Exhibit 8
PARTICIPATION AGREEMENT
Among
HARTFORD BOND HLS FUND, INC.,
HARTFORD INDEX HLS FUND, INC.,
HARTFORD MONEY MARKET HLS FUND, INC.,
HARTFORD MORTGAGE SECURITIES HLS FUND, INC.,
HARTFORD SERIES FUND, INC.,
HARTFORD SECURITIES DISTRIBUTION COMPANY, INC.,
and
ROYAL LIFE INSURANCE COMPANY OF AMERICA
TABLE OF CONTENTS
Page
ARTICLE I. Fund Shares 4
ARTICLE II. Representations and Warranties 6
ARTICLE III. Prospectuses, Reports to Shareholders and 8
Proxy Statements; Voting
ARTICLE IV. Sales Material and Information 10
ARTICLE V. Reserved 11
ARTICLE VI. Diversification 11
ARTICLE VII. Potential Conflicts 12
ARTICLE VIII. Indemnification 13
ARTICLE IX. Applicable Law 17
ARTICLE X. Termination 17
ARTICLE XI. Notices 19
ARTICLE XII. Foreign Tax Credits 20
ARTICLE XIII. Miscellaneous 20
SCHEDULE A Separate Accounts and Contracts 27
SCHEDULE B Participating Fund Shares 25
SCHEDULE C Proxy Voting Procedures 26
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PARTICIPATION AGREEMENT
Among
HARTFORD BOND HLS FUND, INC.
HARTFORD INDEX HLS FUND, INC.
HARTFORD MONEY MARKET HLS FUND, INC.
HARTFORD MORTGAGE SECURITIES HLS FUND, INC.
HARTFORD SERIES FUND, INC.
HARTFORD SECURITIES DISTRIBUTION COMPANY, INC.
and
ROYAL LIFE INSURANCE COMPANY OF AMERICA
THIS AGREEMENT, made and entered into as of the 1st day of December, 1998 by and
among ROYAL LIFE INSURANCE COMPANY OF AMERICA (hereinafter the "Company"); a
Connecticut corporation, on its 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") and HARTFORD BOND
HLS FUND, INC., HARTFORD INDEX HLS FUND, INC., HARTFORD MONEY MARKET HLS FUND,
INC., HARTFORD, MORTGAGE SECURITIES HLS FUND, INC., HARTFORD SERIES FUND, INC.,
each a corporation established under the laws of the state of Maryland ("state")
(hereinafter the "Funds"); and HARTFORD SECURITIES DISTRIBUTION COMPANY, INC., a
Connecticut corporation (hereinafter the "Underwriter").
WHEREAS, each Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established by insurance companies for individual and group life insurance
policies and annuity contracts with variable accumulation and/or pay-out
provisions (hereinafter referred to individually and/or collectively as
"Variable Insurance Products"); and
WHEREAS, insurance companies desiring to utilize the Funds as an investment
vehicle under their Variable Insurance Products are required to enter into
participation agreements with the Funds and the Underwriter (the "Participating
Insurance Companies"); and
WHEREAS, shares of the Funds are divided into series and classes of shares,
which may be made available for Variable Insurance Products of Participating
Insurance Companies; and
WHEREAS, the Funds intend to offer the shares set forth in Schedule B as
may be
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amended from time to time by mutual agreement of the parties hereto, under this
Agreement to the Accounts of the Company; and
WHEREAS, each Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (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 each
Fund; 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 aforesaid Variable
Insurance Products; and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act unless exempt from such registration; 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 aforesaid 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
Funds, the Underwriter agree as follows:
ARTICLE I. Fund Shares
1.1. The Fund and the Underwriter agree to make available for purchase
by the Company shares of the Funds and shall execute orders placed for each
Account on a daily basis at the net asset value next computed after receipt by
each Fund or its designee of such order. For purposes of this Section 1.1, the
Company shall be the designee of each Fund and Underwriter 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 10:00 a.m.
