Exhibit 99.(e)(4)
PARTICIPATION AGREEMENT
AMONG
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ VARIABLE INVESTMENT SERIES,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ DISTRIBUTORS INC.
AND
THE TRAVELERS INSURANCE COMPANY
DATED AS OF
SEPTEMBER 15, 2003
TABLE OF CONTENTS
PAGE
----
ARTICLE I. Purchase and Redemption of Trust Shares 3
ARTICLE II. Representations and Warranties 5
ARTICLE III. Prospectuses, Reports to Shareholders
and Proxy Statements; Voting 7
ARTICLE IV. Sales Material and Information 8
ARTICLE V. Fees and Expenses 9
ARTICLE VI. Diversification 10
ARTICLE VII. Potential Conflicts 10
ARTICLE VIII. Indemnification 12
ARTICLE IX. Applicable Law 15
ARTICLE X. Termination 16
ARTICLE XI. Notices 17
ARTICLE XII. Miscellaneous 18
SCHEDULE A Separate Accounts and Associated Contracts A-1
SCHEDULE B Portfolios of Variable Investment Series Available
Under this Agreement B-1
SCHEDULE C Proxy Voting Procedures C-1
THIS AGREEMENT is made and entered into as of the 15th day of September,
2003 by and among The Travelers Insurance Company (the "Company"), a Connecticut
corporation, on its own behalf and on behalf of each separate account of the
Company set forth on Schedule A hereto as may be amended from time to time (each
such account referred to as an "Account"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ VARIABLE INVESTMENT
SERIES (the "Trust"), an unincorporated business trust organized under the laws
of the Commonwealth of Massachusetts, and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ DISTRIBUTORS INC. (the
"Distributor"), a Delaware corporation.
WHEREAS, the Trust engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established by insurance companies for individual and group life insurance
policies and annuity contracts with variable accumulation and/or pay-out
provisions (hereinafter referred to individually and/or collectively as
"Variable Insurance Products"); and
WHEREAS, insurance companies desiring to utilize the Trust as an investment
vehicle under their Variable Insurance Products enter into
participation
agreements with the Trust and the Distributor (the "Participating Insurance
Companies"); and
WHEREAS, shares of the Trust are divided into several series of shares,
each representing the interest in a particular managed portfolio of securities
and other assets, any one or more of which may be made available under this
Agreement; and
WHEREAS, the Trust intends to offer shares of the series set forth on
Schedule B hereto (each such series referred to as a "Portfolio"), as such
Schedule may be amended from time to time by mutual agreement of the parties
hereto, to the Account(s) of the Company (all references herein to "shares" of a
Portfolio shall mean the class or classes of shares specifically identified on
Schedule B); and
WHEREAS, the Trust has obtained an order from the Securities and Exchange
Commission ("SEC"), dated November 23, 1994 (File No. 812-9128), granting
Participating Insurance Companies and Variable Insurance Product separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended (the "1940 Act"), and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Trust to be sold to and held by Variable Insurance Product
separate accounts of both affiliated and unaffiliated life insurance companies
(the "Shared Funding Exemptive Order"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Distributor is registered as a broker/dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), is a member in
good standing of the National Association of Securities Dealers, Inc. (the
"NASD") and serves as principal distributor of the shares of the Trust; and
WHEREAS, the Company has registered or will register under the 1933 Act the
Variable Insurance Products identified on Schedule A hereto (the "Contracts"),
as such Schedule may be amended from time to time by mutual written agreement of
the parties hereto; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the
2
date shown for such Account on Schedule A hereto, to set aside and invest assets
attributable to the Contracts; and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of the Portfolios, on behalf
of each Account or sub-Account thereof (together, as applicable, an "Account"),
to fund the Contracts and the Distributor is authorized to sell such shares to
each such Account at net asset value.
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Trust and the Distributor agree as follows:
ARTICLE I. PURCHASE AND REDEMPTION OF TRUST SHARES
1.1. The Trust and the Distributor agree to make available for purchase
by the Company shares of the Portfolios and shall execute orders placed for each
Account on a daily basis at the net asset value next computed after receipt by
the Trust or its designee of such order. For purposes of this Section 1.1, the
Company shall be the designee of the Trust and the Distributor for receipt of
such orders from each Account and receipt by such designee shall constitute
receipt by the Trust; provided that the Trust receives notice of such order by
10:00 a.m. Eastern time on the next following Business Day. "Business Day" shall
mean any day on which the
New York Stock Exchange, Inc. is open for trading and
on which the Fund calculates its net asset value pursuant to SEC rules.
