<PAGE> 1
FILE NOS: 2-53757
811-2571
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
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<PAGE> 2
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
ONE TOWER SQUARE
HARTFORD, CONNECTICUT 06183
NOTICE OF ANNUAL MEETING
March 8, 1999
To Variable Annuity Contract Owners:
Notice is hereby given that the Annual Meeting of Variable Annuity Contract
Owners of The Travelers Quality Bond Account for Variable Annuities ("Account
QB") will be held at its offices at One Tower Square, Hartford, Connecticut, on
Friday, April 30, 1999 at 9:00 a.m. for the following purposes:
1. To elect five (5) members of the Board of Managers to serve until
the next annual meeting and until their successors are elected and qualify.
2. To ratify the selection of KPMG LLP as independent accountants of
Account QB for the year ending December 31, 1999.
3. To approve the Revised Rules and Regulations of Account QB.
4. To act on any and all other business as may properly come before
the meeting.
The close of business on February 19, 1999 has been fixed as the record
date for the determination of Variable Annuity Contract Owners entitled to
notice of and to vote at said meeting.
By order of the Board of Managers.
LOGO
ERNEST J. WRIGHT, SECRETARY
Please complete and return the enclosed proxy card as soon as possible in
the post-paid envelope provided. Your prompt response is appreciated.
YOUR VOTE IS VERY IMPORTANT TO US REGARDLESS OF THE NUMBER OF SHARES THAT
YOU OWN.
002
<PAGE> 3
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
PROXY STATEMENT FOR THE ANNUAL MEETING OF VARIABLE ANNUITY CONTRACT OWNERS
TO BE HELD ON FRIDAY, APRIL 30, 1999
THE BOARD OF MANAGERS OF THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE
ANNUITIES (ACCOUNT QB) SOLICITS YOUR PROXY FOR USE AT THE ANNUAL MEETING OF
CONTRACT OWNERS AND AT ANY ADJOURNMENT OF IT. The annual meeting will be held at
9:00 a.m. on Friday, April 30, 1999, at the offices of Account QB, One Tower
Square, Hartford, Connecticut. This proxy material is being to be mailed to
Contract Owners beginning on or about March 8, 1999.
VOTE BY PROXY
A proxy card is enclosed for use at the meeting. The proxy card may be
revoked at any time before it is voted by sending a written notice of revocation
to Account QB's Secretary or by appearing in person to vote at the meeting. All
proxy cards which are properly executed and received in time and not so revoked
will be voted at the meeting in accordance with the instructions on them, if
any. If no specification is made, the proxy card will be voted for the election
of the five nominees for members of the Board of Managers listed in this proxy
statement and for the ratification of the selection of KPMG LLP as independent
accountants for the fiscal year ending December 31, 1999 and for the approval of
the Revised Rules and Regulations.
COST OF SOLICITATION
The cost of soliciting these proxies will be borne by The Travelers
Insurance Company ("Travelers Insurance"), the issuer of the variable annuity
contracts that use Account QB as an investment alternative. Proxies may be
solicited by directors, officers or employees of Travelers Insurance on behalf
of the Board of Managers of Account QB, either in person, by telephone or by
telegram.
CONTRACT OWNERS AND THE VOTE
Only Contract Owners of record at the close of business on February 19,
1999 (the record date) will be entitled to notice of and to vote at the annual
meeting. On the record date, there were 27,595,445.449 units of Account QB
outstanding and entitled to be voted at the meeting. The number of full and
fractional votes, which you as a Contract Owner are entitled to cast is set
forth on the enclosed proxy card. As of January 31, 1999, no single person or
entity owned beneficially a contract or contracts entitling it to cast more than
5% of the total outstanding votes.
VOTE REQUIRED
Approval of Proposals 1, 2 and 3 requires the affirmative vote of the
holders of a majority of the voting securities present at the meeting in person
or by proxy. A quorum present for Proposals 1, 2 and 3 is 35% of the voting
securities of Account QB present at the meeting in person or by proxy.
Abstentions will be counted as present for purposes of determining a quorum, but
will not be counted as voting with respect to those proposals from which
contract owners abstain.
<PAGE> 4
ANNUAL REPORT
Account QB's Annual Report containing financial statements for the fiscal
year ended December 31, 1998 was mailed to Contract Owners of record as of
December 31, 1998. Copies of the Annual Report and the most recent semi-annual
report succeeding Account QB's Annual Report may be obtained by writing to The
Travelers Insurance Company, Annuity Services, One Tower Square, Hartford,
Connecticut 06183-5030, without charge or by calling 1-800-842-9368.
1. ELECTION OF THE BOARD OF MANAGERS
At the meeting, five (5) members of the Board of Managers are to be elected
to hold office until the next annual meeting and until their successors shall
have been elected and qualify. Unless this authority has been withheld on the
proxy card, it is intended that the proxy card will be voted for the election of
the five (5) nominees named below. If any of the nominees are unable to serve at
the time of the meeting, and there is no reason to believe they will not serve,
the persons named as proxies may vote for any other person or persons as they
may determine at their discretion. The following nominees are recommended by the
Nominating Committee pursuant to their meeting held on January 29, 1999.
<TABLE>
<CAPTION>
CONTRACTS
NOMINEE FOR OWNED
MEMBER PRINCIPAL OCCUPATION 12/31/98
----------- -------------------- ---------
<C> <S> <C>
Heath B. McLendon* Managing Director (1993-present), Salomon Smith Barney None
Age 65 Inc. ("Salomon Smith Barney"); President and Director
Member Since 1995 (1994- present), SSBC Fund Management Inc.; Director and
President (1996-present), Travelers Investment Adviser,
Inc.; Chairman and Director of fifty-nine investment
companies associated with Salomon Smith Barney; Trustee of
certain Citifunds' family of Trusts; Trustee, Drew
University; Advisory Director, First Empire State
Corporation; Chairman, Board of Managers, seven Variable
Annuity Separate Accounts of The Travelers Insurance
Company+; Chairman, Board of Trustees, five Mutual Funds
sponsored by The Travelers Insurance Company++; prior to
July 1993, Senior Executive Vice President of Shearson
Lehman Brothers Inc.; Vice Chairman of Shearson Asset
Management; Director of PanAgora Asset Management, Inc.
and PanAgora Management Limited.
Knight Edwards Of Counsel (1988-present), Partner (1956-1988), Edwards & None
Age 75 Angell, Attorneys; Member, Advisory Board (1973-1994),
Member Since 1975 thirty-one mutual funds sponsored by Keystone Group, Inc.;
Member, Board of Managers, seven Variable Annuity Separate
Accounts of The Travelers Insurance Company+; Trustee,
five Mutual Funds sponsored by The Travelers Insurance
Company++.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
CONTRACTS
NOMINEE FOR OWNED
MEMBER PRINCIPAL OCCUPATION 12/31/98
----------- -------------------- ---------
<C> <S> <C>
Robert E. McGill, Retired manufacturing executive. Director (1983-1995), None
III Executive Vice President (1989-1994) and Senior Vice
Age 67 President, Finance and Administration (1983-1989), The
Member Since 1975 Dexter Corporation (manufacturer of specialty chemicals
and materials); Vice Chairman (1990-1992), Director
(1983-1995), Life Technologies, Inc. (life
science/biotechnology products); Director (1994-present),
The Connecticut Surety Corporation (insurance); Director
(1995-present), Chemfab Corporation (specialty materials
manufacturer); Director (1999-present) Ravenwoods Winery,
Inc.; Member, Board of Managers, seven Variable Annuity
Separate Accounts of The Travelers Insurance Company+;
Trustee, five Mutual Funds sponsored by The Travelers
Insurance Company++.
Lewis Mandell Dean, School of Management (1998-present), University at None
Age 56 Buffalo; Dean, College of Business Administration (1995-
Member Since 1990 1998), Marquette University; Professor of Finance (1980-
1995) and Associate Dean (1993-1995), School of Business
Administration, and Director, Center for Research and
Development in Financial Services (1980-1995), University
of Connecticut; Director (1992-present), GZA
Geoenvironmental Tech, Inc. (engineering services);
Member, Board of Managers, seven Variable Annuity Separate
Accounts of The Travelers Insurance Company+; Trustee,
five Mutual Funds sponsored by The Travelers Insurance
Company++.
Frances M. Hawk, Private Investor (1997-present), Portfolio Manager (1992- None
CFA, CFP 1997), HLM Management Company, Inc. (investment manage-
Age 51 ment); Assistant Treasurer, Pensions and Benefits
Member Since 1991 Management (1989-1992), United Technologies Corporation
(broad-based designer and manufacturer of high technology
products); Member, Board of Managers, seven Variable
Annuity Separate Accounts of The Travelers Insurance
Company+; Trustee, five Mutual Funds sponsored by The
Travelers Insurance Company++.
</TABLE>
3
<PAGE> 6
- ---------------
+ These seven Variable Annuity Separate Accounts are: The Travelers Growth and
Income Stock Account for Variable Annuities; The Travelers Quality Bond
Account for Variable Annuities; The Travelers Money Market Account for
Variable Annuities; The Travelers Timed Growth and Income Stock Account for
Variable Annuities; The Travelers Timed Short-Term Bond Account for Variable
Annuities; The Travelers Timed Aggressive Stock Account for Variable
Annuities and The Travelers Timed Bond Account for Variable Annuities.
++ These five Mutual Funds are: Capital Appreciation Fund; Money Market
Portfolio; High Yield Bond Trust; Managed Assets Trust and The Travelers
Series Trust.
* Mr. McLendon is an "interested person" within the meaning of the Investment
Company Act of 1940, as amended ("1940 Act") by virtue of his position as
Managing Director of Salomon Smith Barney and Director of The Travelers
Investment Management Company, the investment adviser to some of the Separate
Accounts, both indirect wholly owned subsidiaries of Citigroup Inc. Mr.
McLendon also owns shares and options to purchase shares of Citigroup Inc.,
the indirect parent of The Travelers Insurance Company.
Prior to each annual meeting of Contract Owners at which members of the
Board of Managers are to be elected, or if a vacancy in the Board of Managers
occurs between such meetings, the Nominating Committee of the Board of Managers
recommends candidates for nomination as members of the Board of Managers.
Account QB's Nominating Committee consists of those members of the Board of
Managers who are not "interested persons" as defined in the 1940 Act. Currently,
these are Knight Edwards, Robert E. McGill, III, Lewis Mandell and Frances M.
