice from Insurer to such
Indemnified Party of Insurer's election to assume the defense thereof, the
Indemnified Party will cooperate fully with Insurer and shall bear the fees and
expenses of any additional counsel retained by it, and Insurer will not be
liable to such Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by such Indemnified Party independently in
connection with the defense thereof, other than reasonable costs of
investigation.
11.2 Of Insurer and Contracts Distributor by Adviser.
-----------------------------------------------
(a) Except to the extent provided in Sections 11.2(c) and 11.2(d), below,
Adviser agrees to indemnify and hold harmless Insurer and Contracts Distributor,
each of their directors and officers, and each person, if any, who controls
Insurer or Contracts Distributor within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified Parties" for purposes of this Section 11.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of Adviser) or actions in respect thereof
(including, to the extent reasonable, legal and other expenses) to which the
Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or actions are
related to the sale, acquisition, or holding of the Fund's shares and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of
34
any material fact contained in the Fund's 1933 Act registration
statement, Fund Prospectus, sales literature or advertising of the
Fund or, to the extent not prepared by Insurer or Contracts
Distributor, sales literature or advertising 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
Distributor, Adviser or the Fund by or on behalf of Insurer or
Contracts Distributor for use in the Fund's 1933 Act registration
statement, Fund Prospectus, or in sales literature or advertising (or
any amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations contained
in the Separate Account's 1933 Act registration statement, Separate
Account Prospectus, sales literature or advertising for the
Contracts, or any amendment or supplement to any of the foregoing,
not supplied for use therein by or on behalf of Distributor, Adviser,
or the Fund) or the negligent, illegal or fraudulent conduct of the
Fund, Distributor, Adviser or persons under their control (including,
without limitation, their employees and Associated Persons), in
connection with the sale or distribution of the Contracts
35
or Fund shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Separate
Account's 1933 Act registration statement, Separate Account
Prospectus, sales literature or advertising covering the Contracts,
or any amendment or supplement to any of the foregoing, or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, if such statement or omission was made in
reliance upon and in conformity with information furnished to
Insurer or Contracts Distributor by or on behalf of the Fund,
Distributor or Adviser for use in the Separate Account's 1933 Act
registration statement, Separate Account Prospectus, sales
literature or advertising covering the Contracts, or any amendment
or supplement to any of the foregoing; or
(iv) arise as a result of any failure by the Fund, Adviser or Distributor
to perform the obligations, provide the services and furnish the
materials required of them under the terms of this Agreement;
(b) Except to the extent provided in Sections 11.2(c) and 11.2(d)
hereof, Adviser agrees to indemnify and hold harmless the Indemnified Parties
from and against any and all losses, claims, damages, liabilities (including
amounts paid in settlement thereof with the written
36
consent of Adviser) or actions in respect thereof (including, to the extent
reasonable, legal and other expenses) to which the Indemnified Parties may
become subject directly or indirectly under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or actions
directly or indirectly result from or arise out of the failure of any Portfolio
to operate as a regulated investment company in compliance with (i) Subchapter M
of the Code and regulations thereunder and (ii) Section 817(h) of the Code and
regulations thereunder (except to the extent that such failure is caused by
Insurer), including, without limitation, any income taxes and related penalties,
rescission charges, liability under state law to Contract owners or Participants
asserting liability against Insurer or Contracts Distributor pursuant to the
Contracts, the costs of any ruling and closing agreement or other settlement
with the Internal Revenue Service, and the cost of any substitution by Insurer
of shares of another investment company or portfolio for those of any adversely
affected Portfolio as a funding medium for the Separate Account that Insurer
deems necessary or appropriate as a result of the noncompliance.
(c) Adviser shall not be liable under this Section 11.2 with respect to
any losses, claims, damages, liabilities or actions to which an Indemnified
Party would otherwise be subject by reason of willful misfeasance, bad faith, or
gross negligence in the performance by that Indemnified Party of its duties or
by reason of such Indemnified Party's reckless disregard of its obligations and
duties under this Agreement or to Insurer, Contracts Distributor or the Separate
Account.
(d) Adviser shall not be liable under this Section 11.2 with respect to
any action
37
against an Indemnified Party unless Insurer or Contracts Distributor shall have
notified Adviser in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the action shall have
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but failure to
notify Adviser of any such action shall not relieve Adviser from any liability
which it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this Section 11.2. In case any such action is
brought against an Indemnified Party, Adviser will be entitled to participate,
at its own expense, in the defense of such action. Adviser also shall be
entitled to assume the defense thereof (which shall include, without limitation,
the conduct of any ruling request and closing agreement or other settlement
proceeding with the Internal Revenue Service), with counsel approved by the
Indemnified Party named in the action, which approval shall not be unreasonably
withheld. After notice from Adviser to such Indemnified Party of Adviser's
election to assume the defense thereof, the Indemnified Party will cooperate
fully with Adviser and shall bear the fees and expenses of any additional
counsel retained by it, and Adviser will not be liable to such Indemnified Party
under this Agreement for any legal or other expenses subsequently incurred by
such Indemnified Party independently in connection with the defense thereof,
other than reasonable costs of investigation.
38
11.3 Effect of Notice.
----------------
Any notice given by the indemnifying party to an Indemnified Party referred
to in Section 11.1(c) or 11.2(d) above of participation in or control of any
action by the indemnifying party will in no event be deemed to be an admission
by the indemnifying party of liability, culpability or responsibility, and the
indemnifying party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
Section 12. Applicable Law
--------------------------
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with New York law, without regard for that state's
principles of conflict of laws.
Section 13. Execution in Counterparts
-------------------------------------
This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.
Section 14. Severability
------------------------
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
39
Section 15. Rights Cumulative
-----------------------------
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, that the Parties are entitled to under federal and state
laws.
Section 16. Restrictions on Sales of Fund Shares
------------------------------------------------
Insurer agrees that the Fund will be permitted (subject to the other
terms of this Agreement) to make its shares available to separate accounts of
other life insurance companies.
Section 17. Headings
--------------------
The headings used in this Agreement are for purposes of reference only
and shall not limit or define the meaning of the provisions of this Agreement.
40
Section 18. Trademarks, Etc.
----------------------------
Except as otherwise expressly provided in this Agreement, neither the
Adviser, the Distributor, or any affiliate thereof shall use any trademark,
trade name, service mark or logo of Insurer or any of its affiliates, or any
variation of any such trademark, trade name, service mark or logo, without
Insurer's prior written consent, the granting of which shall be at Insurer's
sole option. Except as otherwise expressly provided in this Agreement, neither
Insurer nor any affiliate thereof shall use any trademark, trade name, service
mark or logo of the Fund, the Adviser, the Distributor or any of their
affiliates, or any variation of any trademark, trade name, service mark or logo,
without the prior written consent of the Adviser or the Distributor, the
granting of which shall be at the sole option of the Adviser or the Distributor,
as applicable.