(local time where the Fund processes orders) on the next following Business Day.
Notwithstanding the foregoing, the Company shall use its best efforts to
provide the Fund with notice of such orders by 9:15 a.m. on the next following
Business Day. "Business Day" shall mean any day on which
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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 Securities and Exchange
Commission, as set forth in the Fund's prospectus and statement of additional
information. Notwithstanding the foregoing, the Board of Directors of each Fund
(hereinafter the "Board") may refuse to permit the Fund to sell shares to any
person, or suspend or terminate the offering of shares if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Board acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in the
best interests of the shareholders.
1.2. Each Fund and the Underwriter agree that shares of the Funds will
be sold only to Participating Insurance Companies for their Variable Insurance
Products. No shares will be sold to the general public.
1.3. Each Fund will not make its shares available for purchase by any
insurance company or separate account unless the Fund is in compliance with
Sections 2.1, 2.4, 2.9, 3.4 and Article VII of this Agreement.
1.4. Each Fund and the Underwriter agree to redeem for cash, on the
Company's request, any full or fractional shares of the Fund held by the
Company, executing such requests on a daily basis at the net asset value next
computed after receipt by the Fund or its designee of the request for
redemption. For purposes of this Section 1.4, the Company shall be the designee
of each Fund for receipt of requests for redemption from each Account and
receipt by such designee shall constitute receipt by the Fund; provided that the
Underwriter receives notice of such request for redemption on the next following
Business Day in accordance with the timing rules described in Section 1.1.
1.5. The Company agrees that purchases and redemptions of Fund shares
offered by the then current prospectus of each Fund shall be made in accordance
with the provisions of such prospectus. The Accounts of the Company, under which
amounts may be invested in the Funds 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 Funds and the Underwriter concurrent written notice of its
intention to make available in the future, as a funding vehicle under the
Contracts, any other investment company.
1.6. The Company will place separate orders to purchase or redeem
shares of each Fund. Each order shall describe the net amount of shares and
dollar amount of each Fund to be purchased or redeemed. In the event of net
purchases, the Company shall pay for Fund shares no later than the third
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. In the event of net redemptions, the Fund shall pay the
redemption proceeds in federal funds transmitted by wire on the next Business
Day after an order to redeem Fund shares is made in accordance with the
provisions of Section 1.4 hereof. Notwithstanding the foregoing, if the
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payment of redemption proceeds on the third Business Day would require the Fund
to dispose of Fund securities or otherwise incur substantial additional costs,
and if the Fund has determined to settle redemption transactions for all
shareholders on a delayed basis, proceeds shall be wired to the Company within
seven (7) days and the Fund shall notify in writing the person designated by the
Company as the recipient for such notice of such delay by 3:00 p.m. Eastern Time
on the same Business Day that the Company transmits the redemption order to the
Fund.
1.7. Issuance and transfer of Fund shares will be by book entry only.
Share certificates will not be issued to the Company or any Account. Shares
ordered from the Fund will be recorded in an appropriate title for each Account
or the appropriate subaccount of each Account.
1.8. The Underwriter shall use its best efforts to furnish same day
notice by 6:00 p.m. in its local time zone (by wire or telephone, followed by
written confirmation) to the Company of any dividends or capital gain
distributions payable on the Fund's shares. The Company hereby elects to receive
all such dividends and capital gain distributions as are payable on the Fund
shares in additional shares of the Fund. The Company reserves the right to
revoke this election and to receive all such dividends and capital gain
distributions in cash. The Fund shall notify the Company of the number of shares
so issued as payment of such dividends and distributions.
1.9. The Underwriter shall make the net asset value per share of each
Fund available to the Company on a daily basis as soon as reasonably practical
after the net asset value per share is calculated.
