<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1 (File No. 33-62407)
Post-Effective Amendment No. 1
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940
Amendment No. 2 (File No. 811-07355)
IDS LIFE VARIABLE ACCOUNT 10
___________________________________________________________________
(Exact Name of Registrant)
IDS Life Insurance Company
___________________________________________________________________
(Name of Depositor)
80 South 8th Street, P.O. Box 534, Minneapolis, MN 55440-0534
___________________________________________________________________
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 671-3678
Mary Ellyn Minenko, IDS Tower 10, Minneapolis, MN 55440-0010
___________________________________________________________________
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 1996 pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a)(i) of Rule 485
on (date) pursuant to paragraph (a)(i) of Rule 485
75 days after filing pursuant to paragraph (a)(ii)
on (date) pursuant to paragraph (a)(ii) of rule 485
If appropriate, check the following box:
this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
The Registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Section
24-f of the Investment Company Act of 1940. Registrant's Rule 24-2
Notice for its most recent fiscal year ending Dec. 31, 1996 will be
filed on or about Feb. 25, 1997.<PAGE>
PAGE 2
<TABLE>
<CAPTION>
CROSS REFERENCE SHEET
Cross reference sheet showing location in the prospectus of the information
called for by the items enumerated in Part A and B of Form N-4.
Negative answers omitted from prospectus are so indicated.
PART A PART B
<C> <C> <C> <C>
Section Section in Statement of
Item No. in Prospectus Item No. Additional Information
1 Cover page 15 Cover page
2 Key terms 16 Table of Contents
3(a) Expense Summary 17(a) NA
(b) The Flexible Portfolio Annuity in brief (b) NA
(c) About IDS Life*
4(a) NA
(b) Performance information 18(a) NA
(c) NA (b) NA
(c) Independent Auditors
5(a) Cover page; About IDS Life (d) NA
(b) The variable account (e) NA
(c) The funds (f) Principal underwriter
(d) Cover page; The funds
(e) Voting rights 19(a) Distribution of the contracts*;
(f) NA About IDS Life*
(g) NA (b) Charges*
6(a) Charges 20(a) Principal underwriter
(b) Charges (b) Principal underwriter
(c) Charges (c) NA
(d) Distribution of the contracts (d) NA
(e) The funds
(f) NA 21(a) Performance information
(b) Performance information
7(a) Buying your annuity; Benefits in case of
death; The annuity payout period 22 Calculating annuity payouts
(b) The variable account; Making the most of
your annuity, Transferring money between 23(a) NA
charge accounts (b) NA
(c) The funds; Charges
(d) Cover page
8(a) The annuity payout period
(b) Buying your annuity
(c) The annuity payout period
(d) The annuity payout period
(e) The annuity payout period
(f) The annuity payout period
9(a) Benefits in case of death
(b) Benefits in case of death
10(a) Buying your annuity; Valuing your
investment
(b) Valuing your investment
(c) Buying your annuity; Valuing your
investment
(d) NA
11(a) Surrendering your contract
(b) TSA - Special surrender provisions
(c) Surrendering your contract
(d) Buying your annuity
(e) The Flexible Portfolio Annuity in brief
12(a) Taxes
(b) Key terms
(c) NA
13 NA
14 Table of contents of the Statement of
Additional Information
*Designates section in the prospectus, which is hereby incorporated by reference in this statement of Additional Information.
/TABLE
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IDS Life Flexible Portfolio Annuity
Prospectus
May 1, 1996
The Flexible Portfolio Annuity is an individual deferred
fixed/variable annuity contract offered by IDS Life Insurance
Company (IDS Life), a subsidiary of American Express Financial
Corporation. Purchase payments may be allocated among different
accounts, providing variable and/or fixed returns and payouts. The
annuity is available for qualified and nonqualified retirement
plans.
IDS Life Variable Account 10
Sold by: IDS Life Insurance Company, IDS Tower 10, Minneapolis, MN
55440-0010, Telephone: 612-671-3131.
THIS PROSPECTUS CONTAINS THE INFORMATION ABOUT THE VARIABLE ACCOUNT
THAT YOU SHOULD KNOW BEFORE INVESTING. Refer to "The variable
account" in this prospectus.
THE PROSPECTUS IS ACCOMPANIED OR PRECEDED BY THE FOLLOWING
PROSPECTUSES: THE RETIREMENT ANNUITY MUTUAL FUNDS PROSPECTUS
(DESCRIBING IDS LIFE AGGRESSIVE GROWTH FUND, IDS LIFE INTERNATIONAL
EQUITY FUND, IDS LIFE CAPITAL RESOURCE FUND, IDS LIFE MANAGED FUND,
IDS LIFE SPECIAL INCOME FUND, IDS LIFE MONEYSHARE FUND) IDS LIFE
GROWTH DIMENSIONS FUND, IDS LIFE GLOBAL YIELD FUND AND IDS LIFE
INCOME ADVANTAGE FUND; AIM VARIABLE INSURANCE FUNDS, INC.
PROSPECTUS (DESCRIBING AIM V.I. GROWTH AND INCOME FUND); PUTNAM
CAPITAL MANAGER TRUST (DESCRIBING PCM NEW OPPORTUNITIES FUND); TCI
PORTFOLIOS, INC., (DESCRIBING TCI VALUE); TEMPLETON VARIABLE
PRODUCTS SERIES FUND (DESCRIBING TEMPLETON DEVELOPING MARKETS FUND)
AND WARBURG PINCUS TRUST (DESCRIBING WARBURG PINCUS TRUST/SMALL
COMPANY GROWTH PORTFOLIO). PLEASE KEEP THESE PROSPECTUSES FOR
FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
IDS LIFE IS NOT A FINANCIAL INSTITUTION, AND THE SECURITIES IT
OFFERS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY FINANCIAL INSTITUTION NOR ARE THEY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR
ANY OTHER AGENCY. INVESTMENTS IN THIS ANNUITY INVOLVE INVESTMENT
RISK INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
A Statement of Additional Information (SAI) dated May 1, 1996
(incorporated by reference into this prospectus) has been filed
with the Securities and Exchange Commission (SEC), and is available
without charge by contacting IDS Life at the telephone number above
or by completing and sending the order form on the last page of
this prospectus. The table of contents of the SAI is on the last
page of this prospectus.
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Table of contents
Key terms.......................................................
The Flexible Portfolio Annuity in brief.........................
Expense summary.................................................
Financial statements............................................
Performance information.........................................
The variable account............................................
The funds.......................................................
IDS Life Aggressive Growth Fund............................
IDS Life International Equity Fund.........................
IDS Life Capital Resource Fund.............................
IDS Life Managed Fund......................................
IDS Life Special Income Fund...............................
IDS Life Moneyshare Fund...................................
IDS Life Growth Dimensions Fund............................
IDS Life Global Yield Fund.................................
IDS Life Income Advantage Fund.............................
AIM V.I. Growth and Income Fund............................
PCM New Opportunities Fund.................................
TCI Value..................................................
Templeton Developing Markets Fund..........................
Warburg Pincus Trust/Small Company Growth Portfolio........
The fixed account...............................................
Buying your annuity.............................................
The retirement date........................................
Beneficiary................................................
How to make purchase payments..............................
Charges.........................................................
Contract administrative charge.............................
Mortality and expense risk fee.............................
Surrender charge...........................................
Waiver of surrender charges................................
Premium taxes..............................................
Valuing your investment.........................................
Number of units............................................
Accumulation unit value....................................
Net investment factor......................................
Factors that affect variable subaccount
accumulation units.........................................
Making the most of your annuity.................................
Automated dollar-cost averaging............................
Transferring money between subaccounts.....................
Transfer policies..........................................
How to request a transfer or a surrender...................
Surrendering your contract......................................
Surrender policies.........................................
Receiving payment when you request a surrender.............
TSA-special surrender provisions................................
Changing ownership..............................................
Benefits in case of death.......................................
The annuity payout period.......................................
Annuity payout plans.......................................
Death after annuity payouts begin..........................
Taxes...........................................................
Voting rights...................................................
Substitution of investments.....................................<PAGE>
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Distribution of the contracts...................................
About IDS Life .................................................
Regular and special reports.....................................
Services..................................................
Table of contents of the Statement of
Additional Information...................................
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Key terms
These terms can help you understand details about your annuity.
Annuity - A contract purchased from an insurance company that
offers tax-deferred growth of the investment until earnings are
withdrawn, and that can be tailored to meet the specific needs of
the individual during retirement.
Accumulation unit - A measure of the value of each variable
subaccount before annuity payouts begin.
Annuitant - The person on whose life or life expectancy the annuity
payouts are based.
Annuity payouts - An amount paid at regular intervals under one of
several plans available to the owner and/or any other payee. This
amount may be paid on a variable or fixed basis or a combination of
both.
Annuity unit - A measure of the value of each variable subaccount
used to calculate the annuity payouts you receive.
Beneficiary - The person designated to receive annuity benefits in
case of the owner's or annuitant's death.
Close of business - When the New York Stock Exchange (NYSE) closes,
normally 3 p.m. Central time.
Code - Internal Revenue Code of 1986, as amended.
Contract value - The total value of your annuity before any
applicable surrender charge and any contract administrative charge
have been deducted.
Contract year - A period of 12 months, starting on the effective
date of your contract and on each anniversary of the effective
date.
Fixed account - An account to which you may allocate purchase
payments. Amounts allocated to this account earn interest at rates
that are declared periodically by IDS Life.
IDS Life - In this prospectus, "we," "us," "our" and "IDS Life"
refer to IDS Life Insurance Company.
Mutual funds (funds) - Mutual funds or portfolios, each with a
different investment objective. (See "The funds.") You may
allocate your purchase payments into variable subaccounts investing
in shares of any or all of these funds.
Owner (you, your) - The person who controls the annuity (decides on
investment allocations, transfers, payout options, etc.). Usually,
but not always, the owner is also the annuitant. The owner is
responsible for taxes, regardless of whether he or she receives the
annuity's benefits.
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Purchase payments - Payments made to IDS Life for an annuity.
Qualified annuity - An annuity purchased for a retirement plan
that is subject to applicable federal law and any rules of the plan
itself. These plans include:
o Individual Retirement Annuities (IRAs)
o Simplified Employee Pension Plans (SEPs)
o Section 401(k) plans
o Custodial and trusteed pension and profit-sharing plans
o Tax-Sheltered Annuities (TSAs)
o Section 457 plans.
All other annuities are considered nonqualified annuities.
Retirement date - The date when annuity payouts are scheduled to
begin. This date is first established when you start your
contract. You can change it in the future.
Surrender charge - A deferred sales charge that may be applied if
you surrender your annuity before the retirement date.
Surrender value - The amount you are entitled to receive if you
surrender your annuity. It is the contract value minus any
applicable surrender charge and contract administrative charge.
Valuation date - Any normal business day, Monday through Friday,
that the NYSE is open. The value of each variable subaccount is
calculated at the close of business on each valuation date.
Variable account - An account consisting of separate subaccounts to
which you may allocate purchase payments; each invests in shares of
one mutual fund. (See "The variable account.") The value of your
investment in each variable subaccount changes with the performance
of the particular fund.
The Flexible Portfolio Annuity in brief
Purpose: The Flexible Portfolio Annuity is designed to allow you
to build up funds for retirement. You do this by making one or more
investments (purchase payments) that may earn returns that increase
the value of the annuity. Beginning at a specified future date
(the retirement date), the annuity provides lifetime or other forms
of payouts to you or to anyone you designate.
Ten-day free look: You may return your annuity to your financial
advisor or our Minneapolis office within 10 days after it is
delivered to you and receive a full refund of the contract value.
No charges will be deducted. However, you bear the investment risk
from the time of purchase until return of the contract; the refund
amount may be more or less than the payment you made. (Exception:
if the law so requires, all of your purchase payment will be
refunded.)
Accounts: You may allocate your purchase payments among any or all
of:
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o variable subaccounts, each of which invests in a mutual fund
with a particular investment objective. The value of each
variable subaccount varies with the performance of the
particular fund. We cannot guarantee that the value at the
retirement date will equal or exceed the total of purchase
payments allocated to the variable subaccounts. (p.13)
o one fixed account, which earns interest at rates that are
adjusted periodically by IDS Life. (p.18)
Buying your annuity: Your financial advisor will help you complete
and submit an application. Applications are subject to acceptance
at our Minneapolis office. You may buy a nonqualified annuity or a
qualified annuity including an IRA. Payment may be made either in
a lump sum or installments:
o Minimum initial purchase payment - $2,000 ($1,000 for qualified
annuities) unless you pay in installments by means of a bank
authorization or under a group billing arrangement such as a
payroll deduction.
o Minimum additional purchase payment - $50.
o Minimum installment payment - $50 monthly; $23.08 biweekly
(scheduled payment plan billing).
o Maximum first-year payment(s) - $50,000 to $1,000,000 depending
on your age.
o Maximum payment for each subsequent year - $50,000 to $100,000
depending upon your age. (p.19)
Transfers: Subject to certain restrictions you may redistribute
your money among accounts without charge at any time until annuity
payouts begin, and once per contract year among the variable
subaccounts thereafter. You may establish automated transfers
among the fixed account and variable subaccount(s). (p.30)
Surrenders: You may surrender all or part of your contract value at
any time before the retirement date. You also may establish
automated partial surrenders. Surrenders may be subject to charges
and tax penalties and may have other tax consequences; also,
certain restrictions apply. (p.34)
Changing ownership: You may change ownership of a nonqualified
annuity by written instruction, however, such changes of
nonqualified annuities may have federal income tax consequences.
Certain restrictions apply concerning change of ownership of a
qualified annuity. (p.37)
Benefits in case of death: If you or the annuitant dies before
annuity payouts begin, we will pay the beneficiary an amount at
least equal to the contract value. (p.38)
Annuity payouts: The contract value of your investment can be
applied to an annuity payout plan that begins on the retirement
date. You may choose from a variety of plans to make sure that
payouts continue as long as they are needed. If you purchased a
qualified annuity, the payout schedule must meet the requirements
of the qualified plan. Payouts may be made on a fixed or variable
<PAGE>
PAGE 9
basis, or both. Total monthly payouts may include amounts from
each variable subaccount and the fixed account. During the annuity
payout period, you cannot be invested in more than five variable
subaccounts at any one time unless we agree otherwise. (p.40)
Taxes: Generally, your annuity grows tax-deferred until you
surrender it or begin to receive payouts. (Under certain
circumstances, IRS penalty taxes may apply.) Even if you direct
payouts to someone else, you will still be taxed on the income if
you are the owner. (p.43)
Charges: Your Flexible Portfolio Annuity is subject to a $30
annual contract administrative charge, a 1.25% mortality and
expense risk charge, a surrender charge and any applicable premium
taxes that may be imposed by state or local governments and
deducted as applicable either from your purchase payments or upon
total withdrawal or when annuity payouts begin. (p.23)
Expense summary
The purpose of this summary is to help you understand the various
costs and expenses associated with your annuity.
You pay no sales charge when you purchase the annuity. All costs
that you bear directly or indirectly for the variable subaccounts
and underlying mutual funds are shown below. Some expenses may
vary as explained under "Contract charges."
Direct charges. These are deducted directly from the contract
value. They include:
Surrender charge: You may pay surrender charges on any surrender
within the first eight contract years. The surrender charge starts
at 7% of any purchase payments surrendered during the first three
contract years, then declines by 1% per year from 6% in the fourth
year to 2% in the eighth year. No charge applies after 8 contract
years. Contract earnings may be surrendered without charge at any
time.
Annual contract administrative charge: $30, waived when contract
value, or total purchase payments (less any payments surrendered)
equals or exceeds $25,000 on your contract anniversary.
Indirect charges. The variable account pays these expenses out of
its assets. They are reflected in the variable subaccount's daily
accumulation unit value and are not charged directly to your
account. They include:
Mortality and expense risk fee: 1.25% per year, deducted from the
variable account as a percentage of the average daily net assets of
the underlying fund.
Operating expenses of underlying mutual funds: management fees and
other expenses deducted as a percentage of average net assets as
follows: *
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<TABLE>
<CAPTION>
IDS Life IDS Life
Aggres- Inter- IDS Life IDS Life IDS Life IDS Life IDS Life AIM V.I. PCM New
sive national Capital IDS Life Special IDS Life Growth Global Income Growth and Oppor- TCI
Growth Equity Resource Managed Income Moneyshare Dimensions Yield Advantage Income*** tunities Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management
fees .64% .86% .63% .62% .63% .54% .63% .84% .62% .65% .70% 1.00%
Other
expenses .04 .09 .04 .03 .04 .05 .05 .06 .05 .52 .14 .00
Total .68%** .95%** .67%** .65%** .67%** .59%** .68%# .90%# .67%# 1.17%** .84%** 1.00%
Warburg Pincus
Templeton Trust/Small
Developing Company
Markets Growth Portfolio
<S> <C> <C>
Management
fees .76% .67%
Other
expenses .94 .58
Total 1.70%++ 1.25%+**
* Premium taxes imposed by some state and local governments are not reflected in this table.
** Annualized operating expenses of underlying mutual funds at Dec. 31, 1995.
+ Figures in "Management Fees," "Other expenses" and "Total" reflect waivers and reimbursements of expenses by the investment
advisor of the Portfolio. If there had been no reimbursement of expenses in 1995, actual expenses of the Portfolio, expressed as a
percent of average daily net assets, would have been as follows: "Management Fees," .90%, "Other expenses," .60% and "Total,"
1.50%.
++This is a new fund: operating expenses are based on annualized estimates of such expenses to be incurred in the current fiscal
year. Expenses shown are Net of Management Fees waived. The Fund's Investment Manager has agreed in advance to reduce its fee so
as to limit the total expenses of the Fund to an annual rate of 1.70% of the Fund's average daily net assets until May 1, 1997.
# This is a new fund, operating expenses are based on annualized estimates of such expenses to be incurred in the current fiscal
year.
IDS Life IDS Life
Aggres- Inter- IDS Life IDS Life IDS Life IDS Life IDS Life AIM V.I. PCM New
sive national Capital IDS Life Special IDS Life Growth Global Income Growth and Oppor- TCI
Growth Equity Resource Managed Income Moneyshare Dimensions Yield Advantage Income tunities Value
Example:* You would pay the following expenses on a $1,000 investment, assuming 5% annual
return and surrender at the end of each time period:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $ 93.42 $ 96.00 $ 93.33 $ 93.14 $ 93.33 $ 92.57 $ 93.42 $ 95.52 $ 93.33 $ 98.09 $ 93.90 $ 96.47
3 years 142.30 150.02 142.01 141.44 142.01 139.71 142.30 148.59 142.01 156.28 143.73 151.45
5 years 170.98 184.15 170.49 169.50 170.49 166.55 170.98 181.72 170.49 194.78 173.43 186.57
10 years 243.98 272.02 242.93 240.82 242.93 234.47 243.98 266.88 242.93 294.32 249.23 277.13
Warburg Pincus
Templeton Trust/Small
Developing Company
Markets Growth Portfolio
<S> <C> <C>
1 year $103.15 $ 98.86
3 years 171.25 158.55
5 years 219.97 198.61
10 years 346.07 302.30<PAGE>
PAGE 11
You would pay the following expenses on the same investment assuming no surrender or the
selection of an annuity payout plan at the end of each time period:
IDS Life IDS Life
Aggres- Inter- IDS Life IDS Life IDS Life IDS Life IDS Life AIM V.I. PCM New
sive national Capital IDS Life Special IDS Life Growth Global Income Growth and Oppor- TCI
Growth Equity Resource Managed Income Moneyshare Dimensions Yield Advantage Income tunities Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $ 21.42 $ 24.19 $ 21.32 $ 21.12 $ 21.32 $ 20.50 $ 21.42 $ 23.68 $ 21.32 $ 26.45 $ 21.94 $ 24.70
3 years 66.12 74.46 65.81 65.19 65.81 63.33 66.12 72.92 65.81 81.22 67.67 76.00
5 years 113.41 127.36 112.89 111.85 112.89 108.73 113.41 124.79 112.89 138.60 116.01 129.92
10 years 243.98 272.02 242.93 240.82 242.93 234.47 243.98 266.88 242.93 294.32 249.23 277.13
Warburg Pincus
Templeton Trust/Small
Developing Company
Markets Growth Portfolio
<S> <C> <C>
1 year $ 31.88 $ 27.27
3 years 97.38 83.67
5 years 165.27 142.67
10 years 346.07 302.30
</TABLE>
This example should not be considered a representation of past or
future expenses. Actual expenses may be more or less than those
shown.
* In this example, the $30 annual contract administrative charge is
approximated as a .160% charge based on the expected average
contract size. IDS Life has entered into certain arrangements
under which it is compensated for the administrative services it
provides to the funds.
Financial statements
The SAI, dated May 1, 1996, contains:
The audited financial statements of IDS Life including:
- consolidated balance sheets as of Dec. 31, 1995 and Dec. 31,
1994.
- related consolidated statements of income, shareholder's
equity and cash flows for each of the three years in the
period ended Dec. 31, 1995.
The SAI does not include financial statements of the variable
account because this is a new account that did not have any assets
as of Dec. 31, 1995.
Performance information
Performance information for the variable subaccounts may appear
from time to time in advertisements or sales literature. In all
cases, such information reflects the performance of a hypothetical<PAGE>
PAGE 12
investment in a particular account during a particular time period.
Calculations are performed as follows:
Simple yield - Account HM (investing in Moneyshare Fund): Income
over a given seven-day period (not counting any change in the
capital value of the investment) is annualized (multiplied by 52)
by assuming that the same income is received for 52 weeks. This
annual income is then stated as an annual percentage return on the
investment.
Compound yield - Account HM (investing in Moneyshare Fund):
Calculated like simple yield, except that, when annualized, the
income is assumed to be reinvested. Compounding of reinvested
returns increases the yield as compared to a simple yield.
Yield - For accounts investing in income funds: Net investment
income (income less expenses) per accumulation unit during a given
30-day period is divided by the value of the unit on the last day
of the period. The result is converted to an annual percentage.
Average annual total return: Expressed as an average annual
compounded rate of return of a hypothetical investment over a
period of one, five and 10 years (or up to the life of the account
if it is less than 10 years old). This figure reflects deduction
of all applicable charges, including the contract administrative
charge, mortality and expense risk fee and surrender charge,
assuming a surrender at the end of the illustrated period.
Optional total return quotations may be made that do not reflect a
surrender charge deduction (assuming no surrender).
Aggregate total return: Represents the cumulative change in the
value of an investment over a specified period of time (reflecting
change in a subaccount's accumulation unit value). The calculation
assumes reinvestment of investment earnings and reflects the
deduction of all applicable charges, including the contract
administrative charge, mortality and expense risk fee and surrender
charge, assuming a surrender at the end of the illustrated period.
Optional total return quotations may be made that do not reflect a
surrender charge deduction (assuming no surrender). Aggregate
total return may be shown by means of schedules, charts or graphs.
Performance information should be considered in light of the
investment objectives and policies, characteristics and quality of
the fund in which the subaccount invests, and the market conditions
during the given time period. Such information is not intended to
indicate future performance. Because advertised yields and total
return figures include all charges attributable to the annuity,
which has the effect of decreasing advertised performance,
subaccount performance should not be compared to that of mutual
funds that sell their shares directly to the public. (See the SAI
for a further description of methods used to determine yield and
total return for the subaccounts.)
If you would like additional information about actual performance,
contact your financial advisor.
<PAGE>
PAGE 13
The variable account
Purchase payments can be allocated to any or all of the subaccounts
of the variable account that invest in shares of the following
funds:
Subaccount
IDS Life Aggressive Growth Fund HA
IDS Life International Equity Fund HI
IDS Life Capital Resource Fund HC
IDS Life Managed Fund HD
IDS Life Special Income Fund HS
IDS Life Moneyshare Fund HM
IDS Life Growth Dimensions Fund HG
IDS Life Global Yield Fund HY
IDS Life Income Advantage Fund HV
AIM V.I. Growth and Income Fund HW
PCM New Opportunities Fund HN
TCI Value HP
Templeton Developing Markets Fund HK
Warburg Pincus Trust/Small Company Growth Portfolio HT
Each variable subaccount meets the definition of a separate account
under federal securities laws. Income, capital gains and capital
losses of each subaccount are credited or charged to that
subaccount alone. No variable subaccount will be charged with
liabilities of any other account or of our general business. All
obligations arising under the contracts are general obligations of
IDS Life.
The variable account was established under Minnesota law on August
23, 1995 and is registered as a unit investment trust under the
Investment Company Act of 1940 (the 1940 Act). This registration
does not involve any supervision of our management or investment
practices and policies by the SEC.
The funds
IDS Life Aggressive Growth Fund
Objective: capital appreciation. Invests primarily in common stock
of small-and medium-size companies. The fund also may invest in
warrants or debt securities or in large, well-established companies
when the portfolio manager believes such investments offer the best
opportunity for capital appreciation.
IDS Life International Equity Fund
Objective: capital appreciation. Invests primarily in common stock
of foreign issuers and foreign securities convertible into common
stock. The fund also may invest in certain international bonds if
the portfolio manager believes they have a greater potential for
capital appreciation than equities.
IDS Life Capital Resource Fund
Objective: capital appreciation. Invests primarily in U.S. common
stocks and other securities convertible into common stock,
diversified over many different companies in a variety of
industries.
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PAGE 14
IDS Life Managed Fund
Objective: maximum total investment return. Invests primarily in
U.S. common stocks, securities convertible into common stock,
warrants, fixed income securities (primarily high-quality corporate
bonds) and money-market instruments. The fund invests in many
different companies in a variety of industries.
IDS Life Special Income Fund
Objective: to provide a high level of current income while
conserving the value of the investment for the longest time period.
Invests primarily in high-quality, lower-risk corporate bonds
issued by many different companies in a variety of industries, and
in government bonds.
IDS Life Moneyshare Fund
Objective: maximum current income consistent with liquidity and
conservation of capital. Invests in high-quality money market
securities with remaining maturities of 13 months or less. The
fund also will maintain a dollar-weighted average portfolio
maturity not exceeding 90 days. The fund attempts to maintain a
constant net asset value of $1 per share.
IDS Life Growth Dimensions Fund
Objective: long-term growth of capital. Invests primarily in
common stocks of U.S. and foreign companies showing potential for
significant growth.
IDS Life Global Yield Fund
Objective: high total return through income and growth of capital.
Invests primarily in a non-diversified portfolio of debt securities
of U.S. and foreign issuers.
IDS Life Income Advantage Fund
Objective: high current income, with capital growth as a secondary
objective. Invests primarily in long-term, high-yielding, high-
risk debt securities below investment grade issued by U.S. and
foreign corporations.
AIM V.I. Growth and Income Fund
Objective: to seek growth of capital, with current income as a
secondary objective. The fund seeks to achieve its objective by
investing primarily in dividend-paying common stocks which have
prospects for both growth of capital and dividend income.
PCM New Opportunities Fund
Objective: long-term capital appreciation. Invests principally in
common stocks of companies in sectors of the economy that
management believes possess above-average, long-term growth
potential.
TCI Value
Objective: long-term capital growth, with income as a secondary
objective. Invests primarily in securities that management
believes to be undervalued at the time of purchase.
<PAGE>
PAGE 15
Templeton Developing Markets Fund
Objective: long-term capital appreciation. Invests primarily in
equity securities of issuers in countries having developing
markets.
Warburg Pincus Trust/Small Company Growth Portfolio
Objective: capital growth. Invests primarily in equity securities
of small-sized domestic companies.
All funds are available to serve as the underlying investment for
variable annuities, and some funds are available to serve as the
underlying investment for variable annuities, variable life
insurance contracts and qualified plans. It is conceivable that in
the future it may be disadvantageous for variable annuity separate
accounts, variable life insurance separate accounts and/or
qualified plans to invest in the available funds simultaneously.
Although IDS Life and the funds do not currently foresee any such
disadvantages, the boards of directors or trustees of the
appropriate funds will monitor events in order to identify any
material conflicts between such contract owners, policy owners and
qualified plans to determine what action, if any, should be taken
in response to a conflict. If a board were to conclude that
separate funds should be established for variable annuity, variable
life insurance and qualified plan separate accounts, the variable
annuity contract holders would not bear any expenses associated
with establishing separate funds.
The Internal Revenue Service (IRS) has issued final regulations
relating to the diversification requirements under Section 817(h)
of the Code. Each mutual fund intends to comply with these
requirements.
The U.S. Treasury and the IRS have indicated they may provide
additional guidance concerning how many variable subaccounts may be
offered and how many exchanges among variable subaccounts may be
allowed before the owner is considered to have investment control
and thus is currently taxed on income earned within variable
subaccount assets. We do not know at this time what the additional
guidance will be or when action will be taken. We reserve the
right to modify the contract, as necessary, to ensure that the
owner will not be subject to current taxation as the owner of the
variable subaccount assets.
We intend to comply with all federal tax laws to ensure that the
contract continues to qualify as an annuity for federal income tax
purposes. We reserve the right to modify the contract as necessary
to comply with any new tax laws.
The investment managers for the funds are as follows:
o IDS Life Funds - IDS Life, IDS Tower 10, Minneapolis, MN 55440;
o AIM V.I. Growth and Income Fund - A I M Advisors, Inc., 11
Greenway Plaza, Suite 1919, Houston, TX 77046-1173;
<PAGE>
PAGE 16
o PCM New Opportunities Fund - Putnam Investment Management, Inc.,
One Post Office Square, Boston, MA 02109;
o TCI Value - Investors Research Corporation, Twentieth Century
Tower, 4500 Main Street, Kansas City, MO 64111;
o Templeton Developing Markets Fund - Templeton Asset Management
Ltd., Hong Kong Branch, Two Exchange Square, Hong Kong;
o Warburg Pincus Trust/Small Company Growth Portfolio - Warburg,
Pincus Counsellors, Inc., 466 Lexington Avenue, New York, NY
10017-3147.
The investment managers cannot guarantee that the funds will meet
their investment objectives. Please read the prospectuses for the
funds for complete information on investment risks, deductions,
expenses and other facts you should know before investing. These
prospectuses are available by contacting IDS Life at the address or
telephone number on the front of this prospectus, or from your
financial advisor.
The fixed account
Purchase payments can also be allocated to the fixed account. The
cash value of the fixed account increases as interest is credited
to the account. Purchase payments and transfers to the fixed
account become part of the general account of IDS Life, the
company's main portfolio of investments. Interest is credited
daily and compounded annually. We may change the interest rates
from time to time.
Because of exemptive and exclusionary provisions, interests in the
fixed account have not been registered under the Securities Act of
1933 (1933 Act), nor is the fixed account registered as an
investment company under the 1940 Act. Accordingly, neither the
fixed account nor any interests in it are generally subject to the
provisions of the 1933 or 1940 Acts, and we have been advised that
the staff of the SEC has not reviewed the disclosures in this
prospectus that relate to the fixed account. Disclosures regarding
the fixed account, however, may be subject to certain generally
applicable provisions of the federal securities laws relating to
the accuracy and completeness of statements made in prospectuses.
Buying your annuity
Your financial advisor will help you prepare and submit your
application, and send it along with your initial purchase payment
to our Minneapolis office. As the owner, you have all rights and
may receive all benefits under the contract. The annuity cannot be
owned in joint tenancy, except in spousal situations. You cannot
buy an annuity or be an annuitant if you are 91 or older. (In
Pennsylvania, the annuitant must be under age 79.)
<PAGE>
PAGE 17
When you apply, you can select:
o the account(s) in which you want to invest;
o how you want to make purchase payments; and
o a beneficiary.
The contract provides for allocation of purchase payments to the
subaccounts of the variable account and/or to the fixed account in
even 1% increments.
If your application is complete, we will process it and apply your
purchase payment to your account(s) within two days after we
receive it. If your application is accepted, we will send you a
contract. If we cannot accept your application within five days,
we will decline it and return your payment. We will credit
additional purchase payments to your account(s) at the next close
of business.
The retirement date
Upon processing your application we will establish the retirement
date to the maximum age or date as specified below. You can also
select a date within the maximum limits. This date can be aligned
with your actual retirement from a job, or it can be a different
future date, depending on your needs and goals and on certain
restrictions. You can also change the date, provided you send us
written instructions at least 30 days before annuity payouts begin.
For nonqualified annuities, the retirement date must be:
o no earlier than the 60th day after the contract's effective
date; and
o no later than the annuitant's 85th birthday or before the 10th
contract anniversary, if purchased after age 75. (In
Pennsylvania, the annuity start date must be no later than the
annuitant's 85th birthday.)
For qualified annuities, to avoid IRS penalty taxes, the retirement
date generally must be:
o on or after the annuitant reaches age 59 1/2; and
o by April 1 of the year following the calendar year when the
annuitant reaches age 70 1/2.
If you are taking the minimum IRA or TSA distributions as required
by the Code from another tax-qualified investment, or in the form
of partial surrenders from this annuity, annuity payouts can start
as late as the annuitant's 85th birthday or the 10th contract
anniversary. (In Pennsylvania, the annuity payouts must start no
later than the annuitant's 85th birthday.)
Certain restrictions on retirement dates apply to participants in
the Texas Optional Retirement Program. (See "Special surrender
provisions.")
<PAGE>
PAGE 18
Beneficiary
If death benefits become payable before the retirement date, your
named beneficiary will receive all or part of the contract value.
If there is no named beneficiary, then you or your estate will be
the beneficiary. (See "Benefits in case of death" for more about
beneficiaries.)
Minimum purchase payment
If single payment:
Nonqualified: $2,000
Qualified: $1,000
o Minimum additional purchase payment: $50
If installment payments:
o Minimum installment payment(s): $50 monthly; $23.08 biweekly
(scheduled payment plan billing)
Installments must total at least $600 in the first year.*
*If you make no purchase payments for 24 months, and your previous
payments total $600 or less, we have the right to give you 30 days'
written notice and pay you the total value of your contract in a
lump sum. This right does not apply to contracts sold to New
Jersey residents.
Maximum first-year payment(s):
This maximum is based on your age or age of the annuitant (whomever
is older) on the effective date of the contract.
Up to age 75 $1 million
76 to 85 $500,000
86 to 90 $50,000
o Maximum payment for each subsequent year**: $100,000 Up to age 85
$ 50,000 Ages 86-90
**These limits apply in total to all IDS Life annuities you own.
We reserve the right to increase maximum limits. For qualified
annuities the qualified plan's limits on annual contributions also
apply.
<PAGE>
PAGE 19
How to make purchase payments
1 By letter
Send your check along with your name and account number to:
Regular mail:
IDS Life Insurance Company
Box 74
Minneapolis, MN 55440-0074
Express mail:
IDS Life Insurance Company
733 Marquette Avenue
Minneapolis, MN 55402
2 By scheduled payment plan
Your financial advisor can help you set up:
o an automatic payroll deduction, salary reduction or other group
billing arrangement; or
o a bank authorization.
Charges
Contract administrative charge
This fee is for establishing and maintaining your records. We
deduct $30 from the contract value on your contract anniversary.
This $30 charge is waived if your contract value, or total purchase
payments less any payments surrendered, equals or exceeds $25,000
on your contract anniversary.
If you surrender your contract, the charge will be deducted at the
time of surrender regardless of the contract value or purchase
payments made. The charge cannot be increased and does not apply
after annuity payouts begin.
Mortality and expense risk fee
This fee is to cover the mortality risk and expense risk and is
applied daily to the variable subaccounts and reflected in the unit
values of the subaccounts. The subaccounts pay this fee at the
time that dividends are distributed from the funds in which they
invest. Annually the fee totals 1.25% of the subaccounts' average
daily net assets. Approximately two-thirds of this amount is for
our assumption of mortality risk, and one-third is for our
assumption of expense risk. This fee does not apply to the fixed
account.
Mortality risk arises because of our guarantee to pay a death
benefit and our guarantee to make annuity payouts according to the
terms of the contract, no matter how long a specific annuitant
lives and no matter how long the entire group of IDS Life<PAGE>
PAGE 20
annuitants live. If, as a group, IDS Life annuitants outlive the
life expectancy we have assumed in our actuarial tables, then we
must take money from our general assets to meet our obligations.
If, as a group, IDS Life annuitants do not live as long as
expected, we could profit from the mortality risk fee. Expense
risk arises because the contract administrative charge cannot be
increased and may not cover our expenses. Any deficit would have
to be made up from our general assets.
We do not plan to profit from the contract administrative charge.
However, we do hope to profit from the mortality and expense risk
fee. We may use any profits realized from this fee for any proper
corporate purpose, including, among others, payment of distribution
(selling) expenses. We do not expect that the surrender charge,
discussed in the following paragraphs, will cover sales and
distribution expenses.
Surrender charge
A surrender charge applies to all purchase payments surrendered in
the first eight contract years. The surrender amount you request
is determined by drawing from your total contract value in the
following order:
o First we surrender any contract earnings (contract value minus
all purchase payments received and not previously surrendered).
There is no surrender charge on contract earnings. Note:
Contract earnings are determined by looking at the entire
contract value, not the earnings of any particular variable
subaccount or the fixed account.
o If necessary, we surrender amounts representing purchase
payments not previously surrendered. The surrender charge rate
on these purchase payments is as follows:
Surrender charge as
percent of purchase
payments surrendered Contract year
7 1-3
6 4
5 5
4 6
3 7
2 8
0 After 8 years
The surrender charge is calculated so that the total amount
surrendered, minus any surrender charge, equals the amount you
request.
Waiver of surrender charges
There are no surrender charges for:
o contract earnings;
o minimum required distributions after you reach age 70 1/2; (for
qualified plans)
o contracts settled using an annuity payout plan; and
o death benefits.
<PAGE>
PAGE 21
If your contract includes a "Waiver of Surrender Charges for
Nursing Home Confinement" Annuity Endorsement, we will waive
surrender charges that are normally assessed upon full or partial
surrender if you provide proof satisfactory to us that, as of the
date you request the surrender, you or your spouse are confined to
a nursing home and have been for the prior 90 days.
To qualify, the nursing home must meet the following criteria:
o be licensed by an appropriate licensing agency to provide
nursing care;
o provide 24-hour-a-day nursing services;
o have a doctor available for emergency situations;
o have a nurse on duty or on call at all times;
o maintain clinical records; and
o have appropriate methods for administering drugs.
To the extent permitted by state law, this endorsement is included
in contracts issued when the owner is under age 76 on the date that
we issue the contract.
Other information on charges: American Express Financial
Corporation makes certain custodial services available to some
custodial and trusteed pension and profit sharing plans and 401(k)
plans funded by IDS Life annuities. Fees for these services start
at $30 per calendar year per participant. A termination fee for
owners under age 59 1/2 will be charged (fee waived in case of
death or disability).
Possible group reductions: In some cases (for example, an employer
making the annuity available to employees), lower sales and
administrative expenses may be incurred due to the size of the
group, the average contribution and the use of group enrollment
procedures. In such cases, we may be able to reduce or eliminate
the contract administrative and surrender charges. However, we
expect this to occur infrequently.
Premium taxes
Certain state and local governments impose premium taxes that may
reach to 3.5%. These taxes are dependent upon the state of
residence or the state in which the contract was sold and are
deducted as applicable. In some cases, premium taxes are deducted
from your purchase payments before they are allocated. In other
cases, the deduction is made when you surrender your contract or
when annuity payouts begin.
Valuing your investment
Here is how your accounts are valued:
Fixed account: The amounts allocated to the fixed account are
valued directly in dollars and equal the sum of your purchase
payments, plus interest earned, less any amounts surrendered or
transferred and any contract administrative charge assessed.
<PAGE>
PAGE 22
Variable subaccounts: Amounts allocated to the variable
subaccounts are converted into accumulation units. Each time you
make a purchase payment or transfer amounts into one of the
variable subaccounts, a certain number of accumulation units are
credited to your contract for that subaccount. Conversely, each
time you take a partial surrender, transfer amounts out of a
variable subaccount, or are assessed a contract administrative
charge, a certain number of accumulation units are subtracted from
your contract.
The accumulation units are the true measure of investment value in
each subaccount during the accumulation period. They are related
to, but not the same as, the net asset value of the underlying
fund. The dollar value of each accumulation unit can rise or fall
daily depending on the performance of the underlying mutual fund
and on certain fund expenses. Here is how unit values are
calculated:
Number of units
To calculate the number of accumulation units for a particular
subaccount, we divide your investment, after deduction of any
premium taxes, by the current accumulation unit value.
Accumulation unit value
The current accumulation unit value for each variable subaccount
equals the last value times the subaccount's current net investment
factor.
Net investment factor
o Determined each business day by adding the underlying mutual
fund's current net asset value per share, plus per share amount
of any current dividend or capital gain distribution; then
o dividing that sum by the previous net asset value per share; and
o subtracting the percentage factor representing the mortality and
expense risk fee from the result.
Because the net asset value of the underlying mutual fund may
fluctuate, the accumulation unit value may increase or decrease.
You bear this investment risk in a variable subaccount.
Factors that affect variable subaccount accumulation units
Accumulation units may change in two ways; in number and in value.
Here are the factors that influence those changes:
The number of accumulation units you own may fluctuate due to:
o additional purchase payments allocated to the variable
subaccount(s);
o transfers into or out of the variable subaccount(s);
o partial surrenders;
o surrender charges; and/or
o contract administrative charges.
Accumulation unit values may fluctuate due to:
o changes in underlying mutual fund(s) net asset value;
o dividends distributed to the variable subaccount(s);<PAGE>
PAGE 23
o capital gains or losses of underlying mutual funds;
o mutual fund operating expenses; and/or
o mortality and expense risk fees.
Making the most of your annuity
Automated dollar-cost averaging
You can use automated transfers to take advantage of dollar-cost
averaging (investing a fixed amount at regular intervals). For
example, you might have a set amount transferred monthly from a
relatively conservative variable subaccount to a more aggressive
one, or to several others.
This systematic approach can help you benefit from fluctuations in
accumulation unit values caused by fluctuations in the market
value(s) of the underlying mutual fund(s). Since you invest the
same amount each period, you automatically acquire more units when
the market value falls, fewer units when it rises. The potential
effect is to lower the average cost per unit. For specific
features contact your financial advisor.
How dollar-cost averaging works
Amount Accumulation Number of units
Month invested unit value purchased
Jan $100 $20 5.00
Feb 100 18 5.56
March 100 17 5.88
April 100 15 6.67
May 100 16 6.25
June 100 18 5.56
July 100 17 5.88
Aug 100 19 5.26
Sept 100 21 4.76
Oct 100 20 5.00
(footnotes to table) By investing an equal number of dollars each
month...
(arrow in table pointing to April) you automatically buy more units
when the per unit market price is low...
(arrow in table pointing to September) and fewer units when the per
unit market price is high.
You have paid an average price of only $17.91 per unit over the 10
months, while the average market price actually was $18.10.
Dollar-cost averaging does not guarantee that any variable
subaccount will gain in value, nor will it protect against a
decline in value if market prices fall. However, if you can
continue to invest regularly throughout changing market conditions,
it can be an effective strategy to help meet your long-term goals.
Transferring money between subaccounts
You may transfer money from any one subaccount, or the fixed
account, to another subaccount before the annuity payouts begin. <PAGE>
PAGE 24
If we receive your request before the close of business, we will
process it that day. Requests received after the close of business
will be processed the next business day. There is no charge for
transfers. Before making a transfer, you should consider the risks
involved in switching investments.
Certain restrictions apply to transfers involving the fixed
account. We may suspend or modify transfer privileges at any time.
Excessive trading activity can disrupt mutual fund management
strategy and increase expenses, which are borne by all contract
owners participating in the fund regardless of their transfer
activity. We may apply modifications or restrictions in any manner
reasonably designed to prevent any use of the transfer right we
consider to be to the disadvantage of other contract owners.
