PARTICIPATION AGREEMENT
among
SELECT TEN PLUS FUND, LLC
ARM SECURITIES CORPORATION
and
NATIONAL INTEGRITY LIFE INSURANCE COMPANY
THIS AGREEMENT, entered into as of the _____ day of ________, 1999 by and
among NATIONAL INTEGRITY LIFE INSURANCE COMPANY (hereinafter the "Company"), a
New York 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"), SELECT TEN
PLUS FUND, LLC (hereinafter the "Fund"), a Delaware corporation, and ARM
SECURITIES CORPORATION (hereinafter the ''Distributor"), a Delaware corporation.
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company and
its shares are registered under the Securities Act of 1933, as amended
(hereinafter the "1933 Act"); and
WHEREAS, the capital stock of the Fund is divided into several series of
shares, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund is available to act as the investment vehicle for
separate accounts established for variable annuity contracts and may in the
future be available as an investment medium for separate accounts established
for variable life insurance policies (collectively, the "Variable Insurance
Products"); and
WHEREAS, the Variable Insurance Products are to be offered by insurance
companies which have entered into participation agreements with the Fund and the
Distributor (hereinafter "Participating Insurance Companies"); and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution 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 one or more Variable Insurance Products; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain Variable Insurance Products ("Contracts"), and
the Distributor is authorized to sell such shares to each Account at the net
asset value of the respective Portfolios; and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act and has registered or will register the
Contracts under the 1933 Act: and
WHEREAS, ARM Capital Advisors, Inc. ("ARM Capital") is duly registered as
an investment adviser under the Investment Advisers Act of 1940 and any
applicable state securities laws; and
WHEREAS, the Distributor 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. (hereinafter
"NASD");
WHEREAS, the Distributor serves as principal underwriter for Fund shares
pursuant to a Distribution Agreement dated August 30, 1995 between the
Distributor and the Fund.
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Distributor agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Fund and the Distributor agree to sell to the Company those shares
of the Fund which each Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Fund or
its designee of the order for the shares of the Fund. For purposes of
this Section 1.1, the Company shall be the designee of the Fund for
receipt of such 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 9:30 a.m. New York time on the next following
Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its
net asset value pursuant to the rules of the SEC.
1.2. The Fund 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 Fund calculates its net asset value
pursuant to rules of the SEC and the Fund 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 Directors of the
Fund (hereinafter the "Board") 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 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 Portfolio.
1.3. The Fund and the Distributor agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate
accounts. No shares of any Portfolio will be sold to the general public.
The Fund and the Distributor agree that each participation agreement with
a Participating Insurance Company will contain substantially identical
terms as this Agreement, including in particular Articles l, lll, V, Vll
and Sections 2.5 and 2.12 of Article ll of this Agreement.
1.4. The Fund and the Distributor agree that they will not sell Fund shares
to any insurance company or its separate accounts other than the Company
and Integrity, or their affiliates unless the Fund has obtained an order
from the SEC granting Participating Insurance Companies exceptions from
the provisions of sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act,
to the extent necessary to permit shares of the Fund to be sold to and
held by separate accounts of both affiliated and unaffiliated life
insurance companies (hereinafter the "Shared Funding Exemptive Order").
1.5. The Fund agrees to redeem for cash, on the Company's request, any full
or fractional shares of the Fund held by the Company and it Accounts,
executing such requests on a daily basis, in a manner consistent with the
provisions of Section 22(e) of the 1940 Act, at the net asset value next
computed after receipt by the Fund or its designee of the request for
redemption, without any redemption charge. For purposes of this Section
1.5, the Company shall be the designee of the Fund 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 on the next following Business Day.
1.6. The Company agrees to purchase and redeem the shares of each Portfolio
offered by the then current prospectus of the Fund and in accordance with
the provisions of such prospectus. The Company agrees that all net
amounts available under the Separate Accounts listed on Schedule A shall
be invested in the Fund, in such other Funds advised by the Adviser as
may be mutually agreed to in writing by the parties hereto, or in
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the Company's general account, provided that such amounts may also be
invested in an investment company other than the Fund if (a) such other
investment company, or the series thereof to be invested in, has
investment objectives or policies that are substantially different from
the investment objectives and policies of all the Portfolios of the Fund
(excluding any Portfolios for which the Company has terminated this
Agreement pursuant to Section 10.1(b)); or (b) such other investment
company was available as a funding vehicle for the Contracts prior to the
date of this Agreement and the Company so informs the Fund and
Distributor prior to their signing this Agreement; or (c) the Fund and
Distributor consent to the use of such other investment company or
portfolio.