Hawk. During the fiscal year ended December 31, 1998, the Nominating Committee
held one meeting. The Committee will consider potential nominees recommended by
Contract Owners. Any Contract Owner desiring to present a candidate to the
Committee for consideration should submit the name of the candidate, in writing,
to Account QB's Secretary prior to December 31, 1999.
MEETINGS
There were four regular meetings and two special meetings of the Board of
Managers of Account QB during 1998. All members of the Board of Managers
attended at least 75% of the aggregate of its meetings and the meetings of the
committees of which they were members.
REMUNERATION OF THE BOARD OF MANAGERS
Members of the Board of Managers who are also employees of Citigroup Inc.
or its subsidiaries are not entitled to any fee. Members of the Board of
Managers who are not affiliated as employees of Citigroup Inc. or its
subsidiaries receive an aggregate annual retainer of $19,000 for service on the
Boards of the seven Variable Annuity Separate Accounts established by Travelers
Insurance and the five Mutual Funds sponsored by Travelers Insurance. They also
receive an aggregate fee of $2,500 for each Board meeting attended. Currently
Travelers Insurance pays such compensation under an agreement with Account QB.
In addition, Account QB has adopted an Emeritus Program for non-interested
Board members pursuant to which Account QB's Board and the management of Account
QB can continue to benefit from the experience of long-time Board members who
have resigned from the Board.
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Pursuant to this Program, Board members with 10 years of service may agree to
provide services as an emeritus director at age 72 or upon reaching 80 years of
age and will receive 50% of the Annual retainer and 50% of meeting fees, if
attended. Service as an emeritus director is limited to 10 years. Each emeritus
director agrees to be available for consultation with the Board and management
of Account QB and may attend Board meetings.
BOARD MEMBER COMPENSATION, BOARD AND COMMITTEE MEETINGS
<TABLE>
<CAPTION>
AMOUNTS PAID DURING CALENDAR YEAR
ENDED DECEMBER 31, 1998 FOR
FIVE MUTUAL FUNDS AND SEVEN VARIABLE
BOARD MEMBER SEPARATE ACCOUNTS (AGGREGATE FEE)
- ------------ ------------------------------------
<S> <C>
Heath B. McLendon N/A
Knight Edwards $31,500.00
Robert E. McGill III $34,000.00
Lewis Mandell $34,000.00
Frances M. Hawk $34,000.00
</TABLE>
RECOMMENDATION OF THE BOARD OF MANAGERS
The Board of Managers of Account QB recommends approval of the Proposal to
elect the five (5) members of the Board.
2. RATIFICATION OF THE SELECTION OF INDEPENDENT ACCOUNTANTS
It is proposed that Contract Owners ratify the action of the Board of
Managers, taken on January 29, 1999 by a unanimous vote, cast in person,
including those members of the Board of Managers who are not interested persons
of Account QB, to select the firm of KPMG LLP as the independent accountants of
Account QB for the fiscal year ending December 31, 1999. A representative from
KPMG LLP is expected to be present at the meeting with the opportunity to make a
statement if desired, and is expected to be available to respond to appropriate
questions.
Account QB did not renew its audit relationship with its former principal
accountant, PricewaterhouseCoopers LLP (formerly known as Coopers & Lybrand
L.L.P.) on January 29, 1999. On that same day, KPMG LLP was engaged as principal
accountant for Account QB. KPMG LLP serves as the principal accountant for other
affiliated separate accounts and mutual funds. PricewaterhouseCoopers LLP is
expected to be present at the meeting with the opportunity to make a statement
if desired, and is expected to be available to respond to appropriate questions.
The report by PricewaterhouseCoopers LLP on the financial statements for
fiscal years ended December 31, 1998 and 1997, did not contain an adverse
opinion or disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope, or accounting principles.
The decision to change principal accountants was approved by the Board of
Managers at a meeting held on January 29, 1999, where it decided to engage KPMG
LLP as the principal accountant to audit Account QB's financial statements since
it would promote consistency and possible economies of scale among affiliated
separate accounts and mutual funds.
5
<PAGE> 8
During the past two years and subsequent interim period preceding such
termination there were no disagreements with PricewaterhouseCoopers LLP on any
matters of accounting principles or practices, financial statement disclosure,
or auditing scope or procedures, which disagreements if not resolved to the
satisfaction of the former accountant, would have caused it to make reference to
the subject matter of disagreement in connection with its report.
Attached as Exhibit A is a letter addressed to the Securities and Exchange
Commission from PricewaterhouseCoopers LLP stating that PricewaterhouseCoopers
LLP agrees with the statements set forth above with respect to the change of
principal accountants.
The Board also has an Audit Committee consisting of those members who are
not "interested persons" as defined in the 1940 Act. The Audit Committee reviews
the scope and results of Account QB's annual audits with Account QB's
independent accountant and recommends the engagement of the accountants.
Currently, the members of the Audit Committee are Knight Edwards, Robert E.
McGill III, Lewis Mandell and Frances M. Hawk who are not "interested persons"
as defined in the 1940 Act. During the fiscal year ended December 31, 1998, the
Audit Committee held one meeting.
RECOMMENDATION OF THE BOARD OF MANAGERS
The Board of Managers of Account QB recommends approval of the Proposal to
ratify the selection of KPMG LLP as independent accountants.
3. APPROVAL OF THE REVISED RULES AND REGULATIONS
The Board of Managers approved the Revised Rules and Regulations of Account
QB at the January 29, 1999 Board of Managers meeting. The Rules and Regulations
govern how Account QB operates. The purpose for adopting new Revised Rules and
Regulations is to standardize the Rules and Regulations for all managed separate
accounts affiliated with Travelers Insurance and to simplify and modernize the
rules and regulations. The Revised Rules and Regulations will minimize costs and
delays associated with frequent Contract Owner meetings. The original Rules and
Regulations were written on December 15, 1975 as set forth in Exhibit B. The
revised Rules and Regulations are set forth in Exhibit C.
The revisions to the Rules and Regulations generally fall into three
categories -- those that directly affect Contract Owners, those that directly
affect Managers, and those provisions that relate to indemnification.
REVISIONS THAT DIRECTLY AFFECT CONTRACT OWNERS. The revisions to the Rules
and Regulations that directly affect Contract Owners are the revisions that: (1)
no longer require annual meetings of the Contract Owners; (2) set forth the
matters on which Contract Owners may vote; (3) reduce the quorum to 20%; (4)
provide for Contract Owner action by written consent; and (5) revise the notice
of meeting date.
Contract Owner meetings entail substantial costs, which could diminish the
benefits of certain cost savings programs implemented or to be implemented by
Account QB through the Administrative Services Agreement and the Agreement to
Provide Guarantees. In part because of the costs involved, most mutual funds and
separate accounts registered under the federal securities laws no
6
<PAGE> 9
longer hold annual shareholders meetings unless there are material changes in
the operation of the mutual fund or separate account.
Travelers Insurance estimates the savings from no longer holding annual
Contract Owner meetings to be approximately $16,500. These costs should be
weighed against the benefits of Contract Owner scrutiny. However, even without
such Contract Owner scrutiny, the Board will carefully consider the matters that
were formerly brought before Contract Owners at the annual meeting.
The remaining revisions that affect Contract Owners generally clarify the
items that require Contract Owner vote, and make it easier to obtain that vote
in an efficient and cost effective manner. For instance, permitting Contract
Owners' to approve matters by consent, will enable the Board to more quickly
resolve various issues, including the ability to respond to a change in the laws
affecting Account QB. These governance provisions are important in today's
rapidly changing business environment.
CHANGES THAT DIRECTLY AFFECT MANAGERS. The revisions to the Rules and
Regulations that directly affect Managers are those revisions that: (1) provide
for an indefinite term of Managers; (2) provide for telephonic meeting of
Managers; (3) permit consent actions of Managers, where permitted by law; and
(4) provide that Managers may elect an executive or other committee.
As with the revisions that affect Contract Owners, the purpose of these
changes is to operate Account QB on a more cost-effective basis, as well as to
provide greater governance flexibility. For instance, by no longer requiring
annual election of the Managers, Account QB will eliminate the expenses
associated with having an annual Contract Owner meeting. Similarly, by
permitting Board of Managers meetings to be conducted by telephone, Account QB
will save many of the transportation and lodging costs associated with
conducting a Board meeting, and will enable the Board to conduct meetings on a
more timely basis.
CHANGES THAT AFFECT INDEMNIFICATION PROVISIONS. The Revised Rules and
Regulations generally clarify and tighten the limitations of liabilities and
indemnification provisions. The current Rules and Regulations provide that
members of the Board of Managers, officers, and employees of Account QB may be
indemnified in accordance with the standards established by Connecticut law. The
revisions to the Rules and Regulations specify who is entitled to
indemnification, the expenses that are covered by the indemnification
provisions, and the exceptions to the indemnification provisions. These
revisions are consistent with industry practice.
RECOMMENDATION OF THE BOARD OF MANAGERS
The Board of Managers of Account QB recommends approval of the Revised
Rules and Regulations.
4. OTHER BUSINESS
The Board of Managers knows of no other business to be presented at the
meeting. The proxy card gives the persons named in the proxy discretion to vote
according to their best judgment if any other business properly comes before the
meeting.
7
<PAGE> 10
ADDITIONAL INFORMATION
CONTRACT OWNER PROPOSALS
All Contract Owner proposals to be included in the Proxy Statement for the
next annual meeting must be received by Account QB's Secretary at One Tower
Square, Hartford, Connecticut 06183 by November 5, 1999.
It is suggested that Contract Owners submit their proposals by Certified
Mail -- Return Receipt Requested. The Securities and Exchange Commission has
adopted certain requirements which apply to any proposals of Contract Owners.
THE INVESTMENT ADVISER
Travelers Asset Management International Corporation ("TAMIC"), One Tower
Square, Hartford, Connecticut, serves as investment adviser to Account QB.
DISTRIBUTION AND PRINCIPAL UNDERWRITING AGREEMENT
CFBDS, Inc., 21 Milk Street, Boston, Massachusetts, is the principal
underwriter for Account QB.
MANAGEMENT AGREEMENT
Travelers Insurance, One Tower Square, Hartford, Connecticut is the
administrator of Account QB.
OFFICERS OF THE FUND
<TABLE>
<CAPTION>
POSITION
HELD
NAME TITLE SINCE
---- ----- --------
<S> <C> <C>
Ernest J. Wright..................... Secretary October 21, 1994
Kathleen A. McGah.................... Assistant Secretary January 27, 1995
David A. Golino...................... Principal Accounting Officer January 30, 1998
</TABLE>
The officers of the Fund serve for one year or until their respective
successors are chosen and qualified. The Fund pays no salaries or compensation
to any of its officers, all of whom are employees of The Travelers Insurance
Company or its affiliates.
