PARTICIPATION AGREEMENT
Among
XXXXX VARIABLE ACCOUNT FUND, INC.
XXXXX SELECTED ADVISERS, XX
XXXXX DISTRIBUTORS, LLC.
And
EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
THIS AGREEMENT, made and entered into this 2nd day of July, 2002, by and
among EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (hereinafter the
"Insurance Company"), a New York corporation, on its own behalf and on behalf
of each segregated asset account of the Insurance Company set forth on Schedule
A hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account"), XXXXX VARIABLE ACCOUNT FUND, INC., a Maryland
Corporation (the "Company"), Xxxxx Selected Advisers, LP, a Colorado Limited
Partnership ("Adviser") and Xxxxx Distributors, LLC., a Delaware Limited
Liability Company ("Xxxxx Distributors").
WHEREAS, the Company engages in business as an open-end management
investment company and is available to act as the investment vehicle for
variable annuity and life insurance contracts to be offered by separate accounts
of insurance companies and qualified retirement and pension plans ("Qualified
Plans") which have entered into participation agreements substantially similar
to this Agreement (the Insurance Company and such other insurance companies, and
qualified plans hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Company is divided into several
series of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Company has obtained an order from the Securities and Exchange
Commission (the "SEC"), granting Participating Insurance Companies and their
separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a),
and 15(b) of the Investment Company Act of 1940, as amended, (the "1940 Act")
and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Company to be sold to and held by Qualified Plans and by
variable annuity and variable life insurance separate accounts of Participating
Insurance Companies that may or may not be affiliated with one another (the
"Mixed and Shared Funding Exemptive Order"); and
WHEREAS, the Company has registered as an open-end management investment
company under the 1940 Act and the offering of its shares has been registered
under the Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
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WHEREAS, Xxxxx Distributors is duly registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended, (the "1934 Act"), and is a member
in good standing of the National Association of Securities Dealers, Inc. (the
"NASD"); and
WHEREAS, Xxxxx Distributors is a wholly owned subsidiary of Xxxxx Selected
Advisers, L.P. which is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law; and
WHEREAS, the Insurance Company has registered under the 1933 Act, or will
register under the 1933 Act, certain interests in an Account Funding variable
annuity or variable life insurance contracts identified on Schedule B to this
Agreement, as amended from time to time hereafter by mutual written agreement of
all the parties hereto (the "Contracts"); and
WHEREAS, the Account is a duly organized, validly existing segregated asset
account, established by resolution of the board of directors of the Insurance
Company on the date shown for that Account on Schedule A hereto, to set aside
and invest assets attributable to the Contracts; and
WHEREAS, the Insurance 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 Insurance Company intends to purchase shares in the Funds
listed on Schedule C to this Agreement as amended from time to time, at net
asset value on behalf of the Account to fund the Contracts;
NOW, THEREFORE, in consideration of their mutual promises, the Insurance
Company, the Company and Xxxxx Selected Advisors, LLP, Xxxxx Distributors agree
as follows:
ARTICLE I. SALE OF COMPANY SHARES
1.1. Xxxxx Distributors agrees to sell to the Insurance Company those
shares of the Company which each Account orders, executing such orders on a
daily basis at the net asset value next computed after receipt by the Company or
its designee of the order for the shares of the Company. For purposes of this
Section 1.1, the Insurance Company, or its designee, shall be the designee of
the Company for receipt of such orders from the Accounts and receipt by such
designee shall constitute receipt by the Company; provided that the Company
receives notice of such order by 10:00 a.m., Eastern Time, on the next following
Business Day. In this Agreement, "Business Day" shall mean any day on which the
New York Stock Exchange is open for trading and on which the Company calculates
its net asset value pursuant to the rules of the SEC.
1.2. The Company agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Insurance Company
and its Accounts on those days on which the Company calculates its Funds' net
asset values pursuant to rules of the SEC and the Company shall use reasonable
efforts to calculate its Funds' net asset values on each day on which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
directors of the Company may refuse to sell shares of any Fund to any person, or
suspend or terminate the offering of shares of any Fund if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the directors of the Company 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 that Fund. . If the Board
refuses to sell shares to
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the Insurance Company, the Insurance Company shall have the right to terminate
this Agreement in accordance with section 10.1(b) of this Agreement.
1.3. The Company agrees that shares of the Company will be sold only to
Accounts of Participating Insurance Companies and to Qualified Plans. No shares
of any Fund will be sold to the general public.
1.4. The Company will not sell its shares to any insurance company or
separate account unless an agreement containing provisions substantially the
same as Sections 1.5, 2.2, 2.4, 3.4, 3.5, and Article VII of this Agreement is
in effect to govern such sales. The Company shall make available upon written
request from the Insurance Company (i) a list of all other Participating
Insurance Companies and (ii) a certification that all agreement contain
provisions substantially the same as Sections 1.5, 2.2, 2.4, 3.4, 3.5, and
Article VII of this Agreement is in effect to govern such sales.
1.5. The Company agrees to redeem, on the Insurance Company's request, any
full or fractional shares of the Company held by the Account, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Company or its designee of the request for redemption. However, if one or
more Funds has determined to settle redemption transactions for all of its
shareholders on a delayed basis (more than one business day, but in no event
more than three Business Days, after the date on which the redemption order is
received, unless otherwise permitted by an order of the SEC under Section 22(e)
of the 1940 Act), the Company shall be permitted to delay sending redemption
proceeds to the Insurance Company by the same number of days that the Company is
delaying sending redemption proceeds to the other shareholders of the Fund. For
purposes of this Section 1.5, the Insurance Company shall be the designee of the
Company for receipt of requests for redemption from each Account and receipt by
that designee shall constitute receipt by the Company; provided that the Company
receives notice of the request for redemption by 10:00 a.m., Eastern Time, on
the next following Business Day.
1.6. The Insurance Company agrees to purchase and redeem the shares of each
Fund listed on Schedule C to this Agreement, as amended from time to time, and
offered by the then-current prospectus of the Company in accordance with the
provisions of that prospectus, provided that such provisions are also consistent
with the terms of this agreement.
1.7. Each purchase, redemption and exchange order placed by the Insurance
Company shall be netted with respect to a Fund. With respect to payment of the
purchase price by the Insurance Company and of redemption proceeds by the
Company, the Insurance Company and the Company shall net purchase and redemption
orders with respect to each Fund and shall transmit one net payment for all of
the Funds. Payment shall be in federal funds transmitted by wire. In the event
of net purchase, the Insurance Company shall pay for the Funds' shares by 3:00
p.m. Eastern time on the next Business Day after an order to purchase shares is
made in accordance with the provisions of Section 1.1 hereof. For the purpose of
Sections 2.9 and 2.10, upon receipt by the Company of the wired federal funds,
such funds shall cease to be the responsibility of the Insurance Company and
shall become the responsibility of the Company. In the event of net redemption,
the Company shall pay the redemption proceeds by 3:30 p.m. Eastern time on the
next Business Day after an order to redeem the shares is made in accordance with
the provisions of Section 1.5 hereof. However, payment may be postponed under
unusual circumstances, such as when normal trading is not taking place on the
New York Stock Exchange, an emergency as defined by the SEC exists, or as
permitted by the SEC.
1.8. Issuance and transfer of the Company's shares will be by book entry
only. Stock certificates will not be issued to the Insurance Company or any
Account. Shares ordered from the Company will be recorded in an appropriate
title for each Account or the appropriate subaccount of each Account. . The
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Company shall notify the Insurance Company by 10:00: a.m. on the next business
day of the number of Shares of the Portfolio that are held under the Contracts.
