PARTICIPATION AGREEMENT
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Among
THE XXXXX AMERICAN FUND
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XXXX XXXXX & COMPANY, INCORPORATED
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and
AMERITAS VARIABLE LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this 28th day of April,
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1992 by and among AMERITAS VARIABLE LIFE INSURANCE COMPANY, (hereinafter the
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"Company"), a Nebraska corporation, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule C hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"), and the Xxxxx American Fund, an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts (hereinafter the
"Fund") and Xxxx Xxxxx & Company, Incorporated (hereinafter the "Underwriter").
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
substantially similar to this Agreement (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended, ("1940 Act") and
its shares are registered under the Securities Act of 1933, as amended
(hereinafter the "1933 Act") ; and
WHEREAS, Xxxx Xxxxx Management, Inc. (the "Adviser") is duly registered
as an investment adviser under the Investment Advisers Act and any applicable
state securities law; and
WHEREAS, the Company has registered or will register certain variable
life and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company on the date shown for such Account on Schedule C hereto, to set aside
and invest assets attributable to the aforesaid variable life and annuity
contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities & Exchange Commission under the Securities Exchange Act of 1934, as
amended, (hereinafter the "1934 Act"), and is a member in good standing of the
National Association of Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
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1.1. The Underwriter agrees to sell to the Company those shares of
the Fund which each Account orders, executing such orders on a daily basis at
the net asset value next computed
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after receipt by the Fund or its designee of the order for the shares of the
Fund. For purposes of this Section 1.1, the Company shall be the designee of the
Fund for receipt of such orders from each Account and receipt by such designee
shall constitute receipt by the Fund; provided that in the normal course of
business the Fund receives notice of such order by 10:00 a.m. New York time on
the next following Business Day. The Fund may, at its discretion, accept orders
to purchase until 3:00 p.m. New York time. "Business Day" shall mean any day on
which the New York Stock Exchange is open for trading and on which the Fund
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value
pursuant to rules of the Securities and Exchange Commission and the Fund shall
use reasonable efforts to calculate such net asset value on each day which the
New York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Trustees") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Trustees
acting in good faith and in light of their fiduciary duties under Federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts or to
the Underwriter. No shares of any Portfolio will be sold to the general public.
1.4. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
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Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption by 10:00 a.m. on the next following Business Day. The
Fund may, at its discretion, accept orders to redeem until 3:00 p.m. New York
time.
1.5. The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available under the variable life and variable annuity contracts with the form
number(s) which are listed on Schedule A attached hereto and incorporated herein
by this reference, as such Schedule A may be amended from time to time hereafter
by mutual written agreement of all the parties hereto, (the "contracts") shall
be invested in the Fund, in such other Funds advised by the Adviser as may be
mutually agreed to in writing by the parties hereto, or in the Company's general
account, provided that such amounts may also be invested in investment companies
other than the Fund.
1.6. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. The Fund shall pay for Fund shares redeemed on the next
business day after the order to redeem is made in accordance with the provisions
of Section 1.4 hereof. Payment shall be in Federal Funds transmitted by wire.
For purposes of Section 2.9 and 2.10, upon receipt by the Fund or the Company of
the Federal Funds so wired, such funds shall cease to be the responsibility of,
respectively, the Company or the Fund and shall become the responsibility of
respectively the Fund or the Company. It is agreed that the Company and the Fund
may net the money wire transfers necessary to affect its orders to purchase and
redeem units.
1.7. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be
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recorded in an appropriate title for each Account or the appropriate subaccount
of each Account.
1.8. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the company of any income dividends or
capital gain distributions payable on the Funds' shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio.
The Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.9. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 7 p.m. New York
time.