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<PAGE> 11
EXHIBIT A
PRICEWATERHOUSECOOPERS LOGO
PRICEWATERHOUSECOOPERS LLP
100 Pearl Street
Hartford CT 06103-4508
Telephone (860) 241 7000
Facsimile (860) 241 7590
February 15, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Gentlemen:
We were informed on February 10, 1999, that the Board of Managers of The
Travelers Quality Bond Account for Variable Annuities (Commission File Number
2-53757) (the "Fund") voted to replace PricewaterhouseCoopers LLP as auditors of
the Fund effective January 29, 1999. We have read the Statements made by the
Board of Managers of the Fund as part of the definitive Proxy Statement dated
March 5, 1999, which we understand will be filed with the Commission, pursuant
to Regulation 229, Item 304, as part of the Fund's Proxy Book dated March 5,
1999. We agree with the statements concerning our Firm in such Proxy.
Very truly yours,
PRICEWATERHOUSECOOPERS
PricewaterhouseCoopers LLP
<PAGE> 12
EXHIBIT B
THE TRAVELERS INSURANCE COMPANY
HARTFORD, CONNECTICUT
THE TRAVELERS FUND A-1 FOR VARIABLE ANNUITIES
------------------------
RULES AND REGULATIONS
------------------------
ARTICLE I
GENERAL
Section 1. Name. The name* of this separate account will be The Travelers
Fund A-l for Variable Annuities (referred to as "Separate Account"). The name of
the Separate Account has been selected by and belongs to The Travelers Insurance
Company (the "Company"). The use of its name by the Separate Account will in no
way prevent the Company or any company affiliated with the Company from using
the name "Travelers" with any other word or words in connection with any other
entity or business, whether competitive with the Separate Account or not. The
Company's red umbrella service mark may be used by the Separate Account only
with the consent of the Company, which reserves the right to withdraw such
consent.
Section 2. Office. The office of the Separate Account will be in the City
of Hartford, Connecticut.
Section 3. Purposes. The purposes of the Separate Account are to provide
an account for assets to be set aside, separate and apart from the other assets
of the Company, for the credit and sole benefit of variable contracts issued by
the Company and entitled to participate in the Separate Account. The assets of
the Separate Account will be held and applied exclusively to meet obligations
(including expenses) to provide variable benefits under variable contracts
participating in the Separate Account, as provided in such contracts, all in
accordance with applicable state law and as may be required to comply with the
requirements of the Investment Company Act of 1940, as amended, and the rules
and regulations of the Securities and Exchange Commission under the Act.
ARTICLE II
BOARD OF MANAGERS
Section 1. Election. A Board of Managers of seven members will be elected
by the Board of Directors of the Company or a Committee of the Company to serve
until the first meeting of the owners of variable contracts (referred to as
"Contract Owners") at which time a Board of Managers of six members will be
elected by the Contract Owners. Each member will serve, subject to applicable
law, until the next annual meeting of the Contract Owners and until his
successor is duly elected and qualified. Members of the Board of Managers need
not be Contract Owners.
Section 2. Meetings. Regular meetings of the Board of Managers will be
held at such place and at such times as the Board of Managers by vote may
determine from time to time, and if so determined no call or notice need be
given. Special meetings of the Board of Managers may be
<PAGE> 13
held in Hartford, Connecticut, at any time whenever called by the Chairman of
the Board of Managers, or any two or more members of the Board of Managers,
notice being given to each member by the Secretary or Assistant Secretary or the
person or persons calling the meeting, or at any time without formal notice
provided all the members are present or those not present waive notice in
writing which is filed with the records of the meeting. Notice of special
meetings, stating the time and place will be given by mailing the same to each
member at his residence or business address at least two days before the meeting
or by delivering the same to him personally or telephoning or telegraphing the
same to him at his residence or business address at least one day before the
meeting unless, in case of urgency, the Chairman of the Board of Managers
prescribes a shorter notice to be given personally or by telephoning or
telegraphing each member at the member's residence or business address. The
Chairman of the Board of Managers will preside at all meetings of the Board at
which he is present. Whenever any notice is required to be given to any member
of the Board of Managers under this Section, a waiver in writing signed by the
member entitled to such notice, whether before or after the time stated in the
notice, will be deemed equivalent to giving notice. Any waiver will be filed
with the records of the meeting.
Section 3. Quorum. A majority of the members of the Board of Managers in
office will constitute a quorum for the transaction of business at any meeting
of the Board, and at every meeting the presiding officer for the time being will
have the right to vote. When a quorum is present at any meeting, a majority of
the members present will decide any question brought before the meeting except
as otherwise provided by applicable law or by these Rules and Regulations.
Section 4. Officers. At the first meeting of the Board of Managers and at
the first meeting following each annual meeting of the Contract Owners, the
Board of Managers will elect one of its members to act as Chairman of the Board
of Managers to hold office until a successor is elected and qualified. The Board
of Managers may also elect a Secretary and an Assistant Secretary of the Board
of Managers who may or may not be a member of the Board of Managers. The
Secretary or Assistant Secretary will have the power to certify the minutes of
the proceedings of the Contract Owners and Board of Managers and any portions of
the minutes and will perform any other duties and have any other powers as the
Board of Managers designates from time to time. In the absence of the Secretary
or Assistant Secretary, a temporary Secretary will perform these duties and have
these powers.
Section 5. Resignations and Removal. Any member of the Board of Managers
or the Secretary or Assistant Secretary may resign at any time by mailing or
delivering his resignation in writing to the Chairman of the Board of the
Managers or to a meeting of the Board of Managers. Contract Owners may at any
meeting called for the purpose, by vote of a majority of all votes entitled to
be cast, remove any member of the Board of Managers or the Secretary or
Assistant Secretary.
Section 6. Vacancies. After the first meeting of Contract Owners no person
will serve as a member of the Board of Managers unless duly elected to the
office by ballot of the Contract Owners called for that purpose except that
whenever any vacancy occurs in the Board of Managers by death, resignation or
otherwise, the vacancy may be filled by the Board for the remainder of the term
for which the member was elected if, immediately after filling any vacancy
occurring after the first meeting of Contract Owners, at least two-thirds of the
members then holding offices have been elected by the Contract Owners. In the
event that at any time after the first meeting of
2
<PAGE> 14
Contract Owners at least two-thirds of the Board have not been so elected, the
Board of Managers will cause to be held as promptly as possible, and in any
event within sixty days, a meeting of the Contract Owners for the purpose of
electing a member or members to fill the existing vacancy or vacancies in the
Board of Managers.
ARTICLE III
CONTRACT OWNERS
Section 1. Annual Meeting. The first annual meeting of the Contract Owners
will be called as soon as there are outstanding contracts entitled to a total of
250,000 votes, but in no event later than nine months and two weeks from the
first effective date of a Registration Statement for variable annuity contracts
sold by the Company and entitled to participate in the Separate Account.
Thereafter annual meetings of the Contract Owners will be held at the hour and
place the Board of Managers may appoint, on the first Monday of March or on some
other day within two months after as fixed by the Board of Managers.
Section 2. Special Meetings. Special meetings of the Contract Owners may
be called by a majority of the Board of Managers at the times and places they
may determine. The notice of a special meeting will state the purposes of the
meeting and no business will be transacted at the meeting except matters coming
within the stated purposes.
Section 3. Notice of Meeting. A notice stating the place, day and hour of
the meeting, and, in case of a special meeting, the purposes for which the
meeting is called, will be given to each Contract Owner as of a record date
within seventy-five days prior to the date of the meeting selected by the Board
of Managers, by mailing to his address as it appears on the records of the
Company not less than twenty days prior to the day of the meeting. Only persons
owning a contract on the date used to determine the Contract Owners entitled to
notice will be entitled to vote at the meeting. Notice of any adjourned meeting
will not be required. Whenever any notice of time, place or any other matter is
required to be given to Contract Owners, a waiver thereof in writing signed by
the Contract Owner entitled to the notice, whether before or after the time
stated in the notice, will be deemed equivalent to the giving of notice. Any
waivers will be filed with the records of the meeting.
Section 4. Quorum. Contract Owners entitled to vote, represented either in
person or by proxy, will constitute a quorum for the transaction of business at
any annual or special meeting of the Contract Owners, provided that there is
represented, either in person or by proxy, at any meeting, thirty-five percent
(35%) of the votes entitled to be cast. If a quorum is not present, a majority
of votes represented may adjourn the meeting to some later time. When a quorum
is present a majority of the votes represented in person or by proxy will
determine any question, except as may be otherwise provided by these Rules and
Regulations or by applicable law.
Section 5. Proxies. A Contract Owner may vote either in person or by proxy
duly executed in writing by the Contract Owner. A proxy for any meeting will be
valid for any adjournment of such meeting.
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<PAGE> 15
Section 6. Voting. The records of the Company will be conclusive in
determining Contract Owners entitled to vote. The number of votes which the
Contract Owner may cast will be determined as of the record date chosen by the
Board of Managers not more than seventy-five nor less than twenty days prior to
the date of the annual or any special meeting of the Contract Owners, provided
that the record date may be less than twenty days prior to the initial meeting
of Contract Owners. Prior to the commencement of payments under a variable
annuity contract, the number of votes will equal the number of Accumulation
Units credited to the contract. After variable payments have commenced, the
number of votes will equal the amount of the assets in the Separate Account
established to meet variable obligations related to the variable contract,
divided by the value of an Accumulation Unit.
During the accumulation period the Owners of contracts issued in connection
with plans qualified under Section 401(a) of the Internal Revenue Code (other
than H.R. 10 plans) will have the sole right to cast all votes attributable to
the Owners' contributions under those contracts; during the accumulation period
an individual covered by or participating under variable annuity contracts (a)
adopted by the public school systems and certain tax-exempt organizations in
accordance with Section 403(b) of the Internal Revenue Code, (b) plans
established by persons eligible under Section 408 of the Internal Revenue Code,
(c) in connection with plans established by persons entitled to the benefits of
the self-employed Individual's Tax Retirement Act of 1962, as amended, "H.R.
10," and (d) in connection with plans qualified under Section 401(a) of the
Internal Revenue Code (other than H.R. 10 plans) to the extent of the
individual's contributions under the contract, will have the right to instruct
the Owner with respect to the votes attributable to that individual's account.
