FUND PARTICIPATION AGREEMENT
AMONG
THE MERGER FUND VL
WESTCHESTER CAPITAL MANAGEMENT, INC.
AND
THE TRAVELERS INSURANCE COMPANY
THIS AGREEMENT, made and entered into this 1st day of August 2003 (the
"Agreement") by and among The Travelers Insurance Company, a corporation
organized under the laws of the State of Connecticut (the "Company"), on behalf
of itself and each separate account of the Company named in Schedule A to this
Agreement, as may be amended from time to time (each account referred to as the
"Account" and collectively as the "Accounts"); The Merger Fund VL, an open-end
management investment company organized as a statutory trust under the laws of
the State of Delaware (the "Fund"); and Westchester Capital Management, Inc., a
corporation organized under the laws of the State of New York and investment
adviser to the Fund (the "Adviser").
WHEREAS, the Fund engages in business as an open-end management investment
company and was established for the purpose of serving as the investment vehicle
for separate accounts established for variable life insurance contracts and
variable annuity contracts to be offered by insurance companies which have
entered into participation agreements substantially similar to this Agreement
(the "Participating Insurance Companies"); and
WHEREAS, beneficial interests in the Fund may be divided into several series of
shares, each representing the interest in a particular managed portfolio of
securities and other assets (the "Portfolios"); and
WHEREAS, the Company, as depositor, has established the Accounts to serve as
investment vehicles for certain variable annuity contracts and variable life
insurance policies and funding agreements offered by the Company (the
"Contracts"); and
WHEREAS, the Accounts are duly organized, validly existing segregated asset
accounts, established pursuant to the authority of the Board of Directors of the
Company under the insurance laws of the State of Connecticut, to set aside and
invest assets attributable to the Contracts; and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase shares of the Portfolios named in Schedule B, as
such schedule may be amended from time to time (the "Designated Portfolios") on
behalf of the Accounts to fund the Contracts;
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NOW, THEREFORE, in consideration of their mutual promises, the Company, the Fund
and the Adviser agree as follows:
ARTICLE I - SALE OF FUND SHARES
1.1. The Fund agrees to sell to the Company those shares of the Designated
Portfolios which each Account orders, executing such orders on a daily basis at
the net asset value (and with no sales charges) next computed after receipt and
acceptance by the Fund or its designee of the order for the shares of the Fund.
For purposes of this Section 1.1, the Company will be the designee of the Fund
for receipt of such orders from each Account and receipt by such designee will
constitute receipt by the Fund; provided that the Fund receives notice of such
order by 10:00 a.m. Eastern Time on the next following business day. "Business
Day" will mean any day on which the New York Stock Exchange is open for trading
and on which the Fund calculates its net asset value pursuant to the rules of
the Securities and Exchange Commission (the "Commission"). Notwithstanding the
foregoing, Fund portfolios in existence now or that may be established in the
future and not listed on Schedule B will be made available to the Company only
as the Adviser may so provide. The Fund may net the notice of redemptions it
receives from the Company under Section 1.3 of this Agreement against the notice
of purchases it receives from the Company under this Section 1.1.
1.2. The Company will pay for Fund shares on the same Business Day the Fund
receives notice of an order to purchase Fund shares in accordance with Section
1.1. Payment will be made in federal funds transmitted by wire. Upon receipt by
the Fund of the payment, such funds shall cease to be the responsibility of the
Company and shall become the responsibility of the Fund.
1.3. The Fund agrees to redeem for cash, upon 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 and
acceptance by the Fund or its agent of the request for redemption. For purposes
of this Section 1.3, the Company will be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee will
constitute receipt by the Fund; provided the Fund receives notice of such
requests for redemption by 10:00 a.m. Eastern Time on the next following
Business Day. Redemptions will be processed and payments will be made normally
within one day after receipt of such redemption orders by the Company as agent
for the Fund. Payment will be made in federal funds transmitted by wire to the
Company's account as designated by the Company in writing from time to time. The
Fund may suspend redemptions, if permitted by the Investment Company Act of
1940, as amended (the" 1940 Act"), for any period during which the New York
Stock Exchange is closed or during which trading is restricted by the Commission
or the Commission declares that an emergency exists. Redemptions may also be
suspended during other periods permitted by the Commission for the protection of
the Fund's shareholders. The Fund will not bear any responsibility whatsoever
for the proper disbursement or crediting of redemption proceeds; the Company
alone will be responsible for such action. The Fund may net the notice of
purchases it receives from the Company under Section 1.1 of this Agreement
against the notice of redemptions it receives from the Company under this
Section 1.3.
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1.4. The Fund agrees to make shares of the Designated Portfolios available
continuously for purchase at the applicable net asset value per share by the
Company and its separate accounts on those days on which the Fund calculates its
Designated Portfolio net asset value pursuant to rules of the Commission;
provided, however, that the Board of Trustees of the Fund (the "Fund Board") 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
Fund Board, acting in good faith and in light of its fiduciary duties under
federal and any applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.
1.5. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts, qualified pension
and retirement plans or such other persons as are permitted under Section
817(h)(4) of the Internal Revenue Code of 1986, as amended, (the "Code"), and
regulations promulgated thereunder, the sale to which will not impair the tax
treatment currently afforded the Contracts. No shares of any Portfolio will be
sold directly to the general public.
1.6. The Fund will not sell Fund shares to any insurance company or
separate account unless an agreement containing provisions substantially the
same as Articles I, III, V, and VI of this Agreement is in effect to govern such
sales.
1.7. The Company agrees to purchase and redeem the shares of the Designated
Portfolios offered by the then current prospectus of the Fund in accordance with
the provisions of such prospectus.
1.8. Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or to any Account. Purchase
and redemption orders for Fund shares will be recorded in an appropriate title
for each Account or the appropriate sub-account of each Account.
1.9. The Fund will furnish same day notice (by facsimile, or telephone
followed by written confirmation) to the Company of the declaration of any
income, dividends or capital gain distributions payable on each Designated
Portfolio's shares. The Company hereby elects to receive all such dividends and
distributions as are payable on the Portfolio shares in the form of additional
shares of that Portfolio at the ex-dividend date net asset values. The Company
reserves the right to revoke this election and to receive all such dividends and
distributions in cash. The Fund will notify the Company of the number of shares
so issued as payment of such dividends and distributions.
1.10. The Fund will make the net asset value per share for each Designated
Portfolio available to the Company via electronic means on a daily basis as soon
as reasonably practical after the net asset value per share is calculated and
will use its best efforts to make such net asset value per share available by
7:00 p.m. Eastern Time, each Business Day. If the Fund provides the Company
materially incorrect net asset value per share information (as determined under
Commission guidelines), the Company shall be entitled to an adjustment to the
number of shares
Page 3 of 29
purchased or redeemed to reflect the correct net asset value per share. Any
material error in the calculation or reporting of net asset value per share,
dividend or capital gain information shall be reported to the Company upon
discovery by the Fund.
1.11. The Company may withdraw an Account's investment in the Fund only:
(i) as necessary to facilitate Contract owner requests; (ii) upon a
determination by a majority of the Fund Board, or a majority of disinterested
Fund Board members, that an irreconcilable material conflict exists among (x)
the interests of all Contract owners or (y) the interests of the Participating
Insurance Companies investing in the Fund; (iii) upon requisite vote of the
Contract owners having an interest in the affected Portfolio; (iv) as required
by state and/or federal laws or regulations or judicial or other legal precedent
of general implication; (v) upon sixty (60) days advance written notice; (vi)
from a Portfolio, upon a change in the Portfolio Manager for that Portfolio; or
(vii) as permitted by an order of the Commission pursuant to Section 26(b) of
the 0000 Xxx.
