FUND PARTICIPATION AGREEMENT
among
THE MERGER FUND VL
WESTCHESTER CAPITAL MANAGEMENT, INC.
and
THE TRAVELERS INSURANCE COMPANY
THIS AGREEMENT, made and entered into this ____ day of ______ 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;
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 9:00 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 11:00 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.
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 are 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 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 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 817(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.
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.ss.ss.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 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-1 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 12b-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.
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 817(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 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 (10) 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.
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 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, SAIs,
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 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 12b-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), 15(a), and 15(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
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 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 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
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. 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
(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 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
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
(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 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
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 specified in Section 3.3 hereof
or if the Company reasonably and in good faith believes the Fund may
fail to meet such requirements; or
(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 sub-account) 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
(a) No termination of this Agreement, except a termination under Section
10.1 (l) 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 Redeed
The parties understand and acknowledge that it is essential for compliance
with Section 817(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 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: If to the Fund:
----------------- --------------
The Travelers Insurance Company The Merger Fund VL
One Cityplace 000 Xxxxxx Xxxx Xxxxx
Xxxxxxxx, XX 00000 Xxxxxxxxx, XX 00000
Attn: General Counsel Attn: Xxxxxx Xxxxx
If to the Adviser:
------------------
Westchester Capital Management, Inc.
000 Xxxxxx Xxxx Xxxxx
Xxxxxxxx, 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 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.
12.10Each 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.
12.11The 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.
12.12This 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:
--------------------------------------------
Name:
--------------------------------------------
Title:
--------------------------------------------
THE MERGER FUND VL
By:
--------------------------------------------
Name:
--------------------------------------------
Title:
--------------------------------------------
WESTCHESTER CAPITAL MANAGEMENT, INC.
By:
--------------------------------------------
Name:
--------------------------------------------
Title:
--------------------------------------------
PARTICIPATION AGREEMENT
SCHEDULE A
Dated ______________
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 Account
The Travellers Fund UL III for Variable Life Insurance
The Travellers Insurance Company Separate Account CPPVUL1
PARTICIPATION AGREEMENT
SCHEDULE B
Dated ______________
The Separate Account(s) shown on Schedule A may invest in the following
Portfolio(s) of the Fund:
The Merger Fund VL
PARTICIPATION AGREEMENT
SCHEDULE C
Dated ______________
None
