-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OxvzBLvBqBrI/dr+F1dhkS6H7IVVNT2+eCACjKlbmQSarZqyrjvbXqJUW1DHiXrE Z3FOLvztAIUeLZqwdLIupg== 0001193125-04-074428.txt : 20040430 0001193125-04-074428.hdr.sgml : 20040430 20040429202818 ACCESSION NUMBER: 0001193125-04-074428 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20040430 EFFECTIVENESS DATE: 20040430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METROPOLITAN LIFE SEPARATE ACCOUNT UL CENTRAL INDEX KEY: 0000858997 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-57320 FILM NUMBER: 04767099 BUSINESS ADDRESS: STREET 1: 1 MADISON AVE STREET 2: METROPOLITAN LIFE INSURANCE CO CITY: NEW YORK STATE: NY ZIP: 10010 BUSINESS PHONE: 2125788717 MAIL ADDRESS: STREET 1: 1 MADISON AVENUE STREET 2: LAW DEPARTMENT AREA 7 G CITY: NEW YORK STATE: NY ZIP: 10010 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METROPOLITAN LIFE SEPARATE ACCOUNT UL CENTRAL INDEX KEY: 0000858997 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-06025 FILM NUMBER: 04767100 BUSINESS ADDRESS: STREET 1: 1 MADISON AVE STREET 2: METROPOLITAN LIFE INSURANCE CO CITY: NEW YORK STATE: NY ZIP: 10010 BUSINESS PHONE: 2125788717 MAIL ADDRESS: STREET 1: 1 MADISON AVENUE STREET 2: LAW DEPARTMENT AREA 7 G CITY: NEW YORK STATE: NY ZIP: 10010 485BPOS 1 d485bpos.txt METROPOLITAN LIFE SEPARATE ACCOUNT UL As filed with the Securities and Exchange Commission on April 30, 2004 Registration No. 033-57320 811-06025 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-6 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective Amendment No. 16 [X] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 10 [X] Metropolitan Life Separate Account UL (Exact Name of Registrant) Metropolitan Life Insurance Company (Name of Depositor) One Madison Avenue New York, NY 10010 (Address of depositor's principal executive offices) --------------------- James L. Lipscomb, Esq. Executive Vice President and General Counsel Metropolitan Life Insurance Company One Madison Avenue New York, NY 10010 (Name and address of agent for service) Copies to: Gary O. Cohen, Esq. and Thomas C. Lauerman, Esq. Foley & Lardner LLP 3000 K Street, N.W. Washington, D.C. 20007 It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) [X] on May 1, 2004 pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1) [ ] on (date) pursuant to paragraph (a)(1) of Rule 485 [ ] this post-effective amendment designates a new effective date for a previously filed post-effective amendment Title of Securities Being Registered: Interests in Metropolitan Life Separate Account UL, which funds certain Variable Universal Life Insurance Policies. PROSPECTUS FOR METFLEX, A FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY ("Policy") Issued by Metropolitan Life Insurance Company ("MetLife") May 1, 2004 This prospectus provides you with important information about MetLife's MetFlex Policies. However, this prospectus is not the Policy. The Policy, rather, is a separate written agreement that MetLife issues to you. The Policy is designed to provide: .. Life insurance coverage .. Flexible premium payments .. A choice among three death benefit options .. A method of financing certain deferred compensation plans, post-retirement benefits and payroll deduction programs We offer the following funding options for allocating premium payments to and transferring cash value among a fixed interest account ("Fixed Account") and the Metropolitan Life Separate Account UL investment divisions which invest in the following corresponding fund ("Fund") portfolios: Metropolitan Series Fund, Inc. portfolios (Class A, except where noted): State Street Research Neuberger Berman Partners Aggressive Growth Mid Cap Value State Street Research Diversified Scudder Global Equity State Street Research T. Rowe Price Large Cap Investment Trust Growth State Street Research T. Rowe Price Small Cap Aurora Growth FI International Stock Lehman Brothers(R) Aggregate Bond Index (formerly Putnam International Stock) MetLife Stock Index Met/Putnam Voyager Morgan Stanley EAFE(R) Index (formerly Putnam Large Cap Growth) Russell 2000(R) Index Harris Oakmark Large Cap MetLife Mid Cap Stock Value Index FI Mid Cap Opportunities FI Value Leaders (formerly Janus Mid Cap) (formerly FI Structured Equity) Davis Venture Value State Street Research Bond Income Loomis Sayles Small Cap MFS Total Return--Class B State Street Research Large Cap Growth (formerly Alger Equity Growth) MFS Investors Trust State Street Research Money Market The Janus Aspen Series portfolios: Janus Aspen Growth--Institutional Shares Janus Aspen Capital Appreciation--Service Shares Janus Aspen Balanced--Service Shares The Franklin Templeton Variable Insurance Products Trust funds: Templeton Foreign Franklin Mutual Discovery Securities--Class 1 Securities--Class 2 Templeton Growth Securities--Class 2 AllianceBernstein Variable Products Series Fund, Inc. portfolios: AllianceBernstein Growth AllianceBernstein and Income--Class B Technology--Class B AllianceBernstein US Government/High Grade Securities--Class B Met Investors Series Trust portfolios: Lord Abbett Growth and Lord Abbett Bond Income--Class A Debenture--Class A Janus Aggressive Neuberger Berman Real Growth--Class B Estate--Class B Met/AIM Small Cap Lord Abbett Growth Growth--Class B Opportunities--Class B Met/AIM Mid-Cap Core T. Rowe Price Mid-Cap Equity--Class B Growth--Class B Third Avenue Small Cap Lord Abbett Mid-Cap Value--Class B Value--Class B Fidelity(R) Variable Insurance Products Fund portfolios: Growth--Service Class Asset Manager Growth(R)--Service Class Contrafund(R)--Service Class Investment Grade Bond--Service Class Equity-Income--Service Class AIM Variable Insurance Funds portfolios: AIM V.I. Government Securities--Series II AIM V.I. Real Estate--Series I INVESCO VIF--Core Equity--Series I American Century Variable Products Fund portfolios: International--Class II Vista--Class I Value--Class II Delaware VIP Trust portfolios: Small Cap Value--Service Shares Dreyfus Investment Portfolios portfolios (Service Shares): MidCap Stock Emerging Leaders Dreyfus Variable Investment Fund portfolios (Service Shares): International Value Appreciation Goldman Sachs Variable Insurance Trust portfolios Mid Cap Value CORE/SM/ Small Cap Equity Massachusetts Financial Services Variable Insurance Trust portfolios (Service Class): Global Equity High Income Value New Discovery Van Kampen Life Investment Trust portfolios: Government--Class II 2 Wells Fargo Variable Trust portfolios Total Return Bond Money Market Asset Allocation Growth Large Company Growth Equity Income Separate prospectuses for the Metropolitan Series Fund, Inc., the Janus Aspen Series, the Franklin Templeton Variable Insurance Products Trust, the AllianceBernstein Variable Products Series Fund, Inc., the Met Investors Series Trust, the AIM Variable Insurance Funds, the American Century Variable Products Fund, the Delaware VIP Trust, the Dreyfus Investment Portfolio, the Dreyfus Variable Investment Fund, the Goldman Sachs Variable Insurance Trust, the Massachusetts Financial Services Variable Insurance Trust, the Van Kampen Life Investment Trust, the Wells Fargo Variable Trust and the Fidelity Variable Insurance Products Fund (each a "Fund") are available from us. They describe in greater detail an investment in the Portfolios listed above. Before purchasing a Policy, read the information in this prospectus and in the prospectus for each Fund. Keep these prospectuses for future reference. Since the Fixed Account is not registered under the federal securities laws, this Prospectus contains only limited information about the Fixed Account. The Policy gives you more information on the operation of the Fixed Account. Policies issued in your state may provide different features and benefits from, and impose different costs than, those described in this Prospectus. Your actual Policy and any endorsements are the controlling documents. You should read the Policy carefully for any variations in your state. Neither the Securities and Exchange Commission ("SEC") nor any state securities authority has approved or disapproved these securities, nor have they determined if this Prospectus is accurate or complete. Any representation otherwise is a criminal offense. This Prospectus does not constitute an offering in any jurisdiction where such offering may not lawfully be made. Interests in the Separate Account, the Fixed Account and the Portfolios are not deposits, obligations of, or insured or guaranteed by, the U.S. Government, any bank or other depository institution including the Federal Deposit Insurance Corporation ("FDIC"), the Federal Reserve Board or any other agency or entity or person. We do not authorize any representations about this offering other than as contained in this Prospectus or its supplements or in our authorized supplemental sales material. 3 TABLE OF CONTENTS
Page in this Subject Prospectus ------- ---------- Cover Page Contacting Us................................................. 5 Summary of Benefits and Risks................................. 5 Policy Benefits.............................................. 5 Risks of a Policy............................................ 6 Fee Tables.................................................... 7 Transaction Fees............................................. 8 Periodic Charges Other Than Portfolio Operating Expenses..... 10 Periodic Charges for Optional Riders That You Choose to Add to Your Policy............................................. 11 Portfolio Operating Expenses................................. 12 MetLife....................................................... 20 The Fixed Account............................................ 20 Separate Account UL.......................................... 20 The Funds.................................................... 21 The Portfolio Share Classes that We Offer.................. 26 Voting Rights.............................................. 27 Issuing a Policy.............................................. 27 Payment and Allocation of Premiums............................ 28 Paying Premiums.............................................. 28 Maximum and Minimum Premium Payments......................... 28 Allocating Net Premiums...................................... 29 Insurance Proceeds............................................ 29 Death Benefit Options........................................ 29 Minimum Death Benefit........................................ 30 Specified Face Amount........................................ 31 Income Plans................................................. 32 Cash Value, Transfers and Withdrawals......................... 33 Cash Value................................................... 33 Cash Value Transfers......................................... 33 Surrender and Withdrawal Privileges.......................... 35 Benefit at Final Date........................................ 36 Loan Privileges............................................... 37 Optional Rider Benefits....................................... 38 Term Benefit................................................. 39 Charges and Deductions........................................ 40 Important Information Applicable to all Policy Charges and Deductions............................................... 40 Charges Deducted From Premiums............................. 40 Charges Included in the Monthly Deduction.................. 41 Charges for Certain Optional Rider Benefits................ 42 Variations in Charges...................................... 42 Portfolio Company Charges.................................... 43 Other Charges................................................ 43 Policy Termination and Reinstatement.......................... 43 Federal Tax Matters........................................... 43 Rights We Reserve............................................. 45 Other Policy Provisions....................................... 46 Sales of Policies............................................. 48 Experts....................................................... 49 Financial Statements.......................................... 49
4 [SIDEBAR: You can contact us at our Designated Office.] Contacting Us You can communicate all of your requests, instructions and notifications to us by contacting us in writing at our Designated Office. We may require that certain requests, instructions and notifications be made on forms that we provide. These include: changing your beneficiary; taking a Policy loan; changing your death benefit option; taking a partial withdrawal; surrendering your Policy; making transfer requests (including elections with respect to the systematic investment strategies); or changing your premium allocations. Our Designated Office is our home office at 1 Madison Avenue, New York, NY 10010. We may name additional or alternate Designated Offices. If we do, we will notify you in writing. Summary of Benefits and Risks This summary gives an overview of the Policy and is qualified by the more detailed information in the balance of this Prospectus and the Policy. MetLife issues the Policies. We offer the Policies to employers, employer sponsored plans, or other organizations or individuals associated with such employers, plans or organizations. We designed the Policies for financing nonqualified deferred compensation plans, other post-employment benefits, certain employer sponsored payroll deduction programs or other purposes. Policy Benefits Premium Payment Flexibility. The Policy allows flexibility in making premium payments. The Policy will remain in force as long as the cash surrender value is large enough to cover one monthly deduction, regardless of whether or not premium payments have been made. Cash Value. Your cash value in the Policy reflects your premium payments, the charges we deduct, interest we credit if you have cash value in our fixed interest account, any investment experience you have in our Separate Account, as well as your loan and withdrawal activity. Transfers And Systematic Investment Strategies. You may transfer cash value among the funding options, subject to certain limits (see "Cash Value, Transfers and Withdrawals"). You may also choose among four systematic investment strategies: the Equity Generator/SM/, the Equalizer/SM/, the Allocator/SM/, and the Rebalancer/SM/. Specified Face Amount of Insurance. Within certain limits, you may choose your specified face amount of insurance when the Policy is issued. You may also change the amount at any time after the first Policy year, subject to our rules and procedures. Death Benefit Options. Generally, you have a choice among three options. These range from an amount equal to the specified face amount to an amount equal to the specified face amount plus the policy cash value at the date of death. Income Plans. The insurance proceeds can be paid under a variety of income plans that are available under the Policy. 5 Surrenders, Partial Withdrawals and Loans. Within certain limits, you may take partial withdrawals and loans from the Policy. You may also surrender your Policy for its cash surrender value. Tax Advantages. If you meet certain requirements, you will not pay income taxes on withdrawals or surrenders or at the Final Date of the Policy, until your cumulative withdrawn amounts exceed the cumulative premiums you have paid. The death benefit may be subject to Federal and state estate taxes, but your beneficiary will generally not be subject to income tax on the death benefit. As with any taxation matter, you should consult with and rely on the advice of your own tax advisor. Term Rider. This rider provides coverage on the insured to age 95. The amount of sales charge you pay will be less if coverage is obtained through this rider rather than as part of the Policy. If your Policy was issued after May 1, 2004 and is not part of a plan already in existence on that date, the current charges for the cost of insurance are lower for coverage under the term rider than under the base Policy. For details, see "Optional Rider Benefits--Term Benefit." (For Policies under existing plans or Policies issued prior to that date, the charges for the cost of insurance are higher under any term rider than under the base Policy.) Other Optional Rider Benefits. You may be eligible for certain other benefits provided by rider, subject to certain underwriting requirements and the payment of additional premiums. We will deduct any charges for the rider(s) (other than the charge for the interim term insurance rider) as part of the monthly deduction. Risks of a Policy This Prospectus discusses the risks associated with purchasing the Policy. Other prospectuses (which are attached at the end of this Prospectus) discuss the risks associated with investment in the Fund described therein. Those prospectuses are being provided to you in addition to this Prospectus because each of the Separate Account UL investment divisions that are available to you under the Policy invests solely in a corresponding "Portfolio" of a Fund. Investment Risk. MetLife does not guarantee the investment performance of the variable investment options and you should consider your risk tolerance before selecting any of these options. You will be subject to the risk that investment performance will be unfavorable and that your cash value will decrease. In addition, we deduct Policy fees and charges from your Policy's cash value, which can significantly reduce your Policy's cash value. During times of poor investment performance, these deductions may have an even greater impact on your Policy's cash value. It is possible to lose your full investment and your Policy could terminate without value, unless you pay additional premiums. If you allocate cash value to the Fixed Account, then we credit such cash value with a declared rate of interest. You assume the risk that the rate may decrease, although it will never be lower than the guaranteed minimum annual effective rate of 4%. Surrender and Withdrawal Risks. The Policies are designed to provide lifetime insurance protection. They are not offered primarily as an investment, and are not suitable as a short-term savings vehicle. You should purchase the Policy only if you have the financial ability to keep it in force for a substantial 6 period of time. You should not purchase the Policy if you intend to surrender all or part of the Policy's cash value in the near future. Risk of Policy Termination. Your Policy may terminate without value if you have paid an insufficient amount of premiums or if the investment experience of the investment divisions is poor. If your cash surrender value is not enough to pay the monthly deduction, your Policy will terminate without value unless you make a premium payment sufficient to cover two monthly deductions within the 61-day grace period. If your Policy does terminate, your insurance coverage will terminate (although you will be given an opportunity to reinstate your coverage if you satisfy certain requirements). Lapse of a policy on which there is an outstanding loan may have adverse tax consequences. Policy Charge and Expense Increase. We have the right to increase certain Policy charges. Tax Law Risks. To the extent that you purchase a Policy based on expected tax benefits relative to other financial or investment products or strategies, there is no certainty that such advantages will always continue to exist. As with any taxation matter, you should consult with and rely on the advice of your own tax advisor. During the first 15 Policy years, in certain circumstances, a distribution may be subject to tax on an income-out-first tax basis if there is a gain in your Policy (which is generally when your cash value exceeds the cumulative premiums you paid). Finally, if your Policy is part of an equity split dollar arrangement, there is a risk that some portion of the cash value may be taxed prior to any Policy distribution. If you pay more than a certain amount of premiums, you may cause your Policy to become a "modified endowment contract." If it does, you will pay income taxes (on an income-out-first basis) on loans and other amounts we pay out to you (except for payment of insurance proceeds), to the extent of any gains in your Policy (which is generally the excess of cash value over the premiums paid). In this case, an additional 10% tax penalty may also apply. Tax laws, regulations, and interpretations have often been changed in the past and such changes continue to be proposed. Fee Tables The following tables describe the fees and expenses that you will pay when buying, owning, and surrendering the Policy. The charges set forth in the first three tables may vary by group, based on anticipated variations in our costs or risks associated with the group or individuals in the group that the charge was intended to cover. Our variations in the charges will be made in accordance with our established and uniformly applied administrative procedures. Any variations in charges will be reasonable and will not be unfairly discriminatory to the interests of any Policy owner. In addition to the following tables, certain charges that we don't currently impose (but which we have the right to impose on your Policy in the future) are described under "Charges and Deductions--Other Charges," further back in this Prospectus. In certain cases, we have the right to increase our charges for new Policies, as well as for Policies already outstanding. The maximum charges in such cases are shown in the far right-hand columns of each of the first three tables below. 7 Transaction Fees This table describes the fees and expenses that you will pay at the time that you buy the Policy, surrender the Policy, or transfer cash value among the variable investment options or the Fixed Account.
When Charge Current Amount Maximum Amount Charge is Deducted Deducted We Can Deduct - ------------------------------------------------------------------------------------------- Sales Charge/(1)(3)(4)/ On payment of Up to 6.5% of Policy Years 1 to 10, premium premiums paid (3% up to 9% of in Policy Years 11 premiums paid./(6)/ and later) until the total of payments in Policy Years 11 and any Policy year later, same as equals the annual Current Amount for target premium/(5)/ for those years that Policy year and 0% on the excess. - ------------------------------------------------------------------------------------------- Charge for average On payment of 2.25% of each Same as Current expected state and premium premium payment Amount local taxes attributable to premiums - ------------------------------------------------------------------------------------------- Charge for expected On payment of 1.2% of each Same as Current federal taxes premium premium payment Amount attributable to premiums - ------------------------------------------------------------------------------------------- Administrative On payment of Up to 1.05% of each Same as Current Charge premium premium payment. Amount We reduce the charge to .05% on the portion of any premiums paid in a Policy year above the annual target premium/(2)/. - ------------------------------------------------------------------------------------------- Transfer Fee On transfer of cash Not currently $25 per transfer, and value among charged none for transfers investment divisions under Systematic or to or from the Investment Fixed Account Strategies - ------------------------------------------------------------------------------------------- Interim Term On payment of first Insurance Benefit premium if rider is Highest: $11.40 per Highest: $30.45 per (applies only if you elected $1,000 of term $1,000 of term elected rider at insurance amount insurance amount issue) Lowest: $0.03 per Lowest: $0.09 per Highest and Lowest $1,000 of term $1,000 of term Charge Among All insurance amount insurance amount Possible Insureds $0.16 per $1,000 of $0.40 per $1,000 of Charge for male, term insurance term insurance issue age 45, amount amount Guaranteed Issue underwriting class/(4)/ - ------------------------------------------------------------------------------------------- Enhanced Cash On premium 0.25% of each Same as Current Surrender Value payments made premium payment Amount Rider/(2)/ during the first five made during the first Policy years five Policy years - -------------------------------------------------------------------------------------------
8
When Charge Current Amount Maximum Amount Charge is Deducted Deducted We Can Deduct ------------------------------------------------------------------------ Underwriting Charge On face amount None Up to $3 per $1,000 (applies only if you increase of increase request an increase in your specified face amount)
- -------- /1/ For Policies issued with the Refund of Sales Charge Rider, if you request a full cash withdrawal during the first three Policy years (first five Policy years for Policies issued on or after August 1, 2000), we will refund any sales charges deducted within 365 days prior to the date the request is received at our Designated office. /2/ For Policies issued on or after February 1, 2004 with the Enhanced Cash Surrender Value Rider, if you request a full cash withdrawal during the first ten Policy years, we will refund (a) part of the cumulative charges we have deducted from your premium payments and (b) part of the cost of term insurance we have deducted in the current Policy year, as shown in Table A below. However, we will not pay this refund if the full cash withdrawal is related to an exchange pursuant to Section 1035 of the Internal Revenue Code. This rider is subject to state approval. For Policies issued with the Enhanced Cash Surrender Value Rider and issued on or after November 23, 2001 and prior to February 1, 2004 or in connection with employer sponsored plans already in existence on that date, if you request a full cash withdrawal during the first seven Policy years, we will refund (a) part of the cumulative charges we have deducted from your premium payments and (b) part of the cost of term insurance we have deducted in the current Policy year, as shown in Table B below. However, we will not pay this refund if the full cash withdrawal is related to an exchange pursuant to Section 1035 of the Internal Revenue Code. Table A
Portion of Cost of Term Insurance Charges Deducted Portion of during Policy Year of Policy Year of Cumulative Premium Full Cash Withdrawal Full Cash Withdrawal Charges to be Refunded* to be Refunded ----------------------------------------------------------------------- 1 100% 95% ----------------------------------------------------------------------- 2 95% 85% ----------------------------------------------------------------------- 3 90% 75% ----------------------------------------------------------------------- 4 85% 65% ----------------------------------------------------------------------- 5 80% 55% ----------------------------------------------------------------------- 6 75% 45% ----------------------------------------------------------------------- 7 70% 35% ----------------------------------------------------------------------- 8 65% 25% ----------------------------------------------------------------------- 9 60% 15% ----------------------------------------------------------------------- 10 55% 5% ----------------------------------------------------------------------- 11 and later None None -----------------------------------------------------------------------
Table B
Portion of Cost of Term Insurance Charges Deducted Portion of during Policy Year of Policy Year of Cumulative Premium Full Cash Withdrawal Full Cash Withdrawal Charges to be Refunded* to be Refunded ----------------------------------------------------------------------- 1 100% 75% ----------------------------------------------------------------------- 2 90% 50% ----------------------------------------------------------------------- 3 75% 25% ----------------------------------------------------------------------- 4 60% None ----------------------------------------------------------------------- 5 45% None ----------------------------------------------------------------------- 6 30% None ----------------------------------------------------------------------- 7 15% None ----------------------------------------------------------------------- 8 and later None None -----------------------------------------------------------------------
* The percent shown is applied to the cumulative sales, tax, and administrative charges deducted from your premium. 9 /3/ For Policies issued prior to May 1, 1996 or in connection with certain employer sponsored plans effective prior to August 1, 2000, the maximum we can charge is 1% of each premium payment and we currently charge 0%. /4/ This charge varies based on individual characteristics of the insured or of individuals in the group that the charge was intended to cover, and may not be representative of the charge that you will pay. You can obtain more information about the charges that would apply by contacting your insurance sales representative. If you would like, we will provide you with an illustration of the impact of these and other charges under the Policy based on various assumptions. /5/ See "Charges and Deductions--Annual Target Premium" for a detailed discussion of the determination of the annual target premium. /6/ There is no sales charge for payments in excess of the annual target premium in any Policy year. Periodic Charges Other Than Portfolio Operating Expenses These tables describe other fees and expenses that you will pay periodically during the time that you own the Policy not including the fees and expenses of the Portfolios. Periodic Charges
Maximum Amount We Can Charge When Charge is Deducted Current Amount Deducted Deduct - ----------------------------------------------------------------------------------------------------------- Cost of Term Insurance On each monthly for coverage under base anniversary of the Policy Highest: $13.93 per Highest: $30.45 per policy* $1,000 of term insurance $1,000 of term insurance amount amount Highest and Lowest Charge Among All Possible Lowest: $0.03 per $1,000 Lowest: $0.09 per $1,000 Insureds of term insurance amount of term insurance amount $0.16 per $1,000 of term $0.40 per $1,000 of term Charge for male, issue insurance amount insurance amount age 45, Guaranteed Issue underwriting class - ----------------------------------------------------------------------------------------------------------- Cost of Term Insurance On each monthly under term benefit ***** anniversary of the Policy Highest: $10.44 per Highest: $30.45 per $1,000 of term insurance $1,000 of term insurance Highest and Lowest Charge amount amount Among All Possible Insureds+ Lowest: $0.02 per $1,000 Lowest: $0.09 per $1,000 of term insurance amount of term insurance amount Charge for male, issue $0.12 per $1,000 of term $0.40 per $1,000 of term age 45, Guaranteed Issue insurance amount insurance amount underwriting class++ - ----------------------------------------------------------------------------------------------------------- Mortality and Expense On each monthly Effective annual rate of Effective annual rate up Risk Charge anniversary of the Policy 0.40% of the cash value to .90% in the Separate Account.** We intend to reduce this charge after Policy year 9 to 0.20% and after Policy year 20 to 0.10%. - ----------------------------------------------------------------------------------------------------------- Loan Interest Spread Annually (or on loan Annual rate of 0.25% of Annual rate of 2% of the termination, if earlier) the loan amount loan amount
10 Periodic Charges Applicable to any Optional Riders That You Choose to Add to Your Policy****
When Charge is Current Amount Maximum Amount Optional Feature Deducted Deducted We Can Deduct - ----------------------------------------------------------------------------------------------------------- Disability Waiver of Monthly Monthly Deduction Benefit Highest: $0.28 per $1,000 Highest: $0.28 per $1,000 ***** of total term insurance of total term insurance amount amount Highest and Lowest Charge Among All Possible Lowest: $0.01 per $1,000 Lowest: $0.01 per $1,000 Insureds of total term insurance of total term insurance amount amount Charge for male, issue $0.03 per $1,000 of total $0.04 per $1,000 of total age 45, Guaranteed Issue term insurance amount term insurance amount underwriting class - ----------------------------------------------------------------------------------------------------------- Accidental Death Benefit Monthly ***** Highest: $0.07 per $1,000 Highest: $0.12 per $1,000 of accidental death of accidental death Highest and Lowest Charge benefit amount benefit amount Among All Possible Policies Lowest: $0.04 per $1,000 Lowest: $0.07 per $1,000 of accidental death of accidental death benefit amount benefit amount Charge for male, issue age 45, Guaranteed Issue $0.04 per $1,000 of $0.07 per $1,000 of underwriting class accidental death benefit accidental death benefit amount amount - -----------------------------------------------------------------------------------------------------------
- -------- * The cost of term insurance charge varies based on anticipated variations in our costs or risks associated with the group or individuals in the group that the charge was intended to cover. See "Charges and Deductions--Cost of Term Insurance" for a more detailed discussion of factors affecting this charge. You can obtain more information about the cost of insurance or other charges that would apply by contacting your insurance sales representative. If you would like, we will provide you with an illustration of the impact of these and other charges under the Policy based on various assumptions. ** For Policies issued on or after August 1, 2000 and prior to February 1, 2004 or in connection with employer sponsored plans that became effective within that period, the charge is currently at an effective annual rate of 0.48% of the cash value in the Separate Account. For those Policies, we intend to reduce this charge after Policy year 9 to .36% and after Policy year 20 to .30%. For policies issued prior to May 1, 1996 or in connection with employer sponsored plans that became effective prior to August 1, 2000, the charge is currently equivalent to an effective annual rate of 0.60% of the cash value in the Separate Account. For those Policies, we intend to reduce this charge to .30% for all Policy years after the ninth. *** We charge interest on Policy loans but credit you with interest on the amount of the cash value we hold as collateral for the loan. The loan interest spread is the excess of the interest rate we charge over the interest rate we credit. **** The charges for the optional Interim Term Insurance Rider and the Enhanced Cash Surrender Value Rider have previously been described in the table of Transaction Fees above, since the charges for those riders are deducted from premiums. ***** This charge varies based on individual characteristics of the insured or of individuals in the group that the charge was intended to cover, and may not be representative of the charge that you will pay. You can obtain more information about the charges that would apply by contacting your insurance sales representative. If you would like, we will provide you with an illustration of the impact of these and other charges under the Policy, based on various assumptions. + For Policies issued prior to May 1, 2004, the highest and lowest cost of insurance charges for this term benefit would be:
Current Amount Maximum Amount Deducted We Can Deduct ----------------------------------------------------- Highest: $14.34 per Highest: $30.45 per $1,000 of term insurance $1,000 of term insurance amount amount Lowest: $0.03 per $1,000 Lowest: $0.09 per $1,000 of term insurance amount of term insurance amount
11 ++ For Policies issued prior to May 1, 2004, the cost of insurance charges for the term rider for a male, issue age 45, in the guaranteed issue underwriting class would be $.17 per $1,000 of term insurance amount (current amount deducted) and $.40 per $1,000 of term insurance amount (maximum amount we can deduct). Portfolio Operating Expenses Each of the Funds pays an investment management fee to its investment manager. Each of the Funds also incurs other direct expenses (see the applicable Fund Prospectus and the Statement of Additional Information referred to therein for each Fund). You bear indirectly your proportionate share of the fees and expenses of the Portfolios of each Fund that correspond to the Separate Account investment divisions you are using. Most of the Funds offer various classes of shares, each of which has a different level of expenses, only one of which is available under a Policy. The available class of each Portfolio is specified in the expense table below and on the front cover pages of the Prospectus. The first table below shows the lowest and highest fees and expenses charged by any of the Portfolios for the fiscal year ended December 31, 2003.
Lowest* Highest* - ------------------------------------------------------------------ Total Annual Portfolio Operating Expenses (expenses that are deducted from Portfolio assets, including management fees, distribution (Rule 12b-1) fees and other expenses) 0.31% 2.19% - ------------------------------------------------------------------
- -------- *The lowest and highest percentages have been selected after adjustment of the percentage for all Portfolios (on a consistent basis) to reflect any changes in expenses during the 12 months ended December 31, 2003 or expected to occur during the 12 months ended December 31, 2004. The table below describes the annual operating expenses for each Portfolio for the year ended December 31, 2003 as a percentage of the Portfolio's average daily net assets for the year.
Gross Manage- Total Fee Waivers Net Total ment Other 12b-1 Annual and Expense Annual Fees Expenses Fees Expenses Reimbursements Expenses ------------------------------------------------------------------------- Metropolitan Series Fund, Inc. (Class A, except where noted) ------------------------------------------------------------------------- State Street Research Aggressive Growth/(a)/ .73% .08% 0 .81% 0 .81% ------------------------------------------------------------------------- State Street Research Diversified/(a)/ .44% .07% 0 .51% 0 .51% ------------------------------------------------------------------------- State Street Research Investment Trust/(a)/ .49% .07% 0 .56% 0 .56% ------------------------------------------------------------------------- State Street Research Aurora .85% .08% 0 .93% 0 .93% ------------------------------------------------------------------------- FI International Stock/(a)(k)/ .86% .23% 0 1.09% 0 1.09% -------------------------------------------------------------------------
12
Gross Manage- Total Fee Waivers Net Total ment Other 12b-1 Annual and Expense Annual Fees Expenses Fees Expenses Reimbursements Expenses ------------------------------------------------------------------------------ Met/Putnam Voyager/(b)/ .80% .27% 0 1.07% .07% 1.00% ------------------------------------------------------------------------------ Harris Oakmark Large Cap Value/(a)/ .74% .09% 0 .83% 0 .83% ------------------------------------------------------------------------------ FI Mid Cap Opportunities/(k)/ .69% .08% 0 .77% 0 .77% ------------------------------------------------------------------------------ Neuberger Berman Partners Mid Cap Value/(a)/ .69% .11% 0 .80% 0 .80% ------------------------------------------------------------------------------ Scudder Global Equity .64% .20% 0 .84% 0 .84% ------------------------------------------------------------------------------ T. Rowe Price Large Cap Growth/(a)/ .63% .16% 0 .79% 0 .79% ------------------------------------------------------------------------------ T. Rowe Price Small Cap Growth/(k)/ .52% .11% 0 .63% 0 .63% ------------------------------------------------------------------------------ Lehman Brothers(R) Aggregate Bond Index .25% .09% 0 .34% 0 .34% ------------------------------------------------------------------------------ MetLife Mid Cap Stock Index .25% .15% 0 .40% 0 .40% ------------------------------------------------------------------------------ Morgan Stanley EAFE(R) Index .30% .41% 0 .71% 0 .71% ------------------------------------------------------------------------------ Russell 2000(R) Index .25% .22% 0 .47% 0 .47% ------------------------------------------------------------------------------ MetLife Stock Index .25% .06% 0 .31% 0 .31% ------------------------------------------------------------------------------ Davis Venture Value .74% .05% 0 .79% 0 .79% ------------------------------------------------------------------------------ Loomis Sayles Small Cap .90% .09% 0 .99% 0 .99% ------------------------------------------------------------------------------ State Street Research Large Cap Growth/(k)/ .73% .07% 0 .80% 0 .80% ------------------------------------------------------------------------------ MFS Investors Trust/(a)(b)(k)/ .75% .36% 0 1.11% .11% 1.00% ------------------------------------------------------------------------------ State Street Research Money Market .35% .05% 0 .40% 0 .40% ------------------------------------------------------------------------------ MFS Total Return--Class B .50% .19% .25% .94% 0 .94% ------------------------------------------------------------------------------ FI Value Leaders/(k)/ .67% .07% 0 .74% 0 .74% ------------------------------------------------------------------------------ State Street Research Bond Income// .40% .07% 0 .47% 0 .47% ------------------------------------------------------------------------------
13
Gross Manage- Total Fee Waivers Net Total ment Other 12b-1 Annual and Expense Annual Fees Expenses Fees Expenses Reimbursements Expenses - ----------------------------------------------------------------------------------- The Janus Aspen Series - ----------------------------------------------------------------------------------- Janus Aspen Growth-- Institutional Shares /(l)/ .65% .02% 0 .67% 0 .67% - ----------------------------------------------------------------------------------- Janus Aspen Balanced-- Service Shares /(l)(m)/ .65% .02% .25% .92% 0 .92% - ----------------------------------------------------------------------------------- Janus Aspen Capital Appreciation-- Service Shares /(l)(m)/ .65% .03% .25% .93% 0 .93% - ----------------------------------------------------------------------------------- The Franklin Templeton Variable Insurance Products Trust - ----------------------------------------------------------------------------------- Templeton Foreign Securities-- Class 1 /(j)/ .69% .22% 0 .91% .04% .87% - ----------------------------------------------------------------------------------- Templeton Growth Securities-- Class 2 /(o)(p)/ .81% .07% .25% 1.13% 0 1.13% - ----------------------------------------------------------------------------------- Franklin Mutual Discovery Securities-- Class 2 /(p)/ .80% .24% .25% 1.29% 0 1.29% - ----------------------------------------------------------------------------------- AllianceBernstein Variable Products Series Fund, Inc. - ----------------------------------------------------------------------------------- AllianceBernstein Growth and Income--Class B /(q)/ .63% .03% .25% .91% .08% .83% - ----------------------------------------------------------------------------------- AllianceBernstein US Government/ High Grade Securities-- Class B /(q)/ .60% .18% .25% 1.03% .15% .88% - ----------------------------------------------------------------------------------- AllianceBernstein Technology-- Class B /(q)/ 1.00% .12% .25% 1.37% .25% 1.12% - ----------------------------------------------------------------------------------- Met Investors (formerly COVA) Series Trust - ----------------------------------------------------------------------------------- Lord Abbett Growth and Income--Class A .56% .06% 0 .62% 0 .62% - ----------------------------------------------------------------------------------- Lord Abbett Bond Debenture/(c)(k)/-- Class A .60% .10% 0 .70% 0 .70% - -----------------------------------------------------------------------------------
14
Gross Manage- Total Fee Waivers Net Total ment Other 12b-1 Annual and Expense Annual Fees Expenses Fees Expenses Reimbursements Expenses ---------------------------------------------------------------------------- Janus Aggressive Growth-- Class B/(c)/ .78% .15% .25% 1.18% .03% 1.15% ---------------------------------------------------------------------------- Neuberger Berman Real Estate-- Class B/(c)/ .70% .41% .25% 1.36% .21% 1.15% ---------------------------------------------------------------------------- Lord Abbett Growth Opportunities-- Class B/(c)/ .70% .44% .25% 1.39% .25% 1.14% ---------------------------------------------------------------------------- T. Rowe Price Mid-Cap Growth-- Class B/(c)/ .75% .18% .25% 1.18% 0 1.18% ---------------------------------------------------------------------------- Lord Abbett Mid-Cap Value-- Class B/(c)/ .70% .13% .25% 1.08% 0 1.08% ---------------------------------------------------------------------------- Met/AIM Small Cap Growth-- Class B/(c)/ .90% .21% .25% 1.36% .06% 1.30% ---------------------------------------------------------------------------- Met/AIM Mid Cap Core Equity-- Class B/(c)/ .75% .19% .25% 1.19% 0 1.19% ---------------------------------------------------------------------------- Third Avenue Small Cap Value--Class B/(c)/ .75% .18% .25% 1.18% 0 1.18% ---------------------------------------------------------------------------- Fidelity Variable Insurance Products Fund ---------------------------------------------------------------------------- Growth--Service Class/(g)/ .58% .09% .10% .77% 0 .77% ---------------------------------------------------------------------------- Contrafund (R) Service Class/(i)/ .58% .09% .10% .77% 0 .77% ---------------------------------------------------------------------------- Asset Manager Growth (R)-- Service Class/(i)/ .58% .17% .10% .85% 0 .85% ---------------------------------------------------------------------------- Investment Grade Bond-- Service Class/(h)/ .43% .11% .10% .64% 0 .64% ---------------------------------------------------------------------------- Equity-Income-- Service Class/(i)/ .48% .09% .10% .67% 0 .67% ---------------------------------------------------------------------------- AIM Variable Insurance Funds ---------------------------------------------------------------------------- AIM V.I. Government Securities-- Series II .47% .29% .25% 1.01% 0 1.01% ---------------------------------------------------------------------------- AIM V.I. Real Estate-- Series I/(r)(s)(t)/ .90% .92% 0 1.82% .52% 1.30% ---------------------------------------------------------------------------- INVESCO VIF--Core Equity-- Series I/(s)(t)/ .75% .38% 0 1.13% 0 1.13% ----------------------------------------------------------------------------
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Gross Manage- Total Fee Waivers Net Total ment Other 12b-1 Annual and Expense Annual Fees Expenses Fees Expenses Reimbursements Expenses ---------------------------------------------------------------------------- American Century Variable Products Fund ---------------------------------------------------------------------------- International-- Class II/(u)/ 1.23% .01% .25% 1.49% 0 1.49% ---------------------------------------------------------------------------- Vista--Class I/(u)/ 1.00% 0 0 1.00% 0 1.00% ---------------------------------------------------------------------------- Value--Class II/(u)/ .85% 0 .25% 1.10% 0 1.10% ---------------------------------------------------------------------------- Delaware VIP Trust ---------------------------------------------------------------------------- Small Cap Value--Service Shares/(v)/ .75% .11% .25% 1.11% .05% 1.06% ---------------------------------------------------------------------------- Dreyfus Investment Portfolios (Service Shares) ---------------------------------------------------------------------------- MidCap Stock/(w)/ .75% .06% .25% 1.06% .06% 1.00% ---------------------------------------------------------------------------- Emerging Leaders .90% .26% .25% 1.41% 0 1.41% ---------------------------------------------------------------------------- Dreyfus Variable Investment Fund (Service Shares) ---------------------------------------------------------------------------- International Value/(x)/ 1.00% .49% .25% 1.74% .34% 1.40% ---------------------------------------------------------------------------- Appreciation .75% .05% .25% 1.05% 0 1.05% ---------------------------------------------------------------------------- Goldman Sachs Variable Insurance Trust ---------------------------------------------------------------------------- Mid Cap Value/(n)/ .80% .11% 0 .91% 0 .91% ---------------------------------------------------------------------------- CORE Small Cap Equity/(y)/ .75% .50% 0 1.25% .35% .90% ---------------------------------------------------------------------------- Massachusetts Financial Services Variable Insurance Trust (Service Class) ---------------------------------------------------------------------------- Global Equity/(z)(aa)(bb)/ 1.00% .94% .25% 2.19% .79% 1.40% ---------------------------------------------------------------------------- High Income/(z)(aa)(bb)/ .75% .15% .25% 1.15% 0 1.15% ---------------------------------------------------------------------------- Value/(z)(aa)(bb)/ .75% .43% .25% 1.43% .28% 1.15% ---------------------------------------------------------------------------- New Discovery/(z)/ .90% .14% .25% 1.29% 0 1.29% ---------------------------------------------------------------------------- Van Kampen Life Investment Trust ---------------------------------------------------------------------------- Government Fund-- Class II/(cc)/ .50% .13% .25% .88% 0% .88% ----------------------------------------------------------------------------
16
Gross Manage- Total Fee Waivers Net Total ment Other 12b-1 Annual and Expense Annual Fees Expenses Fees Expenses Reimbursements Expenses -------------------------------------------------------------------------- Wells Fargo Variable Trust -------------------------------------------------------------------------- Total Return Bond /(dd)/ .45% .27% .25% .97% .07% .90% -------------------------------------------------------------------------- Money Market /(dd)/ .40% .24% .25% .89% .14% .75% -------------------------------------------------------------------------- Asset Allocation /(dd)/ .55% .22% .25% 1.02% .02% 1.00% -------------------------------------------------------------------------- Growth /(dd)/ .55% .33% .25% 1.13% .13% 1.00% -------------------------------------------------------------------------- Large Company Growth /(dd)/ .55% .26% .25% 1.06% .06% 1.00% -------------------------------------------------------------------------- Equity Income /(dd)/ .55% .26% .25% 1.06% .06% 1.00% --------------------------------------------------------------------------
- -------- (a) The Metropolitan Series Fund directed certain of the Portfolio's trades to brokers who paid a portion of the Portfolio's expenses. Net Total Annual Expenses for the Portfolio does not reflect this reduction in expenses. (b) The Metropolitan Series Fund and its affiliate MetLife Advisers, LLC have entered into an Expense Agreement under which MetLife Advisers, LLC will waive investment management fees and/or pay expenses (other than brokerage costs, interest, taxes or extraordinary expenses) ("Expenses") attributable to the Class A shares of this Portfolio of the Metropolitan Series Fund, so that the Net Total Annual Expenses of this Portfolio will not exceed, at any time prior to April 30, 2005, the percentage shown in the far right column. Under the Expense Agreement, if certain conditions are met, the MFS Investors Trust Portfolio may reimburse Metlife Advisers, LLC for fees it waived and Expenses it paid if, in the future, actual Expenses of the Portfolios are less than the expense limits. Net Total Annual Expenses for the MFS Investors Trust Portfolio have been restated to reflect certain changes during the year in the arrangements described above. (c) Met Investors Series Trust and its affiliate Met Investors Advisory LLC have entered into an Expense Limitation Agreement under which Met Investors Advisory LLC has agreed to waive or limit its fees and to assume other expenses so that the Net Total Annual Expenses of this Portfolio (other than interest, taxes, brokerage commissions, other expenditures which are capitalized in accordance with generally accepted accounting principles, and other extraordinary expenses not incurred in the ordinary course of this Portfolio's business) will not exceed, at any time prior to April 30, 2005, the percentages shown in the far right column. Under certain circumstances, any fees waived or expenses reimbursed by Met Investors Advisory LLC may, with the approval of the Trust's Board of Trustees, be repaid by the Portfolio to Met Investors Advisory LLC. Fees waived or expenses reimbursed by the investment managers of certain Portfolios in prior years were repaid in the last fiscal year to the investment managers by these Portfolios with the approval of the Fund's Board of Trustees. These amounts are included in the "Other Expenses" column. The amounts per Portfolio are:
Portfolio Percentage --------- ---------- T. Rowe Price Mid-Cap Growth Portfolio .02 Lord Abbett Mid-Cap Value .02 Met/AIM Mid Cap Core Equity .04 Third Avenue Small Cap Value .03 Lord Abbett Bond Debenture Portfolio .03
Neuberger Berman Real Estate Portfolio will begin operation on or about May 1, 2004. The expense information in the fee table is an estimate of the Portfolio's expenses through December 31, 2004. (d) The Portfolio's actual Other Expenses and Net Total Annual Expenses were lower than the figures shown because its custodian fees were reduced under an expense offset arrangement. (e) Certain expenses of the Portfolio were absorbed voluntarily by INVESCO pursuant to commitments between the Portfolio and INVESCO. This commitment may be changed at any 17 time following consultation with the Board of Directors and is not reflected in the table. After absorption, but excluding any expense offset arrangements, the Portfolio's other Expenses and Net Total Annual Expenses were 0.46% and 1.36% respectively. (f) Effective June 1, 2002, INVESCO is entitled to reimbursement from the Portfolio for fees and expenses absorbed pursuant to a voluntary expense limitation commitment between INVESCO and the Portfolio, if such reimbursements do not cause the Portfolio to exceed expense limitations and the reimbursement is made within three years after INVESCO incurred the expense. The voluntary expense limitations may be changed at any time following consultation with the Board of Directors and are not reflected in the table. (g) A portion of the brokerage commissions that the Portfolio pays may be reimbursed and used to reduce the Portfolio's expenses. Including this reduction, the total class operating expenses would have been the rate shown in the last column. These offsets may be discontinued at any time. (h) Through arrangements with the Portfolio's custodian, credits realized as a result of uninvested cash balances are used to reduce the Portfolio's custodian expenses. Including this reduction, the total class operating expenses would have been the rate shown in the last column. These offsets may be discontinued at any time. (i) A portion of the brokerage commissions that the Portfolio pays may be reimbursed and used to reduce the Portfolio's expenses. In addition, through arrangements with the Portfolio's custodian, credits realized as a result of uninvested cash balances are used to reduce the Portfolio's custodian expenses. Including these reductions, the total class operating expenses would have been the rate shown in the last column. These offsets may be discontinued at any time. (j) The manager has agreed in advance to reduce its fee to reflect reduced services resulting from the Portfolio's investment in a Franklin Templeton money fund. This reduction is reflected in the table and is required by the Portfolio's Board of Trustees and an order of the Securities and Exchange Commission. (k) On December 16, 2003, Fidelity Management & Research Company became the sub-adviser for the Putnam International Stock Portfolio which changed its name to FI International Stock Portfolio. On May 1, 2004, the FI Mid Cap Opportunities Portfolio of the Metropolitan Series Fund was merged into the Janus Mid Cap Portfolio of the Metropolitan Series Fund which changed its name to FI Mid Cap Opportunities Portfolio. On May 1, 2004, the MFS Research Managers Portfolio of the Metropolitan Series Fund was merged into the MFS Investors Trust Portfolio of the Metropolitan Series Fund. On May 1, 2004, State Street Research & Management Company became the sub-adviser for the Alger Equity Growth Portfolio of the Metropolitan Series Fund which changed its name to the State Street Research Large Cap Growth Portfolio. On May 1, 2004, the FI Structured Equity Portfolio of the Metropolitan Series Fund was renamed the FI Value Leaders Portfolio. The assets of the Franklin Small Cap Investment Division of the Separate Account merged into the T. Rowe Price Small Cap Growth Class B Investment Division on May 1, 2004. The Franklin Small Cap Investment Division is no longer available under the Policy. The assets of the AllianceBernstein Premier Growth Investment Division of the Separate Account merged into the Janus Aggressive Growth Investment Division on May 1, 2004. The AllianceBernstein Premier Growth Investment Division is no longer available under the Policy. The assets of the INVESCO VIF--High Yield Investment Division of the Separate Account merged into the Lord Abbett Bond Debenture Investment Division on May 1, 2004. The INVESCO VIF--High Yield Investment Division is no longer available under the Policy. (l) Expenses for the Portfolios are based upon expenses for the year ended December 31, 2003. Expenses are stated both with and without contractual waivers by Janus Capital. All expenses are shown without the effect of any expense offset arrangements. (m) Because the 12b-1 fee is charged as an ongoing fee, long-term shareholders may pay more than the economic equivalent of the maximum front-end sales charges permitted by the National Association of Securities Dealers, Inc. (n) "Other Expenses" include transfer agency fees and expenses equal on an annualized basis to 0.04% of the average daily net assets of the Portfolio plus all other ordinary expenses not detailed above. The Adviser has voluntarily agreed to reduce or limit "Other Expenses" (excluding management fees, transfer agency fees and expenses, taxes, interest, brokerage fees, litigation, indemnification, shareholder meeting and other extraordinary expenses) equal on an annualized basis to 0.25% of the average daily net assets of the Portfolio. The Adviser may cease or modify the expense limitation at its discretion at any time. If this occurs, "Other Expenses" and "Gross Total Annual Expenses" may increase without shareholder approval. (o) The Portfolio administration fee is paid indirectly through the management fee. (p) While the maximum amount payable under the Portfolio's Class 2 rule 12b-1 plan is 0.35% per year of the Portfolio's Class 2 average annual net assets, the Portfolio's Board of Trustees has set the current rate at 0.25% per year. 18 (q) Net Total Annual Expenses reflect Alliance's waiver of a portion of its advisory fee. This waiver is effective as of January 1, 2004 and the fee reduction is expected to continue for a period of at least five years. (r) The Portfolio's advisor has contractually agreed to waive advisory fees or reimburse expenses of Portfolio I shares to the extent necessary to limit Net Total Annual Expenses (excluding certain items discussed below) to 1.30%. In determining the advisor's obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the Net Total Annual Expenses to exceed the 1.30% cap: (i) interest; (ii) taxes; (iii) extraordinary items (these are expenses that are not anticipated to arise from the Portfolio's day-to-day operations), as defined in the Financial Accounting Standard's Board's Generally Accepted Accounting Principles or as approved by the Portfolio's board of trustees; (iv) expenses related to a merger or reorganization as approved by the Portfolio's board of trustees; and (v) expenses that the Portfolio has incurred but did not actually pay because of an expense offset arrangement. Currently, the only expense offset arrangements from which the Portfolio benefits are in the form of credits that the Portfolio receives from banks where the Portfolio benefits are in the form of credits that the Portfolio receives from banks where the Portfolio or its transfer agent has deposit accounts in which it holds uninvested cash. Those credits are used to pay certain expenses incurred by the Portfolio. This expense limitation agreement is in effect through December 31, 2004. (s) The Portfolio has adopted a new form of administrative services and transfer agency agreements which will be effective May 1, 2004. As a result, Other Expenses have been restated to reflect the changes in fees under the new agreements. (t) The Portfolio's advisor is entitled to receive reimbursement from the Portfolio for fees and expenses paid for by the Portfolio's advisor pursuant to expense limitation commitments between the Portfolio's advisor and the Portfolio if such reimbursement does not cause the Portfolio to exceed its then-current expense limitations and the reimbursement is made within three years after the Portfolio's advisor incurred the expense. (u) The Portfolio has a stepped fee schedule. As a result, the Portfolio's management fee generally decreases as Portfolio assets increase. (v) For the period May 1, 2002 through April 30, 2005, the advisor has contractually agreed to waive its management fee and/or reimburse the Portfolio for expenses to the extent that total expenses (excluding any 12b-1 fees, taxes, interest, brokerage fees, extraordinary expenses and certain insurance expenses) will not exceed 0.95% of average daily net assets. Under its Management Agreement, the Portfolio pays a management fee based on average daily net assets as follows: 0.75% on the first $500 million, 0.70% on the next $500 million, 0.65% on the next $1,500 million, 0.60% on assets in excess of $2,500 million, all per year. The Service Class shares are subject to an annual 12b-1 fee of not more than 0.30%. Effective May 1, 2004 through April 30, 2005, Delaware Distributors, L.P. has contracted to limit the Service Class shares 12b-1 to no more than 0.25% of average daily net assets. Prior to May 1, 2003, the Board of Trustees of the Portfolio had set the fee at an annual rate of 0.15% of average daily net assets. (w) The Dreyfus Corporation has agreed, until December 31, 2004, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses do not (excluding taxes, brokerage commissions, extraordinary expenses, interest expenses and commitment fees on borrowings) exceed 1.00%. (x) The Dreyfus Corporation has undertaken, until December 31, 2004, to waive receipt of its fees and/or assume the expenses of the portfolio so that the expenses do not (excluding taxes, brokerage commissions, extraordinary expenses, interest expenses and commitment fees on borrowings) exceed 1.40%. (y) "Other Expenses" include transfer agency fees and expenses equal on an annualized basis to 0.04% of the average daily net assets of the Portfolio plus all other ordinary expenses not detailed above. Additionally, the Adviser has voluntarily agreed to limit "Other Expenses" (excluding management fees, transfer agency fees and expenses, taxes, interest, brokerage fees, litigation, indemnification, shareholder meeting and other extraordinary expenses) to the extent that such expenses exceed, on an annual basis, a percentage rate of the average daily net assets of each Portfolio. Effective December 22, 2003, the Adviser has agreed to reduce the "Other Expenses" limitation, as defined above, for the Goldman Sachs CORE Small Cap Equity Portfolio to be 0.11% of the Portfolio's average daily net assets, resulting in total expenses for each such Portfolio at a rate no higher than 0.90%. The Adviser has contractually agreed to maintain these expense limitation reductions through June 30, 2005. (z) Each Portfolio has an expense offset arrangement that reduces the Portfolio's custodian fee based upon the amount of cash maintained by the Portfolio with its custodian and dividend 19 disbursing agent. Each Portfolio may enter into other such arrangements and directed brokerage arrangements, which would also have the effect of reducing the Portfolio's expenses. "Other Expenses" do not take into account these fee reductions, and are therefore higher than the actual expenses of the Portfolio. Had these fee reductions been taken into account, "Net Total Annual Expenses" would be lower for the New Discovery Portfolio and would equal 1.28%. (aa) MFS has contractually agreed, subject to reimbursement, to bear the Portfolio's expenses such that "Other Expenses" (after taking into account the expense offset and brokerage arrangements described above), do not exceed 0.15% annually. (Note that the High Income Portfolio' "Other Expenses" are currently at or below 0.15% and the Portfolio is reimbursing MFS.) This contractual fee arrangement may not be changed without approval of the Board of Trustees which oversees the Portfolio. (bb) The reimbursement agreement will terminate on the earlier of April 30, 2005 or such date as all expenses previously borne by MFS under the agreement have been paid by the Portfolio. (cc) Under the terms of the Advisory agreement, if the total ordinary business expenses, exclusive of taxes, distribution fees and interest, exceed .95% of the average daily net assets of the Portfolio, the Adviser will reimburse the Portfolio for the amount of the excess. Additionally, the Adviser has voluntarily agreed to reimburse the Portfolio for all expenses as a percent of average daily net assets in excess of .60% for Class I Shares and .85% for Class II Shares. For the year ended December 31, 2003, the Adviser voluntarily waived $52,190 of its investment advisory fees. This waiver is voluntary in nature and can be discontinued at the Adviser's discretion. (dd) The adviser has committed through April 30, 2005 to waive fees and/or reimburse expenses to the extent necessary to maintain the Portfolio's net operating expense ratio shown. The expense information regarding the Portfolios was provided by those Portfolios. MetLife Metropolitan Life Insurance Company ("MetLife") is a wholly-owned subsidiary of MetLife, Inc., a publicly traded company. Our main office is located at One Madison Avenue, New York, New York 10010. MetLife has the legal obligation to pay all benefits and other amounts to which you are entitled under the terms of your Policy. The Fixed Account The Fixed Account is part of our general assets that are not in any legally segregated separate accounts. Amounts in the Fixed Account are credited with interest at an effective annual rate of 4%. We may also credit excess interest on such amounts. Different excess interest rates may apply to different amounts based upon when such amounts were allocated to the Fixed Account. Any partial amounts we remove from the Fixed Account (such as any portion of your Policy's monthly deduction that is allocable to the Fixed Account) will be taken from the most recently allocated amounts first. Any excess interest rate will be credited for at least 12 months before a new rate is credited. We can delay transfers, withdrawals, surrender and payment of Policy loans from the Fixed Account for up to 6 months. Since the Fixed Account is not registered under the federal securities laws, this Prospectus contains only limited information about the Fixed Account. The Policy gives you more information on the operation of the Fixed Account. Separate Account UL The Separate Account receives premium payments from the Policy described in this Prospectus and other variable life insurance policies that we issue. The assets in the Separate Account legally belong to us, but they are held solely 20 for the benefit of investors in the Separate Account and no one else, including our other creditors. Income and realized and unrealized capital gains and losses of the Separate Account are credited to the Separate Account without regard to any of our other income or capital gains and losses. We will keep an amount in the Separate Account that at least equals the value of our commitments to policy owners that are based on their investments in the Separate Account. We can also keep charges that we deduct and other excess amounts in the Separate Account or we can transfer the excess out of the Separate Account. [SIDEBAR: Each Separate Account investment division invests in a corresponding Portfolio of a Fund.] The Separate Account has subdivisions, called "investment divisions." Each Investment division invests its assets exclusively in shares of a corresponding Portfolio of a Fund. We can add new investment divisions to or eliminate Investment divisions from the Separate Account. You can designate how you would like your net premiums and cash value to be allocated among the available investment divisions and our Fixed Account. Amounts you allocate to each investment division receive the investment experience of the investment division, and you bear this investment risk. The Funds [SIDEBAR: You should carefully review the investment objectives, strategies, and risks of each Portfolio which are described in the prospectus for each Fund you have also received.] Each of the Funds is a "series" type of mutual fund, which is registered as an open-end management investment company under the Investment Company Act of 1940 (the "1940 Act"). Each Fund is divided into Portfolios, each of which represents a different class of stock in which a corresponding investment division of the Separate Account invests. You should read each Fund prospectus that you have also received. They contain information about each Fund and its Portfolios, including the investment objectives, strategies, risks and investment advisers that are associated with each Portfolio. They also contain information on our different separate accounts and those of our affiliates that invest in each Fund and the risks related thereto. Some of the Portfolios have names and investment objectives that are very similar to certain publicly available mutual funds that are managed by the same money managers. These Portfolios are not those publicly available mutual funds and will not have the same performance. Different performance will result from such factors as different implementation of investment policies, different cash flows into and out of the Portfolios, different fees and different sizes. Our arrangements with certain of the unaffiliated Fund sponsors provide that they or one of their affiliates will pay us based on a percentage (up to 0.50% on an annual basis) of the net assets of a Portfolio attributable to the Policies. (This is in addition to any amounts we may receive from Rule 12b-1 fees charged to a Portfolio.) Any such additional payments are not charged to you, the Separate Account or the Portfolio. As of the end of each Valuation Period (see "Valuation period" description below in "Other Policy Provisions--When Your Requests Become Effective"), we purchase and redeem Fund shares for the Separate Account at their net asset value without any sales or redemption charges. These purchases and redemptions reflect the amount of any of the following transactions that take effect at the end of the Valuation Period: .. The allocation of net premiums to the Separate Account. .. Dividends and distributions on Fund shares, which are reinvested as of the dates paid (which reduces the value of each share of the Fund and increases the number of Fund shares outstanding, but has no effect on the cash value in the Separate Account). 21 .. Policy loans and loan repayments allocated to the Separate Account. .. Transfers to and among investment divisions. .. Withdrawals and surrenders taken from the Separate Account. The adviser, any sub-adviser and investment objective of each Portfolio are as follows: Metropolitan Series Fund, Inc. Adviser: MetLife Advisers, LLC
Portfolio Sub-Adviser Investment Objective - ------------------------------------------------------------------------------------- State Street Research State Street Research & Maximum capital Aggressive Growth Management Company appreciation. - ------------------------------------------------------------------------------------- State Street Research State Street Research & Long-term growth of capital Investment Trust Management Company and income. - ------------------------------------------------------------------------------------- State Street Research State Street Research & High total return, consisting Aurora Management Company principally of capital appreciation. - ------------------------------------------------------------------------------------- State Street Research State Street Research & High total return while Diversified Management Company attempting to limit investment risk and preserve capital. - ------------------------------------------------------------------------------------- FI International Stock Fidelity Management & Long-term growth of capital. Research Company - ------------------------------------------------------------------------------------- Met/Putnam Voyager Putnam Investment Capital appreciation. Management, LLC - ------------------------------------------------------------------------------------- Harris Oakmark Large Cap Harris Associates L.P. Long-term capital Value appreciation. - ------------------------------------------------------------------------------------- FI Mid Cap Opportunities Fidelity Management & Long-term growth of capital. Research Company - ------------------------------------------------------------------------------------- Neuberger Berman Partners Neuberger Berman Capital growth. Mid Cap Value Management Inc. - ------------------------------------------------------------------------------------- Scudder Global Equity Deutsche Investment Long-term growth of capital. Management Americas Inc. - ------------------------------------------------------------------------------------- T. Rowe Price Large Cap T. Rowe Price Associates Long-term growth of capital Growth Inc. and, secondarily, dividend income. - ------------------------------------------------------------------------------------- T. Rowe Price Small Cap T. Rowe Price Associates Long-term capital growth. Growth Inc. - ------------------------------------------------------------------------------------- Lehman Brothers(R) Metropolitan Life Insurance To equal the performance of Aggregate Bond Index Company the Lehman Brothers Aggregate Bond Index. - ------------------------------------------------------------------------------------- MetLife Stock Index Metropolitan Life Insurance To equal the performance of Company the Standard & Poor's 500 Composite Stock Price Index. - ------------------------------------------------------------------------------------- Morgan Stanley EAFE(R) Metropolitan Life Insurance To equal the performance of Index Company the MSCI EAFE Index. - ------------------------------------------------------------------------------------- Russell 2000(R) Index Metropolitan Life Insurance To equal the return of Company Russell 2000 Index. - ------------------------------------------------------------------------------------- MetLife Mid Cap Stock Metropolitan Life Insurance To equal the performance of Index Company the Standard & Poor's MidCap 400 Composite Stock Price Index. - ------------------------------------------------------------------------------------- Davis Venture Value Davis Selected Advisors, Growth of capital. L.P. - ------------------------------------------------------------------------------------- State Street Research Large State Street Research & Long-term growth of capital. Cap Growth Management Company - ------------------------------------------------------------------------------------- Loomis Sayles Small Cap Loomis, Sayles & Company, Long-term capital growth L.P. from investments in common stocks or other equity securities. - -------------------------------------------------------------------------------------
22
Portfolio Sub-Adviser Investment Objective - ----------------------------------------------------------------------------------- MFS Investors Trust Massachusetts Financial Long-term growth of capital Services Company with a secondary objective to seek reasonable current income. - ----------------------------------------------------------------------------------- State Street Research State Street Research & High level of current income Money Market Management Company consistent with preservation of capital. - ----------------------------------------------------------------------------------- MFS Total Return Massachusetts Financial Favorable total return Services Company through investment in a diversified portfolio. - ----------------------------------------------------------------------------------- FI Value Leaders Fidelity Management & Long-term growth of capital. (formerly FI Structured Research Company Equity) - ----------------------------------------------------------------------------------- State Street Research Bond State Street Research & A competitive total return Income Management Company primarily from investing in fixed-income securities. - ----------------------------------------------------------------------------------- The Janus Aspen Series Adviser: Janus Capital Management LLC - ----------------------------------------------------------------------------------- Portfolio Sub-Adviser Investment Objective - ----------------------------------------------------------------------------------- Janus Aspen Growth N/A Long-term growth of capital in a manner consistent with the preservation of capital. - ----------------------------------------------------------------------------------- Janus Aspen Balanced N/A Long-term capital growth, consistent with preservation of capital and balanced by current income. - ----------------------------------------------------------------------------------- Janus Aspen Capital N/A Long-term growth of capital. Appreciation - ----------------------------------------------------------------------------------- The Franklin Templeton Variable Insurance Products Trust Adviser: See below - ----------------------------------------------------------------------------------- Portfolio Adviser Investment Objective - ----------------------------------------------------------------------------------- Templeton Foreign Templeton Investment Long-term capital growth. Securities Counsel, LLC - ----------------------------------------------------------------------------------- Templeton Growth Templeton Global Advisors, Long-term capital growth. Securities Limited - ----------------------------------------------------------------------------------- Franklin Mutual Discovery Franklin Mutual Advisers, Capital appreciation. Securities LLC - ----------------------------------------------------------------------------------- AllianceBernstein Variable Products Series Adviser: Alliance Capital Fund, Inc. Management, L.P. - ----------------------------------------------------------------------------------- Portfolio Sub-Adviser Investment Objective - ----------------------------------------------------------------------------------- AllianceBernstein Growth N/A To seek reasonable current and Income income and reasonable opportunity for appreciation. - ----------------------------------------------------------------------------------- AllianceBernstein US N/A High current income Government/High Grade consistent with preservation Securities of capital. - ----------------------------------------------------------------------------------- AllianceBernstein N/A Growth of capital. Technology - -----------------------------------------------------------------------------------
23 Met Investors Series Trust Adviser: Met Investors Advisory, LLC - --------------------------------------------------------------------------------- Portfolio Sub-Adviser Investment Objective - --------------------------------------------------------------------------------- Lord Abbett Growth and Lord, Abbett & Co. Long-term growth of capital Income and income without excessive fluctuations in market value. - --------------------------------------------------------------------------------- Lord Abbett Bond Lord, Abbett & Co. To provide high current Debenture income and the opportunity for capital appreciation to produce a high total return. - --------------------------------------------------------------------------------- Janus Aggressive Growth Janus Capital Management Long term growth of capital. LLC - --------------------------------------------------------------------------------- Neuberger Berman Real Neuberger Berman To provide total return Estate Management Inc. through investment in real estate securities, emphasizing both capital appreciation and current income. - --------------------------------------------------------------------------------- Lord Abbett Growth Lord, Abbett & Co. Capital appreciation. Opportunities - --------------------------------------------------------------------------------- T. Rowe Price Mid-Cap T. Rowe Price Associates, Long term growth of capital. Growth Inc. - --------------------------------------------------------------------------------- Lord Abbett Mid-Cap Value Lord, Abbett & Co. Capital appreciation through investments, primarily in equity securities. - --------------------------------------------------------------------------------- Met/AIM Small Cap Growth AIM Capital Management, Long term growth of capital. Inc. - --------------------------------------------------------------------------------- Met/AIM Mid Cap Core AIM Capital Management, Long term growth of capital. Equity Inc. - --------------------------------------------------------------------------------- Third Avenue Small Cap Third Avenue Management Long term capital Value LLC appreciation. - --------------------------------------------------------------------------------- Fidelity Variable Insurance Products Fund Adviser: Fidelity Management & Research Company - --------------------------------------------------------------------------------- Portfolio Sub-Adviser Investment Objective - --------------------------------------------------------------------------------- Growth FMR Co., Inc. Capital appreciation. - --------------------------------------------------------------------------------- Contrafund(R) N/A Long-term capital appreciation. - --------------------------------------------------------------------------------- Asset Manager Growth(R) N/A High total return with reduced risk over the long term through an asset allocation approach. - --------------------------------------------------------------------------------- Investment Grade Bond Fidelity Investments Money High level of current income Management, Inc. as is consistent with preservation of capital. - --------------------------------------------------------------------------------- Equity-Income FMR Co., Inc. Reasonable income. - ---------------------------------------------------------------------------------
24 AIM Variable Insurance Funds Adviser: AIM Advisors, Inc. -------------------------------------------------------------------------- Portfolio Sub-Adviser Investment Objective -------------------------------------------------------------------------- AIM V.I. Government N/A To achieve a high level of Securities current income consistent with reasonable concern for safety of principal. -------------------------------------------------------------------------- AIM V.I. Real Estate N/A High total return. -------------------------------------------------------------------------- INVESCO VIF--Core Invesco Institutional To provide a high total Equity return through both growth and current income. -------------------------------------------------------------------------- American Century Variable Products Fund Adviser: American Century Investment Management, Inc. -------------------------------------------------------------------------- Portfolio Sub-Adviser Investment Objective -------------------------------------------------------------------------- International N/A Capital growth. -------------------------------------------------------------------------- Vista N/A Long term capital growth. -------------------------------------------------------------------------- Value N/A Long term capital growth. -------------------------------------------------------------------------- Delaware VIP Trust Adviser: Delaware Management Company -------------------------------------------------------------------------- Portfolio Sub-Adviser Investment Objective -------------------------------------------------------------------------- Small Cap Value N/A Capital appreciation. -------------------------------------------------------------------------- Dreyfus Investment Portfolios Adviser: The Dreyfus Corporation -------------------------------------------------------------------------- Portfolio Sub-Adviser Investment Objective -------------------------------------------------------------------------- MidCap Stock N/A Exceed the total return performance of the S&P 400(R) by investing in stocks of medium-size companies. -------------------------------------------------------------------------- Emerging Leaders N/A Capital growth by investing in small companies. -------------------------------------------------------------------------- Dreyfus Variable Investment Fund Adviser: The Dreyfus Corporation -------------------------------------------------------------------------- Portfolio Sub-Adviser Investment Objective -------------------------------------------------------------------------- International Value N/A Long-term capital growth by investing in foreign stocks of value companies. -------------------------------------------------------------------------- Appreciation Fayez Sarofim & Co. Long term capital growth consistent with the preservation of capital. -------------------------------------------------------------------------- Goldman Sachs Variable Insurance Trust Adviser: Goldman Sachs Asset Management, L.P. -------------------------------------------------------------------------- Portfolio Sub-Adviser Investment Objective -------------------------------------------------------------------------- Mid Cap Value N/A Long term capital appreciation. -------------------------------------------------------------------------- CORE Small Cap Equity N/A Long term growth of capital. --------------------------------------------------------------------------
25 Massachusetts Financial Services Variable Adviser: Massachusetts Insurance Trust Financial Services Company -------------------------------------------------------------------------- Portfolio Sub-Adviser Investment Objective -------------------------------------------------------------------------- Global Equity N/A Capital appreciation. -------------------------------------------------------------------------- High Income N/A To provide high current income. -------------------------------------------------------------------------- Value N/A Capital appreciation and reasonable income. -------------------------------------------------------------------------- New Discovery N/A Capital appreciation. -------------------------------------------------------------------------- Van Kampen Life Investment Trust Adviser: Van Kampen Asset Management -------------------------------------------------------------------------- Portfolio Sub-Adviser Investment Objective -------------------------------------------------------------------------- Government N/A To provide investors with high current return consistent with preservation of capital. -------------------------------------------------------------------------- Wells Fargo Variable Trust Adviser: Wells Fargo -------------------------------------------------------------------------- Portfolio Sub-Adviser Investment Objective -------------------------------------------------------------------------- Total Return Wells Capital Management Total return consisting of income and capital appreciation. -------------------------------------------------------------------------- Money Market Wells Capital Management High current income, while preserving capital and liquidity. -------------------------------------------------------------------------- Asset Allocation Wells Capital Management Long term total return, consistent with reasonable risk. -------------------------------------------------------------------------- Growth Wells Capital Management Long term capital appreciation. -------------------------------------------------------------------------- Large Company Growth Peregrine Capital Long term capital appreciation by investing primarily in large, domestic companies that have superior growth potential. -------------------------------------------------------------------------- Equity Income Wells Capital Management Long term capital appreciation and above- average dividend income. --------------------------------------------------------------------------
The Portfolio Share Classes that We Offer The Funds offer various classes of shares, each of which has a different level of expenses. The Fund prospectuses may provide information for share classes or Portfolios that are not available through the Policy. When you consult the Fund prospectus for a Portfolio, you should be careful to refer only to the information regarding the Portfolio and class of shares that is available through the Policy. The classes of shares that are available under the Policy are indicated in the expense table on pages 12 to 17 and on the front cover pages of the Prospectus. 26 Voting Rights [SIDEBAR: You can give us voting instructions on shares of each Portfolio of a Fund that are attributed to your Policy.] The Funds have shareholder meetings from time to time to, for example, elect directors and approve some changes in investment management arrangements. We will vote the shares of each Portfolio that are attributed to your Policy based on your instructions. Should we determine that the 1940 Act no longer requires us to do this, we may decide to vote Fund shares in our own right, without input from you or any other owners of variable life insurance policies or variable annuity contracts that participate in a Fund. Issuing a Policy If you want to own a Policy, then you must complete an application, which must be received by the Designated Office. We reserve the right to reject an application for any reason permitted by law, and our acceptance of an application is subject to our insurance underwriting rules. There are three types of underwriting available under the Policy. We decide which type to use based on the total number of eligible possible insureds within the eligible group for whom a Policy could be purchased and the percentage of those insureds for whom a Policy is actually purchased. The three types of underwriting are: Guaranteed Issue--requires the least evidence of insurability and rating classification Simplified Underwriting--requires more evidence of insurability and rating classification Full Underwriting--requires the most evidence of insurability and rating classification An insured who is a standard risk under Simplified Underwriting or Guaranteed Issue may have a higher cost of term insurance rate than would apply to the same insured under Full Underwriting. [SIDEBAR: We will issue a Policy to you as owner. You will have all the rights under the Policy including the ability to name a new owner or contingent owner.] Generally, we will issue a Policy only for insureds that are age 70 or less (although we may decide to permit an insured that is older) that have provided evidence of insurability that we find acceptable. An "insured" is the person upon whose life we issue the Policy. For the purpose of computing the insured's age under the Policy, we start with the insured's age on the Date of Policy which is set forth in the Policy. Age under the Policy at any other time is then computed using that issue age and adding the number of full Policy years completed. The Date of Policy is usually the date the Policy application is approved and premiums are accepted. We use the Date of Policy to calculate the Policy years (and Policy months and monthly anniversaries). To preserve a younger age for the insured, we may permit a Date of Policy that is earlier than the date the application is approved if there have been no material misrepresentations in the application. You may request that your Date of Policy be the same date the planned periodic premium is received. In these cases, you would incur a charge for insurance protection before insurance coverage starts. However, the earlier Date of Policy gives you the potential advantage of having the premium applied to the Separate or Fixed Account on an earlier date if a payment is received. 27 Insurance coverage under the Policy will generally begin at the time the application is approved. For coverage to be effective, the insured's health on the date of such approval must be the same as stated in the application and, in most states, we can require that the insured not have sought medical advice or treatment between the date of the application and the date of approval. [SIDEBAR: You can make voluntary planned periodic premium payments and unscheduled premium payments.] Payment and Allocation of Premiums The payment of a given premium won't necessarily guarantee that your Policy will remain in force. Rather, this depends on your Policy's cash surrender value. Paying Premiums You can make premium payments, subject to certain limitations discussed below, through the: Voluntary Planned Periodic Premium Schedule: You choose the schedule on your application. The schedule sets forth the amount of premiums, fixed payment intervals and the period of time that you intend to pay premiums. The schedule can be: (a) annual; (b) semi-annual; or (c) through another method to which we agree. After payment of the first planned periodic premium, you do not have to pay premiums in accordance with your voluntary planned period premium schedule. Unscheduled Premium Payment Option: You also can make other premium payments at any time. Maximum and Minimum Premium Payments .. The first premium may not be less than the planned premium. .. After the first Policy year, your voluntary planned periodic payments must be at least $100, whether on an annual or semi-annual basis. .. Unscheduled premium payments must be at least $100 each. We may change this minimum amount on 90 days' notice to you. .. You may not pay premiums that exceed tax law premium limitations for life insurance policies. We will return any amounts that exceed these limits, except that we will keep any amounts that are required to keep the Policy from terminating. We will let you make premium payments that would turn your Policy into a modified endowment contract, but we will tell you of this status in your annual statement, and if possible, we will tell you how to reverse the status. ("See Tax Matters--Modified Endowment Contracts.") .. We reserve the right not to sell a Policy to any group or individual associated with such group if the total amount of annual premium that is expected to be paid in connection with all Policies sold to the group or individuals associated with such group is less than $500,000. .. We may require evidence of insurability for premium payments that cause the minimum death benefit to exceed the death benefit then in effect under the death benefit option chosen. 28 Allocating Net Premiums [SIDEBAR: Net premiums are your premiums minus the charges deducted from your premiums.] Your allocations of net premiums to the Fixed Account are effective as of the Investment Start Date. See "Investment Start Date" description below in "Other Policy Provisions--When Your Requests Become Effective." Your allocations of net premiums to the investment divisions of the Separate Account are effective as of the end of the free look period. During the free look period, we allocate the net premium payments you allocated to the investment divisions to the State Street Research Money Market investment division. At the end of the free look period, we will allocate your cash value in that investment division among all the Separate Account investment divisions according to your net premium allocation instructions. You can instruct us to allocate your net premiums among the Fixed Account and the investment divisions. The percentage of your net premium allocation into each of these investment options must be in whole numbers. You can change your allocations (effective after the end of the free look period) at any time by giving us written notification at our Designated Office or in any other manner that we permit. If you have cash value of at least $60,000,000 in the Fixed Account for all Policies you own, we will have to give prior approval to any allocation of net premium or transfer of cash value to the Fixed Account. Insurance Proceeds If the Policy is in force, we will pay your beneficiary the insurance proceeds as of the end of the Valuation Period that includes the insured's date of death. We will pay this amount after we receive documents that we request as due proof of the insured's death. The beneficiary can receive the death benefit in a single sum or under an income plan described below. You may make this choice during the insured's lifetime. If no selection is made, we will place the amount in an account to which we will credit interest, and the beneficiary will have immediate access to all or part of that amount. The beneficiary has one year from the date the insurance proceeds are paid to change the selection from a single sum payment to an income plan, as long as we have made no payments from the interest-bearing account. If the terms of the income plan permit the beneficiary to withdraw the entire amount from the plan, the beneficiary can also name contingent beneficiaries. The insurance proceeds equal: .. The death benefit under the death benefit option or minimum death benefit that is in effect on the date of death; plus .. Any additional insurance proceeds provided by rider; minus .. Any unpaid Policy loans and accrued interest thereon, and any due and unpaid charges accruing during a grace period. Death Benefit Options [SIDEBAR: The Policy generally offers a choice of three death benefit options.] You can choose among three options. You select which option you want in the Policy application. The three options are: .. Option A: The death benefit is a level amount and equals the specified face amount of the Policy. .. Option B: The death benefit varies and equals the specified face amount of the Policy plus the cash value on the date of death. 29 .. Option C: The death benefit varies and equals the specified face amount of the Policy plus the amount by which the Policy premiums paid exceed withdrawals made. There are issues that you should consider in choosing your death benefit option. For example, under Options B and C, the cash value or other amounts are added to the specified face amount. Therefore, the death benefit will generally be greater under these options than under Option A, for Policies with the same specified face amount and premium payments. By the same token, the cost of insurance will generally be greater under Options B and C than under Option A. [SIDEBAR: You can generally change your death benefit option.] You can change your death benefit option after the first Policy year, provided that: .. Your cash surrender value after the change would be enough to pay at least two monthly deductions. .. The specified face amount continues to be no less than the minimum we allow after a decrease. .. The total premiums you have paid do not exceed the then current maximum premium limitations permitted under Internal Revenue Service rules. .. You provide evidence satisfactory to us of the insured's insurability, as we may require. Any change will be effective on the monthly anniversary on or immediately following the Date of Receipt of the request (or following the date we approve it if we require evidence of insurability). A change in death benefit option will cause us to automatically increase or decrease your specified face amount so that the amount of the death benefit is not changed on the effective date of the new death benefit option. Before you change your death benefit option you should consider the following: .. If the term insurance portion of your death benefit changes, as it may with a change from Option A to B or C and vice versa, the term insurance charge will also change. This will affect your cash value and, in some cases, the death benefit levels. .. If your specified face amount changes because of the change in death benefit option, consider also the issues presented by changing your specified face amount that are described under "Specified Face Amount," below. These issues include the possibility that your Policy would become a modified endowment contract; that you would receive a taxable distribution; and that the maximum premium amounts that you can pay would change. Minimum Death Benefit In no event will the Policy death benefit (plus the proceeds under any term rider on the insured's life) be lower than the minimum amount required to maintain the Policy as life insurance under the federal income tax laws as in effect on the date your Policy is issued. We determine this minimum by applying either the: I. Cash Value Accumulation Test or II. Guideline Premium/Cash Value Corridor Test. You choose the Cash Value Accumulation Test or the Guideline Premium/Cash Value Corridor Test before we issue your Policy, and the election cannot 30 later be changed. Under the Cash Value Accumulation Test, your death benefit is never less than the amount of your Policy's cash value at the insured's date of death, multiplied by a factor set forth in your Policy. This factor varies depending upon the insured's age at the date of death, and it declines as the insured grows older. Under the Guideline Premium/Cash Value Corridor Test, there is a very similar minimum death benefit based on your Policy's cash value at the date of death. However, the factors set forth in your Policy are higher for the Guideline Premium/Cash Value Corridor Test (which results in a higher minimum death benefit, assuming the same cash value). Also, there are firm limits on the amount of premiums you can pay for the amount of coverage you have in force under the Guideline Premium/Cash Value Corridor Test, while the tax law imposes no such firm limits under the Cash Value Accumulation Test. Before choosing between these two Tests you should consider the following: .. The Cash Value Accumulation Test may allow you to pay a greater amount in premiums for the same amount of death benefit under federal income tax laws and still qualify as life insurance. This is the case because the Policy will qualify as life insurance even though the Policy owner is paying a higher level of premium than allowed under the Guideline Premium/Cash Value Accumulation Test. However, the death benefit under the Cash Value Accumulation Test (and thus the monthly cost of term insurance) could be higher. You should ask for an illustration comparing results under both tests. We reserve the right to return any premium to the extent it would cause the death benefit to increase above certain limits. .. Increases in death benefits by operation of the Cash Value Accumulation Test will result in a higher monthly cost of term insurance. Such increases can also occur under the Guideline Premium/Cash Value Corridor Test, although this is less likely. .. Any advantage of the Cash Value Accumulation Test may be eliminated if the Policy owner does not intend to exceed the 7-pay test limit. The 7-pay test sets a limit on the amount of premiums which may be paid under a policy during the 7-pay testing period (usually the first 7 Policy years after issue or after a material modification of the Policy) without incurring possible adverse tax consequences. If premiums paid exceed such limit during any 7-pay testing period, any partial withdrawals, Policy loan and other distributions may be subject to adverse federal income tax consequences. (See "Federal Tax Matters--Modified Endowment Contracts" below.) Specified Face Amount Choosing Your Initial Specified Face Amount The specified face amount is the basic amount of insurance specified in your Policy. The Minimum Initial Specified Face amount is the smallest amount of specified face amount for which a Policy may be issued. Currently this amount is $100,000. If the term insurance rider is purchased, the specified face amount and term rider amount are combined to determine the Minimum Initial Specified Face Amount. You should consider whether to take all of your coverage as specified face amount or whether to take some coverage, if available, under our term insurance benefit. The term insurance benefit provides coverage on the insured to age 95. You may purchase this rider, if available, only at the time of Policy issue. By electing to take part of your coverage under the term insurance rider, you can reduce the amount of sales charges and current cost of insurance charges that you otherwise would pay. For details, see "Optional Rider Benefits--Term Benefit." 31 [SIDEMARK: You can generally increase or decrease your Policy's specified face amount.] Changing Your Specified Face Amount Generally, you may change your specified face amount at any time after the first Policy year subject to certain criteria specified below. Any change will be effective on: the monthly anniversary on or next following the (a) Date of Receipt of your request; or (b) if we require evidence of insurability, the date we approve your request. No reduction may decrease the specified face amount below the Minimum Initial Specified Face Amount during the first five Policy years or one half that amount thereafter. These minimums also apply to decreases that result from partial withdrawals or changes in death benefit options. If there have been previous specified face amount increases, any decreases in specified face amount will be made in the following order: (i) the specified face amount provided by the most recent increase; (ii) the next most recent increases successively; and (iii) the initial specified face amount. You may increase the specified face amount only if the cash surrender value after the change is large enough to cover at least two monthly deductions based on your most recent cost of term insurance charge. Any increase may require that we receive additional evidence of insurability that is satisfactory to us. We may also impose a one-time underwriting charge. Before you change your specified face amount you should consider the following: .. The term insurance portion of your death benefit will change and so will the term insurance charge. This will affect the insurance charges, cash value and, in some cases, death benefit levels. .. Reducing your specified face amount may result in our returning an amount to you which, if it occurs during the first 15 Policy years, could then be taxed on an income first basis. .. The amount of additional premiums that the tax laws permit you to pay into your Policy may increase or decrease. The additional amount you can pay without causing your Policy to be a modified endowment contract for tax purposes may also increase or decrease. (See "Tax Matters--Modified Endowment Contracts.") .. In some circumstances, the Policy could become a modified endowment contract. .. For Policies issued on or after May 1, 1996 in connection with other than certain employer sponsored plans that became effective prior to August 1, 2000, the sales charge and the administration charge may change. This is because an increase or decrease in the specified face amount will result in an increase or decrease in the annual target premium on which these charges are based. Income Plans [SIDEBAR: Generally you can receive the Policy's insurance proceeds, amounts payable at the Final Date or amounts paid upon surrender under an income plan instead of in a lump sum.] The insurance proceeds can be paid under a variety of income plans that are available under the Policy. Generally, we currently make the following income plans available: .. Interest income .. Installment Income for a Stated Period .. Installment Income of a Stated Amount .. Single Life Income--Guaranteed Payment Period .. Single Life Income--Guaranteed Return .. Joint and Survivor Life Income Before you choose an income plan you should consider: .. The tax consequences associated with the Policy proceeds, which can vary considerably, depending on whether a plan is chosen. You or your beneficiary should consult with a qualified tax adviser about tax consequences. 32 .. That your Policy will terminate at the time you commence an income plan and you will receive a new contract, which describes the terms of the income plan. You should carefully review the terms of the new contract, because it contains important information about the terms and conditions of the income plan. .. That the rates of return we credit under these plans are not based on the investment performance of any of the Portfolios. Cash Value, Transfers and Withdrawals Cash Value [SIDEBAR: Your Policy is designed to accumulate cash value.] Your Policy's cash value equals: .. The Fixed Account cash value, plus .. The Policy Loan Account cash value, plus .. The Separate Account cash value. Your Policy's cash surrender value equals your cash value minus any outstanding Policy loans (plus any accrued and unpaid loan interest). On your Investment Start Date, the Policy's cash value in an investment division will equal the portion of any net premium allocated to the investment division, reduced by the portion of any monthly deductions allocated to the Policy's cash value in that investment division. Thereafter, at the end of each Valuation Period the cash value in an investment division will equal: .. The cash value in the investment division at the beginning of the Valuation Period; plus .. All net premiums, loan repayments and cash value transfers into the investment division during the Valuation Period; minus .. All partial cash withdrawals, loans and cash value transfers out of the investment division during the Valuation Period; minus .. The portion of any charges and deductions allocated to the cash value in the investment division during the Valuation Period; plus .. The net investment return for the Valuation Period on the amount of cash value in the investment division at the beginning of the Valuation Period. The net investment return currently equals the rate of increase or decrease in the net asset value per share of the underlying Fund Portfolio over the Valuation Period, adjusted upward to take appropriate account of any dividends and other distributions paid by the Portfolio during the period. Cash Value Transfers [SIDEBAR: You can transfer your cash value among the investment divisions and the Fixed Account at any time beginning after the end of the free look period.] The minimum amount you may transfer is $50 or, if less, the total amount in an investment option. You may make transfers at any time. The maximum amount that you may transfer or withdraw from the Fixed Account in any Policy year is the greater of $50 and 25% of the largest amount in the Fixed Account over the last four Policy years. This limit does not apply to a full surrender, any loans taken, or any transfers under a systematic investment strategy. We may also limit the number of investment options to which you may transfer cash value, and, under certain conditions, we may have to approve transfers to the Fixed Account. (See "Payment and Allocation of Premiums--Allocating Net Premiums.") 33 We have policies and procedures that attempt to detect transfer activity that may adversely affect other Policy owners or Fund shareholders in situations where there is potential for pricing inefficiencies or that involve relatively large single or grouped transactions by one or more Policy owners (i.e., market timing). We employ various means to try to detect such transfer activity, such as periodically examining the number of transfers and/or the number of "round trip" transfers into and out of particular subaccounts made by Policy owners within given periods of time and/or investigating transfer activity identified by our Administrative Office or the Funds on a case-by-case basis. We may revise these policies and procedures in our sole discretion at any time without prior notice. The detection and deterrence of harmful transfer activity involves judgments that are inherently subjective. Our ability to detect such transfer activity may be limited by operational and technological systems, as well as our ability to predict strategies employed by Policy owners to avoid such detection. Our ability to restrict such transfer activity may be limited by provisions of the Policy. We apply our policies and procedures without exception, waiver, or special arrangement, although we may vary our policies and procedures among our variable contracts and subaccounts and may be more restrictive with regard to certain contracts or subaccounts than others. Accordingly, there is no assurance that we will prevent all transfer activity that may adversely affect Policy owners or Fund shareholders. In addition, we cannot guarantee that the Portfolios will not be harmed by transfer activity related to other insurance companies and/or retirement plans that may invest in the Portfolios. Our policies and procedures may result in restrictions being applied to Policy owner(s). These restrictions may include: .. requiring you to send us by U.S. mail a signed, written request to make transfers; .. limiting the number of transfers you may make each Policy Year; .. limiting the dollar amount that may be transferred at any one time; .. charging a transfer or collecting a Fund redemption fee; .. denying a transfer request from an authorized third party acting on behalf of multiple Policy owners; and .. imposing other limitations and modifications where we determine that exercise of the transfer privilege may create a disadvantage to other Policy owners (including, but not limited to, imposing a minimum time period between transfers). If restrictions are imposed on a Policy owner, we will reverse upon discovery any transaction inadvertently processed in contravention of such restrictions. In accordance with applicable law, we reserve the right to modify or terminate the transfer privilege at any time. We also reserve the right to defer or restrict the transfer privilege at any time that we are unable to purchase or redeem shares of any of the Portfolios, including any refusal or restriction on purchases or redemptions of their shares as a result of their own policies and procedures on market timing activities. You should read the Fund Prospectuses for more details. 34 Systematic Investment Strategies: You can choose one of four currently available strategies described below. You can also change or cancel your choice at any time. .. Equity Generator/ SM/. Allows you to transfer the interest earned on amounts in the Fixed Account in any Policy month equal to at least $20 to the MetLife Stock Index investment division or the State Street Research Aggressive Growth investment division. The transfer will be made at the beginning of the Policy month following the Policy month in which the interest was earned. .. Equalizer/ SM/. Allows you to periodically equalize amounts in your Fixed Account and either the MetLife Stock Index investment division or the State Street Research Aggressive Growth investment division. We currently make equalization each quarter. We will terminate this strategy if you make a transfer out of the investment division or the Fixed Account that isn't part of the strategy. You may then reelect the Equalizer on your next Policy anniversary. .. Rebalancer/ SM/. Allows you to periodically redistribute amounts in the Fixed Account and investment divisions in the same proportion that the net premiums are then being allocated. We currently make the redistribution at the beginning of each quarter. .. Allocator/ SM/. Allows you to systematically transfer money from the State Street Research Money Market investment division to the Fixed Account and/or any investment division(s). You must have enough cash value in the State Street Research Money Market investment division to enable the election to be in effect for three months. The election can be to transfer each month: .. A specific amount, until the cash value in the State Street Research Money Market investment division is exhausted. .. A specific amount for a specific number of months. .. Amounts in equal installments until the total amount you have requested has been transferred. Transfers By Telephone: We may, if permitted by state law, decide in the future to allow you to make transfer requests, changes to Systematic Investment Strategies and changes to allocations of future net premium by phone. We may also allow you to authorize your sales representative to make such requests. The following procedures would apply: .. We must have received your authorization in writing satisfactory to us, to act on instructions from any person that claims to be you or your sales representative, as applicable, as long as that person follows our procedures. .. We will institute reasonable procedures to confirm that instructions we receive are genuine. Our procedures will include receiving from the caller your personalized data. .. All telephone calls will be recorded. .. You will receive a written confirmation of any transaction. .. Neither the Separate Account nor we will be liable for any loss, expense or cost arising out of a telephone request if we reasonably believed the request to be genuine. Surrender and Withdrawal Privileges [SIDEBAR: You can surrender your Policy for its cash surrender value.] We may ask you to return the Policy before we honor your request to surrender your Policy. You can choose to have the proceeds paid in a single sum, or under an income plan. If the insured dies after you surrender the Policy but before the end of the Policy month in which you surrendered the Policy, we will pay your beneficiary an amount equal to the difference between the Policy's death benefit and its cash value, computed as of the surrender date. 35 You can make partial withdrawals if: .. the withdrawal would not result in the cash surrender value being less than sufficient to pay 2 monthly deductions; .. the withdrawal is at least $250; .. the withdrawal would not result in total premiums paid exceeding any then current maximum premium limitation determined by Internal Revenue Code rules; and .. the withdrawal would not result in your specified face amount falling below the minimum allowable amount after a decrease, as described under "Insurance Proceeds--Specified Amount--Changing Your Specified Face Amount," above. If you make a request for a partial withdrawal that is not permitted, we will tell you and you may then ask for a smaller withdrawal or surrender the Policy. We will deduct your withdrawal from the Fixed Account and the investment divisions in the same proportion that the Policy's cash value in each such option bears to the total cash value of the Policy in the Fixed Account and the investment divisions. As regards payment of amounts attributable to a check, we can wait for a reasonable time (15 days or less) to let the check clear. Before surrendering your Policy or requesting a partial withdrawal, you should consider the following: .. At least some amounts received may be taxable as income and, if your Policy is a modified endowment contract, subject to certain tax penalties. (See "Tax Matters--Modified Endowment Contracts.") .. Your Policy could become a modified endowment contract. .. For partial withdrawals, your death benefit will decrease, generally by the amount of the withdrawal. .. For partial withdrawals, your specified face amount may also decrease. For Option A Policies, your specified face amount will decrease by the amount of the withdrawal. For Option B Policies, a withdrawal will not decrease the specified face amount. For Option C Policies, your specified face amount will decrease by the amount, if any, by which cumulative withdrawals exceed cumulative premiums paid. In some cases you may be better off taking a Policy loan, rather than a partial withdrawal. Benefit at Final Date The Final Date is the Policy anniversary on which the insured is Age 95. Subject to certain conditions, we will allow you to extend that date where permitted by state law. If the insured is living on the Final Date, we will pay you the cash surrender value of the Policy. You can receive the cash surrender value in a single sum, in an account that earns interest, or under an available income plan. 36 Loan Privileges [SIDEBAR: You can borrow from us and use your Policy as security for the loan.] The amount of each loan must be: .. At least $250. .. No more than the greater of the cash surrender value less two monthly deductions and 75% of the cash surrender value (unless state law requires a different percentage to be applied, as set forth in your Policy) when added to all other outstanding Policy loans. As of your loan request's Date of Receipt, we will: .. Remove an amount equal to the loan from your cash value in the Fixed Account and each investment division of the Separate Account in the same proportion as the Policy's cash value in each such option bears to the total cash value of the Policy in the Fixed Account and the investment divisions. .. Transfer such cash value to the Policy loan account, where it will be credited with interest at a rate equal to the loan rate charged less a percentage charge, based on expenses associated with Policy loans, determined by us. This percentage charge will not exceed 2%, and the minimum rate we will credit to the Policy Loan Account will be 4% per year. At least once a year, we will transfer any interest earned in your Policy loan account to the Fixed Account and the investment divisions, according to the way that we then allocate your net premiums. .. Charge you interest, which will accrue daily. We will tell you the initial interest rate that applies to your loan and mail you advance notices of any increases applicable to existing loans. The interest rate charged for a Policy year will never be more than the maximum allowed by law and will generally be the greater of: .. The published monthly average for the calendar month ending two months before the start of such year; and .. The guaranteed rate used to credit interest to the cash value allocated to the Fixed Account for the Policy, plus no more than 1%. The published monthly average means (a) Moody's Corporate Bond Yield Average Monthly Average Corporates, as published by Moody's Investors Service, Inc. or any successor service; or (b) If the Moody's average is not published, a substantially similar average established by regulation issued by the insurance supervisory official of the state in which your Policy is delivered. Your interest payments are due at the end of each Policy year and if you don't pay the amount within 31 days after it is due, we will treat it as a new Policy loan, which will be taken from the Fixed Account and the investment divisions by the same method as other loans. Repaying your loans (plus accrued interest) is done by sending in payments at least equal to $25. You should designate whether a payment is intended as a loan repayment or a premium payment, since we will treat any payment for which no designation is made as a premium payment. We will allocate your repayment to the Fixed Account and the investment divisions, in the same proportion that net premiums are then allocated, except that amounts borrowed from the Fixed Account will be repaid to the Fixed Account first. Before taking a Policy loan you should consider the following: .. Interest payments on loans are generally not deductible for tax purposes. .. Under certain situations, Policy loans could be considered taxable distributions. .. Amounts held in your Policy loan account do not participate in the investment experience of the investment divisions or receive the interest rate credited to the 37 Fixed Account, either of which may be higher than the interest rate credited on the amount you borrow. .. If you surrender your Policy or if we terminate your Policy, or at the Final Date, any outstanding loan amounts (plus accrued interest) will be taxed as a distribution. (See "Federal Tax Matters--Loans" below.) .. A Policy loan increases the chances of our terminating your Policy due to insufficient cash value. We will terminate your Policy with no value if: (a) on a monthly anniversary your loans (plus accrued interest) exceed your cash value minus the monthly deduction; and (b) we tell you of the insufficiency and you do not make a sufficient payment within 61 days of the monthly anniversary. .. Your Policy's death proceeds will be reduced by any unpaid loan (plus any accrued and unpaid loan interest). Optional Rider Benefits You may be eligible for certain benefits provided by rider, subject to certain underwriting requirements and the payment of additional premiums. We will deduct any charges for the rider(s) (other than the charge for the interim term insurance rider) as part of the monthly deduction. Generally, we currently make the following benefits available by rider: . Disability Waiver of . Interim Term Insurance Monthly Deduction Benefit Benefit/(1)/ ----------------------------------------------------- . Accidental Death . Term Insurance Benefit/(5)/ Benefit/(3)/ ----------------------------------------------------- . Accelerated Death . Enhanced Cash Benefit/(2)/ Surrender Value Rider/(4)/ ----------------------------------------------------- - -------- /1/ An increase in specified face amount may not be covered by this rider. If not, the portion of the monthly deduction associated with the increase will continue to be deducted from the cash value, which if insufficient, could result in the Policy's termination. For this reason, it may be advantageous for the owner, at the time of total disability, to reduce the specified face amount to that covered by this rider. /2/ Payment under this rider may affect eligibility for benefits under state or federal law. This rider is currently not available in New Jersey or Massachusetts. /3/ This rider is discussed in more detail under "Term Benefit" below. /4/ This rider may be attached at issue if you request it, but not thereafter. /5/ This rider is not available on the portion of the coverage provided under the Term Benefit. Each rider contains important information, including limits and conditions that apply to the benefits. If you decide to purchase any of the riders, you should carefully review their provisions to be sure the benefit is something that you want. These riders may not be available in all states. You should also consider: .. That the addition of certain riders can restrict your ability to exercise certain rights under the Policy. .. That the amount of benefits provided under the rider is not based on investment performance of a separate account; but, if the Policy terminates because of poor investment performance or any other reason, the riders generally will also terminate. .. The tax consequences. You should also consult with your tax advisor before purchasing one of the riders. 38 Term Benefit You have the flexibility to include, at Policy issue, a rider that provides a term benefit ("Term Rider"). Such a rider was generally not available with Policies issued prior to May 1, 1996 or in connection with certain employer sponsored plans that became effective prior to that date. The availability of the Term Rider is also subject to governmental approval in your state. The Term Rider is a rider to the Policy that, like the base Policy, provides coverage on the insured to age 95. You may purchase this rider, if available, only at Policy issue. Nevertheless, if you purchase the Term Rider, the amount of coverage under the rider will automatically increase and decrease with any changes to your specified face amount under the Policy, so that the ratio between the Policy's specified face amount and the amount of Term Rider coverage will always remain the same as you originally selected. In almost all respects, coverage taken under the Term Rider has exactly the same effect as coverage taken as specified face amount under the Policy. An important difference, however, is that the sales charge depends on the amount of the coverage provided under the base policy. The amount of Term Rider will not impact the sales charge. Thus, in comparing two Policies with identical total insurance amounts, the one with the greater portion provided by the Term Rider will have a lower sales charge. Conversely, the Policy with the higher amount provided under the base policy will have a higher sales charge. Additionally, the cost of term insurance rates currently applicable to coverage provided under the Term Rider are lower than those currently charged for coverage under the base policy. Therefore, the larger the portion of coverage provided under the Term Rider, the lower the overall cost of term insurance. Again comparing two Policies with identical total insurance amounts, the cost of term insurance will be lower under the Policy with the higher portion of coverage provided under the Term Rider. To summarize, the lower sales charge and lower anticipated current cost of term insurance rates resulting from a greater portion of total coverage provided by the Term Rider will result in better overall performance under the Policy. You may elect to have up to 95% of your total coverage provided by the Term Rider. We are able to make these favorable terms available under the Term Rider largely because our costs of selling it (principally the commissions we pay) are lower than under the base policy. See "Sales of Policies". A disadvantage of the Term Rider is that the Accidental Death Benefit rider is not available in relation to the coverage under the Term Rider. If your Policy was issued prior to May 1, 2004, or if the plan became effective prior to that date, any Term Rider you have differs from the above description in that your cost of insurance charges for the Term Rider are higher (rather than lower) than under the base Policy. 39 Charges and Deductions Important Information Applicable to all Policy Charges and Deductions [SIDEBAR: Carefully review the Fee Tables in this Prospectus which set forth the charges that you pay under your Policy.] The charges discussed in the paragraphs that follow are all included in the Fee Tables on pages 6 to 14 of this Prospectus. You should refer to these Fee Tables for information about the rates and amounts of such charges, as well as other information that is not covered below. The Policy charges compensate us for our expenses and risks. Any distinctions we make about the specific purposes of the different charges are imprecise, and we are free to keep and use our revenues or profits for any other purpose, including paying any of our costs and expenses in connection with the Policies. Our revenues from any particular charge may be more or less than any costs or expenses that charge may be intended primarily to cover. The following sets forth additional information about Policy charges. Charges Deducted from Premiums Annual Target Premium: We use the concept of annual target premium to determine certain limits on sales and administrative charges (discussed immediately below). We define the annual target premium to be: For Policies issued prior to May 1, 1996 or issued in connection with certain employer sponsored plans that became effective prior to August 1, 2000, 50% of the estimated annual amount which satisfied the 7-Pay test under federal tax law based on the issue age of the insured and the initial specified face amount. (See "Federal Tax Matters--Modified Endowment Contracts".) For all other Policies, 100% of the estimated annual amount that satisfied the 7-Pay test based on the issue age of the insured, the specified face amount of insurance of the base Policy only (excluding the Term Rider) and standard underwriting class. For such Policies, the annual target premium amount is increased and decreased proportionately for increases and decreases in the specified face amount of the Policy. This could, in turn, increase or decrease sales and administrative charges. Sales Charge: We deduct this charge primarily to help pay the cost of compensating sales representatives and other direct and indirect expenses of distributing the Policies. The charge is assessed directly against each premium. For premiums received in Policy years 1 through 10, the current rate is up to 6.5% of the premium paid until the total payments in each such year equals the annual target premium, and for Policy years 11 and later the rate we charge is up to 3% of each premium until the total payments in the year equals the annual target premium. No sales charge is or will be assessed against any premiums paid in any Policy year in excess of a total equal to the annual target premium. The maximum rate we can charge for premiums received up to a total equal to the annual target premium during Policy years 1 through 10 is 9%, and the maximum for Policy years 11 and later is the same as currently charged in those years. Administrative Charge: We incur expenses in the administration of the Policy, including our underwriting and start-up expenses. We deduct up to 40 1.05% of each premium payment primarily to cover this expense up to a total of payments in any Policy year equal to the annual target premium, and .05% on any excess payments in any Policy year exceeding that total amount. Our charge will never exceed this rate. Charge for Average Expected State and Local Taxes Attributable To Premiums: We make this charge to reimburse us for the state premium taxes that we must pay on premiums we receive. Premium taxes vary from state to state and currently range from 0 to 3.5%. Our charge of 2.25% approximates the average tax rate we expect to pay on premiums we receive from all states. Charge for Expected Federal Taxes Attributable to Premiums: Federal income tax law requires us to pay certain amounts of taxes that are related to the amount of premiums we receive. We deduct 1.2% of each premium payment to offset the cost to us of those additional taxes, which may be more or less than the amount we pay in respect of your premiums. Charge for Interim Term Insurance Benefit: This charge is deducted only from your initial premium payment, and only if you elect the interim term insurance benefit. The interim term insurance benefit provides temporary initial life insurance coverage on the insured prior to the time that coverage under the Policy takes effect. This coverage is provided by adding a "rider" and is subject to several conditions and limitations. The charge for this benefit is described in the rider form. This charge is primarily to compensate us for the risk that the insured will die while coverage under this rider is in force. Loan Interest Spread: We charge interest on Policy loans but credit you with interest on the amount of the cash value we hold as collateral for the loan. The loan interest spread is the excess of the interest rate we charge over the interest rate we credit. This charge is primarily to cover our expense in providing the loan. The charge is guaranteed to never exceed 2%. Charges Included in the Monthly Deduction We allocate the monthly deduction (except for the monthly mortality and expense risk charge) among the Fixed Account and each investment division of the Separate Account in the same proportion as the Policy's cash value in each such option bears to the total cash value of the Policy in the Fixed Account and the investment divisions. We deduct the monthly deductions as of each monthly anniversary, commencing with the Date of Policy. .. Cost of Term Insurance. This charge varies monthly based on many factors. Each month, we determine the charge by multiplying your cost of insurance rates by the term insurance amount. This is the amount that we are at risk if the insured dies. The term insurance amount is the death benefit at the beginning of the Policy month divided by a discount factor to account for an assumed return during the month; minus the cash value at the beginning of the Policy month after deduction of all other applicable charges. Factors that affect the term insurance amount include the specified face amount, the cash value and the death benefit option you choose (generally, the term insurance amount will be higher for Options B and C). The term insurance rate is based on our expectations as to future experience, taking into account the insured's sex (if permitted by law and applicable under your Policy), age, underwriting class and rate class. The 41 rates will never exceed the guaranteed rates, which are based on certain 1980 Commissioners Standard Ordinary Mortality Tables. Our current rates are lower than the maximums in most cases. We review our rates periodically and may adjust them, but we will apply the same rates to everyone who has had their Policy for the same amount of time and who is the same age, sex and rate class. As a general rule, the cost of insurance rate increases each year you own your Policy, as the insured's age increases. Rate class relates to the level of mortality risk we assume with respect to an insured. It can be the standard rate class, or one that is higher (and may be divided by smoking status). The insured's rate class will affect your cost of term insurance. You can also have more than one rate class in effect, if the insured's rate class has changed and you change your specified face amount. A better rate class will lower the cost of term insurance on your entire Policy and a worse rate class will affect the portion of your cost of term insurance charge attributable to the specified face amount increase. .. Mortality and Expense Risk Charge. We make this monthly charge primarily to compensate us for mortality risks that insureds may live for a shorter period than we expect; and expense risks that our issuing and administrative expenses may be higher than we expect. This monthly charge is allocated proportionately to the cash value in each investment division of the Separate Account. The maximum rate we may charge is equivalent to an effective annual rate of .90% of the cash value in the Separate Account. Charges for Certain Optional Rider Benefits: The charges for most of the optional benefits that you can add by rider to your Policy will be deducted as part of the monthly deduction. This includes the following riders: .. Disability Waiver of Monthly Deduction Benefit .. Accidental Death Benefit .. Accelerated Death Benefit .. Term Benefit The purpose of the charge for each rider is primarily to compensate us for our direct and indirect costs and risks in providing that rider. The charge we deduct for any such additional benefits you can add by rider is described in the rider form. Variations In Charges We may vary a charge by group, based on anticipated variations in our costs or risks associated with the group or individuals in the group that the charge was intended to cover. Our variations in the charges will be made in accordance with our established and uniformly applied administrative procedures. We consider a variety of factors in determining charges, including but not limited to: .. The nature of the group and its organizational framework .. The method by which sales will be made to the individuals associated with the group .. The facility by which premiums will be paid .. The group's capabilities with respect to administrative tasks .. Our anticipated persistency of the Policies .. The size of the group and the number or years it has been in existence .. The aggregate amount of premiums we expect to be paid on the Policies owned by the group or by individuals associated with the group Any variations in charges will be reasonable and will not be unfairly discriminatory to the interests of any Policy owner. 42 Portfolio Company Charges Each of the Portfolios pays an investment management fee to its investment manager. Each Portfolio also incurs other direct expenses. See the fuller description contained in the Fee Table section of this Prospectus (also see the Fund Prospectus and Statement of Additional Information referred to therein for each Fund). You bear indirectly your proportionate share of the fees and expenses of the Portfolios of each Fund that correspond to the Separate Account investment divisions you are using. Other Charges Additional Taxes. In general, we don't expect to incur federal, state or local taxes upon the earnings or realized capital gains attributable to the assets in the Separate Account relating to the cash surrender value of the Policies. If we do incur such taxes, we reserve the right to charge cash value allocated to the Separate Account for these taxes. Cash Value Transfers. We do not currently charge for any transfer amounts. Except for transfers under Systematic Investment Strategies, we reserve the right to assess up to a $25 charge in the future against all transfers. Currently, transfers are not taxable transactions. Policy Termination and Reinstatement Termination: We will terminate your Policy without any cash surrender value if: .. The cash surrender value is less than the monthly deduction; and .. We do not receive a sufficient premium payment within the 61-day grace period to cover the monthly deduction. We will mail you notice if any grace period starts. Reinstatement: Upon your request, we will reinstate your Policy (without reinstating any amounts in a Policy loan account), subject to certain terms and conditions that the Policy provides. We must receive your request within 3 years (or any longer period required by state law) after the end of the grace period and before the Final Date. You also must provide us: .. A written application for reinstatement (the date we approve the application will be the effective date of the reinstatement). .. Evidence of insurability that we find satisfactory. .. An additional premium amount that the Policy prescribes for this purpose. Federal Tax Matters [SIDEBAR: You should consult with your own tax advisor to find out how taxes can affect your benefits and rights under your Policy.] The following is a brief summary of some tax rules that may apply to your Policy. Such discussion does not purport to be complete or to cover every situation. You must consult with and rely on the advice of your own tax or ERISA counsel where the Policy is being purchased in connection with an employee benefit plan, such as a death benefit or deferred compensation plan, or is being purchased for estate, tax planning or similar purposes. You should also consult with your own tax advisor to find out how taxes can affect your benefits and rights under your Policy. Such consultation is especially important before you make unscheduled premium payments, change your specified face amount, change your death benefit option, change coverage provided by riders, take a loan or withdrawal, or assign or surrender the 43 Policy. Under current federal income tax law, the taxable portion of distributions from variable annuities or variable life contracts is taxed at ordinary income tax rates and does not qualify for the reduced tax rate applicable to long-term capital gains and dividends. Insurance Proceeds .. Insurance proceeds are generally excludable from your beneficiary's gross income. .. The proceeds may be subject to federal estate tax: (i) if paid to the insured's estate or (ii) if paid to a different beneficiary if the insured possessed incidents of ownership at or within three years before death. .. If you die before the insured, the value of your Policy (determined under IRS rules) is included in your estate and may be subject to federal estate tax. .. Whether or not any federal estate tax is due is based on a number of factors including the estate size. Cash Value (If Your Policy Is Not a Modified Endowment Contract) .. You are generally not taxed on your cash value until you withdraw it or surrender your Policy or receive a distribution (such as on the Final Date). In these cases, you are generally permitted to take withdrawals and receive other distributions up to the amount of premiums paid without any tax consequences. However, withdrawals and other distributions will be subject to income tax after you have received amounts equal to the total premiums you paid. Somewhat different rules may apply if there is a death benefit reduction in the first 15 Policy years, when a distribution may be subject to tax on an income-out-first basis if there is a gain in your Policy (which is generally when your cash value exceeds the cumulative premiums you paid). Finally, if your Policy is part of an equity split dollar arrangement, there is a risk that some portion of the cash value may be taxed prior to any Policy distribution. Loans .. Loan amounts you receive will generally not be subject to income tax, unless your Policy is or becomes a modified endowment contract, is exchanged or terminates. .. Interest on loans is generally not deductible. For businesses that own a Policy, at least part of the interest deduction unrelated to the Policy may be disallowed unless the insured is a 20% owner, officer, director or employee of the business. .. If your Policy terminates (upon surrender, cancellation, lapse, the Final Date or, in most cases, exchanges) while any Policy loan is outstanding, the amount of the loan plus accrued interest thereon will be deemed to be a "distribution" to you. Any such distribution will have the same tax consequences as any other Policy distribution. Thus, there will generally be federal income tax payable on the amount by which withdrawals and loans exceed the premiums paid to date. Please be advised that amounts borrowed and withdrawn reduce the Policy's cash value and any remaining Policy cash value may be insufficient to pay the income tax on your gains. Modified Endowment Contracts These contracts are life insurance contracts where the premiums paid during the first 7 years after the Policy is issued, or after a material change in the Policy, exceed tax law limits referred to as the "7-pay test." Material changes in the Policy include changes in the level of benefits and certain other changes to your Policy after the issue date. Reductions in benefits during a 7-pay period also may cause your Policy to become a modified endowment contract. Generally, a life insurance policy that is received in exchange for a modified endowment contract will also be considered a modified endowment contract. 44 The IRS has promulgated a procedure for the correction of inadvertent modified endowment contracts. If your Policy is considered a modified endowment contract the following applies: .. The death benefit will still generally be income tax free to your beneficiary, as discussed above. .. Amounts withdrawn or distributed before the insured's death, including (without limitation) loans, assignments and pledges, are treated as income first and subject to income tax (to the extent of any gain in your Policy). All modified endowment contracts you purchase from us and our affiliates during the same calendar year are treated as a single contract for purposes of determining the amount of any such income. .. An additional 10% income tax generally applies to the taxable portion of the amounts received before age 591/2 except generally if you are disabled or if the distribution is part of a series of substantially equal periodic payments made over life expectancy. Diversification In order for your Policy to qualify as life insurance, we must comply with certain diversification standards with respect to the investments underlying the Policy. We believe that we satisfy and will continue to satisfy these diversification standards. Inadvertent failure to meet these standards may be able to be corrected. Failure to meet these standards would result in immediate taxation to Policy owners of gains under their Policies. Changes to Tax Rules and Interpretations Changes in applicable tax rules and interpretations can adversely affect the tax treatment of your Policy. These changes may take effect retroactively. We reserve the right to amend the Policy in any way necessary to avoid any adverse tax treatment. Examples of changes that could create adverse tax consequences include: .. Possible taxation of cash value transfers between investment funds. .. Possible taxation as if you were the owner of your allocable portion of the Separate Account's assets. .. Possible limits on the number of investment funds available or the frequency of transfers among them. .. Possible changes in the tax treatment of Policy benefits and rights. To the extent permitted under the federal tax law, we may claim the benefit of certain foreign tax credits attributable to taxes paid by certain Funds to foreign jurisdictions. Rights We Reserve We reserve the right to make certain changes if we believe the changes are in the best interest of our Policy owners or would help carry out the purposes of the Policy. We will make these changes in the manner permitted by applicable law and only after getting any necessary owner and regulatory approval. We will notify you of any changes that result in a material change in the underlying investments in the investment divisions, and you will have a chance to transfer out of the affected division (without charge). Some of the changes we may make include: .. Operating the Separate Account in any other form that is permitted by applicable law. 45 .. Changes to obtain or continue exemptions from the 1940 Act. .. Transferring assets among investment divisions or to other separate accounts, or our general account or combining or removing investment divisions from the Separate Account. .. Substituting Fund shares in an investment division for shares of another portfolio of a Fund or another fund or investment permitted by law. .. Changing the way we assess charges without exceeding the aggregate amount of the Policy's guaranteed maximum charges. .. Making any necessary technical changes to the Policy to conform it to the changes we have made. Some such changes might require us to obtain regulatory or Policy owner approval. Whether regulatory or Policy owner approval is required would depend on the nature of the change and, in many cases, the manner in which the change is implemented. You should not assume, therefore, that you necessarily will have an opportunity to approve or disapprove any such changes. Circumstances that could influence our determination to make any change might include changes in law or interpretations thereof; changes in financial or investment market conditions; changes in accepted methods of conducting operations in the relevant market; or a desire to achieve material operating economies or efficiencies. [SIDEBAR: Carefully review your Policy, which contains a full discussion of all its provisions.] Other Policy Provisions Free Look Period You can return the Policy during this period. The period ends on the later of: .. 10 days after you receive the Policy (unless state law requires a longer period); and .. the date we receive a receipt signed by you. If you return your Policy, we will send you a complete refund of any premiums paid (or cash value plus any charges deducted if state law requires) within seven days. Suicide If the insured commits suicide within the first two Policy years (or any other period required by state law), your beneficiary will receive all premiums paid (without interest), less any outstanding loans (plus accrued interest) and withdrawals taken. Similarly, we will pay the beneficiary only the cost of any increase in specified face amount if the insured commits suicide within two years of such increase. Assignment and Change in Ownership You can assign your Policy as collateral if you notify us in writing. The assignment or release of the assignment is effective when it is recorded at the Designated Office. We are not responsible for determining the validity of the assignment or its release. Also, there could be serious adverse tax consequences to you or your beneficiary, so you should consult with your tax adviser before making any change of ownership or other assignment. Reports Generally, you will promptly receive statements confirming your significant transactions such as: .. Change in specified face amount. .. Change in death benefit option. .. Transfers among investment divisions (including those through Systematic Investment Strategies, which are confirmed quarterly). 46 .. Partial withdrawals. .. Loan amounts you request. .. Loan repayments and premium payments. If your premium payments are made through a systematic payment method, we will not send you any confirmation in addition to the one you receive from your employer. We will also send you an annual statement within 30 days after a Policy year. That statement will summarize the year's transactions and include information on: .. Deductions and charges. .. Status of the death benefit. .. Cash and cash surrender values. .. Amounts in the investment divisions and Fixed Account. .. Status of Policy loans. .. Automatic loans to pay interest. .. Information on your modified endowment contract status (if applicable). We will also send you a Fund's annual and semi-annual reports to shareholders. When Your Requests Become Effective Generally, requests, premium payments and other instructions and notifications are effective on the Date of Receipt. In those cases, the effective time is at the end of the Valuation Period during which we receive them at our Designated Office. (Some exceptions to this general rule are noted below and elsewhere in this Prospectus.) A Valuation Period is the period between two successive Valuation Dates. It begins at the close of regular trading on the New York Stock Exchange on a Valuation Date and ends at the close of regular trading on the New York Stock Exchange on the next succeeding Valuation Date. The close of regular trading is 4:00 p.m., Eastern Time on most days. Valuation Date is: .. Each day on which the New York Stock Exchange is open for trading. .. Other days, if we think that there has been a sufficient degree of trading in a Fund's portfolio securities that the current net asset value of its shares might be materially affected. The end of the free look period is the effective time of the premium allocation instructions you make in your Policy application (and any changes in allocation or transfer requests you make on or before the end of the free look period). Your Investment Start Date is the date the first net premium is applied to the Fixed Account and/or the Separate Account and is the later of (1) the Date of Policy and (2) the Date of Receipt of your first premium payment. The effective date of your Systematic Investment Strategies will be that set forth in the strategy chosen. Third Party Requests Generally, we accept requests for transactions or information only from you. Therefore, we reserve the right not to process transactions requested on your behalf by your agent with a power of attorney or any other authorization. This includes processing transactions by an agent you designate, through a power 47 of attorney or other authorization, who has the ability to control the amount and timing of transfers for a number of other Policy owners, and who simultaneously makes the same request or series of requests on behalf of other Policy owners. Exchange Privilege If you decide that you no longer want to take advantage of the investment divisions in the Separate Account, you may transfer all of your money into the Fixed Account. No charge will be imposed on a transfer of your entire cash value (or the cash value attributable to a specified face amount increase) to the Fixed Account within the first 24 Policy months (or within 24 Policy months after a specified face amount increase you have requested, as applicable). In some states, in order to exercise your exchange privilege, you must transfer, without charge, the Policy cash value (or the portion attributable to a specified face amount increase) to a flexible premium fixed benefit life insurance policy that we make available. Sales of Policies We serve as the "principal underwriter," as defined in the 1940 Act, for the Policy. This offering is continuous. We are registered under the Securities Exchange Act of 1934 as a broker-dealer and are a member of the National Association of Securities Dealers, Inc. We sell the Policies through licensed life insurance sales representatives: .. Registered through us. .. Registered through other broker-dealers, including a wholly owned subsidiary. We may pay commissions to representatives (or the broker-dealers through which they are registered) for the sale of our products. The amount of commissions we pay may vary between different brokers and is based on a detailed formula. The formula generally provides for commissions equal to a certain percentage of premiums that you pay in a given Policy year up to your Policy's annual target premium and a lower percentage on amounts you pay in excess of that amount. In later Policy years, the commissions are lower and may be the same for all premiums, regardless of your Policy's annual target premium. We also may pay an additional amount based on the cash value of your Policy. The commissions that we pay in any year generally will not exceed $47.88 per $1,000 current specified face amount. See "Additional Information About Commissions" in the Statement of Additional Information. Our licensed representatives are eligible for various cash benefits, such as bonuses, insurance benefits and financing arrangements, and non-cash compensation programs we offer, such as attendance at conferences, trips, prizes, and awards. In addition, our licensed sales representatives who meet certain productivity, persistency, and length of service standards and/or their managers may be eligible for additional compensation. Other payments may be made for other services that do not directly involve the sale of the Policies. These services may include the recruitment and training of personnel, production of promotional literature, and similar services. We may require all or part of the commission to be returned to us by the MetLife representative or other broker-dealer if you do not continue the Policy for at least five years. The commissions do not result in a charge against the Policy in addition to the charges already described elsewhere in this Prospectus. 48 Experts The financial statements included in this Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. Deloitte & Touche LLP's principal business address is 201 E. Kennedy Boulevard, Tampa, Florida 33602. Financial Statements The financial statements of the Separate Account are attached to this Prospectus. You can find the financial statements of MetLife in the Statement of Additional Information referred to on the back cover of this Prospectus. Our financial statements should be considered only as bearing upon our ability to meet our obligations under the Policy. 49 In order to help you understand how the Policy's values would vary over time under different sets of assumptions, we will provide you with certain illustrations upon request. These will be based on the age and insurance risk characteristics of the person insured under the Policy and such factors as the specified face amount, premium payment amounts and rates of return (within limits) that you request. You can request such illustrations at any time. We have filed an example of such an illustration as an exhibit to the registration statement referred to below. Additional information about the Policy and the Separate Account can be found in the Statement of Additional Information. This Prospectus incorporates by reference all of the information contained in the Statement of Additional Information, which is legally part of this Prospectus. You may obtain, without charge, a copy of the Statement of Additional Information or a personalized illustration of death benefits, cash surrender values and cash values, by calling us at 1-732-602-6400 or contacting us through our website at www.metlife.com/sbr. Information about the Policy and the Separate Account, including the Statement of Additional Information, is available for viewing and copying at the SEC's Public Reference Room in Washington, D.C. Information about the operation of the public reference room may be obtained by calling the SEC at 202-942-8090. The Statement of Additional Information, reports and other information about the Separate Account are available on the SEC Internet site as www.sec.gov. Copies of this information may be obtained upon payment of a duplicating fee, by writing to the SEC's Public Reference Section at 450 Fifth Street, NW, Washington, DC 20549-0102. 811-06025 50 INDEPENDENT AUDITORS' REPORT To the Policyholders of Metropolitan Life Separate Account UL and the Board of Directors Metropolitan Life Insurance Company: We have audited the accompanying statement of assets and liabilities of each of the investment divisions (as disclosed in Note 1 to the financial statements) comprising Metropolitan Life Separate Account UL (the "Separate Account") of Metropolitan Life Insurance Company ("Metropolitan Life") as of December 31, 2003, and the related statements of operations and statements of changes in net assets for each of the periods in the three years then ended. These financial statements are the responsibility of the Separate Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodians and the depositors of the Separate Account. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the investment divisions comprising the Separate Account of Metropolitan Life as of December 31, 2003, the results of their operations and the changes in their net assets for each of the periods in the three years then ended, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Tampa, Florida April 16, 2004 F-1 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 2003
