EXHIBIT 3(b)(i)
PARTICIPATION AGREEMENT
AMONG
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK
AMERICAN GENERAL SECURITIES INCORPORATED
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
AND
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
DATED AS OF
DECEMBER 1, 1998
TABLE OF CONTENTS
Page
ARTICLE I. Fund Shares............................................ 4
ARTICLE II. Representations and Warranties......................... 6
ARTICLE III. Prospectuses, Reports to Shareholders
and Proxy Statements, Voting........................... 8
ARTICLE IV. Sales Material and Information......................... 12
ARTICLE V. [Reserved]............................................. 13
ARTICLE VI. Diversification........................................ 14
ARTICLE VII. Potential Conflicts.................................... 14
ARTICLE VIII. Applicable Law......................................... 15
ARTICLE IX. Termination............................................ 15
ARTICLE X. Notices................................................ 18
ARTICLE XI. Miscellaneous.......................................... 18
SCHEDULE A Portfolios of American General Series Portfolio
Company Available for Purchase by
The United States Life Insurance Company
in the City of New York............................... 21
SCHEDULE B Separate Accounts and Contracts....................... 22
SCHEDULE C Proxy Voting Procedures............................... 23
THIS PARTICIPATION AGREEMENT, made and entered into as of the 1st day of
December, 1998 by and among THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY
OF NEW YORK (hereinafter the "Company"), a New York insurance company, on its
own behalf and on behalf of each separate account of the Company set forth on
Schedule B hereto as may be amended from time to time (each such account
hereinafter referred to as the "Account"), AMERICAN GENERAL SECURITIES
INCORPORATED ("AGSI"), a Texas corporation, AMERICAN GENERAL SERIES PORTFOLIO
COMPANY (hereinafter the "Fund"), a Maryland corporation, and THE VARIABLE
ANNUITY LIFE INSURANCE COMPANY (the "Adviser"), a Texas corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as (i) the investment vehicle for separate
accounts established by insurance companies for individual and group life
insurance policies and annuity contracts with variable accumulation and/or pay-
out provisions (hereinafter referred to individually and/or collectively as
"Variable Insurance Products") and (ii) the investment vehicle for certain
qualified pension and retirement plans (hereinafter "Qualified Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an investment
vehicle under their Variable Insurance Products are required to enter into a
participation agreement with the Fund and the Adviser (the "Participating
Insurance Companies"); and
WHEREAS, shares of the Fund are divided into several series of shares, each
representing the interest in a particular managed portfolio of securities and
other assets, any one or more of which may be made available for Variable
Insurance Products of Participating Insurance Companies; and
WHEREAS, the Fund intends to offer shares of the series set forth on Schedule A
(each such series hereinafter referred to as a "Portfolio"), as may be amended
from time to time by mutual agreement of the parties hereto, under this
Agreement to the Accounts of the Company; and
WHEREAS, the Fund is registered as an open-end management investment company
under the Investment Company Act of 1940 (hereinafter the "1940 Act") and its
shares are registered under the Securities Act of 1933, as amended (hereinafter
the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
laws; and
WHEREAS, the Adviser manages certain Portfolios of the Fund; and
WHEREAS, The Variable Annuity Marketing Company, (the "Underwriter") is
registered as a broker/dealer under the Securities Exchange Act of 1934, as
amended (hereinafter the "1934 Act"), is a member in good standing of the
National Association of Securities Dealers, Inc. (hereinafter "NASD") and serves
as principal underwriter of the shares of the Fund; and
WHEREAS, the Company has registered or will register certain Variable Insurance
Products under the 1933 Act; and
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WHEREAS, the Variable Insurance Products issued by the Accounts are variable
annuity contracts or are variable life insurance policies relying on certain
exemptions from the 1930 Act pursuant to Rule 6e-3(T), and not Rule 6e-2,
thereunder.