1.2. The Trust, so long as this Agreement is in effect, agrees to make
shares of the Portfolios available for purchase at the applicable net asset
value per share by the Company and its Accounts on those days on which the Trust
calculates its net asset value pursuant to SEC rules and the Trust shall use
reasonable efforts to calculate such net asset value on each day that the
New
York Stock Exchange, Inc. is open for trading. Notwithstanding the foregoing,
the Board of Trustees of the Trust (the "Board") may refuse to permit the Trust
to sell shares of any Portfolio to any person, or suspend or terminate the
offering of shares of any Portfolio if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of the
Board acting in good faith and in light of its fiduciary duties under federal
and any applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.
1.3. The Trust and the Distributor agree that shares of the Trust will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of a Portfolio will be sold to the general public.
1.4. The Trust and the Distributor agree to redeem for cash, on the
Company's request, any full or fractional shares of the Portfolios held by the
Company, executing such requests on a daily basis at the net asset value next
computed after receipt by the Trust or its designee of the request for
redemption. Subject to and in accordance with applicable laws and regulations,
however, the Trust reserves the right to redeem shares of the Portfolios for
assets other than cash.
3
For purposes of this Section 1.4, the Company shall be the designee of the Trust
and the Distributor for receipt of requests for redemption from each Account and
receipt by such designee shall constitute receipt by the Trust; provided that
the Trust receives notice of such request for redemption by 10:00 a.m. Eastern
time on the next following Business Day.
1.5. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Trust shall be made in
accordance with the provisions of such prospectus. The Company will give the
Trust and the Distributor forty-five (45) days written notice of its intention
to make available in the future any other investment company as a funding
vehicle under the Contracts.
1.6. In the event of net purchases, the Company shall pay for Portfolio
shares on the next business Day after an order to purchase Trust shares is made
in accordance with the provisions of Section 1.1 hereof. Payment shall be in
federal funds transmitted by wire and the Company agrees to use its best efforts
to transmit such funds by no later than the end of the Business Day on the day
of transmission. If the Trust or the Distributor does not receive payment by the
end of the Business Day on the day of transmission, the Trust may, without
notice, cancel the order and require the Company to reimburse the Trust promptly
for any loss the Trust suffered by reason of the Company failing to timely pay
for its shares. In the event of net redemptions, the Trust shall pay the
redemption proceeds in federal funds transmitted by wire on the next Business
Day after an order to redeem Portfolio shares is made in accordance with the
provisions of Section 1.4 hereof. For purposes of Sections 2.9 and 2.10, upon
receipt by the Trust and the Company, respectively, of the federal funds so
wired under this Section 1.6, such funds shall cease to be the responsibility of
the paying party and shall become the responsibility of the receiving party.
1.7. Issuance and transfer of the Trust's shares will be by book entry
only. Share certificates will not be issued to the Company or any Account.
Shares ordered from the Trust will be recorded in an appropriate title for each
Account or the appropriate sub-account of each Account.
1.8. The Trust shall use its best efforts to furnish same-day notice (by
wire or telephone, followed by written confirmation) to the Company of any
income dividends or capital gain distributions payable on Portfolio shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional shares of
that Portfolio. The Company reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash. The
Trust shall notify the Company of the number of shares so issued as payment of
such dividends and distributions.
1.9. The Trust shall make the net asset value per share for each
Portfolio available to the Company on each Business Day as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Eastern time) and shall use its best efforts to make such net asset value
per share available by 7:00 p.m. Eastern time.