Transfer policies
o Before annuity payouts begin, you may transfer contract values
between the variable subaccounts, or from the variable
subaccount(s) to the fixed account at any time. However, if you
have made a transfer from the fixed account to the variable
subaccount(s), you may not make a transfer (including automated
transfers) from any variable subaccount back to the fixed
account until the next contract anniversary.
o You may transfer contract values from the fixed account to the
variable subaccount(s) once a year during a 31-day transfer
period starting on each contract anniversary (except for
automated transfers, which can be set up at any time for
transfer periods of your choosing subject to certain minimums).
o If we receive your transfer request within 30 days before the
contract anniversary date, the transfer from the fixed account
to the variable subaccount(s) will be effective on the
anniversary.
o If we receive your request on or within 30 days after the
contract anniversary date, the transfer from the fixed account
to the variable subaccount(s) will be effective on the day we
receive it.
o We will not accept requests for transfers from the fixed account
at any other time.
o Once annuity payouts begin, no transfers may be made to or from
the fixed account, but transfers may be made once per contract
year among the variable subaccounts. During the annuity payout
period, you cannot be invested in more than five variable
subaccounts at any one time unless we agree otherwise.
How to request a transfer or a surrender
1 By letter
Send your name, account number, Social Security Number or Taxpayer
Identification Number and signed request for a transfer or
surrender to:<PAGE>
PAGE 25
Regular mail:
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
Express mail:
IDS Life Insurance Company
733 Marquette Avenue
Minneapolis, MN 55402
Minimum amount
Mail transfers: $250 or entire account balance
Mail surrenders: $250 or entire account balance
Maximum amount
Mail transfers: None (up to contract value)
Mail surrenders: None (up to contract value)
2 By phone
Call between 7 a.m. and 6 p.m. Central time:
1-800-437-0602 (toll free) or
(612) 671-4738 (Minneapolis/St. Paul area)
TTY service for the hearing impaired:
1-800-285-8846 (toll free)
Minimum amount
Phone transfers: $250 or entire account balance
Phone surrenders: $250 or entire account balance
Maximum amount
Phone transfers: None (up to contract value)
Phone surrenders: $50,000
We answer phone requests promptly, but you may experience delays
when the call volume is unusually high. If you are unable to get
through, use the mail procedure as an alternative.
We will honor any telephone transfer or surrender request believed
to be authentic and will use reasonable procedures to confirm that
they are. This includes asking identifying questions and tape
recording calls. A telephone surrender will not be allowed within
30 days of a phoned-in address change. As long as the procedures
are followed, neither IDS Life nor its affiliates will be liable
for any loss resulting from fraudulent requests.
Telephone transfers or surrenders are automatically available. You
may request that telephone transfers or surrenders not be
authorized from your account by writing IDS Life.
3 By automated transfers and automated partial surrenders
Your financial advisor can help you set up automated transfers
among your accounts or partial surrenders from the accounts.<PAGE>
PAGE 26
You can start or stop this service by written request or other
method acceptable to IDS Life. You must allow 30 days for IDS Life
to change any instructions that are currently in place.
o Automated transfers from the fixed account to any one of the
variable subaccount(s) may not exceed an amount that, if
continued, would deplete the fixed account within 12 months.
o Automated surrenders may be restricted by applicable law under
some contracts.
o You may not make additional purchase payments if automated
partial surrenders are in effect.
o Automated partial surrenders may result in IRS taxes and
penalties on all or part of the amount surrendered.
Minimum amount
Automated transfers or surrenders: $50
Maximum amount
Automated transfers or surrenders: None (except for automated
transfers from the fixed
account)
Surrendering your contract
As owner, you may surrender all or part of your contract at any
time before annuity payouts begin by sending a written request or
calling IDS Life. For total surrenders we will compute the value
of your contract at the close of business after we receive your
request. We may ask you to return the contract. You may have to
pay surrender charges (see "Surrender charge") and IRS taxes and
penalties (see "Taxes"). No surrenders may be made after annuity
payouts begin.
Surrender policies
If you have a balance in more than one account and request a
partial surrender, we will withdraw money from all your accounts in
the same proportion as your value in each account correlates to
your total contract value, unless you request otherwise. The
minimum contract value after partial surrender is $600.
Receiving payment when you request a surrender
By regular or express mail:
o Payable to owner;
o Mailed to address of record;
o Special payee and/or addressee.
By wire:
o Request that payment be wired to your bank;<PAGE>
PAGE 27
o Bank account must be in the same ownership as your contract;
o Pre-authorization required. For instructions, contact your
financial advisor.
Payment normally will be sent within seven days after receiving
your request. However, we may postpone the payment if:
-the surrender amount includes a purchase payment check that
has not cleared;
-the NYSE is closed, except for normal holiday and weekend
closings;
-trading on the NYSE is restricted, according to SEC rules;
-an emergency, as defined by SEC rules, makes it impractical
to sell securities or value the net assets of the accounts;
or
-the SEC permits us to delay payment for the protection of
security holders.
TSA-special surrender provisions
Participants in Tax-Sheltered Annuities: The Code imposes certain
restrictions on your right as owner to receive early distributions
from a TSA:
o Distributions attributable to salary reduction contributions
made after Dec. 31, 1988, plus the earnings on them, or to
transfers or rollovers of such amounts from other contracts, may
be made from the TSA only if:
-you have attained age 59 1/2;
-you have become disabled as defined in the Code;
-you have separated from the service of the employer who
purchased the annuity; or
-the distribution is made to your beneficiary because of your
death.
o If you encounter a financial hardship (within the meaning of the
Code), you may receive a distribution of all contract values
attributable to salary reduction contributions made after Dec.
31, 1988, but not the earnings on them.
o Even though a distribution may be permitted under the above
rules, it still may be subject to IRS taxes and penalties. (See
"Taxes.")
o The above restrictions on the right to receive a distribution do
not affect the availability of the amount credited to the
contract as of Dec. 31, 1988. The restrictions do not apply to
transfers or exchanges of contract value within the annuity, or
to another registered variable annuity contract or investment
vehicle available through the employer.
o If the contract has a loan provision, the right to receive a
loan from your fixed account is described in detail in your
contract. You may borrow from the contract value allocated to
the fixed account.<PAGE>
PAGE 28
o For certain types of contributions under a TSA contract to be
excluded from taxable income, the employer must comply with
certain nondiscrimination requirements. You should consult your
employer to determine whether the nondiscrimination rules apply
to you.
Participation in the Portland Public Schools TSA program: IDS Life
will guarantee that your fixed account surrender value will not be
less than the purchase payments paid, less any amounts previously
surrendered, provided:
o all purchase payments under the contract have been allocated
only to the fixed account; and
o there have been no transfers of fixed account contract values to
any variable subaccount. If payments are allocated to a
variable subaccount or monies are transferred from the fixed
account to a variable subaccount, the guarantee does not apply.
Participants in the Texas Optional Retirement Program: You cannot
receive any distribution before retirement unless you become
totally disabled or end your employment at a Texas college or
university. This restriction affects your right to:
o surrender all or part of your annuity at any time; and
o move up your retirement date.
If you are in the program for only one year, the portion of the
purchase payments made by the state of Texas will be refunded to
the state with no surrender charge. These restrictions are based
on an opinion of the Texas Attorney General interpreting Texas law.
Changing ownership
You may change ownership of your nonqualified annuity at any time
by filing a change of ownership with us at our Minneapolis office.
The change will become binding upon us when we receive and record
it. We will honor any change of ownership request believed to be
authentic and will use reasonable procedures to confirm that it is.
If these procedures are followed, we take no responsibility for the
validity of the change.
If you have a nonqualified annuity, you may lose your tax
advantages by transferring, assigning or pledging any part of it.
(See "Taxes.")
If you have a qualified annuity, you may not sell, assign,
transfer, discount or pledge your contract as collateral for a
loan, or as security for the performance of an obligation or for
any other purpose to any person except IDS Life. However, if the
owner is a trust or custodian, or an employer acting in a similar
capacity, ownership of a contract may be transferred to the
annuitant.
Benefits in case of death
If you or the annuitant dies (or, for qualified annuities, if the
annuitant dies) before annuity payouts begin, we will pay the<PAGE>
PAGE 29
beneficiary as follows:
For contracts issued in all states except Oregon, Texas and
Washington:
If death occurs before the annuitant's 75th birthday, the
beneficiary receives the greatest of:
o the contract value;
o the contract value as of the most recent sixth contract
anniversary, minus any surrenders since that anniversary; or
o purchase payments, minus any surrenders.
If death occurs on or after the annuitant's 75th birthday, the
beneficiary receives the greater of:
o the contract value; or
o the contract value as of the most recent sixth contract
anniversary, minus any surrenders since that anniversary.
For contracts issued in Oregon, Texas and Washington:
If death occurs before the annuitant's 75th birthday, the
beneficiary receives the greater of:
o purchase payments minus any surrenders; or
o the contract value.
If death occurs on or after the annuitant's 75th birthday, the
beneficiary receives the contract value.
If your spouse is sole beneficiary under a nonqualified annuity and
you die before the retirement date, your spouse may keep the
annuity as owner. To do this your spouse must, within 60 days
after we receive proof of death, give us written instructions to
keep the contract in force.
Under a qualified annuity, if the annuitant dies before reaching
age 70 1/2 and before the retirement date, and the spouse is the
only beneficiary, the spouse may keep the annuity in force until
the date on which the annuitant would have reached age 70 1/2 or
any other date permitted by the Code. To do this, the spouse must
give us written instructions within 60 days after we receive proof
of death.
Payments: We will pay the beneficiary in a single sum unless you
have given us other written instructions, or the beneficiary may
receive payouts under any annuity payout plan available under this
contract if:
o the beneficiary asks us in writing within 60 days after we
receive proof of death;
o payouts begin no later than one year after death; and
o the payout period does not extend beyond the beneficiary's life
or life expectancy.
When paying the beneficiary, we will determine the contract's value
at the next close of business after our death claim requirements
are fulfilled. Interest, if any, will be paid from the date of<PAGE>
PAGE 30
death at a rate no less than required by law. We will mail payment
to the beneficiary within seven days after our death claim
requirements are fulfilled. (See "Taxes.")
The annuity payout period
As owner of the contract, you have the right to decide how and to
whom annuity payouts will be made starting at the retirement date.
You may select one of the annuity payout plans outlined below, or
we will mutually agree on other payout arrangements. The amount
available for payouts under the plan you select is the contract
value on your retirement date. No surrender charges are deducted
under the payout plans listed below.
You also decide whether annuity payouts are to be made on a fixed
or variable basis, or a combination of fixed and variable. Amounts
of fixed and variable payouts depend on:
o the annuity payout plan you select;
o the annuitant's age and, in most cases, sex;
o the annuity table in the contract;
o the amounts you allocated to the account(s) at settlement.
In addition, for variable payouts only, amounts depend on the
investment performance of the subaccount(s) you select. These
payouts will vary from month to month because the performance of
the underlying mutual funds will fluctuate. (In the case of fixed
annuities, payouts remain the same from month to month.)
For information with respect to transfers between accounts after
annuity payouts begin, see "Transfer policies."
Annuity payout plans
You may choose any one of these annuity payout plans by giving us
written instructions at least 30 days before contract values are to
be used to purchase the payout plan.
o Plan A - Life annuity - no refund: Monthly payouts are made
until the annuitant's death. Payouts end with the last payout
before the annuitant's death; no further payouts will be made.
This means that if the annuitant dies after only one monthly payout
has been made, no more payouts will be made.
o Plan B - Life annuity with five, 10 or 15 years certain: Monthly
payouts are made for a guaranteed payout period of five, 10 or 15
years that the annuitant elects. This election will determine the
length of the payout period to the beneficiary if the annuitant
should die before the elected period has expired. The guaranteed
payout period is calculated from the retirement date. If the
annuitant outlives the elected guaranteed payout period, payouts
will continue until the annuitant's death.
o Plan C - Life annuity - installment refund: Monthly payouts are
made until the annuitant's death, with our guarantee that payouts
will continue for some period of time. Payouts will be made for at
least the number of months determined by dividing the amount
applied under this option by the first monthly payout, whether or<PAGE>
PAGE 31
not the annuitant is living.
o Plan D - Joint and last survivor life annuity - no refund:
Monthly payouts are made to the annuitant and a joint annuitant
while both are living. If either annuitant dies, monthly payouts
continue at the full amount until the death of the surviving
annuitant. Payouts end with the death of the second annuitant.
o Plan E - Payouts for a specified period: Monthly payouts are
made for a specific payout period of 10 to 30 years chosen by the
annuitant. Payouts will be made only for the number of years
specified whether the annuitant is living or not. Depending on the
time period selected, it is foreseeable that an annuitant can
outlive the payout period selected. In addition, a 10% IRS penalty
tax could apply under this payout plan. (See "Taxes.")
Restrictions for some qualified plans: If you purchased a
qualified annuity, you must select a payout plan that provides for
payouts:
o over the life of the annuitant;
o over the joint lives of the annuitant and a designated
beneficiary;
o for a period not exceeding the life expectancy of the
annuitant; or
o for a period not exceeding the joint life expectancies
of the annuitant and a designated beneficiary.
If we do not receive instructions: You must give us written
instructions for the annuity payouts at least 30 days before the
annuitant's retirement date. If you do not, we will make payouts
under Plan B, with 120 monthly payouts guaranteed.
If monthly payouts would be less than $20: We will calculate the
amount of monthly payouts at the time the contract value is used to
purchase a payout plan. If the calculations show that monthly
payouts would be less than $20, we have the right to pay the
contract value to the owner in a lump sum.
Death after annuity payouts begin
If you or the annuitant dies after annuity payouts begin, any
amount payable to the beneficiary will be provided in the annuity
payout plan in effect.
Taxes
Generally, under current law, any increase in your contract value
is taxable to you only when you receive a payout or surrender.
(See detailed discussion below.) Any portion of the annuity
payouts and any surrenders you request that represent ordinary
income are normally taxable. You will receive a 1099 tax
information form for any year in which a taxable distribution was
made.<PAGE>
PAGE 32
Annuity payouts under nonqualified annuities: A portion of each
payout will be ordinary income and subject to tax, and a portion of
each payout will be considered a return of part of your investment
and will not be taxed. All amounts received after your investment
in the annuity is fully recovered will be subject to tax.
Tax law requires that all nonqualified deferred annuity contracts
issued by the same company to the same owner during a calendar year
are to be taxed as a single, unified contract when distributions
are taken from any one of such contracts.
Annuity payouts under qualified annuities: Under a qualified
annuity, the entire payout generally will be includable as ordinary
income and subject to tax except to the extent that contributions
were made with after-tax dollars. If you or your employer invested
in your contract with pre-tax dollars as part of a qualified
retirement plan, such amounts are not considered to be part of your
investment in the contract and will be taxed when paid to you.
Surrenders: If you surrender part or all of your contract before
your annuity payouts begin, your surrender payment will be taxed to
the extent that the value of your contract immediately before the
surrender exceeds your investment. You also may have to pay a 10%
IRS penalty for surrenders before reaching age 59 1/2. For
qualified annuities, other penalties may apply if you surrender
your annuity before your plan specifies that you can receive
payouts.
Death benefits to beneficiaries: The death benefit under an
annuity is not tax-exempt. Any amount received by the beneficiary
that represents previously deferred earnings within the contract,
is taxable as ordinary income to the beneficiary in the year(s) he
or she receives the payment(s).
Annuities owned by corporations, partnerships or trusts: Any
annual increase in the value of annuities held by such entities
generally will be treated as ordinary income received during that
year. This provision is effective for purchase payments made after
Feb. 28, 1986. However, if the trust was set up for the benefit of
a natural person only, the income will continue to be tax-deferred.
Penalties: If you receive amounts from your contract before
reaching age 59 1/2, you may have to pay a 10% IRS penalty on the
amount includable in your ordinary income. However, this penalty
will not apply to any amount received by you or your beneficiary:
o because of your death;
o because you become disabled (as defined in the Code);
o if the distribution is part of a series of substantially equal
periodic payments, made at least annually, over your life or
life expectancy (or joint lives or life expectancies of you and
your beneficiary); or
o if it is allocable to an investment before Aug. 14, 1982 (except
for qualified annuities).
For a qualified annuity, other penalties or exceptions may apply if
you surrender your annuity before your plan specifies that payouts
can be made.<PAGE>
PAGE 33
Withholding, generally: If you receive all or part of the contract
value from an annuity, withholding may be imposed against the
taxable income portion of the payout. Any withholding that is done
represents a prepayment of your tax due for the year. You take
credit for such amounts on the annual tax return that you file.
If the payout is part of an annuity payout plan, the amount of
withholding generally is computed using payroll tables. You can
provide us with a statement of how many exemptions to use in
calculating the withholding. As long as you've provided us with a
valid Social Security Number or Taxpayer Identification Number, you
can elect not to have any withholding occur.
If the distribution is any other type of payment (such as a partial
or full surrender), withholding is computed using 10% of the
taxable portion. Similar to above, as long as you've provided us
with a valid Social Security Number or Taxpayer Identification
Number, you can elect not to have this withholding occur.
Some states also impose withholding requirements similar to the
federal withholding described above. If this should be the case,
any payment from which federal withholding is deducted may also
have state withholding deducted. The withholding requirements may
differ if payment is being made to a non-U.S. citizen or if the
payment is being delivered outside the United States.
Withholding from qualified annuities: If you receive directly all
or part of the contract value from a qualified annuity (except an
IRA), mandatory 20% income tax withholding generally will be
imposed at the time the payout is made. This mandatory withholding
is in place of the elective withholding discussed above. This
mandatory withholding will not be imposed if:
o instead of receiving the distribution check, you elect to have
the distribution rolled over directly to an IRA or another
eligible plan;
o the payout is one in a series of substantially equal periodic
payouts, made at least annually, over your life or life
expectancy (or the joint lives or life expectancies of you and
your designated beneficiary) or over a specified period of 10
years or more; or
o the payment is a minimum distribution required under the Code.
Payments made to a surviving spouse instead of being directly
rolled over to an IRA may also be subject to mandatory 20% income
tax withholding.
State withholding also may be imposed on taxable distributions.
Transfer of ownership of a nonqualified annuity: If you make such
a transfer without receiving adequate consideration, the transfer
is considered a gift, and also may be considered a surrender for
federal income tax purposes. If the gift is a currently taxable
event, the amount of deferred earnings at the time of the transfer
will be taxed to the original owner, who also may be subject to a
10% IRS penalty as discussed earlier. In this case, the new
owner's investment in the annuity will be the value of the annuity
at the time of the transfer.<PAGE>
PAGE 34
Collateral assignment of a nonqualified annuity: If you
collaterally assign or pledge your contract, earnings on purchase
payments you made after Aug. 13, 1982 will be taxed to you like a
surrender.
Important: Our discussion of federal tax laws is based upon our
understanding of these laws as they are currently interpreted.
Federal tax laws or current interpretations of them may change.
For this reason and because tax consequences are complex and highly
individual and cannot always be anticipated, you should consult a
tax advisor if you have any questions about taxation of your
contract.
Tax qualification: The contract is intended to qualify as an
annuity for federal income tax purposes. To that end, the
provisions of the contract are to be interpreted to ensure or
maintain such tax qualification, notwithstanding any other
provisions of the contract. We reserve the right to amend the
contract to reflect any clarifications that may be needed or are
appropriate to maintain such qualification or to conform the
contract to any applicable changes in the tax qualification
requirements. We will send you a copy of any such amendments.
Voting rights
As a contract owner with investments in the variable subaccount(s)
you may vote on important mutual fund policies until annuity
payouts begin. Once they begin, the person receiving them has
voting rights. We will vote fund shares according to the
instructions of the person with voting rights.
Before annuity payouts begin, the number of votes is determined by
applying the percentage interest in each variable subaccount to the
total number of votes allowed to the subaccount.
After annuity payouts begin, the number of votes is equal to:
o the reserve held in each subaccount for the contract,
divided by
o the net asset value of one share of the applicable underlying
mutual fund.
As we make annuity payouts, the reserve for the annuity decreases;
therefore, the number of votes also will decrease.
We calculate votes separately for each subaccount not more than 60
days before a shareholders' meeting. Notice of these meetings,
proxy materials and a statement of the number of votes to which the
voter is entitled, will be sent.
We will vote shares for which we have not received instructions in
the same proportion as the votes for which we have received
instructions. We also will vote the shares for which we have
voting rights in the same proportion as the votes for which we have
received instructions.<PAGE>
PAGE 35
Substitution of investments
If shares of any fund should not be available for purchase by the
appropriate variable subaccount or if, in the judgment of IDS
Life's Management, further investment in such shares is no longer
appropriate in view of the purposes of the subaccount, investment
in the subaccount may be discontinued or another
registered open-end management investment company may be
substituted for fund shares held in the subaccounts if IDS Life
believes it would be in the best interest of persons having voting
rights under the contract. The variable account may be operated as
a management company under the 1940 Act or it may be deregistered
under this Act if the registration is no longer required. In the
event of any such substitution or change, IDS Life, without the
consent or approval of the owners, may amend the contract and take
whatever action is necessary and appropriate. However, no such
substitution or change will be made without the necessary approval
of the SEC and state insurance departments. IDS Life will notify
owners of any substitution or change.
Distribution of the contracts
IDS Life, a registered broker/dealer, is the sole distributor of
the contract. IDS Life pays total commissions of up to 7.0% of the
total purchase payments received on the contracts. A portion of
this total commission is paid to district managers and field vice
presidents of the selling representative.
About IDS Life
The Flexible Portfolio Annuity is issued by IDS Life, a wholly
owned subsidiary of American Express Financial Corporation, which
itself is a wholly owned subsidiary of the American Express
Company, a financial services company headquartered in New York
City.
IDS Life is a stock life insurance company organized in 1957 under
the laws of the State of Minnesota and located at IDS Tower 10,
Minneapolis, MN 55440-0010. IDS Life conducts a conventional life
insurance business in the District of Columbia and all states
except New York.
American Express Financial Advisors Inc. offers mutual funds,
investment certificates and a broad range of financial management
services. IDS Life offers insurance and annuities.
American Express Financial Advisors Inc. serves individuals and
businesses through its nationwide network of more than 175 offices
and more than 7,800 financial advisors.
Other subsidiaries provide investment management and related
services for pension, profit-sharing, employee savings and
endowment funds of businesses and institutions.
<PAGE>
PAGE 36
Regular and special reports
Services
To help you track and evaluate the performance of your annuity, we
provide:
Quarterly statements showing the value of your investment.
Annual reports containing required information on the annuity and
its underlying investments.
A personalized annuity progress report detailing the cumulative
return since the contract was purchased and the average annual rate
of return on your investments. This report, which is unique in the
industry, is available upon request from your financial advisor.
Table of contents of the Statement of Additional Information
IDS Life Preferred Retirement Account.........
Performance information.......................
Calculating annuity payouts...................
Rating agencies...............................
Principal underwriter.........................
Independent auditors..........................
Mortality and expense risk fee................
Prospectus....................................
Financial statements -
IDS Life Insurance Company
___________________________________________________________________
Please check the appropriate box to receive a copy of the Statement
of Additional Information for:
_____ IDS Life Flexible Portfolio Annuity
_____ IDS Life Retirement Annuity Mutual Funds
_____ AIM Variable Insurance Funds, Inc.
_____ Putnam Capital Manager Trust
_____ TCI Portfolios, Inc.
_____ Templeton Variable Products Series Fund
_____ Warburg Pincus Trust/Small Company Growth Portfolio
Please return this request to:
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
Your name _______________________________________________________
Address _________________________________________________________
City ______________________ State ______________ Zip ___________<PAGE>
PAGE 37
STATEMENT OF ADDITIONAL INFORMATION
for
IDS LIFE FLEXIBLE PORTFOLIO ANNUITY
IDS Life Variable Account 10
May 1, 1996
IDS Life Flexible Portfolio Annuity Account is a separate account
established and maintained by IDS Life Insurance Company (IDS
Life).
This Statement of Additional Information, dated May 1, 1996, is not
a prospectus. It should be read together with the Account's
prospectus, dated May 1, 1996, which may be obtained from your
financial advisor, or by writing or calling IDS Life at the address
or telephone number below.
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440
612-671-3131
<PAGE>
PAGE 38
TABLE OF CONTENTS
IDS Life Preferred Retirement Account.........................p. 3
Performance Information.......................................p. 3
Calculating Annuity Payouts...................................p. 7
Rating Agencies...............................................p. 8
Principal Underwriter.........................................p. 9
Independent Auditors..........................................p. 9
Mortality and Expense Risk Fee................................p. 9
Prospectus....................................................p. 9
Financial Statements
IDS Life Insurance Company..........................p. 10
<PAGE>
PAGE 39
IDS LIFE PREFERRED RETIREMENT ACCOUNT
The Flexible Portfolio Annuity may be used to fund the IDS Life
Preferred Retirement Account (PRA) as a way to build tax-deferred
retirement income. The PRA can be used to supplement, or as an
alternative to, a non-deductible IRA or other retirement plan.
The advantages of the IDS Life Preferred Retirement Account over a
non-deductible IRA are shown below:
IDS Life Preferred Non-deductible IRA
Retirement
Account
_____________________________________________________________
Maximum $50,000 to $1 million $2,000 per year
amount you initially, then $50,000 (only $250 for
can to $100,000 per year non-working spouse)
contribute depending on your
age. (spouse can have
own plan)
______________________________________________________________
Highest age The later of age 85 70 1/2 years old
you can or the 10th contract
contribute anniversary
______________________________________________________________
Types of Any type: wages, Generally limited
income you investment income, to income from
can gifts, inheritance, employment
contribute etc.
______________________________________________________________
Records None required, but You must keep all
you must IDS Life furnishes you records yourself
keep regular reports
for your files
______________________________________________________________
Reports you None You must report all
must file contributions and
with the withdrawals each
IRS year
______________________________________________________________
Age at which The later of age 85 70 1/2 years old
you must or the 10th contract
begin anniversary
withdrawals
______________________________________________________________
PERFORMANCE INFORMATION
The following performance figures are calculated on the basis of
historical performance of the funds. The performance figures
relating to these funds assume that the contract was in existence
prior to Feb. 12, 1996, which it was not. Performance figures are
calculated on the basis of historical performance of the funds.
Before the subaccounts began investing in these funds, the figures<PAGE>
PAGE 40
show what the subaccount performance would have been if these
subaccounts had existed during the illustrated periods. Once these
subaccounts began investing in these funds, actual values are used
for the calculations.
Calculation of yield for Subaccount HM (Investing in IDS Life
Moneyshare Fund)
Subaccount HM, which invests in IDS Life Moneyshare Fund, Inc.,
calculates an annualized simple yield and a compound yield based on
a seven-day period.
The simple yield is calculated by determining the net change in the
value of a hypothetical subaccount having the balance of one
accumulation unit at the beginning of the seven-day period. (The
net change does not include capital change, but does include a pro
rata share of the annual contract charges, including the annual
contract administrative charge and the mortality and expense risk
fee.) The net change in the subaccount value is divided by the
value of the subaccount at the beginning of the period to obtain
the return for the period. That return is then multiplied by 365/7
to obtain an annualized figure. The value of the hypothetical
subaccount includes the amount of any declared dividends, the value
of any shares purchased with any dividend paid during the period
and any dividends declared for such shares. The variable
subaccount's yield does not include any realized or unrealized
gains or losses, nor does it include the effect of any applicable
surrender charge.
The subaccount calculates its compound yield according to the
following formula:
365/7
Compound Yield = [(return for seven-day period +1) ] - 1
Based on the historical performance of the Fund on Dec. 31, 1995,
the subaccount's annualized simple yield would have been 4.04% and
its compound yield would have been 4.13% had the subaccount been in
existence.
The rate of return, or yield, on the subaccount's accumulation unit
may fluctuate daily and does not provide a basis for determining
future yields. Investors must consider, when comparing an
investment in subaccount HM with fixed annuities, that fixed
annuities often provide an agreed-to or guaranteed fixed yield for
a stated period of time, whereas the variable subaccount's yield
fluctuates. In comparing the yield of subaccount HM to a money
market fund, you should consider the different services that the
annuity provides.
Calculation of yield for Subaccounts (Investing in income funds)
Quotations of yield will be based on all investment income earned
during a particular 30-day period, less expenses accrued during the
period (net investment income) and will be computed by dividing net
<PAGE>
PAGE 41
investment income per accumulation unit by the value of an
accumulation unit on the last day of the period, according to the
following formula:
YIELD = 2[(a-b + 1)6 - 1]
cd
where: a = dividends and investment income earned during the
period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period that were entitled to
receive dividends.
d = the maximum offering price per accumulation unit on
the last day of the period.
Yield on the subaccount is earned from the increase in the net
asset value of shares of the fund in which the subaccount invests
and from dividends declared and paid by the fund, which are
automatically invested in shares of the fund.
Based on the historical performance of the Fund, on Dec. 31, 1995,
the subaccount's annualized yield would have been 8.45% had this
subaccount been in existence.
Calculation of average annual total return
Quotations of average annual total return for a subaccount will be
expressed in terms of the average annual compounded rate of return
of a hypothetical investment in the annuity contract over a period
of one, five and 10 years (or, if less, up to the life of the
account), calculated according to the following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the one, five,
or ten year (or other) period at the end of the
one, five, or ten year (or other) period (or
fractional portion thereof).
The following performance figures are calculated on the basis of
historical performance of the funds. These figures show what the
performance of the subaccounts of the variable account would have
been if these subaccounts had existed during the illustrated
periods.
<PAGE>
PAGE 42
Average Annual Total Return For Period Ended: Dec. 31, 1995
Average Annual Total Return with Surrender
<TABLE>
<CAPTION>
Since
Subaccount investing in: 1 Year 5 Year 10 Year Inception
<S> <C> <C> <C> <C>
IDS LIFE
Aggressive Growth Fund (1/92)* 22.91% --% --% 8.85%
Capital Resource Fund (10/81) 19.07 13.21 12.26 --
International Equity Fund (1/92) 3.01 -- -- 7.11
Managed Fund (4/86) 15.46 10.99 -- 9.99
Moneyshare Fund (10/81) -2.97 1.86 4.41 --
Special Income Fund (10/81) 13.62 9.69 8.78 --
AIM
AIM V.I. Growth and Income Fund (5/94) 25.45 -- -- 10.79
PCM
New Opportunities Fund (5/94) 36.45 -- -- 22.67
Warburg Pincus Trust
Small Company Growth Portfolio (6/95)** -- -- -- 47.15
Average Annual Total Return without Surrender
Since
Subaccount investing in: 1 Year 5 Year 10 Year Inception
IDS LIFE
Aggressive Growth Fund (1/92)* 29.91% --% --% 10.01%
Capital Resource Fund (10/81) 26.07 13.81 12.26 --
International Equity Fund (1/92) 10.01 -- -- 8.32
Managed Fund (4/86) 22.46 11.64 -- 9.99
Moneyshare Fund (10/81) 4.03 2.78 4.41 --
Special Income Fund (10/81) 20.62 10.37 8.78 --
AIM
AIM V.I. Growth and Income Fund (5/94) 32.45 -- -- 17.79
PCM
New Opportunities Fund (5/94) 43.56 -- -- 29.67
Warburg Pincus Trust
Small Company Growth Portfolio (6/95)** -- -- -- 54.15
*inception dates of the funds are shown in parentheses.
**Annualized return at Dec. 31, 1995 with expense limitation.
</TABLE>
Aggregate Total Return
Aggregate total return represents the cumulative change in the
value of an investment over a specified period of time (reflecting
change in a subaccount's accumulation unit value) and is computed
by the following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000.
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the one, five,
or ten year (or other) period at the end of the
one, five, or ten year (or other) period (or
fractional portion thereof).
The Securities and Exchange Commission requires that an assumption
be made that the contract owner surrenders the entire contract at
the end of the one, five and ten year periods (or, if less, up to
<PAGE>
PAGE 43
the life of the account) for which performance is required to be
calculated. In addition, performance figures may be shown without
the deduction of a surrender charge. Total return figures reflect
the deduction of the contract administrative charge and mortality
and expense risk fee.
Performance of the subaccounts may be quoted or compared to
rankings, yields, or returns as published or prepared by
independent rating or statistical services or publishers or
publications such as The Bank Rate Monitor National Index,
Barron's, Business Week, Donoghue's Money Market Fund Report,
Financial Services Week, Financial Times, Financial World, Forbes,
Fortune, Global Investor, Institutional Investor, Investor's Daily,
Kiplinger's Personal Finance, Lipper Analytical Services, Money,
Mutual Fund Forecaster, Newsweek, The New York Times, Personal
Investor, Stanger Report, Sylvia Porter's Personal Finance, USA
Today, U.S. News and World Report, The Wall Street Journal and
Wiesenberger Investment Companies Service.
CALCULATING ANNUITY PAYOUTS
The Variable Account
The following calculations are done separately for each of the
subaccounts of the variable account. The separate monthly payouts,
added together, make up your total variable annuity payout.
Initial Payout: To compute your first monthly payment, we:
o determine the dollar value of your annuity as of the valuation
date seven days before the retirement date and then deduct any
applicable premium tax.
o apply the result to the annuity table contained in the contract
or another table at least as favorable. The annuity table shows
the amount of the first monthly payment for each $1,000 of value
which depends on factors built into the table, as described below.
Annuity Units: The value of your subaccount is then converted to
annuity units. To compute the number credited to you, we divide
the first monthly payment by the annuity unit value (see below) on
the valuation date on (or next day preceding) the seventh calendar
day before the retirement date. The number of units in your
subaccount is fixed. The value of the units fluctuates with the
performance of the underlying mutual fund.
Subsequent Payouts: To compute later payouts, we multiply:
o the annuity unit value on the valuation date on or immediately
preceding the seventh calendar day before the payout is due; by
o the fixed number of annuity units credited to you.
Annuity Table: The table shows the amount of the first monthly
payment for each $1,000 of contract value according to the age and,
when applicable, the sex of the annuitant. (Where required by law,
we will use a unisex table of settlement rates.) The table assumes
<PAGE>
PAGE 44
that the contract value is invested at the beginning of the annuity
payout period and earns a 5% rate of return, which is reinvested
and helps to support future payouts.
Substitution of 3.5% Table: If you ask us at least 30 days before
the retirement date, we will substitute an annuity table based on
an assumed 3.5% investment rate for the 5% table in the contract.
The assumed investment rate affects both the amount of the first
payout and the extent to which subsequent payouts increase or
decrease. Using the 5% table results in a higher initial payment,
but later payouts will increase more slowly when annuity unit
values are rising and decrease more rapidly when they are
declining.
Annuity Unit Values: This value was originally set at $1 for each
variable subaccount. To calculate later values we multiply the
last annuity value by the product of:
o the net investment factor; and
o the neutralizing factor. The purpose of the neutralizing factor
is to offset the effect of the assumed investment rate built into
the annuity table. With an assumed investment rate of 5%, the
neutralizing factor is 0.999866 for a one day valuation period.
Net Investment Factor:
o Determined each business day by adding the underlying mutual
fund's current net asset value per share plus per share amount of
any current dividend or capital gain distribution; then
o dividing that sum by the previous net asset value per share; and
o subtracting the percentage factor representing the mortality and
expense risk fee from the result.
Because the net asset value of the underlying mutual fund may
fluctuate, the net investment factor may be greater or less than
one, and the accumulation unit value may increase or decrease. You
bear this investment risk in a variable subaccount.
The Fixed Account
Your fixed annuity payout amounts are guaranteed. Once calculated,
your payout will remain the same and never change. To calculate
your annuity payouts we:
o take the value of your fixed account at the retirement date or the
date you have selected to begin receiving your annuity payouts; then
o using an annuity table we apply the value according to the
annuity payout plan you select; and
o the annuity payout table we use will be the one in effect at the
time you choose to begin your annuity payouts. The table will be
equal to or greater than the table in your contract.
RATING AGENCIES
The following chart reflects the ratings given to IDS Life by
independent rating agencies. These agencies evaluate the financial
soundness and claims-paying ability of insurance companies based on
<PAGE>
PAGE 45
a number of different factors. This information does not relate to
the management or performance of the variable subaccounts of the
annuity. This information relates only to the fixed account and
reflects IDS Life's ability to make annuity payouts and to pay
death benefits and other distributions from the annuity.
Rating agency Rating
A.M. Best A+
(Superior)
Duff & Phelps AAA
Moody's Aa2
PRINCIPAL UNDERWRITER
The principal underwriter for the variable account is IDS Life,
which offers the variable annuities on a continuous basis.
INDEPENDENT AUDITORS
The consolidated financial statements of IDS Life Insurance Company
at Dec. 31, 1995 and 1994, and for each of the three years in the
period ended Dec. 31, 1995 appearing in this Statement of
Additional Information have been audited by Ernst & Young LLP,
independent auditors, as stated in their report appearing herein.
MORTALITY AND EXPENSE RISK FEE
IDS Life has represented to the SEC that:
IDS Life has reviewed publicly available information regarding
products of other companies. Based upon this review, IDS Life has
concluded that the mortality and expense risk fee is within the
range of charges determined by industry practice. IDS Life will
maintain at its administrative office, and make available on
request of the SEC or its staff, a memorandum setting forth in
detail the variable products analyzed and the methodology, and
results of, its comparative review.
IDS Life has concluded that there is a reasonable likelihood that
the proposed distribution financing arrangements made with respect
to the contracts will benefit the variable account and investors in
the contracts. The basis for such conclusion is set forth in a
memorandum which will be made available to the SEC or its staff on
request.
PROSPECTUS
The prospectus dated May 1, 1996, is hereby incorporated in this
Statement of Additional Information by reference.
<PAGE>
PAGE 46
IDS Life Financial Information
The financial statements shown below are those of the insurance
company and not those of any other entity. They are included in
the prospectus for the purpose of informing investors as to the
financial condition of the insurance company and its ability to
carry out its obligations under its variable contracts.
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
Dec. 31, Dec. 31,
ASSETS 1995 1994
(thousands)
<S> <C> <C>
Investments:
Fixed maturities:
Held to maturity, at amortized cost (Fair value:
1995, $11,878,377; 1994 $10,694,800) $11,257,591 $11,269,861
Available for sale, at fair value (Amortized cost:
1995, $10,146,136; 1994 $8,459,128) 10,516,212 8,017,555
Mortgage loans on real estate
(Fair value: 1995, $3,184,666; 1994, $2,342,520) 2,945,495 2,400,514
Policy loans 424,019 381,912
Other investments 146,894 51,795
Total investments 25,290,211 22,121,637
Cash and cash equivalents 72,147 267,774
Receivables:
Reinsurance 114,387 80,304
Amounts due from brokers - 7,933
Other accounts receivable 33,667 49,745
Premiums due 5,441 1,594
Total receivables 153,495 139,576
Accrued investment income 348,008 317,510
Deferred policy acquisition costs 2,025,725 1,865,324
Deferred income taxes - 124,061
Other assets 36,410 30,426
Separate account assets 14,974,082 10,881,235
Total assets $42,900,078 $35,747,543
========== ==========
<PAGE>
PAGE 47
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS (continued)
Dec. 31, Dec. 31,
LIABILITIES AND STOCKHOLDER'S EQUITY 1995 1994
(thousands)
Liabilities:
Fixed annuities--future policy benefits $21,404,836 $19,361,979
Universal life-type insurance--future policy benefits 3,076,847 2,896,100
Traditional life insurance--future policy benefits 209,249 206,754
Disability income, health and long-term care
insurance--future policy benefits 327,157 244,077
Policy claims and other policyholders' funds 56,323 50,068
Deferred income taxes 112,904 -
Amounts due to brokers 121,618 226,737
Other liabilities 285,354 291,902
Separate account liabilities 14,974,082 10,881,235
Total liabilities 40,568,370 34,158,852
Stockholder's equity:
Capital stock, $30 par value per share;
100,000 shares authorized, issued and outstanding 3,000 3,000
Additional paid-in capital 278,814 222,000
Net unrealized gain (loss) on investments 230,129 (275,708)
Retained earnings 1,819,765 1,639,399
Total stockholder's equity 2,331,708 1,588,691
Total liabilities and stockholder's equity $42,900,078 $35,747,543
========== ==========
Commitments and contingencies (Note 6)
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
PAGE 48
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Years ended Dec. 31,
1995 1994 1993
(thousands)
<S> <C> <C> <C>
Revenues:
Premiums:
Traditional life insurance $ 50,193 $ 48,184 $ 48,137
Disability income and long-term care insurance 111,337 96,456 79,108
Total premiums 161,530 144,640 127,245
Policyholder and contractholder charges 256,454 219,936 184,205
Management and other fees 215,581 164,169 120,139
Net investment income 1,907,309 1,781,873 1,783,219
Net realized loss on investments (4,898) (4,282) (6,737)
Total revenues 2,535,976 2,306,336 2,208,071
Benefits and expenses:
Death and other benefits - Traditional life
insurance 29,528 28,263 32,136
Death and other benefits - Universal life-type
insurance and investment contracts 71,691 52,027 49,692
Death and other benefits - Disability income,
health and long-term care insurance 16,259 13,393 13,148
Increase (decrease) in liabilities for future
policy benefits:
Traditional life insurance (1,315) (3,229) (4,513)
Disability income, health and
long-term care insurance 51,279 37,912 32,528
Interest credited on universal life-type
insurance and investment contracts 1,315,989 1,174,985 1,218,647
Amortization of deferred policy acquisition costs 280,121 280,372 211,733
Other insurance and operating expenses 211,642 210,101 241,974
Total benefits and expenses 1,975,194 1,793,824 1,795,345
Income before income taxes 560,782 512,512 412,726
Income taxes 195,842 176,343 142,647
Net income $ 364,940 $ 336,169 $ 270,079
========= ========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
PAGE 49
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
Three years ended December 31, 1995 (thousands)
Additional Net Unrealized
Capital Paid-In Gain (Loss) on Retained
Stock Capital Investments Earnings Total
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $3,000 $ 22,000 $ 214 $1,223,151 $1,248,365
Net income 270,079 270,079
Change in net unrealized
gain (loss) on investments - - (100) - (100)
Capital contribution from parent - 200,000 - - 200,000
Cash dividends - - - (25,000) (25,000)
Balance, December 31, 1993 3,000 222,000 114 1,468,230 1,693,344
Net income - - - 336,169 336,169
Change in net unrealized
gain (loss) on investments - - (275,822) - (275,822)
Cash dividends - - - (165,000) (165,000)
Balance, December 31, 1994 3,000 222,000 (275,708) 1,639,399 1,588,691
Net income - - - 364,940 364,940
Change in net unrealized
gain (loss) on investments - - 505,837 - 505,837
Capital contribution from parent - 56,814 - - 56,814
Loss on reinsurance transaction
with affiliate - - - (4,574) (4,574)
Cash dividends - - - (180,000) (180,000)
Balance, December 31, 1995 $3,000 $278,814 $230,129 $1,819,765 $2,331,708
====== ======== ======== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
PAGE 50
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended Dec. 31,
1995 1994 1993
(thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 364,940 $ 336,169 $ 270,079
Adjustments to reconcile net income to
net cash provided by operating activities:
Policy loan issuances, excluding universal
life-type insurance: (46,011) (37,110) (35,886)
Policy loan repayments, excluding universal
life-type insurance 36,416 33,384 29,557
Change in reinsurance receivable (34,083) (25,006) (55,298)
Change in other accounts receivable 16,078 (28,286) (1,364)
Change in accrued investment income (30,498) (10,333) (22,057)
Change in deferred policy acquisition costs, net (196,963) (192,768) (211,509)
Change in liabilities for future policy
benefits for traditional life, disability income,
health and long-term care insurance 85,575 55,354 79,695
Change in policy claims and other policyholders' funds 6,255 5,552 (5,383)
Change in deferred income taxes (33,810) (19,176) (44,237)
Change in other liabilities (6,548) (122) 56,515
Amortization of premium (accretion
of discount), net (22,528) 30,921 (27,438)
Net loss on investments 4,898 4,282 6,737
Premiums related to universal life--type insurance 465,631 409,035 397,883
Surrenders and death benefits related to
universal life--type insurance (306,600) (290,427) (255,133)
Interest credited to account balances related
to universal life--type insurance 162,222 150,955 156,885
Policyholder and contractholder charges, non-cash (140,506) (126,918) (115,140)
Other, net 2 (8,974) (1,907)
Net cash provided by operating activities $ 324,470 $ 286,532 $ 221,999
<PAGE>
PAGE 51
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Years ended Dec. 31,
1995 1994 1993
(thousands)
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases $(1,007,208) $ (879,740) $ -
Maturities, sinking fund payments and calls 538,219 1,651,762 -
Sales 332,154 58,001 -
Fixed maturities available for sale:
Purchases (2,452,181) (2,763,278) -
Maturities, sinking fund payments and calls 861,545 1,234,401 -
Sales 136,825 374,564 -
Fixed maturities:
Purchases - - (6,548,852)
Maturities, sinking fund payments and calls - - 3,934,055
Sales - - 487,983
Other investments, excluding policy loans:
Purchases (823,131) (634,807) (553,694)
Sales 160,521 243,862 123,352
Change in amounts due from brokers 7,933 (2,214) 14,483
Change in amounts due to brokers (105,119) (124,749) 92,832
Net cash used in investing activities (2,350,442) (842,198) (2,449,841)
Cash flows from financing activities:
Activity related to investment contracts:
Considerations received 3,723,894 3,157,778 2,843,668
Surrenders and death benefits (2,834,804) (3,311,965) (1,765,869)
Interest credited to account balances 1,153,767 1,024,031 1,071,917
Policy loans issuances, universal
life-type insurance (84,700) (78,239) (70,304)
Policy loan repayments, universal
life-type insurance 52,188 50,554 46,148
Capital contribution from parent - - 200,000
Cash dividend to parent (180,000) (165,000) (25,000)
Net cash provided by financing activities 1,830,345 677,159 2,300,560
Net (decrease) increase in cash and
cash equivalents (195,627) 121,493 72,718
Cash and cash equivalents at
beginning of year 267,774 146,281 73,563
Cash and cash equivalents at
end of year $ 72,147 $ 267,774 $ 146,281
========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
PAGE 52
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ thousands)
1. Summary of significant accounting policies
Nature of business
IDS Life Insurance Company (the Company) is a stock life insurance
company organized under the laws of the State of Minnesota. The
Company is a wholly owned subsidiary of American Express Financial
Corporation, which is a wholly owned subsidiary of American Express
Company. The Company serves residents of all states except New
York. IDS Life Insurance Company of New York is a wholly owned
subsidiary of the Company and serves New York State residents. The
Company also wholly owns American Enterprise Life Insurance
Company, American Centurion Life Assurance Company (ACLAC), and
American Partners Life Insurance Company.