State Street State Street State Street Research Research Research Investment Trust Diversified Aggressive Growth Investment Division Investment Division Investment Division ------------------- ------------------- ------------------- ASSETS: Investments at Value: Metropolitan Series Fund, Inc. ("Metropolitan Fund") State Street Research Investment Trust Portfolio (14,863,974 Shares; cost $441,842,964)................ $ 366,694,241 $ -- $ -- State Street Research Diversified Portfolio (19,105,895 Shares; cost $308,822,843)................ -- 289,072,197 -- State Street Research Aggressive Growth Portfolio (10,426,099 Shares; cost $247,124,703)................ -- -- 187,148,479 MetLife Stock Index Portfolio (15,492,994 Shares; cost $471,480,310)................ -- -- -- FI International Stock Portfolio (4,453,384 Shares; cost $49,092,645).................. -- -- -- Janus Mid Cap Portfolio (13,049,904 Shares; cost $245,811,880)................ -- -- -- T. Rowe Price Small Cap Growth Portfolio (5,028,788 Shares; cost $60,709,864).................. -- -- -- Scudder Global Equity Portfolio (2,503,741 Shares; cost $28,862,268).................. -- -- -- Harris Oakmark Large Cap Value Portfolio (3,104,521 Shares; cost $33,265,016).................. -- -- -- Neuberger Berman Partners Mid Cap Value Portfolio (1,781,579 Shares; cost $24,876,339).................. -- -- -- T. Rowe Price Large Cap Growth Portfolio (2,868,134 Shares; cost $31,282,336).................. -- -- -- Lehman Brothers Aggregate Bond Index Portfolio (5,026,722 Shares; cost $53,380,037).................. -- -- -- Morgan Stanley EAFE Index Portfolio (2,459,540 Shares; cost $19,855,278).................. -- -- -- Russell 2000 Index Portfolio (2,317,218 Shares; cost $22,079,290).................. -- -- -- Met/Putnam Voyager Portfolio (1,900,061 Shares; cost $8,302,977)................... -- -- -- State Street Research Aurora Portfolio (3,401,875 Shares; cost $44,584,567).................. -- -- -- MetLife Mid Cap Stock Index Portfolio (2,344,249 Shares; cost $23,095,881).................. -- -- -- Franklin Templeton Small Cap Growth Portfolio (327,356 Shares; cost $2,499,796)..................... -- -- -- State Street Research Large Cap Value Portfolio (104,079 Shares; cost $957,558)....................... -- -- -- Davis Venture Value Portfolio (965,333 Shares; cost $21,277,385).................... -- -- -- Loomis Sayles Small Cap Portfolio (23,295 Shares; cost $3,717,206)...................... -- -- -- Alger Equity Growth Portfolio (263,538 Shares; cost $4,582,005)..................... -- -- -- MFS Investors Trust Portfolio (186,025 Shares; cost $1,391,215)..................... -- -- -- MFS Research Managers Portfolio (79,153 Shares; cost $613,213)........................ -- -- -- State Street Research Bond Income Portfolio (837,355 Shares; cost $89,830,207).................... -- -- -- FI Structured Equity Portfolio (3,215 Shares; cost $454,116)......................... -- -- -- Harris Oakmark Focused Value Portfolio (115,466 Shares; cost $21,015,539).................... -- -- -- Salomon Brothers Strategic Bond Opportunities Portfolio (409,695 Shares; cost $4,866,132)..................... -- -- -- Salomon Brothers U.S. Government Portfolio (592,211 Shares; cost $7,267,172)..................... -- -- -- State Street Research Money Market Portfolio (273,528 Shares; cost $27,352,817).................... -- -- -- FI Mid Cap Opportunities Portfolio (96,616 Shares; cost $916,740)........................ -- -- -- ----------------- ----------------- ----------------- Total Investments...................................... 366,694,241 289,072,197 187,148,479 Cash and Accounts Receivable........................... 393,060 -- 119,894 ----------------- ----------------- ----------------- Total Assets........................................... 367,087,301 289,072,197 187,268,373 LIABILITIES............................................ Due to/From Metropolitan Life Insurance Company........ -- 38,810 -- ----------------- ----------------- ----------------- NET ASSETS............................................. $367,087,301 $289,033,387 $187,268,373 ================= ================= ================= Outstanding Units (In Thousands)....................... 16,151 12,881 11,833 Unit Values............................................ $10.57 to $33.12 $11.79 to $30.64 $11.71 to $16.87
MetLife Stock Index Investment Division ------------------- ASSETS: Investments at Value: Metropolitan Series Fund, Inc. ("Metropolitan Fund") State Street Research Investment Trust Portfolio (14,863,974 Shares; cost $441,842,964)................ $ -- State Street Research Diversified Portfolio (19,105,895 Shares; cost $308,822,843)................ -- State Street Research Aggressive Growth Portfolio (10,426,099 Shares; cost $247,124,703)................ -- MetLife Stock Index Portfolio (15,492,994 Shares; cost $471,480,310)................ 456,268,669 FI International Stock Portfolio (4,453,384 Shares; cost $49,092,645).................. -- Janus Mid Cap Portfolio (13,049,904 Shares; cost $245,811,880)................ -- T. Rowe Price Small Cap Growth Portfolio (5,028,788 Shares; cost $60,709,864).................. -- Scudder Global Equity Portfolio (2,503,741 Shares; cost $28,862,268).................. -- Harris Oakmark Large Cap Value Portfolio (3,104,521 Shares; cost $33,265,016).................. -- Neuberger Berman Partners Mid Cap Value Portfolio (1,781,579 Shares; cost $24,876,339).................. -- T. Rowe Price Large Cap Growth Portfolio (2,868,134 Shares; cost $31,282,336).................. -- Lehman Brothers Aggregate Bond Index Portfolio (5,026,722 Shares; cost $53,380,037).................. -- Morgan Stanley EAFE Index Portfolio (2,459,540 Shares; cost $19,855,278).................. -- Russell 2000 Index Portfolio (2,317,218 Shares; cost $22,079,290).................. -- Met/Putnam Voyager Portfolio (1,900,061 Shares; cost $8,302,977)................... -- State Street Research Aurora Portfolio (3,401,875 Shares; cost $44,584,567).................. -- MetLife Mid Cap Stock Index Portfolio (2,344,249 Shares; cost $23,095,881).................. -- Franklin Templeton Small Cap Growth Portfolio (327,356 Shares; cost $2,499,796)..................... -- State Street Research Large Cap Value Portfolio (104,079 Shares; cost $957,558)....................... -- Davis Venture Value Portfolio (965,333 Shares; cost $21,277,385).................... -- Loomis Sayles Small Cap Portfolio (23,295 Shares; cost $3,717,206)...................... -- Alger Equity Growth Portfolio (263,538 Shares; cost $4,582,005)..................... -- MFS Investors Trust Portfolio (186,025 Shares; cost $1,391,215)..................... -- MFS Research Managers Portfolio (79,153 Shares; cost $613,213)........................ -- State Street Research Bond Income Portfolio (837,355 Shares; cost $89,830,207).................... -- FI Structured Equity Portfolio (3,215 Shares; cost $454,116)......................... -- Harris Oakmark Focused Value Portfolio (115,466 Shares; cost $21,015,539).................... -- Salomon Brothers Strategic Bond Opportunities Portfolio (409,695 Shares; cost $4,866,132)..................... -- Salomon Brothers U.S. Government Portfolio (592,211 Shares; cost $7,267,172)..................... -- State Street Research Money Market Portfolio (273,528 Shares; cost $27,352,817).................... -- FI Mid Cap Opportunities Portfolio (96,616 Shares; cost $916,740)........................ -- ---------------- Total Investments...................................... 456,268,669 Cash and Accounts Receivable........................... 845,678 ---------------- Total Assets........................................... 457,114,347 LIABILITIES............................................ Due to/From Metropolitan Life Insurance Company........ -- ---------------- NET ASSETS............................................. $457,114,347 ================ Outstanding Units (In Thousands)....................... 25,747 Unit Values............................................ $9.58 to $29.26
See Notes to Financial Statements. F-2
FI International Janus T. Rowe Price Scudder Harris Oakmark Neuberger Berman T. Rowe Price Stock Mid Cap Small Cap Growth Global Equity Large Cap Value Partners Mid Cap Large Cap Growth Investment Investment Investment Investment Investment Value Investment Investment Division Division Division Division Division Division Division - ---------------- ---------------- ----------------- ----------------- ----------------- ----------------- ---------------- $ -- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 43,910,364 -- -- -- -- -- -- -- 182,829,152 -- -- -- -- -- -- -- 61,703,229 -- -- -- -- -- -- -- 28,617,758 -- -- -- -- -- -- -- 37,440,522 -- -- -- -- -- -- -- 30,910,402 -- -- -- -- -- -- -- 33,385,077 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- - ---------------- ---------------- ----------------- ----------------- ----------------- ----------------- ---------------- 43,910,364 182,829,152 61,703,229 28,617,758 37,440,522 30,910,402 33,385,077 73,925 1,248,936 139,936 77,960 63,107 35,149 135,257 - ---------------- ---------------- ----------------- ----------------- ----------------- ----------------- ---------------- 43,984,289 184,078,088 61,843,165 28,695,718 37,503,629 30,945,551 33,520,334 -- -- -- -- -- -- -- - ---------------- ---------------- ----------------- ----------------- ----------------- ----------------- ---------------- $ 43,984,289 $ 184,078,088 $ 61,843,165 $ 28,695,718 $ 37,503,629 $ 30,945,551 $ 33,520,334 ================ ================ ================= ================= ================= ================= ================ 3,484 13,348 4,703 2,140 3,060 1,946 3,290 $9.92 to $13.85 $5.69 to $16.17 $12.64 to $14.08 $12.92 to $14.39 $11.53 to $14.56 $13.86 to $19.29 $8.23 to $12.13 Lehman Brothers Aggregate Bond Index Investment Division - ----------------- $ -- -- -- -- -- -- -- -- -- -- -- 54,942,071 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- - ----------------- 54,942,071 52,236 - ----------------- 54,994,307 -- - ----------------- $ 54,994,307 ================= 4,064 $12.77 to $13.67
See Notes to Financial Statements. F-3 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 2003
Morgan Stanley Russell 2000 Met/Putnam State Street EAFE Index Index Voyager Research Aurora Investment Investment Investment Investment Division Division Division Division ---------------- ----------------- --------------- ----------------- ASSETS: Investments at Value: Metropolitan Series Fund, Inc. ("Metropolitan Fund") State Street Research Investment Trust Portfolio (14,863,974 Shares; cost $441,842,964)................ $ -- $ -- $ -- $ -- State Street Research Diversified Portfolio (19,105,895 Shares; cost $308,822,843)................ -- -- -- -- State Street Research Aggressive Growth Portfolio (10,426,099 Shares; cost $247,124,703)................ -- -- -- -- MetLife Stock Index Portfolio (15,492,994 Shares; cost $471,480,310)................ -- -- -- -- FI International Stock Portfolio (4,453,384 Shares; cost $49,092,645).................. -- -- -- -- Janus Mid Cap Portfolio (13,049,904 Shares; cost $245,811,880)................ -- -- -- -- T. Rowe Price Small Cap Growth Portfolio (5,028,788 Shares; cost $60,709,864).................. -- -- -- -- Scudder Global Equity Portfolio (2,503,741 Shares; cost $28,862,268).................. -- -- -- -- Harris Oakmark Large Cap Value Portfolio (3,104,521 Shares; cost $33,265,016).................. -- -- -- -- Neuberger Berman Partners Mid Cap Value Portfolio (1,781,579 Shares; cost $24,876,339).................. -- -- -- -- T. Rowe Price Large Cap Growth Portfolio (2,868,134 Shares; cost $31,282,336).................. -- -- -- -- Lehman Brothers Aggregate Bond Index Portfolio (5,026,722 Shares; cost $53,380,037).................. -- -- -- -- Morgan Stanley EAFE Index Portfolio (2,459,540 Shares; cost $19,855,278).................. 24,103,487 -- -- -- Russell 2000 Index Portfolio (2,317,218 Shares; cost $22,079,290).................. -- 27,690,757 -- -- Met/Putnam Voyager Portfolio (1,900,061 Shares; cost $8,302,977)................... -- -- 8,588,274 -- State Street Research Aurora Portfolio (3,401,875 Shares; cost $44,584,567).................. -- -- -- 56,539,160 MetLife Mid Cap Stock Index Portfolio (2,344,249 Shares; cost $23,095,881).................. -- -- -- -- Franklin Templeton Small Cap Growth Portfolio (327,356 Shares; cost $2,499,796)..................... -- -- -- -- State Street Research Large Cap Value Portfolio (104,079 Shares; cost $957,558)....................... -- -- -- -- Davis Venture Value Portfolio (965,333 Shares; cost $21,277,385).................... -- -- -- -- Loomis Sayles Small Cap Portfolio (23,295 Shares; cost $3,717,206)...................... -- -- -- -- Alger Equity Growth Portfolio (263,538 Shares; cost $4,582,005)..................... -- -- -- -- MFS Investors Trust Portfolio (186,025 Shares; cost $1,391,215)..................... -- -- -- -- MFS Research Managers Portfolio (79,153 Shares; cost $613,213)........................ -- -- -- -- State Street Research Bond Income Portfolio (837,355 Shares; cost $89,830,207).................... -- -- -- -- FI Structured Equity Portfolio (3,215 Shares; cost $454,116)......................... -- -- -- -- Harris Oakmark Focused Value Portfolio (115,466 Shares; cost $21,015,539).................... -- -- -- -- Salomon Brothers Strategic Bond Opportunities Portfolio (409,695 Shares; cost $4,866,132)..................... -- -- -- -- Salomon Brothers U.S. Government Portfolio (592,211 Shares; cost $7,267,172)..................... -- -- -- -- State Street Research Money Market Portfolio (273,528 Shares; cost $27,352,817).................... -- -- -- -- FI Mid Cap Opportunities Portfolio (96,616 Shares; cost $916,740)........................ -- -- -- -- ---------------- ----------------- --------------- ----------------- Total Investments...................................... 24,103,487 27,690,757 8,588,274 56,539,160 Cash and Accounts Receivable........................... 186,690 35,522 62,483 502 ---------------- ----------------- --------------- ----------------- Total Assets........................................... 24,290,177 27,726,279 8,650,757 56,539,662 LIABILITIES Due to/From Metropolitan Life Insurance Company........ -- -- -- -- ---------------- ----------------- --------------- ----------------- NET ASSETS $ 24,290,177 $ 27,726,279 $ 8,650,757 $ 56,539,662 ================ ================= =============== ================= Outstanding Units (In Thousands)....................... 2,676 2,085 1,913 3,372 Unit Values............................................ $7.85 to $10.37 $10.75 to $14.59 $4.38 to $4.78 $15.46 to $16.89
See Notes to Financial Statements. F-4
MetLife Franklin State Street MFS Mid Cap Stock Templeton Small Research Large Davis Venture Loomis Sayles Alger Equity Investors Index Cap Growth Cap Value Value Small Cap Growth Trust Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division - ----------------- --------------- ----------------- ---------------- ----------------- ------------ --------------- $ -- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 27,896,567 -- -- -- -- -- -- -- 3,041,132 -- -- -- -- -- -- -- 1,110,523 -- -- -- -- -- -- -- 24,393,963 -- -- -- -- -- -- -- 4,415,478 -- -- -- -- -- -- -- 4,933,432 -- -- -- -- -- -- -- 1,538,430 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- - ----------------- --------------- ----------------- ---------------- ----------------- ---------- --------------- 27,896,567 3,041,132 1,110,523 24,393,963 4,415,478 4,933,432 1,538,430 28,320 -- -- 35,532 7,461 -- 5,616 - ----------------- --------------- ----------------- ---------------- ----------------- ---------- --------------- 27,924,887 3,041,132 1,110,523 24,429,495 4,422,939 4,933,432 1,544,046 -- 2,885 395 -- -- -- -- - ----------------- --------------- ----------------- ---------------- ----------------- ---------- --------------- $ 27,924,887 $ 3,038,247 $ 1,110,128 $ 24,429,495 $ 4,422,939 $4,933,432 $ 1,544,046 ================= =============== ================= ================ ================= ========== =============== 2,338 329 103 1,322 30 721 186 $11.04 to $12.13 $9.07 to $9.29 $10.70 to $10.86 $9.79 to $28.40 $9.27 to $205.39 $6.84 $7.96 to $8.33 MFS Research Mangers Investment Division - --------------- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 666,466 -- -- -- -- -- -- -- - --------------- 666,466 2,075 - --------------- 668,541 -- - --------------- $ 668,541 =============== 81 $6.57 to $8.51
See Notes to Financial Statements. F-5 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 2003
State Street Salomon Brothers Research Bond FI Structured Harris Oakmark Strategic Bond Income Equity Focused Value Opportunities Investment Investment Investment Investment Division Division Division Division ---------------- --------------- ------------------ ---------------- ASSETS: Investments at Value: Metropolitan Series Fund, Inc. ("Metropolitan Fund") State Street Research Investment Trust Portfolio (14,863,974 Shares; cost $441,842,964)................ $ -- $ -- $ -- $ -- State Street Research Diversified Portfolio (19,105,895 Shares; cost $308,822,843)................ -- -- -- -- State Street Research Aggressive Growth Portfolio (10,426,099 Shares; cost $247,124,703)................ -- -- -- -- MetLife Stock Index Portfolio (15,492,994 Shares; cost $471,480,310)................ -- -- -- -- FI International Stock Portfolio (4,453,384 Shares; cost $49,092,645).................. -- -- -- -- Janus Mid Cap Portfolio (13,049,904 Shares; cost $245,811,880)................ -- -- -- -- T. Rowe Price Small Cap Growth Portfolio (5,028,788 Shares; cost $60,709,864).................. -- -- -- -- Scudder Global Equity Portfolio (2,503,741 Shares; cost $28,862,268).................. -- -- -- -- Harris Oakmark Large Cap Value Portfolio (3,104,521 Shares; cost $33,265,016).................. -- -- -- -- Neuberger Berman Partners Mid Cap Value Portfolio (1,781,579 Shares; cost $24,876,339).................. -- -- -- -- T. Rowe Price Large Cap Growth Portfolio (2,868,134 Shares; cost $31,282,336).................. -- -- -- -- Lehman Brothers Aggregate Bond Index Portfolio (5,026,722 Shares; cost $53,380,037).................. -- -- -- -- Morgan Stanley EAFE Index Portfolio (2,459,540 Shares; cost $19,855,278).................. -- -- -- -- Russell 2000 Index Portfolio (2,317,218 Shares; cost $22,079,290).................. -- -- -- -- Met/Putnam Voyager Portfolio (1,900,061 Shares; cost $8,302,977)................... -- -- -- -- State Street Research Aurora Portfolio (3,401,875 Shares; cost $44,584,567).................. -- -- -- -- MetLife Mid Cap Stock Index Portfolio (2,344,249 Shares; cost $23,095,881).................. -- -- -- -- Franklin Templeton Small Cap Growth Portfolio (327,356 Shares; cost $2,499,796)..................... -- -- -- -- State Street Research Large Cap Value Portfolio (104,079 Shares; cost $957,558)....................... -- -- -- -- Davis Venture Value Portfolio (965,333 Shares; cost $21,277,385).................... -- -- -- -- Loomis Sayles Small Cap Portfolio (23,295 Shares; cost $3,717,206)...................... -- -- -- -- Alger Equity Growth Portfolio (263,538 Shares; cost $4,582,005)..................... -- -- -- -- MFS Investors Trust Portfolio (186,025 Shares; cost $1,391,215)..................... -- -- -- -- MFS Research Managers Portfolio (79,153 Shares; cost $613,213)........................ -- -- -- -- State Street Research Bond Income Portfolio (837,355 Shares; cost $89,830,207).................... 96,806,570 -- -- -- FI Structured Equity Portfolio (3,215 Shares; cost $454,116)......................... -- 505,504 -- -- Harris Oakmark Focused Value Portfolio (115,466 Shares; cost $21,015,539).................... -- -- 25,894,491 -- Salomon Brothers Strategic Bond Opportunities Portfolio (409,695 Shares; cost $4,866,132)..................... -- -- -- 5,166,251 Salomon Brothers U.S. Government Portfolio (592,211 Shares; cost $7,267,172)..................... -- -- -- -- State Street Research Money Market Portfolio (273,528 Shares; cost $27,352,817).................... -- -- -- -- FI Mid Cap Opportunities Portfolio (96,616 Shares; cost $916,740)........................ -- -- -- -- ---------------- --------------- ------------------ ---------------- Total Investments...................................... 96,806,570 505,504 25,894,491 5,166,251 Cash and Accounts Receivable........................... -- -- -- -- ---------------- --------------- ------------------ ---------------- Total Assets........................................... 96,806,570 505,504 25,894,491 5,166,251 LIABILITIES Due to/From Metropolitan Life Insurance Company........ 86,980 221 28,853 3,182 ---------------- --------------- ------------------ ---------------- NET ASSETS............................................. $96,719,590 $505,283 $25,865,638 $5,163,069 ================ =============== ================== ================ Outstanding Units (In Thousands)....................... 5,517 49 115 375 Unit Values............................................ $12.89 to $27.12 $8.37 to $10.56 $219.73 to $225.05 $13.52 to $13.85
See Notes to Financial Statements. F-6
State Street Salomon Brothers Research FI Mid Cap U.S. Government Money Market Opportunities Investment Investment Investment Division Division Division ----------------- ----------------- ----------------- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 7,307,884 -- -- -- 27,352,819 -- -- -- 1,112,044 ----------------- ----------------- ----------------- 7,307,884 27,352,819 1,112,044 -- 15,270 -- ----------------- ----------------- ----------------- 7,307,884 27,368,089 1,112,044 2,982 21,662 273 ----------------- ----------------- ----------------- $ 7,304,902 $ 27,346,427 $ 1,111,771 ================= ================= ================= 559 1,760 96 $12.82 to $13.13 $15.21 to $15.92 $11.50 to $11.67
See Notes to Financial Statements. F-7 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 2003
Invesco VIF Invesco VIF Janus Aspen Invesco VIF Equity Real Estate Growth High Yield Income Opportunity Investment Investment Investment Investment Division Division Division Division ----------- ----------- ----------- ----------- ASSETS: Investments at Value: Janus Aspen Series Fund ("Janus Fund") Janus Aspen Growth Portfolio (182,002 Shares; cost $3,317,989).......................................... $3,499,893 $ -- $ -- $ -- Invesco Variable Investment Funds, Inc ("Invesco Funds") Invesco VIF High Yield Portfolio (101,401 Shares; cost $755,920)............................................ -- 804,108 -- -- Invesco VIF Equity Income Portfolio (10,296 Shares; cost $180,622)............................................. -- -- 184,406 -- Invesco VIF Real Estate Opportunity Portfolio (12,455 Shares; cost $132,719)............................................. -- -- -- 178,608 Franklin Templeton Variable Insurance Product Series Funds ("Franklin Fund") Franklin Templeton International Stock Portfolio (327,691 Shares; cost $3,587,146).......................................... -- -- -- -- Franklin Templeton Valuemark Small Cap Portfolio (77,203 Shares; cost $1,159,415)........................................... -- -- -- -- Alliance Variable Product Series Funds ("Alliance Fund") Alliance Growth & Income Portfolio (95,425 Shares; cost $1,731,867)........................................... -- -- -- -- Alliance Premier Growth Portfolio (3,941 Shares; cost $83,621)............................................... -- -- -- -- Alliance Technology Portfolio (3,177 Shares; cost $43,696)............................................... -- -- -- -- Fidelity Variable Insurance Products Funds ("Fidelity Funds") Fidelity VIP Contrafund Portfolio (38,974 Shares; cost $783,501)............................................. -- -- -- -- Fidelity VIP Asset Manager Growth Portfolio (35,491 Shares; cost $395,048)............................................. -- -- -- -- Fidelity VIP Growth Portfolio (9,647 Shares; cost $277,258).............................................. -- -- -- -- American Series Funds ("American Fund") American Funds Growth Portfolio (555,600 Shares; cost $21,669,606)......................................... -- -- -- -- American Funds Growth-Income Portfolio (602,836 Shares; cost $17,398,081)......................................... -- -- -- -- American Funds Global Small Cap Portfolio (410,836 Shares; cost $4,620,777).......................................... -- -- -- -- Met Investors Series Trust ("Met Investors Fund") T. Rowe Price Mid Cap Growth Portfolio (527,122 Shares; cost $2,959,767).......................................... -- -- -- -- MFS Research International Portfolio (152,598 Shares; cost $1,307,159).......................................... -- -- -- -- PIMCO Total Return Portfolio (1,093,890 Shares; cost $12,468,910)....................................... -- -- -- -- PIMCO Innovation Portfolio (924,904 Shares; cost $3,855,266).......................................... -- -- -- -- Lord Abbett Bond Debenture Portfolio (991,531 Shares; cost $10,678,786)......................................... -- -- -- -- Met/AIM Mid Cap Core Equity Portfolio (80,233 Shares; cost $854,896)............................................. -- -- -- -- Met/AIM Small Cap Growth Portfolio (53,490 Shares; cost $596,561)............................................. -- -- -- -- Harris Oakmark International Portfolio (68,416 Shares; cost $766,989)............................................. -- -- -- -- Janus Aggressive Growth Portfolio (567,168 Shares; cost $3,302,437).......................................... -- -- -- -- Lord Abbett Growth and Income Portfolio (845 Shares; cost $16,883)................................................. -- -- -- -- ---------- -------- -------- -------- Total Investments........................................................... 3,499,893 804,108 184,406 178,608 Cash and Accounts Receivable................................................ -- -- -- -- ---------- -------- -------- -------- Total Assets................................................................ 3,499,893 804,108 184,406 178,608 LIABILITIES Due to/From Metropolitan Life Insurance Company............................. -- -- -- -- ---------- -------- -------- -------- NET ASSETS.................................................................. $3,499,893 $804,108 $184,406 $178,608 ========== ======== ======== ======== Outstanding Units (In Thousands)............................................ 435 87 19 10 Unit Values................................................................. $8.03 $9.21 $9.73 $17.79
See Notes to Financial Statements. F-8
Alliance Alliance Fidelity Franklin Templeton Franklin Templeton Growth & Premier Alliance Fidelity Asset Manager Fidelity International Stock Valuemark Small Income Growth Technology Contrafund Growth Growth Investment Cap Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division Division - ------------------- ------------------ ---------- ---------- ---------- ---------- ------------- ---------- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 4,053,532 -- -- -- -- -- -- -- -- 1,345,642 -- -- -- -- -- -- -- -- 2,063,085 -- -- -- -- -- -- -- -- 84,057 -- -- -- -- -- -- -- -- 45,595 -- -- -- -- -- -- -- -- 893,677 -- -- -- -- -- -- -- -- 432,629 -- -- -- -- -- -- -- -- 296,358 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ----------- ---------- ---------- ------- ------- -------- -------- -------- 4,053,532 1,345,642 2,063,085 84,057 45,595 893,677 432,629 296,358 -- -- -- -- -- -- -- -- ----------- ---------- ---------- ------- ------- -------- -------- -------- 4,053,532 1,345,642 2,063,085 84,057 45,595 893,677 432,629 296,358 -- -- -- -- -- -- -- -- ----------- ---------- ---------- ------- ------- -------- -------- -------- $4,053,532 $1,345,642 $2,063,085 $84,057 $45,595 $893,677 $432,629 $296,358 =========== ========== ========== ======= ======= ======== ======== ======== 403 199 197 14 10 97 54 47 $10.03 $6.76 $10.47 $6.10 $4.54 $9.18 $8.00 $6.27
See Notes to Financial Statements. F-9 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 2003
American Funds American Funds American Funds Global Growth Growth-Income Small Cap Investment Investment Investment Division Division Division ---------------- ---------------- ---------------- ASSETS: Investments at Value: Janus Aspen Series Fund ("Janus Fund") Janus Aspen Growth Portfolio (182,002 Shares; cost $3,317,989).......................................... $ -- $ -- $ -- Invesco Variable Investment Funds, Inc ("Invesco Funds") Invesco VIF High Yield Portfolio (101,401 Shares; cost $755,920)............................................ -- -- -- Invesco VIF Equity Income Portfolio (10,296 Shares; cost $180,622)............................................. -- -- -- Invesco VIF Real Estate Opportunity Portfolio (12,455 Shares; cost $132,719)............................................. -- -- -- Franklin Templeton Variable Insurance Product Series Funds ("Franklin Fund") Franklin Templeton International Stock Portfolio (327,691 Shares; cost $3,587,146).......................................... -- -- -- Franklin Templeton Valuemark Small Cap Portfolio (77,203 Shares; cost $1,159,415)........................................... -- -- -- Alliance Variable Product Series Funds ("Alliance Fund") Alliance Growth & Income Portfolio (95,425 Shares; cost $1,731,867)........................................... -- -- -- Alliance Premier Growth Portfolio (3,941 Shares; cost $83,621)............................................... -- -- -- Alliance Technology Portfolio (3,177 Shares; cost $43,696)............................................... -- -- -- Fidelity Variable Insurance Products Funds ("Fidelity Funds") Fidelity VIP Contrafund Portfolio (38,974 Shares; cost $783,501)............................................. -- -- -- Fidelity VIP Asset Manager Growth Portfolio (35,491 Shares; cost $395,048)............................................. -- -- -- Fidelity VIP Growth Portfolio (9,647 Shares; cost $277,258).............................................. -- -- -- American Series Funds ("American Fund") American Funds Growth Portfolio (555,600 Shares; cost $21,669,606)......................................... 25,279,776 -- -- American Funds Growth-Income Portfolio (602,836 Shares; cost $17,398,081)......................................... -- 20,182,964 -- American Funds Global Small Cap Portfolio (410,836 Shares; cost $4,620,777).......................................... -- -- 5,784,566 Met Investors Series Trust ("Met Investors Fund") T. Rowe Price Mid Cap Growth Portfolio (527,122 Shares; cost $2,959,767).......................................... -- -- -- MFS Research International Portfolio (152,598 Shares; cost $1,307,159).......................................... -- -- -- PIMCO Total Return Portfolio (1,093,890 Shares; cost $12,468,910)....................................... -- -- -- PIMCO Innovation Portfolio (924,904 Shares; cost $3,855,266).......................................... -- -- -- Lord Abbett Bond Debenture Portfolio (991,531 Shares; cost $10,678,786)......................................... -- -- -- Met/AIM Mid Cap Core Equity Portfolio (80,233 Shares; cost $854,896)............................................. -- -- -- Met/AIM Small Cap Growth Portfolio (53,490 Shares; cost $596,561)............................................. -- -- -- Harris Oakmark International Portfolio (68,416 Shares; cost $766,989)............................................. -- -- -- Janus Aggressive Growth Portfolio (567,168 Shares; cost $3,302,437).......................................... -- -- -- Lord Abbett Growth and Income Portfolio (845 Shares; cost $16,883)................................................. -- -- -- ---------------- ---------------- ---------------- Total Investments........................................................... 25,279,776 20,182,964 5,784,566 Cash and Accounts Receivable................................................ 480,164 185,947 16,294 ---------------- ---------------- ---------------- Total Assets................................................................ 25,759,940 20,368,911 5,800,860 LIABILITIES Due to/From Metropolitan Life Insurance Company............................. -- -- -- ---------------- ---------------- ---------------- NET ASSETS.................................................................. $25,759,940 $20,368,911 $5,800,860 ================ ================ ================ Outstanding Units (In Thousands)............................................ 417 525 378 Unit Values................................................................. $60.53 to $62.00 $38.04 to $38.96 $15.06 to $15.42
T. Rowe Price Mid Cap Growth Investment Division -------------- ASSETS: Investments at Value: Janus Aspen Series Fund ("Janus Fund") Janus Aspen Growth Portfolio (182,002 Shares; cost $3,317,989).......................................... $ -- Invesco Variable Investment Funds, Inc ("Invesco Funds") Invesco VIF High Yield Portfolio (101,401 Shares; cost $755,920)............................................ -- Invesco VIF Equity Income Portfolio (10,296 Shares; cost $180,622)............................................. -- Invesco VIF Real Estate Opportunity Portfolio (12,455 Shares; cost $132,719)............................................. -- Franklin Templeton Variable Insurance Product Series Funds ("Franklin Fund") Franklin Templeton International Stock Portfolio (327,691 Shares; cost $3,587,146).......................................... -- Franklin Templeton Valuemark Small Cap Portfolio (77,203 Shares; cost $1,159,415)........................................... -- Alliance Variable Product Series Funds ("Alliance Fund") Alliance Growth & Income Portfolio (95,425 Shares; cost $1,731,867)........................................... -- Alliance Premier Growth Portfolio (3,941 Shares; cost $83,621)............................................... -- Alliance Technology Portfolio (3,177 Shares; cost $43,696)............................................... -- Fidelity Variable Insurance Products Funds ("Fidelity Funds") Fidelity VIP Contrafund Portfolio (38,974 Shares; cost $783,501)............................................. -- Fidelity VIP Asset Manager Growth Portfolio (35,491 Shares; cost $395,048)............................................. -- Fidelity VIP Growth Portfolio (9,647 Shares; cost $277,258).............................................. -- American Series Funds ("American Fund") American Funds Growth Portfolio (555,600 Shares; cost $21,669,606)......................................... -- American Funds Growth-Income Portfolio (602,836 Shares; cost $17,398,081)......................................... -- American Funds Global Small Cap Portfolio (410,836 Shares; cost $4,620,777).......................................... -- Met Investors Series Trust ("Met Investors Fund") T. Rowe Price Mid Cap Growth Portfolio (527,122 Shares; cost $2,959,767).......................................... 3,368,307 MFS Research International Portfolio (152,598 Shares; cost $1,307,159).......................................... -- PIMCO Total Return Portfolio (1,093,890 Shares; cost $12,468,910)....................................... -- PIMCO Innovation Portfolio (924,904 Shares; cost $3,855,266).......................................... -- Lord Abbett Bond Debenture Portfolio (991,531 Shares; cost $10,678,786)......................................... -- Met/AIM Mid Cap Core Equity Portfolio (80,233 Shares; cost $854,896)............................................. -- Met/AIM Small Cap Growth Portfolio (53,490 Shares; cost $596,561)............................................. -- Harris Oakmark International Portfolio (68,416 Shares; cost $766,989)............................................. -- Janus Aggressive Growth Portfolio (567,168 Shares; cost $3,302,437).......................................... -- Lord Abbett Growth and Income Portfolio (845 Shares; cost $16,883)................................................. -- -------------- Total Investments........................................................... 3,368,307 Cash and Accounts Receivable................................................ 6,963 -------------- Total Assets................................................................ 3,375,270 LIABILITIES Due to/From Metropolitan Life Insurance Company............................. -- -------------- NET ASSETS.................................................................. $3,375,270 ============== Outstanding Units (In Thousands)............................................ 527 Unit Values................................................................. $6.28 to $6.43
See Notes to Financial Statements. F-10
MFS Lord Abbett Met/AIM Mid Research PIMCO PIMCO Bond Cap Met/AIM Small Harris Oakmark International Total Return Innovation Debenture Core Equity Cap Growth International Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division - -------------- ---------------- -------------- ---------------- ---------------- ---------------- ----------------- $ -- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 1,496,988 -- -- -- -- -- -- -- 12,700,057 -- -- -- -- -- -- -- 4,467,285 -- -- -- -- -- -- -- 11,938,027 -- -- -- -- -- -- -- 989,278 -- -- -- -- -- -- -- 643,481 -- -- -- -- -- -- -- 813,470 -- -- -- -- -- -- -- -- -- -- -- -- -- -- - -------------- ---------------- -------------- ---------------- ---------------- ---------------- ----------------- 1,496,988 12,700,057 4,467,285 11,938,027 989,278 643,481 813,470 232 -- 13,528 104,275 -- -- -- - -------------- ---------------- -------------- ---------------- ---------------- ---------------- ----------------- 1,497,220 12,700,057 4,480,813 12,042,302 989,278 643,481 813,470 -- 2,991 -- -- 346 30 454 - -------------- ---------------- -------------- ---------------- ---------------- ---------------- ----------------- $1,497,220 $12,697,066 $4,480,813 $12,042,302 $988,932 $643,451 $ 813,016 ============== ================ ============== ================ ================ ================ ================= 151 1,042 932 876 92 60 72 $9.70 to $9.94 $11.96 to $12.25 $4.72 to $4.83 $12.87 to $14.95 $10.69 to $10.85 $10.46 to $10.62 $11.23 to $11.40
Janus Lord Abbett Aggressive Growth & Growth Income Investment Investment Division Division - --------------- ----------- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 3,987,193 -- -- 20,634 - --------------- ------- 3,987,193 20,634 15,526 -- - --------------- ------- 4,002,719 20,634 -- 105 - --------------- ------- $ 4,002,719 $20,529 =============== ======= 569 3 $6.89 to $7.06 $8.10
See Notes to Financial Statements. F-11 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
State Street Research Investment Trust Investment Division ---------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------- INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ 2,669,960 $ 1,708,899 $ 51,437,166 Expenses: Mortality and expense charges................................ 2,738,164 2,678,347 3,136,115 ----------- ------------ ------------- Net investment (loss) income................................... (68,204) (969,448) 48,301,051 ----------- ------------ ------------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions......... (6,958,914) (6,132,437) 731,187 Change in unrealized appreciation (depreciation) of investments 88,855,777 (90,883,953) (122,469,738) ----------- ------------ ------------- Net realized and unrealized gains (losses) on investments...... 81,896,863 (97,016,390) (121,738,551) ----------- ------------ ------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $81,828,659 $(97,985,838) $ (73,437,500) =========== ============ =============
See Notes to Financial Statements. F-12
State Street Research Diversified State Street Research Aggressive Growth MetLife Stock Index Investment Division Investment Division Investment Division - --------------------------------------- --------------------------------------- ---------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 9,831,564 $ 5,726,999 $ 25,415,648 $ -- $ -- $ 46,776,659 $ 6,468,236 $ 5,409,402 $ 3,858,667 2,320,042 2,168,000 2,231,404 1,367,678 1,263,240 1,493,070 3,080,678 2,704,257 2,645,594 - ----------- ------------ ------------ ----------- ------------ ------------ ------------ ------------ ------------ 7,511,522 3,558,999 23,184,244 (1,367,678) (1,263,240) 45,283,589 3,387,558 2,705,145 1,213,073 - ----------- ------------ ------------ ----------- ------------ ------------ ------------ ------------ ------------ (2,593,687) (1,810,936) (111,095) (8,202,841) (5,953,657) (1,536,972) (10,060,006) (5,045,284) 4,130,927 42,182,763 (41,694,719) (42,080,714) 62,199,697 (44,703,891) (94,895,107) 101,361,307 (82,559,071) (48,985,481) - ----------- ------------ ------------ ----------- ------------ ------------ ------------ ------------ ------------ 39,589,076 (43,505,655) (42,191,809) 53,996,856 (50,657,548) (96,432,079) 91,301,301 (87,604,355) (44,854,554) - ----------- ------------ ------------ ----------- ------------ ------------ ------------ ------------ ------------ $47,100,598 $(39,946,656) $(19,007,565) $52,629,178 $(51,920,788) $(51,148,490) $ 94,688,859 $(84,899,210) $(43,641,481) =========== ============ ============ =========== ============ ============ ============ ============ ============
F-13 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
FI International Stock Investment Division -------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ 249,748 $ 317,077 $ 1,500,375 Expenses: Mortality and expense charges................................ 304,442 298,333 327,499 ----------- ----------- ------------ Net investment (loss) income................................... (54,694) 18,744 1,172,876 ----------- ----------- ------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions......... (1,630,864) (2,655,399) (1,661,736) Change in unrealized appreciation (depreciation) of investments 10,924,390 (4,418,288) (9,202,287) ----------- ----------- ------------ Net realized and unrealized gains (losses) on investments...... 9,293,526 (7,073,687) (10,864,023) ----------- ----------- ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 9,238,832 $(7,054,943) $ (9,691,147) =========== =========== ============
See Notes to Financial Statements. F-14
Janus Mid Cap T. Rowe Price Small Cap Growth Scudder Global Equity Investment Division Investment Division Investment Division - --------------------------------------- -------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ -- $ -- $ -- $ -- $ -- $ 3,542,193 $ 501,419 $ 350,009 $ 2,319,964 1,297,757 1,013,088 1,037,631 402,320 332,098 332,644 189,917 168,321 164,713 - ----------- ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- (1,297,757) (1,013,088) (1,037,631) (402,320) (332,098) 3,209,549 311,502 181,688 2,155,251 - ----------- ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- (1,145,184) (5,163,698) (2,451,549) (309,653) (297,872) (796,014) (1,005,776) (466,029) (71,082) 46,019,342 (34,449,605) (53,291,667) 17,635,578 (12,423,975) (6,595,361) 7,242,152 (3,445,540) (5,825,339) - ----------- ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- 44,874,158 (39,613,303) (55,743,216) 17,325,925 (12,721,847) (7,391,375) 6,236,376 (3,911,569) (5,896,421) - ----------- ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- $43,576,401 $(40,626,391) $(56,780,847) $16,923,605 $(13,053,945) $(4,181,826) $ 6,547,878 $(3,729,881) $(3,741,170) =========== ============ ============ =========== ============ =========== =========== =========== ===========
F-15 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
Harris Oakmark Large Cap Value Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ -- $ 618,214 $ 12,105 Expenses: Mortality and expense charges................................ 252,368 179,930 68,617 ---------- ----------- -------- Net investment (loss) income................................... (252,368) 438,284 (56,512) ---------- ----------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions......... 38,696 173,172 94,596 Change in unrealized appreciation (depreciation) of investments 6,986,213 (3,824,797) 810,284 ---------- ----------- -------- Net realized and unrealized gains (losses) on investments...... 7,024,909 (3,651,625) 904,880 ---------- ----------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $6,772,541 $(3,213,341) $848,368 ========== =========== ========
See Notes to Financial Statements. F-16
Neuberger Berman Partners Mid Cap Value T. Rowe Price Large Cap Growth Lehman Brothers Aggregate Bond Index Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- -------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 78,805 $ 49,885 $ 196,293 $ 30,610 $ 57,106 $ 8,447 $ 2,863,939 $1,283,105 $ 366,468 197,793 139,354 89,772 210,672 163,196 103,226 357,739 300,244 154,225 ---------- ----------- --------- ---------- ----------- --------- ----------- ---------- ---------- (118,988) (89,469) 106,521 (180,062) (106,090) (94,779) 2,506,200 982,861 212,243 ---------- ----------- --------- ---------- ----------- --------- ----------- ---------- ---------- 28,084 105,666 (68,863) (489,389) (317,124) (100,488) 1,152,171 515,268 210,509 7,656,793 (1,888,036) (195,526) 7,871,800 (5,333,848) (92,461) (2,185,014) 2,760,523 1,053,501 ---------- ----------- --------- ---------- ----------- --------- ----------- ---------- ---------- 7,684,877 (1,782,370) (264,389) 7,382,411 (5,650,972) (192,949) (1,032,843) 3,275,791 1,264,010 ---------- ----------- --------- ---------- ----------- --------- ----------- ---------- ---------- $7,565,889 $(1,871,839) $(157,868) $7,202,349 $(5,757,062) $(287,728) $ 1,473,357 $4,258,652 $1,476,253 ========== =========== ========= ========== =========== ========= =========== ========== ==========
F-17 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
Morgan Stanley EAFE Index Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ 280,223 $ 59,278 $ 25,460 Expenses: Mortality and expense charges................................ 158,241 123,406 63,300 ---------- ----------- ----------- Net investment (loss) income................................... 121,982 (64,128) (37,840) ---------- ----------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions......... (497,564) (800,822) (961,834) Change in unrealized appreciation (depreciation) of investments 6,516,826 (1,274,363) (729,479) ---------- ----------- ----------- Net realized and unrealized gains (losses) on investments...... 6,019,262 (2,075,185) (1,691,313) ---------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $6,141,244 $(2,139,313) $(1,729,153) ========== =========== ===========
See Notes to Financial Statements. F-18
Russell 2000 Index Met/Putnam Voyager State Street Research Aurora Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 134,309 $ 74,869 $ 21,244 $ -- $ -- $ -- $ -- $ 127,494 $ 44,265 163,522 104,600 68,898 58,697 39,278 22,732 336,756 225,368 95,291 ---------- ----------- ----------- ---------- ----------- --------- ----------- ----------- ---------- (29,213) (29,731) (47,654) (58,697) (39,278) (22,732) (336,756) (97,874) (51,026) ---------- ----------- ----------- ---------- ----------- --------- ----------- ----------- ---------- (125,595) (343,069) (1,016,179) (624,452) (304,226) (113,353) 196,537 81,843 155,882 7,938,110 (2,545,881) 1,215,383 2,271,140 (1,227,374) (585,114) 17,391,943 (6,958,922) 1,218,805 ---------- ----------- ----------- ---------- ----------- --------- ----------- ----------- ---------- 7,812,515 (2,888,950) 199,204 1,646,688 (1,531,600) (698,467) 17,588,480 (6,877,079) 1,374,687 ---------- ----------- ----------- ---------- ----------- --------- ----------- ----------- ---------- $7,783,302 $(2,918,681) $ 151,550 $1,587,991 $(1,570,878) $(721,199) $17,251,724 $(6,974,953) $1,323,661 ========== =========== =========== ========== =========== ========= =========== =========== ==========
F-19 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
MetLife Mid Cap Stock Index Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ 100,611 $ 42,658 $ 24,102 Expenses: Mortality and expense charges................................ 164,774 98,019 42,826 ---------- ----------- -------- Net investment (loss) income................................... (64,163) (55,361) (18,724) ---------- ----------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions......... 12,063 (23,095) (19,531) Change in unrealized appreciation (depreciation) of investments 6,538,587 (2,089,536) 294,328 ---------- ----------- -------- Net realized and unrealized gains (losses) on investments...... 6,550,650 (2,112,631) 274,797 ---------- ----------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $6,486,487 $(2,167,992) $256,073 ========== =========== ========
See Notes to Financial Statements. F-20
State Street Research Franklin Templeton Small Cap Growth Large Cap Value Davis Venture Value Investment Division Investment Division Investment Division - --------------------------------------- -------------------------- ------------------------------------- For the Year For the Year For the Period For the Year For the Period For the Year For the Year For the Year Ended Ended May 1, 2001 to Ended May 1, 2002 to Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2003 2002 2001 - ------------ ------------ -------------- ------------ -------------- ------------ ------------ ------------ $ -- $ -- $ -- $ 8,880 $ 869 $ 69,175 $ 91,596 $ 192,850 16,641 8,397 1,124 4,290 436 144,858 90,846 39,662 -------- --------- ------- -------- ------- ---------- ----------- --------- (16,641) (8,397) (1,124) 4,590 433 (75,683) 750 153,188 -------- --------- ------- -------- ------- ---------- ----------- --------- (19,016) (42,766) (3,651) 41,938 (3,284) (213,900) (188,804) (46,987) 796,643 (271,373) 16,066 156,144 (3,178) 5,610,390 (2,083,879) (437,523) -------- --------- ------- -------- ------- ---------- ----------- --------- 777,627 (314,139) 12,415 198,082 (6,462) 5,396,490 (2,272,683) (484,510) -------- --------- ------- -------- ------- ---------- ----------- --------- $760,986 $(322,536) $11,291 $202,672 $(6,029) $5,320,807 $(2,271,933) $(331,322) ======== ========= ======= ======== ======= ========== =========== =========
F-21 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
Loomis Sayles Small Cap Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ -- $ 2,322 $ 86,281 Expenses: Mortality and expense charges................................ 28,298 18,464 11,207 ---------- --------- -------- Net investment (loss) income................................... (28,298) (16,142) 75,074 ---------- --------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions......... (88,636) (106,829) (35,645) Change in unrealized appreciation (depreciation) of investments 1,169,772 (414,868) (62,611) ---------- --------- -------- Net realized and unrealized gains (losses) on investments...... 1,081,136 (521,697) (98,256) ---------- --------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $1,052,838 $(537,839) $(23,182) ========== ========= ========
See Notes to Financial Statements. F-22
Alger Equity Growth MFS Investors Trust MFS Research Managers Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 2,523 $ -- $ -- $ 2,817 $ 3,660 $ -- $ 3,840 $ 705 $ 386 26,251 13,698 121 10,528 6,375 1,179 4,713 3,132 749 ---------- ----------- ------- -------- --------- ------- -------- -------- ------ (23,728) (13,698) (121) (7,711) (2,715) (1,179) (873) (2,427) (363) ---------- ----------- ------- -------- --------- ------- -------- -------- ------ (63,998) (57,097) (175) 13,432 (71,866) (5,896) (4,462) (30,794) 1,304 1,339,908 (983,355) (5,126) 221,187 (78,498) 4,527 112,414 (58,814) (346) ---------- ----------- ------- -------- --------- ------- -------- -------- ------ 1,275,910 (1,040,452) (5,301) 234,619 (150,364) (1,369) 107,952 (89,608) 958 ---------- ----------- ------- -------- --------- ------- -------- -------- ------ $1,252,182 $(1,054,150) $(5,422) $226,908 $(153,079) $(2,548) $107,079 $(92,035) $ 595 ========== =========== ======= ======== ========= ======= ======== ======== ======
F-23 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
State Street Research Bond Income Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $2,907,624 $4,937,322 $5,667,650 Expenses: Mortality and expense charges................................ 724,135 658,727 572,051 ---------- ---------- ---------- Net investment (loss) income................................... 2,183,489 4,278,595 5,095,599 ---------- ---------- ---------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions......... 880,712 (378,655) 400,025 Change in unrealized appreciation (depreciation) of investments 1,572,001 2,444,438 (137,736) ---------- ---------- ---------- Net realized and unrealized gains (losses) on investments...... 2,452,713 2,065,783 262,289 ---------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $4,636,202 $6,344,378 $5,357,888 ========== ========== ==========
See Notes to Financial Statements. F-24
FI Structured Equity Harris Oakmark Focused Value Salomon Brothers Strategic Bond Investment Division Investment Division Opportunities Investment Division - ------------------------------------- --------------------------------------- --------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Period For the Year For the Year For the Period Ended Ended Ended Ended Ended May 1, 2001 to Ended Ended May 1, 2001 to December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------ -------------- $ 1,560 $ 527 $ -- $ 24,204 $ 15,621 $ -- $ 62,248 $ 83,495 $ -- 2,368 457 69 151,516 79,292 9,775 29,146 10,768 894 ------- -------- ------- ---------- ----------- -------- -------- -------- ------ (808) 70 (69) (127,312) (63,671) (9,775) 33,102 72,727 (894) ------- -------- ------- ---------- ----------- -------- -------- -------- ------ 24,426 (9,596) (77) 31,214 (9,588) (43) 97,650 241 117 58,141 (4,285) (2,467) 5,537,632 (938,481) 279,801 233,146 62,351 4,621 ------- -------- ------- ---------- ----------- -------- -------- -------- ------ 82,567 (13,881) (2,544) 5,568,846 (948,069) 279,758 330,796 62,592 4,738 ------- -------- ------- ---------- ----------- -------- -------- -------- ------ $81,759 $(13,811) $(2,613) $5,441,534 $(1,011,740) $269,983 $363,898 $135,319 $3,844 ======= ======== ======= ========== =========== ======== ======== ======== ======
F-25 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
Salomon Brothers U.S. Government Investment Division --------------------------------------- For the Year For the Year For the Period Ended Ended May 1, 2001 to December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ -------------- INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ 91,740 $ 90,377 $ -- Expenses: Mortality and expense charges................................ 49,123 18,808 1,841 -------- -------- ------- Net investment (loss) income................................... 42,617 71,569 (1,841) -------- -------- ------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions......... 48,098 10,225 5,065 Change in unrealized appreciation (depreciation) of investments (40,677) 83,661 (2,273) -------- -------- ------- Net realized and unrealized gains (losses) on investments...... 7,421 93,886 2,792 -------- -------- ------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 50,038 $165,455 $ 951 ======== ======== =======
See Notes to Financial Statements. F-26
State Street Research Money Market FI Mid Cap Opportunities Janus Aspen Growth Investment Division Investment Division Investment Division - ------------------------------------- -------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Period For the Year For the Year For the Year Ended Ended Ended Ended May 1, 2002 to Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2003 2002 2001 - ------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ $226,302 $ 527,338 $1,134,017 $ 14,470 $ -- $ 2,873 $ 708 $ 210,720 179,158 268,010 215,488 4,632 333 13,156 10,078 25,354 -------- --------- ---------- -------- ------- ---------- --------- ----------- 47,144 259,328 918,529 9,838 (333) (10,283) (9,370) 185,366 -------- --------- ---------- -------- ------- ---------- --------- ----------- (1) (628,588) (499,341) 19,777 (1,950) (263,013) (179,152) (1,848,663) 1 611,711 796,577 191,546 3,758 1,041,007 (329,490) 498,521 -------- --------- ---------- -------- ------- ---------- --------- ----------- -- (16,877) 297,236 211,323 1,808 777,994 (508,642) (1,350,142) -------- --------- ---------- -------- ------- ---------- --------- ----------- $ 47,144 $ 242,451 $1,215,765 $221,161 $ 1,475 $ 767,711 $(518,012) $(1,164,776) ======== ========= ========== ======== ======= ========== ========= ===========
F-27 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
Invesco VIF High Yield Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ 46,066 $ 49,754 $ 29,774 Expenses: Mortality and expense charges................................ 2,831 1,346 602 -------- -------- -------- Net investment (loss) income................................... 43,235 48,408 29,172 -------- -------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions......... (5,183) (31,480) (3,798) Change in unrealized appreciation (depreciation) of investments 90,384 (7,350) (33,395) -------- -------- -------- Net realized and unrealized gains (losses) on investments...... 85,201 (38,830) (37,193) -------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $128,436 $ 9,578 $ (8,021) ======== ======== ========
See Notes to Financial Statements. F-28
Invesco VIF Equity Income Invesco VIF Real Estate Opportunity Franklin Templeton International Stock Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 1,951 $ 2,157 $ 1,779 $ 2,672 $ 1,881 $ 1,183 $ 50,493 $ 44,446 $ 203,320 662 638 304 946 2,129 531 16,047 13,035 5,484 ------- -------- ------- ------- ------- ------- -------- --------- --------- 1,289 1,519 1,475 1,726 (248) 652 34,446 31,411 197,836 ------- -------- ------- ------- ------- ------- -------- --------- --------- (4,599) (7,425) (1,414) 7,645 12,032 1,271 (71,786) (325,690) (18,952) 30,971 (21,641) (4,995) 41,591 3,016 (3,692) 947,139 (187,267) (287,060) ------- -------- ------- ------- ------- ------- -------- --------- --------- 26,372 (29,066) (6,409) 49,236 15,048 (2,421) 875,353 (512,957) (306,012) ------- -------- ------- ------- ------- ------- -------- --------- --------- $27,661 $(27,547) $(4,934) $50,962 $14,800 $(1,769) $909,799 $(481,546) $(108,176) ======= ======== ======= ======= ======= ======= ======== ========= =========
F-29 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
Franklin Templeton Valuemark Small Cap Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ -- $ 2,327 $ 56 Expenses: Mortality and expense charges................................ 6,613 3,601 177 -------- --------- ------ Net investment (loss) income................................... (6,613) (1,274) (121) -------- --------- ------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions......... (16,606) (49,638) (480) Change in unrealized appreciation (depreciation) of investments 366,174 (184,311) 4,364 -------- --------- ------ Net realized and unrealized gains (losses) on investments...... 349,568 (233,949) 3,884 -------- --------- ------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $342,955 $(235,223) $3,763 ======== ========= ======
See Notes to Financial Statements. F-30
Alliance Growth & Income Alliance Premier Growth Alliance Technology Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 11,419 $ 27,692 $ 3,229 $ -- $ -- $ -- $ -- $ -- $ 782 7,030 4,105 1,034 257 274 104 181 96 121 -------- --------- ------- ------- -------- ------ ------- ------- -------- 4,389 23,587 2,195 (257) (274) (104) (181) (96) 661 -------- --------- ------- ------- -------- ------ ------- ------- -------- (27,592) (18,278) (318) (661) (9,853) (138) (931) (519) (19,763) 441,306 (137,057) 24,267 11,616 (12,480) 1,299 13,613 (9,033) (2,681) -------- --------- ------- ------- -------- ------ ------- ------- -------- 413,714 (155,335) 23,949 10,955 (22,333) 1,161 12,682 (9,552) (22,444) -------- --------- ------- ------- -------- ------ ------- ------- -------- $418,103 $(131,748) $26,144 $10,698 $(22,607) $1,057 $12,501 $(9,648) $(21,783) ======== ========= ======= ======= ======== ====== ======= ======= ========
F-31 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
Fidelity Contrafund Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ 830 $ 187 $ -- Expenses: Mortality and expense charges................................ 3,285 1,113 57 -------- -------- ----- Net investment (loss) income................................... (2,455) (926) (57) -------- -------- ----- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 6,303 (348) (27) Change in unrealized appreciation (depreciation) of investments 139,867 (29,437) (253) -------- -------- ----- Net realized and unrealized gains (losses) on investments...... 146,170 (29,785) (280) -------- -------- ----- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $143,715 $(30,711) $(337) ======== ======== =====
See Notes to Financial Statements. F-32
Fidelity Asset Manager Growth Fidelity Growth American Funds Growth Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- --------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Period Ended Ended Ended Ended Ended Ended Ended Ended May 1, 2001 to December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ -------------- $ 8,346 $ 3,640 $ -- $ 174 $ 132 $ -- $ 22,917 $ 3,067 $ 134,864 1,598 623 233 1,005 649 243 141,220 59,610 6,807 ------- -------- ------- ------- -------- ------- ---------- ----------- --------- 6,748 3,017 (233) (831) (517) (243) (118,303) (56,543) 128,057 ------- -------- ------- ------- -------- ------- ---------- ----------- --------- (4,335) (5,591) 113 (2,588) (8,400) (3,407) (100,817) (49,022) (95,342) 59,143 (19,964) (1,597) 63,146 (40,968) (3,078) 5,264,250 (1,636,890) (17,189) ------- -------- ------- ------- -------- ------- ---------- ----------- --------- 54,808 (25,555) (1,484) 60,558 (49,368) (6,485) 5,163,433 (1,685,912) (112,531) ------- -------- ------- ------- -------- ------- ---------- ----------- --------- $61,556 $(22,538) $(1,717) $59,727 $(49,885) $(6,728) $5,045,130 $(1,742,455) $ 15,526 ======= ======== ======= ======= ======== ======= ========== =========== =========
F-33 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
American Funds Growth-Income Investment Division --------------------------------------- For the Year For the Year For the Period Ended Ended May 1, 2001 to December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ -------------- INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ 170,202 $ 83,225 $ 20,236 Expenses: Mortality and expense charges................................ 112,608 48,157 5,104 ---------- ----------- -------- Net investment (loss) income................................... 57,594 35,068 15,132 ---------- ----------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... (26,406) (51,319) (13,398) Change in unrealized appreciation (depreciation) of investments 3,852,340 (1,122,854) 55,397 ---------- ----------- -------- Net realized and unrealized gains (losses) on investments...... 3,825,934 (1,174,173) 41,999 ---------- ----------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $3,883,528 $(1,139,105) $ 57,131 ========== =========== ========
See Notes to Financial Statements. F-34
American Funds Global Small Cap JPM Enhanced Index T. Rowe Price Mid Cap Growth Investment Division Investment Division Investment Division - --------------------------------------- ------------------------------------- --------------------------------------- For the Year For the Year For the Period For the Year For the Year For the Year For the Year For the Year For the Period Ended Ended May 1, 2001 to Ended Ended Ended Ended Ended May 1, 2001 to December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ -------------- ------------ ------------ ------------ ------------ ------------ -------------- $ 19,214 $ 10,794 $ 7,147 $ 163 $ 117 $ -- $ -- $ 7,906 $ -- 27,847 12,245 1,216 16 39 13 17,818 6,944 940 ---------- --------- -------- ------- ------- ----- -------- --------- ------- (8,633) (1,451) 5,931 147 78 (13) (17,818) 962 (940) ---------- --------- -------- ------- ------- ----- -------- --------- ------- (33,362) 35,746 (18,714) (1,554) (1,186) (25) (46,026) (55,314) (1,372) 1,513,502 (396,292) 46,579 1,806 (1,483) (320) 776,010 (378,709) 11,239 ---------- --------- -------- ------- ------- ----- -------- --------- ------- 1,480,140 (360,546) 27,865 252 (2,669) (345) 729,984 (434,023) 9,867 ---------- --------- -------- ------- ------- ----- -------- --------- ------- $1,471,507 $(361,997) $ 33,796 $ 399 $(2,591) $(358) $712,166 $(433,061) $ 8,927 ========== ========= ======== ======= ======= ===== ======== ========= =======
F-35 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
MFS Research International Investment Division --------------------------------------- For the Year For the Year For the Period Ended Ended May 1, 2001 to December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ -------------- INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ 10,739 $ 1,203 $ 174 Expenses: Mortality and expense charges................................ 7,953 3,324 525 -------- -------- ------- Net investment (loss) income................................... 2,786 (2,121) (351) -------- -------- ------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 148,987 (66,559) (4,107) Change in unrealized appreciation (depreciation) of investments 191,049 (2,664) 1,444 -------- -------- ------- Net realized and unrealized gains (losses) on investments...... 340,036 (69,223) (2,663) -------- -------- ------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $342,822 $(71,344) $(3,014) ======== ======== =======
See Notes to Financial Statements. F-36
PIMCO Total Return PIMCO Innovation Lord Abbett Bond Debenture Investment Division Investment Division Investment Division - --------------------------------------- --------------------------------------- ------------------------------------- For the Year For the Year For the Period For the Year For the Year For the Period For the Year For the Year For the Year Ended Ended May 1, 2001 to Ended Ended May 1, 2001 to Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ -------------- ------------ ------------ -------------- ------------ ------------ ------------ $255,223 $ -- $ 26,164 $ -- $ -- $ -- $ 190,964 $ 996,547 $ 923,897 79,517 28,120 2,322 21,608 9,521 1,528 81,381 71,674 64,809 -------- -------- -------- ---------- --------- ------- ---------- ----------- ----------- 175,706 (28,120) 23,842 (21,608) (9,521) (1,528) 109,583 924,873 859,088 -------- -------- -------- ---------- --------- ------- ---------- ----------- ----------- 175,963 60,373 1,564 (195,867) (111,879) (9,873) 198,834 (1,886,218) (134,223) (25,434) 270,736 (14,155) 1,260,206 (652,366) 4,179 1,391,673 949,375 (902,997) -------- -------- -------- ---------- --------- ------- ---------- ----------- ----------- 150,529 331,109 (12,591) 1,064,339 (764,245) (5,694) 1,590,507 (936,843) (1,037,220) -------- -------- -------- ---------- --------- ------- ---------- ----------- ----------- $326,235 $302,989 $ 11,251 $1,042,731 $(773,766) $(7,222) $1,700,090 $ (11,970) $ (178,132) ======== ======== ======== ========== ========= ======= ========== =========== ===========
F-37 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
Met/AIM Mid Cap Core Equity Met/AIM Small Cap Growth Investment Division Investment Division -------------------------- -------------------------- For the Year For the Period For the Year For the Period Ended May 1, 2002 to Ended May 1, 2002 to December 31, December 31, December 31, December 31, 2003 2002 2003 2002 ------------ -------------- ------------ -------------- INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ 8,411 $ 291 $ -- $ -- Expenses: Mortality and expense charges................................ 4,773 638 2,947 281 -------- ------- -------- ------- Net investment (loss) income................................... 3,638 (347) (2,947) (281) -------- ------- -------- ------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 6,414 (1,242) 66,977 (593) Change in unrealized appreciation (depreciation) of investments 140,733 (6,351) 51,242 (4,322) -------- ------- -------- ------- Net realized and unrealized gains (losses) on investments...... 147,147 (7,593) 118,219 (4,915) -------- ------- -------- ------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.................................................... $150,785 $(7,940) $115,272 $(5,196) ======== ======= ======== =======
See Notes to Financial Statements. F-38
Harris Oakmark International Janus Aggressive Growth Lord Abbett Growth & Income Investment Division Investment Division Investment Division - -------------------------- --------------------------------------- -------------------------------- For the Year For the Period For the Year For the Year For the Period For the Year For the Period Ended May 1, 2002 to Ended Ended May 1, 2001 to Ended October 31, 2002 to December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2003 2002 2001 2003 2002 - ------------ -------------- ------------ ------------ -------------- ------------ ------------------- $ 8,848 $ 210 $ -- $ -- $ -- $ -- $-- 2,473 298 25,657 13,374 2,780 47 -- -------- ------- ---------- --------- -------- ------ --- 6,375 (88) (25,657) (13,374) (2,780) (47) -- -------- ------- ---------- --------- -------- ------ --- 72,432 (843) (313,967) (78,401) (43,356) 20 -- 49,401 (2,920) 1,123,504 (426,893) (11,854) 3,750 -- -------- ------- ---------- --------- -------- ------ --- 121,833 (3,763) 809,537 (505,294) (55,210) 3,770 -- -------- ------- ---------- --------- -------- ------ --- $128,208 $(3,851) $ 783,880 $(518,668) $(57,990) $3,723 $-- ======== ======= ========== ========= ======== ====== ===
F-39 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
State Street Research Investment Trust Investment Division ----------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------- (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ (68,204) $ (969,448) $ 48,301,051 Net realized (losses) gains from security transactions..................... (6,958,914) (6,132,437) 731,187 Change in unrealized appreciation (depreciation) of investments............ 88,855,777 (90,883,953) (122,469,738) ------------ ------------ ------------- Net increase (decrease) in net assets resulting from operations............ 81,828,659 (97,985,838) (73,437,500) ------------ ------------ ------------- From capital transactions: Net premiums............................................................... 67,707,999 78,160,135 80,046,712 Redemptions................................................................ (15,137,546) (10,399,853) (15,513,042) Net Investment Division transfers.......................................... (7,863,696) (11,186,400) 2,751,095 Other net transfers........................................................ (36,428,084) (38,309,389) (40,534,492) ------------ ------------ ------------- Net increase (decrease) in net assets resulting from capital transactions.. 8,278,673 18,264,493 26,750,273 ------------ ------------ ------------- NET CHANGE IN NET ASSETS...................................................... 90,107,332 (79,721,345) (46,687,227) NET ASSETS--BEGINNING OF PERIOD............................................... 276,979,969 356,701,314 403,388,541 ------------ ------------ ------------- NET ASSETS--END OF PERIOD..................................................... $367,087,301 $276,979,969 $ 356,701,314 ============ ============ =============
See Notes to Financial Statements. F-40
State Street Research Diversified State Street Research Aggressive Growth MetLife Stock Index Investment Division Investment Division Investment Division - ---------------------------------------- ---------------------------------------- ---------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 7,511,522 $ 3,558,999 $ 23,184,244 $ (1,367,678) $ (1,263,240) $ 45,283,589 $ 3,387,558 $ 2,705,145 $ 1,213,073 (2,593,687) (1,810,936) (111,095) (8,202,841) (5,953,657) (1,536,972) (10,060,006) (5,045,284) 4,130,927 42,182,763 (41,694,719) (42,080,714) 62,199,697 (44,703,891) (94,895,107) 101,361,307 (82,559,071) (48,985,481) - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 47,100,598 (39,946,656) (19,007,565) 52,629,178 (51,920,788) (51,148,490) 94,688,859 (84,899,210) (43,641,481) - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 52,190,961 54,194,120 55,767,097 34,182,901 40,003,786 42,942,155 108,236,751 114,022,950 113,949,042 (14,264,879) (9,523,000) (8,333,720) (7,318,523) (4,831,140) (6,486,474) (14,265,812) (13,779,170) (11,030,629) (2,178,352) (383,162) 8,413,016 (5,104,646) (6,485,783) 1,097,789 (11,228,029) 11,797,286 19,393,554 (31,835,294) (32,044,615) (31,250,185) (17,936,155) (17,642,321) (19,697,556) (46,545,385) (47,844,806) (45,631,351) - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 3,912,436 12,243,343 24,596,208 3,823,577 11,044,542 17,855,914 36,197,525 64,196,260 76,680,616 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 51,013,034 (27,703,313) 5,588,643 56,452,755 (40,876,246) (33,292,576) 130,886,384 (20,702,950) 33,039,135 238,020,353 265,723,666 260,135,023 130,815,618 171,691,864 204,984,440 326,227,963 346,930,913 313,891,778 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $289,033,387 $238,020,353 $265,723,666 $187,268,373 $130,815,618 $171,691,864 $457,114,347 $326,227,963 $346,930,913 ============ ============ ============ ============ ============ ============ ============ ============ ============
F-41 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
FI International Stock Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ (54,694) $ 18,744 $ 1,172,876 Net realized (losses) gains from security transactions..................... (1,630,864) (2,655,399) (1,661,736) Change in unrealized appreciation (depreciation) of investments............ 10,924,390 (4,418,288) (9,202,287) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations............ 9,238,832 (7,054,943) (9,691,147) ----------- ----------- ----------- From capital transactions: Net premiums............................................................... 7,903,805 9,783,594 9,615,907 Redemptions................................................................ (1,780,012) (1,287,021) (1,289,983) Net Investment Division transfers.......................................... (552,252) (2,781,604) 323,092 Other net transfers........................................................ (3,792,182) (3,974,969) (4,148,436) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from capital transactions.. 1,779,359 1,740,000 4,500,580 ----------- ----------- ----------- NET CHANGE IN NET ASSETS...................................................... 11,018,191 (5,314,943) (5,190,567) NET ASSETS--BEGINNING OF PERIOD............................................... 32,966,098 38,281,041 43,471,608 ----------- ----------- ----------- NET ASSETS--END OF PERIOD..................................................... $43,984,289 $32,966,098 $38,281,041 =========== =========== ===========
See Notes to Financial Statements. F-42
Janus Mid Cap T. Rowe Price Small Cap Growth Scudder Global Equity Investment Division Investment Division Investment Division - ---------------------------------------- -------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (1,297,757) $ (1,013,088) $ (1,037,631) $ (402,320) $ (332,098) $ 3,209,549 $ 311,502 $ 181,688 $ 2,155,251 (1,145,184) (5,163,698) (2,451,549) (309,653) (297,872) (796,014) (1,005,776) (466,029) (71,082) 46,019,342 (34,449,605) (53,291,667) 17,635,578 (12,423,975) (6,595,361) 7,242,152 (3,445,540) (5,825,339) - ------------ ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- 43,576,401 (40,626,391) (56,780,847) 16,923,605 (13,053,945) (4,181,826) 6,547,878 (3,729,881) (3,741,170) - ------------ ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- 53,673,455 64,528,237 74,363,749 12,384,395 14,332,234 15,023,523 6,014,790 7,029,500 7,562,752 (5,340,392) (2,804,544) (3,144,623) (1,578,439) (1,348,311) (2,577,320) (1,735,572) (936,418) (630,613) (5,185,372) (5,298,371) 3,860,189 (197,295) 753,895 (372,409) (125,590) (322,915) 603,395 (21,665,579) (21,964,497) (23,970,747) (5,569,189) (5,463,573) (5,350,422) (2,481,721) (2,670,700) (2,572,779) - ------------ ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- 21,482,112 34,460,825 51,108,568 5,039,472 8,274,245 6,723,372 1,671,907 3,099,467 4,962,755 - ------------ ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- 65,058,513 (6,165,566) (5,672,279) 21,963,077 (4,779,700) 2,541,546 8,219,785 (630,414) 1,221,585 119,019,575 125,185,141 130,857,420 39,880,088 44,659,788 42,118,242 20,475,933 21,106,347 19,884,762 - ------------ ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- $184,078,088 $119,019,575 $125,185,141 $61,843,165 $ 39,880,088 $44,659,788 $28,695,718 $20,475,933 $21,106,347 ============ ============ ============ =========== ============ =========== =========== =========== ===========
F-43 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
Harris Oakmark Large Cap Value Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ (252,368) $ 438,284 $ (56,512) Net realized (losses) gains from security transactions..................... 38,696 173,172 94,596 Change in unrealized appreciation (depreciation) of investments............ 6,986,213 (3,824,797) 810,284 ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations............ 6,772,541 (3,213,341) 848,368 ----------- ----------- ----------- From capital transactions: Net premiums............................................................... 11,430,624 10,115,432 4,073,390 Redemptions................................................................ (991,704) (287,586) (268,807) Net Investment Division transfers.......................................... 1,835,698 6,291,525 9,043,603 Other net transfers........................................................ (4,616,084) (4,169,815) (1,466,228) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from capital transactions.. 7,658,534 11,949,556 11,381,958 ----------- ----------- ----------- NET CHANGE IN NET ASSETS...................................................... 14,431,075 8,736,215 12,230,326 NET ASSETS--BEGINNING OF PERIOD............................................... 23,072,554 14,336,339 2,106,013 ----------- ----------- ----------- NET ASSETS--END OF PERIOD..................................................... $37,503,629 $23,072,554 $14,336,339 =========== =========== ===========
See Notes to Financial Statements. F-44
Neuberger Berman Partners Mid Cap Value T. Rowe Price Large Cap Growth Lehman Brothers Aggregate Bond Index Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (118,988) $ (89,469) $ 106,521 $ (180,062) $ (106,090) $ (94,779) $ 2,506,200 $ 982,861 $ 212,243 28,084 105,666 (68,863) (489,389) (317,124) (100,488) 1,152,171 515,268 210,509 7,656,793 (1,888,036) (195,526) 7,871,800 (5,333,848) (92,461) (2,185,014) 2,760,523 1,053,501 - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 7,565,889 (1,871,839) (157,868) 7,202,349 (5,757,062) (287,728) 1,473,357 4,258,652 1,476,253 - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 8,682,614 8,172,686 5,746,048 8,620,553 9,447,412 8,996,035 13,565,785 10,479,062 8,533,067 (629,059) (1,215,338) (57,006) (982,056) (125,856) (60,227) (1,812,183) (1,839,866) (1,024,276) 650,401 2,321,678 4,766,372 (78,277) 873,833 8,736,398 (6,698,353) 8,318,943 11,244,179 (3,610,116) (3,236,171) (2,321,908) (3,337,120) (3,453,967) (3,536,498) (5,580,587) (4,492,832) (2,262,688) - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 5,093,840 6,042,855 8,133,506 4,223,100 6,741,422 14,135,708 (525,338) 12,465,307 16,490,282 - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 12,659,729 4,171,016 7,975,638 11,425,449 984,360 13,847,980 948,019 16,723,959 17,966,535 18,285,822 14,114,806 6,139,168 22,094,885 21,110,525 7,262,545 54,046,288 37,322,329 19,355,794 - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- $30,945,551 $18,285,822 $14,114,806 $33,520,334 $22,094,885 $21,110,525 $54,994,307 $54,046,288 $37,322,329 =========== =========== =========== =========== =========== =========== =========== =========== ===========
F-45 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
Morgan Stanley EAFE Index Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ 121,982 $ (64,128) $ (37,840) Net realized (losses) gains from security transactions..................... (497,564) (800,822) (961,834) Change in unrealized appreciation (depreciation) of investments............ 6,516,826 (1,274,363) (729,479) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations............ 6,141,244 (2,139,313) (1,729,153) ----------- ----------- ----------- From capital transactions: Net premiums............................................................... 7,425,875 6,625,665 4,890,376 Redemptions................................................................ (362,211) (1,101,621) (722,285) Net Investment Division transfers.......................................... 438,708 1,672,217 4,395,203 Other net transfers........................................................ (2,849,511) (2,360,586) (1,819,787) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from capital transactions.. 4,652,861 4,835,675 6,743,507 ----------- ----------- ----------- NET CHANGE IN NET ASSETS...................................................... 10,794,105 2,696,362 5,014,354 NET ASSETS--BEGINNING OF PERIOD............................................... 13,496,072 10,799,710 5,785,356 ----------- ----------- ----------- NET ASSETS--END OF PERIOD..................................................... $24,290,177 $13,496,072 $10,799,710 =========== =========== ===========
See Notes to Financial Statements. F-46
Russell 2000 Index Met/Putnam Voyager State Street Research Aurora Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (29,213) $ (29,731) $ (47,654) $ (58,697) $ (39,278) $ (22,732) $ (336,756) $ (97,874) $ (51,026) (125,595) (343,069) (1,016,179) (624,452) (304,226) (113,353) 196,537 81,843 155,882 7,938,110 (2,545,881) 1,215,383 2,271,140 (1,227,374) (585,114) 17,391,943 (6,958,922) 1,218,805 - ----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- 7,783,302 (2,918,681) 151,550 1,587,991 (1,570,878) (721,199) 17,251,724 (6,974,953) 1,323,661 - ----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- 7,659,016 7,082,371 5,343,692 3,213,111 3,461,165 2,425,615 16,618,731 15,376,489 7,040,736 (486,878) (266,570) (375,673) (93,468) (27,865) (23,841) (920,139) (302,359) (81,569) 991,151 2,834,125 1,811,235 (151,453) 548,678 2,239,800 1,566,557 6,843,668 11,247,758 (3,048,846) (2,527,437) (2,007,235) (1,158,137) (1,159,060) (878,209) (7,037,769) (5,887,521) (2,656,308) - ----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- 5,114,443 7,122,489 4,772,019 1,810,053 2,822,918 3,763,365 10,227,380 16,030,277 15,550,617 - ----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- 12,897,745 4,203,808 4,923,569 3,398,044 1,252,040 3,042,166 27,479,104 9,055,324 16,874,278 14,828,534 10,624,726 5,701,157 5,252,713 4,000,673 958,507 29,060,558 20,005,234 3,130,956 - ----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- $27,726,279 $14,828,534 $10,624,726 $ 8,650,757 $ 5,252,713 $4,000,673 $56,539,662 $29,060,558 $20,005,234 =========== =========== =========== =========== =========== ========== =========== =========== ===========
F-47 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
MetLife Mid Cap Stock Index Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ (64,163) $ (55,361) $ (18,724) Net realized (losses) gains from security transactions..................... 12,063 (23,095) (19,531) Change in unrealized appreciation (depreciation) of investments............ 6,538,587 (2,089,536) 294,328 ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations............ 6,486,487 (2,167,992) 256,073 ----------- ----------- ----------- From capital transactions: Net premiums............................................................... 8,658,518 7,438,484 4,147,919 Redemptions................................................................ (315,294) (109,971) (16,900) Net Investment Division transfers.......................................... 960,729 4,006,261 4,052,437 Other net transfers........................................................ (3,433,510) (2,617,681) (1,566,864) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from capital transactions.. 5,870,443 8,717,093 6,616,592 ----------- ----------- ----------- NET CHANGE IN NET ASSETS...................................................... 12,356,930 6,549,101 6,872,665 NET ASSETS--BEGINNING OF PERIOD............................................... 15,567,957 9,018,856 2,146,191 ----------- ----------- ----------- NET ASSETS--END OF PERIOD..................................................... $27,924,887 $15,567,957 $ 9,018,856 =========== =========== ===========
See Notes to Financial Statements. F-48
State Street Research Franklin Templeton Small Cap Growth Large Cap Value Davis Venture Value Investment Division Investment Division Investment Division - --------------------------------------- -------------------------- ------------------------------------- For the Year For the Year For the Period For the Year For the Period For the Year For the Year For the Year Ended Ended May 1, 2001 to Ended May 1, 2002 to Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2003 2002 2001 - ------------ ------------ -------------- ------------ -------------- ------------ ------------ ------------ $ (16,641) $ (8,397) $ (1,124) $ 4,590 $ 433 $ (75,683) $ 750 $ 153,188 (19,016) (42,766) (3,651) 41,938 (3,284) (213,900) (188,804) (46,987) 796,643 (271,373) 16,066 156,144 (3,178) 5,610,390 (2,083,879) (437,523) ---------- ---------- -------- ---------- -------- ----------- ----------- ----------- 760,986 (322,536) 11,291 202,672 (6,029) 5,320,807 (2,271,933) (331,322) ---------- ---------- -------- ---------- -------- ----------- ----------- ----------- 844,482 626,488 107,629 405,361 64,977 6,492,659 5,157,409 3,338,434 (27,310) (5,592) (802) (5,862) (313) (286,620) (86,825) (44,938) 610,392 745,849 369,945 469,287 153,138 2,147,532 5,300,022 4,710,785 (416,036) (235,608) (30,931) (149,915) (23,188) (2,675,075) (2,166,021) (1,312,198) ---------- ---------- -------- ---------- -------- ----------- ----------- ----------- 1,011,528 1,131,137 445,841 718,871 194,614 5,678,496 8,204,585 6,692,083 ---------- ---------- -------- ---------- -------- ----------- ----------- ----------- 1,772,514 808,601 457,132 921,543 188,585 10,999,303 5,932,652 6,360,761 1,265,733 457,132 -- 188,585 -- 13,430,192 7,497,540 1,136,779 ---------- ---------- -------- ---------- -------- ----------- ----------- ----------- $3,038,247 $1,265,733 $457,132 $1,110,128 $188,585 $24,429,495 $13,430,192 $ 7,497,540 ========== ========== ======== ========== ======== =========== =========== ===========
F-49 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
Loomis Sayles Small Cap Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ (28,298) $ (16,142) $ 75,074 Net realized (losses) gains from security transactions..................... (88,636) (106,829) (35,645) Change in unrealized appreciation (depreciation) of investments............ 1,169,772 (414,868) (62,611) ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations............ 1,052,838 (537,839) (23,182) ---------- ---------- ---------- From capital transactions: Net premiums............................................................... 1,387,309 1,200,038 909,510 Redemptions................................................................ (49,105) (11,815) (7,864) Net Investment Division transfers.......................................... 159,941 268,407 960,425 Other net transfers........................................................ (536,437) (436,811) (356,458) ---------- ---------- ---------- Net increase (decrease) in net assets resulting from capital transactions.. 961,708 1,019,819 1,505,613 ---------- ---------- ---------- NET CHANGE IN NET ASSETS...................................................... 2,014,546 481,980 1,482,431 NET ASSETS--BEGINNING OF PERIOD............................................... 2,408,393 1,926,413 443,982 ---------- ---------- ---------- NET ASSETS--END OF PERIOD..................................................... $4,422,939 $2,408,393 $1,926,413 ========== ========== ==========
See Notes to Financial Statements. F-50
Alger Equity Growth MFS Investors Trust MFS Research Managers Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (23,728) $ (13,698) $ (121) $ (7,711) $ (2,715) $ (1,179) $ (873) $ (2,427) $ (363) (63,998) (57,097) (175) 13,432 (71,866) (5,896) (4,462) (30,794) 1,304 1,339,908 (983,355) (5,126) 221,187 (78,498) 4,527 112,414 (58,814) (346) ---------- ----------- ------- ---------- --------- --------- -------- --------- --------- 1,252,182 (1,054,150) (5,422) 226,908 (153,079) (2,548) 107,079 (92,035) 595 ---------- ----------- ------- ---------- --------- --------- -------- --------- --------- 1,035,783 40,283 -- 701,861 657,381 122,835 278,607 256,687 72,571 -- -- -- (14,052) (4,428) (1,444) (4,854) (250) (3,984) 359 4,290,312 52,468 164,766 480,329 486,210 57,895 151,712 231,621 (337,622) (338,952) (1,809) (229,330) (608,417) (282,946) (84,526) (153,237) (149,340) ---------- ----------- ------- ---------- --------- --------- -------- --------- --------- 698,520 3,991,643 50,659 623,245 524,865 324,655 247,122 254,912 150,868 ---------- ----------- ------- ---------- --------- --------- -------- --------- --------- 1,950,702 2,937,493 45,237 850,153 371,786 322,107 354,201 162,877 151,463 2,982,730 45,237 -- 693,893 322,107 -- 314,340 151,463 -- ---------- ----------- ------- ---------- --------- --------- -------- --------- --------- $4,933,432 $ 2,982,730 $45,237 $1,544,046 $ 693,893 $ 322,107 $668,541 $ 314,340 $ 151,463 ========== =========== ======= ========== ========= ========= ======== ========= =========
F-51 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
State Street Research Bond Income Investment Division -------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ 2,183,489 $ 4,278,595 $ 5,095,599 Net realized (losses) gains from security transactions..................... 880,712 (378,655) 400,025 Change in unrealized appreciation (depreciation) of investments............ 1,572,001 2,444,438 (137,736) ----------- ----------- ------------ Net increase (decrease) in net assets resulting from operations............ 4,636,202 6,344,378 5,357,888 ----------- ----------- ------------ From capital transactions: Net premiums............................................................... 16,159,717 18,007,464 14,237,318 Redemptions................................................................ (4,549,369) (3,078,401) (3,623,665) Net Investment Division transfers.......................................... (3,340,166) 1,121,089 3,289,281 Other net transfers........................................................ (9,344,726) (8,719,726) (15,760,945) ----------- ----------- ------------ Net increase (decrease) in net assets resulting from capital transactions.. (1,074,544) 7,330,426 (1,858,011) ----------- ----------- ------------ NET CHANGE IN NET ASSETS...................................................... 3,561,658 13,674,804 3,499,877 NET ASSETS--BEGINNING OF PERIOD............................................... 93,157,932 79,483,128 75,983,251 ----------- ----------- ------------ NET ASSETS--END OF PERIOD..................................................... $96,719,590 $93,157,932 $ 79,483,128 =========== =========== ============
See Notes to Financial Statements. F-52
Salomon Brothers FI Structured Equity Harris Oakmark Focused Value Strategic Bond Opportunities Investment Division Investment Division Investment Division - ------------------------------------- --------------------------------------- --------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Period For the Year For the Year For the Period Ended Ended Ended Ended Ended May 1, 2001 to Ended Ended May 1, 2001 to December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------ -------------- $ (808) $ 70 $ (69) $ (127,312) $ (63,671) $ (9,775) $ 33,102 $ 72,727 $ (894) 24,426 (9,596) (77) 31,214 (9,588) (43) 97,650 241 117 58,141 (4,285) (2,467) 5,537,632 (938,481) 279,801 233,146 62,351 4,621 -------- -------- ------- ----------- ----------- ---------- ---------- ---------- -------- 81,759 (13,811) (2,613) 5,441,534 (1,011,740) 269,983 363,898 135,319 3,844 -------- -------- ------- ----------- ----------- ---------- ---------- ---------- -------- 167,405 51,077 -- 8,198,287 6,333,512 999,657 1,996,763 890,271 97,914 (10,046) -- -- (450,269) (161,171) (7,188) (108,331) (17,732) (566) 229,644 41,277 28,886 3,144,705 5,880,885 3,223,723 1,486,748 1,049,918 396,753 (56,377) (10,863) (1,055) (3,347,152) (2,377,498) (271,630) (749,672) (348,947) (33,111) -------- -------- ------- ----------- ----------- ---------- ---------- ---------- -------- 330,626 81,491 27,831 7,545,571 9,675,728 3,944,562 2,625,508 1,573,510 460,990 -------- -------- ------- ----------- ----------- ---------- ---------- ---------- -------- 412,385 67,680 25,218 12,987,105 8,663,988 4,214,545 2,989,406 1,708,829 464,834 92,898 25,218 -- 12,878,533 4,214,545 -- 2,173,663 464,834 -- -------- -------- ------- ----------- ----------- ---------- ---------- ---------- -------- $505,283 $ 92,898 $25,218 $25,865,638 $12,878,533 $4,214,545 $5,163,069 $2,173,663 $464,834 ======== ======== ======= =========== =========== ========== ========== ========== ========
F-53 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
Salomon Brothers U.S. Government Investment Division --------------------------------------- For the Year For the Year For the Period Ended Ended May 1, 2001 to December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ -------------- (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ 42,617 $ 71,569 $ (1,841) Net realized (losses) gains from security transactions..................... 48,098 10,225 5,065 Change in unrealized appreciation (depreciation) of investments............ (40,677) 83,661 (2,273) ----------- ---------- -------- Net increase (decrease) in net assets resulting from operations............ 50,038 165,455 951 ----------- ---------- -------- From capital transactions: Net premiums............................................................... 3,454,837 1,641,232 162,934 Redemptions................................................................ (137,457) (35,283) (10,909) Net Investment Division transfers.......................................... 916,767 2,382,469 755,686 Other net transfers........................................................ (1,344,693) (637,762) (59,363) ----------- ---------- -------- Net increase (decrease) in net assets resulting from capital transactions.. 2,889,454 3,350,656 848,348 ----------- ---------- -------- NET CHANGE IN NET ASSETS...................................................... 2,939,492 3,516,111 849,299 NET ASSETS--BEGINNING OF PERIOD............................................... 4,365,410 849,299 -- ----------- ---------- -------- NET ASSETS--END OF PERIOD..................................................... $ 7,304,902 $4,365,410 $849,299 =========== ========== ========
See Notes to Financial Statements. F-54
State Street Research Money Market FI Mid Cap Opportunities Janus Aspen Growth Investment Division Investment Division Investment Division - -------------------------------------- -------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Period For the Year For the Year For the Year Ended Ended Ended Ended May 1, 2002 to Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2003 2002 2001 - ------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ $ 47,144 $ 259,328 $ 918,529 $ 9,838 $ (333) $ (10,283) $ (9,370) $ 185,366 (1) (628,588) (499,341) 19,777 (1,950) (263,013) (179,152) (1,848,663) 1 611,711 796,577 191,546 3,758 1,041,007 (329,490) 498,521 - ----------- ------------ ----------- ---------- -------- ---------- ---------- ----------- 47,144 242,451 1,215,765 221,161 1,475 767,711 (518,012) (1,164,776) - ----------- ------------ ----------- ---------- -------- ---------- ---------- ----------- 4,560,820 25,769,284 17,936,134 324,317 49,033 839,829 913,602 779,753 (1,186,158) (4,958,930) (1,689,474) (43,946) (19) (88,894) (13,590) (2,741,484) (4,975,125) (33,048,287) (4,603,225) 537,734 149,230 (5,665) 34,319 254,486 (1,910,867) 10,079,748 (1,666,768) (95,364) (31,850) (176,510) (211,649) (189,372) - ----------- ------------ ----------- ---------- -------- ---------- ---------- ----------- (3,511,330) (2,158,185) 9,976,667 722,741 166,394 568,760 722,682 (1,896,617) - ----------- ------------ ----------- ---------- -------- ---------- ---------- ----------- (3,464,186) (1,915,734) 11,192,432 943,902 167,869 1,336,471 204,670 (3,061,393) 30,810,613 32,726,347 21,533,915 167,869 -- 2,163,422 1,958,752 5,020,145 - ----------- ------------ ----------- ---------- -------- ---------- ---------- ----------- $27,346,427 $ 30,810,613 $32,726,347 $1,111,771 $167,869 $3,499,893 $2,163,422 $ 1,958,752 =========== ============ =========== ========== ======== ========== ========== ===========
F-55 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
Invesco VIF High Yield Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ 43,235 $ 48,408 $ 29,172 Net realized (losses) gains from security transactions..................... (5,183) (31,480) (3,798) Change in unrealized appreciation (depreciation) of investments............ 90,384 (7,350) (33,395) -------- -------- -------- Net increase (decrease) in net assets resulting from operations............ 128,436 9,578 (8,021) -------- -------- -------- From capital transactions: Net premiums............................................................... 232,669 216,788 213,527 Redemptions................................................................ (6,154) -- -- Net Investment Division transfers.......................................... 11,139 2,473 71,476 Other net transfers........................................................ (37,616) (27,503) (13,506) -------- -------- -------- Net increase (decrease) in net assets resulting from capital transactions.. 200,038 191,758 271,497 -------- -------- -------- NET CHANGE IN NET ASSETS...................................................... 328,474 201,336 263,476 NET ASSETS--BEGINNING OF PERIOD............................................... 475,634 274,298 10,822 -------- -------- -------- NET ASSETS--END OF PERIOD..................................................... $804,108 $475,634 $274,298 ======== ======== ========
See Notes to Financial Statements. F-56
Invesco VIF Equity Income Invesco VIF Real Estate Opportunity Franklin Templeton International Stock Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 1,289 $ 1,519 $ 1,475 $ 1,726 $ (248) $ 652 $ 34,446 $ 31,411 $ 197,836 (4,599) (7,425) (1,414) 7,645 12,032 1,271 (71,786) (325,690) (18,952) 30,971 (21,641) (4,995) 41,591 3,016 (3,692) 947,139 (187,267) (287,060) -------- -------- -------- -------- -------- -------- ---------- ---------- ---------- 27,661 (27,547) (4,934) 50,962 14,800 (1,769) 909,799 (481,546) (108,176) -------- -------- -------- -------- -------- -------- ---------- ---------- ---------- 44,937 30,604 5,886 20,763 9,629 3,478 571,285 937,164 461,547 (13,395) -- (780) (74,780) -- -- (219,304) (90,063) (236,261) 6,492 7,548 112,018 8,373 64,182 (24,700) 342,850 643,475 589,847 (6,352) (8,020) (3,589) (5,943) 1,520 (2,641) (163,132) (163,651) (39,531) -------- -------- -------- -------- -------- -------- ---------- ---------- ---------- 31,682 30,132 113,535 (51,587) 75,331 (23,863) 531,699 1,326,925 775,602 -------- -------- -------- -------- -------- -------- ---------- ---------- ---------- 59,343 2,585 108,601 (625) 90,131 (25,632) 1,441,498 845,379 667,426 125,063 122,478 13,877 179,233 89,102 114,734 2,612,034 1,766,655 1,099,229 -------- -------- -------- -------- -------- -------- ---------- ---------- ---------- $184,406 $125,063 $122,478 $178,608 $179,233 $ 89,102 $4,053,532 $2,612,034 $1,766,655 ======== ======== ======== ======== ======== ======== ========== ========== ==========
F-57 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
Franklin Templeton Valuemark Small Cap Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ (6,613) $ (1,274) $ (121) Net realized (losses) gains from security transactions..................... (16,606) (49,638) (480) Change in unrealized appreciation (depreciation) of investments............ 366,174 (184,311) 4,364 ---------- --------- -------- Net increase (decrease) in net assets resulting from operations............ 342,955 (235,223) 3,763 ---------- --------- -------- From capital transactions: Net premiums............................................................... 258,012 40,174 32,699 Redemptions................................................................ -- -- -- Net Investment Division transfers.......................................... 30,689 995,374 69,587 Other net transfers........................................................ (86,982) (102,364) (3,042) ---------- --------- -------- Net increase (decrease) in net assets resulting from capital transactions.. 201,719 933,184 99,244 ---------- --------- -------- NET CHANGE IN NET ASSETS...................................................... 544,674 697,961 103,007 NET ASSETS--BEGINNING OF PERIOD............................................... 800,968 103,007 -- ---------- --------- -------- NET ASSETS--END OF PERIOD..................................................... $1,345,642 $ 800,968 $103,007 ========== ========= ========
See Notes to Financial Statements. F-58
Alliance Growth & Income Alliance Premier Growth Alliance Technology Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 4,389 $ 23,587 $ 2,195 $ (257) $ (274) $ (104) $ (181) $ (96) $ 661 (27,592) (18,278) (318) (661) (9,853) (138) (931) (519) (19,763) 441,306 (137,057) 24,267 11,616 (12,480) 1,299 13,613 (9,033) (2,681) ---------- ---------- -------- ------- -------- ------- ------- ------- -------- 418,103 (131,748) 26,144 10,698 (22,607) 1,057 12,501 (9,648) (21,783) ---------- ---------- -------- ------- -------- ------- ------- ------- -------- 581,532 560,351 422,139 29,785 29,958 -- 15,245 17,162 463 (87,076) (14,526) -- -- -- -- (316) -- -- 41,687 192,482 160,474 3,688 (60,622) 97,128 727 -- 36,082 (82,296) (71,035) (11,019) (2,341) (2,820) 133 (792) (1,833) (2,213) ---------- ---------- -------- ------- -------- ------- ------- ------- -------- 453,847 667,272 571,594 31,132 (33,484) 97,261 14,864 15,329 34,332 ---------- ---------- -------- ------- -------- ------- ------- ------- -------- 871,950 535,524 597,738 41,830 (56,091) 98,318 27,365 5,681 12,549 1,191,135 655,611 57,873 42,227 98,318 -- 18,230 12,549 -- ---------- ---------- -------- ------- -------- ------- ------- ------- -------- $2,063,085 $1,191,135 $655,611 $84,057 $ 42,227 $98,318 $45,595 $18,230 $ 12,549 ========== ========== ======== ======= ======== ======= ======= ======= ========
F-59 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
Fidelity Contrafund Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ (2,455) $ (926) $ (57) Net realized (losses) gains from security transactions..................... 6,303 (348) (27) Change in unrealized appreciation (depreciation) of investments............ 139,867 (29,437) (253) --------- -------- ------- Net increase (decrease) in net assets resulting from operations............ 143,715 (30,711) (337) --------- -------- ------- From capital transactions: Net premiums............................................................... 53,210 22,932 3,356 Redemptions................................................................ (213,750) -- -- Net Investment Division transfers.......................................... 657,697 237,002 21,462 Other net transfers........................................................ 3,584 (3,862) (621) --------- -------- ------- Net increase (decrease) in net assets resulting from capital transactions.. 500,741 256,072 24,197 --------- -------- ------- NET CHANGE IN NET ASSETS...................................................... 644,456 225,361 23,860 NET ASSETS--BEGINNING OF PERIOD............................................... 249,221 23,860 -- --------- -------- ------- NET ASSETS--END OF PERIOD..................................................... $ 893,677 $249,221 $23,860 ========= ======== =======
See Notes to Financial Statements. F-60
Fidelity Asset Manager Growth Fidelity Growth American Funds Growth Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- --------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Period Ended Ended Ended Ended Ended Ended Ended Ended May 1, 2001 to December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ -------------- $ 6,748 $ 3,017 $ (233) $ (831) $ (517) $ (243) $ (118,303) $ (56,543) $ 128,057 (4,335) (5,591) 113 (2,588) (8,400) (3,407) (100,817) (49,022) (95,342) 59,143 (19,964) (1,597) 63,146 (40,968) (3,078) 5,264,250 (1,636,890) (17,189) -------- -------- ------- -------- -------- ------- ----------- ----------- ---------- 61,556 (22,538) (1,717) 59,727 (49,885) (6,728) 5,045,130 (1,742,455) 15,526 -------- -------- ------- -------- -------- ------- ----------- ----------- ---------- 194,197 105,094 16,990 101,957 102,972 22,338 8,746,040 5,515,691 700,197 (1,698) (2,162) -- (738) -- -- (274,455) (51,220) (1,570) 74,992 (31,085) 84,590 6,224 (1,143) 74,755 5,353,241 5,147,713 2,173,706 (27,293) (12,942) (5,355) (4,423) (5,581) (3,117) (3,102,038) (2,053,980) 288,414 -------- -------- ------- -------- -------- ------- ----------- ----------- ---------- 240,198 58,905 96,225 103,020 96,248 93,976 10,722,788 8,558,204 3,160,747 -------- -------- ------- -------- -------- ------- ----------- ----------- ---------- 301,754 36,367 94,508 162,747 46,363 87,248 15,767,918 6,815,749 3,176,273 130,875 94,508 -- 133,611 87,248 -- 9,992,022 3,176,273 -- -------- -------- ------- -------- -------- ------- ----------- ----------- ---------- $432,629 $130,875 $94,508 $296,358 $133,611 $87,248 $25,759,940 $ 9,992,022 $3,176,273 ======== ======== ======= ======== ======== ======= =========== =========== ==========
F-61 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
American Funds Growth-Income Investment Division --------------------------------------- For the Year For the Year For the Period Ended Ended May 1, 2001 to December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ -------------- (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ 57,594 $ 35,068 $ 15,132 Net realized (losses) gains from security transactions..................... (26,406) (51,319) (13,398) Change in unrealized appreciation (depreciation) of investments............ 3,852,340 (1,122,854) 55,397 ----------- ----------- ---------- Net increase (decrease) in net assets resulting from operations............ 3,883,528 (1,139,105) 57,131 ----------- ----------- ---------- From capital transactions: Net premiums............................................................... 7,049,440 4,324,156 553,810 Redemptions................................................................ (184,181) (62,519) (6,270) Net investment division transfers.......................................... 3,708,586 4,404,613 1,876,550 Other net transfers........................................................ (2,495,963) (1,573,001) (27,864) ----------- ----------- ---------- Net increase (decrease) in net assets resulting from capital transactions.. 8,077,882 7,093,249 2,396,226 ----------- ----------- ---------- NET CHANGE IN NET ASSETS...................................................... 11,961,410 5,954,144 2,453,357 NET ASSETS--BEGINNING OF PERIOD............................................... 8,407,501 2,453,357 -- ----------- ----------- ---------- NET ASSETS--END OF PERIOD..................................................... $20,368,911 $ 8,407,501 $2,453,357 =========== =========== ==========
See Notes to Financial Statements. F-62
American Funds Global Small Cap JPM Enhanced Index T. Rowe Price Mid Cap Growth Investment Division Investment Division Investment Division - --------------------------------------- ------------------------------------- --------------------------------------- For the Year For the Year For the Period For the Year For the Year For the Year For the Year For the Year For the Period Ended Ended May 1, 2001 to Ended Ended Ended Ended Ended May 1, 2001 to December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ -------------- ------------ ------------ ------------ ------------ ------------ -------------- $ (8,633) $ (1,451) $ 5,931 $ 147 $ 78 $ (13) $ (17,818) $ 962 $ (940) (33,362) 35,746 (18,714) (1,554) (1,186) (25) (46,026) (55,314) (1,372) 1,513,502 (396,292) 46,579 1,806 (1,483) (320) 776,010 (378,709) 11,239 ---------- ---------- -------- -------- ------- ------ ---------- ---------- -------- 1,471,507 (361,997) 33,796 399 (2,591) (358) 712,166 (433,061) 8,927 ---------- ---------- -------- -------- ------- ------ ---------- ---------- -------- 1,663,445 1,071,636 138,839 3,043 6,165 -- 1,283,521 820,210 82,192 (60,720) (8,869) -- -- -- -- (26,453) (1,344) (543) 1,303,948 1,067,611 476,691 (11,034) 1,869 5,908 481,182 375,032 264,649 (610,233) (354,525) (30,269) (173) (3,041) (187) (448,143) 47,743 209,192 ---------- ---------- -------- -------- ------- ------ ---------- ---------- -------- 2,296,440 1,775,853 585,261 (8,164) 4,993 5,721 1,290,107 1,241,641 555,490 ---------- ---------- -------- -------- ------- ------ ---------- ---------- -------- 3,767,947 1,413,856 619,057 (7,765) 2,402 5,363 2,002,273 808,580 564,417 2,032,913 619,057 -- 7,765 5,363 -- 1,372,997 564,417 -- ---------- ---------- -------- -------- ------- ------ ---------- ---------- -------- $5,800,860 $2,032,913 $619,057 $ -- $ 7,765 $5,363 $3,375,270 $1,372,997 $564,417 ========== ========== ======== ======== ======= ====== ========== ========== ========
F-63 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
MFS Research International Investment Division --------------------------------------- For the Year For the Year For the Period Ended Ended May 1, 2001 to December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ -------------- (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ 2,786 $ (2,121) $ (351) Net realized (losses) gains from security transactions..................... 148,987 (66,559) (4,107) Change in unrealized appreciation (depreciation) of investments............ 191,049 (2,664) 1,444 ---------- -------- -------- Net increase (decrease) in net assets resulting from operations............ 342,822 (71,344) (3,014) ---------- -------- -------- From capital transactions: Net premiums............................................................... 514,658 323,700 38,580 Redemptions................................................................ (15,626) (1,956) -- Net investment division transfers.......................................... 140,125 254,704 77,076 Other net transfers........................................................ (198,441) (28,935) 124,871 ---------- -------- -------- Net increase (decrease) in net assets resulting from capital transactions.. 440,716 547,513 240,527 ---------- -------- -------- NET CHANGE IN NET ASSETS...................................................... 783,538 476,169 237,513 NET ASSETS--BEGINNING OF PERIOD............................................... 713,682 237,513 -- ---------- -------- -------- NET ASSETS--END OF PERIOD..................................................... $1,497,220 $713,682 $237,513 ========== ======== ========
See Notes to Financial Statements. F-64
PIMCO Total Return PIMCO Innovation Lord Abbett Bond Debenture Investment Division Investment Division Investment Division - --------------------------------------- --------------------------------------- -------------------------------------- For the Year For the Year For the Period For the Year For the Year For the Period For the Year For the Year For the Year Ended Ended May 1, 2001 to Ended Ended May 1, 2001 to Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ -------------- ------------ ------------ -------------- ------------ ------------ ------------ $ 175,706 $ (28,120) $ 23,842 $ (21,608) $ (9,521) $ (1,528) $ 109,583 $ 924,873 $ 859,088 175,963 60,373 1,564 (195,867) (111,879) (9,873) 198,834 (1,886,218) (134,223) (25,434) 270,736 (14,155) 1,260,206 (652,366) 4,179 1,391,673 949,375 (902,997) - ----------- ---------- ---------- ---------- ---------- -------- ----------- ------------ ---------- 326,235 302,989 11,251 1,042,731 (773,766) (7,222) 1,700,090 (11,970) (178,132) - ----------- ---------- ---------- ---------- ---------- -------- ----------- ------------ ---------- 5,176,301 1,998,260 266,987 1,268,741 931,879 138,136 2,358,538 2,500,797 2,653,126 (300,049) (31,798) (9,397) (47,295) (7,020) -- (558,076) (441,582) (478,731) 3,254,351 3,693,012 902,199 1,385,317 627,449 661,537 1,087,733 11,019,013 807,014 (1,973,454) (851,347) (68,474) (437,762) (258,151) (43,761) (1,142,589) (13,314,199) (872,472) - ----------- ---------- ---------- ---------- ---------- -------- ----------- ------------ ---------- 6,157,149 4,808,127 1,091,315 2,169,001 1,294,157 755,912 1,745,606 (235,971) 2,108,937 - ----------- ---------- ---------- ---------- ---------- -------- ----------- ------------ ---------- 6,483,384 5,111,116 1,102,566 3,211,732 520,391 748,690 3,445,696 (247,941) 1,930,805 6,213,682 1,102,566 -- 1,269,081 748,690 -- 8,596,606 8,844,547 6,913,742 - ----------- ---------- ---------- ---------- ---------- -------- ----------- ------------ ---------- $12,697,066 $6,213,682 $1,102,566 $4,480,813 $1,269,081 $748,690 $12,042,302 $ 8,596,606 $8,844,547 =========== ========== ========== ========== ========== ======== =========== ============ ==========
F-65 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
Met/AIM Met/AIM Mid Cap Core Equity Small Cap Growth Investment Division Investment Division -------------------------- -------------------------- For the Year For the Period For the Year For the Period Ended May 1, 2002 to Ended May 1, 2002 to December 31, December 31, December 31, December 31, 2003 2002 2003 2002 ------------ -------------- ------------ -------------- (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income..................................... $ 3,638 $ (347) $ (2,947) $ (281) Net realized (losses) gains from security transactions........... 6,414 (1,242) 66,977 (593) Change in unrealized appreciation (depreciation) of investments.. 140,733 (6,351) 51,242 (4,322) --------- -------- -------- -------- Net increase (decrease) in net assets resulting from operations.. 150,785 (7,940) 115,272 (5,196) --------- -------- -------- -------- From capital transactions: Net premiums..................................................... 376,221 70,763 201,753 30,362 Redemptions...................................................... (9,516) (929) (5,605) (129) Net investment division transfers................................ 345,361 212,616 286,464 84,320 Other net transfers.............................................. (126,899) (21,530) (70,229) 6,439 --------- -------- -------- -------- Net increase (decrease) in net assets resulting from capital transactions............................................ 585,167 260,920 412,383 120,992 --------- -------- -------- -------- NET CHANGE IN NET ASSETS............................................ 735,952 252,980 527,655 115,796 NET ASSETS--BEGINNING OF PERIOD..................................... 252,980 -- 115,796 -- --------- -------- -------- -------- NET ASSETS--END OF PERIOD........................................... $ 988,932 $252,980 $643,451 $115,796 ========= ======== ======== ========
See Notes to Financial Statements. F-66
Harris Oakmark International Janus Aggressive Growth Lord Abbett Growth & Income Investment Division Investment Division Investment Division - -------------------------- --------------------------------------- -------------------------------- For the Year For the Period For the Year For the Year For the Period For the Year For the Period Ended May 1, 2002 to Ended Ended May 1, 2001 to Ended October 31, 2002 to December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2003 2002 2001 2003 2002 - ------------ -------------- ------------ ------------ -------------- ------------ ------------------- $ 6,375 $ (88) $ (25,657) $ (13,374) $ (2,780) $ (47) $-- 72,432 (843) (313,967) (78,401) (43,356) 20 -- 49,401 (2,920) 1,123,504 (426,893) (11,854) 3,750 -- -------- -------- ---------- ---------- ---------- ------- --- 128,208 (3,851) 783,880 (518,668) (57,990) 3,723 -- -------- -------- ---------- ---------- ---------- ------- --- 111,653 59,332 1,705,553 1,567,918 311,526 4,885 -- (357) (178) (28,560) (23,600) -- -- -- 446,278 122,434 109,161 607,036 817,361 12,124 -- (22,736) (27,767) (612,599) (540,084) (118,215) (203) -- -------- -------- ---------- ---------- ---------- ------- --- 534,838 153,821 1,173,555 1,611,270 1,010,672 16,806 -- -------- -------- ---------- ---------- ---------- ------- --- 663,046 149,970 1,957,435 1,092,602 952,682 20,529 -- 149,970 -- 2,045,284 952,682 -- -- -- -------- -------- ---------- ---------- ---------- ------- --- $813,016 $149,970 $4,002,719 $2,045,284 $ 952,682 $20,529 $-- ======== ======== ========== ========== ========== ======= ===
F-67 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company NOTES TO FINANCIAL STATEMENTS December 31, 2003 1. BUSINESS Metropolitan Life Separate Account UL (the "Separate Account"), a separate account of Metropolitan Life Insurance Company ("Metropolitan Life"), was established on December 13, 1988 to support Metropolitan Life's operations with respect to certain variable universal life policies ("Policies"). Metropolitan Life is a wholly owned subsidiary of MetLife Inc. ("MetLife"). The Separate Account was registered as a unit investment trust on January 5, 1990 under the Investment Company Act of 1940, as amended, and exists in accordance with the regulations of the New York Insurance Department. The Separate Account presently consists of fifty-seven investment divisions that support six variable universal life insurance policies: Flexible Premium Multifunded Life ("UL II"), MetLife Flexible Premium Variable Life ("MetFlex"), Group Variable Universal Life ("GVUL"), Flexible Premium Multifunded Life ("UL 2001"), Variable Additional Insurance ("VAI") and Variable Additional Benefits Rider ("VABR"). The Separate Account is divided into investment divisions. Each investment division invests its assets exclusively in shares of corresponding portfolios, series or funds (with the same name) within the Metropolitan Fund, Janus Fund, Invesco Funds, Franklin Fund, Alliance Fund, Fidelity Funds, American Fund or Met Investors Fund, collectively, (the "Funds"). For convenience, the portfolios, series, and funds are referred to as "portfolios." The assets of the Separate Account are registered in the name of Metropolitan Life. Under applicable insurance law, the assets and liabilities of the Separate Account are clearly identified and distinguished from Metropolitan Life's other assets and liabilities. The portion of the Separate Account's assets applicable to the variable life policies is not chargeable with liabilities arising out of any other business Metropolitan Life may conduct. The table below represents the investment divisions within the Separate Account: State Street Research Investment Trust Investment Division State Street Research Diversified Investment Division State Street Research Aggressive Growth Investment Division MetLife Stock Index Investment Division FI International Stock Investment Division Janus Mid Cap Investment Division T. Rowe Price Small Cap Growth Investment Division Scudder Global Equity Investment Division Harris Oakmark Large Cap Value Investment Division Neuberger Berman Partners Mid Cap Value Investment Division T. Rowe Price Large Cap Growth Investment Division Lehman Brothers Aggregate Bond Index Investment Division Morgan Stanley EAFE Index Investment Division Russell 2000 Index Investment Division Met/Putnam Voyager Investment Division State Street Research Aurora Investment Division MetLife Mid Cap Stock Index Investment Division Franklin Templeton Small Cap Growth Investment Division (b) State Street Research Large Cap Value Investment Division (c) Davis Venture Value Investment Division Loomis Sayles Small Cap Investment Division Alger Equity Growth Investment Division (a) MFS Investors Trust Investment Division (a) MFS Research Managers Investment Division (a) State Street Research Bond Income Investment Division (a) FI Structured Equity Investment Division (a) Harris Oakmark Focused Value Investment Division (b) Salomon Brothers Stategic Bond Opportunities Investment Division (b) Salomon Brothers U.S. Government Investment Division (b) State Street Research Money Market Investment Division FI Mid Cap Opportunities Investment Division (c) Janus Aspen Growth Investment Division Invesco VIF High Yield Investment Division Invesco VIF Equity Income Investment Division Invesco VIF Real Estate Opportunity Investment Division Franklin Templeton International Stock Investment Division Franklin Templeton Valuemark Small Cap Investment Division (a) Alliance Growth & Income Investment Division Alliance Premier Growth Investment Division (a) Alliance Technology Investment Division (a) Fidelity Contrafund Investment Division (a) Fidelity Asset Manager Growth Investment Division (a) Fidelity Growth Investment Division (a) American Funds Growth Investment Division (b) American Funds Growth-Income Investment Division (b) American Funds Global Small Cap Investment Division (b) JPM Enhanced Index Investment Division (a) T. Rowe Price Mid Cap Growth Investment Division (b) MFS Research International Investment Division (b) PIMCO Total Return Investment Division (b) PIMCO Innovation Investment Division (b) Lord Abbett Bond Debenture Investment Division Met/AIM Mid Cap Core Equity Investment Division (c) Met/AIM Small Cap Growth Investment Division (c) Harris Oakmark International Investment Division (c) Janus Aggressive Growth Investment Division Lord Abbett Growth & Income Investment Division (d) F-68 NOTES TO FINANCIAL STATEMENTS -- (Continued) 1. BUSINESS -- (Continued) (a) On January 1, 2001, operations commenced for eleven new investment divisions added to the Separate Account on that date: Franklin Templeton Valuemark Small Cap Investment Division, Alger Equity Growth Investment Division, MFS Investors Trust Investment Division, MFS Research Managers Investment Division, FI Structured Equity Investment Division, Alliance Premier Growth Investment Division, Alliance Technology Investment Division, Fidelity Contrafund Investment Division, Fidelity Asset Manager Growth Investment Division, Fidelity Growth Investment Division, and JPM Enhanced Index Investment Division. (b) On May 1, 2001, operations commenced for twelve new investment divisions added to the Separate Account on that date: Janus Aggressive Growth Investment Division, Franklin Templeton Small Cap Growth Investment Division, Harris Oakmark Focused Value Investment Division, Salomon Brothers Strategic Bond Opportunities Investment Division, Salomon Brothers U.S. Government Investment Division, American Funds Growth Investment Division, American Funds Growth-Income Investment Division, American Funds Global Small Cap Investment Division, T. Rowe Price Mid Cap Growth Investment Division, MFS Research International Investment Division, PIMCO Total Return Investment Division, and PIMCO Innovation Investment Division. (c) On May 1, 2002, operations commenced for five new investment divisions added to the Separate Account on that date: State Street Research Large Cap Value Investment Division, FI Mid Cap Opportunities Investment Division, Met/AIM Mid Cap Core Equity Investment Division, Met/AIM Small Cap Growth Investment Division, and Harris Oakmark International Investment Division. (d) On October 31, 2002 operations commenced for one new investment division added to the Separate Account on that date: Lord Abbett Growth & Income Investment Division. 2. SIGNIFICANT ACCOUNTING POLICIES The financial statements included herein have been provided in accordance with accounting principles generally accepted in the United States of America for variable universal life separate accounts registered as unit investment trusts. A. Valuation of Investments Investments are made in the portfolios of the Funds and are valued at the reported net asset values of these portfolios. The investments of the Funds are valued at fair value. Money market fund investments are valued utilizing the amortized cost method of valuation. B. Security Transactions Purchases and sales are recorded on the trade date basis. Realized gains and losses on the sales of investments are computed on the basis of the identified cost of the investment sold. Income from dividends, and gains from realized gain distributions, are recorded on the ex-distribution date. C. Federal Income Taxes The operations of the Separate Account are included in the Federal income tax return of Metropolitan Life, which is taxed as a life insurance company under the provisions of the Internal Revenue Code ("IRC"). Under the current provisions of the IRC, Metropolitan Life does not expect to incur Federal income taxes on the earnings of the Separate Account to the extent the earnings are credited under the policies. Accordingly, no charge is being made currently to the Separate Account for Federal income taxes. Metropolitan Life will review periodically the status of this policy in the event of changes in the tax law. A charge may be made in future years for any Federal income taxes that would be attributed to the policies. D. Net Premiums Metropolitan Life deducts a sales load and a state premium tax charge from premiums before amounts are allocated to the Separate Account. In the case of certain policies, Metropolitan Life also deducts a Federal income tax charge before amounts are allocated to the Separate Account. The Federal income tax charge is imposed in connection with certain policies to recover a portion of the Federal income tax adjustment attributable to policy acquisition expenses. F-69 NOTES TO FINANCIAL STATEMENTS -- (Continued) 2. SIGNIFICANT ACCOUNTING POLICIES -- (Continued) E. Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported herein. Actual results could differ from these estimates. F. Purchase Payments Purchase payments received by Metropolitan Life are credited as Accumulation Units as of the end of the valuation period in which received, as provided in the prospectus. 3. EXPENSES With respect to assets in the Separate Account that support certain policies, Metropolitan Life deducts a charge from the assets of the Separate Account for the assumption of general administrative expenses and mortality and expense risks. This charge is equivalent to an effective annual rate of 0.45% of the average daily values of the assets in the Separate Account for GVUL policies, 0.90% for UL II & UL 2001 policies, 0.75% for VAI and VABR policies less than $250,000, and 0.50% for VAI and VABR policies $250,000 and greater. For Met Flex policies, a charge of 0.48% is assessed against the cash value of the assets in the separate account. F-70 NOTES TO FINANCIAL STATEMENTS -- (Continued) 4. PURCHASES AND SALES OF INVESTMENTS The cost of purchases and proceeds from sales of investments for the year ended December 31, 2003 were as follows:
Purchases Sales --------- -------- (In Thousands) State Street Research Investment Trust Investment Division....... $ 23,613 $ 15,572 State Street Research Diversified Investment Division............ 25,688 14,354 State Street Research Aggressive Growth Investment Division...... 11,163 8,764 MetLife Stock Index Investment Division.......................... 63,324 24,023 FI International Stock Investment Division....................... 5,514 3,811 Janus Mid Cap Investment Division................................ 22,923 3,117 T. Rowe Price Small Cap Growth Investment Division............... 6,430 1,862 Scudder Global Equity Investment Division........................ 4,833 2,872 Harris Oakmark Large Cap Value Investment Division............... 9,213 1,835 Neuberger Berman Partners Mid Cap Value Investment Division...... 5,510 557 T. Rowe Price Large Cap Growth Investment Division............... 6,544 2,531 Lehman Brothers Aggregate Bond Index Investment Division......... 20,915 19,015 Morgan Stanley EAFE Index Investment Division.................... 9,570 4,867 Russell 2000 Index Investment Division........................... 6,960 1,888 Met/Putnam Voyager Investment Division........................... 2,701 964 State Street Research Aurora Investment Division................. 11,291 1,416 MetLife Mid Cap Stock Index Investment Division.................. 7,181 1,384 Franklin Templeton Small Cap Growth Investment Division.......... 1,497 116 State Street Research Large Cap Value Investment Division........ 1,062 338 Davis Venture Value Investment Division.......................... 6,627 1,045 Loomis Sayles Small Cap Investment Division...................... 1,611 682 Alger Equity Growth Investment Division.......................... 1,071 396 MFS Investors Trust Investment Division.......................... 1,675 1,062 MFS Research Managers Investment Division........................ 279 34 State Street Research Bond Income Investment Division............ 13,891 12,765 FI Structured Equity Investment Division......................... 587 257 Harris Oakmark Focused Value Investment Division................. 7,908 488 Salomon Brothers Stategic Bond Opportunities Investment Division. 4,033 1,375 Salomon Brothers U.S. Government Investment Division............. 5,404 2,472 State Street Research Money Market Investment Division........... 6,223 9,648 FI Mid Cap Opportunities Investment Division..................... 823 90 Janus Aspen Growth Investment Division........................... 833 274 Invesco VIF High Yield Investment Division....................... 298 55 Invesco VIF Equity Income Investment Division.................... 57 24 Invesco VIF Real Estate Opportunity Investment Division.......... 32 82 Franklin Templeton International Stock Investment Division....... 1,048 482 Franklin Templeton Valuemark Small Cap Investment Division....... 311 502 Alliance Growth & Income Investment Division..................... 635 176 Alliance Premier Growth Investment Division...................... 33 3 Alliance Technology Investment Division.......................... 16 1 Fidelity Contrafund Investment Division.......................... 728 230 Fidelity Asset Manager Growth Investment Division................ 279 32 Fidelity Growth Investment Division.............................. 109 6 American Funds Growth Investment Division........................ 10,843 369 American Funds Growth-Income Investment Division................. 8,552 463 American Funds Global Small Cap Investment Division.............. 3,456 1,175 JPM Enhanced Index Investment Division........................... 3 11 T. Rowe Price Mid Cap Growth Investment Division................. 1,455 183 MFS Research International Investment Division................... 2,812 2,368 PIMCO Total Return Investment Division........................... 8,452 2,120 PIMCO Innovation Investment Division............................. 2,694 553 Lord Abbett Bond Debenture Investment Division................... 4,152 2,314 Met/AIM Mid Cap Core Equity Investment Division.................. 704 115 Met/AIM Small Cap Growth Investment Division..................... 786 377 Harris Oakmark International Investment Division................. 1,577 1,035 Janus Aggressive Growth Investment Division...................... 4,304 3,158 Lord Abbett Growth & Income Investment Division.................. 17 0 -------- -------- Total............................................................ $350,250 $155,708 ======== ========
F-71 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. CHANGES IN OUTSTANDING UNITS The changes in units outstanding for the years ended December 31, 2003, 2002 and 2001 were as follows:
State Street State Street State Street Research MetLife Research Research Aggressive Stock Investment Trust Diversified Growth Index Investment Investment Investment Investment Division Division Division Division ---------------- ------------ ------------ ---------- (In Thousands) Outstanding at December 31, 2002 15,060 12,268 11,447 22,140 Activity during 2003: Issued........................ 5,136 3,873 3,343 10,343 Redeemed...................... (4,045) (3,260) (2,957) (6,736) ------ ------ ------ ------ Outstanding at December 31, 2003 16,151 12,881 11,833 25,747 ====== ====== ====== ====== Outstanding at December 31, 2001 13,264 11,138 10,503 17,015 Activity during 2002: Issued........................ 5,072 3,678 3,343 9,909 Redeemed...................... (3,276) (2,548) (2,399) (4,784) ------ ------ ------ ------ Outstanding at December 31, 2002 15,060 12,268 11,447 22,140 ====== ====== ====== ====== Outstanding at December 31, 2000 11,054 9,234 9,254 11,689 Activity during 2001: Issued........................ 2,828 2,200 1,392 6,525 Redeemed...................... (618) (296) (143) (1,199) ------ ------ ------ ------ Outstanding at December 31, 2001 13,264 11,138 10,503 17,015 ====== ====== ====== ======
F-72 NOTES TO FINANCIAL STATEMENTS -- (Continued)
FI T. Rowe Price Harris Neuberger T. Rowe Price Lehman Brothers International Janus Small Cap Scudder Oakmark Berman Partners Large Cap Aggregate Stock Mid Cap Growth Global Equity Large Cap Value Mid Cap Value Growth Bond Index Investment Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division Division - ------------- ---------- ------------- ------------- --------------- --------------- ------------- --------------- 3,296 11,521 4,261 1,978 2,346 1,567 2,853 4,147 1,224 5,469 1,463 768 1,639 892 1,408 2,097 (1,036) (3,642) (1,021) (606) (925) (513) (971) (2,180) ------ ------ ------ ----- ----- ----- ----- ------ 3,484 13,348 4,703 2,140 3,060 1,946 3,290 4,064 ====== ====== ====== ===== ===== ===== ===== ====== 3,106 8,481 3,509 2,000 1,242 1,076 2,124 3,153 1,176 5,867 1,561 687 1,697 906 1,289 1,774 (986) (2,827) (809) (709) (593) (415) (560) (780) ------ ------ ------ ----- ----- ----- ----- ------ 3,296 11,521 4,261 1,978 2,346 1,567 2,853 4,147 ====== ====== ====== ===== ===== ===== ===== ====== 2,709 5,367 2,995 1,848 220 456 632 1,730 1,578 3,701 864 209 1,076 790 2,004 2,267 (1,181) (587) (350) (57) (54) (170) (512) (844) ------ ------ ------ ----- ----- ----- ----- ------ 3,106 8,481 3,509 2,000 1,242 1,076 2,124 3,153 ====== ====== ====== ===== ===== ===== ===== ======
F-73 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. CHANGES IN OUTSTANDING UNITS -- (Continued)
Morgan Stanley State Street EAFE Russell Met/Putnam Research Index 2000 Index Voyager Aurora Investment Investment Investment Investment Division Division Division Division -------------- ---------- ---------- ------------ (In Thousands) Outstanding at December 31, 2002 2,044 1,614 1,463 2,599 Activity during 2003: Issued........................ 2,174 1,138 1,235 1,832 Redeemed...................... (1,542) (667) (785) (1,059) ------ ----- ----- ------ Outstanding at December 31, 2003 2,676 2,085 1,913 3,372 ====== ===== ===== ====== Outstanding at December 31, 2001 1,352 920 792 1,317 Activity during 2002: Issued........................ 1,485 1,015 1,075 1,944 Redeemed...................... (793) (321) (404) (662) ------ ----- ----- ------ Outstanding at December 31, 2002 2,044 1,614 1,463 2,599 ====== ===== ===== ====== Outstanding at December 31, 2000 544 512 131 164 Activity during 2001: Issued........................ 1,865 1,181 704 1,201 Redeemed...................... (1,057) (773) (43) (48) ------ ----- ----- ------ Outstanding at December 31, 2001 1,352 920 792 1,317 ====== ===== ===== ======
F-74 NOTES TO FINANCIAL STATEMENTS -- (Continued)
MetLife Mid Franklin State Street MFS Cap Stock Templeton Research Davis Loomis Sayles Alger MFS Research Index Small Cap Growth Large Cap Value Venture Value Small Cap Equity Growth Investors Trust Managers Investment Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division Division - ----------- ---------------- --------------- ------------- ------------- ------------- --------------- ---------- 1,762 198 23 901 18 589 104 47 1,301 266 147 650 21 200 272 54 (725) (135) (67) (229) (9) (68) (190) (20) ----- ---- --- ----- -- --- ---- --- 2,338 329 103 1,322 30 721 186 81 ===== ==== === ===== == === ==== === 867 52 -- 297 11 6 43 13 1,231 215 27 754 12 624 110 73 (336) (69) (4) (150) (5) (41) (49) (39) ----- ---- --- ----- -- --- ---- --- 1,762 198 23 901 18 589 104 47 ===== ==== === ===== == === ==== === 210 -- -- 39 2 -- -- -- 693 54 -- 267 10 6 47 83 (36) (2) -- (9) (1) -- (4) (70) ----- ---- --- ----- -- --- ---- --- 867 52 -- 297 11 6 43 13 ===== ==== === ===== == === ==== ===
F-75 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. CHANGES IN OUTSTANDING UNITS -- (Continued)
State Street Saloman Brothers Research FI Harris Oakmark Strategic Bond Bond Income Structured Equity Focused Value Opportunities Investment Investment Investment Investment Division Division Division Division ------------ ----------------- -------------- ---------------- (In Thousands) Outstanding at December 31, 2002 5,564 12 76 177 Activity during 2003: Issued........................ 1,494 75 72 430 Redeemed...................... (1,541) (38) (33) (232) ------ --- --- ---- Outstanding at December 31, 2003 5,517 49 115 375 ====== === === ==== Outstanding at December 31, 2001 4,202 3 23 41 Activity during 2002: Issued........................ 2,094 15 72 195 Redeemed...................... (732) (6) (19) (59) ------ --- --- ---- Outstanding at December 31, 2002 5,564 12 76 177 ====== === === ==== Outstanding at December 31, 2000 3,980 -- -- -- Activity during 2001: Issued........................ 1,197 3 24 42 Redeemed...................... (975) -- (1) (1) ------ --- --- ---- Outstanding at December 31, 2001 4,202 3 23 41 ====== === === ====
F-76 NOTES TO FINANCIAL STATEMENTS -- (Continued)
State Street FI Janus Invesco VIF Invesco Franklin Templeton Saloman Brothers Research Mid Cap Aspen Invesco VIF Equity VIF Real Estate International U.S. Government Money Market Opportunities Growth High Yield Income Opportunity Stock Investment Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division Division - ---------------- ------------ ------------- ---------- ----------- ----------- --------------- ------------------ 340 1,981 21 354 65 15 14 344 626 526 107 123 29 6 2 118 (407) (747) (32) (42) (7) (2) (6) (59) ---- ------ --- ---- --- -- --- --- 559 1,760 96 435 87 19 10 403 ==== ====== === ==== === == === === 71 2,156 -- 236 37 12 7 189 393 1,770 22 149 38 5 61 183 (124) (1,945) (1) (31) (10) (2) (54) (28) ---- ------ --- ---- --- -- --- --- 340 1,981 21 354 65 15 14 344 ==== ====== === ==== === == === === -- 1,479 -- 473 1 2 10 99 99 2,983 -- 84 45 12 1 118 (28) (2,306) -- (321) (9) (2) (4) (28) ---- ------ --- ---- --- -- --- --- 71 2,156 -- 236 37 12 7 189 ==== ====== === ==== === == === ===
F-77 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. CHANGES IN OUTSTANDING UNITS -- (Continued)
Franklin Templeton Alliance Valuemark Growth & Alliance Alliance Small Cap Income Premier Growth Technology Investment Investment Investment Investment Division Division Division Division ------------------ ---------- -------------- ---------- (In Thousands) Outstanding at December 31, 2002 163 150 9 6 Activity during 2003: Issued........................ 57 67 6 5 Redeemed...................... (21) (20) (1) (1) --- --- --- --- Outstanding at December 31, 2003 199 197 14 10 === === === === Outstanding at December 31, 2001 16 65 14 2 Activity during 2002: Issued........................ 183 95 5 4 Redeemed...................... (36) (10) (10) -- --- --- --- --- Outstanding at December 31, 2002 163 150 9 6 === === === === Outstanding at December 31, 2000 -- 6 -- -- Activity during 2001: Issued........................ 17 60 14 26 Redeemed...................... (1) (1) -- (24) --- --- --- --- Outstanding at December 31, 2001 16 65 14 2 === === === ===
F-78 NOTES TO FINANCIAL STATEMENTS -- (Continued)
Fidelity American JPM T. Rowe Price Fidelity Asset Manager Fidelity American American Funds Funds Global Enhanced Mid Cap Contrafund Growth Growth Funds Growth Growth-Income Small Cap Index Growth Investment Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division Division - ---------- ------------- ---------- ------------ -------------- ------------ ---------- ------------- 35 20 28 221 287 203 1 294 90 39 20 313 387 375 1 387 (28) (5) (1) (117) (149) (200) (2) (154) --- -- -- ---- ---- ---- -- ---- 97 54 47 417 525 378 -- 527 === == == ==== ==== ==== == ==== 3 13 13 53 68 49 1 68 33 15 18 217 287 226 1 328 (1) (8) (3) (49) (68) (72) (1) (102) --- -- -- ---- ---- ---- -- ---- 35 20 28 221 287 203 1 294 === == == ==== ==== ==== == ==== -- -- -- -- -- -- -- -- 3 14 17 67 76 55 1 71 -- (1) (4) (14) (8) (6) -- (3) --- -- -- ---- ---- ---- -- ---- 3 13 13 53 68 49 1 68 === == == ==== ==== ==== == ====
F-79 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. CHANGES IN OUTSTANDING UNITS -- (Continued)
MFS Lord Abbett Research PIMCO PIMCO Bond International Total Return Innovation Debenture Investment Investment Investment Investment Division Division Division Division ------------- ------------ ---------- ----------- (In Thousands) Outstanding at December 31, 2002 95 534 416 748 Activity during 2003: Issued........................ 397 1,055 896 449 Redeemed...................... (341) (547) (380) (321) ---- ----- ---- ---- Outstanding at December 31, 2003 151 1,042 932 876 ==== ===== ==== ==== Outstanding at December 31, 2001 28 103 121 774 Activity during 2002: Issued........................ 239 623 437 178 Redeemed...................... (172) (192) (142) (204) ---- ----- ---- ---- Outstanding at December 31, 2002 95 534 416 748 ==== ===== ==== ==== Outstanding at December 31, 2000 -- -- -- 601 Activity during 2001: Issued........................ 113 123 128 246 Redeemed...................... (85) (20) (7) (73) ---- ----- ---- ---- Outstanding at December 31, 2001 28 103 121 774 ==== ===== ==== ====
F-80 NOTES TO FINANCIAL STATEMENTS -- (Continued)
Met/Aim Met/Aim Harris Janus Lord Abbett Mid Cap Small Cap Oakmark Aggressive Growth & Core Equity Growth International Growth Income Investment Investment Investment Investment Investment Division Division Division Division Division ----------- ---------- ------------- ---------- ----------- 30 15 18 381 -- 96 99 180 1,088 3 (34) (54) (126) (900) -- --- --- ---- ----- -- 92 60 72 569 3 === === ==== ===== == -- -- -- 122 -- 33 17 22 409 -- (3) (2) (4) (150) -- --- --- ---- ----- -- 30 15 18 381 -- === === ==== ===== == -- -- -- -- -- -- -- -- 148 -- -- -- -- (26) -- --- --- ---- ----- -- -- -- -- 122 -- === === ==== ===== ==
F-81 NOTES TO FINANCIAL STATEMENTS -- (Continued) 6. UNIT VALUES A summary of unit values and units outstanding for the Contracts and the expense as a percentage of average net assets, excluding expenses for the underlying funds, for each of the periods ended December 31, 2003, 2002 and 2001, respectively, or lesser time period if applicable.