1.9. The Company shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Insurance Company as soon as reasonably
practicable, but no later than two business days prior to any described action
of any income, dividends or capital gain distributions payable on the Funds'
shares. The Insurance Company hereby elects to receive all income dividends and
capital gain distributions payable on a Fund's shares in additional shares of
that Fund. The Insurance Company reserves the right to revoke this election and
to receive all such income dividends and capital gain distributions in cash. The
Company shall notify the Insurance Company of the dividend rate per share for
the payment of dividends and distributions (promptly (but no later than 4:00
p.m. on the same business day that such dividend or distribution is made).
1.10. The Company shall make the net asset value per share for each Fund
available to the Insurance Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make those per-share net asset values available by 6:30 p.m.,
Eastern Time. In the event that the Company is unable to meet the 6:30 p.m.
Eastern Time stated herein, it shall provide additional time for the Insurance
Company to place orders for the purchase and redemption of shares. Such
additional time shall be equal to the additional time which the Company takes to
make the net asset value available to the Insurance Company. In accordance with
Section 8.3(a)(iii) hereof, if the Company provides materially incorrect share
net asset value information, the Company will make an adjustment to the number
of shares purchased or redeemed for the Account to reflect the correct net asset
value per share (a "Pricing Error"). Any material error (determined by the
Company in accordance with SEC guidelines, as to whether a material error has
occurred) in the calculation or reporting of net asset value per share, dividend
or capital gains information shall be reported to the Insurance Company promptly
upon discovery. Such notification may be oral, but shall be confirmed promptly
in writing within two business days. In such event, the Company shall recompute
all Account share transactions that were based on the Pricing Error and credit
or debit the Account's account such that the Account has the same number of the
Portfolio's shares as if all those transactions had been correctly priced. The
Adviser shall reimburse the Company for (a) any loss resulting from the fact
that any Participating Insurance Company or other owner of the Portfolio's
shares has an insufficient number or amount of shares remaining in its account
to make a correcting adjustment for any over payment to such owner by the
Portfolio due to the Pricing error, unless the Company is able to collect any
such deficiency from such owner and (b) any other material liabilities and
expenses that a Portfolio incurs as a result of the Pricing Error. If, as a
result of the Pricing Error, the Insurance Company has paid out to a Contract
owner or beneficiary, or a Contract owner has transferred to a different option
under the Contract, an amount in excess of what that person should have
received, the Adviser shall reimburse the Insurance Company for the excess
amount upon receipt from the Insurance Company of an invoice or other statement
documenting such excess payments. In addition, in the event that the Pricing
Error causes the Insurance Company to incur any costs for re-processing values
under Contracts, such as preparing and mailing revised statements to Contract
owners, the Adviser shall reimburse the Company for all such reasonable costs
and expenses upon receipt from the Insurance Company of an invoice or other
statement documenting such costs and expenses. Notwithstanding anything else in
this Section 1.10, neither the Fund, any Portfolio, the Adviser, the
Underwriter, nor any of their affiliates shall be liable for any information
provided to the Company pursuant to this Agreement which information is based on
incorrect information supplied by the Insurance Company to the Company or Xxxxx
Distributors.
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ARTICLE II. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
2.1. The Insurance Company represents, warrants and agrees that the
offerings of the interests in the Account are, or will be, registered under the
1933 Act; that the Contracts will be issued and sold in compliance in all
material respects with all applicable federal and state laws and that the sale
of the Contracts shall comply in all material respects with applicable state
insurance suitability requirements. The Insurance Company further represents
that it is an insurance company duly organized and in good standing under
applicable law and that it has legally and validly established the Account prior
to any issuance or sale thereof as a segregated asset account under New York
insurance law and has registered, or warrants and agrees that prior to any
issuance or sale of the Contracts it will register, the Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts.
2.2. The Adviser and the Company each warrants, represents and agrees that
Company shares sold pursuant to this Agreement shall be registered under the
1933 Act, duly authorized for issuance and sale in compliance with the laws of
the State of Maryland and all applicable federal securities laws and that the
Company is and shall remain registered under the 1940 Act and that it 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 Company 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 Company or Xxxxx Distributors.
2.3. The Adviser and Company each represents and warrants that each Fund is
currently qualified as a Regulated Investment Company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), and represents, warrants
and agrees that it will make all reasonable efforts to maintain each Fund's
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Insurance Company immediately upon having a reasonable
basis for believing that any Fund has ceased to so qualify or might not so
qualify in the future. In the event that a Fund fails to so qualify, the
Insurance Company shall have the right to terminate this arrangement in
accordance with Section 10.1 (b), which right shall be in addition to any other
rights that the Insurance Company has.
2.4. The Insurance Company represents and warrants that the Contracts are
currently treated as annuity or life insurance contracts under applicable
provisions of the Code and represents and warrants and agrees that it will make
all reasonable efforts to maintain such treatment and that it will notify the
Company, Adviser and Xxxxx Distributors immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5.The Company represents and warrants that it currently does not intend
to make any payments to finance distribution expenses pursuant to Rule 12b-1
under the 1940 Act or otherwise, although it may make such payments in the
future. To the extent that it decides to finance distribution expenses pursuant
to Rule 12b-1, the Company undertakes to have a board of directors, a majority
of whom are not interested persons of the Company, formulate and approve any
plan under Rule 12b-1 to finance distribution expenses.
2.6.The Company and the Adviser each represents and warrants that each
Fund's investment objectives, policies and restrictions comply and will continue
to comply with applicable state and federal laws (other than state insurance
laws) as they may apply to the Company. The Company and Adviser will use their
best efforts to comply with state insurance laws which apply to them on account
of the availability of the Fund to Contract owners pursuant to this Agreement,
provided that the Insurance Company shall inform them of any insurance
restrictions imposed by state insurance laws which are
5
applicable to a Fund. To the extent feasible and consistent with market
conditions, the Company will adjust a Fund's practices to comply with the
aforementioned state insurance laws upon written notice from the Insurance
Company of such requirements and proposed adjustments, it being agreed and
understood that in any such case the Company shall be allowed a reasonable
period of time under the circumstances after receipt of such notice to make any
such adjustment. If the Company is unable to so adjust a Fund's practices, then
the Insurance Company shall have the right to terminate this Agreement in
accordance with Section 10.1(b), which right shall be in addition to any other
rights that the Insurance Company has.
2.7. The Company represents and warrants that it is lawfully organized and
validly existing under the laws of the State of Maryland and represents,
warrants and agrees that the Company does and will comply in all material
respects with the 1940 Act and the laws of the State of Maryland.
2.8. Xxxxx Distributors represents and warrants that it shall remain duly
registered as a broker-dealer under all applicable federal and state securities
laws and agrees that it shall perform its obligations for the Company in
compliance in all material respects with any applicable state and federal
securities laws.
2.9. The Adviser represents and warrants that , it is and shall remain duly
registered under all applicable federal and state securities laws and that the
Adviser will perform its obligations to the Fund in accordance with the laws of
any applicable state and federal securities laws
2.10. The Company, the Adviser and Xxxxx Distributors each represents and
warrants that all of their officers, employees, investment advisers, investment
sub-advisers, and other individuals or entities described in Rule 17g-1 under
the 1940 Act dealing with the money and/or securities of the Company are, and
shall continue to be at all times, covered by a blanket fidelity bond or similar
coverage for the benefit of the Company in an amount not less than the minimum
coverage required currently by Rule 17g-1 under the 1940 Act or related
provisions as may be promulgated from time to time. That fidelity bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.11 The Company and the Adviser each represents and warrants that, to the
best of its knowledge, the investment management fees paid by the Fund does not
constitute a breach of fiduciary duty under the 1940 Act.
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ARTICLE III. DISCLOSURE DOCUMENTS AND VOTING
3.1. Xxxxx Distributors shall provide the Insurance Company (at the
Insurance Company's expense) with as many copies of the current prospectus
(which term as used in this Agreement shall also include any supplements
thereto) for each Fund listed on Schedule C herein as the Insurance Company may
reasonably request for distribution to prospective purchasers of contracts.