1.10. If Underwriter provides materially incorrect share net asset value
information through no fault of the Company, the Company shall be entitled to an
adjustment with respect to the Fund shares purchased or redeemed to reflect the
correct net asset value per share. The determination of the materiality of any
net asset value pricing error shall be based on the SEC's recommended guidelines
regarding such errors. The correction of any such errors shall be made at the
Company level pursuant to the SEC's recommended guidelines. Any material error
in the calculation or reporting of net asset value per share, dividend or
capital gain information shall be reported promptly upon discovery to the
Company.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the interests of the
Accounts which offer the Funds (the "Contracts") are or will be registered
unless exempt and that it will maintain such registration under the 1933 Act and
the regulations thereunder to the extent required by the 1933 Act; that the
Contracts will be issued and sold in compliance with all applicable federal and
state laws and regulations. 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 under the Connecticut
Insurance Code and the regulations thereunder and has registered or, prior to
any issuance or sale of the Contracts, will register and will maintain the
registration
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of each Account as a unit investment trust in accordance with and to the extent
required by the provisions of the 1940 Act and the regulations thereunder,
unless exempt therefrom, to serve as a segregated investment account for the
Contracts. The Company shall amend its registration statement for its contracts
under the 1933 Act and the 1940 Act from time to time as required in order to
effect the continuous offering of its Contracts.
2.2. The Funds and the Underwriter represent and warrant that Fund
shares sold pursuant to this Agreement shall be registered under the 1933 Act
and the regulations thereunder to the extent required by the 1933 Act, duly
authorized for issuance in accordance with the laws of State and sold in
compliance with all applicable federal and state securities laws and regulations
and that each Fund is and shall remain registered under the 1940 Act and the
regulations thereunder to the extent required by the 1940 Act. Each 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. Each Fund shall register and qualify the shares for sale in
accordance with the laws of the various states only if and to the extent deemed
advisable by the Fund.
2.3. Each 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") and that each will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that each will notify the Company immediately upon having a reasonable basis for
believing that the Fund has ceased to so qualify or that the Fund might not so
qualify in the future.
2.4. The Company represents that each Account is and will continue to
be a "segregated account" under applicable provisions of the Code and that each
Contract is and will be treated as a "variable contract" under applicable
provisions of the Code and that it will make every effort to maintain such
treatment and that it will notify the Fund immediately upon having a reasonable
basis for believing that the Account or Contract has ceased to be so treated or
that they might not be so treated in the future.
2.5. Each Fund represents that to the extent that it decides to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the
Fund undertakes to have a board of directors, a majority of whom are not
interested persons of the Fund, formulate and approve any plan under Rule 12b-1
to finance distribution expenses.
2.6. Each Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.7. Each Fund represents that it is duly organized and validly
existing under the laws of the state of Maryland and that the Fund does and will
comply in all material respects with the 1940 Act.
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2.8. The Underwriter represents and warrants that it is and shall
remain duly registered under all applicable federal and state laws and
regulations and that it will perform its obligations for the Funds and the
Company in compliance with the laws and regulations of its state of domicile and
any applicable state and federal laws and regulations.
2.9. The Company represents and warrants that all of its officers,
employees, investment advisers, and other individuals/entities dealing with the
money and/or securities of the Funds are covered by a blanket fidelity bond or
similar coverage, in an amount equal to the greater of $5 million or any amount
required by applicable federal or state law or regulation. The aforesaid
includes coverage for larceny and embezzlement is issued by a reputable bonding
company.
ARTICLE III. PROSPECTUSES; REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS; VOTING
3.1 Each Fund shall provide the Company with as many printed copies of
the Fund'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 Fund shall provide camera-ready film or computer diskettes
containing the Fund's prospectus and statement of additional information, and
such other assistance as is reasonably necessary in order for the Company once
each year (or more frequently if the prospectus and/or statement of additional
information for the Fund is amended during the year) to have the prospectus for
the Contracts and the Fund's prospectus printed together in one document or
separately. The Company may elect to print the Fund's prospectus and/or its
statement of additional information in combination with other fund companies'
prospectuses and statements of additional information.