41
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers signing below.
MERRILL LYNCH LIFE INSURANCE
COMPANY
By
------------------------------
Title
---------------------------
ALLIANCE CAPITAL MANAGEMENT L.P.
By
------------------------------
Title
---------------------------
ALLIANCE FUND DISTRIBUTORS, INC.
By
------------------------------
Title
---------------------------
42
As of
--------------
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
--------------------------------------
- -----------------------------------------------------------------------------------------
Name of Separate
Account and Date Policies Funded Portfolios
Established by Board of Directors by Separate Account Applicable to Policies
- -----------------------------------------------------------------------------------------
Merrill Lynch Life Variable Merrill Lynch Fund's Premier Growth Portfolio
Annuity Separate Retirement Plus
Account A Variable Annuity
(8/6/91)
- -----------------------------------------------------------------------------------------
43
EX-99.B8M
19
EXHIBIT (8)(M)
EXHIBIT (8)(m)
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
MERRILL LYNCH LIFE INSURANCE COMPANY.
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this ____ day of November 1996, by
and among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), MERRILL LYNCH LIFE INSURANCE Company, an Arkansas company (the
"Company"), on its own behalf and on behalf of each of the segregated asset
accounts of the Company set forth in Schedule A hereto, as may be amended from
time to time (the "Accounts"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a
Delaware corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or variable
life insurance contracts (individually, the "Policy" or, collectively, the
"Policies") which, if required by applicable law, will be registered under the
1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated asset
accounts, established by resolution of the Board of Directors of the Company, to
set aside and invest assets attributable to the aforesaid variable annuity
and/or variable life insurance contracts that are allocated to the Accounts (the
Policies and the Accounts covered by this Agreement, and each corresponding
Portfolio covered by this Agreement in which the Accounts invest, is specified
in Schedule A attached hereto as may be modified from time to time);
WHEREAS, the Company has registered or will register the Accounts as unit
investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered as a
broker-dealer with the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"), and is
a member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD");
WHEREAS, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") the
underwriter for the individual variable annuity and the variable life policies,
is registered as a broker-dealer with the SEC under the 1934 Act and is a member
in good standing of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust, MFS,
and the Company agree as follows:
ARTICLE I. SALE OF TRUST SHARES
--------------------
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that Business
Day, as defined below) and which are available for purchase by such
Accounts, executing such orders on a daily basis at the net asset value
next computed after receipt by the Trust or its designee of the order for
the Shares. For purposes of this Section 1.1, the Company shall be the
designee of the Trust for receipt of such orders from Policy owners and
receipt by such designee shall constitute receipt by the Trust; provided
--------
that the Trust receives notice of such orders by 9:30 a.m. New York time on
the next following Business Day. "Business Day" shall mean any day on
which the New York Stock Exchange, Inc. (the "NYSE") is open for trading
and on which the Trust calculates its net asset value pursuant to the rules
of the SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and the
Accounts on those days on which the Trust calculates its net asset value
pursuant to rules of the SEC and the Trust shall calculate such net asset
value on each day which the NYSE is open for trading. Notwithstanding the
foregoing, the Board of Trustees of the Trust (the "Board") may refuse to
sell any Shares to the Company and the Accounts, or suspend or terminate
the offering of the Shares if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of
the Board acting in good faith and in light of its fiduciary duties under
federal and any applicable state laws, necessary in the best interest of
the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to
insurance companies which have entered into participation agreements with
the Trust and MFS (the "Participating Insurance Companies") and their
separate accounts, qualified pension and retirement plans and MFS or its
affiliates. The Trust and MFS will not sell Trust shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Articles III and VII of this Agreement is in
effect to govern such sales. The Company will not resell the Shares except
to the Trust or its agents.
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed by
Policy owners on that Business Day), executing such requests on a daily
basis at the net asset value next computed after receipt by the Trust or
its designee of the request for redemption. For purposes of this Section
1.4, the Company shall be the designee of the Trust for receipt of requests
for redemption from Policy owners and receipt by such designee shall
constitute receipt by the Trust; provided that the Trust receives notice of
such request for redemption by 9:30 a.m. New York time on the next
following Business Day.
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted with
respect to any Portfolio. However, with respect to payment of the purchase
price by the Company and of redemption proceeds by the Trust, the Company
-2-
and the Trust shall net purchase and redemption orders with respect to each
Portfolio and shall transmit one net payment for all of the Portfolios in
accordance with Section 1.6 hereof.
1.6. In the event of net purchases, the Company shall pay for the Shares
by 2:00 p.m. New York time on the next Business Day after an order to
purchase the Shares is deemed to be received in accordance with the
provisions of Section 1.1. hereof. In the event of net redemptions, the
Trust shall pay the redemption proceeds by 2:00 p.m. New York time on the
next Business Day after an order to redeem the shares is deemed to be
received in accordance with the provisions of Section 1.4. hereof. All
such payments shall be in federal funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only.
Stock certificates will not be issued to the Company or the Accounts. The
Shares ordered from the Trust will be recorded in an appropriate title for
the Accounts or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire, facsimile or
telephone followed by written confirmation) to the Company of any dividends
or capital gain distributions payable on the Shares. The Company hereby
elects to receive all such dividends and distributions as are payable on a
Portfolio's Shares in additional Shares of that Portfolio. The Trust shall
notify the Company of the number of Shares so issued as payment of such
dividends and distributions.
1.9. The Trust or its custodian shall make the net asset value per share
for each Portfolio available to the Company on each Business Day as soon as
reasonably practical after the net asset value per share is calculated and
shall use its best efforts to make such net asset value per share available
by 6:30 p.m. New York time. In the event that the Trust is unable to meet
the 6:30 p.m. time stated herein, it shall provide additional time for the
Company to place orders for the purchase and redemption of Shares. Such
additional time shall be equal to the additional time which the Trust takes
to make the net asset value available to the Company. If the Trust
provides materially incorrect share net asset value information, the Trust
shall make an adjustment to the number of shares purchased or redeemed for
the Accounts to reflect the correct net asset value per share. Any
material error in the calculation or reporting of net asset value per
share, dividend or capital gains information shall be reported promptly
upon discovery to the Company.
ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
-------------------------------------------------
2.1. The Company represents and warrants that the Policies are or will be
registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold, and
distributed in compliance in all material respects with all applicable
state and federal laws, including without limitation the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940
Act. The Company further represents and warrants that it is an insurance
company duly organized and in good standing under applicable law and that
it has legally and validly established the Account as a segregated asset
account under applicable law and has registered or, prior to any issuance
or sale of the Policies, will register the Accounts as unit investment
trusts in accordance with the provisions of the 1940 Act (unless exempt
therefrom) to serve as segregated investment accounts for the Policies, and
that it will maintain such registration for so long as any Policies are
outstanding. The Company shall amend the registration statements under the
1933 Act for the Policies and the registration statements under the 1940
Act for the Accounts from time to time as required in order to effect the
continuous offering of the Policies or as may otherwise be required by
applicable law. The Company shall register and qualify the Policies for
sales in accordance with the securities laws of the various states only if
and to the extent deemed necessary by the Company.
2.2. Subject to Article VI hereof, the Company represents and warrants
that the Policies are currently
-3-
and at the time of issuance will be treated as life insurance, endowment or
annuity contracts under applicable provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), that it will maintain such treatment and
that it will notify the Trust or MFS immediately upon having a reasonable
basis for believing that the Policies have ceased to be so treated or that
they might not be so treated in the future.
2.3. The Company represents and warrants that MLPF&S, the underwriter for
the individual variable annuity and the variable life policies, is a member
in good standing of the NASD and is a registered broker-dealer with the
SEC. The Company represents and warrants that the Company and MLPF&S will
sell and distribute such policies in accordance in all material respects
with all applicable state and federal securities laws, including without
limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.4. The Trust and MFS represent and warrant that the Shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized
for issuance and sold in compliance with the laws of The Commonwealth of
Massachusetts and all applicable federal and state securities laws and that
the Trust is and shall remain registered under the 1940 Act. The Trust
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 Trust shall register and qualify
the Shares for sale in accordance with the laws of the various states only
if and to the extent deemed necessary by the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.
The Trust and MFS represent that the Trust and the Underwriter will sell
and distribute the Shares in accordance in all material respects with all
applicable state and federal securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.
2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that it
does and will comply in all material respects with the 1940 Act and
Subchapter M of the Code and any applicable regulations thereunder.
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it shall
perform its obligations for the Trust in compliance in all material
respects with any applicable federal securities laws and with the
securities laws of The Commonwealth of Massachusetts. MFS represents and
warrants that it is not subject to state securities laws other than the
securities laws of The Commonwealth of Massachusetts and that it is exempt
from registration as an investment adviser under the securities laws of The
Commonwealth of Massachusetts.
2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably request so
that it may carry out fully the obligations imposed upon it by the
conditions contained in the exemptive application pursuant to which the SEC
has granted exemptive relief to permit mixed and shared funding (the "Mixed
and Shared Funding Exemptive Order").
2.9 The Trust and MFS represent that they have used their best efforts to
maintain the Trust's investment policies, fees and expenses in compliance
with the insurance laws and regulations of the state of California; and the
Trust and MFS further represent and warrant that they shall use their best
efforts to comply in all material respects with the insurance laws and
regulations of the states of Arkansas, New York, California, and any
additional state, to the extent that such laws or regulations are
specifically provided to the Trust or MFS in writing by the Company.
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
---------------------------------------
-4-
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the Shares
as the Company may reasonably request for distribution to existing Policy
owners whose Policies are funded by such Shares. The Trust or its designee
shall provide the Company, at the Company's expense, with as many copies of
the current prospectus for the Shares as the Company may reasonably request
for distribution to prospective purchasers of Policies. If requested by
the Company in lieu thereof, the Trust or its designee shall provide such
documentation (including a "camera ready" copy of the new prospectus as set
in type or, at the request of the Company, as a diskette in the form sent
to the financial printer) and other assistance as is reasonably necessary
in order for the parties hereto once each year (or more frequently if the
prospectus for the Shares is supplemented or amended) to have the
prospectus for the Policies and the prospectus for the Shares printed
together in one document; the expenses of such printing to be apportioned
between (a) the Company and (b) the Trust or its designee in proportion to
the number of pages of the Policy and Shares' prospectuses, taking account
of other relevant factors affecting the expense of printing, such as
covers, columns, graphs and charts; the Trust or its designee to bear the
cost of printing the Shares' prospectus portion of such document for
distribution to owners of existing Policies funded by the Shares and the
Company to bear the expenses of printing the portion of such document
relating to the Accounts; provided, however, that the Company shall bear
--------
all printing expenses of such combined documents where used for
distribution to prospective purchasers or to owners of existing Policies
not funded by the Shares. In the event that the Company requests that the
Trust or its designee provides the Trust's prospectus in a "camera ready"
or diskette format, the Trust shall be responsible for providing the
prospectus in the format in which it or MFS is accustomed to formatting
prospectuses and shall bear the expense of providing the prospectus in such
format (e.g., typesetting expenses), and the Company shall bear the expense
----
of adjusting or changing the format to conform with any of its
prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or its
designee. The Trust or its designee, at its expense, shall print and
provide such statement of additional information to the Company (or a
master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Trust or
its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable for
duplication by the Company) for distribution to a prospective purchaser who
requests such statement or to an owner of a Policy not funded by the
Shares.
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's proxy
materials, reports to Shareholders and other communications to Shareholders
in such quantity as the Company shall reasonably require for distribution
to Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3 above,
or of Article V below, the Company shall pay the expense of printing or
providing documents to the extent such cost is considered a distribution
expense. Distribution expenses would include by way of illustration, but
are not limited to, the printing of the Shares' prospectus or prospectuses
for distribution to prospective purchasers or to owners of existing
Policies not funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate to
include in the prospectus pursuant to which a Policy is offered disclosure
regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
-5-
(b) vote the Shares in accordance with instructions received from
Policy owners; and
(c) vote the Shares for which no instructions have been received in
the same proportion as the Shares of such Portfolio for which
instructions have been received from Policy owners;
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.
Subject to applicable law, the Company will in no way recommend action in
connection with or oppose or interfere with the solicitation of proxies for
the Shares held for such Policy owners. The Company reserves the right to
vote shares held in any segregated asset account in its own right, to the
extent permitted by law. Participating Insurance Companies shall be
responsible for assuring that each of their separate accounts holding
Shares calculates voting privileges in the manner required by the Mixed and
Shared Funding Exemptive Order. The Trust and MFS will notify the Company
of any changes of interpretations or amendments to the Mixed and Shared
Funding Exemptive Order.