1.7. The Company shall pay for Fund 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. For purpose of Section 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.
1.8. Issuance and transfer of the Fund's shares will be by book entry only.
Stock 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 subaccount or division of each Account.
1.9. The Fund shall 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 the Fund's shares. The Company
hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Portfolio shares in additional shares
of that Portfolio. The Company reserves the right with respect to each
Portfolio 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.
1.10. The Fund shall make the net asset value per share for each Portfolio
available to the Company or its designee 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 7 p.m. New York time.
ARTICLE ll. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or will
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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 separate account under Section 4240 of the New York
Insurance Law 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 unit
investment trust for the Contracts.
2.2. The Fund represents and warrants 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 New
York and all applicable federal and state securities laws and that the
Fund is and shall remain registered under the 0000 Xxx. 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 or the
Distributor.
2.3. The Fund 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"), 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 that the Contracts are currently treated as
endowment, annuity or life insurance contracts under applicable
provisions of the Code, that it will make every effort to maintain such
treatment and that it will notify the Fund 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.
2.5. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future, subject to
compliance with applicable requirements under federal and state law. The
Fund may in the future adopt a "no fee" or "defensive" Rule 12b-1 Plan
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under which it makes no payments for distribution expenses (a "Rule 12b-1
Plan"). To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-1, the Fund will undertake to have the Board, a
majority of whom are not interested persons of the Fund, formulate and
approve any Rule 12b-1 Plan 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 except that the Fund represents that the Fund's
investment policies, fees and expenses are and shall at all times remain
in compliance with the laws of the State of New York and the Fund and the
Distributor represent that their respective operations are and shall at
all times remain in material compliance with the laws of the State of New
York to the extent required to perform this Agreement.
2.7. The Distributor 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 Distributor further represents that it will sell and distribute the
Fund shares in accordance with the laws of the State of New York and all
applicable state and federal securities laws, including without
limitation the 1933 Act, the 1934 Act and the 0000 Xxx.
2.8. The Fund represents that it is lawfully organized and validly existing
under the laws of the State of Maryland and that it does and will comply
in all material respects with the 1940 Act.
2.9. The Fund represents and warrants that the Adviser is and shall remain
duly registered in all material respects under all applicable federal and
state securities laws and that the Adviser shall perform its obligations
for the Fund in compliance in all material respects with the laws of the
State of New York and any applicable state and federal securities laws.
2.10. The Fund and Distributor represent and warrant that all of their
directors, officers, employees, investment advisers, 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 minimal coverage as required currently by Rule 179-(1) of
the 1940 Act or related provisions as may be promulgated from time to
time. Such bond shall include coverage for larceny and embezzlement and
shall be issued by a reputable bonding company.
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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 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
minimal coverage as required currently by entities subject to the
requirements of Rule 17g-1 of the 1940 Act or related provisions as may
be promulgated from time to time. The Bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding
company.
ARTICLE lll. PROSPECTUSES, STATEMENTS OF ADDITIONAL INFORMATION AND PROXY
STATEMENTS; VOTING
3.1. The Fund shall provide to the Company such documentation (including a
camera ready final copy of each prospectus or supplement thereto as set
in type at the Fund's expense) and other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if
the prospectus for the Fund is amended) to have the prospectus for the
Contracts and the Fund's prospectus printed together in one document
(such printing to be at the Company's expense).
3.2. The Fund's prospectus shall state that the current Statement of
Additional Information for the Fund is available from the Distributor (or
in the Fund's discretion, the Prospectus shall state that such Statement
is available from the Fund), and the Distributor (or the Fund), at its
expense, shall print, or otherwise reproduce, and provide such Statement
free of charge to the Company and to each Contract owner who requests
such Statement. At the request of the Company, the Fund shall provide to
the Company a camera ready final copy of such Statement.