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 B hereto, to set
aside and invest assets attributable to the aforesaid Variable Insurance
Product; and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase shares in the Portfolios 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; and
WHEREAS, AGSI serves as both the distributor and the principal underwriter of
the Variable Insurance Products that are set forth on Schedule B;
NOW, THEREFORE, in consideration of their mutual promises, the Company, AGSI,
the Fund, and the Adviser agree as follows:
ARTICLE I. FUND SHARES
1.1. The Fund agrees to make available for purchase by the Company shares
of the Portfolios set forth on Schedule A and shall execute orders placed for
each Account on a daily basis at the net asset value next computed after receipt
by the Fund or its designee of such order. For purposes of this Section 1.1,
the Company shall be the designee of the Fund for receipt of such orders from
each Account and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order as soon as reasonably
practical (normally by 10:00 a.m. Eastern time) 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 10:15 a.m. Eastern 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 the net
asset value pursuant to the rules of the SEC, as set forth in the Fund's
Prospectus and Statement of Additional Information. Notwithstanding the
foregoing, the Board of Directors of the Fund (hereinafter the "Board") may
refuse to permit the Fund to sell shares of any Portfolio to any person, or
suspend or terminate the offering of shares of any Portfolio, if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Board acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of such Portfolio.
1.2. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance
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Companies and their Variable Insurance Products and to certain Qualified Plans.
No shares of any Portfolio will be sold to the general public.
1.3. The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing provisions
substantially the same as Sections 2.4, 2.9, 3.4 and Article VII of this
Agreement is in effect to govern such sales.
1.4. The Fund agrees 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 the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day in accordance with the
timing rules described in Section 1.1.
1.5. The Company agrees that purchases and redemptions of Portfolio shares
offered by the then current prospectus of the 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 Fund, are listed on Schedule B attached
hereto and incorporated herein by reference, as such Schedule B may be amended
from time to time by mutual written agreement of all of the parties hereto. The
Company will give the Fund and the Adviser sixty (60) days 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 Portfolio. Each order shall describe the net amount of shares and
dollar amount of each Portfolio to be purchased or redeemed. In the event of
net purchases, the Company shall pay for Portfolio shares on the next Business
Day after an order to purchase Portfolio 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 Portfolio shall pay the redemption
proceeds in federal funds transmitted by wire on the next Business Day after an
order to redeem a Portfolio's shares is made in accordance with the provision of
Section 1.4 hereof. Notwithstanding the foregoing, if the payment of redemption
proceeds on the next Business Day would require the Portfolio to dispose of
securities or otherwise incur substantial additional costs, and if the Portfolio
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 Portfolio 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
Portfolio.
1.7. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
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1.8. The Fund shall make the dividends or capital gain distributions
payable on the Fund's shares available to the Company as soon as reasonably
practical after the dividends or capital gains are calculated (normally by 6:30
p.m. Eastern time) and shall use its best efforts to furnish same day notice by
7:00 p.m. Eastern time (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 Portfolio shares in additional
shares of that Portfolio. The Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
1.9. The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated (normally by 6:30 p.m. Eastern time)
and shall use its best efforts to make such net asset value per share available
by 7:00 p.m. Eastern time. In the event that the Fund is unable to meet the
7:00 p.m. time stated immediately above, then the Fund shall provide the Company
with additional time to notify the Fund of purchase or redemption orders
pursuant to Sections 1.1 and 1.4, respectively, above. Such additional time
shall be equal to the additional time that the Fund takes to make the net asset
values available to the Company; provided, however, that notification must be
made by 10:15 a.m. Eastern time on the Business Day such order is to be executed
regardless of when the net asset value is made available.
1.10. If the Fund 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 Fund's policy on determining
materiality. The correction of any such errors shall be made at the Company
level and shall be made pursuant to the Fund's policy on determining
materiality. 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 (the "Contracts") are or will be registered and will maintain the
registration under the 1933 Act and the regulations thereunder to the extent
required by the 1933 Act; that the Contracts will be issued in compliance in all
material respects 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 insurance laws of the State of New York and
the regulations thereunder and has registered or, prior to any issuance or sale
of the Contracts, will register and will maintain the registration 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 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 Fund represents and warrants that Fund shares sold pursuant to
this Agreement
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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 the State of Maryland and sold in compliance with all applicable
federal and state securities laws and regulations and that the Fund is and shall
remain registered under the 1940 Act and the regulations thereunder to the
extent required by the 0000 Xxx. The Fund shall amend the registration statement
for its shares under the 1933 Act and the 1940 Act from time to time as required
in order to effect the continuous offering of its shares. The Fund shall
register and qualify the shares for sale in accordance with the laws of the
various states only if and to the extent deemed advisable by the Fund.