3.2(a). Except as otherwise provided in this Section 3.2, all expenses of
preparing, setting in type and printing and distributing Fund 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 setting in type, printing and
distributing shall be borne by the Fund. If the Company chooses to receive
camera-ready film or computer diskettes in lieu of receiving printed copies of
the Fund's prospectus and/or statement of additional information, the Fund shall
bear the cost of typesetting to provide the Fund's prospectus and/or statement
of additional information to the Company in the format in which the Fund is
accustomed to formatting prospectuses and statements of additional information,
respectively, and the Company shall bear the expense of adjusting or changing
the format to conform with any of its prospectuses and/or statements of
additional information. In such event, the Fund will reimburse the Company in an
amount equal to the product of x and y where x is the number of such
prospectuses distributed to owners of the Contracts, and y is the Fund's per
unit cost of printing the Fund's prospectuses. The same procedures shall be
followed with respect to the Fund's statement of additional information. The
Fund shall not pay any costs of typesetting, printing and distributing the
Fund's prospectus and/or statement of additional
8
information to prospective Contract owners.
3.2(b). Each Fund, at its expense, shall provide the Company with copies
of its proxy statements, reports to shareholders, and other communications
(except for prospectuses and statements of additional information, which are
covered in Section 3.2(a) above) to shareholders in such quantity as the Company
shall reasonably require for distributing to Contract owners. The Fund shall
not pay any costs of distributing such proxy-related material, reports to
shareholders, and other communications to prospective Contract owners.
3.2(c). The Company agrees to provide each Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of typesetting, printing or distributing any of
the foregoing documents other than those actually distributed to existing
Contract owners.
3.2(d) Each Fund shall pay no fee or other compensation to the Company
under this Agreement, except that if the Fund adopts and implements a plan
pursuant to Rule 12b-1 to finance distribution expenses, then the Underwriter
may make payments to the Company or to the underwriter for the Contracts if and
in amounts agreed to by the Underwriter in writing.
3.2(e) All expenses, including expenses to be borne by each Fund pursuant
to Section 3.2 hereof, incident to performance by the Fund under this Agreement
shall be paid by the Fund. Each 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.
3.3. Each Fund's statement of additional information shall be
obtainable from the Fund, the Underwriter, the Company or such other person as
the Fund may designate.
3.4. If and to the extent required by law the Company shall distribute
all proxy material furnished by each Fund to Contract Owners to whom voting
privileges are required to be extended and shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the 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 Fund shares 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
9
vote Fund shares held in any segregated asset account in
its own right, to the extent permitted by law. The Fund
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 C attached hereto and incorporated
herein by reference. Participating Insurance Companies
shall be responsible for ensuring that each of their
separate accounts participating in the Fund calculates
voting privileges in a manner consistent with the
standards set forth on Schedule C, which standards will
also be provided to the other Participating Insurance
Companies.
(iv) For unregistered separate accounts subject to the
Employee Retirement Income Security Act of 1974 ("ERISA")
to refrain from voting shares for which no instructions
are received if such shares are held in an unregistered
segregated asset account subject to ERISA.
3.5. Each Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings (except insofar as the Securities and Exchange Commission
may interpret Section 16 not to require such meetings). Further, the Fund 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.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Funds, the Underwriter or their designee, each piece of sales literature or
other promotional material prepared by the Company or any person contracting
with the Company in which the Funds or the Underwriter is described, at least
ten Business Days prior to its use. No such material shall be used if the Funds,
the Underwriter or their designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.2. Neither the Company nor any person contracting with the Company
shall give any information or make any representations or statements on behalf
of the Funds or concerning the Funds in connection with the sale of the
Contracts other than the information or representations contained in the
registration statement or Fund prospectus, as such registration statement or
Fund prospectus may be amended or supplemented from time to time, or in reports
to shareholders or proxy statements for the Fund, or in sales literature or
other promotional material approved by the Fund or its designee, except with the
permission of the Fund or its designee.