State Street State Street State Street Research Research Research Aggressive MetLife Investment Trust Diversified Growth Stock Index Investment Investment Investment Investment Division Division Division Division ---------------- ---------------- ---------------- ---------------- 2003 Units (In Thousands).................................. 16,151 12,881 11,833 25,747 Unit Fair Value, Lowest to Highest (1)................ $10.57 to $33.12 $11.79 to $30.64 $11.71 to $16.87 $9.58 to $29.26 Net Assets (In Thousands)............................. $367,087 $289,033 $187,268 $457,114 Investment Income Ratio to Net Assets (2)............. 0.83% 3.73% 0.00% 1.65% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3)....................................... 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% Total Return, Lowest to Highest (1)(4)................ 29.08% to 30.24% 19.48% to 20.56% 39.53% to 40.79% 27.06% to 28.20% 2002 Units (In Thousands).................................. 15,060 12,268 11,447 22,140 Unit Fair Value, Lowest to Highest (1)................ $8.11 to $25.66 $9.78 to $25.64 $8.32 to $12.09 $7.48 to $23.03 Net Assets (In Thousands)............................. $276,980 $238,020 $130,816 $326,228 Investment Income Ratio to Net Assets (2)............. 0.54% 2.27% 0.00% 1.61% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3)....................................... 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% Total Return, Lowest to Highest (1)(4)................ -27% to -26% -15% to -14% -29% -23% to -22% 2001 Units (In Thousands).................................. 13,264 11,138 10,503 17,015 Unit Fair Value, Lowest to Highest (1)................ $10.98 to $35.04 $11.35 to $30.04 $11.67 to $17.12 $9.62 to $29.91 Net Assets (In Thousands)............................. $356,701 $265,724 $171,692 $346,931 Investment Income Ratio to Net Assets (2)............. 13.53% 9.67% 24.84% 1.17% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3)....................................... 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% Total Return, Lowest to Highest (1)(4)................ -18% to -17% -7% to -6% -24% -13% to -12%
- -------- (1) Metropolitan Life sells a number of variable life products which have unique combinations of features and fees that are charged against the contract owners' account balance. Differences in the fee structures result in a variety of unit values, expense ratios and total returns. (2) These amounts represent the dividends, excluding distributions of capital gains, received by the investment division from the underlying portfolio, net of management fees assessed by the fund manager, divided by the average net assets. These ratios excluded those expenses, such as mortality and expense charges, that are assessed against contract owners' accounts either through reductions in unit values or the redemption of units. The recognition of investment income by the investment division is affected by the timing of the declaration of dividends by the underlying portfolio in which the investment divisions invest. (3) These amounts represent the annualized contract expenses of the Separate Account, consisting primarily of mortality and expense risk charges for each period indicated. The ratios include only those expenses that result in a direct reduction to unit value. Charges made directly to contract owner accounts through the redemption of units, and expenses of the underlying portfolio, are excluded. (4) These amounts represent the total return for the period indicated including changes in the value of the underlying portfolio, and expenses assessed through the reduction of units values. The total return does not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the Separate Account. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. F-82 NOTES TO FINANCIAL STATEMENTS -- (Continued)
FI T. Rowe Price Harris Neuberger T. Rowe Price International Janus Small Cap Scudder Oakmark Large Berman Partners Large Cap Stock Mid Cap Growth Global Equity Cap Value Mid Cap Value Growth Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division - ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- 3,484 13,348 4,703 2,140 3,060 1,946 3,290 $9.92 to $13.85 $5.69 to $16.17 $12.64 to $14.08 $12.92 to $14.39 $11.53 to $14.56 $13.86 to $19.29 $8.23 to $12.13 $43,984 $184,078 $61,843 $28,696 $37,504 $30,946 $33,520 0.65% 0.00% 0.00% 2.04% 0.00% 0.32% 0.11% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.60% to 0.90% 0.60% to 0.90% 26.90% to 28.04% 33.38% to 35.10% 39.62% to 40.87% 29.29% to 30.45% 24.38% to 25.49% 35.30% to 36.52% 29.64% to 30.81% 3,296 11,521 4,261 1,978 2,346 1,567 2,853 $7.78 to $10.91 $4.22 to $12.07 $9.05 to $10.04 $9.90 to $11.03 $9.23 to $11.71 $10.24 to $14.13 $6.35 to $9.27 $32,966 $119,020 $39,880 $20,476 $23,073 $18,286 $22,095 0.89% 0.00% 0.00% 1.68% 3.31% 0.31% 0.26% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% -18% to -17% -30% to -29% -27% -17% to -16% -15% to -14% -10% -24% to 23% 3,106 8,481 3,509 2,000 1,242 1,076 2,124 $9.47 to $13.35 $5.95 to $17.08 $12.46 to $13.76 $11.79 to $12.88 $10.80 to $13.76 $11.44 to $15.63 $8.35 to $12.08 $38,281 $125,185 $44,660 $21,106 $14,336 $14,115 $21,111 3.67% 0.00% 8.16% 11.32% 0.15% 1.94% 0.06% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.60% to 0.90% 0.60% to 0.90% -21% to -20% -37% to -33% -10% to 2% -16% to -15% 17% to 20% -3% to 0% -11% to -6%
F-83 NOTES TO FINANCIAL STATEMENTS -- (Continued) 6. UNIT VALUES -- (Continued)
Lehman Brothers Aggregate Bond Morgan Stanley Russell 2000 Met/Putnam Index EAFE Index Index Voyager Investment Investment Investment Investment Division Division Division Division ---------------- ---------------- ---------------- ---------------- 2003 Units (In Thousands).................................. 4,064 2,676 2,085 1,913 Unit Fair Value, Lowest to Highest (1)................ $12.77 to $13.67 $7.85 to $10.37 $10.75 to $14.59 $4.38 to $4.78 Net Assets (In Thousands)............................. $54,994 $24,290 $27,726 $8,651 Investment Income Ratio to Net Assets (2)............. 5.25% 1.48% 0.63% 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3)....................................... 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.60% to 0.90% Total Return, Lowest to Highest (1)(4)................ 2.71% to 3.63% 36.41% to 37.70% 44.77% to 46.07% 24.78% to 25.91% 2002 Units (In Thousands).................................. 4,147 2,044 1,614 1,463 Unit Fair Value, Lowest to Highest (1)................ $12.43 to $13.19 $5.76 to $7.53 $7.43 to $9.99 $3.51 to $3.79 Net Assets (In Thousands)............................. $54,046 $13,496 $14,829 $5,253 Investment Income Ratio to Net Assets (2)............. 2.81% 0.49% 0.59% 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3)....................................... 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.50% to 0.90% Total Return, Lowest to Highest (1)(4)................ 9% to 10% -17% -21% to -20% -30% to -29% 2001 Units (In Thousands).................................. 3,153 1,352 920 792 Unit Fair Value, Lowest to Highest (1)................ $11.38 to $11.97 $6.97 to $9.04 $9.42 to $12.56 $4.98 to $5.04 Net Assets (In Thousands)............................. $37,322 $10,800 $10,625 $4,001 Investment Income Ratio to Net Assets (2)............. 1.29% 0.31% 0.26% 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3)....................................... 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.60% to 0.90% Total Return, Lowest to Highest (1)(4)................ 7% -22% to -21% 0% to 6% -46% to -31%
- -------- (1) Metropolitan Life sells a number of variable life products which have unique combinations of features and fees that are charged against the contract owners' account balance. Differences in the fee structures result in a variety of unit values, expense ratios and total returns. (2) These amounts represent the dividends, excluding distributions of capital gains, received by the investment division from the underlying portfolio, net of management fees assessed by the fund manager, divided by the average net assets. These ratios excluded those expenses, such as mortality and expense charges, that are assessed against contract owners' accounts either through reductions in unit values or the redemption of units. The recognition of investment income by the investment division is affected by the timing of the declaration of dividends by the underlying portfolio in which the investment divisions invest. (3) These amounts represent the annualized contract expenses of the Separate Account, consisting primarily of mortality and expense risk charges for each period indicated. The ratios include only those expenses that result in a direct reduction to unit value. Charges made directly to contract owner accounts through the redemption of units, and expenses of the underlying portfolio, are excluded. (4) These amounts represent the total return for the period indicated including changes in the value of the underlying portfolio, and expenses assessed through the reduction of unit values. The total return does not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the Separate Account. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. F-84 NOTES TO FINANCIAL STATEMENTS -- (Continued)
Franklin State Street MetLife Mid Templeton State Street Loomis Research Cap Stock Small Cap Research Davis Sayles Alger Aurora Index Growth Large Cap Value Venture Value Small Cap Equity Growth Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division - ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ------------- 3,372 2,338 329 103 1,322 30 721 $15.46 to $16.89 $11.04 to $12.13 $9.07 to $9.29 $10.70 to $10.86 $9.79 to $28.40 $9.27 to $205.39 $6.84 $56,540 $27,925 $3,038 $1,110 $24,429 $4,423 $4,933 0.00% 0.46% 0.00% 1.37% 0.37% 0.00% 0.06% 0.60% to 0.90% 0.60% to 0.90% 0.90% 0.90% 0.60% to 0.90% 0.60% to 0.90% 0.60% 48.80% to 50.14% 33.76% to 34.96% 43.64% to 44.93% 34.47% to 35.68% 29.70% to 30.87% 35.25% to 36.47% 35.15% 2,599 1,762 198 23 901 18 589 $10.30 to $11.25 $8.18 to $8.98 $6.31 to $6.41 $7.96 to $8.00 $7.48 to $21.70 $6.80 to $150.51 $5.06 $29,061 $15,568 $1,266 $189 $13,430 $2,408 $2,983 0.52% 0.35% 0.00% 0.92% 0.88% 0.11% 0.00% 0.50% to 0.90% 0.50% to 0.90% 0.90% 0.90% 0.50% to 0.90% 0.50% to 0.90% 0.60% -22% to -21% -16% to -15% -28% -20% -17% to -16% -22% -33% 1,317 867 52 -- 297 11 6 $13.09 to $14.29 $9.62 to $10.56 $8.83 to $8.88 $-- $8.94 to $25.95 $8.66 to $191.87 $7.57 $20,005 $9,019 $457 $-- $7,498 $1,926 $45 0.38% 0.43% 0.00% -- 4.47% 7.28% 0.00% 0.60% to 0.90% 0.60% to 0.90% 0.60% -- 0.60% to 0.90% 0.60% to 0.90% 0.60% 16% to 19% -1% to 3% -12% to -11% -- -11% to -9% -9% to -4% -16%
F-85 NOTES TO FINANCIAL STATEMENTS -- (Continued) 6. UNIT VALUES -- (Continued)
MFS State Street MFS Research Research Investors Trust Managers Bond Income Investment Investment Investment Division Division Division ---------------- ---------------- ---------------- 2003 Units (In Thousands)................................................. 186 81 5,517 Unit Fair Value, Lowest to Highest (1)............................... $7.96 to $8.33 $6.57 to $8.51 $12.89 to $27.12 Net Assets (In Thousands)............................................ $1,544 $669 $96,720 Investment Income Ratio to Net Assets (2)............................ 0.25% 0.78% 3.06% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% to 0.90% 0.60% to 0.90% 0.60% to 0.90% Total Return, Lowest to Highest (1)(4)............................... 20.76% to 21.85% 23.00% to 24.10% 4.91% to 5.85% 2002 Units (In Thousands)................................................. 104 47 5,564 Unit Fair Value, Lowest to Highest (1)............................... $6.54 to $6.84 $5.29 to $6.86 $12.18 to $25.85 Net Assets (In Thousands)............................................ $694 $314 $93,158 Investment Income Ratio to Net Assets (2)............................ 0.72% 0.30% 5.72% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% to 0.90% 0.60% to 0.90% 0.60% to 0.90% Total Return, Lowest to Highest (1)(4)............................... -21% to -20% -25% to -24% 7% to 8% 2001 Units (In Thousands)................................................. 43 13 4,202 Unit Fair Value, Lowest to Highest (1)............................... $8.19 to $8.57 $6.97 to $9.04 $11.23 to $24.08 Net Assets (In Thousands)............................................ $322 $151 $79,483 Investment Income Ratio to Net Assets (2)............................ 0.00% 0.25% 5.64% to 7.28% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% to 0.90% 0.60% to 0.90% .45% to 0.90% Total Return, Lowest to Highest (1)(4)............................... -14% to -3% -17% to -14% 7% to 8%
FI Structured Equity Investment Division ---------------- 2003 Units (In Thousands)................................................. 49 Unit Fair Value, Lowest to Highest (1)............................... $8.37 to $10.56 Net Assets (In Thousands)............................................ $505 Investment Income Ratio to Net Assets (2)............................ 0.52% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% to .90% Total Return, Lowest to Highest (1)(4)............................... 25.79% to 26.92% 2002 Units (In Thousands)................................................. 12 Unit Fair Value, Lowest to Highest (1)............................... $6.59 to $8.32 Net Assets (In Thousands)............................................ $93 Investment Income Ratio to Net Assets (2)............................ 0.89% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% to .90% Total Return, Lowest to Highest (1)(4)............................... -19% to -17% 2001 Units (In Thousands)................................................. 3 Unit Fair Value, Lowest to Highest (1)............................... $8.19 Net Assets (In Thousands)............................................ $25 Investment Income Ratio to Net Assets (2)............................ 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% Total Return, Lowest to Highest (1)(4)............................... -11%
- -------- (1) Metropolitan Life sells a number of variable life products which have unique combinations of features and fees that are charged against the contract owners' account balance. Differences in the fee structures result in a variety of unit values, expense ratios and total returns. (2) These amounts represent the dividends, excluding distributions of capital gains, received by the investment division from the underlying portfolio, net of management fees assessed by the fund manager, divided by the average net assets. These ratios excluded those expenses, such as mortality and expense charges, that are assessed against contract owners' accounts either through reductions in unit values or the redemption of units. The recognition of investment income by the investment division is affected by the timing of the declaration of dividends by the underlying portfolio in which the investment divisions invest. (3) These amounts represent the annualized contract expenses of the Separate Account, consisting primarily of mortality and expense risk charges for each period indicated. The ratios include only those expenses that result in a direct reduction to unit value. Charges made directly to contract owner accounts through the redemption of units, and expenses of the underlying portfolio, are excluded. (4) These amounts represent the total return for the period indicated including changes in the value of the underlying portfolio, and expenses assessed through the reduction of unit values. The total return does not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the Separate Account. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. F-86 NOTES TO FINANCIAL STATEMENTS -- (Continued)
Saloman Brothers Saloman State Street FI Janus Invesco Invesco Harris Oakmark Strategic Bond Brothers Research Mid Cap Aspen VIF High VIF Equity Focused Value Opporunities U.S. Government Money Market Opportunities Growth Yield Income Investment Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division Division - ------------------ ---------------- ---------------- ---------------- ---------------- ---------- ---------- ---------- 115 375 559 1,760 96 435 87 19 $219.73 to $225.05 $13.52 to $13.85 $12.82 to $13.13 $15.21 to $15.92 $11.50 to $11.67 $8.03 $9.21 $9.73 $25,866 $5,163 $7,305 $27,346 $1,112 $3,500 $804 $184 0.12% 1.70% 1.57% 0.78% 2.26% 0.10% 7.20% 1.26% 0.90% 0.90% 0.90% 0.60% to 0.90% 0.90% 0.60% 0.60% 0.60% 31.47% to 32.66% 11.62% to 12.62% 0.77% to 1.68% -0.09% to 0.81% 41.26% to 42.53% 31.73% 25.04% 22.60% 76 177 340 1,981 21 354 65 15 $167.13 to $169.65 $12.12 to $12.30 $12.72 to $12.91 $13.09 to $15.93 $8.14 to $8.19 $6.10 $7.37 $7.94 $12,879 $2,174 $4,365 $30,811 $168 $2,163 $476 $125 0.18% 6.33% 3.47% 1.57% 0.00% 0.03% 13.27% 1.74% 0.90% 0.90% 0.90% 0.45% to 0.90% 0.90% 0.60% 0.60% 0.60% -10% to -9% 9% to 10% 7% to 8% 0% to 1% -19% to -18% -27% -1% -19% 23 41 71 2,156 -- 236 37 12 $184.98 to $186.09 $11.15 to $11.22 $11.89 to $11.96 $14.88 to $15.85 $-- $8.30 $7.46 $9.81 $4,215 $465 $849 $32,726 $-- $1,959 $274 $122 0.00% 0.00% 0.00% 4.18% -- 6.04% 20.89% 2.61% 0.90% 0.90% 0.90% 0.60% to 0.90% -- 0.60% 0.60% 0.60% 12% to 13% 3% to 4% 4% 3% to 4% -- -19% -15% -7%
F-87 NOTES TO FINANCIAL STATEMENTS -- (Continued) 6. UNIT VALUES -- (Continued)
Franklin Franklin Invesco VIF Templeton Templeton Alliance Real Estate International Valuemark Growth & Opportunity Stock Small Cap Income Investment Investment Investment Investment Division Division Division Division ----------- ------------- ---------- ---------- 2003 Units (In Thousands)................................................. 10 403 199 197 Unit Fair Value, Lowest to Highest (1)............................... $17.79 $10.03 $6.76 $10.47 Net Assets (In Thousands)............................................ $179 $4,054 $1,346 $2,063 Investment Income Ratio to Net Assets (2)............................ 1.49% 1.52% 0.00% 0.70% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% 0.60% 0.60% 0.60% Total Return, Lowest to Highest (1)(4)............................... 38.82% 32.55% 37.24% 32.18% 2002 Units (In Thousands)................................................. 14 344 163 150 Unit Fair Value, Lowest to Highest (1)............................... $12.82 $7.57 $4.93 $7.92 Net Assets (In Thousands)............................................ $179 $2,612 $801 $1,191 Investment Income Ratio to Net Assets (2)............................ 1.40% 2.03% 0.51% 3.31% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% 0.60% 0.60% 0.60% Total Return, Lowest to Highest (1)(4)............................... -6% -18% -29% -22% 2001 Units (In Thousands)................................................. 7 189 16 65 Unit Fair Value, Lowest to Highest (1)............................... $12.05 $9.27 $6.91 $10.19 Net Assets (In Thousands)............................................ $89 $1,767 $103 $656 Investment Income Ratio to Net Assets (2)............................ 1.16% 14.19% 0.05% 0.91% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% 0.60% 0.60% 0.60% Total Return, Lowest to Highest (1)(4)............................... 1% -16% -9% 2%
- -------- (1) Metropolitan Life sells a number of variable life products which have unique combinations of features and fees that are charged against the contract owners' account balance. Differences in the fee structures result in a variety of unit values, expense ratios and total returns. (2) These amounts represent the dividends, excluding distributions of capital gains, received by the investment division from the underlying portfolio, net of management fees assessed by the fund manager, divided by the average net assets. These ratios excluded those expenses, such as mortality and expense charges, that are assessed against contract owners' accounts either through reductions in unit values or the redemption of units. The recognition of investment income by the investment division is affected by the timing of the declaration of dividends by the underlying portfolio in which the investment divisions invest. (3) These amounts represent the annualized contract expenses of the Separate Account, consisting primarily of mortality and expense risk charges for each period indicated. The ratios include only those expenses that result in a direct reduction to unit value. Charges made directly to contract owner accounts through the redemption of units, and expenses of the underlying portfolio, are excluded. (4) These amounts represent the total return for the period indicated including changes in the value of the underlying portfolio, and expenses assessed through the reduction of unit values. The total return does not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the Separate Account. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. F-88 NOTES TO FINANCIAL STATEMENTS -- (Continued)
Fidelity American Asset American American Funds Alliance Alliance Fidelity Manager Fidelity Funds Funds Global Premier Growth Technology Contrafund Growth Growth Growth Growth-Income Small Cap Investment Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division Division - -------------- ---------- ---------- ---------- ---------- ---------------- ---------------- ---------------- 14 10 97 54 47 417 525 378 $6.10 $4.54 $9.18 $8.00 $6.27 $60.53 to $62.00 $38.04 to $38.96 $15.06 to $15.42 $84 $46 $894 $433 $296 $25,760 $20,369 $5,801 0.00% 0.00% 0.15% 2.96% 0.08% 0.13% 1.18% 0.49% 0.60% 0.60% 0.60% 0.60% 0.60% 0.90% 0.90% 0.90% 23.37% 43.79% 28.35% 23.15% 32.78% 35.59% to 36.81% 31.25% to 32.43% 52.16% to 53.53% 9 6 35 20 28 221 287 203 $4.94 $3.16 $7.16 $6.50 $4.72 $44.64 to $45.32 $28.98 to $29.42 $9.90 to $10.05 $42 $18 $249 $131 $134 $9,992 $8,408 $2,033 0.00% 5.08% 0.14% 3.23% 0.12% 0.05% 1.74% 0.81% 0.60% 0.60% 0.60% 0.60% 0.60% 0.90% 0.90% 0.90% -31% -42% -10% -18% -30% -25% to -24% -19% to -18% -20% to -19% 14 2 3 13 13 53 68 49 $7.15 $5.43 $7.96 $7.89 $6.77 $59.63 to $59.99 $35.81 to $36.03 $12.34 to $12.41 $98 $13 $24 $95 $87 $3,176 $2,453 $619 0.00% 6.23% 0.00% 0.00% 0.00% 4.25% 0.82% 1.15% 0.60% 0.60% 0.60% 0.60% 0.60% 0.90% 0.90% 0.90% -14% -35% -12% -10% -20% -15% to -14% -3% -9% to -8%
F-89 NOTES TO FINANCIAL STATEMENTS -- (Continued) 6. UNIT VALUES -- (Continued)
JPM MFS Enhanced T. Rowe Price Research Index Mid Cap Growth International Investment Investment Investment Division Division Division ---------- ---------------- ---------------- 2003 Units (In Thousands)................................................. -- 527 151 Unit Fair Value, Lowest to Highest (1)............................... $-- $6.28 to $6.43 $9.70 to $9.94 Net Assets (In Thousands)............................................ $-- $3,375 $1,497 Investment Income Ratio to Net Assets (2)............................ -- 0.00% 0.97% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) -- 0.90% 0.90% Total Return, Lowest to Highest (1)(4)............................... -- 35.90% to 37.12% 31.01% to 32.19% 2002 Units (In Thousands)................................................. 1 294 95 Unit Fair Value, Lowest to Highest (1)............................... $6.09 $4.62 to $4.69 $7.41 to $7.52 Net Assets (In Thousands)............................................ $8 $1,373 $714 Investment Income Ratio to Net Assets (2)............................ 1.78% 0.82% 0.25% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% 0.90% 0.90% Total Return, Lowest to Highest (1)(4)............................... -25% -44% -12% 2001 Units (In Thousands)................................................. 1 68 28 Unit Fair Value, Lowest to Highest (1)............................... $8.12 $8.32 to $8.37 $8.44 to $8.50 Net Assets (In Thousands)............................................ $5 $564 $238 Investment Income Ratio to Net Assets (2)............................ 0.00% 0.00% 0.07% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% 0.90% 0.90% Total Return, Lowest to Highest (1)(4)............................... -9% -16% to -15% -13% to -12%
PIMCO Total Return Investment Division ---------------- 2003 Units (In Thousands)................................................. 1,042 Unit Fair Value, Lowest to Highest (1)............................... $11.96 to $12.25 Net Assets (In Thousands)............................................ $12,697 Investment Income Ratio to Net Assets (2)............................ 2.70% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.90% Total Return, Lowest to Highest (1)(4)............................... 3.59% to 4.52% 2002 Units (In Thousands)................................................. 534 Unit Fair Value, Lowest to Highest (1)............................... $11.55 to $11.72 Net Assets (In Thousands)............................................ $6,214 Investment Income Ratio to Net Assets (2)............................ 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.90% Total Return, Lowest to Highest (1)(4)............................... 9% to 10% 2001 Units (In Thousands)................................................. 103 Unit Fair Value, Lowest to Highest (1)............................... $10.64 to $10.70 Net Assets (In Thousands)............................................ $1,103 Investment Income Ratio to Net Assets (2)............................ 2.37% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.90% Total Return, Lowest to Highest (1)(4)............................... 6%
- -------- (1) Metropolitan Life sells a number of variable life products which have unique combinations of features and fees that are charged against the contract owners' account balance. Differences in the fee structures result in a variety of unit values, expense ratios and total returns. (2) These amounts represent the dividends, excluding distributions of capital gains, received by the investment division from the underlying portfolio, net of management fees assessed by the fund manager, divided by the average net assets. These ratios excluded those expenses, such as mortality and expense charges, that are assessed against contract owners' accounts either through reductions in unit values or the redemption of units. The recognition of investment income by the investment division is affected by the timing of the declaration of dividends by the underlying portfolio in which the investment divisions invest. (3) These amounts represent the annualized contract expenses of the Separate Account, consisting primarily of mortality and expense risk charges for each period indicated. The ratios include only those expenses that result in a direct reduction to unit value. Charges made directly to contract owner accounts through the redemption of units, and expenses of the underlying portfolio, are excluded. (4) These amounts represent the total return for the period indicated including changes in the value of the underlying portfolio, and expenses assessed through the reduction of unit values. The total return does not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the Separate Account. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. F-90 NOTES TO FINANCIAL STATEMENTS -- (Continued)
Lord Abbett Met/Aim Met/Aim Janus Lord Abbett PIMCO Bond Mid Cap Small Cap Harris Oakmark Aggressive Growth & Innovation Debenture Core Equity Growth International Growth Income Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division - ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------- 932 876 92 60 72 569 3 $4.72 to $4.83 $12.87 to $14.95 $10.69 to $10.85 $10.46 to $10.62 $11.23 to $11.40 $6.89 to $7.06 $8.10 $4,481 $12,042 $989 $643 $814 $4,003 $20,529 0.00% 1.85% 1.35% 0.00% 1.84% 0.00% 0.00% 0.90% 0.45% to 0.90% 0.90% 0.90% 0.90% 0.90% 0.60% 56.44% to 57.84% 17.17% to 19.52% 25.29% to 26.42% 37.84% to 39.08% 34.16% to 35.37% 28.77% to 29.93% 29.15% 416 748 30 15 18 381 -- $3.01 to $3.06 $10.87 to $12.51 $8.53 to $8.58 $7.59 to $7.63 $8.37 to $8.42 $5.35 to $5.43 $-- $1,269 $8,597 $253 $116 $150 $2,045 $-- 0.00% 11.43% 0.00% 0.00% 0.00% 0.00% -- 0.90% 0.45% to 0.90% 0.90% 0.90% 0.90% 0.90% -- -51% 0% to 1% -15% to -14% -24% -16% -31% -- 121 774 -- -- -- 122 -- $6.15 to $6.19 $10.83 to $12.35 $-- $-- $-- $7.73 to $7.82 $-- $749 $8,845 $-- $-- $-- $953 $-- 0.00% 11.73% -- -- -- 0.00% -- 0.90% 0.45% to 0.90% -- -- -- 0.90% -- -25% -2% to -1% -- -- -- -23% to -22% --
F-91 NOTES TO FINANCIAL STATEMENTS -- (Concluded) 7. CHANGE OF PORTFOLIO NAME AND PORTFOLIO MERGERS Effective January 1, 2003, MFS Mid Cap Growth Portfolio changed sub-advisers from Massachusetts Financial Services to T. Rowe Price Associates Inc. and changed its name to T. Rowe Price Mid Cap Growth Portfolio; and State Street Research Concentrated International Portfolio changed sub-advisers from State Street Research & Management Company to Harris Associates L.P. and changed its name to Harris Oakmark International Portfolio. Effective April 28, 2003, Janus Growth Portfolio of the Metropolitan Fund merged into the Janus Aggressive Growth Portfolio of the Met Investors Fund. Effective May 1, 2003, Putnam Large Cap Growth Portfolio changed its name to Met/Putnam Voyager Portfolio. Effective May, 1, 2003, all series of the New England Zenith Fund became newly organized portfolios of the Metropolitan Fund. The reorganization had no effect on the investment objectives, policies or advisory fees of any series, nor was there any change in investment adviser or sub-adviser. Effective December 16, 2003, Putnam International Stock Portfolio of the Metropolitan Fund changed its name to FI International Stock Portfolio. Effective April 29, 2002, Loomis Sayles High Yield Bond Portfolio of the Metropolitan Fund was merged into the Lord Abbett Bond Debenture Portfolio of the Met Investors Fund. Effective April 29, 2002, State Street Research Income Portfolio and State Street Research Money Market Portfolio of the Metropolitan Fund were merged respectively into the State Street Research Bond Income Portfolio and the State Street Research Money Market Portfolio of the Zenith Fund. Effective May 1, 2002, State Street Research Aurora Small Cap Value Portfolio and the Harris Oakmark Mid Cap Value Portfolio changed their names to State Street Research Aurora Portfolio and Harris Oakmark Focused Value Portfolio, respectively. Effective July 1, 2001, State Street Research became the sub-investment manager of the State Street Research Bond Income Portfolio (formerly Back Bay Advisers Bond Income Portfolio) of the New England Zenith Series Fund. Effective May 1, 2001, State Street Research Growth Portfolio changed its name to State Street Research Investment Trust Portfolio. F-92 METFLEX A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE POLICY Metropolitan Life Separate Account UL Issued by Metropolitan Life Insurance Company STATEMENT OF ADDITIONAL INFORMATION May 1, 2004 This Statement of Additional Information is not a prospectus. This Statement of Additional Information relates to the prospectus dated May 1, 2004 for MetFlex--A Flexible Premium Variable Universal Life Policy. A copy of that prospectus may be obtained by writing to MetLife SBR, 485-B Route 1 South, Suite 420, Iselin, NJ 08830. B-1 TABLE OF CONTENTS The Company and the Separate Account....................... 3 Additional Information about the Operations of the Policies 3 Limits to MetLife's Right to Challenge the Policy......... 3 Misstatement of Age or Sex................................ 3 Dividends................................................. 3 Payment and Deferment..................................... 3 Additional Information about Voting........................ 4 Restrictions on Financial Transactions..................... 4 Additional Information about Commissions................... 4 Legal and Actuarial Matters................................ 4 Experts.................................................... 5 Financial Statements....................................... 5
B-2 THE COMPANY AND THE SEPARATE ACCOUNT Metropolitan Life Insurance Company ("MetLife") is a wholly-owned subsidiary of MetLife, Inc., a publicly traded company. Our main office is located at One Madison Avenue, New York, New York 10010. MetLife was formed under the laws of New York State in 1868. MetLife Inc., through its subsidiaries and affiliates, is a leading provider of insurance and other financial services to individual and group customers. The MetLife companies serve approximately 12 million individuals in the United States and provide benefits to 37 million employees and family members through their plan sponsors. Outside the U.S., the MetLife companies have insurance operations in 8 countries serving approximately 8 million customers. We established the Separate Account under New York law on December 13, 1988. The Separate Account receives premium payments from the Policies described in the Prospectus and other variable life insurance policies that we issue. We have registered the Separate Account as a unit investment trust under the Investment Company Act of 1940 (the "1940 Act"). For more information about MetLife, please visit our website at www.metlife.com ADDITIONAL INFORMATION ABOUT THE OPERATION OF THE POLICIES Limits To Metlife's Right To Challenge The Policy We will not contest: .. Your Policy after 2 Policy years from issue or reinstatement (excluding riders added later). .. An increase in a death benefit after it has been in effect for two years. Misstatement Of Age Or Sex We will adjust benefits to reflect the correct age and sex of the insured, if this information isn't correct in the Policy application. Dividends The Policy is "nonparticipating," which means it is not eligible for dividends from us and does not share in any distributions of our surplus. Payment and Deferment We can delay transfers, withdrawals, surrender and payment of Policy loans from the Fixed Account for up to 6 months. Generally, we will pay or transfer amounts from the Separate Account within seven days after the Date of Receipt of all necessary documentation required for such payment or transfer. We can defer this if: .. The New York Stock Exchange has an unscheduled closing. .. There is an emergency so that we could not reasonably determine the investment experience of a Policy. .. The Securities and Exchange Commission by order permits us to do so for the protection of Policy owners (provided that the delay is permitted under New York State insurance law and regulations). .. With respect to the insurance proceeds, if entitlement to a payment is being questioned or is uncertain. .. We are paying amounts attributable to a check. In that case we can wait for a reasonable time (15 days or less) to let the check clear. We currently pay interest on the amount of insurance proceeds at 3% per year (or higher if state law requires) from the date of death until the date we pay the benefit. B-3 ADDITIONAL INFORMATION ABOUT VOTING If you are eligible to give us voting instructions, we will send you informational material and a form to send back to us. We are entitled to disregard voting instructions in certain limited circumstances prescribed by the SEC. If we do so, we will give you our reasons in the next semi-annual report to Policy owners. The number of shares for which you can give us voting instructions is determined as of the record date for the Fund shareholder meeting by dividing: .. Your Policy's cash value in the corresponding investment division; by .. The net asset value of one share of that Portfolio. We will count fractional votes. If we do not receive timely voting instructions from Policy owners and other insurance and annuity owners that are entitled to give us voting instructions, we will vote those shares in the same proportion as the shares held in the same separate account for which we did receive voting instructions. Also, we will vote Fund shares that are not attributable to insurance or annuity owners (including shares that we hold in our general account) or that are held in separate accounts that are not registered under the 1940 Act in the same proportion as the aggregate of the shares for which we received voting instructions from all insurance and annuity owners. RESTRICTIONS ON FINANCIAL TRANSACTIONS If mandated under money laundering or anti-terrorist laws, or other applicable law, we may be required to reject a premium payment or refuse to honor any request for transfers, withdrawals, surrenders, loans, or death benefits, until we receive instructions from the appropriate regulator. ADDITIONAL INFORMATION ABOUT COMMISSIONS Maximum commissions are generally: .. Policy Year 1: 28% of premiums paid up to the target premium 2.5% of premiums paid above the target premium .. Policy Years 2-4: 8.25% of premiums paid up to the target premium 2.5% of premiums paid above the target premium .. Policy Years 5-7: 2.5% of premiums paid up to the target premium 2.5% of premiums paid above the target premium .. Policy Years 8 and Later: 2.5% of premiums paid up to the target premium 2.5% of premiums paid above the target premium We may pay up to .10% of the cash value of a Policy in certain circumstances. We paid commissions of $5,295,786, $5,115,258 and $2,617,461 in 2001, 2002 and 2003 respectively. The amount of revenues we received from sales charges was less than the amount of commissions we paid in each of these three years. LEGAL AND ACTUARIAL MATTERS Christopher P. Nicholas, Associate General Counsel at MetLife, has passed upon the legality of the Policies. The law firm of Foley & Lardner LLP, Washington, D.C., has advised us on certain matters relating to the federal securities laws. Sebastian Janssen, FSA, MAAA, Vice-President and Actuary of MetLife, has examined actuarial matters included in the registration statement, as stated in his opinion filed as an exhibit to the registration statement. B-4 MetLife, like other life insurance companies, is involved in lawsuits, including class action lawsuits. In some class action and other lawsuits involving insurers, substantial damages have been sought and/or material settlement payments have been made. Although the outcome of any litigation cannot be predicted with certainty, MetLife believes that, as of the date of this prospectus, there are no pending or threatened lawsuits that will have a materially adverse impact on it or the Separate Account. EXPERTS The financial statements included in this Statement of Additional Information have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein (which report expresses an unqualified opinion and includes an explanatory paragraph referring to the change in the method of accounting for embedded derivatives in certain insurance products as required by new accounting guidance which became effective on October 1, 2003, and recorded the impact as a cumulative effect of a change in accounting principle), and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. Deloitte & Touche LLP's principal business address is 201 E. Kennedy Boulevard, Tampa, Florida 33602. FINANCIAL STATEMENTS The financial statements of MetLife are attached to the Statement of Additional Information. Our financial statements should be considered only as bearing upon our ability to meet our obligations under the Policy. B-5 Independent Auditors' Report To the Board of Directors and Stockholder of Metropolitan Life Insurance Company: We have audited the accompanying consolidated balance sheets of Metropolitan Life Insurance Company and subsidiaries (the "Company") as of December 31, 2003 and 2002, and the related consolidated statements of income, stockholder's equity, and cash flows for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of Metropolitan Life Insurance Company and subsidiaries as of December 31, 2003 and 2002, and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 1, the Company changed its method of accounting for embedded derivatives in certain insurance products as required by new accounting guidance which became effective on October 1, 2003, and recorded the impact as a cumulative effect of a change in accounting principle. DELOITTE & TOUCHE LLP New York, New York April 9, 2004 F-1 Metropolitan Life Insurance Company and Subsidiaries Consolidated Balance Sheets December 31, 2003 and 2002 (Dollars in millions, except share and per share data)
2003 2002 -------- -------- Assets Investments: Fixed maturities available-for-sale, at fair value (amortized cost: $134,844 and $117,528, respectively)................................................................ $143,148 $124,260 Equity securities, at fair value (cost: $893 and $1,495, respectively)...................... 1,246 1,551 Mortgage loans on real estate............................................................... 26,637 25,353 Policy loans................................................................................ 8,180 8,047 Real estate and real estate joint ventures held-for-investment.............................. 3,163 3,050 Real estate held-for-sale................................................................... 89 799 Other limited partnership interests......................................................... 2,461 2,380 Short-term investments...................................................................... 1,320 1,199 Other invested assets....................................................................... 4,803 3,419 -------- -------- Total investments........................................................................ 191,047 170,058 Cash and cash equivalents....................................................................... 2,393 1,106 Accrued investment income....................................................................... 1,922 1,889 Premiums and other receivables.................................................................. 6,193 6,721 Deferred policy acquisition costs............................................................... 10,232 9,666 Other assets.................................................................................... 5,817 6,084 Separate account assets......................................................................... 63,661 53,912 -------- -------- Total assets............................................................................. $281,265 $249,436 ======== ======== Liabilities and Stockholder's Equity Liabilities: Future policy benefits...................................................................... $ 86,802 $ 86,039 Policyholder account balances............................................................... 61,725 54,464 Other policyholder funds.................................................................... 6,948 6,206 Policyholder dividends payable.............................................................. 1,046 1,025 Policyholder dividend obligation............................................................ 2,130 1,882 Short-term debt............................................................................. 3,536 912 Long-term debt.............................................................................. 2,055 2,624 Shares subject to mandatory redemption...................................................... 277 -- Current income taxes payable................................................................ 792 873 Deferred income taxes payable............................................................... 2,698 1,947 Payables under securities loaned transactions............................................... 24,065 16,321 Other liabilities........................................................................... 8,057 6,889 Separate account liabilities................................................................ 63,661 53,912 -------- -------- Total liabilities........................................................................ 263,792 233,094 -------- -------- Company-obligated mandatorily redeemable securities of subsidiary trusts........................ -- 277 -------- -------- Stockholder's Equity: Preferred stock, par value $1,000 per share; 110,000 shares authorized; 93,402 shares issued and outstanding at December 31, 2003............................................................... 93 -- Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 494,466,664 shares issued and outstanding at December 31, 2003 and 2002........................................... 5 5 Additional paid-in capital...................................................................... 13,730 13,474 Retained earnings............................................................................... 1,261 708 Accumulated other comprehensive income.......................................................... 2,384 1,878 -------- -------- Total stockholder's equity............................................................... 17,473 16,065 -------- -------- Total liabilities and stockholder's equity............................................... $281,265 $249,436 ======== ========
See accompanying notes to consolidated financial statements. F-2 Metropolitan Life Insurance Company and Subsidiaries Consolidated Statements of Income For the years ended December 31, 2003, 2002 and 2001 (Dollars in millions)
2003 2002 2001 ------- ------- ------- Revenues Premiums...................................................................... $18,151 $18,461 $17,023 Universal life and investment-type product policy fees........................ 1,921 1,927 1,874 Net investment income......................................................... 10,357 10,631 11,054 Other revenues................................................................ 1,062 1,354 1,532 Net investment gains (losses) (net of amounts allocable from other accounts of ($259), ($139) and ($33), respectively)..................................... (287) (697) 951 ------- ------- ------- Total revenues............................................................. 31,204 31,676 32,434 ------- ------- ------- Expenses Policyholder benefits and claims (excludes amounts directly related to net investment gains (losses) of ($233), ($150) and ($54), respectively)........ 18,677 18,860 18,265 Interest credited to policyholder account balances............................ 2,379 2,711 3,035 Policyholder dividends........................................................ 1,897 1,911 2,060 Other expenses (excludes amounts directly related to net investment gains (losses) of ($26), $11 and $21, respectively)............................... 5,836 6,543 6,920 ------- ------- ------- Total expenses............................................................. 28,789 30,025 30,280 ------- ------- ------- Income from continuing operations before provision for income taxes........... 2,415 1,651 2,154 Provision for income taxes.................................................... 688 510 774 ------- ------- ------- Income from continuing operations............................................. 1,727 1,141 1,380 Income from discontinued operations, net of income taxes...................... 300 471 107 ------- ------- ------- Income before cumulative effect of change in accounting....................... 2,027 1,612 1,487 Cumulative effect of change in accounting, net of income taxes................ (26) -- -- ------- ------- ------- Net income.................................................................... $ 2,001 $ 1,612 $ 1,487 ======= ======= =======
See accompanying notes to consolidated financial statements. F-3 Metropolitan Life Insurance Company and Subsidiaries Consolidated Statements of Stockholder's Equity For the years ended December 31, 2003, 2002 and 2001 (Dollars in millions)
Additional Preferred Common Paid-in Retained Stock Stock Capital Earnings --------- ------ ---------- -------- Balance at December 31, 2000........................... $-- $ 5 $14,549 $ 407 Sale of subsidiary to the Holding Company.............. 96 Issuance of warrants--by subsidiary.................... 40 Dividends on common stock.............................. (1,860) (1,894) Comprehensive income: Net income.......................................... 1,487 Other comprehensive income: Cumulative effect of change in accounting for derivatives, net of income taxes and reclassification adjustment..................... Unrealized gains on derivative instruments, net of income taxes............................. Unrealized investment gains, net of related offsets, reclassification adjustments and income taxes.................................... Foreign currency translation adjustment.......... Minimum pension liability adjustment............. Other comprehensive income....................... Comprehensive income................................ --- --- ------- ------- Balance at December 31, 2001........................... -- 5 12,825 -- Sale of subsidiary to the Holding Company.............. 149 Capital contribution from the Holding Company.......... 500 Dividends on common stock.............................. (904) Comprehensive income: Net income.......................................... 1,612 Other comprehensive income: Unrealized losses on derivative instruments, net of income taxes............................. Unrealized investment gains, net of related offsets, reclassification adjustments and income taxes.................................... Foreign currency translation adjustment.......... Other comprehensive income....................... Comprehensive income................................ --- --- ------- ------- Balance at December 31, 2002........................... -- 5 13,474 708 Issuance of preferred stock--by subsidiary............. 93 Issuance of shares--by subsidiary...................... 24 Issuance of stock options.............................. 2 Sale of subsidiaries to the Holding Company or affiliate............................................. 261 Capital contribution from the Holding Company.......... 2 Return of capital to the Holding Company............... (33) Dividends on common stock.............................. (1,448) Comprehensive income: Net income.......................................... 2,001 Other comprehensive income: Unrealized losses on derivative instruments, net of income taxes............................. Unrealized investment gains, net of related offsets, reclassification adjustments and income taxes.................................... Foreign currency translation adjustment.......... Minimum pension liability adjustment............. Other comprehensive income....................... Comprehensive income................................ --- --- ------- ------- Balance at December 31, 2003........................... $93 $ 5 $13,730 $ 1,261 === === ======= =======
Accumulated Other Comprehensive Income (Loss) -------------------------------------------- Net Foreign Minimum Unrealized Currency Pension Investment Translation Liability (Losses) Gains Adjustment Adjustment Total -------------- ----------- ---------- ------- Balance at December 31, 2000........................... $1,183 $(100) $ (28) $16,016 Sale of subsidiary to the Holding Company.............. 96 Issuance of warrants--by subsidiary.................... 40 Dividends on common stock.............................. (3,754) Comprehensive income: Net income.......................................... 1,487 Other comprehensive income: Cumulative effect of change in accounting for derivatives, net of income taxes and reclassification adjustment..................... 22 22 Unrealized gains on derivative instruments, net of income taxes............................. 24 24 Unrealized investment gains, net of related offsets, reclassification adjustments and income taxes.................................... 570 570 Foreign currency translation adjustment.......... (39) (39) Minimum pension liability adjustment............. (18) (18) ------- Other comprehensive income....................... 559 ------- Comprehensive income................................ 2,046 ------ ----- ----- ------- Balance at December 31, 2001........................... 1,799 (139) (46) 14,444 Sale of subsidiary to the Holding Company.............. 149 Capital contribution from the Holding Company.......... 500 Dividends on common stock.............................. (904) Comprehensive income: Net income.......................................... 1,612 Other comprehensive income: Unrealized losses on derivative instruments, net of income taxes............................. (58) (58) Unrealized investment gains, net of related offsets, reclassification adjustments and income taxes.................................... 250 250 Foreign currency translation adjustment.......... 72 72 ------- Other comprehensive income....................... 264 ------- Comprehensive income................................ 1,876 ------ ----- ----- ------- Balance at December 31, 2002........................... 1,991 (67) (46) 16,065 Issuance of preferred stock--by subsidiary............. 93 Issuance of shares--by subsidiary...................... 24 Issuance of stock options.............................. 2 Sale of subsidiaries to the Holding Company or affiliate............................................. 261 Capital contribution from the Holding Company.......... 2 Return of capital to the Holding Company............... (33) Dividends on common stock.............................. (1,448) Comprehensive income: Net income.......................................... 2,001 Other comprehensive income: Unrealized losses on derivative instruments, net of income taxes............................. (228) (228) Unrealized investment gains, net of related offsets, reclassification adjustments and income taxes.................................... 642 642 Foreign currency translation adjustment.......... 174 174 Minimum pension liability adjustment............. (82) (82) ------- Other comprehensive income....................... 506 ------- Comprehensive income................................ 2,507 ------ ----- ----- ------- Balance at December 31, 2003........................... $2,405 $ 107 $(128) $17,473 ====== ===== ===== =======
See accompanying notes to consolidated financial statements. F-4 Metropolitan Life Insurance Company and Subsidiaries Consolidated Statements of Cash Flows For the years ended December 31, 2003, 2002 and 2001 (Dollars in millions)
2003 2002 2001 -------- -------- -------- Cash flows from operating activities Net income............................................................. $ 2,001 $ 1,612 $ 1,487 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expenses.............................. 386 432 521 Amortization of premiums and accretion of discounts associated with investments, net.................................................. (162) (456) (560) (Gains) losses from sales of investments and businesses, net........ 125 256 (918) Interest credited to other policyholder account balances............ 2,379 2,711 3,035 Universal life and investment-type product policy fees.............. (1,921) (1,927) (1,874) Change in premiums and other receivables............................ (81) (1,878) (612) Change in deferred policy acquisition costs, net.................... (902) (766) (553) Change in insurance-related liabilities............................. 4,210 4,550 3,463 Change in income taxes payable...................................... 250 684 871 Change in other liabilities......................................... 725 106 (226) Other, net.......................................................... (485) (937) (946) -------- -------- -------- Net cash provided by operating activities.............................. 6,525 4,387 3,688 -------- -------- -------- Cash flows from investing activities Sales, maturities and repayments of: Fixed maturities.................................................... 69,292 61,473 51,479 Equity securities................................................... 576 2,676 2,116 Mortgage loans on real estate....................................... 3,221 2,555 1,834 Real estate and real estate joint ventures.......................... 888 714 1,131 Other limited partnership interests................................. 307 209 396 Purchases of: Fixed maturities.................................................... (90,122) (79,509) (51,122) Equity securities................................................... (104) (1,235) (3,323) Mortgage loans on real estate....................................... (4,354) (3,111) (3,310) Real estate and real estate joint ventures.......................... (310) (28) (665) Other limited partnership interests................................. (588) (447) (424) Net change in short-term investments................................... (183) (308) (303) Proceeds from sales of businesses...................................... 1,995 749 831 Net change in payable under securities loaned transactions............. 7,744 3,659 361 Other, net............................................................. (1,141) (815) (510) -------- -------- -------- Net cash used in investing activities.................................. $(12,779) $(13,418) $ (1,509) ======== ======== ========
See accompanying notes to consolidated financial statements. F-5 Metropolitan Life Insurance Company and Subsidiaries Consolidated Statements of Cash Flows--(Continued) For the years ended December 31, 2003, 2002 and 2001 (Dollars in millions)
2003 2002 2001 -------- -------- -------- Cash flows from financing activities Policyholder account balances: Deposits........................................................... $ 29,054 $ 30,457 $ 31,407 Withdrawals........................................................ (22,268) (24,880) (27,846) Net change in short-term debt......................................... 2,624 567 (740) Long-term debt issued................................................. 145 537 353 Long-term debt repaid................................................. (714) (221) (1,379) Capital contribution from the Holding Company......................... 148 649 96 Net proceeds from issuance of company-obligated mandatorily redeemable securities of subsidiary trust...................................... -- -- 197 Dividends on common stock............................................. (1,448) (904) (3,754) -------- -------- -------- Net cash provided by (used in) financing activities................... 7,541 6,205 (1,666) -------- -------- -------- Change in cash and cash equivalents................................... 1,287 (2,826) 513 Cash and cash equivalents, beginning of year.......................... 1,106 3,932 3,419 -------- -------- -------- Cash and cash equivalents, end of year................................ $ 2,393 $ 1,106 $ 3,932 ======== ======== ======== Supplemental disclosures of cash flow information: Cash paid (refunded) during the year: Interest....................................................... $ 344 $ 267 $ 346 ======== ======== ======== Income taxes................................................... $ 789 $ 96 $ (335) ======== ======== ======== Non-cash transactions during the year: Business dispositions--assets.................................. $ 5,506 $ 17,276 $ 6,162 ======== ======== ======== Business dispositions--liabilities............................. $ 3,511 $ 16,547 $ 5,263 ======== ======== ======== Mortgage note on sale of real estate........................... $ -- $ -- $ 1,530 ======== ======== ======== Purchase money mortgage on real estate sale.................... $ 196 $ 954 $ -- ======== ======== ======== Real estate acquired in satisfaction of debt................... $ 14 $ 30 $ 30 ======== ======== ========
See accompanying notes to consolidated financial statements. F-6 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements 1. Summary of Accounting Policies Business Metropolitan Life Insurance Company ("Metropolitan Life") and its subsidiaries (the "Company") is a leading provider of insurance and other financial services to a broad spectrum of individual and institutional customers. The Company offers life insurance, annuities, and mutual funds to individuals, as well as group insurance, reinsurance and retirement and savings products and services to corporations and other institutions. Metropolitan Life is a wholly-owned subsidiary of MetLife, Inc. ("MetLife" or the "Holding Company"). The Company offered automobile and homeowners insurance through Metropolitan Property and Casualty Insurance Company, which was sold to the Holding Company in 2003. Basis of Presentation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). The New York Insurance Department (the "Department") recognizes only statutory accounting practices for determining and reporting the financial condition and results of operations of an insurance company for determining solvency under the New York Insurance Law. No consideration is given by the Department to financial statements prepared in conformity with GAAP in making such determination. The accompanying consolidated financial statements include the accounts of (i) Metropolitan Life and its subsidiaries; (ii) partnerships and joint ventures in which the Company has a majority voting interest; and (iii) variable interest entities ("VIEs") created or acquired on or after February 1, 2003 of which the Company is deemed to be the primary beneficiary. Closed block assets, liabilities, revenues and expenses are combined on a line by line basis with the assets, liabilities, revenues and expenses outside the closed block based on the nature of the particular item. See Note 6. Intercompany accounts and transactions have been eliminated. Metropolitan Insurance and Annuity Company ("MIAC" ), which was sold to MetLife in 2001; Cova Corporation, MetLife Investors Group, Inc., MetLife International Holdings, Inc., Walnut Street Securities, Inc., Seguros Genesis S.A., MetLife Pensiones S.A. and Metropolitan Life Seguros de Vida S.A., which were sold to MetLife in 2002; and Metropolitan Property and Casualty Insurance Company and its subsidiaries, Metropolitan Tower Life Insurance Company, MetLife General Insurance Agency, Inc. and its subsidiaries, MetLife Securities, Inc. and N.L. Holding Corporation and its subsidiaries, which were sold to MetLife in 2003, are included in the accompanying financial statements until the date of sale. See Note 17. The Company uses the equity method of accounting for investments in real estate joint ventures and other limited partnership interests in which it has more than a minor equity interest or more than minor influence over the partnership's operations, but does not have a controlling interest. The Company uses the cost method of accounting for interests in which it has a minor equity investment and virtually no influence over the partnership's operations. Minority interest related to consolidated entities included in other liabilities was $1,233 million and $481 million at December 31, 2003 and 2002, respectively. This increase was the direct result of the change in Metropolitan Life's ownership of Reinsurance Group of America Incorporated ("RGA") to approximately 52% in 2003 as compared to 58% in 2002. Certain amounts in the prior years' consolidated financial statements have been reclassified to conform with the 2003 presentation. F-7 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Summary of Critical Accounting Estimates The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the consolidated financial statements. The critical accounting policies, estimates and related judgments underlying the Company's consolidated financial statements are summarized below. In applying these policies, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company's businesses and operations. Investments The Company's principal investments are in fixed maturities, mortgage loans and real estate, all of which are exposed to three primary sources of investment risk: credit, interest rate and market valuation. The financial statement risks are those associated with the recognition of impairments and income, as well as the determination of fair values. The assessment of whether impairments have occurred is based on management's case-by-case evaluation of the underlying reasons for the decline in fair value. Management considers a wide range of factors about the security issuer and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in management's evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used by the Company in the impairment evaluation process include, but are not limited to: (i) the length of time and the extent to which the market value has been below cost; (ii) the potential for impairments of securities when the issuer is experiencing significant financial difficulties; (iii) the potential for impairments in an entire industry sector or sub-sector; (iv) the potential for impairments in certain economically depressed geographic locations; (v) the potential for impairments of securities where the issuer, series of issuers or industry has suffered a catastrophic type of loss or has exhausted natural resources; (vi) unfavorable changes in forecasted cash flows on asset-backed securities; and (vii) other subjective factors, including concentrations and information obtained from regulators and rating agencies. In addition, the earnings on certain investments are dependent upon market conditions, which could result in prepayments and changes in amounts to be earned due to changing interest rates or equity markets. The determination of fair values in the absence of quoted market values is based on: (i) valuation methodologies; (ii) securities the Company deems to be comparable; and (iii) assumptions deemed appropriate given the circumstances. The use of different methodologies and assumptions may have a material effect on the estimated fair value amounts. In addition, the Company enters into certain structured investment transactions, real estate joint ventures and limited partnerships for which the Company may be deemed to be the primary beneficiary and, therefore, may be required to consolidate such investments. The accounting rules for the determination of the primary beneficiary are complex and require evaluation of the contractual rights and obligations associated with each party involved in the entity, an estimate of the entity's expected losses and expected residual returns and the allocation of such estimates to each party. Derivatives The Company enters into freestanding derivative transactions primarily to manage the risk associated with variability in cash flows or changes in fair values related to the Company's financial assets and liabilities or to changing fair values. The Company also uses derivative instruments to hedge its currency exposure associated with net investments in certain foreign operations. The Company also purchases investment securities, issues certain insurance policies and engages in certain reinsurance contracts that embed derivatives. The associated financial statement risk is the volatility in net income which can result from (i) changes in fair value of derivatives not qualifying as accounting hedges; (ii) ineffectiveness of designated hedges; and (iii) counterparty default. In addition, there is a risk that embedded derivatives requiring bifurcation are not identified and reported F-8 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) at fair value in the consolidated financial statements. Accounting for derivatives is complex, as evidenced by significant authoritative interpretations of the primary accounting standards which continue to evolve, as well as the significant judgments and estimates involved in determining fair value in the absence of quoted market values. These estimates are based on valuation methodologies and assumptions deemed appropriate in the circumstances. Such assumptions include estimated volatility and interest rates used in the determination of fair value where quoted market values are not available. The use of different assumptions may have a material effect on the estimated fair value amounts. Deferred Policy Acquisition Costs The Company incurs significant costs in connection with acquiring new and renewal insurance business. These costs, which vary with and are primarily related to the production of that business, are deferred. The recovery of such costs is dependent upon the future profitability of the related business. The amount of future profit is dependent principally on investment returns in excess of the amounts credited to policyholders, mortality, morbidity, persistency, interest crediting rates, expenses to administer the business, creditworthiness of reinsurance counterparties and certain economic variables, such as inflation. Of these factors, the Company anticipates that investment returns are most likely to impact the rate of amortization of such costs. The aforementioned factors enter into management's estimates of gross margins and profits, which generally are used to amortize such costs. Revisions to estimates result in changes to the amounts expensed in the reporting period in which the revisions are made and could result in the impairment of the asset and a charge to income if estimated future gross margins and profits are less than amounts deferred. In addition, the Company utilizes the reversion to the mean assumption, a standard industry practice, in its determination of the amortization of deferred policy acquisition cost ("DAC"), including value of business acquired ("VOBA"). This practice assumes that the expectation for long-term appreciation in equity markets is not changed by minor short-term market fluctuations, but that it does change when large interim deviations have occurred. Future Policy Benefits The Company establishes liabilities for amounts payable under insurance policies, including traditional life insurance, annuities and disability insurance. Generally, amounts are payable over an extended period of time and liabilities are established based on methods and underlying assumptions in accordance with GAAP and applicable actuarial standards. Principal assumptions used in the establishment of liabilities for future policy benefits are mortality, morbidity, expenses, persistency, investment returns and inflation. The Company also establishes liabilities for unpaid claims and claims expenses for property and casualty insurance. Liabilities for property and casualty insurance are dependent on estimates of amounts payable for claims reported but not settled and claims incurred but not reported. These estimates are influenced by historical experience and actuarial assumptions with respect to current developments, anticipated trends and risk management strategies. Differences between the actual experience and assumptions used in pricing these policies and in the establishment of liabilities result in variances in profit and could result in losses. Reinsurance The Company enters into reinsurance transactions as both a provider and a purchaser of reinsurance. Accounting for reinsurance requires extensive use of assumptions and estimates, particularly related to the future performance of the underlying business and the potential impact of counterparty credit risks. The Company periodically reviews actual and anticipated experience compared to the aforementioned assumptions used to F-9 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) establish assets and liabilities relating to ceded and assumed reinsurance and evaluates the financial strength of counterparties to its reinsurance agreements using criteria similar to that evaluated in the security impairment process discussed previously. Additionally, for each of its reinsurance contracts, the Company must determine if the contract provides indemnification against loss or liability relating to insurance risk, in accordance with applicable accounting standards. The Company must review all contractual features, particularly those that may limit the amount of insurance risk to which the reinsurer is subject or features that delay the timely reimbursement of claims. If the Company determines that a reinsurance contract does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk, the Company records the contract using the deposit method of accounting. Litigation The Company is a party to a number of legal actions. Given the inherent unpredictability of litigation, it is difficult to estimate the impact of litigation on the Company's consolidated financial position. Liabilities are established when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Liabilities related to certain lawsuits, including the Company's asbestos-related liability, are especially difficult to estimate due to the limitation of available data and uncertainty regarding numerous variables used to determine amounts recorded. The data and variables that impact the assumption used to estimate the Company's asbestos-related liability include the number of future claims, the cost to resolve claims, the disease mix and severity of disease, the jurisdiction of claims filed, tort reform efforts and the impact of any possible future adverse verdicts and their amounts. It is possible that an adverse outcome in certain of the Company's litigation, including asbestos-related cases, or the use of different assumptions in the determination of amounts recorded could have a material effect upon the Company's consolidated net income or cash flows in particular quarterly or annual periods. Employee Benefit Plans The Company sponsors pension and other retirement plans in various forms covering employees who meet specified eligibility requirements. The reported expense and liability associated with these plans requires an extensive use of assumptions which include the discount rate, expected return on plan assets and rate of future compensation increases as determined by the Company. Management determines these assumptions based upon currently available market and industry data, historical performance of the plan and its assets, and consultation with an independent consulting actuarial firm to aid it in selecting appropriate assumptions and valuing its related liabilities. The actuarial assumptions used in the calculation of the Company's aggregate projected benefit obligation may vary and include an expectation of long-term market appreciation in equity markets which is not changed by minor short-term market fluctuations, but does change when large interim deviations occur. These assumptions used by the Company may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of the participants. These differences may have a significant effect on the Company's consolidated financial statements and liquidity. Significant Accounting Policies Investments The Company's fixed maturity and equity securities are classified as available-for-sale and are reported at their estimated fair value. Unrealized investment gains and losses on securities are recorded as a separate component of other comprehensive income or loss, net of policyholder related amounts and deferred income taxes. The cost of fixed maturity and equity securities is adjusted for impairments in value deemed to be other- than-temporary. These adjustments are recorded as investment losses. Investment gains and losses on sales of F-10 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) securities are determined on a specific identification basis. All security transactions are recorded on a trade date basis. Mortgage loans on real estate are stated at amortized cost, net of valuation allowances. Valuation allowances are established for the excess carrying value of the mortgage loan over its estimated fair value when it is probable that, based upon current information and events, the Company will be unable to collect all amounts due under the contractual terms of the loan agreement. Such valuation allowances are based upon the present value of expected future cash flows discounted at the loan's original effective interest rate or the collateral value if the loan is collateral dependent. The Company also establishes allowances for loan loss when a loss contingency exists for pools of loans with similar characteristics based on property types and loan to value risk factors. A loss contingency exists when the likelihood that a future event will occur is probable based on past events. Changes in valuation allowances are included in net investment gains and losses. Interest income earned on impaired loans is accrued on the principal amount of the loan based on the loan's contractual interest rate. However, interest ceases to be accrued for loans on which interest is generally more than 60 days past due and/or where the collection of interest is not considered probable. Cash receipts on impaired loans are recorded as a reduction of the recorded investment. Real estate held-for-investment, including related improvements, is stated at cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated useful life of the asset (typically 20 to 40 years). Once the Company identifies a property that is expected to be sold within one year and commences a firm plan for marketing the property, in accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS 144"), the Company, if applicable, classifies the property as held-for-sale and reports the related net investment income and any resulting investment gains and losses as discontinued operations. Real estate held-for-sale is stated at the lower of depreciated cost or fair value less expected disposition costs. Real estate is not depreciated while it is classified as held-for-sale. Cost of real estate held-for-investment is adjusted for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Impaired real estate is written down to estimated fair value with the impairment loss being included in net investment gains and losses. Impairment losses are based upon the estimated fair value of real estate, which is generally computed using the present value of expected future cash flows from the real estate discounted at a rate commensurate with the underlying risks. Real estate acquired upon foreclosure of commercial and agricultural mortgage loans is recorded at the lower of estimated fair value or the carrying value of the mortgage loan at the date of foreclosure. Policy loans are stated at unpaid principal balances. Short-term investments are stated at amortized cost, which approximates fair value. Other invested assets consist principally of leveraged leases and funds withheld at interest. The leveraged leases are recorded net of non-recourse debt. The Company participates in lease transactions which are diversified by industry, asset type and geographic area. The Company regularly reviews residual values and impairs residuals to expected values as needed. Funds withheld represent amounts contractually withheld by ceding companies in accordance with reinsurance agreements. For agreements written on a modified coinsurance basis and certain agreements written on a coinsurance basis, assets supporting the reinsured policies and equal to the net statutory reserves are withheld and continue to be legally owned by the ceding companies. Other invested assets also includes the fair value of embedded derivatives related to funds withheld and modified coinsurance contracts. The Company recognizes interest on funds withheld in accordance with the treaty terms as investment income is earned on the assets supporting the reinsured policies. F-11 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Structured Investment Transactions The Company participates in structured investment transactions, primarily asset securitizations and structured notes. These transactions enhance the Company's total return of the investment portfolio principally by generating management fee income on asset securitizations and by providing equity-based returns on debt securities through structured notes and similar instruments. The Company sponsors financial asset securitizations of high yield debt securities, investment grade bonds and structured finance securities and also is the collateral manager and a beneficial interest holder in such transactions. As the collateral manager, the Company earns management fees on the outstanding securitized asset balance, which are recorded in income as earned. When the Company transfers assets to a bankruptcy-remote special purpose entity ("SPE") and surrenders control over the transferred assets, the transaction is accounted for as a sale. Gains or losses on securitizations are determined with reference to the carrying amount of the financial assets transferred, which is allocated to the assets sold and the beneficial interests retained based on relative fair values at the date of transfer. Beneficial interests in securitizations are carried at fair value in fixed maturities. Income on these beneficial interests is recognized using the prospective method in accordance with Emerging Issues Task Force ("EITF") Issue No. 99-20, Recognition of Interest Income and Impairment on Certain Investments ("EITF 99-20"). The SPEs used to securitize assets are not consolidated by the Company because the Company has determined that it is not the primary beneficiary of these entities based on the framework provided in Financial Accounting Standards Board ("FASB") Interpretation No. 46 (revised December 31, 2003), Consolidation of Variable Interest Entities, An Interpretation of ARB No. 51 ("FIN 46(r)"). Prior to the adoption of FIN 46(r), such SPEs were not consolidated because they did not meet the criteria for consolidation under previous accounting guidance. The Company purchases or receives beneficial interests in SPEs, which generally acquire financial assets, including corporate equities, debt securities and purchased options. The Company has not guaranteed the performance, liquidity or obligations of the SPEs and the Company's exposure to loss is limited to its carrying value of the beneficial interests in the SPEs. The Company uses the beneficial interests as part of its risk management strategy, including asset-liability management. These SPEs are not consolidated by the Company because the Company has determined that it is not the primary beneficiary of these entities based on the framework provided in FIN 46(r). Prior to the adoption of FIN 46(r), such SPEs were not consolidated because they did not meet the criteria for consolidation under previous accounting guidance. These beneficial interests are generally structured notes, as defined by EITF Issue No. 96-12, Recognition of Interest Income and Balance Sheet Classification of Structured Notes, which are included in fixed maturities, and their income is recognized using the retrospective interest method or the level yield method, as appropriate. Impairments of these beneficial interests are included in net investment gains and losses. Derivative Financial Instruments The Company uses derivative instruments to manage risk through one of five principal risk management strategies, the hedging of: (i) liabilities; (ii) invested assets; (iii) portfolios of assets or liabilities; (iv) net investments in certain foreign operations; and (v) firm commitments and forecasted transactions. Additionally, the Company enters into income generation and replication derivative transactions as permitted by its insurance subsidiaries' Derivatives Use Plans approved by the applicable state insurance departments. The Company's derivative hedging strategy employs a variety of instruments, including financial futures, financial forwards, interest rate, credit default and foreign currency swaps, foreign currency forwards, and options, including caps and floors. On the date the Company enters into a derivative contract, management designates the derivative as a hedge of the identified exposure (fair value, cash flow or foreign currency). If a derivative does not qualify for hedge F-12 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) accounting, according to SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended ("SFAS 133"), the changes in its fair value and all scheduled periodic settlement receipts and payments are reported in net investment gains or losses. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. In this documentation, the Company specifically identifies the asset, liability, firm commitment, foreign operation, or forecasted transaction that has been designated as a hedged item, states how the hedging instrument is expected to hedge the risks related to the hedged item, and sets forth the method that will be used to retrospectively and prospectively assess the hedging instruments effectiveness and the method that will be used to measure hedge ineffectiveness. The Company generally determines hedge effectiveness based on total changes in fair value of a derivative instrument. The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item; (ii) the derivative expires or is sold, terminated, or exercised; (iii) the derivative is de-designated as a hedge instrument; (iv) it is probable that the forecasted transaction will not occur; (v) a hedged firm commitment no longer meets the definition of a firm commitment; or (vi) management determines that designation of the derivative as a hedge instrument is no longer appropriate. The Company designates and accounts for the following as cash flow hedges, when they have met the effectiveness requirements of SFAS 133: (i) various types of interest rate swaps to convert floating rate investments to fixed rate investments; (ii) various types of interest rate swaps to convert floating rate liabilities into fixed rate liabilities; (iii) receive U.S. dollar fixed on foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated investments; (iv) foreign currency forwards to hedge the exposure of future payments or receipts in foreign currencies; and (v) other instruments to hedge the cash flows of various other forecasted transactions. For all qualifying and highly effective cash flow hedges, the effective portion of changes in fair value of the derivative instrument is reported in other comprehensive income or loss. The ineffective portion of changes in fair value of the derivative instrument is reported in net investment gains or losses. Hedged forecasted transactions, other than the receipt or payment of variable interest payments, are not expected to occur more than 12 months after hedge inception. The Company designates and accounts for the following as fair value hedges when they have met the effectiveness requirements of SFAS 133: (i) various types of interest rate swaps to convert fixed rate investments to floating rate investments; (ii) receive U.S. dollar floating on foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated investments; (iii) pay U.S. dollar floating on foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated liabilities, and (iv) other instruments to hedge various other fair value exposures of investments. For all qualifying and highly effective fair value hedges, the changes in fair value of the derivative instrument are reported as net investment gains or losses. When hedge accounting is discontinued because it is determined that the derivative no longer qualifies as an effective fair value hedge, the derivative continues to be carried on the consolidated balance sheet at its fair value, but the hedged asset or liability will no longer be adjusted for changes in fair value. When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the derivative continues to be carried on the consolidated balance sheet at its fair value, and any asset or liability that was recorded pursuant to recognition of the firm commitment is removed from the consolidated balance sheet and recognized as a net investment gain or loss in the current period. When hedge accounting is discontinued because it is probable that a forecasted transaction will not occur, the derivative continues to be carried on the consolidated balance sheet at its fair value, and gains and losses that were accumulated in other comprehensive F-13 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) income or loss are recognized immediately in net investment gains or losses. When the hedged forecasted transaction is no longer probable, but is reasonably possible, the accumulated gain or loss remains in other comprehensive income or loss and is recognized when the transaction affects net income or loss; however, prospective hedge accounting for the transaction is terminated. In all other situations in which hedge accounting is discontinued, the derivative is carried at its fair value on the consolidated balance sheet, with changes in its fair value recognized in the current period as net investment gains or losses. The Company uses forward exchange contracts that provide an economic hedge on portions of its net investments in foreign operations against adverse movements in foreign currency exchange rates. Unrealized losses on instruments so designated are recorded as components of accumulated other comprehensive income. The Company may enter into contracts that are not themselves derivative instruments but contain embedded derivatives. For each contract, the Company assesses whether the economic characteristics of the embedded derivative are clearly and closely related to those of the host contract and determines whether a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. If it is determined that the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract, and that a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract and accounted for as a stand-alone derivative. Such embedded derivatives are recorded on the consolidated balance sheet at fair value and changes in their fair value are recognized in the current period in net investment gains or losses. If the Company is unable to properly identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the consolidated balance sheet at fair value, with changes in fair value recognized in the current period as net investment gains or losses. The Company also uses derivatives to synthetically create investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These securities, called replication synthetic asset transactions ("RSATs"), are a combination of a credit default swap and a U.S. Treasury or Agency security, to synthetically create a third replicated security. These derivatives are not designated as hedges. As of December 31, 2003 and 2002, 23 and 18, respectively, of such RSATs, with notional amounts totaling $479 million and $275 million, respectively, were outstanding. The Company records both the premiums received on the credit default swaps over the life of the contracts and changes in their fair value in net investment gains and losses. The Company enters into written covered calls to generate additional investment income on the underlying assets it holds. These derivatives are not designated as hedges. The Company records the premiums received over the life of the contract and changes in fair value of such options as net investment gains and losses. Cash and Cash Equivalents The Company considers all investments purchased with an original maturity of three months or less to be cash equivalents. Property, Equipment, Leasehold Improvements and Computer Software Property, equipment and leasehold improvements, which are included in other assets, are stated at cost, less accumulated depreciation and amortization. Depreciation is determined using either the straight-line or sum-of-the-years-digits method over the estimated useful lives of the assets. The estimated life for company occupied real estate property is generally 40 years. Estimated lives range from five to ten years for leasehold improvements and three to five years for all other property and equipment. Accumulated depreciation and F-14 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) amortization of property, equipment and leasehold improvements was $394 million and $368 million at December 31, 2003 and 2002, respectively. Related depreciation and amortization expense was $101 million, $81 million and $96 million for the years ended December 31, 2003, 2002 and 2001, respectively. Computer software, which is included in other assets, is stated at cost, less accumulated amortization. Purchased software costs, as well as internal and external costs incurred to develop internal-use computer software during the application development stage, are capitalized. Such costs are amortized generally over a three-year period using the straight-line method. Accumulated amortization of capitalized software was $376 million and $297 million at December 31, 2003 and 2002, respectively. Related amortization expense was $139 million, $153 million and $106 million for the years ended December 31, 2003, 2002 and 2001, respectively. Deferred Policy Acquisition Costs The costs of acquiring new and renewal insurance business that vary with, and are primarily related to, the production of that business are deferred. Such costs, which consist principally of commissions, agency and policy issue expenses, are amortized with interest over the expected life of the contract for participating traditional life, universal life and investment-type products. Generally, DAC is amortized in proportion to the present value of estimated gross margins or profits from investment, mortality, expense margins and surrender charges. Interest rates are based on rates in effect at the inception or acquisition of the contracts. Actual gross margins or profits can vary from management's estimates resulting in increases or decreases in the rate of amortization. Management utilizes the reversion to the mean assumption, a standard industry practice, in its determination of the amortization of DAC. This practice assumes that the expectation for long-term equity investment appreciation is not changed by minor short-term market fluctuations, but that it does change when large interim deviations have occurred. Management periodically updates these estimates and evaluates the recoverability of DAC. When appropriate, management revises its assumptions of the estimated gross margins or profits of these contracts, and the cumulative amortization is reestimated and adjusted by a cumulative charge or credit to current operations. DAC for non-participating traditional life, non-medical health and annuity policies with life contingencies is amortized in proportion to anticipated premiums. Assumptions as to anticipated premiums are made at the date of policy issuance or acquisition and are consistently applied during the lives of the contracts. Deviations from estimated experience are included in operations when they occur. For these contracts, the amortization period is typically the estimated life of the policy. Policy acquisition costs related to internally replaced contracts are expensed at the date of replacement. DAC for property and casualty insurance contracts, which is primarily comprised of commissions and certain underwriting expenses, are deferred and amortized on a pro rata basis over the applicable contract term or reinsurance treaty. VOBA, included as part of DAC, represents the present value of future profits generated from existing insurance contracts in-force at the date of acquisition and is amortized over the expected policy or contract duration in relation to the estimated gross profits or premiums from such policies and contracts. Goodwill The excess of cost over the fair value of net assets acquired ("goodwill") is included in other assets. On January 1, 2002, the Company adopted the provisions of SFAS No. 142, Goodwill and Other Intangible Assets, F-15 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) ("SFAS 142"). In accordance with SFAS 142, goodwill is not amortized but is tested for impairment at least annually to determine whether a write down of the cost of the asset is required. Impairments are recognized in operating results when the carrying amount of goodwill exceeds its implied fair value. Prior to the adoption of SFAS 142, goodwill was amortized on a straight-line basis over a period ranging from ten to 30 years and impairments were recognized in operating results when permanent diminution in value was deemed to have occurred. Changes in goodwill were as follows:
Years Ended December 31, ----------------------- 2003 2002 2001 ----- ----- ---- (Dollars in millions) Net balance at January 1.. $ 405 $ 575 $703 Acquisitions.............. 3 7 20 Amortization.............. -- -- (47) Impairment losses......... -- (2) (61) Disposition and other..... (190) (175) (40) ----- ----- ---- Net balance at December 31 $ 218 $ 405 $575 ===== ===== ====
Accumulated amortization from goodwill was as follows at:
December 31, ------------------ 2003 2002 ---- ---- (Dollars in millions) Accumulated amortization $32 $71 === ===
Recognition of Insurance Revenue and Related Benefits Premiums related to traditional life and annuity policies with life contingencies are recognized as revenues when due. Benefits and expenses are provided against such revenues to recognize profits over the estimated lives of the policies. When premiums are due over a significantly shorter period than the period over which benefits are provided, any excess profit is deferred and recognized into operations in a constant relationship to insurance in-force or, for annuities, the amount of expected future policy benefit payments. Premiums related to non-medical health contracts are recognized on a pro rata basis over the applicable contract term. Deposits related to universal life and investment-type products are credited to policyholder account balances. Revenues from such contracts consist of amounts assessed against policyholder account balances for mortality, policy administration and surrender charges and are recognized in the period in which services are provided. Amounts that are charged to operations include interest credited and benefit claims incurred in excess of related policyholder account balances. Premiums related to property and casualty contracts are recognized as revenue on a pro rata basis over the applicable contract term. Unearned premiums are included in other liabilities. Other Revenues Other revenues include asset management and advisory fees, broker/dealer commissions and fees, and administrative service fees. Such fees and commissions are recognized in the period in which services are F-16 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) performed. Other revenues also include changes in account value relating to corporate-owned life insurance ("COLI"). Under certain COLI contracts, if the Company reports certain unlikely adverse results in its consolidated financial statements, withdrawals would not be immediately available and would be subject to market value adjustment, which could result in a reduction of the account value. Policyholder Dividends Policyholder dividends are approved annually by the insurance subsidiaries' boards of directors. The aggregate amount of policyholder dividends is related to actual interest, mortality, morbidity and expense experience for the year, as well as management's judgment as to the appropriate level of statutory surplus to be retained by the insurance subsidiaries. Participating Business Participating business represented approximately 13% and 16% of the Company's life insurance in-force, and 88% and 89% of the number of life insurance policies in-force, at December 31, 2003 and 2002, respectively. Participating policies represented approximately 40% and 41%, 40% and 41%, and 44% and 46% of gross and net life insurance premiums for the years ended December 31, 2003, 2002 and 2001, respectively. The percentages indicated are calculated excluding the business of the Reinsurance segment. Income Taxes The Holding Company and its includable life insurance and non-life insurance subsidiaries file a consolidated U.S. federal income tax return in accordance with the provisions of the Internal Revenue Code of 1986, as amended (the "Code"). Non-includable subsidiaries file either separate tax returns or separate consolidated tax returns. The future tax consequences of temporary differences between financial reporting and tax bases of assets and liabilities are measured at the balance sheet dates and are recorded as deferred income tax assets and liabilities. Reinsurance The Company has reinsured certain of its life insurance and property and casualty insurance contracts with other insurance companies under various agreements. Amounts due from reinsurers are estimated based upon assumptions consistent with those used in establishing the liabilities related to the underlying reinsured contracts. Policy and contract liabilities are reported gross of reinsurance credits. DAC is reduced by amounts recovered under reinsurance contracts. Amounts received from reinsurers for policy administration are reported in other revenues. The Company assumes and retrocedes financial reinsurance contracts, which represent low mortality risk reinsurance treaties. These contracts are reported as deposits and are included in other assets. The amount of revenue reported on these contracts represents fees and the cost of insurance under the terms of the reinsurance agreement and is reported in other revenue. Separate Accounts Separate accounts are established in conformity with insurance laws and are generally not chargeable with liabilities that arise from any other business of the Company. Separate account assets are subject to general account claims only to the extent the value of such assets exceeds the separate account liabilities. Investments (stated at estimated fair value) and liabilities of the separate accounts are reported separately as assets and F-17 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) liabilities. Deposits to separate accounts, investment income and recognized and unrealized gains and losses on the investments of the separate accounts accrue directly to contractholders and, accordingly, are not reflected in the revenues of the Company. Fees charged to contractholders, principally mortality, policy administration and surrender charges are included in universal life and investment-type product fees. See "--Application of Recent Accounting Pronouncements." Stock-Based Compensation Effective January 1, 2003, MetLife and the Company account for stock-based compensation plans using the prospective fair value method prescribed by SFAS No. 123, Accounting for Stock-Based Compensation ("SFAS 123"), as amended by SFAS 148, Accounting for Stock-Based Compensation--Transition and Disclosure ("SFAS 148"). MetLife allocates 100% of stock option expense to the Company. Stock-based compensation grants prior to January 1, 2003 are accounted for using the accounting method prescribed by Accounting Principles Board Opinion ("APB") No. 25, Accounting for Stock Issued to Employees ("APB 25") and Note 14 includes the pro forma disclosures required by SFAS No. 123, as amended. Foreign Currency Balance sheet accounts of foreign operations are translated at the exchange rates in effect at each year-end and income and expense accounts are translated at the average rates of exchange prevailing during the year. The local currencies of foreign operations are the functional currencies unless the local economy is highly inflationary. Translation adjustments are charged or credited directly to other comprehensive income or loss. Gains and losses from foreign currency transactions are reported in earnings. Discontinued Operations The results of operations of a component of the Company that either has been disposed of or is classified as held-for-sale on or after January 1, 2002 are reported in discontinued operations if the operations and cash flows of the component have been or will be eliminated from the ongoing operations of the Company as a result of the disposal transaction and the Company will not have any significant continuing involvement in the operations of the component after the disposal transaction. Application of Recent Accounting Pronouncements Effective December 31, 2003, the Company adopted EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments ("EITF 03-1"). EITF 03-1 provides guidance on the disclosure requirements for other-than-temporary impairments of debt and marketable equity investments that are accounted for under SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities ("SFAS 115"). The adoption of EITF 03-1 requires the Company to include certain quantitative and qualitative disclosures for debt and marketable equity securities classified as available-for-sale or held-to-maturity under SFAS 115 that are impaired at the balance sheet date but for which an other-than-temporary impairment has not been recognized. (See Note 2). The initial adoption of EITF 03-1, which only required additional disclosures, did not have a material impact on the Company's consolidated financial statements. In December, 2003, the FASB revised SFAS No. 132, Employers' Disclosures about Pensions and Other Postretirement Benefits--an Amendment of FASB Statements No. 87, 88 and 106 ("SFAS 132(r)"). SFAS 132(r) retains most of the disclosure requirements of SFAS 132 and requires additional disclosure about assets, obligations, cash flows and net periodic benefit cost of defined benefit pension plans and other defined F-18 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) postretirement plans. SFAS 132(r) is primarily effective for fiscal years ending after December 15, 2003; however, certain disclosures about foreign plans and estimated future benefit payments are effective for fiscal years ending after June 15, 2004. The Company's adoption of SFAS 132(r) on December 31, 2003 did not have a significant impact on its consolidated financial statements since it only revises disclosure requirements. In January 2004, the FASB issued FASB Staff Position ("FSP") No. 106-1, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ("FSP 106-1") which permits a sponsor of a postretirement health care plan that provides a prescription drug benefit to make a one-time election to defer accounting for the effects of the new legislation. The Company has elected to defer the accounting until further guidance is issued by the FASB. The measurements of the Company's postretirement accumulated benefit plan obligation and net periodic benefit cost disclosed in Note 13 do not reflect the effects of the new legislation. The guidance, when issued, could require the Company to change previously reported information. In July 2003, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position 03-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts ("SOP 03-1"). SOP 03-1 provides guidance on (i) the classification and valuation of long-duration contract liabilities, (ii) the accounting for sales inducements and (iii) separate account presentation and valuation. SOP 03-1 is effective for fiscal years beginning after December 15, 2003. As of January 1, 2004, the Company increased future policyholder benefits for various guaranteed minimum death and income benefits net of DAC and unearned revenue liability offsets under certain variable annuity and universal life contracts of approximately $61 million, net of income tax, which will be reported as a cumulative effect of a change in accounting. Industry standards and practices continue to evolve relating to the valuation of liabilities relating to these types of benefits, which may result in further adjustments to the Company's measurement of liabilities associated with such benefits in subsequent accounting periods. Effective with the adoption of SOP 03-1, costs associated with enhanced or bonus crediting rates to contractholders must be deferred and amortized over the life of the related contract using assumptions consistent with the amortization of DAC, which has been the Company's accounting treatment. Effective January 1, 2004, the Company reclassified $116 million of ownership in its own separate accounts from other assets to fixed maturities available-for-sale and equity securities. This reclassification will have no effect on net income or other comprehensive income. In accordance with SOP 03-1's revised definition of a separate account, effective January 1, 2004, the Company also reclassified $1,678 million of separate account assets to general account investments and $1,678 million of separate account liabilities to future policy benefits and policyholder account balances. The net cumulative effect of this reclassification was insignificant. In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity ("SFAS 150"). SFAS 150 clarifies the accounting for certain financial instruments with characteristics of both liabilities and equity and requires that those instruments be classified as a liability or, in certain circumstances, an asset. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS 150, as of July 1, 2003, required the Company to reclassify $277 million of company-obligated mandatorily redeemable securities of subsidiary trusts from mezzanine equity to liabilities. In April 2003, the FASB cleared Statement 133 Implementation Issue No. B36, Embedded Derivatives: Modified Coinsurance Arrangements and Debt Instruments That Incorporate Credit Risk Exposures That Are Unrelated or Only Partially Related to the Creditworthiness of the Obligor under Those Instruments ("Issue B36"). Issue B36 concluded that (i) a company's funds withheld payable and/or receivable under certain F-19 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) reinsurance arrangements, and (ii) a debt instrument that incorporates credit risk exposures that are unrelated or only partially related to the creditworthiness of the obligor include an embedded derivative feature that is not clearly and closely related to the host contract. Therefore, the embedded derivative feature must be measured at fair value on the balance sheet and changes in fair value reported in income. Issue B36 became effective on October 1, 2003 and required the Company to increase policyholder account balances by $40 million, to decrease other invested assets by $1 million and increase DAC by $2 million. These amounts, net of income taxes of $13 million, were recorded as a cumulative effect of a change in accounting. As a result of the adoption of Issue B36, the Company recognized investment gains of $9 million, net of income tax, for the three month period ended December 31, 2003. In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities ("SFAS 149"). SFAS 149 amends and clarifies the accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. Except for certain implementation guidance that is incorporated in SFAS 149 and already effective, SFAS 149 is effective for contracts entered into or modified after June 30, 2003. The Company's adoption of SFAS 149 on July 1, 2003 did not have a significant impact on the consolidated financial statements. During 2003, the Company adopted FASB Interpretation No. 46 Consolidation of Variable Interest Entities--An Interpretation of ARB No. 51 ("FIN 46") and its December 2003 revision ("FIN 46(r)"). Certain of the Company's asset-backed securitizations, collateralized debt obligations, structured investment transactions, and investments in real estate joint ventures and other limited partnership interests meet the definition of a variable interest entity ("VIE") and must be consolidated, in accordance with the transition rules and effective dates, if the Company is deemed to be the primary beneficiary. A VIE is defined as (i) any entity in which the equity investments at risk in such entity do not have the characteristics of a controlling financial interest or (ii) any entity that does not have sufficient equity at risk to finance its activities without additional subordinated support from other parties. Effective February 1, 2003, the Company adopted FIN 46 for VIEs created or acquired on or after February 1, 2003 and, effective December 31, 2003, the Company adopted FIN 46(r) with respect to interests in entities formerly considered special purpose entities ("SPEs") including interests in asset-backed securities and collateralized debt obligations. In accordance with the provisions in FIN 46(r), the Company has elected to defer until March 31, 2004 the consolidation of interests in VIEs for non SPEs acquired prior to February 1, 2003 for which it is the primary beneficiary. The adoption of FIN 46 as of February 1, 2003 did not have a significant impact on the Company's consolidated financial statements. The adoption of the provisions of FIN 46(r) at December 31, 2003 did not require the Company to consolidate any additional VIEs that were not previously consolidated. Effective January 1, 2003, the Company adopted FIN No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others ("FIN 45"). FIN 45 requires entities to establish liabilities for certain types of guarantees and expands financial statement disclosures for others. The initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of FIN 45 did not have a significant impact on the Company's consolidated financial statements. See Note 12. Effective January 1, 2003, MetLife and the Company adopted SFAS No. 148, Accounting for Stock-Based Compensation--Transition and Disclosure ("SFAS 148"), which provides guidance on how to apply the fair value method of accounting and use the prospective transition method for stock options granted by the Holding Company and the Company subsequent to December 31, 2002. As permitted under SFAS 148, options granted prior to January 1, 2003 will continue to be accounted for under Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"), and the pro forma impact of accounting for these options at fair value will continue to be disclosed in the consolidated financial statements until the last of those options vest in 2005. See Note 14. F-20 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Effective January 1, 2003, the Company adopted SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities ("SFAS 146"). SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recorded and measured initially at fair value only when the liability is incurred rather than at the date of an entity's commitment to an exit plan as required by EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity Including Certain Costs Incurred in a Restructuring ("EITF 94-3"). The Company's activities subject to this guidance in 2003 were not significant. Effective January 1, 2003, the Company adopted SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections ("SFAS 145"). In addition to amending or rescinding other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions, SFAS 145 generally precludes companies from recording gains and losses from the extinguishment of debt as an extraordinary item. SFAS 145 also requires sale-leaseback treatment for certain modifications of a capital lease that result in the lease being classified as an operating lease. The adoption of SFAS 145 did not have a significant impact on the Company's consolidated financial statements. Effective January 1, 2002, the Company adopted SFAS 144. SFAS 144 provides a single model for accounting for long-lived assets to be disposed of by superseding SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of ("SFAS 121"), and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions ("APB 30"). Under SFAS 144, discontinued operations are measured at the lower of carrying value or fair value less costs to sell, rather than on a net realizable value basis. Future operating losses relating to discontinued operations also are no longer recognized before they occur. SFAS 144 (i) broadens the definition of a discontinued operation to include a component of an entity (rather than a segment of a business); (ii) requires long-lived assets to be disposed of other than by sale to be considered held and used until disposed; and (iii) retains the basic provisions of (a) APB 30 regarding the presentation of discontinued operations in the statements of income, (b) SFAS 121 relating to recognition and measurement of impaired long-lived assets (other than goodwill), and (c) SFAS 121 relating to the measurement of long-lived assets classified as held-for-sale. Adoption of SFAS 144 did not have a material impact on the Company's consolidated financial statements other than the presentation as discontinued operations of net investment income and net investment gains related to operations of real estate on which the Company initiated disposition activities subsequent to January 1, 2002 and the classification of such real estate as held-for-sale on the consolidated balance sheets. See Note 18. Effective January 1, 2002, the Company adopted SFAS No. 142. SFAS 142 eliminates the systematic amortization and establishes criteria for measuring the impairment of goodwill and certain other intangible assets by reporting unit. Amortization of goodwill, prior to the adoption of SFAS 142 was $47 million for the year ended December 31, 2001. Amortization of other intangible assets was not material for the years ended December 31, 2003, 2002 and 2001. The Company completed the required impairment tests of goodwill and indefinite-lived intangible assets in the third quarter of 2002 and recorded a $5 million charge to earnings relating to the impairment of certain goodwill assets as a cumulative effect of a change in accounting. There was no impairment of identified intangible assets or significant reclassifications between goodwill and other intangible assets at January 1, 2002. Effective July 1, 2001, the Company adopted SFAS No. 141, Business Combinations ("SFAS 141"). SFAS 141 requires the purchase method of accounting for all business combinations and separate recognition of intangible assets apart from goodwill if such intangible assets meet certain criteria. In accordance with SFAS 141, the elimination of $5 million of negative goodwill was reported in net income in the first quarter of 2002 as a cumulative effect of a change in accounting. F-21 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) In July 2001, the U.S. Securities and Exchange Commission ("SEC") released Staff Accounting Bulletin ("SAB") No. 102, Selected Loan Loss Allowance and Documentation Issues ("SAB 102"). SAB 102 summarizes certain of the SEC's views on the development, documentation and application of a systematic methodology for determining allowances for loan and lease losses. The application of SAB 102 by the Company did not have a material impact on the Company's consolidated financial statements. Effective April 1, 2001, the Company adopted certain additional accounting and reporting requirements of SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities-- a Replacement of FASB Statement No. 125, relating to the derecognition of transferred assets and extinguished liabilities and the reporting of servicing assets and liabilities. The initial adoption of these requirements did not have a material impact on the Company's consolidated financial statements. Effective April 1, 2001, the Company adopted EITF 99-20, Recognition of Interest Income and Impairment on Certain Investments. This pronouncement requires investors in certain asset-backed securities to record changes in their estimated yield on a prospective basis and to apply specific evaluation methods to these securities for an other-than-temporary decline in value. The initial adoption of EITF 99-20 did not have a material impact on the Company's consolidated financial statements. Effective January 1, 2001, the Company adopted SFAS 133 which established new accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. The cumulative effect of the adoption of SFAS 133, as of January 1, 2001, resulted in a $33 million increase in other comprehensive income, net of income taxes of $18 million, and had no material impact on net income. The increase to other comprehensive income is attributable to net gains on cash flow-type hedges at transition. Also at transition, the amortized cost of fixed maturities decreased and other invested assets increased by $22 million, representing the fair value of certain interest rate swaps that were accounted for prior to SFAS 133 using fair value-type settlement accounting. During the year ended December 31, 2001, $18 million of the pre-tax gain reported in accumulated other comprehensive income at transition was reclassified into net investment income. The FASB continues to issue additional guidance relating to the accounting for derivatives under SFAS 133, which may result in further adjustments to the Company's treatment of derivatives in subsequent accounting periods. F-22 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) 2. Investments Fixed Maturities and Equity Securities Fixed maturities and equity securities at December 31, 2003 were as follows:
Gross Cost or Unrealized Amortized ----------- Estimated Cost Gain Loss Fair Value --------- ------ ---- ---------- (Dollars in millions) Fixed Maturities: Bonds: U.S. corporate securities................. $ 49,466 $3,486 $228 $ 52,724 Mortgage-backed securities................ 28,049 687 81 28,655 Foreign corporate securities.............. 18,680 2,005 70 20,615 U.S. treasuries/agencies.................. 13,249 1,208 23 14,434 Asset-backed securities................... 10,414 169 54 10,529 Commercial mortgage-backed securities..... 9,080 480 15 9,545 Foreign government securities............. 4,847 752 20 5,579 States and political subdivisions......... 282 11 8 285 Other fixed income assets................. 232 138 62 308 -------- ------ ---- -------- Total bonds............................ 134,299 8,936 561 142,674 Redeemable preferred stocks................... 545 2 73 474 -------- ------ ---- -------- Total fixed maturities................. $134,844 $8,938 $634 $143,148 ======== ====== ==== ======== Equity Securities: Common stocks................................. $ 514 $ 329 $ 1 $ 842 Nonredeemable preferred stocks................ 379 25 -- 404 -------- ------ ---- -------- Total equity securities................ $ 893 $ 354 $ 1 $ 1,246 ======== ====== ==== ========
F-23 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Fixed maturities and equity securities at December 31, 2002 were as follows:
Cost or Gross Unrealized Amortized ---------------- Estimated Cost Gain Loss Fair Value --------- ------ ------ ---------- (Dollars in millions) Fixed Maturities: Bonds: U.S. corporate securities................. $ 42,265 $2,914 $ 896 $ 44,283 Mortgage-backed securities................ 24,999 1,018 15 26,002 Foreign corporate securities.............. 15,405 1,295 185 16,515 U.S. treasuries/agencies.................. 13,256 1,514 3 14,767 Asset-backed securities................... 8,070 204 181 8,093 Commercial mortgage-backed securities..... 5,445 516 5 5,956 Foreign government securities............. 4,649 516 50 5,115 States and political subdivisions......... 2,575 181 20 2,736 Other fixed income assets................. 312 126 82 356 -------- ------ ------ -------- Total bonds............................ 116,976 8,284 1,437 123,823 Redeemable preferred stocks................... 552 1 116 437 -------- ------ ------ -------- Total fixed maturities................. $117,528 $8,285 $1,553 $124,260 ======== ====== ====== ======== Equity Securities: Common stocks............................. $ 827 $ 114 $ 80 $ 861 Nonredeemable preferred stocks............ 668 25 3 690 -------- ------ ------ -------- Total equity securities................ $ 1,495 $ 139 $ 83 $ 1,551 ======== ====== ====== ========
The Company held foreign currency derivatives with notional amounts of $4,242 million and $2,371 million to hedge the exchange rate risk associated with foreign bonds and loans at December 31, 2003 and 2002, respectively. The Company held fixed maturities at estimated fair values that were below investment grade or not rated by an independent rating agency that totaled $11,814 million and $11,041 million at December 31, 2003 and 2002, respectively. These securities had a net unrealized gain of $839 million at December 31, 2003 and a net unrealized loss of $378 million at December 31, 2002. Non-income producing fixed maturities were $357 million and $456 million at December 31, 2003 and 2002, respectively. F-24 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The cost or amortized cost and estimated fair value of bonds at December 31, 2003, by contractual maturity date (excluding scheduled sinking funds), are shown below:
Cost or Amortized Estimated Cost Fair Value --------- ---------- (Dollars in millions) Due in one year or less.................... $ 4,084 $ 4,233 Due after one year through five years...... 25,388 26,737 Due after five years through ten years..... 24,539 26,662 Due after ten years........................ 32,745 36,313 -------- -------- Subtotal................................ 86,756 93,945 Mortgage-backed and asset-backed securities 47,543 48,729 -------- -------- Subtotal................................ 134,299 142,674 Redeemable preferred stock................. 545 474 -------- -------- Total fixed maturities.................. $134,844 $143,148 ======== ========
Bonds not due at a single maturity date have been included in the above table in the year of final maturity. Actual maturities may differ from contractual maturities due to the exercise of prepayment options. Sales of fixed maturities and equity securities classified as available-for-sale were as follows:
Years Ended December 31, ------------------------- 2003 2002 2001 ------- ------- ------- (Dollars in millions) Proceeds............... $48,390 $34,918 $27,576 Gross investment gains. $ 446 $ 1,683 $ 634 Gross investment losses $ (452) $ (973) $ (934)