1.10. The Company shall not redeem Trust shares attributable to the
Contracts (as distinct from Trust shares attributable to the Company's assets
held in the Account) except (i) as
4
necessary to implement Contract owner initiated or approved transactions, (ii)
as required by state and/or federal laws or regulations or judicial or other
legal precedent of general application (hereinafter referred to as a "Legally
Required Redemption") or (iii) as permitted by an order of the SEC pursuant to
Section 26(c) of the 1940 Act. Upon request, the Company will promptly furnish
to the Trust the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Trust) to the effect that any redemption pursuant
to clause (ii) above is a Legally Required Redemption. Furthermore, except in
cases where permitted under the terms of the Contracts, the Company shall not
prevent Contract owners from allocating payments to a Portfolio that was
otherwise available under the Contracts without first giving the Trust ninety
(90) days prior written notice of its intention to do so.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that: (i) it is an insurance
company duly organized and in good standing under applicable law; (ii) it has
legally and validly established each Account prior to any issuance or sale
thereof as a segregated asset account under applicable laws and regulations; and
(iii) it has registered or, prior to any issuance or sale of the Contracts, will
register and will thereafter maintain the registration of each Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts. The Company further represents
and warrants that: (i) the Contracts are or will be registered and shall remain
registered under the 1933 Act so long as any Contracts are outstanding; (ii) the
Contracts will be issued and sold in compliance in all material respects with
all applicable federal and state laws; and (iii) the sale of the Contracts shall
comply in all material respects with state insurance suitability requirements.
The Company shall amend the registration statement for the Accounts and the
Contracts under the 1940 Act and the 1933 Act, respectively, from time to time
as required in order to effect the continuous offering of the Contracts.
2.2. The Trust and the Distributor represent and warrant that Trust
shares sold pursuant to this Agreement shall be registered under the 1933 Act,
duly authorized for issuance and sold in compliance with the laws of the State
of Massachusetts and all applicable federal and state securities laws and that
the Trust is and shall remain registered under the 1940 Act. The Trust shall
amend the registration statement for its shares under the 1933 Act and the 1940
Act from time to time as required in order to effect the continuous offering of
its shares. The Trust shall register and qualify the shares for sale in
accordance with the laws of the various states only if and to the extent deemed
advisable by the Trust.
2.3. The Trust represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and that it will use its reasonable efforts to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify.
2.4. The Company represents and warrants that each Account is and will
continue to be a "segregated asset account" under applicable provisions of the
Code and applicable Treasury Regulations promulgated thereunder and that each
Contract is and will continue to be treated as a
5
"variable contract" under applicable provisions of the Code and applicable
Treasury Regulations promulgated thereunder. The Company further represents and
warrants that it will make every effort to maintain such treatment and that it
will notify the Trust immediately upon having a reasonable basis for believing
that any Account or Contract has ceased to be so treated or that any Account or
Contract might not be so treated in the future.
2.5. The Trust represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Trust
undertakes to have the Board, a majority of whom are not interested persons of
the Trust, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6. The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.7. The Trust represents that it is lawfully organized and validly
existing under the laws of the State of Massachusetts and that it does and will
comply in all material respects with the 1940 Act.
2.8. The Distributor represents and warrants that it is and shall remain
duly registered in all material respects under all applicable federal and state
securities laws and that it will perform its obligations for the Trust in
compliance in all material respects with the laws of its state of domicile and
any applicable state and federal securities laws.
2.9. The Trust represents and warrants that all of its trustees,
officers, employees, and other individuals/entities dealing with the money
and/or securities of the Trust are and shall continue to be at all times covered
by a blanket fidelity bond or similar coverage for the benefit of the Trust in
an amount not less than the minimum coverage as currently required by Rule 17g-1
of the 1940 Act or related provisions as may be promulgated from time to time.
The aforesaid blanket fidelity bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company. The Trust
agrees to notify the Company in the event that such coverage no longer applies.
2.10. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Account(s) are and shall continue to be
at all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Company and/or the Account(s) that is reasonable and customary in
light of the Company's obligations under this Agreement. The aforesaid includes
coverage for larceny and embezzlement and shall be issued by a reputable bonding
company in an amount not less than $5 million. The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Trust and the
Distributor in the event that such coverage no longer applies.