4.3. Each Fund shall furnish, or shall cause to be furnished, to the
Company or its
10
designee, each piece of sales literature or other promotional material prepared
by the Fund in which the Company or its Accounts, are described at least ten
Business Days prior to its use. No such material shall be used if the Company or
its designee reasonably objects to such use within ten Business Days after
receipt of such material.
4.4. Neither the Funds nor the Underwriter shall give any information
or make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement or prospectus may be amended or supplemented from time to
time, or in published reports or solicitations for voting instruction 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. Each Fund will provide to the Company, at the Company's request,
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 Securities and Exchange Commission or other regulatory
authorities.
4.6. The Company will provide to each Fund, upon the Fund's request, 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 an Account or Contract, 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: 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. [RESERVED]
ARTICLE VI. DIVERSIFICATION
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6.1. Each Fund represents and warrants that, at all times, each Fund
will 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 any Fund ceases to so qualify, it will take
all reasonable steps (a) to notify Company of such event and (b) to adequately
diversify the Fund so as to achieve compliance within the grace period afforded
by Regulation 817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Funds 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 Fund are being managed; (e) a difference in voting instructions given by
variable annuity contract owners and variable life insurance contract 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 material
irreconcilable conflict of which it is aware to the Board. The Company will
assist the Board 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 trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any series of the Fund and reinvesting such assets in a different
investment medium, including (but not limited to) another series 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.
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No charge or penalty will be imposed as a result of such withdrawal. The Company
agrees that it bears the responsibility to take remedial action in the event of
a Board determination of an irreconcilable material conflict and the cost of
such remedial action, and these responsibilities will be carried out with a view
only to the interests of Contract owners.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
(at the Company's expense); provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. No charge or penalty will be imposed as a result of such
withdrawal. The Company agrees that it bears the responsibility to take remedial
action in the event of a Board determination of an irreconcilable material
conflict and the cost of such remedial action, and these responsibilities will
be carried out with a view only to the interests of Contract owners.
7.5. For purposes of Sections 7.3 through 7.4 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 through 7.4 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely affected
by the irreconcilable material conflict.
7.6. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding, then the Fund and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with Rules 6e-2
and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable.
7.7 The Company shall at least annually submit to the Board such
reports, materials or data as the Board may reasonably request so that the Board
may fully carry out the obligations with respect to mixed and shared funding.
All reports received by the Board of potential or existing conflicts, and all
Board action with regard to determining the existence of a conflict, notifying
Participating Insurance Companies of a conflict, and determining whether any
proposed action adequately remedies a conflict, shall be properly recorded in
the minutes of the Board or other appropriate records, and such minutes or other
records shall be made available to the Securities and Exchange Commission upon
request.
ARTICLE VIII. INDEMNIFICATION
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8.1. INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Funds, the
Underwriter and each member of their respective Board and 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 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 Funds 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 Funds not supplied by the
Company, or persons under its control and other than
statements or representations authorized by the Funds 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 Fund shares; or
(iii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained in
a registration statement, prospectus, or sales literature
of the Funds 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 Funds
by or on behalf of the Company; or
14
(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.
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 as 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 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 Fund shares or the Contracts or the operation of the
Funds.
8.2. INDEMNIFICATION BY UNDERWRITER
8.2(a). The Underwriter agrees, with respect to each Fund that it
distributes, 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 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,
15
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of shares of the Fund that it
distributes 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 Funds (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 Funds or the Underwriter 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, the Underwriter or persons under their respective
control and other than statements or representations
authorized by the Company) or unlawful conduct of the
Fund or 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, 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 Funds or the Underwriter;
or
(iv) arise as a result of any failure by the Funds or the
Underwriter 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
Section 8.2(b) and 8.2(c) hereof.
