<PAGE>
As filed with the Securities and Exchange Commission on January 2, 1997
Registration No. 333-07617
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
PRE-EFFECTIVE AMENDMENT NO. 1
FORM S-6
-------------------------
FOR THE REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
-------------------------
A. Exact name of trust:
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
CORPORATE SPONSORED VARIABLE UNIVERSAL LIFE SEPARATE ACCOUNT-I
B. Name of depositor:
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
C. Complete address of depositor's principal office:
51 Madison Avenue
New York, New York 10010
D. Name and complete address of agent for service:
Linda M. Reimer, Esq.
New York Life Insurance and
Annuity Corporation
51 Madison Avenue
New York, New York 10010
Copies to:
Michael Berenson, Esq. Michael J. McLaughlin, Esq.
Jordan Burt Berenson & Johnson, LLP Senior Vice President
Suite 400 East and General Counsel
1025 Thomas Jefferson Street, N.W. New York Life Insurance Company
Washington, DC 20007 51 Madison Avenue
New York, New York 10010
E. Title and amount of securities being registered:
Flexible Premium Variable Universal Life Insurance Policy.
<PAGE>
F. Proposed maximum aggregate offering price to the public of the securities
being registered: Pursuant to Rule 24f-2 of the Investment Company Act of
1940, the Registrant hereby declares that an indefinite amount of its
securities are being registered under the Securities Act of 1933.
H. Approximate date of proposed public offering:
As soon as practicable after the effective date of this Registration
Statement.
------------------------
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
CROSS REFERENCE SHEET
INFORMATION REQUIRED IN A PROSPECTUS
Item of Form N-8B-2 Prospectus Caption
- ------------------- ------------------
1 Cover Page; Basic Questions and Answers About
Us and Our Policy
2 Cover Page
3 Not Applicable
4 Sales and Other Agreements
5 The Separate Account
6 The Separate Account
9 Legal Proceedings
10 General Provisions of the Policy; Death
Benefit Under the Policy; Free Look
Provision; Exchange Privilege; Cash Value and
Cash Surrender Value; Loans; The Separate
Account; The Fixed Account; Charges Under the
Policy; Sales and Other Agreements; When We
Pay Proceeds; Payment Options; Our Rights;
Your Voting Rights; Basic Questions and
Answers About Us and Our Policy
11 The Separate Account; MainStay VP Series
Fund, Inc.; The Alger American Fund; Acacia
Capital Corporation; Fidelity Variable
Insurance Products Fund and Fidelity Variable
Insurance Products Fund II; Janus Aspen
Series; Morgan Stanley Universal Funds, Inc.
12 Cover Page; The Separate Account; Sales and
Other Agreements
13 The Separate Account; Charges Under the
Policy; MainStay VP Series Fund, Inc.; The
Alger American Fund; Acacia Capital
Corporation; Fidelity Variable Insurance
Products Fund and Fidelity Variable Insurance
Products Fund II; Janus Aspen Series; Morgan
Stanley Universal Funds, Inc.
14 Basic Questions and Answers About Us and Our
Policy; The Separate Account; Sales and Other
Agreements
15 Basic Questions and Answers About Us and Our
Policy; General Provisions of the Policy
16 The Separate Account; Investment Return;
Basic Questions and Answers About Us and Our
Policy; MainStay VP Series Fund, Inc.; The
Alger American Fund; Acacia Capital
Corporation; Fidelity Variable Insurance
Products Fund and Fidelity Variable Insurance
Products Fund II; Janus Aspen Series; Morgan
Stanley Universal Funds, Inc.
<PAGE>
Item of Form N-8B-2 Prospectus Caption
- ------------------- ------------------
17 Cash Surrender Value; Partial Withdrawals;
General Provisions of the Policy
18 The Separate Account; MainStay VP Series
Fund, Inc.; The Alger American Fund; Acacia
Capital Corporation; Fidelity Variable
Insurance Products Fund and Fidelity Variable
Insurance Products Fund II; Janus Aspen
Series; Morgan Stanley Universal Funds, Inc.;
Investment Return
19 Records and Reports
20 Not Applicable
21 Loans
22 Not Applicable
23 Not Applicable
24 Additional Provisions of the Policy
25 What are NYLIAC and New York Life?
26 Not Applicable
27 What are NYLIAC and New York Life?
28 Directors and Principal Officers of NYLIAC
29 What are NYLIAC and New York Life?
30 Not Applicable
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Not Applicable
37 Not Applicable
38 Sales and Other Agreements
39 Sales and Other Agreements
40 Not Applicable
41 Sales and Other Agreements
42 Not Applicable
<PAGE>
Item of Form N-8B-2 Prospectus Caption
- ------------------- ------------------
43 Not Applicable
44 The Separate Account; Investment Return;
General Provisions of the Policy
45 Not Applicable
46 The Separate Account; Investment Return
47 The Separate Account; MainStay VP Series
Fund, Inc.; The Alger American Fund; Acacia
Capital Corporation; Fidelity Variable
Insurance Products Fund and Fidelity Variable
Insurance Products Fund II; Janus Aspen
Series; Morgan Stanley Universal Funds, Inc.
48 Not Applicable
49 Not Applicable
50 The Separate Account
51 Cover Page; Basic Questions and Answers About
Us and Our Policy
52 The Separate Account; Our Rights
53 Federal Income Tax Considerations
54 Not Applicable
55 Not Applicable
59 Financial Statements
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such state.
Subject to Completion January 2, 1997
NYLIAC CORPORATE SPONSORED VARIABLE UNIVERSAL LIFE SEPARATE ACCOUNT-I
PROSPECTUS DATED , 1997
FOR
CORPORATE SPONSORED VARIABLE
UNIVERSAL LIFE INSURANCE POLICIES
OFFERED BY
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
(A DELAWARE CORPORATION)
51 MADISON AVENUE, NEW YORK, NEW YORK 10010
This prospectus describes a flexible premium corporate sponsored variable
universal life insurance policy offered by New York Life Insurance and
Annuity Corporation ("NYLIAC"). The policy provides insurance protection for
group or sponsored arrangements. Group arrangements include those in which a
trustee or an employer, for example, purchases policies covering a group of
individuals on a group basis. Sponsored arrangements include those in which
an employer allows us to sell policies to its employees or retirees on an
individual basis. The policy offers flexible premium payments, a choice of
two death benefit options, loan privileges, increases and decreases to the
policy's face amount of insurance and a choice of funding options, including
a guaranteed interest option and eighteen variable investment options. The
variable investment options invest in a corresponding portfolio of a mutual
fund, as specified below:
MAINSTAY VP SERIES FUND, INC.
o MainStay VP Capital Appreciation
o MainStay VP Cash Management
o MainStay VP Convertible
o Mainstay VP Government
o MainStay VP High Yield Corporate Bond
o MainStay VP International Equity
o MainStay VP Total Return
o MainStay VP Value
o MainStay VP Bond
o MainStay VP Growth Equity
o MainStay VP Indexed Equity
THE ALGER AMERICAN FUND
o Alger American Small Capitalization
ACACIA CAPITAL CORPORATION
o Calvert Socially Responsible
FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS II
o Fidelity VIP Contrafund
FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS
o Fidelity VIP Equity-Income
JANUS ASPEN SERIES
o Janus Aspen Balanced
o Janus Aspen Worldwide Growth
MORGAN STANLEY UNIVERSAL FUNDS, INC.
o Morgan Stanley Emerging Markets Equity
We do not guarantee the investment performance of these investment options,
which involve varying degrees of risk.
The death benefit may, and the cash surrender value of a policy will, vary
up or down depending on the performance of the investment options. There is
no guaranteed minimum cash surrender value for a policy. However, a policy's
death benefit will never be less than its face amount, less outstanding
policy debt. Although premiums are flexible, additional premiums may be
required to keep the policy in effect. The policy may terminate if its cash
surrender value (net of any policy debt) is too small to pay the policy's
monthly charges, or if there is an excess loan and a late period expires
without sufficient payment.
You can borrow against or withdraw money from the policy, within limits.
Loans and withdrawals will reduce the policy's death benefit and cash
surrender value. You can also surrender the policy. A surrender charge will
apply if you surrender the policy during the first nine policy years. This
charge may also apply if you request a reduction of the face amount or if the
policy terminates.
You may examine the policy for a limited period and cancel it for a full
refund of the greater of cash value or premiums paid. Replacing existing
insurance with this policy may not be to your advantage.
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.
This prospectus should be read and retained for further reference; it
contains information that should be known before investing in a NYLIAC
corporate sponsored variable universal life insurance policy. This prospectus
is valid only when accompanied by the prospectuses of the MainStay VP Series
Fund., Inc., The Alger American Fund, the Acacia Capital Corporation, the
Fidelity Variable Insurance Products Fund II, the Fidelity Variable Insurance
Products Fund, the Janus Aspen Series and the Morgan Stanley Universal Funds,
Inc.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SECTION I: DEFINITION OF TERMS ............ 4
SECTION II: BASIC QUESTIONS AND ANSWERS
ABOUT US AND OUR POLICY .................. 7
1. What are NYLIAC and New York Life? ... 7
2. What variable life insurance policy
are we offering? ..................... 7
3. How is the Policy available? ......... 7
4. What is the Cash Value of the Policy ? 7
5. What are the Investment Divisions of
the Separate Account? ................ 8
6. How is the value of an Accumulation
Unit determined? ..................... 8
7. What is the Fixed Account? ........... 8
8. Does the Policy have a Cash Surrender
Value? ............................... 9
9. How long will the Policy remain in
force? ............................... 9
10. Is the amount of the Death Benefit
guaranteed?.......................... 9
11. Is the Death Benefit subject to
income taxes? ....................... 9
12. What is a modified endowment
contract? ........................... 9
13. Can the Policy become a modified
endowment contract? ................. 10
14. What are planned Premiums? .......... 10
15. What are unplanned Premiums? ........ 10
16. What happens when the first Premium
is paid? ............................ 10
17. When are subsequent Premiums put
into the Fixed Account and the
Separate Account? ................... 10
18. How are Net Premiums allocated among
the Allocation Alternatives? ........ 10
19. What are the current charges against
the Policy? ......................... 11
20. Are loans available under the
Policy? ............................. 11
21. Do I have a right to cancel? ........ 11
22. Can the Policy be exchanged? ........ 11
SECTION III: CHARGES UNDER
THE POLICY ............................... 12
Deductions from Premiums ................ 12
Sales Expense Charge ................... 12
Premium Tax Charge ..................... 12
Federal Tax Charge ..................... 12
Deductions from Accumulation Value and
Fixed Account Value ................... 12
Monthly Contract Charge ................ 12
Cost of Insurance Charge .............. 12
Deductions from the Separate Account .... 13
Mortality and Expense Risk Charge ..... 13
Other Charges for Federal Income
Taxes ................................ 13
Fund Charges ............................ 13
Surrender Charge ........................ 15
How the Policy Works .................... 16
SECTION IV: THE SEPARATE ACCOUNT, THE
FUNDS AND THE FIXED ACCOUNT .............. 17
The Separate Account .................... 17
Your Voting Rights ..................... 17
Our Rights ............................. 18
MainStay VP Series Fund, Inc. ........... 18
The Alger American Fund ................. 19
Acacia Capital Corporation .............. 19
Fidelity Variable Insurance Products
Fund and Fidelity Variable Insurance
Products Fund II ...................... 19
Janus Aspen Series ...................... 20
Morgan Stanley Universal Funds, Inc. .... 20
The Portfolios .......................... 21
The Fixed Account ....................... 24
Interest Crediting .................... 25
Transfers to Investment Divisions ..... 25
Investment Return ....................... 25
SECTION V: GENERAL PROVISIONS OF THE
POLICY .................................... 26
Premiums ................................ 26
2
<PAGE>
PAGE
--------
Termination ........................... 26
Death Benefit Under the Policy ........ 26
Selection of Life Insurance
Benefit Table ........................ 27
Corridor Table ....................... 27
CVAT Table ........................... 28
The Effect of Investment
Performance on the Death
Benefit .............................. 29
Face Amount Changes .................. 29
Life Insurance Benefit Option Changes 30
Cash Value and Cash Surrender Value . 30
Cash Value .......................... 30
Cash Surrender Value ................ 30
Transfers .............................. 30
Partial Withdrawals .................... 31
Loans .................................. 31
Loan Account ........................ 31
Loan Interest ....................... 32
Repayment ........................... 32
Free Look Provision .................... 32
Exchange Privilege ..................... 32
SECTION VI: ADDITIONAL INFORMATION .... 34
Directors and Principal Officers of
NYLIAC ................................ 34
Federal Income Tax Considerations ..... 36
Tax Status of NYLIAC and the Separate
Account ............................. 36
Charges for Taxes .................. 36
Diversification Standards and
Control Issues .................... 36
Life Insurance Status of Policy .... 37
Modified Endowment Contract Status 38
Surrenders and Partial Withdrawals 38
Loans and Interest Deductions ...... 39
Corporate Alternative Minimum Tax 39
Exchanges or Assignments of
Policies .......................... 40
Other Tax Issues ................... 40
Withholding ........................ 40
Reinstatement Option ................... 40
Additional Benefits Available by Rider 41
Adjustable Term Insurance Rider ...... 41
Payment Options ........................ 41
Payees .............................. 41
Proceeds at Interest Options
(Options 1A and 1B) ................ 42
Life Income Option (Option 2) ....... 42
Beneficiary ............................ 42
Change of Ownership .................... 43
Assignment ............................. 43
Limits on Our Rights to Challenge the
Policy ................................ 43
Misstatement of Age or Sex ............. 43
Suicide ................................ 43
When We Pay Proceeds ................... 43
Records and Reports .................... 44
Sales and Other Agreements ............. 44
Legal Proceedings ...................... 44
Independent Accountants ................ 45
Experts ................................ 45
APPENDIX A: ILLUSTRATIONS ............... A-1
APPENDIX B: SURRENDER CHARGE PREMIUM
RATES PER THOUSAND ...................... B-1
FINANCIAL STATEMENTS .................... F-1
</TABLE>
THE POLICY IS NOT AVAILABLE IN ALL JURISDICTIONS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE. NYLIAC DOES NOT AUTHORIZE ANY INFORMATION OR
REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS OTHER
THAN AS CONTAINED IN THIS PROSPECTUS OR ANY ATTACHED SUPPLEMENT THERETO OR IN
ANY SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY NYLIAC.
3
<PAGE>
SECTION I:
DEFINITION OF TERMS
ACCUMULATION UNITS: Accumulation Units are the accounting units used to
calculate the value in the Investment Divisions. Net Premiums and transfers
that are allocated to the Investment Divisions purchase Accumulation Units in
those Investment Divisions.
ACCUMULATION VALUE: The dollar value of the sum of the Accumulation Units in
all of the Investment Divisions.
ALLOCATION ALTERNATIVES: The 18 Investment Divisions of the Separate Account
and the Fixed Account.
BENEFICIARY: The person(s) and/or entity(ies) named by the Policyowner to
receive the Death Benefit after the Insured dies.
BUSINESS DAY: Generally, our Business Day is any day on which NYLIAC is open
and the New York Stock Exchange is open for trading. We are closed on
national business holidays, Martin Luther King Jr. Day, the Friday after
Thanksgiving and Christmas Eve. Additionally, we may choose to close on the
day immediately preceding or following a national business holiday or due to
emergency conditions. Our Business Day ends at 4:00 p.m. Eastern Time or the
closing of the New York Stock Exchange, if earlier. Policy transactions such
as Loans, Premium payments, Face Amount changes, Partial Withdrawals,
Surrenders and transfers of Cash Value among Allocation Alternatives are
processed on Business Days.
CASH SURRENDER VALUE: An amount equal to the Cash Value less any surrender
charges.
CASH VALUE: The sum of (a) the Accumulation Value, (b) the Fixed Account
Value and (c) the Loan Account Value of the Policy.
CODE: The Internal Revenue Code of 1986, as amended.
DEATH BENEFIT: The amount payable to the named Beneficiary when the Insured
dies. The Death Benefit is equal to the amount calculated under the
applicable Life Insurance Benefit Option, plus any Death Benefit payable
under a Policy rider, less any Policy Debt.
FACE AMOUNT: The initial face amount shown on page 2 of the Policy, plus or
minus any changes made to the face amount, plus the face amount of any riders
in effect.
FIXED ACCOUNT: The Allocation Alternative that pays interest at guaranteed
fixed rates and is part of our General Account.
FIXED ACCOUNT VALUE: The dollar value of the sum of the Net Premiums and
transfers allocated to the Fixed Account, plus interest credited, less
amounts withdrawn, deductions and charges taken and/or amounts transferred
from the Fixed Account.
FREE LOOK PERIOD: The period commencing on the Policy Delivery Date and
ending 20 days later (10 days later in New York).
FUNDS (EACH, INDIVIDUALLY, A "FUND"): The MainStay VP Series Fund, Inc.
("MainStay VP Series Fund" and, formerly, "New York Life MFA Series Fund,
Inc."), The Alger American Fund ("The Alger American Fund"), the Acacia
Capital Corporation ("Acacia Fund"), the Fidelity Variable Insurance Products
Fund and the Fidelity Variable Insurance Products Fund II (collectively, the
"Fidelity Variable Insurance Products Funds" or the "Fidelity Funds"), the
Janus Aspen Series and the Morgan Stanley Universal Funds, Inc. ("Morgan
Stanley Fund").
4
<PAGE>
GENERAL ACCOUNT: An account representing all of NYLIAC's assets, liabilities,
capital and surplus, income, gains or losses that are not included in the
Separate Account or any other NYLIAC separate account.
INSURED: The person whose life the Policy insures.
INVESTMENT DIVISIONS: The 18 divisions of the Separate Account that are
available as Allocation Alternatives under the Policy.
ISSUE DATE: The date we issue the Policy, as shown on page 2 of the Policy.
LOAN ACCOUNT: The account that holds a portion of Cash Value for the purpose
of securing Policy Debt. It is part of our General Account.
LOAN ACCOUNT VALUE: The dollar value of the amounts transferred to the Loan
Account plus interest credited, less amounts transferred out of the Loan
Account.
LIFE INSURANCE BENEFIT OPTION: Two Life Insurance Benefit Options are
available under the Policy:
OPTION 1--Provides a life insurance benefit equal to the greater of (a) the
Face Amount or (b) the Cash Value times the percentage in the appropriate
Code Section 7702 table.
OPTION 2--Provides a life insurance benefit equal to the greater of (a) the
Face Amount plus the Cash Value or (b) the Cash Value times the percentage in
the appropriate Code Section 7702 table.
MAINSTAY VP SERIES FUND: MainStay VP Series Fund, Inc., a diversified,
open-end management investment company registered under the Investment
Company Act of 1940.
MINIMUM FACE AMOUNT: $25,000.
MONTHLY DEDUCTION DAY: The date as of which the monthly contract charge, the
cost of insurance charge and a rider charge for the cost of any additional
riders are deducted from the Cash Value. The first Monthly Deduction Day will
be the Policy Date, and subsequent Monthly Deduction Days will be on each
monthly anniversary of the Policy Date.
NET PREMIUM: Premium paid less the sales expense, premium tax and federal tax
charges.
