EXHIBIT 8
PARTICIPATION AGREEMENT
Among
RYDEX VARIABLE TRUST,
PADCO FINANCIAL SERVICES, INC.
and
KEYPORT LIFE INSURANCE COMPANY
DATED AS OF
January 21, 2000
TABLE OF CONTENTS
Page
ARTICLE I Purchase of Trust 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..................7
ARTICLE V Fees and Expenses...............................9
ARTICLE VI Diversification.................................9
ARTICLE VII Potential Conflicts.............................9
ARTICLE VIII Indemnification................................11
ARTICLE IX Applicable Law.................................17
ARTICLE X Termination....................................17
ARTICLE XI Notices........................................19
ARTICLE XII Miscellaneous 19
SCHEDULE A Separate Accounts and Contracts................22
SCHEDULE B Proxy Voting Procedures 23
THIS AGREEMENT, made and entered into as of the 21st day of January,
2000 by and among KEYPORT LIFE INSURANCE COMPANY (hereinafter the
"Company"), a Rhode Island corporation, 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 hereinafter referred to as
the "Account"), RYDEX VARIABLE TRUST (hereinafter the "Trust"), a Delaware
business trust, and PADCO FINANCIAL SERVICES, INC. (hereinafter the
"Underwriter"), a Maryland corporation.
WHEREAS, the Trust engages in business as an open-end management
investment company and is available to act as (i) the investment vehicle
for separate accounts established by insurance companies for individual and
group life insurance policies and individual and group annuity contracts
with variable accumulation and/or pay-out provisions (hereinafter referred
to individually and/or collectively as "Variable Insurance Products") and
(ii) the investment vehicle for certain qualified pension and retirement
plans (hereinafter "Qualified Plans"); and
WHEREAS, insurance companies desiring to utilize the Trust as an
investment vehicle under their Variable Insurance Products enter into
participation agreements with the Trust and the Underwriter (the
"Participating Insurance Companies");
WHEREAS, beneficial interests in the Trust are divided into several
series of interests or 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, as may be amended
from time to time by mutual agreement of the parties hereto (each such
series is hereinafter referred to as a "Fund"); and
WHEREAS, the Trust has obtained an order from the Securities and
Exchange Commission, dated February 25, 1999 (File No. 812-11344), 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 (hereinafter the
"1940 Act"), and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the
extent necessary to permit shares of a Fund to be sold to and held by
Variable Insurance Product separate accounts of both affiliated and
unaffiliated life insurance companies and Qualified Plans (hereinafter the
"Shared Funding Exemptive 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 (hereinafter the "1933 Act"); and
WHEREAS, the Underwriter is registered as a broker/dealer under the
Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"),
is a member in good standing of the National Association of Securities
Dealers, Inc. (hereinafter "NASD") and serves as principal underwriter of
the shares of the Trust; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, each Account is a duly organized, 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 aforementioned
Variable Insurance Products; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Funds on behalf
of each Account to fund certain of the aforementioned Variable Insurance
Products 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 Trust and each Underwriter agree as follows:
ARTICLE I. Purchase of Trust Shares
1.1. The Trust agrees to make available for purchase by the Company
shares of the Trust and shall execute orders placed for each Account on a
daily basis at the net asset value next computed after receipt by the Trust
or its designee of such order. For purposes of this Section 1.1, the
Company shall be the designee of the Trust for receipt of such orders from
each Account and receipt by such designee shall constitute receipt by the
Trust; provided that the Trust receives notice of such order not later than
the appropriate fund closing time on the same Business Day that such order
is received by the Company. "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.
1.2. The Trust, so long as this Agreement is in effect, agrees to
make its shares available indefinitely for purchase at the applicable net
asset value per share by the Company and its Accounts on those days on
which the Trust calculates its net asset value pursuant to rules of the
Securities and Exchange Commission and the Trust shall use reasonable
efforts to calculate such net asset value on each day which the New York
Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Trust (hereinafter the "Board") may refuse to
permit the Trust 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 Board 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 Fund.
1.3. The Trust agrees that shares of the Trust will be sold only to
Participating Insurance Companies and their separate accounts and to
certain Qualified Plans. No shares of any Fund will be sold to the general
public.
