EXHIBIT 99.A4
EXHIBIT 1A(3)(a)
Form of Participation Agreement
PARTICIPATION AGREEMENT
Among
WRL SERIES FUND, INC.,
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO,
and
AUSA LIFE INSURANCE COMPANY, INC.
THIS AGREEMENT, made and entered into this ___ day of ____, 1998 by and
among AUSA LIFE INSURANCE COMPANY, INC., a New York corporation (hereinafter the
"Company") on its own behalf and on behalf of the AUSA Series Annuity Account A
and AUSA Series Life Account, and other segregated asset accounts of the Company
(hereinafter the "Account(s)"), and WRL SERIES FUND, INC., a Maryland
corporation (hereinafter the "Fund"), and WESTERN RESERVE LIFE ASSURANCE CO. OF
OHIO, an Ohio corporation and an affiliate of the Company (hereinafter "WRL").
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for the Account(s),
and other separate accounts established for variable life insurance policies and
variable annuity contracts of WRL and its affiliates; and
WHEREAS, shares of common stock of the Fund are divided into several
series of shares each designated a "Portfolio" or collectively, "Portfolios",
and each representing the interests in a particular managed pool of securities
and other assets; and
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
and its shares are registered under the Securities Act of 1933, as amended
(hereinafter the "1933 Act"); and
WHEREAS, WRL Investment Management, Inc. ("WRL Management") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law, and is the Fund's investment
adviser; and
WHEREAS, the Company has registered or will register certain variable
annuity contracts and/or life insurance policies under the 1933 Act
(hereinafter, both "contracts" and "policies" referred to individually as the
"Policy", or, collectively, the "Policies"); and
WHEREAS, the Account(s) are duly organized, validly existing segregated
asset account(s), established by resolution of the Board of Directors of the
Company, to set aside and invest assets attributable to the aforesaid Policies
that are allocated to the Account(s) (the
Policies and the Account(s) covered by this Agreement, and each corresponding
Portfolio covered by this Agreement in which the Account(s) invest(s), is
specified in Schedule A attached hereto as may be modified from time to time);
and
WHEREAS, the Company has registered or will register the Account(s) as
unit investment trust(s) under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Account(s) to fund the Policies, and the Fund intends to sell such Shares to
the Account(s) at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Fund, WRL
and the Company agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1 The Fund agrees to sell to the Company those Shares which the
Account(s) orders and which are available for purchase by such Account,
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. For
purposes of this Section 1.1, the Company shall be the designee of the Fund for
receipt of such orders from owners of the Policies ("Policyowners") 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 Securities and Exchange Commission (the
"SEC").
1.2 The Fund agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and the
Account(s) 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 any Shares to the Company and
the Account(s), or suspend or terminate the offering of the Shares if such
action is required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the Board acting in
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good faith and in light of its fiduciary duties under federal and any applicable
state laws, necessary in the best interests of the shareholders of such
Portfolio.
1.3 The Fund agrees that the Shares will be sold only to the Company
and the Account(s) and/or WRL and its separate accounts. In addition, the Shares
may be sold to other insurance companies affiliated with the Company and WRL or
their separate accounts only with the express written consent of WRL. The Shares
will not be sold to the general public or to other investors. Nothing herein
shall prohibit the Company from establishing separate accounts or sub-accounts
of separate accounts which purchase shares from investment companies other than
the Fund.
1.4 The Fund agrees to redeem for cash, at the Company's request,
any full or fractional Shares 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 the Fund for receipt of requests for
redemption from Policyowners and receipt by such designee shall constitute
receipt by the Fund; provided that the Fund receives notice of such request for
redemption by 9:30 a.m. New York time on the next following Business Day.
1.5 The Company shall pay for the Shares by 2:00 p.m. New York time
on the next Business Day after an order to purchase the Shares is made in
accordance with the provisions of Section 1.1 hereof. Payment shall be in
federal funds transmitted by wire or by a credit for any Shares redeemed. For
purpose of Section 2.9, 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.
1.6 Issuance and transfer of the Shares will be by book entry only.
Stock certificates will not be issued to the Company or the Account(s). The
Shares ordered from the Fund will be recorded in an appropriate title for the
Account(s) or the appropriate sub-account of the Account(s).
1.7 The Fund shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any income, dividends or
capital gains distributions payable on the Shares. The Company hereby elects to
receive all such dividends and distributions as are payable on a Portfolio's
Shares in additional Shares of that Portfolio. The
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Fund shall notify the Company of the number of Shares so issued as payment of
such dividends and distributions.
1.8 The Fund or its custodian shall make the net asset per share for
each Portfolio available to the Company on each Business Day as soon as
reasonably practical after the net asset value per share is calculated and shall
use its best efforts to make such net asset value per share available by 6:30
p.m. New York time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that the Policies are or
will be registered under the 1933 Act, and that the Policies will be issued,
sold, and distributed in compliance in all material respects with all applicable
state and federal laws, including without limitation the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act.
The Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable laws and that it has legally and
validly established the Accounts as a segregated asset accounts under New York
law and has registered or, prior to any issuance or sale of the Policies, will
register the Account(s) as unit investment trust(s) in accordance with the
provisions of the 1940 Act (unless exempt therefrom) to serve as a segregated
investment account(s) for the Policies, and that it will maintain such
registration(s) for so long as any Policies are outstanding. The Company shall
amend the registration statement(s) under the 1933 Act for the Policies and the
registration statement(s) under the 1940 Act for the Account(s) from time to
time as required in order to effect the continuous offering of the Policies or
as may otherwise be required by applicable law. The Company shall register and
qualify the Policies for sale in accordance with the securities laws of the
various states only if and to the extent deemed necessary by the Company.
2.2 The Company represents that it believes, in good faith, that the
Policies are currently and at the time of issuance will be treated as life
insurance, endowment or annuity contracts under applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), that it will make every
effort to maintain such treatment and that it will notify the Fund and WRL
immediately upon having reasonable basis for believing that the Policies have
ceased to be so treated or that they might not be so treated in the future.
2.3 The Fund and WRL each separately represents and warrants that
the Shares sold pursuant to this Agreement shall be registered under the 1933
Act, duly authorized
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for issuance and sold in compliance with the laws of Maryland 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 necessary by the Fund, with the
concurrence of WRL.
2.4 The Fund and WRL each separately represents that each Portfolio
of the Fund is currently qualified or will be qualified as a Regulated
Investment Company under Subchapter M of the Code and that every effort will be
made to maintain such qualification (under Subchapter M or any successor or
similar provision) and that the Fund or WRL, as appropriate, will notify the
Company orally (followed by written notice) or by wire immediately upon having a
reasonable basis for believing that any Portfolio of the Fund has ceased to so
qualify or that any Portfolio might not so qualify 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 to the extent permitted and in conformity with the
requirements under the 1940 Act it may make such payments in the future.
2.6 The Fund represents that it will sell and distribute the Shares
in accordance in all material respects with all applicable state and federal
securities laws, including without limitation the 1933 Act, the 1934 Act, and
the 0000 Xxx.
2.7 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.
2.8 WRL Management represents and warrants that it is and shall
remain duly registered under all applicable federal and state securities laws
and that it shall perform its obligations for the Fund in compliance in all
material respects with any applicable state and federal securities laws.
2.9 The Fund and WRL each separately represents and warrants that,
to the extent required by Section 17(g) and Rule 17g-1 of the 1940 Act, or
related provisions as may be promulgated from time to time, all of its
directors, officers, employees, investment advisers, and other individuals or
entities dealing with the money and/or securities of the Fund are and
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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 Section 17(g) and Rule 17g-1 of the 1940 Act
or related provisions as may be promulgated from time to time. The aforesaid
bond shall include coverage for larceny and embezzlement and shall be issued by
a reputable bonding company.
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1 At least annually, the Fund or WRL, as appropriate, shall
provide the Company, free of charge, with as many copies of the current
prospectus for the Shares as the Company may reasonably request for distribution
to existing Policyowners whose Policies are funded by such Shares. The Fund or
WRL, as appropriate, shall provide the Company, at the Company's expense, with
as many copies of the current prospectus for the Shares as the Company
reasonably requests for distribution to prospective purchasers of Policies. If
requested by the Company in lieu thereof, the Fund or WRL, as appropriate, shall
provide such documentation (including a final "camera-ready" copy of the new
prospectus as set in type at the expense of the Fund or WRL, as the case may be)
and other assistance as is reasonably necessary in order for the parties hereto
once each year (or more frequently if the prospectus for the Shares is
supplemented or amended) to have the prospectus for the Policies and the
prospectus for the Shares printed together in one document; the expense of such
printing to be apportioned between (a) the Company, and (b) the Fund or WRL, as
the case may be, in proportion to the number of pages of the Policy's and
Shares' prospectuses, taking account of other relevant factors affecting the
expense of printing, such as columns, charts, etc.; the Fund or WRL, as the case
may be, to bear the cost of printing the Shares' prospectus portion of such
document for distribution to owners of existing Policies funded by the Shares,
and the Company to bear the expenses of printing the portion of such document
relating to the Account(s); PROVIDED, however, that the Company shall bear all
printing expenses of such combined documents where used for distribution to
prospective purchasers or to owners of existing Policies not funded by the
Shares.
3.2 The prospectus for the Shares shall state that the Statement of
Additional Information for the Shares is available from the Fund (or WRL). The
Fund or WRL, at its expense, as appropriate, shall print and provide such
Statement to the Company (or a master of such Statement suitable for duplication
by the Company) for distribution to any owner of a
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Policy funded by the Shares. WRL, at the Company's expense, shall print and
provide such Statement to the Company (or a master of such Statement suitable
for duplication by the Company) for distribution to a prospective purchaser who
requests such Statement or to an owner of a Policy not funded by the Shares.