3.3. The Fund shall promptly notify the Company of any anticipated
amendments to the Fund's registration statement or supplements to the
prospectus.
3.4. The Fund, at its expense, shall provide the Company with copies of its
proxy material, reports to stockholders and other communications to
stockholders in such quantity as the Company shall reasonably require for
distributing to Contract owners. At the request of the Company, the Fund
shall provide a camera ready copy of such communication to the Company,
which may combine such communication with a communication of the Company
or the Accounts, which communications may be bound together. In such case
the printing expenses of the combined communications shall be
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borne by the Company and the Fund in proportion to the number of pages
for which they are respectively responsible.
3.5. If and to the extent required by law the Company shall
(a) solicit voting instructions from Contract owners;
(b) vote the Fund shares in accordance with instructions received
from Contract owners: and
(c) vote Fund shares for which no instructions have been received in
the same proportion as Fund 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 Insurance
Products owners. The Company reserves the right to vote Fund shares held
in any separate 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 Fund calculates
voting privileges in a manner consistent with the standards set forth on
Schedule B attached hereto and incorporated herein by this reference,
which standards will also be provided to the other Participating
Insurance Companies, and with the requirements of the 1940 Act.
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 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
that Act) as well as with Sections 16(a) and, if and when applicable,
16(b). Further, the Fund will act in accordance with the SEC's
interpretation of the requirements of Section 16(a) with respect to
periodic elections of directors and with whatever rules the 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 Fund
or its designee the text and, to the extent relevant, the graphic
component of each piece of sales literature or other promotional material
in which the Fund or its investment adviser or the Distributor is named,
at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee object to such use within fifteen
Business Days after receipt of such material.
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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 and prospectus
for the Fund shares, as such registration statement and prospectus may be
amended or supplemented from time to time, or in reports or proxy
statements for the Fund, or in sales literature or other promotional
material approved by the Fund or its designee or by the Distributor,
except with the permission of the Fund or the Distributor or the designee
of either.
4.3. The Fund, Distributor, 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
separate account(s), is named at least fifteen Business Days prior to its
use. No such material shall be used if the Company or its designee object
to such use within fifteen Business Days after receipt for such material.
4.4. The Fund and the Distributor 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 Contact owners, or in sales literature or other
promotional material approved by the Company or its designee, except with
the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of all
registration statements, 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, contemporaneously with the filing of such
document with the SEC or other regulatory authorities.
4.6. The Company will provide to the Fund 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 Account, contemporaneously with the
filing of such document with the SEC.
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4.7. 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 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 Fund and Distributor 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 Rule 12b-1 Plan to finance distribution expenses,
then the Distributor may make payments to the Company or to the
underwriter for the Contracts if and in amount agreed to by the
Distributor in writing and such payments will be made out of existing
fees otherwise payable to the Distributor, past profits of the
Distributor or other resources available to the Distributor. No such
payments shall be made directly by the Fund. Currently, no such payments
are contemplated.
5.2. All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund, except as otherwise provided herein. 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. The Fund shall bear the expenses for the cost
of registration and qualification of the Fund's shares, preparation and
filing of the Fund's prospectus and registration statement, proxy
materials and reports, setting the prospectus in type, setting in type
and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report),
the setting in type of, and the printing or other reproduction for each
Contract owner of, the statement of additional information, 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.
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5.3. The Company shall bear the expenses of printing and distributing the
Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract
owners.
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ARTICLE Vl. DIVERSIFICATION
6.1. The Fund 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 Fund 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. The Fund shall promptly notify the Company
of any breach by any Portfolio of this Article Vl.
ARTICLE Vll. POTENTIAL CONFLICTS
From and after the date the Fund obtains a Shared Funding Exemptive
Order, or begin serving as a funding medium for variable life insurance
policies:
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 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 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
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disinterested directors, 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 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 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 Fund's election, to withdraw
the affected Account's investment in the Fund 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 members of the Board. Any such withdrawal and
termination must take place within six (6) months after the Fund gives
written notice that this provision is being implemented, and until the
end of that six month period the Distributor and Fund shall continue to
accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.5. 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 Fund and terminate this
Agreement with respect to such Account within six (6) 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 Distributor and Fund shall
continue to accept and implement orders by the Company for the purchase
(and redemption) of shares of the
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Fund.