1.4. The Trust will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing
provisions substantially the same as in Section 1.3 of Article I, Section
3.5 of Article III, Article VI and Article VII of this Agreement is in
effect to govern such sales.
1.5. The Trust agrees to redeem for cash, on the Company's request,
any full or fractional shares of a Trust held by the Company, 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.
Subject to and in accordance with applicable laws, and subject to written
consent of the Company, the Trust may redeem shares for assets other than
cash. For purposes of this Section 1.5, the Company shall be the designee
of the Trust for receipt of requests for redemption from each Account and
receipt by such designee shall constitute receipt by the Trust; provided
that the Trust receives notice of such order not later than the appropriate
fund closing time on the same Business Day that such order is received by
the Company.
1.6. The Company agrees that purchases and redemptions of Fund shares
offered by the then current prospectus of the Trust shall be made in
accordance with the provisions of such prospectus. The Variable Insurance
Products issued by the Company, under which amounts may be invested in the
Trust (hereinafter the "Contracts"), are listed on Schedule A attached
hereto and incorporated herein by reference, as such Schedule A may be
amended from time to time by mutual written agreement of all of the parties
hereto. The Company will give the Trust and the Underwriter 180 days
advance written notice of its intention to make available in the future, as
a funding vehicle under the Contracts, any other investment company.
1.7. The Company shall pay for Trust shares on the next Business Day
after an order to purchase Trust shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire. For purposes of Section 2.9 and 2.10, 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
Trust.
1.8. 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
Account. Shares ordered from the Trust will be recorded in an appropriate
title for each Account or the appropriate subaccount of each Account.
1.9. The Trust shall furnish same day notice (by electronic means,
wire or telephone, followed by written confirmation) to the Company of any
income, dividends or capital gain distributions payable on Fund shares.
The Company hereby elects to receive all such income dividends and capital
gain distributions as are payable on the Fund shares in additional shares
of that Fund. The Company reserves the right to revoke this election and
to receive all such income dividends and capital gain distributions in
cash. The Trust shall notify the Company of the number of shares so issued
as payment of such dividends and distributions.
1.10. 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 (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.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued
and sold in compliance in all material respects 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 it is an insurance company
duly organized and in good standing under applicable law and that it has
legally and validly established each Account prior to any issuance or sale
thereof as a segregated asset account and has registered or, prior to any
issuance or sale of the Contracts, will register each Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve
as a segregated investment account for the Contracts.
2.2. The Trust represents and warrants that Trust 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 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, to
the extent required by applicable state law.
2.3. The Trust represents 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 the Company immediately upon
having a reasonable basis for believing that it has ceased to so qualify or
that it might not so qualify in the future.
2.4. The Company represents and warrants that the Contracts are
currently treated as life insurance policies or annuity contracts, 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 have ceased to
be so treated or that they might not be so treated in the future.
2.5. The Trust represents that to the extent that it decides to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act, it
will 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.
2.6. The Trust represents that the Trust's investment policies, fees
and expenses are and shall at all times remain in compliance with the laws
of the State of Delaware and the Trust represents that their respective
operations are and shall at all times remain in material compliance with
the laws of the State of Delaware to the extent required to perform this
Agreement.
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 the 1940 Act.
2.8. The Underwriter represents and warrants that it is and shall
remain duly registered in all material respects to the extent under all
applicable federal and state securities laws and that it will perform its
obligations for the Trust 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 Trust represents and warrants that its directors, officers,
employees, and other individuals/entities 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 minimum coverage as required currently by
Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated
from time to time. The aforesaid blanket fidelity bond shall include
coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.10. The Company represents and warrants that all of its directors,
officers, employees, investment Underwriter, 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 $5
million. The aforesaid includes coverage for larceny and embezzlement is
issued by a reputable bonding company. The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Trust and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. Prospectuses, Reports to Shareholders and Proxy Statements;
Voting
3.1. The Trust or its designee shall provide the Company with as many
printed copies of the Trust's current prospectus and statement of
additional information as the Company may reasonably request. If requested
by the Company, in lieu of providing printed copies the Trust shall provide
camera-ready film or computer diskettes containing the Trust'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 and/or statement of additional information for
the Trust is amended during the year) to have the prospectus for the
Contracts and the Trust's prospectus printed together in one document, and
to have the statement of additional information for the Trust and the
statement of additional information for the Contracts printed together in
one document. Alternatively, the Company may print the Trust's prospectus
and/or its statement of additional information in combination with other
Trust companies' prospectuses and statements of additional information.