1.12. (a) The parties acknowledge that market timing, short-term trading or
excessive trading (hereinafter "Market Timing") may be harmful to the
Portfolios. The Company agrees to have measures in place to identify holders of
Contracts or their agents who engage in Market Timing (hereinafter "Market
Timers") that is or has the potential to be harmful to the Portfolios, and to
report to the Fund and the Adviser promptly in the event that Market Timers are
engaging in Market Timing that may be detrimental to a Portfolio. The Company
agrees to take all lawful steps within its power to implement any measures
adopted by it, including, but not limited to, restricting the right to transfer
among the Portfolios, if applicable, (via the Accounts) by any Market Timer and
refusing to accept investments attributable to any Market Timer. The Fund and
the Adviser reserve the right to revoke, reject or cancel purchase orders for
shares of the Portfolios made by the Company that the Fund or the Adviser
reasonably believe are attributable to a Market Timer if, in the Fund's or
Adviser's opinion, the Company has not taken satisfactory action with regard to
such purchase order in accordance with the Company's policies and procedures
relating to market timing.
(b) The Fund and the Adviser shall not be responsible for any losses
or costs incurred by the Company, the Account or variable insurance product
holders as a result of the revocation, rejection or cancellation of orders in
furtherance of the prevention of Market Timing. The Company agrees to disclose
in the prospectus for the variable insurance products measures it adopts to
prevent Market Timing that could be material to purchasers of the variable
insurance products, and the Fund and the Adviser agree to disclose in the
prospectus for the Portfolios measures adopted by the Fund to prevent Market
Timing that could be material to purchasers of the shares of the Portfolios.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts or interests in
the Accounts are or will be registered under the Securities Act of 1933 (the
"1933 Act"), or are exempt from registration thereunder, and that the Contracts
will be issued and sold in compliance with all applicable federal and state
laws. 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
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legally and validly established each Account as a separate account under the
General Statutes of Connecticut and that each Account (i) is or will be
registered as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts and that
it will maintain such registration for so long as any Contracts are outstanding;
or (ii) is exempt from registration under the provisions of the 1940 Act. The
Company will amend the registration statement under the 1933 Act for the
Contracts and the registration statement under the 1940 Act for the registered
Accounts from time to time as required in order to effect the continuous
offering of the Contracts or as may otherwise be required by applicable law. The
Company will register and qualify the Contracts for sale in accordance with the
securities laws of the various states only if and to the extent deemed necessary
by the Company to comply with applicable law. The Company will certify the
amount of any shares of the Designated Portfolios purchased by the Company on
behalf of any separate account offering interests not subject to registration
under the 1933 Act to permit the Fund to file a Form 24F-2 with respect to such
shares.
2.2. The Company represents that the Contracts are currently and at the
time of issuance will be treated as annuity contracts and/or life insurance
policies (as applicable) under applicable provisions of the Code, and further
represents that it will make every effort to maintain such treatment and that it
will notify the Fund and the Adviser 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. The Company and the Accounts qualify to
purchase and hold shares of the Fund under Section 8l7(h) of the Code.
2.3. The Company represents and warrants that it will not purchase shares
of the Designated Portfolio(s) with assets derived from tax-qualified retirement
plans except, indirectly, through Contracts purchased in connection with such
plans.
2.4. The Company represents and warrants that all of its trustees, officers
and employees having access to the funds and/or securities of the Fund are and
continue to be at all times covered by a blanket fidelity bond or similar
coverage. The aforesaid bond includes coverage for larceny and embezzlement and
is issued by a reputable bonding company.
2.5. The Company shall maintain the treatment of the Contracts as annuity
contracts or life insurance policies, whichever is appropriate, under applicable
provisions of the Code and shall notify the Fund and the Adviser 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.
2.6. The Company shall not, without prior notice to the Fund (unless
otherwise required by applicable law), take any action to operate the Account as
a management investment company under the 0000 Xxx.
2.7. The Company shall not, without prior notice to the Fund, induce
Contract owners to vote on any matter submitted for consideration by the
shareholders of the Fund in a manner other than as recommended by the Board.
Page 5 of 29
2.8. The Company represents and warrants that it has in place an anti-money
laundering program ("AML program") that does now and will continue to comply
with applicable laws and regulations, including the relevant provisions of the
USA PATRIOT Act (Pub. L. No. 107-56 (2001)) and the regulations issued
thereunder.
2.9. The Company shall comply with any applicable privacy and notice
provisions of 15 U.S.C. Sections 6801-6827 and any applicable regulations
promulgated thereunder (including but not limited to 17 C.F.R. Part 248) as they
may be amended.
2.10. The Company agrees to provide the Fund each year within 60 days of
the end of the Fund's fiscal year, or when reasonably requested by the Fund,
information as to the number of shares purchased by a Registered Account and any
other Account the interests of which are not registered under the 0000 Xxx. The
Company acknowledges that the Fund intends to rely on the information so
provided and represents and warrants that such information shall be accurate.
2.11. The Company shall establish and disclose to Contract owners a
reasonable policy designed to discourage frequent and disruptive purchases and
redemptions of Fund shares by Contract owners and shall cooperate with the Fund
to minimize the impact on the Fund of such transactions.
2.12. The Fund represents and warrants that shares of the Designated
Portfolio(s) sold pursuant to this Agreement will be registered under the 1933
Act and duly authorized for issuance in accordance with applicable law and that
the Fund is and will remain registered as an open-end management investment
company under the 1940 Act for as long as such shares of the Designated
Portfolio(s) are sold. The Fund will 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 will register
and qualify the shares of the Designated Portfolio(s) for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Fund.
2.13. The Fund represents that it will use its best efforts to comply with
any applicable state insurance laws or regulations as they may apply to the
investment objectives, policies and restrictions of the Portfolios, as they may
apply to the Fund, to the extent specifically requested in writing by the
Company. If the Fund cannot comply with such state insurance laws or
regulations, it will so notify the Company in writing. The Fund makes no other
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 any state. The Company represents that it will
use its best efforts to notify the Fund of any restrictions imposed by state
insurance laws that may become applicable to the Fund as a result of the
Accounts' investments therein (including, but not limited to, restrictions with
respect to fees and expenses and investment policies), other than those set
forth on Schedule C to this Agreement. Upon receipt of such information from the
Company, the Fund shall determine whether it is in the best interests of
shareholders to comply with any such restrictions. If the Fund determines that
it is not in the best interests of shareholders (it being understood that
"shareholders" for this purpose shall mean Contract owners), the Fund shall so
inform the Company, and the Fund and the Company shall discuss alternative
accommodations in the circumstances. If the Fund determines
Page 6 of 29
that it is in the best interests of shareholders to comply with such
restrictions, the Fund and the Company shall amend Schedule C to this Agreement
to reflect such restrictions. The Fund and the Adviser agree that they will
furnish the information required by state insurance laws to assist the Company
in obtaining the authority needed to issue the Contracts in various states.
2.14. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-l under the 1940 Act or otherwise,
although it reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
the Fund undertakes to have the trustees of its Fund Board, a majority of whom
are not "interested" persons of the Fund, formulate and approve any plan under
Rule l2b-1 to finance distribution expenses.