The Company's principal products are deferred annuities and
universal life insurance, which are issued primarily to
individuals. It offers single premium and annual premium deferred
annuities on both a fixed and variable dollar basis. Immediate
annuities are offered as well. The Company's insurance products
include universal life (fixed and variable), whole life, single
premium life and term products (including waiver of premium and
accidental death benefits). The Company also markets disability
income and long-term care insurance.
The Company's principal annuity product in terms of amount in force
is the fixed deferred annuity. The annuity contract guarantees a
minimum interest rate during the accumulation period (the time
before annuity payments begin), although the Company normally pays
a higher rate reflective of current market rates. The fixed
annuity provides for a surrender charge during the first seven to
ten years after a purchase payment is made. The Company has also
adopted a practice whereby the higher current rate is guaranteed
for a specified period. The Company also offers a variable annuity
product under the name Flexible Annuity. This is a fixed/variable
annuity offering the purchasers a choice among mutual funds with
portfolios of equities, bonds, managed assets and/or short-term
securities, and the Company's general account, as the underlying
investment vehicles. With respect to funds applied to the variable
portion of the annuity, the purchaser, rather than the Company,
assumes the investment risks and receives the rewards inherent in
the ownership of the underlying investment. The Flexible Annuity
provides for a surrender charge during the first six years after a
purchase payment is made.
The Company's principal insurance product is the flexible-premium,
adjustable-benefit universal life insurance policy. In this type
of insurance policy, each premium payment accumulates interest in
a cash value account. The policyholder has access to the cash
surrender value in whole or in part after the first year. The size
of the cash value of the fund can also be controlled by the
policyholder by increasing or decreasing premiums, subject only to
<PAGE>
PAGE 53
1. Summary of significant accounting policies (continued)
maintaining a required minimum to keep the policy in force.
Monthly deductions from the cash value of the policy are made for
the cost of insurance, expense charges and any policy riders.
Basis of presentation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries, IDS Life
Insurance Company of New York, American Enterprise Life Insurance
Company, American Centurion Life Assurance Company and American
Partners Life Insurance Company. All material intercompany
accounts and transactions have been eliminated in consolidation.
The accompanying consolidated financial statements have been
prepared in conformity with generally accepted accounting
principles which vary in certain respects from reporting practices
prescribed or permitted by state insurance regulatory authorities.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Investments
Fixed maturities that the Company has both the positive intent and
the ability to hold to maturity are classified as held to maturity
and carried at amortized cost. All other fixed maturities and all
marketable equity securities are classified as available for sale
and carried at fair value. Unrealized gains and losses on
securities classified as available for sale are carried as a
separate component of stockholder's equity.
Management determines the appropriate classification of fixed
maturities at the time of purchase and reevaluates the
classification at each balance sheet date.
Mortgage loans on real estate are carried principally at the unpaid
principal balances of the related loans. Policy loans are carried
at the aggregate of the unpaid loan balances which do not exceed
the cash surrender values of the related policies. Other
investments include interest rate caps, equity securities and real
estate investments. When evidence indicates a decline, which is
other than temporary, in the underlying value or earning power of
individual investments, such investments are written down to the
fair value by a charge to income. Equity securities are carried
at market value and the related net unrealized appreciation or
depreciation is reported as a credit or charge to stockholder's
equity.
Realized investment gain or loss is determined on an identified
cost basis.
<PAGE>
PAGE 54
1. Summary of significant accounting policies (continued)
Prepayments are anticipated on certain investments in mortgage-
backed securities in determining the constant effective yield used
to recognize interest income. Prepayment estimates are based on
information received from brokers who deal in mortgage-backed
securities.
Statement of cash flows
The Company considers investments with a maturity at the date of
their acquisition of three months or less to be cash equivalents.
These securities are carried principally at amortized cost which
approximates fair value.
Supplementary information to the consolidated statement of cash
flows for the years ended Dec. 31 is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Cash paid during the year for:
Income taxes $191,011 $226,365 $188,204
Interest on borrowings 5,524 1,553 2,661
</TABLE>
Recognition of profits on fixed annuity contracts and insurance
policies
The Company issues single premium deferred annuity contracts that
provide for a service fee (surrender charge) at annually decreasing
rates upon withdrawal of the annuity accumulation value by the
contract owner. No sales fee is deducted from the contract
considerations received on these contracts ("no load" annuities).
All of the Company's single premium deferred annuity contracts
provide for crediting the contract owners' accumulations at
specified rates of interest. Such rates are revised by the Company
from time to time based on changes in the market investment yield
rates for fixed-income securities.
Profits on single premium deferred annuities and installment
annuities are recognized by the Company over the lives of the
contracts and represent the excess of investment income earned from
investment of contract considerations over interest credited to
contract owners and other expenses.
The retrospective deposit method is used in accounting for
universal life-type insurance. This method recognizes profits over
the lives of the policies in proportion to the estimated gross
profits expected to be realized.
Premiums on traditional life, disability income, health and long-
term care insurance policies are recognized as revenue when
collected or due, and related benefits and expenses are associated
with premium revenue in a manner that results in recognition of
profits over the lives of the insurance policies. This association
is accomplished by means of the provision for future policy
benefits and the deferral and subsequent amortization of policy
acquisition costs.
<PAGE>
PAGE 55
1. Summary of significant accounting policies (continued)
Deferred policy acquisition costs
The costs of acquiring new business, principally sales
compensation, policy issue costs, underwriting and certain sales
expenses, have been deferred on insurance and annuity contracts.
The deferred acquisition costs for single premium deferred
annuities and installment annuities are amortized based upon
surrender charge revenue and a portion of the excess of investment
income earned from investment of the contract considerations over
the interest credited to contract owners. The costs for universal
life-type insurance are amortized over the lives of the policies as
a percentage of the estimated gross profits expected to be realized
on the policies. For traditional life, disability income, health
and long-term care insurance policies, the costs are amortized over
an appropriate period in proportion to premium revenue.
Liabilities for future policy benefits
Liabilities for universal life-type insurance, single premium
deferred annuities and installment annuities are accumulation
values.
Liabilities for fixed annuities in a benefit status are based on
the Progressive Annuity Table with interest at 5 percent, the 1971
Individual Annuity Table with interest at 7 percent or 8.25
percent, or the 1983a Table with various interest rates ranging
from 5.5 percent to 9.5 percent, depending on year of issue.
Liabilities for future benefits on traditional life insurance have
been computed principally by the net level premium method, based on
anticipated rates of mortality (approximating the 1965-1970 Select
and Ultimate Basic Table for policies issued after 1980 and the
1955-1960 Select and Ultimate Basic Table for policies issued prior
to 1981 and the 1975-1980 Select and Ultimate Basic Table for term
insurance policies issued after 1984), policy persistency derived
from Company experience data (first year rates ranging from
approximately 70 percent to 90 percent and increasing rates
thereafter), and estimated future investment yields of 4 percent
for policies issued before 1974 and 5.25 percent for policies
issued from 1974 to 1980. Cash value plans issued in 1980 and
later assume future investment rates that grade from 9.5 percent to
5 percent over 20 years. Term insurance issued from 1981 to 1984
assumes an 8 percent level investment rate, term insurance issued
from 1985-1993 assumes investment rates that grade from 10 percent
to 6 percent over 20 years and term insurance issued after 1993
assumes investment rates that grade from 8 percent to 6.5 percent
over 7 years.
Liabilities for future disability income policy benefits have been
computed principally by the net level premium method, based on the
1964 Commissioners Disability Table with the 1958 Commissioners
Standard Ordinary Mortality Table at 3 percent interest for persons
disabled in 1980 and prior, 8 percent interest for persons disabled
from 1981 to 1991, 7 percent interest for persons disabled in 1992
and 6 percent interest for persons disabled after 1992.
<PAGE>
PAGE 56
1. Summary of significant accounting policies (continued)
Liabilities for future benefits on long-term care insurance have
been computed principally by the net level premium method, using
morbidity rates based on the 1985 National Nursing Home Survey and
mortality rates based on the 1983a Table. The interest rate basis
is 9.5 percent grading to 7 percent over ten years for policies
issued from 1989 to 1992, 7.75 percent grading to 7 percent over
four years for policies issued after 1992, 8 percent for claims
incurred in 1989 to 1991, 7 percent for claims incurred in 1992 and
6 percent for claims incurred after 1992.
Reinsurance
The maximum amount of life insurance risk retained by the Company
on any one life is $750 of life and waiver of premium benefits plus
$50 of accidental death benefits. The maximum amount of disability
income risk retained by the Company on any one life is $6 of
monthly benefit for benefit periods longer than three years. The
excesses are reinsured with other life insurance companies on a
yearly renewable term basis. Graded premium whole life and long-
term care policies are primarily reinsured on a coinsurance basis.
Federal income taxes
The Company's taxable income is included in the consolidated
federal income tax return of American Express Company. The Company
provides for income taxes on a separate return basis, except that,
under an agreement between American Express Financial Corporation
and American Express Company, tax benefit is recognized for losses
to the extent they can be used on the consolidated tax return. It
is the policy of American Express Financial Corporation to
reimburse a subsidiary for any tax benefit.
Included in other liabilities at Dec. 31, 1995 is $13,415 payable
to American Express Financial Corporation for federal income taxes.
Included in other receivables at Dec. 31, 1994 is $22,034
receivable from American Express Financial Corporation for federal
income taxes.
Separate account business
The separate account assets and liabilities represent funds held
for the exclusive benefit of the variable annuity and variable life
insurance contract owners. The Company receives investment
management and mortality and expense assurance fees from the
variable annuity and variable life insurance mutual funds and
separate accounts. The Company also deducts a monthly cost of
insurance charge and receives a minimum death benefit guarantee fee
and issue and administrative fee from the variable life insurance
separate accounts.
The Company makes contractual mortality assurances to the variable
annuity contract owners that the net assets of the separate
accounts will not be affected by future variations in the actual
life expectancy experience of the annuitants and the beneficiaries
from the mortality assumptions implicit in the annuity contracts.
<PAGE>
PAGE 57
1. Summary of significant accounting policies (continued)
The Company makes periodic fund transfers to, or withdrawals from,
the separate accounts for such actuarial adjustments for variable
annuities that are in the benefit payment period. The Company
guarantees, for the variable life insurance policyholders, the
contractual insurance rate and that the death benefit will never be
less than the death benefit at the date of issuance.
Accounting changes
The Financial Accounting Standards Board's (FASB) SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of," is effective January 1, 1996. The
new rule is not expected to have a material impact on the Company's
results of operations or financial condition.
The Company's adoption of SFAS No. 114 as of January 1, 1995 is
discussed in Note 2.
The Company adopted SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The effect of adopting
the new rule was to increase stockholder's equity by approximately
$181 million, net of tax, as of January 1, 1994, but the adoption
had no impact on the Company's net income.
Reclassification
Certain 1994 and 1993 amounts have been reclassified to conform to
the 1995 presentation.
2. Investments
Fair values of investments in fixed maturities represent quoted
market prices and estimated values when quoted prices are not
available. Estimated values are determined by established
procedures involving, among other things, review of market indices,
price levels of current offerings of comparable issues, price
estimates and market data from independent brokers and financial
files.
Net realized gain (loss) on investments for the years ended Dec. 31
is summarized as follows:
1995 1994 1993
Fixed maturities $ 9,973 $(1,575) $ 20,583
Mortgage loans (13,259) (3,013) (25,056)
Other investments (1,612) 306 (2,264)
$ (4,898) $(4,282) $ (6,737)
Changes in net unrealized appreciation (depreciation) of
investments for the years ended Dec. 31 are summarized as follows:
1995 1994 1993
Fixed maturities:
Held to maturity $1,195,847 $(1,329,740) $ --
Available for sale 811,649 (720,449) --
Investment securities -- -- 323,060
Equity securities 3,118 (2,917) (156)<PAGE>
PAGE 58
2. Investments (continued)
The amortized cost, gross unrealized gains and losses and fair
values of investments in fixed maturities and equity securities at
Dec. 31, 1995 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government agency
obligations $ 64,523 $ 3,919 $ -- $ 68,442
State and municipal obligations 11,936 362 32 12,266
Corporate bonds and obligations 8,921,431 620,327 36,786 9,504,972
Mortgage-backed securities 2,259,701 42,684 9,688 2,292,697
$11,257,591 $667,292 $46,506 $11,878,377
Gross Gross
Amortized Unrealized Unrealized Fair
Available for sale Cost Gains Losses Value
U.S. Government agency
obligations $ 84,082 $ 3,248 $ 50 $ 87,280
State and municipal obligations 11,020 1,476 -- 12,496
Corporate bonds and obligations 2,514,308 186,596 3,451 2,697,453
Mortgage-backed securities 7,536,726 206,288 24,031 7,718,983
Total fixed maturities 10,146,136 397,608 27,532 10,516,212
Equity securities 3,156 361 -- 3,517
$10,149,292 $397,969 $27,532 $10,519,729
</TABLE>
The amortized cost, gross unrealized gains and losses and fair
values of investments in fixed maturities and equity securities at
Dec. 31, 1994 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government agency
obligations $ 21,500 $ 43 $ 4,372 $ 17,171
State and municipal obligations 9,687 132 -- 9,819
Corporate bonds and obligations 8,806,707 100,468 459,568 8,447,607
Mortgage-backed securities 2,431,967 10,630 222,394 2,220,203
$11,269,861 $111,273 $686,334 $10,694,800
Gross Gross
Amortized Unrealized Unrealized Fair
Available for sale Cost Gains Losses Value
U.S. Government agency
obligations $ 128,093 $ 756 $ 1,517 $ 127,332
State and municipal obligations 11,008 702 -- 11,710
Corporate bonds and obligations 1,142,321 24,166 7,478 1,159,009
Mortgage-backed securities 7,177,706 9,514 467,716 6,719,504
Total fixed maturities 8,459,128 35,138 476,711 8,017,555
Equity securities 4,663 -- 2,757 1,906
$8,463,791 $ 35,138 $479,468 $ 8,019,461
</TABLE>
The amortized cost and fair value of investments in fixed
maturities at Dec. 31, 1995 by contractual maturity are shown
below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
<PAGE>
PAGE 59
2. Investments (continued)
Amortized Fair
Held to maturity Cost Value
Due in one year or less $ 268,363 $ 272,808
Due from one to five years 1,692,030 1,783,047
Due from five to ten years 5,467,302 5,833,309
Due in more than ten years 1,570,195 1,696,516
Mortgage-backed securities 2,259,701 2,292,697
$11,257,591 $11,878,377
Amortized Fair
Available for sale Cost Value
Due in one year or less $ 118,996 $ 120,019
Due from one to five years 849,800 913,175
Due from five to ten years 1,301,191 1,397,237
Due in more than ten years 339,423 366,798
Mortgage-backed securities 7,536,726 7,718,983
$10,146,136 $10,516,212
During the year ended Dec. 31, 1995, fixed maturities classified as
held to maturity were sold with proceeds of $332,154 and gross
realized gains and losses on such sales were $14,366 and $15,720,
respectively. The sale of these fixed maturities was due to
significant deterioration in the issuers' creditworthiness. As a
result of adopting the FASB Special Report, "A Guide to
Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities," the Company
reclassified securities with a book value of $91,760 and net
unrealized gains of $881 from held to maturity to available for
sale in December 1995.
In addition, fixed maturities available for sale were sold during
1995 with proceeds of $136,825 and gross realized gains and losses
on such sales were $nil and $5,781, respectively.
During the year ended Dec. 31, 1994, fixed maturities classified as
held to maturity were sold with proceeds of $58,001 and gross
realized gains and losses on such sales were $226 and $3,515,
respectively. The sale of these fixed maturities was due to
significant deterioration in the issuers' creditworthiness.
In addition, fixed maturities available for sale were sold during
1994 with proceeds of $374,564 and gross realized gains and losses
on such sales were $1,861 and $7,602, respectively.
At Dec. 31, 1995, bonds carried at $12,761 were on deposit with
various states as required by law.
Net investment income for the years ended Dec. 31 is summarized as
follows:
<PAGE>
PAGE 60
2. Investments (continued)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Interest on fixed maturities $1,656,136 $1,556,756 $1,589,802
Interest on mortgage loans 232,827 196,521 175,063
Other investment income 35,936 38,366 29,345
Interest on cash equivalents 5,363 6,872 2,137
1,930,262 1,798,515 1,796,347
Less investment expenses 22,953 16,642 13,128
$1,907,309 $1,781,873 $1,783,219
</TABLE>
At Dec. 31, 1995, investments in fixed maturities comprised 86
percent of the Company's total invested assets. These securities
are rated by Moody's and Standard & Poor's (S&P), except for
securities carried at approximately $2.3 billion which are rated by
American Express Financial Corporation internal analysts using
criteria similar to Moody's and S&P. A summary of investments in
fixed maturities, at amortized cost, by rating on Dec. 31 is as
follows:
Rating 1995 1994
Aaa/AAA $ 9,907,664 $ 9,708,047
Aaa/AA 3,112 --
Aa/AA 279,403 242,914
Aa/A 154,846 119,952
A/A 3,104,122 2,567,947
A/BBB 871,782 725,755
Baa/BBB 4,417,654 3,849,188
Baa/BB 657,633 796,063
Below investment grade 2,007,511 1,719,123
$21,403,727 $19,728,989
At Dec. 31, 1995, 95 percent of the securities rated Aaa/AAA are
GNMA, FNMA and FHLMC mortgage-backed securities. No holdings of
any other issuer are greater than 1 percent of the Company's total
investments in fixed maturities.
At Dec. 31, 1995, approximately 11.6 percent of the Company's
invested assets were mortgage loans on real estate. Summaries of
mortgage loans by region of the United States and by type of real
estate at Dec. 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
Dec. 31, 1995 Dec. 31, 1994
On Balance Commitments On Balance Commitments
Region Sheet to Purchase Sheet to Purchase
<S> <C> <C> <C> <C>
East North Central $ 720,185 $ 67,206 $ 581,142 $ 62,291
West North Central 303,113 34,411 257,996 7,590
South Atlantic 732,529 111,967 597,896 63,010
Middle Atlantic 508,634 37,079 408,940 34,478
New England 244,816 40,452 209,867 23,087
Pacific 168,272 23,161 138,900 --
West South Central 61,860 27,978 50,854 --
East South Central 58,462 10,122 67,503 --
Mountain 184,964 16,774 122,668 18,750
2,982,835 369,150 2,435,766 209,206
Less allowance
for losses 37,340 -- 35,252 --
$2,945,495 $369,150 $2,400,514 $209,206
<PAGE>
PAGE 61
2. Investments (continued)
Dec. 31, 1995 Dec. 31, 1994
On Balance Commitments On Balance Commitments
Property type Sheet to Purchase Sheet to Purchase
Apartments $1,038,446 $ 84,978 $ 904,012 $ 56,964
Department/retail stores 985,660 134,538 802,522 88,325
Office buildings 464,381 62,664 321,761 21,691
Industrial buildings 255,469 22,721 232,962 18,827
Nursing/retirement homes 80,864 4,378 89,304 4,649
Mixed Use 53,169 -- -- --
Hotels/motels 31,335 48,816 32,666 --
Medical buildings 57,772 2,495 36,490 15,651
Other 15,739 8,560 16,049 3,099
2,982,835 369,150 2,435,766 209,206
Less allowance
for losses 37,340 -- 35,252 --
$2,945,495 $369,150 $2,400,514 $209,206
</TABLE>
Mortgage loan fundings are restricted by state insurance regulatory
authorities to 80 percent or less of the market value of the real
estate at the time of origination of the loan. The Company holds
the mortgage document, which gives the right to take possession of
the property if the borrower fails to perform according to the
terms of the agreement. The fair value of the mortgage loans is
determined by a discounted cash flow analysis using mortgage
interest rates currently offered for mortgages of similar
maturities. Commitments to purchase mortgages are made in the
ordinary course of business. The fair value of the mortgage
commitments is $nil.
As of January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan" (SFAS No. 114), as amended by Statement of
Financial Accounting Standards No. 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures".
The adoption of the new rules did not have a material impact on the
Company's results of operations or financial condition.
SFAS No. 114 applies to all loans except for smaller-balance
homogeneous loans, that are collectively evaluated for impairment.
Impairment is measured as the excess of the loan's recorded
investment over its present value of expected principal and
interest payments discounted at the loan's effective interest rate,
or the fair value of collateral. The amount of the impairment is
recorded as a reserve for investment losses.
Based on management's judgment as to the ultimate collectibility of
principal, interest payments received are either recognized as
income or applied to the recorded investment in the loan until it
has been recovered. Once the recorded investment has been
recovered, any additional payments are recognized as interest
income.
The reserve for investment losses is maintained at a level that
management believes is adequate to absorb estimated credit losses
in the portfolio. The level of the reserve account is determined
based on several factors, including historical experience, expected
future principal and interest payments, estimated collateral
values, and current and anticipated economic and political
conditions. Management regularly evaluates the adequacy of the
reserve for investment losses.
<PAGE>
PAGE 62
2. Investments (continued)
At Dec. 31, 1995, the Company's recorded investment in impaired
loans was $83,874 with a reserve of $19,307. During the year, the
average recorded investment in impaired loans was $74,567.
The Company recognized $5,014 of interest income related to
impaired loans for the year ended Dec. 31, 1995.
The following table presents changes in the reserve for investment
losses related to all loans:
1995
Balance, January 1 $35,252
Provision for investment losses 15,900
Sales of related loans (6,600)
Loan payoffs (5,300)
Other (1,912)
Balance, Dec. 31 $37,340
At Dec. 31, 1995, the Company had commitments to purchase real
estate investments for $54,897. Commitments to purchase real
estate investments are made in the ordinary course of
business. The fair value of these commitments is $nil.
3. Income taxes
The Company qualifies as a life insurance company for federal
income tax purposes. As such, the Company is subject to the
Internal Revenue Code provisions applicable to life insurance
companies.
Income tax expense consists of the following:
1995 1994 1993
Federal income taxes:
Current $218,040 $186,508 $180,558
Deferred (33,810) (19,175) (44,237)
184,230 167,333 136,321
State income taxes-current 11,612 9,010 6,326
Income tax expense $195,842 $176,343 $142,647
Increases (decreases) to the federal tax provision applicable to
pretax income based on the statutory rate are attributable to:
<PAGE>
PAGE 63
3. Income taxes (continued)
<TABLE>
<CAPTION>
1995 1994 1993
Provision Rate Provision Rate Provision Rate
<S> <C> <C> <C> <C> <C> <C>
Federal income
taxes based on
the statutory rate $196,274 35.0% $179,379 35.0% $144,454 35.0%
Increases (decreases)
are attributable to:
Tax-excluded interest
and dividend income (8,524) (1.5) (9,939) (2.0) (11,002) (2.7)
Other, net (3,520) (0.6) (2,107) (0.4) 2,869 0.7
Federal income taxes $184,230 32.9% $167,333 32.6% $136,321 33.0%
</TABLE>
A portion of life insurance company income earned prior to 1984 was
not subject to current taxation but was accumulated, for tax
purposes, in a policyholders' surplus account. At Dec. 31, 1995,
the Company had a policyholders' surplus account balance of
$20,114. The policyholder's surplus account balance increased in
1995 due to the acquisition of ACLAC. The policyholders' surplus
account is only taxable if dividends to the stockholder exceed the
stockholder's surplus account or if the Company is liquidated.
Deferred income taxes of $7,040 have not been established because
no distributions of such amounts are contemplated.
Significant components of the Company's deferred tax assets and
liabilities as of Dec. 31 are as follows:
1995 1994
Deferred tax assets:
Policy reserves $ 600,176 $533,433
Investments -- 116,736
Life insurance guarantee
fund assessment reserve 26,785 32,235
Total deferred tax assets 626,961 682,404
Deferred tax liabilities:
Derred policy acquisition costs 590,762 553,722
Investments 146,805 --
Other 2,298 4,621
Total deferred tax
liabilities 739,865 558,343
Net deferred tax assets
(liabilities) $(112,904) $124,061
The Company is required to establish a valuation allowance for any
portion of the deferred tax assets that management believes will
not be realized. In the opinion of management, it is more
likely than not that the Company will realize the benefit of the
deferred tax assets, and, therefore, no such valuation allowance
has been established.
<PAGE>
PAGE 64
4. Stockholder's equity
During 1995, the Company received a $39,700 capital contribution
from its parent, American Express Financial Corporation, in the
form of investments in fixed maturities and mortgage loans. In
addition, effective January 1, 1995, the Company began
consolidating the financial results of ACLAC. This change
reflected the transfer of ownership of ACLAC from Amex Life
Assurance Company (Amex Life), a former affiliate, to the Company
prior to the sale of Amex Life to an unaffiliated third party on
October 2, 1995. This transfer of ownership to the Company has
been reflected as a capital contribution of $17,114 in the
accompanying financial statements. The effect of this change in
reporting entity was not significant and prior periods have not
been restated.
As discussed in Note 5, the Company entered into a reinsurance
agreement with Amex Life during 1995. As a result of this
transaction, a loss of $4,574 was realized and reported as a
direct charge to retained earnings.
Retained earnings available for distribution as dividends to the
parent are limited to the Company's surplus as determined in
accordance with accounting practices prescribed by state
insurance regulatory authorities. Statutory unassigned surplus
aggregated $1,103,993 as of Dec. 31, 1995 and $1,020,981 as of Dec.
31, 1994 (see Note 3 with respect to the income tax effect of
certain distributions). In addition, any dividend distributions in
1996 in excess of approximately $290,988 would require approval of
the Department of Commerce of the State of Minnesota.
Statutory net income for the years ended Dec. 31 and capital and
surplus as of Dec. 31 are summarized as follows:
1995 1994 1993
Statutory net income $ 326,799 $ 294,699 $ 275,015
Statutory capital and surplus 1,398,649 1,261,958 1,157,022
Dividends paid to American Express Financial Corporation were
$180,000 in 1995, $165,000 in 1994, and $25,000 in 1993.
5. Related party transactions
The Company has loaned funds to American Express Financial
Corporation under two loan agreements. The balance of the first
loan was $25,800 and $40,000 at Dec. 31, 1995 and 1994,
respectively. This loan can be increased to a maximum of $75,000
and pays interest at a rate equal to the preceding month's
effective new money rate for the Company's permanent investments.
It is collateralized by equities valued at $122,978 at Dec. 31,
1995. The second loan was used to fund the construction of the IDS
Operations Center. This loan was paid off during 1994. The loan
was secured by a first lien on the IDS Operations Center property
and had an interest rate of 9.89 percent. The Company also had a
loan to an affiliate which was used to fund construction of the IDS
Learning Center. This loan was sold to the American Express
<PAGE>
PAGE 65
5. Related party transactions (continued)
Financial Corporation during 1994. The loan was secured by a first
lien on the IDS Learning Center property and had an interest rate
of 9.82 percent. Interest income on the above loans totaled
$1,371, $2,894 and $11,116 in 1995, 1994 and 1993, respectively.
The Company purchased a five year secured note from an affiliated
company which had an outstanding balance of $19,444 and $23,333 at
Dec. 31, 1995 and 1994, respectively. The note bears a fixed rate
of 8.42 percent. Interest income on the above note totaled $1,937,
$2,278 and $2,605 in 1995, 1994 and 1993, respectively.
The Company has a reinsurance agreement whereby it assumed 100
percent of a block of single premium life insurance business from
Amex Life. The accompanying consolidated balance sheets at Dec.
31, 1995 and 1994 include $764,663 and $765,366, respectively, of
future policy benefits related to this agreement.
The Company has a reinsurance agreement to cede 50 percent of its
long-term care insurance business to Amex Life. The accompanying
consolidated balance sheets at Dec. 31, 1995 and 1994 include
$95,484 and $65,123, respectively, of reinsurance receivables
related to this agreement. Premiums ceded amounted to $25,553,
$20,360 and $16,230 and reinsurance recovered from reinsurers
amounted to $760, $62 and $404 for the years ended Dec. 31, 1995,
1994 and 1993, respectively.
The Company has a reinsurance agreement to assume deferred annuity
contracts from Amex Life. At October 1, 1995 a $803,618 block of
deferred annuities and $28,327 of deferred policy acquisition costs
were transferred to the Company. The accompanying consolidated
balance sheet at Dec. 31, 1995 includes $828,298 of future policy
benefits related to this agreement.
Until July 1, 1995 the Company participated in the IDS Retirement
Plan of American Express Financial Corporation which covered all
permanent employees age 21 and over who had met certain employment
requirements. Effective July 1, 1995, the IDS Retirement Plan was
merged with American Express Company's American Express Retirement
Plan, which simultaneously was amended to include a cash balance
formula and a lump sum distribution option. Employer contributions
to the plan are based on participants' age, years of service
and total compensation for the year. Funding of retirement costs
for this plan complies with the applicable minimum funding
requirements specified by ERISA. The Company's share of the total
net periodic pension cost was $nil in 1995, 1994 and 1993.
The Company also participates in defined contribution pension plans
of American Express Company which cover all employees who have met
certain employment requirements. Company contributions to the
plans are a percent of either each employee's eligible compensation
or basic contributions. Costs of these plans charged to operations
in 1995, 1994 and 1993 were $815, $957 and $2,008, respectively.
<PAGE>
PAGE 66
5. Related party transactions (continued)
The Company participates in defined benefit health care plans of
American Express Financial Corporation that provide health care and
life insurance benefits to retired employees and retired financial
advisors. The plans include participant contributions and service
related eligibility requirements. Upon retirement, such employees
are considered to have been employees of American Express Financial
Corporation. American Express Financial Corporation expenses these
benefits and allocates the expenses to its subsidiaries.
Accordingly, costs of such benefits to the Company are included in
employee compensation and benefits and cannot be identified on a
separate company basis. At Dec. 31, 1995 and 1994, the total
accumulated post retirement benefit obligation has been recorded as
a liability by American Express Financial Corporation.
Charges by American Express Financial Corporation for use of joint
facilities, marketing services and other services aggregated
$377,139, $335,183, and $243,346 for 1995, 1994 and 1993,
respectively. Certain of these costs are included in deferred
policy acquisition costs. In addition, the Company rents its home
office space from American Express Financial Corporation on an
annual renewable basis.
6. Commitments and contingencies
At Dec. 31, 1995 and 1994, traditional life insurance and universal
life-type insurance in force aggregated $59,683,532 and
$52,666,567, respectively, of which $3,771,204 and $3,246,608
were reinsured at the respective year ends. The Company also
reinsures a portion of the risks assumed under disability income
policies. Under the agreements, premiums ceded to reinsurers
amounted to $29,146, $29,489 and $28,276 and reinsurance recovered
from reinsurers amounted to $5,756, $5,505, and $3,345 for the
years ended Dec. 31, 1995, 1994 and 1993.
Reinsurance contracts do not relieve the Company from its primary
obligation to policyholders.
The Company is a defendant in various lawsuits, none of which, in
the opinion of Company counsel, will result in a material
liability.
The IRS has completed its audit of the Company's 1987 through 1989
tax years. The Company is currently contesting one issue at the
IRS Appeals Level. Management does not believe there will be a
material impact as a result of this audit.
7. Lines of credit
The Company has available lines of credit with three banks
aggregating $100,000 at 40 to 80 basis points over the banks' cost
of funds or equal to the prime rate, depending on which line of
credit agreement is used. Borrowings outstanding under these
agreements were $nil at Dec. 31, 1995 and 1994, respectively.
<PAGE>
PAGE 67
8. Derivative financial instruments
The Company enters into transactions involving derivative financial
instruments to manage its exposure to interest rate risk, including
hedging specific transactions. The Company manages risks
associated with these instruments as described below. The Company
does not hold derivative instruments for trading purposes.
Market risk is the possibility that the value of the derivative
financial instruments will change due to fluctuations in a factor
from which the instrument derives its value, primarily an interest
rate. The Company is not impacted by market risk related to
derivatives held for non-trading purposes beyond that inherent in
cash market transactions. Derivatives held for purposes other than
trading are largely used to manage risk and, therefore, the cash
flow and income effects of the derivatives are inverse to the
effects of the underlying transactions.
Credit risk is the possibility that the counterparty will not
fulfill the terms of the contract. The Company monitors credit
exposure related to derivative financial instruments through
established approval procedures, including setting concentration
limits by counterparty and industry, and requiring collateral,
where appropriate. A vast majority of the Company's counterparties
are rated A or better by Moody's and Standard & Poor's.
The notional or contract amount of a derivative financial
instrument is generally used to calculate the cash flows that are
received or paid over the life of the agreement. Notional
amounts are not recorded on the balance sheet. Notional amounts
far exceed the related credit exposure.
Credit exposure related to interest rate caps is measured by the
replacement cost of the contracts. The replacement cost
represents the fair value of the instruments. Financial futures
contracts are settled in cash daily.
<TABLE>
<CAPTION>
Notional Carrying Fair Total Credit
Dec. 31, 1995 Amount Value Value Exposure
<S> <C> <C> <C> <C>
Assets:
Interest rate caps $5,100,000 $26,680 $ 8,366 $ 8,366
Dec. 31, 1994
Assets:
Financial futures
contracts $ 159,800 $ 2,072 $ 2,072 $ --
Interest rate caps 4,400,000 29,054 42,365 42,365
$4,559,800 $31,126 $44,437 $42,365
</TABLE>
The fair values of derivative financial instruments are based on
market values, dealer quotes or pricing models. The financial
futures contracts expired in 1995. The interest rate caps expire
on various dates from 1996 to 2000.
<PAGE>
PAGE 68
8. Derivative financial instruments (continued)
Financial futures contracts and interest rate caps are used
principally to manage the Company's exposure to rising interest
rates. These instruments are used primarily to protect the margin
between interest rates earned on investments and the interest rates
credited to related annuity contract holders.
Changes in the fair value of financial futures contracts are
accounted for as adjustments to the carrying amount of the hedged
investments and amortized over the remaining lives of such
investments. The cost of interest rate caps is amortized to
interest expense over the life of the contracts and payments
received as a result of these agreements are recorded as a
reduction of interest expense when realized. The amortized cost of
interest rate cap contracts is included in other investments.
9. Fair values of financial instruments
The Company discloses fair value information for most on- and
off-balance sheet financial instruments for which it is practical
to estimate that value. Fair values of life insurance obligations,
receivables and all non-financial instruments, such as deferred
acquisition costs are excluded. Off-balance sheet intangible
assets, such as the value of the field force, are also excluded.
Management believes the value of excluded assets is significant.
The fair value of the Company, therefore, cannot be estimated by
aggregating the amounts presented.
<TABLE>
<CAPTION>
1995 1994
Carrying Fair Carrying Fair
Financial Assets Value Value Value Value
<S> <C> <C> <C> <C>
Investments:
Fixed maturities (Note 2):
Held to maturity $11,257,591 $11,878,377 $11,269,861 $10,694,800
Available for sale 10,516,212 10,516,212 8,017,555 8,017,555
Mortgage loans on
real estate (Note 2) 2,945,495 3,184,666 2,400,514 2,342,520
Other:
Equity securities (Note 2) 3,517 3,517 1,906 1,906
Derivative financial
instruments (Note 8) 26,680 8,366 31,126 44,437
Other 52,182 52,182 -- --
Cash and cash
equivalents (Note 1) 72,147 72,147 267,774 267,774
Separate account assets
(Note 1) 14,974,082 14,974,082 10,881,235 10,881,235
Financial Liabilities
Future policy benefits
for fixed annuities 20,259,265 19,603,114 18,325,870 17,651,897
Separate account
liabilities 14,208,619 13,665,636 10,398,861 9,943,672
</TABLE>
At Dec. 31, 1995 and 1994, the carrying amount and fair value of
future policy benefits for fixed annuities exclude life
insurance-related contracts carried at $1,070,598 and $971,897,
respectively, and policy loans of $74,973 and $64,212,
respectively. The fair value of these benefits is based on the
status of the annuities at Dec. 31, 1995 and 1994. The fair value
of deferred annuities is estimated as the carrying amount less any
<PAGE>
PAGE 69
9. Fair values of financial instruments (continued)
applicable surrender charges and related loans. The fair value for
annuities in non-life contingent payout status is estimated as the
present value of projected benefit payments at rates appropriate
for contracts issued in 1995 and 1994.
At Dec. 31, 1995 and 1994, the fair value of liabilities related to
separate accounts is estimated as the carrying amount less any
applicable surrender charges and less variable insurance contracts
carried at $765,463 and $482,374, respectively.
10. Segment information
The Company's operations consist of two business segments; first,
individual and group life insurance, disability income, health and
long-term care insurance, and second, annuity products designed for
individuals, pension plans, small businesses and employer-sponsored
groups. The consolidated condensed statements of income for the
years ended Dec. 31, 1995, 1994 and 1993 and total assets at Dec.
31, 1995, 1994 and 1993 by segment are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Net investment income:
Life, disability income, health
and long-term care insurance $ 256,242 $ 247,047 $ 250,224
Annuities 1,651,067 1,534,826 1,532,995
$ 1,907,309 $ 1,781,873 $ 1,783,219
Premiums, charges and fees:
Life, disability income, health
and long-term care insurance $ 384,008 $ 335,375 $ 287,713
Annuities 249,557 193,370 143,876
$ 633,565 $ 528,745 $ 431,589
Income before income taxes:
Life, disability income, health
and long-term care insurance $ 125,402 $ 122,677 $ 104,127
Annuities 440,278 394,117 315,336
Net loss on investments (4,898) (4,282) (6,737)
$ 560,782 $ 512,512 $ 412,726
Total assets:
Life, disability income, health
and long-term care insurance $ 6,195,870 $ 5,269,188 $ 4,810,145
Annuities 36,704,208 30,478,355 28,247,608
$42,900,078 $35,747,543 $33,057,753
</TABLE>
Allocations of net investment income and certain general expenses
are based on various assumptions and estimates.
Assets are not individually identifiable by segment and have been
allocated principally based on the amount of future policy benefits
by segment.
Capital expenditures and depreciation expense are not material, and
consequently, are not reported.
<PAGE>
PAGE 70
Report of Independent Auditors
The Board of Directors
IDS Life Insurance Company
We have audited the accompanying consolidated balance sheets of IDS
Life Insurance Company (a wholly owned subsidiary of American
Express Financial Corporation) as of December 31, 1995 and 1994,
and the related consolidated statements of income, stockholder's
equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of IDS Life Insurance Company at December 31, 1995 and
1994, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements,
the Company changed its method of accounting for certain
investments in debt and equity securities in 1994.
Ernst & Young LLP
February 2, 1996
Minneapolis, Minnesota
<PAGE>
PAGE 71
PART C.
Item 24. Financial Statements and Exhibits
(a) Financial statements included in Part B of this Registration
Statement:
IDS Life Insurance Company:
Consolidated Balance Sheets at Dec. 31, 1995 and 1994.
Consolidated Statements of Income for the years ended Dec. 31,
1995, 1994 and 1993.
Consolidated Statements of Stockholder's Equity for the years
ended Dec. 31, 1995, 1994, 1993 and 1992.
Consolidated Statements of Cash Flows for the years ended Dec.
31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements.
Report of Independent Auditors dated February 2, 1996.
(b) Exhibits:
1. Resolution of the Board of Directors of IDS Life establishing
the IDS Life Variable Account 10 dated August 23, 1995, filed
electronically as Exhibit 1 to Initial Registration Statement
is incorporated herein by reference.
2. Not applicable.
3. Not applicable.
4.1 Copy of Qualified Deferred Annuity Contract to be filed by
amendment.
4.2 Copy of Non-Qualified Deferred Annuity Contract filed
electronically as Exhibit 4.2 to Initial Registration
Statement is incorporated herein by reference.
4.3 Copy of Deferred Annuity Contract (IRA) to be filed by
amendment.
5 Form of Application for IDS Life Variable to be filed by
amendment.
6.1 Copy of Certificate of Incorporation of IDS Life dated July
24, 1957, filed electronically as Exhibit 6.1 to Initial
Registration Statement is incorporated herein by reference.
6.2 Copy of Amended By-Laws of IDS Life filed electronically as
Exhibit 6.2 to Initial Registration Statement is incorporated
herein by reference.
7. Not applicable.
8.1 Participation Agreement between IDS Life Insurance Company and
Putnam Capital Manager Trust and Putnam Mutual Funds Corp.,
dated March 1, 1996, is filed electronically herewith.
8.2 Participation Agreement between IDS Life Insurance Company and
Templeton Variable Products Series Fund and Franklin Templeton<PAGE>
PAGE 72
Distributors, Inc., dated March 1, 1996, is filed
electronically herewith.
8.3 Participation Agreement between IDS Life Insurance Company and
Warburg Pincus Trust and Warburg Pincus Counsellors, Inc. and
Counsellors Securities Inc., dated March 1, 1996, is filed
electronically herewith.