ARTICLE II. Representations and Warranties
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2.1. The Company represents and warrants that the Contracts 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
state insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established each
Account prior to any issuance or sale thereof as a segregated asset account
under Section 44-402.01 of the Nebraska Insurance Code and has registered or,
prior to any issuance or sale of the Contracts, will register each Account as a
unit investment trust in accordance with the provisions of the 1940 Act to serve
as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933
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Act, duly authorized for issuance and sold in compliance with the laws of the
State of Nebraska and all applicable Federal and State Securities Laws and that
the Fund is and shall remain registered under the 0000 Xxx. The Fund shall amend
the Registration Statement for its shares under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of its
shares. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated as
endowment, annuity or life insurance contracts, under applicable provisions of
the Code and that it will make every effort to maintain such treatment and that
it will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Nebraska and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Nebraska to the extent required to perform this
Agreement.
2.6. The Underwriter represents and warrants that it is in good
standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will
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sell and distribute the Fund shares in accordance with the laws of the State of
Nebraska and all applicable State and Federal Securities Laws, including without
limitation the 1933 Act, the 1934 Act, and the 0000 Xxx.
2.7. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.8. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
Federal and State Securities Laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of Nebraska and any applicable state and federal securities laws to
the extent required to perform this Agreement.
2.9. The Fund and Underwriter represent and warrant that all of their
Trustees, directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimum coverage as required currently by Section l7g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.10. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Fund, in an amount not less than the minimal coverage as required currently
by Section 270.17g-1 of the 1940 Act or related provisions as may be promulgated
from time to time. The aforesaid Bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
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ARTICLE III. Prospectuses and Proxy Statements; Voting
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3.1. The Underwriter shall provide the Company (at the Company's
expense, except as set out in Article V) with as many copies of the Fund's
current prospectus as the Company may reasonably request. If requested by the
Company in lieu thereof, the Fund shall Provide such documentation (including a
final copy of the new prospectus as set in type at the Fund's expense) and other
assistance as is reasonably necessary in order for the Company once each year
(or more frequently if the prospectus for the Fund is amended) to have the
prospectus for the Contracts and the Fund's prospectus printed together in one
document (such printing to be at the Company's expense, except as set out in
Article V).
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter (or in the Fund's
discretion, the Prospectus shall state that such Statement is available from the
Fund), and the Underwriter (or the Fund), at its expense, shall print and
provide such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such Statement.
3.3. The Fund, at its expense, shall provide the Company with copies of
its proxy material, reports to stockholders and other communications to
stockholders in such quantity as the Company shall reasonably require for
distributing to Contract owner's.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
portfolio for which instructions have been received: so
long as and to the extent that the Securities and Exchange
Commission continues to interpret the 1940 Act to require
pass-through voting privileges for variable contract owners.
The Company
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reserves the right to vote Fund shares held in any
segregated asset account in its own right, to the extent
permitted by law. The Company shall be responsible for
assuring that each of their separate accounts participating
in the Fund calculates voting privileges in a manner
consistent with the standards set forth on Schedule B
attached hereto and incorporated herein by this reference.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16 (a) and, if and when applicable, 16 (b). Further, the Fund will act
in accordance with the Securities and Exchange commission's interpretation of
the requirements of Section 16(a) with respect to periodic elections of trustees
and with whatever rules the Commission and/or the state of organization may
promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
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4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, concurrent with its submission to the NASD. No such material shall be
used if the Fund or its designee makes a material objection to such use within
three Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the
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Fund or its designee or by the Underwriter, except with the permission of the
Fund or the Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named concurrent with its submission to the NASD. No
such material shall be used if the Company or its designee makes a material
objection to such use within three Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement, and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, sales literature and other promotional materials
originated by the Fund or Underwriter, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate to the
Fund or its shares, contemporaneously with the filing of such document with the
Securities and Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to
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the Contracts or each Account, contemporaneously with the filing of such
document with the Securities and Exchange Commission.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboard, motion pictures, or other public media), sales
literature (i.e. any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
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5.1. The Fund and Underwriter shall pay no fee or other compensation to
the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
Underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund. Currently,
no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
Federal and State laws prior to their sale. The Fund shall bear the expenses for
the cost of
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registration and qualification of the Fund's shares, preparation and filing of
the Fund's prospectus and registration statement, proxy materials and reports,
setting the prospectus in type, setting in type and printing the proxy materials
and reports to shareholders (including the costs of printing a prospectus that
constitutes an annual report), the preparation of all statements and notices
required by any Federal or State law, all taxes on the issuance or transfer of
the Fund's shares.