2.3 The Fund and the Adviser represent that the Fund is currently
qualified as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and that the Fund and the Adviser
(with respect to those Portfolios for which such Adviser acts as investment
adviser) will make every effort to maintain such qualification (under Subchapter
M or any successor or similar provision) and that the Fund [or the appropriate
Adviser] will notify the Company immediately upon having a reasonable basis for
believing that a Portfolio has ceased to so qualify or that a Portfolio 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
treatments 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. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have 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. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.7. The Fund and the Adviser represent that the Fund is lawfully
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.
2.8. The Adviser and AGSI each represents and warrants that it is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that it will perform its obligations for
the Fund and the Company in compliance in all material respects with the laws
and regulations of its state of domicile and any applicable state and federal
securities laws and regulations.
2.9. The Company represents and warrants that all of its trustees,
officers, employees, investment adviser, and other individuals/entities dealing
with the money and/or securities of the
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Fund 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. The Company agrees to
make all reasonable efforts to see that this bond or another bond containing
these provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS; VOTING
3.1(a) The Fund or its designee, at its option shall provide the Company
with as many printed copies of the Fund's current prospectus, including the
profile prospectus, (the "Fund Prospectus") as the Company may reasonably
request or in lieu of providing printed copies of the Fund Prospectus, the Fund
shall provide camera-ready film or computer diskettes containing the Fund
Prospectus and such other assistance as is reasonably necessary in order for the
Company once each year (or more frequently if the Fund Prospectus is materially
amended during the year) to have the prospectus for the Contracts (the "Contract
Prospectus") and the Fund Prospectus printed together in one document or
separately. The Company may elect to print the Fund Prospectus in combination
with other fund companies' prospectuses. For purposes hereof, any combined
prospectus including the Fund Prospectus along with the Contract Prospectus or
prospectus of other fund companies shall be referred to as a "Combined
Prospectus." For purposes hereof, the term "Fund Portion of the Combined
Prospectus" shall refer to the percentage of the number of Fund Prospectus pages
in the Combined Prospectus in relation to the total number of pages of the
Combined Prospectus.
3.1(b) The Fund, at its option, shall provide the Company with as many
printed copies of the Fund's current statement of additional information (the
"Fund SAI") as the Company may reasonably request or in lieu of providing
printed copies of the Fund SAI, the Fund shall provide camera-ready film or
computer diskettes containing the Fund SAI, and such other assistance as is
reasonably necessary in order for the Company once each year (or more frequently
if the Fund SAI is materially amended during the year) to have the statement of
additional information for the Contracts (the "Contract SAI") and the Fund SAI
printed together or separately. The Company may also elect to print the Fund
SAI in combination with other fund companies' statements of additional
information. For purposes hereof, any combined statement of additional
information including the Fund SAI along with the Contract SAI or statement of
additional information of other fund companies shall be referred to as a
"Combined SAI." For purposes hereof, the term "Fund Portion of the Combined
SAI" shall refer to the percentage of the number of Fund SAI pages in the
Combined SAI in relation to the total number of pages of the Combined SAI.
3.1(c) The Fund, at its option, shall provide the Company with as many
printed copies of the Fund's annual report and semi-annual report (collectively,
the "Fund Reports") as the Company may reasonably request or in lieu of
providing printed copies of the Fund Reports, the Fund shall
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provide camera-ready film or computer diskettes containing the Fund's Reports,
and such other assistance as is reasonably necessary in order for the Company
once each year to have the annual report and semi-annual report for the
Contracts (collectively, the "Contract Reports") and the Fund Reports printed
together or separately. The Company may also elect to print the Fund Reports in
combination with other fund companies' annual reports and semi-annual reports.
For purposes hereof, any combined annual reports and semi-annual reports
including the Fund Reports along with the Contract Reports or annual reports and
semi-annual reports of other fund companies shall be referred to as "Combined
Reports." For purposes hereof, the term "Fund Portion of the Combined Reports"
shall refer to the percentage of the number of Fund Reports pages in the
Combined Reports in relation to the total number or pages of the Combined
Reports.