Gross investment losses above exclude writedowns recorded during 2003, 2002 and 2001 for other-than-temporarily impaired available-for-sale fixed maturities and equity securities of $328 million, $1,342 million and $278 million, respectively. Excluding investments in U.S. Treasury securities and obligations of U.S. government corporations and agencies, the Company is not exposed to any significant concentration of credit risk in its fixed maturities portfolio. F-25 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The following table shows the estimated fair values and gross unrealized losses of the Company's fixed maturities, aggregated by sector and length of time that the securities have been in a continuous unrealized loss position at December 31, 2003:
Equal to or Greater Less than 12 months than 12 months Total -------------------- -------------------- -------------------- Estimated Gross Estimated Gross Estimated Gross Fair Unrealized Fair Unrealized Fair Unrealized Value Loss Value Loss Value Loss --------- ---------- --------- ---------- --------- ---------- (Dollars in millions) U.S. corporate securities............ $ 6,338 $136 $ 962 $ 92 $ 7,300 $228 Mortgage-backed securities........... 7,133 78 18 3 7,151 81 Foreign corporate securities......... 2,446 57 331 13 2,777 70 U.S. treasuries/agencies............. 3,526 23 -- -- 3,526 23 Asset-backed securities.............. 2,295 29 780 25 3,075 54 Commercial mortgage-backed securities 1,998 13 227 2 2,225 15 Foreign government securities........ 225 20 2 -- 227 20 States and political subdivisions.... 131 8 -- -- 131 8 Other fixed income assets............ 12 52 40 10 52 62 ------- ---- ------ ---- ------- ---- Total bonds....................... 24,104 416 2,360 145 26,464 561 Redeemable preferred stocks.......... 192 60 279 13 471 73 ------- ---- ------ ---- ------- ---- Total fixed maturities............ $24,296 $476 $2,639 $158 $26,935 $634 ======= ==== ====== ==== ======= ====
At December 31, 2003, the Company had gross unrealized losses of $1 million from equity securities that had been in an unrealized loss position for less than twelve months. The amount of unrealized losses from equity securities that had been in an unrealized loss position for twelve months or greater is less than $1 million at December 31, 2003. The fair value of those equity securities that had been in an unrealized loss position for less than twelve months and for twelve months or greater at December 31, 2003, is $18 million and $21 million, respectively. Securities Lending Program The Company participates in securities lending programs whereby blocks of securities, which are included in investments, are loaned to third parties, primarily major brokerage firms. The Company requires a minimum of 102% of the fair value of the loaned securities to be separately maintained as collateral for the loans. Securities with a cost or amortized cost of $22,290 million and $13,477 million and an estimated fair value of $23,461 million and $16,120 million were on loan under the program at December 31, 2003 and 2002, respectively. The Company was liable for cash collateral under its control of $24,065 million and $16,321 million at December 31, 2003 and 2002, respectively. Security collateral on deposit from customers may not be sold or repledged and is not reflected in the consolidated financial statements. Assets on Deposit and Held in Trust The Company had investment assets on deposit with regulatory agencies with a fair market value of $1,286 million and $939 million at December 31, 2003 and 2002, respectively. Company securities held in trust to satisfy collateral requirements had an amortized cost of $1,711 million and $1,430 million at December 31, 2003 and 2002, respectively. F-26 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Mortgage Loans on Real Estate Mortgage loans on real estate were categorized as follows:
December 31, ------------------------------ 2003 2002 -------------- -------------- Amount Percent Amount Percent ------- ------- ------- ------- (Dollars in millions) Commercial mortgage loans.. $21,597 81% $20,433 80% Agricultural mortgage loans 5,166 19% 5,042 20% ------- --- ------- --- Total................... 26,763 100% 25,475 100% === === Less: Valuation allowances. 126 122 ------- ------- Mortgage loans.......... $26,637 $25,353 ======= =======
Mortgage loans on real estate are collateralized by properties primarily located throughout the United States. At December 31, 2003, approximately 20%, 12% and 7% of the properties were located in California, New York and Florida, respectively. Generally, the Company (as the lender) requires that a minimum of one-fourth of the purchase price of the underlying real estate be paid by the borrower. Mortgage loans at December 31, 2003 and 2002 include $1,998 million and $1,515 million, respectively to MIAC, a related party, in connection with MIAC's purchase of real estate from the Company in 2001 and 2003. In addition, certain of the Company's real estate joint ventures have mortgage loans with the Company. The carrying values of such mortgages were $639 million and $620 million at December 31, 2003 and 2002, respectively. Changes in mortgage loan valuation allowances were as follows:
Years Ended December 31, ----------------------- 2003 2002 2001 ---- ---- ---- (Dollars in millions) Balance at January 1...... $122 $144 $ 83 Additions................. 50 39 106 Deductions................ (46) (56) (45) Dispositions of affiliates -- (5) -- ---- ---- ---- Balance at December 31.... $126 $122 $144 ==== ==== ====
A portion of the Company's mortgage loans on real estate was impaired and consisted of the following:
December 31, ------------------ 2003 2002 ---- ---- (Dollars in millions) Impaired mortgage loans with valuation allowances... $286 $604 Impaired mortgage loans without valuation allowances 146 257 ---- ---- Total............................................ 432 861 Less: Valuation allowances on impaired mortgages.... 61 121 ---- ---- Impaired mortgage loans.......................... $371 $740 ==== ====
F-27 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The average investment in impaired mortgage loans on real estate was $615 million, $1,068 million and $938 million for the years ended December 31, 2003, 2002 and 2001, respectively. Interest income on impaired mortgage loans was $55 million, $88 million and $103 million for the years ended December 31, 2003, 2002 and 2001, respectively. The investment in restructured mortgage loans on real estate was $188 million and $410 million at December 31, 2003 and 2002, respectively. Interest income of $19 million, $44 million and $76 million was recognized on restructured loans for the years ended December 31, 2003, 2002 and 2001, respectively. Gross interest income that would have been recorded in accordance with the original terms of such loans amounted to $24 million, $41 million and $60 million for the years ended December 31, 2003, 2002 and 2001, respectively. Mortgage loans on real estate with scheduled payments of 60 days (90 days for agriculture mortgages) or more past due or in foreclosure had an amortized cost of $35 million and $28 million at December 31, 2003 and 2002, respectively. Real Estate and Real Estate Joint Ventures Real estate and real estate joint ventures consisted of the following:
December 31, -------------------- 2003 2002 ------ ------ (Dollars in millions) Real estate and real estate joint ventures held-for-investment $3,446 $3,321 Impairments................................................... (283) (271) ------ ------ Total...................................................... 3,163 3,050 ------ ------ Real estate held-for-sale..................................... 101 815 Impairments................................................... -- (5) Valuation allowance........................................... (12) (11) ------ ------ Total...................................................... 89 799 ------ ------ Real estate and real estate joint ventures............. $3,252 $3,849 ====== ======
Accumulated depreciation on real estate was $1,226 million and $1,319 million at December 31, 2003 and 2002, respectively. The related depreciation expense was $124 million, $180 million and $217 million for the years ended December 31, 2003, 2002 and 2001, respectively. These amounts include $15 million, $66 million and $93 million of depreciation expense related to discontinued operations for the years ended December 31, 2003, 2002 and 2001, respectively. F-28 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Real estate and real estate joint ventures were categorized as follows:
December 31, ---------------------------- 2003 2002 ------------- ------------- Amount Percent Amount Percent ------ ------- ------ ------- (Dollars in millions) Office..... $1,597 49 % $2,244 58 % Retail..... 660 20 697 18 Apartments. 499 15 454 12 Land....... 77 2 87 2 Agriculture 1 -- 7 -- Other...... 418 14 360 10 ------ --- ------ ---- Total... $3,252 100% $3,849 100 % ====== === ====== ====
The Company's real estate holdings are primarily located throughout the United States. At December 31, 2003, approximately 25%, 21% and 17% of the Company's real estate holdings were located in California, Texas and New York, respectively. Changes in real estate and real estate joint ventures held-for-sale valuation allowance were as follows:
Years Ended December 31, ----------------------- 2003 2002 2001 ---- ---- ---- (Dollars in millions) Balance at January 1...................... $ 11 $ 35 $ 39 Additions charged to investment income.... 17 21 16 Deductions for writedowns and dispositions (16) (45) (20) ---- ---- ---- Balance at December 31.................... $ 12 $ 11 $ 35 ==== ==== ====
Investment income related to impaired real estate and real estate joint ventures held-for-investment was $35 million, $48 million and $34 million for the years ended December 31, 2003, 2002 and 2001, respectively. There was no investment income related to impaired real estate and real estate joint ventures held-for-sale for the year ended December 31, 2003. Investment income related to impaired real estate and real estate joint ventures held-for-sale was $3 million and $19 million for the years ended December 31, 2002 and 2001, respectively. The carrying value of non-income producing real estate and real estate joint ventures was $67 million and $62 million at December 31, 2003 and 2002, respectively. The Company owned real estate acquired in satisfaction of debt of $1 million and $8 million at December 31, 2003 and 2002, respectively. F-29 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Leveraged Leases Leveraged leases, included in other invested assets, consisted of the following:
December 31, -------------------- 2003 2002 ------ ------ (Dollars in millions) Investment............... $ 974 $ 985 Estimated residual values 386 428 ------ ------ Total................. 1,360 1,413 Unearned income.......... (380) (368) ------ ------ Leveraged leases...... $ 980 $1,045 ====== ======
The investment amounts set forth above are generally due in monthly installments. The payment periods generally range from one to 15 years, but in certain circumstances are as long as 30 years. These receivables are generally collateralized by the related property. The Company's deferred tax liability related to leveraged leases was $870 million and $981 million at December 31, 2003 and 2002, respectively. Net Investment Income The components of net investment income were as follows:
Years Ended December 31, ----------------------- 2003 2002 2001 ------- ------- ------- (Dollars in millions) Fixed maturities................................. $ 7,757 $ 7,844 $ 8,449 Equity securities................................ 26 42 61 Mortgage loans on real estate.................... 1,811 1,840 1,838 Real estate and real estate joint ventures (1)... 612 673 824 Policy loans..................................... 510 512 527 Other limited partnership interests.............. 75 57 48 Cash, cash equivalents and short-term investments 83 228 264 Other............................................ 315 286 244 ------- ------- ------- Total......................................... 11,189 11,482 12,255 Less: Investment expenses (1).................... 832 851 1,201 ------- ------- ------- Net investment income......................... $10,357 $10,631 $11,054 ======= ======= =======
- -------- (1)Excludes amounts related to real estate held-for-sale presented as discontinued operations in accordance with SFAS 144. F-30 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Net Investment Gains (Losses) Net investment gains (losses), including changes in valuation allowances, and related policyholder amounts were as follows:
Years Ended December 31, ----------------------- 2003 2002 2001 ----- ----- ------ (Dollars in millions) Fixed maturities............................... $(373) $(862) $ (644) Equity securities.............................. 39 230 66 Mortgage loans on real estate.................. (51) (21) (91) Real estate and real estate joint ventures (1). 19 (6) 1,626 Other limited partnership interests............ (84) (2) (161) Sales of businesses............................ 5 (7) 25 Derivatives (2)................................ (122) (140) 124 Other.......................................... 21 (28) (27) ----- ----- ------ Total................................... (546) (836) 918 Amounts allocated from: Deferred policy acquisition costs........... 26 (11) (21) Participating contracts..................... 89 (7) (105) Policyholder dividend obligation............ 144 157 159 ----- ----- ------ Total net investment gains (losses)..... $(287) $(697) $ 951 ===== ===== ======
- -------- (1)The amounts presented exclude amounts related to sales of real estate held-for-sale presented as discontinued operations in accordance with SFAS 144. (2)The amounts presented include scheduled periodic settlement payments on derivative instruments that do not qualify for hedge accounting under SFAS 133. Investment gains and losses are net of related policyholder amounts. The amounts netted against investment gains and losses are (i) amortization of DAC to the extent that such amortization results from investment gains and losses; (ii) adjustments to participating contractholder accounts when amounts equal to such investment gains and losses are applied to the contractholder's accounts; and (iii) adjustments to the policyholder dividend obligation resulting from investment gains and losses. This presentation may not be comparable to presentations made by other insurers. Real estate and real estate joint ventures net investment gains for 2001 include $1,630 million related to the sale of real estate to MIAC. F-31 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Net Unrealized Investment Gains The components of net unrealized investment gains, included in accumulated other comprehensive income, were as follows:
Years Ended December 31, ------------------------- 2003 2002 2001 ------- ------- ------- (Dollars in millions) Fixed maturities........................... $ 8,094 $ 6,701 $ 2,958 Equity securities.......................... 353 56 619 Derivatives................................ (395) (24) 71 Other invested assets...................... (55) 1 59 ------- ------- ------- Total................................... 7,997 6,734 3,707 ------- ------- ------- Amounts allocated from: Future policy benefit loss recognition.. (1,453) (1,242) (30) Deferred policy acquisition costs....... (495) (366) (6) Participating contracts................. (117) (129) (127) Policyholder dividend obligation........ (2,130) (1,882) (708) Deferred income taxes...................... (1,397) (1,124) (1,037) ------- ------- ------- Total................................... (5,592) (4,743) (1,908) ------- ------- ------- Net unrealized investment gains..... $ 2,405 $ 1,991 $ 1,799 ======= ======= =======
The changes in net unrealized investment gains were as follows:
Years Ended December 31, ----------------------- 2003 2002 2001 ------ ------- ------ (Dollars in millions) Balance at January 1................................................. $1,991 $ 1,799 $1,183 Unrealized investment gains during the year.......................... 994 2,803 1,391 Unrealized investment gains (losses) relating to: Future policy benefit (loss) gain recognition..................... (211) (1,212) 254 Deferred policy acquisition costs................................. (129) (204) (128) Participating contracts........................................... 12 (2) 6 Policyholder dividend obligation.................................. (248) (1,174) (323) Deferred income taxes................................................ (179) (72) (475) Unrealized investment gains (losses) of subsidiaries at date of sale, net of deferred income taxes....................................... 175 53 (109) ------ ------- ------ Balance at December 31............................................... $2,405 $ 1,991 $1,799 ====== ======= ====== Net change in unrealized investment gains............................ $ 414 $ 192 $ 616 ====== ======= ======
Structured Investment Transactions The Company securitizes high yield debt securities, investment grade bonds and structured finance securities. The Company has sponsored four securitizations with a total of approximately $1,431 million in financial assets as of December 31, 2003. The Company's beneficial interests in these SPEs as of December 31, 2003 and 2002 and the related investment income for the years ended December 31, 2003, 2002 and 2001 were insignificant. F-32 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The Company also invests in structured notes and similar type instruments, which generally provide equity-based returns on debt securities. The carrying value of such investments was approximately $880 million and $870 million at December 31, 2003 and 2002, respectively. The related income recognized was $78 million, $1 million and $44 million for the years ended December 31, 2003, 2002 and 2001, respectively. Variable Interest Entities As discussed in Note 1, the Company has adopted the provisions of FIN 46 and FIN46(r). At December 31, 2003, FIN 46(r) did not require the Company to consolidate any additional VIEs that were not previously consolidated. The following table presents the total assets of and maximum exposure to loss relating to VIEs for which the Company has concluded that (i) it is the primary beneficiary and which will be consolidated in the Company's financial statements beginning March 31, 2004 and (ii) it holds significant valuable interests but it is not the primary beneficiary and which will not be consolidated:
December 31, 2003 ------------------------------------------------------- Primary Beneficiary (1) Not Primary Beneficiary --------------------------- --------------------------- Total Maximum Exposure Total Maximum Exposure Assets (2) to Loss (3) Assets (2) to Loss (3) ---------- ---------------- ---------- ---------------- (Dollars in millions) SPEs: Asset-backed securitizations and collateralized debt obligations $ -- $ -- $2,400 $20 Non-SPEs: Real estate joint ventures (4)... 617 238 42 59 Other limited partnerships (5)... 29 27 445 10 ---- ---- ------ --- Total......................... $646 $265 $2,887 $89 ==== ==== ====== ===
- -------- (1)Had the Company consolidated these VIEs at December 31, 2003, the transition adjustments would have been $10 million, net of income tax. (2)The assets of the asset-backed securitizations and collateralized debt obligations are reflected at fair value as of December 31, 2003. The assets of the real estate joint ventures and other limited partnerships are reflected at the carrying amounts at which such assets would have been reflected on the Company's balance sheet had the Company consolidated the VIE from the date of its initial investment in the entity. (3)The maximum exposure to loss of the asset-backed securitizations and collateralized debt obligations is equal to the carrying amounts of retained interests. In addition, the Company provides collateral management services for certain of these structures for which it collects a management fee. The maximum exposure to loss relating to real estate joint ventures and other limited partnerships is equal to the carrying amounts plus any unfunded commitments, reduced by amounts guaranteed by other partners. (4)Real estate joint ventures include partnerships and other ventures, which engage in the acquisition, development, management and disposal of real estate investments. (5)Other limited partnerships include partnerships established for the purpose of investing in public and private debt and equity securities, as well as limited partnerships established for the purpose of investing in low-income housing that qualifies for federal tax credits. F-33 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) 3. Derivative Financial Instruments The table below provides a summary of notional amount and fair value of derivative financial instruments held at December 31, 2003 and 2002:
2003 2002 --------------------------- --------------------------- Current Market Current Market or Fair Value or Fair Value Notional ------------------ Notional ------------------ Amount Assets Liabilities Amount Assets Liabilities -------- ------ ----------- -------- ------ ----------- (Dollars in millions) Financial futures................ $ 1,015 $ 8 $ 24 $ 4 $ -- $ -- Interest rate swaps.............. 9,921 189 36 3,866 196 126 Floors........................... 325 5 -- 325 9 -- Caps............................. 9,483 29 -- 7,770 -- -- Financial forwards............... 1,310 2 3 1,870 -- 12 Foreign currency swaps........... 4,679 9 791 2,371 92 181 Options.......................... 6,065 7 -- 6,472 9 -- Foreign currency forwards........ 528 -- 10 1 -- -- Credit default swaps............. 605 2 1 376 2 -- ------- ---- ---- ------- ---- ---- Total contractual commitments. $33,931 $251 $865 $23,055 $308 $319 ======= ==== ==== ======= ==== ====
The following is a reconciliation of the notional amounts by derivative type and strategy at December 31, 2003 and 2002:
December 31, 2002 Terminations/ December 31, 2003 Notional Amount Additions Maturities Notional Amount ----------------- --------- ------------- ----------------- (Dollars in millions) BY DERIVATIVE TYPE Financial futures............................ $ 4 $ 1,543 $ 532 $ 1,015 Interest rate swaps.......................... 3,866 8,040 1,985 9,921 Floors....................................... 325 -- -- 325 Caps......................................... 7,770 3,000 1,287 9,483 Financial forwards........................... 1,870 1,310 1,870 1,310 Foreign currency swaps....................... 2,371 2,516 208 4,679 Options...................................... 6,472 -- 407 6,065 Foreign currency forwards.................... 1 527 -- 528 Written covered calls........................ -- 1,178 1,178 -- Credit default swaps......................... 376 284 55 605 ------- ------- ------ ------- Total contractual commitments............. $23,055 $18,398 $7,522 $33,931 ======= ======= ====== ======= BY DERIVATIVE STRATEGY Liability hedging............................ $ 8,683 $ 5,030 $1,187 $12,526 Invested asset hedging....................... 5,284 6,671 1,459 10,496 Portfolio hedging............................ 9,028 2,323 4,429 6,922 Firm commitments and forecasted transactions. 60 3,847 447 3,460 Hedging net investments in foreign operations -- 527 -- 527 ------- ------- ------ ------- Total contractual commitments............. $23,055 $18,398 $7,522 $33,931 ======= ======= ====== =======
F-34 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The following table presents the notional amounts of derivative financial instruments by maturity at December 31, 2003:
Remaining Life --------------------------------------------------------------------- One Year After One Year After Five Years or Less Through Five Years Through Ten Years After Ten Years Total -------- ------------------ ----------------- --------------- ------- (Dollars in millions) Financial futures................ $ 1,015 $ -- $ -- $ -- $ 1,015 Interest rate swaps.............. 242 6,297 1,716 1,666 9,921 Floors........................... -- -- 325 -- 325 Caps............................. 3,000 6,483 -- -- 9,483 Financial forwards............... 1,310 -- -- -- 1,310 Foreign currency swaps........... 326 1,663 2,255 435 4,679 Options.......................... 4,163 1,901 -- 1 6,065 Foreign currency forwards........ 528 -- -- -- 528 Credit default swaps............. 209 396 -- -- 605 ------- ------- ------ ------ ------- Total contractual commitments. $10,793 $16,740 $4,296 $2,102 $33,931 ======= ======= ====== ====== =======
The following table presents the notional amounts and fair values of derivatives by type of hedge designation at December 31, 2003 and 2002:
2003 2002 -------------------------- --------------------------- Fair Value Fair Value ----------------- ------------------ Notional Notional Amount Asset Liabilities Amount Assets Liabilities -------- ----- ----------- -------- ------ ----------- (Dollars in millions) BY TYPE OF HEDGE Fair value........ $ 3,678 $ 27 $291 $ 418 $ -- $ 64 Cash flow......... 12,968 54 422 3,445 69 72 Foreign Operations 527 -- 10 -- -- -- Non qualifying.... 16,758 170 142 19,192 239 183 ------- ---- ---- ------- ---- ---- Total.......... $33,931 $251 $865 $23,055 $308 $319 ======= ==== ==== ======= ==== ====
The company recognizes net investment expense of $61 million and $4 million and net investment income of $8 million, from the periodic settlement of interest rate caps and interest rate, foreign currency and credit default swaps that qualify as accounting hedges under SFAS No. 133, as amended, for the years ended December 31, 2003, 2002 and 2001, respectively. During the years ended December 31, 2003 and 2002, the Company recognized $184 million and $30 million, respectively, in net investment losses related to qualifying fair value hedges. Accordingly, $158 million and $34 million of net unrealized gains on fair value hedged investments were recognized in net investment losses during the years ended December 31, 2003 and 2002, respectively. There were no discontinued fair value hedges during the years ended December 31, 2003 or 2002. There were no derivatives designated as fair value hedges during the year ended December 31, 2001. For the years ended December 31, 2003 and 2002, the net amounts accumulated in other comprehensive income relating to cash flow hedges were losses of $379 million and $24 million, respectively. For the years ended December 31, 2003 and 2002, the market value of cash flow hedges decreased by $418 million and $145 million, respectively. During the years ended December 31, 2003 and 2002, the Company recognized other F-35 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) comprehensive net losses of $349 million and $142 million, respectively, relating to the effective portion of cash flow hedges. During the year ended December 31, 2003, other comprehensive expense of $2 million was reclassified to net investment income. During the year ended December 31, 2002, other comprehensive losses of $57 million were reclassified to net investment losses. During the year ended December 31, 2003, insignificant amounts were recognized in net investment losses related to discontinued cash flow hedges. During the year ended December 31, 2002 and 2001 no cash flow hedges were discontinued. For the years ended December 31, 2003, 2002 and 2001, $8 million, $10 million and $19 million of other comprehensive income was reclassified to net investment income, respectively, related to the SFAS 133 transition adjustment. Approximately $2 million of net investment expense and $17 million of net losses reported in accumulated other comprehensive income at December 31, 2003 are expected to be reclassified during the year ending December 31, 2004 into net investment income and net investment loss, respectively, as the derivatives and underlying investments mature or expire according to their original terms. For the years ended December 31, 2003, 2002 and 2001, the Company recognized as net investment gains, the settlement payments on derivative instruments of $84 million, $32 million and $24 million, respectively, and net investment losses from changes in fair value of $206 million and $172 million and net investment gains of $100 million, respectively, related to derivatives not qualifying as accounting hedges. The Company uses forward exchange contracts that provide an economic hedge on portions of its net investments in foreign operations against adverse movements in foreign currency exchange rates. For the year ended December 31, 2003, the Company experienced net unrealized foreign currency losses of $10 million related to hedges of its net investments in foreign operations. These unrealized losses were recorded as components of accumulated other comprehensive income. F-36 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) 4. Insurance Deferred Policy Acquisition Costs Information regarding VOBA and DAC for the years ended December 31, 2003, 2002 and 2001 is as follows:
Deferred Value of Policy Business Acquisition Acquired Costs Total -------- ----------- ------- (Dollars in millions) Balance at December 31, 2000............ $1,674 $ 8,823 $10,497 Capitalizations......................... -- 2,018 2,018 ------ ------- ------- Total............................ 1,674 10,841 12,515 Amortization allocated to: Net investment gains (losses)........ (15) 36 21 Unrealized investment gains (losses). 16 112 128 Other expenses....................... 178 1,256 1,434 ------ ------- ------- Total amortization............... 179 1,404 1,583 Dispositions and other.................. 7 (468) (461) ------ ------- ------- Balance at December 31, 2001............ 1,502 8,969 10,471 Capitalizations......................... -- 2,227 2,227 ------ ------- ------- Total............................ 1,502 11,196 12,698 Amortization allocated to: Net investment gains (losses)........ 16 (5) 11 Unrealized investment gains (losses). 31 173 204 Other expenses....................... 121 1,380 1,501 ------ ------- ------- Total amortization............... 168 1,548 1,716 Dispositions and other.................. (463) (853) (1,316) ------ ------- ------- Balance at December 31, 2002............ 871 8,795 9,666 Capitalizations......................... -- 1,982 1,982 Acquisitions............................ -- 218 218 ------ ------- ------- Total............................ 871 10,995 11,866 Amortization allocated to: -- Net investment gains (losses)........ (5) (21) (26) Unrealized investment gains (losses). (9) 138 129 Other expenses....................... 49 1,332 1,381 ------ ------- ------- Total amortization............... 35 1,449 1,484 Dispositions and other.................. -- (150) (150) ------ ------- ------- Balance at December 31, 2003............ $ 836 $ 9,396 $10,232 ====== ======= =======
The estimated future amortization expense allocated to other expenses for VOBA is $71 million in 2004, $69 million in 2005, $63 million in 2006, $59 million in 2007 and $56 million in 2008. Amortization of VOBA and DAC is allocated to (i) investment gains and losses to provide consolidated statement of income information regarding the impact of such gains and losses on the amount of the amortization, (ii) unrealized investment gains and losses to provide information regarding the amount that would F-37 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) have been amortized if such gains and losses had been recognized, and (iii) other expenses to provide amounts related to the gross margins or profits originating from transactions other than investment gains and losses. Investment gains and losses related to certain products have a direct impact on the amortization of VOBA and DAC. Presenting investment gains and losses net of related amortization of VOBA and DAC provides information useful in evaluating the operating performance of the Company. This presentation may not be comparable to presentations made by other insurers. Future Policy Benefits and Policyholder Account Balances Future policy benefit liabilities for participating traditional life insurance policies are equal to the aggregate of (i) net level premium reserves for death and endowment policy benefits (calculated based upon the nonforfeiture interest rate, ranging from 3% to 9%, and mortality rates guaranteed in calculating the cash surrender values described in such contracts), (ii) the liability for terminal dividends, and (iii) premium deficiency reserves, which are established when the liabilities for future policy benefits plus the present value of expected future gross premiums are insufficient to provide for expected future policy benefits and expenses after DAC is written off. Future policy benefit liabilities for traditional annuities are equal to accumulated contractholder fund balances during the accumulation period and the present value of expected future payments after annuitization. Interest rates used in establishing such liabilities range from 3% to 9%. Future policy benefit liabilities for non-medical health insurance are calculated using the net level premium method and assumptions as to future morbidity, withdrawals and interest, which provide a margin for adverse deviation. Interest rates used in establishing such liabilities range from 3% to 7%. Future policy benefit liabilities for disabled lives are estimated using the present value of benefits method and experience assumptions as to claim terminations, expenses and interest. Interest rates used in establishing such liabilities range from 3% to 8%. Policyholder account balances for universal life and investment-type contracts are equal to the policy account values, which consist of an accumulation of gross premium payments plus credited interest, ranging from 1% to 13%, less expenses, mortality charges, and withdrawals. The liability for unpaid claims and claim expenses for property and casualty insurance represents the amount estimated for claims that have been reported but not settled and claims incurred but not reported. Liabilities for unpaid claims are estimated based upon the Company's historical experience and other actuarial assumptions that consider the effects of current developments, anticipated trends and risk management programs, reduced for anticipated salvage and subrogation. Revisions of these estimates are included in operations in the year such refinements are made. Separate Accounts Separate accounts include two categories of account types: non-guaranteed separate accounts totaling $47,198 million and $38,702 million at December 31, 2003 and 2002, respectively, for which the policyholder assumes the investment risk, and guaranteed separate accounts totaling $16,463 million and $15,210 million at December 31, 2003 and 2002, respectively, for which the Company contractually guarantees either a minimum return or account value to the policyholder. Fees charged to the separate accounts by the Company (including mortality charges, policy administration fees and surrender charges) are reflected in the Company's revenues as universal life and investment-type product policy fees and totaled $451 million, $461 million and $559 million for the years ended December 31, F-38 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) 2003, 2002 and 2001, respectively. Guaranteed separate accounts consisted primarily of Met Managed Guaranteed Interest Contracts and participating close-out contracts. The average interest rates credited on these contracts were 4.5% and 4.8% at December 31, 2003 and 2002, respectively. The assets that support these liabilities were comprised of $13,504 million and $12,979 million in fixed maturities at December 31, 2003 and 2002, respectively. 5. Reinsurance The Company's life insurance operations participate in reinsurance activities in order to limit losses, minimize exposure to large risks, and to provide additional capacity for future growth. The Company currently reinsures up to 90% of the mortality risk for all new individual life insurance policies that it writes through its various franchises. This practice was initiated by different franchises for different products starting at various points in time between 1992 and 2000. Risks in excess of $25 million on single life policies and $30 million on survivorship policies are 100% coinsured. In addition, in 1998, the Company reinsured substantially all of the mortality risk on its universal life policies issued since 1983. RGA retains a maximum of $6 million of coverage per individual life with respect to its assumed reinsurance business. The Company reinsures its business through a diversified group of reinsurers. Placement of reinsurance is done primarily on an automatic basis and also on a facultative basis for risks of specific characteristics. The Company is contingently liable with respect to ceded reinsurance should any reinsurer be unable to meet its obligations under these agreements. In addition to reinsuring mortality risk, the Company reinsures other risks and specific coverages. The Company routinely reinsures certain classes of risks in order to limit its exposure to particular travel, avocation and lifestyle hazards. The Company has exposure to catastrophes, which are an inherent risk of the property and casualty business and could contribute to significant fluctuations in the Company's results of operations. The Company uses excess of loss and quota share reinsurance arrangements to limit its maximum loss, provide greater diversification of risk and minimize exposure to larger risks. The Company has also protected itself through the purchase of combination risk coverage. This reinsurance coverage pools risks from several lines of business and includes individual and group life claims in excess of $2 million per policy, as well as excess property and casualty losses, among others. See Note 12 for information regarding certain excess of loss reinsurance agreements providing coverage for risks associated primarily with sales practices claims. The amounts in the consolidated statements of income are presented net of reinsurance ceded. The effects of reinsurance were as follows:
Years Ended December 31, ------------------------- 2003 2002 2001 ------- ------- ------- (Dollars in millions) Direct premiums............................................ $16,843 $17,859 $16,257 Reinsurance assumed........................................ 3,568 2,948 2,786 Reinsurance ceded.......................................... (2,260) (2,346) (2,020) ------- ------- ------- Net premiums............................................... $18,151 $18,461 $17,023 ======= ======= ======= Reinsurance recoveries netted against policyholder benefits $ 2,175 $ 2,478 $ 2,069 ======= ======= =======
Reinsurance recoverables, included in premiums and other receivables, were $3,692 million and $3,833 million at December 31, 2003 and 2002, respectively, including $1,341 million and $1,348 million, respectively, F-39 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) relating to reinsurance of long-term guaranteed interest contracts and structured settlement lump sum contracts accounted for as a financing transaction. Reinsurance and ceded commissions payables, included in other liabilities, were $102 million and $74 million at December 31, 2003 and 2002, respectively. Included in premiums and other receivables are reinsurance recoverables due from Exeter Reassurance Company, Limited, a related party, of $507 million and $502 million at December 31, 2003 and 2002, respectively. Included in future policy benefits, other policyholder funds, and policyholder account balances are reinsurance liabilities assumed from MIAC, Cova Corporation, MetLife Investor's Group, Inc. and MetLife International Holdings, Inc., related parties, of $790 million, $1,807 million, and $190 million and $772 million, $1,694 million, and $136 million, respectively, at December 31, 2003 and 2002. The following table provides an analysis of the activity in the liability for benefits relating to property and casualty group accident and non-medical health policies and contracts (See Note 17):
Years Ended December 31, ------------------------- 2003 2002 2001 ------- ------- ------- (Dollars in millions) Balance at January 1............. $ 4,821 $ 4,597 $ 4,226 Reinsurance recoverables...... (496) (457) (410) ------- ------- ------- Net balance at January 1......... 4,325 4,140 3,816 ------- ------- ------- Incurred related to: Current year.................. 3,816 4,219 4,182 Prior years................... 28 (81) (84) ------- ------- ------- 3,844 4,138 4,098 ------- ------- ------- Paid related to: Current year.................. (2,153) (2,559) (2,538) Prior years................... (1,290) (1,332) (1,236) ------- ------- ------- (3,443) (3,891) (3,774) ------- ------- ------- Dispositions..................... (1,450) (62) -- Net Balance at December 31....... 3,276 4,325 4,140 Add: Reinsurance recoverables. 284 496 457 ------- ------- ------- Balance at December 31........... $ 3,560 $ 4,821 $ 4,597 ======= ======= =======
6. Closed Block On April 7, 2000 ("the date of demutualization"), Metropolitan Life established a closed block for the benefit of holders of certain individual life insurance policies of Metropolitan Life. Assets have been allocated to the closed block in an amount that has been determined to produce cash flows which, together with anticipated revenues from the policies included in the closed block, are reasonably expected to be sufficient to support obligations and liabilities relating to these policies, including, but not limited to, provisions for the payment of claims and certain expenses and taxes, and to provide for the continuation of policyholder dividend scales in effect for 1999, if the experience underlying such dividend scales continues, and for appropriate adjustments in such scales if the experience changes. At least annually, the Company compares actual and projected experience against the experience assumed in the then-current dividend scales. Dividend scales are adjusted periodically to give effect to changes in experience. F-40 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The closed block assets, the cash flows generated by the closed block assets and the anticipated revenues from the policies in the closed block will benefit only the holders of the policies in the closed block. To the extent that, over time, cash flows from the assets allocated to the closed block and claims and other experience related to the closed block are, in the aggregate, more or less favorable than what was assumed when the closed block was established, total dividends paid to closed block policyholders in the future may be greater than or less than the total dividends that would have been paid to these policyholders if the policyholder dividend scales in effect for 1999 had been continued. Any cash flows in excess of amounts assumed will be available for distribution over time to closed block policyholders and will not be available to stockholders. If the closed block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from assets outside of the closed block. The closed block will continue in effect as long as any policy in the closed block remains in-force. The expected life of the closed block is over 100 years. The Company uses the same accounting principles to account for the participating policies included in the closed block as it used prior to the date of demutualization. However, the Company establishes a policyholder dividend obligation for earnings that will be paid to policyholders as additional dividends as described below. The excess of closed block liabilities over closed block assets at the effective date of the demutualization (adjusted to eliminate the impact of related amounts in accumulated other comprehensive income) represents the estimated maximum future earnings from the closed block expected to result from operations attributed to the closed block after income taxes. Earnings of the closed block are recognized in income over the period the policies and contracts in the closed block remain in-force. Management believes that over time the actual cumulative earnings of the closed block will approximately equal the expected cumulative earnings due to the effect of dividend changes. If, over the period the closed block remains in existence, the actual cumulative earnings of the closed block is greater than the expected cumulative earnings of the closed block, the Company will pay the excess of the actual cumulative earnings of the closed block over the expected cumulative earnings to closed block policyholders as additional policyholder dividends unless offset by future unfavorable experience of the closed block and, accordingly, will recognize only the expected cumulative earnings in income with the excess recorded as a policyholder dividend obligation. If over such period, the actual cumulative earnings of the closed block is less than the expected cumulative earnings of the closed block, the Company will recognize only the actual earnings in income. However, the Company may change policyholder dividend scales in the future, which would be intended to increase future actual earnings until the actual cumulative earnings equal the expected cumulative earnings. F-41 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Closed block liabilities and assets designated to the closed block are as follows:
December 31, -------------------- 2003 2002 ------- ------- (Dollars in millions) CLOSED BLOCK LIABILITIES Future policy benefits.................................................... $41,928 $41,207 Other policyholder funds.................................................. 260 279 Policyholder dividends payable............................................ 682 719 Policyholder dividend obligation.......................................... 2,130 1,882 Payables under securities loaned transactions............................. 6,418 4,851 Other liabilities......................................................... 180 433 ------- ------- Total closed block liabilities..................................... 51,598 49,371 ------- ------- ASSETS DESIGNATED TO THE CLOSED BLOCK Investments: Fixed maturities available-for-sale, at fair value (amortized cost: $30,381 and $28,339, respectively).................. 32,348 29,981 Equity securities, at fair value (cost: $217 and $236, respectively)... 250 218 Mortgage loans on real estate.......................................... 7,431 7,032 Policy loans........................................................... 4,036 3,988 Short-term investments................................................. 123 24 Other invested assets.................................................. 108 604 ------- ------- Total investments.................................................. 44,296 41,847 Cash and cash equivalents................................................. 531 435 Accrued investment income................................................. 527 540 Deferred income taxes..................................................... 1,043 1,151 Premiums and other receivables............................................ 164 130 ------- ------- Total assets designated to the closed block........................ 46,561 44,103 ------- ------- Excess of closed block liabilities over assets designated to to the closed block................................................................... 5,037 5,268 ------- ------- Amounts included in accumulated other comprehensive loss: Net unrealized investment gains, net of deferred income tax of $730 and $577, respectively............................ 1,270 1,047 Unrealized derivative gains (losses), net of deferred income tax (benefit) expense of $(28) and $7, respectively.................. (48) 13 Allocated to policyholder dividend obligation, net of deferred income tax benefit of ($778) and ($668), respectively....... (1,352) (1,214) ------- ------- (130) (154) ------- ------- Maximum future earnings to be recognized from closed block assets and liabilities............................................ $ 4,907 $ 5,114 ======= =======
F-42 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Information regarding the policyholder dividend obligation is as follows:
Years Ended December 31, --------------------- 2003 2002 2001 ------ ------ ----- (Dollars in millions) Balance at beginning of year................................... $1,882 $ 708 $ 385 Impact on net income before amounts allocated from policyholder dividend obligation.......................................... 144 157 159 Net investment gains (losses).................................. (144) (157) (159) Change in unrealized investment and derivative gains........... 248 1,174 323 ------ ------ ----- Balance at end of year......................................... $2,130 $1,882 $ 708 ====== ====== =====
Closed block revenues and expenses were as follows:
Years Ended December 31, ----------------------- 2003 2002 2001 ------ ------ ------ (Dollars in millions) REVENUES Premiums................................................................ $3,365 $3,551 $3,658 Net investment income and other revenues................................ 2,554 2,568 2,547 Net investment gains (losses) (net of amounts allocated from the policyholder dividend obligation of ($144), ($157) and ($159), respectively)......................................................... 16 168 (12) ------ ------ ------ Total revenues....................................................... 5,935 6,287 6,193 ------ ------ ------ EXPENSES Policyholder benefits and claims........................................ 3,660 3,770 3,862 Policyholder dividends.................................................. 1,509 1,573 1,544 Change in policyholder dividend obligation (excludes amounts directly related to net investment gains (losses) of ($144), ($157) and ($159), respectively)......................................................... 144 157 159 Other expenses.......................................................... 297 310 352 ------ ------ ------ Total expenses....................................................... 5,610 5,810 5,917 ------ ------ ------ Revenues net of expenses before income taxes............................ 325 477 276 Income taxes............................................................ 118 173 97 ------ ------ ------ Revenues net of expenses and income taxes............................... $ 207 $ 304 $ 179 ====== ====== ======
The change in maximum future earnings of the closed block is as follows:
Years Ended December 31, ---------------------- 2003 2002 2001 ------ ------ ------ (Dollars in millions) Balance at end of year.......... $4,907 $5,114 $5,333 Less: Reallocation of assets....... -- 85 -- Balance at beginning of year. 5,114 5,333 5,512 ------ ------ ------ Change during year.............. $ (207) $ (304) $ (179) ====== ====== ======
F-43 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) During the year ended December 31, 2002, the allocation of assets to the closed block was revised to appropriately classify assets in accordance with the plan of demutualization. The reallocation of assets had no impact on consolidated assets or liabilities. Metropolitan Life charges the closed block with federal income taxes, state and local premium taxes, and other additive state or local taxes, as well as investment management expenses relating to the closed block as provided in the plan of demutualization. Metropolitan Life also charges the closed block for expenses of maintaining the policies included in the closed block. Many of the derivative instrument strategies used by the Company are also used for the closed block. The table below provides a summary of the notional amount and fair value of derivatives by hedge accounting classification at:
December 31, 2003 December 31, 2002 --------------------------- --------------------------- Fair Value Fair Value Notional ------------------ Notional ------------------ Amount Assets Liabilities Amount Assets Liabilities -------- ------ ----------- -------- ------ ----------- (Dollars in millions) By Type of Hedge Fair value...... $ 6 $-- $ 1 $ -- $-- $-- Cash flow....... 473 -- 80 128 2 11 Non qualifying.. 90 -- 12 258 32 2 ---- --- --- ---- --- --- Total........ $569 $-- $93 $386 $34 $13 ==== === === ==== === ===
During the years ended December 31, 2003, 2002 and 2001, the closed block recognized net investment expenses of $2 million and net investment income of $1 million and $1 million, respectively, from the periodic settlement of interest rate caps and interest rate, foreign currency and credit default swaps that qualify as accounting hedges under SFAS 133, as amended. During the year ended December 31, 2003, the closed block recognized $1 million in net investment losses related to qualifying fair value hedges. Accordingly, $1 million of unrealized gains on fair value hedged investments was recognized in net investment losses during the year ended December 31, 2003. There were no fair value hedges during the years ended December 31, 2002 and 2001. There were no discontinued fair value hedges during the years ended December 31, 2003, 2002 and 2001. For the years ended December 31, 2003 and 2002, the net amounts accumulated in other comprehensive income relating to cash flow hedges were losses of $76 million and gains of $20 million, respectively. For the years ended December 31, 2003 and 2002, the market value of cash flow hedges decreased by $106 million and increased $4 million, respectively. During the years ended December 31, 2003 and 2002, the closed block recognized other comprehensive net losses of $93 million and other comprehensive net gains of $4 million, respectively, relating to the effective portion of cash flow hedges. During the years ended December 31, 2003, 2002 and 2001, no cash flow hedges were discontinued. For the years ended December 31, 2003 and 2002, $3 million and $4 million of other comprehensive income was reclassified to net investment income, respectively, related to the SFAS 133 transition adjustment. Amounts reclassified for transition adjustment for the year ended December 31, 2001 were insignificant. Approximately $5 million of net losses reported in accumulated other comprehensive income at December 31, 2003 are expected to be reclassified during the year ending December 31, 2004 into net investment losses as the derivatives and underlying investments mature or expire according to their original terms. F-44 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) For the years ended December 31, 2003, 2002 and 2001, scheduled periodic settlement payments on derivative instruments recognized as net investment gains and losses were immaterial. Net investment losses from changes in fair value of $18 million and $11 million and gains of $5 million related to derivatives not qualifying as accounting hedges were recognized for the years ended December 31, 2003, 2002 and 2001, respectively. 7. Debt Debt consisted of the following:
December 31, --------------------- 2003 2002 ------ ------ (Dollars in millions) Surplus notes, interest rates ranging from 7.00% to 7.88%, maturity dates ranging from 2005 to 2025.............................................................. $ 940 $1,632 Capital notes payable to the Holding Company, interest rate of 7.13%, maturity dates ranging from 2032 to 2033................................................ 500 500 Senior notes, interest rates ranging from 6.75% to 7.25%, maturity dates ranging from 2006 to 2011.............................................................. 299 298 Fixed rate notes, interest rates ranging from 1.69% to 12.00%, maturity dates ranging from 2005 to 2009...................................................... 103 33 Capital lease obligations........................................................ 74 21 Other notes with varying interest rates.......................................... 139 140 ------ ------ Total long-term debt............................................................. 2,055 2,624 Total short-term debt............................................................ 3,536 912 ------ ------ Total......................................................................... $5,591 $3,536 ====== ======
The Company maintains committed and unsecured credit facilities aggregating $2,478 million ($1,000 million expiring in 2004, $1,303 million expiring in 2005 and $175 million expiring in 2006). If these facilities were drawn upon, they would bear interest at rates stated in the agreements. The facilities are primarily used for general corporate purposes and as back-up lines of credit for the borrowers' commercial paper program. At December 31, 2003, the Company had drawn approximately $49 million under the facilities expiring in 2005 at interest rates ranging from 4.08% to 5.48% and approximately another $50 million under the facility expiring in 2006 at an interest rate of 1.69%. In April 2003, the Company replaced an expiring $1 billion five-year credit facility with a $1 billion 364-day credit facility and the Holding Company was added as a borrower. In May 2003, the Company replaced an expiring $140 million three-year credit facility, with a $175 million three-year credit facility which expires in 2006. At December 31, 2003, the Company had approximately $616 million in letters of credit from various banks. Payments of interest and principal on the surplus notes, subordinated to all other indebtedness, may be made only with the prior approval of the insurance department of the state of domicile. On November 1, 2003, the Company redeemed the $300 million of 7.45% surplus notes outstanding scheduled to mature on November 1, 2023 at a redemption price of $311 million. The aggregate maturities of long-term debt for the Company are $131 million in 2004, $309 million in 2005, $160 million in 2006, $14 million in 2007, $24 million in 2008 and $1,417 million thereafter. F-45 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Short-term debt of the Company consisted of commercial paper with a weighted average interest rate of 1.1% and a weighted average maturity of 33 days at December 31, 2003. Short-term debt of the Company consisted of commercial paper with a weighted average interest rate of 1.4% and a weighted average maturity of 63 days at December 31, 2002. The Company also has other collateralized borrowings with a weighted average coupon rate of 5.07% and a weighted average maturity of 30 days at December 31, 2003. Such securities had a weighted average coupon rate of 5.83% and a weighted average maturity of 34 days at December 31, 2002. Interest expense related to the Company's indebtedness included in other expenses was $265 million, $208 million and $313 million for the years ended December 31, 2003, 2002 and 2001, respectively. 8. Shares Subject to Mandatory Redemption and Company-Obligated Mandatorily Redeemable Securities of Subsidiary Trusts GenAmerica Capital I. In June 1997, GenAmerica Corporation ("GenAmerica") issued $125 million of 8.525% capital securities through a wholly-owned subsidiary trust, GenAmerica Capital I. GenAmerica has fully and unconditionally guaranteed, on a subordinated basis, the obligation of the trust under the capital securities and is obligated to mandatorily redeem the securities on June 30, 2027. GenAmerica may prepay the securities any time after June 30, 2007. Capital securities outstanding were $119 million, net of unamortized discounts of $6 million, at both December 31, 2003 and 2002. Interest expense on these instruments is included in other expenses and was $11 million for each of the years ended December 31, 2003, 2002 and 2001. RGA Capital Trust I. In December 2001, a majority-owned subsidiary of the Company, RGA, through its wholly-owned trust, RGA Capital Trust I (the "Trust"), issued 4,500,000 Preferred Income Equity Redeemable Securities ("PIERS") Units. Each PIERS unit consists of (i) a preferred security issued by the trust, having a stated liquidation amount of $50 per unit, representing an undivided beneficial ownership interest in the assets of the Trust, which consist solely of junior subordinated debentures issued by RGA which have a principal amount at maturity of $50 and a stated maturity of March 18, 2051, and (ii) a warrant to purchase, at any time prior to December 15, 2050, 1.2508 shares of RGA stock at an exercise price of $50. The fair market value of the warrant on the issuance date was $14.87 and is detachable from the preferred security. RGA fully and unconditionally guarantees, on a subordinated basis, the obligations of the Trust under the preferred securities. The preferred securities and subordinated debentures were issued at a discount (original issue discount) to the face or liquidation value of $14.87 per security. The securities will accrete to their $50 face/liquidation value over the life of the security on a level yield basis. The weighted average effective interest rate on the preferred securities and the subordinated debentures is 8.25% per annum. Capital securities outstanding were $158 million, net of unamortized discount of $67 million, at both December 31, 2003 and 2002. 9. September 11, 2001 Tragedies On September 11, 2001, terrorist attacks occurred in New York, Washington, D.C. and Pennsylvania (the "tragedies") triggering a significant loss of life and property, which had an adverse impact on certain of the Company's businesses. The Company's original estimate of the total insurance losses related to the tragedies, which was recorded in the third quarter of 2001, was $208 million, net of income taxes of $117 million. As of December 31, 2003 and 2002, the Company's remaining liability for unpaid and future claims associated with the tragedies was $9 million and $47 million, respectively, principally related to disability coverages. This estimate has been and will continue to be subject to revision in subsequent periods, as claims are received from insureds and processed. Any revision to the estimate of losses in subsequent periods will affect net income in such periods. F-46 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) 10. Business Realignment Initiatives During the fourth quarter of 2001, the Company implemented several business realignment initiatives, which resulted from a strategic review of operations and an ongoing commitment to reduce expenses. The impact of these actions on a segment basis were charges of $399 million in Institutional, $97 million in Individual and $3 million in Auto & Home. The liability at December 31, 2003 and 2002 was $27 million and $40 million, in the Institutional segment and $9 million and $14 million, in the Individual segment, respectively. The remaining liability is due to certain contractual obligations. The remaining liability in the Individual segment as of December 31, 2002 does not include $4 million, related to MetLife Investors Group, Inc., a subsidiary sold to the Holding Company in December 2002. There was no liability remaining for Metlife Investors Group, Inc., as of December 31, 2003. 11. Income Taxes The provision for income taxes for continuing operations was as follows:
Years Ended December 31, -------------------- 2003 2002 2001 ---- ----- ---- (Dollars in millions) Current: Federal................ $357 $ 826 $(83) State and local........ 19 (18) (4) Foreign................ 2 (5) 15 ---- ----- ---- 378 803 (72) ---- ----- ---- Deferred: Federal................ 283 (322) 813 State and local........ 27 17 32 Foreign................ -- 12 1 ---- ----- ---- 310 (293) 846 ---- ----- ---- Provision for income taxes $688 $ 510 $774 ==== ===== ====
Reconciliations of the income tax provision at the U.S. statutory rate to the provision for income taxes as reported for continuing operations were as follows:
Years Ended December 31, -------------------- 2003 2002 2001 ----- ---- ---- (Dollars in millions) Tax provision at U.S. statutory rate.............. $ 845 $578 $754 Tax effect of: Tax exempt investment income................... (101) (86) (82) State and local income taxes................... 42 18 29 Foreign operations net of foreign income taxes. (17) 4 4 Prior year taxes............................... (25) (8) 36 Sales of businesses............................ -- -- 5 Other, net..................................... (56) 4 28 ----- ---- ---- Provision for income taxes........................ $ 688 $510 $774 ===== ==== ====
F-47 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Deferred income taxes represent the tax effect of the differences between the book and tax bases of assets and liabilities. Net deferred income tax assets and liabilities consisted of the following:
December 31, -------------------- 2003 2002 ------- ------- (Dollars in millions) Deferred income tax assets: Policyholder liabilities and receivables. $ 2,597 $ 3,020 Net operating losses..................... 245 187 Litigation related....................... 72 95 Other.................................... 179 286 ------- ------- 3,093 3,588 Less: Valuation allowance................ 16 14 ------- ------- 3,077 3,574 ------- ------- Deferred income tax liabilities: Investments.............................. 1,352 1,597 Deferred policy acquisition costs........ 2,815 2,699 Employee benefits........................ 151 65 Net unrealized investment gains.......... 1,397 1,124 Other.................................... 60 36 ------- ------- 5,775 5,521 ------- ------- Net deferred income tax liability........... $(2,698) $(1,947) ======= =======
Domestic net operating loss carryforwards amount to $650 million at December 31, 2003 and will expire beginning in 2013. Foreign net operating loss carryforwards amount to $55 million at December 31, 2003 and were generated in various foreign countries with expiration periods of five years to infinity. The Company has recorded a valuation allowance related to tax benefits of certain foreign net operating loss carryforwards. The valuation allowance reflects management's assessment, based on available information, that it is more likely than not that the deferred income tax asset for certain foreign net operating loss carryforwards will not be realized. The tax benefit will be recognized when management believes that it is more likely than not that these deferred income tax assets are realizable. The 2003 tax provision also includes an adjustment revising the estimate of income taxes for 2002. The Internal Revenue Service has audited the Company for the years through and including 1996. The Company is being audited for the years 1997, 1998 and 1999. The Company believes that any adjustments that might be required for open years will not have a material effect on its consolidated financial statements. 12. Commitments, Contingencies and Guarantees Litigation Sales Practices Claims Over the past several years, Metropolitan Life, New England Mutual Life Insurance Company ("New England Mutual") and General American Life Insurance Company ("General American") have faced numerous claims, including class action lawsuits, alleging improper marketing and sales of individual life insurance policies or annuities. These lawsuits are generally referred to as "sales practices claims." F-48 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) In December 1999, a federal court approved a settlement resolving sales practices claims on behalf of a class of owners of permanent life insurance policies and annuity contracts or certificates issued pursuant to individual sales in the United States by Metropolitan Life, MIAC or Metropolitan Tower Life Insurance Company between January 1, 1982 and December 31, 1997. The class includes owners of approximately six million in-force or terminated insurance policies and approximately one million in-force or terminated annuity contracts or certificates. Similar sales practices class actions against New England Mutual, with which Metropolitan Life merged in 1996, and General American, which was acquired in 2000, have been settled. In October 2000, a federal court approved a settlement resolving sales practices claims on behalf of a class of owners of permanent life insurance policies issued by New England Mutual between January 1, 1983 through August 31, 1996. The class includes owners of approximately 600,000 in-force or terminated policies. A federal court has approved a settlement resolving sales practices claims on behalf of a class of owners of permanent life insurance policies issued by General American between January 1, 1982 through December 31, 1996. An appellate court has affirmed the order approving the settlement. The class includes owners of approximately 250,000 in-force or terminated policies. Certain class members have opted out of the class action settlements noted above and have brought or continued non-class action sales practices lawsuits. In addition, other sales practices lawsuits have been brought. As of December 31, 2003, there are approximately 366 sales practices lawsuits pending against Metropolitan Life, approximately 40 sales practices lawsuits pending against New England Mutual and approximately 25 sales practices lawsuits pending against General American. Metropolitan Life, New England Mutual and General American continue to defend themselves vigorously against these lawsuits. Some individual sales practices claims have been resolved through settlement, won by dispositive motions, or, in a few instances, have gone to trial. Most of the current cases seek substantial damages, including in some cases punitive and treble damages and attorneys' fees. Additional litigation relating to the Company's marketing and sales of individual life insurance may be commenced in the future. The Metropolitan Life class action settlement did not resolve two putative class actions involving sales practices claims filed against Metropolitan Life in Canada, and these actions remain pending. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for sales practices claims against Metropolitan Life, New England Mutual and General American. Regulatory authorities in a small number of states have had investigations or inquiries relating to Metropolitan Life's, New England Mutual's or General American's sales of individual life insurance policies or annuities. Over the past several years, these and a number of investigations by other regulatory authorities were resolved for monetary payments and certain other relief. The Company may continue to resolve investigations in a similar manner. Asbestos-Related Claims Metropolitan Life is also a defendant in thousands of lawsuits seeking compensatory and punitive damages for personal injuries allegedly caused by exposure to asbestos or asbestos-containing products. Metropolitan Life has never engaged in the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products nor has Metropolitan Life issued liability or workers' compensation insurance to companies in the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products. Rather, these lawsuits have principally been based upon allegations relating to certain research, publication and F-49 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) other activities of one or more of Metropolitan Life's employees during the period from the 1920's through approximately the 1950's and have alleged that Metropolitan Life learned or should have learned of certain health risks posed by asbestos and, among other things, improperly publicized or failed to disclose those health risks. Metropolitan Life believes that it should not have legal liability in such cases. Legal theories asserted against Metropolitan Life have included negligence, intentional tort claims and conspiracy claims concerning the health risks associated with asbestos. Although Metropolitan Life believes it has meritorious defenses to these claims, and has not suffered any adverse monetary judgments in respect of these claims, due to the risks and expenses of litigation, almost all past cases have been resolved by settlements. Metropolitan Life's defenses (beyond denial of certain factual allegations) to plaintiffs' claims include that: (i) Metropolitan Life owed no duty to the plaintiffs--it had no special relationship with the plaintiffs and did not manufacture, produce, distribute or sell the asbestos products that allegedly injured plaintiffs; (ii) plaintiffs cannot demonstrate justifiable detrimental reliance; and (iii) plaintiffs cannot demonstrate proximate causation. In defending asbestos cases, Metropolitan Life selects various strategies depending upon the jurisdictions in which such cases are brought and other factors which, in Metropolitan Life's judgment, best protect Metropolitan Life's interests. Strategies include seeking to settle or compromise claims, motions challenging the legal or factual basis for such claims or defending on the merits at trial. In 2002 and 2003, trial courts in California, Utah and Georgia granted motions dismissing claims against Metropolitan Life on some or all of the above grounds. Other courts have denied motions brought by Metropolitan Life to dismiss cases without the necessity of trial. There can be no assurance that Metropolitan Life will receive favorable decisions on motions in the future. Metropolitan Life intends to continue to exercise its best judgment regarding settlement or defense of such cases, including when trials of these cases are appropriate. The following table sets forth the total number of asbestos personal injury claims pending against Metropolitan Life as of the dates indicated, the number of new claims during the years ended on those dates and the total settlement payments made to resolve asbestos personal injury claims during those years:
At or for the Years Ended December 31, ------------------------- 2003 2002 2001 -------- -------- ------- (Dollars in millions) Asbestos personal injury claims at year end (approximate) 111,700 106,500 89,000 Number of new claims during the year (approximate)....... 60,300 66,000 59,500 Settlement payments during the year (1).................. $ 84.2 $ 95.1 $ 90.7
- -------- (1)Settlement payments represent payments made by Metropolitan Life during the year in connection with settlements made in that year and in prior years. Amounts do not include Metropolitan Life's attorneys' fees and expenses and do not reflect amounts received from insurance carriers. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for asbestos-related claims. The ability of Metropolitan Life to estimate its ultimate asbestos exposure is subject to considerable uncertainty due to numerous factors. The availability of data is limited and it is difficult to predict with any certainty numerous variables that can affect liability estimates, including the number of future claims, the cost to resolve claims, the disease mix and severity of disease, the jurisdiction of claims filed, tort reform efforts and the impact of any possible future adverse verdicts and their amounts. Recent bankruptcies of other companies involved in asbestos litigation, as well as advertising by plaintiffs' asbestos lawyers, may result in an increase in the number of claims and the cost of resolving claims, as well as the number of trials and possible adverse verdicts Metropolitan Life may experience. Plaintiffs are seeking F-50 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) additional funds from defendants, including Metropolitan Life, in light of such recent bankruptcies by certain other defendants. In addition, publicity regarding legislative reform efforts may result in an increase in the number of claims. Metropolitan Life will continue to study its claims experience, review external literature regarding asbestos claims experience in the United States and consider numerous variables that can affect its asbestos liability exposure, including bankruptcies of other companies involved in asbestos litigation and legislative and judicial developments, to identify trends and to assess their impact on the recorded asbestos liability. The number of asbestos cases that may be brought or the aggregate amount of any liability that Metropolitan Life may ultimately incur is uncertain. Accordingly, it is reasonably possible that the Company's total exposure to asbestos claims may be greater than the liability recorded by the Company in its consolidated financial statements and that future charges to income may be necessary. While the potential future charges could be material in particular quarterly or annual periods in which they are recorded, based on information currently known by management, it does not believe any such charges are likely to have a material adverse effect on the Company's consolidated financial position. During the fourth quarter of 2002, Metropolitan Life analyzed its claims experience and reviewed external publications and numerous variables to identify trends and assessed their impact on its recorded asbestos liability. Certain publications suggested a trend towards more asbestos-related claims and a greater awareness of asbestos litigation generally by potential plaintiffs and plaintiffs' lawyers. Plaintiffs' lawyers continue to advertise heavily with respect to asbestos litigation. Bankruptcies and reorganizations of other defendants in asbestos litigation may increase the pressures on remaining defendants, including Metropolitan Life. Through the first nine months of 2002, the number of new claims received by Metropolitan Life was lower than those received during the comparable 2001 period. However, the number of new claims received by Metropolitan Life during the fourth quarter of 2002 was significantly higher than those received in the prior year quarter, resulting in more new claims being received by Metropolitan Life in 2002 than in 2001. Factors considered also included expected trends in filing cases, the dates of initial exposure of plaintiffs to asbestos, the likely percentage of total asbestos claims which included Metropolitan Life as a defendant and experience in claims settlement negotiations. Metropolitan Life also considered views derived from actuarial calculations it made in the fourth quarter of 2002. These calculations were made using, among other things, then current information regarding Metropolitan Life's claims and settlement experience, information available in public reports, as well as a study regarding the possible future incidence of mesothelioma. Based on all of the above information, including greater than expected claims experience in 2000, 2001 and 2002, Metropolitan Life expected to receive more claims in the future than it had previously expected. Previously, Metropolitan Life's liability reflected that the increase in asbestos-related claims was a result of an acceleration in the reporting of such claims; the liability now reflects that such an increase is also the result of an increase in the total number of asbestos-related claims expected to be received by Metropolitan Life. Accordingly, Metropolitan Life increased its recorded liability for asbestos-related claims by $402 million from approximately $820 million to $1,225 million at December 31, 2002. This total recorded asbestos-related liability (after the self-insured retention) is within the coverage of the excess insurance policies discussed below. The aforementioned analysis was updated through December 31, 2003. During 1998, Metropolitan Life paid $878 million in premiums for excess insurance policies for asbestos-related claims. The excess insurance policies for asbestos-related claims provide for recovery of losses up to $1,500 million, which is in excess of a $400 million self-insured retention. The asbestos-related policies are also subject to annual and per-claim sublimits. Amounts are recoverable under the policies annually with respect to claims paid during the prior calendar year. Although amounts paid by Metropolitan Life in any given year that may be recoverable in the next calendar year under the policies will be reflected as a reduction in the Company's F-51 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) operating cash flows for the year in which they are paid, management believes that the payments will not have a material adverse effect on the Company's liquidity. Each asbestos-related policy contains an experience fund and a reference fund that provides for payments to Metropolitan Life at the commutation date if the reference fund is greater than zero at commutation or pro rata reductions from time to time in the loss reimbursements to Metropolitan Life if the cumulative return on the reference fund is less than the return specified in the experience fund. The return in the reference fund is tied to performance of the Standard & Poor's 500 Index and the Lehman Brothers Aggregate Bond Index. A claim was made under the excess insurance policies in 2003 for the amounts paid with respect to asbestos litigation in excess of the retention. Based on performance of the reference fund, at December 31, 2002, the loss reimbursements to Metropolitan Life in 2003 and the recoverable with respect to later periods was $42 million less than the amount of the recorded losses. Such foregone loss reimbursements may be recovered upon commutation depending upon future performance of the reference fund. The foregone loss reimbursements were estimated to be $9 million with respect to 2002 claims and estimated to be $42 million in the aggregate. The $402 million increase in the recorded liability for asbestos claims less the foregone loss reimbursement adjustment of $42 million ($27 million, net of income tax) resulted in an increase in the recoverable of $360 million. At December 31, 2002, a portion ($136 million) of the $360 million recoverable was recognized in income while the remainder ($224 million) was recorded as a deferred gain which is expected to be recognized in income in the future over the estimated settlement period of the excess insurance policies. The $402 million increase in the recorded liability, less the portion of the recoverable recognized in income, resulted in a net expense of $266 million ($169 million, net of income tax). The $360 million recoverable may change depending on the future performance of the Standard & Poor's 500 Index and the Lehman Brothers Aggregate Bond Index. As a result of the excess insurance policies, $1,237 million is recorded as a recoverable at December 31, 2002 ($224 million of which is recorded as a deferred gain as mentioned above); the amount includes recoveries for amounts paid in 2002. If at some point in the future, the Company believes the liability for probable and estimable losses for asbestos-related claims should be increased, an expense would be recorded and the insurance recoverable would be adjusted subject to the terms, conditions and limits of the excess insurance policies. Portions of the change in the insurance recoverable would be recorded as a deferred gain and amortized into income over the estimated remaining settlement period of the insurance policies. In 2003, Metropolitan Life also has been named as a defendant in a small number of silicosis, welding and mixed dust cases. The cases are pending in Mississippi, Texas, Ohio, Pennsylvania, West Virginia, Louisiana, Kentucky, Georgia, Alabama, Illinois and Arkansas. The Company intends to defend itself vigorously against these cases. Demutualization Actions Several lawsuits were brought in 2000 challenging the fairness of Metropolitan Life's plan of reorganization, as amended (the "plan") and the adequacy and accuracy of Metropolitan Life's disclosure to policyholders regarding the plan. These actions name as defendants some or all of Metropolitan Life, the Holding Company, the individual directors, the New York Superintendent of Insurance (the "Superintendent") and the underwriters for MetLife, Inc.'s initial public offering, Goldman Sachs & Company and Credit Suisse First Boston. Five purported class actions pending in the New York state court in New York County were consolidated within the commercial part. In addition, there remained a separate purported class action in New York state court in New York County. On February 21, 2003, the defendants' motions to dismiss both the consolidated action and separate action were granted; leave to replead as a proceeding under Article 78 of New York's Civil Practice Law and Rules has been granted in the separate action. Plaintiffs in the consolidated action and separate action F-52 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) have filed notices of appeal. Another purported class action in New York state court in Kings County has been voluntarily held in abeyance by plaintiffs. The plaintiffs in the state court class actions seek injunctive, declaratory and compensatory relief, as well as an accounting and, in some instances, punitive damages. Some of the plaintiffs in the above described actions also have brought a proceeding under Article 78 of New York's Civil Practice Law and Rules challenging the Opinion and Decision of the Superintendent who approved the plan. In this proceeding, petitioners seek to vacate the Superintendent's Opinion and Decision and enjoin him from granting final approval of the plan. This case also is being held in abeyance by plaintiffs. Three purported class actions were filed in the United States District Court for the Eastern District of New York claiming violation of the Securities Act of 1933. The plaintiffs in these actions, which have been consolidated, claim that the Policyholder Information Booklets relating to the plan failed to disclose certain material facts and seek rescission and compensatory damages. Metropolitan Life's motion to dismiss these three cases was denied in 2001. On February 4, 2003, plaintiffs filed a consolidated amended complaint adding a fraud claim under the Securities Exchange Act of 1934. Metropolitan Life has served a motion to dismiss the consolidated amended complaint and a motion for summary judgment in this action. Metropolitan Life, the Holding Company and the individual defendants believe they have meritorious defenses to the plaintiffs' claims and are contesting vigorously all of the plaintiffs' claims in these actions. In 2001, a lawsuit was filed in the Superior Court of Justice, Ontario, Canada on behalf of a proposed class of certain former Canadian policyholders against the Holding Company, Metropolitan Life, and Metropolitan Life Insurance Company of Canada. Plaintiffs' allegations concern the way that their policies were treated in connection with the demutualization of Metropolitan Life; they seek damages, declarations, and other non-pecuniary relief. The defendants believe they have meritorious defenses to the plaintiffs' claims and will contest vigorously all of plaintiffs' claims in this matter. In July 2002, a lawsuit was filed in the United States District Court for the Eastern District of Texas on behalf of a proposed class comprised of the settlement class in the Metropolitan Life sales practices class action settlement approved in December 1999 by the United States District Court for the Western District of Pennsylvania. After the defendants' motion to transfer the lawsuit to the Western District of Pennsylvania was granted, plaintiffs filed an amended complaint alleging that the treatment of the cost of the sales practices settlement in connection with the demutualization of Metropolitan Life breached the terms of the settlement. Plaintiffs sought compensatory and punitive damages, as well as attorneys' fees and costs. In October 2003, the court granted defendants' motion to dismiss the action. Plaintiffs filed a notice of appeal to the United States Court of Appeals for the Third Circuit. In January 2004, the appeal was dismissed. Race-Conscious Underwriting Claims Insurance departments in a number of states initiated inquiries in 2000 about possible race-conscious underwriting of life insurance. These inquiries generally have been directed to all life insurers licensed in their respective states, including Metropolitan Life and certain of its affiliates. The New York Insurance Department has concluded its examination of Metropolitan Life concerning possible past race-conscious underwriting practices. Four purported class action lawsuits filed against Metropolitan Life in 2000 and 2001 alleging racial discrimination in the marketing, sale, and administration of life insurance policies have been consolidated in the United States District Court for the Southern District of New York. On April 28, 2003, the United States District Court approved a class-action settlement of the consolidated actions. Several persons filed notices of appeal from the order approving the settlement, but subsequently the appeals were dismissed. Metropolitan Life also has entered into settlement agreements to resolve the regulatory examination. Metropolitan Life recorded a charge in the fourth quarter of 2001 in connection with the anticipated resolution of these matters. The Company believes the remaining portion of the previously recorded charge is adequate to cover the costs associated with the resolution of these matters. F-53 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Sixteen lawsuits involving approximately 130 plaintiffs have been filed in federal and state court in Alabama, Mississippi and Tennessee alleging federal and/or state law claims of racial discrimination in connection with the sale, formation, administration or servicing of life insurance policies. Metropolitan Life is contesting vigorously plaintiffs' claims in these actions. Other In 2001, a putative class action was filed against Metropolitan Life in the United States District Court for the Southern District of New York alleging gender discrimination and retaliation in the MetLife Financial Services unit of the Individual segment. The plaintiffs were seeking unspecified compensatory damages, punitive damages, a declaration that the alleged practices were discriminatory and illegal, injunctive relief requiring Metropolitan Life to discontinue the alleged discriminatory practices, an order restoring class members to their rightful positions (or appropriate compensation in lieu thereof), and other relief. Plaintiffs filed a motion for class certification. Opposition papers were filed by Metropolitan Life. In August 2003, the court granted preliminary approval to a settlement of the lawsuit. At the fairness hearing held on November 6, 2003, the court approved the settlement of the lawsuit. Implementation of the settlement has commenced in 2004. A putative class action lawsuit is pending in the United States District Court for the District of Columbia, in which plaintiffs allege that they were denied certain ad hoc pension increases awarded to retirees under the Metropolitan Life retirement plan. The ad hoc pension increases were awarded only to retirees (i.e., individuals who were entitled to an immediate retirement benefit upon their termination of employment) and not available to individuals like these plaintiffs whose employment, or whose spouses' employment, had terminated before they became eligible for an immediate retirement benefit. The plaintiffs seek to represent a class consisting of former Metropolitan Life employees, or their surviving spouses, who are receiving deferred vested annuity payments under the retirement plan and who were allegedly eligible to receive the ad hoc pension increases awarded in 1977, 1980, 1989, 1992, 1996 and 2001, as well as increases awarded in earlier years. Metropolitan Life is vigorously defending itself against these allegations. A lawsuit was filed against Metropolitan Life in Ontario, Canada by Clarica Life Insurance Company ("Clarica") regarding the sale of the majority of Metropolitan Life's Canadian operation to Clarica in 1998. Clarica alleged that Metropolitan Life breached certain representations and warranties contained in the sale agreement, that Metropolitan Life made misrepresentations upon which Clarica relied during the negotiations and that Metropolitan Life was negligent in the performance of certain of its obligations and duties under the sale agreement. The parties settled the matter in January 2004. The settlement will have no material impact on the Company's consolidated financial results in 2004. A reinsurer of universal life policy liabilities of Metropolitan Life and certain of its affiliates commenced an arbitration proceeding and sought rescission, claiming that, during underwriting, material misrepresentations or omissions were made to the reinsurer. The reinsurer also sent a notice purporting to increase reinsurance premium rates. In December 2003, the arbitration panel denied the reinsurer's attempt to rescind the contract and granted the reinsurer's request to raise rates. As a result of the panel's rulings, liabilities ceded to the reinsurer were recaptured effective May 5, 2003. The recapture had no material impact on the Company's consolidated financial results in 2003. As previously reported, the SEC is conducting a formal investigation of New England Securities Corporation ("NES"), an indirect subsidiary of New England Life Insurance Company, in response to NES informing the SEC that certain systems and controls relating to one NES advisory program were not operating effectively. NES is cooperating fully with the SEC. F-54 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Prior to filing MetLife's June 30, 2003 Form 10-Q, MetLife announced a $31 million after-tax charge resulting from certain improperly deferred expenses at an affiliate, New England Financial. MetLife notified the SEC about the nature of this charge prior to its announcement. The SEC is pursuing a formal investigation of the matter and MetLife is fully cooperating with the investigation. The American Dental Association and two individual providers have sued MetLife, Mutual of Omaha and Cigna in a purported class action lawsuit brought in a Florida federal district court. The plaintiffs purport to represent a nationwide class of in-network providers who allege that their claims are being wrongfully reduced by downcoding, bundling, and the improper use and programming of software. The complaint alleges federal racketeering and various state law theories of liability. MetLife is vigorously defending the case and a motion to dismiss has been filed. A purported class action in which a policyholder seeks to represent a class of owners of participating life insurance policies is pending in state court in New York. Plaintiff asserts that Metropolitan Life breached her policy in the manner in which it allocated investment income across lines of business during a period ending with the 2000 demutualization. In August 2003, an appellate court affirmed the dismissal of fraud claims in this action. MetLife is vigorously defending the case. Regulatory bodies have contacted the Company and have requested information relating to market timing and late trading of mutual funds and variable insurance products. The Company believes that these inquiries are similar to those made to many financial services companies as part of an industry-wide investigation by various regulatory agencies into the practices, policies and procedures relating to trading in mutual fund shares. State Street Research Investment Services, one of the Company's indirect broker/dealer subsidiaries, has entered into a settlement with the National Association of Securities Dealers ("NASD") resolving all outstanding issues relating to its investigation. The SEC has commenced an investigation with respect to market timing and late trading in a limited number of privately-placed variable insurance contracts that were sold through General American. The Company is in the process of responding and is fully cooperating with regard to these information requests and investigations. The Company at the present time is not aware of any systemic problems with respect to such matters that may have a material adverse effect on the Company's consolidated financial position. Various litigation, claims and assessments against the Company, in addition to those discussed above and those otherwise provided for in the Company's consolidated financial statements, have arisen in the course of the Company's business, including, but not limited to, in connection with its activities as an insurer, employer, investor, investment advisor and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company's compliance with applicable insurance and other laws and regulations. Summary It is not feasible to predict or determine the ultimate outcome of all pending investigations and legal proceedings or provide reasonable ranges of potential losses, except as noted above in connection with specific matters. In some of the matters referred to above, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Although in light of these considerations it is possible that an adverse outcome in certain cases could have a material adverse effect upon the Company's consolidated financial position, based on information currently known by the Company's management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have such an effect. However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company's consolidated net income or cash flows in particular quarterly or annual periods. F-55 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Leases In accordance with industry practice, certain of the Company's income from lease agreements with retail tenants is contingent upon the level of the tenants' sales revenues. Additionally, the Company, as lessee, has entered into various lease and sublease agreements for office space, data processing and other equipment. Future minimum rental and sublease income, and minimum gross rental payments relating to these lease agreements were as follows:
Gross Rental Sublease Rental Income Income Payments ------ -------- -------- (Dollars in millions) 2004.............................................. $ 399 $16 $194 2005.............................................. $ 366 $15 $178 2006.............................................. $ 336 $14 $158 2007.............................................. $ 293 $12 $137 2008.............................................. $ 232 $10 $108 Thereafter........................................ $1,402 $13 $698
Commitments to Fund Partnership Investments The Company makes commitments to fund partnership investments in the normal course of business. The amounts of these unfunded commitments were $1,378 million and $1,667 million at December 31, 2003 and 2002, respectively. The Company anticipates that these amounts will be invested in the partnerships over the next three to five years. Guarantees In the course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties pursuant to which it may be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities, and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation ranging from $1 million to $800 million, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount due under these guarantees in the future. In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Also, the Company indemnifies other of its agents for liabilities incurred as a result of their representation of the Company's interests. Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount due under these indemnities in the future. The fair value of such indemnities, guarantees and commitments entered into was insignificant. The Company's recorded liability at December 31, 2003 and 2002 for indemnities, guarantees and commitments provided to third parties prior to January 1, 2003 was insignificant. F-56 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The Company writes credit default swap obligations requiring payment of principal due in exchange for the reference credit obligation, depending on the nature or occurrence of specified credit events for the referenced entities. In the event of a specified credit event, the Company's maximum amount at risk, assuming the value of the referenced credits become worthless, is $479 million at December 31, 2003. The credit default swaps expire at various times during the next four years. 13. Employee Benefit Plans Pension Benefit and Other Benefit Plans The Company is both the sponsor and administrator of defined benefit pension plans covering eligible employees and sales representatives of the Company. Retirement benefits are based upon years of credited service and final average or career average earnings history. The Company also provides certain postemployment benefits and certain postretirement health care and life insurance benefits for retired employees through insurance contracts. Substantially all of the Company's employees may, in accordance with the plans applicable to the postretirement benefits, become eligible for these benefits if they attain retirement age, with sufficient service, while working for the Company. F-57 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The Company uses a December 31 measurement date for all of its pension and postretirement benefit plans. Obligations, Funded Status and Net Periodic Benefit Costs
December 31, ------------------------------- Pension Benefits Other Benefits -------------- --------------- 2003 2002 2003 2002 ------ ------ ------- ------ (Dollars in millions) Change in projected benefit obligation: Projected benefit obligation at beginning of year...... $4,747 $4,426 $ 1,878 $1,669 Service cost........................................ 122 104 38 36 Interest cost....................................... 311 307 122 123 Acquisitions and divestitures....................... (1) (110) -- -- Actuarial losses.................................... 352 307 167 342 Curtailments and terminations....................... (7) (3) (4) (2) Change in benefits.................................. (1) -- (1) (168) Transfers in (out) of controlled group.............. (181) -- (77) -- Benefits paid....................................... (287) (284) (122) (122) ------ ------ ------- ------ Projected benefit obligation at end of year............ 5,055 4,747 2,001 1,878 ------ ------ ------- ------ Change in plan assets: Contract value of plan assets at beginning of year..... 4,008 4,161 965 1,169 Actual return on plan assets........................ 632 (185) 112 (92) Acquisitions and divestitures....................... (1) (110) -- -- Employer and participant contributions.............. 340 426 46 10 Transfers in (out) of controlled group.............. (186) -- (2) -- Benefits paid....................................... (287) (284) (122) (122) ------ ------ ------- ------ Contract value of plan assets at end of year........... 4,506 4,008 999 965 ------ ------ ------- ------ Under funded........................................... (549) (739) (1,002) (913) Unrecognized net asset at transition................... 1 -- -- -- Unrecognized net actuarial losses...................... 1,438 1,507 352 262 Unrecognized prior service cost........................ 82 101 (175) (208) ------ ------ ------- ------ Prepaid (accrued) benefit cost......................... $ 972 $ 869 $ (825) $ (859) ====== ====== ======= ====== Qualified plan prepaid pension cost.................... $1,296 $1,164 Non-qualified plan accrued pension cost................ (468) (351) Unamortized prior service cost......................... 14 -- Accumulated other comprehensive loss................... 130 56 ------ ------ Prepaid benefit cost................................... $ 972 $ 869 ====== ======
The aggregate projected benefit obligation and aggregate contract value of plan assets for the pension plans were as follows:
Qualified Plan Non-Qualified Plan Total ---------------- ----------------- ---------------- 2003 2002 2003 2002 2003 2002 ------- ------- ----- ----- ------- ------- (Dollars in millions) Aggregate projected benefit obligation....................... $(4,526) $(4,273) $(529) $(474) $(5,055) $(4,747) Aggregate contract value of plan assets (principally Company contracts)....................... 4,506 4,008 -- -- 4,506 4,008 ------- ------- ----- ----- ------- ------- Under funded....................... $ (20) $ (265) $(529) $(474) $ (549) $ (739) ======= ======= ===== ===== ======= =======
F-58 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The accumulated benefit obligation for all defined benefit pension plans was $4,869 million and $4,224 million at December 31, 2003 and 2002, respectively. Information for pension plans with an accumulated benefit obligation in excess of plan assets:
December 31, ------------------ 2003 2002 ---- ---- (Dollars in millions) Projected benefit obligation.. $546 $489 Accumulated benefit obligation $468 $357 Fair value of plan assets..... $ 12 $ 9
Information for pension and postretirement plans with a projected benefit obligation in excess of plan assets:
December 31, ------------------------------------ Pension Benefits Other Benefits ------------------- ---------------- 2003 2002 2003 2002 ------ ------ ------ ------ (Dollars in millions) Projected benefit obligation $5,046 $4,739 $2,001 $1,878 Fair value of plan assets... $4,486 $3,991 $1,003 $ 965
The components of net periodic benefit cost were as follows:
Pension Benefits Other Benefits ------------------- ----------------- 2003 2002 2001 2003 2002 2001 ----- ----- ----- ---- ---- ----- (Dollars in millions) Service cost.................................. $ 122 $ 104 $ 104 $ 38 $ 36 $ 34 Interest cost................................. 311 307 308 122 123 115 Expected return on plan assets................ (331) (354) (402) (71) (93) (108) Amortization of prior actuarial losses (gains) 102 33 (2) (12) (9) (27) Curtailment cost.............................. 10 11 21 3 4 6 ----- ----- ----- ---- ---- ----- Net periodic benefit cost..................... $ 214 $ 101 $ 29 $ 80 $ 61 $ 20 ===== ===== ===== ==== ==== =====
Assumptions Assumptions used in determining benefit obligations were as follows:
December 31, ------------------------------------ Pension Benefits Other Benefits --------------- -------------------- 2003 2002 2003 2002 --------- ----- --------- ---------- Discount rate................ 6.1%-6.5% 6.75% 6.1%-6.5% 6.5%-6.75% Rate of compensation increase 4%-8% 4%-8% N/A N/A
Assumptions used in determining net periodic benefit cost were as follows:
December 31, ---------------------------------------- Pension Benefits Other Benefits ------------------ --------------------- 2003 2002 2003 2002 ---------- ------- ---------- ---------- Discount rate.................. 6.5%-6.75% 6%-7.4% 6.5%-6.75% 6.5%-7.40% Expected rate of return on plan assets....................... 8%-8.75% 8%-9% 3.79%-8.5% 5.2%-9 % Rate of compensation increase.. 4%-8 % 4%-8% N/A N/A
F-59 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The discount rate is based on the yield of a hypothetical portfolio of high-quality debt instruments available on the valuation date, which would provide the necessary future cash flows to pay the aggregate projected benefit obligation when due. The expected rate of return on plan assets is based on anticipated performance of the various asset sectors in which the plan invests, weighted by target allocation percentages. Anticipated future performance is based on long-term historical returns of the plan assets by sector, adjusted for the Company's long-term expectations on the performance of the markets. While the precise expected return derived using this approach will fluctuate from year to year, the Company's policy is to hold this long-term assumption constant as long as it remains within a reasonable tolerance from the derived rate. The assumed health care cost trend rates used in measuring the accumulated nonpension postretirement benefit obligation were as follows:
December 31, ----------------------------------------------- 2003 2002 ------------------------ ---------------------- Pre-Medicare eligible claims 8.5% down to 5% in 2010 9% down to 5% in 2010 Medicare eligible claims.... 10.5% down to 5% in 2014 11% down to 5% in 2014
Assumed health care cost trend rates may have a significant effect on the amounts reported for health care plans. A one-percentage point change in assumed health care cost trend rates would have the following effects:
One Percent One Percent Increase Decrease ----------- ----------- (Dollars in millions) Effect on total of service and interest cost components $ 10 $ (9) Effect of accumulated postretirement benefit obligation $108 $(105)
Plan Assets The weighted average allocation of pension plan and other benefit plan assets is as follows:
December 31, ------------------------------ Pension Benefits Other Benefits --------------- ------------- 2003 2002 2003 2002 Asset Category ---- ---- ---- ---- Equity securities 52% 39% 38% 36% Fixed maturities. 39% 51% 61% 63% Real estate...... 9% 10% -- -- Other............ -- -- 1% 1% --- --- --- --- Total......... 100% 100% 100% 100% === === === ===
The weighted average target allocation of pension plan and other benefit plan assets for 2004 is as follows:
Pension Benefits Other Benefits ---------------- -------------- Asset Category Equity securities 35%-60% 25%-40% Fixed maturities. 35%-70% 50%-80% Real estate...... 0%-15% N/A Other............ 0%-20% 0%-10%
Target allocations of assets are determined with the objective of maximizing returns and minimizing volatility of net assets through adequate asset diversification and partial liability immunization. Adjustments are made to target allocations based on the Company's assessment of the impact of economic factors and market conditions. F-60 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Cash Flows The Company expects to contribute $488 million to its pension plans and $87 million to its other benefit plans during 2004. The following benefit payments, which reflect expected future service as appropriate, are expected to be paid:
Pension Benefits Other Benefits ---------------- -------------- (Dollars in millions) 2004..... $ 326 $115 2005..... $ 297 $119 2006..... $ 309 $123 2007..... $ 313 $128 2008..... $ 321 $131 2009-2013 $1,771 $711
Savings and Investment Plans The Company sponsors savings and investment plans for substantially all employees under which the Company matches a portion of employee contributions. The Company contributed $59 million, $58 million and $60 million for the years ended December 31, 2003, 2002 and 2001, respectively. 14. Equity Preferred Stock On December 16, 2003, the Holding Company contributed 2,532,600 shares of common stock to the Company in exchange for 93,402 shares of Series A Cumulative Preferred Stock ("the Preferred Shares"). Holders of the Preferred Shares are entitled to receive cumulative cash dividends at the annual applicable rate of 7% times the Liquidation Preference of $1,000 per share payable quarterly, when and if declared by the Board of Directors. Holders of the Preferred Shares have no voting rights, except as required by applicable law. The Preferred Shares rank senior to the common stock. The Preferred Shares are redeemable at the option of the Company at any time, to the extent that any such redemption shall not violate applicable provisions of the laws of the State of Missouri. The Preferred Shares are redeemable at a price equal to the par value per share plus any amount equal to accumulated and unpaid dividends. Dividend Restrictions Under the New York Insurance Law, Metropolitan Life is permitted without prior insurance regulatory clearance to pay a stockholder dividend to the Holding Company as long as the aggregate amount of all such dividends in any calendar year does not exceed the lesser of (i) 10% of its surplus to policyholders as of the immediately preceding calendar year, and (ii) its statutory net gain from operations for the immediately preceding calendar year (excluding realized capital gains). Metropolitan Life will be permitted to pay a cash dividend to the Holding Company in excess of the lesser of such two amounts only if it files notice of its intention to declare such a dividend and the amount thereof with the Superintendent and the Superintendent does not disapprove the distribution. Under the New York Insurance Law, the Superintendent has broad discretion in determining whether the financial condition of a stock life insurance company would support the payment of such dividends to its stockholders. The Department has established informal guidelines for such determinations. F-61 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The guidelines, among other things, focus on the insurer's overall financial condition and profitability under statutory accounting practices. For the year ended December 31, 2003, Metropolitan Life paid to MetLife, Inc. $698 million in dividends for which prior insurance regulatory clearance was not required and $750 million in special dividends, as approved by the Superintendent. For the year ended December 31, 2002, Metropolitan Life paid to MetLife, Inc. $535 million in dividends for which prior insurance regulatory clearance was not required and $369 million in special dividends, as approved by the Superintendent. For the year ended December 31, 2001, Metropolitan Life paid to MetLife, Inc. $721 million in dividends for which prior insurance regulatory clearance was not required and $3,033 million in special dividends, as approved by the Superintendent. At December 31, 2003, the maximum amount of the dividend, which may be paid to the Holding Company from Metropolitan Life in 2004, without prior regulatory approval, is $798 million. Stock Compensation Plans Under the MetLife, Inc. 2000 Stock Incentive Plan (the "Stock Incentive Plan"), awards granted may be in the form of non-qualified or incentive stock options qualifying under Section 422A of the Internal Revenue Code. Under the MetLife, Inc. 2000 Directors Stock Plan, as amended, (the "Directors Stock Plan") awards granted may be in the form of stock awards or non-qualified stock options or a combination of the foregoing to outside Directors of MetLife. The aggregate number of shares of stock that may be awarded under the Stock Incentive Plan is subject to a maximum limit of 37,823,333 shares for the duration of the plan. The Directors Stock Plan has a maximum limit of 500,000 share awards. All options granted have an exercise price equal to the fair market value price of MetLife common stock on the date of grant, and an option's maximum term is ten years. Certain options under the Stock Incentive Plan become exercisable over a three-year period commencing with date of grant, while other options become exercisable three years after the date of grant. Options issued under the Directors Stock Plan are exercisable immediately. Effective January 1, 2003, MetLife and the Company elected to apply the fair value method of accounting and use the prospective transition method for stock options granted by MetLife subsequent to December 31, 2002. As permitted under SFAS 148, options granted prior to January 1, 2003 will continue to be accounted for under APB 25. MetLife allocated 100% of stock option expense to the Company in each of the years ended December 31, 2003, 2002 and 2001. Had compensation cost for MetLife Stock Incentive Plan and Directors Stock Plan been determined based on fair value at the grant date for awards under those plans consistent with the method of SFAS 123, the Company's net income would have been reduced to the following pro-forma amounts:
Years Ended December 31, ---------------------- 2003 2002 2001 ------ ------ ------ (Dollars in millions) Net Income.......................................................... $2,001 $1,612 $1,487 Add: Stock-based employee compensation expense included in reported net income, net of related tax effects................... 13 1 1 Deduct: Total Stock-based employee compensation determined under fair value based method for all awards, net of related tax effects (42) (33) (20) ------ ------ ------ Pro forma net income (1) (2)........................................ $1,972 $1,580 $1,468 ====== ====== ======
- -------- (1)The pro forma earnings disclosures are not necessarily representative of the effects on net income. (2)Includes MetLife's ownership share of stock compensation costs related to the RGA incentive stock plan and the stock compensation costs related to the incentive stock plans at SSRM Holdings, Inc. determined in accordance with SFAS 123. F-62 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The fair value of each option grant is estimated on the date of the grant using the Black-Scholes options-pricing model with the following weighted average assumptions used for grants for the:
Years Ended December 31, --------------------------------- 2003 2002 2001 ----------- ----------- --------- Dividend yield.......... 0.68%-0.79% 0.68% 0.68% Risk-free rate of return 2.71%-4.03% 4.74%-5.52% 5.72% Volatility.............. 37.0%-38.7% 25.3%-30.3% 31.60% Expected duration....... 6 years 6 years 4-6 years
Statutory Equity and Income Applicable insurance department regulations require that the insurance subsidiaries prepare statutory financial statements in accordance with statutory accounting practices prescribed or permitted by the insurance department of the state of domicile. Statutory accounting practices primarily differ from GAAP by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions, reporting surplus notes as surplus instead of debt and valuing securities on a different basis. As of December 31, 2001, New York Statutory Accounting Practices did not provide for deferred income taxes. The Department has adopted a modification to its regulations, effective December 31, 2002, with respect to the admissibility of deferred taxes by New York insurers, subject to certain limitations. Statutory net income of Metropolitan Life, as filed with the Department, was $2,169 million, $1,455 million and $2,782 million for the years ended December 31, 2003, 2002 and 2001, respectively; statutory capital and surplus, as filed, was $7,978 million and $6,986 million at December 31, 2003 and 2002, respectively. The National Association of Insurance Commissioners ("NAIC") adopted the Codification of Statutory Accounting Principles (the "Codification"), which is intended to standardize regulatory accounting and reporting to state insurance departments, and became effective January 1, 2001. However, statutory accounting principles continue to be established by individual state laws and permitted practices. The Department required adoption of the Codification, with certain modifications, for the preparation of statutory financial statements effective January 1, 2001. Further modifications by state insurance departments may impact the effect of the Codification on the statutory capital and surplus of Metropolitan Life and the Holding Company's other insurance subsidiaries. F-63 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Other Comprehensive Income The following table sets forth the reclassification adjustments required for the years ended December 31, 2003, 2002 and 2001 in other comprehensive income (loss) that are included as part of net income for the current year that have been reported as a part of other comprehensive income (loss) in the current or prior year:
Years Ended December 31, ---------------------- 2003 2002 2001 ----- ------- ------ (Dollars in millions) Holding gains on investments arising during the year............................... $ 835 $ 2,936 $1,311 Income tax effect of holding gains................................................. (344) (971) (518) Reclassification adjustments: Recognized holding losses included in current year income....................... 311 307 555 Amortization of premiums and accretion of discounts associated with investments................................................................... (152) (440) (475) Recognized holding gains allocated to other policyholder amounts................ (259) (139) (33) Income tax effect............................................................... 40 85 (18) Allocation of holding losses on investments relating to other policyholder amounts. (317) (2,453) (158) Income tax effect of allocation of holding losses to other policyholder amounts.... 125 814 61 Unrealized investment gains (losses) of subsidiary at date of sale................. 269 68 (173) Deferred income taxes on unrealized investment gains (losses) of subsidiary at date of sale.......................................................................... (94) (15) 64 ----- ------- ------ Net unrealized investment gains.................................................... 414 192 616 ----- ------- ------ Foreign currency translation adjustments arising during the year................... 174 137 (58) Foreign currency translation adjustments of subsidiary at date of sale............. -- (65) 19 ----- ------- ------ Foreign currency translation adjustment............................................ 174 72 (39) ----- ------- ------ Minimum pension liability adjustments arising during the year...................... (81) -- (18) Minimum pension liability adjustments of subsidiary at date of sale................ (1) -- -- ----- ------- ------ Minimum pension liability adjustment............................................... (82) -- (18) ----- ------- ------ Other comprehensive income......................................................... $ 506 $ 264 $ 559 ===== ======= ======
15. Other Expenses Other expenses were comprised of the following:
Years Ended December 31, ------------------------- 2003 2002 2001 ------- ------- ------- (Dollars in millions) Compensation....................................................... $ 2,038 $ 2,423 $ 2,447 Commissions........................................................ 1,710 1,938 1,649 Interest and debt issue costs...................................... 313 242 312 Amortization of policy acquisition costs (excludes amounts directly related to net investment gains (losses) of $(26), $11 and $21, respectively).................................................... 1,381 1,501 1,434 Capitalization of policy acquisition costs......................... (1,982) (2,227) (2,018) Rent, net of sublease income....................................... 226 289 280 Minority interest.................................................. 116 74 57 Other.............................................................. 2,034 2,303 2,759 ------- ------- ------- Total other expenses............................................ $ 5,836 $ 6,543 $ 6,920 ======= ======= =======
F-64 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) 16. Business Segment Information The Company provides insurance and financial services to customers in the United States, Canada, Central America, South America, Europe, South Africa, Asia and Australia. The Company's business is divided into six major segments: Institutional, Individual, Auto & Home, International, Reinsurance and Asset Management. These segments are managed separately because they either provide different products and services, require different strategies or have different technology requirements. Institutional offers a broad range of group insurance and retirement and savings products and services, including group life insurance, non-medical health insurance, such as short and long-term disability, long-term care, and dental insurance, and other insurance products and services. Individual offers a wide variety of individual insurance and investment products, including life insurance, annuities and mutual funds. Auto & Home provides insurance coverages, including private passenger automobile, homeowners and personal excess liability insurance. International provides life insurance, accident and health insurance, annuities and retirement and savings products to both individuals and groups, and auto and homeowners coverage to individuals. Reinsurance provides primarily reinsurance of life and annuity policies in North America and various international markets. Additionally, reinsurance of critical illness policies is provided in select international markets. Asset Management provides a broad variety of asset management products and services to individuals and institutions. F-65 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Set forth in the tables below is certain financial information with respect to the Company's operating segments as of and for the years ended December 31, 2003, 2002 and 2001. The accounting policies of the segments are the same as those of the Company, except for the method of capital allocation and the accounting for gains and losses from intercompany sales, which are eliminated in consolidation. The Company allocates capital to each segment based upon an internal capital allocation system that allows the Company to more effectively manage its capital. The Company evaluates the performance of each operating segment based upon net income excluding certain net investment gains and losses, net of income taxes, and the impact from the cumulative effect of changes in accounting, net of income taxes. Scheduled periodic settlement payments on derivative instruments not qualifying for hedge accounting are included in net investment gains (losses). The Company allocates certain non-recurring items (e.g., expenses associated with the resolution of proceedings alleging race-conscious underwriting practices, sales practices claims and claims for personal injuries caused by exposure to asbestos or asbestos-containing products) to Corporate & Other.