8.4 Participation Agreement between IDS Life Insurance Company and
AIM Variable Insurance Funds, Inc. and AIM Distributors, Inc.,
dated March 4, 1996, is filed electronically herewith.
9. Opinion of counsel, dated January 12, 1996, filed
electronically as Exhibit 9 to Pre-Effective Amendment 1, is
incorporated herein by reference.
10. Consent of Independent Auditors is filed electronically
herewith.
11. Financial Statement Schedules and Report of Independent
Auditors is filed electronically herewith.
Financial Statement Schedules
Schedule I Consolidated Summary of Investments Other
Than Investments In Related Parties
Schedule III Supplementary Insurance Information
Schedule IV Reinsurance
Schedule V Valuation and Qualifying Accounts
Report of Independent Auditors dated February 2, 1996
All other schedules to the financial statements required by
Article 7 of Regulation s-4 are not required under the
related instructions or are inapplicable and, therefore, have
been omitted.
12. Not applicable.
13. Copy of schedule for computation of each performance quotation
provided in the Registration Statement in response to Item 21,
filed electronically as Exhibit 13 to Initial Registration
Statement, is incorporated herein by reference.
14. Financial Data Schedule is filed electronically herewith.
15 Power of Attorney to sign this Registration Statement dated
April 1, 1996, is filed electronically herewith.
<TABLE>
<CAPTION>
Item 25. Directors and Officers of the Depositor (IDS Life
Insurance Company)
Positions and
Name Principal Business Address Offices with Depositor
<C> <C> <C>
Timothy V. Bechtold IDS Tower 10 Vice President-Risk
Minneapolis, MN 55440 Management Products<PAGE>
PAGE 73
Item 25. Directors and Officers of the Depositor (IDS Life Insurance Company (cont'd)
David J. Berry IDS Tower 10 Vice President
Minneapolis, MN 55440
Alan R. Dakay IDS Tower 10 Vice President-
Minneapolis, MN 55440 Institutional Insurance
Marketing
Robert M. Elconin IDS Tower 10 Vice President
Minneapolis, MN 55440
Morris Goodwin Jr. IDS Tower 10 Vice President and Treasurer
Minneapolis, MN 55440
Lorraine R. Hart IDS Tower 10 Vice President-Investments
Minneapolis, MN 55440
David R. Hubers IDS Tower 10 Director
Minneapolis, MN 55440
James M. Jensen IDS Tower 10 Vice President-Insurance
Minneapolis, MN 55440 Product Development
Richard W. Kling IDS Tower 10 Director and President
Minneapolis, MN 55440
Paul F. Kolkman IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President
Ryan R. Larson IDS Tower 10 Vice President
Minneapolis, MN 55440
Janis E. Miller IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-
Variable Assets
James A. Mitchell IDS Tower 10 Director, Chairman of
Minneapolis, MN 55440 the Board and Chief
Executive Officer
Barry J. Murphy IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-
Client Service
James R. Palmer IDS Tower 10 Vice President-Taxes
Minneapolis, MN 55440
Stuart A. Sedlacek IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-Assured
Assets
F. Dale Simmons IDS Tower 10 Vice President-
Minneapolis, MN 55440 Real Estate
Loan Management
William A. Stoltzmann IDS Tower 10 Vice President, General
Minneapolis, MN 55440 Counsel and Secretary<PAGE>
PAGE 74
Item 25. Directors and Officers of the Depositor (IDS Life Insurance Company (cont'd)
Melinda S. Urion IDS Tower 10 Director, Executive
Minneapolis, MN 55440 Vice President and
Controller
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant
IDS Life Insurance Company is a wholly owned subsidiary
of American Express Financial Corporation. American
Express Financial Corporation is a wholly owned
subsidiary of American Express Company (American
Express).
The following list includes the names of major
subsidiaries of American Express.
Jurisdiction
Name of Subsidiary of Incorporation
I. Travel Related Services
American Express Travel Related
Services Company, Inc. New York
II. International Banking Services
American Express Bank Ltd. Connecticut
III. Companies engaged in Investors Diversified Financial Services
American Centurion Life Assurance Company New York
American Enterprise Investment Services Inc. Minnesota
American Enterprise Life Insurance Company Indiana
American Express Financial Advisors Inc. Delaware
American Express Financial Corporation Delaware
American Express Insurance Agency of Nevada Inc. Nevada
American Express Minnesota Foundation Minnesota
American Express Service Corporation Delaware
American Express Tax and Business Services Inc. Minnesota
American Express Trust Company Minnesota
American Partners Life Insurance Company Arizona
AMEX Assurance Company Illinois
IDS Advisory Group Inc. Minnesota
IDS Aircraft Services Corporation Minnesota
IDS Cable Corporation Minnesota
IDS Cable II Corporation Minnesota
IDS Capital Holdings Inc. Minnesota
IDS Certificate Company Delaware
IDS Deposit Corp. Utah
IDS Fund Management Limited U.K.
IDS Futures Corporation Minnesota
IDS Futures III Corporation Minnesota
IDS Insurance Agency of Alabama Inc. Alabama
IDS Insurance Agency of Arkansas Inc. Arkansas
IDS Insurance Agency of Massachusetts Inc. Massachusetts
IDS Insurance Agency of Mississippi Ltd. Mississippi
IDS Insurance Agency of New Mexico Inc. New Mexico<PAGE>
PAGE 75
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant (Continued)
Jurisdiction
Name of Subsidiary of Incorporation
IDS Insurance Agency of North Carolina Inc. North Carolina
IDS Insurance Agency of Ohio Inc. Ohio
IDS Insurance Agency of Texas Inc. Texas
IDS Insurance Agency of Utah Inc. Utah
IDS Insurance Agency of Wyoming Inc. Wyoming
IDS International, Inc. Delaware
IDS Life Insurance Company Minnesota
IDS Life Insurance Company of New York New York
IDS Management Corporation Minnesota
IDS Partnership Services Corporation Minnesota
IDS Plan Services of California, Inc. Minnesota
IDS Property Casualty Insurance Company Wisconsin
IDS Real Estate Services, Inc. Delaware
IDS Realty Corporation Minnesota
IDS Sales Support Inc. Minnesota
IDS Securities Corporation Delaware
Investors Syndicate Development Corp. Nevada
Item 27. Number of Contractowners
On March 31, 1996, there were 1,576 contract holders of
qualified contracts. There were 1,376 owners of non-
qualified contracts
Item 28. Indemnification
The By-Laws of the depositor provide that it shall
indemnify any person who was or is a party or is
threatened to be made a party, by reason of the fact that
he is or was a director, officer, employee or agent of
this Corporation, or is or was serving at the direction
of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture,
trust or other enterprise, to any threatened, pending or
completed action, suit or proceeding, wherever brought,
to the fullest extent permitted by the laws of the State
of Minnesota, as now existing or hereafter amended,
provided that this Article shall not indemnify or protect
any such director, officer, employee or agent against any
liability to the Corporation or its security holders to
which he would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence, in the
performance of his duties or by reason of his reckless
disregard of his obligations and duties.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to director, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for<PAGE>
PAGE 76
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Item 29. Principal Underwriters
(a) IDS Life is the principal underwriter for IDS Life
Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ IDS Life
Variable Annuity Fund A, IDS Life Variable Annuity
Fund B, IDS Life Account SBS, IDS Life Variable Life
Separate Account and IDS Life Variable Account for
Smith Barney.
(b) This table is the same as our response to Item 25 of
this Registration Statement.
(c)
<TABLE>
<CAPTION>
Name of Net Underwriting
Principal Discounts and Compensation on Brokerage Other
Underwriter Commissions Redemption Commissions Compensation
<S> <C> <C> <C> <C>
IDS Life None None None None
</TABLE>
Item 30. Location of Accounts and Records
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Registrant undertakes to file a post-effective
amendment to this registration statement as
frequently as is necessary to ensure that the
audited financial statements in the
registration statement are never more than 16
months old for so long as payments under the
variable annuity contracts may be accepted.
(b) Registrant undertakes to include either (1) as
part of any application to purchase a contract
offered by the prospectus, a space that an
applicant can check to request a Statement of
Additional Information, or (2) a post card or
similar written communication affixed to or
included in the prospectus that the applicant <PAGE>
PAGE 77
can remove to send for a Statement of
Additional Information.
(c) Registrant undertakes to deliver any Statement
of Additional Information and any financial
statements required to be made available under
this Form promptly upon written or oral
request.
(d) Registrant represents that it is relying upon
the no-action assurance given to the American
Council of Life Insurance (pub. avail. Nov. 28,
1988). Further, Registrant represents that it
has complied with the provisions of paragraphs
(1)-(4) of that no-action letter.
<PAGE>
PAGE 78
SIGNATURES
As required by the Securities Act of 1933 and the Investment
Company Act of 1940, IDS Life Insurance Company, on behalf of the
Registrant, certifies that it meets requirements for effectiveness
of this Amendment to its Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf in the City of
Minneapolis, and State of Minnesota, on the 23rd day of April,
1996.
IDS LIFE VARIABLE ANNUITY ACCOUNT 10
(Registrant)
By IDS Life Insurance Company
(Sponsor)
By /s/ Richard W. Kling*
Richard W. Kling
President
As required by the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the
capacities indicated on the 23rd day of April, 1996.
Signature Title
/s/ James A. Mitchell* Director, Chairman of the
James A. Mitchell Board and Chief Executive
Officer
/s/ Richard W. Kling* Director and President
Richard W. Kling
/s/ David R. Hubers* Director
David R. Hubers
/s/ Paul F. Kolkman* Director and Executive Vice
Paul F. Kolkman President
/s/ Janis E. Miller* Director and Executive Vice
Janis E. Miller President, Variable Assets
/s/ Barry J. Murphy* Director and Executive Vice
Barry J. Murphy President, Client Service
/s/ Stuart A. Sedlacek* Director and Executive Vice
Stuart A. Sedlacek President, Assured Assets
/s/ Melinda S. Urion* Director, Executive Vice
Melinda S. Urion President and Controller
*Signed pursuant to Power of Attorney dated April 1, 1996, filed
electronically herewith by:
___________________________
Mary Ellyn Minenko<PAGE>
PAGE 79
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 1
This Registration Statement is comprised of the following papers
and documents:
The Cover Page.
Cross-reference sheet.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements.
Part C.
Other Information.
The signatures.
Exhibits.
<PAGE>
PAGE 1
IDS LIFE FLEXIBLE PORTFOLIO ANNUITY ACCOUNT
Registration No. 33-62407/811-07355
EXHIBIT INDEX
8.1 Participation Agreement between IDS Life Insurance
Company and Putnam Capital Manager Trust and Putnam
Mutual Funds Corp., dated March 1, 1996.
8.2 Participation Agreement between IDS Life Insurance
Company and Templeton Variable Products Series Fund and
Franklin Templeton Distributors, Inc., dated March 1,
1996.
8.3 Participation Agreement between IDS Life Insurance
Company and Warburg Pincus Trust and Warburg Pincus
Counsellors, Inc. and Counsellors Securities Inc.,
dated March 1, 1996.
8.4 Participation Agreement between IDS Life Insurance
Company and AIM Variable Insurance funds, Inc. and AIM
Distributors, Inc., dated March 4, 1996.
10. Consent of Independent Auditors.
11. Financial Statement Schedules and Report of Independent
Auditors.
14. Financial Data Schedule.
IDS Life Insurance Company
15. Power of Attorney to sign this Registration Statement
dated April 1, 1996.
<PAGE>
PAGE 1
PARTICIPATION AGREEMENT
By and Among
IDS LIFE INSURANCE COMPANY
And
PUTNAM CAPITAL MANAGER TRUST
And
PUTNAM MUTUAL FUNDS CORP.
THIS AGREEMENT, made and entered into this 1st day of March, 1996
by and among IDS Life Insurance Company organized under the laws of
the State of Minnesota (the "Company"), on its own behalf and on
behalf of each separate account of the Company named in Schedule 1
to this Agreement, as may be amended from time to time (each
account referred to as the "Account"), Putnam Capital Manager
Trust, an open-end management investment company and business trust
organized under the laws of the Commonwealth of Massachusetts (the
"Fund") and Putnam Mutual Funds Corp., a Massachusetts corporation
(the "Distributor").
WHEREAS, the Fund engages in business as an open-end management
investment company and was established for the purpose of serving
as the investment vehicle for separate accounts established for
variable life insurance contracts and variable annuity contracts to
be offered by insurance companies that have entered into
participation agreements with the Fund and the Distributor (the
"Participating Insurance Companies"), and
WHEREAS, beneficial interests in the Fund are divided into several
series of shares, each representing the interest in a particular
managed portfolio of securities and other assets (the
"Portfolios"); and
WHEREAS, the Fund has received an order from the Securities &
Exchange Commission (the "SEC") granting Participating Insurance
Companies and variable annuity separate accounts and variable life
insurance separate accounts relief from the provisions of Sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of
1940, as amended, (the "1940 Act") and Rules 6e-2(b)(15) and 6e-
3(T)(b)(15) thereunder, to the extent necessary to permit shares of
the Fund to be sold to and held by variable annuity separate
accounts and variable life insurance separate accounts of both
affiliated and unaffiliated Participating Insurance Companies and
qualified pension and retirement plans outside of the separate
account context (the "Mixed and Shared Funding Exemptive Order").
The parties to this Agreement agree that the conditions or
undertakings specified in the Mixed and Shared Funding Exemptive
Order and that may be imposed on the Company, the Fund and/or the
Distributor by virtue of the receipt of such order by the SEC will
be incorporated herein by reference, and such parties agree to
comply with such conditions and undertakings to the extent
applicable to each such party; and
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and its shares are registered
under the Securities Act of 1933, as amended (the "1933 Act"); and<PAGE>
PAGE 2
WHEREAS, the Company has registered or will register certain
variable annuity contracts (the "Contracts") under the 1933 Act;
and
WHEREAS, the Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of
Directors of the Company under the insurance laws of the State of
Minnesota, to set aside and invest assets attributable to the
Contracts; and
WHEREAS, the Company has registered the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of the
Portfolios named in Schedule 2, as such schedule may be amended
from time to time (the "Designated Portfolios") on behalf of the
Account to fund the Contracts, and the Fund is authorized to sell
such shares to unit investment trusts such as the Account at net
asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Distributor agree as follows:
ARTICLE 1. Sale of Fund Shares
1.1. The Fund agrees, subject to the terms of this Agreement, to
sell to the Company those shares of the Designated Portfolios
that each Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt and
acceptance by the Fund or its designee of the order for the
shares of the Fund. For purposes of this Section 1.1, the
Company will be the designee of the Fund for receipt of such
orders from each Account and receipt by such designee will
constitute receipt by the Fund; provided that the Fund
receives notice of such order by 9:00 a.m. Central Time on
the next following business day. "Business Day" will mean
any day on which the New York Stock Exchange is open for
trading and on which the Fund calculates its net asset value
pursuant to the rules of the SEC.
1.2. The Company will pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance
with Section 1.1 above. Payment will be in federal funds
transmitted by wire. The Company will only purchase Fund
shares to fund Contracts sold by the Company or by
broker-dealers affiliated with the Company.
1.3. The Fund agrees to make shares of the Designated Portfolios
available indefinitely, subject to Article X, for purchase at
the applicable net asset value per share by Participating
Insurance Companies and their separate accounts on those days
on which the Fund calculates its Designated Portfolio net
asset value pursuant to rules of the SEC; provided, however,
<PAGE>
PAGE 3
that the Trustees of the Fund (the "Trustees") may refuse to
sell shares of any Portfolio to any person, or suspend or
terminate the offering of shares of any Portfolio if such
action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Trustees,
acting in good faith and in light of their fiduciary duties
under federal and any applicable state laws, necessary or in
the best interests of the shareholders of such Portfolio.
1.4. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate
accounts, qualified pension and retirement plans or such
other persons as are permitted under applicable provisions of
the Internal Revenue Code of 1986, as amended, (the "Internal
Revenue Code"), and regulations promulgated thereunder, the
sale to which will not impair the tax treatment currently
afforded the Contracts. No shares of any Portfolio will be
sold to the general public.
1.5. The Fund agrees to redeem for cash, upon the Company's
request, any full or fractional shares of the Fund held by
the Company, executing such requests on a daily basis at the
net asset value next computed after receipt and acceptance by
the Fund or its agent of the request for redemption. For
purposes of this Section 1.5, the Company will be the
designee of the Fund for receipt of requests for redemption
from each Account and receipt by such designee will
constitute receipt by the Fund; provided the Fund receives
notice of request for redemption by 9:00 a.m. Central Time on
the next following Business Day. Payment will be in federal
funds transmitted by wire to the Company's account as
designated by the Company in writing from time to time, on
such next Business Day as the Fund receives notice of the
redemption order from the Company. If notification of
redemption is received after 9:00 a.m. Central Time on a
Business Day, payment for redeemed shares will be made on the
next following Business Day. The Fund reserves the right to
delay payment of redemption proceeds, but in no event may
such payment be delayed longer than the period permitted
under Section 22(e) of the 1940 Act. The Fund will not bear
any responsibility whatsoever for the proper disbursement or
crediting of redemption proceeds; the Company alone will be
responsible for such action.
1.6. The Company agrees to purchase and redeem the shares of the
Designated Portfolios offered by the then current prospectus
of the Fund in accordance with the provisions of such
prospectus. The Company will provide the Fund with such
information about the sales and redemptions of shares as the
Fund may reasonably request.
1.7. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the
Company or any Account. Purchase and redemption orders for
Fund shares will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
<PAGE>
PAGE 4
1.8. The Fund will furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of the
declaration of any income, dividends or capital gain
distributions payable on each Designated Portfolio's shares.
The Company hereby elects to receive all such dividends and
distributions as are payable on the Designated Portfolio
shares in the form of additional shares of that Designated
Portfolio. The Company reserves the right to revoke this
election and to receive all such dividends and distributions
in cash. The Fund will notify the Company of the number of
shares so issued as payment of such dividends and
distributions.
1.9. The Fund will make the net asset value per share for each
Designated Portfolio available to the Company on a daily
basis as soon as reasonably practical after the net asset
value per share is calculated and will use its best efforts
to make such net asset value per share available by 5:30
p.m., Central Time, but other than with respect to events
outside the control of the Fund, in no event later than 6:00
p.m., Central Time, each business day.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act and that the Contracts
will be issued and sold in compliance with all applicable
federal and state laws, including state insurance suitability
requirements. The Company further represents and warrants
that it is an insurance company duly organized and in good
standing under applicable law and that it has legally and
validly established each Account as a separate account under
applicable state law and has registered the Account as a unit
investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the
Contracts, and that it will maintain such registration for so
long as any Contracts are outstanding. The Company will
amend the registration statement under the 1933 Act for the
Contracts and the registration statement under the 1940 Act
for the Account from time to time as required in order to
effect the continuous offering of the Contracts or as may
otherwise be required by applicable law. The Company will
register and qualify the Contracts for sale in accordance
with the securities laws of the various states only if and to
the extent deemed necessary by the Company.
2.2. The Company represents that the Contracts are currently and
at the time of issuance will be treated as annuity contracts
under applicable provisions of the Internal Revenue Code, and
that it will make every effort to maintain such treatment and
that it will notify the Fund and the Distributor immediately
upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not
be so treated in the future.
2.3. The Company represents and warrants that it will not purchase
shares of the Designated Portfolios with assets derived from
tax-qualified retirement plans except, indirectly, through
Contracts purchased in connection with such plans.<PAGE>
PAGE 5
2.4. The Company agrees that it will notify the Fund and the
Distributor if the Company adds an aggressive growth fund
with similar objectives to the Fund as an investment option
under the Contracts sixty (60) days prior to the effective
date of such addition.
2.5. The Fund represents and warrants that Fund shares of the
Designated Portfolios sold pursuant to this Agreement will be
registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund
is and will remain registered under the 1940 Act for as long
as such shares of the Designated Portfolios are sold. The
Fund will amend the registration statement for its shares
under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its
shares. The Fund will register and qualify the shares of the
Designated Portfolios for sale in accordance with the laws of
the various states only if and to the extent deemed advisable
by the Fund based solely on the sale of Fund shares to the
Company.
2.6. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the
Internal Revenue Code, and that it will make every effort to
maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify the
Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might
not so qualify in the future.
2.7. The Fund represents that its investment objectives, policies
and restrictions comply with applicable state securities laws
as they may apply to the Fund. The Fund makes no
representation as to whether any aspect of its operations
(including, but not limited to, fees and expenses and
investment policies, objectives and restrictions) complies
with the insurance laws and regulations of any state. The
Fund and the Distributor agree that they will furnish the
information required by state insurance laws so that the
Company can obtain the authority needed to issue the
Contracts in the various states.
2.8. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under
the 1940 Act or otherwise, although it reserves the right to
make such payments in the future. To the extent that it
decides to finance distribution expenses pursuant to Rule
12b-1, the Fund undertakes to have the Trustees, a majority
of whom are not "interested" persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.9. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts
and that it does and will comply in all material respects
with applicable provisions of the 1940 Act.
<PAGE>
PAGE 6
2.10. The Distributor represents and warrants that it is and will
remain duly registered under all applicable federal and state
securities laws and that it will perform its obligations for
the Fund in accordance in all material respects with any
applicable state and federal securities laws.
2.11. The Fund represents and warrants that all of its Trustees,
officers, employees investment advisers, and other
individuals/entities having access to the funds and/or
securities of the Fund are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for
the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the
1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for
larceny and embezzlement and is issued by a reputable bonding
company.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Fund will provide such documentation, including a final
copy of a current prospectus set in type or a computer
diskette at the Fund's expense, and other assistance as is
reasonably necessary in order for the Company at least
annually (or more frequently if the Fund prospectus is
amended more frequently) to have the Fund's prospectus and
the prospectuses of other funds in which assets attributable
to the Contracts may be invested printed together in one
document. The Company will bear the expense of printing and
distributing prospectuses. The Fund will provide such
documentation to the Company in a timely manner so that the
Company can print and distribute the prospectuses within the
time required by applicable law.
3.2. The Fund's prospectus will state that the statement of
additional information for the Fund is available from the
Company. The Fund will provide the Company, at the Fund's
expense, with as many copies of the statement of additional
information as the Company may reasonably request for
distribution, at the Company's expense, to prospective
contractowners and applicants. The Fund will provide, at the
Fund's expense, as many copies of said statement of
additional information as necessary for distribution, at the
Fund's expense, to any existing contractowner who requests
such statement or whenever state or federal law otherwise
requires that such statement be provided. The Fund will
provide the copies of said statement of additional
information to the Company or to its mailing agent in a
timely manner so that the Company can distribute the
statement of additional information within the time required
by applicable law. The Company will distribute the statement
of additional information as requested or required and will
bill the Fund for the reasonable cost of such distribution.
<PAGE>
PAGE 7
3.3. The Fund, at its expense, will provide the Company or its
mailing agent with copies of its proxy material if any,
reports to shareholders and other communications to
shareholders in such quantity as the Company will reasonably
require and in a timely manner so that the Company can
distribute these documents within the time required by
applicable law. The Company will distribute this proxy
material, reports and other communications to existing
contractowners, such distribution to be at the Company's
expense.
3.4. If and to the extent required by law and the Mixed & Shared
Funding Exemptive Order, the Company will:
(a) solicit voting instructions from contractowners;
(b) vote the shares of the Designated Portfolios held
in the Account in accordance with instructions
received from contractowners; and
(c) vote shares of the Designated Portfolios held in
the Account for which no timely instructions have
been received, in the same proportion as shares of
such Designated Portfolio for which instructions
have been received from the Company's
contractowners;
so long as and to the extent that the SEC continues to
interpret the 1940 Act and the Mixed & Shared Funding
Exemptive Order to require pass-through voting privileges for
variable contractowners. The Company reserves the right to
vote Fund shares held in any segregated asset account in its
own right, to the extent permitted by law and the Mixed &
Shared Funding Exemptive Order. The Company will be
responsible for assuring that each Account participating in
the Fund calculates voting privileges in a manner consistent
with all legal requirements, including the Mixed and Shared
Funding Exemptive Order.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular, the Fund
either will provide for annual meetings (except insofar as
the SEC may interpret Section 16 of the 1940 Act not to
require such meetings) or, as the Fund currently intends, to
comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when
applicable, 16(b). Further, the Fund will act in accordance
with the SEC's interpretation of the requirements of Section
16(a) with respect to periodic elections of Trustees and with
whatever rules the SEC may promulgate with respect thereto.
<PAGE>
PAGE 8
ARTICLE IV. Sales Material and Information
4.1. The Company will furnish, or will cause to be furnished, to
the Distributor, each piece of sales literature or other
promotional material in which the Fund, its investment
adviser or the Distributor is named, at least ten (10)
business days prior to its use. No such material will be
used if the Fund or the Distributor reasonably objects to
such use within five (5) business days after receipt of such
material.
4.2. The Company will not give any information or make any
representations or statements on behalf of the Fund or
concerning the Fund in connection with the sale of the
Contracts other than the information or representations
contained in the registration statement, prospectus or
statement of additional information for Fund shares, as such
registration statement, prospectus and statement of
additional information may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund,
or in published reports for the Fund which are in the public
domain or approved by the Fund or the Distributor for
distribution, or in sales literature or other material
provided by the Fund or by the Distributor, except with
permission of the Fund or the Distributor. The Fund and the
Distributor agree to respond to any request for approval on a
prompt and timely basis. Nothing in this Section 4.2 will be
construed as preventing the Company or its employees or
agents from giving advice on investment in the Fund.
4.3. The Fund or the Distributor will furnish, or will cause to be
furnished, to the Company or its designee, each piece of
sales literature or other promotional material in which the
Company or its Account is named, at least ten (10) business
days prior to its use. No such material will be used if the
Company reasonably objects to such use within five (5)
business days after receipt of such material.
4.4. The Fund and the Distributor will not give any information or
make any representations or statements on behalf of the
Company or concerning the Company, each Account, or the
Contracts other than the information or representations
contained in a registration statement, prospectus or
statement of additional information for the Contracts, as
such registration statement, prospectus and statement of
additional information may be amended or supplemented from
time to time, or in published reports for each Account or the
Contracts which are in the public domain or approved by the
Company for distribution to contractowners, or in sales
literature or other material provided by the Company, except
with permission of the Company. The Company agrees to
respond to any request for approval on a prompt and timely
basis.
<PAGE>
PAGE 9
4.5. The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, statements
of additional information, reports, proxy statements, sales
literature and other promotional materials naming the Company
or the Account, and all amendments to any of the above, that
relate to the Fund or its shares, promptly following the
filing of such document with the SEC or the NASD.
4.6. The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses, statements
of additional information, reports, solicitations for voting
instructions, sales literature and other promotional
materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that
relate to the Contracts or each Account, promptly following
the filing of such document with the SEC or the NASD.
4.7. For purposes of this Article IV, the phrase "sales literature
or other promotional material" includes, but is not limited
to, advertisements (such as material published, or designed
for use in, a newspaper, magazine, or other periodical,
radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other
public media, (e.g., on-line networks such as the Internet or
other electronic messages), sales literature (i.e., any
written communication distributed or made generally available
to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar
texts, reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training
materials or other communications distributed or made
generally available to some or all agents or employees,
registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy
materials and any other material constituting sales
literature or advertising under the NASD rules, the 1933 Act
or the 1940 Act.
4.8. The Fund and the Distributor hereby consent to the Company's
use of the names "Putnam", "Putnam Capital Manager Trust",
and "PCM", in connection with marketing the Contracts,
subject to the terms of Sections 4.1 and 4.2 of this
Agreement. Such consent will terminate with the termination
of this Agreement.
ARTICLE V. Fees and Expenses
5.1. The Fund and the Distributor will pay no fee or other
compensation to the Company under this Agreement, except: (a)
if the Fund or any Designated Portfolio adopts and implements
a plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses, then, subject to obtaining any
required exemptive orders or other regulatory approvals, the
<PAGE>
PAGE 10
Distributor may make payments to the Company if and in such
amounts agreed to by the Distributor in writing; and (b) the
Fund may pay fees to the Company for services provided to
contractowners that are not primarily intended to result in
the sale of shares of the Designated Portfolio or of lying
contracts.
5.2. All expenses incident to performance by the Fund of this
Agreement will be paid by the Fund to the extent permitted by
law. All shares of the Designated Portfolios will be duly
authorized for issuance and registered in accordance with
applicable federal law and, to the extent deemed advisable by
the Fund, in accordance with applicable state law, prior to
sale. The Fund will bear the expenses for the cost of
registration and qualification of the Fund's shares;
preparation and filing of the Fund's prospectus, statement of
additional information and registration statement, proxy
materials and reports; setting the Fund's prospectus in type;
setting in type and printing proxy materials and reports to
contractowners the preparation of all statements and notices
required by any federal or state law; all taxes on the
issuance or transfer of the Fund's shares; any expenses
permitted to be paid or assumed by the Fund pursuant to a
plan, if any, under Rule 12b-1 under the 1940 Act; and all
other expenses set forth in Article III of this Agreement.
5.3. The Company will bear all expenses incident to the
performance of its obligations under this Agreement. The
Company will bear those expenses of:
(a) printing and distributing the Fund's prospectus to
existing and prospective contractowners;
(b) distributing reports to contractowners; and
(c) distributing the Fund's proxy materials to contractowners
as set forth in Article III of this Agreement.
ARTICLE VI. Diversification
6.1. The Fund will comply with Section 817(h) of the Internal
Revenue Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment,
or life insurance contracts. In the event of a breach of
this Article VI by the Fund, it will take all reasonable
steps: (a) to notify the Company of such breach; and (b) to
adequately diversify the Fund so as to achieve compliance
within the grace period afforded by Treasury Regulation
1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Trustees will monitor the Fund for the existence of any
irreconcilable material conflict among the interests of the
contractowners of all separate accounts investing in the
Fund. An irreconcilable material conflict may arise for a
variety of reasons, including: (a) an action by any state
<PAGE>
PAGE 11
insurance regulatory authority; (b) a change in applicable
federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant
proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting
instructions given by Participating Insurance Companies or by
variable annuity and variable life insurance contractowners;
or (f) a decision by an insurer to disregard the voting
instructions contractowners. The Trustees will promptly
inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts
of which it is aware to the Trustees. The Company agrees to
assist the Trustees in carrying out their responsibilities,
as delineated in the Mixed and Shared Funding Exemptive
Order, by providing the Trustees with all information
reasonably necessary for them to consider any issues raised.
This includes, but is not limited to, an obligation by the
Company to inform the Trustees whenever contractowner voting
instructions are to be disregarded. The Trustees will record
in their minutes, or other appropriate records, all reports
received by them and all action with regard to a conflict.
7.3. If it is determined by a majority of the Trustees, or a
majority of the disinterested Trustees, that an
irreconcilable material conflict exists, the Company and
other Participating Insurance Companies will, at their
expense and to the extent reasonably practicable (as
determined by a majority of the disinterested Trustees), take
whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (a)
withdrawing the assets allocable to some or all of the
Accounts from the Fund or any Portfolio and reinvesting such
assets in a different investment medium, including (but not
limited to) another Portfolio of the Fund, or submitting the
question whether such segregation should be implemented to a
vote of all affected contractowners and, as appropriate,
segregating the assets of any appropriate group (i.e.,
variable annuity contractowners or variable life insurance
contractowners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or
offering to the affected contractowners the option of making
such a change; and (b) establishing a new registered
management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contractowner voting
instructions, and such disregard of voting instructions could
conflict with the majority of contractowner voting
instructions, and the Company's judgement represents a
minority position that would preclude a majority vote, the
<PAGE>
PAGE 12
Company may be required, at the Fund's election, to withdraw
the affected subaccount of the Account's investment in the
Fund and terminate this Agreement with respect to such
subaccount; provided, however, that such withdrawal and
termination will be limited to the extent required by the
foregoing irreconcilable material conflict as determined by a
majority of the disinterested Trustees. No charge or penalty
will be imposed a result of such withdrawal. Any such
withdrawal and termination must take place within six (6)
months after the Fund gives written notice to the Company
that this provision is being implemented. Until the end of
such six-month period the Distributor and Fund will, to the
extent permitted by law and any exemptive relief previously
granted to the Fund, continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because of a
particular state insurance regulator's decision applicable to
the Company to disregard contractowner voting instructions,
and that decision represents a minority position that would
preclude a majority vote, then the Company may be required,
at the Fund's direction, to withdraw the affected subaccount
of the Account's investment in the Fund and terminate this
Agreement with respect to such subaccount; provided, however,
that such withdrawal and termination will be limited to the
extent required by the foregoing irreconcilable material
conflict as determined by a majority of the disinterested
Trustees. No charge or penalty will be imposed as a result
of such withdrawal. Any such withdrawal and termination must
take place within six (6) months after the Fund gives written
notice to the Company that this provision is being
implemented. Until the end of such six-month period the
Distributor and Fund will, to the extent permitted by law and
any exemptive relief previously granted to the Fund, continue
to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested Trustees will determine whether
any proposed action adequately remedies any irreconcilable
material conflict, but in no event will the Fund be required
to establish a new funding medium for the Contracts. The
Company will not be required to establish a new funding
medium for the Contracts if an offer to do so has been
declined by vote of a majority of contractowners affected by
the irreconcilable material conflict.
7.7. The Company will at least annually submit to the Trustees
such reports, materials or data as the Trustees may
reasonably request so that they may fully carry out the
duties imposed upon them as delineated in the Mixed and
Shared Funding Exemptive Order, and said reports, materials
and data will be submitted more frequently if deemed
appropriate by the Trustees.
<PAGE>
PAGE 13
7.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief
from any provision of the 1940 Act or the rules promulgated
thereunder with respect to mixed or shared funding (as
defined in the Mixed and Shared Funding Exemptive Order) on
terms and conditions materially different from those
contained in the Mixed and Shared Funding Exemptive Order,
then: (a) the Fund and/or the Participating Insurance
Companies, as appropriate, will take such steps as may be
necessary to comply with Rules 6e-2 and 6e-3(T), as amended,
and Rule 6e-3, as adopted, to the extent such rules are
applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement will continue in effect only to the
extent that terms and conditions substantially identical to
such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
(a) The Company agrees to indemnify and hold harmless the
Fund, the Distributor, and each person, if any, who
controls or is associated with the Fund or the
Distributor within the meaning of such terms under the
federal securities laws and any director, trustee,
officer, partner, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of
this Section 8.1) against any and all losses, claims,
expenses, damages, liabilities (including amounts paid
in settlement with the written consent of the Company
which consent may not be unreasonably withheld) or
litigation (including reasonable legal and other
expenses) to which the Indemnified Parties may become
subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof)
or settlements:
(1) arise out of or are based upon any untrue
statements or alleged untrue statements of any
material fact contained in the registration
statement, prospectus or statement of additional
information for the Contracts or contained in the
Contracts or sales literature or other promotional
material for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged
omission to state therein a material fact required
to be stated or necessary to make such statements
not misleading in light of the circumstances in
which they were made; provided that this agreement
to indemnify will not apply as to any Indemnified
Party if such statement or omission or such alleged
<PAGE>
PAGE 14
statement or omission was made in reliance upon and
in conformity with information furnished to the
Company by or on behalf of the Distributor or the
Fund for use in the registration statement,
prospectus or statement of additional information
for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or
otherwise for use in connection with the sale of
the Contracts or Fund shares; or
(2) arise out of or as a result of statements or
representations by or on behalf of the Company
(other than statements or representations contained
in the Fund registration statement, prospectus,
statement of additional information or sales
literature or other promotional material of the
Fund (or any amendment or supplement) not supplied
by the Company or persons under control of the
Company), or wrongful conduct of the Company or
persons under its control, with respect to the sale
or distribution of the Contracts or Fund shares; or
(3) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund
registration statement, prospectus, statement of
additional information or sales literature or other
promotional material of the Fund (or amendment or
supplement) or the omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make such statements not
misleading in light of the circumstances in which
they were made, if such a statement or omission was
made in reliance upon and in conformity with
information furnished to the Fund or the
Distributor by or on behalf of the Company or
persons under its control; or
(4) arise out of any material breach of any
representation and/or warranty made by the Company
in this Agreement or arise out of or result from
any other material breach by the Company of this
Agreement; except to the extent provided in
Sections 8.1(b) and 8.4 hereof. This
indemnification will be in addition to any
liability that the Company otherwise may have.
(b) No party will be entitled to indemnification under
Section 8.1(a) if the loss, claim, damage, liability or
litigation for which indemnification is sought is due to
the willful misfeasance, bad faith, or gross negligence
in the performance of such party's duties under this
Agreement, or by reason of such party's reckless
disregard of its obligations or duties under this
Agreement by such party.
<PAGE>
PAGE 15
(c) An Indemnified Party promptly will notify the Company of
the commencement of any litigation, proceedings,
complaints or actions by regulatory authorities against
him, her or it in connection with the issuance or sale
of the Fund shares or the Contracts or the operation of
the Fund.
8.2. Indemnification By The Distributor
(a) The Distributor agrees to indemnify and hold harmless
the Company and each person, if any, who controls or is
associated with the Company within the meaning of such
terms under the federal securities laws and any
director, trustee, officer, partner, employee or agent
of the foregoing (collectively, the "Indemnified
Parties" for purposes of this Section 8.2) against any
and all losses, claims, expenses, damages, liabilities
(including amounts paid in settlement with the written
consent of the Distributor which consent may not be
unreasonably withheld) or litigation (including
reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar
as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) or settlements:
(1) arise out of or are based upon any untrue
statements or alleged untrue statements of any
material fact contained in the sales literature or
other promotional material of the Fund (or any
amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or
the alleged omission to state therein a material
fact required to be stated or necessary to make
such statements not misleading in light of the
circumstances in which they were made; provided
that this agreement to indemnify will not apply as
to any Indemnified Party if such statement or
omission or such alleged statement or omission was
made in reliance upon and in conformity with
information furnished to the Distributor or Fund by
or on behalf of the Company for use in the sales
literature of the Fund (or any amendment or
supplement thereto) or otherwise for use in
connection with the sale of the Contracts or Fund
shares; or
(2) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Contracts or in
the Contract or Fund registration statements,
prospectuses or statements of additional
information or sales literature or other
promotional material for the Contracts or the Fund
<PAGE>
PAGE 16
(or any amendment or supplement) not supplied by
the Distributor or the Fund or persons under the
control of the Distributor or the Fund
respectively) or wrongful conduct of the
Distributor or persons under the control of the
Distributor, with respect to the sale or
distribution of the Contracts or Fund shares; or
(3) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
registration statement, prospectus, statement of
additional information or sales literature or other
promotional material covering the Contracts (or any
amendment or supplement thereto), or the omission
or alleged omission to state therein a material
fact required to be stated or necessary to make
such statement or statements not misleading in
light of the circumstances in which they were made,
if such statement or omission was made in reliance
upon and in conformity with information furnished
to the Company by or on behalf of the Distributor
or persons under the control of the Distributor; or
(4) arise out of or result from any material breach of
any representation and/or warranty made by the
Distributor in this Agreement or arise out of or
result from any other material breach of this
Agreement by the Distributor (including a failure,
whether unintentional or in good faith or
otherwise, to comply with the diversification
requirements and procedures related thereto
specified in Article VI of this Agreement); or
(5) arise out of or result from any failure to supply
timely and accurate net asset value information
related to the Fund, as contemplated by Article I,
which failure is the result of gross negligence or
willful misconduct of the Distributor or its
affiliates (it being agreed that neither the
Distributor or such affiliates assume
responsibility for the timing or accuracy of prices
supplied by independent third parties, such as
pricing services and market makers); except to the
extent provided in Sections 8.2(b) and 8.4 hereof.
(b) No party will be entitled to indemnification under
Section 8.2(a) if the loss, claim, damage, liability or
litigation for which indemnification is sought is due to
the willful misfeasance, bad faith, or gross negligence
in the performance of such party's duties under this
Agreement, or by reason of such party's reckless
disregard of its obligations or duties under this
Agreement by such party.
<PAGE>
PAGE 17
(c) The Indemnified Parties will promptly notify the
Distributor and the Fund of the commencement of any
litigation, proceedings, complaints or actions by
regulatory authorities against them in connection with
the issuance or sale of the Contracts or the operation
of the Account.
8.3. Indemnification By the Fund
(a) The Fund agrees to indemnify and hold harmless the
Company and each person, if any, who controls or is
associated with the Company within the meaning of such
terms under the federal securities laws and any
director, trustee, officer, partner, employee or agent
of the foregoing (collectively, the "Indemnified
Parties" for purposes of this Section 8.3) against any
and all losses, claims, expenses, damages, liabilities
(including amounts paid in settlement with the written
consent of the Fund which consent may not be
unreasonably withheld) or litigation (including
reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar
as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) or settlements, are
related to the operations of the Fund and:
(1) arise out of or based upon any untrue statement or
alleged untrue statement of any material fact
contained in the registration statement, prospectus
or statement of additional information for the Fund
(or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading in light of the circumstances in which
they were made, provided that this agreement to
indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to the
Distributor or Fund by or on behalf of the Company
for use in the registration statement, prospectus,
or statement of additional information for the Fund
(or any amendment or supplement) or otherwise for
use in connection with the sale of the Contracts or
Fund shares; or
(2) arise out of or result from any material breach of
any representation and/or warranty made by the Fund
in this Agreement or arise out of or result from
any other material breach of this Agreement by the
Fund; except to the extent provided in Sections
8.3(b) and 8.4 hereof.
<PAGE>
PAGE 18
(b) No party will be entitled to indemnification under
Section 8.3(a) if the loss, claim, damage, liability or
litigation for which indemnification is sought is due to
the willful misfeasance, bad faith, or gross negligence
in the performance of such party's duties under this
Agreement, or by reason of such party's reckless
disregard of its obligations and duties under this
Agreement by such party.
(c) The Indemnified Parties will promptly notify the Fund of
the commencement of any litigation, proceedings,
complaints or actions by regulatory authorities against
them in connection with the issuance or sale of the
Contracts or the operation of the Account.
8.4. Indemnification Procedure
Any person obligated to provide indemnification under this
Article VIII ("Indemnifying Party" for the purpose of this
Section 8.4) will not be liable under the indemnification
provisions of this Article VIII with respect to any claim
made against a party entitled to indemnification under this
Article VIII ("Indemnified Party" for the purpose of this
Section 8.4) unless such Indemnified Party will have notified
the Indemnifying Party in writing within a reasonable time
after the summons or other first legal process giving
information of the nature of the claim will have been served
upon such Indemnified Party (or after such party will have
received notice of such service on any designated agent), but
failure to notify the Indemnifying Party of any such claim
will not relieve the Indemnifying Party from any liability
which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of the
indemnification provision of this Article VIII, except to the
extent that the failure to notify results in the failure of
actual notice to the Indemnifying Party and such Indemnifying
Party is damaged solely as a result of failure to give such
notice. In case any such action is brought against the
Indemnified Party, the Indemnifying Party will be entitled to
participate, at its own expense, in the defense thereof. The
Indemnifying Party also will be entitled to assume the
defense thereof, with counsel satisfactory to the party named
in the action. After notice from the Indemnifying Party to
the Indemnified Party of the Indemnifying Party's election to
assume the defense thereof, the Indemnified Party will bear
the fees and expenses of any additional counsel retained by
it, and the Indemnifying Party will not be liable to such
party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in
connection with the defense thereof other than reasonable
costs of investigation, unless: (a) the Indemnifying Party
and the Indemnified Party will have mutually agreed to the
retention of such counsel; or (b) the named parties to any
such proceeding (including any impleaded parties) include
<PAGE>
PAGE 19
both the Indemnifying Party and the Indemnified Party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests
between them. The Indemnifying Party will not be liable for
any settlement of any proceeding effected without its written
consent (such consent may not be unreasonably withheld) but
if settled with such consent or if there is a final judgment
for the plaintiff, the Indemnifying Party agrees to indemnify
the Indemnified Party from and against any loss or liability
by reason of such settlement or judgment. A successor by law
of the parties to this Agreement will be entitled to the
benefits of the indemnification contained in this Article
VIII. The indemnification provisions contained in this
Article VIII will survive any termination of this Agreement.