3.2. Except as provided in this Section 3.2., all expenses of
printing and distributing Trust prospectuses and statements of additional
information shall be the expense of the Company. For prospectuses and
statements of additional information provided by the Company to its
existing owners of Contracts 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 Trust. The Trust will provide camera-ready film or computer diskettes
in lieu of receiving printed copies of the Trust's prospectus. The Company
agrees to provide the Trust or its designee with such information as may be
reasonably requested by the Trust to assure that the Trust's expenses do
not include the cost of printing any prospectuses or statements of
additional information other than those actually distributed to existing
owners of the Contracts.
3.3. The Trust's statement of additional information shall be
obtainable from the Trust, the Company or such other person as the Trust
may designate, as agreed upon by the parties.
3.4. The Trust, 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 Contract owners.
3.5. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Trust shares of such
Fund for which instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting
privileges for variable contract owners. The Company reserves the right to
vote Fund shares held in any Account in its own right, to the extent
permitted by law. The Trust and the Company shall follow the procedures,
and shall have the corresponding responsibilities, for the handling of
proxy and voting instruction solicitations, as set forth in Schedule B
attached hereto and incorporated herein by reference. Participating
Insurance Companies shall be responsible for ensuring that each of their
separate accounts participating in a Fund calculates voting privileges in a
manner consistent with the standards set forth on Schedule B, which
standards will also be provided to the other Participating Insurance
Companies.
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 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). Further, the Trust will act in accordance with the Securities and
Exchange Commission's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors and with whatever rules the
Commission may promulgate with respect thereto.
3.7. The Trust shall use reasonable efforts to provide Trust
prospectuses, reports to shareholders, proxy materials and other Trust
communications (or camera-ready equivalents) to the Company sufficiently in
advance of the Company's mailing dates to enable the Company to complete,
at reasonable cost, the printing, assembling and distribution of the
communications in accordance with applicable laws and regulations.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to
the Underwriter, each piece of sales literature or other promotional
material in which the Trust or the Underwriter is named, at least five
Business Days prior to its use. No such material shall be used if the
Trust or its designee reasonably objects to such use within five 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 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, 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 its designee, except with the permission
of the Trust.
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 or its separate
account(s) or Contracts are named at least five Business Days prior to its
use.
No such material shall be used if the Company or its designee
reasonably objects to such use within five Business Days after receipt of
such material.
4.4. The Trust and the Underwriter shall not 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 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 Account
which are in the public domain or approved by the Company for distribution
to Contract owners, or in sales literature or other promotional material
approved by the Company or its designee, except with the permission of the
Company.
4.5. The 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
Securities and Exchange Commission or other regulatory authorities.
4.6. 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 investment in the Trust under the Contracts,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
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 Trust or any affiliate of 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, 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, prospectuses,
statements of additional information, shareholder reports, and proxy
materials.
ARTICLE V. Fees and Expenses
5.1. The Trust shall pay no fee or other compensation to the Company
under this Agreement, except that if the Trust or any Fund adopts and
implements a plan pursuant to Rule 12b-1 to finance distribution expenses
or a shareholder servicing plan to finance investor services, then payments
may be made to the Company, or to the underwriter for the Contracts, or to
other service providers if and in amounts agreed upon by the parties.
5.2. All expenses incident to performance by the Trust under this
Agreement shall be paid by the Trust. The Trust 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
Trust, in accordance with applicable state laws prior to their sale. The
Trust shall bear the expenses for the cost of registration and
qualification of Fund shares, preparation and filing of the Trust's
prospectus and registration statement, proxy materials and reports, setting
the prospectus in type, setting in type and printing the proxy materials
and reports to shareholders (including the costs of printing a prospectus
that constitutes an annual report), the preparation of all statements and
notices required by any federal or state law, and all taxes on the issuance
or transfer of Fund shares.