3.3 The Fund shall provide the Company, free of charge, copies, if
and to the extent applicable to the Shares, of the Fund's proxy material,
reports to Shareholders and other communications to Shareholders in such
quantity as the Company shall reasonably require for distributing to
Policyowners.
3.4 Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3
above, or of Article V below, the Company shall pay the expense of printing or
providing documents to the extent such cost is considered a distribution
expense. Distribution expenses would include by way of illustration, but are not
limited to, the printing of the Shares' prospectus for distribution to
prospective purchasers or to owners of existing Policies not funded by such
Shares.
3.5 If and to the extent required by law, the Company shall:
(i) solicit voting instructions from Policyowners;
(ii) vote the Shares in accordance with instructions received
from Policyowners; and
(iii) vote the Shares for which no instructions have been
received in the same proportion as the Shares of such
Portfolio for which instructions have been received;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require passthrough voting privileges for variable contract owners. The Company
reserves the right to vote the Shares held in the Account(s) in its own right,
to the extent permitted by law.
3.6 The process of soliciting Policyowners' voting instructions,
tabulating votes, etc. shall be conducted in accordance with Schedule B attached
hereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1 The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or the Fund's advisers are named, at least ten
Business Days prior to its use. No such material shall be used if the Fund or
its designee object to such use within ten 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 its advisers concerning
the Fund or its advisers in connection with the sale of the Policies other than
the information or representations contained in the registration statement or
prospectus for the Fund shares, as such registration statement or prospectus may
be amended or supplemented from time to time, or in reports or proxy statements
for the Fund, or in sales literature or other promotional material approved by
the Fund or its designee, except with the permission of the Fund. The Fund or
its designee agrees to respond to any request for approval on a prompt and
timely basis.
4.3 WRL shall furnish, or shall cause to be furnished, to the
Company or its designee, each piece of sales literature or other promotional
material in which the Company and/or the Account(s) is named, at least ten
Business Days prior to its use. No such material shall be used if the Company or
its designee object to such use within ten Business Days after receipt of such
material.
4.4 The Fund and WRL each separately agrees not to give any
information or make any representations on behalf of the Company or concerning
the Company, the Account(s), or the Policies other than information or
representations contained in a registration statement or prospectus for the
Policies, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports for the Account(s) which are in
the public domain or approved by the Company for distribution to Policyowners,
or in sales literature or other promotional material approved by the Company or
its designee, except with the permission of the Company. The Company or its
designee agrees to respond to any request for approval on a prompt and timely
basis.
4.5 The Company and Fund (or WRL in lieu of the Fund, as
appropriate) will each provide to the other at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Policies, or to the Fund or its Shares,
prior to or contemporaneously with the filing of such document with the SEC or
other regulatory authorities. The Company or Fund shall also each promptly
inform the other of the results of any examination by the SEC (or other
regulatory authorities) that relates to the Policies, the Fund or its Shares,
and the party that was subject of the examination shall provide the other
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party with a copy of any "deficiency letter" or other correspondence or written
report regarding any such examination.
4.6 For purposes of this Article IV, the phrase "sales literature or
other promotional material" means 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 billboard),
and sales literature (such as brochure, circulars, market letters and form
letters), distributed or made generally available to customers or the public,
educational or training materials or communications distributed or made
generally available to some or all agents or employees.
ARTICLE V. FEES AND EXPENSES
5.1 Neither the Fund nor WRL shall pay any fee or other compensation
to the Company under this Agreement, and the Company shall pay no fee or other
compensation to the Fund or WRL, except that if the Fund or any Portfolio adopts
and implements a plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses, then, subject to obtaining any required exemptive orders
or regulatory approvals, the Fund may make payments to the Company or to the
underwriter for the Policies if and in amounts agreed to by the Fund in writing
(currently no such payments are contemplated). Each party, however, shall, in
accordance with the allocation of expenses specified in Articles III and V
hereof, reimburse other parties for expenses initially paid by one party but
allocated to another party.
5.2 The Fund or WRL, as appropriate, shall bear the expenses for the
cost of registration and qualification of the Shares under all applicable
federal and state laws, including preparation and filing of the Fund's
registration statement, and payment of filing fees and registration fees;
preparation and filing of the Fund's proxy materials and reports to
Shareholders; setting in type and printing its prospectus (to the extent
provided by and as determined in accordance with Article III above); setting in
type and printing the proxy materials and reports to Shareholders (to the extent
provided by and as determined in accordance with Article III above); the
preparation of all statements and notices required of the Fund by any federal or
state law with respect to its Shares; all taxes on the issuance or transfer of
the Shares; and the costs of distributing the Fund's prospectuses and proxy
materials to owners of Policies funded by the Shares and any expenses permitted
to be paid or assumed by the Fund
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pursuant to a plan, if any, under Rule 12b-1 of the 1940 Act. The Fund shall not
bear any expenses of marketing the Policies.