2.15. The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Delaware and that it does and will
comply in all material respects with applicable provisions of the 0000 Xxx.
2.16. The Fund represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having access to
the funds and/or securities of the Fund are and 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
Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
2.17. The Adviser represents and warrants that it is duly registered as an
investment adviser under the Investment Advisers Act of 1940, as amended, and
will remain duly registered under all applicable federal and state securities
laws and that it will perform its obligations for the Fund in accordance in all
material respects with the laws of the State of New York and any applicable
state and federal securities laws.
2.18. Until the Exemptive Order (as defined below) has been issued, the
Fund will take no actions that would not be permitted without the Order.
ARTICLE III - FUND COMPLIANCE
3.1. The Fund and the Adviser acknowledge that any failure (whether
intentional or in good faith or otherwise) to comply with the requirements of
Subchapter M of the Code or the diversification requirements of Section 817(h)
of the Code may result in the Contracts not being treated as variable contracts
for federal income tax purposes, which would have adverse tax consequences for
Contract owners and could also adversely affect the Company's corporate tax
liability. The Fund and the Adviser further acknowledge that any such failure
may result in costs and expenses being incurred by the Company in obtaining
whatever regulatory authorizations are required to substitute shares of another
investment company for those of the failed Fund, as well as fees and expenses of
legal counsel and other advisors to the Company and any federal income taxes,
interest or tax penalties incurred by the Company in connection with any such
failure.
Page 7 of 29
3.2. The Fund represents and warrants that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Code, and that it will
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.
3.3. The Fund represents that it 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;
including, but not limited to, that the Fund will at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, as amended from time
to time, relating to the diversification requirements for variable annuity,
endowment, or life insurance contracts, and with Section 817(d) of the Code,
relating to the definition of a variable contract, and any amendments or other
modifications to such Section or Regulation. The Fund will notify the Company
immediately upon having a reasonable basis for believing that the Fund or a
Portfolio thereunder has ceased to comply with the diversification requirements
or that the Fund or Portfolio might not comply with the diversification
requirements in the future. In the event of a breach of this representation by
the Fund, it will take all reasonable steps to adequately diversify the Fund so
as to achieve compliance within the grace period afforded by Treasury Regulation
1.817-5.
3.4. The Adviser agrees to provide the Company with a certificate or
statement indicating compliance by each Portfolio of the Fund with Section
8l7(h) of the Code, such certificate or statement to be sent to the Company no
later than thirty (30) days following the end of each calendar quarter.
ARTICLE IV - PROSPECTUS AND PROXY STATEMENTS/VOTING
4.1. The Fund will provide the Company with as many copies of the current
Fund prospectus and any supplements thereto for the Designated Portfolio(s) as
the Company may reasonably request for distribution to Contract owners at the
time of Contract fulfillment and confirmation. The Fund will provide the copies
of said prospectus to the Company or to its mailing agent. The Company will
distribute the prospectus to existing Contract owners. The Fund will, upon
request, provide the Company with a copy of the Fund's prospectus through
electronic means to facilitate the Company's efforts to provide Fund
prospectuses via electronic delivery. The Company will bear the expense of
printing and distributing prospectuses to prospective contractholders.
4.2. The Fund's prospectus will state that the Statement of Additional
Information (the "SAI") for the Fund is available free of charge upon request.
The Fund will provide the Company, at the Fund's expense, with as many copies of
the SAI and any supplements thereto as the Company may reasonably request for
distribution to prospective Contract owners and applicants and to any existing
Contract owner who requests such statement or whenever state or federal law
requires that such statement be provided. The Fund will provide the copies of
said SAI to the Company or to its mailing agent.
4.3. The Fund, at its expense, will provide the Company or its mailing
agent with copies of its proxy material, if any, reports to
shareholders/Contract owners and other
Page 8 of 29
permissible communications to shareholders/Contract owners in such quantity as
the Company will reasonably require. The Company will distribute this proxy
material, reports and other communications to existing Contract owners and will
xxxx the Fund for the reasonable cost of such distribution.
4.4. If and to the extent required by law, the Company will:
(a) solicit voting instructions from Contract owners;
(b) vote the shares of the Designated Portfolios held in the Account
in accordance with instructions received from Contract owners; and
(c) vote shares of the Designated Portfolios held in the Account for
which no timely instructions have been received or are held by the Company on
behalf of the Account that are not attributable to Contract owners, in the same
proportion as shares of such Designated Portfolio for which instructions have
been received from-the Company's Contract owners, so long as and to the extent
that the Commission continues to interpret the 1940 Act to require pass-through
voting privileges for variable Contract owners. The Company reserves the right
to vote Fund shares held in any segregated asset account in its own right in the
same proportion as shares of such Designated Portfolio for which instructions
have been received from the Company's Contract owners. The Company will be
responsible for assuring that the Accounts participating in the Fund calculate
voting privileges in a manner consistent with all legal requirements, including
the Mixed and Shared Funding Exemptive Order described in Section 7.1 and
consistent with any reasonable standards that the Fund may adopt and provide in
writing.
4.5. The Company shall not, without prior notice to the Fund, induce
Contract owners to vote on any matter submitted for consideration by the
shareholders of the Fund in a manner other than as recommended by the Board.
4.6. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular, the Fund either will provide for
annual meetings (except insofar as the Commission may interpret Section 16 of
the 1940 Act not to require such meetings) or to comply with Section 16( c) of
the 1940 Act as well as with Section 16(a) and, if and when applicable, Section
16(b). Further, the Fund will act in accordance with the Commission's
interpretation of the requirements of Section 16(a) with respect to periodic
elections of trustees and with whatever rules the Commission may promulgate with
respect thereto.
ARTICLE V - SALES MATERIAL AND INFORMATION
5.1. The Company will furnish, or will cause to be furnished, to the Fund
or the Adviser, each piece of sales literature or other promotional material in
which the Fund or the Adviser is named, at least ten (l0) Business Days prior to
its use. If after (5) Business Days, the Fund has not objected, the Company may
proceed with such use. However, the Fund reserves the right to object to such
use at any time and the Company agrees to cease use upon receipt of such
objection. The Fund may delegate its rights and responsibilities under this
provision to the Adviser.
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5.2. The Company will not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund or the Adviser to the
public (including current and prospective Contract owners) in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement, prospectus or SAI for Fund shares, as
such registration statement, prospectus and SAI may be amended or supplemented
from time to time, or in reports or proxy statements for the Fund, or in
published reports for the Fund which are in the public domain or approved by the
Fund or the Adviser for distribution, or in sales literature or other material
provided by the Fund or by the Adviser, except with the prior written permission
of the Fund or the Adviser. The Fund and the Adviser agree to respond to any
request for approval on a prompt and timely basis.
5.3. The Fund and the Adviser will furnish, or will cause to be furnished,
to the Company or its designee, each piece of sales literature or other
promotional material in which the Company or its separate account is named, at
least ten (10) Business Days prior to its use. If after five (5) Business Days,
the Company has not objected, the Fund or the Adviser may proceed with such use.
However, the Company reserves the right to object to such use at any time and
the Fund and Adviser agree to cease use upon receipt of any such objection.
5.4. The Fund and the Adviser will not give any information or make any
representations or statements 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, prospectus, SAI or other
offering materials for the Contracts, as such registration statement, prospectus
and SAI may be amended or supplemented from time to time, or in published
reports for each Account or the Contracts which are in the public domain or
approved by the Company for distribution to Contract owners, or in sales
literature or other material provided by the Company, except with permission of
the Company. The Company agrees to respond to any request for approval on a
prompt and timely basis.