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 Fund 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. In the event
that the Board determines that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will
withdraw the Account's investment in the 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 shall be limited to the extent required by any
such material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
ARTICLE Vlll. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Fund
and each of the members of the Board and Fund officers and each
person, if any, who controls the Fund within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this 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 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 or prospectus for 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
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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 or
prospectus for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus or
sales literature of the Fund 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 Fund shares; or
(iii) arise out 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 such a statement
or omission was made in reliance upon 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, as
limited by and in accordance with 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,
15
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 or to the Fund, whichever is
applicable.
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, and
to settle the claim at its own expense, provided however, that no
such settlement shall, without the Indemnified Parties' written
consent, include any factual stipulations referring to the
Indemnified Parties or their conduct. 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 Fund shares or the
Contracts or the operation of the Fund.
8.2 INDEMNIFICATION BY THE DISTRIBUTOR
16
8.2(a). The Distributor agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person,
if any, who controls the Company within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for
purposes of this Section 8.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with
the written consent of the Distributor) 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 the Fund's shares 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 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
Distributor or Fund 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 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 for the Contracts not supplied by the
Fund, Distributor or persons under their control) or
wrongful conduct of Fund or the Distributor or persons
under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
17
statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto,
or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary
to make the statement or statements therein not
misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or
on behalf of the Fund or the Distributor; or
(iv) arise as a result of any failure by the Distributor 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 Distributor in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Distributor; as
limited by and in accordance with the provisions of
Sections 8.2(b) and 8.2(c) hereof.
8.2(b). The Distributor 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 or to each Company or the Account,
whichever is applicable.
8.2(c). The Distributor 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 Distributor 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 Distributor of any such claim shall not
relieve the Distributor 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
18
case any such action is brought against the Indemnified Parties,
the Distributor will be entitled to participate, at its own
expense, in the defense thereof. The Distributor also shall be
entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action, and to settle the claim at its
own expense, provided however, that no such settlement shall,
without the Indemnified Parties' written permission, include any
factual stipulations referring to the Indemnified Parties or
their conduct. After notice from the Distributor to such party of
the Distributor'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 Distributor 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 Distributor 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 FUND
8.3(a). The Fund 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, other than Affiliated persons (as defined in
Section 2(a)(3) of the 0000 Xxx) of the Fund (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 Fund)
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 Fund and:
(i) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of
this Agreement (including a failure to comply with the
19
diversification requirements specified in Article Vl of
this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other
material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b)
and 8.3(c) hereof.
8.3(b). The Fund 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 or to the Company, the Fund, the
Distributor or each Account, whichever is applicable.
8.3(c). The Fund 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 Fund
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 Fund of any such
claim shall not relieve the Fund 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 Fund will be entitled to participate, at its own expense, in
the defense thereof. The Fund also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named
in the action, and to settle the claim at its own expense,
provided however, that no such settlement shall, without the
Indemnified Parties' written permission, include any factual
stipulations referring to the Indemnified Parties or their
conduct. After notice from the Fund to such party of the Fund's
election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses
20
of any additional counsel retained by it, and the Fund 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 and the Distributor agree promptly to notify
the Fund 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 each Account, or the
sale or acquisition of shares of the Fund.
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 New
York.
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 terminate:
(a) at the option of any party upon one year advance written notice
to the other parties; provided, however such notice shall not be
given earlier than one year following the date of this Agreement;
or
(b) at the option of the Company to the extent that shares of
Portfolios are not reasonably available to meet the requirements
of the Contracts as determined by the Company, provided however,
that such termination shall apply only to the Portfolio(s) not
reasonably available. Prompt notice of the election to terminate
for such cause shall be furnished by the Company; or
(c) at the option of the Fund in the event that formal administrative
proceedings are instituted against the Company by the NASD, the
SEC, any state insurance department or any other regulatory body
21
regarding the Company's duties under this Agreement or related to
the sale of the Contracts, with respect to the operation of any
Account, or the purchase of the Fund shares, provided however,
that the Fund determines in its sole judgment exercised in good
faith, that any such administrative proceedings will have a
material adverse effect upon the ability of the Company to
perform its obligations under this Agreement; or
(d) at the option of the Company in the event that formal
administrative proceedings are instituted against the Fund or
Distributor by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body, provided,
however, that the Company determines in its sole judgment
exercised in good faith, that any such administrative proceedings
will have a material adverse effect upon the ability of the Fund
or Distributor to perform its obligations under this Agreement;
or
(e) with respect to any Account, upon requisite vote of the Contract
owners having an interest in such Account (or any subaccount or
division) to substitute the shares of another investment company
for the corresponding Portfolio shares of the Fund in accordance
with the terms of the Contracts for which those Portfolio shares
had been selected to serve as the underlying investment media.