ARTICLE IX. Applicable Law
9.1. This Agreement will be construed and the provisions hereof
interpreted under and in accordance with the laws of the
State of Minnesota.
9.2. This Agreement will be subject to the provisions of the 1933
Act, the 1934 Act and the 1940 Act, and the rules and
regulations and rulings thereunder, including such exemptions
from those statutes, rules and regulations as the SEC may
grant (including, but not limited to, the Mixed and Shared
Funding Exemptive Order) and the terms hereof will be
interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement will terminate:
(a) at the option of any party, with or without cause, with
respect to some or all of the Designated Portfolios,
upon six (6) month's advance written notice to the other
parties or, if later, upon receipt of any required
exemptive relief or orders from the SEC, unless
otherwise agreed in a separate written agreement among
the parties; or
(b) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio if shares of the
Designated Portfolio are not reasonably available to
meet the requirements of the Contracts as determined in
good faith by the Company; or
(c) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio in the event any of
the Designated Portfolio's shares are not registered,
issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such
shares as the underlying investment media of the
Contracts issued or to be issued by Company; or
<PAGE>
PAGE 20
(d) at the option of the Fund or the Distributor, upon
receipt of the Fund's or the Distributor's written
notice by the other parties, upon institution of formal
proceedings against the Company by the NASD, the SEC,
the insurance commission of any state or any other
regulatory body, provided that the Fund or the
Distributor determines in its sole judgment, exercised
in good faith, that any such proceeding would have a
material adverse effect on the Company's ability to
perform its obligations under this Agreement; or
(e) at the option of the Company, upon receipt of the
Company's written notice by other parties, upon
institution of formal proceedings against the Fund or
the Distributor by the NASD, the SEC, or any state
securities or insurance department or any other
regulatory body, provided that the Company determines in
its sole judgment, exercised in good faith, that any
such proceeding would have a material adverse effect on
the Fund's or the Distributor's ability to perform its
obligations under this Agreement; or
(f) at the option of the Company, upon receipt of the
Company's written notice by the other parties, if the
Fund ceases to qualify as a Regulated Investment Company
under Subchapter M of the Internal Revenue Code, or
under any successor or similar provision, or if the
Company reasonably and in good faith believes that the
Fund may fail to so qualify; or
(g) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio if the Fund fails to
meet the diversification requirements specified in
Article VI hereof or if the Company reasonably and in
good faith believes the Fund may fail to meet such
requirements; or
(h) at the option of any party to this Agreement, upon
written notice to the other parties, upon another
party's material breach of any provision of this
Agreement; or
(i) at the option of the Company, if the Company determines
in its sole judgment exercised in good faith, that
either the Fund or the Distributor has suffered a
material adverse change in its business, operations or
financial condition since the date of this Agreement or
is the subject of material adverse publicity which is
likely to have a material adverse impact upon the
business and operations of the Company, such termination
to be effective sixty (60) days' after receipt by the
other parties of written notice of the election to
terminate; or
<PAGE>
PAGE 21
(j) at the option of the Fund or the Distributor, if the
Fund or Distributor respectively, determines in its sole
judgment exercised in good faith, that the Company has
suffered a material adverse change in its business,
operations or financial condition since the date of this
Agreement or is the subject of material adverse
publicity which is likely to have a material adverse
impact upon the business and operations of the Fund or
the Distributor, such termination to be effective sixty
(60) days' after receipt by the other parties of written
notice of the election to terminate; or
(k) at the option of the Company or the Fund upon receipt of
any necessary regulatory approvals and/or the vote of
the contractowners having an interest in the Account (or
any subaccount) to substitute the shares of another
investment company for the corresponding Designated
Portfolio shares of the Fund in accordance with the
terms of the Contracts for which those Designated
Portfolio shares had been selected to serve as the
underlying investment media. The Company will give
sixty (60) days' prior written notice to the Fund of the
date of any proposed vote or other action taken to
replace the Fund's shares; or
(l) at the option of the Company or the Fund upon a
determination by a majority of the Trustees, or a
majority of the disinterested members, that an
irreconcilable material conflict exists among the
interests of: (1) all contractowners of variable
insurance products of all separate accounts; or (2) the
interests of the Participating Insurance Companies
investing in the Fund as set forth in Article VII of
this Agreement; or
(m) at the option of the Fund in the event any of the
Contracts are not issued or sold in accordance with
applicable federal and/or state law. Termination will
be effective immediately upon such occurrence without
notice; or
(n) with respect to any Designated Portfolio, upon sixty
(60) days' advance written notice from the Distributor
to the Company, upon a decision by the Distributor or
the Fund to cease offering shares of the Designated
Portfolio for sale; or
(o) at the option of the Distributor or the Fund, upon sixty
(60) days' prior written notice to the Company, if the
Company delivers the notice contemplated by Section 2.4.
<PAGE>
PAGE 22
10.2. Notice Requirement
(a) No termination of this Agreement will be effective
unless and until the party terminating this Agreement
gives prior written notice to all other parties of its
intent to terminate, which notice will set forth the
basis for the termination.
(b) In the event that any termination of this Agreement is
based upon the provisions of Article VII, such prior
written notice will be given in advance of the effective
date of termination as required by such provisions.
10.3. Effect of Termination
Notwithstanding any termination of this Agreement, the Fund
and the Distributor will, at the option of the Company,
continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for
all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing
Contracts."). Specifically, without limitation, the owners
of the Existing Contracts will be permitted to reallocate
investments in the Portfolios (as in effect on such date),
redeem investments in the Portfolios and/or invest in the
Portfolios upon the making of additional purchase payments
under the Existing Contracts to the same extent as if this
Agreement had not terminated. The parties agree that this
Section 10.3 will not apply to any terminations under
Article VII and the effect of such Article VII terminations
will be governed by Article VII of this Agreement.
10.4. Surviving Provisions
Not withstanding any termination of this Agreement, each
party's obligations under Article VIII to indemnify other
parties will survive and not be affected by any termination
of this Agreement. In addition, with respect to Existing
Contracts, all provisions of this Agreement also will
survive and not be affected by any termination of this
Agreement.
ARTICLE XI. Notices
11.1. Any notice will be deemed duly given when sent by registered
or certified mail to the other party at the address of such
party set forth below or at such other address as such party
may from time to time specify in writing to the other
parties.
If to the Company:
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
Attention: Mr. Wendell Halvorson
American Express Financial Advisors
Inc.<PAGE>
PAGE 23
With a simultaneous copy to:
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
Attention: Ms. Mary Ellyn Minenko
Counsel
If to the Fund:
One Post Office Square
Boston, MA 02109
Attention: Mr. John R. Verani
If to the Distributor:
One Post Office Square
Boston, MA 02109
Attention: General Counsel
ARTICLE XII. Miscellaneous
12.1. A copy of the Agreement and Declaration of Trust of the Fund
is on file with the Secretary of State of the Commonwealth
of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Trustees of the Fund
as Trustees and not individually and that the obligations of
or arising out of this instrument, including without
limitations Article VII are not binding upon any of the
Trustees or shareholders individually but binding only upon
the assets and property of the Fund.
12.2. The Fund and the Distributor acknowledge that the identities
of the customers of the Company or any of its affiliates
(collectively the "Protected Parties" for purposes of this
Section 12.2), information maintained regarding those
customers, and all computer programs and procedures or other
information developed or used by the Protected Parties or
any of their employees or agents with respect to such
customers are the valuable property of the Protected
Parties. The Fund and the Distributor agree that if they
come into possession of any list or compilation of the
identities of or other information about the Protected
Parties' customers, or any other confidential information or
property of the Protected Parties, other than such
information as may be independently developed or compiled by
the Fund or the Distributor from information supplied to
them by the Protected Parties' customers who also maintain
accounts directly with the Fund or the Distributor, the Fund
and the Distributor will hold such information or property
in confidence and refrain from using, disclosing or
distributing any of such information or other property
except: (a) with the Company's prior written consent; or (b)
as required by law or judicial process. The Fund and the
<PAGE>
PAGE 24
Distributor acknowledge that any breach of the agreements in
this Section 12.2 would result in immediate and irreparable
harm to the Protected Parties for which there would be no
adequate remedy at law and agree that in the event of such a
breach, the Protected Parties will be entitled to equitable
relief by way of temporary and permanent injunctions, as
well as such other relief as any court of competent
jurisdiction deems appropriate.
12.3. The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of
the provisions hereof or otherwise affect their construction
or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute
one and the same instrument.
12.5. If any provision of this Agreement will be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement will not be affected thereby.
12.6. This Agreement will not be assigned by any party hereto
without the prior written consent of all the parties.
12.7. Each party to this Agreement will cooperate with each other
party and all appropriate governmental authorities
(including without limitation the SEC, the NASD and state
insurance regulators) and will permit each other and such
authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to
this Agreement or the transactions contemplated hereby. The
Fund agrees that the Company will have the right to inspect,
audit and copy all records pertaining to the performance of
services under this Agreement pursuant to the requirements
of any state insurance department.
12.8. Each party represents that the execution and delivery of
this Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all
necessary corporate or board action, as applicable, by such
party and when so executed and delivered this Agreement will
be the valid and binding obligation of such party
enforceable in accordance with its terms.
12.9. The parties to this Agreement may amend the schedules to
this Agreement from time to time to reflect changes in or
relating to the Contracts, the Accounts or the Designated
Portfolios of the Fund or other applicable terms of this
Agreement.
<PAGE>
PAGE 25
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed
hereto as of the date specified below.
IDS LIFE INSURANCE COMPANY
SEAL /s/ Janis E. Miller
Janis E. Miller
Title: Vice President
ATTEST:
/s/ Paul D. Sand
Paul D. Sand
Title: Assistant Secretary
PUTNAM CAPITAL MANAGER
TRUST
SEAL /s/ John R. Verani
John R. Verani
Title: Vice President
PUTNAM MUTUAL FUNDS CORP.
SEAL /s/ Jeff Miller
Jeff Miller
Title: Senior Vice
President<PAGE>
PAGE 26
Schedule 1
PARTICIPATION AGREEMENT
By and Among
IDS LIFE INSURANCE COMPANY
And
PUTNAM CAPITAL MANAGER TRUST
And
PUTNAM MUTUAL FUNDS CORP.
The following separate accounts of IDS Life Insurance Company are
permitted in
accordance with the provisions of this Agreement to invest in
Designated Portfolios of the Fund shown in Schedule 2:
IDS Life Variable Account 10, established August 23, 1995.
March 1, 1996
<PAGE>
PAGE 27
Schedule 2
PARTICIPATION AGREEMENT
By and Among
IDS LIFE INSURANCE COMPANY
And
PUTNAM CAPITAL MANAGER TRUST
And
PUTNAM MUTUAL FUNDS CORP.
The Separate Account(s) shown on Schedule 1 may invest in the
following Designated Portfolios of the Putnam Capital Manager
Trust:
PCM New Opportunities Fund
March 1, 1996
<PAGE>
PAGE 1
PARTICIPATION AGREEMENT
By and Among
IDS LIFE INSURANCE COMPANY
And
TEMPLETON VARIABLE PRODUCTS SERIES FUND
And
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
THIS AGREEMENT, made and entered into this 1st day of March, 1996
by and among IDS Life Insurance Company organized under the laws of
the State of Minnesota (the "Company"), on its own behalf and on
behalf of each separate account of the Company named in Schedule 1
to this Agreement, as may be amended from to time (each account
referred to as the "Account"), Templeton Variable Products Series
Fund an open-end management investment company and business trust
organized under the laws of the State of Massachusetts (the "Fund")
and Franklin Templeton Distributors, Inc. a corporation organized
under the laws of the State of California (the "Underwriter"), the
Fund's principal underwriter.
WHEREAS, the Fund engages in business as an open-end management
investment company and was established for the purpose of serving
as the investment vehicle for separate accounts established for
variable life insurance contracts and variable annuity contracts to
be offered by insurance companies that have entered into
participation agreements substantially identical to this Agreement
(the "Participating Insurance Companies"); and
WHEREAS, beneficial interests in the Fund are divided into several
series of shares, each representing the interest in a particular
managed portfolio of securities and other assets (the
"Portfolios"); and
WHEREAS, the Fund has received an order from the Securities &
Exchange Commission (the "SEC") granting Participating Insurance
Companies and their variable annuity separate accounts and variable
life insurance separate accounts relief from the provisions of
Sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company
Act of 1940, as amended, (the "1940 Act") and Rules 6e-2(b)(15) and
6e3(T)(b)(15) thereunder, to the extent necessary to permit shares
of the Fund to be sold to and held by variable annuity separate
accounts and variable life insurance separate accounts of both
affiliated and unaffiliated Participating Insurance Companies and
certain qualified pension and retirement plans outside of the
separate account context (the "Mixed and Shared Funding Exemptive
Order"). The parties to this Agreement agree that the conditions or
undertakings specified in the Mixed and Shared Funding Exemptive
Order and that may be imposed on the Company, the Fund and/or the <PAGE>
PAGE 2
Underwriter by virtue of the receipt of such order by the SEC will
be incorporated herein by reference, and such parties agree to
comply with such conditions and undertakings to the extent
applicable to each such party; and
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and its shares are registered
under the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Company has registered or will register certain
variable annuity contracts (the "Contracts") under the 1933 Act;
and
WHEREAS, the Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of
Directors of the Company under the insurance laws of the State of
Minnesota, to set aside and invest assets attributable to the
Contracts; and
WHEREAS, the Company has registered the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker-dealer with the
SEC under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and is a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of the
Portfolios named in Schedule 2, as such schedule may be amended
from time to time (the "Designated Portfolios") on behalf of the
Account to fund the Contracts, and the Fund is authorized to sell
such shares to unit investment trusts such as the Account at net
asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale and Redemption of Fund Shares
1.1. The Fund agrees to sell to the Company those shares of the
Designated Portfolios that each Account orders, executing
such orders on a daily basis at the net asset value next
computed after receipt and acceptance by the Fund or its
designee of the order for the shares of the Fund, as
established in accordance with the provisions of the
then-current prospectus of the Fund describing purchase
procedures on those days on which the Fund calculates its net
asset value pursuant to rules of the SEC, and the Fund shall
use reasonable efforts to calculate such net asset value on
<PAGE>
PAGE 3
each day on which the New York Stock Exchange is open for
trading. For purposes of this Section 1.1, the Company will
be the designee of the Fund for receipt of such orders from
each Account and receipt by such designee will constitute
receipt by the Fund; provided that the Fund receives notice
of such order by 10:00 a.m. Eastern Time on the next
following business day. "Business Day" will mean any day on
which the New York Stock Exchange is open for trading and on
which the Fund calculates its net asset value pursuant to the
rules of the SEC.
1.2. The Company will pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance
with Section 1.1 above. Payment will be in federal funds
transmitted by wire to the Fund.
1.3. The Fund agrees to make shares of the Designated Portfolios
available for purchase at the applicable net asset value per
share by Participating Insurance Companies and their separate
accounts on those days on which the Fund calculates its
Designated Portfolio net asset value pursuant to rules of the
SEC; provided, however, that the Board of Trustees of the
Fund (the "Fund Board") may refuse to sell shares of any
Portfolio to any person, or suspend or terminate the offering
of shares of any Portfolio if such action is required by law
or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Fund Board, acting in good faith
and in light of its fiduciary duties under federal and any
applicable state laws, necssary in the best interests of the
shareholders of such Portfolio.
1.4. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate
accounts, qualified pension and retirement plans or such
other persons as are permitted under applicable provisions of
the Internal Revenue Code of 1986, as amended, (the "Internal
Revenue Code"), and regulations promulgated thereunder, the
sale to which will not impair the tax treatment currently
afforded the Contracts. No shares of any Portfolio will be
sold to the general public. The Company agrees that it will
use Fund shares only for the purpose of funding the Contracts
through the Accounts listed on Schedule 1, as amended from
time to time.
1.5. The Fund will not sell Fund shares to any insurance company
or separate account unless an agreement containing provisions
substantially the same as Articles I, III, and VII of this
Agreement are in effect to govern such sales. The Fund will
make available upon written request from the Company a list
of all other Participating Insurance Companies.
<PAGE>
PAGE 4
1.6. The Fund agrees to redeem for cash, upon the Company's
request, any full or fractional shares of the Fund held by
the Company, executing such requests on a daily basis at the
net asset value next computed after receipt and acceptance by
the Fund or its agent of the request for redemption. For
purposes of this Section 1.6, the Company will be the
designee of the Fund for receipt of requests for redemption
from each Account and receipt by such designee will
constitute receipt by the Fund; provided the Fund receives
notice of request for redemption by 10:00 a.m. Eastern Time
on the next following Business Day. Payment will be in
federal funds transmitted by wire to the Company's account as
designated by the Company in writing from time to time, on
the same Business Day the Fund receives notice of the
redemption order from the Company; provided the Fund receives
notice of redemption by 10:00 a.m. Eastern Time. If the Fund
receives notice of the redemption after 10:00 a.m. Eastern
Time, payment for the redeemed shares will be made on the
next following Business Day. The Fund reserves the right to
delay payment of redemption proceeds, but in no event may
such payment be delayed longer than the period permitted
under Section 22(e) of the 1940 Act. The Fund will not bear
any responsibility whatsoever for the proper disbursement or
crediting of redemption proceeds; the Company alone will be
responsible for such action.
1.7. The Company agrees to purchase and redeem the shares of the
Designated Portfolios offered by the then current prospectus
of the Fund in accordance with the provisions of such
prospectus.
1.8. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the
Company or any Account. Purchase and redemption orders for
Fund shares will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund will furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of the
declaration of any income, dividends or capital gain
distributions payable on each Designated Portfolio's shares.
The Company hereby elects to receive all such dividends and
distributions as are payable on the Designated Portfolio
shares in the form of additional shares of that Designated
Portfolio. The Company reserves the right to revoke this
election and to receive all such dividends and distributions
in cash. The Fund will notify the Company of the number of
shares so issued as payment of such dividends and
distributions.
<PAGE>
PAGE 5
1.10. The Fund will make the net asset value per share for each
Designated Portfolio available to the Company on a daily
basis as soon as reasonably practical after the net asset
value per share is calculated and will use its best efforts
to make such net asset value per share available by 6:00 p.m.
Eastern Time each business day.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act and that the Contracts
will be issued and sold in compliance with all applicable
federal and state laws, including state insurance suitability
requirements. The Company further represents and warrants
that it is an insurance company duly organized and in good
standing under applicable law and that it has legally and
validly established each Account as a separate account under
applicable state law and has registered the Account as a unit
investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the
Contracts, and that it will maintain such registration for so
long as any Contracts are outstanding. The Company will amend
the registration statement under the 1933 Act for the
Contracts and the registration statement under the 1940 Act
for the Account from time to time as required in order to
effect the continuous offering of the Contracts or as may
otherwise be required by applicable law. The Company will
register and qualify the Contracts for sale in accordance
with the securities laws of the various states only if and to
the extent deemed necessary by the Company.
2.2. The Company represents that the Contracts are currently and
at the time of issuance will be treated as annuity contracts
under applicable provisions of the Internal Revenue Code, and
that it will make every effort to maintain such treatment and
that it will notify the Fund and the Underwriter immediately
upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not
be so treated in the future.
2.3. The Company represents and warrants that it will not purchase
shares of the Designated Portfolios with assets derived from
tax-qualified retirement plans except, indirectly, through
Contracts purchased in connection with such plans.
2.4. The Fund represents and warrants that Fund shares of the
Designated Portfolios sold pursuant to this Agreement will be
registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund
is and will remain registered under the 1940 Act for as long
<PAGE>
PAGE 6
as such shares of the Designated Portfolios are sold. The
Fund will amend the registration statement for its shares
under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its
shares. The Fund will register and qualify the shares of the
Designated Portfolios for sale in accordance with the laws of
the various states only if and to the extent deemed advisable
by the Fund.
2.5. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the
Internal Revenue Code, and that it will make every effort to
maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify the
Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might
not so qualify in the future.
2.6. The Fund represents that its investment objectives, policies
and restrictions comply with applicable state investment laws
as they may apply to the Fund. The Fund makes no
representation as to whether any aspect of its operations
(including, but not limited to, fees and expenses and
investment policies, objectives and restrictions) complies
with the insurance laws and regulations of any state. The
Fund and the Underwriter agree that they will furnish the
information required by state insurance laws so that the
Company can obtain the authority needed to issue the
Contracts in the various states.
2.7. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under
the 1940 Act or otherwise, although it reserves the right to
make such payments in the future. To the extent that it
decides to finance distribution expenses pursuant to Rule
12b-1, the Fund undertakes to have its Fund Board, a majority
of whom are not "interested" persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Massachusetts and
that it does and will comply in all material respects with
applicable provisions of the 1940 Act.
2.9. The Underwriter represents and warrants that it will
distribute the Fund shares of the Designated Portfolios in
accordance with all applicable federal and state securities
laws including, without limitation, the 1933 Act, the 1934
Act and the 1940 Act.
<PAGE>
PAGE 7
2.10. The Underwriter represents and warrants that the adviser for
the Fund is and will remain duly registered under all
applicable federal and state securities laws and that it will
perform its obligations for the Fund in accordance in all
material respects with any applicable state and federal
securities laws.
2.11. The Fund represents and warrants that all of its trustees,
officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or
securities of the Fund are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for
the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the
1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for
larceny and embezzlement and is issued by a reputable bonding
company.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Fund or the Underwriter will provide the Company, at the
Company's expense, with as many copies of the current Fund
prospectus for the Designated Portfolios, annual report,
semi-annual report and other shareholder communications,
including any amendments and supplements to any of the
foregoing, as the Company may reasonably request for
distribution, at the Company's expense, to prospective
contractowners and applicants. The Fund or the Underwriter
will provide the Company, at the Fund's expense, with as many
copies of said documents as necessary for distribution, at
the Company's expense, to existing contractowners. The Fund
will provide the copies of said documents to the Company or
to its mailing agent. The Company will distribute such
documents to existing contractowners. If requested by the
Company in lieu thereof, the Fund will provide such
documentation, including a final copy of such documents set
in type or a computer diskette at the Fund's expense, and
other assistance as is reasonably necessary in order for the
Company at least annually (or more frequently if the Fund
prospectus is amended more frequently) to have the Fund's
prospectus and the prospectuses of other mutual funds printed
together, in which case the Fund will pay its share of
reasonable expenses directly related to the required
disclosure of information concerning the Fund.
3.2. The Fund's prospectus will state that the statement of
additional information for the Fund is available from the
Company. The Fund will provide the Company, at the Company's
expense, with as many copies of the statement of additional
information as the Company may reasonably request for
<PAGE>
PAGE 8
distribution, at the Company's expense, to prospective
contractowners and applicants. The Fund will provide, at the
Fund's expense, as many copies of said statement of
additional information as necessary for distribution, at the
Fund's expense, to any existing contractowner who requests
such statement or whenever state or federal law otherwise
requires that such statement be provided. The Fund will
provide the copies of said statement of additional
information to the Company or to its mailing agent. The
Company will distribute the statement of additional
information as requested or required and will bill the Fund
for the reasonable cost of such distribution.
3.3. The Fund, at its expense, will provide the Company or its
mailing agent with copies of its proxy material in such
quantity as the Company will reasonably require for
distribution to contractowners. The Company will distribute
this proxy material to contractowners at its expense.
3.4. The Company assumes responsibility for ensuring that current
prospectuses, annual and semi-annual reports, shareholder
communications and proxy material are delivered to
contractowners in accordance with applicable securities laws
provided the Company receives the required information and/or
documentation from the Fund within a reasonable time to allow
for compliance with such laws.
3.5. If and to the extent required by law the Company will:
(a) solicit voting instructions from contractowners;
(b) vote the shares of the Designated Portfolios
held in the Account in accordance with
instructions received from contractowners;
(c) vote shares of the Designated Portfolios held in
the Account for which no timely instructions
have been received, in the same proportion as
shares of such Designated Portfolio for which
instructions have been received from the
Company's contractowners;
so long as and to the extent that the SEC continues to
interpret the 1940 Act to require pass-through voting
privileges for variable contractowners. The Company reserves
the right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by law.
Participating Insurance Companies will be responsible for
assuring that each of their separate accounts participating
in the Fund calculates voting privileges in a manner
consistent with all legal requirements, including the Mixed
and Shared Funding Exemptive Order.<PAGE>
PAGE 9
3.6. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular, the Fund
either will provide for annual meetings (except insofar as
the SEC may interpret Section 16 of the 1940 Act not to
require such meetings) or, as the Fund currently intends, to
comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when
applicable, 16(b). Further the Fund will act in accordance
with the SEC's interpretation of the requirements of Section
16(a) with respect to periodic elections of directors and
with whatever rules the SEC may promulgate with respect
thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company will furnish, or will cause to be furnished, to
the Fund or the Underwriter, each piece of sales literature
or other promotional material in which the Fund, the
Underwriter or the adviser of the Fund is named, at least ten
(10) business days prior to its use. No such material will be
used if the Fund or the Underwriter reasonably objects to
such use within five (5) business days after receipt of such
material.
4.2. The Company and its agents will not give any information or
make any representations or statements on behalf of the Fund
or concerning the Fund, the Underwriter or the adviser for
the Fund, in connection with the sale of the Contracts other
than the information or representations contained in and
accurately derived from the registration statement,
prospectus or statement of additional information for Fund
shares, as such registration statement, prospectus and
statement of additional information may be amended or
supplemented from time to time, or in reports or proxy
statements for the Fund, or in published reports for the Fund
which are in the public domain or approved by the Fund or the
Underwriter for distribution, or in sales literature or other
material provided by the Fund or by the Underwriter, except
with permission of the Fund or the Underwriter. The Fund and
the Underwriter agree to respond to any request for approval
on a prompt and timely basis. Nothing in this Section 4.2
will be construed as preventing the Company or its employees
or agents from giving advice on investment in the Fund,
subject to compliance with applicable state and federal law.
4.3. The Fund or the Underwriter will furnish, or will cause to be
furnished, to the Company or its designee, each piece of
sales literature or other promotional material in which the
<PAGE>
PAGE 10
Company or its Account is named, at least ten (10) business
days prior to its use. No such material will be used if the
Company reasonably objects to such use within five (5)
business days after receipt of such material.
4.4. The Fund and the Underwriter will not give any information or
make any representations or statements on behalf of the
Company or concerning the Company, each Account, or the
Contracts other than the information or representations
contained in and accurately derived from a registration
statement, prospectus or statement of additional information
for the Contracts, as such registration statement, prospectus
and statement of additional information may be amended or
supplemented from time to time, or in published reports for
each Account or the Contracts which are in the public domain
or approved by the Company for distribution to
contractowners, or in sales literature or other material
provided by the Company, except with permission of the
Company. The Company agrees to respond to any request for
approval on a prompt and timely basis.
4.5. The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, statements
of additional information, reports, proxy statements, sales
literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or
its shares, contemporaneously with the filing of such
document with the SEC or the NASD.
4.6. The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses, statements
of additional information, reports, solicitations for voting
instructions, sales literature and other promotional
materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that
relate to the Contracts or each Account, contemporaneously
with the filing of such document with the SEC or the NASD.
4.7. For purposes of this Article IV, the phrase "sales literature
or other promotional material" includes, but is not limited
to, advertisements (such as material published, or designed
for use in, a newspaper, magazine, or other periodical,
radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other
public media, (e.g., on-line networks such as the Internet or
other electronic messages), sales literature (i.e., any
written communication distributed or made generally available
to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar
<PAGE>
PAGE 11
texts, reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training
materials or other communications distributed or made
generally available to some or all agents or employees,
registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy
materials and any other material constituting sales
literature or advertising under the NASD rules, the 1933 Act
or the 1940 Act.
4.8. The Company agrees and acknowledges that the Underwriter (or
its affiliates) is the sole owner of the name and mark
"Franklin Templeton" and that all use of any designation
comprised in whole or part of such name or mark under this
Agreement shall inure to the benefit of the Underwriter.
Except as provided in Section 4.1, the Company shall not use
any such name or mark on its own behalf or on behalf of the
Accounts or Contracts in any registration statement,
advertisement, sales literature or other materials relating
to the Accounts or Contracts without the prior written
consent of the Underwriter. Upon termination of this
Agreement for any reason, the Company shall cease all use of
any such name or mark as soon as reasonably practicable.
ARTICLE V. Fees and Expenses
5.1. The Fund will pay no fee or other compensation to the Company
under this Agreement; except: (a) if the Fund or any
Designated Portfolio adopts and implements a plan pursuant to
Rule 12b-1 under the 1940 Act to finance distribution
expenses, then, subject to obtaining any required exemptive
orders or other regulatory approvals, the Fund may make
payments to the Company if and in such amounts agreed to by
the Fund in writing; and (b) the Fund may pay fees to the
Company for services provided to contractowners that are not
primarily intended to result in the sale of shares of the
Designated Portfolio or of underlying contracts.
5.2. All expenses incident to performance by the Fund of this
Agreement will be paid by the Fund to the extent permitted by
law. All shares of the Designated Portfolios will be duly
authorized for issuance and registered in accordance with
applicable federal law and, to the extent deemed advisable by
the Fund, in accordance with applicable state law, prior to
sale. The Fund will bear the expenses for the cost of
registration and qualification of the Fund's shares;
preparation and filing of the Fund's prospectus, statement of
additional information and registration statement, proxy
materials and reports; setting in type and printing the
Fund's prospectus; setting in type and printing proxy
<PAGE>
PAGE 12
materials and reports to contractowners (including the costs
of printing a Fund prospectus that constitutes an annual
report); the preparation of all statements and notices
required by any federal or state law; all taxes on the
issuance or transfer of the Fund's shares; any expenses
permitted to be paid or assumed by the Fund pursuant to a
plan, if any, under Rule 12b-1 under the 1940 Act; and all
other typesetting, printing and distribution expenses set
forth in Article III of this Agreement.
ARTICLE VI. Diversification
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated
as variable annuity contracts under the Internal Revenue Code
and the regulations issued thereunder. Without limiting the
scope of the foregoing, the Fund will comply with Section
817(h) of the Internal Revenue Code and Treasury Regulation
1.817-5, as amended from time to time, relating to the
diversification requirements for variable annuity, endowment,
or life insurance contracts and any amendments or other
modifications to such Section or Regulation. In the event of
a breach of this Article VI by the Fund, it will take all
reasonable steps: (a) to notify the Company of such breach;
and (b) to adequately diversify the Fund so as to achieve
compliance within the grace period afforded by Treasury
Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Fund Board will monitor the Fund for the existence of any
irreconcilable material conflict among the interests of the
contractowners of all separate accounts investing in the
Fund. An irreconcilable material conflict may arise for a
variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable
federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no
-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant
proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting
instructions given by Participating Insurance Companies or by
variable annuity and variable life insurance contractowners;
or (f) a decision by an insurer to disregard the voting
instructions of contractowners. The Fund Board will promptly
inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
<PAGE>
PAGE 13
7.2. The Company will report any potential or existing conflicts
of which it is aware to the Fund Board. The Company agrees to
assist the Fund Board in carrying out its responsibilities,
as delineated in the Mixed and Shared Funding Exemptive
Order, by providing the Fund Board with all information
reasonably necessary for the Fund Board to consider any
issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Fund Board whenever
contractowner voting instructions are to be disregarded. The
Fund Board will record in its minutes, or other appropriate
records, all reports received by it and all action with
regard to a conflict.
7.3. If it is determined by a majority of the Fund Board, or a
majority of its disinterested directors, that an
irreconcilable material conflict exists, the Company and
other Participating Insurance Companies will, at their
expense and to the extent reasonably practicable (as
determined by a majority of the disinterested directors),
take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (a)
withdrawing the assets allocable to some or all of the
Accounts from the Fund or any Portfolio and reinvesting such
assets in a different investment medium, including (but not
limited to) another Portfolio of the Fund, or submitting the
question whether such segregation should be implemented to a
vote of all affected contractowners and, as appropriate,
segregating the assets of any appropriate group (i.e.,
variable annuity contractowners or variable life insurance
contractowners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or
offering to the affected contractowners the option of making
such a change; and (b) establishing a new registered
management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contractowner voting
instructions, and such disregard of voting instructions could
conflict with the majority of contractowner voting
instructions, and the Company's judgment represents a
minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw
the affected subaccount of the Account's investment in the
Fund and terminate this Agreement with respect to such
subaccount; provided, however, that such withdrawal and
termination will be limited to the extent required by the
foregoing irreconcilable material conflict as determined by a
majority of the disinterested directors of the Fund Board. No
charge or penalty will be imposed as a result of such
withdrawal. Any such withdrawal and termination must take
<PAGE>
PAGE 14
place within six (6) months after the Fund gives written
notice to the Company that this provision is being
implemented. Until the end of such six-month period the
Underwriter and Fund will, to the extent permitted by law and
any exemptive relief previously granted to the Fund, continue
to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to
the Company conflicts with the majority of other state
insurance regulators, then the Company will withdraw the
affected subaccount of the Account's investment in the Fund
and terminate this Agreement with respect to such subaccount;
provided, however, that such withdrawal and termination will
be limited to the extent required by the foregoing
irreconcilable material conflict as determined by a majority
of the disinterested directors of the Fund Board. No charge
or penalty will be imposed as a result of such withdrawal.
Any such withdrawal and termination must take place within
six (6) months after the Fund gives written notice to the
Company that this provision is being implemented. Until the
end of such six-month period the Advisor and Fund will, to
the extent permitted by law and any exemptive relief
previously granted to the Fund, continue to accept and
implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Fund Board will
determine whether any proposed action adequately remedies any
irreconcilable material conflict, but in no event will the
Fund be required to establish a new funding medium for the
Contracts. The Company will not be required by Section 7.3 to
establish a new funding medium for the Contracts if an offer
to do so has been declined by vote of a majority of
contractowners affected by the irreconcilable material
conflict.
7.7. The Company will at least annually submit to the Fund Board
such reports, materials or data as the Fund Board may
reasonably request so that the Fund Board may fully carry out
the duties imposed upon it as delineated in the Mixed and
Shared Funding Exemptive Order, and said reports, materials
and data will be submitted more frequently if deemed
appropriate by the Fund Board.
7.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief
from any provision of the 1940 Act or the rules promulgated
thereunder with respect to mixed or shared funding (as
<PAGE>
PAGE 15
defined in the Mixed and Shared Funding Exemptive Order) on
terms and conditions materially different from those
contained in the Mixed and Shared Funding Exemptive Order,
then: (a) the Fund and/or the Participating Insurance
Companies, as appropriate, will take such steps as may be
necessary to comply with Rules 6e-2 and 6e-3(T), as amended,
and Rule 6e-3, as adopted, to the extent such rules are
applicable; and (b) Sections 3.5, 3.6, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement will continue in effect only to the
extent that terms and conditions substantially identical to
such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
(a) The Company agrees to indemnify and hold harmless the
Fund, the Underwriter, and each person, if any, who
controls or is associated with the Fund or the
Underwriter within the meaning of such terms under the
federal securities laws and any director, trustee,
officer, partner, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of
this Section 8.1) against any and all losses, claims,
expenses, damages, liabilities (including amounts paid
in settlement with the written consent of the Company)
or litigation (including reasonable legal and other
expenses), to which the Indemnified Parties may become
subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof)
or settlements:
(1) arise out of or are based upon any untrue
statements or alleged untrue statements of any
material fact contained in the registration
statement, prospectus or statement of additional
information for the Contracts or contained in the
Contracts or sales literature or other promotional
material for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged
omission to state therein a material fact required
to be stated or necessary to make such statements
not misleading in light of the circumstances in
which they were made; provided that this agreement
to indemnify will not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and
<PAGE>
PAGE 16
in conformity with information furnished to the
Company by or on behalf of the Underwriter or the
Fund for use in the registration statement,
prospectus or statement of additional information
for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or
otherwise for use in connection with the sale of
the Contracts or Fund shares; or
(2) arise out of or as a result of statements or
representations by or on behalf of the Company
(other than statements or representations contained
in the Fund registration statement, prospectus,
statement of additional information or sales
literature or other promotional material of the
Fund (or any amendment or supplement) not supplied
by the Company or persons under its control) or
wrongful conduct of the Company or persons under
its control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(3) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund
registration statement, prospectus, statement of
additional information or sales literature or other
promotional material of the Fund (or amendment or
supplement) or the omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make such statements not
misleading in light of the circumstances in which
they were made, if such a statement or omission was
made in reliance upon and in conformity with
information furnished to the Fund by or on behalf
of the Company or persons under its control; or
(4) arise as a result of any failure by the Company to
provide the services and furnish the materials
under the terms of this Agreement; or
(5) arise out of any material breach of any
representation and/or warranty made by the Company
in this Agreement or arise out of or result from
any other material breach by the Company of this
Agreement;
except to the extent provided in Sections 8.1(b) and 8.4
hereof. This indemnification will be in addition to any
liability that the Company otherwise may have.
<PAGE>
PAGE 17
(b) No party will be entitled to indemnification under
Section 8.1(a) if such loss, claim, damage, liability or
litigation is due to the willful misfeasance, bad faith,
or gross negligence in the performance of such party's
duties under this Agreement, or by reason of such
party's reckless disregard of its obligations or duties
under this Agreement by the party seeking
indemnification.
(c) The Indemnified Parties promptly will notify the Company
of the commencement of any litigation, proceedings,
complaints or actions by regulatory authorities against
them in connection with the issuance or sale of the Fund
shares or the Contracts or the operation of the Fund.
8.2. Indemnification By The Underwriter
(a) The Underwriter agrees to indemnify and hold harmless
the Company and each person, if any, who controls or is
associated with the Company within the meaning of such
terms under the federal securities laws and any
director, trustee, officer, partner, employee or agent
of the foregoing (collectively, the "Indemnified
Parties" for purposes of this Section 8.2) against any
and all losses, claims, expenses, damages, liabilities
(including amounts paid in settlement with the written
consent of the Underwriter) or litigation (including
reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar
as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) or settlements:
(1) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement, prospectus
or statement of additional information for the Fund
or sales literature or other promotional material
of the Fund (or any amendment or supplement to any
of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state
therein a material fact required to be stated or
necessary to make such statements not misleading in
light of the circumstances in which they were made;
provided that this agreement to indemnify will not
apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission
was made in reliance upon and in conformity with
information furnished to the Underwriter or Fund by
or on behalf of the Company for use in the
<PAGE>
PAGE 18
registration statement, prospectus or statement of
additional information for the Fund or in sales
literature of the Fund (or any amdendment or
supplement thereto) or otherwise for use in
connection with the sale of the Contracts or Fund
shares; or
(2) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Contracts or in
the Contract or Fund registration statements,
prospectuses or statements of additional
information or sales literature or other
promotional material for the Contracts or of the
Fund (or any amendment or supplement) not supplied
by the Underwriter or the Fund or persons under the
control of the Underwriter or the Fund
respectively) or wrongful conduct of the
Underwriter or the Fund or persons under the
control of the Underwriter or the Fund
respectively, with respect to the sale or
distribution of the Contracts or Fund shares; or
(3) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
registration statement, prospectus, statement of
additional information or sales literature or other
promotional material covering the Contracts (or any
amendment or supplement thereto), or the omission
or alleged omission to state therein a material
fact required to be stated or necessary to make
such statement or statements not misleading in
light of the circumstances in which they were made,
if such statement or omission was made in reliance
upon and in conformity with information furnished
to the Company by or on behalf of the Underwriter
or the Fund or persons under the control of the
Underwriter or the Fund; or
(4) arise as a result of any failure by the Fund or the
Underwriter to provide the services and furnish the
materials under the terms of this Agreement
(including a failure, whether unintentional or in
good faith or otherwise, to comply with the
diversification requirements and procedures related
thereto specified in Article VI of this Agreement);
or
<PAGE>
PAGE 19
(5) arise out of or result from any material breach of
any representation and/or warranty made by the
Underwriter or the Fund in this Agreement, or arise
out of or result from any other material breach of
this Agreement by the Underwriter or the Fund;
except to the extent provided in Sections 8.2(b) and 8.4
hereof.
(b) No party will be entitled to indemnification under
Section 8.2(a) if such loss, claim, damage, liability or
litigation is due to the willful misfeasance, bad faith,
or gross negligence in the performance of such party's
duties under this Agreement, or by reason of such
party's reckless disregard of its obligations or duties
under this Agreement by the party seeking
indemnification.
(c) The Indemnified Parties will promptly notify the
Underwriter and the Fund of the commencement of any
litigation, proceedings, complaints or actions by
regulatory authorities against them in connection with
the issuance or sale of the Contracts or the operation
of the Account.
8.3. Indemnification By the Fund
(a) The Fund agrees to indemnify and hold harmless the
Company and each person, if any, who controls or is
associated with the Company within the meaning of such
terms under the federal securities laws and any
director, trustee, officer, partner, employee or agent
of the foregoing (collectively, the "Indemnified
Parties" for purposes of this Section 8.3) against any
and all losses, claims, expenses, damages, liabilities
(including amounts paid in settlement with the written
consent of the Fund) or litigation (including reasonable
legal and other expenses) to which the Indemnified
Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements, are related
to the operations of the Fund and:
(1) arise as a result of any failure by the Fund to
provide the services and furnish the materials
under the terms of this Agreement (including a
failure, whether unintentional or in good faith or
otherwise, to comply with the diversification and
other qualification requirements specified in
Article VI); or
<PAGE>
PAGE 20
(2) arise out of or result from any material breach of
any representation and/or warranty made by the Fund
in this Agreement or arise out of or result from
any other material breach of this Agreement by the
Fund; or
(3) arise out of or result from the incorrect or
untimely calculation or reporting of the daily net
asset value per share or dividend or capital gain
distribution rate;
except to the extent provided in Sections 8.3(b) and 8.4
hereof.
(b) No party will be entitled to indemnification under
Section 8.3(a) if such loss, claim, damage, liability or
litigation is due to the willful misfeasance, bad faith,
or gross negligence in the performance of such party's
duties under this Agreement, or by reason of such
party's reckless disregard of its obligations and duties
under this Agreement by the party seeking
indemnification.
(c) The Indemnified Parties will promptly notify the Fund of
the commencement of any litigation, proceedings,
complaints or actions by regulatory authorities against
them in connection with the issuance or sale of the
Contracts or the operation of the Account.
(d) It is understood and expressly stipulated that neither
the holders of shares of the Fund nor any Fund Board
member, officer, agent or employee of the Fund shall be
personally liable hereunder, nor shall any resort be had
to other private property for the satisfaction of any
claim or obligation hereunder, but the Fund only shall
be liable.