16
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 in which the Funds are made available.
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 Connecticut.
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 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:
17
(a) termination by any party for any reason upon six-months advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Funds and the
Underwriter with respect to any portfolio based upon the Company's
determination that shares of such portfolio are not reasonably
available to meet the requirements of the Contracts. Reasonable
advance notice of election to terminate shall be furnished by the
Company, said termination to be effective ten (10) days after
receipt of notice unless the Fund makes available a sufficient
number of shares to reasonably meet the requirements of the
Account within said ten (10) day period; or
(c) termination by the Company upon written notice to the Fund 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 medium of the
Contracts issued or to be issued by the Company. The terminating
party shall give prompt notice to the other parties of its
decision to terminate; or
(d) termination by the Company upon written notice to the Funds and
the Underwriter with respect to any portfolio in the event that
such portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Code or under any successor or similar
provision; or
(e) termination by the Company upon written notice to the Fund and the
Underwriter with respect to any portfolio in the event that such
portfolio fails to meet the diversification requirements specified
in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or more of the Funds or the
Underwriter, shall determine, in its or their sole judgment
exercised in good faith, that the Company and/or their 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,
provided that the Funds or the Underwriter will give the Company
sixty (60) days' advance written notice of such determination of
as intent to terminate this Agreement, and provided further that
after consideration of the actions taken by the Company and any
other changes in circumstances since the giving of such notice,
the determination of the Funds or the Underwriter shall continue
to apply on the 60th day since giving of such
18
notice, then such 60th day shall be the effective date of
termination; or
(g) termination by the Company by written notice to the Funds and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Funds 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,
provided that the Company will give the Funds and the Underwriter
sixty (60) days' advance written notice of such determination of
its intent to terminate this Agreement, and provided further that
after consideration of the actions taken by the Funds or the
Underwriter and any other changes in circumstances since the
giving of such notice, the determination of the Company shall
continue to apply on the 60th day since giving of such notice,
then such 60th day shall be the effective date of termination; or
(i) termination by any party upon the other party's breach of any
representation in Section 2 or any material provision of this
Agreement, which breach has not been cured to the satisfaction of
the terminating party within ten (10) days after written notice of
such breach is delivered to the Funds or the Company, as the case
may be; or
(j) termination by the Funds or Underwriter by written notice to the
Company in the event an Account or Contract is not registered
(unless exempt from registration) or sold in accordance with
applicable federal or state law or regulation, or the Company
fails to provide pass-through voting privileges as specified in
Section 3.4.
10.2. EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, each Fund 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") unless such
further sale of Fund shares is proscribed by law, regulation or applicable
regulatory body, or unless the Fund determine that liquidation of the Fund
following termination of this Agreement is in the best interests of the Fund and
its shareholders. Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to direct reallocation of investments in the Fund,
redemption of investments in the Fund and/or investment in the Fund 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 Fund shares attributable to the
Contracts (as distinct from Fund shares attributable to the Company's assets
held in the Account) except (i) as
19
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 SEC
pursuant to Section 26(b) of the 1940 Act. Upon request, the Company will
promptly furnish to the Funds and the Underwriter the opinion of counsel for the
Company (which counsel shall be reasonably satisfactory to the Funds and the
Underwriter) to the effect that any redemption pursuant to clause (ii) above is
a Legally Required Redemption. Furthermore, except in cases where permitted
under the terms of the Contracts, the Company shall not prevent Contract Owners
from allocating payments to a Fund that was otherwise available under the
Contracts without first giving the Fund 30 days 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 any of the Funds:
The Hartford Investment Management Company
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
If to the Underwriter:
Hartford Securities Distribution Company, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Senior Vice President
If to the Company: With a copy to:
Royal Life Insurance Company Royal Life Insurance Company
of America of America
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇ Attn: ▇▇▇▇▇ ▇▇▇▇▇▇, General Counsel
ARTICLE XII. FOREIGN TAX CREDITS
20
12.1. The Funds agree to consult in advance with the Company concerning
whether any series of the Funds qualifies to provide a foreign tax credit
pursuant to Section 853 of the Code.