5.3 The Company shall bear the expenses of distributing the Shares'
prospectus in connection with new sales of the Policies and of distributing the
Fund's shareholder reports to Policyowners. The Company shall bear all expenses
associated with the registration, qualification, and filing of the Policies
under applicable federal securities and state insurance laws; the cost of
printing the Policy prospectus; and the cost of preparing and printing annual
individual account statements for Policyowners as required by state insurance
laws.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1 The Fund and WRL each separately represents and warrants that
the Fund will at all times invest its assets in such a manner as to ensure that
the Policies will be treated as annuity, endowment, or life insurance 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 Treas. Reg. ' 1.817-5, as amended from time to time, and any Treasury
interpretations thereof, relating to the diversification requirements for
variable annuity, endowment, or life insurance contracts and any amendments or
other modifications to such Section or Regulations.
6.2 The Shares will not be sold to any person or entity that
would result in the Policies not being treated as annuity, endowment, or life
insurance contracts, in accordance with the statutes and regulations referred
to in the preceding paragraph (Section 6.1 hereof).
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1 The Fund agrees that the Board, constituted with a majority of
disinterested directors, will monitor each Portfolio for the existence of any
material irreconcilable conflict between the interests of the variable annuity
contract owners and the variable life insurance policyowners of the Company
and/or affiliated companies investing in the Fund. The Board shall have the sole
authority to determine if a material irreconcilable conflict exists, and such
determination shall be binding on the Company only if approved in the form of a
resolution by a majority of the Board, or a majority of the disinterested
directors of the Board. The Board will give prompt notice of any such
determination to the Company.
7.2 The Company and WRL each separately agrees that it will be
responsible for promptly reporting any potential or existing conflicts of which
it is aware to the Board. The
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Company also agrees that, if a material irreconcilable conflict arises, it will
at its own cost remedy such conflict up to and including (a) withdrawing the
assets allocable to some or all of the Accounts from any Portfolio and
reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Fund, or submitting to a vote of all
affected Policyowners whether to withdraw assets from any Portfolio and
reinvesting such assets in a different investment medium and, as appropriate,
segregating the assets attributable to any appropriate group of Policyowners
that votes in favor of such segregation, or offering to any of the affected
Policyowners the option of segregating the assets attributable to their
contracts or policies, and (b) establishing a new registered management
investment company and segregating the assets underlying the Policies, unless a
majority of Policyowners materially adversely affected by the conflict have
voted to decline the offer to establish a new registered management investment
company.
7.3 A majority of the disinterested directors of the Board shall
determine whether any proposed action by the Company adequately remedies any
material irreconcilable conflict. in the event that the Board determines that
any proposed action does not adequately remedy any material irreconcilable
conflict, the Company will withdraw from investment in the Fund each of the
Account(s) designated by the disinterested directors and terminate this
Agreement within six (6) months after the Board informs the Company in writing
of the foregoing determination; PROVIDED, HOWEVER, that such withdrawal and
termination shall be limited to the extent required to remedy any such material
irreconcilable conflict as determined by a majority of the disinterested
directors of the Board.
7.4 The Fund agrees that it will not enter into any agreement with a
life insurance company affiliated with the Company unless such agreement
includes a section substantially identical to this Article VII.
ARTICLE VIII. INDEMNIFICATION
8.1 INDEMNIFICATION BY THE COMPANY
8.1(a) The Company agrees to indemnify and hold harmless the Fund,
WRL, and each of their respective directors and officers and each person, if
any, who controls the Fund or WRL within the meaning of Section 15 of the 1933
Act, and any agents or employees of the foregoing (each an "Indemnified Party",
or collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages or liabilities (including
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amounts paid in settlement with the written consent of the Company) or
litigation (including legal and other expenses), to which an Indemnified Party
may become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Shares or the Policies and:
(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 Policies or
contained in the Policies or sales literature for the Policies
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, PROVIDED that this agreement to indemnify shall
not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in
reasonable and good faith reliance upon and in conformity with
information furnished the Company by or on behalf of the Fund
or WRL for use in the registration statement or prospectus for
the Policies or in the Policies or sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Policies or Shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature of the
Fund not supplied by the Company, or persons under its control
and on which the Company has reasonably relied in good faith)
or wrongful conduct of the Company or persons under its
control, with respect to the sale or distribution of the
Policies or 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 statement or omission was made in reliance
upon information furnished to the Fund or WRL by or on behalf
of the Company; or
(iv) 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;
except to the extent provided in Sections 8.1(b) and 8.1(c) hereof.