5.5. The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, SAIs, reports, proxy statements, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Fund or its shares, within a reasonable time after the filing of
each such document with the Commission or the NASD.
5.6. The Company will provide to the Fund at least one complete copy of all
definitive prospectuses, definitive SAI, offering materials, reports,
solicitations for voting instructions, sales literature and other promotional
materials, applications for exemptions, requests for no action letters, and all
amendments to any of the above, that relate to the Contracts or each Account,
contemporaneously with the filing of each such document with the Commission or
the NASD (except that with respect to post-effective amendments to such
prospectuses and SAIs and sales literature and promotional material, only those
prospectuses and SAIs and sales literature and promotional material that relate
to or refer to the Fund will be provided), or with the printing of such
materials if not so filed with the Commission or the NASD. In addition, the
Company will provide to the Fund at least one complete copy of (i) a
registration statement or offering document that relates to the Contracts or
each Account, containing representative and relevant
Page 10 of 29
disclosure concerning the Fund; and (ii) any post-effective amendments to any
registration statements or amendments to offering documents, relating to the
Contracts or such Account that refer to or relate to the Fund.
5.7. For purposes of this Article V, 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 billboards, motion pictures, or other public media, (i.e., on-line
networks such as the Internet or other electronic messages)), 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, registration statements, prospectuses, SAls,
shareholder reports, and proxy materials and any other material constituting
sales literature or advertising under the NASD rules, the 1933 Act or the 0000
Xxx.
5.8. The Company shall amend each Contract's registration statement (if
any) and the Account's 1940 Act registration statement (if any) from time to
time as required in order to effect the continuous offering of the Contracts or
as may otherwise be required by applicable law. The Company shall file,
register, qualify and obtain approval of its Contracts for sale to the extent
required by applicable insurance and securities laws of the various states.
5.9. The Fund and the Adviser hereby consent to the Company's use of the
names of the Designated Portfolios set forth in Schedule B of this Agreement, in
connection with marketing the Contracts, subject to the terms of Article V of
this Agreement. The Fund and the Adviser hereby consent to the use of any
trademark, trade name, service xxxx or logo used by the Fund or the Adviser,
subject to the Fund's and the Adviser's prior written approval of such use and
in accordance with the reasonable requirements of the Fund or the Adviser. Such
consent will terminate following the termination of this Agreement as soon as no
Designated Portfolio continues to be offered through variable insurance
contracts issued by the Company and no Account owns any shares of any Designated
Portfolio.
5.10. The Company hereby consents to the use by the Fund or the Adviser of
the names of the Accounts set forth in Schedule A of this Agreement, in
connection with marketing the Fund, subject to the terms of Article V of this
Agreement. The Company hereby consents to the use of any trademark, trade name,
service xxxx or logo used by the Account of the Company by the Fund or the
Adviser subject to the prior written approval of the Company of such use and in
accordance with the reasonable requirements of the Company. Such consent will
terminate following the termination of this Agreement as soon as no Designated
Portfolio continues to be offered through variable insurance contracts issued by
the Company and no Account owns any shares of any Designated Portfolio.
5.11. The Fund, the Adviser and the Company agree to adopt and implement
procedures reasonably designed to ensure that information concerning the
Company, the Fund or the Adviser, respectively, and their respective affiliated
companies, that is intended for use only
Page 11 of 29
by brokers or agents selling the Contracts is properly marked as "Not For Use
With The Public" and that such information is only so used.
ARTICLE VI - FEES, COSTS AND EXPENSES
6.1. The Fund will pay no fee or other compensation to the Company under
this Agreement, except: (a) if the Fund or any Designated Portfolio adopts and
implements a plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses, then, subject to obtaining any required exemptive orders
or other regulatory approvals, the Fund may make payments to the Company or to
the underwriter for the Contracts if and in such amounts agreed to by the Fund
in writing; and (b) the Fund may pay fees to the Company for administrative
services provided to Contract owners that are not primarily intended to result
in the sale of shares of the Designated Portfolio or of underlying Contracts.
6.2. All expenses incident to performance by the Fund of this Agreement
will be paid by the Fund to the extent permitted by law. The Fund will bear the
expenses for the cost of registration and qualification of the Fund's shares,
including without limitation, the preparation of and filing with the Commission
of Forms N-SAR and Rule 24f-2 Notices and payment of all applicable registration
or filing fees with respect to shares of the Fund to the extent that shares of
Designated Portfolios are purchased by unregistered Accounts; preparation and
filing of the Fund's prospectus, SAI and registration statement, proxy materials
and reports; typesetting the Fund's prospectus; typesetting and printing proxy
materials and reports to Contract owners (including the costs of printing a Fund
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; any expenses permitted to be paid or assumed by
the Fund pursuant to a plan, if any, under Rule l2b-1 under the 1940 Act; and
other costs associated with preparation of prospectuses and SAIs for the
Designated Portfolios in electronic or typeset format, as well as any
distribution expenses as set forth in Article IV of this Agreement.
6.3. Expenses assumed by the Company include, but are not limited to, the
costs of: (i) registration and qualification of the Contracts under the federal
and any applicable state securities laws; (ii) preparation and filing with the
Commission of the Contracts prospectus and Contracts registration statement; and
(iii) preparation and dissemination of all statements and notices to Contract
owners required by any federal or state insurance law other than those paid for
by the Fund.
ARTICLE VII - MIXED & SHARED FUNDING RELIEF
7.1. The Fund represents and warrants that it will apply for an order from
the Commission granting Participating Insurance Companies and variable annuity
separate accounts and variable life insurance separate accounts relief from the
provisions of Sections 9(a), 13(a), l5(a), and l5(b) of 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 Fund to be sold to and held by variable annuity separate accounts
and variable life insurance separate accounts of both affiliated and
unaffiliated Participating Insurance Companies and qualified pension and
retirement plans outside of the separate account context (the "Mixed and Shared
Funding Exemptive Order" or the "Exemptive
Page 12 of 29
Order"). The parties to this Agreement agree that the conditions or undertakings
specified in the Mixed and Shared Funding Exemptive Order, when received, and
that may be imposed on the Company, the Fund and/or the Adviser by virtue of the
receipt of such order by the Commission, will be incorporated herein by
reference, and such parties agree to comply with such conditions and
undertakings to the extent applicable to each such party.
7.2. The Fund Board will monitor the Fund for the existence of any
irreconcilable material conflict among 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, but not limited to: (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 Participating Insurance Companies or by variable annuity
and variable life insurance Contract owners; or (f) a decision by an insurer to
disregard the voting instructions of Contract owners. The Fund Board will
promptly inform the Company if it determines that an irreconcilable material
conflict exists and the implications thereof. A majority of the Fund Board will
consist of persons who are not "interested" persons of the Fund.
7.3. The Company will report any potential or existing conflicts of which
it is aware promptly to the Fund Board. The Company agrees to assist the Fund
Board in carrying out its responsibilities, as delineated in the Mixed and
Shared Funding Exemptive Order, by providing the Fund Board with all information
reasonably necessary for the Fund Board to consider any issues raised. This
includes, but is not limited to, an obligation by the Company to inform the Fund
Board whenever Contract owner voting instructions are to be disregarded. The
Fund Board will record in its minutes, or other appropriate records, all reports
received by it and all action with regard to a conflict. The Company agrees to
carry out such responsibilities with a view only to the interests of Contract
owners.