-6-
ARTICLE IV. SALES MATERIAL AND INFORMATION
------------------------------
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust, MFS, any other investment adviser to the
Trust, or any affiliate of MFS are named, at least seven (7) Business Days
prior to its use. No such material shall be used if the Trust, MFS, or
their respective designees reasonably objects to such use within seven (7)
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statement on behalf of the Trust, MFS, any other
investment adviser to the Trust, or any affiliate of MFS or concerning the
Trust or any other such entity in connection with the sale of the Policies
other than the information or representations contained in the registration
statement, prospectus or statement of additional information for the
Shares, as such registration statement, prospectus and statement of
additional information may be amended or supplemented from time to time, or
in reports or proxy statements for the Trust, or in sales literature or
other promotional material approved by the Trust, MFS or their respective
designees, except with the permission of the Trust, MFS or their respective
designees. The Trust, MFS or their respective designees each agrees to
respond to any request for approval on a prompt and timely basis. The
Company shall adopt and implement procedures reasonably designed to ensure
that information concerning the Trust, MFS or any of their affiliates which
is intended for use only by brokers or agents selling the Policies (i.e.,
----
information that is not intended for distribution to Policy owners or
prospective Policy owners) is so used, and neither the Trust, MFS nor any
of their affiliates shall be liable for any losses, damages or expenses
relating to the improper use of such broker only materials by agents of the
Company or its affiliates who are unaffiliated with the Trust or MFS. The
parties hereto agree that this Section 4.2 is not intended to designate nor
otherwise imply that the Company is an underwriter or distributor of the
Trust's shares.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company and/or the Accounts is
named, at least seven (7) Business Days prior to its use. No such material
shall be used if the Company or its designee reasonably objects to such use
within seven (7) Business Days after receipt of such material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter
shall not give, any information or make any representations on behalf of
the Company or concerning the Company, the Accounts, or the Policies in
connection with the sale of the Policies other than the information or
representations contained in a registration statement, prospectus, or
statement of additional information for the Policies, as such registration
statement, prospectus and statement of additional information may be
amended or supplemented from time to time, or in reports for the Accounts,
or in sales literature or other promotional material approved by the
Company or its designee, except with the permission of the Company. The
Company or its designee agrees to respond to any request for approval on a
prompt and timely basis. The Trust and MFS shall mark information produced
by or on behalf of the Trust "FOR BROKER USE ONLY" which is intended for
use only by brokers or agents selling the Policies (i.e., information that
is not intended for distribution to Policy holders or prospective
Policyholders), and neither the Company, nor MLPF&S nor any of their
affiliates shall be liable for any losses, damages or expense arising on
account of the use by brokers of such information with third parties in the
event that it is not so marked. The parties hereto agree that this Section
4.4. is neither intended to designate nor otherwise imply that MFS is an
underwriter or distributor of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company or
the Trust, as appropriate) will each provide to the other at least one
complete copy of all registration statements, prospectuses, statements of
additional information, reports, proxy statements, sales literature and
other promotional
-7-
materials, applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to the Policies, or to the
Trust or its Shares, prior to or contemporaneously with the filing of such
document with the SEC or other regulatory authorities. The Company and the
Trust shall also each promptly inform the other of the results of any
examination by the SEC (or other regulatory authorities) that relates to
the Policies, the Trust or its Shares, and the party that was the subject
of the examination shall provide the other party with a copy of relevant
portions of any "deficiency letter" or other correspondence or written
report regarding any such examination.
4.6. The Trust and MFS will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Portfolio (but in
any event, such notice shall be provided at least forty-five days prior to
the anticipated date of such solicitation), and of any material change in
the Trust's registration statement, particularly any change resulting in
change to the registration statement or prospectus or statement of
additional information for any Account. The Trust and MFS will cooperate
with the Company so as to enable the Company to solicit proxies from Policy
owners or to make changes to its prospectus, statement of additional
information or registration statement, in an orderly manner. The Trust and
MFS will make reasonable efforts to attempt to have changes affecting
Policy prospectuses become effective simultaneously with the annual updates
for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited to
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures, or
other public media), and sales literature (such as brochures, circulars,
reprints or excerpts of any other advertisement, sales literature, or
published articles), distributed or made generally available to customers
or the public, educational or training materials or communications
distributed or made generally available to some or all agents or employees.
4.8. The Trust and MFS agree to provide to the Company, within five (5)
Business Days after the end of a calendar month, the following information
--------------
with respect to each Portfolio of the Trust set forth on Schedule A, each
as of the last Business Day of such calendar month: the Portfolio's ten
largest portfolio holdings (based on the percentage of the Portfolio's net
assets); the five industry sectors in which the Portfolio's investments are
most heavily weighted; the relative proportion of the Portfolio's net
assets invested in equity, bond, and cash instruments, respectively; the
geographic regions in which the Portfolio's investments are most heavily
weighted; and year-to-date SEC standardized performance data. In addition,
the Trust and MFS agree to provide to the Company, within fifteen (15)
Business Days after the end of a calendar quarter, the following
information with respect to each Portfolio of the Trust set forth on
Schedule A, each as of the last Business Day of such quarter: a market
commentary from the portfolio manager of such Portfolio; and a complete
--------------
list of portfolio holdings (which will not be audited or reconciled against
---------------------------------------------------------------------------
the Portfolio's books and records). Also, the Trust and MFS agree to
-----------------------------------
provide to the Company, within fifteen (15) Business Days after a request
is submitted to the Trust or to MFS by the Company, the following
information with respect to each Portfolio of the Trust set forth on
Schedule A, each as of the date or dates specified in such request: net
asset value; net asset value per Share; and other Share information. The
Trust and MFS acknowledge that such information may be furnished to the
Company's internal or independent auditors and to the insurance departments
of the various jurisdictions in which the Company does business.