During the annuity period an individual will have the right to instruct the
Owner with respect to all votes attributable to the amount of assets established
in the Separate Account to meet the annuity obligations relating to that
individual.
Votes for which instructions have not been received where the individual
was entitled to instruct the Owner will be cast by the Owner for or against each
proposal to be voted on only in the same proportion as votes for which
instructions have been received.
The Company will furnish to the Owner (or mail in accordance with his
instructions) proxy materials necessary for distribution to individuals in order
to permit the Owner to obtain instructions as to casting the votes, when the
individuals are entitled to instruct the Owner, and each individual so entitled
will receive a statement of the number of votes, including fractional shares,
attributable to his participation under the contract or contracts and stating
his right to instruct the Owner how these votes will be cast. In no case will
the Company be under any duty to inquire as to the instructions received by, or
the authority of, the Owner, with respect to votes cast by an Owner in person or
by proxy, which will be valid and effective insofar as the Company, the Separate
Account and other Owners are concerned.
Section 7. Tellers. Every meeting of the Contract Owners will be organized
by the election viva voce of a chairman and clerk. The Chairman will appoint two
tellers to receive, count and report all ballots cast at the meeting and he may
also appoint a committee on qualifications and proxies to inquire and report to
the meeting what Contract Owners are present, duly qualified or
4
<PAGE> 16
properly represented. If the right of any person to vote be questioned, the
chairman of the meeting will, on receiving the report of the committee on
qualifications and proxies, determine the person's said right, subject to an
appeal from such decision to the meeting.
ARTICLE IV
POWERS AND DUTIES OF BOARD OF MANAGERS
The Board of Managers will have the following powers, responsibilities and
duties:
1. To select and approve annually an independent public accountant,
whose employment will be approved by the Contract Owners;
2. To execute a management agreement or agreements and an investment
advisory agreement or agreements providing for sales and administrative
services, mortality guarantees, expense guarantees, investment advisory
services and other related matters, which agreements will be submitted for
approval or rejection by Contract Owners at their first meeting;
3. To consider annually the terms of any management and investment
advisory agreements approved by Contract Owners and approve their
continuance or submit for action by Contract Owners recommendations for
amendment or termination;
4. To recommend any changes in the fundamental investment policies of
the Separate Account and to submit the same to the Contract Owners at any
annual or special meeting;
5. To supervise the investment of the assets of the Separate Account
in accordance with the fundamental investment policies of the Separate
Account;
6. To enter into agreements and to take any and all actions necessary
or proper in connection with the operation and management of the Separate
Account and the assets of it.
ARTICLE V
FEES OF MEMBERS OF BOARD AND OTHERS
The Board of Managers will have power to fix and determine the fee or fees
to be paid members of the Board of Managers or any person elected by the Board
of Managers or by the Contract Owners on account of services to the Separate
Account, except that members of the Board of Managers who are also officers,
directors or employees of the Company or The Travelers Corporation or any
company affiliated with The Travelers Corporation will not be entitled to any
fee. Any fees so fixed and determined by the Board of Managers shall be subject
to revision or amendment by the Contract Owners and may be paid by the Company
in accordance with the terms of any management agreement entered into with the
Separate Account.
5
<PAGE> 17
ARTICLE VI
INDEMNIFICATION
Indemnification will be provided members of the Board of Managers, officers
and employees of the fund in accordance with the standards established by
Section 33-320a of the Connecticut General Statutes relating to indemnification
under the Connecticut Stock Corporation Act as it may now exist or may exist in
the future.
ARTICLE VII
VALUATION OF THE FUND
Section 1. Valuation of Assets. In determining the total value of the
assets of the Separate Account on any valuation date, securities will be taken
at their market value at the close of the New York Stock Exchange and all other
assets at fair value, determined as follows:
(1) In the case of securities actively traded in the
over-the-counter-market, the mean between the bid and asked prices on the
valuation date will be used, provided that in the case of short term
discount securities, amortized cost (which approximates market value) will
be used.
(2) In the case of securities not actively traded in the over-the
counter market, the following guidelines will be used consistent with
generally accepted accounting principles:
(a) Consideration will be given to recent bid prices for securities
of the same issuer closely comparable with respect to ranking, yield and
other features to those being valued;
(b) Consideration will be given to recent bid prices for other
securities with the same or comparable ranking, yield and other features
as those being valued;
(c) Adjustments are to be made where preconditions or restrictions
generally recognized to have a significant impact on market valuation
exist as to the free sale of the securities being valued, such as a
requirement that a registration statement under the Securities Act of
1933 be filed or brought up to date, or that a prospectus be delivered
to the purchaser; and
(d) Any of the criteria commonly used in investment analysis to
value securities for which there is not a readily available or reliable
market price.
(3) In all instances where the guidelines of (2) are applicable, the
officers of the Separate Account will report to the Board at the next
regular meeting their action for specific approval or rejection.
Section 2. Determination Binding. Any determination made in good faith
and, so far as accounting matters are involved, in accordance with generally
accepted accounting principles, by or in accordance with the direction of the
Board of Managers, as to the amount of the assets, debts, obligations, or
liabilities of the Separate Account, as to the amount of any liabilities or
expenses set up and the propriety thereof, as to the time of or purpose for
creating such liabilities or expenses, as
6
<PAGE> 18
to the use, alternation or cancellation of any liabilities or expenses (whether
or not any debt, obligation or liability for which such liabilities or expenses
have been created, have been paid or discharged or are then or after required to
be paid or discharged), as to the price or closing bid or asked price of any
security owned or held by the Separate Account, as to the market value of any
security or fair value of any other asset of the Separate Account, as to the
number of units of the Separate Account outstanding, as to the estimated expense
to the Separate Account in connection with purchases of assets or units, as to
the ability to liquidate securities in orderly fashion, or as to any other
matters relating to the issue, sale, purchase and or acquisition of disposition
of securities or units of the Separate Account, will be final, conclusive and
binding.
ARTICLE VIII
AMENDMENTS
These Rules and Regulations, subject to applicable law, may be altered,
amended or repealed by vote of a majority of the Board of Managers as is
necessary and appropriate to carry out the purposes of the Separate Account.
***
As adopted on December 15, 1975, in accordance with authorization by a vote
of the Board of Directors of The Travelers Insurance Company on August 4, 1967.
* Name changed to "The Travelers Quality Bond Account for Variable
Annuities."
7
<PAGE> 19
EXHIBIT C
THE TRAVELERS INSURANCE COMPANY
HARTFORD, CONNECTICUT
------------------------
RULES AND REGULATIONS
OF
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
------------------------
DATED AS OF MAY 1, 1999
<PAGE> 20
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
RULES AND REGULATIONS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I GENERAL........................................... 1
Section 1.1. Name......................................... 1
Section 1.2. Office....................................... 1
Section 1.3. Purposes..................................... 1
Section 1.4. Status Under the 1940 Act.................... 1
ARTICLE II BOARD OF MANAGERS................................ 2
Section 2.1. Management of the Separate Account........... 2
Section 2.2. Qualification................................ 2
Section 2.3. Number....................................... 2
Section 2.4. Term and Election............................ 2
Section 2.5. Composition of the Board of Managers......... 2
Section 2.6. Resignation and Retirement................... 2
Section 2.7. Removal...................................... 2
Section 2.8. Vacancies.................................... 3
Section 2.9. Meetings and Vote of Managers................ 3
Section 2.9.1. Regular Meetings........................ 3
Section 2.9.2. Special Meetings........................ 3
Section 2.9.3. Telephonic Meetings..................... 3
Section 2.9.4. Quorum.................................. 3
Section 2.9.5. Required Vote........................... 3
Section 2.9.6. Consent in Lieu of a Meeting............ 3
Section 2.10 Officers and Agents.......................... 3
Section 2.10.1. Enumeration............................ 3
Section 2.10.2. Qualification.......................... 4
Section 2.10.3. Election............................... 4
Section 2.10.4. Term of Office......................... 4
Section 2.10.5. Titles and Duties...................... 4
(a) Chairman......................................... 4
(b) Secretary........................................ 4
(c) Assistant Secretary.............................. 4
(d) Temporary Secretary.............................. 4
Section 2.10.6. Powers................................. 4
Section 2.10.7. Resignation, Retirement, and Removal... 5
Section 2.10.8. Vacancies.............................. 5
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 2.11. Powers and Duties of the Board of
Managers............................................... 5
Section 2.11.1. Powers and Duties -- Generally......... 5
Section 2.11.2. Powers and Duties Regarding Fees and
Benefits.............................................. 6
Section 2.12. Committees.................................. 7
Section 2.12.1. Generally.............................. 7
Section 2.12.2. Executive Committee.................... 7
ARTICLE III CONTRACT OWNERS................................. 7
Section 3.1. Annual or Regular Meetings................... 7
Section 3.2. Special Meetings............................. 7
Section 3.3. Notice of Meetings........................... 8
Section 3.4. Call of Meetings............................. 8
Section 3.5. Record Date.................................. 8
Section 3.6. Actions by Written Consent................... 8
Section 3.7. Required Vote................................ 8
Section 3.8. Proxies...................................... 9
Section 3.9. Quorum....................................... 9
Section 3.10. Adjournments................................ 9
Section 3.11. Procedure at Meetings....................... 9
Section 3.12. Voting Powers............................... 9
Section 3.13. Matters Requiring Contract Owner Action..... 9
ARTICLE IV LIMITATION OF LIABILITY AND INDEMNIFICATION...... 10
Section 4.1. General Provisions........................... 10
Section 4.1.1. General Limitation of Liability......... 10
Section 4.1.2. Notice of Limited Liability............. 10
Section 4.1.3. Liability Limited to Assets of the
Separate Account...................................... 10
Section 4.2. Liability of Managers........................ 10
Section 4.2.1. Liability for Own Actions............... 10
Section 4.2.2. Liability for Actions of Others......... 11
Section 4.2.3. Advice of Experts and Reports of
Others................................................ 11
Section 4.2.4. Bond.................................... 11
Section 4.2.5. Rules and Regulations Governs Issues of
Liability............................................. 11
Section 4.3. Liability of Third Persons Dealing with
Managers............................................... 11
Section 4.4. Indemnification.............................. 11
Section 4.4.1. Indemnification of Covered Persons...... 11
Section 4.4.2. Exceptions.............................. 12
Section 4.4.3. Rights of Indemnification............... 12
Section 4.4.4. Expenses of Indemnification............. 12
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 4.4.5. Certain Defined Terms Relating to
Indemnification....................................... 13
Section 4.5. Consistent with Applicable Law............... 13
ARTICLE V VALUATION OF ASSETS............................... 13
Section 5.1. General...................................... 13
Section 5.2. Suspension of Determination of Value......... 13
Section 5.3. Computation of Net Assets.................... 13
Section 5.4. Separate Account's Assets.................... 13
Section 5.5. Valuation of Assets.......................... 14
Section 5.6. The Separate Account's Liabilities........... 14
Section 5.7. Determination Binding........................ 14
ARTICLE VI AMENDMENTS....................................... 15
Section 6.1. General...................................... 15
Section 6.2. Prohibited Retrospective Amendments.......... 15
ARTICLE VII MISCELLANEOUS PROVISIONS........................ 15
Section 7.1. Certain Internal References.................. 15
Section 7.2. Certified Copies............................. 15
Section 7.3. Fiscal Year.................................. 15
Section 7.4. Governing Law................................ 15
Section 7.5. Headings..................................... 15
Section 7.6. Resolution of Ambiguities.................... 16
Section 7.7. Seal......................................... 16
Section 7.8. Severability................................. 16
Section 7.9. Signatures................................... 16
</TABLE>
<PAGE> 23
EXHIBIT C
THE TRAVELERS INSURANCE COMPANY
HARTFORD, CONNECTICUT
THE TRAVELERS QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
------------------------
RULES AND REGULATIONS
------------------------
ARTICLE I
GENERAL
Section 1.1. Name. The name of this separate account will be The Travelers
Quality Bond Account for Variable Annuities (the "Separate Account"). The name
of the Separate Account has been selected by and belongs to The Travelers
Insurance Company (the "Company"). The use of its name by the Separate Account
will in no way prevent the Company or any company affiliated with the Company
from using the name "Travelers" with any other word or words in connection with
any other entity or business, whether competitive with the Separate Account or
not. The Company's red umbrella service mark may be used by the Separate Account
only with the consent of the Company, which reserves the right to withdraw such
consent.