5.3. The Company shall bear the expenses of printing and distributing
the Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners
except as follows:
(a) The Fund will pay the cost of printing, distribution,
calculation and tabulation of proxies for the second
and all subsequent proxy solicitations, each calendar
year;
(b) In the event that the Fund terminates this Contract
under 10.1(a) or the Company terminates the Contract
under 10.1(b), (d), (f), (g), (h), (j) the Fund will:
(i) reimburse the Company for the Company's cost in
connection with distributing prospectuses, periodic
reports, and any other information or documents to
policyholders of Contracts in effect on the effective
date of the termination as set out in Article 10.4;
(ii) pay the cost of printing, distribution and
tabulation of proxy solicitation to policyowners of
Contracts in effect on the effective date of the
termination as set out in Article 10.4.
ARTICLE VI. Diversification
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6.1. The Fund will at all times invest money from the Contracts in such
a manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the scope
of the foregoing, the Fund will at all times comply with Section 817(h)
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of the Code and Treasury Regulation Section 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations.
ARTICLE VII. Potential Conflicts
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7.1. The Board of Trustees of the Fund (the "Board") will monitor the
Fund for the existence of any material irreconcilable conflict between the
interests of the contract owners of all separate accounts investing in the Fund.
An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance contract owners; or (f) a decision
by an insurer to disregard the voting instructions of contract owners. The Board
shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material
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irreconcilable conflict exists, the Company and other Participating Insurance
companies shall, at their expense and to the extent reasonably practicable (as
determined by a majority of the disinterested trustees), take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict, up to and
including: (1), withdrawing the assets allocable to some or all of the separate
accounts from the Fund or any Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another Portfolio of
the Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected Contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., annuity contract owners,
life insurance 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 contract owners the option of making such a change; and
(2), establishing a new registered management investment company or managed
separate account.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the Account's investment in
the Fund and terminate this Agreement; provided, however that such withdrawal
and termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Any such withdrawal and termination must
take place within six (6) months after the Fund gives written notice that this
provision is being implemented, and until the end of that six month period the
Underwriter and Fund shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment
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in the Fund and terminate this Agreement within six months after the Board
informs the company in writing that it has determined that such decision has
created an irreconcilable material conflict; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Until the end of the foregoing six month
period, the Underwriter and Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
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
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and
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Rule 6e-3, as adopted, to the extent such 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 such
Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
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8.1. Indemnification By The Company
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8.1(a). The Company agrees to indemnify and hold harmless the
Fund and each of its Trustees and officers, the Underwriter, and each
person if any, who controls the Fund within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of this Section 8.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written
consent of the Company) or litigation (including legal and other
expenses) , to which the Indemnified Parties may become subject under
any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the Registration Statement or prospectus for the Contracts or
contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
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omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the
Fund for use in the Registration Statement or prospectus for
the Contracts or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations contained in the Registration Statement,
prospectus or sales literature of the Fund not supplied by the
Company, or persons under its control) or wrongful conduct
of the Company or persons under its control, with respect
to the sale or distribution of the Contracts or Fund Shares;
or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature of the Fund or any
amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading if such a statement or omission was made in
reliance upon information furnished to the Fund by or on
behalf of the Company: or (iv) arise as a result of any
failure by the Company to provide the services and furnish the
materials under the terms of this Agreement; or (v) arise out
of or result from any material breach of any representation
and/or warranty made by the Company in this Agreement or arise
out of or result from any other material breach of this
Agreement by the Company, as limited by and in accordance with
the provisions of Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise
be subject by reason of such
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Indemnified Party's willful misfeasance, bad faith, or gross negligence
in the performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations or duties
under this Agreement or to the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Company in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall
have been served upon such Indemnified Party (or after such Indemnified
Party shall have received notice of such service on any designated
agent), but failure to notify the Company of any such claim shall not
relieve the Company from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Company shall be entitled
to participate, at its own expense, in the defense of such action. The
Company also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice
from the Company to such party of the Company's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses
of any additional counsel retained by it, and the Company will not be
liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.1(d). The Indemnified Parties will promptly notify the
Company of the commencement of any litigation or proceedings against
them in connection with the issuance or sale of the Fund Shares or the
Contracts or the operation of the Fund.