ARTICLE V. FEES AND EXPENSES
-----------------
5.1. The Trust shall pay no fee or other compensation to the Company under
this Agreement, and the Company shall pay no fee or other compensation to
the Trust, except that if the Trust or any Portfolio adopts and implements
a plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution
and Shareholder servicing expenses, then, subject to obtaining any required
exemptive orders or regulatory approvals, the Trust may make payments to
the Company or to the underwriter for the Policies if and in
-8-
amounts agreed to by the Trust in writing. Each party, however, shall, in
accordance with the allocation of expenses specified in Articles III and V
hereof, reimburse other parties for expenses initially paid by one party
but allocated to another party. In addition, nothing herein shall prevent
the parties hereto from otherwise agreeing to perform, and arranging for
appropriate compensation for, other services relating to the Trust and/or
to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable federal
and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration fees;
preparation and filing of the Trust's proxy materials and reports to
Shareholders; setting in type and printing its prospectus and statement of
additional information (to the extent provided by and as determined in
accordance with Article III above); setting in type and printing the proxy
materials and reports to Shareholders (to the extent provided by and as
determined in accordance with Article III above); the preparation of all
statements and notices required of the Trust by any federal or state law
with respect to its Shares; all taxes on the issuance or transfer of the
Shares; and the costs of distributing the Trust's prospectuses and proxy
materials to owners of Policies funded by the Shares and any expenses
permitted to be paid or assumed by the Trust pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act. The Trust shall not bear any expenses
of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies and
of distributing the Trust's Shareholder reports to Policy owners. The
Company shall bear all expenses associated with the registration,
qualification, and filing of the Policies under applicable federal
securities and state insurance laws; the cost of preparing, printing and
distributing the Policy prospectus and statement of additional information;
and the cost of preparing, printing and distributing annual individual
account statements for Policy owners as required by state insurance laws.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
---------------------------------------
6.1. The Trust and MFS represent and warrant that each Portfolio of the
Trust will meet the diversification requirements of Section 817(h)(1) of
the Code and Treas. Reg. 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts,
as they may be amended from time to time (and any revenue rulings, revenue
procedures, notices, and other published announcements of the Internal
Revenue Service interpreting these sections). In the event that any
Portfolio is not so diversified at the end of any applicable quarter, the
Trust and MFS will make every effort to (a) adequately diversify the
Portfolio so as to achieve compliance within the grace period afforded by
Treas. Reg. 1.817.5 and (b) notify the Company.
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
----------------------------
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for the
existence of any material irreconcilable conflict between the interests of
the variable annuity contract owners and the variable life insurance policy
owners of the Company and/or affiliated companies ("contract owners")
investing in the Trust. The Board shall have the sole authority to
determine if a material irreconcilable conflict exists, and such
determination shall be binding on the Company only if approved in the form
of a resolution by a majority of the Board, or a majority of the
disinterested trustees of the Board. The Board will give prompt notice of
any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its
-9-
responsibilities under the conditions set forth in the Trust's exemptive
application pursuant to which the SEC has granted the Mixed and Shared
Funding Exemptive Order by providing the Board, as it may reasonably
request, with all information necessary for the Board to consider any
issues raised and agrees that it will be responsible for promptly reporting
any potential or existing conflicts of which it is aware to the Board
including, but not limited to, an obligation by the Company to inform the
Board whenever contract owner voting instructions are disregarded. The
Company also agrees that, if a material irreconcilable conflict arises, it
will at its own cost remedy such conflict up to and including (a)
withdrawing the assets allocable to some or all of the Accounts from the
Trust or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the
Trust, or submitting to a vote of all affected contract owners whether to
withdraw assets from the Trust or any Portfolio and reinvesting such assets
in a different investment medium and, as appropriate, segregating the
assets attributable to any appropriate group of contract owners that votes
in favor of such segregation, or offering to any of the affected contract
owners the option of segregating the assets attributable to their contracts
or policies, and (b) establishing a new registered management investment
company and segregating the assets underlying the Policies, unless a
majority of Policy owners materially adversely affected by the conflict
have voted to decline the offer to establish a new registered management
investment company.
7.3. A majority of the disinterested trustees of the Board shall determine
whether any proposed action by the Company adequately remedies any material
irreconcilable conflict. In the event that the Board determines that any
proposed action does not adequately remedy any material irreconcilable
conflict, the Company will withdraw from investment in the Trust each of
the Accounts designated by the disinterested trustees and terminate this
Agreement within six (6) months after the Board informs the Company in
writing of the foregoing determination; provided, however, that such
-------- -------
withdrawal and termination shall be limited to the extent required to
remedy any such material irreconcilable conflict as determined by a
majority of the disinterested trustees of the Board.
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Mixed and Shared Funding Exemptive Order)
on terms and conditions materially different from those contained in the
Mixed and Shared Funding Exemptive Order, then (a) the Trust and/or the
Participating Insurance Companies, as appropriate, shall take such steps as
may be necessary to comply with Rule 6e-2 and 6e-3(T), as amended, and Rule
6e-3, as adopted, to the extent such rules are applicable; and (b) Sections
3.5, 3.6, 7.1, 7.2, 7.3, and 7.4 of this Agreement shall continue in effect
only to the extent that terms and conditions substantially identical to
such Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
---------------
8.1. Indemnification by the Company
------------------------------
The Company agrees to indemnify and hold harmless the Trust, MFS, any
affiliates of MFS, and each of their respective directors/trustees,
officers and each person, if any, who controls MFS within the meaning of
Section 15 of the 1933 Act, and any agents or employees of the foregoing
(each an "Indemnified Party," or collectively, the "Indemnified Parties"
for purposes of this Section 8.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company) or expenses (including reasonable counsel fees) to
which any Indemnified Party may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Shares or the
Policies and:
-10-
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus or statement of additional
information for the Policies or contained in sales literature or
other promotional material for the Policies (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 reasonable reliance upon and in conformity
with information furnished to the Company or its designee by or
on behalf of the Trust or MFS for use in the registration
statement, prospectus or statement of additional information for
the Policies or in the Policies or sales literature or other
promotional material (or any amendment or supplement) or
otherwise for use in connection with the sale of the Policies or
Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material of
the Trust not supplied by the Company or its designee, or persons
under its control and on which the Company has reasonably relied)
or wrongful conduct of the Company or persons under its control,
with respect to the sale or distribution of the Policies or
Shares; or
(c) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the registration statement,
prospectus, statement of additional information, or sales
literature or other promotional literature of the Trust, 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 Trust by or on behalf
of the Company; or
(d) 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; or
(e) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.2. Indemnification by the Trust
----------------------------
The Trust 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, and any agents or
employees of the foregoing (each an "Indemnified Party," or collectively,
the "Indemnified Parties" for purposes of this Section 8.2) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Trust) or expenses (including
reasonable counsel fees) to which any Indemnified Party may become subject
under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Shares or the
Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus, statement of additional
-11-
information or sales literature or other promotional material of