6
ARTICLE III. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS; VOTING
3.1. The Trust or its designee shall provide the Company with as many
printed copies of the Trust's current prospectus and statement of additional
information as the Company may reasonably request. If requested by the Company,
in lieu of providing printed copies the Trust shall provide camera-ready film or
computer diskettes containing the Trust's prospectus and statement of additional
information, and such other assistance as is reasonably necessary in order for
the Company once each year (or more frequently if the prospectus and/or
statement of additional information for the Trust is amended during the year) to
have the prospectus for the Contracts and the Trust's prospectus printed
together in one document, and to have the statement of additional information
for the Trust and the statement of additional information for the Contracts
printed together in one document. Alternatively, the Company may print the
Trust's prospectus and/or its statement of additional information in combination
with other fund companies' prospectuses and statements of additional
information.
3.2. Except as provided in this Section 3.2, all expenses of preparing,
setting in type, printing and distributing Trust prospectuses and statements of
additional information shall be the expense of the Company. For prospectuses and
statements of additional information provided by the Company in order to update
disclosure as required by the 1933 Act and/or the 1940 Act, the cost of
preparing, setting in type and printing shall be borne by the Trust. If the
Company chooses to receive camera-ready film or computer diskettes in lieu of
receiving printed copies of the Trust's prospectus, the Trust shall bear the
cost of typesetting to provide the Trust's prospectus to the Company in the
format in which the Trust is accustomed to formatting prospectuses, and the
Company shall bear the expense of adjusting or changing the format to conform
with any of its prospectuses. In such event, the Trust will reimburse the
Company in an amount equal to the product of "x" and "y", where "x" is the
number of such prospectuses distributed and "y" is the Trust's per unit cost of
printing the Trust's prospectus. The same procedures shall be followed with
respect to the Trust's statement of additional information.
3.3. The statement of additional information of the Trust shall be
obtainable from the Trust, the Distributor, the Company or such other person as
the Trust may designate.
3.4. The Trust, at its expense, shall provide the Company with copies of
its proxy statements, reports to shareholders, and other communications (except
for prospectuses and statements of additional information, which are covered in
Section 3.1 and 3.2) to shareholders in such quantity as the Company shall
reasonably require for distributing to its Contract owners who currently own
shares of one or more Portfolios ("Existing Contract Owners"). The Trust shall
not pay any costs of distributing such proxy materials, reports to shareholders
and other communications to prospective Contract owners.
3.5. If and to the extent required by law, the Company shall distribute
all proxy materials furnished by the Trust to Contract owners to whom voting
privileges are required to be extended and shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Portfolio shares in accordance with instructions
received from Contract owners; and
7
(iii) vote Portfolio shares for which no instructions have been
received in the same proportion as Portfolio shares for
which instructions have been received;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners. The Company
reserves the right to vote Portfolio shares held in any segregated asset account
in its own right, to the extent permitted by law. If the Company is required to
solicit voting instructions, the Trust and the Company shall follow the
procedures, and shall have the corresponding responsibilities, for the handling
of proxies and voting instruction solicitations, as set forth in Schedule C
attached hereto and incorporated herein by reference. Participating Insurance
Companies shall be responsible for ensuring that each of their separate accounts
participating in the Trust (and for which the soliciting of voting instructions
is required) calculates voting privileges in a manner consistent with the
standards set forth on Schedule C, which standards will also be provided to the
other Participating Insurance Companies.
3.6. The Trust will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Trust will either provide for
annual meetings (except insofar as the SEC may interpret Section 16 of the 1940
Act not to require such meetings) or comply with Section 16(c) of the 1940 Act
(although the Trust is not one of the trusts described in Section 16(c) of the
▇▇▇▇ ▇▇▇) as well as with Section 16(a) of the 1940 Act and, if and when
applicable, Section 16(b) of the 1940 Act. Further, the Trust will act in
accordance with the SEC's interpretation of the requirements of Section 16(a) of
the 1940 Act with respect to periodic elections of trustees and with whatever
rules the SEC may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust or the Distributor is named, at least ten (10)
Business Days prior to its use. No such material shall be used without the prior
approval of the Trust or its designee. The Trust shall use its reasonable best
efforts to review any such material as soon as practicable after receipt and no
later than ten (10) Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Trust shares, as such registration statement or prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Trust
which are in the public domain or approved by the Trust for distribution to
Trust shareholders, or in sales literature or other promotional material
approved by the Trust or its designee, except with the permission of the Trust.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the
8
Company and/or its Account(s) or Contract(s) are named at least ten (10)
Business Days prior to its use. No such material shall be used if the Company or
its designee reasonably objects to such use within ten (10) Business Days after
receipt of such material.