3.2 Expenses
3.2(a) Expenses Borne by Company. Except as otherwise provided in this
Section 3.2., all expenses of preparing, setting in type and printing and
distributing (i) Contract Prospectuses, Fund Prospectuses, and Combined
Prospectuses; (ii) Fund SAIs, Contract SAIs, and Combined SAIs; (iii) Fund
Reports, Contract Reports, and Combined Reports, and (iv) Contract proxy
material that the Company may require in sufficient quantity to be sent to
Contract owners, annuitants, or participants under Contracts (collectively, the
"Participants"), shall be the expense of the Company.
3.2(b) Expenses Borne by Fund
Fund Prospectuses
With respect to existing Participants, the Fund shall pay the cost of
setting in type, printing and distributing Fund Prospectuses made available by
the Company to such existing Participants in order to update disclosure as
required by the 1933 Act and/or the 1940 Act. With respect to existing
Participants, in the event the Company elects to prepare a Combined Prospectus,
the Fund shall pay the cost of setting in type, printing and distributing the
Fund Portion of the Combined Prospectus made available by the Company to its
existing Participants in order to update disclosure as required by the 1933 Act
and/or the 1940 Act. In such event, the Fund shall bear the cost of typesetting
to provide the Fund Prospectus to the Company in the format in which the Fund is
accustomed to formatting prospectus. Notwithstanding the foregoing, in no event
shall the Fund pay for any such costs that exceed by more than five (5) percent
what the Fund would have paid to print such documents. The Fund shall not pay
any costs of typesetting, printing and distributing the Fund Prospectus (or
Combined Prospectus, if applicable) to prospective Participants.
Fund SAIs, Fund Reports and Proxy Material
With respect to existing Participants, the Fund shall pay the cost of
setting in type and printing Fund SAIs, Fund Reports and Fund proxy material
made available by the Company to its
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existing Participants. With respect to existing Participants, in the event the
Company elects to prepare a Combined SAI or Combined Reports, the Fund shall pay
the cost of setting in type and printing the Fund Portion of the Combined SAI or
Combined Reports, respectively, made available by the Company to its existing
Participants. In such event, the Fund shall bear the cost of typesetting to
provide the Fund SAI or Fund Reports to the Company in the format in which the
Fund is accustomed to formatting statements of additional information and annual
and semi-annual reports. Notwithstanding the foregoing, in no event shall the
Fund pay for any such costs that exceed by more than five (5) percent what the
Fund would have paid to print such documents. The Fund shall pay one half the
cost of distributing Fund SAIs, Fund Reports and Fund proxy statements and
proxy-related material to such existing Participants. The Fund shall pay the
cost of distributing the Fund Portion of the Combined SAIs and the Fund Portion
of the Combined Reports to existing Participants. The Fund shall not pay any
costs of distributing Fund SAIs, Combined SAIs, Fund Reports, Combined Reports
or proxy statements or proxy-related material to prospective Participants.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of typesetting, printing or distributing any of
the foregoing documents other than those actually distributed to existing
Participants.
The Fund shall pay no fee or other compensation to the Company under this
Agreement, except that if the Fund or any Portfolio adopts and implements a plan
pursuant to Rule 12b-1 to finance distribution expenses, then the Underwriter
may make payments to the Company or to AGSI if and in amounts agreed to by the
Underwriter in writing.
All expenses, including expenses to be borne by the Fund pursuant to
Section 3.2 hereof, incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed available by the Fund, in accordance with
applicable state laws prior to their sale.
3.2(c) Expenses Borne by AGSI.
Fund Prospectuses
With respect to prospective Participants, AGSI shall pay one half of the
cost of setting in type, printing and distributing Fund Prospectuses made
available by the Company as sales literature to such prospective Participants.
With respect to prospective Participants, in the event the Company elects to
prepare a Combined Prospectus, AGSI shall pay one half of the cost of printing
and distributing the Combined Prospectus made available by the Company to its
prospective Participants as sales literature. In such event, AGSI shall bear
the cost of typesetting to provide the Fund Prospectus to the Company in the
format in which the Fund is accustomed to formatting prospectuses.
Notwithstanding the foregoing, in no event shall AGSI pay for any such costs
that exceed by more than five (5) percent what AGSI would have paid to print
such documents.