-18-
8.2. Indemnification by the Underwriter
----------------------------------
8.2 (a). The Underwriter agrees to indemnify and hold harmless
the Company and each of its directors and officers and each person, if
any, who controls the Company within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Underwriter) or litigation (including legal and other expenses) to
which the Indemnified Parties may become subject under any statute, at
common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement or prospectus or sales literature of
the Fund (or any amendment or supplement to any of the
foregoing), or Arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to the Underwriter or Fund by or on behalf of the
Company for use in the Registration Statement or prospectus
for the Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Contracts or Fund shares: or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement,
-19-
prospectus or sales literature for the Contracts not supplied
by the Underwriter or persons under its control) or wrongful
conduct of the Fund, Adviser or Underwriter or persons under
their control, with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statement or statements therein not misleading, if such
statement or omission was made in reliance upon information
furnished to the Company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of
this Agreement (including a failure, whether unintentional
or in good faith or otherwise, to comply with the
diversification requirements specified in Article VI of this
Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter; as limited by
and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise
be subject by reason of such Indemnified Party's willful misfeasance,
bad faith, or gross negligence in the performance of such Indemnified
Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations and duties under this Agreement or to each
Company or the Account, whichever is applicable.
-20-
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Underwriter in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim
shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Underwriter of any such
claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case
any such action is brought against the Indemnified Parties, the
Underwriter will be entitled to participate, at its own expense, in the
defense thereof. The Underwriter also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Underwriter to such party of the
Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party
under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter
of the commencement of any litigation or proceedings against it or any
of its officers or directors in connection with the issuance or sale of
the Contracts or the operation of each Account.
8.3. Indemnification By the Fund
---------------------------
8.3(a). The Fund agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any,
who controls the Company within the meaning
-21-
of Section 15 of the 1933 Act (collectively, the "Indemnified Parties"
for purposes of this Section 8.3) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the
written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any
statute, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or
settlements result from the gross negligence, bad faith or willful
misconduct of the Board of Trustees or any member thereof, are related
to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to Provide
the services and furnish the materials under the terms of this
Agreement (including a failure to comply with the
diversification requirements specified in Article VI of this
Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund; as limited by and in
accordance with the provisions of Sections 8.3(b) and 8.3(c)
hereof.
8.3(b). The Fund shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or
to the Company, the Fund, the Underwriter or each Account, whichever is
applicable.
8.3(c). The Fund shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Fund in writing within a reasonable
-22-
time after the summons or other first legal process giving information
of the nature of the claim shall have been served upon such Indemnified
Party (or after such Indemnified Party shall have received notice of
such service on any designated agent) , but failure to notify the Fund
of any such claim shall not relieve the Fund from any liability which
it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In
case any such action is brought against the Indemnified Parties, the
Fund will be entitled to participate, at its own expense, in the
defense thereof. The Fund also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the Fund
will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.3(d). The Company and the Underwriter agree promptly to
notify the Fund of the commencement of any litigation or proceedings
against it or any of its respective officers or directors in connection
with this Agreement, the issuance or sale of the Contracts, with
respect to the operation of either Account, or the sale or acquisition
of shares of the Fund.