Xxxxx Distributors shall also provide the Insurance Company (free of charge)
with as many copies of the current prospectus for each Fund listed on Schedule C
herein as the Insurance Company may reasonably request for distribution to
existing Contract owners and provide same to Insurance Company on a timely basis
such that Insurance Company can satisfy its obligation to provide the prospectus
to existing contractowners, as required by law. If requested by the Insurance
Company in lieu thereof, the Company shall provide such documentation (including
a final copy of the new prospectus as set in type or at the request of the
Insurance Company, as a diskette in the form sent to the financial printer, at
the Company's expense) and other assistance as is reasonably necessary in order
for the Insurance Company once each year (or more frequently if the prospectus
for the Company is amended) to have the prospectus for the Contracts and the
Company's prospectus printed together in one document. The expenses of such
printing to be apportioned between (a) the Insurance Company and (b) the Company
or its designee in proportion to the number of pages of the Policy and Shares'
prospectuses, taking account of other relevant factors affecting the expense of
printing, such as covers, columns, graphs and charts; the Company or its
designee to bear the cost of printing the Shares' prospectus portion of such
document for distribution to owners of existing Policies and the Insurance
Company to bear the expenses of printing the portion of such document relating
to the Accounts provided, however, that the Insurance Company shall bear all
printing expenses of such combined documents where used for distribution to
prospective purchasers. In the event that the Insurance Company requests that
the Company or its designee provides the Fund's prospectus, profile prospectus
or supplements thereto in a "camera ready" or diskette format, the Company shall
be responsible for providing such document in the format in which it or the
Adviser is accustomed to formatting such documents and shall bear the expense of
providing such documents in such format (e.g., typesetting expenses), and the
Insurance Company shall bear the expense of adjusting or changing the format to
conform with any of its prospectuses.
3.2. The Company's prospectus shall state that the Statement of Additional
Information for the Company (the "SAI, which term, as used in this Agreement
shall include any supplement thereto) is available from the Company, and Xxxxx
Distributors (or the Company), at its expense, shall print and provide the SAI
free of charge to the Insurance Company and to any owner of a Contract or
prospective owner who requests the SAI.
3.3. The Company or the Adviser, at its expense, shall provide the
Insurance Company with copies of its voting instructions, proxy material,
reports to shareholders and other communications to shareholders in such
quantity as the Insurance Company shall reasonably require for distributing to
Contract owners and the Company or the Adviser shall bear the costs of
distributing them to existing contractowners.
3.4. If and to the extent required by law, the Insurance Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Company shares of each Fund in accordance with
instructions received from Contract owners; and
(iii) vote Company shares for which no instructions have been received
in the same proportion as Company shares of that Fund 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
Insurance Company reserves the right to vote Company shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that each of
their separate accounts participating in the Company calculates voting
privileges in a manner consistent with the standards set forth on Schedule D
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies. The Insurance
Company shall fulfill its obligation under, and abide by the terms and
conditions of, the Mixed and Shared Funding Exemptive Order the material terms
of which are set forth herein.
3.5. The Company will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Company will either provide for
annual meetings (except insofar as the SEC may interpret Section 16 of the 1940
Act not to require such meetings) or, as the Company currently intends, comply
with Section 16(c) of the 1940 Act as well as with Sections 16(a) and, if and
when applicable, 16(b). Further, the Company will act in accordance with the
SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of directors and with whatever rules the SEC may promulgate
with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Insurance Company 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, Xxxxx Selected Advisers, L.P., or
Xxxxx Distributors is named, at least 10 Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably objects to such
use within 10 Business Days after receipt of such material.
4.2. The Insurance Company shall not give any information or make any
representations or statements on behalf of the Company or concerning the Company
in connection with the sale of the Contracts other than the information or
representations contained in the Company's registration statement, prospectus or
SAI, as that registration statement, prospectus or SAI may be amended or
supplemented from time to time, or in published reports for the Company which
are in the public domain or approved by the Company or in reports or proxy
statements for the Company, or in sales literature or other promotional material
approved by the Company or its designee or by Xxxxx Distributors, except with
the permission of the Company or Xxxxx Distributors.
4.3. The Company, Xxxxx Distributors, or its designee shall furnish, or
shall cause to be furnished, to the Insurance Company or its designee, each
piece of sales literature or other promotional material in which the Insurance
Company, the Contract or the Account is named at least 10 Business Days prior to
its use. No such material shall be used if the Insurance Company or its designee
reasonably objects to such use within 10 Business Days after receipt of that
material.
4.4. The Company, the Adviser and Xxxxx Distributors shall not give any
information or make any representations on behalf of the Insurance Company or
concerning the Insurance Company, any Account, or the Contracts other than the
information or representations contained in a registration statement, prospectus
or statement of additional information for the Contracts, as that registration
statement, prospectus or statement of additional information may be amended or
supplemented from time to time, or in published reports for any Account which
are in the public domain or approved by the Insurance Company for distribution
to Contract
8
owners, or in sales literature or other promotional material approved by the
Insurance Company or its designee, except with the permission of the Insurance
Company.
4.5. The Company will provide to the Insurance Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, proxy statement, piece of sales literature or
other promotional material, application for exemption, request for no-action
letter, and any amendment to any of the above, that relate to the Company or its
shares, contemporaneously with the filing of the document with the SEC, the
NASD, or other regulatory authorities.
4.6. The Insurance Company will provide to the Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, solicitation for voting instructions, piece of
sales literature and other promotional material, application for exemption,
request for no-action letter, and any amendment to any of the above, that
relates to the Contracts or the Account, contemporaneously with the filing of
the document with the SEC, the NASD, 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, advertisements,
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, shareholder
newsletters, 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 and any other
material constituting sales literature or advertising under NASD rules, the 1940
Act or the 1933 Act.
ARTICLE V. FEES AND EXPENSES
5.1. The Company and Xxxxx Distributors shall pay no fee or other
compensation to the Insurance Company under this agreement, except as set forth
in Section 5.4.
5.2. All expenses incident to performance by the Company under this
Agreement shall be paid by the Company or the Adviser. The Company shall see to
it that any offering of its shares is registered and that all of its shares are
authorized for issuance in accordance with applicable federal law and, if and to
the extent deemed advisable by the Company or Xxxxx Distributors, in accordance
with applicable state laws prior to their sale. The Company or the Adviser shall
bear the cost of registration and qualification of the Company's shares,
preparation and filing of the Company's prospectus and registration statement,
contract owner voting instructions, proxy materials and reports, printing,
distributing to contract owners, setting the prospectus in type, setting in type
and printing and distributing to contract owners the contract owner voting
instructions, proxy materials and reports to shareholders, the preparation of
all statements and notices required by any federal or state law, and all taxes
on the issuance or transfer of the Company's shares.
5.3. The Insurance Company shall bear the expenses of printing and
distributing to Contract owners the Contract prospectuses.
5.4. The Distributor will monthly pay the Insurance Company certain amounts
to appropriately recognize the relative rights and responsibilities of the
parties hereto. Such payments will be equal to _____% per annum of the average
aggregate amount invested by the Insurance Company in the
9
Company under this Agreement up to $____ million of assets invested in the
Company, and ____% per annum for any amount exceeding $____ million invested by
the Insurance Company in the Company under this Agreement. Such payments will be
made monthly, and only when the average aggregate amount invested exceeds
$_________. The parties agree that such payments do not constitute payment for
investment advisory, distribution or other services. Payment of such amounts by
Xxxxx Distributors shall not increase the fees paid by the Company or its
shareholders.