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Fund SAIs, Fund Reports and Proxy Material.
With respect to prospective Participants, AGSI shall pay one half of the
cost of setting in type and printing Fund SAIs, Fund Reports and Fund proxy
material made available by the Company to its prospective Participants as sales
literature. In the event the Company elects to prepare a Combined SAI or
Combined Reports, AGSI shall pay one half of the cost of printing the Combined
SAI or Combined Reports, respectively, made available by the Company to its
prospective Participants as sales literature. In such event, AGSI shall bear
the cost of typesetting to provide the Fund SAI and Fund Reports to the Company
in the format in which the Fund is accustomed to formatting statements of
additional information and annual and semi-annual reports. Notwithstanding the
foregoing, in no event shall AGSI pay for any such costs that exceed by more
than five (5) percent what AGSI would have paid to print such documents. AGSI
shall pay one half the cost of distributing Fund SAIs, Combined SAIs, Fund
Reports, Combined Reports, and Fund proxy material to such prospective
Participants as sales literature.
3.2(d) If the Company chooses to receive camera-ready film or computer
diskettes in lieu of receiving printed copies of the Fund Prospectus, Fund SAI
or Fund Reports, the Fund or its designee will be responsible for providing the
Fund Prospectus, Fund SAI or Fund Reports in the format in which it is
accustomed to formatting such documents, and, notwithstanding anything in
Sections 3.2(b) or 3.2(c), the Company shall bear the expense of adjusting or
changing the format to conform with any of its prospectuses or reports.
3.2(e) Certain Administrative Expenses of the Company. The Adviser will
quarterly reimburse the Company certain of the administrative costs and expenses
incurred by the Company as a result of operations necessitated by the beneficial
ownership by Contract owners of shares of the Portfolios of the Fund, equal to
fifteen (15) basis points per annum of the net assets of the Funds attributable
to the Contracts. The determination of applicable assets shall be made by
averaging assets in applicable Portfolios as of the last Business Day of each
calendar month falling within the applicable calendar quarter. In no event
shall such fee be paid by the Fund, its shareholders or by any Contract owner.
3.3. The Fund SAI shall be obtainable from the Fund, 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 the Fund to Participants to whom voting privileges
are required to be extended and shall:
(i) solicit voting instructions from Participants;
(ii) vote the Fund shares in accordance with instructions received from
Participants; and
(iii) vote Fund shares for which no instructions have been received in the
same proportion as Fund shares of such Portfolio for which
instructions have been received;
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so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners. The
Company reserves the right to vote 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.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings (except insofar as the Securities and Exchange Commission may
interpret Section 16 not to require such meetings) or comply with Section 16(c)
of the 1940 Act (although the Fund is not one of the trusts described in Section
16(c) of that Act) as well as with Sections 16(a) and, if and when applicable,
16(b). Further, the Fund will act in accordance with the 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
Fund or its designee, each piece of sales literature or other promotional
material prepared by the Company, AGSI or any person contracting with the
Company or AGSI in which the Fund or the Adviser is named, at least ten Business
Days prior to its use. No such material shall be used if the Fund, the Adviser,
or their designee reasonably objects to such use within ten Business Days after
receipt of such material.
4.2. Neither the Company, AGSI nor any person contracting with the Company
or AGSI shall give any information or make any representations or statements on
behalf of the Fund or concerning the Fund in connection with the sale of the
Contracts other than the information or representations contained in the
registration statement or the Fund Prospectus, as such registration statement or
Fund 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.
4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material prepared by the Fund in which the Company or its
Account(s) are named 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 Fund nor the Adviser shall give any information or make
any representations
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on behalf of the Company or concerning the Company, each Account, or the
Contracts, other than the information or representations contained in a
registration statement or prospectus for the Contracts, as such registration
statement and prospectus may be amended or supplemented from time to time, or in
published reports or solicitations for voting instructions for each Account
which are in the public domain or approved by the Company for distribution to
Participants, or in sales literature or other promotional material approved by
the Company or its designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the SEC or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the investment
in an Account or Contract contemporaneously with the filing of such document
with the SEC 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
6.1. The Adviser represents, as to the Portfolios for which it acts as
investment adviser, that it will use its best efforts at all times to 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 a Portfolio ceases to so qualify, the Adviser will
take all reasonable steps (a) to notify the Company of such breach and (b) to
adequately diversify the Portfolio so as to achieve compliance
13
within the grace period afforded by Regulation 817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by 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 conflicts of which it is aware to the Board.