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8.1(b) The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of 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, except to the extent that failure to
notify results in failure of actual notice to the Company and the Company is
damaged solely as a result of failure to give notice. In case any such action is
brought against one or more of 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. Each Indemnified Party shall
fully cooperate with the Company in defense of the action, regardless of whether
the Company assumes or only participates in the defense. 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, unless (i) the Company and the Indemnified Party shall have
mutually agreed on the retention of such counsel or (ii) the named parties to
any such proceeding (including any impleaded parties) include both the Company
and the Indemnified Party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. The Company shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent
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or if there be a final judgement for the plaintiff, the Company agrees to
indemnify the Indemnified Party from all and against any loss or liability by
reason of such settlement or judgment.
8.1(d) Each Indemnified Party will promptly notify the Company of
the commencement of any litigation or proceedings against it in connection with
the issuance or sale of the Shares or the Policies or the operation of the Fund
and each Indemnified Party will provide the Company with all relevant
information and documents in its possession or in the possession of a person
within its control requested by the Company. For purposes of this Section
8.1(d), the "commencement" of proceedings shall include any informal or formal
communications from the SEC or its staff (or the receipt of information from any
other persons or entities) indicating that enforcement action by the SEC or its
staff may be contemplated or forthcoming, to include any information to the
effect that any matter(s) has been referred to the SEC's Division of
Enforcement, or that any matter(s) is being discussed with that Division.
8.2 INDEMNIFICATION BY WRL
8.2(a) WRL agrees to indemnify and hold harmless the Company and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act, and any agents or
employees of the foregoing (each an Indemnified Party", 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 WRL) or litigation (including legal and other expenses)
to which an Indemnified Party may become subject under any statute, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of the Shares or the Policies and:
(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 was made in reasonable and good
faith reliance upon and in conformity with information
furnished to WRL by or on behalf of the Company for use in the
registration statement or prospectus for the Fund or in sales
literature for the Fund (or any amendment or supplement) or
otherwise for use in connection with the sale of the Policies
or Shares; or
14
(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
Policies not supplied by WRL, or persons under its control and
on which WRL has reasonably relied in good faith) or wrongful
conduct of WRL or persons under its control, with respect to
the sale or distribution of the Policies or 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 covering the Policies, or any
amendment thereof or supplement thereto, or 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 WRL; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by WRL in this Agreement
or arise out of or result from any other material breach of
this Agreement by WRL (including a failure, whether
unintentional or in good faith or otherwise, to comply with
the requirements specified in Article VI of this Agreement);
except to the extent provided in Sections 8.2(b) and 8.2(c) hereof.
8.2(b) WRL shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to which
an Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Company or the Account(s).
8.2(c) WRL 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 WRL 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 WRL of any such claim shall not relieve WRL 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,
except to the extent that failure to notify results in the failure of actual
notice to WRL and WRL is damaged solely as a result of
15
failure to give such notice. In case any such action is brought against one or
more of the Indemnified Parties, WRL will be entitled to participate, at its own
expense, in the defense thereof. WRL also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
Each Indemnified Party shall fully cooperate with WRL in defense of the action,
regardless of whether WRL assumes or only participates in the defense. After
notice from WRL to such party of its election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and WRL will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation, unless (i) WRL and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include WRL and the Indemnified
Party and representation of these parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. WRL
shall not be liable for any settlement of any proceeding effected without its
written consent but if settled with such consent or if there be a final judgment
for the plaintiff, WRL agrees to indemnify the Indemnified Party from and
against any loss or liability by reason of such settlement or judgment.
8.2(d) Each Indemnified Party will promptly notify WRL of the
commencement of any litigation or proceedings against it in connection with the
issuance or sale of the Shares or the Policies or the operation of the Fund and
each Indemnified Party will provide WRL with all relevant information and
documents in its possession or in the possession of a person within its control
requested by WRL. For purposes of this Section 8.2(d), the "commencement" of
proceedings shall include any informal or formal communications from the SEC or
its staff (or the receipt of information from any other persons or entities)
indicating that enforcement action by the SEC or its staff may be contemplated
or forthcoming, to include any information to the effect that any matter(s) has
been referred to the SEC's Division of Enforcement, or that any matter(s) is
being discussed with that Division.
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, and any agents or
employees of the foregoing (each an
16
"Indemnified Party, or 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 any Indemnified Party
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Shares or
Policies 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 statement
therein not misleading, PROVIDED that this statement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reasonable and good faith reliance upon and in
conformity with information furnished to the Fund by or on
behalf of the Company for use in the registration statement or
prospectus for the Fund or in sales literature for the Fund
(or any amendment or supplement) or otherwise for use in
connection with the sale of the Policies or 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
Policies not supplied by the Fund, or persons under its
control and on which the Fund has reasonably relied in good
faith) or wrongful conduct of the Fund or persons under its
control, with respect to the sale or distribution of the
Policies or 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 covering the Policies, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to
the Company by or on behalf of the Fund; or
(iv) 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 (including a failure,
whether unintentional or in good faith or otherwise, to comply
with the requirements specified in Article VI of this
Agreement);
except to the extent provided in Sections 8.3(b), 8.3(c) and 8.3(e) hereof.