ARTICLE IX. Applicable Law
--------------
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Nebraska.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those
-23-
statutes, rules and regulations as the Securities and Exchange Commission may
grant (including, but not limited to, the Shared Funding Exemptive Order) and
the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. Termination
-----------
10.1. This Agreement shall terminate:
(a) at the option of any party upon 180 days advance written
notice to the other parties; provided, however such notice
shall not be given earlier than one year following the date of
this Agreement; or
(b) at the option of the Company to the extent that shares
of Portfolios are not reasonably available to meet the
requirements of the Contracts as determined by the Company,
provided however, that such termination shall apply only to
the Portfolio(s) not reasonably available. Prompt notice
of the election to terminate for such cause shall be
furnished by the Company; or
(c) at the option of the Fund in the event that formal
administrative proceedings are instituted against the Company
by the National Association of Securities Dealers, Inc.
("NASD"), the Securities and Exchange Commission, the
Insurance Commissioner or any other regulatory body regarding
the Company's duties under this Agreement or related to the
sale of the Contracts, with respect to the operation of any
Account, or the purchase of the Fund shares, provided,
however, that the Fund determines in its sole judgment
exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the
ability of the Company to perform its obligations under this
Agreement; or
-24-
(d) at the option of the company in the event that formal
administrative proceedings are instituted against the Fund or
Underwriter by the NASD, the Securities and Exchange Commission, or any
state securities or insurance department or any other regulatory body,
provided, however, that the Company determines in its sole judgment
exercised in good faith, that any such administrative proceedings will
have a material adverse effect upon the ability of the Fund or
Underwriter to perform its obligations under this Agreement; or
(e) with respect to any Account, upon requisite vote of the
Contract owners having an interest in such Account (or any
subaccount) to substitute the shares of another investment
company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Contracts for which those
Portfolio shares had been selected to serve as the underlying
investment media. The Company will give 30 days' prior written
notice to the Fund of the date of any proposed vote to replace
the Fund's shares; or
(f) at the option of the Company, in the event any of the
Fund's shares are not registered, issued or sold in accordance
with applicable state and/or federal law or such law precludes
the use of such shares as the underlying investment media of
the Contracts issued or to be issued by the Company; or
(g) at the option of the Company, if the Fund ceases to
qualify as a Regulated Investment Company under Subchapter
M of the Code or under any successor or similar provision,
or if the Company reasonably believes that the Fund may fail
to so qualify; or
(h) at the option of the Company, if the Fund fails to meet
the diversification requirements specified in Article VI
hereof; or
(i) at the option of either the Fund or the Underwriter, if
(1) the Fund or the Underwriter, respectively, shall
determine, in their sole judgment reasonably exercised
-25-
in good faith, that the Company has suffered a material
adverse change in its business or financial condition or is
the subject of material adverse publicity and such material
adverse change or material adverse publicity will have a
material adverse impact upon the business and operations of
either the Fund or the Underwriter, (2) the Fund or the
Underwriter shall notify the Company in writing of such
determination and its intent to terminate this Agreement, and
(3) after considering the actions taken by the Company and any
other changes in circumstances since the giving of such
notice, such determination of the Fund or the Underwriter
shall continue to apply on the sixtieth (60th) day following
the giving of such notice, which sixtieth day shall be the
effective date of termination; or
(j) at the option of the Company, if (1) the Company shall
determine, in its sole judgment reasonably exercised in good
faith, that either the Fund or the Underwriter has suffered a
material adverse change in its business or financial
condition or is the subject of material adverse publicity and
such material adverse change or material adverse publicity
will have a material adverse impact upon the business and
operations of the Company, (2) the Company shall notify the
Fund and the Underwriter in writing of such determination
and its intent to terminate the Agreement, and (3) after
considering the actions taken by the Fund and/or the
Underwriter and any other changes in circumstances since the
giving of such notice, such determination shall continue to
apply on the sixtieth (60th) day following the giving of such
notice, which sixtieth day shall be the effective date of
termination; or
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3. Notice Requirement. No termination of this Agreement shall be
------------------
effective unless and until the party terminating this
-26-
Agreement gives prior written notice to all other parties to this Agreement
of its intent to terminate which notice shall set forth the basis for such
termination. Furthermore,
(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, such prior
written notice shall be given in advance of the effective date
of termination as required by such provisions; and
(b) in the event that any termination is based upon the
provisions of Section 10.1(c) or 10.1(d) of this Agreement,
such prior written notice shall be given at least ninety (90)
days before the effective date of termination.