4.4. Neither the Trust nor the Distributor shall give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement or prospectus may be amended or supplemented from time to
time, or in reports or proxy statements for each Account which are in the public
domain or approved by the Company for distribution to Contract owners, or in
sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Trust will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Trust or its shares and are relevant to
the Company or the Contracts.
4.6. The Company will provide to the Trust at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to investment in
the Trust or the Portfolios under the Contracts.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Trust or any affiliate of the Trust: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (I.E., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials.
ARTICLE V. FEES AND EXPENSES
5.1 The Trust shall pay no fee or other compensation to the Company
under this Agreement, except that if the Trust or any Portfolio adopts and
implements a service plan and/or a plan pursuant to Rule 12b-1, then the
Distributor may make payments to the Company or to the underwriter for the
Contracts pursuant to such plans if and in amounts agreed to by the Distributor
in writing.
9
5.2 All expenses incident to performance by the Trust under this
Agreement shall be paid by the Trust. The Trust shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Trust, in
accordance with applicable state laws prior to their sale. Except as otherwise
set forth in Section 3.2 of this Agreement, the Trust shall bear the expenses
for the cost of registration and qualification of the Trust's shares,
preparation and filing of the Trust's prospectus and registration statement,
proxy materials and reports, setting in type and printing the prospectus, proxy
materials and reports to shareholders, the preparation of all statements and
notices required by any federal or state law, and all taxes on the issuance or
transfer of the Trust's shares.
5.3. The Company shall bear the expenses of distributing the Trust's
prospectus, statement of additional information, proxy materials and reports to
owners of Contracts issued by the Company.
ARTICLE VI. DIVERSIFICATION
6.1. The Trust will use its best efforts to at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for annuity, endowment, or life insurance contracts
and any amendments or other modifications to such Section or Regulations. In the
event the Trust ceases to so qualify, it will take reasonable steps to (a)
notify the Company of such event and (b) adequately diversify the Trust so as to
achieve compliance within the grace period afforded by Regulation 1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Trust. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by contract owners; or (f) a decision by a Participating
Insurance Company to disregard the voting instructions of contract owners. The
Trust shall promptly inform the Company if the Board determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever Contract owner voting instructions are
disregarded. The Company agrees that these responsibilities will be carried out
with a view only to the interests of Contract owners.
10
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Trust or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another portfolio of the Trust, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (I.E., annuity contract owners, life insurance policy
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account. No charge
or penalty will be imposed as a result of such withdrawal. The Company agrees
that it bears the responsibility to take remedial action in the event of a Board
determination of an irreconcilable material conflict and the cost of such
remedial action, and that these responsibilities will be carried out with a view
only to the interests of Contract owners.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account (at the Company's expense); provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. No charge or penalty will be imposed as a result of such
withdrawal. The Company agrees that it bears the responsibility to take remedial
action in the event of a Board determination of an irreconcilable material
conflict and the cost of such remedial action, and that these responsibilities
will be carried out with a view only to the interests of Contract owners.
7.5. For purposes of Sections 7.3 and 7.4 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Trust be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 or 7.4 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict.
7.6. 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 Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Trust and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3 and
7.4 of this Agreement shall continue in effect only to the extent that terms
11
and conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
7.7. Each of the Company and the Distributor shall at least annually
submit to the Board such reports, materials or data as the Board may reasonably
request so that the Board may fully carry out the obligations imposed upon it by
the provisions hereof and in the Shared Funding Exemptive Order. Such reports,
materials and data shall be submitted more frequently if deemed appropriate by
the Board.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Trust and the
Distributor and each member of the Board and each officer and employee of the
Trust, and each director, officer and employee of the Distributor, and each
person, if any, who controls the Trust or the Distributor within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" and
individually, an "Indemnified Party," for purposes of this Section 8.1) against
any and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Company) or litigation (including
reasonable legal and other expenses), to which the Indemnified Parties may
become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Trust's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the registration statement or prospectus for the Contracts
or contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or
on behalf of the Trust for use in the registration statement
or prospectus for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise for
use in connection with the sale of the Contracts or Trust
shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature of
the Trust not supplied by the Company, or persons under its
control and other than statements or representations
authorized by the Trust or the Distributor) or unlawful
conduct of the
12
Company or persons under its control, with respect to the
sale or distribution of the Contracts or Trust shares; or
(iii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained in a
registration statement, prospectus, or sales literature of
the Trust or any amendment thereof or supplement thereto or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or
omission was made in reliance upon and in conformity with
information furnished to the Trust by or on behalf of the
Company; or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of
this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company.