NON-QUALIFIED POLICIES: Policies that do not qualify for special federal
income tax treatment.
PARTIAL WITHDRAWAL: A withdrawal of a portion of the Cash Value by the
Policyowner.
POLICY: The flexible premium corporate sponsored variable universal life
insurance policy offered by NYLIAC that is described in this prospectus.
POLICY ANNIVERSARY: The anniversary of the Policy Date.
POLICYOWNER: The person(s) and/or entity(ies) who own(s) the Policy and have
(has) all rights of ownership in the Policy while the Insured is living.
POLICY DATE: The date shown on page 2 of the Policy, which is the starting
point for determining Policy Anniversaries, Policy Years and Monthly
Deduction Days.
POLICY DEBT: The amount of any outstanding loans under the Policy, including
accrued interest.
POLICY DELIVERY DATE: The date the Policy is signed for and received by the
Policyowner, as indicated on the Policy delivery receipt.
5
<PAGE>
POLICY YEAR: The twelve month period commencing with the Policy Date, and
each twelve month period thereafter.
PORTFOLIOS: The available mutual fund Portfolios of the Funds. The MainStay
VP Series Fund currently has eleven Portfolios available for investment by
the Investment Divisions of the Separate Account: the MainStay VP Capital
Appreciation, MainStay VP Cash Management, MainStay VP Convertible, MainStay
VP Government, MainStay VP High Yield Corporate Bond, MainStay VP
International Equity, MainStay VP Total Return, MainStay VP Value, MainStay
VP Bond, MainStay VP Growth Equity and MainStay VP Indexed Equity Portfolios.
The Alger American Fund has one Portfolio available to the Separate Account:
the Alger American Small Capitalization Portfolio. The Acacia Fund has one
Portfolio available to the Separate Account: the Calvert Responsibly Invested
Balanced Portfolio ("Calvert Socially Responsible Portfolio"). The Fidelity
Funds have two Portfolios available to the Separate Account: the Contrafund
Portfolio of the Fidelity Variable Insurance Products Fund II ("Fidelity VIP
Contrafund Portfolio") and the Equity-Income Portfolio of the Fidelity
Variable Insurance Products Fund ("Fidelity VIP Equity-Income Portfolio").
The Janus Aspen Series has two Portfolios available to the Separate Account:
the Balanced Portfolio ("Janus Aspen Balanced Portfolio") and the Worldwide
Growth Portfolio ("Janus Aspen Worldwide Growth Portfolio"). The Morgan
Stanley Fund has one Portfolio available to the Separate Account: the
Emerging Markets Equity Portfolio of the Morgan Stanley Universal Funds, Inc.
("Morgan Stanley Emerging Markets Equity Portfolio").
PREMIUM: A dollar amount contributed to the Policy.
PREMIUM REMITTANCE CENTER:
SEC: The Securities and Exchange Commission.
SEPARATE ACCOUNT: NYLIAC Corporate Sponsored Variable Universal Life
Separate Account-I, a segregated asset account established by NYLIAC to
receive and invest Premiums paid under Policies.
SERVICE OFFICE: New York Life Insurance and Annuity Corporation
NYLIFE Distributors Inc.
Attention: Executive Benefits
920 Main Street, Suite 2100
Kansas City, MO 64105
Telephone: (816) 889-4000
SURRENDER: A surrender by the Policyowner of all rights under the Policy in
exchange for the Policy's Cash Surrender Value, less any Policy Debt.
VALUATION PERIOD: The period, consisting of one or more days, from one
Valuation Time to the next succeeding Valuation Time.
VALUATION TIME: The time of the close of the New York Stock Exchange
(currently 4:00 p.m. New York time) on any day on which the New York Stock
Exchange is open except the day after Thanksgiving and Christmas Eve.
WE OR US: NYLIAC.
YOU: The Policyowner.
6
<PAGE>
SECTION II:
BASIC QUESTIONS AND ANSWERS ABOUT US AND OUR POLICY
1. WHAT ARE NYLIAC AND NEW YORK LIFE?
New York Life Insurance and Annuity Corporation ("NYLIAC") is a stock life
insurance company incorporated in Delaware in 1980. NYLIAC is licensed to
sell life, accident and health insurance and annuities in all states and the
District of Columbia. NYLIAC is the issuer of the Policies and the depositor
of the Separate Account. In addition to the Policies described in this
prospectus, NYLIAC issues other life insurance policies and annuities and is
the depositor for their respective separate accounts. NYLIAC's Financial
Statements are included herein.
NYLIAC is a wholly-owned subsidiary of New York Life Insurance Company
("New York Life"), a mutual insurance company founded in New York in 1845.
New York Life had consolidated total assets amounting to $74.3 billion at the
end of 1995, and is authorized to do business in all states, the District of
Columbia and the Commonwealth of Puerto Rico. New York Life has invested in
NYLIAC, and may, in order to maintain capital and surplus in accordance with
state requirements, occasionally make additional contributions to NYLIAC.
2. WHAT VARIABLE LIFE INSURANCE POLICY ARE WE OFFERING?
In this prospectus we are offering a Flexible Premium Corporate Sponsored
Variable Universal Life Insurance Policy. We issue the Policy to provide for
a Death Benefit, Cash Surrender Value, loan privileges and flexible Premiums.
It is called "flexible" because the Policyowner may select the timing and
amount of Premiums and adjust the Death Benefit by increasing or decreasing
the Face Amount (subject to certain restrictions). It is called "variable"
because, unlike the fixed benefits of a traditional whole life policy, the
Death Benefits may, and Cash Surrender Values will, vary up or down depending
on the performance of the Investment Division(s) to which Cash Value has been
allocated.
The Policy is a legal contract between the Policyowner and NYLIAC. The
entire contract consists of the Policy, the application for the Policy and
any riders to the Policy.
3. HOW IS THE POLICY AVAILABLE?
The Policy is available as a Non-Qualified Policy. The minimum Face Amount
of a Policy is $25,000. Increases are subject to our underwriting rules in
effect at the time of the request. The Insured may not be older than age 85
as of the Policy Date or the date of any increase in Face Amount. Before
issuing any Policy we will require satisfactory evidence of insurability. For
certain eligible groups, the Policy may be issued based on guaranteed issue
or simplified underwriting rules and procedures as defined by us.
In Massachusetts and Montana, the Policy is issued only on a unisex basis,
and we may issue on this basis in other states as well. For Policies issued
on a unisex basis, any reference in this prospectus that makes a distinction
based on the gender of the Insured shall be disregarded.
4. WHAT IS THE CASH VALUE OF THE POLICY?
The Cash Value is determined by the amount, frequency and timing of
Premiums, the investment experience of the Investment Divisions chosen by the
Policyowner, the interest
7
<PAGE>
earned on amounts in the Fixed Account and the Loan Account, and any Partial
Withdrawals or charges imposed in connection with the Policy. The Policyowner
bears the investment risk of any depreciation in value of the underlying
assets of the Investment Divisions, but he or she also reaps the benefit of
any appreciation in their value.
5. WHAT ARE THE INVESTMENT DIVISIONS OF THE SEPARATE ACCOUNT?
You may allocate Net Premiums to, or transfer amounts among, a total of
nineteen Allocation Alternatives, the Fixed Account and eighteen Investment
Divisions of the Separate Account--the MainStay VP Capital Appreciation
Division, the MainStay VP Cash Management Division, the MainStay VP
Convertible Division, the MainStay VP Government Division, the MainStay VP
High Yield Corporate Bond Division, the MainStay VP International Equity
Division, the MainStay VP Total Return Division, the MainStay VP Value
Division, the MainStay VP Bond Division, the MainStay VP Growth Equity
Division, the MainStay VP Indexed Equity Division, the Alger American Small
Capitalization Division, the Calvert Socially Responsible Division, the
Fidelity VIP Contrafund Division, the Fidelity VIP Equity-Income Division,
the Janus Aspen Balanced Division, the Janus Aspen Worldwide Growth Division
and the Morgan Stanley Emerging Markets Equity Division. Each Investment
Division invests only in the shares of a corresponding Portfolio of the
relevant Fund. Because amounts allocated to the Investment Divisions are
invested in mutual funds, investment return and principal will fluctuate and
your Accumulation Units may be worth more or less than their original cost
when redeemed.
6. HOW IS THE VALUE OF AN ACCUMULATION UNIT DETERMINED?
The value of an Accumulation Unit on any Business Day is determined by
multiplying the value of that unit on the immediately preceding Business Day
by the net investment factor for the Valuation Period. The net investment
factor used to calculate the value of an Accumulation Unit in any Investment
Division for the Valuation Period is determined by dividing (a) by (b) and
subtracting (c) from the result, where:
(a) is the sum of:
(1) the net asset value of a Portfolio share held in the Separate
Account for that Investment Division determined at the end of the
current Valuation Period, plus
(2) the per share amount of any dividends or capital gain
distributions made by the Portfolio for shares held in the Separate
Account for that Investment Division if the ex-dividend date occurs
during the Valuation Period.
(b) is the net asset value of a Portfolio share held in the Separate
Account for that Investment Division determined as of the end of the
immediately preceding Valuation Period.
(c) is a factor representing the mortality and expense risk charge. This
factor accrues daily and is currently equal, on an annual basis, to .70%
of the value of each Investment Division's assets (for Policy Years one
through ten) or .30% of the value of each Investment Division's assets
(for Policy Years eleven and later).
7. WHAT IS THE FIXED ACCOUNT?
In addition to the Investment Divisions, you may allocate or transfer
amounts to the Fixed Account. Net Premiums applied to and any amounts
transferred to the Fixed Account are
8
<PAGE>
credited with interest using a fixed interest rate that we will set in
advance at least annually. This rate will never be less than 4% per year.
Interest accrues daily and is credited on each Monthly Deduction Day. All Net
Premiums applied to, or amounts transferred to, the Fixed Account receive the
interest rate in effect at that time.
8. DOES THE POLICY HAVE A CASH SURRENDER VALUE?
The Policyowner may surrender the Policy at any time and receive its Cash
Surrender Value less any Policy Debt. Partial Withdrawals are also allowed
subject to certain restrictions. See "Section V: General Provisions of the
Policy--Cash Value and Cash Surrender Value." The Cash Surrender Value of a
Policy fluctuates with the investment performance of the Investment Divisions
in which the Policy has Cash Value and the amounts held in the Fixed Account
and the Loan Account. It may increase or decrease daily.
For federal income tax purposes, the Policyowner usually is not taxed on
increases in the Cash Surrender Value until he or she actually surrenders the
Policy. However, in connection with certain Partial Withdrawals and loans on
the Policy, the Policyowner may be taxed on all or a part of the amount
distributed. See "Section V: General Provisions of the Policy--Cash Value and
Cash Surrender Value" and "Section VI: Additional Information--Federal Income
Tax Considerations."
9. HOW LONG WILL THE POLICY REMAIN IN FORCE?
The Policy does not automatically terminate for failure to pay planned
Premiums. Payment of these Premiums, however, does not guarantee the Policy
will remain in force. The Policy terminates only when the Cash Surrender
Value less any Policy Debt is insufficient to pay the charges deducted on
each Monthly Deduction Day or where there is an excess loan, and a late
period expires without sufficient payment.
10. IS THE AMOUNT OF THE DEATH BENEFIT GUARANTEED?
As long as the Policy remains in force, the proceeds payable under the
Policy will be based on the Life Insurance Benefit Option in effect on the
date of death. Death Benefit proceeds will, however, be reduced by any
outstanding Policy Debt, and/or increased by any additional Death Benefits
added by rider.
11. IS THE DEATH BENEFIT SUBJECT TO INCOME TAXES?
A Death Benefit paid under our Policies may be fully excludable from the
gross income of the Beneficiary for federal income tax purposes. See "Section
VI: Additional Information--Federal Income Tax Considerations."
12. WHAT IS A MODIFIED ENDOWMENT CONTRACT?
A modified endowment contract, as defined in the Code, is a life insurance
policy under which the cumulative premiums paid during the first seven policy
years exceed the cumulative premiums payable under a hypothetical policy
providing for guaranteed benefits upon the payment of seven level annual
premiums. Certain changes to a policy can subject it to retesting for a new
seven-year period. If your Policy is determined to be a modified endowment
contract, any distributions, including collateral assignments, loans and
Partial Withdrawals, are taxable to the extent that such distributions
represent income. In addition you may incur a penalty tax if you are not yet
age 59 1/2 and no other exceptions, as set forth in the Code, are applicable.
9
<PAGE>
13. CAN THE POLICY BECOME A MODIFIED ENDOWMENT CONTRACT?
Since the Policy permits flexible Premium payments, it may become a
modified endowment contract. NYLIAC currently tests a Policy at issue to
determine whether it will be classified as a modified endowment contract.
This at-issue test examines the Policy for the first seven Policy Years,
based on the Policy application and the first Premium requested, and based on
the assumption that there are no increases in Premiums or decreases in
benefits during the period. NYLIAC has also instituted procedures to monitor
whether a Policy may become a modified endowment contract after issue. See
"Section VI: Additional Information--Federal Income Tax
Considerations--Modified Endowment Contract Status."
14. WHAT ARE PLANNED PREMIUMS?
The amount and interval of any planned Premiums are shown on page 2 of the
Policy. A planned Premium does not have to be paid to keep the Policy in
force if the Cash Surrender Value, less any Policy Debt, is sufficient to
cover the charges made on the Monthly Deduction Day. The amount of any
planned Premium may be increased or decreased subject to the limits we set.
The frequency of Premiums may also be changed subject to our minimum Premium
rules. Planned Premiums end on the Policy Anniversary on which the Insured is
age 95.
15. WHAT ARE UNPLANNED PREMIUMS?
While the Insured is living, you may make unplanned Premium payments at
any time prior to the Policy Anniversary on which the Insured is age 95. If
an unplanned Premium would result in an increase in the Death Benefit greater
than the increase in the Cash Value, we reserve the right to require proof of
insurability before accepting that payment and applying it to the Policy. We
also reserve the right to limit the number and amount of any unplanned
Premiums. See "Section V: General Provisions of the Policy--Premiums."
16. WHAT HAPPENS WHEN THE FIRST PREMIUM IS PAID?
The first premium (and any other Premiums received on or before the last
day of the Free Look Period) will be allocated to the General Account. Sales
expense, premium tax and federal tax charges are deducted from Premiums on
the Issue Date; however, deductions made on the Issue Date will be calculated
as of the later of the Policy Date or the date they are received. Also, the
monthly contract charge, cost of insurance charge and cost for any riders are
deducted as of the Policy Date and as of each subsequent Monthly Deduction
Day. The Net Premium less the monthly charges will remain in the General
Account through the last day of the Free Look Period. Net Premiums less the
monthly charges plus interest will then be allocated to the Investment
Divisions or to the Fixed Account in accordance with the Policyowner's
instructions.
17. WHEN ARE SUBSEQUENT PREMIUMS PUT INTO THE FIXED ACCOUNT AND THE
SEPARATE ACCOUNT?
Upon receipt, Net Premiums will be applied to the Separate Account at the
Accumulation Unit value determined at the end of the Valuation Period, and to
the Fixed Account in accordance with your allocation election in effect at
that time, and before any other charges that may be due are deducted.
18. HOW ARE NET PREMIUMS ALLOCATED AMONG THE ALLOCATION ALTERNATIVES?
You may maintain Accumulation Value in all 19 Allocation Alternatives.
Moreover, you may raise or lower the percentages of the Net Premium (which
must be in whole number percentages) allocated to each Allocation Alternative
at any time.
10
<PAGE>
19. WHAT ARE THE CURRENT CHARGES AGAINST THE POLICY?
Three charges are deducted from each Premium, whether planned or
unplanned. A sales expenses charge of 2.25% is used to partially cover sales
expenses. Deductions of 2% and 1.25% are also made for premium tax and
federal tax charges, respectively.
In addition, on each Monthly Deduction Day, the following deductions are
made:
(a) a monthly contract charge equal to $7.50 ($90.00 annually);
(b) a monthly cost of insurance charge; and
(c) the monthly cost for any riders attached to the Policy.
A deduction may also be made for any temporary flat extras as set forth on
page 2 of the Policy. A temporary flat extra is a charge per $1,000 of Face
Amount made against the Cash Value for the amount of time specified on the
Policy data page. It is designed to cover the risk of substandard mortality
experience which is not permanent in nature.
The Monthly Deduction Day for the Policy is shown on page 2 of the Policy.
The first Monthly Deduction Day is the Policy Date. All monthly deductions
are made from each of the Investment Divisions and the Fixed Account in
proportion to the amount in each.
Also, a mortality and expense risk charge is made on a daily basis against
the assets of each Investment Division. For Policy Years one through ten,
this charge is calculated at an effective annual rate of .70% of the value of
each Investment Division's assets. For Policy Years eleven and later, the
mortality and expense risk charge is calculated at an effective annual rate
of .30% of the value of each Investment Division's assets. The mortality and
expense risk charge may be changed at NYLIAC's option subject to a maximum
annual effective rate of .90%.
Currently, we are not making any charges for income taxes, but we may make
charges in the future against the Separate Account for federal income taxes
attributable to it.
Additionally, upon a surrender or a requested decrease in Face Amount
during the first nine Policy years, a surrender charge is assessed. Partial
Withdrawals of Cash Value are subject to a charge equal to the lesser of $25
or 2% of the amount withdrawn.
See "Section III: Charges Under the Policies" and "Section VI: Additional
Information--Federal Income Tax Considerations."
20. ARE LOANS AVAILABLE UNDER THE POLICY?
Using the Policy as sole security, you can borrow any amount up to the
loan value of the Policy. The loan value on any given date is equal to 90% of
the Cash Surrender Value, less any Policy Debt.
21. DO I HAVE A RIGHT TO CANCEL?
The Policy contains a provision that permits you to cancel the Policy at
any time during the Free Look Period and receive a refund. The Policy may be
returned to our Service Office or to the registered representative who sold
you the Policy. See "Section V: General Provisions of the Policy--Free Look
Provision."
22. CAN THE POLICY BE EXCHANGED?
You have the right during the first 24 months following the Issue Date to
exchange the Policy for a permanent plan of life insurance offered by us for
this purpose. See "Section V: General Provisions of the Policy--Exchange
Privilege."
11
<PAGE>
SECTION III:
CHARGES UNDER THE POLICY
Certain charges are deducted to compensate for providing the insurance
benefits under the Policy, for any riders, for administering the Policy, for
assuming certain risks, and for incurring certain expenses in distributing
the Policy.
DEDUCTIONS FROM PREMIUMS
When we receive a Premium, whether planned or unplanned, we will deduct a
sales expense charge, a premium tax charge and a federal tax charge.
SALES EXPENSE CHARGE.
The sales expense charge is 2.25% of any Premium. We reserve the right to
increase this charge in the future, but it will never exceed 4.5% of
Premiums. The amount of the sales expense charge in a Policy Year is not
necessarily related to our actual sales expenses for that particular year. To
the extent that sales expenses are not covered by the sales expense charge
and the surrender charge, they will be recovered from NYLIAC surplus,
including any amounts derived from the mortality and expense risk charge and
the cost of insurance charge.