ARTICLE VI. DIVERSIFICATION
6.1. The Adviser and Company each represents and warrants that each Fund of
the Company will at all times invest their assets in such a manner as to ensure
that the Contracts will be treated as variable contracts under the Internal
Revenue Code and the regulations issued thereunder. Without limiting the scope
of the foregoing, The Adviser and the Company each represent and warrant that
they will comply with Section 817(h) of the Code and Treasury Regulation
1.817-5(b) and (f) relating to the diversification requirements for variable
annuity, endowment, modified endowment or life insurance contracts and any
amendments or other modifications to that Section or Regulation (and any revenue
rulings, revenue procedures, notices and other published announcements of the
Internal Revenue Service interpreting these sections) as if those requirements
applied separately to each such Fund. In the event of a breach of this Article
VI by the Company, and in addition to other remedies and actions set forth in
this Agreement, the Company will take all reasonable steps (a) to notify the
Insurance Company of such breach and (b) to adequately diversify the Company so
as to achieve compliance with the grace period afforded by Treasury Regulation
1.817-5.
Without limiting their obligations under Section 6.1 above, the Company and
Adviser each represents and warrants that each Fund will elect to be qualified
as a Regulated Investment Company under Subchapter M of the Code, that they will
operate each such Regulated Investment Company in such a way as to avoid the
imposition of any Federal taxes, and that they will maintain such qualification
(under Subchapter M or any successor or similar provision).
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The directors of the Company will monitor each Fund for the existence
of any material irreconcilable conflict between the interests of the variable
Contract owners of all separate accounts investing in the Company and the
participants of all Qualified Plans investing in the Company. 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 interpretive letter, or any similar action
by insurance, tax, or securities regulatory authorities; (c) an administrative
or judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Fund are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by a Participating Insurance Company to
disregard the voting instructions of variable contract owners. The directors of
the Company shall promptly inform the Insurance Company if they determine that
an irreconcilable material conflict exists and the implications thereof. The
directors of the Company shall have sole authority to determine whether an
irreconcilable material conflict exists and their determination shall be binding
upon the Insurance Company.
10
7.2. The Insurance Company and Xxxxx Distributors each will report promptly
any potential or existing conflicts of which it is aware to the directors of the
Company. The Insurance Company and Xxxxx Distributors each will assist the
directors of the Company in carrying out their responsibilities under the Mixed
and Shared Funding Exemptive Order, by providing the directors of the Company
with all information reasonably necessary for them to consider any issues
raised. This includes, but is not limited to, an obligation by the Insurance
Company to inform the directors of the Company whenever Contract owner voting
instructions are to be disregarded. These responsibilities shall be carried out
by the Insurance Company with a view only to the interests of the Contract
owners and by Xxxxx Distributors with a view only to the interests of Contract
owners and Qualified Plan participants.
7.3. If it is determined by a majority of the directors of the Company, or
a majority of the directors who are not interested persons of the Company, any
of its Funds, or Xxxxx Distributors (the "Independent Directors"), that a
material irreconcilable conflict exists, the Insurance Company and/or other
Participating Insurance Companies or Qualified Plans that have executed
participation agreements shall, at their expense and to the extent reasonably
practicable (as determined by a majority of the Independent Directors), take
whatever steps are necessary to remedy or eliminate the irreconcilable material
conflict, up to and including: (1) withdrawing the assets attributable to some
or all of the separate accounts from the Company or any Fund and reinvesting
those assets in a different investment medium, including (but not limited to)
another Fund of the Company, or submitting the question whether such segregation
should be implemented to a vote of all affected variable contract owners and, as
appropriate, segregating the assets of any appropriate group (e.g., annuity
contract owners, life insurance contract owners, or variable contract owners of
one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected variable contract owners the option of
making such a change; and (2) establishing a new registered management
investment company or managed separate account and obtaining any necessary
approvals or orders of the SEC in connection therewith.
7.4. If a material irreconcilable conflict arises because of a decision by
the Insurance Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Insurance Company may be required, at the Company's election, to withdraw the
affected Account's investment in the Company and terminate this Agreement with
respect to that Account; provided, however, that such withdrawal and termination
shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the Independent Directors. Any such
withdrawal and termination must take place within six (6) months after the
Company gives written notice that this provision is being implemented, and,
until the end of that six month period, the Company shall continue to accept and
implement orders by the Insurance Company for the purchase (and redemption) of
shares of the Company.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Insurance Company
conflicts with the majority of other state regulators, then the Insurance
Company will withdraw the affected Account's investment in the Company and
terminate this Agreement with respect to that Account within six months after
the directors of the Company inform the Insurance Company in writing that they
have determined that the state insurance regulator's decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the Independent
Directors. Until the end of the foregoing six month period, the Company shall
continue to accept and implement orders by the Insurance Company for the
purchase (and redemption) of shares of the Company.
11
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the Independent Directors shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Company be required to establish a new funding medium for the Contracts. The
Insurance Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the directors of the Company
determine that any proposed action does not adequately remedy any irreconcilable
material conflict, then the Insurance Company will withdraw the Account's
investment in the Company and terminate this Agreement within six (6) months
after the directors of the Company inform the Insurance Company in writing of
the foregoing determination, provided, however, that the withdrawal and
termination shall be limited to the extent required by the material
irreconcilable conflict, as determined by a majority of the Independent
Directors.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Mixed and Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Mixed and Shared
Funding Exemptive Order, then (a) the Company and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent those rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3,
7.4, and 7.5 of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to those Sections are contained in
the Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE INSURANCE COMPANY
8.1(a). The Insurance Company agrees to indemnify and hold harmless the
Company and each director, officer, employee or agent of the Company, and each
person, if any, who controls or is associated with the Company within the
meaning of the federal securities law (collectively, the "Indemnified Parties"
for purposes of this Section 8.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Insurance Company) or litigation (including reasonable legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale, holding, acquisition, distribution or redemption of the
Company's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the registration statement, prospectus or statement of
additional information for the Account or contained in the
Contracts or sales literature for the Account or Contracts
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading in light of the circumstances in which they
were made, provided that this agreement to indemnify and
hold harmless shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished to the Insurance Company by
12
or on behalf of the any indemnified party or approved for use
by or on behalf of any indemnified party for use in the
registration statement, prospectus or statement of
additional information for the Account or in the Contracts
or sales literature (or any amendment or supplement to any
of the foregoing) or otherwise for use in connection with
the sale, holding, acquisition, distribution or redemption
of the Contracts or shares of the Company;
(ii) arise out of or as a result of statements or
representations or wrongful conduct of the Insurance Company
or persons under its control authorized to act on its behalf
with regard to this Agreement, with respect to the sale,
holding, acquisition, redemption or distribution of the
Contracts or Company Shares, provided that this agreement to
indemnify and hold harmless shall not apply as to any
indemnified party if such statement or omission or such
alleged statement or omission was made in reliance upon and
in conformity with information furnished to the Insurance
Company by or on behalf of any indemnified party, or
approved for use by or on behalf of any indemnified party
for use in the Account registration statement, Account
prospectus or Account SAI or in the Contract's or Account's
sales literature or other promotional material (or any
amendment or supplement to any of the foregoing) or
otherwise for use in connection with the sale, holding,
acquisition or distribution of the Account, Contracts or
Company share or operations of the Company;
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, statement of additional information
or sales literature or other promotional material of the
Company 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 in light of the
circumstances in which they were made, if such a statement
or omission was made in reliance upon information furnished
in writing to the Company by or on behalf of the Insurance
Company or persons under its control authorized to act on
its behalf with regard to this Agreement; or;
(iv) arise as a result of any failure by the Insurance
Company to provide the services and furnish the materials or
to make payments under the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation, warranty or agreement made by the Insurance
Company in this Agreement or arise out of or result from any
other material breach of this Agreement by the Insurance
Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof. This indemnification shall be in addition to any liability which
the Insurance Company may otherwise have.