Each of paragraphs (i) through (v) above is limited by and in accordance with
the provisions of Sections 8.1(b) and 8.1(c) below.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Trust or the Distributor, as applicable, will promptly notify
the Company of the commencement of any litigation or proceedings against an
Indemnified Party in connection
13
with this Agreement, the issuance or sale of the Trust shares or the Contracts,
or the operation of the Trust.
8.2. INDEMNIFICATION BY THE DISTRIBUTOR
8.2(a). The Distributor agrees to indemnify and hold harmless the Company
and each of its directors, officers and employees, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" and individually, an "Indemnified
Party," for purposes of this Section 8.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Distributor) or litigation (including reasonable legal and other
expenses) to which the Indemnified Parties may become subject under any statute
or regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of shares of a Portfolio and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the registration statement or prospectus or sales literature
of the Trust (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in
conformity with information furnished to the Trust or the
Distributor by or on behalf of the Company for use in the
registration statement or prospectus for the Trust or in
sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Portfolio shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature for
the Contracts not supplied by the Trust or the Distributor
or persons under their respective control and other than
statements or representations authorized by the Company) or
unlawful conduct of the Trust or the Distributor or persons
under their respective control, with respect to the sale or
distribution of the Contracts or Portfolio shares; or
(iii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained in a
registration statement, prospectus, or sales literature
covering the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein
or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on
behalf of the Trust or the Distributor; or
14
(iv) arise as a result of any failure by the Distributor to
provide the services and furnish the materials under the
terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Distributor.
Each of paragraphs (i) through (v) above is limited by and in accordance with
the provisions of Sections 8.2(b) and 8.2(c) below.
8.2(b). The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement.
8.2(c). The Distributor shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Distributor in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Distributor of
any such claim shall not relieve the Distributor from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Distributor will be entitled to
participate, at its own expense, in the defense thereof. The Distributor also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Distributor to such party
of the Distributor's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Distributor will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company will promptly notify the Distributor of the
commencement of any litigation or proceedings against an Indemnified Party in
connection with this Agreement, the issuance or sale of the Contracts or the
operation of the Account(s).
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of
New York.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, the Shared
15
Funding Exemptive Order) and the terms hereof shall be interpreted and construed
in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by sixty (60) days advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Trust and
Distributor with respect to any Portfolio based upon the Company's
determination that shares of such Portfolio are not reasonably
available to meet the requirements of the Contracts; provided,
however, that said termination shall become effective ten (10) days
after receipt of notice unless the Trust makes available a sufficient
number of shares of the Portfolio to reasonably meet the requirements
of the Contracts within said ten (10) day period; or
(c) termination by the Company by written notice to the Trust and the
Distributor with respect to any Portfolio in the event that any of the
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 the Company; or
(d) termination by the Company by written notice to the Trust and the
Distributor with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company under
Subchapter M of the Code or under any successor or similar provision;
or
(e) termination by the Company by written notice to the Trust and the
Distributor with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements specified in
Article VI hereof; or
(f) termination by the Trust or the Distributor by written notice to the
Company if the Trust or the Distributor, as applicable, shall
determine, in its sole judgment exercised in good faith, that the
Company and/or its affiliated companies has suffered a material
adverse change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject of
material adverse publicity; or
(g) termination by the Company by written notice to the Trust and the
Distributor, if the Company shall determine, in its sole judgment
exercised in good faith, that the Trust or the Distributor has
suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement or
is the subject of material adverse publicity; or
16
(h) termination by the Trust or the Distributor by written notice to the
Company, if the Company gives the Trust and the Distributor the
written notice specified in Section 1.5 hereof and at the time such
notice was given there was no notice of termination outstanding under
any other provision of this Agreement; provided, however, any
termination under this Section 10.1(h) shall be effective forty-five
(45) days after the notice specified in Section 1.5 was given; or
(i) termination by any party to this Agreement upon another party's
material breach of any provision of this Agreement, which breach has
not been cured to the satisfaction of the terminating party within ten
(10) days after written notice of such breach is delivered to the
Trust or the Company as the case may be.