PREMIUM TAX CHARGE.
Various states and jurisdictions impose a tax on premiums received by
insurance companies. Premium tax rates vary from state to state and currently
range from 0.75% to 3.00%. We deduct 2% of each Premium to cover state
premium taxes. Two percent represents the approximate average of the premium
taxes assessed by the states, and will be assessed uniformly to all Policies.
NYLIAC reserves the right to increase this charge consistent with changes in
applicable law.
FEDERAL TAX CHARGE.
NYLIAC's federal tax obligations will increase based upon Premiums
received under the Policies. We deduct 1.25% of each Premium to cover this
federal tax charge. NYLIAC reserves the right to increase this charge
consistent with changes in applicable law.
DEDUCTIONS FROM ACCUMULATION VALUE AND FIXED ACCOUNT VALUE
On each Monthly Deduction Day, a monthly contract charge, a cost of
insurance charge, and a rider charge for the cost of any additional riders
are deducted from the Investment Divisions and the Fixed Account in
proportion to the amount in each.
MONTHLY CONTRACT CHARGE.
There is a monthly charge currently equal to $7.50 ($90.00 annually) that
compensates NYLIAC for costs incurred in providing certain administrative
services including Premium collection, recordkeeping, processing claims and
communicating with Policyowners. This charge is not designed to produce a
profit. If the cost of providing these administrative services increases, we
reserve the right to increase this charge, subject to a maximum of $9.00
monthly ($108.00 annually).
COST OF INSURANCE CHARGE.
A charge for the cost of insurance is deducted on each Monthly Deduction
Day. Maximum cost of insurance rates are set forth on page 2.2 of your Policy
and are based on the gender,
12
<PAGE>
smoker class, duration, underwriting class, and issue age of the Insured. The
cost of insurance charge for any month will equal (1) multiplied by the
result of (2) minus (3) where: (1) is the applicable cost of insurance rate
(2) is the number of thousands of Death Benefit as of the Monthly Deduction
Day divided by 1.0032737, and (3) is the number of thousands of Cash Value as
of the Monthly Deduction Day (before this cost of insurance charge, but after
the monthly contract charge and any charges for riders and flat extras are
deducted). In rated cases, an additional charge may be assessed as part of
the cost of insurance charge. Charges for any flat extras and optional
benefits added by rider will also be deducted on each Monthly Deduction Day.
DEDUCTIONS FROM THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE.
We charge the Investment Divisions for the mortality and expense risks we
assume. For Policy Years one through ten, we deduct a daily charge at an
effective annual rate of .70% of the value of each Investment Division's
assets. For Policy Years eleven and later, we deduct a daily charge at an
effective annual rate of .30% of the value of each Investment Division's
assets. The mortality and expense risk charge may be changed at NYLIAC's
option, subject to a maximum of .90%.
The mortality risk we assume is that the group of lives insured under our
Policies may, on average, live for shorter periods of time than we estimated.
The expense risk we assume is that our costs of issuing and administering
Policies may be more than we estimated.
If these charges are insufficient to cover actual costs and assumed risks,
the loss will be deducted from the NYLIAC surplus. Conversely, if the charge
proves more than sufficient, any excess will be added to the NYLIAC surplus.
OTHER CHARGES FOR FEDERAL INCOME TAXES.
We reserve the right to make a charge for Separate Account federal income
tax liabilities, should the law change to require the taxation of separate
accounts. See "Section VI: Additional Information--Federal Income Tax
Considerations."
FUND CHARGES
The Investment Divisions purchase shares of the relevant Funds at net
asset value. The price reflects management fees, administration fees and
other expenses that have already been deducted from the assets of the Funds.
The Funds do not impose a sales charge. Fund charges incurred in 1995 are set
forth in the following table.
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP
CAPITAL CASH MAINSTAY VP MAINSTAY VP
APPRECIATION MANAGEMENT CONVERTIBLE GOVERNMENT
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
FUND ANNUAL EXPENSES
AFTER REIMBURSEMENT
(as a % of average
net assets)
Management Fees ....... 0.36% 0.25% 0.36% 0.30%
Administration Fees .. 0.20% 0.20% 0.20% 0.20%
Other Expenses ........ 0.17% 0.17% 0.17% 0.17%
Total Portfolio Annual
Expenses ............. 0.73%(a) 0.62%(a) 0.73%(b) 0.67%(a)
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
MAINSTAY VP
HIGH YIELD MAINSTAY VP MAINSTAY VP
CORPORATE INTERNATIONAL TOTAL MAINSTAY VP MAINSTAY VP
BOND EQUITY RETURN VALUE BOND
----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
FUND ANNUAL EXPENSES
AFTER REIMBURSEMENT
(as a % of average
net assets)
Management Fees ....... 0.30% 0.60% 0.32% 0.36% 0.25%
Administration Fees .. 0.20% 0.20% 0.20% 0.20% 0.20%
Other Expenses ........ 0.17% 0.17% 0.17% 0.17% 0.17%
Total Portfolio Annual
Expenses ............. 0.67%(a) 0.97%(a) 0.69%(a) 0.73%(a) 0.62%(a)
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
MAINSTAY VP MAINSTAY VP ALGER AMERICAN CALVERT
GROWTH INDEXED SMALL SOCIALLY
EQUITY EQUITY CAPITALIZATION RESPONSIBLE
----------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
FUND ANNUAL EXPENSES
AFTER REIMBURSEMENT
(as a % of average
net assets)
Management Fees ....... 0.25% 0.10% 0.85% 0.70%
Administration Fees .. 0.20% 0.20% -- --
Other Expenses ........ 0.17% 0.17% 0.07% 0.13%
Total Portfolio Annual
Expenses ............. 0.62%(a) 0.47%(a) 0.92% 0.83%(c)
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
FIDELITY VIP JANUS ASPEN MORGAN STANLEY
FIDELITY VIP EQUITY- JANUS ASPEN WORLDWIDE EMERGING
CONTRAFUND INCOME BALANCED GROWTH MARKETS EQUITY
------------ ------------ ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
FUND ANNUAL EXPENSES
AFTER REIMBURSEMENT
(as a % of average
net assets)
Management Fees ....... 0.61% 0.51% 0.82%(d) 0.68%(d) 0.85%
Administration Fees .. -- -- -- -- 0.25%
Other Expenses ........ 0.11% 0.10 % 0.55% 0.22% 0.65%(e)
Total Portfolio Annual
Expenses ............. 0.72% 0.61% 1.37% 0.90% 1.75%(e)
</TABLE>
[FN]
- ------------
(a) Commencing in May 1996, NYLIAC has agreed to pay certain other expenses
which were previously charged to the MainStay VP Series Fund. These
numbers reflect an expense reimbursement agreement effective through
December 31, 1996 limiting "Other Expenses" to 0.17% annually for the
MainStay VP Series Fund. Numbers for the MainStay VP High Yield
Corporate Bond, MainStay VP International Equity and MainStay VP Value
Portfolios have been annualized based on the period from May 1, 1995
(the date of inception) to December 31, 1995. In addition, NYLIAC has
agreed to continue to limit "Other Expenses" to 0.17% annually for the
MainStay VP High Yield Corporate Bond, MainStay VP International Equity
and MainStay VP Value Portfolios until December 31, 1997. In the
absence of the expense reimbursement arrangement and certain other
expenses which will no longer be charged to the MainStay VP Series
Fund, the total annual expenses for the year ended December 31, 1995
would have been 0.64%, 0.59%, 0.62%, 0.52%, 1.17%, 0.61%, 0.67%, 0.56%,
0.56% and 0.42% for the MainStay VP Capital Appreciation, MainStay VP
Cash Management, MainStay VP Government, MainStay VP High Yield
Corporate Bond, MainStay VP International Equity, MainStay VP Total
Return, MainStay VP Value, MainStay VP Bond, MainStay VP Growth Equity
and MainStay VP Indexed Equity Portfolios, respectively.
(b) "Other Expenses" for the MainStay VP Convertible Portfolio are
estimated for 1995. NYLIAC has agreed to limit "Other Expenses" to
0.17% annually for this Portfolio until December 31, 1997. Absent such
limitation, it is estimated that "Other Expenses" and "Total Portfolio
Annual Expenses" would be .36% and .92%, respectively.
(c) The "Advisory Fee" may be reduced or increased by up to 0.15% depending
on the performance of the Calvert Socially Responsible Portfolio
relative to the Lipper Balanced Funds Index. See "Acacia Capital
Corporation" at page 19 and the prospectus to the Acacia Capital
Corporation which is attached to this Prospectus. Calvert Asset
Management Company, Inc. pays, at its own expense, NCM Capital
Management Group, Inc. an annual fee equal to 0.25% of one-half of the
average net assets of the Portfolio. "Other Expenses" reflects a fee of
0.02% paid pursuant to an expense offset arrangement between the
Calvert Socially Responsible Portfolio and its custodian bank. Net
"Total Portfolio Annual Expenses" are 0.81%.
(d) Janus Capital Corporation ("JCC") has agreed to reduce the advisory fee
for each Portfolio to the extent that such fee exceeds the effective
rate of the Janus retail fund corresponding to such Portfolio. JCC may
terminate this fee reduction at any time upon 90 days' notice to the
Board of Trustees of the Janus Aspen Series. Absent such reductions,
"Advisory Fees" and "Total Portfolio Annual Expenses" for the fiscal
year ended December 31, 1995 would have been 1.00% and 1.55%,
respectively, for the Janus Aspen Balanced Portfolio and 0.87% and
1.09%, respectively, for the Janus Aspen Worldwide Growth Portfolio.
(e) "Other Expenses" for the Morgan Stanley Emerging Markets Equity
Portfolio are estimated for the current fiscal year. Morgan Stanley
Asset Management Inc. has agreed to a reduction in its management fees
and to reimburse the Portfolio if such fees would cause the "Total
Portfolio Annual Expenses" to exceed 1.75% of average daily net assets.
Absent such reductions, it is estimated that "Advisory Fees" and "Total
Portfolio Annual Expenses" would be 1.25% and 2.15%, respectively.
14
<PAGE>
SURRENDER CHARGE
During the first nine Policy Years, a surrender charge will be assessed on
a complete surrender or a requested decrease in Face Amount. The surrender
charge is based on the Policy Year in which the surrender or decrease in Face
Amount is made and will be deducted from the Investment Divisions and the
Fixed Account in proportion to the amount in each.
For a surrender, the maximum surrender charge is calculated by multiplying
the applicable percentage shown in the table below by the surrender charge
premium, which appears on page 2.1 of your Policy. A table of surrender
charge premium rates per thousand appears in Appendix B to this prospectus.
<TABLE>
<CAPTION>
PERCENTAGE OF
SURRENDER CHARGE
POLICY YEAR PREMIUM
- --------------- ------------------
<S> <C>
1-5 ............ 32.5%
6 .............. 26.0%
7 .............. 19.5%
8 .............. 13.0%
9 .............. 6.5%
10+ ........... 0%
</TABLE>
A requested decrease in Face Amount will result in the imposition of a
surrender charge equal to the difference between the surrender charge that
would have been payable on a complete surrender prior to the decrease and the
surrender charge that would be payable on a complete surrender after the
decrease. Requested decreases and increases in Face Amount will cause a
corresponding change in the amount of your surrender charge premium.
In no event will the surrender charge exceed 50% of Premiums paid to date,
less (i) any sales expense charges deducted from such Premium payments, less
(ii) any surrender charge previously deducted.
During the first two Policy Years, the surrender charge is further limited
to the sum of: (i) 30% of all Premium payments made during the first two
Policy Years up to one SEC guideline annual premium, plus (ii) 10% of all
Premium payments in the first two Policy Years in excess of one SEC guideline
annual premium, but not more than two SEC guideline annual premiums, plus
(iii) 9% of all Premium payments in the first two Policy Years in excess of
two SEC guideline annual premiums, less (iv) any sales expense charges
deducted from such Premium payments, less (v) any surrender charge previously
deducted. An SEC guideline annual premium is the level annual amount that
would be payable in each Policy Year under certain assumptions defined by the
SEC. These assumptions include cost of insurance charges based on the 1980
Commissioner's Standard Ordinary Mortality Tables, net investment earnings at
an annual rate of 5%, and the guaranteed fees and charges associated with the
Policy.
The percentages specified above and/or the year in which the surrender
charge is reduced may vary for individuals having a life expectancy of less
than 20 years either at the time that a Policy is issued or the Face Amount
is increased.
15
<PAGE>
HOW THE POLICY WORKS.
This example is based on the illustration for the first Policy Year from
page A-1, assuming a 6% hypothetical gross annual investment return and
current charges:
<TABLE>
<CAPTION>
<S> <C> <C>
Planned Annual Premium $7,500.00
less: Sales expense charge (2.25%) .............................. 168.75
Premium tax charge (2%) ................................... 150.00
Federal tax charge (1.25%) ................................ 93.75
-----------
equals: Net Premium ............................................... $7,087.50
less: Monthly contract charge ($7.50 per month) ................. 90.00
less: Charges for cost of insurance (varies monthly) ........... 566.25
-----------
plus: Net investment performance (varies monthly) ............... 302.23
equals: Cash Value ................................................ $6,733.48
less: Surrender charge (a percentage of surrender charge
premium) .................................................. 1,023.75
-----------
equals: Cash Surrender Value ...................................... $5,709.73
</TABLE>
16
<PAGE>
SECTION IV:
THE SEPARATE ACCOUNT, THE FUNDS AND THE FIXED ACCOUNT
THE SEPARATE ACCOUNT
The Separate Account was established under the laws of Delaware as of May
24, 1996, pursuant to resolutions of the NYLIAC Board of Directors. The
Separate Account is registered as a unit investment trust with the SEC under
the Investment Company Act of 1940 (the "1940 Act"), but such registration
does not signify that the SEC supervises the management, or the investment
practices or policies, of the Separate Account. The Separate Account meets
the definition of "separate account" under the federal securities laws.
Although the assets of the Separate Account belong to NYLIAC, they are
held separately from the other assets of NYLIAC, and are not chargeable with
liabilities incurred in any other business operations of NYLIAC (except to
the extent that assets in the Separate Account exceed the reserves and other
liabilities of that Account). The income, capital gains and capital losses
incurred on the assets of the Separate Account are credited to, or are
charged against, the assets of the Separate Account, without regard to the
income, capital gains or capital losses arising out of any other business
NYLIAC may conduct. NYLIAC may accumulate in the Separate Account the charge
for mortality and expense risks, monthly charges assessed against the Policy
and investment results applicable to those assets that are in excess of net
assets supporting the Policies.
The Separate Account currently has 18 Investment Divisions, each of which
invests solely in a corresponding Portfolio of the relevant Fund. The
Investment Divisions are: MainStay VP Capital Appreciation, MainStay VP Cash
Management, MainStay VP Convertible, MainStay VP Government, MainStay VP High
Yield Corporate Bond, MainStay VP International Equity, MainStay VP Total
Return, MainStay VP Value, MainStay VP Bond, MainStay VP Growth Equity,
MainStay VP Indexed Equity, Alger American Small Capitalization, Calvert
Socially Responsible, Fidelity VIP Contrafund, Fidelity VIP Equity-Income,
Janus Aspen Balanced, Janus Aspen Worldwide Growth and Morgan Stanley
Emerging Markets Equity. Investment Divisions may, subject to any required
regulatory approvals, be added or deleted at the discretion of NYLIAC.
YOUR VOTING RIGHTS.
As explained previously, contributions allocated to the Investment
Divisions are invested in shares of the corresponding Portfolios of the
relevant Fund. Since we own the assets of the Separate Account, we are the
legal owner of the shares and, as such, have the right to vote on certain
matters. Among other things, we may vote:
o to elect the Board of Directors of the Funds;
o to ratify the selection of independent auditors for the Funds; and
o on any other matters described in the Funds' current prospectuses or
requiring a vote by shareholders under the 1940 Act.
The Funds are not required to hold, and do not hold, annual shareholder
meetings. Whenever a shareholder vote is taken, we will give Policyowners the
opportunity to instruct us how to vote the number of shares attributable to
their Policies. If we do not receive instructions in time from all
Policyowners, we will vote the shares of a Portfolio for which no
instructions have been received in the same proportion as we vote shares of
that Portfolio for which we have received instructions.
17
<PAGE>
The Policyowner holds a voting interest in each Investment Division to
which Cash Value is allocated. The number of votes which are available to a
Policyowner will be calculated separately for each Investment Division and
will be determined by dividing the Accumulation Value attributable to an
Investment Division by the net asset value per share of the applicable
Portfolios.
OUR RIGHTS.
We reserve the right to take certain actions in connection with the
operation of the Separate Account. These actions will be taken in accordance
with applicable laws (including obtaining any required approval of the SEC).
If necessary, we will seek approval by Policyowners.
Specifically, we reserve the right to:
o substitute, add or remove any Investment Division;
o create new separate accounts;
o combine the Separate Account with one or more other separate accounts;
o operate the Separate Account as a management investment company under
the 1940 Act or in any other form permitted by law;
o deregister the Separate Account under the 1940 Act;
o manage the Separate Account under the direction of a committee or
discharge such committee at any time;
o transfer the assets of the Separate Account to one or more other
separate accounts; and
o restrict or eliminate any of the voting rights of Policyowners or other
persons who have voting rights as to the Separate Account.
MAINSTAY VP SERIES FUND, INC.
The Separate Account currently invests in eleven Portfolios of the
MainStay VP Series Fund, a "series" type of mutual fund established under the
laws of Maryland.
MacKay-Shields Financial Corporation ("MacKay-Shields") is the investment
adviser to the MainStay VP Capital Appreciation, MainStay VP Cash Management,
MainStay VP Convertible, MainStay VP Government, MainStay VP High Yield
Corporate Bond, MainStay VP International Equity, MainStay VP Total Return
and MainStay VP Value Portfolios. Monitor Capital Advisors, Inc. ("Monitor")
is the investment adviser to the MainStay VP Indexed Equity Portfolio, and
New York Life is the investment adviser to the MainStay VP Bond and MainStay
VP Growth Equity Portfolios. MacKay-Shields, Monitor and New York Life
provide investment advisory services to these Portfolios in accordance with
the policies, programs and guidelines established by the Board of Directors
of MainStay VP Series Fund. As compensation for such services, MainStay VP
Series Fund pays MacKay-Shields a fee in the form of a daily charge at an
annual rate of .36%, .25%, .36%, .30%, .30%, .60%, .32% and .36% of the
aggregate average daily net assets of the MainStay VP Capital Appreciation
Portfolio, the MainStay VP Cash Management Portfolio, the MainStay VP
Convertible, the MainStay VP Government Portfolio, the MainStay VP High Yield
Corporate Bond Portfolio, the MainStay VP International Equity Portfolio, the
MainStay VP Total Return Portfolio, and the MainStay VP Value Portfolio,
respectively. MainStay VP Series Fund pays Monitor a fee in the form of a
daily charge at an
18
<PAGE>
annual rate of .10% of the average daily net assets of the MainStay VP
Indexed Equity Portfolio. MainStay VP Series Fund pays New York Life a fee in
the form of a daily charge at an annual rate of .25% of the aggregate average
daily net assets of each of the MainStay VP Bond and MainStay VP Growth
Equity Portfolios. See the prospectus for the MainStay VP Series Fund which
is attached to this Prospectus.