8.1(b). No indemnified party shall be entitled to indemnification if such
loss, claim, damage, liability or litigation is due to willful misfeasance, bad
faith, or gross or reckless disregard of obligations or
13
duties by the party seeking indemnification or due to the breach of any
representation, warranty or agreement made by the indemnified party.
8.1(c). The Insurance Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless that Indemnified Party shall have notified the Insurance 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 that
Indemnified Party (or after the Indemnified Party shall have received notice of
such service on any designated agent). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Insurance Company of its obligations hereunder except to the extent
that the Insurance Company has been prejudiced by such failure to give notice.
In addition, any failure by the Indemnified Party to notify the Insurance
Company of any such claim shall not relieve the Insurance Company from any
liability which it may have to the Indemnified Party against whom the action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Insurance Company
shall be required to assume, at its own expense, the defense of the action..
After the Insurance Company assumes the defense of any claim or proceeding
brought against any Indemnified Party, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the Insurance Company
will not be liable to that party under this Agreement for any legal or other
expenses subsequently incurred by the party independently in connection with the
defense of any action or proceeding brought against any Indemnified Party unless
(i) the Company 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 both the Company party 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. .
8.1(d). The Indemnified Parties will promptly notify the Insurance Company
of the commencement of any litigation or proceedings against them in connection
with the issuance or sale holding, acquisition, redemption or distribution of
the Company's shares or the Contracts or the operation of the Company for which
indemnification may be sought under this Section 8.1.
8.2. INDEMNIFICATION BY ADVISER
8.2(a). Adviser agrees to indemnify and hold harmless the Insurance
Company, its parents and subsidiaries and other affiliates and each of their
directors, officers, employees or agents, and each person, if any, who controls
or is associated with the Insurance Company within the meaning of the federal
securities laws and the Company (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
Advisor) or litigation (including reasonable legal and other expenses) to which
the Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale, acquisition,
holding distribution or redemption of the Company's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the registration statement, prospectus, statement of
additional information or sales literature of the Company
(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
14
statements therein not misleading in light of the
circumstances in which they were made, provided that this
agreement to indemnify and hold harmless shall not apply as
to any Indemnified Party if the statement or omission or
alleged statement or omission was made in reliance upon and
in conformity with information furnished to Xxxxx
Distributors, the Adviser or the Company by or on behalf of
the Insurance Company for use in the registration statement,
prospectus, or statement of additional information or in
sales literature for the Company (or any amendment or
supplement to any of the foregoing) or otherwise for use in
connection with the acquisition, holding, distribution,
redemption or sale of the Contracts or Company shares;
(ii) arise out of or as a result of statements or
representations (or wrongful conduct by or on behalf of the
Company, Advisor, Xxxxx Distributors or persons under their
control authorized to act on their behalf with regard to
this Agreement, with respect to the sale, acquisition,
holding or distribution of the Contracts or shares of the
Company; provided that this agreement to indemnify and hold
harmless shall not apply as to any indemnified party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to Xxxxx Distributors, the Company or the Adviser
by or on behalf of any indemnified party, or approved for
use by on behalf of any indemnified party for use in the
Company registration statement, Company prospectus or
Company SAI or in the Company's, Adviser's or Xxxxx
Distributor's sales literature or other promotional material
(or any amendment or supplement to same) or otherwise for
use in connection with the sale, holding, acquisition,
redemption or distribution of the Contracts or shares of the
Company;
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, statement of additional information
for the Account or sales literature or other promotional
material covering the Contracts or Account, or any amendment
thereof or supplement to any of the foregoing, 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 in light of
the circumstances in which they were made, if such statement
or omission was made in reliance upon information furnished
in writing to the Insurance Company by or on behalf of the
Xxxxx Distributors, the Advisor or the Company or persons
under their control authorized to act on their behalf with
regard to this Agreement or;
(iv) arise as a result of any failure by the Company, the
Adviser or Xxxxx Distributors to provide the services and
furnish the materials or to make payments under the terms of
this Agreement (including a failure, whether intentional or
in good faith or otherwise, to comply with the requirements
and procedures related thereto specified in Section 1.3
and/or Article VI of this Agreement in which case, (1) the
damages recoverable under this indemnity shall, without
limitation include any cost the Insurance
15
Company reasonably incurs in working out any settlement or
closing agreement with the Internal Revenue Service (IRS) in
order that holders of the Contracts not be taxed currently
on gains thereunder, together with any related settlement
payments or penalties required of the Insurance Company by
the IRS, and (2) Xxxxx shall either inform Company of its
consent or declined to consent to any such penalties or
settlement payments under this Section within 20 days of
receipt of a request for such consent. In the event that
Xxxxx does not consent, Company may immediately commence
arbitration proceedings pursuant to Section 12.10; or
(v) arise out of or result from any material breach of any
representation, warranty or agreement made by Xxxxx
Distributors, the Adviser or the Company in this Agreement
or arise out of or result from any other material breach of
this Agreement by Xxxxx Distributors the Adviser or the
Company;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof. This indemnification shall be in addition to any liability which
the Adviser may otherwise have. If a Fund's net asset value is materially and
adversely affected by any losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses) that are incurred by or charged
against the Company and that arise out of are based on any of the circumstances
set forth in sub-paragraphs (i)-(v) of this Section 8.2(a), and if the Insurance
Company elects to give credits or make payments to its customers to reasonably
offset the negative impact thereof on their Contract values, the amount of such
credits and payments shall be reimbursable to the Company under this Section
8.2, if Xxxxx has been given 20 days to consent (or decline to consent) and has
so consented to such action. In the event Xxxxx does not consent to such action,
Company may immediately commence arbitration proceedings pursuant to Section
12.10.
Nothing in this Agreement shall be construed so as to make the Adviser liable
for any adverse effect to a Fund's net asset value or loss if proximately caused
by the decision to purchase, sell, or retain any security, if such decision was
made with due care and in good faith. A decision will be presumptively assumed
to be made with due care and in good faith if the Adviser can demonstrate a
reasonable belief that the securities in question (i) may assist the Fund in
pursuing its investment objective; (ii) are consistent with the Fund's
investment strategies as disclosed in its prospectus and Statement of Additional
Information, as amended from time to time; and (iii) will not cause the Fund to
violate any of its investment restrictions as described in the Fund's prospectus
and Statement of Additional Information, as amended from time to time.
8.2(b) No indemnified party shall be entitled to indemnification if such
loss, claim, damage, liability or litigation is due to the willful misfeasance,
bad faith, or gross negligence or by reason of the reckless disregard of
obligations and duties by the party seeking indemnification or due to the breach
of any representation, warranty or agreement made by the indemnified party.
8.2(c) The Adviser shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless the
Indemnified Party shall have notified the Adviser 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 the Indemnified Party (or after
the Indemnified Party shall have received notice of such service on any
designated agent). Notwithstanding the foregoing, the failure of any
16
Indemnified Party to give notice as provided herein shall not relieve the
Adviser of its obligations hereunder except to the extent that the Adviser has
been prejudiced by such failure to give notice. In addition, any failure by the
Indemnified Party to notify the Adviser of any such claim shall not relieve the
Adviser from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified Parties,
the Adviser will be required to assume, at its own expense, in the defense
thereof. After the Adviser assumes the defense of any action or proceeding
brought against any Indemnified Party, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the Adviser will not
be liable to that party under this Agreement for any legal or other expenses
subsequently incurred by that party independently in connection with the defense
of any action or proceeding brought against any Indemnified Party unless (i) the
Adviser 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 both the Adviser 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 Adviser 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 Adviser agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
8.2(d) The Indemnified parties agrees to notify the Adviser promptly of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance, holding, acquisition,
distribution, redemption or sale of the Contracts or Company Shares or the
operation of the Account or Company for which indemnification may be sought
under this Section 8.2. .