ARTICLE XIII. MISCELLANEOUS
13.1. All persons dealing with the Funds must look solely to the
property of the Funds for the enforcement of any claims against the Funds as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Funds.
13.2. 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.
13.3. 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.
13.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
13.5. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
13.6. 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 (and
other parties hereto) reasonable access to its books and records in connection
with any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
13.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations at law or in equity, which the parties hereto are entitled to under
state and federal laws.
13.8. 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.
21
13.9. The Company shall furnish, or shall cause to be furnished, to each
of the Funds or their designee upon request, 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 June 30th quarterly statements (statutory),
as soon as practical and in any event within 45 days
following such 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 public 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.
22
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in as name and on its behalf by its duly authorized representative
as of the date specified above.
ROYAL LIFE INSURANCE COMPANY OF AMERICA
on behalf of Itself and each of its Accounts named in
Schedule A hereto, as amended from time to time
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its Senior Vice President & Chief Actuary
HARTFORD BOND HLS FUND, INC*.
HARTFORD INDEX HLS FUND, INC.*
HARTFORD MONEY MARKET HLS FUND, INC.*
HARTFORD MORTGAGE SECURITIES HLS FUND, INC.*
HARTFORD SERIES FUND, INC.*
*By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President of each Fund
HARTFORD SECURITIES DISTRIBUTION COMPANY, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇
----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇
Its Controller
23
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
--------------------------------------------------------------------------------
Name of Separate Account and Date Established by Form Numbers
Board of Directors Funded by Separate Account
--------------------------------------------------------------------------------
Separate Account One VA-ROYAL SAMPLE
--------------------------------------------------------------------------------
Separate Account Two VL-ROYAL SAMPLE
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
24
SCHEDULE B
PARTICIPATING FUND SHARES
CLASS IA SHARES OF HARTFORD BOND HLS FUND, INC.
CLASS IA SHARES OF HARTFORD INDEX HLS FUND, INC.
CLASS IA SHARES OF HARTFORD MONEY MARKET HLS FUND, INC.
CLASS IA SHARES OF HARTFORD MORTGAGE SECURITIES HLS FUND, INC.
CLASS IA SHARES OF HARTFORD HIGH YIELD HLS FUND OF HARTFORD SERIES FUND, INC.
25
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to a Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
1. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of voting
instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will inform
the Company of the Record, Mailing and Meeting dates. This will be done
verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run," or
other activity, which will generate the names, address 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 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 voting instruction
solicitation material. The Fund 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 Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Fund or its
affiliate must approve the Card before it is printed. Allow approximately
2-4 business days for printing information on the Cards. Information
commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. fund or account number
d. coding to state number of units (or equivalent shares)
e. individual Card number for use in tracking and verification of votes
(already on
26
Cards as printed by the Fund).
5. During this time, the Fund will develop, 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 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 buck slip"- optional, but recommended. (This is a small, single
sheet of paper that requests Customers to vote as quickly as possible
and that their vote is important. One copy will be supplied by the
Fund.)
e. cover letter - optional, supplied by Company and reviewed and approved
in advance by the Fund.
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 Fund.
7. Package mailed by the Company at the Fund's expense.
*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. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by the Fund in the past.
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 "▇▇▇▇ ▇. ▇▇▇▇▇,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
27
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 (or equivalent shares)
which is then converted to shares. (It is very important that the fund
receives the tabulations stated in terms of a percentage and the number of
shares.) The Fund must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to the Fund on
the morning of the meeting not later then 10:00 A.M. Eastern time. The Fund
may request an earlier deadline if reasonable and if required to calculate
the vote in time for the 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.
28