17
8.3(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company or the Account(s).
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, except to the extent that failure to
notify results in the failure of actual notice to the Fund and the Fund is
damaged solely as a result of failure to give such notice. In case any such
action is brought against one or more of 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 actions. Each Indemnified Party shall fully cooperate
with the Fund in defense of the action, regardless of whether the Fund assumes
or only participates in the defense. After notice from the Fund to such party of
its election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses 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, unless (i) the Fund and
the Indemnified Party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include the Fund and the Indemnified Party and representation
of these parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The Fund shall not be liable for any
settlement of any proceeding effected without its written consent but if settled
with such consent or if there be a final judgment for the plaintiff, the Fund
agrees to indemnify
18
the Indemnified Party from and against any loss or liability by reason of such
settlement or judgment.
8.3(d) Each Indemnified Party will promptly notify the Fund of the
commencement of any litigation or proceedings against it in connection with the
issuance or sale of the Shares or the Policies or the operation of the Fund with
all relevant information and documents in its possession or in the possession of
a person within its control requested by the Fund. For purposes of this Section
8.3(d), the "commencement" of proceedings shall include any informal or formal
communications from the SEC or its staff (or the receipt of information from any
other persons or entities) indicating that enforcement action by the SEC or its
staff may be contemplated or forthcoming, to include any information to the
effect that any matter(s) has been referred to the SEC's Division of
Enforcement, or that any matter(s) is being discussed with that Division.
8.3(e) Notwithstanding any other provisions of this Article VIII to
the contrary, any liability which the Fund may have under this indemnification
provision shall be the liability only of the particular Portfolio or Portfolios
to which such liability relates; any such liability of a Portfolio may be
satisfied only by and to the extent of the assets of that Portfolio.
8.4 A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this Article VIII.
The indemnification contained in this Article VIII shall survive any termination
of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of Florida.
9.2 This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X TERMINATION
10.1 This Agreement shall terminate with respect to the Account(s),
or one, some, or all Portfolios:
(a) at the option of any party upon six months' advance written
notice to the other parties; or
19
(b) at the option of the Company to the extent that the Shares are
not reasonably available to meet the requirements of the Policies or are not
"appropriate funding vehicles" for the Policies, as determined by the Company
reasonably and in good faith. Without limiting the generality of the foregoing,
the Shares of any Portfolio would not be "appropriate funding vehicles" if, for
example, such Shares did not meet the diversification or other requirements
referred to in Article VI hereof; or if such Portfolio did not qualify under
Subchapter M of the Code, as referred to in Section 2.4 hereof; or if the
investments or investment policies, objectives, and/or limitations of such
Portfolio would impose unanticipated risks on the Company; or if the Company
would be permitted to disregard policyowner voting instructions pursuant to
Rules 6e-2 or 6e-3(T) under the 1940 Act; etc. Prompt notice of the election to
terminate for such cause and an explanation of such cause shall be furnished by
the Company; or
(c) at the option of the Fund upon institution of formal proceedings
against the Company by the National Association of Securities Dealers, Inc. (the
"NASD"), the SEC, or any insurance department or any other regulatory body
regarding the Company's duties under this Agreement or related to the sale of
the Policies, the operation of the Account(s), or the purchase of the Shares; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body; or
(e) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the Policyowners having an
interest in the Account(s) (or any subaccount) to substitute the shares of
another investment company for the corresponding Shares in accordance with the
terms of the Policies for which those 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 or other action taken to replace
the Shares; or
(f) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement.
10.2 The notice shall specify the Portfolio or Portfolios, Policies
and, if applicable, the Account(s) as to which this Agreement is to be
terminated.
20
10.3 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
cause or for no cause.
10.4 Except as necessary to implement Policyowner initiated
transactions, or as required by state insurance laws or regulations, the Company
shall not redeem the Shares attributable to the Policies (as opposed to the
Shares attributable to the Company's assets held in the Account(s)), and the
Company shall not prevent Policyowners from allocating payments to a Portfolio
that was otherwise available under the Policies, until 30 days after the Company
shall have notified the Fund and WRL of its intention to do so.
10.5 Notwithstanding any termination of this Agreement, the Fund
shall, at the option of the Company, continue to make available additional
Shares pursuant to the terms and conditions of this Agreement, for all Policies
in effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Policies"), except as otherwise provided under Article
VII of this Agreement. Specifically, without limitation, the owners of the
Existing Policies shall be permitted to transfer or reallocate investments under
the Policies, redeem Shares in any Portfolio and/or invest in the Fund upon the
making of additional purchase payments under the Existing Policies.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
WRL Series Fund, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
If to WRL:
Western Reserve Life Assurance Co. of Ohio
000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
If to the Company:
AUSA Life Insurance Company, Inc.
21
0 Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxx, Esq.
ARTICLE XII. MISCELLANEOUS
12.1 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 Policies and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement or as otherwise required by applicable law or regulation, shall
not disclose, disseminate or utilize such names and addresses and other
confidential information without the express written consent of the affected
party until such time as it may come into the public domain.