At or for the Year Ended Auto & Asset Corporate December 31, 2003 Institutional Individual Home International Reinsurance Management & Other Total - ------------------------ ------------- ---------- ------ ------------- ----------- ---------- --------- -------- (Dollars in millions) Premiums.......................... $ 9,093 $ 4,242 $2,168 $ 6 $ 2,648 $ -- $ (6) $ 18,151 Universal life and investment-type product policy fees.............. 633 1,287 -- 1 -- -- -- 1,921 Net investment income............. 4,037 5,592 119 50 431 66 62 10,357 Other revenues.................... 592 204 23 14 48 143 38 1,062 Net investment gains (losses)..... (204) (127) (4) (7) 31 9 15 (287) Policyholder benefits and claims.. 9,931 5,020 1,604 16 2,102 -- 4 18,677 Interest credited to policyholder account balances................. 914 1,280 -- 1 184 -- -- 2,379 Policyholder dividends............ 198 1,697 -- 3 -- -- (1) 1,897 Other expenses.................... 1,782 2,464 572 24 741 182 71 5,836 Income from continuing operations before provision for income taxes............................ 1,326 737 130 20 131 36 35 2,415 Income from discontinued operations, net of income taxes............................ 30 30 -- -- -- -- 240 300 Cumulative effect of change in accounting, net of income taxes............................ (26) -- -- -- -- -- -- (26) Net income........................ 849 519 111 13 86 22 401 2,001 Total assets...................... 109,492 133,335 -- 1,069 12,879 175 24,315 281,265 Deferred policy acquisition costs............................ 739 7,363 -- 6 2,122 -- 2 10,232 Goodwill, net..................... 59 42 -- -- 99 18 -- 218 Separate account assets........... 35,632 28,028 -- -- 13 -- (12) 63,661 Policyholder liabilities.......... 61,565 88,096 -- 297 9,272 -- (579) 158,651 Separate account liabilities...... 35,632 28,028 -- -- 13 -- (12) 63,661
F-66 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued)
At or for the Year Ended Auto & Asset Corporate December 31, 2002 Institutional Individual Home International Reinsurance Management & Other Total - ------------------------ ------------- ---------- ------ ------------- ----------- ---------- --------- -------- (Dollars in millions) Premiums.......................... $ 8,245 $ 4,419 $2,828 $992 $1,984 $ -- $ (7) $ 18,461 Universal life and investment-type product policy fees.............. 623 1,267 -- 37 -- -- -- 1,927 Net investment income............. 3,915 6,019 177 241 378 59 (158) 10,631 Other revenues.................... 607 454 26 10 42 166 49 1,354 Net investment gains (losses)..... (497) (110) (46) (9) 7 (4) (38) (697) Policyholder benefits and claims.. 9,337 5,162 2,020 821 1,517 -- 3 18,860 Interest credited to policyholder account balances................. 930 1,608 -- 28 146 -- (1) 2,711 Policyholder dividends............ 115 1,769 (1) 28 -- -- -- 1,911 Other expenses.................... 1,529 2,543 794 373 616 211 477 6,543 Income (loss) from continuing operations before provision (benefit) for income taxes....... 982 967 172 21 132 10 (633) 1,651 Income from discontinued operations, net of income taxes............................ 121 199 -- -- -- -- 151 471 Net income (loss)................. 759 811 131 21 86 6 (202) 1,612 Total assets...................... 94,911 120,284 4,957 795 9,458 191 18,840 249,436 Deferred policy acquisition costs............................ 608 7,448 175 5 1,429 -- 1 9,666 Goodwill, net..................... 62 73 156 -- 96 18 -- 405 Separate account assets........... 31,935 21,982 -- -- 11 -- (16) 53,912 Policyholder liabilities.......... 55,460 84,844 2,673 248 6,734 -- (343) 149,616 Separate account liabilities...... 31,935 21,982 -- -- 11 -- (16) 53,912 At or for the Year Ended Auto & Asset Corporate December 31, 2001 Institutional Individual Home International Reinsurance Management & Other Total - ------------------------ ------------- ---------- ------ ------------- ----------- ---------- --------- -------- (Dollars in millions) Premiums.......................... $ 7,288 $ 4,531 $2,755 $788 $1,664 $ -- $ (3) $ 17,023 Universal life and investment-type product policy fees.............. 592 1,245 -- 38 -- -- (1) 1,874 Net investment income............. 3,966 6,107 200 256 349 71 105 11,054 Other revenues.................... 649 527 22 16 35 198 85 1,532 Net investment gains (losses)..... (16) 864 (17) (16) (10) 25 121 951 Policyholder benefits and claims.. 8,924 5,213 2,121 632 1,373 -- 2 18,265 Interest credited to policyholder account balances................. 1,012 1,850 -- 51 122 -- -- 3,035 Policyholder dividends............ 259 1,767 -- 34 -- -- -- 2,060 Other expenses.................... 1,746 2,763 800 315 478 252 566 6,920 Income (loss) from continuing operations before provision (benefit) for income taxes....... 538 1,681 39 50 65 42 (261) 2,154 Income from discontinued operations, net of income taxes............................ 21 36 -- -- -- -- 50 107 Net income (loss)................. 383 1,092 41 16 39 27 (111) 1,487
F-67 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The following table indicates amounts in the current and prior years that have been classified as discontinued operations in accordance with SFAS 144:
Year ended December 31, ----------------------- 2003 2002 2001 ---- ---- ---- (Dollars in millions) Net investment income Institutional............................... $ 2 $ 33 $ 34 Individual.................................. 5 50 56 Corporate & Other........................... 45 77 79 ---- ---- ---- Total net investment income............. $ 52 $160 $169 ==== ==== ==== Net investment gains (losses) Institutional............................... $ 45 $156 $ -- Individual.................................. 43 262 -- Corporate & Other........................... 333 164 -- ---- ---- ---- Total net investment gains (losses)..... $421 $582 $ -- ==== ==== ==== Interest Expense Individual.................................. $ 1 $ 1 $ -- ---- ---- ---- Total interest expense.................. $ 1 $ 1 $ -- ==== ==== ====
Economic Capital. Beginning in 2003, the Company changed its methodology of allocating capital to its business segments from Risk-Based Capital ("RBC") to Economic Capital. Prior to 2003, the Company's business segments' allocated equity was primarily based on RBC, an internally developed formula based on applying a multiple to the National Association of Insurance Commissioners Statutory Risk-Based Capital and included certain adjustments in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Economic Capital is an internally developed risk capital model, the purpose of which is to measure the risk in the business and to provide a basis upon which capital is deployed. The Economic Capital model accounts for the unique and specific nature of the risks inherent in the Company's businesses. This is in contrast to the standardized regulatory RBC formula, which is not as refined in its risk calculations with respect to the nuances of the Company's businesses. The change in methodology is being applied prospectively. This change has and will continue to impact the level of net investment income and net income of each of the Company's business segments. A portion of net investment income is credited to the segments based on the level of allocated equity. This change in methodology of allocating equity does not impact the Company's consolidated net investment income or net income. F-68 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The following table presents actual and pro forma net investment income with respect to the Company's segments for the years ended December 31, 2002 and 2001. The amounts shown as pro forma reflect net investment income that would have been reported in these years had the Company allocated capital based on Economic Capital rather than on the basis of RBC. Net Investment Income
For the Years Ended December 31, ------------------------------------ 2002 2001 ----------------- ----------------- Actual Pro forma Actual Pro forma ------- --------- ------- --------- (Dollars in millions) Institutional.... $ 3,915 $ 3,977 $ 3,966 $ 4,040 Individual....... 6,019 5,929 6,107 6,020 Auto & Home...... 177 160 200 184 International.... 241 204 256 240 Reinsurance...... 378 341 349 313 Asset Management. 59 71 71 89 Corporate & Other (158) (51) 105 168 ------- ------- ------- ------- Total......... $10,631 $10,631 $11,054 $11,054 ======= ======= ======= =======
The Auto & Home segment's results of operations for the year ended December 31, 2003 consists of Metropolitan Property and Casualty Insurance Company and its subsidiaries until October 2003 when it was sold to MetLife. See Note 17. The Reinsurance segment's results of operations for the year ended December 31, 2003 include RGA's coinsurance agreement under which it assumed the traditional U.S. life reinsurance business of Allianz Life Insurance Company of North America. The transaction added approximately $246 million of premiums and $11 million of pre-tax income, excluding minority interest expense. The Individual segment's results of operations for the year ended December 31, 2003 includes a second quarter after-tax charge of $31 million resulting from certain improperly deferred expenses at an affiliate, New England Financial. The Institutional, Individual, Reinsurance and Auto & Home segments for the year ended December 31, 2001 include $287 million, $24 million, $9 million and $5 million, respectively, of pre-tax losses associated with the September 11, 2001 tragedies. See Note 9. The Institutional, Individual and Auto & Home segments include $399 million, $97 million and $3 million, respectively, in pre-tax charges associated with business realignment initiatives for the year ended December 31, 2001. See Note 10. The Individual segment for the year ended December 31, 2001, includes $118 million of pre-tax expenses associated with the establishment of a policyholder liability for certain group annuity policies. For the year ended December 31, 2001, pre-tax gross investment gains (losses) of $1,027 million, $142 million and $357 million resulting from the sale of certain real estate properties to MIAC are included in the Individual segment, Institutional segment and Corporate & Other, respectively. F-69 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) As part of the GenAmerica acquisition in 2000, the Company acquired Conning Corporation ("Conning"), the results of which are included in the Asset Management segment due to the types of products and strategies employed by the entity from its acquisition date to July 2001, the date of its disposition. The Company sold Conning, receiving $108 million in the transaction and reported a gain of approximately $25 million, in the third quarter of 2001. Corporate & Other includes various start-up and run-off entities, as well as the elimination of all intersegment amounts. The elimination of intersegment amounts relates to intersegment loans, which bear interest rates commensurate with related borrowings, as well as intersegment reinsurance transactions. Net investment income and net investment gains (losses) are based upon the actual results of each segment's specifically identifiable asset portfolio adjusted for allocated capital. Other costs and operating costs were allocated to each of the segments based upon: (i) a review of the nature of such costs; (ii) time studies analyzing the amount of employee compensation costs incurred by each segment; and (iii) cost estimates included in the Company's product pricing. Revenues derived from any customer did not exceed 10% of consolidated revenues for the years ended December 31, 2003, 2002 and 2001. Revenues from U.S. operations were $30,199 million, $29,723 million and $30,812 million for the years ended December 31, 2003, 2002 and 2001, respectively, which represented 97%, 94% and 95%, respectively, of consolidated revenues. 17. Acquisitions and Dispositions In September 2003, a subsidiary of the Company, RGA, announced a coinsurance agreement under which it assumed the traditional U.S. life reinsurance business of Allianz Life Insurance Company of North America. This transaction closed during the fourth quarter of 2003 with an effective date retroactive to July 1, 2003. The transaction added approximately $278 billion of life reinsurance in-force, $246 million of premiums and $11 million of income before income tax expense, excluding minority interest expense, to the fourth quarter of 2003. In October 2003, the Company completed its sales of Met Tower Life Insurance Company, MetLife General Insurance Agency, Inc., MetLife Securities, Inc., and N.L. Holding Corporation to the Holding Company. The amount received in excess of book value of $28 million was recorded as a capital contribution from the Holding Company. Total assets and total liabilities of the entities sold at the date of sale were $293 million and $195 million, respectively. Total revenues of the entities sold included in the consolidated statements of income were $156 million, $218 million and $219 million for the years ended December 31, 2003, 2002 and 2001, respectively. In October 2003, the Company sold Metropolitan Property and Casualty Insurance Company's common stock to the Holding Company for $1,990 million. The amount received in excess of book value of $120 million was recorded as a capital contribution from the Holding Company. Total assets and total liabilities of the entities sold at the date of sale were $5,806 million and $3,400 million, respectively. Total revenues of the entities sold included in the consolidated statements of income were $2,343 million, $3,013 million and $2,973 million for the years ended December 31, 2003, 2002 and 2001, respectively. In December 2002, the Company completed its sales of Cova Corporation, MetLife Investors Group, Inc., MetLife International Holdings, Inc., Walnut Street Securities, Inc., Seguros Genesis S.A., MetLife Pensiones S.A. and Metropolitan Life Seguros de Vida S.A. to the Holding Company. The amount received in excess of book value of $149 million was recorded as a capital contribution from the Holding Company. Total assets and F-70 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) total liabilities of the entities sold at the date of sale were $17,853 million and $16,545 million, respectively. Total revenues of the entities sold included in the consolidated statements of income were $1,648 million and $1,463 million for the years ended December 31, 2002 and 2001, respectively. In December 2001, the Company completed its sale of MIAC to the Holding Company. The amount received in excess of book value of $96 million was recorded as a capital contribution from the Holding Company. Total assets and total liabilities of MIAC at the date of sale were $6,240 million and $5,219 million, respectively. Total revenues of MIAC included in the consolidated statements of income were $391 million for the year ended December 31, 2001. In July 2001, the Company completed its sale of Conning, an affiliate acquired in the acquisition of GenAmerica Financial Corporation in 2000. Conning specialized in asset management for insurance company investment portfolios and investment research. 18. Discontinued Operations The Company actively manages its real estate portfolio with the objective to maximize earnings through selective acquisitions and dispositions. In accordance with SFAS 144, income related to real estate classified as held-for-sale on or after January 1, 2002 is presented as discontinued operations. These assets are carried at lower of cost or market. The following table presents the components of income from discontinued operations:
Years Ended December 31, ----------------------- 2003 2002 2001 ---- ----- ----- (Dollars in millions) Investment income...................... $120 $ 458 $ 508 Investment expense..................... (68) (298) (339) Net investment gains (losses).......... 421 582 -- ---- ----- ----- Total revenues...................... 473 742 169 Interest Expense....................... 1 1 -- Provision for income taxes............. 172 270 62 ---- ----- ----- Income from discontinued operations. $300 $ 471 $ 107 ==== ===== =====
The carrying value of real estate related to discontinued operations was $89 million and $799 million at December 31, 2003 and 2002, respectively. See Note 16 for discontinued operations by business segment. F-71 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) 19. Fair Value Information The estimated fair values of financial instruments have been determined by using available market information and the valuation methodologies described below. Considerable judgment is often required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein may not necessarily be indicative of amounts that could be realized in a current market exchange. The use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. Amounts related to the Company's financial instruments were as follows:
Notional Carrying Estimated Amount Value Fair Value December 31, 2003 -------- -------- ---------- (Dollars in millions) Assets: Fixed maturities............................. $143,148 $143,148 Equity securities............................ $ 1,246 $ 1,246 Mortgage loans on real estate................ $ 26,637 $ 28,572 Policy loans................................. $ 8,180 $ 8,180 Short-term investments....................... $ 1,320 $ 1,320 Cash and cash equivalents.................... $ 2,393 $ 2,393 Mortgage loan commitments.................... $ 555 $ -- $ (4) Commitments to fund partnership investments.. $1,378 $ -- $ -- Liabilities: Policyholder account balances................ $ 53,503 $ 55,218 Short-term debt.............................. $ 3,536 $ 3,536 Long-term debt............................... $ 2,055 $ 2,236 Shares subject to mandatory redemption....... $ 277 $ 336 Payable under securities loaned transactions. $ 24,065 $ 24,065
Notional Carrying Estimated Amount Value Fair Value December 31, 2002 -------- -------- ---------- (Dollars in millions) Assets: Fixed maturities.................................................. $124,260 $124,260 Equity securities................................................. $ 1,551 $ 1,551 Mortgage loans on real estate..................................... $ 25,353 $ 27,935 Policy loans...................................................... $ 8,047 $ 8,047 Short-term investments............................................ $ 1,199 $ 1,199 Cash and cash equivalents......................................... $ 1,106 $ 1,106 Mortgage loan commitments......................................... $ 859 $ -- $ 12 Commitments to fund partnership investments....................... $1,667 $ -- $ -- Liabilities: Policyholder account balances..................................... $ 34,706 $ 35,063 Short-term debt................................................... $ 912 $ 912 Long-term debt.................................................... $ 2,624 $ 2,794 Payable under securities loaned transactions...................... $ 16,321 $ 16,321 Other: Company-obligated mandatorily redeemable securities of subsidiary trusts.......................................................... $ 277 $ 310
F-72 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The methods and assumptions used to estimate the fair values of financial instruments are summarized as follows: Fixed Maturities and Equity Securities The fair value of fixed maturities and equity securities are based upon quotations published by applicable stock exchanges or received from other reliable sources. For securities for which the market values were not readily available, fair values were estimated using quoted market prices of comparable investments. Mortgage Loans on Real Estate, Mortgage Loan Commitments and Commitments to Fund Partnership Investments Fair values for mortgage loans on real estate are estimated by discounting expected future cash flows, using current interest rates for similar loans with similar credit risk. For mortgage loan commitments, the estimated fair value is the net premium or discount of the commitments. Commitments to fund partnership investments have no stated interest rate and are assumed to have a fair value of zero. Policy Loans The carrying values for policy loans approximate fair value. Cash and Cash Equivalents and Short-term Investments The carrying values for cash and cash equivalents and short-term investments approximated fair values due to the short-term maturities of these instruments. Policyholder Account Balances The fair value of policyholder account balances is estimated by discounting expected future cash flows based upon interest rates currently being offered for similar contracts with maturities consistent with those remaining for the agreements being valued. Short-term and Long-term Debt, Payables Under Securities Loaned Transactions, Shares Subject to Mandatory Redemption and Company-Obligated Mandatorily Redeemable Securities of Subsidiary Trusts The fair values of short-term and long-term debt, payables under securities loaned transactions, shares subject to mandatory redemption and Company-obligated mandatorily redeemable securities of subsidiary trusts are determined by discounting expected future cash flows using risk rates currently available for debt with similar terms and remaining maturities. Derivative Financial Instruments The fair value of derivative instruments, including financial futures, financial forwards, interest rate, credit default and foreign currency swaps, foreign currency forwards, caps, floors, options and written covered calls are based upon quotations obtained from dealers or other reliable sources. See Note 3 for derivative fair value disclosures. 20. Related Parties Effective January 1, 2003, MetLife Group, Incorporated, a New York corporation and wholly owned subsidiary of the Holding Company, was formed as a personnel services company to provide personnel, as needed, to support the activities of the Company. Charges for these services were approximately $1,680 million in 2003. F-73 Metropolitan Life Separate Account UL PART C. OTHER INFORMATION Item 27. Exhibits (a) Resolution of Board of Directors of Metropolitan Life effecting the establishment of Metropolitan Life Separate Account UL++++ (b) Not Applicable (c) (1) Not Applicable (2) Form of Selected Broker Agreement* (3) Schedule of Sales Commissions+++ (d) (1) Specimen Flexible Premium Variable Life Insurance Policy* (2) Alternate pages required by State Law* (3) Endorsement for calculation of minimum death benefit using the Cash Value Accumulation test* (4) Accelerated Death Benefit and Zero Cost Loan riders* (5) Yearly Renewable Term rider+++++ (6) Refund of sales load rider+++++ (7) Amended Policy Specifications Page indicating alternate premium expense charges+++++ (8) Enhanced Cash Surrender Value Rider****** (9) Term Insurance Rider+ (e) Amended Application Forms for Policy and Form of Receipt (including State variations)* (f) Restated Charter and By-Laws of Metropolitan Life*** (g) Reinsurance Contracts (h) (1) Participation Agreements with INVESCO and Janus** (2) Form of Participation Agreement with Templeton** (3) Participation Agreements with New England and Alliance***** (4) Form of Participation Agreement with COVA***** (5) (i) Participation Agreement with Fidelity Investments**** (ii) Supplemental Agreements with Fidelity Investments***** (6) Form of Participation Agreements with AIM, American Century, Delaware Management, Dreyfus, Templeton, Goldman Sachs, MFS, Janus, Van Kampen and Wells Fargo+ (i) Not Applicable (j) Not Applicable (k) Opinion and consent of Counsel as to the legality of the securities being registered+++++ (l) Opinion and consent of Sebastian Janssen, relating to the Policies+ (m) Not Applicable (n) Powers of Attorney++++ (o) Not Applicable (p) Not Applicable (q) Memoranda describing certain procedures filed pursuant to Rule 6e-3 (T)(b)(12)(iii)* (r) Form of Personalized illustration.***** + Filed herewith ++ Included in the filing of Post-Effective Amendment No. 4 to this Registration Statement on C-1 March 1, 1996. +++ Incorporated by reference from "Distribution of the Policies" in the Prospectus included herein. ++++ Incorporated by reference to the filing of Post-Effective Amendment No. 30 to the Registration Statement of Metropolitan Life Separate Account E (File No. 2-90380) filed October 22, 2003 except for the respective powers of attorney of John M. Keane, William J. Wheeler and Joseph J. Prochaska, Jr., each of which is incorporated by reference to Post-Effective Amendment No. 4 to the Registration Statement of Metropolitan Life Separate Account E (File No. 033-69320) filed on February 6, 2004, and the power of attorney of Sylvia M. Mathews which is incorporated by reference to Post-Effective Amendment No. 32 to the Registration Statement of Metropolitan Life Separate Account E (File No. 2-90380) filed on April 20, 2004. +++++ Included in the filing of Post-Effective Amendment No. 5 to this Registration Statement on April 26, 1996. * Included in the filing of Post-Effective Amendment No. 6 to this Registration Statement on April 30, 1997. ** Included in the filing of Post-Effective Amendment No. 8 to this Registration Statement on April 23, 1999. *** Incorporated by reference to the filing of Post-Effective Amendment No. 3 to the Registration Statement of Separate Account UL (File No. 333-40161) on April 6, 2000. **** Incorporated by reference to the filing of Post-Effective Amendment No. 26 to the Registration Statement of Separate Account E (File No. 2-90380) on Form N-4 on April 30, 1997. ***** Incorporated by reference to the filing of Post-Effective Amendment No. 10 to this Registration Statement on September 18, 2000. ****** Incorporated by reference to the filing of Post-Effective Amendment No. 12 to this Registration Statement on April 22, 2002. Item 28. Directors and Officers of Depositor
Name and Principal Business Address Positions and Offices with Depositor - ----------------------------------- ------------------------------------ Robert H. Benmosche Chairman of the Board, President and Chief Metropolitan Life Insurance Company Executive Officer One Madison Avenue, New York, NY 10010 Curtis H. Barnette Director Chairman Emeritus Bethlehem Steel Corporation 1170 Eighth Avenue, Martin Tower 2118 Bethlehem, PA 18016-7699
C-2 John C. Danforth Director Partner Bryan Cave LLP One Metropolitan Square 211 North Broadway, Suite 3600 St. Louis, MO 63102 Burton A. Dole, Jr. Director Retired Chairman Nellcor Puritan Bennett, Inc. P.O. Box 208 Pauma Valley, CA 92061 Cheryl W. Grise Director President Utility Group, Northeast Utilities Service Company P.O. Box 270 Hartford, CT 06141 James R. Houghton Director Chairman of the Board Emeritus Corning Incorporated One Riverfront Plaza, MP HQE2-6 Corning, NY 14831 Harry P. Kamen Director Retired Chairman and Chief Executive Officer Metropolitan Life Insurance Company 200 Park Avenue, Suite 5700 New York, NY 10166 Helene L. Kaplan Director Of Counsel, Skadden, Arps, Slate, Meagher & Flom, LLP Four Times Square New York, NY 10036 John M. Keane Director General (Retired), United States Army, 2200 Wilson Blvd., Suite 102-542, Arlington, VA 22201-3324 Catherine R. Kinney Director Co-Chief Operating Officer, President and Executive Vice Chairman, New York Stock Exchange, Inc. 11 Wall Street, 6th floor New York, NY 10005
C-3 Charles H. Leighton Director Retired Chairman and Chief Executive Officer CML Group, Inc. 51 Vaughn Hill Road Bolton, MA 01740 Sylvia M. Mathews Director Chief Operating Officer and Executive Director The Bill & Melinda Gates Foundation 1551 Eastlake Avenue East Seattle, WA 98102 Stewart G. Nagler Vice Chairman and Director Vice Chairman of the Board Metropolitan Life Insurance Company One Madison Avenue New York, NY 10010 John J. Phelan, Jr. Director Former Chairman and Chief Executive Officer New York Stock Exchange, Inc. 108 Forest Avenue Locust Valley, NY 11560 Hugh B. Price Director Of Counsel Piper Rudnick LLP 1251 Avenue of the Americas New York, NY 10005 Kenton J. Sicchitano Director Retired Global Managing Partner PricewaterhouseCoopers, 101 Jericho Road Weston, MA 02493 William C. Steere, Jr. Director Retired Chairman of the Board Pfizer, Inc. 235 East 42nd Street New York, NY 10016
Set forth below is a list of certain principal officers of Metropolitan Life. The principal business address of each officer of Metropolitan Life is One Madison Avenue, New York, New York 10010.
Name Position with Metropolitan Life Robert H. Benmosche Chairman of the Board, President and Chief Executive Officer Stewart C. Nagler Vice Chairman of the Board and Director Gwenn L. Carr Vice President and Secretary Daniel J. Cavanagh Executive Vice President C. Robert Henrikson President- U.S. Insurance and Financial Services Leland C. Launer, Jr. Executive Vice President and Chief Investment Officer James L. Lipscomb Executive Vice President and General Counsel Catherine A. Rein Senior Executive Vice President; President and Chief Executive Officer of MetLife Auto & Home
C-4 Company Stanley J. Talbi Senior Vice President and Chief Actuary William J. Toppeta President, International Lisa M. Weber Senior Executive Vice President, Chief Administration Officer Judy E. Weiss Executive Vice President Joseph J. Prochaska Senior Vice President, Financial Opeations and Chief Accounting Officer Joseph A. Reali Senior Vice President and Tax Director John E. Welch Senior Vice President and General Auditor William J. Wheeler Executive Vice President and Chief Financial Officer Anthony J. Williamson Senior Vice President and Treasurer Timothy Journy Vice President and Controller
The business address of each officer is One Madison Avenue, New York, New York 10010. Item 29. Persons Controlled by or Under Common Control with the Depositor or the Registrant The registrant is a separate account of Metropolitan Life Insurance Company under the New York Insurance law. Under said law the assets allocated to the separate account are the property of Metropolitan Life Insurance Company. Metropolitan Life Insurance Company is a wholly-owned subsidiary of MetLife, Inc. a publicly traded company. The following outline indicates those persons who are controlled by or under common control with Metropolitan Life Insurance Company: [Module of the List of Companies under Common Control appears here] C-5 Item 30. Indemnification MetLife, Inc. has secured a Financial Institutions Bond in the amount of $50,000,000 subject to a $5,000,000 deductible. MetLife maintains a directors' and officers' liability policy with a maximum coverage of $300 million under which Metropolitan Life Insurance Company ("Metropolitan"), which is the Depositor and the Registrant's underwriter (the "Underwriter"), as well as certain other subsidiaries of MetLife are covered. A provision in Metropolitan's by-laws provides for the indemnification (under certain circumstances) of individuals serving as directors or officers of Metropolitan. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Metropolitan pursuant to the foregoing provisions, or otherwise, Metropolitan Life Insurance Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification may be against public policy as expressed in the Act and may be, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Metropolitan of expenses incurred or paid by a director, officer or controlling person or Metropolitan Life Insurance Company 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, Metropolitan 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 31. Principal Underwriters (a) Other Activity. The principal underwriter for the registrant is Metropolitan Life Insurance Company. Metropolitan Life Insurance Company acts in the following capacities with respect to the following investment companies: Metropolitan Tower Life Separate Account One (principal underwriter) Metropolitan Tower Life Separate Account Two (principal underwriter) Metropolitan Life Separate Account E (principal underwriter and depositor) Metropolitan Series Fund, Inc. (principal underwriter and sub-investment manager) New England Variable Annuity Fund I (depositor) New England Life Retirement Investment Account (depositor) The New England Variable Account (depositor) (b) Management. See response to Item 28 above. (c) Compensation from the Registrant. C-6
(1) (2) (3) (4) (5) Compensation on Net Underwriting Events Occasioning Name of Principal Discounts and the Deduction of a Brokerage Other Underwriter Commissions Deferred Sales Commissions Compensation ----------- ----------- Load ----------- ------------ ---- Metropolitan Life Insurance Company $2,617,461 0 0 0
Commissions are paid by the Company directly to agents who are registered representatives of the Principal Underwriter or to broker-dealers that have entered into a selling agreement with the principal underwriter with respect to sales of the Contracts. Item 32. Location of Accounts and Records The following companies will maintain possession of the documents required by Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder: (a) Registrant (b) Metropolitan Life Insurance Company One Madison Avenue New York, NY 10010 Item 33. Management Services Not applicable Item 34. Fee Representation Metropolitan Life represents that the fees and charges deducted under the Policies offered and sold pursuant to this amended Registration Statement, in the aggregate, are reasonable in relation to the services rendered, the expenses to be incurred, and the risks assumed by Metropolitan Life under the Policies. Metropolitan Life bases its representation on its assessment of numerous facts and circumstances that it deems relevant. These may include such factors as: the nature and extent of such services, expenses and risks, the need for Metropolitan Life to earn an adequate profit, the degree to which the Policies include innovative features, and regulatory standards for exemptive relief under the Investment Company Act of 1940 used prior to October 1996, including the range of industry practice. This representation applies to all policies issued pursuant to this Registration Statement, including those sold on the terms specifically described in the prospectuses contained herein, or any variations therein based on supplements, amendments, endorsements or other riders to such policies or prospectuses, or otherwise. C-7 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, Metropolitan Life Separate Account UL, certifies that it meets the requirements of Securities Rule 485(b) for effectiveness of this Registration Statement and has caused this Amendment to the Registration Statement to be signed on its behalf, in the City of New York, and the State of New York on the 29th day of April, 2004. Metropolitan Life Separate Account UL By: Metropolitan Life Insurance Company By: /s/ James L. Lipscomb --------------------- James L. Lipscomb, Esq. Executive Vice President and General Counsel Attest: /s/ James D. Gaughan -------------------- James D. Gaughan Assistant Secretary C-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, Metropolitan Life Insurance Company has caused this Amendment to the Registration Statement to be signed on its behalf, in the City of New York, and the State of New York on the 29th day of April, 2004. Metropolitan Life Insurance Company BY: /s/ James L. Lipscomb --------------------- James L. Lipscomb, Esq. Executive Vice President and General Counsel Attest: /s/ James D. Gaughan -------------------- James D. Gaughan Assistant Secretary Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons, in the capacities indicated, on April 29, 2004.
SIGNATURE Title * - ------------------------------------------------- Chairman of the Board, President and Chief Robert H. Benmosche Executive Officer * - --------------------------------------- Vice-Chairman and Director Stewart G. Nagler * - --------------------------------------- Executive Vice President and Chief Financial Officer William J. Wheeler * - --------------------------------------- Executive Vice President and Chief Investment Officer Leland C. Launer, Jr. * - --------------------------------------- Senior Vice President, Financial Operations and Joseph J. Prochaska Jr. Chief Accounting Officer * - --------------------------------------- Curtis H. Barnette Director * - --------------------------------------- John C. Danforth Director * - --------------------------------------- Burton A. Dole, Jr. Director - --------------------------------------- Director Cheryl W. Grise * - ---------------------------------------
C-9 James R. Houghton Director * - --------------------------------------- Harry P. Kamen Director * - --------------------------------------- Helene L. Kaplan Director * - --------------------------------------- John M. Keane Director * - --------------------------------------- Catherine R. Kinney Director * - --------------------------------------- Charles M. Leighton Director * - --------------------------------------- Sylvia M. Mathews Director * - --------------------------------------- John J. Phelan, Jr. Director * - --------------------------------------- Hugh B. Price Director * - --------------------------------------- Kenton J. Sicchitano Director * - --------------------------------------- William C. Steere, Jr. Director April 29, 2004 /s/ Christopher P. Nicholas - --------------------------- Christopher P. Nicholas, Esq. Attorney- in - fact
* Executed by Christopher P. Nicholas, Esq. on behalf of those indicated pursuant to Powers of Attorney filed with Post-Effective Amendment No. 30 to the Registration Statement of Metropolitan Life Separate Account E (File No. 2-90380) filed October 22, 2003 except for the respective powers of attorney of John M. Keane, William J. Wheeler and Joseph J. Prochaska, Jr., each of which is incorporated by reference to Post-Effective Amendment No. 4 to the Registration Statement of Metropolitan Life Separate Account E (File No. 333-69320) filed on February 6, 2004, and the power of attorney of Sylvia M. Mathews which is incorporated by reference to Post-Effective Amendment No. 32 to the Registration Statement of Metropolitan Life Separate Account E (File No. 2-90380) filed on April 20, 2004. C-10 EX-99.D9 2 dex99d9.txt TERM INSURANCE RIDER Exhibit (d)(9) Metropolitan Life Insurance Company TERM INSURANCE RIDER After we receive proof that the insured died on or before the Final Date, we will pay the Rider Amount to the beneficiary. DEFINITIONS When this Rider is attached to the Policy, the following terms have the following meanings: Policy the Policy to which this Rider is attached. Rider Amount the amount of this Rider on the policy Date of Issue, as shown on page 3. The Rider Amount is equal to the Total Insurance Amount multiplied by the Rider Percent. All changes to the Specified Face Amount will be made proportionately to the Rider Amount so that the Rider Percent (shown below) does not change. Total Insurance Amount the sum of the Rider Amount and the Specified Face Amount as shown on page 3. We will provide a new page 3 when there is any change to the Total Insurance Amount other than as the result of the Minimum Death Benefit provision. Rider Percent The Rider Amount as a percent of the Total Insurance Amount as shown on page 3. The Rider Percent is determined on the Date of Issue and will not change. Target Premium The premium used to compute the amount of expense charge deducted from each premium payment. The Target Premium is shown on page 3.1. When there is a change to the Total Insurance Amount, the Target Premium will change. A new page 3.1 showing the new Target Premium will be issued. Date of Rider The Date of Policy shown on page 3. Final Date The Final Date of Policy, shown on page 3. This Rider may not be continued after the Final Date of Policy. GENERAL PROVISIONS Death Benefit When this Rider is attached to the Policy the Death Benefit provision is changed to the following: The Death Benefit under this Policy will be 1, 2, or 3 below, whichever is chosen and is in effect on the date of death but in no event less than the minimum death benefit. 1. Option A: The Total Insurance Amount. 2. Option B: The Total Insurance Amount plus the Cash Value on the date of death. 3. Option C: The Total Insurance Amount plus the Adjusted Premiums. See the Full and Partial Cash Withdrawal provision for the effect of a partial withdrawal on the Death Benefit. 1 Death Benefit Adjustment When this Rider is attached to the Policy the Death Benefit Adjustment provision is changed as follows: 2. The Total Insurance Amount may not be reduced to less than $100,000 during the first 5 policy years or to less than $50,000 after the 5th policy year. Cost of Rider The cost of this Rider is computed as the Rider Amount divided by 1,000, and multiplied by the monthly cost of insurance rate for this Rider. The cost for this Rider is deducted from the Policy Cash Value at the same time as the monthly deduction for the Policy. The monthly cost of insurance rate for this Rider will never be more than the maximum shown in the Table of Guaranteed Maximum Rates on page 4 of your Policy. Reinstatement If this Rider did not end as a result of your request for its termination, you may reinstate this Rider at the same time you reinstate this Policy under the terms of the "Reinstatement" provision of the Policy. You must provide evidence satisfactory to us of the insurability of the insured. Termination This Term Insurance Rider will end on the earliest of: . the Final Date; . the day after the end of the grace period of the Policy; . date of death of the insured; . the date of written request to terminate this Rider. You may terminate this Rider at any time by providing Us with a written request to do so. After you request termination of the Rider, it may not be reinstated. All of the terms used in this Rider have the same meaning as in the Policy unless otherwise clearly indicated in this Rider. Signed for Metropolitan Life Insurance Company. 2 EX-99.H.6 3 dex99h6.txt FORM OF PARTICIPATION AGREEMENTS Exhibit (h)(6) JANUS ASPEN SERIES FUND PARTICIPATION AGREEMENT (Institutional Shares) THIS AGREEMENT is made this 30th day of April, 2004, between JANUS ASPEN SERIES, an open-end management investment company organized as a Delaware business trust (the "Trust"), and Metropolitan Life Insurance Company, a life insurance company organized under the laws of the State of New York (the "Company"), on its own behalf and on behalf of each segregated asset account of the Company set forth on Schedule A, as may be amended from time to time (the "Accounts"). W I T N E S S E T H: WHEREAS, the Trust has registered with the Securities and Exchange Commission as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and the beneficial interest in the Trust is divided into several series of shares, each series representing an interest in a particular managed portfolio of securities and other assets (the "Portfolios"); and WHEREAS, the Trust has registered the offer and sale of a class of shares designated the Institutional Shares ("Shares") of each of its Portfolios under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Trust 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 Trust (the "Participating Insurance Companies"); and WHEREAS, the Trust has received an order from the Securities and Exchange Commission 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 Trust 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 "Exemptive Order"); and WHEREAS, the Company has registered or will register (unless registration is not required under applicable law) certain variable life insurance policies and/or variable annuity contracts under the 1933 Act (the "Contracts"); and WHEREAS, the Company has registered or will register each Account as a unit -1- investment trust under the 1940 Act if necessary; and WHEREAS, the Company desires to utilize Shares of one or more Portfolios as an investment vehicle of the Accounts; NOW, THEREFORE, in consideration of their mutual promises, the parties agree as follows: ARTICLE I Sale of Trust Shares 1.1 The Trust shall make Shares of its Portfolios available to the Accounts at the net asset value next computed after receipt of such purchase order by the Trust (or its agent), as established in accordance with the provisions of the then current prospectus of the Trust. Shares of a particular Portfolio of the Trust shall be ordered in such quantities and at such times as determined by the Company to be necessary to meet the requirements of the Contracts. The Trustees of the Trust (the "Trustees") may refuse to sell Shares of any Portfolio to any person, 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 Trustees 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. With respect to payment of purchase price by the Company and of redemption proceeds by the Trust, the Company and the Trust shall remit gross purchase and sale orders with respect to each Portfolio and shall transmit one net payment per Portfolio in accordance with the provisions of this Article I. 1.2 The Trust will redeem any full or fractional Shares of any Portfolio when requested by the Company on behalf of an Account at the net asset value next computed after receipt by the Trust (or its agent) of the request for redemption, as established in accordance with the provisions of the then current prospectus of the Trust. The Trust shall wire payment for such shares in federal funds to an account designated by the Company no later than 5:00 p.m. Eastern Time on the same Business Day the Trust receives notice of the order, provided that the Trust may delay payment in extraordinary circumstances to the extent permitted under Section 22(e) of the 1940 Act. 1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby appoints the Company as its agent for the limited purpose of receiving and accepting purchase and redemption orders resulting from investment in and payments under the Contracts. Receipt by the Company shall constitute receipt by the Trust provided that i) such orders are received by the Company in good order prior to the time the net asset value of each Portfolio is priced in accordance with its prospectus and ii) the Trust receives notice of such orders by 9:00 a.m. New York time on the next following Business Day. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which the Trust calculates its net asset value pursuant to the rules of the Securities and Exchange Commission. -2- 1.4 Purchase orders that are transmitted to the Trust in accordance with Section 1.3 shall be paid for no later than 5:00 p.m. New York time on the same Business Day that the Trust receives notice of the order. Payments shall be made in federal funds transmitted by wire. 1.5 Issuance and transfer of the Trust's Shares will be by book entry only. Stock certificates will not be issued to the Company or the Account. Shares ordered from the Trust will be recorded in the appropriate title for each Account or the appropriate subaccount of each Account. 1.6 The Trust shall furnish at least two days advance notice to the Company of an estimate of any income dividends or capital gain distributions payable on the Trust's Shares. 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 Trust shall notify the Company of the number of Shares so issued as payment of such dividends and distributions. 1.7 The Trust 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 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 p.m. New York time. If the Trust provides the Company with 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. 1.8 The Trust agrees that its Shares will be sold only to Participating Insurance Companies and their separate accounts and to certain qualified pension and retirement plans, but only to the extent such sale will not impair the ability of any Account to treat investments of a Portfolio in which an Account owns shares as investments of the Account for the purpose of satisfying the diversification requirements of Section 817(h) and to the extent permitted by the Exemptive Order. No Shares of any Portfolio will be sold directly to the general public. The Company agrees that Trust Shares will be used only for the purposes of funding the Contracts and Accounts listed in Schedule A, as amended from time to time. 1.9 The Trust 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 2.8 and Article IV of this Agreement. -3- 1.10 All orders accepted by the Company shall be subject to the terms of the then current prospectus of each Portfolio, including without limitation, policies regarding minimum account sizes, market timing and excessive trading. The Company shall use its best efforts, and shall reasonably cooperate with, the Trust to enforce stated prospectus policies regarding transactions in Shares, particularly those related to market timing. The Company acknowledges that orders accepted by it in violation of the Trust's stated policies may be subsequently revoked or cancelled by the Trust and that the Trust shall not be responsible for any losses incurred by the Company or Contract or Account as a result of such cancellation. The Trust or its agent shall notify the Company of such cancellation prior to 12:00 p.m. EST on the next day following Business Day after any such cancellation. In addition, the Company acknowledges that the Trust has the right to refuse any purchase order for any reason, particularly if the Trust determines that a Portfolio would be unable to invest the money effectively in accordance with its investment policies or would otherwise be adversely affected due to the size of the transaction, frequency of trading by the account or other factors. ARTICLE II Obligations of the Parties 2.1 The Trust shall prepare and be responsible for filing with the Securities and Exchange Commission and any state 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 Trust. The Trust shall bear the costs of registration and qualification of its shares, preparation and filing of the documents listed in this Section 2.1 and all taxes to which an issuer is subject on the issuance and transfer of its shares. 2.2 At the option of the Company, the Trust shall either (a) provide the Company (at the Company's expense) with as many copies of the Trust's Shares' current prospectus, annual report, semi-annual report and other shareholder communications, including any amendments or supplements to any of the foregoing, as the Company shall reasonably request; or (b) provide the Company with a camera ready copy of such documents in a form suitable for printing. The Trust shall use best efforts to provide camera-ready or diskette copies of annual and semi-reports to the Company no later than 45 days (and in no event later than 50 days) after the end of the Fund's reporting period. The Trust shall provide the Company with a copy of its statement of additional information in a form suitable for duplication by the Company. The Trust (at its expense) shall provide the Company with copies of any Trust-sponsored proxy materials in such quantity as the Company shall reasonably require for distribution to Contract owners. 2.3 (a) The Company shall bear the costs of printing and distributing the Trust's Shares' prospectus, statement of additional information, shareholder reports and other shareholder communications to owners of and applicants for policies for which Shares of the Trust is serving or is to serve as an investment vehicle. The Company shall bear the costs of distributing proxy materials (or similar materials such as voting solicitation instructions) to Contract owners. The -4- Company assumes sole responsibility for ensuring that such materials are delivered to Contract owners in accordance with applicable federal and state securities laws. (b) If the Company elects to include any materials provided by the Trust, specifically prospectuses, Statement of Information, shareholder reports and proxy materials, on its web site or in any other computer or electronic format, the Company assumes sole responsibility for maintaining such materials in the form provided by the Trust and for promptly replacing such materials with all updates provided by the Trust. 2.4 The Company agrees and acknowledges that the Trust's adviser, Janus Capital Management LLC or its affiliates ("Janus Capital"), is the sole owner of the name and mark "Janus" and that all use of any designation comprised in whole or part of Janus (a "Janus Mark") under this Agreement shall inure to the benefit of Janus Capital. Except as provided in Section 2.5, the Company shall not use any Janus Mark on its own behalf or on behalf of the Accounts or Contracts in any registration statement, advertisement, sales literature or other materials relating to the Accounts or Contracts without the prior written consent of Janus Capital. All references contained in this Agreement to "the name or mark `Janus'" shall include but not be limited to the Janus logo, the website www.janus.com and any and all electronic links relating to such website. The Company will make no use of the name or mark "Janus" except as expressly provided in this Agreement or expressly authorized by Janus Capital in writing. All goodwill associated with the name and mark "Janus" shall inure to the benefit of Janus Capital or its affiliates. Upon termination of this Agreement for any reason, the Company shall cease any and all use of any Janus Mark(s). 2.5 The Company shall furnish, or cause to be furnished, to the Trust or its designee, a copy of each Contract prospectus, offering memorandum or statement of additional information in which the Trust or its investment adviser is named contemporaneously with the filing of such document with the Securities and Exchange Commission. 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 or its investment adviser is named, at least ten 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 the Trust or its designee reasonably objects to such use within ten 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 Trust or concerning the Trust 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 Trust Shares (as such registration statement and prospectus may be amended or supplemented from time to time), reports of the Trust, Trust-sponsored proxy statements, or in sales literature or other promotional material approved by the Trust or its designee, except as required by legal process or regulatory authorities or with the written permission of the Trust or its designee, such permission not to be unreasonably withheld. -5- 2.7 The Trust 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 be amended or supplemented from time to time), or in materials approved by the Company for distribution including sales literature or other promotional materials, except as required by legal process or regulatory authorities or with the written permission of the Company. . No such material shall be used if the Company or its designee reasonably objects to such use within ten Business Days after receipt of such material. 2.8 So long as, and to the extent that the Securities and Exchange Commission interprets the 1940 Act to require pass-through voting privileges for variable policyowners, the Company will provide pass-through voting privileges to owners of policies whose cash values are invested, through the Accounts, in shares of the Trust. The Trust 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 Trust. With respect to each Account, the Company will vote Shares of the Trust held by the Account and for which no timely voting instructions from policyowners are received as well as Shares it owns that are held by that Account, in the same proportion as those Shares for which voting instructions are received. The Company and its agents will in no way recommend or oppose or interfere with the solicitation of proxies for Trust shares held by Contract owners without the prior written consent of the Trust, which consent may be withheld in the Trust's sole discretion. 2.9 The Company shall notify the Trust of any additional applicable state insurance laws that restrict the Portfolios' investments or otherwise affect the operation of the Trust after the date of this Agreement. ARTICLE III 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 _New York and that it has legally and validly 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 each Account has been registered or, prior to any issuance or sale of the Contracts, will be registered, if necessary, as a unit investment trust in accordance with the provisions of the 1940 Act. 3.3 The Company represents and warrants that the Contracts or interests in the Accounts (1) are or, prior to issuance, will be registered as securities under the 1933 Act or, -6- alternatively (2) are not registered because they are properly exempt from registration under the 1933 Act or will be offered exclusively in transactions that are properly exempt from registration under the 1933 Act. The Company further represents and warrants that the Contracts will be issued and sold in compliance in all material respects with all applicable federal and state laws; and the sale of the Contracts shall comply in all material respects with any applicable state insurance suitability requirements. 3.4 The Trust represents and warrants that it is duly organized and validly existing 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 the obligations under this Agreement. 3.5 The Trust represents and warrants that the Trust Shares offered and sold pursuant to this Agreement will be registered under the 1933 Act and the Trust shall be registered under the 1940 Act prior to any issuance or sale of such Shares. The Trust shall amend its registration statement 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 its shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by the Trust. 3.6 3.6 The Trust represents and warrants that the investments of each Portfolio will comply with the diversification requirements set forth in Section 817(h) of the Internal Revenue Code of 1986, as amended, and the rules and regulations thereunder. The Trust further represents and warrants that each Portfolio qualifies as a "look-through" entity under Treas. Sec. 1.817-5(f) and will use its best efforts to continue to so qualify as long as the Company or an Account owns Shares. The Trust also agrees to provide the Company with a certificate of compliance with this Section 3.6 within 30 days after the end of each calendar quarter and will notify the Company immediately upon having a reasonable basis for believing that it is out of compliance with this Section 3.6. 3.7 The Trust represents and warrants that each portfolio qualifies as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended and that it will use its best efforts to maintain such qualification (under Subchapter M or any successor or similar provision) and that it will notify the Company immediately upon having a reasonable basis for believing that it is out of compliance with this Section 3.7. 3.8 The Trust has received Company's written instructins relating to "investor control" and shall enact procedures reasonably designed to comply with such written instructions. -7- 3.9 The Company represents and warrants that it is in compliance with all applicable anti-money laundering laws, rules and regulations including, but not limited to, the U.S.A. PATRIOT Act of 2001, P.L. 107-56. ARTICLE IV Potential Conflicts 4.1 The parties acknowledge that the Trust's shares may be made available for investment to other Participating Insurance Companies. In such event, the Trustees will monitor the Trust for the existence of any material irreconcilable conflict between the interests of the contract owners of all Participating Insurance Companies. An irreconcilable material conflict may arise for a variety of reasons, including: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Portfolio are being managed; (e) a difference in voting instructions given by variable annuity contract and variable life insurance contract owners; or (f) a decision by an insurer to disregard the voting instructions of contract owners. The Trustees 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 Trustees. The Company will assist the Trustees in carrying out their responsibilities under the Exemptive Order by providing the Trustees with all information reasonably necessary for the Trustees 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 Trustees, or a majority of its disinterested Trustees, 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 Trustees) 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 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 the question of whether or not such segregation should be implemented to a vote of all affected Contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., annuity contract owners, life insurance contract owners, or variable contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected Contract 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 -8- 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 Trust's election, to withdraw the affected Account's investment in the Trust and terminate this Agreement with respect to such Account; 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 Trustees. Any such withdrawal and termination must take place within six (6) months after the Trust gives written notice that this provision is being implemented. Until the end of such six (6) month period, the Trust shall continue to accept and implement orders by the Company for the purchase and redemption of shares of the Trust. 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 investment in the Trust and terminate this Agreement with respect to such Account within six (6) months after the Trustees inform 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 Trustees. Until the end of such six (6) month period, the Trust shall continue to accept and implement orders by the Company for the purchase and redemption of shares of the Trust. 4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a majority of the disinterested Trustees 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 event that the Trustees determine that any proposed action does not adequately remedy any irreconcilable material conflict, then the Company will withdraw the Account's investment in the Trust and terminate this Agreement within six (6) months after the Trustees inform the Company in writing of the foregoing determination; provided, however, that such withdrawal and termination shall be limited to the extent required by any such material irreconcilable conflict as determined by a majority of the disinterested Trustees. 4.7 The Company shall at least annually submit to the Trustees such reports, materials or data as the Trustees may reasonably request so that the Trustees may fully carry out the duties imposed upon them by the Exemptive Order, and said reports, materials and data shall be submitted more frequently if deemed appropriate by the Trustees. 4.8 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 Exemptive Order) on terms and conditions materially different from those contained in the Exemptive Order, then the Trust and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the -9- extent such rules are applicable. ARTICLE V Indemnification 5.1 Indemnification By the Company. The Company agrees to indemnify and hold harmless the Trust and each of its Trustees, officers, employees and agents and each person, if any, who controls the Trust within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Article V) 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) (collectively, "Losses"), to which the 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 statements of any material fact contained in a registration statement, offering memorandum or prospectus for the Contracts or in the Contracts themselves 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 V), 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 Trust for use in Company Documents or otherwise for use in connection with the sale of the Contracts or Trust Shares; or (b) arise out of or result from misleading statements or representations (other than statements or representations contained in and accurately derived from Trust Documents as defined in Section 5.2(a)) or wrongful conduct of the Company or persons under its control, with respect to the sale or acquisition of the Contracts or Trust Shares; or (c) arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in Trust Documents as defined in Section 5.2(a) 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 Trust by or on behalf of the Company; or (d) arise out of or result from any failure by the Company to provide the -10- 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 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 Trust. The Trust 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 V) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Trust) 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 the 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 statements of any material fact contained in the registration statement or prospectus for the Trust (or any amendment or supplement thereto), (collectively, "Trust Documents" for the purposes of this Article V), 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 Trust by or on behalf of the Company for use in Trust Documents or otherwise for use in connection with the sale of the Contracts or Trust Shares; or (b) arise out of or result from statements or representations (other than statements or representations contained in and accurately derived from Company Documents) or wrongful conduct of the Trust or persons under its control, with respect to the sale or acquisition of the Contracts or Trust 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 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 Trust; or (d) arise out of or result from any failure by the Trust to provide the services or furnish the materials required under the terms of this Agreement; or -11- (e) arise out of or result from any material breach of any representation and/or warranty made by the Trust in this Agreement or arise out of or result from any other material breach of this Agreement by the Trust. 5.3 Neither the Company nor the Trust shall be liable under the indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect to any Losses incurred or assessed against an Indemnified Party that arise 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 Trust shall be liable under the indemnification provisions of Sections 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 other party in writing within a reasonable time after the summons, or other first written notification, giving information of the nature of the claim shall have been served upon or otherwise received by such Indemnified Party (or after such Indemnified Party shall have received notice of service upon or other notification to any designated agent), but failure to notify the party against whom indemnification is sought of any such claim shall not relieve that party from any liability which 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 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 party independently in connection with the defense thereof other than reasonable costs of investigation. ARTICLE VI Termination 6.1 This Agreement may be terminated by either party for any reason by ninety (90) days advance written notice delivered to the other party. 6.2 Notwithstanding any termination of this Agreement, the Trust shall, at the option of the Company, continue to make available additional shares of the Trust (or any Portfolio) pursuant to the terms and conditions of this Agreement for all Contracts in effect on the effective date of termination of this Agreement, provided that the Company continues to pay the costs set forth in Section 2.3. 6.3 The provisions of Article V shall survive the termination of this Agreement, and -12- the provisions of Article IV and Section 2.8 shall survive the termination of this Agreement as long as shares of the Trust are held on behalf of Contract owners in accordance with Section 6.2. ARTICLE VII Notices Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. If to the Trust: Janus Aspen Series 100 Fillmore Street Denver, Colorado 80206 Attention: General Counsel If to the Company: Metropolitan Life Insurance Company 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Attn: Andrew Mensch With copy to: Metropolitan Life Insurance Company 485B US Highway One South, Suite 420 Iselin, NJ 08830 Attn: Sabrina K Model ARTICLE VIII 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. -13- 8.4 This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of State of Colorado. 8.5 The parties to this Agreement acknowledge and agree that all liabilities of the Trust arising, directly or indirectly, under this Agreement, of any and every nature whatsoever, shall be satisfied solely out of the assets of the Trust and that no Trustee, officer, agent or holder of shares of beneficial interest of the Trust 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 Securities and Exchange Commission, the National Association of Securities Dealers, Inc., and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. 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 Participation Agreement as of the date and year first above written. JANUS ASPEN SERIES By: ------------------------------- Name: Bonnie M. Howe Title: Vice President Metropolitan Life Insurance Company -14- By: ------------------------------- Name: John Ryan Title: Vice President -15- Schedule A Separate Accounts and Associated Contracts Name of Separate Account and Contracts Funded Date Established by Board of Directors By Separate Account - -------------------------------------- ------------------- Separate Account UL MetFlex Separate Account DCVL PPVL- Group and Individual -16- Schedule B List of Portfolios Name of Portfolio All Portfolios of Janus Aspen Series open to new investors (as set forth in the current prospectus of Janus Aspen Series) except Global Technology Portfolio and Global Life Sciences Portfolio. Separate Account UL Balanced Portfolio - Service Shares Growth Portfolio - Institutional Shares Capital Appreciation Portfolio - Service Shares Separate Account DCVL Balanced Portfolio - Institutional Shares Capital Appreciation Portfolio - Institutional Shares -17- JANUS ASPEN SERIES FUND PARTICIPATION AGREEMENT (Service Shares) THIS AGREEMENT is made this 30th day of April, 2004, between JANUS ASPEN SERIES, an open-end management investment company organized as a Delaware business trust (the "Trust"), and _Metropolitan Life Insurance Company, a life insurance company organized under the laws of the State of _New York (the "Company"), on its own behalf and on behalf of each segregated asset account of the Company set forth on Schedule A, as may be amended from time to time (the "Accounts"). W I T N E S S E T H: WHEREAS, the Trust has registered with the Securities and Exchange Commission as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), and the beneficial interest in the Trust is divided into several series of shares, each series representing an interest in a particular managed portfolio of securities and other assets (the "Portfolios"); and WHEREAS, the Trust has registered the offer and sale of a class of shares designated the Service Shares ("Shares") of each of its Portfolios under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Trust 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 Trust (the "Participating Insurance Companies"); and WHEREAS, the Trust has received an order from the Securities and Exchange Commission 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 Trust 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 "Exemptive Order"); and WHEREAS, the Company has registered or will register (unless registration is not required under applicable law) certain variable life insurance policies and/or variable annuity contracts under the 1933 Act (the "Contracts"); and WHEREAS, the Company has registered or will register each Account as a unit investment trust under the 1940 Act, if necessary; and -1- WHEREAS, the Company desires to utilize the Shares of one or more Portfolios as an investment vehicle of the Accounts; NOW, THEREFORE, in consideration of their mutual promises, the parties agree as follows: ARTICLE I Sale of Trust Shares 1.1 The Trust shall make Shares of its Portfolios listed on Schedule B available to the Accounts at the net asset value next computed after receipt of such purchase order by the Trust (or its agent), as established in accordance with the provisions of the then current prospectus of the Trust. Shares of a particular Portfolio of the Trust shall be ordered in such quantities and at such times as determined by the Company to be necessary to meet the requirements of the Contracts. The Trustees of the Trust (the "Trustees") may refuse to sell Shares of any Portfolio to any person, 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 Trustees 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 The Trust will redeem any full or fractional Shares of any Portfolio when requested by the Company on behalf of an Account at the net asset value next computed after receipt by the Trust (or its agent) of the request for redemption, as established in accordance with the provisions of the then current prospectus of the Trust. The Trust shall make payment for such Shares in the manner established from time to time by the Trust, but in no event shall payment be delayed for a greater period than is permitted by the 1940 Act. 1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby appoints the Company as its agent for the limited purpose of receiving and accepting purchase and redemption orders resulting from investment in and payments under the Contracts. Receipt by the Company shall constitute receipt by the Trust provided that i) such orders are received by the Company in good order prior to the time the net asset value of each Portfolio is priced in accordance with its prospectus and ii) the Trust receives notice of such orders by 9:00 a.m. New York time on the next following Business Day. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which the Trust calculates its net asset value pursuant to the rules of the Securities and Exchange Commission. 1.4 Purchase orders that are transmitted to the Trust in accordance with Section 1.3 shall be paid for no later than 12:00 noon New York time on the same Business Day that the Trust receives notice of the order. Payments shall be made in federal funds transmitted by wire. -2- 1.5 Issuance and transfer of the Trust's Shares will be by book entry only. Stock certificates will not be issued to the Company or the Account. Shares ordered from the Trust will be recorded in the appropriate title for each Account or the appropriate subaccount of each Account. 1.6 The Trust shall furnish prompt notice to the Company of any income dividends or capital gain distributions payable on the Trust's Shares. 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 Trust shall notify the Company of the number of Shares so issued as payment of such dividends and distributions. 1.7 The Trust 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 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 p.m. New York time. If the Trust provides the Company with 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. 1.8 The Trust agrees that its Shares will be sold only to Participating Insurance Companies and their separate accounts and to certain qualified pension and retirement plans to the extent permitted by the Exemptive Order. No Shares of any Portfolio will be sold directly to the general public. The Company agrees that Trust Shares will be used only for the purposes of funding the Contracts and Accounts listed in Schedule A, as amended from time to time. 1.9 The Trust 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 2.8 and Article IV of this Agreement. 1.10 All orders accepted by the Company shall be subject to the terms of the then current prospectus of each Portfolio, including without limitation, policies regarding minimum account sizes, market timing and excessive trading. The Company shall use its best efforts, and shall reasonably cooperate with, the Trust to enforce stated prospectus policies regarding transactions in Shares, particularly those related to market timing. The Company acknowledges that orders accepted by it in violation of the Trust's stated policies may be subsequently revoked or cancelled by the Trust and that the Trust shall not be responsible for any losses incurred by the Company or Contract or Account as a result of such cancellation. The Trust or its agent shall notify the Company of such cancellation prior to 12:00 p.m. EST on the next day following Business Day after any such cancellation. In addition, the Company acknowledges that the Trust has the right to refuse any purchase order for any reason, particularly if the Trust determines that a Portfolio would be unable to invest -3- the money effectively in accordance with its investment policies or would otherwise be adversely affected due to the size of the transaction, frequency of trading by the account or other factors. ARTICLE II Obligations of the Parties 2.1 The Trust shall prepare and be responsible for filing with the Securities and Exchange Commission and any state 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 Trust. The Trust shall bear the costs of registration and qualification of its shares, preparation and filing of the documents listed in this Section 2.1 and all taxes to which an issuer is subject on the issuance and transfer of its shares. 2.2 At the option of the Company, the Trust shall either (a) provide the Company (at the Company's expense) with as many copies of the Trust's Shares' current prospectus, annual report, semi-annual report and other shareholder communications, including any amendments or supplements to any of the foregoing, as the Company shall reasonably request; or (b) provide the Company with a camera ready copy of such documents in a form suitable for printing. The Trust shall provide the Company with a copy of the Shares' statement of additional information in a form suitable for duplication by the Company. The Trust (at its expense) shall provide the Company with copies of any Trust-sponsored proxy materials in such quantity as the Company shall reasonably require for distribution to Contract owners. 2.3 (a) The Company shall bear the costs of printing and distributing the Trust's Shares' prospectus, statement of additional information, shareholder reports and other shareholder communications to owners of and applicants for policies for which Shares of the Trust are serving or are to serve as an investment vehicle. The Company shall bear the costs of distributing proxy materials (or similar materials such as voting solicitation instructions) to Contract owners. The Company assumes sole responsibility for ensuring that such materials are delivered to Contract owners in accordance with applicable federal and state securities laws. (b) If the Company elects to include any materials provided by the Trust, specifically prospectuses, Statement of Information, shareholder reports and proxy materials, on its web site or in any other computer or electronic format, the Company assumes sole responsibility for maintaining such materials in the form provided by the Trust and for promptly replacing such materials with all updates provided by the Trust. 2.4 The Company agrees and acknowledges that the Trust's adviser, Janus Capital Management LLC or its affiliates ("Janus Capital") is the sole owner of the name and mark "Janus" and that all use of any designation comprised in whole or part of Janus (a "Janus Mark") under this Agreement shall inure to the benefit of Janus Capital. Except as provided in Section 2.5, the Company shall not use any Janus Mark on its own behalf or on behalf of the Accounts or Contracts in any registration statement, advertisement, sales literature or other materials relating -4- to the Accounts or Contracts without the prior written consent of Janus Capital. All references contained in this Agreement to "the name or mark `Janus'" shall include but not be limited to the Janus logo, the website www.janus.com and any and all electronic links relating to such website. The Company will make no use of the name or mark "Janus" except as expressly provided in this Agreement or expressly authorized by Janus Capital in writing. All goodwill associated with the name and mark "Janus" shall inure to the benefit of Janus Capital or its affiliates. Upon termination of this Agreement for any reason, the Company shall cease any and all use of any Janus Mark(s). 2.5 The Company shall furnish, or cause to be furnished, to the Trust or its designee, a copy of each Contract prospectus, offering memorandum or statement of additional information in which the Trust or its investment adviser is named prior to the filing of such document with the Securities and Exchange Commission. 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 or its investment adviser is named, at least fifteen Business Days prior to its use. No such material shall be used if the Trust or its designee reasonably objects to such use within fifteen 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 Trust or concerning the Trust 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 Trust Shares (as such registration statement and prospectus may be amended or supplemented from time to time), reports of the Trust, Trust-sponsored proxy statements, or in sales literature or other promotional material approved by the Trust or its designee, except as required by legal process or regulatory authorities or with the written permission of the Trust or its designee. 2.7 The Trust 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, offering memorandum or prospectus for the Contracts (as such registration statement and prospectus may be amended or supplemented from time to time), or in materials approved by the Company for distribution including sales literature or other promotional materials, except as required by legal process or regulatory authorities or with the written permission of the Company. No such material shall be used if the Company or its designee reasonably objects to such use within fifteen Business Days after receipt of such material.2.8 So long as, and to the extent that the Securities and Exchange Commission interprets the 1940 Act to require pass-through voting privileges for variable policyowners, the Company will provide pass-through voting privileges to owners of policies whose cash values are invested, through the Accounts, in shares of the Trust. The Trust 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 Trust. With respect to each Account, the Company will vote Shares of the Trust held by the Account and for which no timely voting instructions from policyowners are received as well as Shares it owns that are held by that -5- Account, in the same proportion as those Shares for which voting instructions are received. The Company and its agents will in no way recommend or oppose or interfere with the solicitation of proxies for Trust shares held by Contract owners without the prior written consent of the Trust, which consent may be withheld in the Trust's sole discretion. 2.9 The Company shall notify the Trust of any applicable state insurance laws that restrict the Portfolios' investments or otherwise affect the operation of the Trust and shall notify the Trust of any changes in such laws. ARTICLE III 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 __New York and that it has legally and validly 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 each Account has been registered or, prior to any issuance or sale of the Contracts, will be registered as a unit investment trust, if necessary, in accordance with the provisions of the 1940 Act. 3.3 The Company represents and warrants that the Contracts or interests in the Accounts (1) are or, prior to issuance, will be registered as securities under the 1933 Act or, alternatively (2) are not registered because they are properly exempt from registration under the 1933 Act or will be offered exclusively in transactions that are properly exempt from registration under the 1933 Act. The Company further represents and warrants that the Contracts will be issued and sold in compliance in all material respects with all applicable federal and state laws; and the sale of the Contracts shall comply in all material respects with any applicable state insurance suitability requirements. 3.4 The Trust represents and warrants that it is duly organized and validly existing 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 the obligations under this Agreement. 3.5 The Trust represents and warrants that the Trust Shares offered and sold pursuant to this Agreement will be registered under the 1933 Act and the Trust shall be registered under the 1940 Act prior to any issuance or sale of such Shares. The Trust shall amend its registration statement 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 its Shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by the Trust. 3.6 The Trust represents and warrants that the investments of each Portfolio will -6- comply with the diversification requirements set forth in Section 817(h) of the Internal Revenue Code of 1986, as amended, and the rules and regulations thereunder. The Trust further repressents and warrants that each Portfolio qualifies as a "look-through" entity under Treasury Section 1.817-5(f) and will use its best efforts to continue to qualify so long as the company or an Account owns Shares. The Trust also agrees to provide the Company with a certificate of compliance with this Section 3.6 within 30 days after the end of each calender quarter and will notify the Company immediately upon having a reasonable basis for believing that it is out of compliance with this Section 3.6. 3.7 The Trust represents and warrants that each portfolio qualifies as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended and that it will use its best efforts to maintain such qualification (under Subchapter M or any successor or similar provision) and that it will notify the Company immediately upon having a reasonable basis for believing that it is out of compliance with this Section 3.7. 3.8 The Trust has received Company's written instructins relating to "investor control" and shall enact procedures reasonably designed to comply with such written instructions. 3.9 The Company represents and warrants that it is in compliance with all applicable anti-money laundering laws, rules and regulations including, but not limited to, the U.S.A. PATRIOT Act of 2001, P.L. 107-56. ARTICLE IV Potential Conflicts 4.1 The parties acknowledge that the Trust's shares may be made available for investment to other Participating Insurance Companies. In such event, the Trustees will monitor the Trust for the existence of any material irreconcilable conflict between the interests of the contract owners of all Participating Insurance Companies. An irreconcilable material conflict may arise for a variety of reasons, including: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Portfolio are being managed; (e) a difference in voting instructions given by variable annuity contract and variable life insurance contract owners; or (f) a decision by an insurer to disregard the voting instructions of contract owners. The Trustees shall promptly inform the Company if they determine that an irreconcilable material conflict exists and the implications thereof. -7- 4.2 The Company agrees to promptly report any potential or existing conflicts of which it is aware to the Trustees. The Company will assist the Trustees in carrying out their responsibilities under the Exemptive Order by providing the Trustees with all information reasonably necessary for the Trustees 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 Trustees, or a majority of its disinterested Trustees, 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 Trustees) 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 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 the question of whether or not such segregation should be implemented to a vote of all affected Contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., annuity contract owners, life insurance contract owners, or variable contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected Contract 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 Trust's election, to withdraw the affected Account's investment in the Trust and terminate this Agreement with respect to such Account; 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 Trustees. Any such withdrawal and termination must take place within six (6) months after the Trust gives written notice that this provision is being implemented. Until the end of such six (6) month period, the Trust shall continue to accept and implement orders by the Company for the purchase and redemption of shares of the Trust. 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 investment in the Trust and terminate this Agreement with respect to such Account within six (6) months after the Trustees inform 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 Trustees. Until the end of such six (6) month period, the Trust shall continue to accept and implement orders by the Company for the purchase and redemption of Shares of the Trust. 4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a majority of the -8- disinterested Trustees 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 event that the Trustees determine that any proposed action does not adequately remedy any irreconcilable material conflict, then the Company will withdraw the Account's investment in the Trust and terminate this Agreement within six (6) months after the Trustees inform the Company in writing of the foregoing determination; provided, however, that such withdrawal and termination shall be limited to the extent required by any such material irreconcilable conflict as determined by a majority of the disinterested Trustees. 4.7 The Company shall at least annually submit to the Trustees such reports, materials or data as the Trustees may reasonably request so that the Trustees may fully carry out the duties imposed upon them by the Exemptive Order, and said reports, materials and data shall be submitted more frequently if deemed appropriate by the Trustees. 4.8 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 Exemptive Order) on terms and conditions materially different from those contained in the Exemptive Order, then the Trust and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary 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. ARTICLE V Indemnification 5.1 Indemnification By the Company. The Company agrees to indemnify and hold harmless the Trust and each of its Trustees, officers, employees and agents and each person, if any, who controls the Trust within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Article V) 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) (collectively, "Losses"), to which the 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 statements of any material fact contained in a registration statement or prospectus for the Contracts or in the Contracts themselves or in sales literature for the Trust 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 V), or arise out of or are based upon the omission or the alleged omission to -9- 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 Trust for use in Company Documents or otherwise for use in connection with the sale of the Contracts or Trust Shares; or (b) arise out of or result from misleading statements or representations (other than statements or representations contained in and accurately derived from Trust Documents as defined in Section 5.2(a)) or wrongful conduct of the Company or persons under its control, with respect to the sale or acquisition of the Contracts or Trust Shares; or (c) arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in Trust Documents as defined in Section 5.2(a) 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 Trust 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 (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 Trust. The Trust 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 V) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Trust) 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 the 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 statements of any material fact contained in the registration statement,prospectus or offering memorandum for the Trust (or any amendment or supplement thereto), (collectively, "Trust Documents" for the purposes of this Article V), 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 -10- such alleged statement or omission was made in reliance upon and was accurately derived from written information furnished to the Trust by or on behalf of the Company for use in Trust Documents or otherwise for use in connection with the sale of the Contracts or Trust Shares; or (b) arise out of or result from statements or representations (other than statements or representations contained in and accurately derived from Company Documents) or wrongful conduct of the Trust or persons under its control, with respect to the sale or acquisition of the Contracts or Trust 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 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 Trust; or (d) arise out of or result from any failure by the Trust 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 Trust in this Agreement or arise out of or result from any other material breach of this Agreement by the Trust. 5.3 Neither the Company nor the Trust shall be liable under the indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect to any Losses incurred or assessed against an Indemnified Party that arise 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 Trust shall be liable under the indemnification provisions of Sections 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 other party in writing within a reasonable time after the summons, or other first written notification, giving information of the nature of the claim shall have been served upon or otherwise received by such Indemnified Party (or after such Indemnified Party shall have received notice of service upon or other notification to any designated agent), but failure to notify the party against whom indemnification is sought of any such claim shall not relieve that party from any liability which 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 -11- Indemnified Party of an election to assume such defense, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the indemnifying party will not be liable to the Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. -12- ARTICLE VI Termination 6.1 This Agreement may be terminated by either party for any reason by ninety (90) days advance written notice delivered to the other party. 6.2 Notwithstanding any termination of this Agreement, the Trust shall, at the option of the Company, continue to make available additional shares of the Trust (or any Portfolio) pursuant to the terms and conditions of this Agreement for all Contracts in effect on the effective date of termination of this Agreement, provided that the Company continues to pay the costs set forth in Section 2.3. 6.3 The provisions of Article V shall survive the termination of this Agreement, and the provisions of Article IV and Section 2.8 shall survive the termination of this Agreement as long as Shares of the Trust are held on behalf of Contract owners in accordance with Section 6.2. ARTICLE VII Notices Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. If to the Trust: Janus Aspen Series 100 Fillmore Street Denver, Colorado 80206 Attention: General Counsel If to the Company: Metropolitan Life Insurance Company 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Attn: Andrew Mensch With copy to: Metropolitan Life Insurance Company 485B US Highway One South, Suite 420 Iselin, NJ 08830 -13- Attn: Sabrina K Model -14- ARTICLE VIII 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 State of Colorado. 8.5 The parties to this Agreement acknowledge and agree that all liabilities of the Trust arising, directly or indirectly, under this Agreement, of any and every nature whatsoever, shall be satisfied solely out of the assets of the Trust and that no Trustee, officer, agent or holder of shares of beneficial interest of the Trust 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 Securities and Exchange Commission, the National Association of Securities Dealers, Inc., and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. 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. -15- IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Participation Agreement as of the date and year first above written. JANUS ASPEN SERIES By: ------------------------------------ Name: Bonnie M. Howe Title: Vice President (Insurance Company) By: ------------------------------------ Name: ---------------------------------- Te: ------------------------------------ -16- Schedule A Separate Accounts and Associated Contracts Contracts Funded Name of Separate Account By Separate Account - ------------------------ -------------------------- Separate Account UL MetFlex Separate Account DCVL PPVL- Group and Individual -17- Schedule B List of Portfolios Name of Portfolio All Portfolios of Janus Aspen Series open to new investors (as set forth in the current prospectus of Janus Aspen Series) except Global Technology Portfolio and Global Life Sciences Portfolio. Separate Account UL Balanced Portfolio-Service Shares Growth Portfolio- Institutional Shares Capital Appreciation Portfolio- Service Shares Separate Account DCVL Balanced Portfolio - Institutional Shares Capital Appreciation Portfolio - Institutional Shares -18- Participation Agreement as of April 30, 2004 Franklin Templeton Variable Insurance Products Trust Franklin Templeton Distributors, Inc. Metropolitan Life Insurance Company on behalf of itself and its Separate Accounts CONTENTS Section Subject Matter - ------- -------------- 1. Parties and Purpose 2. Representations and Warranties 3. Purchase and Redemption of Trust Portfolio Shares 4. Fees, Expenses, Prospectuses, Proxy Materials and Reports 5. Voting 6. Sales Material, Information and Trademarks 7. Indemnification 8. Notices 9. Termination 10. Miscellaneous Schedules to this Agreement A. The Company B. Accounts of the Company C. Available Portfolios and Classes of Shares of the Trust; Investment Advisers D. Contracts of the Company E. Other Portfolios Available under the Contracts F. Rule 12b-1 Plans of the Trust G. Addresses for Notices H. Shared Funding Order 1. Parties and Purpose This agreement (the "Agreement") is between certain portfolios, specified below and in Schedule C, of Franklin Templeton Variable Insurance Products Trust, an open-end management investment company organized as a business trust under Massachusetts law (the "Trust"), Franklin Templeton Distributors, Inc., a California corporation which is the principal underwriter for the Trust (the "Underwriter," and together with the Trust, "we" or "us") and the insurance company identified on Schedule A ("you") and your distributor, on your own behalf and on behalf of each segregated asset account maintained by you that is listed on Schedule B, as that schedule may be amended from time to time ("Account" or "Accounts"). The purpose of this Agreement is to entitle you, on behalf of the Accounts, to purchase the shares, and classes of shares, of portfolios of the Trust ("Portfolios") that are identified on Schedule C, solely for the purpose of funding benefits of your variable life insurance policies or variable annuity contracts ("Contracts") that are identified on Schedule D. This Agreement does not authorize any other purchases or redemptions of shares of the Trust. 2. Representations and Warranties 2.1 Representations and Warranties by You You represent and warrant that: 2.1.1 You are an insurance company duly organized and in good standing under the laws of your state of incorporation. 2.1.2 All of your directors, officers, employees, and other individuals or entities dealing with the money and/or securities of the Trust are and shall be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Trust, in an amount not less than $5 million. Such bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company. You agree to make all reasonable efforts to see that this bond or another bond containing such provisions is always in effect, and you agree to notify us in the event that such coverage no longer applies. 2.1.3 Each Account is a duly organized, validly existing segregated asset account under applicable insurance law and interests in each Account are offered exclusively through the purchase of or transfer into a "variable contract" within the meaning of such terms under Section 817 of the Internal Revenue Code of 1986, as amended ("Code") and the regulations thereunder. You will use your best efforts to continue to meet such definitional requirements, and will notify us 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. 2.1.4 Each Account either: (i) has been registered or, prior to any issuance or sale of the Contracts, will be registered as a unit investment trust under the Investment Company Act of 1940 ("1940 Act"); or (ii) has not been so registered in proper reliance upon an exemption from registration under Section 3(c) of the 1940 Act; if the Account is exempt from registration as an investment company under Section 3(c) of the 1940 Act, you will use your best efforts to maintain such exemption and will notify us immediately upon having a reasonable basis for believing that such exemption no longer applies or might not apply in the future. 2.1.5 The Contracts or interests in the Accounts: (i) are or, prior to any issuance or sale will be, registered as securities under the Securities Act of 1933, as amended (the "1933 Act"); or (ii) are not registered because they are properly exempt from registration under Section 3(a)(2) of the 1933 Act or will be offered exclusively in transactions that are properly exempt from registration 2 under Section 4(2) or Regulation D of the 1933 Act, in which case you will make every effort to maintain such exemption and will notify us immediately upon having a reasonable basis for believing that such exemption no longer applies or might not apply in the future. 2.1.6 The Contracts: (i) will be sold by broker-dealers, or their registered representatives, who are registered with the Securities and Exchange Commission ("SEC") under the Securities and Exchange Act of 1934, as amended (the "1934 Act") and who are members in good standing of the National Association of Securities Dealers, Inc. (the "NASD"); (ii) will be issued and sold in compliance in all material respects with all applicable federal and state laws; and (iii) will be sold in compliance in all material respects with any applicable state insurance suitability requirements and NASD suitability guidelines. 2.1.7 Subject to Section 2.2.8, the Contracts currently are treated as annuity contracts or life insurance contracts under applicable provisions of the Code and you will use your best efforts to maintain such treatment; you will notify us 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. 2.1.8 The fees and charges deducted under each Contract, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by you. 2.1.9 You will use shares of the Trust only for the purpose of funding benefits of the Contracts through the Accounts. 2.1.10 Contracts will not be sold outside of the United States. 2.1.11 With respect to any Accounts which are exempt from registration under the 1940 Act in reliance on 3(c)(1) or Section 3(c)(7) thereof: 2.1.11.1 the principal underwriter for each such Account and any subaccounts thereof is a registered broker-dealer with the SEC under the 1934 Act; 2.1.11.2 the shares of the Portfolios of the Trust are and will continue to be the only investment securities held by the corresponding subaccounts; and 2.1.11.3 with regard to each Portfolio, you, on behalf of the corresponding subaccount, will: (a) vote such shares held by it in the same proportion as the vote of all other holders of such shares; and (b) refrain from substituting shares of another security for such shares unless the SEC has approved such 3 substitution in the manner provided in Section 26 of the 1940 Act. 2.1.12 As covered financial institutions we, only with respect to Portfolio shareholders, and you each undertake and agree to comply, and to take full responsibility in complying with any and all applicable laws, regulations, protocols and other requirements relating to money laundering including, without limitation, the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 (Title III of the USA PATRIOT Act). 2.2 Representations and Warranties by the Trust The Trust represents and warrants that: 2.2.1 It is duly organized and in good standing under the laws of the State of Massachusetts. 2.2.2 All of its directors, officers, employees and others dealing with the money and/or securities of a Portfolio are and shall be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Trust in an amount not less than the minimum coverage required by Rule 17g-1 or other regulations under the 1940 Act. Such bond shall include coverage for larceny and embezzlement and be issued by a reputable bonding company. 2.2.3 It is registered as an open-end management investment company under the 1940 Act. 2.2.4 Each class of shares of the Portfolios of the Trust is registered under the 1933 Act. 2.2.5 It will amend its registration statement under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its shares. 2.2.6 It will comply, in all material respects, with the 1933 and 1940 Acts and the rules and regulations thereunder. 2.2.7 It, and each Portfolio, is currently qualified as a "regulated investment company" under Subchapter M of the Code, it will make every effort to maintain such qualification, and will notify you immediately upon having a reasonable basis for believing that it or any Portfolio has ceased to so qualify or might not so qualify in the future. 2.2.8 The Trust and each Portfolio qualifies as a "look-through" entity under Treas. Sec. 1.817-5(f) and that the Trust will use its best efforts to assure that it and each Portfolio continue to so qualify as long as you or an Account owns shares. The Trust will use its best efforts to assure that each Portfolio will comply with the diversification requirements for variable annuity, endowment or life insurance contracts set forth in Section 817(h) of the Code, and the rules and regulations thereunder, including without limitation Treasury Regulation 1.817-5. The Trust has established procedures to monitor such compliance. Upon having a reasonable basis for believing any Portfolio has ceased to comply and will not be able to comply within the grace period afforded by Regulation 4 1.817-5, the Trust will notify you immediately and will take all reasonable steps to adequately diversify the Portfolio to achieve compliance. The Trust will provide you with a certificate of Section 817(h) diversification compliance for each Portfolio in which you or an Account owns shares within 30 days after the end of each calendar quarter. 2.2.9 It currently intends for one or more classes of shares (each, a "Class") to make payments to finance its distribution expenses, including service fees, pursuant to a plan ("Plan") adopted under rule 12b-1 under the 1940 Act ("Rule 12b-1"), although it may determine to discontinue such practice in the future. To the extent that any Class of the Trust finances its distribution expenses pursuant to a Plan adopted under rule 12b-1, the Trust undertakes to comply with any then current SEC interpretations concerning rule 12b-1 or any successor provisions. 2.3 Representations and Warranties by the Underwriter The Underwriter represents and warrants that: 2.3.1 It is registered as a broker dealer with the SEC under the 1934 Act, and is a member in good standing of the NASD. 2.3.2 Each investment adviser listed on Schedule C (each, an "Adviser") is duly registered as an investment adviser under the Investment Advisers Act of 1940, as amended, and any applicable state securities law. 2.4 Warranty and Agreement by Both You and Us We received an order from the SEC dated November 16, 1993 (file no. 812-8546), which was amended by a notice and an order we received on September 17, 1999 and October 13, 1999, respectively (file no. 812-11698) (collectively, the "Shared Funding Order," attached to this Agreement as Schedule H). The Shared Funding Order grants exemptions from certain provisions of the 1940 Act and the regulations thereunder to the extent necessary to permit shares of the Trust to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated life insurance companies and qualified pension and retirement plans outside the separate account context. You and we both warrant and agree that both you and we will comply with the "Applicants' Conditions" prescribed in the Shared Funding Order as though such conditions were set forth verbatim in this Agreement, including, without limitation, the provisions regarding potential conflicts of interest between the separate accounts which invest in the Trust and regarding contract owner voting privileges. In order for the Trust's Board of Trustees to perform its duty to monitor for conflicts of interest, you agree to inform us of the occurrence of any of the events specified in condition 2 of the Shared Funding Order to the extent that such event may or does result in a material conflict of interest as defined in that order. 3. Purchase and Redemption of Trust Portfolio Shares 3.1 We will make shares of the Portfolios available to the Accounts for the benefit of the Contracts. The shares will be available for purchase at the net asset value per share next computed after we (or our agent) receive a purchase order, as established in accordance with the provisions of 5 the then current prospectus of the Trust. Notwithstanding the foregoing, the Trust's Board of Trustees ("Trustees") may refuse to sell shares of any Portfolio to any person, or may suspend or terminate the offering of shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or if, in the sole discretion of the Trustees, they deem such action to be in the best interests of the shareholders of such Portfolio. Without limiting the foregoing, the Trustees have determined that there is a significant risk that the Trust and its shareholders may be adversely affected by investors whose purchase and redemption activity follows a market timing pattern, and have authorized the Trust, the Underwriter and the Trust's transfer agent to adopt procedures and take other action (including, without limitation, rejecting specific purchase orders) as they deem necessary to reduce, discourage or eliminate market timing activity. You agree to cooperate with us to assist us in implementing the Trust's restrictions on purchase and redemption activity that follows a market timing pattern. 3.2 We agree that shares of the Trust will be sold only to life insurance companies which have entered into fund participation agreements with the Trust ("Participating Insurance Companies") and their separate accounts or to qualified pension and retirement plans in accordance with the terms of the Shared Funding Order, but only to the extent such sale will not impair the ability of any Account to treat investments of a Portfolio in which an Account owns shares as investments of the Account for the purpose of satisfying the diversification requirements of Section 817(h). No shares of any Portfolio will be sold to the general public. 3.3 You agree that all net amounts available under the Contracts shall be invested in: (i) the Company's general account; (ii) investment companies currently available as funding vehicles for the Contracts and appearing on Schedule E of this Agreement; or (iii) other investment companies, provided that you shall have given the Trust and the Underwriter thirty (30) days' advance written notice of your intention to add such other investment companies. 3.4 You shall be the designee for us for receipt of purchase orders and requests for redemption resulting from investment in and payments under the Contracts ("Instructions"). The Business Day on which such Instructions are received in proper form by you and time stamped by the close of trading will be the date as of which Portfolio shares shall be deemed purchased, exchanged, or redeemed as a result of such Instructions. Instructions received in proper form by you and time stamped after the close of trading on any given Business Day shall be treated as if received on the next following Business Day. You warrant that all orders, Instructions and confirmations received by you which will be transmitted to us for processing on a Business Day will have been received and time stamped prior to the Close of Trading on that Business Day. Instructions we receive after 9 a.m. Eastern Time shall be processed on the next Business Day. "Business Day" shall mean any day on which the New York Stock Exchange is open for trading and on which the Trust calculates its net asset value pursuant to the rules of the SEC and its current prospectus. 3.5 We shall calculate the net asset value per share of each Portfolio on each Business Day, and shall communicate these net asset values to you or your designated agent on a daily basis as soon as reasonably practical after the calculation is completed (normally by 6:30 p.m. Eastern time). 3.6 You shall submit payment for the purchase of shares of a Portfolio on behalf of an Account in federal funds transmitted by wire to the Trust or to its designated custodian, which must 6 receive such wires no later than the close of the Reserve Bank, which is 6:00 p.m. East Coast time, on the Business Day following the Business Day as of which such purchases orders are made. 3.7 We will redeem any full or fractional shares of any Portfolio, when requested by you on behalf of an Account, at the net asset value next computed after receipt by us (or our agent) of the request for redemption, as established in accordance with the provisions of the then current prospectus of the Trust. We shall make payment for such shares in the manner we establish from time to time, but in no event shall payment be delayed for a greater period than is permitted by the 1940 Act. 3.8 Issuance and transfer of the Portfolio shares will be by book entry only. Stock certificates will not be issued to you or the Accounts. Portfolio shares purchased from the Trust will be recorded in the appropriate title for each Account or the appropriate subaccount of each Account. 3.9 We shall furnish, on or before the ex-dividend date, notice to you of any income dividends or capital gain distributions payable on the shares of any Portfolio. You hereby elect to receive all such income dividends and capital gain distributions as are payable on shares of a Portfolio in additional shares of that Portfolio, and you reserve the right to change this election in the future. We will notify you of the number of shares so issued as payment of such dividends and distributions. 3.10 Each party to this Agreement agrees that, in the event of a material error resulting from incorrect information or confirmations, the parties will seek to comply in all material respects with the provisions of applicable federal securities laws. 4. Fees, Expenses, Prospectuses, Proxy Materials and Reports 4.1 We shall pay no fee or other compensation to you under this Agreement except as provided on Schedule F, if attached. 4.2 We shall prepare and be responsible for filing with the SEC, and any state 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 Trust. We shall bear the costs of preparation and filing of the documents listed in the preceding sentence, registration and qualification of the Trust's shares of the Portfolios. 4.3 We shall use reasonable efforts to provide you, on a timely basis, with such information about the Trust, the Portfolios and each Adviser, in such form as you may reasonably require, as you shall reasonably request in connection with the preparation of disclosure documents and annual and semi-annual reports pertaining to the Contracts. 4.4 At your option, we shall provide you, at our expense, with either: (i) for each Contract owner who is invested through the Account in a subaccount corresponding to a Portfolio ("designated subaccount"), one copy of each of the following documents on each occasion that such document is required by law or regulation to be delivered to such Contract owner who is invested in a designated subaccount: the Trust's current prospectus, annual report, semi-annual report and other shareholder communications, including any amendments or supplements to any of the foregoing, 7 pertaining specifically to the Portfolios ("Designated Portfolio Documents"); or (ii) a camera ready copy of such Designated Portfolio Documents in a form suitable for printing and from which information relating to series of the Trust other than the Portfolios has been deleted to the extent practicable. In connection with clause (ii) of this paragraph, we will pay for proportional printing costs for such Designated Portfolio Documents in order to provide one copy for each Contract owner who is invested in a designated subaccount on each occasion that such document is required by law or regulation to be delivered to such Contract owner, and provided the appropriate documentation is provided and approved by us. We shall provide you with a copy of the Trust's current statement of additional information, including any amendments or supplements, in a form suitable for you to duplicate. The expenses of furnishing, including mailing, to Contract owners the documents referred to in this paragraph shall be borne by you. For each of the documents provided to you in accordance with clause (i) of this paragraph 4.4, we shall provide you, upon your request and at your expense, additional copies. In no event shall we be responsible for the costs of printing or delivery of Designated Portfolio Documents to potential or new Contract owners or the delivery of Designated Portfolio Documents to existing contract owners. 4.5 We shall provide you, at our expense, with copies of any Trust-sponsored proxy materials in such quantity as you shall reasonably require for distribution to Contract owners who are invested in a designated subaccount. You shall bear the costs of distributing proxy materials (or similar materials such as voting solicitation instructions) to Contract owners. 4.6 You assume sole responsibility for ensuring that the Trust's prospectuses, shareholder reports and communications, and proxy materials are delivered to Contract owners in accordance with applicable federal and state securities laws. 5. Voting 5.1 All Participating Insurance Companies shall have the obligations and responsibilities regarding pass-through voting and conflicts of interest corresponding to those contained in the Shared Funding Order. 5.2 If and to the extent required by law, you shall: (i) solicit voting instructions from Contract owners; (ii) vote the Trust shares in accordance with the instructions received from Contract owners; and (iii) vote Trust shares for which no instructions have been received in the same proportion as Trust shares of such Portfolio for which instructions have been received; so long as and to the extent that the SEC continues to interpret the 1940 Act to require pass-through voting privileges for variable contract owners. You reserve the right to vote Trust shares held in any Account in your own right, to the extent permitted by law. 5.3 So long as, and to the extent that, the SEC interprets the 1940 Act to require pass-through voting privileges for Contract owners, you shall provide pass-through voting privileges to Contract owners whose Contract values are invested, through the Accounts, in shares of one or more Portfolios of the Trust. We shall require all Participating Insurance Companies to calculate voting privileges in the same manner and you shall be responsible for assuring that the Accounts calculate voting privileges in the manner established by us. With respect to each Account, you will vote shares of each Portfolio of the Trust held by an Account and for which no timely voting instructions from 8 Contract owners are received in the same proportion as those shares held by that Account for which voting instructions are received. You and your agents will in no way recommend or oppose or interfere with the solicitation of proxies for Portfolio shares held to fund the Contracts without our prior written consent, which consent may be withheld in our sole discretion. 6. Sales Material, Information and Trademarks 6.1 For purposes of this Section 6, "Sales literature or other Promotional material" includes, but is not limited to, portions of the following that use any logo or other trademark related to the Trust, or Underwriter or its affiliates, or refer to the Trust: 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, electronic communication or other public media), 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 or any other advertisement, sales literature or published article or electronic communication), educational or training materials or other communications distributed or made generally available to some or all agents or employees in any media, and disclosure documents, shareholder reports and proxy materials. 6.2 You shall furnish, or cause to be furnished to us or our designee, at least one complete copy of each registration statement, prospectus, statement of additional information, private placement memorandum, retirement plan disclosure information or other disclosure documents or similar information, as applicable (collectively "Disclosure Documents"), as well as any report, solicitation for voting instructions, Sales literature or other Promotional materials, and all amendments to any of the above that relate to the Contracts or the Accounts prior to its first use. You shall furnish, or shall cause to be furnished, to us or our designee each piece of Sales literature or other Promotional material in which the Trust or an Adviser is named, at least fifteen (15) Business Days prior to its proposed use. No such material shall be used unless we or our designee approve such material and its proposed use. 6.3 You and your agents shall not give any information or make any representations or statements on behalf of the Trust or concerning the Trust, the Underwriter or an Adviser, other than information or representations contained in and accurately derived from the registration statement or prospectus for the Trust shares (as such registration statement and prospectus may be amended or supplemented from time to time), annual and semi-annual reports of the Trust, Trust-sponsored proxy statements, or in Sales literature or other Promotional material approved by the Trust or its designee, except as required by legal process or regulatory authorities or with the written permission of the Trust or its designee. You shall send us a complete copy of each Disclosure Document and item of Sales literature or other Promotional materials in its final form within twenty (20) days of its first use. 6.4 We shall not give any information or make any representations or statements on behalf of you or concerning you, the Accounts or the Contracts other than information or representations, including naming you as a Trust shareholder, contained in and accurately derived from Disclosure Documents for the Contracts (as such Disclosure Documents may be amended or supplemented from time to time), or in materials approved by you for distribution, including Sales 9 literature or other Promotional materials, except as required by legal process or regulatory authorities or with your written permission. 6.5 Except as provided in Section 6.2, you shall not use any designation comprised in whole or part of the names or marks "Franklin" or "Templeton" or any logo or other trademark relating to the Trust or the Underwriter without prior written consent, and upon termination of this Agreement for any reason, you shall cease all use of any such name or mark as soon as reasonably practicable. 6.6 You shall furnish to us ten (10) Business Days prior to its first submission to the SEC or its staff, any request or filing for no-action assurance or exemptive relief naming, pertaining to, or affecting, the Trust, the Underwriter or any of the Portfolios. 7. Indemnification 7.1 Indemnification By You 7.1.1 You agree to indemnify and hold harmless the Underwriter, the Trust and each of its Trustees, officers, employees and agents and each person, if any, who controls the Trust within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" and individually the "Indemnified Party" for purposes of this Section 7) against any and all losses, claims, damages, fines, liabilities (including amounts paid in settlement with your written consent, which consent shall not be unreasonably withheld) or expenses (including the reasonable costs of investigating or defending any alleged loss, claim, damage, fines, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, "Losses"), to which the Indemnified Parties may become subject under any statute or regulation, or at common law or otherwise, insofar as such Losses are related to the sale or acquisition of shares of the Trust or the Contracts and 7.1.1.1 arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in a Disclosure Document for the Contracts or in the Contracts themselves or in sales literature generated or approved by you 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 Section 7), 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 you by or on behalf of us for use in Company Documents or otherwise for use in connection with the sale of the Contracts or Trust shares; or 7.1.1.2 arise out of or result from untrue or alleged untrue statements or representations (other than statements or representations contained in and accurately derived from Trust Documents as defined below in Section 7.2) or wrongful conduct of you or 10 persons under your control, with respect to the sale or acquisition of the Contracts or Trust shares; or 7.1.1.3 arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in Trust Documents as defined below in Section 7.2 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 Trust by or on behalf of you; or 7.1.1.4 arise out of or result from any failure by you to provide the services or furnish the materials required under the terms of this Agreement; 7.1.1.5 arise out of or result from any material breach of any representation and/or warranty made by you in this Agreement or arise out of or result from any other material breach of this Agreement by you; or 7.1.1.6 The Trust has received Company's written instructions relating to "investor control" and shall enact procedures reasonably designed to comply with such written instructions. 7.1.2 You shall not be liable under this indemnification provision with respect to any Losses to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement or to the Trust or Underwriter, whichever is applicable. You shall also not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified you in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify you of any such claim shall not relieve you from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, you shall be entitled to participate, at your own expense, in the defense of such action. Unless the Indemnified Party releases you from any further obligations under this Section 7.1, you also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from you to such party of your election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and you will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 7.1.3 The Indemnified Parties will promptly notify you of the commencement of any litigation or proceedings against them in connection with the issuance or sale of the Trust shares or the Contracts or the operation of the Trust. 11 7.2 Indemnification By The Underwriter 7.2.1 The Underwriter agrees to indemnify and hold harmless you, and each of your directors and officers and each person, if any, who controls you within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" and individually an "Indemnified Party" for purposes of this Section 7.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Underwriter, which consent shall not be unreasonably withheld) 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 the Indemnified Parties may become subject under any statute, at common law or otherwise, insofar as such Losses are related to the sale or acquisition of the shares of the Trust or the Contracts and: 7.2.1.1 arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the Registration Statement, prospectus or sales literature of the Trust (or any amendment or supplement to any of the foregoing) (collectively, the "Trust Documents") 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 of such alleged statement or omission was made in reliance upon and in conformity with information furnished to us by or on behalf of you for use in the Registration Statement or prospectus for the Trust or in sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Trust shares; or 7.2.1.2 arise out of or as a result of statements or representations (other than statements or representations contained in the Disclosure Documents or sales literature for the Contracts not supplied by the Underwriter or persons under its control) or wrongful conduct of the Trust, Adviser or Underwriter or persons under their control, with respect to the sale or distribution of the Contracts or Trust shares; or 7.2.1.3 arise out of any untrue statement or alleged untrue statement of a material fact contained in a Disclosure Document or sales literature covering the Contracts, or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading, if such statement or omission was made in reliance upon information furnished to you by or on behalf of the Trust; or 7.2.1.4 arise as a result of any failure by us to provide the services and furnish the materials under the terms of this Agreement (including a failure, whether unintentional or in good faith or otherwise, to comply with the qualification representation specified above in Section 2.2.7 and the diversification requirements specified above in Section 2.2.8); or 7.2.1.5 arise out of or result from any material breach of any representation and/or warranty made by us in this Agreement or arise out of or result from any other 12 material breach of this Agreement by us; as limited by and in accordance with the provisions of Sections 7.2.2, and 7.2.3, 7.3.3 hereof. 7.2.2 The Underwriter shall not be liable under this indemnification provision with respect to any Losses to which an Indemnified Party would otherwise be subject by reason of such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement or to you or the Accounts, whichever is applicable. 7.2.3 The Underwriter shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Underwriter in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Underwriter of any such claim shall not relieve the Underwriter from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Underwriter will be entitled to participate, at its own expense, in the defense thereof. Unless the Indemnified Party releases the Underwriter from any further obligations under this Section 7.2, the Underwriter also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Underwriter to such party of the Underwriter's election to assume the defense thereof, the Indemnified Party shall bear the expenses of any additional counsel retained by it, and the Underwriter will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 7.2.4 You agree promptly to notify the Underwriter of the commencement of any litigation or proceedings against you or the Indemnified Parties in connection with the issuance or sale of the Contracts or the operation of each Account. 7.3 Indemnification By The Trust 7.3.1 The Trust agrees to indemnify and hold harmless you, and each of your directors and officers and each person, if any, who controls you within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this Section 7.3) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Trust, which consent shall not be unreasonably withheld) or litigation (including 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 expenses (or actions in respect thereof) or settlements result from the gross negligence, bad faith or willful misconduct of the Board or any member thereof, are related to the operations of the Trust, and arise out of or result from any material breach of any representation and/or warranty made by the Trust in this Agreement or arise out of or result from any other material breach of this Agreement by the Trust; as limited by and in accordance with the provisions of Sections 7.3.2 and 7.3.3 hereof. It is understood and expressly stipulated that neither the holders of shares of the Trust nor any Trustee, officer, agent or 13 employee of the Trust shall be personally liable hereunder, nor shall any resort be had to other private property for the satisfaction of any claim or obligation hereunder, but the Trust only shall be liable. 7.3.2 The Trust shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against any Indemnified Party as such may arise from such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement or to you, the Trust, the Underwriter or each Account, whichever is applicable. 14 7.3.3 The Trust shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Trust in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claims shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Trust of any such claim shall not relieve the Trust from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Trust will be entitled to participate, at its own expense, in the defense thereof. Unless the Indemnified Party releases the Trust from any further obligations under this Section 7.3, the Trust also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Trust to such party of the Trust's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Trust will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 7.3.4 You agree promptly to notify the Trust of the commencement of any litigation or proceedings against you or the Indemnified Parties in connection with this Agreement, the issuance or sale of the Contracts, with respect to the operation of the Account, or the sale or acquisition of shares of the Trust. 8. Notices Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth in Schedule G below or at such other address as such party may from time to time specify in writing to the other party. 9. Termination 9.1 This Agreement may be terminated by mutual agreement at any time. If this Agreement is so terminated, we shall, at your option, continue to make available additional shares of any Portfolio and redeem shares of any Portfolio for any or all Contracts or Accounts existing on the effective date of termination of this Agreement, pursuant to the terms and conditions of this Agreement. 9.2 This Agreement may be terminated by any party in its entirety or with respect to one, some or all Portfolios for any reason by sixty (60) days' advance written notice delivered to the other parties. If this Agreement is so terminated, we may, at our option, continue to make available additional shares of any Portfolio and redeem shares of any Portfolio for any or all Contracts or Accounts existing on the effective date of termination of this Agreement, pursuant to the terms and conditions of this Agreement; alternatively, we may, at our option, redeem the Portfolio shares held by the Accounts, provided that such redemption shall not occur prior to six (6) months following written notice of termination, during which time we will cooperate with you in effecting a transfer of Portfolio assets to another underlying fund pursuant to any legal and appropriate means. 15 9.3 This Agreement may be terminated immediately by you or us upon written notice to the other party if either party materially breaches any of the representations and warranties made in this Agreement or either party is materially in default in the performance of any of its duties or obligations under the Agreement, receive a written notice thereof and fails to remedy such default or breach to the other party's reasonable satisfaction within 30 days after such notice. If this Agreement so terminates, the parties shall cooperate to effect an orderly windup of the business which may include, at the non-breaching party's option, a redemption of the Portfolio shares held by the Accounts, provided that such redemption shall not occur prior to a period of up to six (6) months following written notice of termination, during which time we will cooperate reasonably with you in effecting a transfer of Portfolio assets to another underlying fund pursuant to any legal and appropriate means. 9.4 This Agreement may be terminated immediately by us upon written notice to you if, with respect to the representations and warranties made in sections 2.1.3, 2.1.5, 2.1.7 and 2.1.12 of this Agreement: (i) you materially breach any of such representations and warranties; or (ii) you inform us that any of such representations and warranties may no longer be true or might not be true in the future; or (iii) any of such representations and warranties were not true on the effective date of this Agreement, are at any time no longer true, or have not been true during any time since the effective date of this Agreement. If this Agreement is so terminated, the Trust may redeem, at its option in kind or for cash, the Portfolio shares held by the Accounts on the effective date of termination of this Agreement. 9.5 This Agreement may be terminated by the Board of Trustees of the Trust, in the exercise of its fiduciary duties, either upon its determination that such termination is a necessary and appropriate remedy for a material breach of this Agreement which includes a violation of laws, or upon its determination to completely liquidate a Portfolio. Pursuant to such termination, the Trust may redeem, at its option in kind or for cash, the Portfolio shares held by the Accounts on the effective date of termination of this Agreement; 9.6 This Agreement shall terminate immediately in the event of its assignment by any party without the prior written approval of the other parties, or as otherwise required by law. If this Agreement is so terminated, the Trust may redeem, at its option in kind or for cash, the Portfolio shares held by the Accounts on the effective date of termination of this Agreement. 9.7 This Agreement shall be terminated as required by the Shared Funding Order, and its provisions shall govern. 9.8 The provisions of Sections 2 (Representations and Warranties) and 7 (Indemnification) shall survive the termination of this Agreement. All other applicable provisions of this Agreement shall survive the termination of this Agreement, as long as shares of the Trust are held on behalf of Contract owners, except that we shall have no further obligation to sell Trust shares with respect to Contracts issued after termination. 9.9 You shall not redeem Trust shares attributable to the Contracts (as opposed to Trust shares attributable to your assets held in the Account) except: (i) as necessary to implement Contract owner initiated or approved transactions; (ii) as required by state and/or federal laws or regulations 16 or judicial or other legal precedent of general application (hereinafter referred to as a "Legally Required Redemption"); or (iii) as permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon request, you shall promptly furnish to us the opinion of your counsel (which counsel shall be reasonably satisfactory to us) to the effect that any redemption pursuant to clause (ii) of this Section 9.9 is a Legally Required Redemption. Furthermore, you shall not prevent Contract owners from allocating payments to any Portfolio that has been available under a Contract without first giving us ninety (90) days advance written notice of your intention to do so. 10. Miscellaneous 10.1 The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions of this Agreement or otherwise affect their construction or effect. 10.2 This Agreement may be executed simultaneously in two or more counterparts, all of which taken together shall constitute one and the same instrument. 10.3 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. 10.4 This Agreement shall be construed and its provisions interpreted under and in accordance with the laws of the State of California. It shall also be subject to the provisions of the federal securities laws and the rules and regulations thereunder, to any orders of the SEC on behalf of the Trust granting it exemptive relief, and to the conditions of such orders. We shall promptly forward copies of any such orders to you. 10.5 The parties to this Agreement acknowledge and agree that all liabilities of the Trust arising, directly or indirectly, under this Agreement, of any and every nature whatsoever, shall be satisfied solely out of the assets of the Trust and that no Trustee, officer, agent or holder of shares of beneficial interest of the Trust shall be personally liable for any such liabilities. 10.6 The parties to this Agreement agree that the assets and liabilities of each Portfolio of the Trust are separate and distinct from the assets and liabilities of each other Portfolio. No Portfolio shall be liable or shall be charged for any debt, obligation or liability of any other Portfolio. 10.7 Each party to this Agreement shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the NASD, and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. 10.8 Each party shall treat as confidential all information of the other party which the parties agree in writing is confidential ("Confidential Information"). Except as permitted by this Agreement or as required by appropriate governmental authority (including, without limitation, the SEC, the NASD, or state securities and insurance regulators) the receiving party shall not disclose or 17 use Confidential Information of the other party before it enters the public domain, without the express written consent of the party providing the Confidential Information. 10.9 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 to this Agreement are entitled to under state and federal laws. 10.10 The parties to this Agreement acknowledge and agree that this Agreement shall not be exclusive in any respect, except as provided above in Section 3.3. 10.11 Neither this Agreement nor any rights or obligations created by it may be assigned by any party without the prior written approval of the other parties. 10.12 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. 18 IN WITNESS WHEREOF, each of the parties have caused their duly authorized officers to execute this Agreement. The Company: Metropolitan Life Insurance Company By: --------------------------------- Name: John Ryan Title: Vice President Distributor for the Company: By: --------------------------------- Name: Title: The Trust: Franklin Templeton Variable Insurance Only on behalf of each Products Trust Portfolio listed on Schedule C hereof. By: --------------------------------- Name: Karen L. Skidmore Title: Assistant Vice President The Underwriter: Franklin Templeton Distributors, Inc. By: --------------------------------- Name: Title: 19 Schedule A The Company and its Distributor [name] Metropolitan Life Insurance Company 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 [address] [state of incorporation] New York [name of Distributor] Metropolitan Life Insurance Company 485B US Highway One South, Suite 420 Iselin, NJ 08830 [address of Distributor] [state of incorporation of Distributor] New York A Schedule B Accounts of the Company - ------------------------------------------------------------ 1. Name: [Separate Account UL] - ------------------------------------------------------------ Date Established: [12/1988] - ------------------------------------------------------------ SEC Registration Number: 811-06025 ---- - ------------------------------------------------------------ - ------------------------------------------------------------ 2. Name: [Separate Account DCVL] - ------------------------------------------------------------ Date Established: [11/2003] - ------------------------------------------------------------ SEC Registration Number: Unregistered Account - ------------------------------------------------------------ - ------------------------------------------------------------ B Schedule C Available Portfolios and Classes of Shares of the Trust; Investment Advisers Separate Account UL - -------------------------------------------------------------------------------- Franklin Templeton Variable Insurance Products Trust Investment Adviser - -------------------------------------------------------------------------------- Mutual Discovery Securities Fund Class 2 Franklin Mutual Advisors - -------------------------------------------------------------------------------- Growth Securities Fund Class 2 Templeton Global Advisors - -------------------------------------------------------------------------------- Foreign Securities Fund Class 1 Templeton - -------------------------------------------------------------------------------- Separate Account DCVL - -------------------------------------------------------------------------------- Franklin Templeton Variable Insurance Products Trust Investment Adviser - -------------------------------------------------------------------------------- Mutual Discovery Securities Fund Class 2 Franklin Mutual Advisors - -------------------------------------------------------------------------------- Growth Securities Fund Class 2 Templeton Global Advisors - -------------------------------------------------------------------------------- C Schedule D Contracts of the Company
- -------------------------------------------------------------------------------------------------------- Product Name Separate Account Name Insurance Registered Y/N Registered Y/N # Company 1933 Act #, State Form ID 1940 Act # Classes of Shares and Portfolios - -------------------------------------------------------------------------------------------------------- 01 Metropolitan MetFlex Separate Account UL Class 2 shares: Life Yes Yes Insurance 811- Mutual Discovery Securities Fund Company Growth Securities Fund Class 1 Shares: Foreign Securities Fund - -------------------------------------------------------------------------------------------------------- 02 Metropolitan PPVL Separate Account DCVL Class 2 shares: Life No No Mutual Discovery Securities Fund Insurance NA Company Growth Securities Fund - --------------------------------------------------------------------------------------------------------