THE ALGER AMERICAN FUND
The Separate Account currently invests in the Alger American Small
Capitalization Portfolio of The Alger American Fund, a "series" type of
mutual fund established under the laws of Massachusetts. Currently, the Alger
American Small Capitalization Portfolio is the only Portfolio available
through The Alger American Fund for investment by the Separate Account.
Fred Alger Management, Inc. ("FAM") provides investment advisory services
to the Alger American Small Capitalization Portfolio in accordance with the
policies, programs and guidelines established by the Board of Trustees of The
Alger American Fund. As compensation for such services, The Alger American
Fund pays FAM a fee in the form of a daily charge at an annual rate of .85%
of the average daily net assets of the Portfolio. See the prospectus for The
Alger American Fund which is attached to this Prospectus.
ACACIA CAPITAL CORPORATION
The Separate Account currently invests in the Calvert Socially Responsible
Portfolio of Acacia Capital Corporation, a "series" type of mutual fund
established under the laws of Maryland. Currently, the Calvert Socially
Responsible Portfolio is the only Portfolio available through the Acacia Fund
for investment by the Separate Account.
Calvert Asset Management Company, Inc. ("CAM") provides investment
advisory services to the Calvert Socially Responsible Portfolio in accordance
with the policies, programs and guidelines established by the Board of
Directors of the Acacia Fund. As compensation for such services, the Acacia
Fund pays CAM a fee in the form of a daily charge at an annual rate of 0.70%
of the first $500 million of the average daily net assets of the Calvert
Socially Responsible Portfolio, 0.65% of the next $500 million of average
daily net assets of the Portfolio, and 0.60% of the average daily net assets
of the Portfolio in excess of $1 billion. This fee may be reduced or
increased by up to 0.15%, depending on the performance of the Calvert
Socially Responsible Portfolio relative to the Lipper Balanced Funds Index.
See the prospectus for the Acacia Capital Corporation which is attached to
this Prospectus.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND AND
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
The Separate Account currently invests in the Fidelity VIP Contrafund and
Fidelity VIP Equity-Income Portfolios of the Fidelity Variable Insurance
Products Funds, both of which are "series" types of mutual funds established
under the laws of Massachusetts. Currently, the Fidelity VIP Contrafund and
Fidelity VIP Equity-Income Portfolios are the only Portfolios available
through the Fidelity Funds for investment by the Separate Account.
Fidelity Management and Research Company ("FMR") provides investment
advisory services to the Fidelity VIP Contrafund and Fidelity VIP
Equity-Income Portfolios in accordance with the policies, programs and
guidelines established by the Boards of Trustees of the Fidelity Variable
Insurance Products Funds. As compensation for such services, the Fidelity
Funds pay
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<PAGE>
FMR a monthly fee in the form of a charge, calculated on a monthly basis by
adding a group fee rate to an individual Portfolio fee rate, and multiplying
the result by the Portfolios' average net assets. The group fee rate is based
on the average net assets of all the mutual fund assets advised by FMR, and
cannot rise above .52%. FMR pays, at its own expense, FMR U.K. and FMR Far
East an annual fee equal to 50% of its management fee rate with respect to
the Fidelity VIP Contrafund Portfolio's investments that each sub-advisor
manages on a discretionary basis. See the prospectus for the Fidelity
Variable Insurance Products Funds which is attached to this Prospectus.
JANUS ASPEN SERIES
The Separate Account currently invests in the Janus Aspen Balanced and
Janus Aspen Worldwide Growth Portfolios of the Janus Aspen Series, a "series"
type of mutual fund established under the laws of Delaware. Currently, the
Janus Aspen Balanced and Janus Aspen Worldwide Growth Portfolios are the only
Portfolios available through the Janus Aspen Series for investment by the
Separate Account.
Janus Capital Corporation ("JCC") provides investment advisory services to
the Janus Aspen Balanced and Janus Aspen Worldwide Growth Portfolios in
accordance with the policies, programs and guidelines established by the
Board of Trustees of the Janus Aspen Series. As compensation for such
services, the Janus Aspen Series pays JCC a management fee in the form of a
daily charge at an annual rate of 1.00% for the first $30 million of the
average daily net assets of each Portfolio, .75% of the next $270 million of
the average daily net assets of each Portfolio, .70% of the next $200 million
of the average daily net assets of each Portfolio, and .65% of an amount over
$500 million of the average daily net assets of each Portfolio. JCC has
agreed to reduce the advisory fee for each Portfolio to the extent that such
fee exceeds the effective rate of the Janus retail fund corresponding to such
Portfolio. JCC may terminate this fee reduction at any time upon 90 days'
notice to the Board of Trustees of the Janus Aspen Series. See the prospectus
for the Janus Aspen Series which is attached to this Prospectus.
MORGAN STANLEY UNIVERSAL FUNDS, INC.
The Separate Account currently invests in the Morgan Stanley Emerging
Markets Equity Portfolio of the Morgan Stanley Universal Funds, Inc., a
"series" type of mutual fund established under the laws of Maryland.
Currently, the Morgan Stanley Emerging Markets Equity Portfolio is the only
Portfolio available through the Morgan Stanley Fund for investment by the
Separate Account.
Morgan Stanley Asset Management Inc. ("MSAM") provides investment advisory
services to the Morgan Stanley Emerging Markets Equity Portfolio in
accordance with the policies, programs and guidelines established by the
Board of Directors of the Morgan Stanley Fund. As compensation for such
services, the Morgan Stanley Fund pays MSAM a quarterly management fee in the
form of a daily charge at an annual rate of 1.25% for the first $500 million
of the average daily net assets of the Portfolio, 1.20% of the next $500
million of the average daily net assets of the Portfolio, and 1.15% of the
average daily net assets of the Portfolio in excess of $1 billion. MSAM has
agreed to a reduction in their management fees and to reimburse the Portfolio
if such fees would cause the total annual operating expenses of the Portfolio
to exceed 1.75% of average daily net assets. See the prospectus for the
Morgan Stanley Universal Funds, Inc. which is attached to this Prospectus.
20
<PAGE>
THE PORTFOLIOS
The assets of each Portfolio are separate from the others and each such
Portfolio has different investment objectives and policies. As a result, each
Portfolio operates as a separate investment fund and the investment
performance of one Portfolio has no effect on the investment performance of
any other Portfolio.
THE MAINSTAY VP CAPITAL APPRECIATION PORTFOLIO
The MainStay VP Capital Appreciation Portfolio seeks long-term growth of
capital. It seeks to achieve its primary investment objective by maintaining
a flexible approach towards investing in various types of companies as well
as types of securities depending upon the economic environment and the
relative attractiveness of the various securities markets. Generally, the
Portfolio will seek to invest in securities issued by companies with
investment characteristics such as participation in expanding markets,
increasing unit sales volume, growth in revenues and earnings per share
superior to that of the average common stocks comprising indices such as the
Standard & Poor's 500 Composite Price Index ("S&P 500") and increasing return
on investment. Dividend income, if any, is a consideration incidental to the
Portfolio's objective of growth of capital.
THE MAINSTAY VP CASH MANAGEMENT PORTFOLIO
The MainStay VP Cash Management Portfolio seeks as high a level of current
income as is consistent with preservation of capital and maintenance of
liquidity. It invests primarily in short-term U.S. Government Securities,
obligations of banks, commercial paper, short-term corporate obligations and
obligations of U.S. and non-U.S. issuers denominated in U.S. dollars. An
investment in the MainStay VP Cash Management Portfolio is neither insured
nor guaranteed by the U.S. Government, and there can be no assurance that the
Portfolio will be able to maintain a stable net asset value of $1.00 per
share.
THE MAINSTAY VP CONVERTIBLE PORTFOLIO
The MainStay VP Convertible Portfolio seeks capital appreciation together
with current income. The Portfolio will invest primarily in convertible
securities consisting of bonds, debentures, corporate notes, preferred stocks
or other securities which are convertible into common stocks. Certain of the
Portfolio's investments have speculative characteristics, as further
discussed in the MainStay VP Series Fund prospectus.
THE MAINSTAY VP GOVERNMENT PORTFOLIO
The MainStay VP Government Portfolio seeks a high level of current income,
consistent with safety of principal. It will invest primarily in U.S.
Government Securities which include U.S. Treasury obligations and obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. The U.S. Government Securities purchased for this
Portfolio, but not the shares of the Portfolio themselves, are issued or
guaranteed by the U.S. Government or its agencies or instrumentalities.
THE MAINSTAY VP HIGH YIELD CORPORATE BOND PORTFOLIO
The MainStay VP High Yield Corporate Bond Portfolio seeks maximum current
income through investment in a diversified portfolio of high yield, high risk
debt securities. This Portfolio seeks to achieve its primary objective by
investment in a diversified portfolio of high yield debt
21
<PAGE>
securities which are ordinarily in the lower rating categories of recognized
rating agencies that is, rated Baa to B by Moody's Investors Services, Inc.
("Moody's") or BBB to B by Standard & Poor's ("S&P"). Securities rated lower
than Baa by Moody's or BBB by S&P, or, if not rated, of equivalent quality,
are sometimes referred to as "high yield" securities or "junk bonds." The
potential for high yield is accompanied by higher risk. Certain of the
Portfolio's investments have speculative characteristics, as further
discussed in the MainStay VP Series Fund Prospectus. Capital appreciation is
a secondary objective which will be sought only when consistent with this
Portfolio's primary objective.
THE MAINSTAY VP INTERNATIONAL EQUITY PORTFOLIO
The MainStay VP International Equity Portfolio seeks long-term growth of
capital by investing in a portfolio consisting primarily of non-U.S. equity
securities. Current income is a secondary objective. In pursuing its
investment objective, the Portfolio will seek to invest in securities that
provide the potential for strong return but that do not, in MacKay-Shields'
judgment, present undue or imprudent risk. The Portfolio pursues its
objectives by investing its assets in a diversified portfolio of common
stocks, preferred stocks, warrants and comparable equity securities. Foreign
investing involves certain risks which are discussed in greater detail in the
MainStay VP Series Fund prospectus.
THE MAINSTAY VP TOTAL RETURN PORTFOLIO
The MainStay VP Total Return Portfolio seeks to realize current income
consistent with reasonable opportunity for future growth of capital and
income. The Portfolio maintains a flexible approach by investing in a broad
range of securities, which may be diversified by company, by industry and by
type. The Portfolio may invest in common stocks, convertible securities,
warrants and fixed-income securities, such as bonds, preferred stocks and
other debt obligations, including money market instruments.
THE MAINSTAY VP VALUE PORTFOLIO
The MainStay VP Value Portfolio seeks maximum long-term total return from
a combination of capital growth and income. It seeks to achieve this
objective by following flexible investment policies emphasizing investment in
common stocks which are, in the opinion of MacKay-Shields, undervalued at the
time of purchase. This Portfolio will normally invest in dividend-paying
common stocks that are listed on a national securities exchange or traded in
the over-the-counter market, but may also invest in non-dividend paying
stocks in accordance with MacKay-Shields' judgment.
THE MAINSTAY VP BOND PORTFOLIO
The MainStay VP Bond Portfolio seeks the highest income over the long-term
consistent with preservation of principal. It will invest primarily in
fixed-income debt securities of an investment grade, but may also invest in
lower-rated securities, convertible debt, and preferred and convertible
preferred stock.
THE MAINSTAY VP GROWTH EQUITY PORTFOLIO
The MainStay VP Growth Equity Portfolio seeks long-term growth of capital,
with income as a secondary consideration. It will invest principally in
common stock (and securities convertible into, or with rights to purchase,
common stock ) of well-established, well-managed companies which appear to
have better than average growth potential.
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<PAGE>
THE MAINSTAY VP INDEXED EQUITY PORTFOLIO
The MainStay VP Indexed Equity Portfolio seeks to provide investment
results that correspond to the total return performance (reflecting
reinvestment of dividends) of common stocks in the aggregate, as represented
by the S&P 500. Using a full replication method, the Portfolio invests in all
500 stocks in the S&P 500 in the same proportion as their representation in
the S&P 500. The S&P 500 is an unmanaged index considered representative of
the U.S. stock market. The MainStay VP Indexed Equity Portfolio is neither
sponsored by nor affiliated with the S&P 500.
THE ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
The Alger American Small Capitalization Portfolio seeks long-term capital
appreciation. Except during temporary defensive periods, the Portfolio
invests at least 65% of its total assets in equity securities of companies
that, at the time of purchase of the securities, have total market
capitalization within the range of companies included in the Russell 2000
Growth Index, updated quarterly. The Russell 2000 Growth Index is designed to
track the performance of small capitalization companies. The Portfolio may
invest up to 35% of its total assets in equity securities of companies that,
at the time of purchase, have total market capitalization outside the range
of companies included in the Russell 2000 Growth Index and in excess of that
amount (up to 100% of its assets) during temporary defensive periods.
THE CALVERT SOCIALLY RESPONSIBLE PORTFOLIO
The Calvert Socially Responsible Portfolio seeks to achieve a total return
above the rate of inflation through an actively managed portfolio of common
and preferred stocks, bonds and money market instruments which offer income
and capital growth opportunity and that satisfy the social concern criteria
established for this Portfolio.
THE FIDELITY VIP CONTRAFUND PORTFOLIO
The Fidelity VIP Contrafund Portfolio seeks long term capital
appreciation. The Portfolio will normally invest in common stock or
securities convertible into common stock of companies believed to be
undervalued due to an overly pessimistic appraisal by the public. This
Portfolio also has the flexibility to invest in any type of security that may
produce capital appreciation.
THE FIDELITY VIP EQUITY-INCOME PORTFOLIO
The Fidelity VIP Equity-Income Portfolio seeks reasonable income by
investing primarily in income producing equity securities. Its goal is to
achieve a yield in excess of the composite yield of the S&P 500. At least 65%
of this Portfolio will be invested in income producing common or preferred
stock. The remainder will normally be invested in convertible and
non-convertible debt obligations.
THE JANUS ASPEN BALANCED PORTFOLIO
The Janus Aspen Balanced Portfolio seeks long-term capital growth,
consistent with preservation of capital and balanced by current income. It is
a diversified Portfolio that, under normal circumstances, pursues its
objective by investing 40 to 60% of its assets in securities selected
primarily for their growth potential and 40 to 60% of its assets in
securities selected primarily for their income potential. The Portfolio
normally invests at least 25% of its assets in fixed-income senior
securities, which include debt securities and preferred stock.
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<PAGE>
THE JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
The Janus Aspen Worldwide Growth Portfolio seeks long-term growth of
capital in a manner consistent with the preservation of capital. It invests
in a diversified portfolio of common stocks of foreign and domestic issuers.
The Portfolio has the flexibility to invest on a worldwide basis in companies
and organizations of any size, regardless of country of organization or place
of principal business activity. The Portfolio normally invests in issuers
from at least five different countries, including the United States. The
Portfolio may at times invest in fewer than five countries or even in a
single country.
THE MORGAN STANLEY EMERGING MARKETS EQUITY PORTFOLIO
The Morgan Stanley Emerging Markets Equity Portfolio seeks long-term
capital appreciation by investing primarily in common and preferred stocks,
convertible securities, rights and warrants to purchase common stocks,
sponsored and unsponsored ADR's and other equity securities of emerging
market country issuers. Under normal circumstances, at least 65% of the
Portfolio's total assets will be invested in emerging market countries in
which the Portfolio's investment adviser believes the economies are
developing strongly and in which the markets are becoming more sophisticated.
Additional information concerning the Funds, investment objectives and
policies of the Portfolios, the risks associated with such objectives and
policies, investment advisory services and charges can be found in the
current prospectuses for the Funds, each of which is attached to this
prospectus. The prospectuses of the Funds should be read carefully before any
decision is made concerning the allocation of Premiums to an Investment
Division.
The Funds' shares may also be available to certain separate accounts
funding variable life insurance policies offered by NYLIAC. This is called
"mixed funding." Shares of The Alger American Fund, the Acacia Fund, the
Fidelity Funds, the Janus Aspen Series and the Morgan Stanley Fund may also
be available to separate accounts of insurance companies unaffiliated with
NYLIAC and, in certain instances, to qualified plans. This is called "shared
funding." Although we do not anticipate any inherent difficulties arising
from mixed and shared funding, it is theoretically possible that, due to
differences in tax treatment or other considerations, the interests of owners
of various contracts participating in the Funds might at some time be in
conflict. The Board of Directors/Trustees of each Fund, each Fund's
investment advisers, and NYLIAC are required to monitor events to identify
any material conflicts that arise from the use of the Funds for mixed and
shared funding. For more information about the risks of mixed and shared
funding please refer to the relevant Fund prospectus.
NYLIAC retains the right, subject to any applicable law, to make additions
to, deletions from, or substitutions for, the Portfolio shares held by any
Investment Division. NYLIAC reserves the right to eliminate the shares of any
of the Portfolios and to substitute shares of another portfolio of the Funds,
or of another registered open-end management investment company, if the
shares of the Portfolios are no longer available for investment or, if in
NYLIAC's judgment, investment in any Portfolio would become inappropriate in
view of the purposes of the Separate Account. To the extent required by the
1940 Act, substitutions of shares attributable to a Policyowner's interest in
an Investment Division will not be made until the Policyowner has been
notified of the change.
THE FIXED ACCOUNT
The Fixed Account is supported by the assets in the General Account.
NYLIAC has sole discretion to invest the assets of the Fixed Account subject
to applicable law. An interest in the
24
<PAGE>
Fixed Account is not registered under the Securities Act of 1933, and the
Fixed Account is not registered as an investment company under the 1940 Act.
Accordingly, neither the Fixed Account nor any interests therein are
generally subject to the provisions of these statutes, and NYLIAC has been
advised that the staff of the SEC has not reviewed the disclosures in this
prospectus relating to the Fixed Account. These disclosures regarding the
Fixed Account may, however, be subject to certain applicable provisions of
the federal securities laws relating to the accuracy and completeness of
statements made in prospectuses.
INTEREST CREDITING.
Any amounts in the Fixed Account are credited with interest using a fixed
interest rate, which we declare periodically. We will set this rate in
advance at least annually. This rate will never be less than 4% per year.
Interest accrues daily and is credited on each Monthly Deduction Day. All Net
Premiums applied to, and amounts transferred to, the Fixed Account receive
the rate in effect at that time.
TRANSFERS TO INVESTMENT DIVISIONS.
In each Policy Year, you may make one transfer from the Fixed Account to
the Investment Divisions, subject to the following three conditions:
1. Maximum Transfer. An amount not greater than 10% of the Fixed Account
Value at the beginning of the Policy Year may be transferred during
that Policy Year. During the retirement year only, however, (the Policy
Year following the Insured's 65th birthday, the date you indicate in
the application or another date if we approve), the 10% maximum
transfer limitation does not apply.
2. Minimum Transfer. The minimum amount that may be transferred is $500,
unless we agree otherwise.
3. Minimum Remaining Value. The Fixed Account Value remaining after the
transfer must be at least $500. If the remaining Fixed Account Value
would be less than $500, that amount must be included in the transfer.