12.2 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.3 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.4 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.
12.5 The Schedules attached hereto, as modified from time to time,
are incorporated herein by reference and are part of this Agreement.
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 transaction contemplated hereby.
12.7 The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
22
COMPANY:
AUSA Life Insurance Company, Inc
By its authorized officer,
By: _______________________________
Xxxxxx X. Xxxxx
Title: VICE PRESIDENT,
ASSISTANT SECRETARY AND COUNSEL
Date: _____________________________
FUND:
WRL Series Fund, Inc.
By its authorized officer,
By: _______________________________
Xxxx Xxxxxx
Title: EXECUTIVE VICE PRESIDENT
Date: _____________________________
WRL:
Western Reserve Life Assurance
Co. of Ohio
By its authorized officer,
By: _______________________________
Xxxx Xxxxxx
Title: CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Date: _____________________________
23
SCHEDULE A
ACCOUNT(S), POLICY(IES) AND PORTFOLIO(S) SUBJECT
TO THE PARTICIPATION AGREEMENT
ACCOUNT(S): AUSA Series Life Account
POLICIES: AUSA Freedom Wealth Protector
AUSA Financial Freedom Builder
PORTFOLIO(S): WRL Series Fund, Inc. Growth Portfolio
WRL Series Fund, Inc. Bond Portfolio
WRL Series Fund, Inc. Money Market Portfolio
WRL Series Fund, Inc. Global Portfolio
WRL Series Fund, Inc. Emerging Growth Portfolio
WRL Series Fund, Inc. Strategic Total Return Portfolio
WRL Series Fund, Inc. International Equity Portfolio
WRL Series Fund, Inc. Growth & Income Portfolio
WRL Series Fund, Inc. Balanced Portfolio
WRL Series Fund, Inc. Aggressive Growth Portfolio
WRL Series Fund, Inc. Tactical Asset Allocation Portfolio
WRL Series Fund, Inc. U.S. Equity Portfolio
WRL Series Fund, Inc. Value Equity Portfolio
WRL Series Fund, Inc. Global Sector Portfolio
WRL Series Fund, Inc. Third Avenue Value Portfolio
WRL Series Fund, Inc. Real Estate Securities Portfolio
SCHEDULE B
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding
responsibilities for handling of proxies relating to the Fund by WRL, 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 Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by WRL on a
date as early as possible before the date set by the Fund for the
shareholder meeting (the "Record Date") to facilitate the
establishment of tabulation procedures. At this time, WRL will
inform the Company of the Record, mailing and meeting dates. This
will be done orally 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 shares in each Portfolio which are attributed to each
contract owner/policyholder ( the "Customer") as of the Record Date.
Fractional shares will be counted. The number of shares for which a
Customer has the right to give voting instructions will be
calculated separately for each sub-account of the Account(s) and
will be determined by dividing the portion of the value allocable to
the Customer's Policy in the sub-account by $100. Allowance should
be made for account adjustments made after this date that could
effect the status of the Customers' accounts as of the Record Date.
NOTE: The number of voting instruction cards is determined by the
activities described in Step #2. If the proxy proposal only
affects a particular Portfolio, then only the shares of that
Portfolio may be voted and only the Customers with investment
of all or a portion of their Policies in that Portfolio may
vote on the proposal to the extent of their investment. The
Company will use its best efforts to call in the number of
Customers to
WRL, 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 Customer's receipt of a
proxy statement. The Fund or WRL will provide to the Company as many
copies of the last annual report as the Company shall reasonably
require for distribution to the Customers.
4. The voting instruction cards (the "Cards" or "Card") are produced
and paid for by the Fund and sent to the Company. (This and related
steps may occur later in the chronological process due to possible
uncertainties relating to the proposals.)
5. The Company will, at its expense, print account information on the
Cards.
6. Allow approximately 2-4 business days for printing information on
the Cards. Information commonly found on the Card includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding which indicates number of shares of the Fund
attributable to the Customer and, if appropriate, of each
applicable Portfolio (depends upon tabulation process used by
the computer system, I.E., whether or not system knows number
of shares held just by "reading" the account number)
e. individual Card number for use in tracking and
verification of votes (already on Cards as printed by the
Fund)
NOTE: When the Cards are printed by the Fund, each Card is
numbered individually to guard against potential
Card/vote duplication.
f. spaces where the Customer can vote "yes" or "no" on each proxy
proposal.