The Company will give 30 days' prior written notice to the Fund
of the date of any proposed vote to replace the Fund's shares; or
(f) at the option of the Company, 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
(g) at the option of the Company, if the 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 Fund may fail to so qualify; or
(h) at the option of the Company, if the Fund fails to meet the
diversification requirements specified in Article Vl hereof; or
(i) at the option of either the Fund or the Distributor, if (1) the
Fund or the Distributor, respectively, shall determine, in its
sole judgment reasonably exercised in good faith, that the
Company has suffered a
22
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 will have a material
adverse impact upon the business and operations of either the
Fund or the Distributor, (2) the Fund or the Distributor shall
notify the Company in writing of such determination and its
intent to terminate this Agreement, and (3) after considering the
actions taken by the Company and any other changes in
circumstances since the giving of such notice, such determination
of the Fund or the Distributor 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; or
(j) at the option of the Company, if (1) the Company shall determine,
in its sole judgment reasonably exercised in good faith, that
either the Fund or the Distributor 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 will have a material adverse
impact upon the business and operations of the Company, (2) the
Company shall notify the Fund and the Distributor in writing of
such determination and its intent to terminate the Agreement, and
(3) after considering the actions taken by the Fund and/or the
Distributor and any other changes in circumstances since the
giving of such notice, such determination 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; or
(k) at the option of either the Fund or the Distributor, if the
Company gives the Fund and the Distributor the written notice
specified in Section 1.6(b) 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(k) shall be effective forty
five (45) days after the notice specified in Section 1.6(b) was
given.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1 (a) may be exercised
for any reason or for no reason.
10.3. NOTICE REQUIREMENT No termination of this Agreement shall be effective
unless and until the party terminating this Agreement gives prior written
notice to all other parties to this Agreement of its intent to terminate,
which notice shall set forth the basis for such termination. Furthermore,
23
(a) in the event that any termination is based upon the provisions of
Article Vll, or the provision of Section 10.1(a), 10.1(i), 10.1(j) or
10.1(k) of this Agreement, such prior written notice shall be given in
advance of the effective date of termination as required by such
provisions; and
(b) in the event that any termination is based upon the provisions of
Section 10.1 (c) or 10.1 (d) of this Agreement, such prior written notice
shall be given at least ninety (90) days before the effective date of
termination.
10.4. EFFECT OF TERMINATION Notwithstanding any termination of this
Agreement, the Fund and the Distributor shall, at the option of the
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 shall be permitted to
reallocate investments in the Fund, redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under
the Existing Contracts. The parties agree that this Section 10.4 shall
not apply to any terminations under Article Vll and the effect of such
Article Vll terminations shall be governed by Article Vll of this
Agreement.
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
each Account) except (a) as necessary to implement Contract Owner
initiated transactions, (b) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter a "Legally Required Redemption"), or (c) upon termination of
this Agreement with respect to one or more Portfolios. Upon request, the
Company will promptly furnish to the Fund and the Distributor the opinion
of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Distributor) to the effect that any
redemption pursuant to clause (b) 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 or the Distributor ninety (90) days notice
of its intention to do so.
10.6. If for any reason the shares of any Portfolio are no longer to be made
available, then, at the request of the Company, the Fund and the
Distributor shall cooperate with the Company so that the provisions of
Section 26(b) of
24
the 1940 Act will be complied with as soon as reasonably practicable and
substitution of an underlying funding medium accomplished without
disruption of sales of securities to the Account or any subaccount or
division thereof in connection with such Contracts.