10.2. Notwithstanding any termination of this Agreement with respect to a
Portfolio, the Trust and the Distributor shall at the option of the Company
continue to make available additional shares of the Portfolio, pursuant to the
terms and conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement (the "Existing Contracts"),
unless such further sale of Portfolio shares is proscribed by law, regulation or
applicable regulatory authority, or unless the Board determines that liquidation
of the Portfolio following termination of this Agreement is in the best
interests of the Portfolio. Specifically, subject to the foregoing, the owners
of the Existing Contracts shall be permitted to direct reallocation of
investments in the Portfolio, redemption of investments in the Portfolio and/or
investment in the Portfolio upon the making of additional purchase payments
under the Existing Contracts. The parties agree that this Section 10.2 shall not
apply to any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
17
If to the Trust:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Variable Investment Series
c/o Morgan ▇▇▇▇▇▇▇ Investment Management
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
If to the Distributor:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Distributors Inc.
c/o Morgan ▇▇▇▇▇▇▇ Investment Management
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
If to the Company:
Travelers Insurance Company
▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
ARTICLE XII. MISCELLANEOUS
12.1. The Declaration of Trust establishing ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Variable
Investment Series, dated February 24, 1983, a copy of which, together with all
amendments thereto (the "DECLARATION"), is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Variable Investment Series refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and no Trustee,
shareholder, officer, employee or agent of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Variable Investment
Series shall be held to any personal liability, nor shall resort be had to their
private property for the satisfaction of any obligation or claim or otherwise,
in connection with the affairs of said ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Variable Investment
Series, but the Trust Estate only shall be liable.
12.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential any "non-public
personal information" about any "consumer" of another party (as such terms are
defined in SEC Regulation S-P) and any other information reasonably identified
as confidential in writing by another party ("Confidential Information"). Each
party agrees not to disclose, disseminate or utilize another party's
Confidential Information except: (i) as permitted by this Agreement, (ii) upon
the written consent of the other party, (iii) where the Confidential Information
comes into the public domain through no fault of the party receiving the
information, or (iv) as otherwise required or permitted under applicable law.
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.
18
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
National Association of Securities Dealers and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby. Notwithstanding the generality of the
foregoing, each party hereto further agrees to furnish state insurance
authorities with any information or reports in connection with services provided
under this Agreement which such authorities may request in order to ascertain
whether the insurance operations of the Company are being conducted in a manner
consistent with applicable law and regulations.
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 laws.
12.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Distributor may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Distributor, if such assignee is duly licensed and registered
to perform the obligations of the Distributor under this Agreement.
12.9. If requested by the Trust or the Distributor, the Company shall
furnish, or shall cause to be furnished, to the requesting party or its designee
copies of the following documents:
(a) the Company's annual statement (prepared under statutory accounting
principles) and annual report (prepared under generally accepted
accounting principles ("GAAP"), if any), as soon as practical and in
any event within ninety (90) days after the end of each fiscal year;
(b) the Company's quarterly statements (prepared under statutory
accounting principles and GAAP, if any), as soon as practical and in
any event within forty-five (45) days after the end of each quarterly
period;
(c) any financial statement, proxy statement, notice or report of the
Company sent to stockholders and/or policyholders, as soon as
practical after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and financial reports of
the Company filed with the SEC or any state insurance regulator, as
soon as practical after the filing thereof; and
19
(e) any other report submitted to the Company by independent accountants
in connection with any annual, interim or special audit made by them
of the books of the Company, as soon as practical after the receipt
thereof.
12.10. Unless otherwise specifically provided in this Agreement, no
provision of this Agreement may be amended or modified in any manner except by a
written agreement executed by all parties.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified above.