Transfer requests must be in writing on a form approved by NYLIAC.
INVESTMENT RETURN
The investment return of a Policy is based on:
o the Accumulation Units held in each Investment Division for that
Policy;
o the investment experience of each Investment Division as measured by
its actual net rate of return;
o the interest rate credited on amounts held in the Fixed Account; and
o the interest rate credited on amounts held in the Loan Account, if any.
The investment experience of an Investment Division reflects increases or
decreases in the net asset value of the shares of the underlying Portfolio,
any dividend or capital gains distributions declared by the Funds, and any
charges against the assets of the Investment Division. This investment
experience is determined at the end of each Valuation Period.
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<PAGE>
SECTION V:
GENERAL PROVISIONS OF THE POLICY
This section of the prospectus describes the general provisions of the
Policy, and is subject to the terms of the Policy. You may review a copy of
the Policy upon request.
PREMIUMS
While the Policy is in force, Premiums may be paid at any time while the
Insured is living and before the Policy Anniversary on which the Insured is
age 95. Subject to certain restrictions, Premiums can be paid at any interval
and by any method we make available. Premiums should be sent to our Premium
Remittance Center or to the address indicated for payment on the notice. The
Policyowner selects a Premium schedule in the Application and this amount,
along with the amount of the first Premium, is set forth on page 2 of the
Policy. You may elect not to make a planned Premium payment at any time.
You may also make other Premium payments that are not planned. If an
unplanned Premium payment would result in an increase in the Death Benefit
greater than the increase in the Cash Value, we reserve the right to require
proof of insurability before accepting that payment and applying it to the
Policy. We also reserve the right to limit the number and amount of any
unplanned Premiums.
There is no penalty if a planned Premium is not paid, since Premiums,
other than the first Premium, are not specifically required. Paying planned
Premiums, however, does not guarantee coverage for any period of time.
Instead, the duration of the Policy depends upon the Policy's Cash Surrender
Value, less any Policy Debt.
TERMINATION
If, on a Monthly Deduction Day, the Cash Surrender Value less any Policy
Debt is less than the amount of the charges to be deducted on the next
Monthly Deduction Day, the Policy will go into default status and will
continue for a late period of 62 days commencing with the current Monthly
Deduction Day. If we do not receive a Premium sufficient to take your Policy
out of default status before the end of the late period, the Policy will
lapse and there will be no Cash Value or Death Benefit.
NYLIAC will mail a notice to you at your last known address, and a copy to
the last known assignee on our records, at least 31 days before the end of
the late period. During the late period, the Policy remains in force. If the
Insured dies during the late period, we will pay the Death Benefit. However,
these proceeds will be reduced by the amount of any unpaid loan and the
amount of the charges to be deducted on each Monthly Deduction Day from the
beginning of the late period through the Policy month in which the Insured
dies.
DEATH BENEFIT UNDER THE POLICY
The Death Benefit is the amount payable to the named Beneficiary when the
Insured dies. Upon receiving due proof of death at our Service Office, we
will pay the Beneficiary the Death Benefit determined as of the date the
Insured dies. All or part of the Death Benefit can be paid in cash or applied
under one or more of our payment options described under "Section VI:
Additional Information--Payment Options."
The amount of the Death Benefit is determined by whether you have chosen
Life Insurance Benefit Option 1 or Life Insurance Benefit Option 2. See "Life
Insurance Benefit Options" under Definition of Terms. Added to the amount
determined by the selected Life
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<PAGE>
Insurance Benefit Option is the value of any additional benefits provided by
rider. We pay interest on the Death Benefit from the date of death to the
date the Death Benefit is paid or a payment option becomes effective. The
interest rate equals the rate determined under the Interest Payment Option as
described in "Section VI: Additional Information--Payment Options." We
subtract any outstanding Policy Debt and any charges incurred but not yet
deducted, and then credit the interest.
Beginning on the Policy Anniversary on which the Insured is age 95, the
Face Amount, as shown on page 2 of the Policy, will no longer apply. Instead,
the life insurance benefit under the Policy will equal the Cash Value, less
outstanding Policy Debt. Also, no further monthly deductions will be made for
cost of insurance.
SELECTION OF LIFE INSURANCE BENEFIT TABLE.
Under either Life Insurance Benefit Option, the Death Benefit cannot be
less than the Policy's Cash Value times a percentage determined from the
appropriate Code Section 7702 table. The Policyowner may choose either the
"Corridor" table or the "CVAT" table, which are described below, before the
Policy is issued. The Death Benefit will vary depending on which table is
selected. If the Policyowner does not choose a table, the Corridor table will
be used. Once the Policy is issued, the Policyowner may not change to a
different table.
Under Code Section 7702, a Policy will be treated as life insurance for
federal tax purposes if at all times it meets either (1) a "cash value
accumulation" test or (2) both a "guideline premium" test and a "cash value
corridor" test. The CVAT table is designed to meet the cash value
accumulation test, while the Corridor table is designed to meet the cash
value corridor test. A Policy using the Corridor table must also satisfy the
"guideline premium" test of Code Section 7702. This test limits the amount of
Premiums that may be paid into the Policy.
CORRIDOR TABLE
<TABLE>
<CAPTION>
INSURED'S AGE INSURED'S AGE
ON POLICY % OF CASH ON POLICY % OF CASH
ANNIVERSARY VALUE ANNIVERSARY VALUE
- --------------- ------------ --------------- ------------
<S> <C> <C> <C>
0-40 250 61 128
41 243 62 126
42 236 63 124
43 229 64 122
44 222 65 120
45 215 66 119
46 209 67 118
47 203 68 117
48 197 69 116
49 191 70 115
50 185 71 113
51 178 72 111
52 171 73 109
53 164 74 107
54 157 75-90 105
55 150 91 104
56 146 92 103
57 142 93 102
58 138 94 101
59 134 95 & Over 100
60 130
</TABLE>
27
<PAGE>
CVAT TABLE
<TABLE>
<CAPTION>
INSURED'S AGE
ON POLICY % OF
ANNIVERSARY CASH VALUE
- ------------- --------------------------
MALE FEMALE UNISEX
------ -------- --------
<S> <C> <C> <C>
18 691 830 715
19 671 803 694
20 652 778 674
21 634 753 654
22 615 729 635
23 597 705 616
24 579 683 597
25 564 661 579
26 544 639 561
27 527 618 543
28 511 598 526
29 494 579 509
30 478 560 493
31 463 541 477
32 448 524 461
33 433 507 446
34 419 490 432
35 405 474 417
36 392 458 404
37 380 443 391
38 367 429 378
39 356 415 366
40 344 402 354
41 333 389 343
42 323 377 332
43 313 365 322
44 303 354 312
45 294 343 303
46 285 333 293
47 276 323 285
48 268 313 276
49 260 303 268
50 253 294 260
51 245 286 252
52 238 277 245
53 231 269 238
54 225 261 231
55 219 254 225
56 213 247 219
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INSURED'S AGE
ON POLICY % OF
ANNIVERSARY CASH VALUE
- ------------- --------------------------
MALE FEMALE UNISEX
------ -------- --------
<S> <C> <C> <C>
57 207 240 213
58 202 233 207
59 196 226 202
60 191 220 197
61 187 214 192
62 182 208 187
63 178 202 182
64 173 197 178
65 169 191 174
66 166 186 170
67 162 182 166
68 159 177 162
69 155 172 159
70 152 168 155
71 149 164 152
72 146 160 149
73 143 156 146
74 141 152 143
75 138 149 141
76 136 146 138
77 134 143 136
78 132 140 134
79 130 137 132
80 128 134 130
81 126 132 128
82 125 130 126
83 123 127 124
84 122 125 123
85 120 123 121
86 119 121 120
87 118 119 118
88 116 118 117
89 115 116 115
90 113 114 114
91 112 112 112
92 110 110 110
93 107 108 108
94 104 104 104
95 & Over 100 100 100
</TABLE>
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<PAGE>
THE EFFECT OF INVESTMENT PERFORMANCE ON THE DEATH BENEFIT.
Positive investment experience in the Investment Divisions may result in a
Death Benefit that will be greater than the Face Amount, but negative
investment experience will never result in a Death Benefit that will be less
than the Face Amount, so long as the Policy remains in force.
Example 1: The following example shows how the Death Benefit varies as a
result of investment performance on a Policy, assuming that Life Insurance
Benefit Option 1 and the Corridor Table have been selected, and assuming age
at death is 45:
<TABLE>
<CAPTION>
POLICY A POLICY B
---------- ----------
<S> <C> <C>
Face Amount ................................ $100,000 $100,000
Cash Value on Date of Death ................ $ 50,000 $ 40,000
Code Section 7702 Life Insurance Percentage
on Date of Death .......................... 215% 215%
</TABLE>
The Death Benefit will equal the greater of the $100,000 Face Amount or the
Cash Value times the Code Section 7702 Life Insurance Percentage. For Policy
A, the Death Benefit will equal $107,500. For Policy B, the Death Benefit
will equal the $100,000 Face Amount.
Example 2: The following example shows how the Death Benefit varies as a
result of investment performance on a Policy, assuming that Life Insurance
Benefit Option 1 and the CVAT Table have been selected and that the
Policyowner is a male, and assuming age at death is 45:
<TABLE>
<CAPTION>
POLICY A POLICY B
---------- ----------
<S> <C> <C>
Face Amount ............................... $100,000 $100,000
Cash Value on Date of Death ............... $ 50,000 $ 30,000
Code Section 7702 Life Insurance
Percentage
on Date of Death ......................... 294% 294%
</TABLE>
The Death Benefit will equal the greater of the $100,000 Face Amount or the
Cash Value times the Code Section 7702 Life Insurance Percentage. For Policy
A, the Death Benefit will equal $147,000. For Policy B, the Death Benefit
will equal the $100,000 Face Amount.
FACE AMOUNT CHANGES.
You can apply in writing to have the Face Amount of your Policy increased.
In addition, on or after the first Policy Anniversary, you can apply in
writing to have the Face Amount of your Policy decreased. Face Amount changes
may be made while the Insured is living, but only if your Policy will
continue to qualify as life insurance under Code Section 7702 after the
change is made. Requested decreases and increases in Face Amount will cause a
corresponding change in the amount of your surrender charge premium.
The amount of an increase in Face Amount is subject to NYLIAC's maximum
retention limits. Evidence of insurability which is satisfactory to us is
required for an increase. If this evidence results in a change of
underwriting class, a new Policy will be issued for the amount of the
increase. We reserve the right to limit increases. Any increase will take
effect on the Monthly Deduction Day on or after the Business Day we approve
your request for the increase. An increase in Face Amount may increase the
cost of insurance charge.
Decreases in coverage may be requested. The Face Amount will be reduced
and the appropriate surrender charge will be deducted from the Cash Value.
See "Section III: Charges Under the Policy--Surrender Charge." A decrease in
Face Amount is effective on the Monthly Deduction Day on or after the
Business Day we receive your request for the decrease. The Face Amount may
not be decreased to less than $25,000.
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<PAGE>
LIFE INSURANCE BENEFIT OPTION CHANGES.
On or after the first Policy Anniversary, you can change the Life
Insurance Benefit Option of the Policy. Any change of Option will take effect
on the Monthly Deduction Day on or after the Business Day we approve your
signed request. If you change from Option 1 to Option 2, the Face Amount of
the Policy will be decreased by the Cash Value. No surrender charge will
apply to this automatic decrease in Face Amount. If you change from Option 2
to Option 1, the Face Amount of the Policy will be increased by the Cash
Value. The surrender charge premium will not be affected by changes in the
Life Insurance Benefit Option. See "Section III: Charges Under the
Policy--Surrender Charge."
CASH VALUE AND CASH SURRENDER VALUE
CASH VALUE.
The Cash Value of the Policy is the sum of the Accumulation Value in the
Separate Account, the Fixed Account Value and the Loan Account Value.
Initially, the Cash Value equals the Net Premium paid under the Policy. This
amount is allocated among the Fixed Account and the Investment Divisions
according to the allocation percentages requested in the Application, or as
subsequently changed by the Policyowner. A portion of your Cash Value is
allocated to the Loan Account if you take a loan under your Policy. See
"Section V: General Provisions of the Policy--Loans." The Cash Value also
reflects various charges. See "Section III: Charges Under the Policy."
CASH SURRENDER VALUE.
The Policy may be surrendered for its Cash Surrender Value, less any
Policy Debt, at any time before the Insured dies. Unless a later effective
date is selected, the surrender is effective on the Business Day we receive
the Policy and a signed surrender request in proper form at our Service
Office. The Cash Surrender Value is the Cash Value, less any surrender
charges.
TRANSFERS
All or part of the Cash Value may be transferred among Investment
Divisions or from an Investment Division to the Fixed Account. Transfers may
also be made from the Fixed Account to the Investment Divisions in certain
situations. See "Section IV: The Separate Account, the Funds and the Fixed
Account--The Fixed Account."
The minimum amount that may be transferred from one Investment Division to
another Investment Division or to the Fixed Account, is the lesser of (i)
$500 or (ii) the value of the Accumulation Units in the Investment Division
from which the transfer is being made. If, after the transfer, the value of
the remaining Accumulation Units in an Investment Division or the Fixed
Account Value would be less than $500, that amount will be included in the
transfer. There is no charge for the first twelve transfers in any one Policy
Year. NYLIAC reserves the right to charge $30 for each transfer in excess of
twelve per year. This charge will be applied on a pro-rata basis to the
Allocation Alternatives to which the transfer is being made.
Transfer requests must be made in writing on a form approved by NYLIAC.
Transfers to or from Investment Divisions will be made based on the
Accumulation Unit values on the Business Day on which NYLIAC receives the
transfer request.
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<PAGE>
PARTIAL WITHDRAWALS
The owner of a Policy may make a Partial Withdrawal of the Policy's Cash
Value, at any time while the Insured is living. The minimum Partial
Withdrawal is $500, and at least $500 of Cash Surrender Value, plus any
Policy Debt, must remain following the withdrawal. The Partial Withdrawal
will be made from the Fixed Account and the Investment Divisions in
proportion to the amount in each, or only from the Investment Divisions in an
amount or ratio that you tell us. There will be a processing charge equal to
the lesser of $25 or 2% of the amount withdrawn applied to any Partial
Withdrawal. This fee will be deducted from the remaining balance of the Fixed
Account and/or Investment Divisions based on the withdrawal allocation or, if
the fee amount exceeds the remaining balance, it will be deducted from the
Fixed Account and/or Investment Divisions in proportion to the amount in
each.
A Partial Withdrawal will be prohibited if it would cause the Face Amount
to drop below $25,000. If Life Insurance Benefit Option 1 is in effect, the
Face Amount will be reduced by the amount of the Partial Withdrawal. If Life
Insurance Benefit Option 2 is in effect, the Face Amount will not be changed
by the amount of the Partial Withdrawal. A Partial Withdrawal will not be
permitted during the first Policy Year if Life Insurance Benefit Option 1 is
in effect.
LOANS
Using the Policy as sole security, you can borrow up to the loan value of
the Policy. The loan value on any given date is equal to 90% of the Cash
Surrender Value, less any Policy Debt.
LOAN ACCOUNT.
The Loan Account secures Policy Debt and is part of our General Account.
When a loan is requested, an amount is transferred to the Loan Account from
the Investment Divisions and the Fixed Account (on a pro-rata basis unless
you request otherwise) equal to: (1) the requested loan amount; plus (2) any
Policy Debt; plus (3) the interest to the next Policy Anniversary on the
requested loan amount and on any Policy Debt; minus (4) the amount in the
Loan Account. On each Policy Anniversary, the Loan Account will be increased
by an amount equal to the loan interest to the next Policy Anniversary on any
Policy Debt. The effective date of the loan is the Business Day we make
payment.
The Loan Account Value will never be less than (a) plus (b) minus (c),
where (a) is the amount in the Loan Account on the prior Policy Anniversary,
(b) is the amount of any loan taken since the prior Policy Anniversary and
(c) is any loan amount repaid since the prior Policy Anniversary. On each
Policy Anniversary, if the amount in the Loan Account exceeds the amount of
any outstanding loans plus interest to the next Policy Anniversary, the
excess will be transferred from the Loan Account to the Investment Divisions
and to the Fixed Account. Amounts transferred will first be transferred to
the Fixed Account up to an amount equal to the total amounts transferred from
the Fixed Account to the Loan Account. Any subsequent amounts transferred
will be allocated according to your Premium allocation in effect at the time
of transfer unless you tell us otherwise.
The Loan Account Value earns interest at a rate of not less than the
greater of 4% per year and the effective annual loan interest rate less 2%.
Interest accrues daily and is credited on each Monthly Deduction Day.
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<PAGE>
LOAN INTEREST.
Unless we set a lower rate for any period, the effective annual loan
interest rate is 6%, payable in arrears. Loan interest accrues each day and
is compounded annually. Loan interest not paid as of the Policy Anniversary
becomes part of the loan. An amount may need to be transferred to the Loan
Account to cover this increased loan amount.
On the date of death, the date the Policy ends, the date of a loan
repayment, or on any other date we specify, we will make any adjustment in
the loan that is required to reflect any interest paid for any period beyond
that date.
If we have set a rate lower than 6% per year, any subsequent increase in
the interest rate shall be subject to the following conditions:
(1) The effective date of any increase in the interest rate for loans
shall not be earlier than one year after the effective date of the
establishment of the previous rate.
(2) The amount by which the interest rate may be increased shall not
exceed one percent per year, but the interest shall in no event ever
exceed 6%.
(3) We will give notice of the interest rate in effect when a loan is made
and when sending notice of loan interest due.
(4) If a loan is outstanding 40 days or more before the effective date of
an increase in the interest rate, we will notify you of that increase
at least 30 days prior to the effective date of the increase.
(5) We will give notice of any increase in the interest rate when a loan
is made during the 40 days before the effective date of the increase.
REPAYMENT.
All or part of an unpaid loan can be repaid before the Insured's death or
before the Policy is surrendered. Excess amounts in the Loan Account
(resulting from either loan repayments or interest accrued) will be
transferred in accordance with the procedures set forth in "Loan Account"
above.
If a loan is outstanding when the life insurance or surrender proceeds
become payable, we will deduct the amount of any Policy Debt from these
proceeds. In addition, if an unpaid loan exceeds the Cash Surrender Value of
the Policy, we will mail a notice to you at your last known address, and a
copy to the last known assignee on our records. All insurance will end 31
days after the date on which we mail that notice to you if the excess of the
unpaid loan over the Cash Surrender Value is not paid within that 31 days.
FREE LOOK PROVISION
The Policy contains a provision that permits cancellation by returning it
to our Service Office, or to the registered representative through whom it
was purchased, at any time during the Free Look Period. The Policyowner will
then receive from us the greater of the Policy's Cash Value as of the date
the Policy is returned or the Premiums paid, less loans and Partial
Withdrawals.
EXCHANGE PRIVILEGE
At any time within 24 months of the Issue Date, the Policyowner may
exchange the Policy for a policy on a permanent plan of life insurance on the
Insured which we are offering for this
32
<PAGE>
purpose. NYLIAC will not require evidence of insurability. Upon an exchange
of a Policy, all riders and benefits will end unless we agree otherwise or
unless required under state law. The replacement policy will have the same
Policy Date, issue age, risk classification, and initial Face Amount as the
original Policy, but will not offer variable investment options such as the
Investment Divisions.