10.7. Articles ll and Vlll and Sections 12.1, 12.6, and 12.7 shall survive
termination of this Agreement.
ARTICLE Xl. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to, or when received by overnight or other delivery service by, a
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.
If to the Fund: Select Ten Plus Fund, LLC
000 Xxxx Xxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
If to the Company: National Integrity Life Insurance Company
000 Xxxx Xxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: General Counsel
If to the Distributor: ARM Securities Corporation
000 Xxxx Xxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: President
ARTICLE Xll. 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 assume any personal liability
for obligations entered into on behalf of the Fund.
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
25
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
SEC, the NASD and state insurance regulators) and shall permit such
authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby. Notwithstanding the generality of the
foregoing, each party hereto further agrees to furnish the 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 variable life insurance
operations of the Company are being conducted in a manner consistent with
the California Variable Life Insurance Regulations and any other
applicable law or regulations.
12.7. The Fund and Distributor agree that to the extent any advisory or
other fees received by the Fund, the Distributor or the Adviser are
determined to be unlawful in legal or administrative proceedings under
the 1973 NAIC model variable life insurance regulation in the states of
California, Colorado, Maryland or Michigan, the Distributor shall
indemnify and reimburse the Company for any out of pocket expenses and
actual damages the Company has incurred as a result of any such
proceeding; provided however, that the provisions of Section 8.2(b) and
8.2(c) of this Agreement shall apply to such indemnification and
reimbursement obligation. Such indemnification and reimbursement
obligation shall be in addition to any other indemnification and
reimbursement obligations of the Fund and/or the Distributor under this
Agreement.
12.8. 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
26
federal laws.
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 as of the date first written above.
NATIONAL INTEGRITY LIFE INSURANCE COMPANY
By:
-------------------------------------
Title:
----------------------------------
27
SBM FINANCIAL SERVICES, INC. THE LEGENDS FUND, INC.
By: By:
---------------------------------
Title: Title:
------------------------------
28
SCHEDULE A
ACCOUNTS
Date of Resolution of Company's Board
Name of Account Which Established the Account
--------------- --------------------------------------
29
SCHEDULE B
PROXY VOTING PROCEDURES
The following is a list or procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Distributor, the Fund and the
Company. 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 Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Distributor
as early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Distributor will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
the 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 contractowner/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 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.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy
statement. The Distributor will provide at least one copy of the last
Annual Report to the Company.
4. 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 Legal
Department of the Adviser or its affiliate must approve the Card before
it is printed. Allow approximately 24 business days for printing
information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
30
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of votes
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, the Fund or its counsel will develop and produce, and
the Fund will pay for, the Notice of Proxy and the Proxy Statement (one
document). Printed and folded notices and statements will be sent to the
Company for insertion into envelopes (envelopes and return envelopes are
provided and paid for by the Insurance Company). Contents of the 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 the 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.)
e. cover letter - optional, supplied by the Company
6. The above contents should be received by the Company approximately 3-5
business days before the mail date. The individual in charge at the
Company reviews and approves the contents of the mailing package to
ensure correctness and completeness. A copy of this approval is sent to
the Fund or its counsel.
7. 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 meeting, counting backwards.
8. Collection and tabulation of Cards begins. Cards sorted on arrival by
proposal into vote categories of all yes, no, or mixed replies, and data
entry begun.
Note: Postmarks are not generally needed. A need for postmark
information would be due to a Company's internal procedure.
31
9. Signatures on Card checked against legal name on account registration
which was printed or affixed on the Card.
Note: For example, if the account registration is under "Xxxxxxx X.
Xxxxx, Trustee," then that is the exact legal name 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 the Customer with an explanatory letter a
new Card and a return envelope. The mutilated or illegible Card is
disregarded and considered to be NOT RECEIVED for purposes of vote
tabulation. Any Cards that have "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 Fund receive the tabulations
stated in terms of a percentage and the number of SHARES.) The Fund or
its counsel must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to the Fund
on the morning of the meeting not later than 10:00 a.m. New York Time.
The Fund or its counsel may request an earlier deadline 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 Fund 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 Fund 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.
32