7.4 If it is determined by a majority of the Fund Board, or a majority of
its disinterested trustees, that an irreconcilable material conflict exists, the
Company and other Participating Insurance Companies will, 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: (a)
withdrawing the assets allocable to some or all of the 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 submitted to a vote of all affected
Contract owners and, as appropriate, segregating the assets of any appropriate
group (i.e., variable annuity Contract owners or variable life insurance
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 (b) establishing a new registered management
investment company or managed separate account.
7.5. If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions, and such disregard
of voting instructions could
Page 13 of 29
conflict with the majority of Contract owner voting instructions, and the
Company's judgment represents a minority position or would preclude a majority
vote, the Company may be required, at the Fund's election, to withdraw the
affected subaccount of the Account's investment in the Fund and terminate this
Agreement with respect to such sub-account; provided, however, that such
withdrawal and termination will be limited to the extent required by the
foregoing irreconcilable material conflict as determined by a majority of the
disinterested trustees of the Fund Board. No charge or penalty will be imposed
as a result of such withdrawal. Any such withdrawal and termination must take
place within six (6) months after the Fund gives written notice to the Company
that this provision is being implemented. Until the end of such six-month period
the Adviser and Fund will, to the extent permitted by law and any exemptive
relief previously granted to the Fund, continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Fund.
7.6. 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 insurance regulators, then the Company will withdraw
the affected sub-account of the Account's investment in the Fund and terminate
this Agreement with respect to such sub-account; provided, however, that such
withdrawal and termination will be limited to the extent required by the
foregoing irreconcilable material conflict as determined by a majority of the
disinterested trustees of the Fund Board. No charge or penalty will be imposed
as a result of such withdrawal. Any such withdrawal and termination must take
place within six (6) months after the Fund gives written notice to the Company
that this provision is being implemented. Until the end of such six-month period
the Advisor and Fund will, to the extent permitted by law and any exemptive
relief previously granted to the Fund, continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Fund.
7.7. For purposes of Sections 7.4 through 7.7 of this Agreement, a majority
of the disinterested members of the Fund Board will determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event, other than as specified in Section 7.4, will the Fund be required to
establish a new funding medium for the Contracts. The Company will not be
required by Section 7.4 to establish a new funding medium for the Contracts if
an offer to do so has been declined by vote of a majority of Contract owners
affected by the irreconcilable material conflict. In the event that the Fund
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 Fund 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 Trustees.
7.8. The Company will at least annually submit to the Fund Board such
reports, materials or data as the Fund Board may reasonably request so that the
Fund Board may fully carry out the duties imposed upon it as delineated in the
Mixed and Shared Funding Exemptive Order, and said reports, materials and data
will be submitted more frequently if deemed appropriate by the Fund Board.
Page 14 of 29
7.9. 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 Fund and/or the Participating Insurance
Companies, as appropriate, will take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 4.5, 4.6, 4.7, 7.1, 7.2, 7.3,
7.4, and 7.5 of this Agreement will 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
8.1. Indemnification by the Company
(a) The Company agrees to indemnify and hold harmless the Fund, the
Adviser, and each person, if any, who controls or is associated with the Fund or
the Adviser within the meaning of such terms under the federal securities laws
and any director, trustee, officer, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, expenses, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or actions
in respect thereof (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:
(1) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the registration
statement, prospectus, SAI or other offering materials for the Contracts or
contained in the Contracts or sales literature or other promotional material 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 or necessary to make such statements not
misleading in light of the circumstances in which they were made; provided that
this agreement to indemnify will not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or on behalf
of the Fund or the Adviser for use in the registration statement, prospectus,
SAI or other offering materials for the Contracts 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 of the Contracts or Fund shares; or
(2) arise out of or as a result of statements or representations
by or on behalf of the Company (other than statements or representations
contained in the Fund registration statement, prospectus, SAI or other offering
materials or sales literature or other promotional material of the Fund, or any
amendment or supplement to the foregoing, 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
Page 15 of 29
(3) arise out of untrue statement or alleged untrue statement of
a material fact contained in the Fund registration statement, prospectus, SAI or
sales literature or other promotional material of the Fund (or any amendment or
supplement to the foregoing) or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make such
statements not misleading in light of the circumstances in which they were made,
if such a statement or omission was made in reliance upon and in conformity with
information furnished to the Fund or the Adviser by or on behalf of the Company
or persons under its control; or
(4) arise as a result of any failure by the Company to provide
the services and furnish the materials or to make any payments required under
the terms of this Agreement; or
(5) arise out of 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 by the Company of this Agreement; except to the extent
provided in Sections 8.1(b) and 8.4 hereof. This indemnification will be in
addition to any liability that the Company otherwise may have.
(b) No party will be entitled to indemnification under Section 8.1(a)
if such loss, claim, damage, liability or action is due to the willful
misfeasance, bad faith, or gross negligence in the performance of such party's
duties under this Agreement, or by reason of such party's reckless disregard of
its obligations or duties under this Agreement.
(c) The Indemnified Parties promptly will notify the Company of the
commencement of any litigation, proceedings, complaints or actions by regulatory
authorities against them in connection with the issuance or sale of the Fund
shares or the Contracts or the operation of the Fund.
8.2. Indemnification by the Adviser
(a) The Adviser agrees to indemnify and hold harmless the Company and
each person, if any, who controls or is associated with the Company within the
meaning of such terms under the federal securities laws and any director,
officer, employee or agent of the foregoing (collectively, the "Indemnified
Parties" for purposes of this Section 8.2) against any and all losses, claims,
expenses, damages, liabilities (including amounts paid in settlement with the
written consent of the Adviser) or actions in respect thereof (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:
(1) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the registration
statement, prospectus or SAI for the Fund or sales literature or other
promotional material 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 or necessary to
make such statements not misleading in light of the circumstances in which they
were made only to the
Page 16 of 29
extent that such statements or omissions relate to the Advisor; provided that
this agreement to indemnify will 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 Adviser or the Fund by
or on behalf of the Company for use in the registration statement, prospectus or
SAI for the Fund or in sales literature of the Fund (or any amendment or
supplement thereto) or otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(2) arise out of or as a result of statements or representations
(other than statements or representations contained in the Contracts or in the
Contract registration statements, prospectuses, statements of additional
information or other offering materials or sales literature or other promotional
material for the Contracts, or any amendment or supplement to the foregoing, not
supplied by the Adviser or persons under the control of the Adviser) or wrongful
conduct of the Adviser or persons under the control of the Adviser respectively,
with respect to the sale or distribution of the Contracts; or
(3) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement, prospectus, SAI or
other offering materials or sales literature or other promotional material
covering the Contracts (or any amendment or supplement thereto), or the omission
or alleged omission to state therein a material fact required to be stated or
necessary to make such statement or statements not misleading in light of the
circumstances in which they were made, if such statement or omission was made in
reliance upon and in conformity with information furnished to the Company by or
on behalf of the Adviser, or persons under any of its control; or
(4) arise as a result of any failure by the Fund or the Adviser
to provide the services and furnish the materials under the terms of this
Agreement; or
(5) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser or the Fund in this
Agreement, or arise out of or result from any other material breach of this
Agreement by the Adviser or the Fund (including a failure, whether intentional
or in good faith or otherwise, to comply with the requirements of Subchapter M
of the Code specified in Article III, Section 3.2 of this Agreement and the
diversification requirements specified in Article III, Section 3.3 of this
Agreement, as described more fully in Section 8.5 below); except to the extent
provided in Sections 8.2(b) and 8.4 hereof. This indemnification will be in
addition to any liability that the Adviser otherwise may have.