10.4. Effect of Termination. Notwithstanding any termination of this
---------------------
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.4 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.5. The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in either Account) except (i) as necessary to implement Contract Owner initiated
transactions, or (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally Required Redemption"). Upon request, they will promptly
furnish to the Fund and the Underwriter the
-27-
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or the
Underwriter 90 days notice of its intention to do so.
ARTICLE XI. Notices
-------
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
00 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Treasurer
If to the Company:
5900 "0" Street, X.X. Xxx 00000
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxx
If to the Underwriter:
00 Xxxxxxxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
Attention: Treasurer
ARTICLE XII. Miscellaneous
-------------
12.1 All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Trustees, shareholders, officers, or agents assume any personal liability for
obligations entered into on behalf of the Fund.
-28-
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby. Notwithstanding the generality of the
foregoing, each party hereto further agrees to furnish the California Insurance
Commissioner with any information or reports in connection with services
provided under this Agreement which such Commissioner may request in order to
ascertain whether the variable life insurance operations of the Company are
being conducted in a manner consistent with the California Variable Life
Insurance Regulations and any other applicable law or regulations.
12.7 The Fund and Underwriter agree that to the extent any advisory or
other fees received by the Fund, the Underwriter or the Adviser are determined
to be unlawful in legal or
-29-
administrative proceedings under the 1973 NAIC Model variable life insurance
regulation in the States of California, Colorado, Maryland or Michigan, the
Underwriter shall indemnify and reimburse the Company for any out of pocket
expenses and actual damages the Company has incurred as a result of any such
proceeding; provided however that the provisions of Section 8.2 (b) of this and
8.2(c) shall apply to such indemnification and reimbursement obligation. Such
indemnification and reimbursement obligation shall be in addition to any other
indemnification and reimbursement obligations of the Fund and/or the Underwriter
under this Agreement.
12.8. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.9 The parties specifically agree that this Contract is not an
exclusive Contract between the parties.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Company:
AMERITAS VARIABLE LIFE INSURANCE COMPANY
By its authorized officer,
SEAL By: /s/ Xxxxxxxx X. Xxxx
-------------------------
Title: President
-------------------------
Date: May 1, 1992
-------------------------
-30-
Fund:
XXXXX AMERICAN FUND
By its authorized officer,
SEAL By: /s/ Xxxxxxx Xxxx
---------------------
Title: Treasurer
---------------------
Date: 4/28/92
---------------------
Underwriter:
XXXX XXXXX & COMPANY, INCORPORATED
By its authorized officer,
By: /s/ Xxxxxxx Xxxx
-----------------------
Title: Treasurer
-----------------------
Date: 4/28/92
-----------------------
-31-
Schedule A
----------
Contracts
---------
1. Contract Form 4001, 4010, 4778, 4782
-32-
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the
Underwriter as early as possible before the date set by the Fund for
the shareholder meeting (the "Record Date") to facilitate the
establishment of tabulation procedures. At this time the Underwriter
will inform the Company of the Record, Mailing and Meeting dates. This
will be done verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape
run", or other activity, which will generate the names, addresses and
number of units/shares which are attributed to each
contractowner/policyholder (the "Customer") as of the Record Date.
Allowance should be made for account adjustments made after this date
that could affect the status of the Customers' accounts as of the
Record Date.
Note: The number of voting instruction cards is determined by the
activities described in Step #2. The Company will use its best
efforts to call in the number of Customers to the Fund, as
soon as possible, but no later than two weeks after the Record
Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt
-33-
of a proxy statement. Underwriter will provide at least one copy of
the last Annual Report to the Company.
4. The Voting Instruction Cards ("Cards" or "Card") are produced and paid
for by the Fund and sent to Company. (This and related steps may occur
later in the chronological process due to possible uncertainties
relating to the proposals.)