THE TRAVELERS INSURANCE COMPANY
BY:
------------------------
NAME:
TITLE:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ VARIABLE INVESTMENT SERIES
BY: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
NAME: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
TITLE: EXECUTIVE VICE PRESIDENT
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ DISTRIBUTORS INC.
BY: /S/ ▇▇▇▇ ▇▇▇▇ III
-------------------------------
NAME: ▇▇▇▇ ▇▇▇▇ III
TITLE: PRESIDENT
20
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
NAME OF SEPARATE ACCOUNT AND DATE FORM NUMBER AND NAME OF
ESTABLISHED BY BOARD OF DIRECTORS CONTRACT FUNDED BY SEPARATE ACCOUNT
--------------------------------- -----------------------------------
Travelers Life & Annuity Premier The Travelers Separate Account ABD For Variable
Advisers III Prospectus Annuities
(established November 14, 2002)
Travelers Life & Annuity Premier The Travelers Separate Account Seven For
Advisers L Annuity Prospectus Variable Annuities
(established November 14, 2002)
A-1
SCHEDULE B
PORTFOLIOS OF VARIABLE INVESTMENT SERIES
AVAILABLE UNDER THIS AGREEMENT
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Dividend Growth Portfolio - Class Y
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Equity Portfolio - Class Y
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ S&P 500 Index - Class Y
B-1
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Trust. The defined
terms herein shall have the meanings assigned in the
Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
- The proxy proposals are given to the Company by the Trust as early as
possible before the date set by the Trust for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of voting
instructions from Contract owners and to facilitate the establishment of
tabulation procedures. At this time the Trust will inform the Company of
the Record, Mailing and Meeting dates. This will be done verbally
approximately two months before the shareholder meeting.
- Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each Contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in this Step #2. The Company will use its best efforts to call in
the number of Customers to the Trust, as soon as possible, but no later
than two weeks after the Record Date.
- The Trust's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting instruction
solicitation material. The Trust will provide the last Annual Report to the
Company pursuant to the terms of Section 3.4 of the
Participation Agreement
to which this Schedule relates.
- The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Trust. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Trust or its
affiliate must approve the Card before it is printed. Allow approximately
2-4 Business Days for printing information on the Cards. Information
commonly found on the Cards includes:
- name (legal name as found on account registration)
- address
- fund or account number
- coding to state number of units
C-1
- individual Card number for use in tracking and verification of votes
(already on Cards as printed by the Trust).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
- During this time, the Trust will develop, produce and pay for the Notice of
Proxy and the Proxy Statement (one document). Printed and folded notices
and statements will be sent to Company for insertion into envelopes
(envelopes and return envelopes are provided and paid for by the Company).
Contents of envelope sent to Customers by the Company will include:
- Voting Instruction Card(s)
- One proxy notice and statement (one document)
- return envelope (postage pre-paid by Company) addressed to the Company
or its tabulation agent
- "urge buckslip" - optional, but recommended (this is a small, single
sheet of paper that requests Customers to vote as quickly as possible
and that their vote is important; one copy will be supplied by the
Trust.)
- cover letter - optional; supplied by Company and reviewed and approved
in advance by the Trust
- The above contents should be received by the Company approximately 3-5
Business Days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to the Trust.
- Package mailed by the Company.
- The Trust must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including,) the shareholder meeting, counting backwards.
- Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by the Trust in the past.
C-2
- Signatures on Card checked against legal name on account registration that
was printed on the Card.
Note: For Example, if the account registration is under "▇▇▇▇ ▇. ▇▇▇▇▇,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
- If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter and a
new Card and return envelope. The mutilated or illegible Card is
disregarded and considered to be not received for purposes of vote
tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to why
they did not complete the system. Any questions on those Cards are usually
remedied individually.
- There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
- The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Trust receives the tabulations
stated in terms of a percentage and the number of SHARES.) The Trust must
review and approve tabulation format.
- Final tabulation in shares is verbally given by the Company to the Trust on
the morning of the shareholder meeting not later than 10:00 a.m. Eastern
time. The Trust may request an earlier deadline if reasonable and if
required to calculate the vote in time for the shareholder meeting.
- A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
The Trust will provide a standard form for each Certification.
- The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Trust will be
permitted reasonable access to such Cards.
- All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
C-3