(b) No party will be entitled to indemnification under Section 8.2(a)
if such loss, claim, damage, liability or action is due to the willful
misfeasance, bad faith, or gross negligence in the performance of such party's
duties under this Agreement, or by reason of such party's reckless disregard or
its obligations or duties under this Agreement.
(c) The Indemnified Parties will promptly notify the Adviser and the
Fund of the commencement of any litigation, proceedings, complaints or actions
by regulatory authorities
Page 17 of 29
against them in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3. Indemnification by the Fund
(a) The Fund agrees to indemnify and hold harmless the Company and
each person, if any, who controls or is associated with the Company within the
meaning of such terms under the federal securities laws and any director,
officer, employee or agent of the foregoing (collectively, the "Indemnified
Parties" for purposes of this Section 8.3) against any and all losses, claims,
expenses, damages, liabilities (including amounts paid in settlement with the
written consent of the Fund) or action in respect thereof (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 operations of the Fund and:
(1) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the registration
statement, prospectus or SAI for the Fund or sales literature or other
promotional material 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 or necessary to
make such statements not misleading in light of the circumstances in which they
were made only to the extent that such statements or omissions relate to the
Fund; provided that this agreement to indemnify will 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 Adviser or the Fund by or on behalf of the Company for use in the
registration statement, prospectus or SAI for the Fund or in sales literature of
the Fund (or any amendment or supplement thereto) or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
(2) arise out of or as a result of statements or representations
(other than statements or representations contained in the Contracts or in the
Contract or Fund registration statements, prospectuses, statements of additional
information or other offering materials or sales literature or other promotional
material for the Contracts or of the Fund, or any amendment or supplement to the
foregoing, not supplied by the Fund or persons under the control of the Fund) or
wrongful conduct of the Fund or persons under the control of the Fund
respectively, with respect to the sale or distribution of the Contracts or Fund
shares; or
(3) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement, prospectus, SAI or
other offering materials or sales literature or other promotional material
covering the Contracts (or any amendment or supplement thereto), or the omission
or alleged omission to state therein a material fact required to be stated or
necessary to make such statement or statements not misleading in light of the
circumstances in which they were made, if such statement or omission was made in
reliance upon and in conformity with information furnished to the Company by or
on behalf of the Fund, or persons under any of its control; or
Page 18 of 29
(4) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement; or
(5) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or arise out
of or result from any other material breach of this Agreement by the Fund
(including a failure, whether intentional or in good faith or otherwise, to
comply with the requirements of Subchapter M of the Code specified in Article
III, Section 3.2 of this Agreement and the diversification requirements
specified in Article III, Section 3.3 of this Agreement as described more fully
in Section 8.5 below); or
(6) arise out of or result from the incorrect or untimely
calculation or reporting of daily net asset value per share or dividend or
capital gain distribution rate; except to the extent provided in Sections 8.3(b)
and 8.4 hereof. This indemnification will be in addition to any liability that
the Fund otherwise may have.
(b) No party will be entitled to indemnification under Section 8.3(a)
if such loss, claim, damage, liability or action is due to the willful
misfeasance, bad faith, or gross negligence in the performance of such party's
duties under this Agreement, or by reason of such party's reckless disregard of
its obligations and duties under this Agreement.
(c) The Indemnified Parties will promptly notify the Fund of the
commencement of any litigation, proceedings, complaints or actions by regulatory
authorities against them in connection with the issuance or sale of the
Contracts or the operation of the Account.
8.4. Indemnification Procedures
Any person obligated to provide indemnification under this Article
VIII ("Indemnifying Party" for the purpose of this Section 8.4) will not be
liable under the indemnification provisions of this Article VIII with respect to
any claim made against a party entitled to indemnification under this Article
VIII ("Indemnified Party" for the purpose of this Section 8.4) unless such
Indemnified Party will have notified the Indemnifying Party in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim upon such Indemnified Party (or after
such party will have received notice of such service on any designated agent),
but failure to notify the Indemnifying Party of any such claim will not relieve
the Indemnifying Party from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of the
indemnification provision of this Article VIII, except to the extent that the
failure to notify results in the failure of actual notice to the Indemnifying
Party and such Indemnifying Party is damaged solely as a result of failure to
give such notice. In case any such action is brought against the Indemnified
Party, the Indemnifying Party will be entitled to participate, at its own
expense, in the defense thereof. The Indemnifying Party also will be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Indemnifying Party to the Indemnified Party of the
Indemnifying Party's election to assume the defense thereof, the Indemnified
Party will bear the fees and expenses of any additional counsel retained by it,
and the Indemnifying Party will not be liable to such party under this Agreement
Page 19 of 29
for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation, unless: (a) the Indemnifying Party and the Indemnified Party
will have mutually agreed to the retention of such counsel; or (b) the named
parties to any such proceeding (including any impleaded parties) include both
the Indemnifying 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. The Indemnifying Party will not be liable for
any settlement of any proceeding effected without its written consent but if
settled with such consent or if there is a final judgment for the plaintiff, the
Indemnifying Party agrees to indemnify the Indemnified Party from and against
any loss or liability by reason of such settlement or judgment. A successor by
law of the parties to this Agreement will be entitled to the benefits of the
indemnification contained in this Article VIII. The indemnification provisions
contained in this Article VIII will survive any termination of this Agreement.
8.5. Indemnification for Failure to Comply with Diversification
Requirements
The Fund and the Adviser acknowledge that any failure (whether
intentional or in good faith or otherwise) to comply with the diversification
requirements specified in Article III, Section 3.3 of this Agreement may result
in the Contracts not being treated as variable contracts for federal income tax
purposes, which would have adverse tax consequences for Contract owners and
could also adversely affect the Company's corporate tax liability. Accordingly,
without in any way limiting the effect of Sections 8.2(a) and 8.3(a) hereof and
without in any way limiting or restricting any other remedies available to the
Company, the Fund and the Adviser will pay all costs associated with or arising
out of any failure, or any anticipated or reasonably foreseeable failure, of the
Fund or any Portfolio to comply with Section 3.3 of this Agreement, including
all costs associated with correcting or responding to any such failure; such
costs may include, but are not limited to, the costs involved in creating,
organizing, and registering a new investment company as a funding medium for the
Contracts and/or the costs of obtaining whatever regulatory authorizations are
required to substitute shares of another investment company for those of the
failed Fund or Portfolio (including but not limited to an order pursuant to
Section 26(b) of the 1940 Act); the reasonable fees and expenses of legal
counsel and other advisors to the Company and any federal income taxes or tax
penalties (or "toll charges" or exactments or amounts paid in settlement)
incurred by the Company in connection with any such failure or anticipated or
reasonably foreseeable failure. Such indemnification and reimbursement
obligation shall be in addition to any other indemnification and reimbursement
obligations of the Fund and/or the Adviser under this Agreement.