8.4. Indemnification Procedure
Any person obligated to provide indemnification under this
Article VIII ("Indemnifying Party" for the purpose of this
Section 8.4) will not be liable under the indemnification
provisions of this Article VIII with respect to any claim
made against a party entitled to indemnification under this
Article VIII ("Indemnified Party" for the purpose of this
Section 8.4) unless such Indemnified Party will have notified
the Indemnifying Party in writing within a reasonable time
after the summons or other first legal process giving
information of the nature of the claim will have been served
<PAGE>
PAGE 21
upon such Indemnified Party (or after such party will have
received notice of such service on any designated agent), but
failure to notify the Indemnifying Party of any such claim
will not relieve the Indemnifying Party from any liability
which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of the
indemnification provision of this Article VIII, except to the
extent that the failure to notify results in the failure of
actual notice to the Indemnifying Party and such Indemnifying
Party is damaged solely as a result of failure to give such
notice. In case any such action is brought against the
Indemnified Party, the Indemnifying Party will be entitled to
participate, at its own expense, in the defense thereof. The
Indemnifying Party also will be entitled to assume the
defense thereof with counsel satisfactory to the party named
in the action. After notice from the Indemnifying Party to
the Indemnified Party of the Indemnifying Party's election to
assume the defense thereof, the Indemnified Party will bear
the fees and expenses of any additional counsel retained by
it, and the Indemnifying Party will not be liable to such
party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in
connection with the defense thereof other than reasonable
costs of investigation, unless: (a) the Indemnifying Party
and the Indemnified Party will have mutually agreed to the
retention of such counsel; or (b) the named parties to any
such proceeding (including any impleaded parties) include
both the Indemnifying Party and the Indemnified Party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests
between them. The Indemnifying Party will not be liable for
any settlement of any proceeding effected without its written
consent but if settled with such consent or if there is a
final judgment for the plaintiff, the Indemnifying Party
agrees to indemnify the Indemnified Party from and against
any loss or liability by reason of such settlement or
judgment. A successor by law of the parties to this Agreement
will be entitled to the benefits of the indemnification
contained in this Article VIII. The indemnification
provisions contained in this Article VIII will survive any
termination of this Agreement.
ARTICLE IX. Applicable Law
9.1. This Agreement will be construed and the provisions hereof
interpreted under and in accordance with the laws of the
State of Minnesota.
9.2. This Agreement will be subject to the provisions of the 1933
Act, the 1934 Act and the 1940 Act, and the rules and
regulations and rulings thereunder, including such exemptions
<PAGE>
PAGE 22
from those statutes, rules and regulations as the SEC may
grant (including, but not limited to, the Mixed and Shared
Funding Exemptive Order) and the terms hereof will be
interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement will terminate:
(a) at the option of any party, with or without cause,
with respect to some or all of the Designated
Portfolios, upon sixty (60) days advance written notice
to the other parties or, if later, upon receipt of any
required exemptive relief or orders from the SEC, unless
otherwise agreed in a separate written agreement among
the parties; or
(b) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio if shares of the
Designated Portfolio are not reasonably available to
meet the requirements of the Contracts as determined in
good faith by the Company; or
(c) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio in the event any of
the Designated Portfolio's shares are not registered,
issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such
shares as the underlying investment media of the
Contracts issued or to be issued by company; or
(d) at the option of the Fund, upon receipt of the Fund's
written notice by the other parties, upon institution of
formal proceedings against the Company by the NASD, the
SEC, the insurance commission of any state or any other
regulatory body regarding the Company's duties under
this Agreement or related to the sale of the Contracts,
the administration of the Contracts, the operation of
the Account, or the purchase of the Fund shares,
provided that the Fund determines in its sole judgment,
exercised in good faith, that any such proceeding would
have a material adverse effect on the Company's ability
to perform its obligations under this Agreement; or
(e) at the option of the Company, upon receipt of the
Company's written notice by the other parties, upon
institution of formal proceedings against the Fund or
the Underwriter by the NASD, the SEC, or any state
securities or insurance department or any other
regulatory body, regarding the Fund's or the<PAGE>
PAGE 23
Underwriter's duties under this Agreement or related to
the sale of Fund shares or the administration of the
Fund, provided that the Company determines in its sole
judgment, exercised in good faith, that any such
proceeding would have a material adverse effect on the
Fund's or the Underwriter's ability to perform its
obligations under this Agreement; or
(f) at the option of the Company, upon receipt of the
Company's written notice by the other parties, if the
Fund ceases to qualify as a Regulated Investment Company
under Subchapter M of the Internal Revenue Code, or
under any successor or similar provision, or if the
Company reasonably and in good faith believes that the
Fund may fail to so qualify; or
(g) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio if the Fund fails to
meet the diversification requirements specified in
Article VI hereof or if the Company reasonably and in
good faith believes the Fund may fail to meet such
requirements; or
(h) at the option of any party to this Agreement, upon
written notice to the other parties, upon another
party's material breach of any provision of this
Agreement; or
(i) at the option of the Company, if the Company determines
in its sole judgment exercised in good faith, that
either the Fund or the Underwriter has suffered a
material adverse change in its business, operations or
financial condition since the date of this Agreement or
is the subject of material adverse publicity which is
likely to have a material adverse impact upon the
business and operations of the Company, such termination
to be effective sixty (60) days' after receipt by the
other parties of written notice of the election to
terminate; or
(j) at the option of the Fund or the Underwriter, if the
Fund or Underwriter respectively, determines in its sole
judgment exercised in good faith, that the Company has
suffered a material adverse change in its business,
operations or financial condition since the date of this
Agreement or is the subject of material adverse
publicity which is likely to have a material adverse
impact upon the business and operations of the Fund or
the Underwriter, such termination to be effective sixty
(60) days' after receipt by the other parties of written
notice of the election to terminate; or<PAGE>
PAGE 24
(k) at the option of the Company or the Fund upon receipt of
any necessary regulatory approvals and/or the vote of
the contractowners having an interest in the Account (or
any subaccount) to substitute the shares of another
investment company for the corresponding Designated
Portfolio shares of the Fund in accordance with the
terms of the Contracts for which those Designated
Portfolio shares had been selected to serve as the
underlying investment media. The Company will give sixty
(60) days' prior written notice to the Fund of the date
of any proposed vote or other action taken to replace
the Fund's shares; or
(l) at the option of the Company or the Fund upon a
determination by a majority of the Fund Board, or a
majority of the disinterested Fund Board members, that
an irreconcilable material conflict exists among the
interests of: (1) all contractowners of variable
insurance products of all separate accounts; or (2) the
interests of the Participating Insurance Companies
investing in the Fund as set forth in Article VII of
this Agreement; or
(m) at the option of the Fund in the event any of the
Contracts are not issued or sold in accordance with
applicable federal and/or state law. Termination will be
effective immediately upon such occurrence without
notice.
10.2. Notice Requirement
(a) No termination of this Agreement will be effective
unless and until the party terminating this Agreement
gives prior written notice to all other parties of its
intent to terminate, which notice will set forth the
basis for the termination.
(b) In the event that any termination of this Agreement is
based upon the provisions of Article VII, such prior
written notice will be given in advance of the effective
date of termination as required by such provisions.
10.3. Effect of Termination
Notwithstanding any termination of this Agreement, the Fund
and the Underwriter will, at the option of the Company,
continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for
all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing
Contracts.") . Specifically, without limitation, the owners
<PAGE>
PAGE 25
of the Existing Contracts will be permitted to reallocate
investments in the Portfolios (as in effect on such date),
redeem investments in the Portfolios and/or invest in the
Portfolios upon the making of additional purchase payments
under the Existing Contracts. The parties agree that this
Section 10 3 will not apply to any terminations under Article
VII and the effect of such Article VII terminations will be
governed by Article VII of this Agreement.
10.4 Surviving Provisions
Notwithstanding any termination of this Agreement, each
party's obligations under Article VIII to indemnify other
parties will survive and not be affected by any termination
of this Agreement. In addition, with respect to Existing
Contracts, all provisions of this Agreement also will survive
and not be affected by any termination of this Agreement.
ARTICLE XI. Notices
11.1 Any notice will be deemed duly given when sent by registered
or certified mail to the other party at the address of such
party set forth below or at such other address as such party
may from time to time specify in writing to the other
parties.
If to the Company:
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
Attn: Wendell Halvorson
American Express Financial Advisors Inc.
With a simultaneous copy to:
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
Attn: Mary Ellyn Minenko
Counsel
If to the Fund or the Underwriter:
Templeton Variable Products Series Fund
or Franklin Templeton Distributors, Inc.
700 Central Avenue
St. Petersburg, FL 33701
Attn: Thomas M. Mistele
Secretary
<PAGE>
PAGE 26
ARTICLE XII. Miscellaneous
12.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims
against the Fund as neither the directors, trustees,
officers, partners, employees, agents or shareholders assume
any personal liability for obligations entered into on behalf
of the Fund.
12.2. The Fund and the Underwriter acknowledge that the identities
of the customers of the Company or any of its affiliates
(collectively the "Protected Parties" for purposes of this
Section 12.2), information maintained regarding those
customers, and all computer programs and procedures or other
information developed or used by the Protected Parties or any
of their employees or agents in connection with the Company's
performance of its duties under this Agreement are the
valuable property of the Protected Parties. The Fund and the
Underwriter agree that if they come into possession of any
list or compilation of the identities of or other information
about the Protected Parties' customers, or any other
information or property of the Protected Parties, other than
such information as may be independently developed or
compiled by the Fund or the Underwriter from information
supplied to them by the Protected Parties' customers who also
maintain accounts directly with the Fund or the Underwriter,
the Fund and the Underwriter will hold such information or
property in confidence and refrain from using, disclosing or
distributing any of such information or other property
except: (a) with the Company's prior written consent; or (b)
as required by law or judicial process. The Fund and the
Underwriter acknowledge that any breach of the agreements in
this Section 12.2 would result in immediate and irreparable
harm to the Protected Parties for which there would be no
adequate remedy at law and agree that in the event of such a
breach, the Protected Parties will be entitled to equitable
relief by way of temporary and permanent injunctions, as well
as such other relief as any court of competent jurisdiction
deems appropriate.
12.3. The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of
the provisions hereof or otherwise affect their construction
or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute
one and the same instrument.
12.5. If any provision of this Agreement will be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement will not be affected thereby.<PAGE>
PAGE 27
12.6. This Agreement will not be assigned by any party hereto
without the prior written consent of all the parties.
12.7. Each party to this Agreement will cooperate with each other
party and all appropriate governmental authorities (including
without limitation the SEC, the NASD and state insurance
regulators) and will permit each other and such authorities
reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or
the transactions contemplated hereby. The Fund agrees that
the Company will have the right to inspect, audit and copy
all records pertaining to the performance of services under
this Agreement pursuant to the requirements of any state
insurance department.
12.8. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all
necessary corporate or board action, as applicable, by such
party and when so executed and delivered this Agreement will
be the valid and binding obligation of such party enforceable
in accordance with its terms.
12.9. The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating
to the Contracts, the Accounts or the Designated Portfolios
of the Fund or other applicable terms of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed
hereto as of the date specified below.
IDS LIFE INSURANCE COMPANY
SEAL By: /s/ J.E. Miller
Name: Janis E. Miller
Title: Vice President
ATTEST
By: /s/ Paul D. Sand
Name: Paul D. Sand
Title: Assistant Secretary
TEMPLETON VARIABLE PRODUCTS SERIES FUND
SEAL By: /s/ Thomas M. Mistele
Name: Thomas M. Mistele
Title: Secretary
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
SEAL By: /s/ Thomas M. Mistele
Name: Thomas M. Mistele
Title: Vice President<PAGE>
PAGE 28
Schedule 1
PARTICIPATION AGREEMENT
By and Among
IDS LIFE INSURANCE COMPANY
And
TEMPLETON VARIBLE PRODUCTS SERIES FUND
And
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
The following separate accounts of IDS Life Insurance Company are
permitted in accordance with the provisions of this Agreement to
invest in Designated Portfolios of the Fund shown in Schedule 2:
IDS Life Variable Account 10, established August 23, 1995
March 1, 1996
<PAGE>
PAGE 29
Schedule 2
PARTICIPATION AGREEMENT
By and Among
IDS LIFE INSURANCE COMPANY
And
TEMPLETON VARIBLE PRODUCTS SERIES FUND
And
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
The Separate Account(s) shown on Schedule 1 may invest in the
following Designated Portfolios of the Templeton Variable Products
Series Fund:
Templeton Developing Markets Fund
March 1, 1996
<PAGE>
PAGE 1
PARTICIPATION AGREEMENT
By and Among
IDS LIFE INSURANCE COMPANY
And
WARBURG PINCUS TRUST
And
WARBURG, PINCUS COUNSELLORS, INC.
And
COUNSELLORS SECURITIES INC.
THIS AGREEMENT, made and entered into this 1st day of March, 1996
by and among IDS Life Insurance Company, organized under the laws
of the State of Minnesota (the "Company"), on its own behalf and on
behalf of each separate account of the Company named in Schedule 1
to this Agreement, as may be amended from time to time (each
account referred to as the "Account"), Warburg Pincus Trust, an
open-end management investment company and business trust organized
under the laws of the Commonwealth of Massachusetts (the "Fund");
Warburg, Pincus Counsellors, Inc. a corporation organized under the
laws of the State of Delaware (the "Adviser"); and Counsellors
Securities Inc., a corporation organized under the laws of the
State of New York ("CSI").
WHEREAS, the Fund engages in business as an open-end management
investment company and was established for the purpose of serving
as the investment vehicle for separate accounts established for
variable life insurance contracts and variable annuity contracts to
be offered by insurance companies that have entered into
participation agreements similar to this Agreement (the
"Participating Insurance Companies"), and
WHEREAS, beneficial interests in the Fund are divided into several
series of shares, each representing the interest in a particular
managed portfolio of securities and other assets (the
"Portfolios"); and
WHEREAS, the Fund has received an order from the Securities &
Exchange Commission (the "SEC") granting Participating Insurance
Companies and variable annuity separate accounts and variable life
insurance separate accounts relief from the provisions of Sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of
1940, as amended, (the "1940 Act") and Rules 6e-2(b)(15) and 6e-
3(T)(b)(15) thereunder, to the extent necessary to permit shares of
the Fund to be sold to and held by variable annuity separate
accounts and variable life insurance separate accounts of both
affiliated and unaffiliated Participating Insurance Companies and
qualified pension and retirement plans outside of the separate
account context (the "Mixed and Shared Funding Exemptive Order").
The parties to this Agreement agree that the conditions or
undertakings specified in the Mixed and Shared Funding Exemptive
Order and that may be imposed on the Company, the Fund, the Adviser
and/or CSI by virtue of the receipt of such order by the SEC will
be incorporated herein by reference, and such parties agree to
comply with such conditions and undertakings to the extent
applicable to each such party; and
WHEREAS, the Fund is registered as an open-end management<PAGE>
PAGE 2
investment company under the 1940 Act and its shares are registered
under the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Company has registered or will register certain
variable annuity contracts (the "Contracts") under the 1933 Act;
and
WHEREAS, the Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of
Directors of the Company under the insurance laws of the State of
Minnesota, to set aside and invest assets attributable to the
Contracts; and
WHEREAS, the Company has registered the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, CSI, the Fund's distributor, is registered as a broker-
dealer with the SEC under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and is a member in good standing of the
National Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of the
Portfolios named in Schedule 2, as such schedule may be amended
from time to time (the "Designated Portfolios") on behalf of the
Account to fund the Contracts, and the Fund is authorized to sell
such shares to unit investment trusts such as the Account at net
asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund, the Adviser and CSI agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Fund agrees to sell to the Company those shares of the
Designated Portfolios that each Account orders, executing
such orders on a daily basis at the net asset value next
computed after receipt and acceptance by the Fund or its
designee of the order for the shares of the Fund. For
purposes of this Section 1.1, the Company will be the
designee of the Fund for receipt of such orders from each
Account and receipt by such designee will constitute receipt
by the Fund; provided that the Fund receives notice of such
order by 10:00 a.m. Eastern Time on the next following
business day ("T+l"). "Business Day" will mean any day on
which the New York Stock Exchange is open for trading and on
which the Fund calculates its net asset value pursuant to the
rules of the SEC.
1.2 The Company will pay for Fund shares on T+1 that an order to
purchase Fund shares is made in accordance with Section 1.1
above. Payment will be in federal funds transmitted by wire.
This wire transfer will be initiated by 12:00 p.m. Eastern
Time.
1.3 The Fund agrees to make shares of the Designated Portfolios
available for purchase at the applicable net asset value per<PAGE>
PAGE 3
share by Participating Insurance Companies and their separate
accounts on those days on which the Fund calculates its
Designated Portfolio net asset value pursuant to rules of the
SEC; provided, however, that the Board of Trustees of the
Fund (the "Fund Board") may refuse to sell shares of any
Portfolio to any person, or suspend or terminate the offering
of shares of any Portfolio if such action is required by law
or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Fund Board, acting in good faith
and in light of its fiduciary duties under federal and any
applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.
1.4 On each Business Day on which the Fund calculates its net
asset value, the Company will aggregate and calculate the net
purchase or redemption orders for each Account maintained by
the Fund in which contractowner assets are invested. Net
orders will only reflect orders that the Company has received
prior to the close of regular trading on the New York Stock
Exchange, Inc. (the "NYSE") (currently 4:00 p.m.,Eastern
Time) on that Business Day. Orders that the Company has
received after the close of regular trading on the NYSE will
be treated as though received on the next Business Day. Each
communication of orders by the Company will constitute a
representation that such orders were received by it prior to
the close of regular trading on the NYSE on the Business Day
on which the purchase or redemption order is priced in
accordance with Rule 22c-1 under the 1940 Act. Other
procedures relating to the handling of orders will be in
accordance with the prospectus and statement of information
of the relevant Designated Portfolio or with oral or written
instructions that CSI or the Fund will forward to the Company
from time to time.
1.5 The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate
accounts, qualified pension and retirement plans or such
other persons as are permitted under applicable provisions of
the Internal Revenue Code of 1986, as amended, (the "Internal
Revenue Code"), and regulations promulgated thereunder, the
sale to which will not impair the tax treatment currently
afforded the Contracts. No shares of any Portfolio will be
sold to the general public except as set forth in this
Section 1.5.
1.6 The Fund agrees to redeem for cash, upon the Company's
request, any full or fractional shares of the Fund held by
the Company, executing such requests on a daily basis at the
net asset value next computed after receipt and acceptance by
the Fund or its agent of the request for redemption. For
purposes of this Section 1.6, the Company will be the
designee of the Fund for receipt of requests for redemption
from each Account and receipt by such designee will
constitute receipt by the Fund, provided the Fund receives
notice of request for redemption by 10:00 a.m. Eastern Time
on the next following Business Day. Payment will be in
federal funds transmitted by wire to the Company's account as
designated by the Company in writing from time to time, on<PAGE>
PAGE 4
the same Business Day the Fund receives notice of the
redemption order from the Company. The Fund reserves the
right to delay payment of redemption proceeds, but in no
event may such payment be delayed longer than the period
permitted by the 1940 Act. The Fund will not bear any
responsibility whatsoever for the proper disbursement or
crediting of redemption proceeds; the Company alone will be
responsible for such action. If notification of redemption is
received after 10:00 a.m. Eastern Time, payment for redeemed
shares will be made on the next following Business Day.
1.7 The Company agrees to purchase and redeem the shares of the
Designated Portfolios offered by the then current prospectus
of the Fund in accordance with the provisions of such
prospectus.
1.8 Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the
Company or any Account. Purchase and redemption orders for
Fund shares will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9 The Fund will furnish same day notice (by telecopier,
followed by written confirmation) to the Company of the
declaration of any income, dividends or capital gain
distributions payable on each Designated Portfolio's shares.
The Company hereby elects to receive all such dividends and
distributions as are payable on the Designated Portfolio
shares in the form of additional shares of that Designated
Portfolio. The Fund will notify the Company of the number of
shares so issued as payment of such dividends and
distributions. The Company reserves the right to revoke this
election upon reasonable prior notice to the Fund and to
receive all such dividends and distributions in cash.
1.10 The Fund will make the net asset value per share for each
Designated Portfolio available to the Company on a daily
basis as soon as reasonably practical after the net asset
value per share is calculated and will use its best efforts
to make such net asset value per share available by 6:00
p.m., Eastern Time, but in no event later than 7:00 p.m.,
Eastern Time, each business day.
1.11 In the event adjustments are required to correct any error in
the computation of the net asset value of the Fund's shares,
the Fund or CSI will notify the Company as soon as
practicable after discovering the need for those adjustments
that result in an aggregate reimbursement of $150 or more to
any one Account maintained by a Designated Portfolio (or, if
greater, result in an adjustment of $10 or more to each
contractowner's account). Any such notice will state for each
day for which an error occurred the incorrect price, the
correct price and, to the extent communicated to the Fund's
shareholders, the reason for the price change. The Company
may send this notice or a derivation thereof (so long as such
derivation is approved in advance by CSI or the Adviser) to
contractowners whose accounts are affected by the price
change. The parties will negotiate in good faith to develop a
reasonable method for effecting such adjustments.<PAGE>
PAGE 5
ARTICLE II. Representations and Warranties
2.1 The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act and that the Contracts
will be issued and sold in compliance with all applicable
federal and state laws, including state insurance suitability
requirements. The Company further represents and warrants
that it is an insurance company duly organized and in good
standing under applicable law and that it has legally and
validly established each Account as a separate account under
applicable state law and has registered the Account as a unit
investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the
Contracts, and that it will maintain such registration for so
long as any Contracts are outstanding. The Company will amend
the registration statement under the 1933 Act for the
Contracts and the registration statement under the 1940 Act
for the Account from time to time as required in order to
effect the continuous offering of the Contracts or as may
otherwise be required by applicable law. The Company will
register and qualify the Contracts for sale in accordance
with the securities laws of the various states only if and to
the extent deemed necessary by the Company.
2.2 The Company represents that the Contracts are currently and
at the time of issuance will be treated as annuity contracts
under applicable provisions of the Internal Revenue Code, and
that it will make every effort to maintain such treatment and
that it will notify the Fund and the Adviser immediately upon
having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so
treated in the future.
2.3 The Company represents and warrants that it will not purchase
shares of the Designated Portfolios with assets derived from
tax-qualified retirement plans except, indirectly, through
Contracts purchased in connection with such plans.
2.4 The Fund represents and warrants that Fund shares of the
Designated Portfolios sold pursuant to this Agreement will be
registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund
is and will remain registered under the 1940 Act for as long
as such shares of the Designated Portfolios are sold. The
Fund will amend the registration statement for its shares
under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its
shares. The Fund will register and qualify the shares of the
Designated Portfolios for sale in accordance with the laws of
the various states only if and to the extent deemed advisable
by the Fund.
<PAGE>
PAGE 6
2.5 The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the
Internal Revenue Code, and that it will make every effort to
maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify the
Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might
not so qualify in the future.
2.6 The Fund represents and warrants that in performing the
services described in this Agreement, the Fund will comply
with all applicable laws, rules and regulations. The Fund
makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses
and investment policies, objectives and restrictions)
complies with the insurance laws and regulations of any
state. The Fund and CSI agree that upon request they will use
their best efforts to furnish the information required by
state insurance laws so that the Company can obtain the
authority needed to issue the Contracts in the various
states.
2.7 The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under
the 1940 Act, although it reserves the right to make such
payments in the future. To the extent that it decides to
finance distribution expenses pursuant to Rule 12b-1, the
Fund undertakes to have its Fund Board, formulate and approve
any plan under Rule 12b-1 to finance distribution expenses in
accordance with the 1940 Act.
2.8 CSI represents and warrants that it will distribute the Fund
shares of the Designated Portfolios in accordance with all
applicable federal and state securities laws including,
without limitation, the 1933 Act, the 1934 Act and the 1940
Act.
2.9 The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts
and that it does and will comply in all material respects
with applicable provisions of the 1940 Act.
2.10 CSI represents and warrants that it is and will remain duly
registered under all applicable federal and state securities
laws and that it will perform its obligations for the Fund in
accordance in all material respects with any applicable state
and federal securities laws.
2.11 The Fund and CSI represent and warrant that all of their
trustees, officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or
securities of the Fund are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for
the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the
1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for
larceny and embezzlement and is issued by a reputable bonding
company.<PAGE>
PAGE 7
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1 The Fund or CSI will provide the Company, at the Fund's or
its affiliate's expense, with as many copies of the current
Fund prospectus for the Designated Portfolios as the Company
may reasonably request for distribution, at the Company's
expense, to prospective contractowners and applicants. The
Fund or CSI will provide, at the Fund's or its affiliate's
expense, as many copies of said prospectus as necessary for
distribution, at the Company s expense, to existing
contractowners. The Fund or CSI will provide the copies of
said prospectus to the Company or to its mailing agent. If
requested by the Company in lieu thereof, the Fund or CSI
will provide such documentation, including a computer
diskette or a final copy of a current prospectus set in type
at the Fund's or its affiliate's expense, and such other
assistance as is reasonably necessary in order for the
Company at least annually (or more frequently if the Fund
prospectus is amended more frequently) to have the Fund's
prospectus and the prospectuses of other mutual funds in
which assets attributable to the Contracts may be invested
printed together in one document, in which case the Fund or
its affiliate will bear its reasonable share of expenses as
described above, allocated based on the proportionate number
of pages of the Fund's and other funds' respective portions
of the document.
3.2 The Fund or CSI will provide the Company, at the Fund's or
its affiliate's expense, with as many copies of the statement
of additional information as the Company may reasonably
request for distribution, at the Company's expense, to
prospective contractowners and applicants. The Fund or CSI
will provide at the Fund's or its affiliate's expense, as
many copies of said statement of additional information as
necessary for distribution, at the Company's expense, to any
existing contractowner who requests such statement or
whenever state or federal law otherwise requires that such
statement be provided. The Fund or CSI will provide the
copies of said statement of additional information to the
Company or to its mailing agent.
3.3 The Fund or CSI, at the Fund's or its affiliate's expense,
will provide the Company or its mailing agent with copies of
its proxy material, if any, reports to shareholders and other
communications to shareholders in such quantity as the
Company will reasonably require. The Company will distribute
this proxy material, reports and other communications to
existing contractowners and tabulate the votes.
3.4 If and to the extent required by law the Company will:
(a) solicit voting instructions from contractowners;
(b) vote the shares of the Designated Portfolios held in the
Account in accordance with instructions received from
contractowners; and<PAGE>
PAGE 8
(c) vote shares of the Designated Portfolios held in the
Account for which no timely instructions have been
received, as well as shares it owns, in the same
proportion as shares of such Designated Portfolio for
which instructions have been received from the Company's
contractowners;
so long as and to the extent that the SEC continues to
interpret the 1940 Act to require pass-through voting
privileges for variable contractowners. Except as set forth
above, the Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the
extent permitted by law. The Company will be responsible for
assuring that each of its separate accounts participating in
the Fund calculates voting privileges in a manner consistent
with all legal requirements, including the Mixed and Shared
Funding Exemptive Order.
3.5 The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular, the Fund
either will provide for annual meetings (except insofar as
the SEC may interpret Section 16 of the 1940 Act not to
require such meetings) or, as the Fund currently intends, to
comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when
applicable, 16(b). Further, the Fund will act in accordance
with the SEC's interpretation of the requirements of Section
16(a) with respect to periodic elections of trustees and with
whatever rules the SEC may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1 CSI will provide the Company on a timely basis with
investment performance information for each Designated
Portfolio in which the Company maintains an Account,
including total return for the preceding calendar month and
calendar quarter, the calendar year to date, and the prior
one-year, five-year, and ten-year (or life of the Fund)
periods. The Company may, based on the SEC-mandated
information supplied by CSI, prepare communications for
contractowners ("Contractowner Materials"). The Company will
provide copies of all Contractowner Materials concurrently
with their first use for CSI's internal recordkeeping
purposes. It is understood that neither CSI nor any
Designated Portfolio will be responsible for errors or
omissions in, or the content of, Contractowner Materials
except to the extent that the error or omission resulted from
information provided by or on behalf of CSI or the Designated
Portfolio. Any printed information that is furnished to the
Company other than each Designated Portfolio's prospectus or
statement of additional information (or information
supplemental thereto), periodic reports and proxy
solicitation materials is CSI's sole responsibility and not
the responsibility of any Designated Portfolio or the Fund.
The Company agrees that the Portfolios, the shareholders of
the Portfolios and the officers and governing Board of the
Fund will have no liability or responsibility to the Company
in these respects.<PAGE>
PAGE 9
4.2 The Company will not give any information or make any
representations or statements on behalf of the Fund or
concerning the Fund in connection with the sale of the
Contracts other than the information or representations
contained in the registration statement, prospectus or
statement of additional information for Fund shares, as such
registration statement, prospectus and statement of
additional information may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund,
or in published reports for the Fund which are in the public
domain or approved by the Fund or CSI for distribution, or in
sales literature or other material provided by the Fund or by
CSI, except with permission of the Fund or CSI. The Fund and
CSI agree to respond to any request for approval on a prompt
and timely basis. Nothing in this Section 4.2 will be
construed as preventing the Company or its employees or
agents from giving advice on investment in the Fund.
4.3 The Fund, the Adviser or CSI will furnish, or will cause to
be furnished, to the Company or its designee, each piece of
sales literature or other promotional material in which the
Company or its Account is named, at least ten (10) business
days prior to its use. No such material will be used if the
Company reasonably objects to such use within five (5)
business days after receipt of such material.
4.4 The Fund, the Adviser and CSI will not give any information
or make any representations or statements on behalf of the
Company or concerning the Company, each Account, or the
Contracts other than the information or representations
contained in a registration statement, prospectus or
statement of additional information for the Contracts, as
such registration statement, prospectus and statement of
additional information may be amended or supplemented from
time to time, or in published reports for each Account or the
Contracts which are in the public domain or approved by the
Company for distribution to contractowners, or in sales
literature or other material provided by the Company, except
with permission of the Company. The Company agrees to respond
to any request for approval on a prompt and timely basis.
4.5 The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, statements
of additional information, reports, proxy statements, sales
literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or
its shares, contemporaneously with the filing of such
document with the SEC, the NASD or other regulatory
authority.
4.6 The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses, statements
of additional information, reports, solicitations for voting
instructions, sales literature and other promotional
materials, applications for exemptions, requests for no<PAGE>
PAGE 10
action letters, and all amendments to any of the above, that
relate to the Contracts or each Account, contemporaneously
with the filing of such document with the SEC, the NASD or
other regulatory authority.
4.7 For purposes of this Article IV, the phrase "sales literature
or other promotional material" includes, but is not limited
to, advertisements (such as material published, or designed
for use in, a newspaper, magazine, or other periodical,
radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other
public media, (e.g., on-line networks such as the Internet or
other electronic messages), sales literature (i.e., any
written communication distributed or made generally available
to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar
texts, reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training
materials or other communications distributed or made
generally available to some or all agents or employees,
registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy
materials and any other material constituting sales
literature or advertising under the NASD rules, the 1933 Act
or the 1940 Act.
4.8 The Fund and CSI hereby consent to the Company's use of the
names Warburg Pincus Trust - Small Company Growth Portfolio
and Warburg, Pincus Counsellors, Inc. in connection with the
marketing of the Contracts, subject to the terms of Sections
4.1 and 4.2 of this Agreement. Such consent will terminate
with the termination of this Agreement.
ARTICLE V. Fees and Expenses
5.1 The Fund, the Adviser and CSI will pay no fee or other
compensation to the Company under this Agreement except if
the Fund or any Designated Portfolio adopts and implements a
plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses, then, subject to obtaining any
required exemptive orders or other regulatory approvals, the
Fund may make payments to the Company if and in such amounts
agreed to by the Fund in writing.
5.2 All expenses incident to performance by the Fund of this
Agreement will be paid by the Fund to the extent permitted by
law. The Fund will bear the expenses for the cost of
registration and qualification of the Fund's shares;
preparation and filing of the Fund's prospectus, statement of
additional information and registration statement, proxy
materials and reports; setting in type and printing the
Fund's prospectus; setting in type and printing proxy
materials and reports by it to contractowners (including the
costs of printing a Fund prospectus that constitutes an
annual report); the preparation of all statements and notices
required by any federal or state law; all taxes on the
issuance or transfer of the Fund's shares; any expenses
permitted to be paid or assumed by the Fund pursuant to a<PAGE>
PAGE 11
plan, if any, under Rule 12b-1 under the 1940 Act; and all
other expenses set forth in Article III of this Agreement.
ARTICLE VI. Diversification
6.1 The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated
as variable annuity contracts under the Internal Revenue Code
and the regulations issued thereunder. Without limiting the
scope of the foregoing, the Fund will comply with Section
817(h) of the Internal Revenue Code and Treasury Regulation
1.817-5, as amended from time to time, relating to the
diversification requirements for variable annuity, endowment,
or life insurance contracts and any amendments or other
modifications to such Section or Regulation. In the event of
a breach of this Article VI by the Fund, it will take all
reasonable steps: (a) to notify the Company of such breach;
and (b) to adequately diversify the Fund so as to achieve
compliance within the grace period afforded by Treasury
Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
7.1 The Fund Board will monitor the Fund for the existence of any
irreconcilable material conflict among the interests of the
contractowners of all separate accounts investing in the
Fund. An irreconcilable material conflict may arise for a
variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable
federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-
action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant
proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting
instructions given by Participating Insurance Companies or by
variable annuity and variable life insurance contractowners;
or (f) a decision by an insurer to disregard the voting
instructions of contractowners. The Fund Board will promptly
inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2 The Company will report any potential or existing conflicts
of which it is aware to the Fund Board. The Company agrees to
assist the Fund Board in carrying out its responsibilities,
as delineated in the Mixed and Shared Funding Exemptive
Order, by providing the Fund Board with all information
reasonably necessary for the Fund Board to consider any
issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Fund Board whenever
contractowner voting instructions are to be disregarded. The
Company's responsibilities hereunder will be carried out with
a view only to the interest of contractowners.
7.3 If it is determined by a majority of the Fund Board, or a
majority of its disinterested directors, that an
irreconcilable material conflict exists, the Company will, at<PAGE>
PAGE 12
its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested directors),
take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (a)
withdrawing the assets allocable to some or all of the
Accounts from the Fund or any Portfolio and reinvesting such
assets in a different investment medium, including (but not
limited to) another Portfolio of the Fund, or submitting the
question whether such segregation should be implemented to a
vote of all affected contractowners and, as appropriate,
segregating the assets of any appropriate group (i.e.,
variable annuity contractowners or variable life insurance
contractowners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or
offering to the affected contractowners the option of making
such a change; and (b) establishing a new registered
management investment company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a
decision by the Company to disregard contractowner voting
instructions, and the Company's judgment represents a
minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw
the affected subaccount of the Account's investment in the
Fund and terminate this Agreement with respect to such
subaccount; provided, however, that such withdrawal and
termination will be limited to the extent required by the
foregoing irreconcilable material conflict as determined by a
majority of the disinterested directors of the Fund Board. No
charge or penalty will be imposed as a result of such
withdrawal.
7.5 If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to
the Company conflicts with the majority of other state
insurance regulators, then the Company will withdraw the
affected subaccount of the Account's investment in the Fund
and terminate this Agreement with respect to such subaccount;
provided, however, that such withdrawal and termination will
be limited to the extent required by the foregoing
irreconcilable material conflict as determined by a majority
of the disinterested directors of the Fund Board. No charge
or penalty will be imposed as a result of such withdrawal.
7.6 For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Fund Board will
determine whether any proposed action adequately remedies any
irreconcilable material conflict, but in no event will the
Fund or the Adviser (or any other investment adviser to the
Fund) be required to establish a new funding medium for the
Contracts. The Company will not be required by Section 7.3 to
establish a new funding medium for the Contracts if an offer
to do so has been declined by vote of a majority of
contractowners materially affected by the irreconcilable
material conflict.
7.7 The Company will at least annually submit to the Fund Board
such reports, materials or data as the Fund Board may<PAGE>
PAGE 13
reasonably request so that the Fund Board may fully carry out
the duties imposed upon it as delineated in the Mixed and
Shared Funding Exemptive Order, and said reports, materials
and data will be submitted more frequently if deemed
appropriate by the Fund Board.
7.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief
from any provision of the 1940 Act or the rules promulgated
thereunder with respect to mixed or shared funding (as
defined in the Mixed and Shared Funding Exemptive Order) on
terms and conditions materially different from those
contained in the Mixed and Shared Funding Exemptive Order,
then: (a) the Fund and/or the Participating Insurance
Companies, as appropriate, will take such steps as may be
necessary to comply with Rules 6e-2 and 6e-3(T), as amended,
and Rule 6e-3, as adopted, to the extent such rules are
applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement will continue in effect only to the
extent that terms and conditions substantially identical to
such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE XIII. Indemnification
8.1 Indemnification By The Company
(a) The Company agrees to indemnify and hold harmless the
Fund, the Adviser, CSI, and each person, if any, who
controls or is associated with the Fund, the Adviser or
CSI within the meaning of such terms under the federal
securities laws and any director, trustee, officer,
partner, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of
this Section 8.1) against any and all losses, claims,
expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Company) or
litigation (including reasonable legal and other
expenses), to which the Indemnified Parties may become
subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof)
or settlements:
(1) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact
contained in the registration statement, prospectus
or statement of additional information for the
Contracts or contained in the Contracts or sales
literature or other promotional material for the
Contracts (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated or necessary to
make such statements not misleading in light of the
circumstances in which they were made; provided that
this agreement to indemnify will not apply as to any
Indemnified Party if such statement or omission or<PAGE>
PAGE 14
such alleged statement or omission was made in
reliance upon and in conformity with written
information furnished to the Company by the Fund, the
Adviser or CSI for use in the registration statement,
prospectus or statement of additional information for
the Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund
shares; or
(2) arise out of or as a result of statements or
representations by or on behalf of the Company or
wrongful conduct of the Company or persons under its
control, with respect to the sale or distribution of
the Contracts or Fund shares; or
(3) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund
registration statement, prospectus, statement of
additional information or sales literature or other
promotional material of the Fund (or amendment or
supplement) or the omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make such statements not
misleading in light of the circumstances in which
they were made, if such a statement or omission was
made in reliance upon and in conformity with
information furnished to the Fund by or on behalf of
the Company or persons under its control; or
(4) arise as a result of any failure by the Company to
provide the services and furnish the materials under
the terms of this Agreement; or
(5) arise out of any material breach of any
representation and/or warranty made by the Company in
this Agreement or arise out of or result from any
other material breach by the Company of this
Agreement;
except to the extent provided in Sections 8.1(b) and 8.4
hereof. This indemnification will be in addition to any
liability that the Company otherwise may have.
(b) No party will be entitled to indemnification under
Section 8.1(a) to the extent such loss, claim, damage,
liability or litigation is due to the willful
misfeasance, bad faith, or gross negligence in the
performance of such party's duties under this Agreement,
or by reason of such party's reckless disregard of its
obligations or duties under this Agreement by the party
seeking indemnification.
(c) The Indemnified Parties promptly will notify the Company
of the commencement of any litigation, proceedings,
complaints or actions by regulatory authorities against
them in connection with the issuance or sale of the Fund
shares or the Contracts or the operation of the Fund.<PAGE>
PAGE 15
8.2 Indemnification By The Adviser, the Fund and CSI
(a) The Adviser, the Fund and CSI, in each case solely to the
extent relating to such party's responsibilities
hereunder, agree to indemnify and hold harmless the
Company and each person, if any, who controls or is
associated with the Company within the meaning of such
terms under the federal securities laws and any director,
trustee, officer, partner, employee or agent of the
foregoing (collectively, the "Indemnified Parties" for
purposes of this Section 8.2) against any and all losses,
claims, expenses, damages, liabilities (including amounts
paid in settlement with the written consent of the
Adviser) or litigation (including reasonable legal and
other expenses) to which the Indemnified Parties may
become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect
thereof) or settlements:
(1) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement, prospectus
or statement of additional information for the Fund
or sales literature or other promotional material of
the Fund (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated or necessary to
make such statements not misleading in light of the
circumstances in which they were made; provided that
this agreement to indemnify will not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished to the Adviser, CSI or the Fund by or on
behalf of the Company for use in the registration
statement, prospectus or statement of additional
information for the Fund or in sales literature of
the Fund (or any amendment or supplement thereto) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(2) arise out of or as a result of statements or
representations or wrongful conduct of the Adviser,
the Fund or CSI or persons under the control of the
Adviser, the Fund or CSI respectively, with respect
to the sale of the Fund shares; or
(3) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
registration statement, prospectus, statement of
additional information or sales literature or other
promotional material covering the Contracts (or any
amendment or supplement thereto), or the omission or
alleged omission to state therein a material fact
required to be stated or necessary to make such
statement or statements not misleading in light of<PAGE>
PAGE 16
the circumstances in which they were made, if such
statement or omission was made in reliance upon and
in conformity with written information furnished to
the Company by the Adviser, the Fund or CSI or
persons under the control of the Adviser, the Fund or
CSI; or
(4) arise as a result of any failure by the Fund, the
Adviser or CSI to provide the services and furnish
the materials under the terms of this Agreement
(including a failure, whether unintentional or in
good faith or otherwise, to comply with the
diversification requirements and procedures related
thereto specified in Article VI of this Agreement);
or
(5) arise out of or result from any material breach of
any representation and/or warranty made by the
Adviser, the Fund or CSI in this Agreement, or arise
out of or result from any other material breach of
this Agreement by the Adviser, the Fund or CSI;
except to the extent provided in Sections 8.2(b) and 8.4
hereof.
(b) No party will be entitled to indemnification under
Section 8.2(a) to the extent such loss, claim, damage,
liability or litigation is due to the willful
misfeasance, bad faith, or gross negligence in the
performance of such party's duties under this Agreement,
or by reason of such party's reckless disregard of its
obligations or duties under this Agreement by the party
seeking indemnification.
(c) The Indemnified Parties will promptly notify the Adviser,
the Fund and CSI of the commencement of any litigation,
proceedings, complaints or actions by regulatory
authorities against them in connection with the issuance
or sale of the Contracts or the operation of the Account.
8.4 Indemnification Procedure
Any person obligated to provide indemnification under this Article
VIII ("Indemnifying Party" for the purpose of this Section 8.4)
will not be liable under the indemnification provisions of this
Article VIII with respect to any claim made against a party
entitled to indemnification under this Article VIII ("Indemnified
Party" for the purpose of this Section 8.4) unless such Indemnified
Party will have notified the Indemnifying Party in writing within a
reasonable time after the summons or other first legal process
giving information of the nature of the claim will have been served
upon such Indemnified Party (or after such party will have received
notice of such service on any designated agent), but failure to
notify the Indemnifying Party of any such claim will not relieve
the Indemnifying Party from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise
than on account of the indemnification provision of this Article
VIII, except to the extent that the failure to notify results in<PAGE>
PAGE 17
the failure of actual notice to the Indemnifying Party and such
Indemnifying Party is damaged solely as a result of failure to give
such notice. In case any such action is brought against the
Indemnified Party, the Indemnifying Party will be entitled to
participate, at its own expense, in the defense thereof. The
Indemnifying Party also will be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the
action. After notice from the Indemnifying Party to the Indemnified
Party of the Indemnifying Party's election to assume the defense
thereof, the Indemnified Party will bear the fees and expenses of
any additional counsel retained by it, and the Indemnifying Party
will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently
in connection with the defense thereof other than reasonable costs
of investigation, unless: (a) the Indemnifying Party and the
Indemnified Party will have mutually agreed to the retention of
such counsel; or (b) the named parties to any such proceeding
(including any impleaded parties) include both the Indemnifying
Party and the Indemnified Party and representation of both parties
by the same counsel would be inappropriate due to actual or
potential differing interests between them. The Indemnifying Party
will not be liable for any settlement of any proceeding effected
without its written consent but if settled with such consent or if
there is a final judgment for the plaintiff, the Indemnifying Party
agrees to indemnify the Indemnified Party from and against any loss
or liability by reason of such settlement or judgment. A successor
by law of the parties to this Agreement will be entitled to the
benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII will
survive any termination of this Agreement.