In order to exchange the Policy, we will require: (a) that the Policy be
in effect on the date of exchange; (b) repayment of any Policy Debt; and (c)
an adjustment, if any, for differences in premiums and cash values under the
Policy and the new policy. The date of exchange will be the later of: (a) the
Business Day you send us the Policy along with a signed request; or (b) the
Business Day we receive at our Service Office, or such other location that we
indicate to you in writing, the necessary payment for the exchange, if any.
33
<PAGE>
SECTION VI:
ADDITIONAL INFORMATION
DIRECTORS AND PRINCIPAL OFFICERS OF NYLIAC
DIRECTORS: POSITIONS DURING LAST FIVE YEARS:
Seymour Sternberg ...... President and Chief Operating Officer of New
York Life from October 1995 to date; Vice
Chairman and President Elect from February
1995 to October 1995; Executive Vice
President prior thereto. President of NYLIAC
from November 1995 to date.
Jay S. Calhoun, III .... Vice President and Treasurer of New York
Life from November 1992 to date; Vice
President and Associate Treasurer from March
1992 to November 1992; Corporate Vice
President prior thereto. Vice President and
Treasurer of NYLIAC from January 1993 to
date.
Richard M. Kernan, Jr. . Executive Vice President and Chief
Investment Officer of New York Life from
March 1991 to date.
Robert D. Rock ......... Senior Vice President in charge of the
Individual Annuity Department of New York
Life from March 1992 to date; Vice President
in charge of the Individual Annuity
Department from November 1991 to March 1992;
Vice President prior thereto. Senior Vice
President of NYLIAC from April 1992 to date;
Vice President prior thereto.
Frederick J. Sievert ... Vice Chairman and Executive Vice President
of New York Life from January 1997 to date;
Executive Vice President from February 1995
to December 1996; Senior Vice President and
Chief Financial Officer--Individual
Operations prior thereto. Executive Vice
President of NYLIAC from November 1995 to
date; Senior Vice President from June 1992
to November 1995.
Stephen N. Steinig ..... Senior Vice President and Chief Actuary of
New York Life from February 1994 to date;
Chief Actuary and Controller prior thereto.
Senior Vice President and Chief Actuary of
NYLIAC from May 1991 to date.
OFFICERS:
Patrick G. Colloton .... Vice President of New York Life from April
1996 to date. Vice President of NYLIAC from
November 1996 to date. Senior Vice
President, Individual Strategic Business
Unit, Business Men's Assurance Company,
prior thereto.
34
<PAGE>
Michael Gallo .......... Senior Vice President in charge of the
Individual Life Department of New York Life
from July 1995 to date; Senior Vice
President--Northeastern Agencies from
February 1994 to July 1995; Vice President
prior thereto. Senior Vice President of
NYLIAC from August 1995 to date.
Solomon Goldfinger ..... Senior Vice President in charge of Financial
Management of New York Life from July 1995
to date; Senior Vice President in charge of
the Individual Life Department from March
1992 to July 1995; Vice President and
Actuary in charge of the Individual Life
Department prior thereto. Senior Vice
President of NYLIAC from April 1992 to date;
Vice President from February 1992 to April
1992; Vice President and Actuary prior
thereto.
Maryann L. Ingenito .... Vice President of New York Life from April
1990 to date. Vice President and Controller
(Principal Accounting Officer) of NYLIAC
from December 1994 to date; Vice President
and Assistant Controller prior thereto.
Lawrence R. Stoehr ..... Vice President of New York Life from March
1993 to date; Corporate Vice President prior
thereto. Vice President of NYLIAC from July
1994 to date; Corporate Vice President prior
thereto.
35
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
THE DISCUSSION CONTAINED HEREIN IS GENERAL IN NATURE, IS NOT AN EXHAUSTIVE
DISCUSSION OF ALL TAX QUESTIONS THAT MIGHT ARISE UNDER THE POLICIES, AND IS
NOT INTENDED AS TAX ADVICE. NO ATTEMPT IS MADE TO CONSIDER ANY APPLICABLE
STATE OR OTHER TAX LAWS AND NO REPRESENTATION IS MADE AS TO THE LIKELIHOOD OF
CONTINUATION OF CURRENT FEDERAL INCOME TAX LAWS AND TREASURY REGULATIONS OR
OF CURRENT INTERPRETATIONS OF THE INTERNAL REVENUE SERVICE.
WHILE NYLIAC RESERVES THE RIGHT TO MAKE CHANGES IN THE POLICY TO ASSURE
THAT IT CONTINUES TO QUALIFY AS LIFE INSURANCE FOR TAX PURPOSES, NYLIAC
CANNOT MAKE ANY GUARANTEE REGARDING THE FUTURE TAX TREATMENT OF ANY POLICY.
FOR COMPLETE INFORMATION ON THE IMPACT OF CHANGES WITH RESPECT TO THE POLICY
AND FEDERAL AND STATE CONSIDERATIONS, A QUALIFIED TAX ADVISOR SHOULD BE
CONSULTED.
The ultimate effect of federal income taxes on values under the Policy and
on the economic benefit to the Policyowner or Beneficiary depends upon
NYLIAC's tax status, upon the terms of the Policy and upon the tax status of
the individual concerned.
TAX STATUS OF NYLIAC AND THE SEPARATE ACCOUNT.
NYLIAC is taxed as a life insurance company under Subchapter L of the
Code. The Separate Account is not a separate taxable entity from NYLIAC and
its operations are taken into account by NYLIAC in determining its income tax
liability. All investment income and realized net capital gains on the assets
of the Separate Account are reinvested and taken into account in determining
Policy Cash Values and are automatically applied to increase the book
reserves associated with the Policies. Under existing federal income tax law,
neither the investment income nor any net capital gains of the Separate
Account are taxed to NYLIAC to the extent those items are applied to increase
reserves associated with the Policies.
CHARGES FOR TAXES.
NYLIAC imposes a Federal Tax Charge equal to 1.25% of Premiums received
under the Policy to compensate NYLIAC for the federal income tax liability it
incurs under Code Section 848 by reason of its receipt of Premiums under the
Policy. NYLIAC believes that this charge is reasonable in relation to the
increased tax burden it incurs as a result of Section 848. No other charge is
currently made to the Separate Account for federal income taxes of NYLIAC
that may be attributable to the Separate Account. Periodically, NYLIAC
reviews the appropriateness of charges to the Separate Account for NYLIAC's
federal income taxes, and in the future, a charge may be made for federal
income taxes incurred by NYLIAC that are attributable to the Separate
Account. In addition, depending on the method of calculating interest on
Policy Values allocated to the Fixed Account (see preceding section), a
charge may also be imposed for the Policy's share of NYLIAC's federal income
taxes attributable to the Fixed Account.
DIVERSIFICATION STANDARDS AND CONTROL ISSUES.
In addition to other requirements imposed by the Code, a Policy will
qualify as life insurance under the Code only if the diversification
requirements of Code Section 817(h) are satisfied by the Separate Account. To
assure that each Policy continues to qualify as life
36
<PAGE>
insurance for federal income tax purposes, NYLIAC intends to comply with Code
Section 817(h) and the Regulations thereunder for each Portfolio. To satisfy
these diversification standards, the Regulations generally require that on
the last day of each quarter of a calendar year: no more than 55% of the
value of a Separate Account's assets can be represented by any one
investment; no more than 70% can be represented by any two investments; no
more than 80% can be represented by any three investments; and no more than
90% can be represented by any four investments. For purposes of these rules,
all securities of the same issuer generally are treated as a single
investment, but each government agency or instrumentality is treated as a
separate issuer. In addition a "look-through" rule applies to treat a
pro-rata portion of each asset of each Portfolio as an asset of the Separate
Account.
The general diversification requirements of Code Section 817(h) are
modified with regard to assets of the Separate Account that are direct
obligations of the United States Treasury. Even if a separate account invests
only in United States Treasury Securities it will be treated as adequately
diversified under Code Section 817(h). In addition, for purposes of
determining whether its holdings of assets other than United States Treasury
Securities are adequately diversified, the generally applicable percentage
limitations are increased based on the value of a separate account's
investment in United States Treasury Securities. Notwithstanding this
modification of the general diversification requirements, however, the
investments of the Portfolios will be structured to comply with the general
diversification standards because they serve as investment vehicles for
certain variable annuity contracts that must comply with the general
standards.
In connection with its issuance of temporary regulations under Code
Section 817(h) in 1986, the Treasury Department announced that such temporary
regulations did not provide guidance concerning the extent to which
Policyowners could be permitted to direct their investments to particular
divisions of a separate account and that guidance on this issue would be
forthcoming. Regulations addressing this issue have not yet been issued or
proposed, and it is not clear, at this time, whether such regulations will
ever be issued or what such regulations might provide. If such regulations
were to be issued in the future, it is possible that the Policy might need to
be modified to comply with such regulations. For these reasons, NYLIAC
reserves the right to modify the Policy, as necessary, to prevent the
Policyowner from being considered the owner of the assets of the Separate
Account.
LIFE INSURANCE STATUS OF POLICY.
NYLIAC believes that the Policy meets the statutory definition of life
insurance under Code Section 7702 and that the Policyowner and Beneficiary of
any Policy will receive the same federal income tax treatment as that
accorded to owners and beneficiaries of fixed benefit life insurance
policies. Specifically, the Death Benefit under the Policy will be excludable
from the gross income of the Beneficiary subject to the terms and conditions
of Code Section 101(a)(1). (Death benefits under a "modified endowment
contract" as discussed below are treated in the same manner as death benefits
under life insurance contracts that are not so classified.)
In addition, unless the Policy is a "modified endowment contract," in
which case the receipt of any loan under the Policy may result in recognition
of income to the Policyowner, the Policyowner will not be deemed to be in
constructive receipt of the Cash Values, including increments thereon, under
the Policy until proceeds of the Policy are received upon a surrender of the
Policy or a Partial Withdrawal.
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<PAGE>
MODIFIED ENDOWMENT CONTRACT STATUS.
A Policy will be a modified endowment contract if it satisfies the
definition of life insurance contained in the Internal Revenue Code, but it
either fails the additional "7-pay test" set forth in Code Section 7702A or
was received in exchange for a modified endowment contract. A Policy will
fail the 7-pay test if the accumulated amount paid under the contract at any
time during the first seven contract years exceeds the total premiums that
would have been payable under a policy providing for guaranteed benefits upon
the payment of seven level annual premiums. A Policy received in exchange for
a modified endowment contract will be taxed as a modified endowment contract
even if it would otherwise satisfy the 7-pay test.
While the 7-pay test is generally applied as of the time the policy is
issued, certain changes in the contractual terms of a Policy will require a
Policy to be retested to determine whether the change has caused the Policy
to become a modified endowment contract. For example, a reduction in death
benefits during the first seven contract years will cause the Policy to be
retested as if it had originally been issued with the reduced death benefit.
In addition, if a "material change" occurs at any time while the Policy is
in force, a new 7-pay test period will start and the Policy will need to be
retested to determine whether it continues to meet the 7-pay test. The term
"material change" generally includes increases in death benefits, but does
not include an increase in death benefits attributable to the payment of
premiums necessary to fund the lowest level of death benefits payable during
the first seven contract years, or which is attributable to the crediting of
interest with respect to such premiums.
Because the Policy provides for flexible Premiums, NYLIAC has instituted
procedures to monitor whether increases in the Death Benefit or additional
Premiums either cause the start of a new seven-year test period or cause the
Policy to be a modified endowment contract. All additional Premiums will be
considered in these determinations.
If you pay a Premium that exceeds the 7-pay limit, we will notify you and
give you the opportunity to prevent your Policy from becoming a modified
endowment contract by requesting that the excess Premium be returned to you.
If your Policy becomes a modified endowment contract, all distributions
(including loans) occurring in the year of failure and thereafter will be
subject to the rules for modified endowment contracts. A recapture provision
also applies to loans and distributions that are received in anticipation of
failing the 7-pay test. Under the Code, any distribution or loan made within
two years prior to the date that a Policy fails the 7-pay test is considered
to have been made in anticipation of the failure.
SURRENDERS AND PARTIAL WITHDRAWALS.
Upon a surrender of a Policy for its Cash Surrender Value, less any Policy
Debt, the Policyowner will recognize ordinary income for federal tax purposes
to the extent that the Cash Surrender Value exceeds the investment in the
contract (the total of all Premiums paid but not previously recovered plus
any other consideration paid for the Policy). The tax consequences of a
Partial Withdrawal from a Policy will depend upon whether the Partial
Withdrawal results in a reduction of future benefits under the Policy and
whether the Policy is a modified endowment contract.
If the Policy is not a modified endowment contract, the general rule is
that a Partial Withdrawal from a Policy is taxable only to the extent that it
exceeds the total investment in the contract. An exception to this general
rule applies, however, if a reduction of future benefits
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<PAGE>
occurs during the first 15 years after a Policy is issued and there is a cash
distribution associated with that reduction. In such a case, Code Section
7702(f)(7) overrides the general rule and prescribes a formula under which
the Policyowner may be taxed on all or a part of the amount distributed.
After 15 years, the rule of Code Section 7702(f)(7) no longer applies so that
cash distributions from a Policy that is not a modified endowment contract
will not be subject to federal income tax, except to the extent they exceed
the total investment in the contract. NYLIAC suggests that a Policyowner
consult with a tax advisor in advance of a proposed decrease in Face Amount
or a Partial Withdrawal. In addition, any amounts distributed under a
"modified endowment contract" (including proceeds of any loan) are taxable to
the extent of any accumulated income in the Policy. In general, the amount
that may be subject to tax is the excess of the Cash Value (both loaned and
unloaned) over the previously unrecovered Premiums.
Under certain circumstances, a distribution under a modified endowment
contract (including a loan) may be taxable even though it exceeds the amount
of accumulated income in the Policy. This can occur because for purposes of
determining the amount of income received upon a distribution (or loan) from
a modified endowment contract, the Code requires the aggregation of all
modified endowment contracts issued to the same Policyowner by an insurer and
its affiliates within the same calendar year. Therefore, loans and
distributions from any one such Policy are taxable to the extent of the
income accumulated in all the modified endowment contracts required to be so
aggregated.
If any amount is taxable as a distribution of income under a modified
endowment contract (as a result of a policy surrender, a Partial Withdrawal
or a loan), it may also be subject to a 10% penalty tax under Code Section
72(v). Limited exceptions from the additional penalty tax are available for
certain distributions to individual Policyowners. The penalty tax will not
apply to distributions: (i) that are made on or after the date the taxpayer
attains age 59 1/2; or (ii) that are attributable to the taxpayer's becoming
disabled; or (iii) that are part of a series of substantially equal periodic
payments (made not less frequently than annually) made for the life or life
expectancy of the taxpayer.
LOANS AND INTEREST DEDUCTIONS.
NYLIAC also believes that under current law any loan received under the
Policy will be treated as Policy Debt of a Policyowner and that, unless the
Policy is a modified endowment contract, no part of any loan under a Policy
will constitute income to the Policyowner. If the Policy is a modified
endowment contract (see discussion above) loans will be fully taxable to the
extent of the income in the Policy (and in any other contracts with which it
must be aggregated) and could be subject to the additional 10 percent tax.
Code Section 264 imposes stringent limitations on the deduction of
interest paid or accrued on loans in connection with a Policy. In addition,
under the "personal" interest limitation provisions of Code Section 163, no
deduction is allowed for interest on any Policy loan if the proceeds are used
for personal purposes, even if the Policy and loan otherwise meet the
requirements of Code Section 264. The limitations on deductibility of
personal interest may not apply to disallow all or part of the interest
expense as a deduction if the loan proceeds are used for "trade or business"
or "investment" purposes. NYLIAC suggests consultation with a tax advisor for
further guidance.
CORPORATE ALTERNATIVE MINIMUM TAX.
Ownership of a Policy by a corporation may affect the Policyowner's
exposure to the corporate alternative minimum tax. In determining whether it
is subject to alternative minimum
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<PAGE>
tax a corporate Policyowner must make two computations. First, the
corporation must take into account a portion of the current year's increase
in the built-in gain in its corporate-owned policies. Second, the corporation
must take into account a portion of the amount by which the Death Benefits
received under any Policy exceed the sum of (i) the premiums paid on that
Policy in the year of death, and (ii) the corporation's basis in the Policy
(as measured for alternative minimum tax purposes) as of the end of the
corporation's tax year immediately preceding the year of death.
EXCHANGES OR ASSIGNMENTS OF POLICIES.
A change of the Policyowner or the Insured or an exchange or assignment of
a Policy may have significant tax consequences depending on the
circumstances. For example, an assignment or exchange of a Policy may result
in taxable income to the transferring Policyowner. Further, Code Section
101(a) provides, subject to certain exceptions, that where a Policy has been
transferred for value, only the portion of the Death Benefit that is equal to
the total consideration paid for the Policy may be excluded from gross
income. For complete information with respect to Policy assignments and
exchanges, a qualified tax advisor should be consulted.
OTHER TAX ISSUES.
Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Policyowner or Beneficiary.
WITHHOLDING.
Under Code Section 3405, withholding is generally required with respect to
certain taxable distributions under insurance contracts. In the case of
periodic payments (payments made as an annuity or on a similar basis), the
withholding is at graduated rates (as though the payments were employee
wages). With respect to non-periodic distributions, the withholding is at a
flat rate of 10%. A policyholder can elect to have either non-periodic or
periodic payments made without withholding except where the Policyowner's tax
identification number has not been furnished to NYLIAC or the Internal
Revenue Service has notified NYLIAC that the tax identification number
furnished by the Policyowner is incorrect.
REINSTATEMENT OPTION
For a period of five years after termination, you can request that we
reinstate the Policy (and any riders) during the Insured's lifetime. We will
not reinstate the Policy if it has been returned for its Cash Surrender
Value. Note that a termination or reinstatement may cause the Policy to
become a modified endowment contract.
Before we will reinstate the Policy, we must receive the following:
o A payment in an amount that is sufficient to keep the Policy (and any
riders) in force for at least 2 months. This payment will be in lieu of
the payment of all Premiums in arrears.
o Any unpaid loan must also be repaid, together with loan interest at 6%
compounded once each year from the end of the late period to the date
of reinstatement. If a loan interest rate of less than 6% is in effect
when the Policy is reinstated, the interest rate for any unpaid loan at
the time of reinstatement will be the same as the loan rate.
40
<PAGE>
o Evidence of insurability satisfactory to us if the reinstatement is
requested more than 31 days after termination.
If we do reinstate the Policy, the Face Amount for the reinstated Policy
will be the same as it would have been if the Policy had not terminated. The
effective date of reinstatement will be the Monthly Deduction Day on or
following the date we approve the request for reinstatement.
ADDITIONAL BENEFITS AVAILABLE BY RIDER
The Policy can include additional benefits that we approve based on our
standards and limits for issuing insurance and classifying risks. None of
these benefits depends on the investment performance of the Separate Account
or the Fixed Account. An additional benefit is provided by a rider and is
subject to the terms of both the Policy and the rider. The following rider is
currently available.