Section 1.2. Office. The office of the Separate Account will be in the
City of Hartford, Connecticut.
Section 1.3. Purposes. The purpose of the Separate Account is to provide
an account pursuant to Section 38a-433 of the Connecticut General Statutes (the
"CGS"), for assets to be set aside, separate and apart from the other assets of
the Company, for the credit and sole benefit of variable insurance contracts
issued by the Company and entitled to participate in the Separate Account. The
assets of the Separate Account will be held and applied exclusively to meet
obligations (including expenses) to provide variable benefits under variable
insurance contracts participating in the Separate Account, as provided in such
contracts, all in accordance with applicable state law and as may be required to
comply with the requirements of the Investment Company Act of 1940, as amended
(the "1940 Act"), and the rules and regulations of the Securities and Exchange
Commission (the "SEC") under the 1940 Act.
Section 1.4. Status Under the 1940 Act. The Separate Account may be
registered as an open-end management investment company under the 1940 Act. Such
registration may be terminated, however, if and to the extent permitted by law;
or the Separate Account may be reorganized and registered as a unit investment
trust under the 1940 Act; in each case with the approval (if required by the
1940 Act) of the owners of the outstanding variable insurance contracts issued
with respect to the Separate Account (the "Contract Owners"), voted as provided
in Article III of these Rules and Regulations. The Separate Account also may be
a series company, with separate investment portfolios or funds.
<PAGE> 24
Any question of interpretation of any term or provisions of these Rules and
Regulations having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to the corresponding
term or provision of the 1940 Act and to any definition thereof in the 1940 Act
or to judicial interpretations thereof, if any, or, in the absence of any
controlling judicial decisions, to rules, regulations, or orders of the SEC
validly issued pursuant to the 1940 Act.
ARTICLE II
BOARD OF MANAGERS
Section 2.1. Management of the Separate Account. The business and affairs
of the Separate Account shall be managed by the Managers, and they shall have
all powers necessary and desirable to carry out that responsibility, including
those specifically set forth in Sections 2.11.1 and 2.11.2 herein.
Section 2.2. Qualification. Each Manager shall be a natural person. A
Manager need not be Contract Owner, a citizen of the United States, or a
resident of the State of Connecticut.
Section 2.3. Number. The number of Managers which shall constitute the
entire Board of Managers shall not be less than five (5) nor more than ten (10),
which number may be increased or decreased by the Managers, but shall never be
less than the minimum number required by the CGS. The number of Managers may be
decreased in conjunction with a removal of a Manager pursuant to Section 2.7.
Notwithstanding the foregoing, the entire Board of Managers may be comprised of
only the initial Manager prior to the effective date of the registration
statement registering the Separate Account and the variable insurance contracts
under the federal securities laws.
Section 2.4. Term and Election. Each Manager shall hold office
indefinitely. If and to the extent required by the 1940 Act, one or more
Managers shall be elected by Contract Owners at a meeting called for that
purpose. Any Manager who is appointed by the Managers to fill a vacancy as
provided hereunder shall hold his position until the next Contract Owners'
meeting, subject to the requirements of the 1940 Act.
Section 2.5. Composition of the Board of Managers. No election or
appointment of a Manager shall take effect if such election or appointment would
cause the number of Managers who are interested persons, as defined in Section
2(a)(19) of the 1940 Act ("Interested Persons"), to exceed the number permitted
by Section 10 of that Act.
Section 2.6. Resignation and Retirement. Any Manager may resign or retire
as a Manager (without need for prior or subsequent accounting) by an instrument
in writing signed by such Manager and delivered or mailed to the Chairman of the
Board of Managers. Such resignation or retirement shall be effective upon such
delivery, or at a later date according to the terms of the instrument.
Section 2.7. Removal. Any Manager may be removed with or without cause at
any time: (1) by written instrument signed by two-thirds (2/3) of the number of
Managers in office prior to such removal, specifying the date upon which such
removal shall become effective, or (2) by the
2
<PAGE> 25
affirmative vote of a majority of all votes entitled to be cast of Contract
Owners in person or by proxy at any meeting called for that purpose.
Section 2.8. Vacancies. Any vacancy or anticipated vacancy resulting for
any reason, including without limitation the death, resignation, retirement,
removal, or incapacity of any of the Managers, or resulting from an increase in
the number of Managers may (but need not unless required by the 1940 Act) be
filled by a majority of the Managers then in office, subject to the provisions
of Section 16 of the 1940 Act, through the appointment in writing of such other
person as such remaining Managers in their discretion shall determine. The
appointment shall be effective upon the written acceptance of the person named
therein to serve as a Manager and agreement by such person to be bound by the
provisions of these Rules and Regulations, except that any such appointment in
anticipation of a vacancy occurring by reason of the resignation, retirement, or
increase in number of Managers to be effective at a later date shall become
effective only at or after the effective date of such resignation, retirement,
or increase in number of Managers.
Section 2.9. Meetings and Vote of Managers.
Section 2.9.1. Regular Meetings. The Managers, from time to time, may
provide for the holding of regular meetings of the Managers, and fix their
time and place.
Section 2.9.2. Special Meetings. Special meetings of the Managers may
be called by the Chairman of the Board of Managers on twenty-four (24)
hours notice to each Manager, either personally, by mail, by telegram, or
by facsimile transmission. Special meetings shall be called by the
Secretary or Assistant Secretary in like manner and on like notice on the
written request of a majority of the Managers then in office.
Section 2.9.3. Telephonic Meetings. Managers may participate in a
meeting of the Managers by means of a telephone conference or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time. Except to the extent that the
1940 Act has been interpreted otherwise, participation by such means shall
constitute presence in person at the meeting.
Section 2.9.4. Quorum. A majority of the Managers then in office
being present in person or by proxy shall constitute a quorum.
Section 2.9.5. Required Vote. Except as otherwise provided by the
1940 Act, other applicable law, or these Rules and Regulations, any action
to be taken by the Managers on behalf of the Separate Account may be taken
by a majority of the Managers present at a meeting of Managers at which a
quorum is present.
Section 2.9.6. Consent in Lieu of a Meeting. Except as otherwise
provided by the 1940 Act or other applicable law, the Managers may, by
unanimous written consent of the Managers then in office, take any action
which may have been taken at a meeting of the Managers.
Section 2.10 Officers and Agents.
Section 2.10.1. Enumeration. The officers of the Board of Managers
shall be a Chairman, a Secretary, and an Assistant Secretary. The Managers
may also appoint such other officers as they deem desirable. The Separate
Account may also have such agents as the Managers from
3
<PAGE> 26
time to time may in their discretion appoint. Any two or more offices may
be held by the same person except that a person who holds more than one
office may not act in more than one capacity to execute, acknowledge, or
verify an instrument required by law to be executed, acknowledged, or
verified by more than one officer.
Section 2.10.2. Qualification. The Chairman shall be a Manager, and
may, but need not be, a Contract Owner. Any other officer may, but need not
be, a Manager or Contract Owner.
Section 2.10.3. Election. The Chairman shall be elected by the
Managers at the first meeting of the Managers. Other officers may be
elected or appointed by the Managers at any meeting of the Managers or at
any other time.
Section 2.10.4. Term of Office. The Chairman shall hold office until
his respective successor is chosen and qualified, or in each case until he
or she sooner dies, resigns, is removed, or becomes disqualified. Each
other officer shall hold office and each agent shall retain authority at
the pleasure of the Managers.
Section 2.10.5 Titles and Duties.
(a) Chairman. Unless the Managers otherwise provide, the Chairman
of the Board shall preside at all meetings of the Contract Owners and of
the Managers. The Chairman of the Board shall also perform such other
duties and have such other powers as the Board of Managers may from time
to time prescribe.
(b) Secretary. The Secretary shall record all proceedings of the
Contract Owners and the Managers in books to be kept for such purposes,
which books or a copy thereof shall be kept at the principal office of
the Separate Account or at such other place as designated by the
Managers, in accordance with the requirements of the 1940 Act and rules
thereunder. The Secretary shall also perform such other duties and have
such other powers as the Board of Managers may from time to time
prescribe.
(c) Assistant Secretary. In the absence of the Secretary or in the
event of his or her inability or refusal to act, the Assistant
Secretary, or if there is more than one, the Assistant Secretaries in
their order of election or in such other order as determined by the
Managers, shall perform the duties of the Secretary, and when so acting
shall have all the powers of and be subject to all the restrictions upon
the Secretary. The Assistant Secretary shall also perform such other
duties and have such other powers as the Board of Managers may from time
to time prescribe.