ARTICLE IX - APPLICABLE LAW
9.1. This Agreement will be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of New York.
9.2. This Agreement will be subject to the provisions of the 1933 Act, the
1934 Act and the 1940 Act, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Commission may grant (including, but not limited to, the Mixed and Shared
Funding Exemptive Order) and the terms hereof will be interpreted and construed
in accordance therewith. If, in the future, the Mixed and Shared
Page 20 of 29
Funding Exemptive Order should no longer be necessary under applicable law, then
Article VII shall no longer apply.
ARTICLE X - TERMINATION
10.1. This Agreement will terminate:
(a) at the option of any party, with or without cause, with respect to
one, some or all of the Designated Portfolios, upon six (6) months' advance
written notice to the other parties or, if later, upon receipt of any required
exemptive relief or orders from the Commission, unless otherwise agreed in a
separate written agreement among the parties; or
(b) at the option of the Company, upon written notice to the other
parties, with respect to any Designated Portfolio if shares of the Designated
Portfolio are not reasonably available to meet the requirements of the Contracts
as determined in good faith by the Company; or
(c) at the option of the Company, upon written notice to the other
parties, with respect to any Designated Portfolio in the event any of the
Designated Portfolio'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 Company; or
(d) at the option of the Fund, upon written notice to the other
parties, upon institution of formal proceedings against the Company by the NASD,
the Commission, the Insurance Commission of any state or any other regulatory
body regarding the Company's duties under this Agreement or related to the sale
of the Contracts, the administration of the Contracts, the operation of the
Account, or the purchase of the Fund shares, provided that the Fund determines
in its sole judgment, exercised in good faith, that any such proceeding would
have a material adverse effect on the Company's ability to perform its
obligations, under this Agreement; or
(e) at the option of the Company, upon written notice to the other
parties, upon institution of formal proceedings against the Fund or the Adviser
by the NASD, the Commission or any state securities or insurance department or
any other regulatory body, provided that the Company determines in its sole
judgment, exercised in good faith, that any such proceeding would have a
material adverse effect on the Fund's or the Adviser's ability to perform its
obligations under this Agreement; or
(f) at the option of the Company, upon written notice to the other
parties, 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 and in good faith believes that the Fund may fail to so
qualify; or
(g) at the option of the Company, upon written notice to the other
parties, with respect to any Designated Portfolio if the Fund fails to meet the
diversification requirements
Page 21 of 29
specified in Section 3.3 hereof or if the Company reasonably and in good faith
believes the Fund may fail to meet such requirements;
(h) at the option of any party to this Agreement, upon written notice
to the other parties, upon another party's material breach of any provision of
this Agreement; or
(i) at the option of the Company, if the Company determines in its
sole judgment exercised in good faith that either the Fund or the Adviser has
suffered a material adverse change in its business, operations or financial
condition since the date of this Agreement or is the subject of material adverse
publicity which is likely to have a material adverse impact upon the business
and operations of the Company, such termination to be effective sixty (60) days
after receipt by the other parties of written notice of the election to
terminate; or
(j) at the option of the Fund or the Adviser, if the Fund or Adviser
respectively, determines in its sole judgment exercised in good faith that the
Company has suffered a material adverse change in its business, operations or
financial condition since the date of this Agreement or is the subject of
material adverse publicity which is likely to have a material adverse impact
upon the business and operations of the Fund or the Adviser, such termination to
be effective sixty (60) days after receipt by the other parties of written
notice of the election to terminate; or
(k) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the Contract owners having an
interest in the Account (or any subaccount) to substitute the shares of another
investment company for the corresponding Designated Portfolio's shares of the
Fund in accordance with the terms of the Contracts for which those Designated
Portfolio shares had been selected to serve as the underlying portfolio. The
Company will give sixty (60) days' prior written notice to the Fund of the date
of any proposed vote or other action taken to replace the Fund's shares or of
the filing of any required regulatory approval(s); or
(l) at the option of the Company or the Fund upon a determination by a
majority of the Fund Board, or a majority of the disinterested Fund Board
members, that an irreconcilable material conflict exists among the interests of:
(1) all Contract owners of variable insurance products of all separate accounts;
or (2) the interests of the Participating Insurance Companies investing in the
Fund as set forth in Article VII of this Agreement; or
(m) at the option of the Fund in the event any of the Contracts are
not issued or sold in accordance with applicable federal and/or state law.
Termination will be effective immediately upon such occurrence without notice;
or
(n) by the Fund if the Fund Board has decided to (i) refuse to sell
shares of any Portfolio to the Company and/or any of its Accounts; (ii) suspend
or terminate the offering of shares of any Portfolio; or (iii) dissolve,
reorganize, liquidate, merge or sell all assets of the Fund or any Portfolio.
10.2. Notice Requirement
Page 22 of 29
(a) No termination of this Agreement, except a termination under
Section 10.1(1) of this Agreement, will be effective unless and until the party
terminating this Agreement gives prior written notice to all other parties of
its intent to terminate, which notice will set forth the basis for the
termination.
(b) In the event that any termination of this Agreement is based upon
the provisions of Article VII, such prior written notice will be given in
advance of the effective date of termination as required by such provisions.
(c) Any notice given by the Indemnifying Party to an Indemnified Party
referred to in Section 8.4 above of participation in or control of any action by
the Indemnifying Party will in no event be deemed to be an admission by the
Indemnifying Party of liability, culpability or responsibility, and the
Indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
10.3. Effect of Termination
(a) Notwithstanding any termination of this Agreement, the Fund and
the Adviser will, at the option of the Company, and for a one year period from
the date of termination and from year to year thereafter if deemed appropriate
by the Fund and the Adviser in their sole discretion, 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 will be permitted to
reallocate investments in the Designated Portfolios (as in effect on such date),
redeem investments in the Designated Portfolios and/or invest in the Designated
Portfolios upon the making of additional purchase payments under the Existing
Contracts. The parties agree that this Section 10.3 will not apply to any
terminations under Article VII and the effect of such Article VII terminations
will be governed by Article VII of this Agreement.
(b) If the Fund so requests, the Company agrees, promptly after any
termination of this Agreement, to take all steps necessary to redeem the
investment of the Accounts in the Portfolios within one year from the date of
termination of the Agreement as provided in Article X. Such steps shall include,
but not be limited to, obtaining an order pursuant to Section 26(c) of the 1940
Act to permit the substitution of other securities for the shares of the
Portfolios.
10.4. Company Required to Redeem
The parties understand and acknowledge that it is essential for
compliance with Section 8l7(h) of the Code that the Contracts qualify as annuity
contracts or life insurance policies, as applicable, under the Code.
Accordingly, if any of the Contracts cease to qualify as annuity contracts or
life insurance policies, as applicable, under the Code, or if the Fund
reasonably believes that any such Contracts may fail to so qualify, the Fund
shall have the right to require a Company to redeem shares attributable to such
Contracts upon ten (10) days written notice to the Company and the Company shall
so redeem such shares in order to ensure that the Fund complies with the
provisions of Section 817(h) of the Code applicable to ownership of Fund shares.
Notice to the Company shall specify the period of time the Company has to redeem
Page 23 of 29
the shares or to make other arrangements satisfactory to the Fund and its
counsel, such period of time to be determined with reference to the requirements
of Section 817(h) of the Code. In addition, the Company may be required to
redeem shares pursuant to action taken or request made by the Fund Board in
accordance with an order of the Commission as described in Article VII, or other
Commission rule, regulation or order that may be adopted after the date hereof.
The Company agrees to redeem shares in such circumstances and to comply with
applicable terms and provisions.
ARTICLE XI - NOTICES
Any notice will be deemed duly given when sent by registered or certified
mail or by overnight courier 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 parties.