7.3. If it is determined by a majority of the Board, or a majority of its
disinterested directors, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the Separate Accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance policy
owners, or variable Contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
Contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account. 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
14
of Contract owners.
7.5. For purposes of Sections 7.3 and 7.4 of this Agreement, a majority of
the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 or 7.4 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict.
7.6. The Company and the Adviser shall at least annually submit to the
Board of the Fund such reports, materials or data as the Board may reasonably
request so that the Board may fully carry out the obligations imposed upon them
by the provisions hereof, and said reports, materials and data shall be
submitted more frequently if deemed appropriate by the Board. 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 SEC upon request.
ARTICLE VIII. APPLICABLE LAW
8.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Texas.
8.2. 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 IX. TERMINATION
9.1. This Agreement shall continue in full force and effect until the
first to occur of:
(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 or AGSI by written notice to the Fund
and the Adviser 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 or AGSI by written notice to the Fund
and the Adviser with respect to any Portfolio in the event any of
the Portfolio's shares
15
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 or AGSI by written notice to the Fund
and the Adviser with respect to any Portfolio in the event that
such Portfolio ceases to qualify as a Regulated Investment
Company under Subchapter M of the Code or under any successor or
similar provision, or if the Company or AGSI reasonably believes
that the Fund may fail to so qualify; or
(e) termination by the Company or AGSI by written notice to the Fund
and the Adviser with respect to any Portfolio in the event that
such Portfolio fails to meet the diversification requirements
specified in Article VI hereof; or
(f) termination by either the Fund or the Adviser by written notice
to the Company if the Adviser or the Fund shall determine, in
its sole judgment exercised in good faith, that the Company, AGSI
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 Fund or the Adviser
will give the Company 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 Company or AGSI and any other changes in circumstances since
the giving of such notice, the determination of the Fund or the
Adviser 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
(g) termination by the Company or AGSI by written notice to the Fund
and the Adviser, if the Company or AGSI shall determine, in its
sole judgment exercised in good faith, that either the Fund or
the Adviser (with respect to the appropriate Portfolio) 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 Fund or the Adviser 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 Company and any other
changes in circumstances since the giving of such notice, the
determination of the Company or AGSI 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
(h) termination by the Fund or the Adviser by written notice to the
Company, if the Company gives the Fund and the Adviser the
written notice specified in
16
Section 2.4 hereof and at the time such notice was given there
was no notice of termination outstanding under any other
provision of this Agreement; provided, however any termination
under this Section 10.1(h) shall be effective sixty (60) days
after the notice specified in Section 2.4 was given; 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 Fund or the Company, as the
case may be; or
(j) termination by the Fund or the Adviser by written notice to the
Company in the event an Account or Contract is not registered 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.
9.2. Notwithstanding any termination of this Agreement, the 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
determines 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.
9.3. 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 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 Fund the opinion of
counsel for the Company (which counsel shall be reasonably satisfactory to the
Fund and the Adviser) to the effect that any redemption pursuant to clause (ii)
above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contracts, the Company shall not prevent
Contract Owners from allocating payments to a Portfolio that was otherwise
available under the Contracts without first giving the Fund or the Adviser 90
days prior written notice of its intention to do so.
17
ARTICLE X. 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: American General Series Portfolio Company
0000 Xxxxx Xxxxxxx, X0-00
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx
IF TO ADVISER: The Variable Annuity Life Insurance Company
P. O. Xxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxx
IF TO THE COMPANY: The United States Life Insurance Company
in the City of New York
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
IF TO AGSI: American General Securities Incorporated
0000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: F. Xxxx Xxxxxx, Xx.
ARTICLE XI. MISCELLANEOUS
11.1. All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
11.2. 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.
11.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
11.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
18
11.5. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
11.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
11.7. 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.
11.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Adviser, if such assignee is duly licensed and registered to
perform the obligations of the Adviser under this Agreement.