(d) Temporary Secretary. In the absence of the Secretary and
Assistant Secretary from any meeting of the Contract Owners or Managers,
the Managers may appoint a temporary secretary at such meeting, who
shall perform the duties of the Secretary for the purposes of such
meeting.
Section 2.10.6. Powers. Subject to the other provisions of these
Rules and Regulations, each officer shall have, in addition to the duties
and powers set forth herein, such duties and powers as are commonly
incident to the office occupied by such officer as if the Separate
4
<PAGE> 27
Account were organized as a Connecticut business corporation and such other
duties and powers as the Managers may from time to time designate.
Section 2.10.7. Resignation, Retirement, and Removal. Any officer may
resign at any time by written instrument signed by him or her delivered to
the Chairman or Secretary or delivered to a meeting of the Managers. Such
resignation shall be effective upon receipt unless specified to be
effective at some other time. The Managers may remove any officer elected
by them with or without cause by the vote or written consent of a majority
of the Managers then in office. To the extent that any officer or Manager
of the Separate Account receives compensation from the Separate Account
(and except as may otherwise be expressly provided in a written agreement
with the Separate Account that is not inconsistent with applicable law), no
Manager or officer resigning and no officer removed shall have any right to
any compensation for any period following his or her resignation or
removal, or any right to damages on account of such removal.
Section 2.10.8. Vacancies. Any vacancy or anticipated vacancy
resulting for any reason, including without limitation the death,
resignation, retirement, removal, or incapacity of the Chairman or the
Secretary may be filled by a majority of the Managers then in office
through the appointment in writing of such other person as such remaining
Managers in their discretion shall determine. The appointment shall be
effective upon the written acceptance of the person named therein to serve
as in the capacity named therein. Other vacancies may be filled, if at all,
by the Managers at a meeting of the Managers or at any other time.
Section 2.11. Powers and Duties of the Board of Managers.
Section 2.11.1. Powers and Duties -- Generally. Subject to applicable
law, the Board of Managers shall have the following powers,
responsibilities, and duties:
(a) to select and approve annually an independent public accountant
for the Separate Account, whose initial selection shall be submitted to
the Contract Owners for ratification or rejection if and to the extent
required by applicable law;
(b) to approve an agreement for investment advisory (and any
agreement for sub-advisory) services, which agreement shall be submitted
to the Contract Owners for approval or rejection if and to the extent
required by applicable law;
(c) to approve an underwriting agreement(s) with a principal
underwriter(s) for the Separate Account;
(d) to consider annually the terms of any agreement or agreements
of the nature contemplated by paragraphs (b) or (c) of this Section
2.11.1 and approve amendments thereto or continuance or termination
thereof, subject to any action by the Contract Owners required by
applicable law;
(e) to approve an agreement or agreements for administrative
services and/or custody of the assets of the Separate Account, if deemed
appropriate;
(f) to take such action as may be necessary or appropriate with
respect to the registration and qualification of the Separate Account
and of the variable insurance
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contracts under the 1940 Act, the Securities Act of 1933 (the 1933 Act),
and any applicable state securities and insurance laws;
(g) to adopt and amend the investment policies and restrictions of
the Separate Account, or in the status or classification of the Separate
Account under the 1940 Act as contemplated by Section 1.4 of these Rules
and Regulations, and, to the extent required by applicable law, to
submit the same to the Contract Owners at a meeting of the Contract
Owners;
(h) to add new funds to the Separate Account or eliminate existing
funds as they deem appropriate;
(i) to supervise the investment of the assets of the Separate
Account in accordance with the investment policies and restrictions of
the Separate Account;
(j) to determine the value of the net assets of the Separate
Account in accordance with Article V hereof, and in particular to
determine, in good faith, the fair value of all assets of the Separate
Account for which market quotations are not readily available;
(k) to elect and remove officers and appoint and terminate agents
and consultants, any one or more of the foregoing of whom may be a
Manager, and provide compensation for the foregoing in the Managers sole
discretion;
(l) to elect, by vote of a majority of the Managers then in office,
an Executive Committee and any other committee, and, in the Managers
sole discretion, to delegate thereto certain of their powers that may be
delegated, subject to Section 2.12 hereof; and
(m) to enter into any other agreements, or authorize the entrance
into the same, on behalf of the Separate Account, and to take any and
all actions necessary or proper in connection with the operation and
management of the Separate Account and the assets thereof.
If any insurance regulatory authority should require that the Separate
Account make or refrain from making certain investments or disapprove any
agreement of the nature referred to in this Section, or if the Company
should disapprove any change in the Separate Account's investment policy,
investment manager, or principal underwriter initiated by the Contract
Owners or the Board of Managers, the Company shall immediately notify the
Board of such action in order that a special meeting of the Board of
Managers may be called, if desired.
Section 2.11.2. Powers and Duties Regarding Fees and Benefits. The
Board of Managers shall have the power to fix and determine the fee or fees
and the reimbursement for expenses, to be paid to Managers or any officer
elected or appointed by the Board of Managers, on account of services to
the Separate Account or expenses incurred in connection with the Separate
Account; and no fees or expenses shall be paid to any such member or
officer on such account which is not so fixed and determined by the Board
of Managers. Managers and officers who are also officers, directors, or
employees of the Company or any company affiliated with the Company shall
not be entitled to any fee from the Separate Account. Any fees or expenses
so fixed and determined by the Board of Managers may be paid by the
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Company in accordance with the terms of any expense agreement entered into
with the Separate Account.
In addition, the Managers shall have the power to pay pensions for faithful
service, as deemed appropriate by the Managers, and to adopt, establish and
carry out pension, profit-sharing, savings, thrift, and other retirement,
incentive and benefit plans, including the purchasing of life insurance and
annuity contracts as a means of providing retirement and other benefits, for any
or all Managers, officers, employees, and agents of the Separate Account, each
in accordance with and subject to the requirements of applicable law.
Section 2.12. Committees.
Section 2.12.1. Generally. The Managers, by vote of the Managers then
in office, may elect from their number an Executive Committee or any other
committee, and may delegate thereto some or all of their powers except
those which by law or by these Rules or Regulations may not be delegated.
Except as the Managers may otherwise determine, any committee established
by a majority of the Managers then in office may make rules for the conduct
of its business, but unless otherwise provided by the Managers or in such
rules, its business shall be conducted so far as possible in the same
manner as is provided by the Rules and Regulations of the Separate Account
for the Managers themselves. All members of such committees shall hold such
offices at the pleasure of the Managers. The Managers may abolish any
committee at any time. Any committee to which the Managers delegate any of
their powers or duties shall keep records of its meetings and shall report
its actions to the Managers. The Managers shall have power to rescind any
action of any committee, but no such rescission shall have retroactive
effect.
Section 2.12.2. Executive Committee. The Executive Committee, if
there shall be one, shall have all of the powers and authority of the
Managers that may lawfully be exercised by an Executive Committee, except
the power to recommend to the Contract Owners any action which requires the
Contract Owners approval; or approve any merger, reorganization, or
exchange which does not require Contract Owners approval. Notwithstanding
the foregoing, the Managers may limit the powers and authority of the
Executive Committee at any time.
ARTICLE III
CONTRACT OWNERS
Section 3.1. Annual or Regular Meetings. No annual or regular meetings of
Contract Owners are required.
Section 3.2. Special Meetings. Special meetings of Contract Owners may be
called by the Chairman of the Board of Managers or the Managers from time to
time for the purpose of taking action upon any matter requiring the vote or
authority of the Contract Owners as herein provided or upon any other matter
upon which Contract Owner approval is deemed by the Managers to be necessary or
desirable. A special meeting shall be called by the Secretary of the Separate
Account upon (i) the request of a majority of the Managers then in office, or
(ii) the written request of
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Contract Owners entitled to cast at least ten percent (10%) of all the votes
entitled to be cast at such meeting subject to the requirements of Section 16(c)
of the 1940 Act.
Section 3.3. Notice of Meetings. Written notice of any meeting of Contract
Owners shall be given or caused to be given by the Managers by mailing or
transmitting such notice not less than ten (10) nor more than sixty (60) days
before such meeting, postage prepaid, stating the time, place, and purpose of
the meeting, to each Contract Owner entitled to vote at such meeting as of the
Record Date, at the Contract Owner's address as it appears on the records of the
Separate Account. Notice of any adjourned meeting will not be required. Whenever
any notice of time, place, or any other matter is required to be given to
Contract Owners, a waiver thereof in writing signed by the Contract Owner
entitled to the notice, whether before or after the time stated in the notice,
will be deemed equivalent to the giving of notice. Any waivers will be filed
with the records of the meeting.
Section 3.4. Call of Meetings. The Managers shall promptly call and give
notice of a meeting of Contract Owners for the purpose of voting upon removal of
any Manager of the Separate Account when requested to do so in accordance with
Section 3.2. For all other matters, the Managers shall call or give notice of a
meeting within thirty (30) days after written application by Contract Owners
entitled to cast at least ten percent (10%) of all the votes entitled to be cast
on the matter request a meeting be called.
Section 3.5. Record Date. The records of the Company will be conclusive in
determining Contract Owners entitled to vote. The number of votes which the
Contract Owner may cast will be determined as of the record date chosen by the
Board of Managers not more than seventy-five (75) nor less than twenty (20) days
prior to the date of any meeting of the Contract Owners, provided that the
record date may be less than twenty days prior to the initial meeting of
Contract Owners. Prior to the commencement of payments under a variable
insurance contract, the number of votes will equal the number of Accumulation
Units credited to the contract. After variable payments have commenced, the
number of votes will equal the amount of the assets in the Separate Account
established to meet variable obligations related to the contract, divided by the
value of an Accumulation Unit.
The Company will furnish to the Contract Owner (or mail in accordance with
his instructions) proxy materials. In no case will the Company be under any duty
to inquire as to the instructions received by, or the authority of, the Contract
Owner, with respect to votes cast by a Contract Owner in person or by proxy,
which will be valid and effective insofar as the Company, the Separate Account,
and other Contract Owners are concerned.
Section 3.6. Actions by Written Consent. Except as otherwise required by
the 1940 Act, other applicable law, or these Rules and Regulations, any action
taken by Contract Owners may be taken without a meeting if Contract Owners
entitled to cast at least a majority of all the votes entitled to be cast on the
matter (or such larger proportion thereof as shall be required by the 1940 Act
or by any express provision of these Rules and Regulations) consent to the
action in writing and such written consents are filed with the records of the
meetings of Contract Owners. Such consent shall be treated for all purposes as a
vote taken at a meeting of Contract Owners.