the Trust (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement therein not
misleading, provided that this agreement to indemnify shall not
--------
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reasonable
reliance upon and in conformity with information furnished to the
Trust, MFS, the Underwriter or their respective designees by or
on behalf of the Company for use in the registration statement,
prospectus or statement of additional information for the Trust
or in sales literature or other promotional material for the
Trust (or any amendment or supplement) or otherwise for use in
connection with the sale of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material for
the Policies not supplied by the Trust, MFS, the Underwriter or
any of their respective designees or persons under their
respective control and on which any such entity has reasonably
relied) or wrongful conduct of the Trust or persons under its
control, with respect to the sale or distribution of the Policies
or Shares; or
(c) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the registration statement,
prospectus, statement of additional information, or sales
literature or other promotional literature for the Policies, 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 Trust or MFS; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement) or arise
out of or result from any other material breach of this Agreement
by the Trust; or
(e) 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; or
(f) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of the
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating Insurance
Company or any Policy holder, with respect to any losses, claims, damages,
liabilities or expenses that arise out of or result from (i) a breach of
any representation, warranty, and/or covenant made by the Company hereunder
or by any Participating Insurance Company under an agreement containing
substantially similar representations, warranties and covenants; (ii) the
failure by the Company or any Participating Insurance Company to maintain
its segregated asset account (which invests in any Portfolio) as a legally
and validly established segregated asset account under applicable state law
and as a duly registered unit investment trust under the provisions of the
1940 Act (unless exempt therefrom); or (iii) subject to the Trust's
compliance with the diversification requirements specified in Article VI,
the
-12-
failure by the Company or any Participating Insurance Company to maintain
its variable annuity and/or variable life insurance contracts (with respect
to which any Portfolio serves as an underlying funding vehicle) as life
insurance, endowment or annuity contracts under applicable provisions of
the Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to any
losses, claims, damages, liabilities or expenses to which an Indemnified
Party would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, willful misconduct, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section
8.5. of notice of commencement of any action, such Indemnified Party will,
if a claim in respect thereof is to be made against the indemnifying party
under this section, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any Indemnified Party
otherwise than under this section. In case any such action is brought
against any Indemnified Party, and it notified the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, assume the defense
thereof, with counsel satisfactory to such Indemnified Party. After notice
from the indemnifying party of its intention to assume the defense of an
action, the Indemnified Party shall bear the expenses of any additional
counsel obtained by it, and the indemnifying party shall not be liable to
such Indemnified Party under this section for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of
the commencement of any litigation or proceeding against it or any of its
respective officers, directors, trustees, employees or 1933 Act control
persons in connection with the Agreement, the issuance or sale of the
Policies, the operation of the Accounts, or the sale or acquisition of
Shares.
8.7. A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
--------------
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
9.2. 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 X. NOTICE OF FORMAL PROCEEDINGS
----------------------------
The Trust, MFS, and the Company agree that each such party shall promptly
notify the other parties to this Agreement, in writing, of the institution of
any formal proceedings brought against such party or its designees by the NASD,
the SEC, or any insurance department or any other regulatory body regarding such
party's duties under this Agreement or related to the sale of the Policies, the
operation of the Accounts, or the purchase of the Shares.
-13-
ARTICLE XI. TERMINATION
------------
11.1. This Agreement shall terminate with respect to the Accounts, or one,
some, or all Portfolios:
(a) at the option of any party upon six (6) months' advance written
notice to the other parties; or
(b) at the option of the Company to the extent that the Shares of
Portfolios are not reasonably available to meet the requirements
of the Policies or are not "appropriate funding vehicles" for the
Policies, as reasonably determined by the Company. Without
limiting the generality of the foregoing, the Shares of a
Portfolio would not be "appropriate funding vehicles" if, for
example, such Shares did not meet the diversification or other
requirements referred to in Article VI hereof; or if the Company
would be permitted to disregard Policy owner voting instructions
pursuant to Rule 6e-2 or 6e-3(T) under the 1940 Act. Prompt
notice of the election to terminate for such cause and an
explanation of such cause shall be furnished to the Trust by the
Company; or
(c) at the option of the Trust or MFS upon institution of formal
proceedings against the Company by the NASD, the SEC, or any
insurance department or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of
the Policies, the operation of the Accounts, or the purchase of
the Shares; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body
regarding the Trust's or MFS' duties under this Agreement or
related to the sale of the Shares; or
(e) at the option of the Company, the Trust or MFS upon receipt of
any necessary regulatory approvals and/or the vote of the Policy
owners having an interest in the Accounts (or any subaccounts) to
substitute the shares of another investment company for the
corresponding Portfolio Shares in accordance with the terms of
the Policies for which those Portfolio Shares had been selected
to serve as the underlying investment media. The Company will
give thirty (30) days' prior written notice to the Trust of the
Date of any proposed vote or other action taken to replace the
Shares; or
(f) termination by either the Trust or MFS by written notice to the
Company, if either one or both of the Trust or MFS 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
(g) termination by the Company by written notice to the Trust and
MFS, if the Company shall determine, in its sole judgment
exercised in good faith, that the Trust or MFS has suffered a
material adverse change in this business, operations, financial
condition or prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(h) at the option of any party to this Agreement, upon another
party's failure to cure a material breach of any provision of
this Agreement within thirty days after written notice thereof;
or
-14-
(i) upon assignment of this Agreement, unless made with the written
consent of the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies and,
if applicable, the Accounts as to which the Agreement is to be terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised for
cause or for no cause.
11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations, the
Company shall not redeem the Shares attributable to the Policies (as
opposed to the Shares attributable to the Company's assets held in the
Accounts), and the Company shall not prevent Policy owners from allocating
payments to a Portfolio that was otherwise available under the Policies,
until thirty (30) days after the Company shall have notified the Trust of
its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and MFS
shall, at the option of the Company, continue to make available additional
shares of the Portfolios pursuant to the terms and conditions of this
Agreement, for all Policies in effect on the effective date of termination
of this Agreement (the "Existing Policies"), except as otherwise provided
under Article VII of this Agreement. Specifically, without limitation, the
owners of the Existing Policies shall be permitted to transfer or
reallocate investment under the Policies, redeem investments in any
Portfolio and/or invest in the Trust upon the making of additional purchase
payments under the Existing Policies.
ARTICLE XII. NOTICES
-------
Any notice shall be sufficiently given when sent by registered or certified
mail, overnight courier or facsimile 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 Trust:
MFS Variable Insurance Trust
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, Secretary
If to the Company:
Merrill Lynch Insurance Group, Inc.
Administrative Offices
800 Scudders Mill Road
Plainsboro, NJ 08536
Facsimile No.: (609) 282-1247
Attn: Mr. Barry G. Skolnick , Esq.
Senior Vice President and
General Counsel
If to MFS:
Massachusetts Financial Services Company
-15-
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, General Counsel
ARTICLE XIII. MISCELLANEOUS
-------------
13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and, except
as permitted by this Agreement or as otherwise required by applicable law
or regulation, 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 it may come into the
public domain.
13.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
13.4. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.