ARTICLE IX. Applicable Law
9.1 This Agreement will be construed and the provisions hereof
interpreted under and in accordance with the laws of the
State of Minnesota.
9.2 This Agreement will be subject to the provisions of the 1933
Act, the 1934 Act and the 1940 Act, and the rules and
regulations and rulings thereunder, including such exemptions
from those statutes, rules and regulations as the SEC may
grant (including, but not limited to, the Mixed and Shared
Funding Exemptive Order) and the terms hereof will be
interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement will terminate:
(a) at the option of any party, with or without cause, with
respect to some or all of the Designated Portfolios, upon
ninety (90) days' advance written notice to the other
parties or, if later, upon receipt of any required
exemptive relief or orders from the SEC, unless otherwise
agreed in a separate written agreement among the parties;
or<PAGE>
PAGE 18
(b) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio if shares of the
Designated Portfolio are not reasonably available to meet
the requirements of the Contracts as determined in good
faith by the Company; or
(c) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio in the event any of
the Designated Portfolio's shares are not registered,
issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares
as the underlying investment media of the Contracts
issued or to be issued by Company; or
(d) at the option of the Fund, upon receipt of the Fund's
written notice by the other parties, upon institution of
formal proceedings against the Company by the NASD, the
SEC, the insurance commission of any state or any other
regulatory body regarding the Company's duties under this
Agreement or related to the sale of the Contracts, the
administration of the Contracts, the operation of the
Account, or the purchase of the Fund shares, provided
that the Fund determines in its sole judgment, exercised
in good faith, that any such proceeding would have a
material adverse effect on the Company's ability to
perform its obligations under this Agreement; or
(e) at the option of the Company, upon receipt of the
Company's written notice by the other parties, upon
institution of formal proceedings against the Fund or CSI
by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body,
provided that the Company determines in its sole
judgment, exercised in good faith, that any such
proceeding would have a material adverse effect on the
Fund's or CSI's ability to perform its obligations under
this Agreement; or
(f) at the option of the Company, upon receipt of the
Company's written notice by the other parties, if the
Fund ceases to qualify as a Regulated Investment Company
under Subchapter M of the Internal Revenue Code, or under
any successor or similar provision, or if the Company
reasonably and in good faith believes that the Fund may
fail to so qualify; or
(g) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio if the Fund fails to
meet the diversification requirements specified in
Article VI hereof or if the Company reasonably and in
good faith believes the Fund may fail to meet such
requirements; or
(h) at the option of any party to this Agreement, upon
written notice to the other parties, upon another party's
material breach of any provision of this Agreement; or<PAGE>
PAGE 19
(i) at the option of the Company, if the Company determines
in its sole judgment exercised in good faith, that either
the Fund, the Adviser or CSI has suffered a material
adverse change in its business, operations or financial
condition since the date of this Agreement or is the
subject of material adverse publicity which is likely to
have a material adverse impact upon the business and
operations of the Company, such termination to be
effective sixty (60) days' after receipt by the other
parties of written notice of the election to terminate;
or
(j) at the option of the Fund or CSI, if the Fund or CSI
respectively, determines in its sole judgment exercised
in good faith, that the Company has suffered a material
adverse change in its business, operations or financial
condition since the date of this Agreement or is the
subject of material adverse publicity which is likely to
have a material adverse impact upon the business and
operations of the Fund or the Adviser, such termination
to be effective sixty (60) days' after receipt by the
other parties of written notice of the election to
terminate; or
(k) at the option of the Company or the Fund upon receipt of
any necessary regulatory approvals and/or the vote of the
contractowners having an interest in the Account (or any
subaccount) to substitute the shares of another
investment company for the corresponding Designated
Portfolio shares of the Fund in accordance with the terms
of the Contracts for which those Designated Portfolio
shares had been selected to serve as the underlying
investment media. The Company will give sixty (60) days'
prior written notice to the Fund of the date of any
proposed vote or other action taken to replace the Fund's
shares; or
(l) at the option of the Company or the Fund upon a
determination by a majority of the Fund Board, or a
majority of the disinterested Fund Board members, that an
irreconcilable material conflict exists among the
interests of: (1) all contractowners of variable
insurance products of all separate accounts; or (2) the
interests of the Participating Insurance Companies
investing in the Fund as set forth in Article VII of this
Agreement; or
(m) at the option of the Fund in the event any of the
Contracts are not issued or sold in accordance with
applicable federal and/or state law. Termination will be
effective immediately upon such occurrence without
notice.<PAGE>
PAGE 20
10.2 Notice Requirement
No termination of this Agreement will be effective unless and
until the party terminating this Agreement gives prior written
notice to all other parties of its intent to terminate, which
notice will set forth the basis for the termination.
10.3 Effect of Termination
Notwithstanding any termination of this Agreement, the Fund
and CSI will, at the option of the Company, continue to make
available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect
on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts.").
Specifically, without limitation, the owners of the Existing
Contracts will be permitted to reallocate investments in the
Portfolios (as in effect on such date), redeem investments in
the Portfolios and/or invest in the Portfolios upon the making
of additional purchase payments under the Existing Contracts.
10.4 Surviving Provisions
Notwithstanding any termination of this Agreement, each
party's obligations under Article VIII to indemnify other
parties will survive and not be affected by any termination of
this Agreement. In addition, each party's obligations under
Section 12.7 will survive and not be affected by any
termination of this Agreement. Finally, with respect to
Existing Contracts, all provisions of this Agreement also will
survive and not be affected by any termination of this
Agreement.
ARTICLE XI. Notices
11.1 Any notice will be deemed duly given when sent by registered
or certified mail to the other party at the address of such
party set forth below or at such other address as such party
may from time to time specify in writing to the other
parties.
If to the Company:
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
Attn: Jim Mortensen
Manager-Product Development
With a simultaneous copy to:
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
Attn: Mary Ellyn Minenko
Counsel<PAGE>
PAGE 21
If to the Fund, the Adviser and/or CSI:
466 Lexington Avenue
New York, NY 10017
Attn: Eugene P. Grace
Senior Vice President
ARTICLE XII. Miscellaneous
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims
against the Fund as neither the directors, trustees,
officers, partners, employees, agents or shareholders assume
any personal liability for obligations entered into on behalf
of the Fund. No Portfolio or series of the Fund will be
liable for the obligations or liabilities of any other
Portfolio or series.
12.2 The Fund, the Adviser and CSI acknowledge that the identities
of the customers of the Company or any of its affiliates
(collectively the "Company Protected Parties" for purposes of
this Section 12.2), information maintained regarding those
customers, and all computer programs and procedures or other
information developed or used by the Company Protected
Parties or any of their employees or agents in connection
with the Company's performance of its duties under this
Agreement are the valuable property of the Company Protected
Parties. The Fund, the Adviser and CSI agree that if they
come into possession of any list or compilation of the
identities of or other information about the Company
Protected Parties' customers, or any other information or
property of the Company Protected Parties, other than such
information as is publicly available or as may be
independently developed or compiled by the Fund, the Adviser
or CSI from information supplied to them by the Company
Protected Parties customers who also maintain Accounts
directly with the Fund, the Adviser or CSI, the Fund, the
Adviser and CSI will hold such information or property in
confidence and refrain from using, disclosing or distributing
any of such information or other property except: (a) with
the Company's prior written consent; or (b) as required by
law or judicial process. The Company acknowledges that the
identities of the customers of the Fund, the Adviser, CSI or
any of their affiliates (collectively the "Adviser Protected
Parties" for purposes of this Section 12.2), information
maintained regarding those customers, and all computer
programs and procedures or other information developed or
used by the Adviser Protected Parties or any of their
employees or agents in connection with the Funds', the
Adviser's or CSI's performance of their respective duties
under this Agreement are the valuable property of the Adviser
Protected Parties. The Company agrees that if it comes into
possession of any list or compilation of the identities of or
other information about the Adviser Protected Parties'
customers, or any other information or property of the
Adviser Protected Parties, other than such information as is
publicly available or as may be independently developed or
compiled by the Company from information supplied to them by
the Adviser Protected Parties' customers who also maintain<PAGE>
PAGE 22
accounts directly with the Company, the Company will hold
such information or property in confidence and refrain from
using, disclosing or distributing any of such information or
other property except: (a) with the Fund's, the Adviser's or
CSI's prior written consent; or (b) as required by law or
judicial process. Each party acknowledges that any breach of
the agreements in this Section 12.2 would result in immediate
and irreparable harm to the other parties for which there
would be no adequate remedy at law and agree that in the
event of such a breach, the other parties will be entitled to
equitable relief by way of temporary and permanent
injunctions, as well as such other relief as any court of
competent jurisdiction deems appropriate.
12.3 The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of
the provisions hereof or otherwise affect their construction
or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute
one and the same instrument.
12.5 If any provision of this Agreement will be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement will not be affected thereby.
12.6 This Agreement will not be assigned by any party hereto
without the prior written consent of all the parties.
12.7 Each party to this Agreement will maintain all records
required by law, including records detailing the services it
provides. Such records will be preserved, maintained and made
available to the extent required by law and in accordance
with the 1940 Act and the rules thereunder. Each party to
this Agreement will cooperate with each other party and all
appropriate governmental authorities (including without
limitation the SEC, the NASD and state insurance regulators)
and will permit each other and such authorities reasonable
access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the
transactions contemplated hereby. Upon request by the Fund or
CSI, the Company agrees to promptly make copies or, if
required, originals of all records pertaining to the
performance of services under this Agreement available to the
Fund or CSI, as the case may be. The Fund agrees that the
Company will have the right to inspect, audit and copy all
records pertaining to the performance of services under this
Agreement pursuant to the requirements of any state insurance
department. Each party also agrees to promptly notify the
other parties if it experiences any difficulty in maintaining
the records in an accurate and complete manner. This
provision will survive termination of this Agreement.
<PAGE>
PAGE 23
12.8 Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all
necessary corporate or board action, as applicable, by such
party and when so executed and delivered this Agreement will
be the valid and binding obligation of such party enforceable
in accordance with its terms.
12.9 The parties to this Agreement acknowledge and agree that all
liabilities of the Fund arising, directly or indirectly,
under this agreement, will be satisfied solely out of the
assets of the Fund and that no trustee, officer, agent or
holder of shares of beneficial interest of the Fund will be
personally liable for any such liabilities.
12.10 The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating
to the Contracts, the Accounts or the Designated Portfolios
of the Fund or other applicable terms of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed
hereto as of the date specified below.
IDS LIFE INSURANCE COMPANY
By: /s/ Janis E. Miller
SEAL Name: Janis E. Miller
Title: VP
ATTEST:
By: /s/ Paul D. Sand
Name: Paul D. Sand
Title: Assistant Secretary
WARBURG PINCUS TRUST
SEAL By: /s/ Eugene P. Grace
Name: Eugene P. Grace
Title: Vice President & Secretary
WARBURG, PINCUS COUNSELLORS, INC.
SEAL By: /s/ Eugene P. Grace
Name: Eugene P. Grace
Title: Senior Vice President &
Asst. Secretary
COUNSELLORS SECURITIES INC.
SEAL By: /s/ Eugene P. Grace
Name: Eugene P. Grace
Title: Vice President
<PAGE>
PAGE 24
Schedule 1
PARTICIPATION AGREEMENT
By and Among
IDS LIFE INSURANCE COMPANY
And
WARBURG PINCUS TRUST
And
WARBURG, PINCUS COUNSELLORS, INC.
And
COUNSELLORS SECURITIES INC.
The following separate accounts of IDS Life Insurance Company are
permitted in accordance with the provisions of this Agreement to
invest in Designated Portfolios of the Fund shown in Schedule 2:
IDS Life Variable Account 10, established August 23, 1995.
March 1, 1996
<PAGE>
PAGE 25
Schedule 2
PARTICIPATION AGREEMENT
By and Among
IDS LIFE INSURANCE COMPANY
And
WARBURG PINCUS TRUST
And
WARBURG, PINCUS COUNSELLORS, INC.
And
COUNSELLORS SECURITIES INC.
The Separate Account(s) shown on Schedule 1 may invest in the
following Designated Portfolios of the Warburg Pincus Trust:
Small Company Growth Portfolio
March 1, 1996
<PAGE>
PAGE 1
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
AIM DISTRIBUTORS, INC.
AND
IDS LIFE INSURANCE COMPANY
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS
<PAGE>
PAGE 2
TABLE OF CONTENTS
Description Page
Section 1. Available Funds.......................................5
1.1 Availability.........................................5
1.2 Addition, Deletion or Modification of Funds..........5
1.3 No Sales to the General Public.......................5
Section 2. Processing Transactions...............................5
2.1 Timely Pricing and Orders............................5
2.2 Timely Payments......................................6
2.3 Applicable Price.....................................6
2.4 Dividends and Distributions..........................6
2.5 Book Entry...........................................7
Section 3. Costs and Expenses....................................7
3.1 General..............................................7
3.2 Registration.........................................7
3.3 Other (Non-Sales-Related)............................7
3.4 Other (Sales-Related)................................8
3.5 Parties To Cooperate.................................8
Section 4. Legal Compliance......................................8
4.1 Tax Laws.............................................8
4.2 Insurance and Certain Other Laws....................11
4.3 Securities Laws.....................................11
4.4 Notice of Certain Proceedings
and Other Circumstances.............................12
4.5 IDS Life To Provide Documents;
Information About AVIF..............................13
4.6 AVIF To Provide Documents;
Information About IDS Life..........................14
Section 5. Mixed and Shared Funding.............................16
5.1 General.............................................16
5.2 Disinterested Directors.............................16
5.3 Monitoring for Material Irreconcilable Conflicts....16
5.4 Conflict Remedies...................................17
5.5 Notice to IDS Life..................................18
5.6 Information Requested by Board of Directors.........18
5.7 Compliance with SEC Rules...........................19
5.8 Other Requirements..................................19
Section 6. Termination..........................................19
6.1 Events of Termination...............................19
6.2 Notice Requirement for Termination..................20
6.3 Funds To Remain Available...........................21
6.4 Survival of Warranties and Indemnifications.........21
6.5 Continuance of Agreement for Certain Purposes.......21
Section 7. Parties To Cooperate Respecting Termination..........21
Section 8. Assignment...........................................22
Section 9. Notices..............................................22<PAGE>
PAGE 3
Description Page
Section 10. Voting Procedures...................................22
Section 11. Foreign Tax Credits.................................23
Section 12. Indemnification.....................................23
12.1 Of AVIF and AIM by IDS Life........................23
12.2 Of IDS Life by AVIF and AIM........................25
12.3 Effect of Notice...................................28
12.4 Successors.........................................28
Section 13. Applicable Law......................................28
Section 14. Execution in Counterparts...........................29
Section 15. Severability........................................29
Section 16. Rights Cumulative...................................29
Section 17. Headings............................................29
Section 18. Confidentiality.....................................29
Section 19. Trademarks and Fund Names...........................30
Section 20. Parties to Cooperate................................31
<PAGE>
PAGE 4
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 4th day of
March, 1996 ("Agreement"), by and among AIM Variable Insurance
Funds, Inc., a Maryland corporation ("AVIF"); AIM Distributors,
Inc., a Delaware corporation ("AIM"); IDS Life Insurance Company, a
Minnesota life insurance company and the principal underwriter of
the Contracts referred to below ("IDS Life"), on behalf of itself
and each of its segregated asset accounts listed in Schedule A
hereto, as the parties hereto may amend from time to time (each, an
"Account," and collectively, the "Accounts") (collectively, the
"Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange
Commission ("SEC") as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, AVIF currently consists of nine separate series
("Series"), shares ("Shares") of each of which are registered under
the Securities Act of 1933, as amended (the "1933 Act") and are
currently sold to one or more separate accounts of life insurance
companies to fund benefits under variable annuity contracts; and
WHEREAS, AVIF will make Shares of each Series listed on
Schedule A hereto as the Parties hereto may amend from time to time
(each a "Fund"; reference herein to "AVIF" includes reference to
each Fund, to the extent the context requires) available for
purchase by the Accounts; and
WHEREAS, IDS Life will be the issuer of certain variable
annuity contracts ("Contracts") as set forth on Schedule A hereto,
as the Parties hereto may amend from time to time, which Contracts
(hereinafter collectively, the "Contracts"), if required by
applicable law, will be registered under the 1933 Act; and
WHEREAS, IDS Life will fund the Contracts through the
Accounts, each of which may be divided into two or more subaccounts
("Subaccounts": reference herein to an "Account" includes reference
to each Subaccount thereof to the extent the context requires); and
WHEREAS, IDS Life will serve as the depositor of the Accounts,
each of which is registered as a unit investment trust investment
company under the 1940 Act (or exempt therefrom), and the security
interests deemed to be issued by the Accounts under the Contracts
will be registered as securities under the 1933 Act (or exempt
therefrom); and
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, IDS Life intends to purchase Shares in one or more
of the Funds on behalf of the Accounts to fund the Contracts; and
WHEREAS, IDS Life is a broker-dealer registered with the SEC
under the Securities Exchange Act of 1934 ("1934 Act") and a member
in good standing of the National Association of Securities Dealers,
Inc. ("NASD");<PAGE>
PAGE 5
NOW, THEREFORE, in consideration of the mutual benefits and
promises contained herein, the Parties hereto agree as follows:
Section 1. Available Funds
1.1 Availability.
AVIF will make Shares of each Fund available to IDS Life for
purchase and redemption at net asset value and with no sales
charges, subject to the terms and conditions of this Agreement.
The Board of Directors of AVIF may refuse to sell Shares of any
Fund to any person, or suspend or terminate the offering of Shares
of any Fund if such action is required by law or by regulatory
authorities having jurisdiction or if, in the sole discretion of
the Directors acting in good faith and in light of their fiduciary
duties under federal and any applicable state laws, such action is
deemed in the best interests of the shareholders of such Fund.
1.2 Addition, Deletion or Modification of Funds.
The Parties hereto may agree, from time to time, to add other
Funds to provide additional funding media for the Contracts, or to
delete, combine, or modify existing Funds, by amending Schedule A
hereto. Upon such amendment to Schedule A, any applicable
reference to a Fund, AVIF, or its Shares herein shall include a
reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part
hereof.
1.3 No Sales to the General Public.
AVIF represents and warrants that no Shares of any Fund have
been or will be sold to the general public.
Section 2. Processing Transactions
2.1 Timely Pricing and Orders.
(a) AVIF or its designated agent will use its best efforts to
provide IDS Life with the net asset value per Share for each Fund
by 5:30 p.m. Central Time on each Business Day. As used herein,
"Business Day" shall mean any day on which (i) the New York Stock
Exchange is open for regular trading, (ii) AVIF calculates the
Fund's net asset value, and (iii) IDS Life is open for business.
(b) IDS Life will use the data provided by AVIF each Business
Day pursuant to paragraph (a) immediately above to calculate
Account unit values and to process transactions that receive that
same Business Day's Account unit values. IDS Life will perform
such Account processing the same Business Day, and will place
corresponding orders to purchase or redeem Shares with AVIF by 9:00
a.m. Central Time the following Business Day; provided, however,
that AVIF shall provide additional time to IDS Life in the event
that AVIF is unable to meet the 5:30 p.m. time stated in paragraph
(a) immediately above. Such additional time shall be equal to the
additional time that AVIF takes to make the net asset values
available to IDS Life.<PAGE>
PAGE 6
(c) With respect to payment of the purchase price by IDS Life
and of redemption proceeds by AVIF, IDS Life and AVIF shall net
purchase and redemption orders with respect to each Fund and shall
transmit one net payment per Fund in accordance with Section 2.2,
below.
(d) If AVIF provides materially incorrect Share net asset
value information (as determined under SEC guidelines), IDS Life
shall be entitled to an adjustment to the number of Shares
purchased or redeemed to reflect the correct net asset value per
Share. Any material error in the calculation or reporting of net
asset value per Share, dividend or capital gain information shall
be reported promptly upon discovery to IDS Life.
2.2 Timely Payments.
IDS Life will wire payment for net purchases to a custodial
account designated by AVIF by 1:00 p.m. Central Time on the same
day as the order for Shares is placed, to the extent practicable.
AVIF will wire payment for net redemptions to an account designated
by IDS Life by 1:00 p.m. Central Time on the same day as the Order
is placed, to the extent practicable, but in any event within five
(5) calendar days after the date the order is placed in order to
enable IDS Life to pay redemption proceeds within the time
specified in Section 22(e) of the 1940 Act or such shorter period
of time as may be required by law.
2.3 Applicable Price.
(a) Share purchase payments and redemption orders that result
from purchase payments, surrenders and other transactions under
Contracts (collectively, "Contract transactions") and that IDS Life
receives prior to the close of regular trading on the New York
Stock Exchange on a Business Day will be executed at the net asset
values of the appropriate Funds next computed after receipt by AVIF
or its designated agent of the orders. For purposes of this
Section 2.3(a), IDS Life shall be the designated agent of AVIF for
receipt of orders relating to Contract transactions on each
Business Day and receipt by such designated agent shall constitute
receipt by AVIF; provided that AVIF receives notice of such orders
by 9:00 a.m. Central Time on the next following Business Day or
such later time as computed in accordance with Section 2.1 (b)
hereof.
(b) All other Share purchases and redemptions by IDS Life will
be effected at the net asset values of the appropriate Funds next
computed after receipt by AVIF or its designated agent of the order
therefor, and such orders will be irrevocable.
2.4 Dividends and Distributions.
AVIF will furnish notice by wire or telephone (followed by
written confirmation) on or prior to the payment date to IDS Life
of any income dividends or capital gain distributions payable on
the Shares of any Fund. IDS Life hereby elects to reinvest all<PAGE>
PAGE 7
dividends and capital gains distributions in additional Shares of
the corresponding Fund at the ex-dividend date net asset values
until IDS Life otherwise notifies AVIF in writing, it being agreed
by the Parties that the ex-dividend date and the payment date with
respect to any dividend or distribution will be the same Business
Day. IDS Life reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in
cash.
2.5 Book Entry.
Issuance and transfer of AVIF Shares will be by book entry
only. Stock certificates will not be issued to IDS Life. Shares
ordered from AVIF will be recorded in an appropriate title for IDS
Life, on behalf of its Account.
Section 3. Costs and Expenses
3.1 General.
Except as otherwise specifically provided herein, each Party
will bear all expenses incident to its performance under this
Agreement.
3.2 Registration.
(a) AVIF will bear the cost of its registering as a
management investment company under the 1940 Act and registering
its Shares under the 1933 Act, and keeping such registrations
current and effective; including, without limitation, the
preparation of and filing with the SEC of Forms N-SAR and Rule 24f-
2 Notices with respect to AVIF and its Shares and payment of all
applicable registration or filing fees with respect to any of the
foregoing.
(b) IDS Life will bear the cost of registering, to the extent
required, each Account as a unit investment trust under the 1940
Act and registering units of interest under the Contracts under the
1933 Act and keeping such registrations current and effective;
including, without limitation, the preparation and filing with the
SEC of Forms N-SAR and Rule 24f-2 Notices with respect to each
Account and its units of interest and payment of all applicable
registration or filing fees with respect to any of the foregoing.
3.3 Other (Non-Sales-Related).
(a) AVIF will bear, or arrange for others to bear, the costs
of preparing, filing with the SEC and setting for printing AVIF's
prospectus, statement of additional information and any amendments
or supplements thereto (collectively, the "AVIF Prospectus"),
periodic reports to shareholders, AVIF proxy material and other
shareholder communications.
(b) IDS Life will bear the costs of preparing, filing with
the SEC and setting for printing each Account's prospectus,
statement of additional information and any amendments or<PAGE>
PAGE 8
supplements thereto (collectively, the "Account Prospectus"), any
periodic reports to Contract owners, annuitants or participants
under the Contracts (collectively, "Participants"), voting
instruction solicitation material, and other Participant
communications.
(c) IDS Life will print in quantity and deliver to existing
Participants the documents described in Section 3.3(b) above and
the prospectus provided by AVIF in camera ready or computer
diskette form. AVIF will print the AVIF statement of additional
information, proxy materials relating to AVIF and periodic reports
of AVIF.
3.4 Other (Sales-Related).
IDS Life will bear the expenses of distribution. These
expenses would include by way of illustration, but are not limited
to, the costs of distributing to Participants the following
documents, whether they relate to the Account or AVIF:
prospectuses, statements of additional information, proxy materials
and periodic reports. These costs would also include the costs of
preparing, printing, and distributing sales literature and
advertising relating to the Funds, as well as filing such materials
with, and obtaining approval from, the SEC, NASD, any state
insurance regulatory authority, and any other appropriate
regulatory authority, to the extent required.
3.5 Parties To Cooperate.
Each Party agrees to cooperate with the others, as applicable,
in arranging to print, mail and/or deliver, in a timely manner,
combined or coordinated prospectuses or other materials of AVIF and
the Accounts.
Section 4. Legal Compliance
4.1 Tax Laws.
(a) AVIF represents and warrants that each Fund is currently
qualified as a regulated investment company ("RIC") under
Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), and represents that it will use its best efforts to
qualify and to maintain qualification of each Fund as a RIC. AVIF
will notify IDS Life immediately upon having a reasonable basis for
believing that a Fund has ceased to so qualify or that it might not
so qualify in the future.
(b) AVIF represents that it will use its best efforts to
comply and to maintain each Fund's compliance with the
diversification requirements set forth in Section 817(h) of the
Code and Section 1.817-5(b) of the regulations under the Code.
AVIF will notify IDS Life immediately upon having a reasonable
basis for believing that a Fund has ceased to so comply or that a
Fund might not so comply in the future. In the event of a breach
of this Section 4.1(b) by AVIF, it will take all reasonable steps<PAGE>
PAGE 9
to adequately diversify the Fund so as to achieve compliance within
the grace period afforded by Section 1.817-5 of the regulations
under the Code.
(c) IDS Life agrees that if the Internal Revenue Service
("IRS") asserts in writing in connection with any governmental
audit or review of IDS Life or, to IDS Life's knowledge, of any
Participant, that any Fund has failed to comply with the
diversification requirements of Section 817(h) of the Code or IDS
Life otherwise becomes aware of any facts that could give rise to
any claim against AVIF or its affiliates as a result of such a
failure or alleged failure:
(i) IDS Life shall promptly notify AVIF of such
assertion or potential claim (subject to the
Confidentiality provisions of Section 18 as to any
Participant);
(ii) IDS Life shall consult with AVIF as to how to
minimize any liability that may arise as a result of
such failure or alleged failure;
(iii) IDS Life shall use its best efforts to minimize any
liability of AVIF or its affiliates resulting from
such failure, including, without limitation,
demonstrating, pursuant to Treasury Regulations
Section 1.817-5(a)(2), to the Commissioner of the
IRS that such failure was inadvertent;
(iv) IDS Life shall permit AVIF, its affiliates and their
legal and accounting advisors to participate in any
conferences, settlement discussions or other
administrative or judicial proceeding or contests
(including judicial appeals thereof) with the IRS,
any Participant or any other claimant regarding any
claims that could give rise to liability to AVIF or
its affiliates as a result of such a failure or
alleged failure; provided, however, that IDS Life
will retain control of the conduct of such
conferences discussions, proceedings, contests or
appeals;
(v) any written materials to be submitted by IDS Life to
the IRS, any Participant or any other claimant in
connection with any of the foregoing proceedings or
contests (including, without limitation, any such
materials to be submitted to the IRS pursuant to
Treasury Regulations Section 1.817-5(a)(2)), (a)
shall be provided by IDS Life to AVIF (together with
any supporting information or analysis); subject to
the confidentiality provisions of Section 18, at
least ten (10) business days or such shorter period
to which the Parties hereto agree prior to the day
on which such proposed materials are to be
submitted, and (b) shall not be submitted by IDS
Life to any such person without the express written
consent of AVIF which shall not be unreasonably
withheld;<PAGE>
PAGE 10
(vi) IDS Life shall provide AVIF or its affiliates and
their accounting and legal advisors with such
cooperation as AVIF shall reasonably request
(including, without limitation, by permitting AVIF
and its accounting and legal advisors to review the
relevant books and records of IDS Life) in order to
facilitate review by AVIF or its advisors of any
written submissions provided to it pursuant to the
preceding clause or its assessment of the validity
or amount of any claim against its arising from such
a failure or alleged failure;
(vii) IDS Life shall not with respect to any claim of the
IRS or any Participant that would give rise to a
claim against AVIF or its affiliates (a) compromise
or settle any claim, (b) accept any adjustment on
audit, or (c) forego any allowable administrative or
judicial appeals, without the express written
consent of AVIF or its affiliates, which shall not
be unreasonably withheld, provided that IDS Life
shall not be required, after exhausting all
administrative penalties, to appeal any adverse
judicial decision unless AVIF or its affiliates
shall have provided an opinion of independent
counsel to the effect that a reasonable basis exists
for taking such appeal; and provided further that
the costs of any such appeal shall be borne equally
by the Parties hereto; and
(viii) AVIF and its affiliates shall have no liability as a
result of such failure or alleged failure if IDS
Life fails to comply with any of the foregoing
clauses (i) through (vii), and such failure could be
shown to have materially contributed to the
liability.
Should AVIF or any of its affiliates refuse to give its
written consent to any compromise or settlement of any claim or
liability hereunder, IDS Life may, in its discretion, authorize
AVIF or its affiliates to act in the name of IDS Life in, and to
control the conduct of, such conferences, discussions, proceedings,
contests or appeals and all administrative or judicial appeals
thereof, and in that event AVIF or its affiliates shall bear the
fees and expenses associated with the conduct of the proceedings
that it is so authorized to control; provided, that in no event
shall IDS Life have any liability resulting from AVIF's refusal to
accept the proposed settlement or compromise with respect to any
failure caused by AVIF. As used in this Agreement, the term
"affiliates" shall have the same meaning as "affiliated person" as
defined in Section 2(a)(3) of the 1940 Act.
(d) IDS Life represents and warrants that the Contracts
currently are and will be treated as annuity contracts under
applicable provisions of the Code and that it will use its best
efforts to maintain such treatment; IDS Life will notify AVIF
immediately upon having a reasonable basis for believing that any
of the Contracts have ceased to be so treated or that they might
not be so treated in the future.<PAGE>
PAGE 11
(e) IDS Life represents and warrants that each Account is a
"segregated asset account" and that interests in each Account are
offered exclusively through the purchase of or transfer into a
"variable contract," within the meaning of such terms under Section
817 of the Code and the regulations thereunder. IDS Life will use
its best efforts to continue to meet such definitional
requirements, and it will notify AVIF immediately upon having a
reasonable basis for believing that such requirements have ceased
to be met or that they might not be met in the future.
4.2 Insurance and Certain Other Laws.
(a) AVIF will use its best efforts to comply with any
applicable state insurance laws or regulations, to the extent
specifically requested in writing by IDS Life, including, the
furnishing of information not otherwise available to IDS Life which
is required by state insurance law to enable IDS Life to obtain the
authority needed to issue the Contracts in the various states.
(b) IDS Life represents and warrants that (i) it is an
insurance company duly organized, validly existing and in good
standing under the laws of the State of Minnesota and has full
corporate power, authority and legal right to execute, deliver and
perform its duties and comply with its obligations under this
Agreement, (ii) it has legally and validly established and
maintains each Account as a segregated asset account under 61A.14
of the Minnesota Insurance Code and the regulations thereunder, and
(iii) the Contracts comply in all material respects with all other
applicable federal and state laws and regulations.
(c) AVIF represents and warrants that it is a corporation
duly organized, validly existing, and in good standing under the
laws of the State of Maryland and has full power, authority, and
legal right to execute, deliver, and perform its duties and comply
with its obligations under this Agreement.
4.3 Securities Laws.
(a) IDS Life represents and warrants that (i) interests in
each Account pursuant to the Contracts will be registered under the
1933 Act to the extent required by the 1933 Act, (ii) the Contracts
will be duly authorized for issuance and sold in compliance with
all applicable federal and state laws, including, without
limitation, the 1933 Act, the 1934 Act, the 1940 Act and Minnesota
law, (iii) each Account is and will remain registered under the
1940 Act, to the extent required by the 1940 Act, (iv) each Account
does and will comply in all material respects with the requirements
of the 1940 Act and the rules thereunder, to the extent required,
(v) each Account's 1933 Act registration statement relating to the
Contracts, together with any amendments thereto, will at all times
comply in all material respects with the requirements of the 1933
Act and the rules thereunder, (vi) IDS Life will amend the
registration statement for its Contracts under the 1933 Act and for
its Accounts under the 1940 Act from time to time as required in
order to effect the continuous offering of its Contracts or as may
otherwise be required by applicable law, and (vii) each Account
Prospectus will at all times comply in all material respects with
the requirements of the 1933 Act and the rules thereunder.<PAGE>
PAGE 12
(b) AVIF represents and warrants that (i) Shares sold
pursuant to this Agreement will be registered under the 1933 Act to
the extent required by the 1933 Act and duly authorized for
issuance and sold in compliance with Maryland law, (ii) AVIF is and
will remain registered under the 1940 Act to the extent required by
the 1940 Act, (iii) AVIF will amend the registration statement for
its Shares under the 1933 Act and itself under the 1940 Act from
time to time as required in order to effect the continuous offering
of its Shares, (iv) AVIF does and will comply in all material
respects with the requirements of the 1940 Act and the rules
thereunder, (v) AVIF's 1933 Act registration statement, together
with any amendments thereto, will at all times comply in all
material respects with the requirements of the 1933 Act and rules
thereunder, and (vi) AVIF's Prospectus will at all times comply in
all material respects with the requirements of the 1933 Act and the
rules thereunder.
(c) AVIF will at its expense register and qualify its Shares
for sale in accordance with the laws of any state or other
jurisdiction if and to the extent reasonably deemed advisable by
AVIF.
(d) AVIF currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940
Act or otherwise, although it reserves the right to make such
payments in the future. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b- 1, AVIF undertakes to
have its Board of Directors, a majority of whom are not
"interested" persons of the Fund, formulate and approve any plan
under Rule 12b-1 to finance distribution expenses.
(e) AVIF represents and warrants that all of its trustees,
officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or securities
of the Fund are and continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less than the minimal coverage as required
currently by Rule 17g-(1) of the 1940 Act or related provisions as
may be promulgated from time to time. The aforesaid bond includes
coverage for larceny and embezzlement and is issued by a reputable
bonding company.
4.4 Notice of Certain Proceedings and Other Circumstances.
(a) AVIF will immediately notify IDS Life of (i) the issuance
by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to AVIF's registration
statement under the 1933 Act or AVIF Prospectus, (ii) any request
by the SEC for any amendment to such registration statement or AVIF
Prospectus that may affect the offering of Shares of AVIF, (iii)
the initiation of any proceedings for that purpose or for any other
purpose relating to the registration or offering of AVIF's Shares,
or (iv) any other action or circumstances that may prevent the
lawful offer or sale of Shares of any Fund in any state or
jurisdiction, including, without limitation, any circumstances in<PAGE>
PAGE 13
which (a) such Shares are not registered and, in all material
respects, issued and sold in accordance with applicable state and
federal law, or (b) such law precludes the use of such Shares as an
underlying investment medium of the Contracts issued or to be
issued by IDS Life. AVIF will make every reasonable effort to
prevent the issuance, with respect to any Fund, of any such stop
order, cease and desist order or similar order and, if any such
order is issued, to obtain the lifting thereof at the earliest
possible time.
(b) IDS Life will immediately notify AVIF of (i) the issuance
by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to each Account's
registration statement under the 1933 Act relating to the Contracts
or each Account Prospectus, (ii) any request by the SEC for any
amendment to such registration statement or Account Prospectus that
may affect the offering of Shares of AVIF, (iii) the initiation of
any proceedings for that purpose or for any other purpose relating
to the registration or offering of each Account's interests
pursuant to the Contracts, or (iv) any other action or
circumstances that may prevent the lawful offer or sale of said
interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not
registered and, in all material respects, issued and sold in
accordance with applicable state and federal law. IDS Life will
make every reasonable effort to prevent the issuance of any such
stop order, cease and desist order or similar order and, if any
such order is issued, to obtain the lifting thereof at the earliest
possible time.
4.5 IDS Life To Provide Documents; Information About AVIF.
(a) IDS Life will provide to AVIF or its designated agent at
least one (1) complete copy of all SEC registration statements,
Account Prospectuses, reports, any preliminary and final voting
instruction solicitation material, applications for exemptions,
requests for no-action letters, and all amendments to any of the
above, that relate to each Account or the Contracts,
contemporaneously with the filing of such document with the SEC or
other regulatory authorities.
(b) IDS Life will provide to AVIF or its designated agent at
least one (1) complete copy of each piece of sales literature or
other promotional material in which AVIF or any of its affiliates
is named, at least five (5) Business Days prior to its use or such
shorter period as the Parties hereto may, from time to time, agree
upon. No such material shall be used if AVIF or its designated
agent objects to such use within five (5) Business Days after
receipt of such material or such shorter period as the Parties
hereto may, from time to time, agree upon. AVIF hereby designates
AIM as the entity to receive such sales literature, until such time
as AVIF appoints another designated agent by giving notice to IDS
Life in the manner required by Section 9 hereof.
(c) Neither IDS Life nor any of its affiliates, will give any
information or make any representations or statements on behalf of
or concerning AVIF or its affiliates in connection with the sale of<PAGE>
PAGE 14
the Contracts other than (i) the information or representations
contained in the registration statement, including the AVIF
Prospectus contained therein, relating to Shares, as such
registration statement and AVIF Prospectus may be amended from time
to time; or (ii) in reports or proxy materials for AVIF; or (iii)
in published reports for AVIF that are in the public domain and
approved by AVIF for distribution; or (iv) in sales literature or
other promotional material approved by AVIF, except with the
express written permission of AVIF.
(d) IDS Life shall adopt and implement procedures reasonably
designed to ensure that information concerning AVIF and its
affiliates that is intended for use only by brokers or agents
selling the Contracts (i.e., information that is not intended for
distribution to Participants) ("broker only materials") is so used,
and neither AVIF nor any of its affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such
broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales
literature or other promotional material" includes, but is not
limited to, advertisements (such as material published, or designed
for use in, a newspaper, magazine, or other periodical, radio,
television, telephone or tape recording, videotape display, signs
or billboards, motion pictures, or other public media, (e.g., on-
line networks such as the Internet or other electronic messages),
sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including
brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational
or training materials or other communications distributed or made
generally available to some or all agents or employees,
registration statements, prospectuses, statements of additional
information, shareholder reports, and proxy materials and any other
material constituting sales literature or advertising under the
NASD rules, the 1933 Act or the 1940 Act.
4.6 AVIF To Provide Documents; Information About IDS Life.
(a) AVIF will provide to IDS Life at least one (1) complete
copy of all SEC registration statements, AVIF Prospectuses,
reports, any preliminary and final proxy material, applications for
exemptions, requests for no-action letters, and all amendments to
any of the above, that relate to AVIF or the Shares of a Fund,
contemporaneously with the filing of such document with the SEC or
other regulatory authorities.
(b) AVIF will provide to IDS Life camera ready or computer
diskette copies of all AVIF prospectuses and printed copies, in an
amount specified by IDS Life, of AVIF statements of additional
information, proxy materials, periodic reports to shareholders and
other materials required by law to be sent to Participants who have
allocated any Contract value to a Fund. AVIF will provide such
copies to IDS Life in a timely manner so as to enable IDS Life, as
the case may be, to print and distribute such materials within the
time required by law to be furnished to Participants.<PAGE>
PAGE 15
(c) AVIF will provide to IDS Life or its designated agent at
least one (1) complete copy of each piece of sales literature or
other promotional material in which IDS Life, or any of its
respective affiliates is named, or that refers to the Contracts, at
least five (5) Business Days prior to its use or such shorter
period as the Parties hereto may, from time to time, agree upon.
No such material shall be used if IDS Life or its designated agent
objects to such use within five (5) Business Days after receipt of
such material or such shorter period as the Parties hereto may,
from time to time, agree upon. IDS Life shall receive all such
sales literature until such time as it appoints a designated agent
by giving notice to AVIF in the manner required by Section 9
hereof.
(d) Neither AVIF nor any of its affiliates will give any
information or make any representations or statements on behalf of
or concerning IDS Life, each Account, or the Contracts other than
(i) the information or representations contained in the
registration statement, including each Account Prospectus contained
therein, relating to the Contracts, as such registration statement
and Account Prospectus may be amended from time to time; or (ii) in
published reports for the Account or the Contracts that are in the
public domain and approved by IDS Life for distribution; or (iii)
in sales literature or other promotional material approved by IDS
Life or its affiliates, except with the express written permission
of IDS Life.
(e) AVIF shall cause its principal underwriter to adopt and
implement procedures reasonably designed to ensure that information
concerning IDS Life, and its respective affiliates that is intended
for use only by brokers or agents selling the Contracts (i.e.,
information that is not intended for distribution to Participants)
("broker only materials") is so used, and neither IDS Life, nor any
of its respective affiliates shall be liable for any losses,
damages or expenses relating to the improper use of such broker
only materials.
(f) For purposes of this Section 4.6, the phrase "sales
literature or other promotional material" includes, but is not
limited to, advertisements (such as material published, or designed
for use in, a newspaper, magazine. or other periodical, radio,
television, telephone or tape recording, videotape display, signs
or billboards, motion pictures, or other public media, (e.g., on-
line networks such as the Internet or other electronic messages),
sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including
brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational
or training materials or other communications distributed or made
generally available to some or all agents or employees,
registration statements, prospectuses, statements of additional
information, shareholder reports, and proxy materials and any other
material constituting sales literature or advertising under the
NASD rules, the 1933 Act or the 1940 Act.<PAGE>
PAGE 16
Section 5. Mixed and Shared Funding
5.1 General.
The SEC has granted an order to AVIF exempting it from certain
provisions of the 1940 Act and rules thereunder so that AVIF may be
available for investment by certain other entities, including,
without limitation, separate accounts funding variable life
insurance contracts, separate accounts of insurance companies
unaffiliated with IDS Life, and trustees of qualified pension and
retirement plans (collectively, "Mixed and Shared Funding"). The
Parties recognize that the SEC has imposed terms and conditions for
such orders that are substantially identical to many of the
provisions of this Section 5. Sections 5.2 through 5.8 below shall
apply pursuant to such an exemptive order granted to AVIF. AVIF
hereby notifies IDS Life that, in the event that AVIF implements
Mixed and Shared Funding, it may be appropriate to include in the
prospectus pursuant to which a Contract is offered disclosure
regarding the potential risks of Mixed and Shared Funding.
5.2 Disinterested Directors.
AVIF agrees that its Board of Directors shall at all times
consist of directors a majority of whom (the "Disinterested
Directors") are not interested persons of AVIF within the meaning
of Section 2(a)(19) of the 1940 Act and the Rules thereunder and as
modified by any applicable orders of the SEC, except that if this
condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this
condition shall be suspended (a) for a period of forty-five (45)
days if the vacancy or vacancies may be filled by the Board; (b)
for a period of sixty (60) days if a vote of shareholders is
required to fill the vacancy or vacancies; or (c) for such longer
period as the SEC may prescribe by order upon application.
5.3 Monitoring for Material Irreconcilable Conflicts.
AVIF agrees that its Board of Directors will monitor for the
existence of any material irreconcilable conflict between the
interests of the Participants in all separate accounts of life
insurance companies utilizing AVIF ("Participating Insurance
Companies"), including each Account, and participants in all
qualified retirement and pension plans investing in AVIF
("Participating Plans"). IDS Life agrees to inform the Board of
Directors of AVIF of the existence of or any potential for any such
material irreconcilable conflict of which it is aware. The concept
of a "material irreconcilable conflict" is not defined by the 1940
Act or the rules thereunder, but the Parties recognize that such a
conflict may arise for a variety of reasons, including, without
limitation:
(a) an action by any state insurance or other regulatory
authority;
(b) a change in applicable federal or state insurance, tax or
securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action
by insurance, tax or securities regulatory authorities;<PAGE>
PAGE 17
(c) an administrative or judicial decision in any relevant
proceeding;
(d) the manner in which the investments of any Fund are being
managed;
(e) a difference in voting instructions given by variable
annuity contract and variable life insurance contract Participants
or by Participants of different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to
disregard the voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the
voting instructions of Plan participants.