11.9 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
(a) The Company's annual statement (prepared under statutory accounting
principles) and annual report (prepared under generally accepted
accounting principles ("GAAP"), if any), as soon as practical and in
any event within 90 days after the end of each fiscal year;
(b) The Company's June 30th quarterly statements (statutory) (and GAAP, if
any), as soon as practical and in any event within 45 days after the
end of each semi-annual period:
(c) Any financial statement, proxy statement, notice or report of the
Company sent to stockholders and/or policyholders, as soon as
practical after the delivery thereof to stockholders;
(d) Any registration statement (without exhibits) and financial reports of
the Company filed with the SEC or any state insurance regulator, as
soon as practical after the filing thereof;
(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.
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
hereto as of the date specified above.
19
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK on behalf
of itself and each of its Accounts named in Schedule B hereto, as amended
from time to time.
By:
-------------------------------
Name:
Title:
AMERICAN GENERAL SECURITIES INCORPORATED
By:
-------------------------------
Name: F. Xxxx Xxxxxx, Xx.
Title: President
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
By:
-------------------------------
Name: Xxxxxx X. Xxxx, Xx.
Title: President and CEO
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
By:
-------------------------------
Name: Xxxxxxx X. Xxxxx
Title: General Counsel and Secretary
20
SCHEDULE A
PORTFOLIOS OF AMERICAN GENERAL SERIES PORTFOLIO COMPANY
AVAILABLE FOR PURCHASE BY
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK
UNDER THIS AGREEMENT
FUND NAME SEPARATE ACCOUNT
--------- -----------------
Money Market Fund The United States Life Insurance Company
in the City of New York
Separate Account USL VA-R
Established: August 8, 1997
21
SCHEDULE B
SEPARATE ACCOUNTS AND CONTRACTS
NAME OF SEPARATE ACCOUNT AND FORM NUMBERS AND NAMES OF CONTRACT FUNDED BY
DATE ESTABLISHED BY BOARD OF DIRECTORS SEPARATE ACCOUNT
------------------------------------------ -------------------------------------------------
The United States Life Insurance Company Form No: 98505N
in the City of New York
Separate Account USL VA-R Name of Contract: Select Reserve[] Flexible
Established: August 8, 1997 Payment Variable and Fixed
Individual Deferred Annuity
22
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
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, addresses and number of units
which are attributed to each contract owner/policyholder (the "Customer") as
of the Record Date. Allowance should be made for account adjustments made
after this date that could affect the status of the Customers' accounts as of
the Record Date.
Note: The number of proxy statements is determined by the activities
described in this Step #2. The Company will use its best efforts to call in
the number of Customers to the Fund , as soon as possible, but no later than
two weeks after the Record Date.
3. Assuming that the Fund has called an annual meeting, then in that event the
Fund's Annual Report must be sent to each Customer by the Company either
before or together with the Customers' receipt of a proxy statement or other
voting instructions and solicitation material. The Fund will provide at
least one copy of 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
e. individual Card number for use in tracking and verification of votes
(already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible
23
uncertainties relating to the proposals.)
5. During this time, the Fund will develop, produce and pay for the Notice of
Proxy and the Proxy Statement (one document). Printed and folded notices and
statements will be sent to Company for insertion into envelopes (envelopes
and return envelopes are provided and paid for by the Company). Contents of
envelope sent to Customers by the Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the Company or
its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small, single
sheet of paper that requests Customers to vote as quickly as possible and
that their vote is important. One copy will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and approved in
advance by the Fund.
6. The proxy notice and statement as provided by the Fund 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 should be sent to
the Fund.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company as
the shareowner. (A 5-week period is recommended.) Solicitation time is
calculated as calendar days from (but not including,) the meeting,
counting backwards.
8. Collection and tabulation of Cards begins. 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 "Xxxx X. Xxxxx,
Trustee," then that is the exact legal name to be printed on the Card and is
the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter and a
new Card and return envelope. The
24
mutilated or illegible Card is disregarded and considered to be not received
for purposes of vote tabulation. Any Cards that have been "kicked out" (e.g.
mutilated, illegible) of the procedure are "hand verified," i.e., examined
as to why they did not complete the system. Any questions on those Cards are
usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the 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 than 10:00 a.m. Eastern time. The Fund
may request an earlier deadline if reasonable and if required to calculate
the vote in time for the 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.
25