ADJUSTABLE TERM INSURANCE RIDER.
This rider provides term insurance coverage on the Insured. The initial
term amount is shown on page 2 of your Policy. You can also elect to change
the term amount at any time. Evidence of insurability, satisfactory to us,
must be furnished in connection with any request to increase the term amount.
PAYMENT OPTIONS
Death Benefits will be paid in one sum or, if elected, all or part of the
Death Benefit can be placed under one or more of the options described in
this section. If we agree, the Death Benefit may be placed under some other
method of payment instead. Any Death Benefits paid in one sum will bear
interest compounded each year from the Insured's death to the date of
payment. We set the interest rate each year. This rate will be at least 3%
per year, and will not be less than required by law.
While the Insured is living, you can elect or change an option. You can
also elect or change one or more beneficiaries who will be the payee or
payees under that option. After the Insured dies, any person who is to
receive proceeds in one sum (other than an assignee) can instead elect a
payment option and name payees. The person who elects an option can also name
one or more successor payees to receive any amount remaining at the death of
the payee. Naming these payees cancels any prior choice of successor payees.
A payee who did not elect the option does not have the right to advance or
assign payments, take the payments in one sum, or make any other change.
However, the payee may be given the right to do one or more of these things
if the person who elects the option tells us in writing and we agree.
If we agree, a payee who has elected a payment option may later elect to
have any unpaid amount, or the present value of any elected payments, placed
under another option described in this section. When any payment under an
option would be less than $100, we may pay any unpaid amount or present value
in one sum.
PAYEES.
Only individuals who are to receive payments in their own behalf may be
named as payees or successor payees, unless we agree to some other payee. We
may require proof of the age or the survival of a payee.
41
<PAGE>
It may happen that when the last surviving payee dies, we still have an
unpaid amount, or there are some payments that remain to be made. If so, we
will pay the unpaid amount with interest to the date of payment, or pay the
present value of the remaining payments, to that payee's estate in one sum.
The present value of the remaining payments is based on the interest rate
used to compute them, and is always less than their sum.
PROCEEDS AT INTEREST OPTIONS (OPTIONS 1A AND 1B).
The Policy proceeds may be left with us at interest. We will set the
interest rate each year. This rate will be at least 3% per year.
For the Interest Accumulation Option (Option 1A), we credit interest each
year on the amount we still have. This amount can be withdrawn at any time in
sums of $100 or more. We pay interest to the date of withdrawal on sums
withdrawn.
For the Interest Payment Option (Option 1B), we pay interest once each
month, every 3 months, every 6 months, or once each year, as chosen, based on
the amount we still have.
LIFE INCOME OPTION (OPTION 2) (NOT AVAILABLE IN MASSACHUSETTS AND MONTANA).
We make equal payments each month during the lifetime of the payee or
payees. We determine the amount of the monthly payment by applying the Death
Benefit to purchase a corresponding single premium life annuity contract that
is being issued when the first payment is due. Payments are based on the
appropriately adjusted annuity premium rate in effect at that time, but will
not be less than the corresponding minimum amount shown in the Option 2
Table, which appears in Section 9 of your Policy. These minimum amounts are
based on the 1983 Table "a" with Projection Scale G and with interest
compounded each year at 3%.
Upon request, we will state in writing what the minimum amount of each
monthly payment would be under this option. It is based on the sex and
adjusted age of the payee or payees. To find the adjusted age in the year the
first payment is due, we increase or decrease the payee's age at that time,
as follows:
<TABLE>
<CAPTION>
1996 AND 2036 AND
EARLIER 1997-2005 2006-2015 2016-2025 2026-2035 LATER
- ---------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
+2 +1 0 -1 -2 -3
</TABLE>
We make a payment each month while the payee is living. Payments do not
change, and are guaranteed for 10 years, even if both payees die sooner.
BENEFICIARY
A Beneficiary is any person or entity named by the Policyowner to receive
the Death Benefit after the Insured dies. You name the Beneficiary when you
apply for the Policy. There may be different classes of Beneficiaries, such
as primary and secondary. These classes set the order of payment. There may
be more than one Beneficiary in a class.
The Beneficiary may be changed during the Insured's lifetime by writing to
our Service Office or such other location that we indicate to you in writing.
Generally, the change will take effect as of the date the request is signed.
If no Beneficiary is living when the Insured dies, unless provided otherwise,
the Death Benefit is paid to the Policyowner or, if deceased, the
Policyowner's estate.
42
<PAGE>
CHANGE OF OWNERSHIP
A successor Policyowner can be named in the application, or in a signed
notice that gives us the facts we need. The successor Policyowner will become
the new Policyowner when you die, if you die before the Insured. If no
successor Policyowner survives you and you die before the Insured, your
estate becomes the new Policyowner.
You can also change the Policyowner in a signed notice that gives us the
facts we need. When this change takes effect, all rights of ownership in this
Policy will pass to the new Policy owner.
When we record a change of Policyowner or successor Policyowner, these
changes will take effect as of the date of the Policyowner's signed notice,
subject to any payments we made or action we took before recording these
changes. We may require that these changes be endorsed in the Policy.
Changing the Policyowner or naming a new successor Policyowner cancels any
prior choice of Policyowner or successor Policyowner, respectively, but does
not change the Beneficiary.
ASSIGNMENT
While the Insured is living, the Policy may be assigned as collateral for
a loan or other obligation. For an assignment to be binding on us, we must
receive a signed copy of it at our Service Office or such other location that
we indicate to you in writing. We are not responsible for the validity of any
assignment.
LIMITS ON OUR RIGHTS TO CHALLENGE THE POLICY
Except for any increases in Face Amount, other than one due solely to a
change in the Life Insurance Benefit Option, we must bring any legal action
to contest the validity of a Policy within two years from its Issue Date.
After that we cannot contest its validity, except for failure to pay Premiums
or unless the Insured died within that two year period. For any increase in
the Face Amount, other than one due solely to a change in the Life Insurance
Benefit Option, we must bring legal action to contest that increase within
two years from the effective date of the increase.
MISSTATEMENT OF AGE OR SEX
If the Insured's age or sex is misstated in the Policy application, the
Death Benefit payable under the Policy will be adjusted based on what the
Policy would provide according to the most recent mortality charge for the
correct date of birth or correct sex.
SUICIDE
If the Insured commits suicide within two years from the Issue Date or
less where required by law (or, with respect to an increase in Face Amount,
the effective date of the increase), and while the Policy is in force, the
Policy will end, and the only amount payable to the Beneficiary will be the
Premiums paid, less any Policy Debt and any Partial Withdrawals.
WHEN WE PAY PROCEEDS
If the Policy has not terminated, payment of the Cash Surrender Value,
Partial Withdrawal, loan proceeds or the Death Benefit are made within 7 days
after we receive all requirements at our Service Office or such other
location that we indicate to you in writing. However, we can delay payment of
the Cash Surrender Value or any Partial Withdrawal from the Separate
43
<PAGE>
Account, loan proceeds attributable to the Separate Account, or the Death
Benefit during any period that: (1) it is not reasonably practicable to
determine the amount because the New York Stock Exchange is closed (other
than customary weekend and holiday closings), trading is restricted by the
SEC, or the SEC declares that an emergency exists; or (2) the SEC, by order,
permits us to delay payment in order to protect our Policyowners.
Amounts payable from the Fixed Account may be deferred for up to 6 months
from the date the request is received at our Service Office.
We can delay payment of the entire Death Benefit if payment is contested.
We investigate all death claims arising within the two-year limit on our
right to challenge the Policy. Upon receiving the information from a
completed investigation, we generally make a determination within 5 days as
to whether the claim should be authorized for payment. Payments are made
promptly after authorization. If payment of a Cash Surrender Value or Partial
Withdrawal is delayed for 30 days or more, we add interest at an annual rate
of 3%. We add interest to a Death Benefit from the date of death to the date
of payment at the same rate as is paid under the Interest Payment Option. See
"Section VI: Additional Information --Payment Options."
RECORDS AND REPORTS
All records and accounts relating to the Separate Account and the Fixed
Account are maintained by New York Life or NYLIAC. Each year we will mail you
a report showing the Cash Value and Policy Debt as of the latest Policy
Anniversary. This report contains any additional information required by
applicable law or regulation.
SALES AND OTHER AGREEMENTS
NYLIFE Distributors Inc., ("NYLIFE Distributors"), member, National
Association of Securities Dealers, 51 Madison Avenue, New York, New York
10010 is the principal underwriter and the distributor of the Policies and is
an indirect wholly-owned subsidiary of New York Life. NYLIFE Distributors is
engaged in the business of underwriting and distributing units of the
Separate Account and shares of open-end investment companies, including The
MainStay Funds and MainStay Institutional Funds Inc.
The commissions paid to registered representatives of broker-dealers who
have entered into dealer agreements with NYLIFE Distributors during a
Policy's first year will not exceed 35% of the Premiums paid up to a Policy's
surrender charge premium (5% in Policy Years two through ten) plus 3% of
Premiums paid in excess of such amount. Commissions paid in Policy Years
eleven and beyond are 2% of Premiums paid. A table of surrender charge
premium rates per thousand appears in Appendix B to this prospectus.
LEGAL PROCEEDINGS
The New York State Supreme Court on January 31, 1996 approved the
settlement of a consolidated nationwide class action lawsuit alleging certain
sales practice claims against NYLIAC and New York Life. In entering into the
settlement, NYLIAC specifically denied any wrongdoing. The class consists of
approximately three million policyowners who purchased whole life or
universal life policies from January 1, 1982 through December 31, 1994.
Appeals from the order may be filed within the prescribed statutory period.
Under the terms of the settlement, the class members receive benefits
intended to address the issues presented in the case or an opportunity to
redress individual claims in an alternative dispute resolution process. The
settlement (including awards made in the alternative dispute resolution
process) will not
44
<PAGE>
have a material adverse effect upon NYLIAC's financial position, and NYLIAC
believes that, after consideration of provisions made, the settlement will
not have a material adverse effect on operating results. NYLIAC, its
affiliates and its agents have been released from liability to class members
for transactions during the class period relating to the sales practice
claims in the lawsuits.
There are also actions in various jurisdictions by individual
policyowners, many of whom excluded themselves from the settlement of the
nationwide class action. Most of these actions seek substantial or
unspecified compensatory and punitive damages.
NYLIAC is also a defendant in other actions arising from its insurance and
investment operations, including actions involving retail sales practices.
Most of these actions also seek substantial or unspecified compensatory and
punitive damages. NYLIAC is also from time to time involved as a party in
various governmental, administrative and investigative proceedings and
inquiries.
Given the uncertain nature of litigation and regulatory inquiries, the
outcome of the above and other actions pending against NYLIAC cannot be
predicted. NYLIAC nevertheless believes that the ultimate outcome of all
pending litigation should not have a material adverse effect on NYLIAC's
financial position; however, it is possible that settlements or adverse
determinations in one or more actions or other proceedings in the future
could have a material adverse effect on NYLIAC's operating results for a
given year.
INDEPENDENT ACCOUNTANTS
The financial statements of NYLIAC have been included herein in reliance
upon the report of Price Waterhouse LLP, independent accountants, given on
the authority of that firm as experts in accounting and auditing.
The financial statements of NYLIAC included herein should be considered
only as bearing upon the ability of NYLIAC to meet its obligations under the
Policy.
EXPERTS
Actuarial matters in this prospectus have been examined by Frederick J.
Garland, Jr., Actuary. An opinion on actuarial matters is filed as an exhibit
to the registration statement we have filed with the SEC.
45
<PAGE>
APPENDIX A
ILLUSTRATIONS
The following tables demonstrate the way in which your Policy works. The
tables are based on the age, initial Death Benefit and Premium as follows:
The table is for a Policy issued to a male, non-smoker, age 45, on a
medically underwritten basis, with a scheduled annual Premium of $7,500 and
an initial Death Benefit of $350,000. It assumes that Life Insurance Benefit
Option 1 and Code Section 7702 Corridor Table have been selected.
The table shows how the Cash Value, Cash Surrender Value and Death Benefit
would vary over an extended period of time assuming hypothetical gross rates
of return equivalent to a constant annual rate of 0%, 6% or 12%. The table
will assist in the comparison of the Death Benefit, Cash Value and Cash
Surrender Value of the Policy with other corporate sponsored variable
universal life insurance plans.
The Death Benefit, Cash Value and Cash Surrender Value for a Policy would
be different from the amounts shown if the actual gross rates of return
averaged 0%, 6% or 12%, but varied above and below those averages for the
period. They would also be different depending on the allocation of the Cash
Value among the Investment Divisions of the Separate Account, the Fixed
Account and the Loan Account, if the actual gross rate of return for all
Investment Divisions averaged 0%, 6% or 12%, but varied above or below that
average for individual Investment Divisions. They would also differ if any
Policy loans or Partial Withdrawals were made during the period of time
illustrated.
The illustration reflects all charges under the Policy and assumes that
the cost of insurance charges are based on our guaranteed maximum cost of
insurance rates and reflect the deduction of all charges from the Cash Value
at their guaranteed maximum levels. They also reflect a daily mortality and
expense risk charge assessed against the assets of the Separate Account
equivalent to an annual charge of 0.70% (on a current basis for Policy Years
one through ten); 0.30% (on a current basis for Policy Years eleven and
later); and 0.90% (on a guaranteed basis for all Policy Years).
The illustration also reflects total assumed fees and expenses incurred by
the Funds of 0.81% of the average daily net assets of the Funds. The total is
based upon (a) 0.47% of average daily net assets, which is an average of the
management fees of each Portfolio; (b) 0.14% of average daily net assets,
which is an average of the administrative fees for each Portfolio; and (c)
0.21% of average daily net assets, which is an average of the other expenses
after expense reimbursement for each Portfolio. Actual fees and expenses of
the Funds may be more or less than the amounts illustrated and will depend on
the allocations made by the Policyowner.
Commencing in May, 1996, NYLIAC has agreed to pay certain other expenses
which were previously charged to the MainStay VP Series Fund. In addition, an
expense reimbursement agreement was effective through December 31, 1996,
limiting Other Expenses to 0.17% annually for the MainStay VP Series Fund. In
the absence of the expense reimbursement agreement and certain other expenses
which will no longer be charged to the MainStay VP Series Fund, the total
annual expenses for the year ended December 31, 1995 would have been 0.64%,
0.59%, 0.62%, 0.52%, 1.17%, 0.61%, 0.67%, 0.56%, 0.56%, and 0.42% for the
MainStay VP Capital Appreciation, MainStay VP Cash Management, MainStay VP
Govern-
A-1
<PAGE>
ment, MainStay VP High Yield Corporate Bond, MainStay VP International
Equity, MainStay VP Total Return, MainStay VP Value, MainStay VP Bond,
MainStay VP Growth Equity and MainStay VP Indexed Equity Portfolios,
respectively. In addition, NYLIAC has agreed to continue to limit "Other
Expenses" to 0.17% annually for the MainStay VP High Yield Corporate Bond,
MainStay VP International Equity and MainStay VP Value Portfolios until
December 31, 1997.
Likewise, the expense reimbursement agreement applies to the MainStay VP
Convertible Portfolio. Absent such limitation, it is estimated that "Other
Expenses" and Total Annual Portfolio Expenses for 1995 would be 0.36% and
0.92%, respectively. Numbers for the MainStay VP High Yield Corporate Bond,
MainStay VP International Equity and MainStay VP Value Portfolios have been
annualized based on the period from May 1, 1995 (the date of inception) to
December 31, 1995.
Janus Capital Corporation ("JCC") has agreed to reduce the advisory fee
for both Janus Portfolios to the extent that such fee exceeds the effective
rate of the Janus retail fund corresponding to such Portfolio. Absent such
reductions, "Advisory Fees" and "Total Portfolio Annual Expenses" for the
fiscal year ended December 3, 1995 would have been: 1.00% and 1.55%,
respectively, for the Janus Aspen Balanced Portfolio and 0.87% and 1.09%,
respectively, for the Janus Aspen Worldwide Growth Portfolio.
Morgan Stanley Asset Management Inc. has agreed to a reduction in its
management fees and to reimburse the Morgan Stanley Emerging Markets Equity
Portfolio if such fees would cause the "Total Portfolio Annual Expenses" to
exceed 1.75% of average daily net assets. Absent such reductions, it is
estimated that "Advisory Fees" and "Total Portfolio Annual Expenses" for the
current fiscal year would be 1.25% and 2.15%, respectively.
Taking into account the assumed charges for mortality and expense risks in
the Separate Account and the average fees and expenses of the Funds, the
gross rates of return of 0%, 6% and 12% would correspond to actual net
investment returns of -1.51%, 4.49% and 10.49%, respectively, based on the
current charge for mortality and expense risks, applicable to Policy Years
one through ten; -1.11%, 4.89% and 10.89%, respectively, based on the current
charge for mortality and expense risks, applicable to Policy Years eleven and
later; and -1.71%, 4.29% and 10.29%, respectively, based on the guaranteed
maximum charge for mortality and expense risks, applicable to all Policy
Years.
The second column of the tables show the amount which would accumulate if an
amount equal to the first Premium were invested and earned interest, after
taxes, at 5% per year, compounded annually.
NYLIAC will furnish upon request a comparable illustration using the age,
sex and underwriting classification of an Insured for any initial Death
Benefit and Premium requested. In addition to an illustration assuming Policy
charges at their maximum, we will furnish an illustration assuming current
Policy charges and current cost of insurance rates.
A-2
<PAGE>
CORPORATE SPONSORED VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE: 45, NON-SMOKER, MEDICALLY UNDERWRITTEN CLASS
SCHEDULED ANNUAL PREMIUM: $7,500
INITIAL FACE AMOUNT: $350,000
SECTION 7702 CORRIDOR TABLE/LIFE INSURANCE BENEFIT OPTION 1
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
END OF YEAR DEATH BENEFIT (2)
ASSUMING HYPOTHETICAL GROSS
TOTAL PREMIUMS PAID ANNUAL INVESTMENT RETURN OF
PLUS INTEREST AT 5% ------------------------------------
POLICY YEAR AS OF END OF YEAR (1) 0% 6% 12%
- ------------ --------------------- --------- --------- -----------
<S> <C> <C> <C> <C>
1 7,875 350,000 350,000 350,000
2 16,144 350,000 350,000 350,000
3 24,826 350,000 350,000 350,000
4 33,942 350,000 350,000 350,000
5 43,514 350,000 350,000 350,000
6 53,565 350,000 350,000 350,000
7 64,118 350,000 350,000 350,000
8 75,199 350,000 350,000 350,000
9 86,834 350,000 350,000 350,000
10 99,051 350,000 350,000 350,000
15 169,931 350,000 350,000 350,000
20 260,394 350,000 350,000 524,263
30 523,206 350,000 428,908 1,399,591
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
END OF YEAR
END OF YEAR CASH VALUE (2) CASH SURRENDER VALUE (2)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
---------------------------- ---------------------------------
POLICY YEAR 0% 6% 12% 0% 6% 12%
- ------------ --------- --------- ----------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 6,329 6,733 7,138 5,305 5,710 6,114
2 12,477 13,682 14,936 11,453 12,658 13,913
3 18,481 20,892 23,503 17,457 19,868 22,479
4 24,329 28,362 32,908 23,305 27,338 31,884
5 30,027 36,110 43,245 29,003 35,086 42,222
6 35,568 44,139 54,611 34,749 43,320 53,792
7 40,938 52,452 67,103 40,324 51,837 66,489
8 46,021 60,944 80,737 45,612 60,535 80,327
9 51,037 69,843 95,850 50,832 69,639 95,646
10 55,983 79,166 112,604 55,983 79,166 112,604
15 79,220 133,515 230,660 79,220 133,515 230,660
20 97,117 200,594 429,724 97,117 200,594 429,724
30 113,508 400,849 1,308,029 113,508 400,849 1,308,029
</TABLE>
- ------------
(1) All premiums are illustrated as if made at the beginning of the Policy
Year.