8.3. INDEMNIFICATION BY XXXXX DISTRIBUTORS
8.3(a). To the extent that the Adviser does not or is not required to
indemnify the Insurance Company or the Company, pursuant to Section 8.2, Xxxxx
Distributors agrees to indemnify and hold harmless the Insurance Company , its
parents and subsidiaries and other affiliates and each of their directors,
officers, employees or agents, and each person, if any, who controls or is
associated with the Insurance Company within the meaning of the federal
securities laws and the Company (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
Xxxxx Distributors) or litigation (including reasonable legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale, acquisition, holding, distribution or redemption of the Company's shares
or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the registration statement, prospectus, statement of
additional information or sales literature of the Company
(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 in light of the circumstances in which they
were made, provided that this agreement to indemnify and
hold harmless shall not apply as to any Indemnified Party if
the statement or omission or alleged statement or omission
was made in reliance upon and in conformity with information
furnished in writing to Xxxxx Distributors,
17
the Adviser or the Company by or on behalf of the Insurance
Company for use in the registration statement, prospectus,
or statement of additional information or in sales
literature for the Company (or any amendment or supplement
to any of the foregoing) or otherwise for use in connection
with the acquisition, holding, distribution, redemption or
sale of the Contracts or Company shares;
(ii) arise out of or as a result of statements or
representations (or wrongful conduct) by or on behalf of the
Company, Advisor, Xxxxx Distributors or persons under their
control authorized to act on their behalf with regard to
this Agreement, with respect to the sale, acquisition,
holding or distribution of the Contracts or shares of the
Company; provided that this agreement to indemnify and hold
harmless shall not apply as to any indemnified party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to Xxxxx Distributors, the Company or the Adviser
by or on behalf of any indemnified party, or approved for
use by on behalf of any indemnified party for use in the
Company registration statement, Company prospectus or
Company SAI or in the Company's, Adviser's or Xxxxx
Distributor's sales literature or other promotional material
(or any amendment or supplement to same) or otherwise for
use in connection with the sale, holding, acquisition,
redemption or distribution of the Contracts or shares of the
Company;
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, statement of additional information
for the Account or sales literature or other promotional
material covering the Contracts or Account, or any amendment
thereof or supplement to any of the foregoing, 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 in light of
the circumstances in which they were made, if such statement
or omission was made in reliance upon information furnished
in writing to the Insurance Company by or on behalf of the
Xxxxx Distributors, the Adviser or the Company or persons
under their control authorized to act on their behalf with
regard to this Agreement or;
(iv) arise as a result of any failure by the Company or
Xxxxx Distributors to provide the services and furnish the
materials or to make payments under the terms of this
Agreement (including a failure, whether intentional or in
good faith or otherwise, to comply with the requirements and
procedures related thereto specified in Section 1.3 and/or
Article VI of this Agreement) in which case, (1) the damages
recoverable under this indemnity shall, without limitation
include any cost the Insurance Company reasonably incurs in
working out any settlement or closing agreement with the
Internal Revenue Service (IRS) in order that holders of the
Contracts not be taxed currently on gains thereunder,
together with any related settlement payments or penalties
required of the Insurance Company by the IRS, and (2) Xxxxx
shall either inform Company of its
18
consent or declined to consent to any such penalties or
settlement payments under this Section within 20 days of
receipt of a request for such consent. In the event that
Xxxxx does not consent, Company may immediately commence
arbitration proceedings pursuant to Section 12.10;or
(v) arise out of or result from any material breach of any
representation, warranty or agreement made by Xxxxx
Distributors, the Adviser or the Company in this Agreement
or arise out of or result from any other material breach of
this Agreement by Xxxxx Distributors the Adviser or the
Company;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof. This indemnification shall be in addition to any liability which
Xxxxx Distributors may otherwise have. If a Fund's net asset value is materially
and adversely affected by any losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses) that are incurred by or charged
against the Company and that arise out of are based on any of the circumstances
set forth in sub-paragraphs (i)-(v) of this Section 8.3(a), and if the Insurance
Company elects to give credits or make payments to its customers to reasonably
offset the negative impact thereof on their Contract values, the amount of such
credits and payments shall be reimbursable to the Company under this Section 8.3
) if Xxxxx has been given 20 days to consent (or decline to consent) and has so
consented to such action. In the event Xxxxx does not consent to such action,
Company may immediately commence arbitration proceedings pursuant to Section
12.10.
Nothing in this Agreement shall be construed so as to make Xxxxx Distributors
liable for any adverse effect to a Fund's net asset value or loss if proximately
caused by the decision to purchase, sell, or retain any security, if such
decision was made with due care and in good faith. A decision will be
presumptively assumed to be made with due care and in good faith if the Adviser
can demonstrate a reasonable belief that the securities in question (i) may
assist the Fund in pursuing its investment objective; (ii) are consistent with
the Fund's investment strategies as disclosed in its prospectus and Statement of
Additional Information, as amended from time to time; and (iii) will not cause
the Fund to violate any of its investment restrictions as described in the
Fund's prospectus and Statement of Additional Information, as amended from time
to time.
8.3(b) No indemnified party shall be entitled to indemnification if such
loss, claim, damage, liability or litigation is due to the willful misfeasance,
bad faith, or gross negligence or by reason of the reckless disregard of
obligations and duties by the party seeking indemnification or due to the breach
of any representation, warranty or agreement made by the indemnified party.
8.3(c) Xxxxx Distributors shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless the
Indemnified Party shall have notified Xxxxx Distributors 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 the
Indemnified Party (or after the Indemnified Party shall have received notice of
such service on any designated agent). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve Xxxxx Distributors of its obligations hereunder except to the extent
that Xxxxx Distributors has been prejudiced by such failure to give notice. In
addition, any failure by the Indemnified Party to notify Xxxxx Distributors of
any such claim shall not relieve Xxxxx Distributors from any liability which it
may have to the Indemnified Party against whom such action is
19
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, Xxxxx Distributors will
be required to assume, at its own expense, in the defense thereof. After Xxxxx
Distributors assumes the defense of any action or proceeding brought against any
Indemnified Party, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and Xxxxx Distributors will not be liable to
that party under this Agreement for any legal or other expenses subsequently
incurred by that party independently in connection with the defense of any
action or proceeding brought against any Indemnified Party unless (i) the Xxxxx
Distributors 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 both the Xxxxx Distributors 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.
Xxxxx Distributors 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, Xxxxx Distributors agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment.
8.3(d) The Indemnified parties agrees to notify Xxxxx Distributors promptly
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance, holding, acquisition,
distribution, redemption or sale of the Contracts or Company Shares or the
operation of the Account or Company for which indemnification may be sought
under this Section 8.3. .