D Schedule E Other Portfolios Available under the Contracts [names of other portfolios] Are you asking us to list all of the investment options - if so why? E Schedule F Rule 12b-1 Plans Compensation Schedule Each Portfolio named below shall pay the following amounts pursuant to the terms and conditions referenced below under its Class 2 Rule 12b-1 Distribution Plan, stated as a percentage per year of Class 2's average daily net assets represented by shares of Class 2. Portfolio Name Maximum Annual Payment Rate - -------------------------------------------------------------------------------- Mutual Discovery Securities Fund .25 - -------------------------------------------------------------------------------- Growth Securities Fund .25 - -------------------------------------------------------------------------------- Question: What about additional 5 bps revenue share? Agreement Provisions If the Company, on behalf of any Account, purchases Trust Portfolio shares ("Eligible Shares") which are subject to a Rule 12b-1 plan adopted under the 1940 Act (the "Plan"), the Company may participate in the Plan. To the extent the Company or its affiliates, agents or designees (collectively "you") provide any activity or service which is primarily intended to assist in the promotion, distribution or account servicing of Eligible Shares ("Rule 12b-1 Services") or variable contracts offering Eligible Shares, the Underwriter, the Trust or their affiliates (collectively, "we") may pay you a Rule 12b-1 fee. "Rule 12b-1 Services" may include, but are not limited to, printing of prospectuses and reports used for sales purposes, preparing and distributing sales literature and related expenses, advertisements, education of dealers and their representatives, and similar distribution-related expenses, furnishing personal services to owners of Contracts which may invest in Eligible Shares ("Contract Owners"), education of Contract Owners, answering routine inquiries regarding a Portfolio, coordinating responses to Contract Owner inquiries regarding the Portfolios, maintaining such accounts or providing such other enhanced services as a Trust Portfolio or Contract may require, or providing other services eligible for service fees as defined under NASD rules. Your acceptance of such compensation is your acknowledgment that eligible services have been rendered. All Rule 12b-1 fees, shall be based on the value of Eligible Shares owned by the Company on behalf of its Accounts, and shall be calculated on the basis and at the rates set forth in the Compensation Schedule stated above. The aggregate annual fees paid pursuant to each Plan shall not exceed the amounts stated as the "annual maximums" in the Portfolio's prospectus, unless an increase is approved by shareholders as provided in the Plan. These maximums shall be a specified percent of the value of a Portfolio's net assets attributable to Eligible Shares owned by the Company on behalf of its Accounts (determined in the same manner as the Portfolio uses to compute its net assets as set forth in its effective Prospectus). The Rule 12b-1 fee will be paid to you within thirty (30) days after the end of the three-month periods ending in January, April, July and October. F-1 You shall furnish us with such information as shall reasonably be requested by the Trust's Boards of Trustees ("Trustees") with respect to the Rule 12b-1 fees paid to you pursuant to the Plans. We shall furnish to the Trustees, for their review on a quarterly basis, a written report of the amounts expended under the Plans and the purposes for which such expenditures were made. The Plans and provisions of any agreement relating to such Plans must be approved annually by a vote of the Trustees, including the Trustees who are not interested persons of the Trust and who have no financial interest in the Plans or any related agreement ("Disinterested Trustees"). Each Plan may be terminated at any time by the vote of a majority of the Disinterested Trustees, or by a vote of a majority of the outstanding shares as provided in the Plan, on sixty (60) days' written notice, without payment of any penalty. The Plans may also be terminated by any act that terminates the Underwriting Agreement between the Underwriter and the Trust, and/or the management or administration agreement between Franklin Advisers, Inc. and its affiliates and the Trust. Continuation of the Plans is also conditioned on Disinterested Trustees being ultimately responsible for selecting and nominating any new Disinterested Trustees. Under Rule 12b-1, the Trustees have a duty to request and evaluate, and persons who are party to any agreement related to a Plan have a duty to furnish, such information as may reasonably be necessary to an informed determination of whether the Plan or any agreement should be implemented or continued. Under Rule 12b-1, the Trust is permitted to implement or continue Plans or the provisions of any agreement relating to such Plans from year-to-year only if, based on certain legal considerations, the Trustees are able to conclude that the Plans will benefit each affected Trust Portfolio and class. Absent such yearly determination, the Plans must be terminated as set forth above. In the event of the termination of the Plans for any reason, the provisions of this Schedule F relating to the Plans will also terminate. You agree that your selling agreements with persons or entities through whom you intend to distribute Contracts will provide that compensation paid to such persons or entities may be reduced if a Portfolio's Plan is no longer effective or is no longer applicable to such Portfolio or class of shares available under the Contracts. Any obligation assumed by the Trust pursuant to this Agreement shall be limited in all cases to the assets of the Trust and no person shall seek satisfaction thereof from shareholders of the Trust. You agree to waive payment of any amounts payable to you by Underwriter under a Plan until such time as the Underwriter has received such fee from the Trust. The provisions of the Plans shall control over the provisions of the Participation Agreement, including this Schedule F, in the event of any inconsistency. You agree to provide complete disclosure as required by all applicable statutes, rules and regulations of all rule 12b-1 fees received from us in the prospectus of the Contracts. F-2 Schedule G Addresses for Notices To the Company: [ ] Metropolitan Life Insurance Company 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Attn: Andrew Mensch, Counsel With a copy to: Metropolitan Life Insurance Company 485B US Highway One South, Suite 420 Iselin, NJ 08830 Attn: Sabrina K Model, Director To the Trust: Franklin Templeton Variable Insurance Products Trust One Franklin Parkway San Mateo, California 94403 Attention: Karen L. Skidmore Assistant Vice President To the Underwriter: Franklin Templeton Distributors, Inc. One Franklin Parkway San Mateo, California 94403 Attention: Philip J. Kearns, Vice President G Schedule H Shared Funding Order Templeton Variable Products Series Fund, et al. File No. 812-11698 SECURITIES AND EXCHANGE COMMISSION Release No. IC-24018 1999 SEC LEXIS 1887 September 17, 1999 ACTION: Notice of application for an amended order of exemption pursuant to Section 6(c) of the Investment Company Act of 1940 (the "1940 Act") 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. TEXT: Summary of Application: Templeton Variable Products Series Fund (the "Templeton Trust"), Franklin Templeton Variable Insurance Products Trust (formerly Franklin Valuemark Funds) (the "VIP Trust," and together with the Templeton Trust, the "Funds"), Templeton Funds Annuity Company ("TFAC") or any successor to TFAC, and any future open-end investment company for which TFAC or any affiliate is the administrator, sub-administrator, investment manager, adviser, principal underwriter, or sponsor ("Future Funds") seek an amended order of the Commission to (1) add as parties to that order the VIP Trust and any Future Funds and (2) permit shares of the Funds and Future Funds to be issued to and held by qualified pension and retirement plans outside the separate account context. Applicants: Templeton Variable Products Series Fund, Franklin Templeton Variable Insurance Products Trust, Templeton Funds Annuity Company or any successor to TFAC, and any future open-end investment company for which TFAC or any affiliate is the administrator, sub-administrator, investment manager, adviser, principal underwriter, or sponsor (collectively, the "Applicants"). Filing Date: The application was filed on July 14, 1999, and amended and restated on September 17, 1999. Hearing or Notification of Hearing: An order granting the application will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Secretary of the Commission and serving Applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m., on October 12, 1999, and should be accompanied by proof of service on the Applicants in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the writer's interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Secretary of the Commission. Addresses: Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, D.C. 20549-0609. Applicants: Templeton Variable Products Series Fund and Franklin Templeton Variable Insurance Products Trust, 777 Mariners Island Boulevard, San Mateo, California 94404, Attn: Karen L. Skidmore, Esq. For Further Information Contact: Kevin P. McEnery, Senior Counsel, or Susan M. Olson, Branch Chief, Office of Insurance Products, Division of Investment Management, at (202) 942-0670. H-1 Supplementary Information: The following is a summary of the application. The complete application is available for a fee from the SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington, D.C. 20549-0102 (tel. (202) 942-8090). Applicants' Representations: 1. Each of the Funds is registered under the 1940 Act as an open-end management investment company and was organized as a Massachusetts business trust. The Templeton Trust currently consists of eight separate series, and the VIP Trust consists of twenty-five separate series. Each Fund's Declaration of Trust permits the Trustees to create additional series of shares at any time. The Funds currently serve as the underlying investment medium for variable annuity contracts and variable life insurance policies issued by various insurance companies. The Funds have entered into investment management agreements with certain investment managers ("Investment Managers") directly or indirectly owned by Franklin Resources, Inc. ("Resources"), a publicly owned company engaged in the financial services industry through its subsidiaries. 2. TFAC is an indirect, wholly owned subsidiary of Resources. TFAC is the sole insurance company in the Franklin Templeton organization, and specializes in the writing of variable annuity contracts. The Templeton Trust has entered into a Fund Administration Agreement with Franklin Templeton Services, Inc. ("FT Services"), which replaced TFAC in 1998 as administrator, and FT Services subcontracts certain services to TFAC. FT Services also serves as administrator to all series of the VIP Trust. TFAC and FT Services provide certain administrative facilities and services for the VIP and Templeton Trusts. 3. On November 16, 1993, the Commission issued an order granting exemptive relief to permit shares of the Templeton Trust to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated life insurance companies (Investment Company Act Release No. 19879, File No. 812-8546) (the "Original Order"). Applicants incorporate by reference into the application the Application for the Original Order and each amendment thereto, the Notice of Application for the Original Order, and the Original Order, to the extent necessary, to supplement the representations made in the application in support of the requested relief. Applicants represent that all of the facts asserted in the Application for the Original Order and any amendments thereto remain true and accurate in all material respects to the extent that such facts are relevant to any relief on which Applicants continue to rely. The Original Order allows the Templeton Trust to offer its shares to insurance companies as the investment vehicle for their separate accounts supporting variable annuity contracts and variable life insurance contracts (collectively, the "Variable Contracts"). Applicants state that the Original Order does not (i) include the VIP Trust or Future Funds as parties, nor (ii) expressly address the sale of shares of the Funds or any Future Funds to qualified pension and retirement plans outside the separate account context including, without limitation, those trusts, plans, accounts, contracts or annuities described in Sections 401(a), 403(a), 403(b), 408(b), 408(k), 414(d), 457(b), 501(c)(18) of the Internal Revenue Code of 1986, as amended (the "Code"), and any other trust, plan, contract, account or annuity that is determined to be within the scope of Treasury Regulation 1.817.5(f)(3)(iii) ("Qualified Plans"). 4. Separate accounts owning shares of the Funds and their insurance company depositors are referred to in the application as "Participating Separate Accounts" and "Participating Insurance Companies," respectively. The use of a common management investment company as the underlying investment medium for both variable annuity and variable life insurance separate accounts of a single insurance company (or of two or more affiliated insurance companies) is referred to as "mixed funding." The use of a common management investment company as the underlying investment medium for variable annuity and/or variable life insurance separate accounts of unaffiliated insurance companies is referred to as "shared funding." Applicants' Legal Analysis: 1. Applicants request that the Commission issue an amended order pursuant to Section 6(c) of the 1940 Act, adding the VIP Trust and Future Funds to the Original Order and exempting scheduled premium variable life insurance separate accounts and flexible premium variable life insurance separate accounts of Participating Insurance Companies (and, to the extent necessary, any principal underwriter and depositor of such an account) and the Applicants from H-2 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) (and any comparable rule) thereunder, respectively, to the extent necessary to permit shares of the Funds and any Future Funds to be sold to and held by Qualified Plans. Applicants submit that the exemptions requested are appropriate in the public interest, consistent with the protection of investors, and consistent with the purposes fairly intended by the policy and provisions of the 1940 Act. 2. The Original Order does not include the VIP Trust or Future Funds as parties nor expressly address the sale of shares of the Funds or any Future Funds to Qualified Plans. Applicants propose that the VIP Trust and Future Funds be added as parties to the Original Order and the Funds and any Future Funds be permitted to offer and sell their shares to Qualified Plans. 3. Section 6(c) of the 1940 Act provides, in part, that the Commission, by order upon application, may conditionally or unconditionally exempt any person, security or transaction, or any class or classes of persons, securities or transactions from any provisions of the 1940 Act or the rules or regulations thereunder, if and to the extent that such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the 1940 Act. 4. In connection with the funding of scheduled premium variable life insurance contracts issued through a separate account registered under the 1940 Act as a unit investment trust ("UIT"), Rule 6e-2(b)(15) provides partial exemptions from various provisions of the 1940 Act, including the following: (1) Section 9(a), which makes it unlawful for certain individuals to act in the capacity of employee, officer, or director for a UIT, by limiting the application of the eligibility restrictions in Section 9(a) to affiliated persons directly participating in the management of a registered management investment company; and (2) Sections 13(a), 15(a) and 15(b) of the 1940 Act to the extent that those sections might be deemed to require "pass-through" voting with respect to an underlying fund's shares, by allowing an insurance company to disregard the voting instructions of contractowners in certain circumstances. 5. These exemptions are available, however, only where the management investment company underlying the separate account (the "underlying fund") offers its shares "exclusively to variable life insurance separate accounts of the life insurer, or of any affiliated life insurance company." Therefore, Rule 6e-2 does not permit either mixed funding or shared funding because the relief granted by Rule 6e-2(b)(15) is not available with respect to a scheduled premium variable life insurance separate account that owns shares of an underlying fund that also offers its shares to a variable annuity or a flexible premium variable life insurance separate account of the same company or of any affiliated life insurance company. Rule 6e-2(b)(15) also does not permit the sale of shares of the underlying fund to Qualified Plans. 6. In connection with flexible premium variable life insurance contracts issued through a separate account registered under the 1940 Act as a UIT, Rule 6e-3(T)(b)(15) also provides partial exemptions from Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act. These exemptions, however, are available only where the separate account's underlying fund offers its shares "exclusively to separate accounts of the life insurer, or of any affiliated life insurance company, offering either scheduled contracts or flexible contracts, or both; or which also offer their shares to variable annuity separate accounts of the life insurer or of an affiliated life insurance company." Therefore, Rule 6e-3(T) permits mixed funding but does not permit shared funding and also does not permit the sale of shares of the underlying fund to Qualified Plans. As noted above, the Original Order granted the Templeton Trust exemptive relief to permit mixed and shared funding, but did not expressly address the sale of its shares to Qualified Plans. 7. Applicants note that if the Funds were to sell their shares only to Qualified Plans, exemptive relief under Rule 6e-2 and Rule 6e-3(T) would not be necessary. Applicants state that the relief provided for under Rule 6e-2(b)(15) and Rule 6e-3(T)(b)(15) does not relate to qualified pension and retirement plans or to a registered investment company's ability to sell its shares to such plans. 8. Applicants state that changes in the federal tax law have created the opportunity for each of the Funds to increase its asset base through the sale of its shares to Qualified Plans. Applicants state that Section 817(h) of the Internal Revenue Code of 1986, as amended (the "Code"), imposes certain diversification standards on the assets underlying Variable Contracts. Treasury Regulations generally require that, to meet the diversification requirements, all of the H-3 beneficial interests in the underlying investment company must be held by the segregated asset accounts of one or more life insurance companies. Notwithstanding this, Applicants note that the Treasury Regulations also contain an exception to this requirement that permits trustees of a Qualified Plan to hold shares of an investment company, the shares of which are also held by insurance company segregated asset accounts, without adversely affecting the status of the investment company as an adequately diversified underlying investment of Variable Contracts issued through such segregated asset accounts (Treas. Reg. 1.817-5(f)(3)(iii)). 9. Applicants state that the promulgation of Rules 6e-2(b)(15) and 6e-3(T)(b)(15) under the 1940 Act preceded the issuance of these Treasury Regulations. Thus, Applicants assert that the sale of shares of the same investment company to both separate accounts and Qualified Plans was not contemplated at the time of the adoption of Rules 6e-2(b)(15) and 6e-3(T)(b)(15). 10. Section 9(a) provides that it is unlawful for any company to serve as investment adviser or principal underwriter of any registered open-end investment company if an affiliated person of that company is subject to a disqualification enumerated in Section 9(a)(1) or (2). Rules 6e-2(b)(15) and 6e-3(T)(b)(15) provide exemptions from Section 9(a) under certain circumstances, subject to the limitations on mixed and shared funding. These exemptions limit the application of the eligibility restrictions to affiliated individuals or companies that directly participate in the management of the underlying portfolio investment company. 11. Applicants state that the relief granted in Rule 6e-2(b)(15) and 6e-3(T)(b)(15) from the requirements of Section 9 limits, in effect, the amount of monitoring of an insurer's personnel that would otherwise be necessary to ensure compliance with Section 9 to that which is appropriate in light of the policy and purposes of Section 9. Applicants submit that those Rules recognize that it is not necessary for the protection of investors or the purposes fairly intended by the policy and provisions of the 1940 Act to apply the provisions of Section 9(a) to the many individuals involved in an insurance company complex, most of whom typically will have no involvement in matters pertaining to investment companies funding the separate accounts. 12. Applicants to the Original Order previously requested and received relief from Section 9(a) and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) to the extent necessary to permit mixed and shared funding. Applicants maintain that the relief previously granted from Section 9(a) will in no way be affected by the proposed sale of shares of the Funds to Qualified Plans. Those individuals who participate in the management or administration of the Funds will remain the same regardless of which Qualified Plans use such Funds. Applicants maintain that more broadly applying the requirements of Section 9(a) because of investment by Qualified Plans would not serve any regulatory purpose. Moreover, Qualified Plans, unlike separate accounts, are not themselves investment companies and therefore are not subject to Section 9 of the 1940 Act. 13. Applicants state that Rules 6e-2(b)(15)(iii) and 6e-3(T)(b)(15)(iii) provide exemptions from the pass-through voting requirement with respect to several significant matters, assuming the limitations on mixed and shared funding are observed. Rules 6e-2(b)(15)(iii)(A) and 6e-3(T)(b)(15)(iii)(A) provide that the insurance company may disregard the voting instructions of its contractowners with respect to the investments of an underlying fund or any contract between a fund and its investment adviser, when required to do so by an insurance regulatory authority (subject to the provisions of paragraphs (b)(5)(i) and (b)(7)(ii)(A) of the Rules). Rules 6e-2(b)(15)(iii)(B) and 6e-3(T)(b)(15)(iii)(A)(2) provide that the insurance company may disregard contractowners' voting instructions if the contractowners initiate any change in such company's investment policies, principal underwriter, or any investment adviser (provided that disregarding such voting instructions is reasonable and subject to the other provisions of paragraphs (b)(5)(ii) and (b)(7)(ii)(B) and (C) of the Rules). 14. Applicants assert that Qualified Plans, which are not registered as investment companies under the 1940 Act, have no requirement to pass-through the voting rights to plan participants. Applicants state that applicable law expressly reserves voting rights to certain specified persons. Under Section 403(a) of the Employment Retirement Income Security Act ("ERISA"), shares of a fund sold to a Qualified Plan must be held by the trustees of the Qualified Plan. Section 403(a) also provides that the trustee(s) must have exclusive authority and discretion to manage and control the Qualified Plan with two exceptions: (1) when the Qualified Plan expressly provides that the trustee(s) are subject to the direction of a named fiduciary who is not a trustee, in which case the trustees are subject to proper H-4 directions made in accordance with the terms of the Qualified Plan and not contrary to ERISA; and (2) when the authority to manage, acquire or dispose of assets of the Qualified Plan is delegated to one or more investment managers pursuant to Section 402(c)(3) of ERISA. Unless one of the two above exceptions stated in Section 403(a) applies, Qualified Plan trustees have the exclusive authority and responsibility for voting proxies. Where a named fiduciary to a Qualified Plan appoints an investment manager, the investment manager has the responsibility to vote the shares held unless the right to vote such shares is reserved to the trustees or the named fiduciary. Where a Qualified Plan does not provide participants with the right to give voting instructions, Applicants do not see any potential for material irreconcilable conflicts of interest between or among variable contract holders and Qualified Plan investors with respect to voting of the respective Fund's shares. Accordingly, Applicants state that, unlike the case with insurance company separate accounts, the issue of the resolution of material irreconcilable conflicts with respect to voting is not present with respect to such Qualified Plans since the Qualified Plans are not entitled to pass-through voting privileges. 15. Even if a Qualified Plan were to hold a controlling interest in one of the Funds, Applicants believe that such control would not disadvantage other investors in such Fund to any greater extent than is the case when any institutional shareholder holds a majority of the voting securities of any open-end management investment company. In this regard, Applicants submit that investment in a Fund by a Qualified Plan will not create any of the voting complications occasioned by mixed funding or shared funding. Unlike mixed or shared funding, Qualified Plan investor voting rights cannot be frustrated by veto rights of insurers or state regulators. 16. Applicants state that some of the Qualified Plans, however, may provide for the trustee(s), an investment adviser (or advisers), or another named fiduciary to exercise voting rights in accordance with instructions from participants. Where a Qualified Plan provides participants with the right to give voting instructions, Applicants see no reason to believe that participants in Qualified Plans generally or those in a particular Qualified Plan, either as a single group or in combination with participants in other Qualified Plans, would vote in a manner that would disadvantage Variable Contract holders. In sum, Applicants maintain that the purchase of shares of the Funds by Qualified Plans that provide voting rights does not present any complications not otherwise occasioned by mixed or shared funding. 17. Applicants do not believe that the sale of the shares of the Funds to Qualified Plans will increase the potential for material irreconcilable conflicts of interest between or among different types of investors. In particular, Applicants see very little potential for such conflicts beyond that which would otherwise exist between variable annuity and variable life insurance contractowners. 18. As noted above, Section 817(h) of the Code imposes certain diversification standards on the underlying assets of variable contracts held in an underlying mutual fund. The Code provides that a variable contract shall not be treated as an annuity contract or life insurance, as applicable, for any period (and any subsequent period) for which the investments are not, in accordance with regulations prescribed by the Treasury Department, adequately diversified. 19. Treasury Department Regulations issued under Section 817(h) provide that, in order to meet the statutory diversification requirements, all of the beneficial interests in the investment company must be held by the segregated asset accounts of one or more insurance companies. However, the Regulations contain certain exceptions to this requirement, one of which allows shares in an underlying mutual fund to be held by the trustees of a qualified pension or retirement plan without adversely affecting the ability of shares in the underlying fund also to be held by separate accounts of insurance companies in connection with their variable contracts (Treas. Reg. 1.817-5(f)(3)(iii)). Thus, Applicants believe that the Treasury Regulations specifically permit "qualified pension or retirement plans" and separate accounts to invest in the same underlying fund. For this reason, Applicants have concluded that neither the Code nor the Treasury Regulations or revenue rulings thereunder presents any inherent conflict of interest. 20. Applicants note that while there are differences in the manner in which distributions from Variable Contracts and Qualified Plans are taxed, these differences will have no impact on the Funds. When distributions are to be made, and a Separate Account or Qualified Plan is unable to net purchase payments to make the distributions, the Separate Account and Qualified Plan will redeem shares of the Funds at their respective net asset value in conformity with Rule 22c-1 under the 1940 Act (without the imposition of any sales charge) to provide proceeds to meet distribution needs. A Qualified Plan will make distributions in accordance with the terms of the Qualified Plan. H-5 21. Applicants maintain that it is possible to provide an equitable means of giving voting rights to Participating Separate Account contractowners and to Qualified Plans. In connection with any meeting of shareholders, the Funds will inform each shareholder, including each Participating Insurance Company and Qualified Plan, of information necessary for the meeting, including their respective share of ownership in the relevant Fund. Each Participating Insurance Company will then solicit voting instructions in accordance with Rules 6e-2 and 6e-3(T), as applicable, and its participation agreement with the relevant Fund. Shares held by Qualified Plans will be voted in accordance with applicable law. The voting rights provided to Qualified Plans with respect to shares of the Funds would be no different from the voting rights that are provided to Qualified Plans with respect to shares of funds sold to the general public. 22. Applicants have concluded that even if there should arise issues with respect to a state insurance commissioner's veto powers over investment objectives where the interests of contractowners and the interests of Qualified Plans are in conflict, the issues can be almost immediately resolved since the trustees of (or participants in) the Qualified Plans can, on their own, redeem the shares out of the Funds. Applicants note that state insurance commissioners have been given the veto power in recognition of the fact that insurance companies usually cannot simply redeem their separate accounts out of one fund and invest in another. Generally, time-consuming, complex transactions must be undertaken to accomplish such redemptions and transfers. Conversely, the trustees of Qualified Plans or the participants in participant-directed Qualified Plans can make the decision quickly and redeem their interest in the Funds and reinvest in another funding vehicle without the same regulatory impediments faced by separate accounts or, as is the case with most Qualified Plans, even hold cash pending suitable investment. 23. Applicants also state that they do not see any greater potential for material irreconcilable conflicts arising between the interests of participants under Qualified Plans and contractowners of Participating Separate Accounts from possible future changes in the federal tax laws than that which already exist between variable annuity contractowners and variable life insurance contractowners. 24. Applicants state that the sale of shares of the Funds to Qualified Plans in addition to separate accounts of Participating Insurance Companies will result in an increased amount of assets available for investment by the Funds. This may benefit variable contractowners by promoting economies of scale, by permitting increased safety of investments through greater diversification, and by making the addition of new portfolios more feasible. 25. Applicants assert that, regardless of the type of shareholders in each Fund, each Fund's Investment Manager is or would be contractually and otherwise obligated to manage the Fund solely and exclusively in accordance with that Fund's investment objectives, policies and restrictions as well as any guidelines established by the Board of Trustees of such Fund (the "Board"). The Investment Manager works with a pool of money and (except in a few instances where this may be required in order to comply with state insurance laws) does not take into account the identity of the shareholders. Thus, each Fund will be managed in the same manner as any other mutual fund. Applicants therefore see no significant legal impediment to permitting the sale of shares of the Funds to Qualified Plans. 26. Applicants state that the Commission has permitted the amendment of a substantially similar original order for the purpose of adding a party to the original order and has permitted open-end management investment companies to offer their shares directly to Qualified Plan in addition to separate accounts of affiliated or unaffiliated insurance companies which issue either or both variable annuity contracts or variable life insurance contracts. Applicants state that the amended order sought in the application is identical to precedent with respect to the conditions Applicants propose should be imposed on Qualified Plans in connection with investment in the Funds. Applicants' Conditions: If the requested amended order is granted, Applicants consent to the following conditions: 1. A majority of the Board of each Fund shall consist of persons who are not "interested persons" thereof, as defined by Section 2(a)(19) of the 1940 Act, and the rules thereunder and as modified by any applicable orders of the Commission, except that if this condition is not met by reason of the death, disqualification or bona fide resignation of any Board Member or Members, then the operation of this condition shall be suspended: (a) for a period of 45 days if H-6 the vacancy or vacancies may be filled by the remaining Board Members; (b) for a period of 60 days if a vote of shareholders is required to fill the vacancy or vacancies; or (c) for such longer period as the Commission may prescribe by order upon application. 2. The Board will monitor their respective Fund for the existence of any material irreconcilable conflict among the interests of the Variable Contract owners of all Separate Accounts investing in the Funds and of the Qualified Plan participants investing in the Funds. The Board will determine what action, if any, shall be taken in response to such conflicts. A material irreconcilable 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 interpretive 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 the Funds are being managed; (e) a difference in voting instructions given by variable annuity contract owners, variable life insurance contract owners, and trustees of Qualified Plans; (f) a decision by an insurer to disregard the voting instructions of Variable Contract owners; or (g) if applicable, a decision by a Qualified Plan to disregard the voting instructions of Qualified Plan participants. 3. Participating Insurance Companies, the Investment Managers, and any Qualified Plan that executes a fund participation agreement upon becoming an owner of 10 percent or more of the assets of an Fund (a "Participating Qualified Plan"), will report any potential or existing conflicts of which it becomes aware to the Board of any relevant Fund. Participating Insurance Companies, the Investment Managers and the Participating Qualified Plans will be responsible for assisting the Board in carrying out its responsibilities under these conditions by providing the Board with all information reasonably necessary for the Board to consider any issues raised. This responsibility includes, but is not limited to, an obligation by each Participating Insurance Company to inform the Board whenever voting instructions of Contract owners are disregarded and, if pass-through voting is applicable, an obligation by each Participating Qualified Plan to inform the Board whenever it has determined to disregard Qualified Plan participant voting instructions. The responsibility to report such information and conflicts, and to assist the Board, will be contractual obligations of all Participating Insurance Companies investing in the Funds under their agreements governing participation in the Funds, and such agreements shall provide that these responsibilities will be carried out with a view only to the interests of the Variable Contract owners. The responsibility to report such information and conflicts, and to assist the Board, will be contractual obligations of all Participating Qualified Plans under their agreements governing participation in the Funds, and such agreements will provide that their responsibilities will be carried out with a view only to the interests of Qualified Plan participants. 4. If it is determined by a majority of the Board of a Fund, or by a majority of the disinterested Board Members, that a material irreconcilable conflict exists, the relevant Participating Insurance Companies and Participating Qualified Plans will, at their own expense and to the extent reasonably practicable as determined by a majority of the disinterested Board Members, take whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, which steps could include: (a) in the case of Participating Insurance Companies, withdrawing the assets allocable to some or all of the Separate Account s from the Fund or any portfolio thereof and reinvesting such assets in a different investment medium, including another portfolio of an Fund or another Fund, or submitting the question as to whether such segregation should be implemented to a vote of all affected Variable Contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., variable annuity contract owners or variable life insurance contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected Variable Contract owners the option of making such a change; (b) in the case of Participating Qualified Plans, withdrawing the assets allocable to some or all of the Qualified Plans from the Fund and reinvesting such assets in a different investment medium; and (c) establishing a new registered management investment company or managed Separate Account. If a material irreconcilable conflict arises because of a decision by a Participating Insurance Company to disregard Variable Contract owner voting instructions, and that decision represents a minority position or would preclude a majority vote, then the insurer may be required, at the Fund's election, to withdraw the insurer's Separate Account investment in such Fund, and no charge or penalty will be imposed as a result of such withdrawal. If a material irreconcilable conflict arises because of a Participating Qualified Plan's decision to disregard Qualified Plan participant voting instructions, if applicable, and that decision represents minority position or would preclude a majority vote, the Participating Qualified Plan may be required, at the Fund's election, to withdraw its investment in such Fund, and no charge or penalty will be imposed as a result of such H-7 withdrawal. The responsibility to take remedial action in the event of a determination by a Board of a material irreconcilable conflict and to bear the cost of such remedial action will be a contractual obligation of all Participating Insurance Companies and Participating Qualified Plans under their agreements governing participation in the Funds, and these responsibilities will be carried out with a view only to the interest of Variable Contract owners and Qualified Plan participants. 5. For purposes of Condition 4, a majority of the disinterested Board Members of the applicable Board will determine whether or not any proposed action adequately remedies any material irreconcilable conflict, but in no event will the relevant Fund or the Investment Managers be required to establish a new funding medium for any Contract. No Participating Insurance Company shall be required by Condition 4 to establish a new funding medium for any Variable Contract if any offer to do so has been declined by vote of a majority of the Variable Contract owners materially and adversely affected by the material irreconcilable conflict. Further, no Participating Qualified Plan shall be required by Condition 4 to establish a new funding medium for any Participating Qualified Plan if (a) a majority of Qualified Plan participants materially and adversely affected by the irreconcilable material conflict vote to decline such offer, or (b) pursuant to governing Qualified Plan documents and applicable law, the Participating Qualified Plan makes such decision without a Qualified Plan participant vote. 6. The determination of the Board of the existence of a material irreconcilable conflict and its implications will be made known in writing promptly to all Participating Insurance Companies and Participating Qualified Plans. 7. Participating Insurance Companies will provide pass-through voting privileges to Variable Contract owners who invest in registered Separate Accounts so long as and to the extent that the Commission continues to interpret the 1940 Act as requiring pass-through voting privileges for Variable Contract owners. As to Variable Contracts issued by unregistered Separate Accounts, pass-through voting privileges will be extended to participants to the extent granted by issuing insurance companies. Each Participating Insurance Company will also vote shares of the Funds held in its Separate Accounts for which no voting instructions from Contract owners are timely received, as well as shares of the Funds which the Participating Insurance Company itself owns, in the same proportion as those shares of the Funds for which voting instructions from contract owners are timely received. Participating Insurance Companies will be responsible for assuring that each of their registered Separate Accounts participating in the Funds calculates voting privileges in a manner consistent with other Participating Insurance Companies. The obligation to calculate voting privileges in a manner consistent with all other registered Separate Accounts investing in the Funds will be a contractual obligation of all Participating Insurance Companies under their agreements governing their participation in the Funds. Each Participating Qualified Plan will vote as required by applicable law and governing Qualified Plan documents. 8. All reports of potential or existing conflicts received by the Board of a Fund and all action by such Board with regard to determining the existence of a conflict, notifying Participating Insurance Companies and Participating Qualified Plans of a conflict, and determining whether any proposed action adequately remedies a conflict, will be properly recorded in the minutes of the meetings of such Board or other appropriate records, and such minutes or other records shall be made available to the Commission upon request. 9. Each Fund will notify all Participating Insurance Companies that separate disclosure in their respective Separate Account prospectuses may be appropriate to advise accounts regarding the potential risks of mixed and shared funding. Each Fund shall disclose in its prospectus that (a) the Fund is intended to be a funding vehicle for variable annuity and variable life insurance contracts offered by various insurance companies and for qualified pension and retirement plans; (b) due to differences of tax treatment and other considerations, the interests of various Contract owners participating in the Fund and/or the interests of Qualified Plans investing in the Fund may at some time be in conflict; and (c) the Board of such Fund will monitor events in order to identify the existence of any material irreconcilable conflicts and to determine what action, if any, should be taken in response to any such conflict. 10. Each Fund will comply with all provisions of the 1940 Act requiring voting by shareholders (which, for these purposes, will be the persons having a voting interest in the shares of the Funds), and, in particular, the Funds will either provide for annual shareholder meetings (except insofar as the Commission may interpret Section 16 of the 1940 Act not to require such meetings) or comply with Section 16(c) of the 1940 Act, although the Funds are not the H-8 type of trust described in Section 16(c) of the 1940 Act, as well as with Section 16(a) of the 1940 Act and, if and when applicable, Section 16(b) of the 1940 Act. Further, each Fund will act in accordance with the Commission's interpretation of the requirements of Section 16(a) with respect to periodic elections of Board Members and with whatever rules the Commission may promulgate with respect thereto. 11. If and to the extent Rules 6e-2 or 6e-3(T) under the 1940 Act is amended, or proposed Rule 6e-3 under the 1940 Act 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 on terms and conditions materially different from any exemptions granted in the order requested in the application, then the Funds and/or Participating Insurance Companies and Participating Qualified Plans, as appropriate, shall take such steps as may be necessary to comply with such Rules 6e-2 and 6e-3(T), as amended, or proposed Rule 6e-3, as adopted, to the extent that such Rules are applicable. 12. The Participating Insurance Companies and Participating Qualified Plans and/or the Investment Managers, at least annually, will submit to the Board such reports, materials or data as the Board may reasonably request so that the Board may fully carry out obligations imposed upon it by the conditions contained in the application. Such reports, materials and data will be submitted more frequently if deemed appropriate by the Board. The obligations of the Participating Insurance Companies and Participating Qualified Plans to provide these reports, materials and data to the Board, when the Board so reasonably requests, shall be a contractual obligation of all Participating Insurance Companies and Participating Qualified Plans under their agreements governing participation in the Funds. 13. If a Qualified Plan should ever become a holder of ten percent or more of the assets of a Fund, such Qualified Plan will execute a participation agreement with the Fund that includes the conditions set forth herein to the extent applicable. A Qualified Plan will execute an application containing an acknowledgment of this condition upon such Qualified Plan's initial purchase of the shares of any Fund. Conclusion: Applicants assert that, for the reasons summarized above, the requested exemptions are appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the 1940 Act. For the Commission, by the Division of Investment Management, pursuant to delegated authority. H-9 Templeton Variable Products Series Fund, et al. File No. 812-11698 SECURITIES AND EXCHANGE COMMISSION Release No. IC-24079 1999 SEC LEXIS 2177 October 13, 1999 ACTION: Order Granting Exemptions TEXT: Templeton Variable Products Series Fund ("Templeton Trust"), Franklin Templeton Variable Insurance Products Trust ("VIP Trust"), Templeton Funds Annuity Company ("TFAC") or any successor to TFAC, and any future open-end investment company for which TFAC or any affiliate is the administrator, sub-administrator, investment manager, adviser, principal underwriter, or sponsor ("Future Funds") filed an application on July 14, 1999, and an amendment on September 17, 1999 seeking an amended order of the Commission pursuant to Section 6(c) of the Investment Company Act of 1940 ("1940 Act") exempting them 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). The prior order (Rel. No. IC-19879) granted exemptive relief to permit shares of the Templeton Trust to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated life insurance companies. The proposed relief would amend the prior order to add as parties to that order the VIP Trust and any Future Funds and to permit shares of the Templeton Trust, the VIP Trust, and Future Funds to be issued to and held by qualified pension and retirement plans outside the separate account context. A notice of the filing of the application was issued on September 17, 1999 (Rel. No. IC-24018). The notice gave interested persons an opportunity to request a hearing and stated that an order granting the application would be issued unless a hearing should be ordered. No request for a hearing has been filed, and the Commission has not ordered a hearing. The matter has been considered, and it is found that granting the requested exemptions is appropriate in the public interest and consistent with the protection of investors and the purposes intended by the policy and provisions of the 1940 Act. Accordingly, IT IS ORDERED, pursuant to Section 6(c) of the 1940 Act, that the requested exemptions from 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, be, and hereby are, granted, effective forthwith. For the Commission, by the Division of Investment Management, pursuant to delegated authority. H-10 PARTICIPATION AGREEMENT BY AND AMONG AIM VARIABLE INSURANCE FUNDS, A I M DISTRIBUTORS, INC., AND METROPOLITAN LIFE INSURANCE COMPANY, ON BEHALF OF ITSELF AND ITS SEPARATE ACCOUNTS, 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 Parties To Cooperate..........................................4 Section 4. Legal Compliance.................................................4 4.1 Tax Laws......................................................4 4.2 Insurance and Certain Other Laws..............................7 4.3 Securities Laws...............................................7 4.4 Notice of Certain Proceedings and Other Circumstances.........8 4.5 LIFE COMPANY To Provide Documents; Information About AVIF.....9 4.6 AVIF To Provide Documents; Information About LIFE COMPANY....10 Section 5. Mixed and Shared Funding........................................11 5.1 General......................................................11 5.2 Disinterested Trustees.......................................12 5.3 Monitoring for Material Irreconcilable Conflicts.............12 5.4 Conflict Remedies............................................13 5.5 Notice to LIFE COMPANY.......................................14 5.6 Information Requested by Board of Trustees...................14 5.7 Compliance with SEC Rules....................................14 5.8 Other Requirements...........................................15 Section 6. Termination.....................................................15 6.1 Events of Termination........................................15 6.2 Notice Requirement for Termination...........................16 6.3 Funds To Remain Available....................................16 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......................................................17 Section 9. Notices.........................................................17 Section 10. Voting Procedures...............................................18 Section 11. Foreign Tax Credits.............................................19 Section 12. Indemnification.................................................19 12.1 Of AVIF and AIM by LIFE COMPANY and UNDERWRITER..............19 12.2 Of LIFE COMPANY and UNDERWRITER by AVIF and AIM..............21 12.3 Effect of Notice.............................................23 12.4 Successors...................................................24 Section 13. Applicable Law..................................................24 Section 14. Execution in Counterparts.......................................24 Section 15. Severability....................................................24 Section 16. Rights Cumulative...............................................24 Section 17. Headings........................................................24 Section 18. Confidentiality.................................................24 Section 19. Trademarks and Fund Names.......................................25 Section 20. Parties to Cooperate............................................26 Section 21. Amendments......................................................26 PARTICIPATION AGREEMENT THIS AGREEMENT, made and entered into as of the 30th day of April, 2004 ("Agreement"), by and among AIM Variable Insurance Funds, a Delaware Trust ("AVIF"), A I M Distributors, Inc., a Delaware corporation, and Metropolitan Life Insurance Company, a New York 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"). 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 eighteen separate series ("Series"), shares ("Shares") 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 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 1 WHEREAS, AIM 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 Trustees 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 Trustees 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 6:00 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. (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 2 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 6:00 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. Materiality and reprocessing cost reimbursement shall be determined in accordance with standards established by the Parties as provided in Schedule B, attached hereto and incorporated herein. 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 in Schedule C, attached hereto and made a part hereof, each Party will bear, or arrange for others to bear, all expenses incident to its performance under this Agreement. 3.2 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. (b) AVIF represents and warrants that each Fund qualifies as a "look-through entity" within the meaning of Treas. Reg. Section 1.817-5(f) and that that it will use its best efforts to comply 4 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 qualify or comply or that a Fund might not so qualify or comply in the future. In the event of a breach of this Section 4.1(b) by AVIF, it use its best efforts 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 and make changes that are necessary so that the Fund may again qualify as a "look-through entity.". (c) Notwithstanding any other provision of this Agreement, LIFE COMPANY and AVIF agrees that if the Internal Revenue Service ("IRS") asserts in writing in connection with any governmental audit or review of LIFE COMPANY or AVIF or any Fund, to LIFE COMPANY'S or AVIF's knowledge, of any Contract owners, annuitants, insureds or participants (as appropriate) under the Contracts (collectively, "Participants"), that any Fund has failed to comply with the diversification requirements of Section 817(h) of the Code or LIFE COMPANY or AVIF 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, or AVIF shall promptly notify LIFE COMPANY, as the case may be 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)(i) and (ii), to the Commissioner of the IRS that such failure was inadvertent by presenting relevant information provided by AVIF, it being understood that any payment required to be made by LIFE COMPANY to the IRS under Treasury Regulations Section 1.817-5(a)(2)(iii) and any associated legal and other related costs shall be fully reimbursed to LIFE COMPANY by AVIF, unless the Fund's or Funds' failure to comply with Section 817(h) of the Code or the regulations thereunder is as a result of LIFE COMPANY'S failure to comply with sections 4.1(d) or 4.1(e) of this Agreement; (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; 5 (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 LIFE COMPANY to any such person without the express written consent of AVIF which shall not be unreasonably withheld; (vi) LIFE COMPANY shall provide to AVIF and AVIF shall provide to LIFE COMPANY or AVIF's or LIFE COMPANY's affiliates and their accounting and legal advisors with such cooperation as AVIF or LIFE COMPANY shall reasonably request (including, without limitation, by permitting AVIF or LIFE COMPANY and its accounting and legal advisors, as the case may be, to review the relevant books and records of AVIF or LIFE COMPANY) in order to facilitate the preparation of any written submission by LIFE COMPANY pursuant to the preceding clause or a 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 remedies, 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 by AVIF unless the Fund's or Funds' failure to comply with Section 817(h) of the Code or the regulations thereunder is as a result of LIFE COMPANY'S failure to comply with sections 4.1(d) or 4.1(e) of this Agreement; 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 6 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 whether or not LIFE COMPANY authorizes AVIF or its affiliates to act in the name of LIFE COMPANY. 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. AVIF and LIFE COMPANY, each, shall comply with MetLife's written instructions dealing with investor control, appended hereto as Schedule D. (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 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, 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 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 lawfully 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. 4.3 Securities Laws. 7 (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 the law(s) of LIFE COMPANY's state(s) of organization and domicile, (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 Delaware 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 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 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 or AIM 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 8 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 and AIM 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 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 AIM 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. 9 (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 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 a camera ready copy 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. 10 (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 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. 11 5.2 Disinterested Trustees. AVIF agrees that its Board of Trustees shall at all times consist of trustees a majority of whom (the "Disinterested Trustees") 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. 5.3 Monitoring for Material Irreconcilable Conflicts. AVIF agrees that its Board of Trustees 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 Trustees 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 Trustees in carrying out its responsibilities by providing the Board of Trustees with all information reasonably necessary for 12 the Board of Trustees to consider any issue raised, including information as to a decision by LIFE COMPANY to disregard voting instructions of Participants. LIFE COMPANY's responsibilities in connection with the foregoing shall be carried out with a view only to the interests 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 Trustees or a majority of the Disinterested Trustees 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 Trustees), 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 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 Trustees 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. 13 (e) For purposes hereof, a majority of the Disinterested Trustees 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. 5.5 Notice to LIFE COMPANY. AVIF will promptly make known in writing to LIFE COMPANY the Board of Trustees' 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 Trustees. LIFE COMPANY and AVIF (or its investment adviser) will at least annually submit to the Board of Trustees of AVIF such reports, materials or data as the Board of Trustees may reasonably request so that the Board of Trustees 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 Trustees. All reports received by the Board of Trustees of potential or existing conflicts, and all Board of Trustees 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 Trustees 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 14 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 three (3) 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 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 15 (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 three (3) months in advance of the effective date of termination unless a shorter time is agreed to by the Parties hereto; (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 or required by the NASD, SEC, any state insurance regulator or other regulatory body; 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 16 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 (to extent permitted, in the case of terminations pursuant to Sections 6.1(b) or 6.1(c) by any applicable regulatory body or order) 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. 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 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: 17 AIM Variable Insurance Funds A I M Distributors, Inc. 11 Greenway Plaza, Suite 100 Houston, Texas 77046 Facsimile: (713) 993-9185 Attn: Peter A. Davidson, Esq. Metropolitan Life Insurance Company 485B U.S. Highway One South Suite 485B Iselin, New Jersey 08833 Facsimile: 732-602-6455 Attn: Sabrina K. Model with a copy to: Metropolitan Life Insurance Company 1 MetLife Plaza, 27-01 Queens Plaza North Long Island City, NY 11101 Attn: Andrew Mensch, Esq. 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 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 18 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 trustees 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 and AIM by LIFE COMPANY. (a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below, LIFE COMPANY agrees to indemnify and hold harmless AVIF, AIM, their affiliates, and each person, if any, who controls AVIF, AIM, or their affiliates within the meaning of Section 15 of the 1933 Act and each of their respective trustees 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) 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 by or on behalf of AVIF or AIM 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 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 19 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 or its affiliates and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of LIFE COMPANY or its affiliates or persons under their control (including, without limitation, their employees and "persons associated with a member," as that term is defined in paragraph (q) 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, AIM or their affiliates by or on behalf of LIFE COMPANY or its 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 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 in this Agreement or arise out of or result from any other material breach of this Agreement by LIFE COMPANY; 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) LIFE COMPANY shall not 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 or AIM. (c) LIFE COMPANY shall not be liable under this Section 12.1 with respect to any action against an Indemnified Party unless AVIF or AIM shall have notified LIFE COMPANY 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 20 COMPANY of any such action shall not relieve LIFE COMPANY from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this Section 12.1. Except as otherwise provided herein, in case any such action is brought against an Indemnified Party, LIFE COMPANY shall be entitled to participate, at its 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 to such Indemnified Party of LIFE COMPANY's election to assume the defense thereof, the Indemnified Party will cooperate fully with LIFE COMPANY and shall bear the fees and expenses of any additional counsel retained by it, and LIFE COMPANY 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. 12.2 Of LIFE COMPANY by AVIF and AIM. (a) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e), below, AVIF and AIM agree to indemnify and hold harmless LIFE COMPANY and its affiliates, and each person, if any, who controls LIFE COMPANY and its affiliates within the meaning of Section 15 of the 1933 Act and each of their respective trustees 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 and/or AIM) 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 and its 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 (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, AIM or their affiliates 21 and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of AVIF, AIM or their affiliates or persons under their control (including, without limitation, their employees and "persons associated with a member" as that term is defined in Section (q) of Article I 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 and its affiliates by or on behalf of AVIF or AIM 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) The parties agree that the foregoing indemnification by AVIF shall not apply to any acts or omissions of AIM. Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e) hereof, AVIF and AIM agree 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 and/or AIM) 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) Neither AVIF nor AIM shall 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 reason of willful misfeasance, bad faith, or gross negligence in the performance by that 22 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, each Account or Participants. (d) Neither AVIF nor AIM shall be liable under this Section 12.2 with respect to any action against an Indemnified Party unless the Indemnified Party shall have notified AVIF and/or AIM 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 or AIM of any such action shall not relieve AVIF or AIM 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 and/or AIM 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 and/or AIM to such Indemnified Party of AVIF's or AIM's election to assume the defense thereof, the Indemnified Party will cooperate fully with AVIF and AIM and shall bear the fees and expenses of any additional counsel retained by it, and AVIF and AIM 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 or AIM be liable under the indemnification provisions contained in this Agreement to any individual or entity, including, without limitation, LIFE COMPANY, 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 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 23 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. 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 Delaware 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), 24 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 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) Except as may otherwise be provided in a License Agreement among A I M Management Group Inc., LIFE COMPANY or any of its affiliates, shall not use any trademark, trade name, service mark or logo of AVIF, AIM or any of their respective affiliates, or any variation of any such trademark, trade name, service mark or logo, without AVIF's or AIM's prior written consent, the granting of which shall be at AVIF's or AIM's sole option. (b) Except as otherwise expressly provided in this Agreement, neither AVIF, its investment adviser, its principal underwriter, or any affiliates thereof shall use any trademark, trade name, service mark or logo of LIFE COMPANY or any of its affiliates, or any variation of any such trademark, trade name, service mark or logo, without LIFE COMPANY's prior written consent, the granting of which shall be at LIFE COMPANY's sole option. 25 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. Section 21. Amendments No provision of this Agreement may be amended or modified in any manner except by a written agreement executed by all parties hereto. 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 Attest: By: -------------------------------- --------------------------------- Name: Name: ---------------------------------- ------------------------------- Title: Title: --------------------------------- ------------------------------ A I M DISTRIBUTORS, INC. Attest: By: -------------------------------- --------------------------------- Name: Name: ---------------------------------- ------------------------------- Title: Title: --------------------------------- ------------------------------ METROPOLITAN LIFE INSURANCE COMPANY, on behalf of itself and its separate accounts Attest: By: -------------------------------- --------------------------------- Name: Name: ---------------------------------- ------------------------------- Title: Title: --------------------------------- ------------------------------ 27 SCHEDULE A FUNDS AVAILABLE UNDER THE CONTRACTS Series I shares and Series II shares of: AIM V.I. Aggressive Growth Fund AIM V.I. Money Market Fund AIM V.I. Premier Equity Fund AIM V.I. Balanced Fund AIM V.I. Real Estate Fund AIM V.I. Basic Value Fund AIM V.I. Small Cap Equity Fund AIM V.I. Blue Chip Fund INVESCO VIF - Core Equity Fund AIM V.I. Capital Appreciation Fund INVESCO VIF - Dynamics Fund AIM V.I. Capital Development Fund INVESCO VIF - Financial Services Fund AIM V.I. Core Equity Fund INVESCO VIF - Health Sciences Fund AIM V.I. Dent Demographic Trends Fund INVESCO VIF - Leisure Fund AIM V.I. Diversified Income Fund INVESCO VIF - Small Company Growth Fund AIM V.I. Government Securities Fund INVESCO VIF - Technology Fund AIM V.I. Growth Fund INVESCO VIF - Total Return Fund AIM V.I. High Yield Fund INVESCO VIF - Utilities Fund AIM V.I. International Growth Fund AIM V.I. Large Cap Growth Fund AIM V.I. Mid Cap Core Equity Fund SEPARATE ACCOUNTS UTILIZING THE FUNDS MetLife Registered Variable Life - Separate Account UL MetLife Unregistered Variable Life - Separate Account DCVL CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS MetFlex PPVL- Both Group and Individual 28 SCHEDULE B AIM's PRICING ERROR POLICIES Determination of Materiality In the event that AIM discovers an error in the calculation of the Fund's net asset value, the following policies will apply: If the amount of the error is less than $.01 per share, it is considered immaterial and no adjustments are made. If the amount of the error is $.01 per share or more, then the following thresholds are applied: a. If the amount of the difference in the erroneous net asset value and the correct net asset value is less than .5% of the correct net asset value, AIM will reimburse the affected Fund to the extent of any loss resulting from the error. No other adjustments shall be made. b. If the amount of the difference in the erroneous net asset value and the correct net asset value is .5% of the correct net asset value or greater, then AIM will determine the impact of the error to the affected Fund and shall reimburse such Fund (and/or LIFE COMPANY, as appropriate, such as in the event that the error was not discovered until after LIFE COMPANY processed transactions using the erroneous net asset value) to the extent of any loss resulting from the error. To the extent that an overstatement of net asset value per share is detected quickly and LIFE COMPANY has not mailed redemption checks to Participants, LIFE COMPANY and AIM agree to examine the extent of the error to determine the feasibility of reprocessing such redemption transaction (for purposes of reimbursing the Fund to the extent of any such overpayment). Reprocessing Cost Reimbursement To the extent a reprocessing of Participant transactions is required pursuant to paragraph (b), above, AIM shall reimburse LIFE COMPANY for LIFE COMPANY's reprocessing costs in an amount not to exceed $1.00 per contract affected by $10 or more. The Pricing Policies described herein may be modified by AVIF as approved by its Board of Trustees. AIM agrees to use its best efforts to notify LIFE COMPANY at least five (5) days prior to any such meeting of the Board of Trustees of AVIF to consider such proposed changes. 29 SCHEDULE C EXPENSE ALLOCATIONS ================================================================================ Life Company AVIF / AIM - -------------------------------------------------------------------------------- preparing and filing the Account's Preparing and filing the Fund's registration statement registration statement - -------------------------------------------------------------------------------- text composition for Account text composition for Fund prospectuses and supplements prospectuses and supplements - -------------------------------------------------------------------------------- text alterations of prospectuses text alterations of prospectuses (Account) and supplements (Account) (Fund) and supplements (Fund) - -------------------------------------------------------------------------------- printing Account and Fund prospectuses a camera ready Fund prospectus and supplements - -------------------------------------------------------------------------------- text composition and printing Account text composition and printing Fund SAIs SAIs - -------------------------------------------------------------------------------- mailing and distributing prospectuses (Account and Fund) and supplements (Account and Fund) to policy owners of record as required by Federal Securities Laws and to prospective purchasers - -------------------------------------------------------------------------------- text composition (Account), printing, text composition of annual and mailing, and distributing annual and semi-annual reports (Fund) semi-annual reports for Account (Fund and Account as, applicable) - -------------------------------------------------------------------------------- text composition, printing, mailing, text composition, printing, mailing, distributing, and tabulation of proxy distributing and tabulation of proxy statements and voting instruction statements and voting instruction solicitation materials to policy owners solicitation materials to policy with respect to proxies related to the owners with respect to proxies Account related to the Fund - -------------------------------------------------------------------------------- preparation, printing and distributing sales material and advertising relating to the Funds, insofar as such materials relate to the Contracts and filing such materials with and obtaining approval from, the SEC, the NASD, any state insurance regulatory authority, and any other appropriate regulatory authority, to the extent required ================================================================================ 30 SCHEDULE D INVESTOR CONTROL METLIFE'S WRITTEN INSTRUCTIONS INVESTOR CONTROL COMMUNICATIONS BETWEEN POLICYOWNER AND INVESTMENT MANAGER(S) NOT PERMITTED MetLife SBR offers a suite of individual and group variable universal life policies which allow investments in the fixed account (general account) and variable account (underlying separate accounts which feature insurance dedicated investment options). In addition to death benefit protection, the purchase of life insurance provides certain tax advantages, namely (a) death benefits are generally income tax free and (b) the inside build-up (i.e. gains/losses and reallocations within a life insurance policy) is generally tax deferred. In order to protect the integrity of the life insurance transaction, MetLife exercises absolute control over the separate account. This document constitutes "written instructions" for purposes of the investor control rule and retention of external investment managers. This document may be updated from time to time to reflect new guidance and developments in this area. BACKGROUND - INVESTOR CONTROL For separate accounts within the life insurance policy, the key points for consideration are "diversification" and "investor control." "Investor control" and "diversification" are often thought to be synonymous, but are not. The rules for diversification are found in Internal Revenue Code (IRC) Section 817(h) and applicable IRS regulations, and relate to the mix of assets in a separate account. Investor control, which has its origins in certain so-called "wraparound annuity" rulings, generally relates to the ability of the policyowner to affect portfolio investment decisions. Generally, when the policyowner exercises impermissible investor control over separate account assets, the policyowner is treated as the owner of the assets for tax purposes. This would be the result even where the separate account is adequately diversified. The consequence of investor control by the policyowner is a loss of the tax deferral advantage of the insurance contract. Therefore, the policyowner is immediately taxed on interest, dividends or other income derived from the assets which the policyowner is treated as owning. Cases and rulings generally hold that where a policyowner possesses substantial incidents of ownership in an account established by an insurance company and can select and control separate account investments, the policyowner is deemed to possess investor control. See e.g. , Rev. Rul. 77-85, 1977-1 CB 12; Rev. Rul. 80-274, 1980-2 CB 27. 31 Investor control is also deemed to be present where the pool of investments within the separate account is available for direct purchase by the policyowner outside of an insurance setting. See e.g., Rev. Rul. 81-225, 1981-2 CB 12; Rev. Rul. 82-54, 1982-1 CB 11; Rev. Rul. 2003-92 I.R.B. 2003-33 (July 23, 2003).NA; Christofferson v. U.S. , 749 F.2d 513 (8 Cir.), rev'g 578 F. Supp. 398 (N.D. Iowa 1984). In Rev. Rul. 2003-91 I.R.B. 2003-33 (July 23, 2003), the IRS stated that the determination of whether a policyowner possesses investor control depends on all of the relevant facts and circumstances. The policyowner was deemed not to possess investor control where all of the following facts and circumstances were present: (a) Policyowner could not select or direct separate account investments. (b) Policyowner could not sell, purchase, or exchange separate account assets. (c) The insurance company or the manager hired by the insurance company makes all investment decisions. (d) The investment strategies of the separate accounts are sufficiently broad. (e) Only the insurance company may add or substitute other separate accounts or investment strategies in the future. (f) No arrangement, plan, contract, or agreement exists between the policyowner and the insurance company or the investment manager regarding specific investments. (g) Policyowner may not communicate directly or indirectly with the investment manager or any of the insurance company's investment officers concerning the selection, quality, or rate of return of any specific investment or group of investments held by the separate account. (h) Investments in the separate account are available solely through the purchase of an insurance contract. As noted above, the presence of investor control will cause the policyowner to be immediately taxed on interest, dividends or other income derived from the assets which the policyowner is treated as owning. In our view the issue of investor control is not clearly defined. If the following guidelines are followed, MetLife believes the investor control risk may be reduced. MetLife Guidelines and Instructions 1. MetLife owns the life insurance Separate Account 32 2. MetLife in its sole discretion will choose, conduct all dealings with, monitor, and if necessary, terminate any investment manager of life insurance Separate Account. MetLife or an investment manager hired by MetLife will make all Separate Account investment decisions. 3. The policyowner, or any of its agents (e.g. the policyowner's broker) may not communicate either directly or indirectly with the investment manager regarding the assets in the Separate Account. 4. The policyowner must not have any legally binding right to require MetLife or the investment manager to acquire any particular investment item. 5. There must be no prearranged plan, contract or agreement between the policyowner and the Separate Account investment manager for any specific investment. However, the policyowner may be informed of general investment strategies. 6. The policyowner may not participate in any investment decisions of the Separate Account. The policyowner may not select the Separate Account investments or direct the sale, purchase or exchange of Separate Account investments. 7. The policyowner must not have any interest in any specific investments in the Separate Account other than through a contractual claim for cash value and death benefit as a result of purchasing the contract. There will be no distributions of assets in kind to the policyowner. 8. The policyowner or its agent will communicate to MetLife its reporting and information needs regarding its life insurance policy. MetLife will ensure that the policyowner's reporting and information needs are met in a timely and reasonable manner. 9. Only MetLife, in its sole discretion, may add or substitute other Separate Accounts or investment strategies in the future. 33 SHAREHOLDER SERVICES AGREEMENT THIS SHAREHOLDER SERVICES AGREEMENT is made and entered into as of April 30, 2004 by and between METROPOLITAN LIFE INSURANCE COMPANY (the "Company"), and AMERICAN CENTURY INVESTMENT SERVICES, INC. ("Distributor"). WHEREAS, the Company offers to the public certain group and individual variable annuity and variable life insurance contracts (the "Contracts"); and WHEREAS, the Company wishes to make available as investment options under the Contracts shares of the following funds: Class I of VP Vista and/or Class II of VP International and VP Value (the "Funds") made available by the Distributor from time to time, each of which is a series of mutual fund shares registered under the Investment Company Act of 1940, as amended, and issued by American Century Variable Portfolios, Inc., (the "Issuer"); and WHEREAS, on the terms and conditions hereinafter set forth, Distributor desires to make shares of the Funds available as investment options under the Contracts and to retain the Company to perform certain administrative services on behalf of the Funds, and the Company is willing and able to furnish such services; NOW, THEREFORE, the Company and Distributor agree as follows: 1. Transactions in the Funds. Subject to the terms and conditions of this Agreement, Distributor will cause the Issuer to make shares of the Funds available to be purchased, exchanged, or redeemed, by or on behalf of the Accounts (defined in Section 7(a) below) through a single account per Fund at the net asset value applicable to each order. The Funds' shares shall be purchased and redeemed on a net basis in such quantity and at such time as determined by the Company to satisfy the requirements of the Contracts for which the Funds serve as underlying investment media. Dividends and capital gains distributions will be automatically reinvested in full and fractional shares of the Funds. 2. Administrative Services. The Company agrees to provide all administrative services for the Contract owners, including but not limited to those services specified in EXHIBIT A (the "Administrative Services"). Neither Distributor nor the Issuer shall be required to provide Administrative Services for the benefit of Contract owners. The Company agrees that it will maintain and preserve all records as required by law to be maintained and preserved in connection with providing the Administrative Services, and will otherwise comply with all laws, rules and regulations applicable to the marketing of the Contracts and the provision of the Administrative Services. Upon request, the Company will provide Distributor or its representatives reasonable information regarding the quality of the Administrative Services being provided and its compliance with the terms of this Agreement. 3. Timing of Transactions. 1 (a) Distributor hereby appoints the Company as agent for the Funds for the limited purpose of accepting purchase and redemption orders for Fund shares from the Plans sponsors and/or Participants, as applicable. On each day the New York Stock Exchange (the "Exchange") is open for business (each, a "Business Day"), the Company may receive instructions from the Plans sponsors and/or Participants for the purchase or redemption of shares of the Funds ("Orders"). Orders received and accepted by the Company prior to the price time for each Fund as set forth in its prospectus (the "Price Time") generally the close of regular trading on the Exchange (the "Close of Trading") on any given Business Day (currently, 4:00 p.m. Eastern time) and transmitted to the Funds' transfer agent prior to the Price Time on such Business Day will be executed at the net asset value determined as of the relevant Fund's Price Time on the Business Day the Company received such Order. Any Orders received by the Company on such day but after the relevant Fund's Price Time on a Business Day, will be executed at the net asset value next determined as of that Fund's Price Time on the next Business Day. The day as of which an Order is executed by the Funds' transfer agent pursuant to the provisions set forth above is referred to herein as the "Trade Date". All Orders are subject to acceptance or rejection by Distributor or the Funds in the sole discretion of any of them. (b) Notwithstanding Section 3(a) above, if the Securities and Exchange Commission adopts a rule, or Congress adopts a law, that changes the requirements for intermediaries with regard to accepting Orders on behalf of the Funds, the timing of transmitting Orders to the Funds, or otherwise affects the way Orders are accepted, transmitted and priced, Section 3(a) shall be deemed to be automatically amended to comply with such new rule or law. 4. Processing of Transactions. (a) If transactions in Fund shares are to be settled through the National Securities Clearing Corporation's ("NSCC") Mutual Fund Settlement, Entry, and Registration Verification (Fund/SERV) system, the following provisions shall apply: (1) Each party to this Agreement represents that it or one of its affiliates has entered into the Standard Networking Agreement with the NSCC and it desires to participate in the programs offered by the NSCC Fund/SERV system which provide (i) an automated process whereby shareholder purchases and redemptions, exchanges and transactions of mutual fund shares are executed through the Fund/SERV system, and (ii) a centralized and standardized communication system for the exchange of customer-level information and account activity through the Fund/SERV Networking system ("Networking"). (2) For each Fund/SERV transaction, including transactions establishing accounts with the Distributor or its affiliate, the Company shall provide the Funds and the Distributor or its affiliate with all information necessary or appropriate to establish and maintain each Fund/SERV transaction (and any subsequent changes to such information), which the Company hereby certifies is and shall remain true and correct. The Company shall maintain documents required by the Funds to 2 effect Fund/SERV transactions. Each instruction shall be deemed to be accompanied by a representation by the Company that it has received proper authorization from each person whose purchase, redemption, account transfer or exchange transaction is effected as a result of such instruction. (3) At all times each party shall maintain insurance coverage that is reasonable and customary in light of all its responsibilities hereunder and under applicable law. Such coverage shall insure for losses resulting from the criminal acts, errors or omissions of each party's employees and agents. (4) The parties agree to participate in Networking with each other under the terms of the Standard Networking Agreement, except that (i) Section 12 of Article IV relating to governing law is hereby amended by deleting the second sentence of such section, and (ii) Section 13 of Article IV relating to arbitration of disputes is hereby deleted and shall be of no force and effect among the parties. (5) The Company represents and warrants that all instructions, questions and other correspondence concerning the accounts for which trades are made in accordance with this Section 4(a) shall come from the Company, and that individual account holders shall contact the Company, rather than contact Distributor or the Funds directly, with instructions, questions and requests concerning the Funds. The Company further represents and warrants that it, rather than Distributor or the Funds, has reporting responsibility to its clients for confirmations of transactions and monthly, quarterly and year-end statements. The Company is a member of the Securities Investor Protection Corporation and is current with the dues required by such membership. (b) If transactions in Fund shares are to be settled directly with the Funds' transfer agent, procedures relating to the processing and settlement of Orders shall be subject to such instructions as Distributor may forward to the Company from time to time. Payment for net purchase transactions shall be made by wire transfer or through a clearinghouse agency approved by us to the applicable Fund custodial account designated by Distributor on the Business Day next following the Trade Date. Such wire transfers shall be initiated by the Company's bank prior to 4:00 p.m. Eastern time and received by the Funds prior to 6:00 p.m. Eastern time on the Business Day next following the Trade Date. If payment for a purchase Order is not timely received, the Fund may cancel the Order or, at Distributor's option, resell the shares to the applicable Fund at the then prevailing net asset value, and the Company shall be responsible for all costs to Distributor, the Funds or any affiliate of the Funds resulting from such resale. The Company shall be responsible for any loss, expense, liability or damage, including loss of profit suffered by Distributor and/or the respective Funds resulting from delay or failure to make timely payment for such shares or cancellation of any trade, or for any Orders that are processed on an "as of" basis as an accommodation to the Company. The Company shall not be entitled to any gains generated thereby. (c) The Company agrees not to withhold placing Orders received from any customers for the purchase or sale of shares so as to profit itself as a result of such withholding. The Company shall 3 not purchase shares through Distributor except for the purpose of covering purchase Orders received by the Company, or for the Company's bona fide investment. The Company agrees to purchase shares only from the Funds or its customers. If the Company purchases shares from its customers, it will pay such customers not less than the applicable redemption price as established by the then-current prospectuses of the Funds. 5. Prospectus and Proxy Materials. Distributor shall provide the Company with reasonable quantities of the Issuer's prospectuses, statements of additional information, proxy materials, periodic fund reports to shareholders and other materials that are required by law to be sent to the Issuers' shareholders, each in the amounts and at the times requested by the Company. The cost of any distribution of prospectuses, proxy materials, periodic fund reports and other materials of the Issuers to the Plans or their Participants shall be paid by either the Company, the Plans or the Plan sponsors, as determined by Company's agreement with the Plans, and shall not be the responsibility of Distributor or the Issuers. 6. Compensation and Expenses. (a) The Accounts shall be the sole shareholder of Fund shares purchased for the Contract owners pursuant to this Agreement (the "Record Owner"). The Record Owner shall properly complete any applications or other forms required by Distributor or the Issuer from time to time. (b) Distributor acknowledges that it will derive a substantial savings in administrative expenses, such as a reduction in expenses related to postage, shareholder communications and recordkeeping, by virtue of having a single shareholder account per Fund for the Accounts rather than having each Contract owner as a shareholder. In consideration of the Administrative Services and performance of all other obligations under this Agreement by the Company, Distributor will pay the Company a fee (the "Administrative Services Fee") equal to 25 basis points (0.25%) per annum of the average aggregate amount invested by the Company in Class I shares of the Funds and 5 basis points (0.05%) per annum of the average aggregate amount invested by the Company in Class II shares of the Funds under this Agreement. The assets under this Agreement shall be included when determining the total asset level thresholds in VP Class I Funds invested in the American Century family of funds by the following affiliates of the Company under other agreements with Distributor or an affiliate of Distributor: General American Life Insurance Company Metlife Securities, Inc. New England Life Insurance Company First Metlife Investors Insurance Company Metlife Investors Insurance Company Metlife Investors Insurance Company of California (c) In consideration of performance of the Distribution Services specified on EXHIBIT B by the Company, Distributor will pay the Company a fee (the "Distribution Fee") of 25 basis points 4 (0.25%) of the average aggregate amount invested by the Company in Class II shares of the Funds under this Agreement. (d) For the purposes of computing the payments to the Company contemplated by this Section 6, the average aggregate amount invested by the Company on behalf of the Accounts in the Funds over a one month period shall be computed by totaling the Company's aggregate investment (share net asset value multiplied by total number of shares of the Funds held by the Company) on each calendar day during the month and dividing by the total number of calendar days during such month. (e) Distributor will calculate the amount of the payments to be made pursuant to this Section 6 at the end of each calendar quarter and will make such payment to the Company within 30 days thereafter. The check for such payments will be accompanied by a statement showing the calculation of the amounts being paid by Distributor for the relevant months and such other supporting data as may be reasonably requested by the Company and shall be mailed to: Metropolitan Life Insurance Company 485B US Hwy One South, Suite 420 Iselin, NJ 08830 Attn: Michael McDermott Phone No.: 732-602-4791 Fax No: 732-602-6455 - ---------- 7. Representations. (a) The Company represents and warrants that (i) this Agreement has been duly authorized by all necessary corporate action and, when executed and delivered, shall constitute the legal, valid and binding obligation of the Company, enforceable in accordance with its terms; (ii) it has established the separate accounts set forth on EXHIBIT C, attached hereto (the "Accounts"), each of which is a duly authorized and established separate account under New York Insurance law, and has registered each Account as a unit investment trust under the Investment Company Act of 1940 (the "1940 Act") to serve as an investment vehicle for the Contracts; (iii) each Contract provides for the allocation of net amounts received by the Company to an Account for investment in the shares of one or more specified investment companies selected among those companies available through the Account to act as underlying investment media; (iv) selection of a particular investment company is made by the Contract owner under a particular Contract, who may change such selection from time to time in accordance with the terms of the applicable Contract; and (v) the activities of the Company contemplated by this Agreement comply in all material respects with all provisions of federal and state securities laws applicable to such activities. (b) Distributor represents that (i) this Agreement has been duly authorized by all necessary corporate action and, when executed and delivered, shall constitute the legal, valid and binding obligation of Distributor, enforceable in accordance with its terms; (ii) the prospectus of each Fund 5 complies in all material respects with federal and state securities laws, and (iii) shares of the Issuer are registered and authorized for sale in accordance with all federal and state securities laws. 8. Additional Covenants and Agreements. (a) Each party shall comply with all provisions of federal and state laws applicable to its respective activities under this Agreement. All obligations of each party under this Agreement are subject to compliance with applicable federal and state laws. (b) Each party shall promptly notify the other party in the event that it is, for any reason, unable to perform any of its obligations under this Agreement. (c) The Company covenants and agrees that all Orders accepted and transmitted by it hereunder with respect to each Account on any Business Day will be based upon instructions that it received from the Contract owners, in proper form prior to the Close of Trading of the Exchange on that Business Day. The Company shall time stamp all Orders or otherwise maintain records that will enable the Company to demonstrate compliance with Section 8(c) hereof. (d) The Company covenants and agrees that all Orders transmitted to the Issuer, whether by telephone, telecopy, or other electronic transmission acceptable to Distributor, shall be sent by or under the authority and direction of a person designated by the Company as being duly authorized to act on behalf of the owner of the Accounts. Distributor shall be entitled to rely on the existence of such authority and to assume that any person transmitting Orders for the purchase, redemption or transfer of Fund shares on behalf of the Company is "an appropriate person" as used in Sections 8-107 and 8-401 of the Uniform Commercial Code with respect to the transmission of instructions regarding Fund shares on behalf of the owner of such Fund shares. The Company shall maintain the confidentiality of all passwords and security procedures issued, installed or otherwise put in place with respect to the use of Remote Computer Terminals and assumes full responsibility for the security therefor. The Company further agrees to be responsible for the accuracy, propriety and consequences of all data transmitted to Distributor by the Company by telephone, telecopy or other electronic transmission acceptable to Distributor. (e) The Company agrees that, to the extent it is able to do so, it will use its best efforts to give equal emphasis and promotion to shares of the Funds as is given to other underlying investments of the Accounts, subject to applicable Securities and Exchange Commission rules. In addition, the Company shall not impose any fee, condition, or requirement for the use of the Funds as investment options for the Contracts that operates to the specific prejudice of the Funds vis-a-vis the other investment media made available for the Contracts by the Company. (f) The Company shall not, without the written consent of Distributor, make representations concerning the Issuer or the shares of the Funds except those contained in the then-current prospectus and in current printed sales literature approved by Distributor or the Issuer. 6 (g) Advertising and sales literature with respect to the Issuer or the Funds prepared by the Company or its agents, if any, for use in marketing shares of the Funds as underlying investment media to Contract owners shall be submitted to Distributor for review and approval 5 business days prior to such materials beingused and whose approval shall not be unreasonable withheld. 9. Use of Names. Except as otherwise expressly provided for in this Agreement, neither Distributor nor any of its affiliates nor the Funds shall use any trademark, trade name, service mark or logo of the Company, 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 for in this Agreement, the Company shall not use any trademark, trade name, service mark or logo of the Issuer, Distributor or any variation of any such trademarks, trade names, service marks, or logos, without the prior written consent of either the Issuer or Distributor, as appropriate, the granting of which shall be at the sole option of Distributor and/or the Issuer. 10. Proxy Voting. (a) The Company shall provide pass-through voting privileges to all Contract owners so long as the SEC continues to interpret the 1940 Act as requiring such privileges. It shall be the responsibility of the Company to assure that it and the separate accounts of the other Participating Companies (as defined in Section 12(a) below) participating in any Fund calculate voting privileges in a consistent manner. (b) The Company will distribute to Contract owners all proxy material furnished by Distributor and will vote shares in accordance with instructions received from such Contract owners. The Company shall vote Fund shares for which no voting instructions are received in the same proportion as shares for which such instructions have been received. The Company and its agents shall not oppose or interfere with the solicitation of proxies for Fund shares held for such Contract owners. 11. Indemnity. (a) Distributor agrees to indemnify and hold harmless the Company and its officers, directors, employees, agents, affiliates and each person, if any, who controls the Company within the meaning of the Securities Act of 1933 (collectively, the "Indemnified Parties" for purposes of this Section 11(a)) against any losses, claims, expenses, damages or liabilities (including amounts paid in settlement thereof) or litigation expenses (including legal and other expenses) (collectively, "Losses"), to which the Indemnified Parties may become subject, insofar as such Losses result from a breach by Distributor of a material provision of this Agreement. Distributor will reimburse any legal or other expenses reasonably incurred by the Indemnified Parties in connection with investigating or defending any such Losses. Distributor shall not be liable for indemnification hereunder if such Losses are attributable to the negligence or misconduct of the Company in performing its obligations under this Agreement. 7 (b) The Company agrees to indemnify and hold harmless Distributor and the Issuer, and their respective officers, directors, employees, agents, affiliates and each person, if any, who controls Issuer or Distributor within the meaning of the Securities Act of 1933 (collectively, the "Indemnified Parties" for purposes of this Section 11(b)) against any Losses to which the Indemnified Parties may become subject, insofar as such Losses result from a breach by the Company of a material provision of this Agreement or the use by any person of the Remote Computer Terminals. The Company will reimburse any legal or other expenses reasonably incurred by the Indemnified Parties in connection with investigating or defending any such Losses. The Company shall not be liable for indemnification hereunder if such Losses are attributable to the negligence or misconduct of Distributor or the Issuer in performing their obligations under this Agreement. (c) Promptly after receipt by an indemnified party hereunder of notice of the commencement of action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party hereunder, 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 11. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish to, assume the defense thereof, with counsel satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 11 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. (d) If the indemnifying party assumes the defense of any such action, the indemnifying party shall not, without the prior written consent of the indemnified parties in such action, settle or compromise the liability of the indemnified parties in such action, or permit a default or consent to the entry of any judgment in respect thereof, unless in connection with such settlement, compromise or consent, each indemnified party receives from such claimant an unconditional release from all liability in respect of such claim. 12. Potential Conflicts (a) The Company has received a copy of an application for exemptive relief, as amended, filed by the Issuer on December 21, 1987, with the SEC and the order issued by the SEC in response thereto (the "Shared Funding Exemptive Order"). The Company has reviewed the conditions to the requested relief set forth in such application for exemptive relief. As set forth in such application, the Board of Directors of the Issuer (the "Board") will monitor the Issuer for the existence of any material irreconcilable conflict between the interests of the contract owners of all separate accounts ("Participating Companies") investing in funds of the Issuer. An irreconcilable material conflict may arise for a variety of reasons, including: (i) an action by any state insurance regulatory authority; (ii) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, 8 private letter ruling, no-action or interpretative letter, or any similar actions by insurance, tax or securities regulatory authorities; (iii) an administrative or judicial decision in any relevant proceeding; (iv) the manner in which the investments of any portfolio are being managed; (v) a difference in voting instructions given by variable annuity contract owners and variable life insurance contract owners; or (vi) a decision by an insurer to disregard the voting instructions of contract owners. The Board shall promptly inform the Company if it determines that an irreconcilable material conflict exists and the implications thereof. (b) The Company will report any potential or existing conflicts of which it is aware to the Board. The Company will assist the Board in carrying out its responsibilities under the Shared Funding Exemptive Order by providing the Board with all information reasonably necessary for the Board to consider any issues raised. This includes, but is not limited to, an obligation by the Company to inform the Board whenever contract owner voting instructions are disregarded. (c) If a majority of the Board, or a majority of its disinterested Board members, determines that a material irreconcilable conflict exists with regard to contract owner investments in a Fund, the Board shall give prompt notice to all Participating Companies. If the Board determines that the Company is responsible for causing or creating said conflict, the Company shall at its sole cost and expense, and to the extent reasonably practicable (as determined by a majority of the disinterested Board members), take such action as is necessary to remedy or eliminate the irreconcilable material conflict. Such necessary action may include but shall not be limited to: (i) withdrawing the assets allocable to the Accounts from the Fund and reinvesting such assets in a different investment medium or submitting the question of whether such segregation should be implemented to a vote of all affected contract owners and as appropriate, segregating the assets of any appropriate group (i.e., annuity contract owners, life insurance contract owners, or variable contract owners of one or more Participating Companies) that votes in favor of such segregation, or offering to the affected contract owners the option of making such a change; and/or (ii) establishing a new registered management investment company or managed separate account. (d) If a material irreconcilable conflict arises as a result of a decision by the Company to disregard its contract owner voting instructions and said decision represents a minority position or would preclude a majority vote by all of its contract owners having an interest in the Issuer, the Company at its sole cost, may be required, at the Board's election, to withdraw an Account's investment in the Issuer and terminate this Agreement; 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 members of the Board. (e) For the purpose of this Section 12, a majority of the disinterested Board members shall 9 determine whether or not any proposed action adequately remedies any irreconcilable material conflict, but in no event will the Issuer be required to establish a new funding medium for any Contract. The Company shall not be required by this Section 12 to establish a new funding medium for any Contract if an offer to do so has been declined by vote of a majority of the Contract owners materially adversely affected by the irreconcilable material conflict. 13. Termination; Withdrawal of Offering. This Agreement may be terminated by any party upon 90 days' prior written notice to the other party, or, on 60 days' written notice pursuant to a vote of a majority of the outstanding securities of the Funds. Notwithstanding the above, each Issuer reserves the right, without prior notice, to suspend sales of shares of any Fund, in whole or in part, or to make a limited offering of shares of any of the Funds in the event that (A) any regulatory body commences formal proceedings against the Company, Distributor or any of the Issuers, which proceedings Distributor reasonably believes may have a material adverse impact on the ability of the Issuers or the Company to perform its obligations under this Agreement or (B) in the judgment of Distributor, declining to accept any additional instructions for the purchase or sale of shares of any such Fund is warranted by market, economic or political conditions. Notwithstanding the foregoing, this Agreement may be terminated immediately (i) by any party as a result of any other breach of this Agreement by another party, which breach is not cured within 30 days after receipt of notice from the other party, or (ii) by any party upon a determination that continuing to perform under this Agreement would, in the reasonable opinion of the terminating party's counsel, violate any applicable federal or state law, rule, regulation or judicial order, (iii) by a vote of a majority of the independent directors. Termination of this Agreement shall not affect the obligations of the parties to make payments under Section 4 for Orders received by the Company prior to such termination and shall not affect the Issuers' obligation to maintain the Accounts in the name of the Plans or any successor trustee or recordkeeper for the Plans. Following termination, Distributor shall not have any Administrative Services payment obligation to the Company (except for payment obligations accrued but not yet paid as of the termination date). 14. Non-Exclusivity. Both parties acknowledge and agree that this Agreement and the arrangement described herein are intended to be non-exclusive and that each party is free to enter into similar agreements and arrangements with other entities. 15. Survival. The provisions of Section 9 (Use of Names) and Section 11 (Indemnity) of this Agreement shall survive termination of this Agreement. 16. Privacy Procedures. Each of the parties to this Agreement affirms that it has procedures in place reasonably designed to protect the privacy of non-public customer information and it will maintain such information that it may acquire pursuant to this Agreement in confidence and in accord with all applicable privacy laws. Each of the parties agrees not to use, or permit the use of, any such customer information for any purpose except to carry out the terms of this Agreement and/or pursuant to any exceptions set forth in such privacy laws. This provision shall survive the termination of this Agreement. 10 17. Amendment. Neither this Agreement, nor any provision hereof, may be amended, waived, discharged or terminated orally, but only by an instrument in writing signed by all of the parties hereto. 18. Notices. All notices and other communications hereunder shall be given or made in writing and shall be delivered personally, or sent by telex, telecopier, express delivery or registered or certified mail, postage prepaid, return receipt requested, to the party or parties to whom they are directed at the following addresses, or at such other addresses as may be designated by notice from such party to all other parties. To the Company: Metropolitan Life Insurance Company 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Attention: Andrew Mensch, Counsel (212) 578-5323 (office number) (212) 743-0657 (telecopy number) With copy to: Metropolitan Life Insurance Company 485B US Hwy One South, Suite 420 Iselin, NJ 08830 Attention: Sabrina K Model (732) 602-6465 (office number) (732) 602-6455 (telecopy number) To the Issuer or Distributor: American Century Investment Services, Inc. 4500 Main Street Kansas City, Missouri 64111 Attention: Janet A. Nash, Esq. (816) 340-7480 (office number) (816) 340-4964 (telecopy number) Any notice, demand or other communication given in a manner prescribed in this Section 18 shall be deemed to have been delivered on receipt. 19. Successors and Assigns. This Agreement may not be assigned and will be terminated 11 automatically upon any attempted assignment. This Agreement shall be binding upon and inure to the benefit both parties hereto. 20. Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any party hereto may execute this Agreement by signing any such counterpart. 21. Severability. In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. 22. Entire Agreement. This Agreement, including the attachments hereto, constitutes the entire agreement between the parties with respect to the matters dealt with herein, and supersedes all previous agreements, written or oral, with respect to such matters. If the foregoing correctly sets forth our understanding, please indicate your agreement to and acceptance thereof by signing below, whereupon this Agreement shall become a binding agreement between us as of the latest date indicated. AMERICAN CENTURY INVESTMENT SERVICES, INC. By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- Date: --------------------------------------- We agree to and accept the terms of the foregoing Agreement. METROPOLITAN LIFE INSURANCE COMPANY By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- Date: --------------------------------------- 12 EXHIBIT A ADMINISTRATIVE SERVICES Pursuant to the Agreement to which this is attached, the Company shall perform all administrative and shareholder services required or requested under the Contracts with respect to the Contract owners, including, but not limited to, the following: 1. Maintain separate records for each Contract owner, which records shall reflect the shares purchased and redeemed and share balances of such Contract owners. The Company will maintain a single master account with each Fund on behalf of the Contract owners and such account shall be in the name of the Company (or its nominee) as the record owner of shares owned by the Contract owners. 2. Disburse or credit to the Contract owners all proceeds of redemptions of shares of the Funds and all dividends and other distributions not reinvested in shares of the Funds. 3. Prepare and transmit to the Contract owners, as required by law or the Contracts, periodic statements showing the total number of shares owned by the Contract owners as of the statement closing date, purchases and redemptions of Fund shares by the Contract owners during the period covered by the statement and the dividends and other distributions paid during the statement period (whether paid in cash or reinvested in Fund shares), and such other information as may be required, from time to time, by the Contracts. 4. Transmit purchase and redemption orders to the Funds on behalf of the Contract owners in accordance with the procedures set forth in Section 4 to the Agreement. 5. Distribute to the Contract owners copies of the Funds' prospectus, proxy materials, periodic fund reports to shareholders and other materials that the Funds are required by law or otherwise to provide to their shareholders or prospective shareholders. 6. Maintain and preserve all records as required by law to be maintained and preserved in connection with providing the Administrative Services for the Contracts. B-1 EXHIBIT B DISTRIBUTION SERVICES Pursuant to the Agreement to which this is attached, the Company shall perform distribution services for Class II shares of the Funds, including, but not limited to, the following: 1. Receive and answer correspondence from prospective shareholders, including distributing prospectuses, statements of additional information, and shareholder reports. 2. Provide facilities to answer questions from prospective investors about Fund shares. 3. Assist investors in completing application forms and selecting dividend and other account options. 4. Provide other reasonable assistance in connection with the distribution of Fund shares. B-1 EXHIBIT C SEPARATE ACCOUNTS Separate Account UL B-1 FUND PARTICIPATION AGREEMENT THIS AGREEMENT, made and entered into this 30thday of April, 2004 (the "Agreement"), by and among Metropolitan Life Insurance Company, organized under the laws of the State of New York_ (the "Company"), on behalf of itself and each separate account of the Company named in Schedule A to this Agreement, as may be amended from time to time (each such separate account being hereinafter referred to as a "Separate Account" and, collectively, as the "Separate Accounts"); Delaware VIP Trust, an open-end management investment company organized as a statutory trust under the laws of the State of Delaware (the "Trust"); Delaware Management Company, a series of Delaware Management Business Trust, a statutory trust organized under the laws of the State of Delaware and investment adviser to the Trust (the "Adviser"); and Delaware Distributors, L.P., a limited partnership organized under the laws of the State of Delaware and principal underwriter/distributor of the Trust (the "Distributor"). WHEREAS, the Trust engages in business as an open-end diversified, management investment company and was established for the purpose of serving as the investment vehicle for separate accounts established for variable life insurance contracts and variable annuity contracts (collectively, the "Variable Insurance Products") to be offered by insurance companies that have entered into participation agreements with the Trust substantially similar to this Agreement ("Participating Insurance Companies"); and WHEREAS, beneficial interests in the Trust are divided into several series of shares, each representing the interest in a particular managed portfolio of securities and other assets (each, a "Fund" and collectively, the "Funds"); and WHEREAS, the Trust has obtained an order from the Securities and Exchange Commission ("SEC"), dated November 2, 1987 (File No. 812-6777), granting Participating Insurance Companies and variable annuity and variable life insurance separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the Investment Company Act of 1940, as amended ("1940 Act"), and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) hereunder, to the extent necessary to permit shares of the Trust to be sold to and held by variable annuity and variable life insurance separate accounts of life insurance companies that may or may not be affiliated with one another and qualified pension and retirement plans ("Qualified Plans") ("Mixed and Shares Funding Exemptive Order"); and WHEREAS, the Trust is registered as an open-end management investment company under the 1940 Act and shares of the Fund(s) are registered under the Securities Act of 1933, as amended ("1933 Act"); and WHEREAS, the Adviser is a series of a statutory trust which is duly registered as an investment adviser under the Investment Advisers Act of 1940, as amended, and any applicable state securities laws; and WHEREAS, the Distributor is duly registered as a broker-dealer under the Securities Exchange Act of 1934, as amended ("1934 Act") and is a member in good standing of the National Association of Securities Dealers, Inc. ("NASD"); and Page 1 of 35 WHEREAS, the Company, as depositor, has established the Separate Accounts to serve as investment vehicles for certain variable annuity contracts and variable life insurance policies and funding agreements offered by the Company set forth on Schedule A ("Contracts"); and WHEREAS, the Company has registered interests under the Contracts that are supported wholly or partially by the Separate Accounts under the 1933 Act to the extent required and WHEREAS, each Separate Account is a duly organized, validly existing segregated asset account, established by resolution of the Board of Directors of the Company under the insurance laws of the State of New Yorkto set aside and invest assets attributable to the Contracts; and WHEREAS, the Company has registered each Separate Account as a unit investment trust under the 1940 Act and has registered (or will register prior to sale) the securities deemed to be issued by each Separate Account under the 1933 Act to the extent required; and WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase shares in the Fund(s) listed in Schedule B hereto (the "Designated Fund(s)"), on behalf of the Separate Accounts to fund the Contracts, and the Trust is authorized to sell such shares to unit investment trusts, such as the Separate Accounts, at net asset value; and WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Separate Accounts also intend to purchase shares in other open-end investment companies or series thereof not affiliated with the Trust ("Unaffiliated Funds") to fund the Contracts. NOW, THEREFORE, in consideration of their mutual promises, the Company, the Trust, the Adviser and the Distributor agree as follows: ARTICLE I. - SALE OF FUND SHARES 1.1 The Distributor agrees to sell to the Company those shares of the Designated Funds that the Company orders on behalf of each Separate Account, executing such orders on a daily basis at the net asset value (and with no sales charges) next computed after receipt and acceptance by the Trust or its designee of the orders for the shares of the Designated Funds. For purposes of this Section 1.1, the Company will be designee of the Trust solely for the purpose of receiving such orders from each Separate Account and receipt by such designee will constitute receipt by the Trust, provided that the Company provides the Trust with a purchase order by 7:30 a.m. Eastern Time on the next following Business Day. "Business Day" will mean any day on which the New York Stock Exchange is open for trading and on which the Trust calculates its net asset value pursuant to the rules of the SEC. If a purchase order is received by the Trust after 7:30 a.m. Eastern Time on a Business Day, such redemption request will be considered to be received on the next following Business Day and payment by the Company for such purchase order pursuant to Section 1.2 of this Agreement will be made by the Company on the next following Business Day. The Trust may net the redemption requests it receives from the Company under Section 1.3 of this Agreement against purchase orders it receives from the 2 Company under this Section 1.1. The Trust and the Company will be responsible for assuring their compliance with the Purchase and Redemption Order Procedures set forth in Schedule D. 1.2 The Company will transmit payment for shares of any Designated Fund purchased by 3:00 p.m. Eastern Time on the same Business Day an order to purchase such shares is provided to the Trust, in accordance with Section 1.1. Payment will be made in federal funds transmitted by wire. Upon receipt by the Trust of the purchase payment, such funds shall cease to be the responsibility of the Company and shall become the responsibility of the Trust. 1.3 The Trust agrees to redeem, upon the Company's request, any full or fractional shares of a Designated Fund held by the Company, executing such requests on a daily basis at the net asset value next computed after receipt and acceptance by the Trust or its designee. For purposes of this Section 1.3, the Company will be the designee of the Trust solely for the purpose of receiving request for redemption from each Separate Account and receipt by such designee will constitute receipt by the Trust, provided that the Company provides the Trust with a redemption request by 7:30 am. Eastern Time on the next following Business Day. Payment for shares of any Designated Fund redeemed will be made in federal funds transmitted by wire to the Company's account as designated by the Company in writing from time to time, by 3:00 p.m. Eastern Time on the Business Day the Trust receives notice of the redemption request for such shares from the Company. The Trust reserves the right to delay payment of redemption proceeds, but in no event may such payment be delayed longer than the period permitted under Section 22(e) of the 1940 Act. The Trust will not bear any responsibility whatsoever for the proper disbursement or crediting of redemption proceeds, the Company alone will be responsible for such action. If a redemption request is received by the Trust after 7:30 a.m. Eastern Time on a Business Day, such redemption request will be considered to be received on the next following Business Day and payment for redeemed shares will be made by the Trust on the next following Business Day. The Trust may net purchase orders it receives from the Company under Section 1.1 of this Agreement against the redemption requests it receives from the Company under this Section 1.3. The Trust and the Company will be responsible for assuring their compliance with the Purchase and Redemption Order Procedures set forth in Schedule D. 1.4 The Trust agrees to make shares of the Designated Funds available indefinitely for purchase at the applicable net asset value per share by the Company on behalf of the Separate Accounts on those days on which the Trust calculates the net asset value of each Designated Fund pursuant to rules of the SEC; provided, however, that the Board of Trustees of the Trust (the "Trustees") may refuse to sell shares of any Designated Fund to any person, or suspend or terminate the offering of shares of any Designated Fund if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Trustees 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 Designated Fund. 3 1.5 The Trust and the Distributor agree that shares of the Designated Funds on Schedule B will be sold only to Participating Insurance Companies and their separate accounts, Qualified Plans or such other persons as are permitted under applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code), and regulations promulgated thereunder, the sale of which will not impair the tax treatment currently afforded the Contracts. No shares of any Designated Fund on Schedule B will be sold directly to the general public. 1.6 The Trust will not sell shares of any Designated Fund to any insurance company or separate account unless an agreement containing provisions substantially similar to those in Sections 2.1, 2.2 and 2.4 of Article II, Section 3.4 of Article III, Sections 4.4 and 4.5 of Article IV, Section 6.1 of Article VI and Article VII of this Agreement are in effect to govern such sales. 1.7 The Company agrees to purchase and redeem the shares of the Designated Funds offered by the then current prospectus of the relevant Designated Fund in accordance with the provisions of such prospectus. 1.8 Issuance and transfer of the shares of the Designated Funds will be by book entry only. Share certificates will not be issued to the Company or to any Separate Account. Purchase and redemption orders for shares of the Designated Funds will be recorded in an appropriate title for each Separate Account or the appropriate sub-account of each Separate Account. 1.9 The Trust will furnish notice (by wire, telephone or facsimile) to the Company as soon as reasonably practicable of the declaration of any income, dividends or capital gain distributions payable on each Designated Fund's shares. The Company, on its behalf and on behalf of each Separate Account, hereby elects to receive all such income, dividends and distributions as are payable on a Designated Fund's shares in the form of additional shares of that Designated Fund at the ex-dividend date net asset values. The Company reserves the right to revoke this election upon prior reasonable written notice to the Trust and to receive all such dividends and distributions in cash. The Trust will notify the Company promptly of the number of shares so issued as payment of such dividends and distributions. 1.10 The Trust will make the net asset value per share for each Designated Fund available to the Company via electronic means on a daily basis as soon as reasonably practical after the net asset value per share is calculated and will use its best efforts to make such net asset value per share available by 6:30 p.m., Eastern Time, each Business Day. If the Trust provides the Company materially incorrect net asset value per share information (as determined under SEC guidelines), the Company and the Trust 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 to the Company upon discovery by the Trust. In no event, however, will the Trust be liable for material errors in calculating or reporting net asset values where such errors are the result 4 of information supplied by the Company or persons under its control (MetLife does not calculate NAV- please explain). ARTICLE II. - REPRESENTATIONS AND WARRANTIES 2.1 The Company represents and warrants that the securities deemed to be issued by the Separate Accounts under the Contracts are or will be registered under the Securities Act of 1933 (the "1933 Act"), or are exempt from registration thereunder, and that the Contracts will be issued and sold in compliance with all applicable federal and state laws, rules and regulations (collectively, "laws"). The Company further represents and warrants that: (i) it is an insurance company duly organized and in good standing under applicable law; (ii) it has legally and validly established each Separate Account as a segregated asset account under Section [____] of the [State Statute] of [New York]; (iii) each Separate Account is or will be registered as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a segregated investment account for the Contracts, or is excluded from registration thereunder, and will comply in all material respects with the provisions of the 1940 Act, to the extent applicable; and (iv) it will maintain any registration contemplated by the preceding clause (iii) for so long as any Contracts are outstanding. The Company will amend each registration statement under the 1933 Act for the Contracts and the registration statement under the 1940 Act for the Separate Accounts from time to time as required under applicable law in order to effect the continuous offering of the Contracts or as may otherwise be required by applicable law. The Company will register and qualify the Contracts for sale in accordance with the securities laws of the various states as applicable. 2.2 Subject to the Trust's representations in Article III, the Company represents and warrants that the Contracts currently will be treated as annuity contracts and/or life insurance policies (as applicable) under applicable provisions of the Code, and that it will make every effort to maintain such treatment and that it will notify the Trust, the Adviser and the Distributor 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. In addition, the Company represents and warrants that each 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 of the Code and regulations thereunder. The Company will make every effort to cause such definitional requirements to be met at all times and it will notify the Trust, the Adviser and the 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. 2.3 The Company represents and warrants that it will not purchase shares of the Designated Fund(s) with assets derived from tax-qualified retirement plans except, indirectly, through Contracts purchased in connection with such plans. 2.4 The Trust represents and warrants that it will not sell shares of the designated Funds to tax-qualified retirement plans except indirectly through life insurance and annuity contracts purchased in conjunction with such plans or if it sells any shares to such plans , 5 will adopt procedures reasonably designed to provide assurances that any such plan if in fact tax qualifies at the time shares are purchased and when held. 2.4 The Trust represents and warrants that shares for the Designated Funds(s) sold pursuant to this Agreement will be registered under the 1933 Act and duly authorized for issuance in accordance with applicable law and that the Trust is and will remain registered as an open-end, management investment company under the 1940 Act for as long as such shares of the Designated Fund(s) are sold. The Trust will amend the registration statement for its shares under the 1933 Act and itself under the 1940 Act from time to time as required under applicable law in order to effect the continuous offering of its shares. 2.5 The Trust and the Adviser each represents and warrants that it will use its best efforts to comply with any applicable state insurance laws or regulations as they may apply to the investment objectives, policies and restrictions of the Designated Funds. The Trust and the Distributor each represents and warrants that it will use its best efforts to ensure that the Designated Funds' shares will be sold in compliance with the insurance laws of the State of New York and all applicable state insurance and securities laws. The Company and the Trust will endeavor to mutually cooperate with respect to the implementation of any modifications necessitated by any change in state insurance laws, regulations or interpretations of the foregoing that affect the Designated Funds (a "Law Change") and to keep each other informed of any Law Change that becomes known to such party. In the event of a Law Change, the Trust agrees that, except in those circumstances where the Trust has advised the Company that implementation of a Law Change is not in the best interests of all of the Trust's shareholders with an explanation regarding why such action is lawful, any action required by a Law Change will be taken. The Trust makes no other representation as to whether any aspect of its operations (including, but not limited to, fees and expenses, and investment policies) complies with the insurance laws or regulations of any state. The Company represents that it will use its best efforts to notify the Trust of any restrictions imposed by state insurance laws that may become applicable to the Trust as a result of the Separate Accounts' investments therein. The Trust and the Adviser agree that they will furnish the information reasonably required by state insurance laws to assist the Company in obtaining the authority needed to issue the Contracts in various states. 2.6 The Trust reserves the right to adopt a plan pursuant to Rule 12b-1 under the 1940 Act and to impose asset-based or other sales charges to finance distribution expenses as permitted by applicable laws. The Trust represents and warrants that, to the extent that it decides to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Trust undertakes to have the Trustees, a majority of whom are not "interested" persons of the Trust, formulate and approve any plan under Rule 12b-1 to finance distribution expenses. The Trust shall notify the Company immediately upon determining to finance distribution expenses pursuant to a plan adopted in accordance with Rule 12b-1 under the 1940 Act. 6 2.7 The Trust represents that it is lawfully organized and validly existing under the laws of the State of Delaware and that it does and will comply in all material respects with applicable provisions of the 1940 Act. 2.8 The Trust represents and warrants that all of is trustees, officers, employees, investment advisers, and other individuals/entities having access to the funds and/or securities of the Trust are and will continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Trust 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. 2.9 The Company represents and warrants that all of its directors, officers, employees, and other individuals/entities employed by the Company dealing with the money and/or securities of the Separate Accounts are covered by a blanket fidelity bond or similar coverage in an amount not less than $5 million. The aforesaid bond includes coverage for larceny and embezzlement and is issued by a reputable bonding company. The Company agrees to hold for the benefit of the Trust and to pay to the Trust any amounts lost from larceny, embezzlement or other events covered by the aforesaid bond to the extent such amounts derive from activities described in this Agreement. The Company agrees to make all reasonable efforts to see that this bond or another bond containing these provisions is always in effect, and agrees to notify the Trust in the event that such coverage no longer applies. 2.10 The Adviser represents and warrants that: (i) it is duly registered as an investment adviser under the Investment Advisers Act of 1940, as amended, and will remain duly registered under all applicable federal and state securities laws; and (ii) it will perform its obligations for the Trust in accordance in all material respects with the laws of the State of Delaware and any applicable state and federal securities laws. 2.11 The Distributor represents and warrants that it: (i) is registered as a broker-dealer under the Securities and Exchange Act of 1934, as amended (the "1934 Act") and will remain duly registered under all applicable federal and state securities laws; (ii) is a member in good standing of the National Association of Securities Dealers, Inc. ("NASD"); (iii) serves as principal underwriter/distributor of the Trust; and (iv) will perform its obligations for the Trust in accordance in all material respects with the laws of the State of Delaware and any applicable state and federal securities laws. ARTICLE III. - FUND COMPLIANCE 3.1 Subject to the Company's representations and warranties in Sections 2.1 and 2.2 hereof, the Trust, the Distributor and the Adviser each represents and warrants that the Trust and each Designated Fund will at all times qualify as a "look-through" entity within the meaning of Treasury Reg. 1.817-5(e) and will sell its shares and invest its assets in such a manner as to ensure that the Contracts will be treated as annuity contracts under the Code, and the regulations issued thereunder. Specifically for further clarification of the foregoing, the Trust and Adviser each represents and warrants that the Trust and each 7 Designated Fund thereof will at all times comply with Section 817(h) of the Code and Treasury Regulation (S)1.817-5, as amended from time to time, and any Treasury interpretations thereof, relating to the diversification requirements for variable annuity, endowment, or life insurance contracts and with Section 817(d) of the Code, relating to the definition of a "variable contract" and any amendments or other modifications or successor provisions to such Sections or Regulations or any other applicable Code requirements. In the event of a breach of this Article III by the Trust, the Trust, Distributor, and Adviser will take all steps necessary to: (a) notify the Company of such breach, and (b) adequately diversify the Trust or Designated Fund so as to achieve compliance within the 30-day grace period afforded by Regulation 1.817-5, and take any other steps that may be required in order to correct any failure under this Article III. The Trust, Distributor and Adviser will notify the Company upon having a reasonable basis to believe that a failure has occurred regarding any representation or warranty under this Article III. 3.2 The Trust and the Distributor each represents and warrants that shares of the Designated Funds will be sold only to Participating Insurance Companies, their separate accounts, and any other persons eligible to purchase the Designated Fund; provided, that the purchase of shares by such persons would not preclude the Company from "looking through" to the investments of each Designated Fund in which it invests, pursuant to the "look through" rules set forth in Treasury Regulation 1.817-5. No shares of any Designated Fund will be sold to the general public. 3.3 The Trust represents and warrants that the Trust and each Designated Fund is currently qualified as a Regulated Investment Company under Subchapter M of the Code, and that the Trust will maintain such qualification (under Subchapter M or any successor or similar provision) and that the Trust will notify the Company immediately upon having a reasonable basis for believing that any Designated Fund has ceased to so qualify of that it might not so qualify or that it might not so qualify in the future. 3.4 Without in any way limiting the effect of Sections 8.2 and 8.3 hereof, and without in any way limiting or restricting any other remedies available to the Company, the Distributor and/or Adviser will pay all costs associated with or arising out of any failure, or any anticipated or reasonably foreseeable failure, of the Trust or any Designated Fund to comply with Section 3.1, 3.2 or 3.3 hereof, including all costs associated with reasonable and appropriate corrections or responses to any such failure; such costs may include, but are not limited to, the costs involved in creating, organizing and registering a new investment company as a funding medium for the Contracts and/or the costs of obtaining whatever regulatory authorizations are required to substitute shares or another investment company for those of the failed Designated Fund (including but not limited to an order pursuant to Section 26(b) of the 1940 Act); such costs are to include, but are not limited to, reasonable fees and expenses of legal counsel and other advisers to the Company and any federal income taxes or tax penalties and interest thereon (or "toll charges" or exactments or amounts paid in settlement) incurred by the Company with respect to itself 8 or its Contract owners in connection with any such failure or anticipated or reasonably foreseeable failure. 3.5 The Trust agrees to provide the Company with a certificate or statement indicating compliance by each Fund of the Trust with Section 817(h) of the Code, such certificate or statement to be sent to the Company no later than thirty (30) days following the end of each calendar quarter. ARTICLE IV. - PROSPECTUS AND PROXY STATEMENTS; VOTING 4.1 The Trust or the Distributor will provide the Company with as many copies of the current Trust prospectus if any and any supplements thereto for the Designated Funds as the Company may reasonably request for distribution to Contract owners at the time of Contract fulfillment and confirmation. To the extent that the Designated Funds are one or more of several funds or series of the Trust, the Trust be obligated to provide the Company only with disclosure related to the Designated Funds. The Trust will provide the copies of said prospectus to the Company or to its mailing agent. If requested by the Company, in lieu thereof, the Trust or the Distributor will provide such documentation, including a final copy of a current prospectus set in type or camera ready or electronic format and other assistance as is reasonably necessary in order for the Company at least annually (or more frequently if the Trust prospectus is amended more frequently) to have the new prospectus for the Contracts and the Trust's new prospectus printed together. The Trust or the Distributor will, upon request, provide the Company with a copy of the Trust's prospectus through electronic means to facilitate the Company's efforts to provide Trust prospectuses via electronic delivery. Expenses associated with providing such documentation shall be allocated in accordance with Article VI of this Agreement. 4.2 The Trust's prospectus will state that a Statement of Additional Information ("SAI") for the Trust is available, and will disclose how investors may obtain the SAI. 4.3 The Trust, the Distributor or the Adviser will provide the Company or its mailing agent with copies of its proxy material, if any, with respect to the Designated Funds, reports to shareholders/Contract owners and other communications to shareholders/Contract owners in such quantity as the Company will reasonably require with expenses to be borne in accordance with Article V of this Agreement. The Company will distribute this proxy material, reports and other communications to existing Contract owners. If requested by the Company, the Trust, the Distributor or the Adviser shall provide an electronic copy of such documentation in a format suitable to posting on a website maintained by or on behalf of the Company. 4.4 If and to the extent required by law, the Company will: (a) solicit voting instructions from Contract owners; (b) vote the shares of Designated Funds held in the Separate Accounts in accordance with instructions received from Contract owners; and 9 (c) vote shares of Designated Funds held in the Separate Accounts for which no timely instructions have been received from the Company's Contract owners in the same proportion as shares of the Designated Funds for which instructions have been received from contract owners, so long as and to the extent that the SEC continues to interpret the 1940 Act to require pass-through voting privileges for Contract owners. The Company reserves the right to vote shares of the Designated Funds held in any segregated asset account in its own right, to the extent permitted by law. The Company will be responsible for assuring that the Separate Accounts calculate voting privileges in a manner consistent with all legal requirements, including the Proxy Voting Procedures set forth in Schedule C and the Mixed and Shared Funding Order, as described in Section 7.1. 4.5 The Trust will comply with all provisions of the 1940 Act requiring voting by shareholders and, in particular, the Trust will either provide for annual meetings (except insofar as the SEC may interpret Section 16 of the 1940 Act not to require such meetings) or, as the Trust currently intends, comply with Section 16(c) of the 1940 Act (although the Trust is not one of the Trusts described in Section 16(c) of that Act) as well as with Sections 16(a) and, if an when applicable, 16(b). Further, the Trust will act in accordance with the SEC's interpretation of the requirements of Section 16(a) with respect to periodic elections of directors or trustees and with whatever rules the SEC may promulgate with respect thereto. ARTICLE V. - SALES MATERIAL AND INFORMATION 5.1 The Company will furnish, or will cause to be furnished, to the Trust or its designee, each piece of sales literature or other promotional material in which the Trust, the Adviser or the Distributor is named. No such material will be used until approved by the Trust or the Distributor. The Trust or its designee reserves the right to object reasonably to the continued use within five (5) business days after receipt of such material or to its continued use of any such sales literature or other promotional material in which the Trust (or any Designated Fund), the Adviser, any sub-adviser or the Distributor is named and no such material shall be used if the Trust or its designee so objects. 5.2 The Company will not give any information or make any representations or statements on behalf of the Trust or concerning the Trust or any Designated Fund in connection with the sale of the Contracts other than the information or representations contained in the registration statement, prospectus or SAI for shares of the Designated Funds, as such registration statement, prospectus and SAI may be amended or supplemented from time to time, or in reports or proxy statements for the Designated Funds, or in sales literature or other material provided by the Trust, the Adviser or the Distributor, except with permission of the Trust, the Adviser or the Distributor. The Trust, the Adviser or the Distributor agree to respond to any request for approval on a prompt and timely basis. 5.3 The Trust, the Adviser or the Distributor, or a designee, will furnish, or will cause to be furnished, to the Company or its designee, each piece of sales literature or other promotional material in which the Company or any Separate Account is named, prior to 10 its use. No such material will be used until approved by the Company or its designee, if the Company reasonably objects to such use within five (5) business days after receipt of such material or to its continued use. 5.4 The Trust, the Adviser or the Distributor will not give any information or make any representations or statements on behalf of the Company or concerning the Company, any Separate Account, or the Contracts other than the information or representations contained in a registration statement, if any, prospectus or SAI for the Contracts, if any, as such registration statement, prospectus and SAI may be amended or supplemented from time to time, or in published reports for each Separate Account or the Contracts which are in the public domain or approved by the Company for distribution to Contract owners, or in sales literature or other material provided by the Company, except with permission of the Company. The Company agrees to respond to any request for approval on a prompt and timely basis. 5.5 The Trust will provide to the Company at least one complete copy, if any, of all registration statements, prospectuses, SAIs, reports, proxy statements, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to the Trust or shares of the Designated Funds, within a reasonable time after filing of such document with the SEC or the NASD [or contemporaneously with the first use or public availability of such documents]. 5.6 The Company will provide to the Trust at least one complete copy of all definitive prospectuses, definitive SAIs, reports, solicitations for voting instructions, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to any Contract or any Separate Account (collectively, "Contract Materials"), contemporaneously with the filing of each such document with the SEC or the NASD (except that with respect to post-effective amendments to such prospectuses and SAIs and sales literature and promotional material, only those prospectuses and SAIs and sales literature and promotional material that relate to or refer to the Trust or any Designated Fund will be provided). In addition, the Company will provide to the Trust at least one complete copy of (i) a registration statement that relates to the Contracts or any Separate Account, containing representative and relevant disclosure concerning the Trust; and (ii) any post-effective amendments to any registration statements relating to the Contracts or such Separate Account that refer to or relate to the Trust or any Designated Fund. The Company shall provide to the Trust and the Distributor copies of any complaints received from Contract owners pertaining to the Trust or any Designated Fund. 5.7 For purposes of this Article V, 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, (i.e., 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, 11 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, SAIs, shareholder reports, and proxy materials if any and any other material constituting sales literature or advertising under the NASD Conduct Rules, the 1933 Act or the 1940 Act. 5.8 The Trust, the Adviser and the Distributor hereby consent to the Company's use of their respective names as well as the names of the Designated Funds in connection with marketing the Contracts, subject to the terms of Sections 5.1 or 5.2 of this Agreement. The Trust, the Adviser and the Distributor hereby consent to the use of any trademark, trade name, service mark or logo used by the Trust, the Adviser and the Distributor, subject to the Trust's, the Adviser's and/or the Distributor's approval of such use and in accordance with reasonable requirements of the Trust, the Adviser or the Distributor. Such consent will terminate with the termination of this Agreement. The Company agrees and acknowledges that the Trust, the Adviser or the Distributor is the owner of the name, trademark, trade name, service mark and logo and that all use of any designation comprised in whole or in part of the name, trademark, trade name, service mark and logo under this Agreement shall inure to the benefit of the Trust, Adviser and/or Distributor. 5.9 The Trust, the Adviser, the Distributor and the Company agree to adopt and implement procedures reasonably designed to ensure that information concerning the Company, the Trust, the Adviser or the Distributor, respectively, and their respective affiliated companies, that is intended for use only by brokers or agents selling the Contracts (i.e., information that is not intended for distribution to Contract owners or prospective Contract owners) and is properly marked as "Not For Use With The Public" or "For Broker-Dealer Use Only" and that such information is only so used. ARTICLE VI. - FEES, COSTS AND EXPENSES 6.1 The Fund, Distributor and Adviser 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 Fund, Distributor or Adviser under this Agreement, although the Parties hereto will bear certain expenses in accordance with this Agreement. 6.2 Each party shall, in accordance with the allocation of expenses specified in this Agreement, 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 (i) for distribution and shareholder-related services under a plan adopted in accordance with Rule 12b-1 under the 1940 Act and (ii) other services that are not primarily intended to result in the sale of shares of the Designated Funds, which are provided to Contract owners relating to the Designated Funds. 6.3 All expenses incident to performance by the Trust of this Agreement will be paid by the Trust or the Distributor to the extent permitted by law. All shares of the Designated Funds will be duly authorized for issuance and registered in accordance with applicable 12 federal law and, to the extent deemed advisable by the Trust, in accordance with applicable state law, prior to sale. The Trust will bear the expenses for the cost of registration and qualification of the Trust's shares, including without limitation, the preparation of and filing with the SEC of Forms N-1A and Rule 24f-2 Notices on behalf of the Trust and payment of all applicable registration or filing fees (if applicable) with respect to shares of the Trust; preparation and filing of the Trust's prospectus, SAI and registration statement, proxy materials and reports; typesetting the Trust's prospectus; typesetting and printing proxy materials and reports to Contract owners (including the costs of printing a Trust prospectus that constitutes an annual report); the preparation of all statements and notices required by any federal or state law; all taxes on the issuance or transfer of shares of the Designated Funds; any expenses permitted to be paid or assumed by the Trust with respect to the Designated Funds pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act; and other costs associated with preparation of prospectuses and SAIs regarding the Designated Funds in electronic or typeset format for distribution to existing Contract owners. 6.4 The Company shall bear all expenses associated with the registration, qualification, and filing of the Contracts under applicable federal securities and state insurance laws; the cost of preparing, printing, and distributing the Contracts' prospectus and SAI; the cost of printing the Trust's prospectus for use in connection with offering the Contracts; the costs of printing and distributing to Contract owners the Trust's prospectus and the Trust's proxy materials and reports; and the cost of printing and distributing such annual individual account statements for Contract owners as are required by state laws. ARTICLE VII. - MIXED AND SHARED FUNDING RELIEF 7.1 The Trust represents and warrants that it has received an order from the SEC granting Participating Insurance Companies and variable annuity separate accounts and variable life insurance separate accounts relief 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 Designated Funds to be sold to and held by variable annuity separate accounts and variable life insurance separate accounts of both affiliated and unaffiliated Participating Insurance Companies and qualified pension and retirement plans outside of the separate account context (the "Mixed and Shares Funding Order"). The parties to this Agreement agree that the conditions or undertakings required by the Mixed and Shared Funding Order that may be imposed on the Company, the Trust and/or the Adviser by virtue of the receipt of such order by the SEC will: (i) apply only upon the sale of shares of the Designated Fund to a variable life insurance separate account (and then only to the extent required under the 1940 Act); (ii) be incorporated herein by reference; and (iii) such parties agree to comply with such conditions and undertakings to the extent applicable to each such party notwithstanding any provision of the agreement to the contrary. 7.2 The Trust represents and warrants that the Trustees will monitor the Trust for the existence of any material irreconcilable conflict among the interests of the Contract owners of all Separate Accounts investing in the Designated Funds. A material irreconcilable conflict may arise for a variety of reasons, including, but not limited to: 13 (1) an action by any state insurance regulatory authority (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Designated Fund are being managed; (e) a difference in voting instructions given by Participating Insurance Companies or by variable annuity and variable life insurance Contract owners; or (f) a decision by an insurer to disregard the voting instructions of Contract owners. The Trustees will promptly inform the Company if it determines that a material irreconcilable conflict exists and explain the implications thereof. 7.3 The Company will promptly report any potential or existing conflicts of which it is aware to the Trustees. The Company agrees to assist the Trustees in carrying out their responsibilities under the Mixed and Shared Funding Order by promptly providing the Trustees with all information reasonably necessary for the Trustees to consider any issues raised. This includes, but is not limited to, an obligation by the Company to promptly inform the Trustees whenever Contract owner voting instructions are to be disregarded. Such responsibilities will be carried out by the Company with a view only to the interests of its Contract owners. 7.4 If it is determined by a majority of the Trustees constituting the Trust's Board of Trustees, or a majority of the disinterested Trustees of the Board, that a material irreconcilable conflict exists, the Company and other Participating Insurance Companies will, at their expense and to the extent reasonably practicable (as determined by a majority of the disinterested trustees), take whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, up to and including: (a) withdrawing the assets allocable to some or all of the Separate Accounts from the Trust or any Designated Fund and reinvesting such assets in a different investment medium, including (but not limited to) another Designated Fund, or submitting the question whether such segregation should be implemented to a vote of all affected Contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., variable annuity Contract owners or variable life insurance 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. 7.5 If a material irreconcilable conflict arises because of a decision by the Company to disregard Contract owner voting instructions, and such disregard of voting instructions could conflict with the majority of Contract owner voting instructions, and the Company's judgment represents a minority position or would preclude a majority vote, the Company may be required, at the Trust's election, to withdraw the investment of the affected sub-account of the Separate Account in the Designated Fund and terminate this Agreement with respect to such sub-account; provided, however, that such withdrawal and termination will be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested Trustees of the Trust. No charge or penalty will be imposed as a result of such withdrawal. Any such withdrawal and termination must take place within six (6) months after the Trust gives 14 written notice to the Company that this provision is being implemented. Until the end of such six-month period, the Distributor and the Adviser will, to the extent permitted by law and the Mixed and Shared Funding Order, continue to accept and implement orders by the Company for the purchase (and redemption) of shares of the Trust. 7.6 If a material irreconcilable conflict arises because a particular state insurance regulator's decision applicable to the Company conflicts with the decisions of the majority of other state insurance regulators, then the Company will withdraw the investment of the affected sub-account of the Separate Account in the Designated Fund and terminate this Agreement with respect to such sub-account; provided, however, that such withdrawal and termination will be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of the disinterested Trustees. No charge or penalty will be imposed as a result of such withdrawal. Any such withdrawal and termination must take place within six (6) months after the Trust gives written notice to the Company that this provision is being implemented. Until the end of such six-month period the Trust will, to the extent permitted by law and the Mixed and Shared Funding Order, continue to accept and implement orders by the Company for the purchase (and redemption) of shares of the Designated Funds. 7.7 For purposes of Section 7.4 through 7.7 of this Agreement, a majority of the disinterested Trustees of the Trust will determine whether any proposed action adequately remedies any material irreconcilable conflict, but in no event will the Trust be required to establish a new funding medium for the Contracts. The Company will not be required by Section 7.4 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 affected by the material irreconcilable conflict. In the event that the Board determines that any proposed action does not adversely remedy any material irreconcilable conflict, then the Company will withdraw the investment of the affected sub-account of the Separate Account in the Designated Fund 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 will be limited to the extent required by any such material irreconcilable conflict as determined by a majority of the disinterested Trustees of the Trust. 7.8 The Company will at least annually submit to the Trustees such reports, materials or data as the Trustees of the Trust may reasonably request so that the Trustees may fully carry out the duties imposed upon it as delineated in the Mixed and Shared Funding Order, and said reports, materials and data will be submitted more frequently if deemed appropriate by the Trustees. 