5.3. The Company shall bear the expenses of distributing the Trust's
prospectus, proxy materials and reports to owners of Contracts issued by
the Company, other than the expenses of distributing prospectuses and
statements of additional information to existing contract owners.
ARTICLE VI. Diversification
6.1. The Trust will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Trust will at all times comply
with Section 817(h) of the 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. In the event of a breach of this Article VI by a
Fund, the Trust will take all reasonable steps (a) to notify Company of
such breach and (b) to adequately diversify the Fund so as to achieve
compliance within the grace period afforded by Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Trust for the existence of any
material irreconcilable conflict between the interests of the contract
owners of all separate accounts investing in the Trust. 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 Fund are being managed; (e) a difference in voting
instructions given by Variable Insurance Product owners; or (f) a decision
by a Participating Insurance Company 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.
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.
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 directors), 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 Trust or any Fund and reinvesting such assets in
a different investment medium, including (but not limited to) another Fund
of the Trust, 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., 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.
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 Trust's election, to withdraw the
affected Account's investment in the Trust 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.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the position of 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 months
after the Board informs the Company in writing that it has determined that
such decision has created an irreconcilable material conflict; provided,
however, that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested members of the Board. Until
the end of the foregoing six month period, the Underwriter and Trust shall
continue to accept and implement orders by the Company for the purchase
(and redemption) of shares of the Trust.
7.6. For purposes of Sections 7.3 through 7.6 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 Trust 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 irreconcilable material conflict.
7.7. 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 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; and (b)
Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 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 VIII. Indemnification
8.1. Indemnification By The Company
8.1(a) The Company agrees to indemnify and hold harmless the Trust
and each member of the Board and each officer and employee of the Trust,
the Underwriter and each director, officer and employee of the Underwriter,
and each person, if any, who controls the Trust, or the Underwriter within
the meaning of Section 15 of the 1933 Act (collectively, an "Indemnified
Parties" and individually, "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 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 Fund 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 or prospectus or statement of additional information for the
Contracts or contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that
this agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with information
furnished to the Company by or on behalf of the Trust for use in the
registration statement or prospectus or statement of additional
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
(ii) 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 of the Trust not supplied by the
Company, or persons under its control and other than statements or
representations authorized by the Trust or the Underwriter) or
unlawful conduct of the Company or persons under its control, with
respect to the sale or distribution of the Contracts or Trust shares;
or
(iii) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, statement of additional information or sales
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 statements
therein not misleading 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
(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 or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this
Agreement by the Company, as limited by and in accordance with the
provisions of Sections 8.1(b) and 8.1(c) hereof.
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 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.
8.2. Indemnification by the Underwriter
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, an "Indemnified Parties" and individually,
"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 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 are related to the sale or acquisition of shares of a Fund or
the Contracts 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, prospectus, statement of additional information or sales
literature 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, 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 Trust by or on behalf of
the Company for use in the registration statement, prospectus,
statement of additional information 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 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, statement of additional
information or sales literature for the Contracts not supplied by the
Trust or persons under its control and other than statements or
representations authorized by the Company) or unlawful conduct of the
Trust, Underwriter(s) or Underwriter or persons under their 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, statement of additional information or sales
literature covering the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
to the Company by or on behalf of the Trust; or
(iv) 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
(v) 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; as limited by and in accordance
with the provisions of Sections 8.2(b) and 8.2(c) hereof.
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 agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the
Contracts or the operation of each Account.
8.3. Indemnification by the Trust
8.3(a). 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
(hereinafter collectively, the "Indemnified Parties" and individually,
"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 Trust) 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, and are related to the
operations of the Trust and:
(i) 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
(ii) 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;
8.3(b). The Trust 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 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 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 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
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. 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.