5. Company will, at its expense, print account information on the Cards.
6. Allow approximately 2-4 business days for printing information on the
Cards. Information commonly found on the Cards includes:
a. Name (legal name as found on account registration)
b. Address
c. Fund or account number
d. Coding to state number of shared/unites (depends upon tabulation
process used by the computer system, i.e. whether or not system
knows number of shares held just by "reading" the account number)
e. Individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
Note: When the Cards are printed by the Fund, each Card is
numbered individually to guard against potential Card/vote
duplication.
7. During this time, the Legal Department of the Underwriter or its
affiliate will develop, product, and the Fund will pay for the Notice
of Proxy and the Proxy Statement (one document). Printed and folded
notices and statements will be sent to Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by
the Insurance Company). Contents of envelope sent to Customers by
Company will include:
-34-
a. Voting Instruction Card
b. Proxy notice and statement (one document)
c. Return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "Urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly as
possible and that their vote is important. one copy will be
supplied by the Fund.)
e. Cover letter - optional, supplied by Company and reviewed and
approved in advance by the Fund's legal department.
8. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to the Fund's legal
department.
9. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended,
but not necessary, to receive a proper response percentage.)
Solicitation time is calculated as days from (but not
including) the meeting, counting backwards.
** If the Customers were actually the shareholders, at least 50%
of the outstanding shares must be represented and 66 2/3% of
that 50% must have voted affirmatively on the proposals to
have an effective vote. However, since the Company is the
-------
shareholder, the Customers' votes will (except in certain
limited circumstances) be used to dictate how the Company will
vote.
10. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending
-35-
on process used. An often used procedure is to sort Cards on arrival
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
* Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal
procedure and has not been required by Fidelity in the past.
11. Signatures on Card check against legal name on account registration
which was printed on the Card.
* This verifies whether an individual has signed correctly for
self with the same name as is on the account registration.
For example:
If the account registration is under "Xxxxxxx X. Xxxxx,
Trustee." then that is the exact legal name to be printed
on the Card and is the signature needed on the Card.
12. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter, a new Card and return envelope. the mutilated or illegible Card
is disregarded and considered to be not received for purposes of vote
------------
tabulation. Any Cards that have "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified." i.e., examined as to
why they did not complete the system. Any questions on those Cards are
usually remedied individually.
13. There are various control procedures used to ensure proper tabulation
of votes an 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
-36-
vote is progressing may be calculated. If the initial
estimates and the actual vote do not coincide, then an
internal audit of that vote should occur. This may entail a
recount.
14. The actual tabulation of votes is done in unites and in shares. (It is
very important that the Fund receives the tabulations states in terms
of a percentage and the number of shares.)
------
15. Final tabulation in shares is verbally given by the Company to the
Legal Department on the morning of the meeting by 10:00 a.m. Boston
time.
16. Vote is verified by the Company and is sent to the Fund's legal
department.
17. Company then votes its proxy in accordance with the votes received from
the Customers the morning of the meeting (except in limited
circumstances as may be otherwise required by law). A letter
documenting the Company's vote is supplied by the Fund's legal
department and is sent to officer of company for his signature. This
letter is normally sent after the meeting has taken place.
18. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will
be permitted reasonable access to such Cards.
19. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
20. During tabulation procedures, the Fund and Company determine if a
resolicitation is required and what form that resolicitation should
take, whether it should be by a
-37-
mailing, or by recorded telephone line. A resolicitation is
considered when the vote response is slow and it appears that
not enough votes would be received by the meeting date. The
meeting could be adjourned to leave enough time for the
resolicitation.
A determination is made by the Company and the Fund to find the most cost
effective candidates for resolicitation. These are Customers who have not yet
voted, but whose balances are large enough to bring in the required vote with
minimal costs.
a. By mail: The Fund's legal department amends the voting instruction
cards, if necessary, and writes a resolicitation letter. The Fund
supplies these to the Company. The Company generates a mailing list
etc., as per step 2 onward.
b. By phone: Rarely used. This must be done on a recorded line. The Fund
will supply the necessary procedures and script if a phone
resolicitation were to be required.
-38-