13.7. 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.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument are
not binding upon any of the Trust's trustees, officers, employees, agents
or shareholders individually, but are binding solely upon the assets and
property of the Trust in accordance with its proportionate interest
hereunder. The Company further acknowledges that the assets and
liabilities of each Portfolio are separate and distinct and that the
obligations of or arising out of this instrument are binding solely upon
the assets or property of the Portfolio on whose behalf the Trust has
executed this instrument. The Company also agrees that the obligations of
each Portfolio hereunder shall be several and not joint, in accordance with
its proportionate interest hereunder, and the Company agrees not to proceed
against any Portfolio for the obligations of another Portfolio.
13.9. Except as otherwise expressly provided in this Agreement, neither
the Trust nor MFS nor any affiliate thereof shall use any trademark, trade
name, service mark or logo of the Company or any of its affiliates, or any
variation of any such trademark, trade name, service mark or logo, without
the Company's prior written consent, the granting of which shall be at the
Company's sole option. Except as otherwise expressly provided in this
Agreement, neither the Company nor any affiliate thereof shall use any
trademark, trade name, service mark or logo of the Trust or of MFS, or any
variation of any such
-16-
trademark, trade name, service mark or logo, without the prior written
consent of either the Trust or of MFS, as appropriate, the granting of
which shall be at the sole option of the Trust or of MFS, as applicable.
-17-
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 above.
MERRILL LYNCH LIFE INSURANCE COMPANY.
By its authorized officer,
By: _______________________________
Title: ____________________________
MFS VARIABLE INSURANCE TRUST, on behalf of the
Portfolios
By its authorized officer and not individually,
By: _______________________________
Title: ____________________________
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: _______________________________
Title: ____________________________
-18-
As of ____________________
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
--------------------------------------
Name of Separate
Account and Date Policies Funded Portfolios
Established by Board of Directors by Separate Account Applicable to Policies
========================================================================================
Merrill Lynch Life Variable Merrill Lynch Fund's MFS Emerging Growth Series
Annuity Separate Retirement Plus
Account A Variable Annuity MFS Research Series
(8/6/91)
- ----------------------------------------------------------------------------------------
-19-
EX-99.B9
20
EXHIBIT (9)
EXHIBIT (9)
November 22, 1996
Board of Directors
Merrill Lynch Life Insurance Company
800 Scudders Mill Road
Plainsboro, New Jersey 08536
To The Board Of Directors:
In my capacity as General Counsel of Merrill Lynch Life Insurance Company
(the "Company"), I have supervised the preparation of Post-Effective Amendment
No. 10 to the registration statements on Form N-4 of the Merrill Lynch Life
Variable Annuity Separate Account A (File No. 33-43773) and Merrill Lynch Life
Variable Annuity Separate Account B (File No. 33-45379) (the "Accounts") to be
filed by the Company with the Securities and Exchange Commission under the
Securities Act of 1933 and the Investment Company Act of 1940. Such registration
statements describe certain individual variable annuity contracts which will
participate in the Accounts.
I am of the following opinion:
1. The Company has been duly organized under the laws of the State of
Arkansas and is a validly existing corporation.
2. The individual variable annuity contracts, when issued in accordance
with the prospectus contained in the aforesaid registration
statements and upon compliance with applicable local law, will be
legal and binding obligations of the Company in accordance with
their terms.
3. The Accounts are duly created and validly existing as separate
accounts of the Company pursuant to Arkansas law.
4. The assets held in the Accounts equal to the reserves and other
contract liabilities with respect to the Accounts will not be
chargeable with liabilities arising out of any other business the
Company may conduct.
In arriving at the foregoing opinion, I have made such examination of law
and examined such records and other documents as in my judgment are necessary or
appropriate.
I hereby consent to the filing of this opinion as an exhibit to the
aforesaid registration statements and to the reference to me under the caption
"Legal Matters" in the prospectus contained in said registration statements.
Very truly yours,
/s/ Barry G. Skolnick
Barry G. Skolnick
Senior Vice President and
General Counsel
EX-99.B10A
21
EXHIBIT (10)(A)
EXHIBIT (10)(a)
December 6, 1996
Board of Directors
Merrill Lynch Life Insurance Company
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus filed as part of Post-Effective Amendment No. 10 to
Form N-4 (File No. 33-43773) for Merrill Lynch Life Variable Annuity Separate
Account A of Merrill Lynch Life Insurance Company. In giving this consent, we do
not admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN, L.L.P.
By /s/ Kimberly J. Smith
---------------------------------
Kimberly J. Smith
EX-99.10B
22
EXHIBIT (10)(B)
EXHIBIT (10)(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 10 to
Registration Statement No. 33-43773 of Merrill Lynch Life Variable Annuity
Separate Account A on Form N-4 of our reports on (i) Merrill Lynch Life
Insurance Company dated February 26, 1996, and (ii) Merrill Lynch Life Variable
Annuity Separate Account A dated January 18, 1996, appearing in the Statement of
Additional Information, which is a part of such Registration Statement, and to
the reference to us under the heading "Experts" in the Prospectus, which is a
part of such Registration Statement.
/s/ Deloitte & Touche LLP
New York, New York
December 5, 1996
EX-99.B13
23
EXHIBIT (13)
EXHIBIT (13)
------------
There is a $40 Contract Maintenance Charge applied to the contract when the
contract value is less than $50,000. It is calculated and deducted
proportionately from each subaccount on the contract anniversary or at full
surrender based on the contract value at that time.
Domestic Money Market Sub-Account
---------------------------------
Note that the information presented below is hypothetical.
7-Day Current Yield
Current Yield = ((NCS-ES)/UV/7) x 365
where NCS = the net change in the value of the Series (exclusive
of realized gains and losses on the sale of securities
and unrealized appreciation and depreciation) for the
7-day period attributable to a hypothetical account
having a balance of 1 Sub-Account unit.
ES = M&E + ADMIN + CMC
where ES = per unit expenses of the Sub-Account for the 7-day
period
M&E = per unit Mortality & Expense Risk Charges Deducted
for the 7-day period
ADMIN = per unit Administration Charges deducted for the 7-day
period
CMC = per unit Contract Maintenance Charge deducted for the
7-day period
= (40/AAV/365) x AUX x 7
where AAV = Average Accumulated Value of Contracts on the last day
of the 7-day period
= $30,000
AUV = the sum of the unit values on the first and last day
of the 7-day period divided by 2
= (10.000000 + 10.01298405)/2
UV = the unit value on the first day of the 7-day period
= 10.00000
Totals for 7-day period:
NCS M&E ADMIN CMC
--- --- ----- ---
0.012984 0.002397 0.000192 0.000256
= ((.012984 - .002397 - .000192 - .000256)/10.000000))/7 x 365
= 5.29% = 7-Day Current Yield
Page 2
Domestic Money Market Sub-Account
---------------------------------
7-Day Effective Yield
Effective Yield = ((1 + (NCS - ES)/UV) (CIRCUMFLEX) (365/7)) - 1
where NCS, ES, and UV are calculated as for the 7-Day Current Yield
7-Day Effective Yield = 5.43%
Page 3
Reserve Assets Sub-Account
--------------------------
Note that the information presented below is hypothetical.