8.3(d). The Company agrees promptly to notify the Trust of the
commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Trust.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the substantive 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
Securities and Exchange Commission 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 180 days advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Trust and the
Underwriter with respect to any Fund based upon the Company's
determination that shares of such Fund are not reasonably
available to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the Trust and the
Underwriter with respect to any Fund in the event any of the
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) termination by the Company by written notice to the Trust and the
Underwriter with respect to any Fund in the event that such 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 the Trust
may fail to so qualify; or
(e) termination by the Company by written notice to the Trust and the
Underwriter with respect to any Fund in the event that such Fund
falls to meet the diversification requirements specified in
Article VI hereof; or
(f) termination by either the Trust by written notice to the Company
if the Trust 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 Trust and the
Underwriter, if the Company shall determine, 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, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity;
or
(h) termination by the Trust or the Underwriter by written notice to
the Company, if the Company gives the Trust and the Underwriter
the written notice specified in Section 1.6 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 180 days after the notice specified in Section
1.6 was given.
10.2. Notwithstanding any termination of this Agreement, the Trust
shall, at the option of the Company, continue to make available additional
shares of the Trust 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
shall be permitted to direct reallocation of investments in the Trust,
redemption of investments in the Trust and investment in the Trust 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.
10.3. The Company shall not redeem Trust shares attributable to the
Contracts (as distinct from Trust 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") or (iii) as permitted by an order of the Securities and
Exchange Commission pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Trust the opinion of
counsel for the Company (which counsel shall be reasonably satisfactory to
the Trust) 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 Fund that was otherwise
available under the Contracts without first giving the Trust 90 days prior
written notice of its intention to do so.
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 Trust:
Rydex Variable Trust
0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
If to Underwriter:
PADCO Financial Services, Inc.
0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
If to the Company:
Keyport Life Insurance Company
Attention: Xxxxxxx X. Xxxxxxxxxxx
General Counsel
000 Xxxx Xxxxxx
Xxxxxx, XX 00000-0000
ARTICLE XII. Miscellaneous
12.1. 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 Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Trust.
12.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except
as permitted by this Agreement, shall not disclose, disseminate or utilize
such names and addresses and other confidential information until such time
as it may come into the public domain without the express written consent
of the affected party.
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
Securities and Exchange Commission, 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 Agreement or the transactions
contemplated hereby. Notwithstanding the generality of the foregoing, each
party hereto further agrees to furnish the California Insurance
Commissioner with any information or reports in connection with services
provided under this Agreement which such Commissioner may request in order
to ascertain whether the insurance operations of the Company are being
conducted in a manner consistent with the California Insurance Regulations
and any other applicable law or 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 an Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or
company under common control with the Underwriter, if such assignee is duly
licensed and registered to perform the obligations of the Underwriter under
this Agreement.
12.9. The Company shall furnish, or shall cause to be furnished, to
the Trust or its designee copies of the following reports:
(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 90 days after the end
of each fiscal year;
(b) the Company's quarterly statements (statutory) (and GAAP, if
any), as soon as practical and in any event within 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 Securities and Exchange
Commission or any state insurance regulator, as soon as practical
after the filing thereof;
(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.
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.
KEYPORT LIFE INSURANCE COMPANY
By: /s/Xxxx X. XxXxxxx
Xxxx X. Xxxxxxx
Chief Operating Officer
RYDEX VARIABLE TRUST
By: /s/Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
President
PADCO FINANCIAL SERVICES, INC.
By: /s/Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
President
KEYPORT LIFE INSURANCE COMPANY
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Shares of the Funds of the Trust shall be made available as
investments for the following Separate Accounts:
Name of Separate Account and Form Number and Name of Contract
Date Established by Board of Directors Funded by Separate Account
Variable Account A (January 30, 1996) DVA(2)/RY - Rydex Variable
Annuity
DVA(1)/CERT and DVA(1)/IND -
Keyport Advisor Vista
DVA(1)/CERT and DVA(1)/IND -
Keyport Advisor Charter
SCHEDULE B
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities
for the handling of proxies and voting instructions relating to the Trust.
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.
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 3.3 of
the Agreement to which this Schedule relates.
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 Instruction 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:
a name (legal name as found on account registration)
b address
c Trust or account number
d coding to state number of units
e 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:
a Voting Instruction Card(s)
b one proxy notice and statement (one document)
c return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d "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.)
e 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 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 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.
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 Trust in the past.
9 Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, if the account registration is under "Xxxx X.
Xxxxx, 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, 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.
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.