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Section 3.7. Required Vote. Subject to any provision of law requiring the
authorization of any matter by a greater proportion, any matter on which the
Contract Owners vote shall be approved by the affirmative vote of the votes
entitled to be cast on such matter at a meeting of the Contract Owners at which
a quorum is present, except that Managers shall be elected by a plurality of the
votes cast at such meeting.
Section 3.8. Proxies. A Contract Owner may vote either in person or by
proxy duly executed by the Contract Owner and transmitted to the Separate
Account by mail, facsimile, or any other form of transmission permitted by
applicable law. A proxy for any meeting will be valid for any adjournment of
such meeting.
Section 3.9. Quorum. Subject to applicable law, Contract Owners entitled
to vote, represented in person or by proxy, will constitute a quorum for the
transaction of business at any annual or special meeting of the Contract Owners,
provided that there is represented, either in person or by proxy, at any
meeting, twenty percent (20%) of the votes entitled to be cast. If a quorum is
not present, a majority of votes represented may adjourn the meeting to some
later time. When a quorum is present, a majority of the votes represented in
person or by proxy will determine any questions, except as may be otherwise
provided by these Rules and Regulations or by applicable law.
Section 3.10. Adjournments. Adjourned meetings may be held within a
reasonable time after the date set for the original meeting without the
necessity of further notice.
Section 3.11. Procedure at Meetings. The Chairman and Secretary of the
Board of Managers shall act as Chairman and Secretary, respectively, of every
meeting of the Contract Owners, or in the absence of both, such other person or
persons as the meeting shall select by voice vote. The chairman of the meeting
shall appoint such inspectors of election, tellers, or other officers or
committees of the meeting as may be necessary to determine the vote on any
question or the right of any person or proxy to vote at the meeting.
Section 3.12. Voting Powers. The Contract Owners shall have power to vote
only with respect to matters expressly enumerated in Section 3.13 or with
respect to such additional matters relating to the Separate Account as may be
required by the 1940 Act, this Separate Account, any registration of the
Separate Account with the SEC or any state, or as the Managers may otherwise
deem necessary or desirable.
Section 3.13. Matters Requiring Contract Owner Action. Action by the
Contract Owners shall be required as to the following matters:
(a) to elect or remove Managers as provided in Sections 2.4 and 2.7
hereof;
(b) to approve any agreement or arrangement with a third party
provider of services as to which Contract Owner approval is required by the
1940 Act;
(c) to ratify the selection of an initial independent public
accountant and any independent public accountant other than the current
accountant, and terminate the employment of such accountant, if and to the
extent required by applicable law ;
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(d) to authorize changes in the fundamental investment restrictions
and/or policies of the Separate Account, if and to the extent required by
applicable law; and
(e) to approve any acts, transactions, or other agreements that may be
submitted to a vote of the Contract Owners by the Board of Managers.
ARTICLE IV
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 4.1. General Provisions.
Section 4.1.1. General Limitation of Liability. No personal liability
for any debt or obligation of the Separate Account shall attach to any
Manager, officer, or employee of the Separate Account or Contract Owner.
Without limiting the foregoing, a Manager shall not be responsible for or
liable in any event for any neglect or wrongdoing of any officer, agent, or
employee, of the Separate Account, nor shall any Manager be responsible or
liable for the act or omission of any other Manager of the Separate
Account. Similarly, an officer or employee of the Separate Account or
Contract Owner shall not be responsible for or liable in any event for any
neglect or wrongdoing of any Manager or agent of the Separate Account, or
any other officer or employee of the Separate Account or Contract Owner.
Every note, bond, contract, instrument, certificate, or undertaking and
every other act or thing whatsoever executed or done by or on behalf of the
Separate Account or the Managers or any Manager in connection with the
Separate Account shall be conclusively deemed to have been executed or done
only in or with respect to their or his or her capacity as Managers or
Manager and neither such Managers or Manager shall be personally liable
thereon.
Section 4.1.2. Notice of Limited Liability. Every note, bond,
contract, instrument, certificate or undertaking made or issued by the
Managers or by any officers or officer shall recite that the same was
executed or made by or on behalf of the Separate Account by them as
Managers or Manager or as officers or officer and not individually and that
the obligations of such instrument are not binding upon any of them but are
binding only upon the assets and property of the Separate Account, and may
contain such further recitals as they or he may deem appropriate, but the
omission thereof shall not operate to bind any Managers or Manager or
officers or officer individually.
Section 4.1.3. Liability Limited to Assets of the Separate
Account. All persons extending credit to, contracting with, or having any
claim against the Separate Account shall look only to the assets of the
Separate Account, as appropriate, for payment under such credit, contract
or claim, and neither the Managers nor any of the Separate Account's
officers, employees, or agents, whether past, present, or future, shall be
personally liable therefor.
Section 4.2. Liability of Managers. The exercise by the Managers of
their powers and discretion hereunder shall be binding upon the Separate
Account, and any other person dealing with the Separate Account. The
liability of the Managers, however, shall be limited by this Article IV.
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Section 4.2.1. Liability for Own Actions. A Manager shall be liable
to the Separate Account only for his or her own willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in
the conduct of the office of Manager, and for nothing else, and shall not
be liable for errors of judgment or mistakes of fact or law.
Section 4.2.2. Liability for Actions of Others. The Managers shall
not be responsible or liable in any event for any neglect or wrongdoing of
any officer, agent, employee, consultant, adviser, administrative
distributor, principal underwriter, custodian, transfer agent, dividend
disbursing agent, Contract Owner, servicing agent, or accounting agent of
the Separate Account, nor shall any Manager be responsible for any act or
omission of any other Manager.
Section 4.2.3. Advice of Experts and Reports of Others. The Managers
may take advice of counsel or other experts with respect to the meaning and
operation of these Rules and Regulations and their duties as Managers
hereunder, and shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice. In
discharging their duties, the Managers, when acting in good faith, shall be
entitled to rely upon the books of account of the Separate Account and upon
written reports made to the Managers by any officer appointed by them, any
independent public accountant, and (with respect to the subject matter of
the contract involved) any officer, partner, or responsible employee of any
other party to any contract entered into hereunder.
Section 4.2.4. Bond. The Managers shall not be required to give any
bond as such, nor any surety if a bond is required.
Section 4.2.5. Rules and Regulations Governs Issues of Liability. The
provisions of these Rules and Regulations, to the extent that they restrict
the duties and liabilities of the Managers otherwise existing at law or in
equity, are agreed by the Contract Owners and all other Persons bound by
these Rules and Regulations to replace such other duties and liabilities of
the Managers.
Section 4.3. Liability of Third Persons Dealing with Managers. No
person dealing with the Managers shall be bound to make any inquiry
concerning the validity of any transaction made or to be made by the
Managers or to see to the application of any payments made or property
transferred to the Separate Account or upon its order.
Section 4.4. Indemnification.
Section 4.4.1. Indemnification of Covered Persons. Subject to the
exceptions and limitations contained in Article IV, every person who is, or
has been, a Manager, officer, employee, or agent of the Separate Account,
including persons who serve at the request of the Separate Account as
Managers, officers, employees, or agents of another organization in which
the Separate Account has an interest as a shareholder, creditor or
otherwise (hereinafter referred to as Covered Person ), shall be
indemnified by the Separate Account to the fullest extent permitted by law
against liability and against all expenses reasonably incurred or paid by
him or her in connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by virtue of his being or
having been such a Manager, officer, employee, or agent and against amounts
paid or incurred by him in settlement thereof.
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Section 4.4.2. Exceptions. No indemnification shall be provided hereunder
to a Covered Person:
(a) For any liability to the Separate Account arising out of a
final adjudication by the court or other body before which the
proceeding was brought that the Covered Person engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office;
(b) With respect to any matter as to which the Covered Person shall
have been finally adjudicated not to have acted in good faith in the
reasonable belief that his or her action was in the best interests of
the Separate Account; or
(c) In the event of a settlement or other disposition not involving
a final adjudication (as provided in paragraph (a) or (b) of this
Section 4.4.2) and resulting in a payment by a Covered Person, unless
there has been either a determination that such Covered Person did not
engage in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office by
the court or other body approving the settlement or other disposition,
or a reasonable determination, based on a review of readily available
facts (as opposed to a full trial-type inquiry), that he or she did not
engage in such conduct, such determination being made by: (i) a vote of
a majority of the Disinterested Managers (as such term is defined in
Section 4.4.5) acting on the matter (provided that a majority of
Disinterested Managers then in office act on the matter); or (ii) a
written opinion of independent legal counsel.
Section 4.4.3. Rights of Indemnification. The rights of indemnification
herein provided may be insured against by policies maintained by the Separate
Account, and shall be severable, shall not affect any other rights to which any
Covered Person may now or hereafter be entitled, shall continue as to a person
who has ceased to be a Covered Person, and shall inure to the benefit of the
heirs, executors and administrators of such a person. Nothing contained herein
shall affect any rights to indemnification to which Separate Account personnel
other than Covered Persons may be entitled by contract or otherwise under law.
Section 4.4.4. Expenses of Indemnification. Expenses of preparation and
indemnification under this Section 4.4.4 shall be advanced by the Separate
Account prior to final disposition thereof upon receipt of an undertaking by or
on behalf of the recipient to repay such amount if it is ultimately determined
that he or she is not entitled to indemnification under this Section 4.4.4,
provided that either:
(a) Such undertaking is secured by a surety bond or some other
appropriate security or the Separate Account shall be insured against
losses arising out of any such advances; or
(b) A majority of the Disinterested Managers acting on the matter
(provided that a majority of the Disinterested Managers then in office
act on the matter) or independent legal counsel in a written opinion
shall determine, based upon a review of the readily available facts (as
opposed to the facts available upon a full trial), that there is reason
to believe that the recipient ultimately will be found entitled to
indemnification.