7-Day Current Yield
Current Yield = ((NCS-ES)/UV/7) x 365
where NCS = the net change in the value of the Series (exclusive
of realized gains and losses on the sale of securities
and unrealized appreciation and depreciation) for the
7-day period attributable to a hypothetical account
having a balance of 1 Sub-Account unit.
ES = M&E + CMC
where ES = per unit expenses of the Sub-Account for the 7-day
period
M&E = per unit Mortality & Expense Risk Charges Deducted
for the 7-day period
CMC = per unit Contract Maintenance Charge deducted for the
7-day period
(40/AAV/365) x AUV x 7
where AAV = Average Accumulated Value of Contracts on the last day
of the 7-day period $30,000
AUV = the sum of the unit values on the first and last day
of the 7-day period divided by 2
= (10.000000 + 10.01298405)/2
UV = the unit value on the first day of the 7-day period
= 10.00000
Totals for 7-day period:
NCS M&E CMC
--- --- ---
0.012984 0.001247 0.000256
= ((.012984 - .001247 - .000256) /10.000000))/7 x 365
= 5.99% = 7-Day Current Yield
Page 4
Reserve Assets Sub-Account
--------------------------
7-Day Effective Yield
Effective Yield = ((1 + (NCS - ES)/UV) (365/7)) - 1
where NCS, ES, and UV are calculated as for the 7-Day Current Yield
7-Day Effective Yield = 6.17%
Page 5
Variable Sub-Accounts
---------------------
Quality Equity, High Current Income, Natural Resources Focus, Equity Growth,
Global Strategic Focus, Prime Bond, Flexible Strategy, American Balanced, Basic
Value Focus, Global Utility Focus, World Income Focus, International Equity
Focus.
Note that the information presented below is hypothetical.
30-Day Yield
Yield = 2 x (((NI-ES)/(U x UV)) + 1) 6 - 1)
where NI = Net income of the portfolio for the 30-day period
attributable to the Sub-Account's units
ES = M&E + ADMIN + CMC
where ES = Expenses of the Sub-Account for the 30-day period
M&E = Mortality and Expense Risk charges deducted from the
Sub-Account for the 30-day period
ADMIN = Administration charges deducted from the Sub-Account
for the 30-day period
CMC = Contract Maintenance Charge deducted from the Sub-
Account for the 30-day period
= (40 / AAV / 365) x (U x AUV) x 30
where AAV = Average Accumulated Value of Contracts on the last day
of the 30-day period
= $30,000
U = the average number of units outstanding, which equals
the number of units on the first day of the 30-day
period plus the number of units on the last day of the
30-day period, the sum of which is divided by 2
AUV = the sum of the unit values on the first and last days
of the 30-day period divided by 2
= (10.000000 + 10.063456)/2
Page 6
UV = the unit value at the close (highest) of the last day
in the 30-day period
NI M&E ADMIN CMC U UV
-- --- ----- --- - --
$25,000.00 $5,136.99 $410.96 $549.68 500,000 $10.0635
Based on the above hypothetical figures and the formulas presented, the 30-day
yield would be
30-day Yield = 4.55%
Page 7
Variable Sub-Accounts
---------------------
Domestic Money Market, Quality Equity, High Current Income, Natural Resources
Focus, Equity Growth, Global Strategic Focus, Prime Bond, Flexible Strategy,
American Balanced, Basic Value Focus, Global Utility Focus, World Income Focus,
International Equity Focus.
Note that the information presented below is hypothetical.
Total Return
Total Return = ((ERV/P) - 1)
where ERV = the value, at the end of the applicable period, of a
hypothetical $1,000 investment made at the beginning of
the applicable period. It is assumed that all dividends
and capital gains distributions are reinvested
P = a hypothetical initial investment of $1,000
ERV = (1,000 x ((EUV-BUV) / BUV)) + 1,000
CMC - (SC x 1,000)
where EUV = Unit Value at the end of the period
BUV = Unit Value at the beginning of the period
SC = Surrender Charge = 5% (assume surrender takes place 2
years from issue, the first day of contract year 3)
CMC = Contract Maintenance Charge attributable to the
hypothetical account for the period
= (40/AAV/365) x (No. of days in period) x
(1,000 +(1,000 x ((EUV - BUV)/BUV)/2))
where AAV = Average Accumulated Value of Contracts on the last day
of the period
= $30,000
BUV EUV CMC ERV
--- --- --- ---
10 11.8 2.91 1127.09
Thus the Total Return over the assumed two year period is:
Total Return = 12.71%
Page 8
Average Annual Total Return
the Average Annual Total Return would be calculated as follow:
Average Annual Total Return = ((ERV/P) (circumflex) (1/N) - 1)
where ERV and P are defined as above
and N = Number of years
= 2
which, based on the above information would yield 6.16% as an Average Annual
Total Return.
Page 9
Reserve Assets Sub-Account
--------------------------
Note that the information presented below is hypothetical.
Total Return
Total Return = ((ERV/P) - 1)
where ERV = the value, at the end of the applicable period, of a
hypothetical $1,000 investment made at the beginning of
the applicable period. It is assumed that all dividends
and capital gains distributions are reinvested
P = a hypothetical Initial Investment of
$1,000
ERV = (1,000 x ((EUV-BUV) / BUV)) +
1,000 - CMC - (SC x 1,000)
where EUV = Unit Value at the end of the period
BUV = Unit Value at the beginning of the
period
SC = Surrender Charge = 0%
CMC = Contract Maintenance Charge attributable to the
hypothetical account for the period
= (40/AAV/365) x (No. of days in period) x
(1,000 + (1,000 x ((EUV - BUV)/BUV)/2))
where AAV = Average Accumulated Value of Contracts
on the last day of the period
= $30,000
BUV EUV CMC ERV
--- --- --- ---
10 11.8 2.91 1177.09
Thus the Total Return over the assumed two year period is:
Total Return = 17.71%
Page 10
Average Annual Total Return
The Average Annual Total Return would be calculated as follows:
Average Annual Total Return = ((ERV/P) (1/N) -1)
where ERV and P are defined as above
and N = Number of years
= 2
which, based on the above information would yield 8.49% as an Average Annual
Total Return.
Page 11
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