If to the Company:
The Travelers Insurance Company
Xxx Xxxxxxxxx
Xxxxxxxx, XX 00000
Attn: General Counsel
If to the Adviser:
Westchester Capital Management, Inc.
000 Xxxxxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxx
If to the Fund:
The Merger Fund VL
000 Xxxxxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxx
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, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
12.2. The Fund and the Adviser acknowledge that the identities of the
customers of the Company or any of its affiliates (collectively the "Protected
Parties" for purposes of this Section 12.2), information maintained regarding
those customers, and all computer programs and procedures developed by the
Protected Parties or any of their employees or agents in connection with the
Company's performance of its duties under this Agreement are the valuable
property of
Page 24 of 29
the Protected Parties. The Fund and the Adviser agree that if they come into
possession of any list or compilation of the identities of or other information
about the Protected Parties' customers, or any other property of the Protected
Parties, other than such information as may be independently developed or
compiled by the Fund or the Adviser from information supplied to them by the
Protected Parties' customers who also maintain accounts directly with the Fund
or the Adviser, the Fund and the Adviser will hold such information or property
in confidence and refrain from using, disclosing or distributing any of such
information or other property except: (a) with the Company's prior written
consent; or (b) as required by law or judicial process. The Fund and the Adviser
acknowledge that any breach of the agreements in this Section 12.2 would result
in immediate and irreparable harm to the Protected Parties for which there would
be no adequate remedy at law and agree that in the event of such a breach, the
Protected Parties will be entitled to equitable relief by way of temporary and
permanent injunctions, as well as such other relief as any court of competent
jurisdiction deems appropriate. Each party agrees to maintain all information
about other parties that it may acquire pursuant to this Agreement in
confidence, and each party agrees not to use, or permit the use of, any such
information for any purpose except that set forth herein, or to disclose any
such information to any person, without the prior written consent of the other
parties. This provision shall survive the termination of this Agreement.
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 will constitute one and the same
instrument.
12.5. If any provision of this Agreement will be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement will
not be affected thereby.
12.6. This Agreement will not be assigned by any party hereto without the
prior written consent of all the parties.
12.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal law.
12.8. The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect.
12.9. Each party to this Agreement will cooperate with each other party and
all appropriate governmental authorities (including without limitation the
Commission, the NASD and state insurance regulators) and will permit each other
and 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. However, such access shall not extend to attorney-client
privileged information.
Page 25 of 29
12.10. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or board action, as applicable, by
such party and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.
12.11. The parties to this Agreement may amend the schedules to this
Agreement in writing from time to time to reflect changes in or relating to the
Contracts, the Accounts or the Portfolios of the Fund or other applicable terms
of this Agreement.
12.12. This Agreement constitutes the entire contract between the parties
relating to the subject matter hereof and supersedes any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed hereto as of the date specified below.
THE TRAVELERS INSURANCE COMPANY
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
THE MERGER FUND VL
By: /s/ Xxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxx X. Xxxxx,
Title: Vice President
WESTCHESTER CAPITAL MANAGEMENT, INC.
By: /s/ Xxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxx X. Xxxxx,
Title: Vice President
Page 26 of 29
PARTICIPATION AGREEMENT
SCHEDULE A
DATED: AUGUST 1, 2003
The following Separate Accounts of The Travelers Insurance Company are permitted
in accordance with the provisions of this Agreement to invest in Portfolios of
the Fund shown in Schedule B:
Name of Separate Accounts
The Travelers Fund UL III for Variable Life Insurance
The Travelers Insurance Company Separate Account CPPVUL1
Page 27 of 29
PARTICIPATION AGREEMENT
SCHEDULE B
DATED: AUGUST 1, 2003
The Separate Account(s) shown on Schedule A may invest in the following
Portfolio(s) of the Fund:
The Merger Fund VL
Page 28 of 29
PARTICIPATION AGREEMENT
SCHEDULE C
DATED: XXXXXX 0, 0000
Xxxx.
Page 29 of 29
AMENDMENT NO. 1
TO
PARTICIPATION AGREEMENT
This Amendment No. 1 to Participation Agreement ("Amendment"), dated as of
May 3, 2004, is entered into by and between The Merger Fund VL, an open-end
management investment company organized as a Delaware statutory trust,
Westchester Capital Management, Inc., a corporation organized under the laws of
the State of New York and The Travelers Insurance Company, a corporation
organized under the laws of the State of Connecticut, and The Travelers Life and
Annuity Company, a corporation organized under the laws of the State of
Connecticut, each on behalf of itself and each separate account named in
Schedule A to the Participation Agreement (as defined below), as may be amended
from time to time. Any capitalized term not defined herein shall have the
meaning given to such term in the Participation Agreement.
WHEREAS, The Merger Fund VL, Westchester Capital Management, Inc. and The
Travelers Insurance Company have entered into a Participation Agreement, dated
August 1, 2003 (the "Participation Agreement"), whereby The Merger Fund VL
agreed to sell to The Travelers Insurance Company shares of the Designated
Portfolios (as defined in the Participation Agreement) pursuant to the terms
thereof;
WHEREAS, The Travelers Life and Annuity Company desires to be bound by and
subject to the terms and conditions of the Participation Agreement, as such
terms and conditions apply to The Travelers Insurance Company; and
WHEREAS, the parties hereto wish to enter into this Amendment in order to
amend the Participation Agreement as set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. Addition of The Travelers Life and Annuity Company
The Participation Agreement is hereby amended so that the definition of
"Company" found therein shall include both The Travelers Insurance Company and
The Travelers Life and Annuity Company. The Travelers Life and Annuity Company
hereby agrees to be bound by and subject to the terms and conditions of the
Participation Agreement, as such terms and conditions apply to The Travelers
Insurance Company.
Page 1 of 3
2. Amendment to Schedule A
Schedule A to the Participation Agreement is hereby amended and restated in
its entirety to read in the form attached hereto as Schedule A.
3. Miscellaneous
a. This Amendment shall be governed by the laws of the State of New York
without regard for the conflicts of law principles thereof.
b. This Amendment may be executed in counterpart and by facsimile
signature, each counterpart being deemed an original, but which when taken
together shall constitute one and the same instrument.
c The Participation Agreement, as amended hereby, remains in full force and
effect, and any reference to the Participation Agreement shall constitute a
reference to the Participation Agreement as amended hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first set forth above.
THE MERGER FUND VL
By: /s/ Xxxxxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxxxxx X. Xxxxx,
Title: President
------------------------------
WESTCHESTER CAPITAL MANAGEMENT, INC.
By: /s/ Xxxxxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxxxxx X. Xxxxx,
Title: President
------------------------------
THE TRAVELERS INSURANCE COMPANY
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
THE TRAVELERS LIFE AND ANNUITY COMPANY
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
Page 2 of 3
PARTICIPATION AGREEMENT
SCHEDULE A
DATED: MAY 3, 2004
The following Separate Accounts of The Travelers Insurance Company and The
Travelers Life and Annuity Company are permitted in accordance with the
provisions of this Agreement to invest in the Portfolios of the Fund shown in
Schedule B:
Name of Separate Accounts
The Travelers Fund UL for Variable Life Insurance
The Travelers Fund UL II for Variable Life Insurance
The Travelers Fund UL III for Variable Life Insurance
The Travelers Insurance Company Separate Account CPPVUL1
Page 3 of 3