8.4 INDEMNIFICATION BY THE COMPANY
8 4(a). To the extent that the Adviser does not or is not required to
indemnify the Company and that the Underwriter does not or is not required to
indemnify the Company, pursuant to Sections 8.2 and 8.3, respectively, The
Company agrees to indemnify and hold harmless the Insurance Company, its parents
and subsidiaries and other affiliates and each of their directors, officers,
employees and agents, and each person, if any, who controls or is associated
with the Insurance Company within the meaning of the federal securities
laws(collectively, the "Indemnified Parties" for purposes of this Section 8.4)
against any and all losses, claims, damages, liabilities (including reasonable
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, at common law or otherwise, insofar as those losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
result from the gross negligence, bad faith or willful misconduct of any
director(s) of the Company, are related to the operations of the Company or:
(i) arise as a result of any failure by the Company to
provide the services and furnish the materials or to make
payments under the terms of this Agreement (including a
failure to comply with the requirements specified in Article
VI of this Agreement in which case, (1) the damages
recoverable under this indemnity shall, without limitation
include any cost the Company reasonably incurs in working
out any settlement or closing agreement with the Internal
Revenue Service (IRS) in order that holders of the Contracts
not be taxed currently on gains thereunder, together with
any related settlement payments or penalties required of the
Company by the IRS, and (2) any such penalties or settlement
payments shall be subject to approval by the Fund's board of
directors under this Section 8.4(a), which approval shall
not be unreasonably withheld);
(ii) arise out of or result from any material breach of any
representation, warranty or agreement made by the Company in
this Agreement or arise
20
out of or result from any other material breach of this
Agreement by the Company; or
as limited by, and in accordance with the provisions of, Sections 8.4(b) and
8.4(c) hereof. . This indemnification shall be in addition to any liability
which the Fund may otherwise have. If a Fund's net asset value is materially and
adversely affected by any losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses) that are incurred by or charged
against the Company and that arise out of are based on any of the circumstances
set forth in sub-paragraphs (i)-(ii) of this Section 8.4(a), and if the
Insurance Company elects to give credits or make payments to its customers to
reasonably offset the negative impact thereof on their Contract values, the
amount of such credits and payments shall be reimbursable to the Insurance
Company under this Section 8.3 if Xxxxx has been given 20 days to consent (or
decline to consent) and has so consented to such action.. In the event Xxxxx
does not consent to such action, Company may immediately commence arbitration
proceedings pursuant to Section 12.10.
Nothing in this Agreement shall be construed so as to make the Company liable
for any adverse effect to a Fund's net asset value or loss if proximately caused
by the decision to purchase, sell, or retain any security, if such decision was
made with due care and in good faith. A decision will be presumptively assumed
to be made with due care and in good faith if the Adviser can demonstrate a
reasonable belief that the securities in question (i) may assist the Fund in
pursuing its investment objective; (ii) are consistent with the Fund's
investment strategies as disclosed in its prospectus and Statement of Additional
Information, as amended from time to time; and (iii) will not cause the Fund to
violate any of its investment restrictions as described in the Fund's prospectus
and Statement of Additional Information, as amended from time to time.
8.4(b). No indemnified party shall be entitled to indemnification if such
loss, claim, damage, liability is due to the willful misfeasance, bad faith, or
gross negligence or reckless disregard of obligations and duties by the party
seeking indemnification or is due to the breach of any representation, warranty,
or agreement made by the Indemnified Party.
8.4(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless the
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 the Indemnified Party (or after
the Indemnified Party shall have received notice of such service on any
designated agent). Notwithstanding the foregoing, the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Company of its
obligations hereunder except to the extent that the Company has been prejudiced
by such failure to give notice. In addition, any failure by the Indemnified
Party to notify the Company of any such claim shall not relieve the Company from
any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties, the Company
will be required to assume, at its own expense, the defense of claim or
proceeding brought against any Indemnified Party After the Company assumes the
defense of any action or proceeding brought against any Indemnified Party, 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 unless(i) the Company 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 both the Company and the indemnified party and representation of both
parties by the
21
same counsel would be inappropriate due to actual or potential differing
interests between them. The Company shall not be liable for any settlement
(other than as specified in Section 8.4(a)(i)) 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 Company agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
8.4(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the
issuance, holding, acquisition, distribution, redemption or sale of the
Contracts, the operation of the Account, or of shares of the Company for which
indemnification may be sought under this section 8.4.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and provisions hereof interpreted
under and in accordance with the laws of the State of New York
9.2. This Agreement shall be subject to the provisions of the 1933, 1934,
and 1940 Acts, and the rules and regulations and rulings thereunder, including
any exemptions from those statutes, rules and regulations the SEC may grant
(including, but not limited to, the Mixed and Shared Funding Exemptive Order)
and the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon 90 days' advance written notice to the
other parties;; or
(b) at the option of the Insurance Company to the extent that shares of
Funds are not reasonably available to meet the requirements of the
Contracts as determined by the Insurance Company, provided, however, that
such a termination shall apply only to the Fund(s) not reasonably
available. Prompt written notice of the election to terminate for such
cause shall be furnished by the Insurance Company to the Company and Xxxxx
Distributors; or
(c) at the option of the Company or Xxxxx Distributors, in the event that
formal administrative proceedings are instituted against the Insurance
Company by the NASD, the SEC, an insurance commissioner or any other
regulatory body regarding the Insurance Company's duties under this
Agreement or related to the sale of the Contracts, the operation of any
Account, or the purchase of the Company's shares, provided, however, that
the Company determines in its sole judgment exercised in good faith, that
any such administrative proceedings will have a material adverse effect
upon the ability of the Insurance Company to perform its obligations under
this Agreement; or
(d) at the option of the Insurance Company in the event that formal
administrative proceedings are instituted against the Company, Adviser or
Xxxxx Distributors by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body, provided, however, that
the Insurance Company determines in its sole judgement exercised in good
faith, that any such
22
administrative proceedings will have a material adverse effect upon the
ability of the Company, Adviser or Xxxxx Distributors to perform its
obligations under this Agreement; or
(e) At the option of the Insurance Company upon any substitution of the
shares of another investment company or series thereof for shares of a Fund
of the Company in accordance with the terms of the Contracts, provided that
the Insurance Company has given at least [ 45 ]days prior written notice to
the Company and Xxxxx Distributors of the date of substitution; or; or
(f) at the option of the Insurance Company, in the event any of the
Company's shares are not registered, issued or sold in accordance with
applicable state and/or federal law or exemptions therefrom, or such law
precludes the use of those shares as the underlying investment media of the
Contracts issued or to be issued by the Insurance Company; or
(g) at the option of the Insurance Company, if the Company ceases to
qualify as a regulated investment company under Subchapter M of the Code or
under any successor or similar provision, or if the Insurance Company
reasonably believes that the Company may fail to so qualify; or
(h) at the option of the Insurance Company, if the Company fails to meet
the diversification and other requirements specified in Article VI hereof;
or
(i) at the option of either the Company or Xxxxx Distributors, if (1) the
Company or Xxxxx Distributors, respectively, shall determine, in their sole
judgment reasonably exercised in good faith, that the Insurance Company has
suffered a material adverse change in its business or financial condition
or is the subject of material adverse publicity and that material adverse
change or material adverse publicity will have a material adverse impact
upon the business and operations of either the Company or Xxxxx
Distributors, (2) the Company or Xxxxx Distributors shall notify the
Insurance Company in writing of that determination and its intent to
terminate this Agreement, and (3) after considering the actions taken by
the Insurance Company and any other changes in circumstances since the
giving of such a notice, the determination of the Company or Xxxxx
Distributors shall continue to apply on the sixtieth (60th) day following
the giving of that notice, which sixtieth day shall be the effective date
of termination; or
(j) at the option of the Insurance Company, if (1) the Insurance Company
shall determine, in its sole judgment reasonably exercised in good
faith, that either the Company, Adviser or Xxxxx Distributors has
suffered a material adverse change in its business or financial
condition or is the subject of material adverse publicity and that
material adverse change or material adverse publicity will have a
material adverse impact upon the business and operations of the
Insurance Company, (2) the Insurance Company shall notify the Company,
Adviser and Xxxxx Distributors in writing of the determination and its
intent to terminate the Agreement, and (3) after considering the
actions taken by the Company, Adviser and/or Xxxxx Distributors and
any other changes in circumstances since the giving of such a notice,
the determination shall continue to apply on the sixtieth (60th) day
following the giving of the notice, which sixtieth day shall be the
effective date of termination.
(k) At the option of any party upon another party's failure to cure a
material breach of any provision of this Agreement within 30 days
after written notice thereof.