Consistent with the SEC's requirements in connection with
exemptive orders of the type referred to in Section 5.1 hereof, IDS
Life will assist the Board of Directors in carrying out its
responsibilities by providing the Board of Directors with all
information reasonably necessary for the Board of Directors to
consider any issue raised, including information as to a decision
by IDS Life to disregard voting instructions of Participants.
5.4 Conflict Remedies.
(a) It is agreed that if it is determined by a majority of
the members of the Board of Directors or a majority of the
Disinterested Directors that a material irreconcilable conflict
exists, IDS Life will, if it is a Participating Insurance Company
for which a material irreconcilable conflict is relevant, at its
own expense and to the extent reasonably practicable (as determined
by a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable
conflict, which steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of
the Accounts from AVIF or any Fund and reinvesting
such assets in a different investment medium,
including another Fund of AVIF, or submitting the
question whether such segregation should be
implemented to a vote of all affected Participants
and, as appropriate, segregating the assets of any
particular group (e.g., annuity Participants, life
insurance Participants or all Participants) that
votes in favor of such segregation, or offering to
the affected Participants the option of making such
a change; and
(ii) establishing a new registered investment company of
the type defined as a "management company" in
Section 4(3) of the 1940 Act or a new separate
account that is operated as a management company.<PAGE>
PAGE 18
(b) If the material irreconcilable conflict arises because of
IDS Life's decision to disregard Participant voting instructions
and that decision represents a minority position or would preclude
a majority vote, IDS Life may be required, at AVIF's election, to
withdraw each Account's investment in AVIF or any Fund. No charge
or penalty will be imposed as a result of such withdrawal. Any
such withdrawal must take place within six (6) months after AVIF
gives notice to IDS Life that this provision is being implemented,
and until such withdrawal AVIF shall continue to accept and
implement orders by IDS Life for the purchase and redemption of
Shares of AVIF.
(c) If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to IDS
Life conflicts with the majority of other state regulators, then
IDS Life will withdraw each Account's investment in AVIF within six
(6) months after AVIF's Board of Directors informs IDS Life that it
has determined that such decision has created a material
irreconcilable conflict, and until such withdrawal AVIF shall
continue to accept and implement orders by IDS Life for the
purchase and redemption of Shares of AVIF. No charge or penalty
will be imposed as a result of such withdrawal.
(d) IDS Life agrees that any remedial action taken by it in
resolving any material irreconcilable conflict will be carried out
at its expense and with a view only to the interests of
Participants.
(e) For purposes hereof, a majority of the Disinterested
Directors will determine whether or not any proposed action
adequately remedies any material irreconcilable conflict. In no
event, however, will AVIF or any of its affiliates be required to
establish a new funding medium for any Contracts. IDS Life will
not be required by the terms hereof to establish a new funding
medium for any Contracts if an offer to do so has been declined by
vote of a majority of Participants materially adversely affected by
the material irreconcilable conflict.
5.5 Notice to IDS Life.
AVIF will promptly make known in writing to IDS Life the Board
of Directors' determination of the existence of a material
irreconcilable conflict, a description of the facts that give rise
to such conflict and the implications of such conflict.
5.6 Information Requested by Board of Directors.
IDS Life and AVIF (or its investment adviser) will at least
annually submit to the Board of Directors of AVIF such reports,
materials or data as the Board of Directors may reasonably request
so that the Board of Directors may fully carry out the obligations
imposed upon it by the provisions hereof or any exemptive order
granted by the SEC to permit Mixed and Shared Funding, and said
reports, materials and data will be submitted at any reasonable
time deemed appropriate by the Board of Directors. All reports
received by the Board of Directors of potential or existing
conflicts, and all Board of Directors actions with regard to<PAGE>
PAGE 19
determining the existence of a conflict, notifying Participating
Insurance Companies and Participating Plans of a conflict, and
determining whether any proposed action adequately remedies a
conflict, will be properly recorded in the minutes of the Board of
Directors or other appropriate records, and such minutes or other
records will be made available to the SEC upon request.
5.7 Compliance with SEC Rules.
If, at any time during which AVIF is serving as an investment
medium for variable life insurance Contracts, 1940 Act Rules 6e-
3(T) or, if applicable, 6e-2 are amended or Rule 6e-3 is adopted to
provide exemptive relief with respect to Mixed and Shared Funding,
AVIF agrees that it will comply with the terms and conditions
thereof and that the terms of this Section 5 shall be deemed
modified if and only to the extent required in order also to comply
with the terms and conditions of such exemptive relief that is
afforded by any of said rules that are applicable.
5.8 Other Requirements.
AVIF will require that each Participating Insurance Company
and Participating Plan enter into an agreement with AVIF that
contains in substance the same provisions as are set forth in
Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b), 4.5(a), 5, and 10 of this
Agreement.
Section 6. Termination
6.1 Events of Termination.
Subject to Section 6.4 below, this Agreement will terminate as
to a Fund:
(a) at the option of any party, with or without cause with
respect to the Fund, upon six (6) months advance written notice to
the other parties, or, if later, upon receipt of any required
exemptive relief from the SEC, unless otherwise agreed to in
writing by the parties; or
(b) at the option of AVIF upon institution of formal
proceedings against IDS Life or its affiliates by the NASD, the
SEC, any state insurance regulator or any other regulatory body
regarding IDS Life's obligations under this Agreement or related to
the sale of the Contracts, the operation of each Account, or the
purchase of Shares, if, in each case, AVIF reasonably determines
that such proceedings, or the facts on which such proceedings would
be based, have a material likelihood of imposing material adverse
consequences on the Fund with respect to which the Agreement is to
be terminated; or
(c) at the option of IDS Life upon institution of formal
proceedings against AVIF, its principal underwriter, or its
investment adviser by the NASD, the SEC, or any state insurance
regulator or any other regulatory body regarding AVIF's obligations
under this Agreement or related to the operation or management of<PAGE>
PAGE 20
AVIF or the purchase of AVIF Shares, if, in each case, IDS Life
reasonably determines that such proceedings, or the facts on which
such proceedings would be based, have a material likelihood of
imposing material adverse consequences on IDS Life, or the
Subaccount corresponding to the Fund with respect to which the
Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the
Fund's Shares are not registered and, in all material respects,
issued and sold in accordance with any applicable federal or state
law, or (ii) such law precludes the use of such Shares as an
underlying investment medium of the Contracts issued or to be
issued by IDS Life; or
(e) upon termination of the corresponding Subaccount's
investment in the Fund pursuant to Section 5 hereof; or
(f) at the option of IDS Life if the Fund ceases to qualify
as a RIC under Subchapter M of the Code or under successor or
similar provisions, or if IDS Life reasonably believes that the
Fund may fail to so qualify; or
(g) at the option of IDS Life if the Fund fails to comply
with Section 817(h) of the Code or with successor or similar
provisions, or if IDS Life reasonably believes that the Fund may
fail to so comply; or
(h) at the option of AVIF if the Contracts issued by IDS Life
cease to qualify as annuity contracts under the Code (other than by
reason of the Fund's noncompliance with Section 817(h) or
Subchapter M of the Code) or if interests in an Account under the
Contracts are not registered, where required, and, in all material
respects, are not issued or sold in accordance with any applicable
federal or state law; or
(i) upon another Party's material breach of any provision of
this Agreement.
6.2 Notice Requirement for Termination.
No termination of this Agreement will be effective unless and
until the Party terminating this Agreement gives prior written
notice to the other Party to this Agreement of its intent to
terminate, and such notice shall set forth the basis for such
termination. Furthermore:
(a) in the event that any termination is based upon the
provisions of Section 6.1(a) or Section 6.1(e) hereof, such prior
written notice shall be given at least six (6) months in advance of
the effective date of termination unless a shorter time is agreed
to by the Parties hereto;
(b) in the event that any termination is based upon the
provisions of Section 6.1(b) or Section 6.1(c) hereof, such prior
written notice shall be given at least ninety (90) days in advance
of the effective date of termination unless a shorter time is
agreed to by the Parties hereto; and<PAGE>
PAGE 21
(c) in the event that any termination is based upon the
provisions of Section 6.1(d), Section 6.1(f), Section 6.1(g),
Section 6.1(h) or Section 6.1(i) hereof, such prior written notice
shall be given as soon as possible within twenty-four (24) hours
after the terminating Party learns of the event causing termination
to be required.
6.3 Funds To Remain Available.
Notwithstanding any termination of this Agreement, AVIF will,
at the option of IDS Life, continue to make available additional
shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing
Contracts."). Specifically, without limitation, the owners of the
Existing Contracts will be permitted to reallocate investments in
the Fund (as in effect on such date), redeem investments in the
Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree
that this Section 6.3 will not apply to any terminations under
Section 5 and the effect of such terminations will be governed by
Section 5 of this Agreement.
6.4 Survival of Warranties and Indemnifications.
All warranties and indemnifications will survive the
termination of this Agreement.
6.5 Continuance of Agreement for Certain Purposes.
If any Party terminates this Agreement with respect to any
Fund pursuant to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g),
6.1(h) or 6.1(i) hereof, this Agreement shall nevertheless continue
in effect as to any Shares of that Fund that are outstanding as of
the date of such termination (the "Initial Termination Date").
This continuation shall extend to the earlier of the date as of
which an Account owns no Shares of the affected Fund or a date (the
"Final Termination Date") six (6) months following the Initial
Termination Date, except that IDS Life may, by written notice
shorten said six (6) month period in the case of a termination
pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i).
Section 7. Parties To Cooperate Respecting Termination
The Parties hereto agree to cooperate and give reasonable
assistance to one another in taking all necessary and appropriate
steps for the purpose of ensuring that an Account owns no Shares of
a Fund after the Final Termination Date with respect thereto, or,
in the case of a termination pursuant to Section 6.1(a), the
termination date specified in the notice of termination. Such
steps may include combining the affected Account with another
Account, substituting other mutual fund shares for those of the
affected Fund, or otherwise terminating participation by the
Contracts in such Fund.<PAGE>
PAGE 22
Section 8. Assignment
This Agreement may not be assigned by any Party, except with
the written consent of each other Party.
Section 9. Notices
Notices and communications required or permitted by Section 9
hereof will be given by means mutually acceptable to the Parties
concerned. Each other notice or communication required or
permitted by this Agreement will be given to the following persons
at the following addresses and facsimile numbers, or such other
persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
IDS Life Insurance Company
105 Tower 10
Minneapolis,MN 55440-0010
Facsimile: 612-671-2269
Attn: Mr. Wendell Halvorson
American Express Financial Advisors Inc.
cc: IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
Facsimile: 612-671-3767
Attn: Mary Ellyn Minenko, Esq.
Counsel
AIM Variable Insurance Funds, Inc.
11 Greenway Plaza, Suite 1919
Houston, TX 77046
Facsimile: 713-993-9185
Attn: Nancy L. Martin, Esq.
AIM Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, TX 77046
Facsimile: 713-993-9185
Attn: Mr. Gary Littlepage
Section 10. Voting Procedures
Subject to the cost allocation procedures set forth in Section
3 hereof, IDS Life will distribute all proxy material furnished by
AVIF to Participants to whom pass-through voting privileges are
required to be extended and will solicit voting instructions from
Participants. IDS Life will vote Shares in accordance with timely
instructions received from Participants. IDS Life will vote Shares
that are (a) not attributable to Participants to whom pass-through
voting privileges are extended, or (b) attributable to
Participants, but for which no timely instructions have been
received, in the same proportion as Shares for which said
instructions have been received from Participants, so long as and
to the extent that the SEC continues to interpret the 1940 Act to<PAGE>
PAGE 23
require pass through voting privileges for Participants. Neither
IDS Life nor any of its affiliates will in any way recommend action
in connection with or oppose or interfere with the solicitation of
proxies for the Shares held for such Participants. IDS Life
reserves the right to vote shares held in any Account in its own
right, to the extent permitted by law. IDS Life shall be
responsible for assuring that each of its Accounts holding Shares
calculates voting privileges in a manner consistent with that of
other Participating Insurance Companies or in the manner required
by the Mixed and Shared Funding exemptive order obtained by AVIF.
AVIF will notify IDS Life of any changes of interpretations or
amendments to Mixed and Shared Funding exemptive order it has
obtained. AVIF will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular, AVIF either
will provide for annual meetings (except insofar as the SEC may
interpret Section 16 of the 1940 Act not to require such meetings)
or will comply with Section 16(c) of the 1940 Act (although AVIF is
not one of the trusts described in Section 16(c) of that Act) as
well as with Sections 16(a) and, if and when applicable, 16(b).
Further, AVIF will act in accordance with the SEC's interpretation
of the requirements of Section 16(a) with respect to periodic
elections of directors and with whatever rules the SEC may
promulgate with respect thereto.
Section 11. Foreign Tax Credits
AVIF agrees to consult in advance with IDS Life concerning any
decision to elect or not to elect pursuant to Section 853 of the
Code to pass through the benefit of any foreign tax credits to its
shareholders.
Section 12. Indemnification
12.1 Of AVIF and AIM by IDS Life.
(a) Except to the extent provided in Sections 12.1(b) and
12.1(c), below, IDS Life agrees to indemnify and hold harmless
AVIF, AIM, their affiliates, and each person, if any, who controls
AVIF, AIM, or their affiliates within the meaning of Section 15 of
the 1933 Act and any of their directors and officers,
(collectively, the "Indemnified Parties" for purposes of this
Section 12.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written
consent of IDS Life) or actions in respect thereof (including, to
the extent reasonable, legal and other expenses), to which the
Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise; provided, the Account owns
shares of the Fund and insofar as such losses, claims, damages,
liabilities or actions:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any Account's 1933 Act registration
statement, any Account Prospectus, the Contracts, or
sales literature or advertising for the Contracts<PAGE>
PAGE 24
(or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading; provided, that this agreement to
indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to IDS Life
by or on behalf of AVIF for use in any Account's
1933 Act registration statement, any Account
Prospectus, the Contracts, or sales literature or
advertising or otherwise for use in connection with
the sale of Contracts or Shares (or any amendment or
supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements
or representations (other than statements or
representations contained in AVIF's 1933 Act
registration statement, AVIF Prospectus, sales
literature or advertising of AVIF, or any amendment
or supplement to any of the foregoing, not supplied
for use therein by or on behalf of IDS Life and on
which such persons have reasonably relied) or the
negligent, illegal or fraudulent conduct of IDS Life
or its affiliates or persons under their control
(including, without limitation, their employees and
"Associated Persons," as that term is defined in
paragraph (m) of Article I of the NASD's By-Laws),
in connection with the sale or distribution of the
Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in AVIF's 1933 Act registration statement,
AVIF Prospectus, sales literature or advertising of
AVIF, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading if such a statement or omission was
made in reliance upon and in conformity with
information furnished to AVIF by or on behalf of IDS
Life or its affiliates for use in AVIF's 1933 Act
registration statement, AVIF Prospectus, sales
literature or advertising of AVIF, or any amendment
or supplement to any of the foregoing; or
(iv) arise as a result of any failure by IDS Life to
perform the obligations, provide the services and
furnish the materials required of them under the
terms of this Agreement, or any material breach of
any representation and/or warranty made by IDS Life
in this Agreement or arise out of or result from any
other material breach of this Agreement by IDS Life;
or<PAGE>
PAGE 25
(v) arise as a result of failure by the Contracts issued
by IDS Life to qualify as annuity contracts under
the Code, otherwise than by reason of any Fund's
failure to comply with Subchapter M or Section
817(h) of the Code.
(b) IDS Life shall not be liable under this Section 12.1 with
respect to any losses, claims, damages, liabilities or actions to
which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the
performance by that Indemnified Party of its duties or by reason of
that Indemnified Party's reckless disregard of obligations or
duties (i) under this Agreement, or (ii) to AVIF.
(c) IDS Life shall not be liable under this Section 12.1 with
respect to any action against an Indemnified Party unless AVIF or
AIM shall have notified IDS Life in writing within a reasonable
time after the summons or other first legal process giving
information of the nature of the action shall have been served upon
such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but
failure to notify IDS Life of any such action shall not relieve IDS
Life from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of
this Section 12.1. Except as otherwise provided herein, in case
any such action is brought against an Indemnified Party, IDS Life
shall be entitled to participate, at its own expense, in the
defense of such action and also shall be entitled to assume the
defense thereof, with counsel approved by the Indemnified Party
named in the action, which approval shall not be unreasonably
withheld. After notice from IDS Life to such Indemnified Party of
its election to assume the defense thereof, the Indemnified Party
will cooperate fully with IDS Life and shall bear the fees and
expenses of any additional counsel retained by it, and IDS Life
will not be liable to such Indemnified Party under this Agreement
for any legal or other expenses subsequently incurred by such
Indemnified Party independently in connection with the defense
thereof, other than reasonable costs of investigation.
12.2 Of IDS Life by AVIF and AIM.
(a) Except to the extent provided in Sections 12.2(c),
12.2(d) and 12.2(e), below, AVIF and AIM agree to indemnify and
hold harmless IDS Life its affiliates, and each person, if any, who
controls IDS Life, or its affiliates within the meaning of Section
15 of the 1933 Act and any of its directors and officers,
(collectively, the "Indemnified Parties" for purposes of this
Section 12.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written
consent of AVIF and AIM) or actions in respect thereof (including,
to the extent reasonable, legal and other expenses), to which the
Indemnified Parties may become subject under any statute,
regulation, at common law, or otherwise; provided, the Account owns
shares of the Fund and insofar as such losses, claims, damages,
liabilities or actions:<PAGE>
PAGE 26
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in AVIF's 1933 Act registration statement,
AVIF Prospectus or sales literature or advertising
of AVIF (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon
the omission or the alleged omission to state
therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading; provided, that this agreement to
indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to AVIF or
its affiliates by or on behalf of IDS Life or its
affiliates for use in AVIF's 1933 Act registration
statement, AVIF Prospectus, or in sales literature
or advertising or otherwise for use in connection
with the sale of Contracts or Shares (or any
amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements
or representations (other than statements or
representations contained in any Account's 1933 Act
registration statement, any Account Prospectus,
sales literature or advertising for the Contracts,
or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on
behalf of AVIF, AIM or their affiliates and on which
such persons have reasonably relied) or the
negligent, illegal or fraudulent conduct of AVIF,
AIM, their affiliates or persons under their control
(including, without limitation, their employees and
"Associated Persons" as that Term is defined in
Section (n) of Article 1 of the NASD By-Laws), in
connection with the sale or distribution of AVIF
Shares; or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any Account's 1933 Act registration
statement, any Account Prospectus, sales literature
or advertising covering the Contracts, or any
amendment or supplement to any of the foregoing, or
the omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading, if such statement or omission was made
in reliance upon and in conformity with information
furnished to IDS Life or its affiliates by or on
behalf of AVIF or AIM for use in any Account's 1933
Act registration statement, any Account Prospectus,
sales literature or advertising covering the
Contracts, or any amendment or supplement to any of
the foregoing; or<PAGE>
PAGE 27
(iv) arise as a result of any failure by AVIF or AIM to
perform the obligations, provide the services and
furnish the materials required of them under the
terms of this Agreement, or any material breach of
any representation and/or warranty made by AVIF or
AIM in this Agreement or arise out of or result
from any other material breach of this Agreement by
AVIF or AIM.
(b) Except to the extent provided in Sections 12.2(c),
12.2(d) and 12.2(e) hereof, AVIF and AIM agree to indemnify and
hold harmless the Indemnified Parties from and against any and all
losses, claims, damages, liabilities (including amounts paid in
settlement thereof with, the written consent of AVIF or AIM) or
actions in respect thereof (including, to the extent reasonable,
legal and other expenses) to which the Indemnified Parties may
become subject directly or indirectly under any statute, at common
law or otherwise, insofar as such losses, claims, damages,
liabilities or actions directly or indirectly result from or arise
out of the failure of any Fund to operate as a regulated investment
company in compliance with (i) Subchapter M of the Code and
regulations thereunder, or (ii) Section 817(h) of the Code and
regulations thereunder, including, without limitation, any income
taxes and related penalties, rescission charges, liability under
state law to Participants asserting liability against IDS Life
pursuant to the Contracts, the costs of any ruling and closing
agreement or other settlement with the IRS, and the cost of any
substitution by IDS Life of Shares of another investment company or
portfolio for those of any adversely affected Fund as a funding
medium for each Account that IDS Life reasonably deems necessary or
appropriate as a result of the noncompliance.
(c) Neither AVIF nor AIM shall be liable under this Section
12.2 with respect to any losses, claims, damages, liabilities or
actions to which an Indemnified Party would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in
the performance by that Indemnified Party of its duties or by
reason of such Indemnified Party's reckless disregard of its
obligations and duties (i) under this Agreement, or (ii) to IDS
Life, each Account or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section
12.2 with respect to any action against an Indemnified Party unless
the Indemnified Party shall have notified AVIF and AIM in writing
within a reasonable time after the summons or other first legal
process giving information of the nature of the action shall have
been served upon such Indemnified Party (or after such Indemnified
Party shall have received notice of such service on any designated
agent), but failure to notify AVIF and AIM of any such action shall
not relieve AVIF and AIM from any liability which they may have to
the Indemnified Party against whom such action is brought otherwise
than on account of this Section 12.2. Except as otherwise provided
herein, in case any such action is brought against an Indemnified
Party, AVIF and AIM will be entitled to participate, at their own
expense, in the defense of such action and also shall be entitled
to assume the defense thereof (which shall include, without
limitation, the conduct of any ruling request and closing agreement
or other settlement proceeding with the IRS), with counsel approved<PAGE>
PAGE 28
by the Indemnified Party named in the action, which approval shall
not be unreasonably withheld. After notice from AVIF or AIM to
such Indemnified Party of AVIF's or AIM's election to assume the
defense thereof, the Indemnified Party will cooperate fully with
AVIF and AIM and shall bear the fees and expenses of any additional
counsel retained by it, and neither AVIF nor AIM will be liable to
such Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof, other than
reasonable costs of investigation.
(e) In no event shall AVIF or AIM be liable under the
indemnification provisions contained in this Agreement to any
individual or entity, including, without limitation, IDS Life, or
any other Participating Insurance Company or any Participant, with
respect to any losses, claims, damages, liabilities or expenses
that arise out of or result from (i) a breach of any
representation, warranty, and/or covenant made by IDS Life
hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations,
warranties and covenants; (ii) the failure by IDS Life or any
Participating Insurance Company to maintain its segregated asset
account (which invests in any Fund) as a legally and validly
established segregated asset account under applicable state law and
as a duly registered unit investment trust under the provisions of
the 1940 Act (unless exempt therefrom); or (iii) the failure by IDS
Life or any Participating Insurance Company to maintain its
variable annuity insurance contracts (with respect to which any
Fund serves as an underlying funding vehicle) as annuity contracts
under applicable provisions of the Code.
12.3 Effect of Notice.
Any notice given by the indemnifying Party to an Indemnified
Party referred to in Section 12.1(c) or 12.2(d) above of
participation in or control of any action by the indemnifying Party
will in no event be deemed to be an admission by the indemnifying
Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with
respect to the claim among the Parties or otherwise.
12.4 Successors.
A successor by law of any Party shall be entitled to the
benefits of the indemnification contained in this Section 12.
Section 13. Applicable Law
This Agreement will be construed and the provisions hereof
interpreted under and in accordance with Maryland law without
regard for that state's principles of conflict of laws.<PAGE>
PAGE 29
Section 14. Execution in Counterparts
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and
the same instrument.
Section 15. Severability
If any provision of this Agreement is held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this
Agreement will not be affected thereby.
Section 16. Rights Cumulative
The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights,
remedies and obligations, at law or in equity, that the Parties are
entitled to under federal and state laws.
Section 17. Headings
The Table of Contents and headings used in this Agreement are
for purposes of reference only and shall not limit or define the
meaning of the provisions of this Agreement.
Section 18. Confidentiality
AVIF acknowledges that the identities of the customers of IDS
Life or any of its affiliates (collectively, the "IDS Life
Protected Parties" for purposes of this Section 18), information
maintained regarding those customers, and all computer programs and
procedures or other information developed by the IDS Life Protected
Parties or any of their employees or agents in connection with IDS
Life's performance of its duties under this Agreement are the
valuable property of the IDS Life Protected Parties. AVIF agrees
that if it comes into possession of any list or compilation of the
identities of or other information about the IDS Life Protected
Parties' customers, or any other information or property of the IDS
Life Protected Parties, other than such information as may be
independently developed or compiled by AVIF from information
supplied to it by the IDS Life Protected Parties' customers who
also maintain accounts directly with AVIF. AVIF will hold such
information or property in confidence and refrain from using,
disclosing or distributing any of such information or other
property except: (a) with IDS Life's prior written consent; or (b)
as required by law or judicial process. IDS Life acknowledges that
the identities of the customers of AVIF or any of its affiliates
(collectively the "AVIF Protected Parties" for purposes of this
Section 18), information maintained regarding those customers, and
all computer programs and procedures or other information developed
by the AVIF Protected Parties or any of their employees or agents<PAGE>
PAGE 30
in connection with AVIF's performance of its duties under this
Agreement are the valuable property of the AVIF Protected Parties.
IDS Life agrees that if it comes into possession of any list or
compilation of the identities of or other information about the
AVIF Protected Parties' customers or any other information or
property of the AVIF Protected Parties, other than such information
as may be independently developed or compiled by IDS Life from
information supplied to it by the AVIF Protected Parties' customers
who also maintain accounts directly with IDS Life, IDS Life will
hold such information or property in confidence and refrain from
using, disclosing or distributing any of such information or other
property except: (a) with AVIF's prior written consent; or (b) as
required by law or judicial process. Each party acknowledges that
any breach of the agreements in this Section 18 would result in
immediate and irreparable harm to the other parties for which there
would be no adequate remedy at law and agree that in the event of
such a breach, the other parties will be entitled to equitable
relief by way of temporary and permanent injunctions, as well as
such other relief as any court of competent jurisdiction deems
appropriate.
Section 19. Trademarks and Fund Names
(a) AIM, or its affiliates, owns all right, title and
interest in and to the name, trademark and service mark "AIM" and
such other tradenames, trademarks and service marks as may be set
forth on Schedule B, as amended from time to time by written notice
from AIM to IDS Life (the "AIM licensed marks" or the "licensor's
licensed marks") and is authorized to use and to license other
persons to use such marks. AIM hereby grants to IDS Life and its
affiliates a non-exclusive license to use the AIM licensed marks in
connection with IDS Life's performance of the services contemplated
under this Agreement, subject to the terms and conditions set forth
in this Section 19.
(b) The grant of license by AIM (a "licensor") to IDS Life
and its affiliates (the "licensee") shall terminate automatically
upon termination of this Agreement. Upon automatic termination,
the licensee shall cease to use the licensor's licensed marks,
except that IDS Life shall have the right to continue to service
any outstanding Contracts bearing any of the AIM licensed marks.
Upon AIM's elective termination of this license, IDS Life and its
affiliates shall immediately cease to issue any new annuity
contracts bearing any of the AIM licensed marks and shall likewise
cease any activity which suggests that it has any right under any
of the AIM licensed marks or that it has any association with AIM,
except that IDS Life shall have the right to continue to service
outstanding Contracts bearing any of the AIM licensed marks.
(c) The licensee shall obtain the prior written approval of
the licensor for the public release by such licensee of any
materials bearing the licensor's licensed marks. The licensor's
approvals shall not be unreasonably withheld.<PAGE>
PAGE 31
(d) During the term of this grant of license, a licensor may
request that a licensee submit samples of any materials bearing any
of the licensor's licensed marks which were previously approved by
the licensor but, due to changes circumstances, the licensor may
wish to reconsider. If, on reconsideration, or on initial review,
respectively, any such samples fail to meet with the written
approval of the licensor, then the licensee shall immediately cease
distributing such disapproved materials. The licensor's approval
shall not be unreasonably withheld, and the licensor, when
requesting reconsideration of a prior approval, shall assume the
reasonable expenses of withdrawing and replacing such disapproved
materials. The licensee shall obtain the prior written approval of
the licensor for the use of any new materials developed to replace
the disapproved materials, in the manner set forth above.
(e) The licensee hereunder: (i) acknowledges and stipulates
that, to the best of the knowledge of the licensee, the licensor's
licensed marks are valid and enforceable trademarks and/or service
marks and that such licensee does not own the licensor's licensed
marks and claims no rights therein other than as a licensee under
this Agreement; (ii) agrees never to contend otherwise in legal
proceedings or in other circumstances; and (iii) acknowledges and
agrees that the use of the licensor's licensed marks pursuant to
this grant of license shall inure to the benefit of the licensor.
Section 20. Parties to Cooperate
Each party to this Agreement will cooperate with each other
party and all appropriate governmental authorities (including,
without limitation, the SEC, the NASD and state insurance
regulators) and will permit each other and such authorities
reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating
to this Agreement or the transactions contemplated hereby.
<PAGE>
PAGE 32
IN WITNESS WHEREOF, the Parties have caused this Agreement to
be executed in their names and on their behalf by and through their
duly authorized signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
By: /s/ Robert H. Graham
Robert H. Graham
Title: President
AIM DISTRIBUTORS, INC.
By: /s/ W. Gary Littlepage
W. Gary Littlepage
Title: Senior Vice President
IDS LIFE, on behalf of itself and its separate accounts
By: /s/ Janis E. Miller
Janis E. Miller
Title: Vice President
Attest: /s/ Paul D. Sand
Paul D. Sand
Title: Assistant Secretary
<PAGE>
PAGE 33
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Growth and Income Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
o IDS Life Variable Accounts 10
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
o Flexible Premium Deferred Variable Annuity Contract Form Nos.
31030, 31031 and 31032-IRA and state variations thereof
<PAGE>
PAGE 34
SCHEDULE B
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Growth and Income Fund
o AIM and Design
(logo)
<PAGE>
PAGE 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Independent Auditors" and to the use of our reports dated February
2, 1996 on the consolidated financial statements and schedules of
IDS Life Insurance Company in Post Effective Amendment No. 1 to the
Registration Statement (Form N-4 No. 33-62407) for the registration
of the IDS Life Variable Account 10 to be offered by IDS Life
Insurance Company.
Ernst & Young LLP
Minneapolis, Minnesota
April 22, 1996
<PAGE>
PAGE 1
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE I - CONSOLIDATED SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES ($ thousands)
AS OF DECEMBER 31, 1995
Column A Column B Column C Column D
Type of Investment Cost Value Amount at which
shown in the
balance sheet
<S> <C> <C> <C>
Fixed maturities:
Held to maturity:
United States Government and
government agencies and
authorities (a) $ 1,237,093 $ 1,253,115 $ 1,237,093
States, municipalities and
political subdivisions 11,936 12,266 11,936
All other corporate bonds 10,008,562 10,612,996 10,008,562
Total held to maturity 11,257,591 11,878,377 11,257,591
Available for sale:
United States Government and
government agencies and
authorities (b) 4,092,563 4,176,080 4,176,080
States, municipalities and
political subdivisions 11,020 12,496 12,496
All other corporate bonds 6,042,553 6,327,636 6,327,636
Total available for sale 10,146,136 10,516,212 10,516,212
Mortgage loans on real estate 2,945,495 XXXXXXXXX 2,945,495
Policy loans 424,019 XXXXXXXXX 424,019
Other investments 146,894 XXXXXXXXX 146,894
Total investments $24,920,135 $ XXXXXXXXX $25,290,211
(a) - Includes mortgage-backed securities with a cost and market value of $1,172,570 and
$1,184,673, respectively.
(b) - Includes mortgage-backed securities with a cost and market value of $4,008,481 and
$4,088,800, respectively.
</TABLE>
<PAGE>
PAGE 2
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1995
Column A Column B Column C Column D Column E Column F Column G
Segment Deferred Future Unearned Other policy Premium Net
policy policy premiums claims and revenue investment
acquisition benefits, benefits income
cost losses, payable
claims and
loss
expenses
<S> <C> <C> <C> <C> <C> <C>
Annuities $1,227,169 $21,404,836 $ - $28,191 $ - $1,651,067
Life, DI,
Long-term Care and
Health Insurance 798,556 3,613,253 - 28,132 161,530 256,242
Total $2,025,725 $25,018,089 $ - $56,323 $161,530 $1,907,309
Column H Column I Column J Column K
Benefits, Amortization Other Premiums
claims, of deferred operating written
losses and policy expenses
settlement acquisition
expenses costs
Annuities $ 2,693 $ 189,626 $166,191 N/A
Life, DI,
Long-term Care and
Health Insurance 164,749 90,495 45,451 N/A
Total $ 167,442 $ 280,121 $211,642 N/A
</TABLE>
<PAGE>
PAGE 3
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1994
Column A Column B Column C Column D Column E Column F Column G
Segment Deferred Future Unearned Other policy Premium Net
policy policy premiums claims and revenue investment
acquisition benefits, benefits income
cost losses, payable
claims and
loss
expenses
<S> <C> <C> <C> <C> <C> <C>
Annuities $1,150,585 $19,361,979 $ - $23,888 $ - $1,534,826
Life, DI,
Long-term Care and
Health Insurance 714,739 3,346,931 - 26,180 144,640 247,047
Total $1,865,324 $22,708,910 $ - $50,068 $144,640 $1,781,873
Column H Column I Column J Column K
Benefits, Amortization Other Premiums
claims, of deferred operating written
losses and policy expenses
settlement acquisition
expenses costs
Annuities $ (5,762) $ 194,060 $131,515 N/A
Life, DI,
Long-term Care and
Health Insurance 134,128 86,312 78,586 N/A
Total $ 128,366 $ 280,372 $210,101 N/A
</TABLE>
<PAGE>
PAGE 4
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1993
Column A Column B Column C Column D Column E Column F
Segment Deferred Future Unearned Other policy Premium
policy policy premiums claims and revenue
acquisition benefits, benefits
cost losses, payable
claims and
loss
expenses
<S> <C> <C> <C> <C> <C>
Annuities $1,008,378 $18,492,135 $ - $ 21,508 $ -
Life, DI,
Long-term Care and
Health Insurance 644,006 3,148,932 - 23,008 127,245
Total $1,652,384 $21,641,067 $ - $ 44,516 $127,245
Column G Column H Column I Column J Column K
Net Benefits, Amortization Other Premiums
investment claims, of deferred operating written
income losses and policy expenses
settlement acquisition
expenses costs
Annuities $1,532,995 $ 3,656 $139,602 $122,999 N/A
Life, DI,
Long-term Care and
Health Insurance 250,224 119,335 72,131 118,975 N/A
Total $1,783,219 $ 122,991 $211,733 $241,974 N/A
</TABLE>
<PAGE>
PAGE 5
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE IV - REINSURANCE ($ thousands)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Column A Column B Column C Column D Column E Column F
Gross amount Ceded to other Assumed from Net % of amount
companies other companies Amount assumed to net
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1995
Life insurance in force $57,895,180 $3,771,204 $1,788,352 $55,912,328 3.20%
Premiums:
Life insurance $ 53,089 $ 2,648 $ (248) $ 50,193 -0.49%
DI & health insurance 137,016 25,679 -- 111,337 0.00%
Total premiums $ 190,105 $ 28,327 $ (248) $ 161,530 -0.15%
For the year ended
December 31, 1994
Life insurance in force $50,814,651 $3,246,608 $1,851,916 $49,419,959 3.75%
Premiums:
Life insurance $ 51,219 $ 3,354 $ 319 $ 48,184 0.66%
DI & health insurance 114,049 17,593 -- 96,456 0.00%
Total premiums $ 165,268 $ 20,947 $ 319 $ 144,640 0.22%
For the year ended
December 31, 1993
Life insurance in force $44,188,493 $3,038,426 $1,937,022 $43,087,089 4.50%
Premiums:
Life insurance $ 51,764 $ 3,627 $ -- $ 48,137 0.00%
DI & health insurance 96,250 17,142 -- 79,108 0.00%
Total premiums $ 148,014 $ 20,769 $ -- $ 127,245 0.00%
</TABLE>
<PAGE>
PAGE 6
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS ($ thousands)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Column A Column B Column C Column D Column E
Additions
---------
Balance at Charged to
Description Beginning Charged to Other Accounts- Deductions- Balance at End
of Period Costs & Expenses Describe Describe * of Period
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1995
- -------------------------
Reserve for Mortgage Loans $35,252 $ 1,088 $0 ($1,000) $37,340
Reserve for Other Investments $ 7,515 ($ 2,802) $0 $ 0 $ 4,713
For the year ended
December 31, 1994
- -------------------------
Reserve for Mortgage Loans $35,020 $ 232 $0 $ 0 $35,252
Reserve for Fixed Maturities $22,777 ($16,777) $0 $6,000 $ 0
Reserve for Other Investments $10,700 ($ 3,185) $0 $ 0 $ 7,515
For the year ended
December 31, 1993
- -------------------------
Reserve for Mortgage Loans $23,595 $13,635 $0 $2,210 $35,020
Reserve for Fixed Maturities $37,899 ($15,122) $0 $22,777
Reserve for Other Investments $12,834 ($ 4,344) $0 ($2,210) $10,700
* 1995 amount represents a reserve on mortgage loans which were transferred from an affiliate. 1994 amount represents
a direct writedown of the related investments in fixed maturities. 1993 amounts represent transfers between reserve accounts.
</TABLE>
<PAGE>
PAGE 7
Report of Independent Auditors
The Board of Directors
IDS Life Insurance Company
We have audited the consolidated financial statements of IDS Life
Insurance Company as of December 31, 1995 and 1994, and for each of
the three years in the period ended December 31, 1995, and have
issued our report thereon dated February 2, 1996 (included
elsewhere in this Registration Statement).
Our audits also included the financial statement schedules listed
in Item 24(b) of this Registration Statement. These schedules are
the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
Ernst & Young LLP
Minneapolis, Minnesota
February 2, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<CIK> 0000768836
<NAME> IDS Life Insurance Company
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLAR
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1995
<PERIOD-START> JAN-01-1994 JAN-01-1995
<PERIOD-END> DEC-31-1994 DEC-31-1995
<PERIOD-TYPE> YEAR YEAR
<EXCHANGE-RATE> 1 1
<DEBT-HELD-FOR-SALE> 8017555 10516212
<DEBT-CARRYING-VALUE> 11269861 11257591
<DEBT-MARKET-VALUE> 10694800 11878377
<EQUITIES> 1906 3517
<MORTGAGE> 2400514 2945495
<REAL-ESTATE> 20835 28796
<TOTAL-INVEST> 22121637 25290211
<CASH> 267774 72147
<RECOVER-REINSURE> 1110 1849
<DEFERRED-ACQUISITION> 1865324 2025725
<TOTAL-ASSETS> 35747543 42900078
<POLICY-LOSSES> 22708910 25018089
<UNEARNED-PREMIUMS> 0 0
<POLICY-OTHER> 0 0
<POLICY-HOLDER-FUNDS> 50068 56323
<NOTES-PAYABLE> 0 0
<COMMON> 3000 3000
0 0
0 0
<OTHER-SE> 1585691 2328708
<TOTAL-LIABILITY-AND-EQUITY> 35747543 42900078
144640 161530
<INVESTMENT-INCOME> 1781873 1907309
<INVESTMENT-GAINS> (4282) (4898)
<OTHER-INCOME> 384105 472035
<BENEFITS> 1303351 1483431
<UNDERWRITING-AMORTIZATION> 280372 280121
<UNDERWRITING-OTHER> 210101 211642
<INCOME-PRETAX> 512512 560782
<INCOME-TAX> 176343 195842
<INCOME-CONTINUING> 336169 364940
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 336169 364940
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<RESERVE-OPEN> 20636 23228
<PROVISION-CURRENT> 93683 117478
<PROVISION-PRIOR> 0 0
<PAYMENTS-CURRENT> 91091 116514
<PAYMENTS-PRIOR> 0 0
<RESERVE-CLOSE> 23228 24192
<CUMULATIVE-DEFICIENCY> 0 0
</TABLE>
<PAGE>
PAGE 1
IDS LIFE INSURANCE COMPANY
POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as directors of the below
listed unit investment trusts that previously have filed
registration statements and amendments thereto pursuant to the
requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 with the Securities and Exchange Commission:
<TABLE>
<CAPTION>
1933 Act 1940 Act
Reg. Number Reg. Number
<S> <C> <C>
IDS Life Variable Account 10
IDS Life Flexible Portfolio Annuity 33-62407 811-07355
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
IDS Life Flexible Annuity 33-4173 811-3217
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
IDS Life Variable and Combination
Retirement Annuities 2-73114 811-3217
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
IDS Life Employee Benefit Annuity 33-52518 811-3217
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
IDS Life Group Variable Annuity Contract 33-47302 811-3217
IDS Life Insurance Company
IDS Life Group Variable Annuity Contract
(Fixed Account) 33-48701 N/A
IDS Life Insurance Company
IDS Life Single Payment Market Value Annuity 33-28976 N/A
IDS Life Insurance Company
IDS Life Flexible Payment Market Value Annuity 33-50968 N/A
IDS Life Variable Life Separate Account
Flexible Premium Variable Life Insurance Policy 33-11165 811-4298
IDS Life Variable Life Separate Account
IDS Life Single Premium Variable Life 2-97637 811-4298
IDS Life Variable Account for Smith Barney
LifeVest Single Premium Variable Life 33-5210 811-4652
IDS Life Account SBS
IDS Life Symphony Annuity 33-40779 812-7731
IDS Life Account RE
IDS Life Real Estate Variable Annuity 33-13375 N/A
IDS Life Variable Annuity Fund A 2-29081 811-1653
IDS Life Variable Annuity Fund B 2-47430 811-1674
</TABLE>
hereby constitutes and appoints William A. Stoltzmann, Mary Ellyn
Minenko, Eileen J. Newhouse and Timothy S. Meehan or any one of
them, as her or his attorney-in-fact and agent, to sign for her or
him in her or his name, place and stead any and all filings,
applications (including applications for exemptive relief),
periodic reports, registration statements (with all exhibits and
other documents required or desirable in connection therewith)
other documents, and amendments thereto and to file such filings,
applications, periodic reports, registration statements other
<PAGE>
PAGE 2
documents, and amendments thereto with the Securities and Exchange
Commission, and any necessary states, and grants to any or all of
them the full power and authority to do and perform each and every
act required or necessary in connection therewith.
Dated the 1st day of April, 1996.
/s/ David R. Hubers March 21, 1996
David R. Hubers
Director
/s/ Richard W. Kling March 21, 1996
Richard W. Kling
Director and President
/s/ Paul F. Kolkman March 21, 1996
Paul F. Kolkman
Director and Executive Vice
President
/s/ Janis E. Miller March 25, 1996
Janis E. Miller
Director and Executive Vice
President, Variable Assets
/s/ James A. Mitchell March 25, 1996
James A. Mitchell
Director, Chairman of the
Board and Chief Executive Officer
/s/ Barry J. Murphy April 1, 1996
Barry J. Murphy
Director and Executive Vice
President, Client Service
/s/ Stuart A. Sedlacek March 27, 1996
Stuart A. Sedlacek
Director and Executive Vice
President, Assured Assets
/s/ Melinda S. Urion March 29, 1996
Melinda S. Urion
Director, Executive Vice
President and Controller