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Section 4.4.5. Certain Defined Terms Relating to Indemnification. As used
in this Article IV, the following words shall have the meanings set forth below:
(a) A Disinterested Manager is one (i) who is not an Interested
Person of the Separate Account (including anyone, as such Disinterested
Manager, who has been exempted from being an interested person by any
rule, regulation or order of the SEC), and (ii) against whom none of
such actions, suits or other proceedings or another action, suit or
other proceeding on the same or similar grounds is then or has been
pending;
(b) Claim, action, suit or proceeding shall apply to all claims,
actions, suits, proceedings (civil, criminal, administrative or other,
including appeals), actual or threatened;
(c) An Independent Legal Counsel is counsel who is not a Manager,
officer, employee, or Interested Person of the Separate Account or the
Company, and who the Covered Person who is submitting the
indemnification claim and the Managers agree will exercise impartial
legal judgment; and
(c) "Liability" and "expenses" shall include without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
Section 4.5. Consistent with Applicable Law. No indemnification provided
by this Section shall be inconsistent with any applicable law, including the
1940 Act and the 1933 Act.
ARTICLE V
VALUATION OF ASSETS
Section 5.1. General. The Board of Managers shall have the power and duty
to determine the value of the net assets of the Separate Account and to adopt
procedures relating thereto. The Board may establish a securities valuation
committee, appoint one or more agents, or enter into other arrangements with
third parties to assist it in the determination of the value of some or all of
the securities in the Separate Account's portfolio and to make the actual
calculations pursuant to directions of the Board of Managers. Any securities
valuation committee, if established, or any agents appointed by the Board of
Manager will have the duty and responsibility to continuously review the
appropriateness of any valuation method established by the Board and to inform
the Board whenever they determine that any method is no longer appropriate. The
data and information considered in implementing the valuation methods adopted by
the Board will be retained for inspection by the Separate Account's independent
auditors.
Section 5.2. Suspension of Determination of Value. The Board of Managers
may declare a suspension of the determination of the value of the net assets of
the Account to the extent permitted by the 1940 Act.
Section 5.3. Computation of Net Assets. The value of the net assets of the
Separate Account as of any particular time shall be the value of the assets of
the Separate Account less its liabilities.
Section 5.4. Separate Account's Assets. The Separate Account's assets
shall be deemed to include: (a) all cash on hand or on deposit, including any
interest accrued thereon, (b) all bills and
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demand notes and accounts receivable, (c) all securities owned by or on behalf
of the Separate Account, (d) all stock and cash dividends and cash distributions
payable but not yet received on behalf of the Separate Account (when the
valuation of the underlying securities is being determined ex-dividend), (e) all
interest accrued on any interest-bearing securities owed on behalf of the
Separate Account (except accrued interest included in the valuation of the
underlying security) and (f) all other property of every kind and nature,
including prepaid expenses.
Section 5.5. Valuation of Assets. The value of the Separate Account's
assets will be determined in accordance with the 1940 Act, rules and
regulations, releases and orders of the SEC from time to time in effect
thereunder, valuation procedures adopted by the Board of Mangers, and the
Separate Account's then-effective registration statement.
Section 5.6. The Separate Account's Liabilities. The Separate Account's
liabilities will be deemed to include (a) all bills and accounts payable, (b)
all administrative or other expenses accrued which are chargeable to the
Separate Account, (c) all contractual obligations for the payment of money or
property, (d) all reserves authorized or approved by the Board of Managers for
taxes or contingencies, and (e) all other liabilities of whatsoever kind and
nature.
Section 5.7. Determination Binding. Any determination made in good faith
and, so far as accounting matters are involved, in accordance with generally
accepted accounting principles, by or pursuant to the direction of the Board of
Managers, as to the amounts of the assets, debts, obligations or liabilities of
the Separate Account, as to the amount of any reserves, liabilities, or expenses
set up and the propriety thereof, as to the time of or purpose for creating such
reserves, liabilities, or expenses, as to the use, alteration or cancellation of
any reserves, liabilities, or expenses (whether or not any debt, obligation or
liability for which such reserves, liabilities or expenses shall have been
created shall have been paid or discharged or shall be then or thereafter
required to be paid or discharged), as to the price or closing bid or asked
price of any securities owed or held by the Separate Account, as to the market
value of any securities or fair value of any other asset of the Separate
Account, as to the estimated expense of the Separate Account in connection with
purchases of assets, as to the ability to liquidate securities in an orderly
fashion, as to the number of Accumulation or Annuity Units of the Separate
Account outstanding, or as to any other matters relating to the sale, purchase
and/or other acquisition or disposition of securities or units of the Separate
Account, shall be final, conclusive and binding. The foregoing sentence shall
not be construed to protect any Manager, officer, or agent of the Separate
Account against any liability to the Separate Account or Contract Owners to
which such person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office or agency; nor shall the foregoing sentence be constructed
as a waiver of compliance with any provision of the 1940 Act or with any rule,
regulation, or order promulgated under said Act.
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ARTICLE VI
AMENDMENTS
Section 6.1. General. Except as otherwise specifically provided herein or
as required by the 1940 Act or other applicable law, these Rules and Regulations
may be amended at any time by an instrument in writing signed by a majority of
the Managers then in office.
Section 6.2. Prohibited Retrospective Amendments. No amendment of these
Rules and Regulations or repeal of any of its provisions shall limit or
eliminate the limitation of liability provided to Managers and officers
hereunder with respect to any act or omission occurring prior to such amendment
or repeal.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1. Certain Internal References. In these Rules and Regulations
or in any such amendment, references to these Rules and Regulations, and all
expressions like "herein," "hereof" and "hereunder," shall be deemed to refer to
these Rules and Regulations as a whole and as amended or affected by any such
amendment.
Section 7.2. Certified Copies. The original or a copy of these Rules and
Regulations and of each amendment hereto shall be kept in the office of the
Separate Account. Anyone dealing with the Separate Account may rely on a
certificate by an officer or Manager of the Separate Account as to whether or
not any such amendments have been made and as to any matters in connection with
the Separate Account hereunder, and with the same effect as if it were the
original, may rely on a copy certified by an officer or Manager of the Separate
Account to be a copy of these Rules and Regulations or of any such amendments.
Section 7.3. Fiscal Year. The fiscal year of the Separate Account shall
end on December 31, or such other date as fixed by resolution of the Managers.
Section 7.4. Governing Law. These Rules and Regulations are executed and
delivered with reference to the laws of the State of Connecticut by all of the
Managers whose signatures appear below, and the rights of all parties and the
validity and construction of every provision hereof shall be subject to and
construed according to the applicable laws of the State of Connecticut (unless
and to the extent otherwise provided for and/or preempted by the 1940 Act or
other applicable federal securities laws). All references to sections of the
1940 Act, or any rules or regulations thereunder, refer to such sections, rules,
or regulations in effect as of the date of, or any successor sections, rules, or
regulations thereto.
Section 7.5. Headings. Headings are placed herein for convenience of
reference only, and in case of any conflict, the text of this instrument, rather
than the headings, shall control. This instrument may be executed in any number
of counterparts, each of which shall be deemed an original.
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Section 7.6. Resolution of Ambiguities. The Managers may construe any of
the provisions of these Rules and Regulations, insofar as the same may appear to
be ambiguous or inconsistent with any other provisions hereof, and any such
construction hereof by the Managers in good faith shall be conclusive as to the
meaning to be given to such provisions. In construing these Rules and
Regulations, the presumption shall be in favor of a grant of power to the
Managers.
Section 7.7. Seal. No official seal of the Separate Account shall be
required to execute any instruments on behalf of the Managers.
Section 7.8. Severability. The provisions of these Rules and Regulations
are severable, and if the Managers shall determine, with the advice of counsel,
that any of such provision is in conflict with the 1940 Act, or with other
applicable laws and regulations, the conflicting provision shall be deemed never
to have constituted a part of these Rules and Regulations; provided, however,
that such determination shall not affect any of the remaining provisions of
these Rules and Regulations or render invalid or improper any action taken or
omitted prior to such determination. If any provision of these Rules and
Regulations shall be held invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall attach only to such provision in such
jurisdiction and shall not in any manner affect such provision in any other
jurisdiction or any other provision of these Rules and Regulations in any
jurisdiction.
Section 7.9. Signatures. To the extent permitted by applicable law, any
instrument signed pursuant to a validly executed power of attorney shall be
deemed to have been signed by the Manager or officer executing the power of
attorney.
16
<PAGE> 39
THE TRAVELERS
QUALITY BOND ACCOUNT
FOR VARIABLE ANNUITIES
PROXY STATEMENT
VG-102 1999
002
<PAGE> 40
THE TRAVELERS QUALITY BOND ACCOUNT FOR VARIABLE ANNUITIES
Proxy for the Annual Meeting of Contract Owners to be held on April 30, 1999
The undersigned, revoking all proxies heretofore given, hereby appoints Heath B.
McLendon, Robert E. McGill, III, or either one of them, as Proxies, with full
power of substitution, to vote on behalf of the undersigned all units of The
Travelers Quality Bond Account for Variable Annuities which the undersigned is
entitled to vote at the Annual Meeting of Contract Owners to be held at 9:00
a.m. on Friday, April 30, 1999 at One Tower Square, Hartford, Connecticut, and
at any adjournment thereof, in the manner directed below with respect to the
matters described in the Proxy Statement for the Annual Meeting, receipt of
which is hereby acknowledged, and in their discretion, upon such other matters
as may properly come before the Annual Meeting or any adjournment thereof.
<TABLE>
<S> <C> <C> <C>
Please vote by filling in the appropriate box(es) below.
FOR WITHHOLD FOR, except
all AUTHORITY vote withheld
nominees for all for nominees
nominees listed at left
1. Election of the Board of Managers - Nominees:
Heath B. McLendon, Knight Edwards, Robert E. McGill, III, Lewis Mandell, [ ] [ ] [ ]
and Frances M. Hawk.
------------------------------------------------------------------------
2. Ratification of the selection of KPMG LLP as independent FOR AGAINST ABSTAIN
accountants for the fiscal year ending December 31, 1999.
[ ] [ ] [ ]
3. To approve the revised Rules and Regulations. [ ] [ ] [ ]
</TABLE>
In their discretion, the Proxies are authorized to vote on any and all other
business as may properly come before the meeting.
PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF CARD.
<PAGE> 41
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF MANAGERS. THE BOARD OF
MANAGERS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3. THE UNITS
REPRESENTED HEREBY WILL BE VOTED BY THE PROXIES IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED CONTRACT OWNER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2 AND 3.
---------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY USING THE ENCLOSED
PRE-ADDRESSED, POSTAGE-PAID ENVELOPE.
---------------------------------------------
PLEASE SIGN EXACTLY AS NAME APPEARS AT LEFT.
DATE:_____________________, 1999
If signing in a representative capacity
(as attorney, executor or administrator,
trustee, guardian or custodian, corporate
officer or general partner), please
indicate such capacity following
signature. Proxies for custodian accounts
must be signed by the named custodian, not
by the minor.
---------------------------------------------
---------------------------------------------
Signature(s) if held jointly
(Title(s), if required)