24
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3. No termination of this Agreement shall be effective unless and until
the party terminating this Agreement gives prior written notice to all other
parties to this Agreement of its intent to terminate, which notice shall set
forth the basis for the termination. Furthermore,
(a) In the event that any termination is based upon the provisions of
Article VII, or the provision of Section 10.1(a), 10.1(i) or 10.1(j) of
this Agreement, the prior written notice shall be given in advance of the
effective date of termination as required by those provisions; and
(b) in the event that any termination is based upon the provisions of
Section 10.1(c) or 10.1(d) of this Agreement, the prior written notice
shall be given at least 60 days before the effective date of termination;
provided that such termination will not be effective If the circumstances
giving rise to the notice are cured prior to the termination date and
provided that any party may terminate this Agreement immediately with
respect to any Fund if such party reasonably determines that continuing to
perform under this Agreement would violate any state or federal law in a
material respect.
10.4. Notwithstanding any termination of this Agreement, subject to Section
1.2 of this Agreement and for so long as the Company continues to exist, the
Company and Xxxxx Distributors shall at the option of the Insurance Company,
continue to make available additional shares of the Company pursuant to the
terms and conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement ("Existing Contracts").
Specifically, without limitation, the owners of the Existing Contracts shall be
permitted to reallocate investments from any other investment option to any
Fund, redeem investments in the Company and/or invest in the Company upon the
making of additional purchase payments under the Existing Contracts. The parties
agree that this Section 10.4 shall not apply to any terminations under Article
VII and the effect of Article VII terminations shall be governed by Article VII
of this Agreement.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of that other party set forth below or at
such other address as the other party may from time to time specify in writing.
If to the Company:
0000 Xxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxx, Vice President
If the to Adviser:
If to the Insurance Company:
Xxxxxx Xxxxx
24
Senior Vice President
Funds Management Group
Equitable Life Insurance Company
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 000000
cc: Xxxxxxxxx Xxxxxxxx
Vice President
Controllers
Equitable Life Insurance Company
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 000000
If to Xxxxx Distributors:
0000 Xxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxx, Vice President
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 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 without the express written consent
of the affected party unless and until that information 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 the Agreement shall
not be affected thereby.
12.5. 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 those authorities
reasonable access to its books and records in connection with any lawful
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
25
12.6. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.7. This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns; provided, that no party may
assign this Agreement without the prior written consent of the others.
12.8. Except as otherwise expressly provided in this Agreement, neither the
Company, Adviser nor Xxxxx Distributors, nor any affiliate thereof shall use any
trademark, trade name, service xxxx or logo of the Insurance Company or any of
its affiliates, or any variation of any such trademark, trade name, service xxxx
or logo, without the Insurance Company's prior written consent, the granting of
which shall be at the Insurance Company's sole option.
12.9. Except as otherwise expressly provided in this Agreement, neither the
Insurance Company nor any affiliate thereof shall use any trademark, trade name,
service xxxx or logo of the Company or Xxxxx Distributors, or any affiliates
thereof, or any variation of any such trademark, trade name, service xxxx or
logo, without the Company's or Xxxxx Distributor's prior written consent, the
granting of which shall be at the Company's and Xxxxx Distributor's sole option.
12.10. AGREEMENT TO ARBITRATE. Each of the parties agrees that any
controversy or claim arising out of or relating to this Agreement, or the breach
thereof, shall be settled by arbitration in accordance with the Code of
Arbitration Procedure of the National Association of Securities Dealers (or, in
the event that the National Association of Securities Dealers refuses to accept
jurisdiction, the Commercial Arbitration Rules of the American Arbitration
Association), and judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction 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
as of the date specified below.
EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
("Insurance Company")
By its authorized officer,
By:_______________________________
Title:_____________________
Date:_____________________
Xxxxx Selected Advisers, L.P.
("Adviser")
by Xxxxx Investments, LLC (General Partner)
By its authorized officer,
26
By:_______________________________
Title:_____________________
Date:_____________________
XXXXX VARIABLE ACCOUNT FUND
("Company")
By its authorized officer,
By:________________________________
Title: Vice President
Date:_______________________
XXXXX DISTRIBUTORS, LLC
("Xxxxx Distributors")
By its authorized officer,
By:_________________________________
Title: Vice President
Date:_______________________
27
SCHEDULE A
ACCOUNTS
NAME OF ACCOUNT DATE OF RESOLUTION OF
INSURANCE COMPANY'S
BOARD WHICH ESTABLISHED
THE ACCOUNT
Separate Account FP of the
Equitable Life Assurance Society of the US Inception Date - 4/19/85
28
SCHEDULE B
CONTRACTS
Paramount Life
29
SCHEDULE C
TO
PARTICIPATION AGREEMENT
NAME OF FUND
------------
Xxxxx Value Portfolio
30
SCHEDULE D
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities
for the handling of proxies relating to the Company by Xxxxx Distributors, the
Company and the Insurance Company. The defined terms herein shall have the
meanings assigned in the Participation Agreement except that the term "Insurance
Company" shall also include the department or third party assigned by the
Insurance Company to perform the steps delineated below.
1. The number of proxy proposals is given to the Insurance Company by Xxxxx
Distributors as early as possible before the date set by the Company for
the shareholder meeting to facilitate the establishment of tabulation
procedures. At this time Xxxxx Distributors will inform the Insurance
Company of the Record, Mailing and Meeting dates. This will be done
verbally, with confirmation following promptly in writing, approximately
two months before meeting.
2. Promptly after the Record Date, the Insurance 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 of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Insurance Company will use its best efforts to call in
the number of Customers to Xxxxx Distributors, as soon as possible, but no later
than one week after the Record Date.
3. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Insurance Company by the Company. The Insurance Company, at
its expense, shall produce and personalize the Voting Instruction cards.
Xxxxx Distributors 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 Company).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
4. During this time, Xxxxx Distributors will develop, produce, and the Company
will pay for the Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to Insurance Company
for insertion into envelopes (envelopes and return envelopes are provided
and paid for by the Insurance Company). Contents of envelope sent to
customers by Insurance Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. Return envelope (postage pre-paid by Insurance Company) addressed
to the Insurance Company or its tabulation agent
31
d. "Urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Contract owners to vote as
quickly as possible and that their vote is important. One copy
will be supplied by the Company.)
e. Cover letter - optional, supplied by Insurance Company and
reviewed and approved in advance by Xxxxx Distributors.
5. The above contents should be received by the Insurance Company
approximately 3-5 business days before mail date, and in no event later
than 3 business days before mail date. Individual in charge at Insurance
Company reviews and approves the contents of the mailing package to ensure
correctness and completeness. Copy of this approval sent to Xxxxx
Distributors.
6. Package mailed by the Insurance Company.
* The Company must allow at least a 15-day solicitation time to the
Insurance 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.
7. 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.
8. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to the Customer with an explanatory letter, a
new Card and return envelope. The mutilated or illegible Card is
disregarded and considered to be not received for purposes of vote
tabulation. Such mutilated or illegible Cards are "hand verified," i.e.,
examined as to why they did not complete the system. Any questions on those
Cards are usually remedied individually.
9. 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.
10. The actual tabulation of votes is done in units and then converted to
shares. (It is very important that the Company receives the tabulations
stated in terms of a percentage and the number of shares.) Xxxxx
Distributors must review and approve tabulation format.
11. Final tabulation in shares is verbally given by the Insurance Company to
Xxxxx Distributors on the day of the meeting not later than 1:00 p.m.
Eastern Time. Xxxxx Distributors may request an earlier deadline if
required to calculate the vote in time for the meeting.
12. A Certificate of Mailing and Authorization to Vote Shares will be required
from the Insurance Company as well as an original copy of the final vote.
Xxxxx Distributors will provide a standard form for each Certification.
13. The Insurance 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,
32
regulatory, or accounting purposes, Xxxxx Distributors will be permitted
reasonable access to such Cards.
14. All approvals and "signing-off" may be done orally, but must always be
followed up in writing. For this purpose, signatures transmitted by
facsimile will be acceptable.
33