7.9 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to provide 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 Order) on terms and conditions materially different from those contained in the Mixed and Shared Funding Order, then: (a) the Trust and/or the Participating Insurance Companies, as appropriate, will take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules 15 are applicable; and (b) Sections 4.3, 4.4, 4.5, 7.1, 7.2, 7.3, 7.4, 7.5 and 7.6 of this Agreement will 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 (a) The Company agrees to indemnify and hold harmless the Trust, the Adviser, the Distributor, and each of the Trust's or the Adviser's or the Distributor's directors, trustees, officers, employees or agents and each person, if any , who controls or is associated with the Trust, the Adviser or the Distributor within the meaning of such terms under the federal securities laws (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 actions in respect thereof (including 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 expenses (or litigation in respect thereof) or settlements: (1) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the registration statement, prospectus or SAI for the Contracts or contained in the Contracts or sales literature or other promotional material 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 or necessary to make such statements not misleading in light of the circumstances in which they were made; provided, that this agreement to indemnify will not apply as to any Indemnified Party if such statement or omission of such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Company by or on behalf of the Trust, the Adviser, of the Distributor for use in the registration statement, prospectus or SAI for the Contracts or in the Contracts or sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or shares of the Designated Funds; or (2) arise out of or as a result of statements or representations by or on behalf of the Company (other than statements or representations contained in the Trust registration statement, prospectus, SAI or sales literature or other promotional material of the Trust, or any amendment or supplement to the foregoing, not supplied by the Company or persons under its control) or wrongful conduct of the Company or persons under its control, with respect to the sale or distribution of the Contracts or shares of the Designated Funds; or 16 (3) arise out of untrue statement or alleged untrue statement of a material fact contained in the Trust registration statement, prospectus, SAI or sales literature or other promotional material of the Trust (or any amendment or supplement thereto) or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make such statements not misleading in light of the circumstances in which they were made, if such statement or omission was made in reliance upon and in conformity with information furnished to the Trust by or on behalf of the Company or persons under its control; or (4) arise as a result of any failure by the Company to provide the services and furnish the materials under the terms of this Agreement; or (5) arise out of 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 by the Company of this Agreement; except to the extent provided in Sections 8.1(b) and 8.4 hereof. This indemnification will be in addition to any liability that the Company otherwise may have. (b) No party will be entitled to indemnification under Section 8.1(a) if such loss, claim, damage, liability or litigation is due to the willful misfeasance, bad faith, gross negligence, or reckless disregard in the performance of such party's duties and obligations under this Agreement. (c) The Indemnified Parties promptly will notify in writing the Company of the commencement of any litigation, proceedings, complaints or litigation by regulatory authorities against them in connection with the issuance or sale of the shares of the Designated Funds or the Contracts or the operation of the Trust. 8.2 Indemnification by the Adviser and Distributor (a) The Adviser and Distributor each agrees to indemnify and hold harmless the Company and each of its directors, officers, employees or agents and each person, if any, who controls or is associated with the Company within the meaning of such terms under the federal securities (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 Adviser and Distributor) or litigation in respect thereof (including 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 expenses (or litigation in respect thereof) or settlements: (1) 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 SAI for the Trust or sales literature or other promotional 17 material generated or approved by the Adviser or the Distributor on behalf 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 or necessary to make such statements not misleading in light of the circumstances in which they were made; provided that this agreement to indemnify will not apply as to any Indemnified Party if such statement or omission of such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Adviser, the Distributor or the Trust by or on behalf of the Company for use in the registration statement, prospectus or SAI for the Trust or in sales literature generated or approved by the Adviser or the Distributor on behalf of the Trust (or any amendment or supplement thereto) or otherwise for use in connection with the sale of the Contracts or shares of the Designated Funds; or (2) arise out of or as a result of statements or representations (other than statements or representations contained in the Contracts or in the Contract or Trust registration statements, prospectuses or statements of additional information or sales literature or other promotional material for the Contracts or of the Trust, or any amendment or supplement to the foregoing, not supplied by the Adviser or the Distributor or persons under the control of the Adviser or the Distributor respectively) or wrongful conduct of the Adviser or the Distributor or persons under the control of the Adviser or the Distributor respectively, with respect to the sale or distribution of the Contracts or shares of the Designated Funds; or (3) arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, SAI or sales literature or other promotional material covering the Contracts (or any amendment or supplement thereto), or the omission or alleged omission to state therein a material fact required to be stated or necessary to make such statement or statements not misleading in light of the circumstances in which they were made, if such statement or omission was made in reliance upon and in conformity with information furnished to the Company by or on behalf of the Adviser or the Distributor or persons under the control of the Adviser or the Distributor; or (4) arise as a result of any failure by the Adviser or the Distributor to provide the services and furnish the materials under the terms of this Agreement; or (5) arise out of or result from any material breach of any representation and/or warranty made by the Adviser or the Distributor in this Agreement, or arise out of or result from any other material breach of this Agreement by the Adviser or the Distributor (including a failure, whether intentional or in good faith or otherwise, to comply with the requirements of Subchapter 18 M of the Code specified in Article III, Section 3.3 of this Agreement, as described more fully in Section 8.5 below); except to the extent provided in Sections 8.2(b) and 8.4 hereof. This indemnification will be in addition to any liability that the Adviser or Distributor otherwise may have. (b) No party will be entitled to indemnification under Section 8.2(a) if such loss, claim, damage, liability or litigation is due to the willful misfeasance, bad faith, gross negligence, or reckless disregard in the performance of such party's duties and obligations under this Agreement. (c) In no event shall the Adviser or the Distributor be liable under the indemnification provisions contained in this Agreement to any individual or entity, including without limitation, the Company, or any Contract owner, with respect to any losses, claims, damages, liabilities or expenses that arise out of or result from the failure by the Company to maintain its segregated asset account(s) under applicable state law and as a duly registered unit investment trust under the provisions of the 1940 Act (unless exempt therefrom) or, subject to compliance by the Designated Funds with the diversification requirements specified in Article III, the failure by the Company to maintain its Contracts (with respect to which any Designated Fund serves as an underlying funding vehicle) as life insurance, endowment or annuity contracts under applicable provisions of the Code. (d) The Indemnified Parties promptly will notify in writing the Adviser and the Distributor of the commencement of any litigation, proceedings, complaints or litigation by regulatory authorities against them in connection with the issuance or sale of the Contracts or the operation of the Separate Account. 8.3 Indemnification by the Trust (a) The Trust agrees to indemnify and hold harmless the Company and each of its directors, officers, employees or agents and each person, if any, who controls or is associated with the Company within the meaning of such terms under the federal securities laws (collectively, the "Indemnified Parties" for purposes of this Section 8.3) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Trust) or litigation in respect thereof (including 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 expenses (or litigation in respect thereof) or settlements, are related to the operations of the Trust and: (1) arise as a result of any failure by the Trust to provide the services and furnish the materials under the terms of this Agreement; or 19 (2) arise out of or result from any material breach of any representation and/or warranty made by the Trust in this Agreement or arise out of or result from any other material breach of this Agreement by the Trust (including a failure, whether intentional or in good faith or otherwise, to comply with the requirements of Subchapter M of the Code specified in Article III, Section 3.3 of this Agreement as described more fully in Section 8.5 below); or (3) arise out of or result from the materially incorrect or untimely calculation or reporting of daily net asset value per share of a Designated Fund or dividend or capital gain distribution on shares of a Designated Fund; except to the extent provided in Sections 8.3(b) and 8.4 hereof. This indemnification will be in addition to any liability that the Trust otherwise may have. (b) No party will be entitled to indemnification under Section 8.3(a) if such loss, claim, damage, liability or litigation is due to the willful misfeasance, bad faith, gross negligence, or reckless disregard in the performance of such party's duties and obligations under this Agreement. (c) 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 Contract owner, with respect to any losses, claims, damages, liabilities or expenses that arise out of or result from the failure by the Company to maintain its segregated asset account(s) under applicable state law and as a duly registered unit investment trust under the provisions of the 1940 Act (unless exempt therefrom) or, subject to compliance by the Designated Funds with the diversification requirements specified in Article III, the failure by the Company to maintain its Contracts (with respect to which any Designated Fund serves as an underlying funding vehicle) as life insurance, endowment or annuity contracts under applicable provisions of the Code. (d) The Indemnified Parties each agree to promptly notify in writing the Trust of the commencement of any litigation, proceedings, complaints or actions by regulatory authorities against itself or any of its respective officers or directors in connection with the Agreement, the issuance or sale of the Contracts, the operation of the Separate Account(s), or the sale or acquisition of shares of the Trust. 20 8.4 Indemnification Procedure Any person obligated to provide indemnification under this Article VIII ("Indemnifying Party" for the purpose of this Section 8.4) will not be liable under the indemnification provisions of this Article VIII with respect to any claim made against a party entitled to indemnification under this Article VIII ("Indemnified Party" for the purpose of this Section 8.4) if such Indemnified Party has failed to notify in writing the Indemnifying Party in accordance with its obligations under Sections 8.1(c), 8.2(c) or 8.3(d), as applicable, but failure to notify the Indemnifying Party or any such claim will not relieve the Indemnifying Party from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of the indemnification provision of this Article VIII, except to the extent that the failure to notify results in the failure of actual notice to the Indemnifying Party and such Indemnifying Party is damaged solely as a result of failure to give such notice. In case any such action is brought against the Indemnified Party, the Indemnifying Party will be entitled to participate, at its own expense, in the defense thereof. The Indemnifying Party also will be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Indemnifying Party to the Indemnified Party of the Indemnifying Party's election to assume the defense thereof, the Indemnified Party will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation, unless: (a) the Indemnifying Party and the Indemnified Party will have mutually agreed to the retention of such counsel; or (b) the named parties to any such proceeding (including any impleaded parties) include both the Indemnifying Party and the Indemnified Party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Indemnifying Party will not be liable for any settlement of any proceeding effected without its written consent but if settled with such consent or if there is a final judgment for the plaintiff, the Indemnifying Party agrees to indemnify the Indemnified Party from and against any loss or liability by reason of such settlement or judgment. A successor by law of the parties to this Agreement will be entitled to the benefits of the indemnification contained in this Article VIII. The indemnification provisions contained in this Article VIII will survive any termination of this Agreement. 8.5 Indemnification for Failure to Comply with Diversification Requirements The Trust and the Adviser acknowledge that if a Designated Fund fails (whether intentionally or in good faith or otherwise) to comply with the diversification requirements specified in Article III, Section 3.3 of this Agreement, the Contracts consequently may not be treated as variable contracts for federal income tax purposes, which would have adverse tax consequences for Contract owners and could also adversely affect the Company's corporate tax liability. Accordingly, without in any way limiting the effects of Sections 8.2(a) and 8.3(a) hereof and without in any way limiting or restricting any other remedies available to the Company, the Trust, the Adviser and the Distributor will pay on a joint and several basis all costs associated with or arising out of any failure, or any anticipated or reasonably foreseeable failure, of any Designated Fund to comply with Section 3.3 of this Agreement, including all costs associated with 21 correcting or responding to any such failure; such costs may include, but are not limited to, the costs involved in creating, organizing, and registering a new investment company as a funding medium for the Contracts and/or the costs of obtaining whatever regulatory authorizations are required to substitute shares of another investment company for those of the failed Designated Fund (including but not limited to an order pursuant to Section 26(b) of the 1940 Act); reasonable fees and expenses of legal counsel and other advisers of the Company and any federal income taxes or tax penalties (or "toll charges" or exactments or amounts paid in settlement) reasonably incurred by the Company in connection with any such failure or anticipated or reasonably foreseeable failure. Such indemnification and reimbursement obligation shall be in addition to any other indemnification and reimbursement obligations of the Trust, the Adviser and/or the Distributor under this Agreement. 8.6 Indemnification for Failure to Comply with Code Provisions The Company acknowledges that if a Separate Account fails (whether intentionally or in good faith or otherwise) to comply with the Code provisions specified in Article II, Section 2.2 of this Agreement or other Code provisions related to the maintenance of the contracts as variable contracts for federal income tax purposes the failure of the contracts to be treated as variable contracts for federal income tax purposes would have adverse consequences for the Designated Funds serving as funding vehicles for Participating Insurance Companies. Accordingly, without in any way limiting the effects of Sections 8.1(a) hereof and without in any way limiting or restricting any other remedies available to the Trust, the Adviser and the Distributor, the Company will pay all costs associated with or arising out of any failure, or any anticipated or reasonably foreseeable failure, of any Separate Account to comply with Section 2.2 of this Agreement or Code provisions related to the maintenance of the contracts as variable contracts for federal income tax purposes, including all costs associated with correcting or responding to any such failure; such costs may include, but are not limited to, reasonable fees and expenses of legal counsel and other advisers of the Trust, the Adviser and the Distributor in connection with any such failure or anticipated or reasonably foreseeable failure. Such indemnification and reimbursement obligation shall be in addition to any other indemnification and reimbursement obligations of the Company under this Agreement. ARTICLE IX. - APPLICABLE LAW 9.1 This Agreement will be construed and the provisions hereof interpreted under and in accordance with the laws of the State of Delaware applicable to contracts entirely entered into and performed in Delaware by Delaware residents. 9.2 This Agreement will be subject to the provisions of the 1933 Act, the 1934 Act and the 1940 Act, and the rules and regulations and ruling thereunder, including such exemptions from those statutes, rules and regulations as the SEC may grant (including, but not limited to, the Mixed and Shared Funding Order) and the terms hereof will be interpreted and construed in accordance therewith. If in the future, the Mixed and Shared Funding 22 Order should no longer be necessary under applicable laws, then Article VII shall no longer apply. ARTICLE X. - TERMINATION 10.1 This Agreement will terminate automatically in the event of its assignment, unless made with the prior written consent of each party, or: (a) at the option of any party, with or without cause, with respect to one, some or all of the Designated Funds, upon six (6) month's advance written notice to the other parties or, if later, upon receipt of any required exemptive relief or orders from the SEC, unless otherwise agreed in a separate written agreement among the parties; or (b) at the option of the Company, upon written notice to the other parties, with respect to any Designated Fund if shares of the Designated Fund are not reasonably available to meet the requirements of the Contracts as determined in good faith by the Company; or (c) at the option of the Company, upon written notice to the other parties, with respect to any Designated Fund in the event any of the Designated Fund's shares are not registered, issued or sold in accordance with applicable state and/or federal law or such law precludes the use of such shares as the underlying investment media of the Contracts issued or to be issued by the Company; or (d) at the option of the Trust upon institution of formal proceedings against the Company by the NASD, the SEC, the insurance commission 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 administration of the Contracts, the operation of any Separate Account, or the purchase of the Trust shares, provided that the Trust determines in its reasonable judgment that any such proceeding would have a material adverse effect on the Company's ability to perform its obligations under this Agreement; or (e) at the option of the Company upon institution of formal proceedings against the Trust, the Adviser or the Distributor by the NASD, the SEC or any state securities or insurance commission or any other regulatory body, provided that the Company determines in its reasonable judgment that any such proceeding would have a material adverse effect on the Trust's, the Adviser's or the Distributor's ability to perform its obligations under this Agreement; or (f) at the option of the Company, if the Trust or any Designated Fund ceases to qualify as a Regulated Investment Company under Subchapter M of the Code, or under any successor or similar provision, or if the Company reasonably believes that any Designated Fund may fail to so qualify; or (g) subject to the Company's compliance with Article II, at the option of the Company, with respect to any Designated Fund, if any Designated Fund fails to 23 meet the diversification requirements specified in Section 3.3 hereof or if the Company reasonably believes any Designated Fund may fail to meet such requirements; or (h) at the option of any party to this Agreement, upon another party's material breach of any provision of this Agreement; or (i) at the option of the Company, if the Company determines in its sole judgment exercised in good faith that either the Trust, the Adviser or the Distributor has suffered a material adverse change in its business, operations or financial condition since the date of this Agreement or is the subject of material adverse publicity which is likely to have a material adverse impact upon the business and operations of the Company or the Contracts (including the sale thereof); or (j) at the option of the Trust, the Adviser or the Distributor, if the Trust, the Adviser or the Distributor respectively, determines in its sole judgment exercised in good faith that the Company has suffered a material adverse change in its business, operations or financial condition since the date of this Agreement or is the subject of material adverse publicity which is likely to have a material adverse impact upon the business and operations of the Trust, the Adviser or the Distributor; or (k) at the option of the Company or the Trust upon receipt of any necessary regulatory approvals and/or the vote of the Contract owners having an interest in a Separate Account (or any sub-account) to substitute the shares of another investment company for the corresponding Designated Fund's shares in accordance with the terms of the Contracts for which those Designated Fund shares had been selected to serve as the underlying portfolio. The Company will give sixty (60) days' prior written notice to the Trust of the date of any proposed vote or other action taken to replace the shares of a Designated Fund or of the filing of any required regulatory approval(s); or (l) at the option of the Company or the Trust upon a determination by a majority of the Trust Board, or a majority of the Trust's disinterested Trustees, that a material irreconcilable conflict exists among the interests of: (1) all Contract owners of variable insurance products of all separate accounts; or (2) the interests of the Participating Insurance Companies investing in the Trust as set forth in Article VII of this Agreement; or (m) subject to the Trust' compliance with Article III, at the option of the Trust in the event any of the Contracts are not issued or sold in accordance with applicable federal and/or state law, or will not be treated as annuity contracts, life insurance policies and/or variable contracts (as applicable) under applicable provisions of the Code, or in the event any representation or warranty of the Company in Section 2.1 is no longer true. Termination will be effective immediately upon such occurrence without notice. 10.2 Notice Requirement 24 (a) In the event that any termination of this Agreement is based upon the provisions of Article VII, such prior written notice will be given in advance of the effective date of termination as required by such provisions. (b) In the event that a party to this Agreement terminates the Agreement based upon the provisions of Sections 10.1(b)-(h), prompt written notice of the election to terminate this Agreement for cause shall be furnished by the party terminating the Agreement to the non-terminating party(ies). The Agreement shall be terminated effective upon receipt of such notice by the non-terminating party(ies). (c) In the event that a party to this Agreement terminates the Agreement based upon the provisions of Sections 10.1(i) or (j), prior written notice of the election to terminate this Agreement for cause shall be furnished by the party terminating the Agreement to the non-terminating party(ies). Such prior written notice shall be given by the party terminating this Agreement to the non-terminating party(ies) at least sixty (60) days before the effective date of termination. 10.3 Effect of Termination Notwithstanding any termination of this Agreement, the Trust and the Distributor will, at the option of the Company, continue to make available additional shares of the Designated Funds pursuant to the terms and conditions of this Agreement, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"), unless the Distributor requests that the Company seek an order pursuant to Section 26(b) of the 1940 Act to permit the substitution of other securities for the shares of the Designated Funds. The Distributor and the Company each will be responsible for one-half of the cost of seeking such order and the Company agrees that it will cooperate with the Distributor and seek such an order upon request. Specifically, without limitation, the owners of the Existing Contracts will be permitted to reallocate investments in the Designated Funds (as in effect on such date), redeem investments in the Designated Funds and/or invest in the Designated Funds upon the making of additional purchase payments under the Existing Contracts. The parties agree that this Section 10.3 will not apply to any terminations under Article VII and the effect of such Article VII terminations will be governed by Article VII of this Agreement. The parties further agree that this Section 10.3 will not apply to any termination under 10.1(m) of this Agreement. 10.4 Surviving Provisions Notwithstanding any termination of this Agreement, each party's obligations under Article VIII to indemnify other parties will survive and not be affected by any termination of this Agreement. In addition, with respect to Existing Contracts, all provisions of this Agreement also will survive and not be affected by any termination of this Agreement. ARTICLE XI. -- NOTICES 25 Any notice will be deemed duly given when sent by certified mail, return receipt requested, 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 parties. All notices will be deemed given three (3) business days after the date received or rejected by the address: If to the Company: Metropolitan Life 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Attn: Andrew Mensch, Counsel With copy to: Metropolitan Life 485B US Highway One South, Suite 420 Iselin, NJ 08830 Attn: Sabrina K Model If to the Trust: Delaware VIP Trust 1818 Market Street Philadelphia, PA 19103 Attn: General Counsel If to the Adviser: Delaware Management Company One Commerce Square Philadelphia, PA 19104 Attn: General Counsel If to the Distributor: Delaware Distributors, L.P. 1818 Market Street Philadelphia, PA 19103 Attn: General Counsel ARTICLE XII. -- MISCELLANEOUS 26 12.1 All persons dealing with the Trust must look solely to the property of the Trust or, in the event of a claim relating to a particular Designated Fund, the relevant Designated Fund for the enforcement of any claims against the Trust or the Designated Fund, as the case may be, as neither the trustees, officers, agents or shareholders assume any personal liability for obligations entered into on behalf of the Trust or any Designated Funds. 12.2 The Trust, the Adviser and the Distributor each acknowledges that the identities of the customers of the Company or any of its affiliates (collectively the "Protected Parties" for purposes of this Section 12.2), information maintained regarding Protected Parties, and all computer programs and procedures developed by the Protected Parties or any of their employees or agents in connection with the Company's performance of its duties under this Agreement are the valuable property of the Protected Parties. The Trust, the Adviser and the Distributor agree that if they come into possession of any list or compilation of the identities of or other information about the Protected Parties' customers, or any other property of the Protected Parties, other than such information as may be independently developed or compiled by the Trust, the Adviser or the Distributor from information supplied to them by the Protected Parties' customers who also maintain accounts directly with the Trust, the Adviser and the Distributor, the Trust, the Adviser and the Distributor 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 the Company's prior written consent; or (b) as required by law or judicial process. Subject to the requirements of legal process and regulatory authority, each party hereto in particular shall treat as confidential any "non-public personal information" about any "consumer" of any party as such terms are defined in the SEC's Regulation S-P and shall not disclose or use such information without the express consent of such party. Such consent shall specify the purposes for which information may be disclosed or used, which disclosure or use shall be consistent with Regulation S-P. The Trust and the Adviser each acknowledges that any breach of the agreements in this Section 12.2 would result in immediate and irreparable harm to the Protected Parties for which there would be no adequate remedy at law and agree that in the event of such a breach, the Protected 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. 12.3 The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 12.4 This Agreement may be executed simultaneously in two or more counterparts, each of which taken together will constitute one and the same instrument. 12.5 If any provision of this Agreement will be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement will not be affected thereby. 12.6 This Agreement will not be assigned by any party hereto, without the prior written consent of all of the parties. 27 12.7 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 law. 12.8 The parties to this Agreement acknowledge and agree that this Agreement shall not be exclusive in any respect. 12.9 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 in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. 12.10 Each party represents that the execution and delivery of this Agreement and the consummation of the transactions contemplated herein have been duly authorized by all necessary corporate or trust action, as applicable, by such party and when so executed and delivered this Agreement will be the valid and binding obligation of such party enforceable in accordance with its terms. 12.11 This Agreement may be amended by written instrument signed by all parties to the Agreement. Notwithstanding the above, the parties to this Agreement may amend the schedules to this Agreement from time to time to reflect changes in or relating to the Contracts, the Separate Accounts or the Funds of the Trust or other applicable terms of this Agreement. 28 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and behalf by its duly authorized representative and its seal to be hereunder affixed hereto as of the date specified below. Metropolitan Life Insurance Company on behalf of Separate Account UL and Separate Account DCVL By: ------------------------------------- Name: Title: DELAWARE VIP TRUST By: ------------------------------------- Name: Title: DELAWARE MANAGEMENT COMPANY By: ------------------------------------- Name: Title: DELAWARE DISTRIBUTORS, L.P. By: ------------------------------------- Name: Title: 29 PARTICPATION AGREEMENT SCHEDULE A The following Separate Accounts and Associated Contracts of [Name of Participating Insurance Company] are permitted in accordance with the provisions of the Participation Agreement to invest in the Designated Funds of the Delaware VIP Trust shown in Schedule B. NAME OF SEPARATE ACCOUNT: Separate Account DCVL CONTRACT(S): Metropolitan Life Insurance Company NAME OF SEPARATE ACCOUNT: Separate Account UL CONTRACT(S): Metropolitan Life Insurance Company NAME OF SEPARATE ACCOUNT: CONTRACT(S): NAME OF SEPARATE ACCOUNT: CONTRACT(S): Date: --------------- A-1 PARTICIPATION AGREEMENT SCHEDULE B In accordance with the provisions of the Participation Agreement, the Separate Account(s) shown on Schedule A may invest in the following Funds of the Trust: Delaware VIP Small Cap Value Series Standard Class Delaware VIP Small Cap Value Series Service Class Date: --------------- B-1 PARTICIPATION AGREEMENT SCHEDULE C PROXY VOTING PROCEDURES The following is a list of procedures and corresponding responsibilities for the handling of proxies and voting instructions relating to the Delaware VIP Trust (the "Trust") under the Participation Agreement (the "Agreement"). The defined terms herein shall have the meanings assigned in the Agreement except that the term "Company" shall also include the department or third party assigned by the Company to perform the steps delineated below. 1. The proxy proposals are given to the Company by the Trust as early as possible before the date set by the Trust for the shareholder meeting to enable the Company to consider and prepare for the solicitation of voting instructions from owners of the Contracts and to facilitate the establishment of tabulation procedures. At this time the Trust will inform the Company of the Record, Mailing and Meeting dates. This will be done verbally approximately two months before meeting. 2. Promptly after the Record Date, the Company will perform a "tape run," or other activity, which will generate the names, addresses and number of units which are attributed to each contract owner/policyholder (the "Customer") as of the Record Date. Allowance should be made for account adjustments made after this date that could affect the status of the Customers' accounts as of the Record Date. Note: The number of proxy statements is determined by the activities described in this Step #2. The Company will use its best efforts to call in the number of Customers to the Trust, as soon as possible, but no later than two weeks after the Record Date. 3. The Trust's Annual Report must be sent to each Customer by the Company either before or together with the Customers' receipt of voting, instruction solicitation material. The Trust will provide the last Annual Report to the Company pursuant to the terms of Section 6.2 of the Agreement. 4. The text and format for the Voting Instruction Cards ("Cards" or Card") is provided to the Company by the Trust. The Company, at its expense, shall produce and personalize the Voting Instructions Cards. The Trust or its affiliate must approve the Card before it is printed. Allow approximately 2-4 business days for printing information on the Cards. Information commonly found on the Cards includes: . name (legal name as found on account registration) . address . Trust or account number . coding to state number of units Date: --------------- C-1 . individual Card number for use in tracking and verification of votes (already on Cards as printed by the Trust). (This and related steps may occur later in the chronological process due to possible uncertainties relating to the proposals.) 5. During this time, the Trust will develop, produce and pay for the Notice of Proxy and the Proxy Statement (one document). Printed and folded notices and statements will be sent to Company for insertion into envelopes (envelopes and return envelopes are provided and paid for by the Company). Contents of envelope sent to Customers by the Company will include: . Voting Instruction Card(s) . one proxy notice and statement (one document) . return envelope (postage pre-paid by Company) addressed to the Company or its tabulation agent . "urge buckslip" - optional, but recommended. (This is a small, single sheet of paper that requests Customers to vote as quickly as possible and that their vote is important. One copy will be supplied by the Trust.) . cover letter - optional, supplied by Company and reviewed and approved in advance by the Trust 6. The above contents should be received by the Company approximately 3-5 business days before mail date. Individual in charge at Company reviews and approves the contents of the mailing package to ensure correctness and completeness. Copy of this approval sent to the Trust. 7. Package mailed by the Company. * The Trust must allow at least 15-day solicitation time to the Company as the shareowner. (A 5-week period is recommended.) Solicitation time is calculated as calendar days from (but NOT including) the meeting, counting backwards. 8. Collection and tabulation of Cards begins. Tabulation usually takes place in another department or another vendor depending on process used. An often used procedure is to sort Cards on arrival by proposal into vote categories of all yes, no or mixed replies, and to begin data entry. 9. Signature on Card checked against legal name on account registration which was printed on the Card. Note: For Example, if the account registration is under "John A. Smith, Trustee," then that is the exact legal name to be printed on the Card and is the signature needed on the Card. 10. If Cards are mutilated, or for any reason are illegible or are not signed properly, they are sent back to Customer with an explanatory letter and a new Card and return envelope. The mutilated or illegible Card is disregarded and considered to be NOT RECEIVED for purposes of vote tabulation. Any Cards that have been "kicked out" (e.g., mutilated, 2 illegible) or the procedure are "hand verified," i.e., examined as to whether they did not complete the system. Any questions on those Cards are usually remedied individually. 11. There are various control procedures used to ensure proper tabulation of votes and accuracy of that tabulation. The most prevalent is to sort the Cards as they first arrive into categories depending upon their vote; an estimate of how the vote is progressing may then be calculated. If the initial estimates and the actual vote do not coincide, then an internal audit of that vote should occur. This may entail a recount. 12. The actual tabulation of votes is done in units which is then converted to shares. (It is very important that the Trust receives the tabulations stated in terms of a percentage and the number of SHARES.) The Trust must review and approve tabulation format. 13. Final tabulation in shares is verbally given by the Company to the Trust on the morning of the meeting not later than 10:00 a.m. Eastern time. The Trust may request an earlier deadline if reasonable and if required to calculate the vote in time for the meeting. 14. A Certification of Mailing and Authorization to Vote Shares will be required from the Company as well as an original copy of the final vote. The Trust will provide a standard form for each Certification. 15. The Company will be required to box and archive the Cards received from the Customers. In the event that any vote is challenged or if otherwise necessary for legal, regulatory, or accounting purposes, the Trust will be permitted reasonable access to such Cards. 16. All approvals and "signing-off" may be done orally, but must always be followed up in writing. 3 PARTICIPATION AGREEMENT SCHEDULE D PURCHASE AND REDEMPTION ORDER PROCEDURES The following is a list of procedures and corresponding responsibilities for the processing of purchase and redemption orders relating to the Delaware VIP Trust (the "Trust") under the Participation Agreement (the "Agreement"). The defined terms herein shall have the meanings assigned in the Agreement except that the term "Company" shall also include the department assigned by the Company to perform the steps delineated below. 1. The Company shall transmit any purchase or redemption order to the Trust or its designated affiliate electronically by an automated file in a form acceptable to the Trust. 2. The purchase or redemption order must be received no later than the times specified in Sections 1.1 and 1.3 of the Agreement. 3. The Trust or its designated affiliate shall send confirmations of the purchase and redemption orders to the Company no later than 10:30 a.m. on the Business Day that the purchase or redemption order is deemed to be received pursuant to Sections 1.1 or 1.3 of the Agreement. 4. The Company shall submit any corrections to the purchase or redemption order to the Trust or its designated affiliate no later than 11:30 a.m. on the same Business Day that the purchase or redemption order is deemed to be received pursuant to the Sections 1.1 or 1.3 of the Agreement. 4 FUND PARTICIPATION AGREEMENT This Agreement is entered into as of the 30st Day of April, 2004, between Metropolitan Life Insurance Company of New York, a life insurance company organized under the laws of the State of New York ("Insurance Company"), and Dreyfus Variable Investment Fund, Dreyfus Investment Portfolios, The Dreyfus Socially Responsible Growth Fund, Inc. and the Dreyfus Life and Annuity Index Fund, Inc. (d/b/a Dreyfus Stock Index Fund, Inc.) (each of the foregoing the "Fund") and The Dreyfus Corporation. ARTICLE I DEFINITIONS 1.1 "Act" shall mean the Investment Company Act of 1940, as amended. 1.2 "Board" shall mean the Board of Directors or Trustees, as the case may be, of a Fund, which has the responsibility for management and control of the Fund. 1.3 "Business Day" shall mean any day for which a Fund calculates net asset value per Share (as defined below) as described in the Fund's Prospectus. 1.4 "Commission" shall mean the Securities and Exchange Commission. 1.5 "Contract" shall mean a variable annuity or variable life insurance contract that uses any Participating Fund (as defined below) as an underlying investment medium. Individuals who participate under a group Contract are "Participants." 1.6 "Contractholder" shall mean any entity that is a party to a Contract with a Participating Company (as defined below). 1.7 "Disinterested Board Members" shall mean those members of the Board of a Fund that are not deemed to be "interested persons" of the Fund, as defined by the Act. 1.8 "Dreyfus" shall mean The Dreyfus Corporation and its affiliates, including Dreyfus Service Corporation. 1.9 "Insurance Company's General Account(s)" shall mean the general account(s) of Insurance Company and its affiliates that invest in Shares (as defined below) of a Participating Fund. 1.10 "Participating Companies" shall mean any insurance company (including Insurance Company) that offers variable annuity and/or variable life insurance contracts to the public and that has entered into an agreement with one or more of the Funds. 1.11 "Participating Fund" shall mean each Fund, including, as applicable, any series thereof, specified in Exhibit A, as such Exhibit may be amended from time to time by agreement of the parties hereto, the Shares (as defined below) of which are available to serve as the underlying investment medium for the aforesaid Contracts. 1.12 "Prospectus" shall mean the current prospectus and statement of additional information of a Fund, relating to its Shares (as defined below), as most recently filed with the Commission. 1.13 "Separate Account" shall mean the separate account(s), a separate account established by Insurance Company in accordance with the laws of the State of New York. 1.14 "Shares" shall mean (i) each class of shares of a Participating Fund set forth on Exhibit A next to the name of such Participating Fund, as such Exhibit may be revised from time to time, or (ii) if no class of shares is set forth on Exhibit A next to the name of such Participating Fund, the shares of the Participating Fund. 1.15 "Software Program" shall mean the software program used by a Fund for providing Fund and account balance information including net asset value per Share. Such Program may include the Lion System. In situations where the Lion System or any other Software Program used by a Fund is not available, such information may be provided by telephone. The Lion System shall be provided to Insurance Company at no charge. ARTICLE II REPRESENTATIONS 2.1 Insurance Company represents and warrants that (a) it is an insurance company duly organized and in good standing under applicable law; (b) it has legally and validly established the Separate Account pursuant to the insurance laws of the State of New York_and the regulations thereunder for the purpose of offering to the public certain individual and group variable annuity and variable life insurance contracts; (c) it has registered the Separate Account, if required, as a unit investment trust under the Act to serve as the segregated investment account for the Contracts; and (d) the Separate Account is eligible to invest in Shares of each Participating Fund without such investment disqualifying any Participating Fund as an investment medium for insurance company separate accounts supporting variable annuity contracts or variable life insurance contracts. 2.2 Insurance Company represents and warrants that (a) the Contracts will be described in a registration statement filed under the Securities Act of 1933, if required, as amended ("1933 Act"); (b) the Contracts will be issued and sold in compliance in all material respects with all applicable federal and state laws; and 2 (c) the sale of the Contracts shall comply in all material respects with state insurance law requirements. Insurance Company agrees to notify each Participating Fund promptly of any investment restrictions imposed by state insurance law and applicable to the Participating Fund. 2.3 Insurance Company represents and warrants that the income, gains and losses, whether or not realized, from assets allocated to the Separate Account are, in accordance with the applicable Contracts, to be credited to or charged against such Separate Account without regard to other income, gains or losses from assets allocated to any other accounts of Insurance Company. Insurance Company represents and warrants that the assets of the Separate Account are and will be kept separate from Insurance Company's General Account and any other separate accounts Insurance Company may have, and will not be charged with liabilities from any business that Insurance Company may conduct or the liabilities of any companies affiliated with Insurance Company. 2.4 Each Participating Fund represents and warrants that it is registered with the Commission under the Act as an open-end, management investment company and possesses, and shall maintain, all legal and regulatory licenses, approvals, consents and/or exemptions required for the Participating Fund to operate and offer its Shares as an underlying investment medium for Participating Companies. 2.5 Each Participating Fund represents and warrants that it is currently qualified as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and that it will make every effort to maintain such qualification (under Subchapter M or any successor or similar provision) and that it will notify Insurance Company immediately upon having a reasonable basis for believing that it has ceased to so qualify or that it might not so qualify in the future. 2.6 Insurance Company represents and agrees that the Contracts are currently, and at the time of issuance will be, treated as life insurance policies or annuity contracts, whichever is appropriate, under applicable provisions of the Code, and that it will make every effort to maintain such treatment and that it will notify each Participating Fund and Dreyfus 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. 2.7 Each Participating Fund represents and agrees that its assets shall be managed and invested in a manner that complies with the requirements of Section 817(h) of the Code and applicable Treasury Regulations. Each Participating Fund further represents and warrants that it qualifies as a "look through" entity under Treasury Regulation Section 1.817-5(f) and will make every effort to so qualify as long as the Insurance Company owns shares. Each Participating Fund agrees to notify the Insurance company when it has a reasonable basis for believing that it no longer qualifies as a "look thorugh entitiy" or that it is out of compliance with Section 3 817(h) diversification requirements. Each Participating Fund also agrees to provide the Insurance Company with a certificate of compliance with this Section 2.7 upon request from Insurance Company. 2.8 Insurance Company agrees that each Participating Fund shall be permitted (subject to the other terms of this Agreement) to make its shares available to other Participating Companies and Contractholders as a separate account investment option under a Contract. 2.9 Each Participating Fund represents and warrants that any of its directors, trustees, officers, employees, investment advisers, and other individuals/entities who deal with the money and/or securities of the Participating Fund are and shall continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Participating Fund in an amount not less than that required by Rule 17g-1 under the Act. The aforesaid Bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company. 2.10 Insurance Company represents and warrants that all of its employees and agents who deal with the money and/or securities of each Participating Fund are and shall continue to be at all times covered by a blanket fidelity bond or similar coverage in an amount not less than the coverage required to be maintained by the Participating Fund. The aforesaid Bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company. 2.11 Insurance Company agrees that Dreyfus shall be deemed a third party beneficiary under this Agreement and may enforce any and all rights conferred by virtue of this Agreement. ARTICLE III FUND SHARES 3.1 The Contracts funded through the Separate Account will provide for the investment of certain amounts in Shares of each Participating Fund. 3.2 Each Participating Fund agrees to make its Shares available for purchase at the then applicable net asset value per Share by Insurance Company and the Separate Account on each Business Day pursuant to rules of the Commission. Notwithstanding the foregoing, each Participating Fund may refuse to sell its Shares to any person, or suspend or terminate the offering of its Shares, if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of its Board, acting in good faith and in light of its fiduciary duties under federal and any applicable state laws, necessary and in the best interests of the Participating Fund's shareholders. 3.3 Each Participating Fund agrees that shares of the Participating Fund will be sold only to (a) Participating Companies and their separate accounts or (b) "qualified 4 pension or retirement plans" as determined under Section 817(h)(4) of the Code for the benefit of participants under those plans ("Participants"). Each Participating Fund agrees that shares of the Participating Fund will be sold only to Participating Companies and their separate accounts and to persons or plans that represent and warrant to the Participating Fund that they qualify to purchase shares of the Participating Fund under Section 817(h) of the Code, and the regulations thereunder without impairing the ability of the Separate Account to consider the portfolio investments of the Participating Fund as constituting investments of the Separate Account for the purpose of satisfying the diversification requirements of Section 817(h). The Participating Fund shall not sell Participating Fund shares to any insurance company or separate account unless an agreement substantially complying with Sections 2.1 and 2.6 of this Agreement is in effect to govern such sales, to the extent required. Except as otherwise set forth in this Section 3.3, no shares of any Participating Fund will be sold to the general public. 3.4 Each Participating Fund shall use its best efforts to provide closing net asset value, dividend and capital gain information on a per Share basis to Insurance Company by 6:00 p.m. Eastern time on each Business Day. Any material errors in the calculation of net asset value, dividend and capital gain information shall be reported immediately upon discovery to Insurance Company. Non-material errors will be corrected in the next Business Day's net asset value per Share. 3.5 At the end of each Business Day, Insurance Company will use the information described in Sections 3.2 and 3.4 to calculate the unit values of the Separate Account for the day. Using this unit value, Insurance Company will process the day's Separate Account transactions received by it by the close of trading on the floor of the New York Stock Exchange (currently 4:00 p.m. Eastern time) to determine the net dollar amount of the Shares of each Participating Fund that will be purchased or redeemed at that day's closing net asset value per Share. The net purchase or redemption orders will be transmitted to each Participating Fund by Insurance Company by 11:00 a.m. Eastern time on the Business Day next following Insurance Company's receipt of that information. Subject to Sections 3.6 and 3.8, all purchase and redemption orders for Insurance Company's General Accounts shall be effected at the net asset value per Share of each Participating Fund next calculated after receipt of the order by the Participating Fund or its Transfer Agent. 3.6 Each Participating Fund appoints Insurance Company as its agent for the limited purpose of accepting orders for the purchase and redemption of Shares of the Participating Fund for the Separate Account. Each Participating Fund will execute orders at the applicable net asset value per Share determined as of the close of trading on the day of receipt of such orders by Insurance Company acting as agent ("effective trade date"), provided that the Participating Fund receives notice of such orders by 11:00 a.m. Eastern time on the next following Business Day and, if such orders request the purchase of Shares of the Participating Fund, 5 the conditions specified in Section 3.8, as applicable, are satisfied. A redemption or purchase request that does not satisfy the conditions specified above and in Section 3.8, as applicable, will be effected at the net asset value per Share computed on the Business Day immediately preceding the next following Business Day upon which such conditions have been satisfied in accordance with the requirements of this Section and Section 3.8. Insurance Company represents and warrants that all orders submitted by the Insurance Company for execution on the effective trade date shall represent purchase or redemption orders received from Contractholders prior to the close of trading on the New York Stock Exchange on the effective trade date. 3.7 Insurance Company will make its best efforts to notify each applicable Participating Fund in advance of any unusually large purchase or redemption orders. 3.8 If Insurance Company's order requests the purchase of Shares of a Participating Fund, Insurance Company will pay for such purchases by wiring Federal Funds to the Participating Fund or its designated custodial account on the day the order is transmitted. Insurance Company shall make all reasonable efforts to transmit to the applicable Participating Fund payment in Federal Funds by 12:00 noon Eastern time on the Business Day the Participating Fund receives the notice of the order pursuant to Section 3.5. Each applicable Participating Fund will execute such orders at the applicable net asset value per Share determined as of the close of trading on the effective trade date if the Participating Fund receives payment in Federal Funds by 12:00 midnight Eastern time on the Business Day the Participating Fund receives the notice of the order pursuant to Section 3.5. If payment in Federal Funds for any purchase is not received or is received by a Participating Fund after 12:00 noon Eastern time on such Business Day, Insurance Company shall promptly, upon each applicable Participating Fund's request, reimburse the respective Participating Fund for any charges, costs, fees, interest or other expenses incurred by the Participating Fund in connection with any advances to, or borrowings or overdrafts by, the Participating Fund, or any similar expenses incurred by the Participating Fund, as a result of portfolio transactions effected by the Participating Fund based upon such purchase request. If Insurance Company's order requests the redemption of any Shares of a Participating Fund valued at or greater than $1 million dollars, the Participating Fund will wire such amount to Insurance Company within seven days of the order. 3.9 Each Participating Fund has the obligation to ensure that its Shares are registered with applicable federal agencies at all times. 3.10 Each Participating Fund will confirm each purchase or redemption order made by Insurance Company. Transfers of Shares of a Participating Fund will be by book entry only. No share certificates will be issued to Insurance Company. Insurance Company will record Shares ordered from a Participating Fund in an appropriate title for the corresponding account. 6 3.11 Each Participating Fund shall credit Insurance Company with the appropriate number of Shares. 3.12 On each ex-dividend date of a Participating Fund or, if not a Business Day, on the first Business Day thereafter, each Participating Fund shall communicate to Insurance Company the amount of dividend and capital gain, if any, per Share. All dividends and capital gains shall be automatically reinvested in additional Shares of the applicable Participating Fund at the net asset value per Share on the ex-dividend date. Each Participating Fund shall, on the day after the ex-dividend date or, if not a Business Day, on the first Business Day thereafter, notify Insurance Company of the number of Shares so issued. ARTICLE IV STATEMENTS AND REPORTS 4.1 Each Participating Fund shall provide monthly statements of account as of the end of each month for all of Insurance Company's accounts by the fifteenth (15th) Business Day of the following month. 4.2 Each Participating Fund shall distribute to Insurance Company copies of the Participating Fund's Prospectuses, proxy materials, notices, periodic reports and other printed materials (which the Participating Fund customarily provides to the holders of its Shares) in quantities as Insurance Company may reasonably request for distribution to each Contractholder and Participant. Insurance Company may elect to print the Participating Fund's prospectus and/or its statement of additional information in combination with other fund companies' prospectuses and statements of additional information, which are also offered in Insurance Company's insurance product at its own cost. At Insurance Company's request, the Participating Fund will provide, in lieu of printed documents, camera-ready copy or diskette of prospectuses, annual and semi-annual reports for printing by the Insurance Company. 4.3 Each Participating Fund will provide to Insurance Company at least one complete copy of all registration statements, Prospectuses, reports, proxy statements, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to the Participating Fund or its Shares (except for such materials that are designed only for a class of shares of a Participating Fund not offered to the Insurance Company pursuant to this Agreement), contemporaneously with the filing of such document with the Commission or other regulatory authorities. 4.4 Insurance Company will provide to each Participating Fund at least one copy of all registration statements, Prospectuses, reports, proxy statements, sales literature and other promotional materials, applications for exemptions, requests for no- 7 action letters, and all amendments to any of the above, that relate to the Contracts or the Separate Account, contemporaneously with the filing of such document with the Commission . 4.5 Insurance Company will provide Participating Funds on a semi-annual basis, or more frequently as reasonably requested by the Participating Funds, with a current tabulation of the number of existing Contractholders of Insurance Company whose Variable Contract values are invested in the Participating Funds. This tabulation will be sent to Participating Funds in the form of a letter signed by a duly authorized officer of the Insurance Company attesting to the accuracy of the information contained in the letter. ARTICLE V EXPENSES 5.1 The charge to each Participating Fund for all expenses and costs of the Participating Fund, including but not limited to management fees, Rule 12b-1 fees, if any, administrative expenses and legal and regulatory costs, will be included in the determination of the Participating Fund's daily net asset value per Share. 5.2 Except as provided in Articles IV and V, in particular in the next sentence, Insurance Company shall not be required to pay directly any expenses of any Participating Fund or expenses relating to the distribution of its Shares. Insurance Company shall pay the following expenses or costs: a. Such amount of the production expenses of any Participating Fund materials, including the cost of printing a Participating Fund's Prospectus, or marketing materials for prospective Insurance Company Contractholders and Participants as Dreyfus and Insurance Company shall agree from time to time. b. Distribution expenses of any Participating Fund materials or marketing materials for prospective Insurance Company Contractholders and Participants. c. Distribution expenses of any Participating Fund materials or marketing materials for Insurance Company Contractholders and Participants. A Participating Fund's principal underwriter may pay Insurance Company, or the broker-dealer acting as principal underwriter for the Insurance Company's Contracts, for distribution and other services related to the Shares of the Participating Fund pursuant to any distribution plan adopted by the Participating Fund in accordance with Rule 12b-1 under the Act, subject to the terms and 8 conditions of an agreement between the Participating Fund's principal underwriter and Insurance Company or the principal underwriter for the Insurance Company's Contracts, as applicable, related to such plan. Except as provided herein, all other expenses of each Participating Fund shall not be borne by Insurance Company. ARTICLE VI EXEMPTIVE RELIEF 6.1 Insurance Company has reviewed a copy of the order dated February 5, 1998 of the Commission under Section 6(c) of the Act with respect to Dreyfus Investment Portfolios, and, in particular, has reviewed the conditions to the relief set forth in the Notice. As set forth therein, if Dreyfus Investment Portfolios is a Participating Fund, Insurance Company agrees, as applicable, to report any potential or existing conflicts promptly to the Board of Dreyfus Investment Portfolios, and, in particular, whenever contract voting instructions are disregarded, and recognizes that it will be responsible for assisting the Board in carrying out its responsibilities under such application. Insurance Company agrees to carry out such responsibilities with a view to the interests of existing Contractholders. 6.2 If a majority of the Board, or a majority of Disinterested Board Members, determines that a material irreconcilable conflict exists with regard to Contractholder investments in a Participating Fund, the Board shall give prompt notice to all Participating Companies and any other Participating Fund. If the Board determines that Insurance Company is responsible for causing or creating said conflict, Insurance Company shall at its sole cost and expense, and to the extent reasonably practicable (as determined by a majority of the Disinterested Board Members), take such action as is necessary to remedy or eliminate the irreconcilable material conflict. Such necessary action may include, but shall not be limited to: a. Withdrawing the assets allocable to the Separate Account from the Participating Fund and reinvesting such assets in another Participating Fund (if applicable) or a different investment medium, or submitting the question of whether such segregation should be implemented to a vote of all affected Contractholders; and/or b. Establishing a new registered management investment company. 6.3 If a material irreconcilable conflict arises as a result of a decision by Insurance Company to disregard Contractholder voting instructions and said decision represents a minority position or would preclude a majority vote by all Contractholders having an interest in a Participating Fund, Insurance Company 9 may be required, at the Board's election, to withdraw the investments of the Separate Account in that Participating Fund. 6.4 For the purpose of this Article, a majority of the Disinterested Board Members shall determine whether or not any proposed action adequately remedies any irreconcilable material conflict, but in no event will any Participating Fund be required to bear the expense of establishing a new funding medium for any Contract. Insurance Company shall not be required by this Article to establish a new funding medium for any Contract if an offer to do so has been declined by vote of a majority of the Contractholders materially adversely affected by the irreconcilable material conflict. 6.5 No action by Insurance Company taken or omitted, and no action by the Separate Account or any Participating Fund taken or omitted as a result of any act or failure to act by Insurance Company pursuant to this Article VI, shall relieve Insurance Company of its obligations under, or otherwise affect the operation of, Article V. ARTICLE VII VOTING SHARES OF PARTICIPATING FUND 7.1 Each Participating Fund shall provide Insurance Company with copies, at no cost to Insurance Company, of the Participating Fund's proxy materials, reports to shareholders and other communications to shareholders (except for such materials that are designed only for a class of shares of a Participating Fund not offered to the Insurance Company pursuant to this Agreement) in such quantity as Insurance Company shall reasonably require for distributing to Contractholders or Participants Insurance Company shall: (a) solicit voting instructions from Contractholders or Participants on a timely basis and in accordance with applicable law; (b) vote the Shares of the Participating Fund in accordance with instructions received from Contractholders or Participants; and (c) vote the Shares of the Participating Fund for which no instructions have been received in the same proportion as Shares of the Participating Fund for which instructions have been received. Insurance Company agrees at all times to vote Shares held by Insurance Company's General Account in the same proportion as Shares of the Participating Fund for which instructions have been received from Contractholders or Participants. Insurance Company further agrees to be responsible for assuring 10 that voting the Shares of the Participating Fund for the Separate Account is conducted in a manner consistent with other Participating Companies. 7.2 Insurance Company agrees that it shall not, without the prior written consent of each applicable Participating Fund and Dreyfus, solicit, induce or encourage Contractholders to (a) change or supplement the Participating Fund's current investment adviser or (b) change, modify, substitute, add to or delete from the current investment media for the Contracts. 11 ARTICLE VIII MARKETING AND REPRESENTATIONS 8.1 Each Participating Fund or its principal underwriter shall periodically furnish Insurance Company with the following documents relating to the Shares of the Participating Fund, in quantities as Insurance Company may reasonably request: a. Current Prospects and any supplements thereto; and b. Other marketing materials. Expenses for the production of such documents shall be borne by Insurance Company in accordance with Section 5.2 of this Agreement. 8.2 Insurance Company shall designate certain persons or entities that shall have the requisite licenses to solicit applications for the sale of Contracts. No representation is made as to the number or amount of Contracts that are to be sold by Insurance Company. Insurance Company shall make reasonable efforts to market the Contracts and shall comply with all applicable federal and state laws in connection therewith. 8.3 Insurance Company shall furnish, or shall cause to be furnished, to each applicable Participating Fund or its designee, each piece of sales literature or other promotional material in which the Participating Fund, its investment adviser or the administrator is named, at least fifteen Business Days prior to its use. No such material shall be used unless the Participating Fund or its designee approves such material. Such approval (if given) must be in writing and shall be presumed not given if not received within ten Business Days after receipt of such material. Each applicable Participating Fund or its designee, as the case may be, shall use all reasonable efforts to respond within ten days of receipt. 8.4 Insurance Company shall not give any information or make any representations or statements on behalf of a Participating Fund or concerning a Participating Fund in connection with the sale of the Contracts other than the information or representations contained in the registration statement or Prospectus of, as may be amended or supplemented from time to time, or in reports or proxy statements for, the applicable Participating Fund, or in sales literature or other promotional material approved by the applicable Participating Fund. 8.5 Each Participating Fund shall furnish, or shall cause to be furnished, to Insurance Company, each piece of the Participating Fund's sales literature or other promotional material in which Insurance Company or the Separate Account is named, at least fifteen Business Days prior to its use. No such material shall be used unless Insurance Company approves such material. Such approval (if given) must be in writing and shall be presumed not given if not received within ten 12 Business Days after receipt of such material. Insurance Company shall use all reasonable efforts to respond within ten days of receipt. 8.6 Each Participating Fund shall not, in connection with the sale of Shares of the Participating Fund, give any information or make any representations on behalf of Insurance Company or concerning Insurance Company, the Separate Account, or the Contracts other than the information or representations contained in a registration statement or prospectus or disclosure document for the Contracts, as may be amended or supplemented from time to time, or in published reports for the Separate Account that are in the public domain or approved by Insurance Company for distribution to Contractholders or Participants, or in sales literature or other promotional material approved by Insurance Company. 8.7 For purposes of this Agreement, the phrase "sales literature or other promotional material" or words of similar import include, without limitation, advertisements (such as material published, or designed for use, in a newspaper, magazine or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures or other public media), sales literature (such as any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, or 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 or disclosure documents, statements of additional information, shareholder reports and proxy materials, and any other material constituting sales literature or advertising under National Association of Securities Dealers, Inc. rules, the Act or the 1933 Act. ARTICLE IX INDEMNIFICATION 9.1 Insurance Company agrees to indemnify and hold harmless each Participating Fund, Dreyfus, each respective Participating Fund's investment adviser and sub-investment adviser (if applicable), each respective Participating Fund's distributor, and their respective affiliates, and each of their directors, trustees, officers, employees, agents and each person, if any, who controls or is associated with any of the foregoing entities or persons within the meaning of the 1933 Act (collectively, the "Indemnified Parties" for purposes of Section 9.1), against any and all losses, claims, damages or liabilities joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted) for which the Indemnified Parties may become subject, under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in information furnished 13 by Insurance Company for use in the registration statement or Prospectus or disclosure documentsor sales literature or advertisements of the respective Participating Fund or with respect to the Separate Account or Contracts, 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; (ii) arise out of or as a result of conduct, statements or representations (other than statements or representations contained in the Prospectus and sales literature or advertisements of the respective Participating Fund) of Insurance Company or its agents, with respect to the sale and distribution of Contracts for which the Shares of the respective Participating Fund are an underlying investment; (iii) arise out of the wrongful conduct of Insurance Company or persons under its control with respect to the sale or distribution of the Contracts or the Shares of the respective Participating Fund; (iv) arise out of Insurance Company's incorrect calculation and/or untimely reporting of net purchase or redemption orders; or (v) arise out of any breach by Insurance Company of a material term of this Agreement or as a result of any failure by Insurance Company to provide the services and furnish the materials or to make any payments provided for in this Agreement. Insurance Company will reimburse any Indemnified Party in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that with respect to clauses (i) and (ii) above Insurance Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any untrue statement or omission or alleged omission made in such registration statement, prospectus, sales literature, or advertisement in conformity with written information furnished to Insurance Company by the respective Participating Fund specifically for use therein. This indemnity agreement will be in addition to any liability which Insurance Company may otherwise have. 9.2 Each Participating Fund and The Dreyfus Corporation severally agree to indemnify and hold harmless Insurance Company and each of its directors, officers, employees, agents and each person, if any, who controls Insurance Company within the meaning of the 1933 Act against any losses, claims, damages or liabilities to which Insurance Company or any such director, officer, employee, agent or controlling person may become subject, under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement or Prospectus or sales literature or advertisements of the respective Participating Fund; (ii) arise out of or are based upon the omission to state in the registration statement or Prospectus or sales literature or advertisements of the respective Participating Fund any material fact required to be stated therein or necessary to make the statements therein not misleading; or (iii) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement or Prospectus or sales literature or advertisements with respect to the Separate Account or the Contracts and such statements were based on information provided to Insurance Company by the respective Participating Fund or (iv) arise 14 out of any breach by a Participating Fund of a material term of this Agreement or as a result of a failure by a Particpating Fund to provide services and furnish materials; and the respective Participating Fund and The Dreyfus Corporation will reimburse any legal or other expenses reasonably incurred by Insurance Company or any such director, officer, employee, agent or controlling person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the respective Participating Fund or The Dreyfus Corporation will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or omission or alleged omission made in such registration statement, Prospectus or disclosure statement, sales literature or advertisements in conformity with written information furnished to the respective Participating Fund by Insurance Company specifically for use therein. This indemnity agreement will be in addition to any liability which the respective Participating Fund or the Dreyfus Corporation may otherwise have. 9.3 Each Participating Fund severally shall indemnify and hold Insurance Company harmless against any and all liability, loss, damages, costs or expenses which Insurance Company may incur, suffer or be required to pay due to the respective Participating Fund's (i) incorrect calculation of the daily net asset value, dividend rate or capital gain distribution rate; (ii) incorrect reporting of the daily net asset value, dividend rate or capital gain distribution rate; and (iii) untimely reporting of the net asset value, dividend rate or capital gain distribution rate; provided that the respective Participating Fund shall have no obligation to indemnify and hold harmless Insurance Company if the incorrect calculation or incorrect or untimely reporting was the result of incorrect information furnished by Insurance Company or information furnished untimely by Insurance Company or otherwise as a result of or relating to a breach of this Agreement by Insurance Company. 9.4 Promptly after receipt by an indemnified party under this Article of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Article, notify the indemnifying party of the commencement thereof. The omission to so notify the indemnifying party will not relieve the indemnifying party from any liability under this Article IX, except to the extent that the omission results in a failure of actual notice to the indemnifying party and such indemnifying party is damaged solely as a result of the failure to give such notice. 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, and to the extent that the indemnifying party has given notice to such effect to the indemnified party and is performing its obligations under this Article, the indemnifying party shall not be liable for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof, other than reasonable costs of investigation. Notwithstanding the foregoing, in any such proceeding, any 15 indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent. A successor by law of the parties to this Agreement shall be entitled to the benefits of the indemnification contained in this Article IX. The provisions of this Article IX shall survive termination of this Agreement. 9.5 ARTICLE X COMMENCEMENT AND TERMINATION 10.1 This Agreement shall be effective as of the date hereof and shall continue in force until terminated in accordance with the provisions herein. 10.2 This Agreement shall terminate without penalty: a. As to any Participating Fund, at the option of Insurance Company or the Participating Fund at any time from the date hereof upon 60 days' notice, unless a shorter time is agreed to by the respective Participating Fund and Insurance Company; b. As to any Participating Fund, at the option of Insurance Company, if Shares of that Participating Fund are not reasonably available to meet the requirements of the Contracts as determined by Insurance Company. Prompt notice of election to terminate shall be furnished by Insurance Company, said termination to be effective ten days after receipt of notice unless the Participating Fund makes available a sufficient number of Shares to meet the requirements of the Contracts within said ten-day period; c. As to a Participating Fund, at the option of Insurance Company, upon the institution of formal proceedings against that Participating Fund by the Commission, National Association of Securities Dealers or any other regulatory body, the expected or anticipated ruling, judgment or outcome of which would, in Insurance Company's reasonable judgment, materially impair that Participating Fund's ability to meet and perform the Participating Fund's obligations and duties hereunder. Prompt notice of 16 election to terminate shall be furnished by Insurance Company with said termination to be effective upon receipt of notice; d. As to a Participating Fund, at the option of each Participating Fund, upon the institution of formal proceedings against Insurance Company by the Commission, National Association of Securities Dealers or any other regulatory body, the expected or anticipated ruling, judgment or outcome of which would, in the Participating Fund's reasonable judgment, materially impair Insurance Company's ability to meet and perform Insurance Company's obligations and duties hereunder. Prompt notice of election to terminate shall be furnished by such Participating Fund with said termination to be effective upon receipt of notice; e. As to a Participating Fund, at the option of that Participating Fund, if the Participating Fund shall determine, in its sole judgment reasonably exercised in good faith, that Insurance Company has suffered a material adverse change in its business or financial condition or is the subject of material adverse publicity and such material adverse change or material adverse publicity is likely to have a material adverse impact upon the business and operation of that Participating Fund or Dreyfus, such Participating Fund shall notify Insurance Company in writing of such determination and its intent to terminate this Agreement, and after considering the actions taken by Insurance Company and any other changes in circumstances since the giving of such notice, such determination of the Participating Fund shall continue to apply on the sixtieth (60th) day following the giving of such notice, which sixtieth day shall be the effective date of termination; f. As to a Participating Fund, at the option of Insurance Company, if Insurance Company shall determine, in its sole judgment reasonably exercised in good faith that the Participating Fund has suffered a material adverse change in its business or financial condition or is the subject of material adverse publicity and such material adverse change or material adverse publicity is likely to have a material adverse impact upon the business and operations of Insurance Company or its Separate Account, the Insurance Company shall notify the Participating Fund in writing of such determination and its intent to terminate this Agreement, and after considering the actions taken by the Participating Fund and any other changes in circumstances since the giving of such notice, such determination of Insurance Company shall continue to apply to the sixtieth (60th) day following the giving of such notice, which sixtieth day shall be the effective date of termination; g. As to a Participating Fund, upon termination of the Investment Advisory Agreement between that Participating Fund and Dreyfus or its successors unless Insurance Company specifically approves the selection of a new 17 Participating Fund investment adviser. Such Participating Fund shall promptly furnish notice of such termination to Insurance Company; h. As to a Participating Fund, in the event that Shares of the Participating Fund are not registered, issued or sold in accordance with applicable federal law, or such law precludes the use of such Shares as the underlying investment medium of Contracts issued or to be issued by Insurance Company. Termination shall be effective immediately as to that Participating Fund only upon such occurrence without notice; i. At the option of a Participating Fund upon a determination by its Board in good faith that it is no longer advisable and in the best interests of shareholders of that Participating Fund to continue to operate pursuant to this Agreement. Termination pursuant to this Subsection (i) shall be effective upon notice by such Participating Fund to Insurance Company of such termination; j. At the option of a Participating Fund if the Contracts cease to qualify as annuity contracts or life insurance policies, as applicable, under the Code, or if such Participating Fund reasonably believes that the Contracts may fail to so qualify; k. At the option of any party to this Agreement, upon another party's breach of any material provision of this Agreement; l. At the option of a Participating Fund, if the Contracts are not registered, issued or sold in accordance with applicable federal and/or state law m. At the option of Insurance Company if it determines in good faith that it is no longer advisable and in the best interests of Contractholders to continue to operate pursuant to this Agreement. Termination pursuant to this Subsection (i) shall be effective upon notice by Insurance Company to Dreyfus and the Participating Fund; or m. Upon assignment of this Agreement, unless made with the written consent of every other non-assigning party. Any such termination pursuant to Section 10.2a, 10.2d, 10.2e, 10.2f or 10.2k herein shall not affect the operation of Article V of this Agreement. Any termination of this Agreement shall not affect the operation of Article IX of this Agreement. 10.3 Notwithstanding any termination of this Agreement pursuant to Section 10.2 hereof, each Participating Fund and Dreyfus may, at the option of the Participating Fund, continue to make available additional Shares of that Participating Fund for as long as the Participating Fund desires pursuant to the 18 terms and conditions of this Agreement as provided 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 that Participating Fund and Dreyfus so elect to make additional Shares of the Participating Fund available, the owners of the Existing Contracts or Insurance Company, whichever shall have legal authority to do so, shall be permitted to reallocate investments in that Participating Fund, redeem investments in that Participating Fund and/or invest in that Participating Fund upon the making of additional purchase payments under the Existing Contracts. In the event of a termination of this Agreement pursuant to Section 10.2 hereof, such Participating Fund and Dreyfus, as promptly as is practicable under the circumstances, shall notify Insurance Company whether Dreyfus and that Participating Fund will continue to make Shares of that Participating Fund available after such termination. If such Shares of the Participating Fund continue to be made available after such termination, the provisions of this Agreement shall remain in effect and thereafter either of that Participating Fund or Insurance Company may terminate the Agreement as to that Participating Fund, as so continued pursuant to this Section 10.3, 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 Participating Fund, need not be for more than six months. 10.4 Termination of this Agreement as to any one Participating Fund shall not be deemed a termination as to any other Participating Fund unless Insurance Company or such other Participating Fund, as the case may be, terminates this Agreement as to such other Participating Fund in accordance with this Article X. ARTICLE XI AMENDMENTS 11.1 Any other changes in the terms of this Agreement, except for the addition or deletion of any Participating Fund or class of Shares of a Participating Fund as specified in Exhibit A, shall be made by agreement in writing between Insurance Company and each respective Participating Fund. ARTICLE XII NOTICE 19 12.1 Each notice required by this Agreement shall be given by certified mail, return receipt requested, to the appropriate parties at the following addresses: Insurance Company: Metropolitan Life Insurance Company 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Attn: Gregg Hirsch, Esq. Copy: Metropolitan Life Insurance Company 485B US Highway One South, Suite 420 Iselin, NJ 08830 Attn: Sabrina Model Participating Funds: [Name of Fund] c/o The Dreyfus Corporation 200 Park Avenue New York, New York 10166 Attn: General Counsel with copies to: Stroock & Stroock & Lavan LLP 180 Maiden Lane New York, New York 10038-4982 Attn: Lewis G. Cole, Esq. Stuart H. Coleman, Esq. Notice shall be deemed to be given on the date of receipt by the addresses as evidenced by the return receipt. ARTICLE XIII MISCELLANEOUS 13.1 This Agreement has been executed on behalf of each Fund by the undersigned officer of the Fund in his capacity as an officer of the Fund. The obligations of this Agreement shall only be binding upon the assets and property of the Fund and shall not be binding upon any director, trustee, officer or shareholder of the Fund individually. It is agreed that the obligations of the Funds are several and not joint, that no Fund shall be liable for any amount owing by another Fund and that the Funds have executed one instrument for convenience only. 20 ARTICLE XIV LAW 14.1 This Agreement shall be construed in accordance with the internal laws of the State of New York, without giving effect to principles of conflict of laws. ARTICLE XV FOREIGN TAX CREDITS 15.1 Each Participating Fund agrees to consult in advance with Insurance Company concerning any decision to elect or not to pass through the benefit of any foreign tax credits to the Participating Fund's shareholders pursuant to Section 853 of the Code. IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be duly executed and attested as of the date first above written. METROPOLITAN LIFE INSURANCE COMPANY Name: ---------------------------------- Title: --------------------------------- Attest: --------------------------- DREYFUS VARIABLE INVESTMENT FUND Name: ---------------------------------- Title: --------------------------------- Attest: --------------------------- DREYFUS INVESTMENT PORTFOLIOS Name: ---------------------------------- Title: --------------------------------- Attest: --------------------------- 21 THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. Name: ---------------------------------- Title: --------------------------------- Attest: --------------------------- DREYFUS STOCK INDEX FUND, INC. Name: ---------------------------------- Title: --------------------------------- Attest: --------------------------- THE DREYFUS CORPORATION Name: ---------------------------------- Title: --------------------------------- Attest: --------------------------- 22 EXHIBIT A LIST OF PARTICIPATING FUNDS Separate Account DCVL, unregistered separate account Fund Name Share Class - --------- ----------- Dreyfus Variable Investment Fund Appreciation Portfolio Initial Shares International Value Portfolio Initial Shares Dreyfus Investment Portfolios Emerging Leaders Portfolio Initial Shares MidCap Stock Portfolio Initial Shares Separate Account UL, Registered Separate Account Dreyfus Variable Investment Fund Appreciation Portfolio Service Class International Value Portfolio Service Class Dreyfus Investment Portfolios Emerging Leaders Portfolio Service Class MidCap Stock Portfolio Service Class 23 PARTICIPATION AGREEMENT THIS AGREEMENT, made and entered into this 30th day of April, 2004 by and between GOLDMAN SACHS VARIABLE INSURANCE TRUST, an unincorporated business trust formed under the laws of Delaware (the "Trust"), GOLDMAN, SACHS & CO., a New York limited partnership (the "Distributor"), and METROPOLITAN LIFE INSURANCE COMPANY, a _New York life insurance company (the "Company"), on its own behalf and on behalf of each separate account of the Company identified herein. WHEREAS, the Trust is a series-type mutual fund offering shares of beneficial interest (the "Trust shares") consisting of one or more separate series ("Series") of shares, each such Series representing an interest in a particular investment portfolio of securities and other assets (a "Fund"), and which Series may be subdivided into various classes ("Classes") with each such Class supporting a distinct charge and expense arrangement; and WHEREAS, the Trust was established for the purpose of serving as an investment vehicle for insurance company separate accounts supporting variable annuity contracts and variable life insurance policies to be offered by insurance companies and may also be utilized by qualified retirement plans; and WHEREAS, the Distributor has the exclusive right to distribute Trust shares to qualifying investors; and WHEREAS, the Company desires that the Trust serve as an investment vehicle for a certain separate account(s) of the Company and the Distributor desires to sell shares of certain Series and/or Class(es) to such separate account(s); NOW, THEREFORE, in consideration of their mutual promises, the Trust, the Distributor and the Company agree as follows: ARTICLE I Additional Definitions 1.1. "Account" -- the separate account of the Company described more specifically in Schedule 1 to this Agreement. If more than one separate account is described on Schedule 1, the term shall refer to each separate account so described. 1.2. "Business Day" -- each day that the Trust is open for business as provided in the Trust's Prospectus. 1.3. "Code" -- the Internal Revenue Code of 1986, as amended, and any successor thereto. 1.4. "Contracts" -- the class or classes of variable annuity contracts and/or variable life insurance policies issued by the Company and described more specifically on Schedule 2 to this Agreement. 1.5. "Contract Owners" -- the owners of the Contracts, as distinguished from all Product Owners. 1.6. "Participating Account" -- a separate account investing all or a portion of its assets in the Trust, including the Account. 1.7. "Participating Insurance Company" -- any insurance company investing in the Trust on its behalf or on behalf of a Participating Account, including the Company. 1.8. "Participating Plan" -- any qualified retirement plan investing in the Trust. 1.9. "Participating Investor" -- any Participating Account, Participating Insurance Company or Participating Plan, including the Account and the Company. 1.10. "Products" -- variable annuity contracts and variable life insurance policies supported by Participating Accounts, including the Contracts. 1.11. "Product Owners" -- owners of Products, including Contract Owners. 1.12. "Trust Board" -- the board of trustees of the Trust. 1.13. "Registration Statement" -- with respect to the Trust shares or a class of Contracts, the registration statement filed with the SEC to register such securities under the 1933 Act, or the most recently filed amendment thereto, in either case in the form in which it was declared or became effective. The Contracts' Registration Statement for each class of Contracts is described more specifically on Schedule 2 to this Agreement. The Trust's Registration Statement is filed on Form N-1A (File No. 333-35883). 1.14. "1940 Act Registration Statement" -- with respect to the Trust or the Account, the registration statement filed with the SEC to register such person as an investment company under the 1940 Act, or the most recently filed amendment thereto. The Account's 1940 Act Registration Statement is described more specifically on Schedule 2 to this Agreement. The Trust's 1940 Act Registration Statement is filed on Form N-1A (File No. 811-08361). 1.15. "Prospectus" -- with respect to shares of a Series (or Class) of the Trust or a class of Contracts, each version of the definitive prospectus or supplement thereto filed with the SEC pursuant to Rule 497 under the 1933 Act. With respect to any provision of this Agreement requiring a party to take action in accordance with a Prospectus, such reference thereto shall be deemed to be to the version for the applicable Series, Class or Contracts last so filed prior to the taking of such action. For purposes of Article IX, the term "Prospectus" shall include any statement of additional information incorporated therein. 1.16. "Statement of Additional Information" -- with respect to the shares of the Trust or a class of Contracts, each version of the definitive statement of additional information or supplement thereto filed with the SEC pursuant to Rule 497 under the 1933 Act. With respect to any provision of this Agreement requiring a party to take action in accordance with a Statement of Additional Information, such reference thereto shall be deemed to be the last version so filed prior to the taking of such action. 1.17. "SEC" -- the Securities and Exchange Commission. 1.18. "NASD" -- The National Association of Securities Dealers, Inc. 2 1.19. "1933 Act" -- the Securities Act of 1933, as amended. 1.20. "1940 Act" -- the Investment Company Act of 1940, as amended. ARTICLE II Sale of Trust Shares 2.1. Availability of Shares (a) The Trust has granted to the Distributor exclusive authority to distribute the Trust shares and to select which Series or Classes of Trust shares shall be made available to Participating Investors. Pursuant to such authority, and subject to Article X hereof, the Distributor shall make available to the Company for purchase on behalf of the Account, shares of the Series and Classes listed on Schedule 3 to this Agreement, such purchases to be effected at net asset value in accordance with Section 2.3 of this Agreement. Such Series and Classes shall be made available to the Company in accordance with the terms and provisions of this Agreement until this Agreement is terminated pursuant to Article X or the Distributor suspends or terminates the offering of shares of such Series or Classes in the circumstances described in Article X. (b) Notwithstanding clause (a) of this Section 2.1, Series or Classes of Trust shares in existence now or that may be established in the future will be made available to the Company only as the Distributor may so provide, subject to the Distributor's rights set forth in Article X to suspend or terminate the offering of shares of any Series or Class or to terminate this Agreement. (c) The parties acknowledge and agree that: (i) the Trust may revoke the Distributor's authority pursuant to the terms and conditions of its distribution agreement with the Distributor; and (ii) the Trust reserves the right in its sole discretion to refuse to accept a request for the purchase of Trust shares. 2.2. Redemptions. The Trust shall redeem, at the Company's request, any full or fractional Trust shares held by the Company on behalf of the Account, such redemptions to be effected at net asset value in accordance with Section 2.3 of this Agreement. Notwithstanding the foregoing, (i) the Company shall not redeem Trust shares attributable to Contract Owners except in the circumstances permitted in Article X of this Agreement, and (ii) the Trust may delay redemption of Trust shares of any Series or Class to the extent permitted by the 1940 Act, any rules, regulations or orders thereunder, or the Prospectus for such Series or Class. 2.3. Purchase and Redemption Procedures (a) The Trust hereby appoints the Company as an agent of the Trust for the limited purpose of receiving purchase and redemption requests on behalf of the Account (but not with respect to any Trust shares that may be held in the general account of the Company) for shares of those Series or Classes made available hereunder, based on allocations of amounts to the Account or subaccounts thereof under the Contracts, other transactions relating to the Contracts or the Account and customary processing of the Contracts. Receipt of any such requests (or effectuation of such transaction or processing) on any Business Day by the Company as such limited agent of the Trust prior to the Trust's close of business as defined from time to time in the applicable Prospectus for such Series or Class (which as of the date of execution of this Agreement is defined as the close of regular trading on the New York Stock Exchange (normally 4:00 p.m. New 3 York Time)) shall constitute receipt by the Trust on that same Business Day, provided that the Trust receives actual and sufficient notice of such request by 8:00 a.m. New York Time on the next following Business Day. Such notice may be communicated by telephone to the office or person designated for such notice by the Trust, and shall be confirmed by facsimile. (b) The Company shall pay for shares of each Series or Class on the same day that it provides actual notice to the Trust of a purchase request for such shares. Payment for Series or Class shares shall be made in Federal funds transmitted to the Trust by wire to be received by the Trust by 12:00 noon New York Time on the day the Trust receives actual notice of the purchase request for Series or Class shares (unless the Trust determines and so advises the Company that sufficient proceeds are available from redemption of shares of other Series or Classes effected pursuant to redemption requests tendered by the Company on behalf of the Account). In no event may proceeds from the redemption of shares requested pursuant to an order received by the Company after the Trust's close of business on any Business Day be applied to the payment for shares for which a purchase order was received prior to the Trust's close of business on such day. If the issuance of shares is canceled because Federal funds are not timely received, the Company shall indemnify the respective Fund and Distributor with respect to all costs, expenses and losses relating thereto. Upon the Trust's receipt of Federal funds so wired, such funds shall cease to be the responsibility of the Company and shall become the responsibility of the Trust. If Federal funds are not received on time, such funds will be invested, and Series or Class shares purchased thereby will be issued, as soon as practicable after actual receipt of such funds but in any event not on the same day that the purchase order was received. (c) Payment for Series or Class shares redeemed by the Account or the Company shall be made in Federal funds transmitted by wire to the Company or any other person properly designated in writing by the Company, such funds normally to be transmitted by 6:00 p.m. New York Time on the next Business Day after the Trust receives actual notice of the redemption order for Series or Class shares (unless redemption proceeds are to be applied to the purchase of Trust shares of other Series or Classes in accordance with Section 2.3(b) of this Agreement), except that the Trust reserves the right to redeem Series or Class shares in assets other than cash and to delay payment of redemption proceeds to the extent permitted by the 1940 Act, any rules or regulations or orders thereunder, or the applicable Prospectus. The Trust shall not bear any responsibility whatsoever for the proper disbursement or crediting of redemption proceeds by the Company; the Company alone shall be responsible for such action. (d) Any purchase or redemption request for Series or Class shares held or to be held in the Company's general account shall be effected at the net asset value per share next determined after the Trust's actual receipt of such request, provided that, in the case of a purchase request, payment for Trust shares so requested is received by the Trust in Federal funds prior to close of business for determination of such value, as defined from time to time in the Prospectus for such Series or Class. (e) Prior to the first purchase of any Trust shares hereunder, the Company and the Trust shall provide each other with all information necessary to effect wire transmissions of Federal funds to the other party and all other designated persons pursuant to such protocols and security procedures as the parties may agree upon. Should such information change thereafter, the Trust and the Company, as applicable, shall notify the other in writing of such changes, observing the same protocols and security procedures, at least three Business Days in advance of when such change is to take effect. The Company 4 and the Trust shall observe customary procedures to protect the confidentiality and security of such information, but the Trust shall not be liable to the Company for any breach of security. (f) The procedures set forth herein are subject to any additional terms set forth in the applicable Prospectus for the Series or Class or by the requirements of applicable law. 2.4. Net Asset Value. The Trust shall use its best efforts to inform the Company of the net asset value per share for each Series or Class available to the Company as soon as reasonably practicable after the net asset value per share for such Series or Class is calculated. The Trust shall calculate such net asset value in accordance with the Prospectus for such Series or Class. 2.5. Dividends and Distributions. The Trust shall furnish notice to the Company as soon as reasonably practicable of any income dividends or capital gain distributions payable on any Series or Class shares. The Company, on its behalf and on behalf of the Account, hereby elects to receive all such dividends and distributions as are payable on any Series or Class shares in the form of additional shares of that Series or Class. The Company reserves the right, on its behalf and on behalf of the Account, to revoke this election and to receive all such dividends and capital gain distributions in cash; to be effective, such revocation must be made in writing and received by the Trust at least ten Business Days prior to a dividend or distribution date. The Trust shall notify the Company promptly of the number of Series or Class shares so issued as payment of such dividends and distributions. 2.6. Book Entry. Issuance and transfer of Trust shares shall be by book entry only. Stock certificates will not be issued to the Company or the Account. Purchase and redemption orders for Trust shares shall be recorded in an appropriate ledger for the Account or the appropriate subaccount of the Account. 2.7. Pricing Errors. Any material errors in the calculation of net asset value, dividends or capital gain information shall be reported immediately upon discovery to the Company. An error shall be deemed "material" based on our interpretation of the SEC's position and policy with regard to materiality, as it may be modified from time to time. Neither the Trust, any Fund, the Distributor, nor any of their affiliates shall be liable for any information provided to the Company pursuant to this Agreement which information is based on incorrect information supplied by or on behalf of the Company or any other Participating Company to the Trust or the Distributor. 2.8. Limits on Purchasers. The Distributor and the Trust shall sell Trust shares only to insurance companies and their separate accounts and to persons or plans ("Qualified Persons") that qualify to purchase shares of the Trust under Section 817(h) of the Code and the regulations thereunder without impairing the ability of the Account to consider the portfolio investments of the Trust as constituting investments of the Account for the purpose of satisfying the diversification requirements of Section 817(h). The Distributor and the Trust shall not sell Trust shares to any insurance company or separate account unless an agreement complying with Article VIII of this Agreement is in effect to govern such sales. The Company hereby represents and warrants that it and the Account are Qualified Persons. However, the Trust shall not sell shares to a qualified retirement plan unless it adopts procedures reasonably designed to provide assurances that such plan is in fact a qualified retirement plan at the time shares are purchased and on an ongoing basis. 5 ARTICLE III Representations and Warranties 3.1. Company. The Company represents and warrants that: (i) the Company is an insurance company duly organized and in good standing under New York insurance law; (ii) the Account is a validly existing separate account, duly established and maintained in accordance with applicable law; (iii) the Account's 1940 Act Registration Statement has been filed with the SEC in accordance with the provisions of the 1940 Act and the Account is duly registered as a unit investment trust thereunder; (iv) the Contracts' Registration Statement has been declared effective by the SEC; (v) the Contracts will be issued in compliance in all material respects with all applicable Federal and state laws; (vi) the Contracts have been filed, qualified and/or approved for sale, as applicable, under the insurance laws and regulations of the states in which the Contracts will be offered; (vii) the Account will maintain its registration under the 1940 Act and will comply in all material respects with the 1940 Act; (viii) subject to Seciton 6.1 the Contracts currently are, 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 and that it will make every effort to maintain such treatment and that it will notify the Trust immediately upon having a reasonable basis for believing that the contracts hae ceased to be so treated or that they might not be so treated in the future; and (ix) the Company's entering into and performing its obligations under this Agreement does not and will not violate its charter documents or by-laws, rules or regulations, or any agreement to which it is a party. The Company will notify the Trust promptly if for any reason it is unable to perform its obligations under this Agreement. 3.2. Trust. The Trust represents and warrants that: (i) the Trust is an unincorporated business trust duly formed and validly existing under the Delaware law; (ii) the Trust's 1940 Act Registration Statement has been filed with the SEC in accordance with the provisions of the 1940 Act and the Trust is duly registered as an open-end management investment company thereunder; (iii) the Trust's Registration Statement has been declared effective by the SEC; (iv) the Trust shares will be issued in compliance in all material respects with all applicable federal laws; (v) the Trust will remain registered under and will comply in all material respects with the 1940 Act during the term of this Agreement; (vi) each Fund of the Trust currently qualifies as a "regulated investment company" under Subchapter M of the Code and to comply with the diversification standards prescribed in Section 817(h) of the Code and the regulations thereunder and qualifies as a "look-through" entity under Treasury Regulation 1.817-5(t) and will make every effort to so qualify and comply in the future; and (vii) the investment policies of each Fund are in material compliance with any investment restrictions set forth on Schedule 4 to this Agreement. The Trust, however, makes no representation as to whether any aspect of its operations (including, but not limited to, fees and expenses and investment policies) otherwise complies with the insurance laws or regulations of any state. 3.3. Distributor. The Distributor represents and warrants that: (i) the Distributor is a limited partnership duly organized and in good standing under New York law; (ii) the Distributor is registered as a broker-dealer under federal and applicable state securities laws and is a member of the NASD; and (iii) the Distributor is registered as an investment adviser under federal securities laws. 3.4. Legal Authority. Each party represents and warrants that the execution and delivery of this Agreement and the consummation of the transactions contemplated herein have been duly authorized by all necessary corporate, partnership or trust action, as applicable, by such party, and, when so executed and delivered, this Agreement will be the valid and binding obligation of such party enforceable in accordance with its terms. 6 3.5. Bonding Requirement. Each party represents and warrants that all of its directors, officers, partners and employees dealing with the money and/or securities of the Trust are and shall continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Trust in an amount not less than the amount required by the applicable rules of the NASD and the federal securities laws. The aforesaid bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company. All parties shall make all reasonable efforts to see that this bond or another bond containing these provisions is always in effect, shall provide evidence thereof promptly to any other party upon written request therefor, and shall notify the other parties promptly in the event that such coverage no longer applies. ARTICLE IV Regulatory Requirements 4.1. Trust Filings. The Trust shall amend the Trust's Registration Statement and the Trust's 1940 Act Registration Statement from time to time as required in order to effect the continuous offering of Trust shares in compliance with applicable law and to maintain the Trust's registration under the 1940 Act for so long as Trust shares are sold. 4.2. Contracts Filings. The Company shall amend the Contracts' Registration Statement and the Account's 1940 Act Registration Statement from time to time as required in order to effect the continuous offering of the Contracts in compliance with applicable law or as may otherwise be required by applicable law, but in any event shall maintain a current effective Contracts' Registration Statement and the Account's registration under the 1940 Act for so long as the Contracts are outstanding unless the Company has supplied the Trust with an SEC no-action letter or opinion of counsel satisfactory to the Trust's counsel to the effect that maintaining such Registration Statement on a current basis is no longer required. The Company shall be responsible for filing all such Contract forms, applications, marketing materials and other documents relating to the Contracts and/or the Account with state insurance commissions, as required or customary, and shall use its best efforts: (i) to obtain any and all approvals thereof, under applicable state insurance law, of each state or other jurisdiction in which Contracts are or may be offered for sale; and (ii) to keep such approvals in effect for so long as the Contracts are outstanding. 4.3. Voting of Trust Shares. With respect to any matter put to vote by the holders of Trust shares ("Voting Shares"), the Company will provide "pass-through" voting privileges to owners of Contracts registered with the SEC as long as the 1940 Act requires such privileges in such cases. In cases in which "pass-through" privileges apply, the Company will (i) solicit voting instructions from Contract Owners of SEC-registered Contracts; (ii) vote Voting Shares attributable to Contract Owners in accordance with instructions or proxies timely received from such Contract Owners; and (iii) vote Voting Shares held by it that are not attributable to reserves for SEC-registered Contracts or for which it has not received timely voting instructions in the same proportion as instructions received in a timely fashion from Owners of SEC-registered Contracts. The Company shall be responsible for ensuring that it calculates "pass-through" votes for the Account in a manner consistent with the provisions set forth above and with other Participating Insurance Companies. Neither the 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 Trust shares held for such Contract Owners, except with respect to matters as to which the Company has the right under Rule 6e-2 or 6e-3(T) under the 1940 Act, to vote Voting Shares without regard to voting instructions from Contract Owners. 4.4. State Insurance Restrictions. The Company acknowledges and agrees that it is the responsibility of the Company and other Participating Insurance Companies to determine investment restrictions and any other restrictions, limitations or requirements under state 7 insurance law applicable to any Fund or the Trust or the Distributor, and that neither the Trust nor the Distributor shall bear any responsibility to the Company, other Participating Insurance Companies or any Product Owners for any such determination or the correctness of such determination. Schedule 4 sets forth the investment restrictions that the Company and/or other Participating Insurance Companies have determined are applicable to any Fund and with which the Trust has agreed to comply as of the date of this Agreement. The Company shall inform the Trust of any investment restrictions imposed by state insurance law that the Company determines may become applicable to the Trust or a Fund from time to time as a result of the Account's investment therein, other than those set forth on Schedule 4 to this Agreement. Upon receipt of any such information from the Company or any other Participating Insurance Company, the Trust shall determine whether it is in the best interests of shareholders to comply with any such restrictions. If the Trust determines that it is not in the best interests of shareholders (it being understood that "shareholders" for this purpose shall mean Product Owners) to comply with a restriction determined to be applicable by the Company, the Trust shall so inform the Company, and the Trust and the Company shall discuss alternative accommodations in the circumstances. If the Trust determines that it is in the best interests of shareholders to comply with such restrictions, the Trust and the Company shall amend Schedule 4 to this Agreement to reflect such restrictions, subject to obtaining any required shareholder approval thereof. 4.6. Drafts of Filings. The Trust and the Company shall provide to each other copies of draft versions of any Registration Statements, Prospectuses, Statements of Additional Information, periodic and other shareholder or Contract Owner reports, proxy statements, solicitations for voting instructions, applications for exemptions, requests for no-action letters, and all amendments or supplements to any of the above, prepared by or on behalf of either of them and that mentions the other party by name. Such drafts shall be provided to the other party sufficiently in advance of filing such materials with regulatory authorities in order to allow such other party a reasonable opportunity to review the materials. 4.7. Copies of Filings. The Trust and the Company shall provide to each other at least one complete copy of all Registration Statements, Prospectuses, Statements of Additional Information, periodic and other shareholder or Contract Owner reports, proxy statements, solicitations of voting instructions, applications for exemptions, requests for no-action letters, and all amendments or supplements to any of the above, that relate to the Trust, the Contracts or the Account, as the case may be, promptly after the filing by or on behalf of each such party of such document with the SEC or other regulatory authorities (it being understood that this provision is not intended to require the Trust to provide to the Company copies of any such documents prepared, filed or used by Participating Investors other than the Company and the Account). 4.8. Regulatory Responses. Each party shall promptly provide to all other parties copies of responses to no-action requests, notices, orders and other rulings received by such party with respect to any filing covered by Section 4.7 of this Agreement. 8 4.9. Complaints and Proceedings (a) The Trust and/or the Distributor shall immediately notify the Company of: (i) the issuance by any court or regulatory body of any stop order, cease and desist order, or other similar order (but not including an order of a regulatory body exempting or approving a proposed transaction or arrangement) with respect to the Trust's Registration Statement or the Prospectus of any Series or Class; (ii) any request by the SEC for any amendment to the Trust's Registration Statement or the Prospectus of any Series or Class; (iii) the initiation of any proceedings for that purpose or for any other purposes relating to the registration or offering of the Trust shares; or (iv) any other action or circumstances that may prevent the lawful offer or sale of Trust shares or any Class or Series in any state or jurisdiction, including, without limitation, any circumstance 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 for the Contracts. The Trust 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) The Company shall immediately notify the Trust and the Distributor of: (i) the issuance by any court or regulatory body of any stop order, cease and desist order, or other similar order (but not including an order of a regulatory body exempting or approving a proposed transaction or arrangement) with respect to the Contracts' Registration Statement or the Contracts' Prospectus; (ii) any request by the SEC for any amendment to the Contracts' Registration Statement or Prospectus; (iii) the initiation of any proceedings for that purpose or for any other purposes relating to the registration or offering of the Contracts; or (iv) any other action or circumstances that may prevent the lawful offer or sale of the Contracts or any class of Contracts in any state or jurisdiction, including, without limitation, any circumstance in which such Contracts are not registered, qualified and approved, and, in all material respects, issued and sold in accordance with applicable state and federal laws. The 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. (c) Each party shall immediately notify the other parties when it receives notice, or otherwise becomes aware of, the commencement of any litigation or proceeding against such party or a person affiliated therewith in connection with the issuance or sale of Trust shares or the Contracts. (d) The Company shall provide to the Trust and the Distributor any complaints it has received from Contract Owners pertaining to the Trust or a Fund, and the Trust and Distributor shall each provide to the Company any complaints it has received from Contract Owners relating to the Contracts. 4.10. Cooperation. Each party hereto shall cooperate with the other parties and all appropriate government authorities (including without limitation the SEC, the NASD and state securities and insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry by any such authority relating to this Agreement or the transactions contemplated hereby. However, such access shall not extend to attorney-client privileged information. 9 ARTICLE V Sale, Administration and Servicing of the Contracts 5.1. Sale of the Contracts. The Company shall be fully responsible as to the Trust and the Distributor for the sale and marketing of the Contracts. The Company shall provide Contracts, the Contracts' and Trust's Prospectuses, Contracts' and Trust's Statements of Additional Information, and all amendments or supplements to any of the foregoing to Contract Owners and prospective Contract Owners, all in accordance with federal and state laws. The Company shall ensure that all persons offering the Contracts are duly licensed and registered under applicable insurance and securities laws. The Company shall ensure that each sale of a Contract satisfies applicable suitability requirements under insurance and securities laws and regulations, including without limitation the rules of the NASD. The Company shall adopt and implement procedures reasonably designed to ensure that information concerning the Trust and the Distributor that is intended for use only by brokers or agents selling the Contracts (i.e., information that is not intended for distribution to Contract Owners or offerees) is so used. 5.2. Administration and Servicing of the Contracts. The Company shall be fully responsible as to the Trust and the Distributor for the underwriting, issuance, service and administration of the Contracts and for the administration of the Account, including, without limitation, the calculation of performance information for the Contracts, the timely payment of Contract Owner redemption requests and processing of Contract transactions, and the maintenance of a service center, such functions to be performed in all respects at a level commensurate with those standards prevailing in the variable insurance industry. The Company shall provide to Contract Owners all Trust reports, solicitations for voting instructions including any related Trust proxy solicitation materials, and updated Trust Prospectuses as required under the federal securities laws. 5.3. Customer Complaints. The Company shall promptly address all customer complaints and resolve such complaints consistent with high ethical standards and principles of ethical conduct. 5.4. Trust Prospectuses and Reports. In order to enable the Company to fulfill its obligations under this Agreement and the federal securities laws, the Trust shall provide the Company with a copy, in camera-ready form or form otherwise suitable for printing or duplication of: (i) the Trust's Prospectus for the Series and Classes listed on Schedule 3 and any supplement thereto; (ii) each Statement of Additional Information and any supplement thereto; (iii) any Trust proxy soliciting material for such Series or Classes; and (iv) any Trust periodic shareholder reports. The Trust and the Company may agree upon alternate arrangements, but in all cases, the Trust reserves the right to approve the printing of any such material. The Trust shall provide the Company at least 10 days advance written notice when any such material shall become available, provided, however, that in the case of a supplement, the Trust shall provide the Company notice reasonable in the circumstances, it being understood that circumstances surrounding such supplement may not allow for advance notice. The Company may not alter any material so provided by the Trust or the Distributor (including without limitation presenting or delivering such material in a different medium, e.g., electronic or Internet) without the prior written consent of the Distributor. 5.5. Trust Advertising Material. No piece of marketing, advertising or sales literature or other promotional material in which the Trust or the Distributor or the trade name and trademark Goldman Sachs (the "Mark") is named (including, without limitation, material for prospects, existing Contract Owners, brokers, rating or ranking agencies, or the press, whether in print, radio, television, video, Internet, or other electronic medium) shall be used by the Company or any person directly or indirectly authorized by the Company, including without limitation, 10 underwriters, distributors, and sellers of the Contracts, except with the prior written consent of the Trust or the Distributor, as applicable, as to the form, content and medium of such material. Any such piece shall be furnished to the Trust for such consent prior to its use. The Trust or the Distributor shall respond to any request for written consent on a prompt and timely basis, but failure to respond shall not relieve the Company of the obligation to obtain the prior written consent of the Trust or the Distributor. After receiving the Trust's or Distributor's consent to the use of any such material, no further changes may be made without obtaining the Trust's or Distributor's consent to such changes. The Trust or Distributor may at any time in its sole discretion revoke such written consent, and upon notification of such revocation, the Company shall no longer use the material subject to such revocation. Until further notice to the Company, the Trust has delegated its rights and responsibilities under this provision to the Distributor. 5.6. Contracts Advertising Material. No piece of marketing, advertising or sales literature or other promotional material in which the Company is named shall be used by the Trust or the Distributor, except with the prior written consent of the Company. Any such piece shall be furnished to the Company for such consent prior to its use. The Company shall respond to any request for written consent on a prompt and timely basis, and failure to respond to the Trust or the Distributor within three business days shall be deemed as the Company's consent to the use of such sales or marketing literature. The Company may at any time in its sole discretion revoke any written consent, and upon notification of such revocation, neither the Trust nor the Distributor shall use the material subject to such revocation. The Company, upon prior written notice to the Trust, may delegate its rights and responsibilities under this provision to the principal underwriter for the Contracts. 5.7. Trade Names. No party shall use any other party's trade names, logos, trademarks or service marks, whether registered or unregistered, without the prior written consent of such other party, or after written consent therefor has been revoked. The Company shall not use in advertising, publicity or otherwise the name of the Trust, Distributor, or any of their affiliates nor any trade name, trademark, trade device, service mark, symbol or any abbreviation, contraction or simulation thereof of the Trust, Distributor, or their affiliates without the prior written consent of the Trust or the Distributor in each instance. The Company acknowledges that the Distributor owns all right, title and interest in and to the Mark and the registrations thereof. The Company shall use the Mark intact and shall not modify or alter the Mark. Upon termination of this Agreement, the Company or its successor (to the extent and as soon as it lawfully can) will cease the use of the Mark. 5.8. Representations by Company. Except with the prior written consent of the Trust, the Company shall not give any information or make any representations or statements about the Trust or the Funds nor shall it authorize or allow any other person to do so except information or representations contained in the Trust's Registration Statement or the Trust's Prospectuses or in reports or proxy statements for the Trust, or in sales literature or other promotional material approved in writing by the Trust or its designee in accordance with this Article V, or in published reports or statements of the Trust in the public domain. 5.9. Representations by Trust. Except with the prior written consent of the Company, the Trust shall not give any information or make any representations on behalf of the Company or concerning the Company, the Account or the Contracts other than the information or representations contained in the Contracts' Registration Statement or Contracts' Prospectus or in published reports of the Account which are in the public domain or in sales literature or other promotional material approved in writing by the Company in accordance with this Article V. 11 5.10. Advertising. For purposes of this Article V, the phrase "sales literature or other promotional material" includes, but is not limited to, any material constituting sales literature or advertising under the NASD rules, the 1940 Act or the 1933 Act. ARTICLE VI Compliance with Code 6.1. Section 817(h). Each Fund of the Trust shall comply with the diversification and "look-through" requirements of Section 817(h) of the Code and the regulations issued thereunder to the extent applicable to the Fund as an investment company underlying the Account, and the Trust shall notify the 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. The Trust shall provide a certificate of compliance with this Section 6.1 within 30 days after the end of each calendar quarter. 6.2. Subchapter M. Each Fund of the Trust shall maintain the qualification of the Fund as a regulated investment company (under Subchapter M or any successor or similar provision), and the Trust shall notify the 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. 6.3. Contracts. The Company shall make every effort to ensure the continued treatment of the Contracts as annuity contracts or life insurance policies, whichever is appropriate, under applicable provisions of the Code and shall notify the Trust and the Distributor 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. ARTICLE VII Expenses 7.1. Expenses. All expenses incident to each party's performance under this Agreement (including expenses expressly assumed by such party pursuant to this Agreement) shall be paid by such party to the extent permitted by law. 7.2. Trust Expenses. Expenses incident to the Trust's performance of its duties and obligations under this Agreement include, but are not limited to, the costs of: (a) registration and qualification of the Trust shares under the federal securities laws; (b) preparation and filing with the SEC of the Trust's Prospectuses, Trust's Statement of Additional Information, Trust's Registration Statement, Trust proxy materials and shareholder reports, and preparation of a camera-ready copy of the foregoing; (c) preparation of all statements and notices required by any Federal or state securities law; (d) all taxes on the issuance or transfer of Trust shares; (e) payment of all applicable fees relating to the Trust, including, without limitation, all fees due under Rule 24f-2 in connection with sales of Trust shares to qualified retirement plans, custodial, auditing, transfer agent and advisory fees, fees for insurance coverage and Trustees' fees; and 12 (f) 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. 7.3. Company Expenses. Expenses incident to the Company's performance of its duties and obligations under this Agreement include, but are not limited to, the costs of: (a) registration and qualification of the Contracts under the federal securities laws; (b) preparation and filing with the SEC of the Contracts' Prospectus and Contracts' Registration Statement; (c) the sale, marketing and distribution of the Contracts, including printing and dissemination of Contracts' Prospectuses and compensation for Contract sales; (d) administration of the Contracts; (e) payment of all applicable fees relating to the Contracts, including, without limitation, all fees due under Rule 24f-2; (f) preparation, printing and dissemination of all statements and notices to Contract Owners required by any Federal or state insurance law other than those paid for by the Trust; and (g) preparation, printing and dissemination of all marketing materials for the Contracts and Trust except where other arrangements are made in advance. 7.4. 12b-1 Payments. The Trust shall pay no fee or other compensation to the Company under this Agreement, except that if the Trust or any Series or Class adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution expenses, then payments may be made to the Company in accordance with such plan. The Trust currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or in contravention of such rule, although it may make payments pursuant to Rule 12b-1 in the future. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1 and such formulation is required by the 1940 Act or any rules or order thereunder, the Trust undertakes to have a Board of Trustees, a majority of whom are not interested persons of the Trust, formulate and approve any plan under Rule 12b-1 to finance distribution expenses. ARTICLE VIII Potential Conflicts 8.1. Exemptive Order. The parties to this Agreement acknowledge that the Trust has received an exemptive order from the SEC (the "Exemptive Order") granting relief from various provisions of the 1940 Act and the rules thereunder to the extent necessary to permit Trust shares to be sold to and held by variable annuity and variable life insurance separate accounts of both affiliated and unaffiliated Participating Insurance Companies and other Qualified Persons (as defined in Section 2.8 hereof). The Exemptive Order requires the Trust and each Participating Insurance Company to comply with conditions and undertakings substantially as provided in this Article VIII. The Trust will not enter into a participation agreement with any other Participating Insurance Company unless it imposes the same conditions and undertakings on that company as are imposed on the Company pursuant to this Article VIII. 13 8.2. Company Monitoring Requirements. The Company will monitor its operations and those of the Trust for the purpose of identifying any material irreconcilable conflicts or potential material irreconcilable conflicts between or among the interests of Participating Plans, Product Owners of variable life insurance policies and Product Owners of variable annuity contracts. 8.3. Company Reporting Requirements. The Company shall report any conflicts or potential conflicts to the Trust Board and will provide the Trust Board, at least annually, with all information reasonably necessary for the Trust Board to consider any issues raised by such existing or potential conflicts or by the conditions and undertakings required by the Exemptive Order. The Company also shall assist the Trust Board in carrying out its obligations including, but not limited to: (a) informing the Trust Board whenever it disregards Contract Owner voting instructions with respect to variable life insurance policies, and (b) providing such other information and reports as the Trust Board may reasonably request. The Company will carry out these obligations with a view only to the interests of Contract Owners. 8.4. Trust Board Monitoring and Determination. The Trust Board shall monitor the Trust for the existence of any material irreconcilable conflicts between or among the interests of Participating Plans, Product Owners of variable life insurance policies and Product Owners of variable annuity contracts and determine what action, if any, should be taken in response to those conflicts. A majority vote of Trustees who are not interested persons of the Trust as defined in the 1940 Act (the "disinterested trustees") shall represent a conclusive determination as to the existence of a material irreconcilable conflict between or among the interests of Product Owners and Participating Plans and as to whether any proposed action adequately remedies any material irreconcilable conflict. The Trust Board shall give prompt written notice to the Company and Participating Plan of any such determination. 8.5. Undertaking to Resolve Conflict. In the event that a material irreconcilable conflict of interest arises between Product Owners of variable life insurance policies or Product Owners of variable annuity contracts and Participating Plans, the Company will, at its own expense, take whatever action is necessary to remedy such conflict as it adversely affects Contract Owners up to and including (1) establishing a new registered management investment company, and (2) withdrawing assets from the Trust attributable to reserves for the Contracts subject to the conflict and reinvesting such assets in a different investment medium (including another Fund of the Trust) or submitting the question of whether such withdrawal should be implemented to a vote of all affected Contract Owners, and, as appropriate, segregating the assets supporting the Contracts of any group of such owners that votes in favor of such withdrawal, or offering to such owners the option of making such a change. The Company will carry out the responsibility to take the foregoing action with a view only to the interests of Contract Owners. 8.6. Withdrawal. If a material irreconcilable conflict arises because of the Company's decision to disregard the voting instructions of Contract Owners of variable life insurance policies and that decision represents a minority position or would preclude a majority vote at any Fund shareholder meeting, then, at the request of the Trust Board, the Company will redeem the shares of the Trust to which the disregarded voting instructions relate. No charge or penalty, however, will be imposed in connection with such a redemption. 8.7. Expenses Associated with Remedial Action. In no event shall the Trust be required to bear the expense of establishing a new funding medium for any Contract. The Company shall not be required by this Article to establish a new funding medium for any Contract 14 if an offer to do so has been declined by vote of a majority of the Contract Owners materially adversely affected by the irreconcilable material conflict. 8.8. Successor Rules. 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 provisions of the 1940 Act or the rules promulgated thereunder with respect to mixed and shared funding on terms and conditions materially different from those contained in the Exemptive Order, then (i) the Trust and/or the Company, as appropriate, shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, or Rule 6e-3, as adopted, as applicable, to the extent such rules are applicable, and (ii) Sections 8.2 through 8.5 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 IX Indemnification 9.1. Indemnification by the Company. The Company hereby agrees to, and shall, indemnify and hold harmless the Trust, the Distributor and each person who controls or is affiliated with the Trust or the Distributor within the meaning of such terms under the 1933 Act or 1940 Act (but not any Participating Insurance Companies or Qualified Persons) and any officer, trustee, partner, director, employee or agent of the foregoing, against any and all losses, claims, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted), to which they or any of them may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities: (a) arise out of or are based upon any untrue statement of any material fact contained in the Contracts Registration Statement, Contracts Prospectus, sales literature or other promotional material for the Contracts or the Contracts themselves (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made; provided that this obligation to indemnify shall not apply if such statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company by the Trust or the Distributor for use in the Contracts Registration Statement, Contracts Prospectus or in the Contracts or sales literature or promotional material for the Contracts (or any amendment or supplement to any of the foregoing) or otherwise for use in connection with the sale of the Contracts or Trust shares; or (b) arise out of any untrue statement of a material fact contained in the Trust Registration Statement, any Prospectus for Series or Classes or sales literature or other promotional material of the Trust (or any amendment or supplement to any of the foregoing), or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made, if such statement or omission was made in reliance upon and in conformity with information furnished to the Trust or Distributor in writing by or on behalf of the Company; or (c) arise out of or are based upon any wrongful conduct of, or violation of federal or state law by, the Company or persons under its control or subject to its authorization, including without limitation, any broker-dealers or agents authorized 15 to sell the Contracts, with respect to the sale, marketing or distribution of the Contracts or Trust shares, including, without limitation, any impermissible use of broker-only material, unsuitable or improper sales of the Contracts or unauthorized representations about the Contracts or the Trust; or (d) arise as a result of any failure by the Company or persons under its control (or subject to its authorization) to provide services, furnish materials or make payments as required under this Agreement; or (e) arise out of any material breach by the Company or persons under its control (or subject to its authorization) of this Agreement; or (f) arise out of any breach of any warranties contained in Article III hereof, any failure to transmit a request for redemption or purchase of Trust shares or payment therefor on a timely basis in accordance with the procedures set forth in Article II, or any unauthorized use of the names, trade names or trademark of the Trust or the Distributor. This indemnification is in addition to any liability that the Company may otherwise have; provided, however, that no party shall be entitled to indemnification if such loss, claim, damage or liability is caused by the willful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 9.2. Indemnification by the Trust. The Trust hereby agrees to, and shall, indemnify and hold harmless the Company and each person who controls or is affiliated with the Company within the meaning of such terms under the 1933 Act or 1940 Act and any officer, director, employee or agent of the foregoing, against any and all losses, claims, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted), to which they or any of them may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities: (a) arise out of or are based upon any untrue statement of any material fact contained in the Trust Registration Statement, any Prospectus for Series or Classes 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 to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made; provided that this obligation to indemnify shall not apply if such statement or omission was made in reliance upon and in conformity with information furnished in writing by the Company to the Trust or the Distributor for use in the Trust Registration Statement, Trust Prospectus or sales literature or promotional material for the Trust (or any amendment or supplement to any of the foregoing) or otherwise for use in connection with the sale of the Contracts or Trust shares; or (b) arise out of any untrue statement of a material fact contained in the Contracts Registration Statement, Contracts Prospectus or sales literature or other promotional material for the Contracts (or any amendment or supplement to any of the foregoing), or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the 16 circumstances in which they were made, if such statement or omission was made in reliance upon information furnished in writing by the Trust to the Company; or (c) arise out of or are based upon wrongful conduct of the Trust or its Trustees or officers with respect to the sale of Trust shares; or (d) arise as a result of any failure by the Trust to provide services, furnish materials or make payments as required under the terms of this Agreement; or (e) arise out of any material breach by the Trust of this Agreement (including any breach of Section 6.1 of this Agreement and any warranties contained in Article III hereof); it being understood that in no way shall the Trust be liable to the Company with respect to any violation of insurance law, compliance with which is a responsibility of the Company under this Agreement or otherwise or as to which the Company failed to inform the Trust in accordance with Section 4.4 hereof. This indemnification is in addition to any liability that the Trust may otherwise have; provided, however, that no party shall be entitled to indemnification if such loss, claim, damage or liability is caused by the willful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 9.3. Indemnification by the Distributor. The Distributor hereby agrees to, and shall, indemnify and hold harmless the Company and each person who controls or is affiliated with the Company within the meaning of such terms under the 1933 Act or 1940 Act and any officer, director, employee or agent of the foregoing, against any and all losses, claims, damages or liabilities, joint or several (including any investigative, legal and other expenses reasonably incurred in connection with, and any amounts paid in settlement of, any action, suit or proceeding or any claim asserted), to which they or any of them may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities: (a) arise out of or are based upon any untrue statement of any material fact contained in the Trust Registration Statement, any Prospectus for Series or Classes 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 to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made; provided that this obligation to indemnify shall not apply if such statement or omission was made in reliance upon and in conformity with information furnished in writing by the Company to the Trust or Distributor for use in the Trust Registration Statement, Trust Prospectus or sales literature or promotional material for the Trust (or any amendment or supplement to any of the foregoing) or otherwise for use in connection with the sale of the Contracts or Trust shares; or (b) arise out of any untrue statement of a material fact contained in the Contracts Registration Statement, Contracts Prospectus or sales literature or other promotional material for the Contracts (or any amendment or supplement to any of the foregoing), or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made, if such statement or omission was made in reliance upon information furnished in writing by the Distributor to the Company; or 17 (c) arise out of or are based upon wrongful conduct of the Distributor or persons under its control with respect to the sale of Trust shares; or (d) arise as a result of any failure by the Distributor or persons under its control to provide services, furnish materials or make payments as required under the terms of this Agreement; or (e) arise out of any material breach by the Distributor or persons under its control of this Agreement (including any breach of Section 6.1 of this Agreement and any warranties contained in Article III hereof); it being understood that in no way shall the Distributor be liable to the Company with respect to any violation of insurance law, compliance with which is a responsibility of the Company under this Agreement or otherwise or as to which the Company failed to inform the Distributor in accordance with Section 4.4 hereof. This indemnification is in addition to any liability that the Distributor may otherwise have; provided, however, that no party shall be entitled to indemnification if such loss, claim, damage or liability is caused by the willful misfeasance, bad faith, gross negligence or reckless disregard of duty by the party seeking indemnification. 9.4. Rule of Construction. It is the parties' intention that, in the event of an occurrence for which the Trust has agreed to indemnify the Company, the Company shall seek indemnification from the Trust only in circumstances in which the Trust is entitled to seek indemnification from a third party with respect to the same event or cause thereof. 9.5. Indemnification Procedures. After receipt by a party entitled to indemnification ("indemnified party") under this Article IX of notice of the commencement of any action, if a claim in respect thereof is to be made by the indemnified party against any person obligated to provide indemnification under this Article IX ("indemnifying party"), such indemnified party will notify the indemnifying party in writing of the commencement thereof as soon as practicable thereafter, provided that the omission to so notify the indemnifying party will not relieve it from any liability under this Article IX, except to the extent that the omission results in a failure of actual notice to the indemnifying party and such indemnifying party is damaged solely as a result of the failure to give such notice. The indemnifying party, upon the request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the reasonable fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. A successor by law of the parties to this Agreement shall be entitled to the benefits of the indemnification contained in this Article IX. The indemnification provisions contained in this Article IX shall survive any termination of this Agreement. 18 ARTICLE X Relationship of the Parties; Termination 10.1. Relationship of Parties. The Company is to be an independent contractor vis-a-vis the Trust, the Distributor, or any of their affiliates for all purposes hereunder and will have no authority to act for or represent any of them (except to the limited extent the Company acts as agent of the Trust pursuant to Section 2.3(a) of this Agreement). In addition, no officer or employee of the Company will be deemed to be an employee or agent of the Trust, Distributor, or any of their affiliates. The Company will not act as an "underwriter" or "distributor" of the Trust, as those terms variously are used in the 1940 Act, the 1933 Act, and rules and regulations promulgated thereunder. 10.2. Non-Exclusivity and Non-Interference. The parties hereto acknowledge that the arrangement contemplated by this Agreement is not exclusive; the Trust shares may be sold to other insurance companies and investors (subject to Section 2.8 hereof) and the cash value of the Contracts may be invested in other investment companies, provided, however, that until this Agreement is terminated pursuant to this Article X: (a) the Company shall promote the Trust and the Funds made available hereunder on the same basis as other funding vehicles available under the Contracts; (b) the Company shall not, without prior notice to the Distributor (unless otherwise required by applicable law), take any action to operate the Account as a management investment company under the 1940 Act; (c) the Company shall not, without the prior written consent of the Distributor (unless otherwise required by applicable law), solicit, induce or encourage Contract Owners to change or modify the Trust to change the Trust's distributor or investment adviser, to transfer or withdraw Contract Values allocated to a Fund, or to exchange their Contracts for contracts not allowing for investment in the Trust; (d) the Company shall not substitute another investment company for one or more Funds without providing written notice to the Distributor at least 60 days in advance of effecting any such substitution; and (e) the Company shall not withdraw the Account's investment in the Trust or a Fund of the Trust except as necessary to facilitate Contract Owner requests and routine Contract processing. 10.3. Termination of Agreement. This Agreement shall not terminate until (i) the Trust is dissolved, liquidated, or merged into another entity, or (ii) as to any Fund that has been made available hereunder, the Account no longer invests in that Fund and the Company has confirmed in writing to the Distributor, if so requested by the Distributor, that it no longer intends to invest in such Fund. However, certain obligations of, or restrictions on, the parties to this Agreement may terminate as provided in Sections 10.4 through 10.6 and the Company may be required to redeem Trust shares pursuant to Section 10.7 or in the circumstances contemplated by Article VIII. Article IX and Sections 5.7, 10.8 and 10.9 shall survive any termination of this Agreement. 10.4. Termination of Offering of Trust Shares. The obligation of the Trust and the Distributor to make Trust shares available to the Company for purchase pursuant to Article II of 19 this Agreement shall terminate at the option of the Distributor upon written notice to the Company as provided below: (a) upon institution of formal proceedings against the Company, or the Distributor's reasonable determination that institution of such proceedings is being considered by the NASD, the SEC, the insurance commission 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 Trust shares, or an expected or anticipated ruling, judgment or outcome which would, in the Distributor's reasonable judgment exercised in good faith, materially impair the Company's or Trust's ability to meet and perform the Company's or Trust's obligations and duties hereunder, such termination effective upon 15 days prior written notice; (b) in the event any of the Contracts are not registered, issued or sold in accordance with applicable federal and/or state law, such termination effective immediately upon receipt of written notice; (c) if the Distributor 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 which is likely to have a material adverse impact upon the business and operations of either the Trust or the Distributor, such termination effective upon 30 days prior written notice; (d) if the Distributor suspends or terminates the offering of Trust shares of any Series or Class to all Participating Investors or only designated Participating Investors, if such action is required by law or by regulatory authorities having jurisdiction or if, in the sole discretion of the Distributor acting in good faith, suspension or termination is necessary in the best interests of the shareholders of any Series or Class (it being understood that "shareholders" for this purpose shall mean Product Owners), such notice effective immediately upon receipt of written notice, it being understood that a lack of Participating Investor interest in a Series or Class may be grounds for a suspension or termination as to such Series or Class and that a suspension or termination shall apply only to the specified Series or Class; (e) upon the Company's assignment of this Agreement (including, without limitation, any transfer of the Contracts or the Account to another insurance company pursuant to an assumption reinsurance agreement) unless the Trust consents thereto, such termination effective upon 30 days prior written notice; (f) if the Company is in material breach of any provision of this Agreement, which breach has not been cured to the satisfaction of the Trust within 10 days after written notice of such breach has been delivered to the Company, such termination effective upon expiration of such 10-day period; or (g) upon the determination of the Trusts Board to dissolve, liquidate or merge the Trust as contemplated by Section 10.3(i), upon termination of the Agreement pursuant to Section 10.3(ii), or upon notice from the Company pursuant to Section 10.5 or 10.6, such termination pursuant hereto to be effective upon 15 days prior written notice. 20 Except in the case of an option exercised under clause (b), (d) or (g), the obligations shall terminate only as to new Contracts and the Distributor shall continue to make Trust shares available to the extent necessary to permit owners of Contracts in effect on the effective date of such termination (hereinafter referred to as "Existing Contracts") to reallocate investments in the Trust, redeem investments in the Trust and/or invest in the Trust upon the making of additional purchase payments under the Existing Contracts. 10.5. Termination of Investment in a Fund. The Company may elect to cease investing in a Fund, promoting a Fund as an investment option under the Contracts, or withdraw its investment or the Account's investment in a Fund, subject to compliance with applicable law, upon written notice to the Trust within 15 days of the occurrence of any of the following events (unless provided otherwise below): (a) if the Trust informs the Company pursuant to Section 4.4 that it will not cause such Fund to comply with investment restrictions as requested by the Company and the Trust and the Company are unable to agree upon any reasonable alternative accommodations; (b) if shares in such Fund are not reasonably available to meet the requirements of the Contracts as determined by the Company (including any non-availability as a result of notice given by the Distributor pursuant to Section 10.4(d)), and the Distributor, after receiving written notice from the Company of such non-availability, fails to make available, within 10 days after receipt of such notice, a sufficient number of shares in such Fund or an alternate Fund to meet the requirements of the Contracts; (c) if such Fund fails to meet the "look-through" and diversification requirements specified in Section 817(h) of the Code and any regulations thereunder and the Trust, upon written request, fails to provide reasonable assurance that it will take action to cure or correct such failure; or (d) if such Fund ceases to qualify as a regulated investment company under Subchapter M of the Code, as defined therein, or any successor or similar provision, or if the Company reasonably believes that the Fund may fail to so qualify, and the Trust, upon written request, fails to provide reasonable assurance that it will take action to cure or correct such failure within 30 days; or Such termination shall apply only as to the affected Fund and shall not apply to any other Fund in which the Company or the Account invests. 10.6. Termination of Investment by the Company. The Company may elect to cease investing in all Series or Classes of the Trust made available hereunder, promoting the Trust as an investment option under the Contracts, or withdraw its investment or the Account s investment in the Trust, subject to compliance with applicable law, upon written notice to the Trust within 15 days of the occurrence of any of the following events (unless provided otherwise below): (a) upon institution of formal proceedings against the Trust or the Distributor (but only with regard to the Trust) by the NASD, the SEC or any state securities or insurance commission or any other regulatory body; or 21 (b) if the Trust or Distributor is in material breach of a provision of this Agreement, which breach has not been cured to the satisfaction of the Company within 10 days after written notice of such breach has been delivered to the Trust or the Distributor, as the case may be. 10.7. Company Required to Redeem. The parties understand and acknowledge that it is essential for compliance with Section 817(h) of the Code that the Contracts qualify as annuity contracts or life insurance policies, as applicable, under the Code. Accordingly, if any of the Contracts cease to qualify as annuity contracts or life insurance policies, as applicable, under the Code, or if the Trust reasonably believes that any such Contracts may fail to so qualify, the Trust shall have the right to require the Company to redeem Trust shares attributable to such Contracts upon notice to the Company and the Company shall so redeem such Trust shares in order to ensure that the Trust complies with the provisions of Section 817(h) of the Code applicable to ownership of Trust shares. Notice to the Company shall specify the period of time the Company has to redeem the Trust shares or to make other arrangements satisfactory to the Trust and its counsel, such period of time to be determined with reference to the requirements of Section 817(h) of the Code. In addition, the Company may be required to redeem Trust shares pursuant to action taken or request made by the Trust Board in accordance with the Exemptive Order described in Article VIII or any conditions or undertakings set forth or referenced therein, or other SEC rule, regulation or order that may be adopted after the date hereof. The Company agrees to redeem shares in the circumstances described herein and to comply with applicable terms and provisions. Also, in the event that the Distributor suspends or terminates the offering of a Series or Class pursuant to Section 10.4(c) of this Agreement, the Company, upon request by the Distributor, will cooperate in taking appropriate action to withdraw the Account's investment in the respective Fund. 10.8. Confidentiality. The Company will keep confidential any information acquired as a result of this Agreement regarding the business and affairs of the Trust, the Distributor, and their affiliates. (We want a reciprocal provision for the Company) ARTICLE XI Applicability to New Accounts and New Contracts The parties to this Agreement may amend the schedules to this Agreement from time to time to reflect, as appropriate, changes in or relating to the Contracts, any Series or Class, additions of new classes of Contracts to be issued by the Company and separate accounts therefor investing in the Trust. Such amendments may be made effective by executing the form of amendment included on each schedule attached hereto. The provisions of this Agreement shall be equally applicable to each such class of Contracts, Series, Class or separate account, as applicable, effective as of the date of amendment of such Schedule, unless the context otherwise requires. The parties to this Agreement may amend this Agreement from time to time by written agreement signed by all of the parties. 22 ARTICLE XII Notice, Request or Consent Any notice, request or consent to be provided pursuant to this Agreement is to be made in writing and shall be given: If to the Trust: James McNamara President Goldman Sachs Variable Insurance Trust 32 Old Slip New York, NY 10005 If to the Distributor: James McNamara Managing Director Goldman Sachs & Co. 32 Old Slip New York, NY 10005 If to the Company: Andrew Mensch, Counsel Metropolitan Life Insurance Company 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 With Copy To: Sabrina Model Director, Product Development Metropolitan Life Insurance Company 485B US Highway One South, Suite 420 Iselin, NJ 08830 or at such other address as such party may from time to time specify in writing to the other party. Each such notice, request or consent to a party shall be sent by registered or certified United States mail with return receipt requested or by overnight delivery with a nationally recognized courier, and shall be effective upon receipt. Notices pursuant to the provisions of Article II may be sent by facsimile to the person designated in writing for such notices. ARTICLE XIII Miscellaneous 13.1. Interpretation. This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the state of Delaware, without giving effect to the principles of conflicts of laws, subject to the following rules: (a) This Agreement shall be subject to the provisions of the 1933 Act, 1940 Act and Securities Exchange Act of 1934, as amended, and the rules, regulations and rulings thereunder, including such exemptions from those statutes, rules, and 23 regulations as the SEC may grant, and the terms hereof shall be limited, interpreted and construed in accordance therewith. (b) 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. (c) 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. (d) 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. 13.2. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which together shall constitute one and the same instrument. 13.3. No Assignment. Neither this Agreement nor any of the rights and obligations hereunder may be assigned by the Company, the Distributor or the Trust without the prior written consent of the other parties. 13.4. Declaration of Trust. A copy of the Declaration of Trust of the Trust is on file with the Secretary of State of the State of Delaware, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Trust as trustees, and is not binding upon any of the Trustees, officers or shareholders of the Trust individually, but binding only upon the assets and property of the Trust. No Series of the Trust shall be liable for the obligations of any other Series of the Trust. 24 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its name and behalf by its duly authorized officer on the date specified below. GOLDMAN SACHS VARIABLE INSURANCE TRUST (Trust) Date: By: --------------------------- ---------------------------------------- Name: Title: GOLDMAN, SACHS & CO. (Distributor) Date: By: --------------------------- ---------------------------------------- Name: Title: METROPOLITAN LIFE INSURANCE COMPANY (Company) Date: By: --------------------------- ---------------------------------------- Name: Title: 25 Schedule 1 Accounts of the Company Investing in the Trust Effective as of the date the Agreement was executed, the following separate accounts of the Company are subject to the Agreement:
======================================================================================== Date Established by Name of Account and Board of Directors of SEC 1940 Act Type of Product Subaccounts the Company Registration Number Supported by Account - ---------------------------------------------------------------------------------------- Separate Account UL 811-06025 MetFlex - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- ========================================================================================
================================================================================ [Form of Amendment to Schedule 1] Effective as of , the following separate accounts of the Company -------------- are hereby added to this Schedule 1 and made subject to the Agreement:
======================================================================================== Date Established by Name of Account and Board of Directors of SEC 1940 Act Type of Product Subaccounts the Company Registration Number Supported by Account - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------- ========================================================================================
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this Schedule 1 in accordance with Article XI of the Agreement. - -------------------------------------- ----------------------------------- Goldman Sachs Variable Insurance Trust Metropolitan Life Insurance Company - -------------------------------------- Goldman, Sachs & Co. 26 Schedule 2 Classes of Contracts Supported by Separate Accounts Listed on Schedule 1 Effective as of the date the Agreement was executed, the following classes of Contracts are subject to the Agreement:
==================================================================================== SEC 1933 Act Policy Marketing Name Registration Number Contract Form Number Annuity or Life - ------------------------------------------------------------------------------------ MetFlex 033-57320 7FV-93 Life - ------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------ ====================================================================================
================================================================================ [Form of Amendment to Schedule 2] Effective as of , the following classes of Contracts are hereby added to ------- this Schedule 2 and made subject to the Agreement:
========================================================================================== SEC 1933 Act Policy Marketing Name Registration Number Name of Supporting Account Annuity or Life - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ ==========================================================================================
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this Schedule 2 in accordance with Article XI of the Agreement. - -------------------------------------- ----------------------------------- Goldman Sachs Variable Insurance Trust Metropolitan Life Insurance Company - -------------------------------------- Goldman, Sachs & Co. 27 Schedule 3 Trust Classes and Series Available Under Each Class of Contracts Effective as of the date the Agreement was executed, the following Trust Classes and Series are available under the Contracts: =================================================================== Contracts Marketing Name Trust Classes and Series - ------------------------------------------------------------------- MetFlex CORE Small Cap Equity Fund - ------------------------------------------------------------------- Mid Cap Value Fund - ------------------------------------------------------------------- - ------------------------------------------------------------------- - ------------------------------------------------------------------- - ------------------------------------------------------------------- =================================================================== ================================================================================ [Form of Amendment to Schedule 3] Effective as of , this Schedule 3 is hereby amended to reflect ------------------ the following changes in Trust Classes and Series: =================================================================== Contracts Marketing Name Trust Classes and Series - ------------------------------------------------------------------- - ------------------------------------------------------------------- - ------------------------------------------------------------------- =================================================================== IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this Schedule 3 in accordance with Article XI of the Agreement. - ---------------------------------------- ------------------------------------- Goldman Sachs Variable Insurance Trust Metropolitan Life Insurance Company - ---------------------------------------- Goldman, Sachs & Co. 28 Schedule 4 Investment Restrictions Applicable to the Trust Effective as of the date the Agreement was executed, the following investment restrictions are applicable to the Trust: ================================================================================ [Form of Amendment to Schedule 4] Effective as of , this Schedule 4 is hereby amended to ------------------- reflect the following changes: IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this Schedule 4 in accordance with Article XI of the Agreement. - ---------------------------------------- ------------------------------------- Goldman Sachs Variable Insurance Trust Metropolitan Life Insurance Company - ---------------------------------------- Goldman, Sachs & Co. 29 PARTICIPATION AGREEMENT AMONG MFS VARIABLE INSURANCE TRUST, ---------- AND MASSACHUSETTS FINANCIAL SERVICES COMPANY THIS AGREEMENT, made and entered into this 30th day of April 2004, by and among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the "Trust"), Metropolitan Life Insurance Company, a/an New York corporation (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, certain series of shares of the Trust are divided into two separate share classes, an Initial Class and a Service Class, and the Trust on behalf of the Service Class has adopted a Rule 12b-1 plan under the 1940 Act pursuant to which the Service Class pays a distribution fee; WHEREAS, the series of shares of the Trust (each, a "Portfolio," and, collectively, the "Portfolios") and the classes of shares of those Portfolios (the "Shares") offered by the Trust to the Company and the Accounts are set forth on Schedule A attached hereto; 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, Metropolitan Life Insurance Company, 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 the Shares of the Portfolios as specified in Schedule A attached hereto 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 prior to the close of regular trading on the New York Stock Exchange, Inc. (the "NYSE") 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 9:00 a.m. New York time on the next following Business Day. "Business Day" shall mean any day on which 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 -2- 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 prior to the close of regular trading on the NYSE 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 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 made 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 made 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 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. -3- 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. The Company represents and warrants that the Policies are currently and at the time of issuance will be treated as life insurance, endowment or annuity contract 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 it, as 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 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. -4- 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 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"). ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING 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 -5- 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 or disclosure documents 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; (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. 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. 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 three (3) Business Days prior to its -6- use. No such material shall be used if the Trust, MFS, or their respective designees reasonably objects to such use within three (3) 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. 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 three (3) Business Days prior to its use. No such material shall be used if the Company or its designee reasonably objects to such use within three (3) 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 disclosure documents, 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 may not alter any material so provided by the Company or its designee (including, without limitation, presenting or delivering such material in a different medium, e.g., electronic or internet) without the prior written consent of the Company. 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 or disclosure documents, statements of additional information, reports, proxy statements, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to the 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 -7- party with a copy of relevant portions of any "deficiency letter" or other correspondence or written report regarding any such examination. 4.6. No party shall use any other party's names, logos, trademarks or service marks, whether registered or unregistered, without the prior written consent of such other party, or after written consent therefor has been revoked, provided that separate consent is not required under this Section 4.6 to the extent that consent to use a party's name, logo, trademark or service mark in connection with a particular piece of advertising or sales literature has previously been given by a party under Sections 4.2 and 4.4 of this Agreement. The Company shall not use in advertising, publicly or otherwise the name of the Trust, MFS or any of their affiliates nor any trade name, trademark, trade device, servicemark, symbol or any abbreviation, contraction or simulation thereof of the Trust, MFS, or their affiliates without the prior written consent of the Trust or MFS in each instance. The Trust and MFS shall not use in advertising, publicly or otherwise the name of the Company or any of its affiliates nor any trade name, trademark, trade device, servicemark, symbol or any abbreviation, contraction or simulation thereof of the Company or its affiliates without the prior written consent of the Company in each instance. 4.7. The Trust and MFS will provide the Company with as much notice as is reasonably practicable of any proxy solicitation for any Portfolio, 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. 4.8. 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 or 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. 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, to the extent the Trust or any Portfolio has adopted and implemented a plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution and for Shareholder servicing expenses, then the Trust may make payments to the Company or to the underwriter for the Policies in accordance with such plan. 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. -8- 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 or disclosure document 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. 5.4. MFS will monthly reimburse the Company certain of the administrative costs and expenses incurred by the Company as a result of operations necessitated by the beneficial ownership by Policy owners of shares of the Portfolios of the Trust, equal to 25% per annum of the aggregate net assets of the Trust attributable to variable life or variable annuity contracts offered by the Company or its affiliates. In no event shall such fee be paid by the Trust, its shareholders or by the Policy holders. 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), as if those requirements applied directly to each such Portfolio. 6.2. The Trust and MFS represent that each Portfolio will elect to be qualified as a Regulated Investment Company under Subchapter M of the Code and that they will maintain such qualification (under Subchapter M or any successor or similar provision). 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 -9- 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 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 -10- 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 the Trust or 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: (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 disclosure document or statement of additional information for the Policies or contained in the Policies or 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 or disclosure document, 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 or disclosure document, 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; -11- 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 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 of the Accounts or relating to 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, MFS or the Underwriter; 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 -12- 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) the 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 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. -13- 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. 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 90 days 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 -14- 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 material breach of any provision of this Agreement; or (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. -15- 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) 954-5182 Attn: James R. Bordewick, Assistant Secretary If to the Company: Metropolitan Life Insurance Company 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Facsimile No.: (212-743-0657 Attn: Andrew Mensch, Counsel With copy to: Metropolitan Life Insurance Company 485B US Hwy One South, Suite 420 Iselin, NJ 08830 Facsimile No: 732-602-6455 Attn: Sabrina K Model, Director If to MFS: Massachusetts Financial Services Company 500 Boylston Street Boston, Massachusetts 02116 Facsimile No.: (617)954-5747 Attn: Jeffrey N. Carp, General Counsel -16- 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. -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. Metropolitan Life Insurance Company, on behalf of Separate Account UL and Separate Account DCVL ---------------------------------------- By its authorized officer and not individually, By: ------------------------------------ John J Ryan Title: Vice President MFS VARIABLE INSURANCE TRUST, on behalf of the Portfolios By its authorized officer and not individually, By: ------------------------------------ James R. Bordewick, Jr. Assistant Secretary MASSACHUSETTS FINANCIAL SERVICES COMPANY By its authorized officer, By: ------------------------------------ Jeffrey N. Carp Senior Vice President -18- As of 5/1/04 SCHEDULE A ACCOUNTS, POLICIES AND PORTFOLIOS SUBJECT TO THE PARTICIPATION AGREEMENT
=================================================================================================================== Name of Separate Account and Date Established by Policies Funded Share Class Portfolios Board of Directors by Separate Account (Initial or Service Class) Applicable to Policies =================================================================================================================== Separate Account UL Established MetFlex Service Class Global Equity Series 12/1988 High Income Series Value Series New Discovery Series - ------------------------------------------------------------------------------------------------------------------- Separate Account DCVL, 11/2003 PPVL - Group and Individual Initial Global Equity Series Policy forms High Income Series Value Series New Discovery Series - -------------------------------------------------------------------------------------------------------------------
-19- THIS AGREEMENT is made and entered into as of the 30th day of _April, 2004 by and among [Metropolitan Life Insurance Company] (the "Company"), a life insurance company organized in the state of New York , on its own behalf and on behalf of each separate account of the Company set forth on Schedule A hereto as may be amended from time to time (each such account referred to as an "Account"), VAN KAMPEN LIFE INVESTMENT TRUST (the "Fund"), a Delaware business trust, VAN KAMPEN FUNDS INC. (the "Underwriter"), a Delaware corporation, and VAN KAMPEN ASSET MANAGEMENT INC. (the "Adviser"), a Delaware corporation. WHEREAS, the Fund engages in business as an open-end management investment company and is available to act as the investment vehicle for separate accounts established by insurance companies for individual and group life insurance policies and annuity contracts with variable accumulation and/or pay-out provisions (hereinafter referred to individually and/or collectively as "Variable Insurance Products"); and WHEREAS, insurance companies desiring to utilize the Fund as an investment vehicle under their Variable Insurance Products enter into participation agreements with the Fund, the Underwriter and the Adviser (the "Participating Insurance Companies"); and WHEREAS, shares of the Fund are divided into several series of shares, each representing the interest in a particular managed portfolio of securities and other assets, any one or more of which may be made available under this Agreement; and WHEREAS, the Fund intends to offer shares of the series set forth on Schedule B hereto (each such series referred to as a "Portfolio"), as such Schedule may be amended from time to time by mutual agreement of the parties hereto, to the Account(s) of the Company (all references herein to "shares" of a Portfolio shall mean the class or classes of shares specifically identified on Schedule B); and WHEREAS, the Fund has obtained an order from the Securities and Exchange Commission ("SEC"), dated September 19, 1990 (File No. 812-7552), granting Participating Insurance Companies and Variable Insurance Product separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended (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 Insurance Product separate accounts of both affiliated and unaffiliated life insurance companies (the "Shared Funding Exemptive Order"); and WHEREAS, the Fund is registered as an open-end management investment company under the 1940 Act and its shares are registered under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Adviser is duly registered as an investment adviser under the Investment Advisers Act of 1940, as amended, and any applicable state securities laws; and WHEREAS, the Adviser manages the Portfolios of the Fund; and WHEREAS, the Underwriter is registered as a broker/dealer 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 serves as principal underwriter of the shares of the Fund; and WHEREAS, the Company offers or proposes to offer certain Variable Insurance Products that it has registered (or will register) under the 1933 Act (the "Registered Contracts"), as well as other Variable Insurance Products that are not registered under the 1933 Act (the "Unregistered Contracts," and together with the Registered Contracts, the "Contracts"), each as set forth on Schedule A hereto; and WHEREAS, each Account is a duly established, validly existing segregated asset account, established by resolution or under authority of the Board of Directors of the Company, on the date shown for such Account on Schedule A hereto, to set aside and invest assets attributable to the Contracts; and WHEREAS, the Company has registered (or will register) certain Accounts as unit investment trusts under the 1940 Act that are attributable to the Registered Contracts (the "Registered Accounts"), while certain other Accounts that are attributable to the Unregistered Contracts will not be registered under the 1940 Act (the "Unregistered Accounts," and together with the Registered Accounts, the "Accounts"), each as set forth on Schedule A hereto; and WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase shares of the Portfolios, on behalf of each Account or sub-Account thereof (together, as applicable, an "Account"), to fund the Contracts and the Underwriter is authorized to sell such shares to each such Account at net asset value. NOW, THEREFORE, in consideration of their mutual promises, the Company, the Fund, the Underwriter and the Adviser agree as follows: ARTICLE I. Purchase and Redemption of Fund Shares 1.1. The Fund and the Underwriter agree to make available for purchase by the Company shares of the Portfolio(s) and shall execute purchase orders placed for each Account on each Business Day at the net asset value next computed after receipt by the Fund or its designee of such purchase order. For purposes of this Section 1.1, the Company shall be the designee of the Fund and the Underwriter for receipt of such purchase orders from each Account and receipt by such designee shall constitute receipt by the Fund; provided that the Fund receives notice of such order by 10:00 a.m. Eastern time on the next following Business Day. "Business Day" shall mean any day on which the New York Stock Exchange, Inc. is open for trading and on which the Fund calculates its net asset value pursuant to SEC rules. 1.2. The Fund, so long as this Agreement is in effect, agrees to make shares of the Portfolios available for purchase at the applicable net asset value per share by the Company and its Accounts on those days on which the Fund calculates its net asset value pursuant to SEC rules 2 and the Fund shall use reasonable efforts to calculate such net asset value on each day that the New York Stock Exchange, Inc. is open for trading. Notwithstanding the foregoing, the Board of Trustees of the Fund (the "Board") may refuse to permit the Fund to sell shares of any Portfolio to any person, or suspend or terminate the offering of shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Board acting in good faith and in light of its fiduciary duties under federal and any applicable state laws, necessary in the best interests of the shareholders of such Portfolio. 1.3. The Fund and the Underwriter agree that shares of the Fund will be sold only to Participating Insurance Companies and their separate accounts. No shares of a Portfolio will be sold to the general public. 1.4. The Fund and the Underwriter agree to redeem for cash, on the Company's request, any full or fractional shares of the Portfolio(s) held by the Company, executing such redemption requests for each Account on each Business Day at the net asset value next computed after receipt by the Fund or its designee of the request for redemption. Subject to and in accordance with applicable laws and regulations, however, the Fund reserves the right to redeem shares of the Portfolios for assets other than cash. For purposes of this Section 1.4, the Company shall be the designee of the Fund and the Underwriter for receipt of requests for redemption from each Account and receipt by such designee shall constitute receipt by the Fund; provided that the Fund receives notice of such request for redemption by 10:00 a.m. Eastern time on the next following Business Day. 1.5. The Company agrees that purchases and redemptions of Portfolio shares offered by the then current prospectus or offering memorandum of the Fund shall be made in accordance with the provisions of such prospectus or offering memorandum. The Company will give the Fund, the Underwriter and the Adviser forty-five (45) days written notice of its intention to make available in the future any other investment company as a funding vehicle under the Contracts. 1.6. The Company shall pay for Portfolio shares on the next Business Day after an order to purchase Fund shares is made in accordance with the provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire and the Company agrees to use its best efforts to transmit such funds by no later than 2:00 p.m. Eastern time on the day of transmission. For purposes of Sections 2.10 and 2.11, upon receipt by the Fund of the federal funds so wired, such funds shall cease to be the responsibility of the Company and shall become the responsibility of the Fund. 1.7. Issuance and transfer of the Fund's shares will be by book entry only. Share certificates will not be issued to the Company or any Account. Shares ordered from the Fund will be recorded in an appropriate title for each Account or the appropriate sub-account of each Account. 1.8. The Fund shall use its best efforts to furnish same-day notice (by wire or telephone, followed by written confirmation) to the Company of any income dividends or capital gain distributions payable on Portfolio shares. The Company hereby elects to receive all such income dividends and capital gain distributions as are payable on a Portfolio's shares in additional 3 shares of that Portfolio. The Company reserves the right to revoke this election and to receive all such income dividends and capital gain distributions in cash. The Fund shall notify the Company of the number of shares so issued as payment of such dividends and distributions. 1.9. The Fund 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 (normally by 6:30 p.m. Eastern time) and shall use its best efforts to make such net asset value per share available by 7:00 p.m. Eastern time. 1.10. The Company shall not redeem Fund shares attributable to the Contracts (as distinct from Fund shares attributable to the Company's assets held in the Account) except (i) as necessary to implement Contract owner initiated or approved transactions, (ii) as required by state and/or federal laws or regulations or judicial or other legal precedent of general application (hereinafter referred to as a "Legally Required Redemption") or (iii) as permitted by an order of the SEC pursuant to Section 26(c) of the 1940 Act. Upon request, the Company will promptly furnish to the Fund the opinion of counsel for the Company (which counsel shall be reasonably satisfactory to the Fund) to the effect that any redemption pursuant to clause (ii) above is a Legally Required Redemption. Furthermore, except in cases where permitted under the terms of the Contracts, the Company shall not prevent Contract owners from allocating payments to a Portfolio that was otherwise available under the Contracts without first giving the Fund ninety (90) days prior written notice of its intention to do so. ARTICLE II. Representations and Warranties 2.1. The Company represents and warrants that: (i) it is an insurance company duly organized and in good standing under applicable law; (ii) it will abide by the rules and regulations of the NSCC; (iii) it has legally and validly established each Account prior to any issuance or sale thereof as a segregated asset account under applicable laws and regulations; (iv) it has registered or, prior to any issuance or sale of the Registered Contracts, will register and will thereafter maintain the registration of each Registered Account as a unit investment trust in accordance with the provisions of the 1940 Act to serve as a segregated investment account for the Registered Contracts; (v) the Unregistered Accounts are exempt from the registration requirements of the 1940 Act under the provisions of Section 3(c)(1) or 3(c)(7) thereof; and (vi) the Unregistered Accounts are exempt from the provisions of Section 12(d)(1) of the 1940 Act under the provisions of Section 12(d)(1)(E) of the 1940 Act. The Company further represents and warrants that: (i) the Registered Contracts are or will be registered and shall remain registered under the 1933 Act; (ii) the Unregistered Contracts are exempt from the registration requirements of the 1933 Act under the provisions of Section 4(2) thereof; (iii) the Contracts will be issued and sold in compliance in all material respects with all applicable federal and state laws; and (iv) the sale of the Contracts shall comply in all material respects with any applicable state insurance suitability requirements. The Company shall amend the registration statement for the Registered Accounts and the Registered Contracts under the 1940 Act and the 1933 Act, respectively, from time to time as required in order to effect the continuous offering of the Registered Contracts; moreover, the Company will notify the Fund immediately in writing of any changes in facts or circumstances leading the Company to believe that any of the exemptions described above with respect to the Unregistered Contracts or Unregistered Accounts are not applicable as represented. 4 2.2. The Fund and the Underwriter represent and warrant that Fund 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 State of Delaware and all applicable federal and state securities laws and that the Fund is and shall remain registered under the 1940 Act. The Fund shall amend the registration statement for its shares under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its shares. The Fund shall register and qualify the shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by the Fund. 2.3. The Fund represents that the fund and each Portfolio is currently qualified as a Regulated Investment Company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and that it will use its reasonable efforts to maintain such qualification (under Subchapter M or any successor or similar provision) and that it will notify the Company immediately upon having a reasonable basis for believing that it has ceased to so qualify. 2.4. Subject to Section 2.12 and Article VI, the Company represents and warrants that each Account is and will continue to be a "segregated asset account" under applicable provisions of the Code and applicable Treasury Regulations promulgated thereunder and that each Contract is treated as a "variable contract" under applicable provisions of the Code and applicable Treasury Regulations promulgated thereunder. The Company further represents and warrants that it will make every effort to maintain such treatment and that it will notify the Fund immediately upon having a reasonable basis for believing that any Account or Contract has ceased to be so treated or that any Account or Contract might not be so treated in the future. 2.5. The Fund represents that to the extent that it decides to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund undertakes to have the Board, a majority of whom are not interested persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance distribution expenses. 2.6. The Fund makes no representation as to whether any aspect of its operations (including, but not limited to, fees and expenses and investment policies) complies with the insurance laws or regulations of the various states. 2.7. The Fund represents that it is lawfully organized and validly existing under the laws of the State of Delaware and that it does and will comply in all material respects with the 1940 Act. 2.8. The Adviser represents and warrants that it is and shall remain duly registered in all material respects under all applicable federal and state securities laws and that it will perform its obligations for the Fund in compliance in all material respects with the laws of its state of domicile and any applicable state and federal securities laws. 2.9. The Underwriter represents and warrants that it is and shall remain duly registered in all material respects under all applicable federal and state securities laws and that it will perform its obligations for the Fund in compliance in all material respects with the laws of its state of domicile and any applicable state and federal securities laws. 5 2.10. The Fund represents and warrants that all of its trustees, officers, employees, and other individuals/entities dealing with the money and/or securities of the Fund are and shall continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Fund in an amount not less than the minimum coverage as currently required by Rule 17g-1 of the 1940 Act or related provisions as may be promulgated from time to time. The aforesaid blanket fidelity bond shall include coverage for larceny and embezzlement and shall be issued by a reputable bonding company. 2.11. The Company represents and warrants that all of its directors, officers, employees, investment advisers, and other individuals/entities dealing with the money and/or securities of the Account(s) are and shall continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Company and/or the Account(s) that is reasonable and customary in light of the Company's obligations under this Agreement. The aforesaid includes coverage for larceny and embezzlement and shall be issued by a reputable bonding company in an amount not less than $5 million. The Company agrees to make all reasonable efforts to see that this bond or another bond containing these provisions is always in effect, and agrees to notify the Fund, the Underwriter and the Adviser in the event that such coverage no longer applies. 2.12. The Fund, the Underwriter and Advisor represent that the Fund and each Portfolio qualify as a "look through" entity under Treasury Regulation 1.817-5(f) and they will notify the Company upon having a reasonable basis for believing that this is not the case and, for so long as he Company own or Portfolio shares they will make every effort to so qualify. ARTICLE III. Prospectuses, Reports to Shareholders and Proxy Statements; Voting 3.1. The Fund or its designee shall provide the Company with as many printed copies of the Fund's current prospectus, offering memorandum and statement of additional information as the Company may reasonably request. If requested by the Company, in lieu of providing printed copies the Fund shall provide camera-ready film or computer diskettes containing the Fund's prospectus and statement of additional information, and such other assistance as is reasonably necessary in order for the Company once each year (or more frequently if the prospectus, offering memorandum and/or statement of additional information for the Fund is amended during the year) to have the prospectus or other disclosure document for the Contracts and the Fund's prospectus (and statement of additional information for the Fund and the statement of additional information for the Registered Contracts) printed together in one document. Alternatively, the Company may print the Fund's prospectus and/or its statement of additional information in combination with other fund companies' prospectuses and statements of additional information. 3.2. Except as provided in this Section 3.2, all expenses of preparing, setting in type, printing and distributing Fund prospectuses and statements of additional information shall be the expense of the Company. For prospectuses, offering memorandums and statements of additional information provided by the Company to its Contract owners who currently own shares of one or 6 more Portfolios ("Existing Contract Owners"), in order to update disclosure as required by the 1933 Act and/or the 1940 Act, the cost of printing shall be borne by the Fund. If the Company chooses to receive camera-ready film or computer diskettes in lieu of receiving printed copies of the Fund's prospectus, the Fund shall bear the cost of typesetting to provide the Fund's prospectus to the Company in the format in which the Fund is accustomed to formatting prospectuses, and the Company shall bear the expense of adjusting or changing the format to conform with any of its prospectuses or other disclosure documents. In such event, the Fund will reimburse the Company in an amount equal to the product of "x" and "y", where "x" is the number of such disclosure documents distributed to Existing Contract Owners and "y" is the Fund's per unit cost of printing the Fund's prospectus. The same procedures shall be followed with respect to the Fund's statement of additional information. The Company agrees to provide the Fund or its designee with such information as may be reasonably requested by the Fund to assure that the Fund's expenses do not include the costs of printing, typesetting or distributing any prospectuses or statements of additional information other than the costs of printing those prospectuses or statements of additional information actually distributed to Existing Contract Owners. 3.3. The statement of additional information of the Fund shall be obtainable from the Fund, the Underwriter, the Company or such other person as the Fund may designate. 3.4. The Fund, at its expense, shall provide the Company with copies of its proxy statements, reports to shareholders, and other communications (except for prospectuses and statements of additional information, which are covered in Section 3.1) to shareholders in such quantity as the Company shall reasonably require for distributing to Existing Contract Owners. The Fund shall not pay any costs of distributing such proxy materials, reports to shareholders and other communications to prospective Contract owners. 3.5. If and to the extent required by law, the Company shall distribute all proxy materials furnished by the Fund to Contract owners to whom voting privileges are required to be extended and shall: (i) solicit voting instructions from Contract owners; (ii) vote the Portfolio shares in accordance with instructions received from Contract owners; and (iii) vote Portfolio shares for which no instructions have been received in the same proportion as Portfolio shares for which instructions have been received; so long as and to the extent that the SEC continues to interpret the 1940 Act to require pass-through voting privileges for variable contract owners. The Company reserves the right to vote Portfolio shares held in any segregated asset account in its own right, to the extent permitted by law. If the Company is required to solicit voting instructions, the Fund and the Company shall follow the procedures, and shall have the corresponding responsibilities, for the handling of proxies and voting instruction solicitations, as set forth in Schedule C attached hereto and incorporated herein by reference. Participating Insurance Companies shall be responsible for 7 ensuring that each of their separate accounts participating in the Fund (and for which the soliciting of voting instructions is required) calculates voting privileges in a manner consistent with the standards set forth on Schedule C, which standards will also be provided to the other Participating Insurance Companies. 3.6. The Fund will comply with all provisions of the 1940 Act requiring voting by shareholders, and in particular the Fund will either provide for annual meetings (except insofar as the SEC may interpret Section 16 of the 1940 Act not to require such meetings) or comply with Section 16(c) of the 1940 Act (although the Fund is not one of the trusts described in Section 16(c) of the 1940 Act) as well as with Section 16(a) of the 1940 Act and, if and when applicable, Section 16(b) of the 1940 Act. Further, the Fund will act in accordance with the SEC's interpretation of the requirements of Section 16(a) of the 1940 Act with respect to periodic elections of trustees and with whatever rules the SEC may promulgate with respect thereto. ARTICLE IV. Sales Material and Information 4.1. 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, the Underwriter or the Adviser is named, at least ten (10) Business Days prior to its use. No such material shall be used without the prior approval of the Fund or its designee. The Fund shall use its reasonable best efforts to review any such material as soon as practicable after receipt and no later than ten (10) Business Days after receipt of such material. 4.2. The Company shall not give any information or make any representations or statements on behalf of the Fund or concerning the Fund in connection with the sale of the Contracts other than the information or representations contained in the registration statement or prospectus for the Fund shares, as such registration statement or prospectus may be amended or supplemented from time to time, or in reports or proxy statements for the Fund which are in the public domain or approved by the Fund for distribution to Fund shareholders, or in sales literature or other promotional material approved by the Fund or its designee, except with the permission of the Fund. 4.3. The Fund 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 its Account(s) or Contract(s) are named at least ten (10) Business Days prior to its use. No such material shall be used if the Company or its designee reasonably objects to such use within ten (10) Business Days after receipt of such material. 4.4. Neither the Fund, the Underwriter nor the Adviser shall give any information or make any representations on behalf of the Company or concerning the Company, each Account, or the Contracts, other than the information or representations contained in a registration statement, prospectus, offering memorandum or other disclosure document for the Contracts, as such documents may be amended or supplemented from time to time, or in reports or proxy statements for each Account which are in the public domain or approved by the Company for distribution to Contract owners, or in sales literature or other promotional material approved by the Company or its designee, except with the permission of the Company. 8 4.5. The Fund will provide to the Company at least one complete copy of all registration statements, prospectuses, statements of additional information, reports, proxy statements, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to the Fund or its shares and are relevant to the Company or the Contracts. 4.6. The Company will provide to the Fund, to the extent applicable, at least one complete copy of all registration statements, prospectuses, statements of additional information, offering memoranda or other disclosure documents, reports, solicitations for voting instructions, sales literature and other promotional materials, applications for exemptions, requests for no action letters, and all amendments to any of the above, that relate to investment in the Fund or the Portfolios under the Contracts. 4.7. For purposes of this Article IV, the phrase "sales literature or other promotional material" includes, but is not limited to, any of the following that refer to the Fund or any affiliate of the Fund: advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, 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, and registration statements, offering memoranda, prospectuses, statements of additional information or other disclosure documents, shareholder reports, and proxy materials. ARTICLE V. Fees and Expenses 5.1. The Fund shall pay no fee or other compensation to the Company under this Agreement, except that if the Fund or any Portfolio adopts and implements a service plan and/or a plan pursuant to Rule 12b-1, then the Underwriter may make payments to the Company or to the underwriter for the Contracts pursuant to such plans if and in amounts agreed to by the Underwriter in writing. 5.2. All expenses incident to performance by the Fund under this Agreement shall be paid by the Fund. The Fund shall see to it that all its shares are registered and authorized for issuance in accordance with applicable federal law and, if and to the extent deemed advisable by the Fund, in accordance with applicable state laws prior to their sale. Except as otherwise set forth in Section 3.2 of this Agreement, the Fund shall bear the expenses for the cost of registration and qualification of the Fund's shares, preparation and filing of the Fund's prospectus and registration statement, proxy materials and reports, setting the prospectus in type, setting in type and printing the proxy materials and reports to shareholders, the preparation of all statements and notices required by any federal or state law, and all taxes on the issuance or transfer of the Fund's shares. 9 5.3. The Company shall bear the expenses of distributing the Fund's prospectus, statement of additional information, proxy materials and reports to owners of Contracts issued by the Company. ARTICLE VI. Diversification 6.1. The Fund , the Underwriter and the Adviser will use its best efforts to have the Fund and each Portfolio at all times comply with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the diversification requirements for annuity, endowment, or life insurance contracts and any amendments or other modifications to such Section or Regulations. In the event the Fund ceases to so qualify, they will take reasonable steps to (a) immediately notify the Company of such event and (b) make every effort to adequately diversify the Fund so as to achieve compliance within the grace period afforded by Regulation 1.817-5. The Fund agrees to provide the Company with a certificate of compliance for each Fund no later than 30 day following the end of each calendar quarter. ARTICLE VII. Potential Conflicts 7.1. The Board will monitor the Fund for the existence of any material irreconcilable conflict between the interests of the contract owners of all separate accounts investing in the Fund. An irreconcilable material conflict may arise for a variety of reasons, including: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Portfolio are being managed; (e) a difference in voting instructions given by contract owners; or (f) a decision by a Participating Insurance Company to disregard the voting instructions of contract owners. The Fund shall promptly inform the Company if the Board determines that an irreconcilable material conflict exists and the implications thereof. 7.2. The Company will report any potential or existing conflicts of which it is aware to the Board. The Company will assist the Board in carrying out its responsibilities under the Shared Funding Exemptive Order by providing the Board with all information reasonably necessary for the Board to consider any issues raised. This includes, but is not limited to, an obligation by the Company to inform the Board whenever Contract owner voting instructions are disregarded. The Company agrees that these responsibilities will be carried out with a view only to the interests of Contract owners. 7.3. If it is determined by a majority of the Board, or a majority of its disinterested members, that a material irreconcilable conflict exists, the Company and other Participating Insurance Companies shall, at their expense and to the extent reasonably practicable (as determined by a majority of the disinterested trustees), take whatever steps are necessary to remedy or eliminate the irreconcilable material conflict, up to and including: (1) 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 (but not limited to) another portfolio of the Fund, or submitting the question whether such segregation should be implemented 10 to a vote of all affected contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., annuity contract owners, life insurance policy 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 (2) establishing a new registered management investment company or managed separate account. No charge or penalty will be imposed as a result of such withdrawal. The Company agrees that it bears the responsibility to take remedial action in the event of a Board determination of an irreconcilable material conflict and the cost of such remedial action, and that these responsibilities will be carried out with a view only to the interests of Contract owners. 7.4. 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 investment in the Fund and terminate this Agreement with respect to such Account (at the Company's expense); 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 members of the Board. No charge or penalty will be imposed as a result of such withdrawal. The Company agrees that it bears the responsibility to take remedial action in the event of a Board determination of an irreconcilable material conflict and the cost of such remedial action, and that these responsibilities will be carried out with a view only to the interests of Contract owners. 7.5. For purposes of Sections 7.3 and 7.4 of this Agreement, a majority of the disinterested members of the Board shall determine whether any proposed action adequately remedies any irreconcilable material conflict, but in no event will the Fund be required to establish a new funding medium for the Contracts. The Company shall not be required by Section 7.3 or 7.4 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. 7.6. 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 Shared Funding Exemptive Order) on terms and conditions materially different from those contained in the Shared Funding Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies, as appropriate, shall take such steps as may be necessary 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; and (b) Sections 3.4, 3.5, 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. 7.7. Each of the Company and the Adviser shall at least annually submit to the Board such reports, materials or data as the Board may reasonably request so that the Board may fully carry out the obligations imposed upon it by the provisions hereof and in the Shared Funding Exemptive Order. Such reports, materials and data shall be submitted more frequently if deemed appropriate by the Board. 11 ARTICLE VIII. Indemnification 8.1. Indemnification by the Company 8.1(a). The Company agrees to indemnify and hold harmless the Fund, the Underwriter, the Adviser and each member of the Board and each officer and employee of the Fund, and each director, officer and employee of the Underwriter and the Adviser, and each person, if any, who controls the Fund, the Underwriter or the Adviser within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" and individually, an "Indemnified Party," 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 litigation (including reasonable legal and other expenses), to which the Indemnified Parties may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of the Fund's shares or the Contracts and: (i) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the registration statement, prospectus, offering memorandum or other disclosure document for the Contracts or contained in the Contracts or sales or other promotional literature for the Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Company by or on behalf of the Fund for use in the registration statement, prospectus, offering memorandum or other disclosure document for the Contracts or in the Contracts or sales or other promotional literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Fund shares; or (ii) arise out of or as a result of statements or representations (other than statements or representations contained in the registration statement, prospectus or sales literature of the Fund not supplied by the Company, or persons under its control and other than statements or representations authorized by the Fund, the Underwriter or the Adviser) or unlawful conduct of the Company or persons under its control, with respect to the sale or distribution of the Contracts or Fund shares; or (iii) arise out of or as a result of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, or sales literature of the Fund or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if 13 such a statement or omission was made in reliance upon and in conformity with information furnished to the Fund by or on behalf of the Company; or (iv) arise as a result of any failure by the Company to provide the services and furnish the materials under the terms of this Agreement; or (v) arise out of or result from any material breach of any representation and/or warranty made by the Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Company. Each of paragraphs (i) through (v) above is limited by and in accordance with the provisions of Sections 8.1(b) and 8.1(c) below. 8.1(b). The Company shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified Party as such may arise from such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations or duties under this Agreement. 8.1(c). The Company shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Company in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Company of any such claim shall not relieve the Company from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Company shall be entitled to participate, at its own expense, in the defense of such action. The Company also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Company to such party of the Company's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Company will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 8.1(d). The Fund, the Underwriter or the Adviser, as applicable, will promptly notify the Company of the commencement of any litigation or proceedings against an Indemnified Party in connection with this Agreement, the issuance or sale of the Fund shares or the Contracts, or the operation of the Fund. 8.2. Indemnification by the Underwriter 14 8.2(a). The Underwriter agrees to indemnify and hold harmless the Company and each of its directors, officers and employees, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" and individually, an "Indemnified Party," 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 Underwriter) or litigation (including reasonable legal and other expenses) to which the Indemnified Parties may become subject under any statute or regulation, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of shares of a Portfolio and: (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement or prospectus or sales literature of the Fund (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Fund, the Underwriter or the Adviser by or on behalf of the Company for use in the registration statement or prospectus for the Fund or in sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Portfolio shares; or (ii) arise out of or as a result of statements or representations (other than statements or representations contained in registration statement, prospectus, offering memorandum, other disclosure document or sales or other promotional literature for the Contracts not supplied by the Fund or the Underwriter or persons under their respective control and other than statements or representations authorized by the Company) or unlawful conduct of the Fund or the Underwriter or persons under their respective control, with respect to the sale or distribution of the Contracts or Portfolio shares; or (iii) arise out of or as a result of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, offering memorandum, other disclosure document or sales or other promotional literature covering the Contracts, or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading, if such statement or omission was made in reliance upon information furnished to the Company by or on behalf of the Fund or the Underwriter; or (iv) arise as a result of any failure by the Underwriter to provide the services and furnish the materials under the terms of this Agreement; or 15 (v) arise out of or result from any material breach of any representation and/or warranty made by the Underwriter or the Fund in this Agreement or arise out of or result from any other material breach of this Agreement by the Underwriter. Each of paragraphs (i) through (v) above is limited by and in accordance with the provisions of Sections 8.2(b) and 8.2(c) below. 8.2(b). The Underwriter shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified Party as such may arise from such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement. 8.2(c). The Underwriter shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Underwriter in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Underwriter of any such claim shall not relieve the Underwriter from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Underwriter will be entitled to participate, at its own expense, in the defense thereof. The Underwriter also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Underwriter to such party of the Underwriter's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Underwriter will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 8.2(d). The Company will promptly notify the Underwriter of the commencement of any litigation or proceedings against an Indemnified Party in connection with this Agreement, the issuance or sale of the Contracts or the operation of the Account(s). 8.3. Indemnification by the Adviser 8.3(a). The Adviser agrees to indemnify and hold harmless the Company and each of its directors, officers and employees, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" and individually, an "Indemnified Party," for purposes of this Section 8.3) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Adviser) or litigation (including reasonable legal and other expenses) to which the Indemnified Parties may become subject under any statute or regulation, at common law or otherwise, insofar as such 16 losses, claims, damages, liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of shares of a Portfolio and: (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement or prospectus or sales literature of the Fund (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Fund, the Underwriter or the Adviser by or on behalf of the Company for use in the registration statement or prospectus for the Fund or in sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Portfolio shares; or (ii) arise out of or as a result of statements or representations (other than statements or representations contained in the registration statement, prospectus, offering memorandum, other disclosure document or sales or other promotional literature for the Contracts not supplied by the Fund or the Adviser or persons under their respective control and other than statements or representations authorized by the Company) or unlawful conduct of the Fund or the Adviser or persons under their respective control, with respect to the sale or distribution of the Contracts or Portfolio shares; or (iii) arise out of or as a result of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, offering memorandum, other disclosure document or sales or other promotional literature covering the Contracts, or any amendment thereof or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading, if such statement or omission was made in reliance upon information furnished to the Company by or on behalf of the Fund or the Adviser; or (iv) arise as a result of any failure by the Adviser or the Fund to provide the services and furnish the materials under the terms of this Agreement; or (v) arise out of or result from any material breach of any representation and/or warranty made by the Adviser or the Fund in this Agreement or arise out of or result from any other material breach of this Agreement by the Adviser. Each of paragraphs (i) through (v) above is limited by and in accordance with the provisions of Sections 8.3(b) and 8.3(c) below. 17 8.3(b). The Adviser shall not be liable under this indemnification provision with respect to any losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified Party as such may arise from such Indemnified Party's willful misfeasance, bad faith, or gross negligence in the performance of such Indemnified Party's duties or by reason of such Indemnified Party's reckless disregard of obligations and duties under this Agreement. 8.3(c). The Adviser shall not be liable under this indemnification provision with respect to any claim made against an Indemnified Party unless such Indemnified Party shall have notified the Adviser in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify the Adviser of any such claim shall not relieve the Adviser from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this indemnification provision. In case any such action is brought against the Indemnified Parties, the Adviser will be entitled to participate, at its own expense, in the defense thereof. The Adviser also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the Adviser to such party of the Adviser's election to assume the defense thereof, the Indemnified Party shall bear the fees and expenses of any additional counsel retained by it, and the Adviser will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation. 8.3(d). The Company will promptly notify the Adviser of the commencement of any litigation or proceedings against an Indemnified Party in connection with this Agreement, the issuance or sale of the Contracts or the operation of the Account(s). 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 State of Delaware. 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 (including, but not limited to, the Shared Funding Exemptive Order) and the terms hereof shall be interpreted and construed in accordance therewith. ARTICLE X. Termination 10.1. This Agreement shall continue in full force and effect until the first to occur of: (a) termination by any party for any reason by sixty (60) days advance written notice delivered to the other parties; or (b) termination by the Company by written notice to the Fund, the Underwriter and the Adviser with respect to any Portfolio based upon the Company's determination that 18 shares of such Portfolio are not reasonably available to meet the requirements of the Contracts; provided, however, that said termination shall become effective ten (10) days after receipt of notice unless the Fund makes available a sufficient number of shares of the Portfolio to reasonably meet the requirements of the Contracts within said ten (10) day period; or (c) termination by the Company by written notice to the Fund, the Underwriter and the Adviser with respect to any Portfolio in the event that any of the Portfolio's shares are not registered, issued or sold in accordance with applicable state and/or federal law or such law precludes the use of such shares as the underlying investment media of the Contracts issued or to be issued by the Company; or (d) termination by the Company by written notice to the Fund, the Underwriter and the Adviser with respect to any Portfolio in the event that such Portfolio ceases to qualify as a Regulated Investment Company under Subchapter M of the Code or under any successor or similar provision; or (e) termination by the Company by written notice to the Fund, the Underwriter and the Adviser with respect to any Portfolio in the event that such Portfolio fails to meet the diversification requirements specified in Article VI hereof; or ceases to qualify as "look through" entity under Treasury Regulaiton 1.817-5(f) or (f) termination by the Fund, the Underwriter or the Adviser by written notice to the Company if the Fund, the Underwriter or the Adviser, as applicable, shall determine, in its sole judgment exercised in good faith, that the Company and/or its affiliated companies 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 Fund, the Underwriter and the Adviser, if the Company shall determine, in its sole judgment exercised in good faith, that the Fund, the Underwriter or the Adviser has suffered a material adverse change in its business, operations, financial condition or prospects since the date of this Agreement or is the subject of material adverse publicity; or (h) termination by the Fund, the Underwriter or the Adviser by written notice to the Company, if the Company gives the Fund, the Underwriter and the Adviser the written notice specified in Section 1.5 hereof and at the time such notice was given there was no notice of termination outstanding under any other provision of this Agreement; provided, however, any termination under this Section 10.1(h) shall be effective forty-five (45) days after the notice specified in Section 1.5 was given; or (i) termination by any party to this Agreement upon another party's material breach of any provision of this Agreement. 19 10.2. Notwithstanding any termination of this Agreement with respect to a Portfolio, the Fund and the Underwriter shall at the option of the Company continue to make available additional shares of the Portfolio, 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"), unless such further sale of Portfolio shares is proscribed by law, regulation or applicable regulatory authority, or unless the Board determines that liquidation of the Portfolio following termination of this Agreement is in the best interests of the Portfolio. Specifically, subject to the foregoing, the owners of the Existing Contracts shall be permitted to direct reallocation of investments in the Portfolio, redemption of investments in the Portfolio and/or investment in the Portfolio upon the making of additional purchase payments under the Existing Contracts. The parties agree that this Section 10.2 shall not apply to any terminations under Article VII and the effect of such Article VII terminations shall be governed by Article VII of this Agreement. ARTICLE XI. Notices Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party. If to the Fund: Van Kampen Life Investment Trust 1 Parkview Plaza Oakbrook Terrace, Illinois 60181 Attention: President If to the Underwriter: Van Kampen Funds Inc. 1 Parkview Plaza Oakbrook Terrace, Illinois 60181 Attention: President If to the Adviser: Van Kampen Asset Management Inc. 1 Parkview Plaza Oakbrook Terrace, Illinois 60181 Attention: President If to the Company: Metropolitan Life 1 MetLife Plaza 20 27-01 Queens Plaza North Long Island City, NY 11101 Attention: Andrew Mensch, Counsel With Copy to : Metropolitan Life 485B US Highway One South, Suite 420 Iselin, NJ 08830 Attention: Sabrina K Model, Director ARTICLE XII. Miscellaneous 12.1. All persons dealing with the Fund must look solely to the property of the Fund for the enforcement of any claims against the Fund, as neither the Board, officers, agents or shareholders of the Fund assume any personal liability for obligations entered into on behalf of the Fund. Each of the Company, the Underwriter and the Adviser acknowledges and agrees that, as provided by the Fund's Agreement and Declaration of Trust, the shareholders, trustees, officers, employees and other agents of the Fund and the Portfolios shall not personally be bound by or be liable for matters set forth hereunder, nor shall resort be had to their private property for the satisfaction of any obligation or claim hereunder. A Certificate of Trust referring to the Fund's Agreement and Declaration of Trust is on file with the Secretary of State of Delaware. 12.2. Subject to the requirements of legal process and regulatory authority, each party hereto shall treat as confidential any "non-public personal information" about any "consumer" of another party (as such terms are defined in SEC Regulation S-P) and any other information reasonably identified as confidential in writing by another party ("Confidential Information"). Each party agrees not to disclose, disseminate or utilize another party's Confidential Information except: (i) as permitted by this Agreement, (ii) upon the written consent of the other party, (iii) where the Confidential Information comes into the public domain through no fault of the party receiving the information, or (iv) as otherwise required or permitted under applicable law. 12.3. The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 12.4. This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 12.5. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 12.6. Each party hereto shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the National Association of Securities Dealers and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this 21 Agreement or the transactions contemplated hereby. Notwithstanding the generality of the foregoing, each party hereto further agrees to furnish state insurance authorities with any information or reports in connection with services provided under this Agreement which such authorities may request in order to ascertain whether the insurance operations of the Company are being conducted in a manner consistent with applicable law and regulations. 12.7. 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. 12.8. This Agreement or any of the rights and obligations hereunder may not be assigned by any party without the prior written consent of all parties hereto; provided, however, that the Adviser may assign this Agreement or any rights or obligations hereunder to any affiliate of or company under common control with the Adviser, if such assignee is duly licensed and registered to perform the obligations of the Adviser under this Agreement. 12.9. If requested by the Fund, the Underwriter or the Adviser, the Company shall furnish, or shall cause to be furnished, to the requesting party or its designee copies of the following documents: (a) the Company's annual statement (prepared under statutory accounting principles) and annual report (prepared under generally accepted accounting principles ("GAAP"), if any), as soon as practical and in any event within ninety (90) days after the end of each fiscal year; (b) the Company's quarterly statements (prepared under statutory accounting principles and GAAP, if any), as soon as practical and in any event within forty-five (45) days after the end of each quarterly period; (c) any financial statement, proxy statement, notice or report of the Company sent to stockholders and/or policyholders, as soon as practical after the delivery thereof to stockholders; (d) any registration statement (without exhibits) and financial reports of the Company filed with the SEC or any state insurance regulator, as soon as practical after the filing thereof; and (e) any other report submitted to the Company by independent accountants in connection with any annual, interim or special audit made by them of the books of the Company, as soon as practical after the receipt thereof. 12.10. Unless otherwise specifically provided in this Agreement, no provision of this Agreement may be amended or modified in any manner except by a written agreement executed by all parties. 22 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. Metropolitan Life Insurance Company By: ----------------------------------- Name: Title: VAN KAMPEN LIFE INVESTMENT TRUST By: ----------------------------------- Name: Title: VAN KAMPEN FUNDS INC. By: ----------------------------------- Name: Title: VAN KAMPEN ASSET MANAGEMENT INC. 23 By: ----------------------------------- Name: Title: 24 SCHEDULE A SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS Name of Separate Account and Form Number and Name of Date Established by Board of Directors Contract Funded by Separate Account - -------------------------------------- ----------------------------------- Registered Account(s): Registered Contract(s): Separate Account UL, 12/1988 MetFlex Unregistered Account(s): Unregistered Contract(s): Separate Account DCVL,11/2003] PPVL - Group and Individual SCHEDULE B PORTFOLIOS OF THE VAN KAMPEN LIFE INVESTMENT TRUST AVAILABLE UNDER THIS AGREEMENT [INSERT] - [Class I/II Shares] Separate Account DCVL Van Kampen LIT Government Portfolio - Class I Separate Account UL Van Kmpen LIT Government Portfolio - Class II B-1 SCHEDULE C PROXY VOTING PROCEDURES The following is a list of procedures and corresponding responsibilities for the handling of proxies and voting instructions relating to the Fund. The defined terms herein shall have the meanings assigned in the Participation Agreement except that the term "Company" shall also include the department or third party assigned by the Company to perform the steps delineated below. .. The proxy proposals are given to the Company by the Fund as early as possible before the date set by the Fund for the shareholder meeting to enable the Company to consider and prepare for the solicitation of voting instructions from Contract owners and to facilitate the establishment of tabulation procedures. At this time the Fund will inform the Company of the Record, Mailing and Meeting dates. This will be done verbally approximately two months before the shareholder meeting. .. Promptly after the Record Date, the Company will perform a "tape run", or other activity, which will generate the names, addresses and number of units which are attributed to each Contract owner/policyholder (the "Customer") as of the Record Date. Allowance should be made for account adjustments made after this date that could affect the status of the Customers' accounts as of the Record Date. Note: The number of proxy statements is determined by the activities described in this Step #2. The Company will use its best efforts to call in the number of Customers to the Fund, as soon as possible, but no later than two weeks after the Record Date. .. The Fund's Annual Report must be sent to each Customer by the Company either before or together with the Customers' receipt of voting instruction solicitation material. The Fund will provide the last Annual Report to the Company pursuant to the terms of Section 3.4 of the Participation Agreement to which this Schedule relates. .. The text and format for the Voting Instruction Cards ("Cards" or "Card") is provided to the Company by the Fund. The Company, at its expense, shall produce and personalize the Voting Instruction Cards. The Fund or its affiliate must approve the Card before it is printed. Allow approximately 2-4 Business Days for printing information on the Cards. Information commonly found on the Cards includes: . name (legal name as found on account registration) . address . fund or account number . coding to state number of units . individual Card number for use in tracking and verification of votes (already on Cards as printed by the Fund). C-2 (This and related steps may occur later in the chronological process due to possible uncertainties relating to the proposals.) .. During this time, the Fund will develop, produce and pay for the Notice of Proxy and the Proxy Statement (one document). Printed and folded notices and statements will be sent to Company for insertion into envelopes (envelopes and return envelopes are provided and paid for by the Company). Contents of envelope sent to Customers by the Company will include: . Voting Instruction Card(s) . One proxy notice and statement (one document) . return envelope (postage pre-paid by Company) addressed to the Company or its tabulation agent . "urge buckslip" - optional, but recommended (this is a small, single sheet of paper that requests Customers to vote as quickly as possible and that their vote is important; one copy will be supplied by the Fund.) . cover letter - optional; supplied by Company and reviewed and approved in advance by the Fund .. The above contents should be received by the Company approximately 3-5 Business Days before mail date. Individual in charge at Company reviews and approves the contents of the mailing package to ensure correctness and completeness. Copy of this approval sent to the Fund. .. Package mailed by the Company. * The Fund must allow at least a 15-day solicitation time to the Company as the shareowner. (A 5-week period is recommended.) Solicitation time is calculated as calendar days from (but not including,) the shareholder meeting, counting backwards. .. Collection and tabulation of Cards begins. Tabulation usually takes place in another department or another vendor depending on process used. An often used procedure is to sort Cards on arrival by proposal into vote categories of all yes, no, or mixed replies, and to begin data entry. Note: Postmarks are not generally needed. A need for postmark information would be due to an insurance company's internal procedure and has not been required by the Fund in the past. .. Signatures on Card checked against legal name on account registration that was printed on the Card. Note: For Example, if the account registration is under "John A. Smith, Trustee," then that is the exact legal name to be printed on the Card and is the signature needed on the Card. C-3 .. If Cards are mutilated, or for any reason are illegible or are not signed properly, they are sent back to Customer with an explanatory letter and a new Card and return envelope. The mutilated or illegible Card is disregarded and considered to be not received for purposes of vote tabulation. Any Cards that have been "kicked out" (e.g. mutilated, illegible) of the procedure are "hand verified," i.e., examined as to why they did not complete the system. Any questions on those Cards are usually remedied individually. .. There are various control procedures used to ensure proper tabulation of votes and accuracy of that tabulation. The most prevalent is to sort the Cards as they first arrive into categories depending upon their vote; an estimate of how the vote is progressing may then be calculated. If the initial estimates and the actual vote do not coincide, then an internal audit of that vote should occur. This may entail a recount. .. The actual tabulation of votes is done in units which is then converted to shares. (It is very important that the Fund receives the tabulations stated in terms of a percentage and the number of shares.) The Fund must review and approve tabulation format. .. Final tabulation in shares is verbally given by the Company to the Fund on the morning of the shareholder meeting not later than 10:00 a.m. Eastern time. The Fund may request an earlier deadline if reasonable and if required to calculate the vote in time for the shareholder meeting. .. A Certification of Mailing and Authorization to Vote Shares will be required from the Company as well as an original copy of the final vote. The Fund will provide a standard form for each Certification. .. The Company will be required to box and archive the Cards received from the Customers. In the event that any vote is challenged or if otherwise necessary for legal, regulatory, or accounting purposes, the Fund will be permitted reasonable access to such Cards. .. All approvals and "signing-off" may be done orally, but must always be followed up in writing. C-4 PARTICIPATION AGREEMENT Among VAN KAMPEN LIFE INVESTMENTS TRUST, VAN KAMPEN FUNDS INC., VAN KAMPEN ASSET MANAGEMENT INC. and Metropolitan Life Insurance Company Dated as of April 30, 2004_ TABLE OF CONTENTS ARTICLE I. Purchase and Redemption of Fund Shares.............................2 ARTICLE II. Representations and Warranties....................................4 ARTICLE III. Prospectuses, Reports to Shareholders and Proxy Statements; Voting...................................................6 ARTICLE IV. Sales Material and Information....................................8 ARTICLE V. Fees and Expenses..................................................9 ARTICLE VI. Diversification..................................................10 ARTICLE VIII. Indemnification................................................13 ARTICLE IX. Applicable Law...................................................18 ARTICLE X. Termination.......................................................18 ARTICLE XI. Notices..........................................................20 ARTICLE XII. Miscellaneous...................................................21 SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS...................................A-1 PORTFOLIOS OF THE VAN KAMPEN LIFE INVESTMENT TRUST AVAILABLE UNDER THIS AGREEMENT............................................B-1 PROXY VOTING PROCEDURES......................................................C-2 PARTICIPATION AGREEMENT By and Among WELLS FARGO VARIABLE TRUST And Metropolitan Life on Behalf of Separate Account DCVL and Separate Account UL And STEPHENS INC. THIS AGREEMENT, made and entered into this 30th day of April, 2004, by and among Metropolitan Life Insurance Company, a New York corporation (the "Company"), on its own behalf and on behalf of each separate account of the Company named in Exhibit A to this Agreement, as may be amended from time to time (each separate account, a "Separate Account"), and Wells Fargo Variable Trust, an open-end diversified management investment company organized under the laws of the State of Delaware (the "Trust"), and Stephens Inc., an Arkansas corporation (the "Underwriter"). WHEREAS, the Trust engages in business as an open-end diversified, management investment company and was established for the purpose of serving as the investment vehicle for separate accounts established for variable life insurance contracts and variable annuity contracts to be offered by insurance companies which have entered into participation agreements substantially similar to this Agreement ("Participating Insurance Companies"); and WHEREAS, beneficial interests in the Trust are divided into several series of shares, each representing the interest in a particular managed portfolio of securities and other assets (each, a "Fund"); and WHEREAS, an order from the U.S. Securities and Exchange Commission (the "SEC" or "Commission"), dated September 28, 1998 (File No. 812-11158), grants Participating Insurance Companies and variable annuity separate accounts and variable life insurance separate accounts relief from the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the Investment Company Act of 1940, as amended (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 Trust to be sold to and held by variable annuity separate accounts and variable life insurance separate accounts of both affiliated and unaffiliated Participating Insurance Companies and qualified pension and retirement plans ("Mixed and Shared Funding Order"), and WHEREAS, the Trust is registered as an open-end management investment company under the 1940 Act and its shares are registered under the Securities Act of 1933, as amended (the "1933 Act"); and WHEREAS, the Company has registered or will if required by law register certain variable annuity and variable life insurance contracts under the 1933 Act and named in Exhibit A to this Agreement, as it may be amended from time to time (the "Contracts"); and WHEREAS, the Separate Accounts are duly organized, validly existing segregated asset accounts, established by resolution of the Board of Directors of the Company under the insurance laws of the State of New York, to set aside and invest assets attributable to the Contracts; and -2- WHEREAS, the Company has registered where required by law the Separate Accounts as unit investment trusts under the 1940 Act; and WHEREAS, the Underwriter is registered as a broker-dealer with 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. (hereinafter "NASD"); WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company intends to purchase shares in the Funds named in Exhibit B on behalf of the Separate Accounts to fund the Contracts, and the Underwriter is authorized to sell such shares to unit investment trusts such as the Separate Accounts at net asset value; NOW, THEREFORE, in consideration of their mutual promises, the Company, the Trust, and the Underwriter agree as follows: ARTICLE I Sale of Trust Shares 1.1. The Underwriter agrees to sell to the Company those shares of the Trust which the Company orders on behalf of the Separate Accounts, executing such orders on a daily basis at the net asset value next computed after receipt and acceptance by the Trust or its designee of the order for the shares of the Trust. For purposes of this Section 1.1, the Company shall be the designee of the Trust for receipt of such orders from each Separate Account and receipt by such designee shall constitute receipt by the Trust; provided that (1) the Company's orders for Trust shares on any day are based exclusively on orders from owners of Contracts received by the Company before 4:00 pm Eastern Time on that day, and (2) the Trust receives notice of such order from the Company by 9:00 am Eastern Time on the next following Business Day. "Business Day" shall mean any day on -3- which the New York Stock Exchange is open for trading and on which the relevant Fund calculates its net asset value. 1.2. The Trust agrees to make its shares available indefinitely for purchase at the applicable net asset value per share by Participating Insurance Companies and their separate accounts on those days on which the Trust calculates its net asset value pursuant to rules of the SEC; provided, however, that the Board of Trustees of the Trust (hereinafter the "Trustees") 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 is, in the sole discretion of the Trustees, 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 any Fund. For purposes of this Section 1.2, the Trust's policy, as amended from time to time, regarding "market timing" (as defined in such policy) shall be enforced by the Company and that disclosure of the substance of the policy shall be made by the Company in the prospectuses for the Contracts. 1.3. The Trust and the Underwriter agree that shares of the Trust will be sold only to Participating Insurance Companies and their separate accounts, and to qualified pension and retirement plans. No shares of the Trust will be sold to the general public. 1.4. The Trust and the Underwriter will not sell Trust shares to any insurance company or separate account unless an agreement containing provisions substantially the same as Articles I, III, V, VII, and Section 2.6 of Article II of this Agreement are in effect to govern such sales. -4- 1.5. The Trust will not accept a purchase order from qualified pension or retirement plan if such purchase would make the plan shareholder an owner of 10 percent or more of the assets of a Fund unless such plan executes an agreement with the Trust governing participation in such Fund that includes the conditions set forth herein to the extent applicable. A qualified pension or retirement plan will execute an application containing an acknowledgment of this condition at the time of its initial purchase of shares of any Fund. Provided, however, that shares will not be sold to qualified pension and retirement plans unless the Trust adopts procedures reasonably designed to provide assurances that any such plan is in fact tax qualified at the time shares are purchased and when held. 1.6. The Trust agrees to redeem for cash, upon the Company's request, any full or fractional shares of the Trust held by the Company, executing such requests on a daily basis at the net asset value next computed after receipt and acceptance by the Trust or its designee of the request for redemption. For purposes of this Section 1.6, the Company shall be the designee of the Trust for receipt of requests for redemption from each Separate Account and receipt by such designee shall constitute receipt by the Trust; provided that (1) the Company's orders for redemption of Trust shares on any day are based exclusively on orders from owners of Contracts received by the Company before 4:00 pm Eastern Time on that day, and (2) the Trust receives notice of such order from the Company by 9:00 am Eastern Time on the next following Business Day. Payment shall be in federal funds transmitted by wire to the Company's account as designated by the Company in writing from time to time. 1.7. Each purchase, redemption, and exchange order placed by the Company shall be placed separately for each Fund and shall not be netted with respect to any Fund. However, with -5- respect to payment of the purchase price by the Company and of redemption proceeds by the Trust, the Company and the Trust shall net purchase and redemption orders with respect to each Fund and shall transmit one net payment for all Funds in accordance with Section 1.8. 1.8. The Company agrees that purchases and redemptions of Fund shares offered by the then current prospectus of the Fund shall be made in accordance with the provisions of such prospectus. The Company agrees that all net amounts available under the variable life insurance contracts with the form number(s) which are listed on Schedule A attached hereto and incorporated herein by this reference, as such Schedule A may be amended from time to time hereafter by mutual written agreement of all the parties hereto (the "Contracts") shall be invested in the Funds, in such other Funds managed by Wells Fargo Bank as may be mutually agreed to in writing by the parties hereto, or in the Company's general account, provided that such amounts may also be invested in an investment company other than the Trust. 1.9. In the event of net purchase, the Company shall pay for shares by 2:00 p.m. Eastern 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 in accordance with the terms of the then-current prospectus for the Trust. All such payments shall be in federal funds transmitted by wire. For purposes of Section 2.3 and Section 2.9, upon receipt by the Trust of the federal funds so wired, such funds shall cease to be the responsibility of the Company and shall become the responsibility of the Fund. -6- 1.10. Issuance and transfer of the Trust's shares will be by book entry only. Stock certificates will not be issued to the Company or any Separate Account. Purchase and redemption orders for Trust shares will be recorded in an appropriate title for each Separate Account or the appropriate subaccount of each Separate Account. 1.11. The Trust shall furnish notice as soon as reasonably practicable to the Company of any income, dividends, or capital gain distributions payable on the Trust's shares. The Company hereby elects to receive all such dividends and distributions as are payable on the Fund shares in the form of additional shares of that Fund. The Company reserves the right to revoke this election and to receive all such dividends and distributions in cash. The Trust shall notify the Company of the number of shares so issued as payment of such dividends and distributions. 1.12. The Trust shall make the net asset value per share for each Fund available to the Company on a daily basis 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 5:30 p.m. Pacific Time, each business day. 1.13. The Company agrees to comply with all applicable laws and regulations designed to prevent money "laundering," and if required by such laws or regulations, to share with the Trust information about individuals, entities, organizations and countries suspected of possible terrorist or money "laundering" activities in accordance with Section 314(b) of the USA Patriot Act. In particular, the Company agrees that: (a) as part of processing an application for a Contract it will verify the identity of applicants and, if an applicant is not a natural person, will verify the identity of prospective principal and beneficial owners submitting an application for a Contract, (b) as part of its ongoing compliance -7- with the USA Patriot Act it will from time to time reverify the identity of Contract owners, including the identity of principal and beneficial owners of Contracts held by non-natural persons, (c) as part of processing an application for a Contract it will verify that no applicant, including prospective principal or beneficial Contract owners is a "specially designated national" or a person from an embargoed or "blocked" country as indicated by the Office of Foreign Asset Control ("OFAC") list of such persons, (d) as part of its ongoing compliance with the USA Patriot Act it will from time to time reverify that no Contract owner, including an principal or beneficial Contract owner, is a "specially designated a national" or a person from an embargoed or "blocked" country as indicated by the OFAC list of such persons, (e) it will ensure that money tendered to the Trust as payment for Shares did not originate with a bank lacking a physical place of business (i.e., a "shell" bank) or from a country or territory named on the list of high-risk or non-cooperating countries or jurisdictions published by the Financial Action Task Force, and (f) if any of (a) through (e) become untrue, then the Trust or its agent(s) in compliance with the USA Patriot Act or Bank Secrecy Act, may seek authority to block one or more Contract owner accounts with the Company or one or more of the Company's accounts with the Trust. 1.14. The Trust agrees to comply with all applicable laws and regulations designed to prevent money "laundering," and if required by such laws or regulations, to share with the Company information about individuals, entities, organizations and countries suspected of possible terrorist or money "laundering" activities in accordance with Section 314(b) of the USA Patriot Act. ARTICLE II Representations and Warranties -8- 2.1. The Company represents and warrants that the Contracts are or will be registered under the 1933 Act, unless exempt therefrom, and that the Contracts will be issued and sold in compliance with all applicable federal and state laws and that the sale of the Contracts shall comply in all material respects with state insurance suitability requirements. The Company further represents and warrants that: (a) it is an insurance company duly organized and in good standing under applicable law; (b) it has legally and validly established each Separate Account as a segregated asset account under applicable state law and has registered each Separate Account as a unit investment trust in accordance with the provisions of the 1940 Act, unless exempt therefrom, to serve as segregated investment accounts for the Contracts; and (c) it will maintain such registration, if required, for so long as any Contracts are outstanding. The Company shall amend any registration statement under the 1933 Act for the Contracts and any registration statement under the 1940 Act for the Separate Accounts 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 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 Section 2.12 and Article VI hereof, the Company represents that: (a) the Contracts are currently and at the time of issuance will be treated as life insurance, endowment, or annuity contracts under applicable provisions of the Internal Revenue Code, (b) for so long as the Separate Accounts hold shares of the Trust it will make every effort to maintain such treatment, (c) it will make every effort to comply with any applicable requirements of the Code or Treasury Regulations as they apply to the -9- Separate Accounts or the Contracts (d) it will notify the Trust and the Underwriter immediately upon having a reasonable basis for believing that the Contracts will not be treated as life insurance, endowment, or annuity contracts under applicable provisions of the Code, (e) it will notify the Trust and the Underwriter immediately upon having a reasonable basis for believing that the failure of the Company, the Separate Accounts or the Contracts to comply with any applicable requirements of the Code or Treasury Regulations will render a Fund ineligible, or jeopardize a Fund's eligibility, for "look-through" treatment under Treasury Regulation 1.817-5(f). 2.3. The Company represents and warrants that all of its directors, officers, employees, investment advisers, and other individuals/entities dealing with the money and/or securities of the Trust are covered by a blanket fidelity bond or similar coverage in an amount not less than $5 million. The aforesaid includes coverage for larceny and embezzlement and is issued by a reputable bonding company. The Company agrees that any amounts received under such bond in connection with claims that derive from arrangements described in this Agreement will be held by the Company for the benefit of the Trust. The Company agrees to see that this bond or another bond containing these provisions is always in effect, and agrees to notify the Trust and the Underwriter in the event that such coverage no longer applies. 2.4. The Trust represents and warrants that Trust shares sold pursuant to this Agreement shall be registered under the 1933 Act and duly authorized for issuance in accordance with applicable law, and that the Trust is and shall remain registered under the 1940 Act for as long as the Trust shares are sold. The Trust shall amend the registration statement for its shares under the 1933 and the 1940 Acts from time to time as required in order to effect -10- 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 advisable by the Trust or the Underwriter. 2.5. The Trust represents that the Trust and each Fund is currently qualified as a Regulated Investment Company under Subchapter M of the Internal Revenue Code, and that it will make every effort to maintain such qualification (under Subchapter M or any successor or similar provision). 2.6. The Trust makes no representations as to whether any aspect of its operations, including but not limited to, investment policies, fees and expenses, complies with the insurance and other applicable laws of the various states, except that the Trust represents that it is and shall at all times remain in compliance with the laws of the state of Delaware to the extent required to perform this Agreement. 2.7. The Trust represents and warrants that to the extent that it decides to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Trust undertakes to have its Board of Trustees, a majority of whom are not interested persons of the Trust, formulate and approve any plan under Rule 12b-1 ("Rule 12b-1 Plan") to finance distribution expenses. The Trust shall notify the Company immediately upon determining to finance distribution expenses pursuant to Rule 12b-1. 2.8. The Trust represents that it is lawfully organized and validly existing under the laws of Delaware and that it does and will comply with applicable provisions of the 1940 Act. 2.9. The Trust represents and warrants that it and all of its trustees, officers, employees and other individuals/entities having access to the funds and/or securities of the Trust are and continue to be at all times covered by a blanket fidelity bond or similar coverage for the -11- benefit of the Trust 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. 2.10. The Underwriter represents and warrants that it is a member in good standing of the NASD and is registered as a broker-dealer with the SEC. The Underwriter further represents that it will sell and distribute the Trust's shares in accordance with all applicable federal and state securities laws, including without limitation the 1933 Act, the 1934 Act, and the 1940 Act. 2.11. The Underwriter represents and warrants that the Trust's investment manager, Wells Fargo Bank, is exempt from registration as an investment adviser under all applicable federal and state securities laws and that the investment manager will perform its obligations to the Trust in accordance with any applicable state and federal securities laws. 2.12. The Trust and the Underwriter represents (I) that the Trust and each Fund qualify as a "look-through" entity with the meaning of Treasury Regulation Section 1.817-5(f) entity, (ii) it will notify the Company upon having reasonable basis for believing that the Trust or any Fund does not qualify for "look-through" treatment under Treasury Regulation Section 1.817-5(f) and for so long as the Company owns shares, it will make every effort to maintain such look-through treatment. ARTICLE III Prospectuses and Proxy Statements; Voting 3.1. The Underwriter shall provide the Company, at the Company's expense, with as many copies of the Trust's current prospectus as the Company may reasonably request. If -12- requested by the Company in lieu thereof, the Trust shall provide such documentation including a final copy of a current prospectus set in type at the Trust's expense and other assistance as is reasonably necessary in order for the Company at least annually (or more frequently if the Trust's prospectus is amended more frequently) to have the new prospectus for the Contracts and the Trust's new prospectus printed together in one document; in such case at the Company's expense. 3.2. The Trust's prospectus shall state that the statement of additional information for the Trust is available from the Underwriter (or, in the Trust's discretion, the Prospectus shall state that such statement is available from the Trust). 3.3. The Trust, at its expense, shall provide the Company with copies of its proxy material, if any, reports to shareholders and other communications to shareholders in such quantity as the Company shall reasonably require and the Company shall bear the costs of distributing them to existing Contract owners or participants. 3.4. The Trust hereby notifies the Company that it is appropriate to include in the prospectuses or offering memoranda or other disclosure document pursuant to which the Contracts are offered disclosure regarding the potential risks of mixed and shared funding. 3.5. To the extent required by law the Company shall: (1) solicit voting instructions from Contract owners or participants; (2) vote the Trust shares held in each Separate Account in accordance with instructions received from Contract owners or participants; and (3) vote Trust shares held in each Separate Account for which no timely instructions have been received, in the same proportion as -13- Trust shares of such Fund for which instructions have been received from the Company's Contract owners or participants; for so long as and to the extent that the 1940 Act requires pass-through voting privileges for variable contract owners. The Company reserves the right to vote Trust 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 participating in the Trust calculates voting privileges in a manner consistent with other Participating Insurance Companies and as required by the Mixed and Shared Funding Order. The Trust will notify the Company of any changes of interpretation or amendment to the Mixed and Shared Funding Order. 3.6. The Trust will comply with all provisions of the 1940 Act requiring voting by shareholders, and in particular, the Trust will either provide for annual meetings (except to the extent that the Commission may interpret Section 16 of the 1940 Act not to require such meetings) or comply with Section 16(c) of the 1940 Act (although the Trust 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) of the 1940 Act. Further, the Trust will act in accordance with the Commission's interpretation of the requirements of Section 16(a) with respect to periodic elections of Trustees and with whatever rules the Commission may promulgate with respect thereto. ARTICLE IV Sales Material and Information 4.1. The Company shall furnish, or shall cause to be furnished, to the Trust or the Underwriter, each piece of sales literature or other promotional material in which the Trust or the Trust's investment manager, sub-advisers or Underwriter is named, at least -14- five business days prior to its use. No such material shall be used if the Trust or the Underwriter reasonably objects in writing to such use within five business days after receipt of such material. 4.2. The Company represents and agrees that sales literature for the Contracts prepared by the Company or its affiliates will be consistent with every law, rule, and regulation of any regulatory agency or self-regulatory agency that applies to the Contracts or to the sale of the Contracts, including, but not limited to, NASD Conduct Rule 2210 and IM-2210-2 thereunder. 4.3. The Company shall not give any information or make any representations or statements on behalf of the Trust or concerning the Trust in connection with the sale of the Contracts other than the information or representations contained in the registration statement or prospectus for the Trust shares as such registration statement and prospectus 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 or by the Underwriter, except with the permission of the Trust or the Underwriter. The Trust and the Underwriter agree 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, the Underwriter, or any of their affiliates which is intended for use by brokers or agents selling the Contracts (i.e., information that is not intended for distribution to Contract owners or prospective Contract owners) is so used, and neither the Trust, the Underwriter, 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 -15- the Underwriter. The parties hereto agree that this Section 4.3 is not intended to designate nor otherwise imply that the Company is an underwriter or distributor of the Trust's shares. 4.4. The Trust or the Underwriter 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, its Separate Account, or the Contracts are named, at least five business days prior to its use. No such material shall be used if the Company reasonably objects in writing to such use within five business days after receipt of such material. 4.5. The Trust represents and agrees that sales literature for the Trust prepared by the Trust or its affiliates in connection with the sale of the Contracts will be consistent with every law, rule, and Regulation of any regulatory agency or self regulatory agency that applies to the Trust or to the sale of Trust shares, including, but not limited to, NASD Conduct Rule 2210 and IM-2210-2 thereunder. 4.6. The Trust and the Underwriter shall not give any information or make any representations on behalf of the Company or concerning the Company, each Separate Account, or the Contracts other than the information or representations contained in a registration statement or prospectus for the Contracts, as such registration statement and prospectus may be amended or supplemented from time to time, or in published reports for each Separate Account which are in the public domain or approved by the Company for distribution to Contract owners or participants, or in sales literature or other promotional material approved by the Company, except with the permission of the Company. The Company agrees to respond to any request for approval on a prompt and timely basis. The Trust and the Underwriter shall mark information produced by or on -16- behalf of the Trust "FOR BROKER USE ONLY" which is intended for use by brokers or agents selling the Contracts (i.e., information that is not intended for distribution to Contract owners or prospective Contract owners), and neither the Company nor any of its affiliates shall be liable for any losses, damages, or expenses arising on account of the use by brokers of such information with third parties in the event that is not so marked. 4.7. The Trust will provide to the Company at least one complete copy of all registration statements, prospectuses, statements of additional information, reports, proxy statements, sales literature and other promotional materials, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to the Trust or its shares, contemporaneously with the filing of such document with the SEC or other regulatory authorities. 4.8. The Company will provide to the Trust at least one complete copy of all registration statements, prospectuses, statements of additional information, reports, solicitations for voting instructions, sales literature and other promotional materials, applications for exemptions, requests for no action letters, and all amendments to any of the above, that relate to the Contracts or each Separate Account, contemporaneously with the filing of such document with the SEC or other regulatory authorities. The Company shall promptly inform the Trust of the results of any examination by the SEC (or other regulatory authorities) that relates to the Contracts, and the Company shall provide the Trust with a copy of relevant portions of any "deficiency letter" or other correspondence or written report regarding any such examination. 4.9. For purposes of this Article IV, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for -17- use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, 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 NASD Conduct Rules, the 1940 Act or the 1933 Act. ARTICLE V Fees and Expenses 5.1. The Trust and Underwriter shall pay no fee or other compensation to the Company under this Agreement, except subject to a Rule 12b-1 Plan to finance distribution expenses, in which case, subject to obtaining any required exemptive orders or other regulatory approvals, the Underwriter may make payments to the Company or to the underwriter for the Contracts if and in amounts agreed to by the Underwriter in writing. Each party, however, shall, in accordance with the allocation of expenses specified in this Agreement, 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 Separate Accounts. 5.2. All expenses incident to performance by the Trust of this Agreement shall be paid by the Trust to the extent permitted by law. All Trust shares will be duly authorized for -18- issuance and registered in accordance with applicable federal law and to the extent deemed advisable by the Trust, in accordance with applicable state law, prior to sale. The Trust shall bear the expenses for the cost of registration and qualification of the Trust's shares, preparation and filing of the Trust's prospectus and registration statement, Trust proxy materials and reports, printing proxy materials and annual reports for existing Contract owners, setting in type the Trust's prospectuses, the preparation of all statements and notices required by any federal or state law, all taxes on the issuance or transfer of the Trust's shares, and any expenses permitted to be paid or assumed by the Trust pursuant to any Rule 12b-1 Plan under the 1940 Act duly adopted by the Trust. 5.3. The Company shall bear the expenses of printing and distributing the Trust prospectuses and proxy statements and shareholder reports. The Company shall bear all expenses associated with the registration, qualification, and filing of the Contracts under applicable federal securities and state insurance laws; the cost of preparing, printing, and distributing the Contracts' prospectuses and statements of additional information; and the cost of printing and distributing annual individual account statements for Contract owners as required by state insurance laws. -19- ARTICLE VI Diversification 6.1. The Trust represents and warrants that the Trust and each Fund will at all times invest it's assets in such a manner as to ensure that the Contracts will be treated as variable contracts under the Internal Revenue Code and the regulations issued thereunder. Without limiting the scope of the foregoing, the Trust will comply with Section 817(h) of the Internal Revenue Code and Treasury Regulation 1. 817-5, relating to the diversification requirements for variable annuity, endowment, or life insurance contracts and any amendments or other modifications to such Section or Regulations or successors thereto. The Trust agrees to provide the Company with a certificate of compliance for each Fund of the Trust with Section 817(h) of the Code, and such certificate will be sent to the Company no later than thirty days following the end of each calendar quarter. ARTICLE VII Potential Conflicts 7.1. If and to the extent that the Trust engages in mixed and shared funding as contemplated by exemptive relief provided by the SEC and applicable to the Trust, this Article VII shall apply. 7.2. The Board of Trustees of the Trust (the "Trust Board") will monitor the Trust for the existence of any material irreconcilable conflict among the interests of the Contract owners of all separate accounts investing in the Trust. A material irreconcilable conflict may arise for a variety of reasons, including: (a) an action by any state insurance regulatory authority; (b) a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the -20- manner in which the investments of any Fund are being managed; (e) a difference in voting instructions given by variable annuity contract owners, variable life insurance contract owners, and trustees of qualified pension or retirement plans; (f) a decision by a Participating Insurance Company to disregard the voting instructions of Contract owners; or (g) if applicable, a decision by a qualified pension or retirement plan to disregard the voting instructions of plan participants. The Trust Board shall promptly inform the Company if it determines that a material irreconcilable conflict exists and the implications thereof. A majority of the Trust Board shall consist of Trustees who are not "interested persons" of the Trust. 7.3. The Company has reviewed a copy of the Mixed and Shared Funding Order, and in particular, has reviewed the conditions to the requested relief set forth therein. The Company agrees to assist the Trust Board in carrying out its responsibilities under the Mixed and Shared Funding Order, by providing the Trust Board with all information reasonably necessary for the Trust Board to consider any issues raised. This includes, but is not limited to, an obligation by the Company to inform the Trust Board whenever Contract owner voting instructions are disregarded. The Trust Board shall record in its minutes or other appropriate records, all reports received by it and all action with regard to a conflict. 7.4. If it is determined by a majority of the Trust Board, or a majority of its disinterested Trustees, that a material irreconcilable conflict exists, the Company shall, at its expense and to the extent reasonably practicable (as determined by a majority of the disinterested Trustees), take whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, up to and including: (a) withdrawing the assets allocable to some -21- or all of the Separate Accounts from the relevant Fund and reinvesting such assets in a different investment medium, including another Fund, or in the case of insurance company participants submitting the question as to whether such segregation should be implemented by a vote of all affected Contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., annuity Contract owners or life insurance 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. 7.5. If the Company's disregard of voting instructions could conflict with the majority of Contract owner voting instructions, and the Company's judgment represents a minority position or would preclude a majority vote, the Company may be required, at the Trust's election, to withdraw the Separate Account's investment in the Trust and terminate this Agreement with respect to such Separate Account, and no charge or penalty will be imposed as a result of such withdrawal. Any such withdrawal and termination shall take place within 30 days after written notice is given that this provision is being implemented, subject to applicable law but in any event consistent with the terms of the Mixed and Shared Funding Order. Until such withdrawal and termination is implemented, the Underwriter and the Trust shall continue to accept and implement orders by the Company for the purchase and redemption of shares of the Trust. Such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of disinterested Trustees. -22- 7.6. If a particular state insurance regulator's decision applicable to the Company conflicts with the majority of other state insurance regulators, then the Company will withdraw the Separate Account's investment in the Trust and terminate this Agreement with respect to such Separate Account within 30 days after the Trust informs the Company of a material irreconcilable conflict, subject to applicable law but in any event consistent with the terms of the Mixed and Shared Funding Order. Until such withdrawal and termination is implemented, the Underwriter and the Trust shall continue to accept and implement orders by the Company for the purchase and redemption of shares of the Trust. Such withdrawal and termination shall be limited to the extent required by the foregoing material irreconcilable conflict as determined by a majority of disinterested Trustees. 7.7. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority of the disinterested members of the Trust Board shall determine whether any proposed action adequately remedies any material irreconcilable conflict, but in no event will the Trust or the Underwriter be required to establish a new funding medium for the Contracts. The Company shall not be required by Section 7.3 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 material irreconcilable conflict. 7.8. The Trust Board's determination of the existence of a material irreconcilable conflict and its implication will be made known in writing to the Company. 7.9. The Company shall at least annually submit to the Trust Board such reports, materials, or data as the Trust Board may reasonably request so that the Trustees may fully carry out the duties imposed upon the Trust Board by the Mixed and Shared Funding Order, and -23- said reports, materials and data shall be submitted more frequently if deemed appropriate by the Trust Board. 7.10. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3(T) 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 Order) on terms and conditions materially different from those contained in the Mixed and Shared Funding Order, the Trust and/or the Company, as appropriate, shall take such steps as may be necessary 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. ARTICLE VIII Indemnification 8.1. Indemnification By The Company (a) The Company agrees to indemnify and hold harmless the Trust, the Underwriter, and each of the Trust's or the Underwriter's directors, officers, employees, or agents and each person, if any, who controls the Trust or the Underwriter within the meaning of such terms under the federal securities laws (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 litigation (including 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 expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of the Trust's shares or the Contracts and: -24- (1) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the registration statements, prospectuses or statements of additional information for the Contracts or contained in the Contracts, or sales literature or other promotional material 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 in light of the circumstances in which they were made; provided that this agreement to indemnify shall not apply as to any indemnified party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Company by or on behalf of the Trust for use in the registration statement, prospectus or statement of information for the Contracts, or in the Contracts or sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Contracts or Trust shares; or (2) arise out of or as a result of statements or representations by or on behalf of the Company (other than statements or representations contained in the Trust registration statement, Trust prospectus or sales literature or other promotional material of the Trust not supplied by the Company or persons under its control) or wrongful conduct of the Company or persons under its control, with respect to the sale or distribution of the Contracts or Trust shares; or (3) arise out of any untrue statement or alleged untrue statement of a material fact contained in the Trust's registration statement, prospectus, statement of additional information, or sales literature or other promotional material 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 statements therein not misleading in light of the circumstances in which they were made, if such a statement or omission was made in reliance upon and in conformity with information furnished to the Trust by or on behalf of the Company or persons under its control; or (4) arise as a result of any failure by the Company to provide the services and furnish the materials or to make any payments under the terms of this Agreement; or (5) arise out of any material breach of any representation and/or warranty made by the Company in this Agreement or arise out of -25- or result from any other material breach by the Company of this Agreement; except to the extent provided in Sections 8.1(b) and 8.4 hereof. This indemnificationshall be in addition to any liability which the Company may otherwise have. b) No party shall be entitled to indemnification by the Company if such loss, claim, damage, liability or litigation is due to the willful misfeasance, bad faith, gross negligence, or reckless disregard of duty by the party seeking indemnification. (c) The indemnified parties will promptly notify the Company of the commencement of any litigation or proceedings against them in connection with the issuance or sale of the Trust shares or the Contracts or the operation of the Trust. (d) The Company will take all necessary steps to cure any failure by the Company, the Separate Accounts or the Contracts to comply with any applicable requirements of the Code or Treasury Regulations that render a Fund ineligible, or jeopardize a Fund's eligibility for "look through" treatment under Treasury Regulation 1.817-5(f), provided such failure was not the result of any failure by a Fund to comply with applicable rules. 8.2. Indemnification By the Underwriter (a) The Underwriter agrees to indemnify and hold harmless the Company and each of its directors, officers, employees, or agents and each person, if any, who controls the Company within the meaning of such terms under the federal securities laws (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 Underwriter), or litigation (including reasonable legal and other -26- 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 expenses (or actions in respect thereof) or settlements are related to the sale or acquisition of the Trust's shares or the Contracts and: (1) 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 Trust, 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 statements therein not misleading in light of the circumstances in which they were made; provided that this agreement to indemnify shall not apply as to any indemnified party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Underwriter or the Trust 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 of the Trust (or any amendment or supplement thereto) or otherwise for use in connection with the sale of the Contracts or Trust shares; or (2) arise out of or as a result of statements or representations (other than statements or representations contained in the Contracts or in the Contract or Trust registration statement, the Contract or Trust prospectus, statement of additional information, or sales literature or other promotional material for the Contracts or of the Trust not supplied by the Underwriter or persons under the control of the Underwriter) or wrongful conduct of the Underwriter or persons under the control of the Underwriter, with respect to the sale or distribution of the Contracts or Trust shares; or (3) arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, statement of additional information, or sales literature or other promotional material covering the Contracts (or any amendment thereof or supplement thereto), or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement or statements therein not misleading in light of the circumstances in which they were made, -27- if such statement or omission was made in reliance upon and in conformity with information furnished to the Company by or on behalf of the Underwriter or persons under the control of the Underwriter; or (4) arise as a result of any failure by the Underwriter to provide the services and furnish the materials under the terms of this Agreement (including a failure, whether unintentional or in good faith or otherwise, to comply with the diversification requirements and procedures related thereto specified in Article VI of this Agreement); or (5) arise out of or result from any material breach of any representation and/or warranty made by the Underwriter in this Agreement or arise out of or result from any other material breach of this Agreement by the Underwriter; except to the extent provided in Sections 8.2(b) and 8.4 hereof. This indemnification shall be in addition to any liability which the Underwriter may otherwise have. (b) No party shall be entitled to indemnification by the Underwriter if such loss, claim, damage, liability or litigation is due to the willful misfeasance, bad faith, gross negligence, or reckless disregard of duty by the party seeking indemnification. 8.3. (c) The indemnified parties will promptly notify the Underwriter of the commencement of any litigation or proceedings against them in connection with the issuance or sale of the Contracts or the operation of each Separate Account. Indemnification By the Trust (a) The Trust agrees to indemnify and hold harmless the Company and each of its directors, officers, employees, or agents and each person, if any, who controls the Company within the meaning of such terms under the federal securities laws (collectively, the "indemnified parties" for purposes of this Section 8.3) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the -28- written consent of the Trust), or litigation (including 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 expenses (or actions in respect thereof) or settlements are related to the operations of the Trust and: (1) arise as a result of any failure by the Trust to provide the services and furnish the materials under the terms of this Agreement (including a failure, whether unintentional or in good faith or otherwise, to comply with the diversification requirements and procedures related thereto specified in Article VI of this Agreement); or (2) arise out of or result from any material breach of any representation and/or warranty made by the Trust in this Agreement or arise out of or result from any other material breach of this Agreement by the Trust; except to the extent provided in Sections 8.3(b) and 8.4 hereof. This indemnification shall be in addition to any liability which the Trust may otherwise have. (b) No party shall be entitled to indemnification by the Trust if such loss, claim, damage, liability or litigation is due to the willful misfeasance, bad faith, gross negligence, or reckless disregard of duty by the party seeking indemnification. (c) The indemnified parties will promptly notify the Trust of the commencement of any litigation or proceedings against it in connection with the issuance or sale of the Contracts or the operation of each Separate Account. 8.4. Indemnification Procedure Any person obligated to provide indemnification under this Article VIII ("indemnifying party" for the purpose of this Section 8.4) shall not be liable under the indemnification provisions of this Article VIII with respect to any claim made against a party entitled to -29- indemnification under this Article VIII ("indemnified party" for the purpose of this Section 8.4) unless such indemnified party shall have notified the indemnifying party in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon such indemnified party (or after such party shall have received notice of such service on any designated agent), but failure to notify the indemnifying party of any such claim shall not relieve the indemnifying party from any liability which it may have to the indemnified party against whom such action is brought under the indemnification provision of this Article VIII, except to the extent that the failure to notify results in the failure of actual notice to the indemnifying party and such indemnifying party is damaged solely as a result of failure to give such notice. In case any such action is brought against the indemnified party, the indemnifying party will be entitled to participate, at its own expense, in the defense thereof. The indemnifying party also shall be entitled to assume the defense thereof, with counsel satisfactory to the party named in the action. After notice from the indemnifying party to the indemnified party of the indemnifying party's election to assume the defense thereof, the indemnified party shall bear the fees and expenses of any additional counsel retained by it, and the indemnifying party will not be liable to such party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation, unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be -30- inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. 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 State of Delaware without giving effect to conflicts of laws provisions thereof. 9.2. This Agreement 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 (including, but not limited to, the Mixed and Shared Funding Order) and the terms hereof shall be interpreted and construed in accordance therewith. ARTICLE X Termination 10.1. This Agreement shall terminate automatically in the event of its assignment, unless made with written consent of each party; or: (a) at the option of any party upon six months advance written notice to the other parties; or -31- (b) at the option of the Company if shares of the Funds delineated in Exhibit B are not reasonably available to meet the requirements of the Contracts as determined by the Company; or (c) at the option of the Trust upon institution of formal proceedings against the Company by the NASD, the SEC, the insurance commission of any state or any other regulatory body, which would have a material adverse effect on the Company's ability to perform its obligations under this Agreement; or (d) at the option of the Company upon institution of formal proceedings against the Trust or the Underwriter by the NASD, the SEC, or any state securities or insurance department or any other regulatory body, which would have a material adverse effect on the Underwriter's or the Trust's ability to perform its obligations under this Agreement; or (e) at the option of the Company or the Trust upon a determination by a majority of the Trust Board, or a majority of the disinterested Trustees, that a material irreconcilable conflict exists among the interests of (i) all contract owners of variable insurance products of all separate accounts, or (ii) the interests of the Participating Insurance Companies investing in the Trust as delineated in Article VII of this Agreement; or (f) at the option of the Company if the Trust or any Fund ceases to qualify as a Regulated Investment Company under Subchapter M of the Internal Revenue Code, or under any successor or similar provision, or if the Company reasonably believes that the Trust may fail to so qualify; or -32- (g) at the option of the Company if the Trust or any Fund fails to meet the diversification requirements specified in Article VI hereof or fails to qualify as a look-through entity within the meaning of Treasury Regulation Section 1.817-5(f) if the Company reasonably believes that the Trust will fail to meet such requirements; or (h) at the option of any party to this Agreement, upon another party's material breach of any provision of this Agreement; or (i) at the option of the Company, if the Company determines in its sole judgment exercised in good faith, that either the Trust or the Underwriter has suffered a material adverse change in its business, operations, or financial condition since the date of this Agreement or is the subject of material adverse publicity which is likely to have a material adverse impact upon the business and operations of the Company or the Contracts (including the sale thereof); or (j) at the option of the Trust or Underwriter, if the Trust or Underwriter respectively, shall determine in its sole judgment exercised in good faith, that the Company has suffered a material adverse change in its business, operations, or financial condition since the date of this Agreement or is the subject of material adverse publicity which is likely to have a material adverse impact upon the business and operations of the Trust or Underwriter; or (k) subject to the Trust's compliance with Article VI hereof, at the option of the Trust in the event any of the Contracts are not issued or sold in accordance with applicable requirements of federal and/or state law. Termination shall be effective immediately upon such occurrence without notice. 10.2. Notice Requirement -33- (a) In the event that any termination of this Agreement is based upon the provisions of Article VII, such prior written notice shall be given in advance of the effective date of termination as required by such provisions. (b) In the event that any termination of this Agreement is based upon the provisions of Sections 10.l(b) - (d) or 10.1(f) - (h), prompt written notice of the election to terminate this Agreement for cause shall be furnished by the party terminating the Agreement to the non-terminating parties, with said termination to be effective upon receipt of such notice by the non-terminating parties. (c) In the event that any termination of this Agreement is based upon the provisions of Sections 10.1(i) or 10. l(j), prior written notice of the election to terminate this Agreement for cause shall be furnished by the party terminating this Agreement to the nonterminating parties. Such prior written notice shall be given by the party terminating this Agreement to the non-terminating parties at least 30 days before the effective date of termination. 10.3. It is understood and agreed that the right to terminate this Agreement pursuant to Section 10.1(a) may be exercised for any reason or for no reason. 10.4. Effect of Termination (a) Notwithstanding any termination of this Agreement pursuant to Section 10.1 of this Agreement and subject to Section 1.3 of this Agreement, the Company may require the Trust and the Underwriter to continue to make available additional shares of the Trust for so long after the termination of this Agreement as the Company desires pursuant to the terms and conditions of this Agreement as provided in paragraph (b) below, for all Contracts in effect on the effective date of termination of this -34- Agreement (hereinafter referred to as "Existing Contracts"). Specifically, without limitation, the owners of the Existing Contracts shall be permitted to reallocate investments in the Trust, redeem investments in the Trust and/or invest in the Trust upon the making of additional purchase payments under the Existing Contracts. The parties agree that this Section 10.4 shall not apply to any terminations under Article VII and the effect of such Article VII terminations shall be governed by Article VII of this Agreement. (b) If shares of the Trust continue to be made available after termination of this Agreement pursuant to this Section 10.4, the provisions of this Agreement shall remain in effect except for Section 10.l(a) and thereafter the Trust, the Underwriter, or the Company may terminate the Agreement, as so continued pursuant to this Section 10.4, upon written notice to the other party, such notice to be for a period that is reasonable under the circumstances but need not be for more than 90 days. 10.5 The Company shall not redeem Fund shares attributable to the Contracts (as opposed to Fund shares attributable to the Company's assets held in the Account) except (i) as necessary to implement Contract Owner initiated or approved transactions, or (ii) as required by state and/or federal laws or regulations or judicial or other legal precedent of general application (hereinafter referred to as a "Legally Required Redemption"). Upon request, the Company will promptly furnish to the Trust and the Underwriter the opinion of counsel for the Company (which counsel shall be reasonably satisfactory to the Trust and the Underwriter) to the effect that any redemption pursuant to clause (ii) above is a Legally Required Redemption. Furthermore, except in cases where permitted under the terms of the Contracts, the Company shall not prevent Contract Owners from allocating -35- payments to a Fund that was otherwise available under the Contracts without first giving the Trust or the Underwriter 90 days notice of its intention to do so. ARTICLE XI Notices Any notice shall be deemed duly given only if sent by hand, evidenced by written receipt or by certified mail, return receipt requested, 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. All notices shall be deemed given three business days after the date received or rejected by the addressee. If to the Trust: Wells Fargo Variable Trust 111 Center Street Little Rock, AK 72201 Attention: Richard H. Blank, Secretary Copy: C. David Messman, Esq. Vice President & Senior Counsel Wells Fargo Bank Legal Department 633 Folsom Street - 7th Floor San Francisco, CA 94107-3600 If to the Company: Gregg Hirsch, Esq Associate General Counsel, MetLife 1 MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Copy: Sabrina Model Director Product Development, MetLife SBR 485 B US Highway One South, Suite 420 Iselin, NJ 08830 -36- If to the Underwriter: Stephens Inc. 111 Center Street Little Rock, AK 72201 Attention: Richard H. Blank, Vice President -37- ARTICLE XII Miscellaneous 11.1. All persons dealing with the Trust must look solely to the property of the Trust for the enforcement of any claims against the Trust as neither the Trustees, officers, agents or shareholders assume any personal liability for obligations entered into on behalf of the Trust. 11.2. Subject to law and regulatory authority, each party hereto shall treat as confidential all information reasonably identified as such in writing by any other party hereto (including without limitation the names and addresses of the owners of the Contracts) and, except as contemplated by this Agreement, shall not disclose, disseminate, or utilize such confidential information until such time as it may come into the public domain without the express prior written consent of the affected party. 11.3. The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect. 11.4. This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument. 11.5. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby. 11.6. This Agreement shall not be assigned by any party hereto without the prior written consent of all the parties. 11.7. Each party hereto shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the NASD, and state insurance -38- regulators) and shall permit each other and 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. 11.8. Each party represents that the execution and delivery of this Agreement and the consummation of the transactions contemplated herein have been duly authorized by all necessary corporate or trust action, as applicable, by such party and when so executed and delivered this Agreement will be the valid and binding obligation of such party enforceable in accordance with its terms. 11.9. The parties to this Agreement may amend the schedules to this Agreement from time to time to reflect changes in or relating to the Contracts, the Separate Accounts or the Funds of the Trust. 11.10. The Trust has filed a Certificate of Trust with the Secretary of State of The State of Delaware. The Company acknowledges that the obligations of or arising out of the Trust's Declaration of Trust 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 Fund 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 Fund on whose behalf the Trust has executed this instrument. The Company also agrees that the obligations of each Fund hereunder shall be several and not joint, in accordance with its proportionate interest hereunder, and the Company agrees not to proceed against any Fund for the obligations of another Fund. -39- 11.11. Except as otherwise expressly provided in this Agreement, neither the Trust nor the underwriter 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 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 the Underwriter, or any variation of any such trademark, trade name, service mark or logo, without the prior consent of either the Trust or of the Underwriter, as appropriate, the granting of which shall be at the sole option of the Trust or of the Underwriter, as applicable. -40- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. Wells Fargo Variable Trust By: ------------------------------- Name: C. David Messman Title: Secretary Metropolitan Life Insurance Company By: ------------------------------- Name: John Ryan Title: Vice President Stephens Inc. By: ------------------------------- Name: Richard H. Blank Title: EXHIBIT A Separate Accounts and Contracts Subject to the Participation Agreement Contracts: MetLife Group Private Placement Variable Life MetLife Individual Private Placement Variable Life MetLife MetFlex Registered Variable Life Separate Accounts: Separate Account DCVL Separate Account UL -42- EXHIBIT B Funds Subject to the Participation Agreement Variable Trust Total Return Bond Variable Trust Money Market Variable Trust Asset Allocation Variable Trust Growth Variable Trust Large Company Growth Variable Trust Equity Income EX-99.L 4 dex99l.txt OPINION LETTER OF SEBASTIAN JANSSEN EXHIBIT L April 26, 2004 Metropolitan Life Insurance Company One Madison Avenue New York, NY 10010 Dear Sirs: This opinion is furnished in connection with the filing of Post-Effective Amendment No. 16 to Registration Statement No. 33-57320 on Form S-6 ("Registration Statement") which covers premiums received under Flexible Premium Variable Life Insurance Policies ("Policies") offered by Metropolitan Life Insurance Company ("MLIC") in each State where they have been approved by appropriate State insurance authorities. As a Vice-President and Actuary of MLIC, I have reviewed the Policy forms and I am familiar with the Registration Statement and Exhibits thereto. In my opinion, the illustrations of Policy death benefits, cash values, cash surrender values and accumulated premiums referenced as Exhibit (r) in the amended Registration Statement, based on the assumptions stated therein, are consistent with the provisions of the Policy forms. Also, in my opinion, the amounts assumed in the illustrations for current Policy charges (including the decrease in mortality and expense risk charge after 9 years) remain reasonable, based on MLIC's current expectations. The Policies have not been designed so as to make the relationship between premiums and benefits, as shown in these illustrations appear to be disproportionately more favorable to a prospective purchaser of the Policy for standard risk males age 45, than to prospective purchasers of Policies for a male at other ages or in other underwriting classes or for a female. Nor have the particular illustrations shown been selected for the purpose of making that relationship appear more favorable. The representative insured assumed for purposes of the Fee Tables in the prospectus has not been selected for the purpose of showing lower charges in those tables than would apply for a different assumed insured. I hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the reference to my name under the heading "Legal and Actuarial Matters" in the statement of additional information contained in the registration statement. Very truly yours, /s/ Sebastian Janssen - --------------------- Sebastian Janssen, FSA, MAAA Vice-President and Actuary EX-99.1 5 dex991.txt INDEPENDENT AUDITORS' CONSENT OF DELOITTE & TOUCHE Independent Auditors' Consent We consent to the use in this Post-Effective Amendment No. 16/Amendment No. 10 to Registration Statement No. 033-57320/ 811-06025 of Metropolitan Life Separate Account UL on Form N-6 of our report dated April 16, 2004, relating to Metropolitan Life Separate Account UL appearing in the Prospectus, which is a part of such Registration Statement, our report dated April 9, 2004 relating to Metropolitan Life Insurance Company (which report expresses an unqualified opinion and includes an explanatory paragraph referring to the change in the method of accounting for embedded derivatives in certain insurance products as required by new accounting guidance which became effective on October 1, 2003, and recorded the impact as a cumulative effect of a change in accounting principle), appearing in the Statement of Additional Information, which is part of such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus and Statement of Additional Information which are part of such Registration Statement. Deloitte & Touche LLP Tampa, Florida April 26, 2004 -----END PRIVACY-ENHANCED MESSAGE-----