7. During this time, the Law Department of WRL or its affiliates ("WRL
Law") will develop, produce, and the Fund will pay for as many
copies of the notice of proxy and the proxy statement (one document)
for the Fund or, if appropriate, for the Portfolio(s) in which the
Customer's Policy is invested as the Company may reasonably require
for distribution to each Customer. 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 each Customer by the Company will
include:
a. voting instruction card
b. proxy notice and statement (one document) (for the Fund or, if
appropriate, for the Portfolio(s) in which the Customer's
Policy is invested)
c. the Fund's annual report (if not sent prior to this time)
d. return envelope (postage pre-paid by the Company) addressed to
the Company or its tabulation agent
e. "urge buckslip" - optional, but recommended (This is a small,
single sheet of paper that requests Customers to vote as
quickly as possible and that their vote is important. One copy
will be supplied by the Fund.)
f. cover letter - optional, supplied by the Company and reviewed
and orally approved in advance by WRL Law.
8. The above contents should be received by the Company approximately
3-5 Business Days before the date set for mailing. The individual in
charge at the Company reviews and approves in writing the contents
of the mailing package supplied by WRL Law to ensure correctness and
completeness. Copy of this approval must be sent to WRL Law.
9. Package mailed by the Company at its expense to the Customers.
* The Fund MUST allow at least a 15-day solicitation time to the
Company as the shareowner. ( A 5-week period is recommended,
but not necessary, to receive a proper response percentage.)
Solicitation time is calculated as days from (but NOT
including) the meeting, counting backwards.
** If the Customers were actually the shareholders, at least 50%
of the outstanding shares must be represented and 66 2/3% of
that 50% must have voted affirmatively on the proposals to
have an effective vote. HOWEVER, since the Company is the
shareholder, the Customers' votes will (except in certain
limited circumstances) be used to dictate how the Company will
vote.
10. Collection and tabulation of the Cards begins. Tabulation usually
takes place in another department or by another vendor depending on
process used. An often used procedure is to sort the Cards on
arrival into vote categories of all yes, no, or mixed replied, and
to begin data entry.
* 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 WRL in the past.
11. Signatures on the Card checked against legal name of account
registration which was printed on the Card.
* This verifies whether an individual has signed correctly with
the same name as is on the account registration.
For Example:
If the account registration is under "Xxxxxxx X. Xxxxx,
Trustee," then that is the exact legal name to be printed on
the Card and is the signature need on the Card.
12. 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, a new Card and return envelope. The mutilated, illegible or
improperly signed Card is disregarded and considered to be NOT
RECEIVED for purposes of vote tabulation. (If the vote on any one
proxy proposal on a Card with more than one proxy proposal is
legible and the Card properly signed, then that vote shall be
counted, and the remainder of the Card which is illegible shall be
disregarded and shall be considered to be NOT RECEIVED for purposes
of vote tabulation.) Any Cards that have "kicked out" (E.G.,
mutilated, illegible) of the procedures are "hand verified," I.E.,
examined as to why they did not complete the proxy process. Any
questions on those Cards are usually remedied individually.
13. 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 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.
14. The actual tabulation of votes is done in shares. (It is very
important that the Fund receives the tabulation stated in terms of
percentage and the number of SHARES.)
15. Final tabulation in shares is orally given by the Company to WRL Law
on the morning of the meeting by 10:00 a.m. E.S.T.
16. The vote is verified by the Company and is sent to WRL Law.
17. The Company then votes its proxy in accordance with the votes
received from the Customers the morning of the meeting (except as
provided in the Participation Agreement or in limited circumstances
as may be otherwise required by law). Voting instructions to abstain
on any item to be voted upon reduces the votes eligible to be cast
by the Company. A letter documenting the Company's vote is supplied
by WRL Law and is sent to an officer of the Company for his
signature. This letter is normally sent after the meeting has taken
place.
NOTE: Shares do not have cumulative voting rights and the holders
of more than 50% of the shares of the Fund voting for the
election of directors of the Board can elect all of the
directors if they choose to do so, and in such event holders
of the remaining shares would not be able to elect any
directors.
18. The Company will be required to box and archive the Cards received
from the Customers in an accessible place for six years from the
date of the meeting. In the event that any vote is challenged or if
otherwise necessary for legal, regulatory, or accounting purposes,
WRL will be permitted reasonable access to such Cards.
19. All approvals and "signing-off" may be done orally, but must always
be followed up in writing.
20. During tabulation procedures, the Fund and the Company determine if
a resolicitation is advisable and what form that resolicitation
should take, whether it should be by a mailing, or by a recorded
telephone call. A resolicitation may be considered, for example,
when the vote response is slow and a judgement is made that the
number of votes is too low under the circumstances. The meeting
could be adjourned to leave enough time for the resolicitation.
A determination is made by the Company and the Fund to find the most
cost effective candidates for resolicitation. These are Customers
who have not yet voted, but whose balances are large enough that
their vote would significantly increase the number of votes with
minimal costs.
a. By mail: WRL Law amends the voting instruction cards, if
necessary, and writes a resolicitation letter. The Fund
supplies these to the Company. The Company generates a mailing
list etc., as per step #2 onward.
b. By phone: Rarely used. This must be done on a recorded line.
WRL Law and the Fund will supply the necessary procedures and
script if a phone resolicitation were to be required.