(2) Assumes no Policy loan or Partial Withdrawal has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN
ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST
OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY THE POLICYOWNER AND THE INVESTMENT EXPERIENCE
OF THE PORTFOLIOS. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES
OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOANS OR PARTIAL WITHDRAWALS WERE MADE. NO
REPRESENTATIONS CAN BE MADE BY NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION OR THE SEPARATE ACCOUNT OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD
OF TIME.
A-3
<PAGE>
CORPORATE SPONSORED VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE: 45, NON-SMOKER, MEDICALLY UNDERWRITTEN CLASS
SCHEDULED ANNUAL PREMIUM: $7,500
INITIAL FACE AMOUNT: $350,000
SECTION 7702 CORRIDOR TABLE/LIFE INSURANCE BENEFIT OPTION 1
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
END OF YEAR DEATH BENEFIT (2)
ASSUMING HYPOTHETICAL GROSS
TOTAL PREMIUMS PAID ANNUAL INVESTMENT RETURN OF
PLUS INTEREST AT 5% ------------------------------------
POLICY YEAR AS OF END OF YEAR (1) 0% 6% 12%
- ------------ --------------------- --------- --------- -----------
<S> <C> <C> <C> <C>
1 7,875 350,000 350,000 350,000
2 16,144 350,000 350,000 350,000
3 24,826 350,000 350,000 350,000
4 33,942 350,000 350,000 350,000
5 43,514 350,000 350,000 350,000
6 53,565 350,000 350,000 350,000
7 64,118 350,000 350,000 350,000
8 75,199 350,000 350,000 350,000
9 86,834 350,000 350,000 350,000
10 99,051 350,000 350,000 350,000
15 169,931 350,000 350,000 350,000
20 260,394 350,000 350,000 382,999
30 523,206 0 350,000 974,332
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
END OF YEAR
END OF YEAR CASH VALUE (2) CASH SURRENDER VALUE (2)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
---------------------------- -----------------------------------
POLICY YEAR 0% 6% 12% 0% 6% 12%
- ------------ --------- --------- ----------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 5,145 5,507 5,870 4,121 4,483 4,846
2 10,104 11,151 12,244 9,080 10,128 11,221
3 14,883 16,945 19,184 13,859 15,921 18,161
4 19,449 22,858 26,715 18,425 21,835 25,691
5 23,808 28,904 34,909 22,785 27,880 33,885
6 27,968 35,094 43,847 27,149 34,275 43,028
7 31,895 41,403 53,582 31,281 40,789 52,967
8 35,561 47,809 64,179 35,151 47,400 63,769
9 38,972 54,326 75,750 38,767 54,122 75,545
10 42,100 60,935 88,389 42,100 60,935 88,389
15 52,948 95,192 172,727 52,948 95,192 172,727
20 53,489 130,978 313,933 53,489 130,978 313,933
30 0 199,957 910,590 0 199,957 910,590
</TABLE>
- ------------
(1) All premiums are illustrated as if made at the beginning of the Policy
Year.
(2) Assumes no Policy loan or Partial Withdrawal has been made.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN
ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST
OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY THE POLICYOWNER AND THE INVESTMENT EXPERIENCE
OF THE PORTFOLIOS. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES
OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOANS OR PARTIAL WITHDRAWALS WERE MADE. NO
REPRESENTATIONS CAN BE MADE BY NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION OR THE SEPARATE ACCOUNT OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER A PERIOD
OF TIME.
A-4
<PAGE>
<TABLE>
<CAPTION>
December 31,
1995 1994
- -----------------------------------------------------------------------------
(in millions)
<C> <C>
ASSETS:
Bonds......................................................... $12,262 $11,141
Mortgage loans. .............................................. 1,062 969
Preferred and common stocks................................... 64 69
Real estate................................................... 141 119
Policy loans.................................................. 445 420
Cash and short-term investments............................... 343 580
Investment income due and accrued............................. 181 175
Separate account assets....................................... 1,444 971
Other assets.................................................. 35 55
------- -------
Total assets.................................................. $15,977 $14,499
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY:
LIABILITIES:
Policy reserves............................................... $12,821 $12,100
Deposit funds................................................. 7 -
Policy proceeds deposited with the Company.................... 88 70
Policy claims................................................. 79 67
Payable to parent............................................. 202 41
Securities sold under agreements to repurchase................ 86 254
Separate account liabilities.................................. 1,396 905
Other liabilities............................................. 256 92
Interest maintenance reserve.................................. 26 20
Asset valuation reserve....................................... 138 105
------- -------
Total liabilities............................................. 15,099 13,654
------- -------
STOCKHOLDER'S EQUITY:
Capital stock-par value $10,000 (20,000 shares authorized,
2,500 issued and outstanding)................................. 25 25
Additional paid-in capital.................................... 480 480
Surplus....................................................... 373 340
------- -------
Total stockholder's equity.................................... 878 845
------- -------
Total liabilities and stockholder's equity.................... $15,977 $14,499
======= =======
</TABLE>
Statement of Financial Position
(Prepared from the Annual Statement filed
with the Delaware Insurance Department)
See accompanying notes to financial statements.
F-1
<PAGE>
(This page intentionally left blank)
F-2
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C>
INCOME:
Premiums............................................................................................. $1,348 $1,203 $1,321
Net investment income................................................................................ 1,037 1,020 1,025
Policy proceeds deposited with the Company........................................................... 121 118 97
Other income......................................................................................... 41 39 16
------- ------- -------
Total income......................................................................................... 2,547 2,380 2,459
------- ------- -------
BENEFITS AND EXPENSES:
Benefit payments:
Death benefits....................................................................................... 117 117 88
Annuity benefits..................................................................................... 324 276 194
Health and disability insurance benefits............................................................. 23 20 18
Surrender benefits................................................................................... 650 718 802
Payments of amounts previously deposited with the Company............................................ 111 107 72
------- ------- -------
1,225 1,238 1,174
Additions to policy reserves......................................................................... 522 442 603
Additions to other insurance reserves................................................................ 369 183 172
Operating expenses................................................................................... 276 250 215
------- ------- -------
Total benefits and expenses.......................................................................... 2,392 2,113 2,164
------- ------- -------
Gain from operations before federal income taxes..................................................... 155 267 295
Federal income taxes................................................................................. 60 105 129
------- ------- -------
Net gain from operations............................................................................. 95 162 166
Net realized capital gains (losses), after transferring $23 million, ($25) million and $44 million of
net realized capital gains (losses) to the interest maintenance reserve for 1995, 1994 and 1993,
respectively......................................................................................... - 4 (61)
------- ------- -------
Net income........................................................................................... $95 $166 $105
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
Statement of Operations
(Prepared from the Annual Statement filed
with the Delaware Insurance Department)
New York Life
Insurance and
Annuity Corporation
(A WHOLLY OWNED SUBSIDIARY OF
NEW YORK LIFE INSURANCE COMPANY)
F-3
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 3
1995 1994 1993
- ---------------------------------------------------------------------
(in millions)
<S> <C> <C> <C>
Surplus, beginning of year...................... $340 $275 $206
Net income...................................... 95 166 105
Net unrealized (losses) gains on investments.... (1) (1) 41
(Increase) decrease in asset valuation reserve.. (33) (27) 3
Dividend to stockholder......................... - (70) (71)
Other adjustments, net.......................... (28) (3) (9)
------ ------ ------
Surplus, end of year............................ $373 $340 $275
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
Statement of Changes in Surplus
(Prepared from the Annual Statement filed
with the Delaware Insurance Department)
F-4
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
- -------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C>
CASH FLOW FROM OPERATIONS:
Premiums received................................... $1,339 $1,195 $1,338
Net investment income received...................... 978 959 950
Other............................................... 347 350 113
-------- -------- --------
Total received...................................... 2,664 2,504 2,401
-------- -------- --------
Benefits and other payments......................... 1,207 1,228 1,173
Operating expenses.................................. 279 249 206
Other............................................... 323 315 285
-------- -------- --------
Total paid.......................................... 1,809 1,792 1,664
-------- -------- --------
Net cash provided from operations................... 855 712 737
-------- -------- --------
Proceeds from investments sold...................... 2,415 3,137 2,839
Proceeds from investments matured or repaid......... 1,307 1,579 2,669
Securities sold under agreements to repurchase...... 3,029 1,938 1,632
Securities repurchased.............................. (3,196) (1,833) (1,483)
Cost of investments acquired........................ (4,846) (4,925) (6,320)
-------- -------- --------
Net cash used for investments....................... (1,291) (104) (663)
-------- -------- --------
Dividend paid to stockholder........................ - (70) (71)
-------- -------- --------
Other, net.......................................... 199 (151) (85)
-------- -------- --------
Net change in cash and short-term investments....... (237) 387 (82)
Cash and short-term investments, beginning of year.. 580 193 275
-------- -------- --------
Cash and short-term investments, end of year........ $343 $580 $193
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
Statement of Cash Flows
(Prepared from the Annual Statement filed
with the Delaware Insurance Department)
New York Life
Insurance and
Annuity Corporation
(A WHOLLY OWNED SUBSIDIARY OF
NEW YORK LIFE INSURANCE COMPANY)
F-5
<PAGE>
NOTE 1-Nature of Operations:
- -------------------------------------------------------------------------------
New York Life Insurance and Annuity Corporation ("NYLIAC"), a direct, wholly
owned subsidiary of New York Life Insurance Company ("New York Life"), is a
stock life insurance company. NYLIAC offers a wide variety of interest
sensitive insurance and annuity products to a large cross section of the total
insurance market. NYLIAC markets its products in all 50 of the United States,
the District of Columbia and Taiwan, primarily through its agency force. In
addition, NYLIAC markets Corporate Owned Life Insurance through independent
brokers and brokerage general agents.
The following companies are also direct, wholly owned subsidiaries of New
York Life: New York Life and Health Insurance Company, NYLIFE Insurance Company
of Arizona and NYLIFE Inc.
- -------------------------------------------------------------------------------
NOTE 2-Significant Accounting Policies:
- -------------------------------------------------------------------------------
Basis of Presentation-The accompanying financial statements have been prepared
on the basis of accounting practices prescribed or permitted by the Delaware
Insurance Department ("statutory accounting practices"). Statutory accounting
practices are currently considered generally accepted accounting principles for
mutual life insurance companies and their stock life subsidiaries, such as
NYLIAC. The Financial Accounting Standards Board has issued an Interpretation
which establishes a different definition of generally accepted accounting
principles for mutual life insurance companies. Under that Interpretation,
financial statements of mutual life insurance companies for periods beginning
after December 15, 1995 which are prepared on the basis of statutory accounting
practices will no longer be characterized as in conformity with generally
accepted accounting principles. Financial statements prepared in conformity
with statutory accounting practices will continue to be required by insurance
regulatory authorities.
Management of NYLIAC has not yet determined the effect on its December 31,
1995 financial statements of applying the new Interpretation nor whether it
will continue to present its general purpose financial statements in conformity
with the statutory basis of accounting or adopt the accounting changes required
in order to continue to present its financial statements in conformity with
generally accepted accounting principles. If NYLIAC chooses to adopt the
accounting changes required, the effect of the changes would be reported
retroactively through restatement of all previously issued financial statements
presented for comparative purposes. The cumulative effect of adopting these
changes would be included in the earliest year restated.
Investments-Investments are carried in accordance with methods and values
prescribed by the National Association of Insurance Commissioners ("NAIC").
Bonds are generally stated at amortized cost. Preferred stocks are generally
stated at cost. Common stocks are stated at market value. Mortgage loans on
real estate are stated at cost or amortized cost, but at no time stated at more
than the appraised value of the underlying collateral. Real estate is stated at
the lower of cost less accumulated depreciation and encumbrances or market
value, except for real estate joint ventures which are stated on an equity
basis. Depreciation of real estate (excluding foreclosed properties which are
not depreciated) is calculated using the straight-line method over the
estimated lives of the assets (generally 30 years). Policy loans are stated at
the aggregate balance due (which approximates fair value). Limited partnership
investments (included in other assets) are stated on the equity basis. The
value of invested assets has been adjusted for impairments that are other than
temporary. Investment income is recorded on the accrual basis, except where
collection is 90 days past due or is considered uncertain.
Notes to Financial Statements
December 31, 1995 and 1994
F-6
<PAGE>
Prepayment assumptions for loan-backed bonds were developed internally using
a proprietary model; outside services were used for structured securities. The
prospective adjustment method is used to adjust the amortization of premiums
and discounts on such securities.
Derivative financial instruments used by NYLIAC to hedge exposure to interest
rate and foreign currency fluctuations are accounted for on an accrual basis.
Gains and losses related to contracts that are effective hedges on specific
assets are deferred and recognized in income in the same period as gains and
losses on the hedged asset.
The Asset Valuation Reserve ("AVR") is required by insurance regulators to
stabilize surplus from fluctuations in the market value of bonds, stocks,
mortgage loans, real estate and other invested assets. Changes in the reserve
are accounted for as direct increases or decreases in surplus. The Interest
Maintenance Reserve ("IMR"), also required by insurance regulators, captures
interest related realized gains and losses (net of taxes) on fixed income
investments (bonds, preferred stocks and mortgage loans) which are amortized
into net investment income over the expected years to maturity of the
investments sold using the seriatim method for bonds and the grouped method for
mortgage loans and preferred stock.
Amounts payable or receivable under interest rate swap, commodity swap and
interest rate floor agreements are recognized as investment income or expense
when earned. Premiums paid for interest rate floor agreements are amortized
into interest expense over the life of the agreement. Unamortized premiums are
included in other assets in the Statement of Financial Position.
Unrealized gains and losses on foreign exchange forward contracts are
reported as other assets or liabilities, as appropriate. Realized gains and
losses are recognized in net income upon termination of the contracts.
Premiums and Related Expenses-Premiums are taken into income over the
premium-paying period of the policies. Commissions and other costs associated
with acquiring new business are charged to operations as incurred.
Policy Reserves-Policy reserves are based on mortality tables and valuation
interest rates which are consistent with statutory requirements and are
designed to be sufficient to provide for contractual benefits.
F ederal Income Taxes-Provision is made for federal income taxes estimated to
be payable to New York Life under a tax allocation agreement, including an
allocation of the equity base tax. Adjustments to such estimates, including
those related to the true-up or true-down of the equity base tax, are recorded
in gain from operations when known. Realized gains and losses are reported
after adjustment for the associated federal income tax.
Change in Accounting Policy for the Equity Base Tax-Each year, an estimated
Differential Earnings Rate (DER) is used to determine the equity base tax
reported in the annual statement as part of gain from operations for that year.
When the final DER is known, NYLIAC records a true-up or true-down adjustment
for the difference between the estimated and final DER.
Based on recent NAIC discussions of this item, NYLIAC changed that policy to
accelerate the recognition of the DER adjustment by one year and to record DER
adjustments through net gain. Previously, NYLIAC recorded such adjustments
directly to surplus. The effect of this change, including $18,000,000 for the
effect of adjusting for prior years, was an increase to net gain of
$12,000,000, and a decrease to surplus of $15,000,000.
New York Life
Insurance and
Annuity Corporation
(A WHOLLY OWNED SUBSIDIARY OF
NEW YORK LIFE INSURANCE COMPANY)
F-7
<PAGE>
Separate Accounts-NYLIAC has established separate accounts with varying
investment objectives which are segregated from NYLIAC's general account and
are maintained for the benefit of separate account contractholders and NYLIAC.
Separate account assets are generally stated at market value. The liability for
separate accounts represents contractholders' interests in the separate account
assets, including accumulated net investment income and realized and unrealized
gains and losses on those assets. Separate account liabilities generally
reflect market value.
Nonadmitted Assets-Under statutory accounting practices, certain assets are
designated as "nonadmitted assets" and are not included in the Statement of
Financial Position.
Fair Values of Financial Instruments-Fair values of various assets and
liabilities are included throughout the notes to financial statements.
Specifically, fair value disclosure of bonds, mortgage loans, and cash and
short-term investments is reported in Note 3. Fair values for insurance
liabilities (policy reserves) are reported in Note 7. Fair values for
derivative financial instruments are included in Note 12.
Permitted Statutory Accounting Practices-NYLIAC prepares its statutory
financial statements in accordance with accounting principles and practices
prescribed or permitted by the Delaware Insurance Department. Prescribed
statutory accounting practices include state laws and regulations along with
NAIC regulations. Permitted statutory accounting practices encompass accounting
practices that are not prescribed; such practices differ from state to state,
may differ from company to company within a state, and may change in the
future. Furthermore, the NAIC has started a project to codify statutory
accounting practices, the result of which is expected to constitute the only
source of "prescribed" statutory accounting practices. Accordingly, that
project, which is expected to be completed in 1997, will likely change the
definition of what comprises prescribed versus permitted statutory accounting
practices, and may result in changes to the accounting policies that insurance
enterprises use to prepare their statutory financial statements. NYLIAC has no
material permitted statutory accounting practices.
Business Risks and Uncertainties-The preparation of financial statements of
life insurance enterprises requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements. As a provider of life insurance and annuity
products, NYLIAC's operating results in any given period depend on estimates of
policy reserves required to provide for future policyowner benefits.
The development of policy reserves for NYLIAC's products requires management
to make estimates and assumptions regarding mortality, morbidity, lapse,
expense and investment experience. Such estimates are primarily based on
historical experience and, in many cases, state insurance laws require specific
mortality, morbidity and investment assumptions to be used by NYLIAC. Actual
results could differ materially from those estimates. Management monitors
actual experience, and where circumstances warrant, revises its assumptions and
the related reserve estimates.
NYLIAC regularly invests in mortgage backed securities and other securities
subject to prepayment and call risk. Significant changes in prevailing interest
rates may adversely affect the timing and amount of cash flows on such
securities. In addition, the amortization of market discount and accretion of
market premium for mortgage backed securities is based on historical experience
and estimates of future payment speeds on the underlying mortgage loans. Actual
prepayment speeds will differ from original estimates and may result in
material adjustments to amortization or accretion recorded in future periods.
Notes to Financial Statements (Continued)
F-8
<PAGE>
NYLIAC distributes a Corporate Owned Life Insurance product to targeted
corporate customers, primarily banks, through individual brokers and brokerage
general agents. Sales of this product by one broker generated $270,000,000 of
premium income in 1995, which represents 20% of NYLIAC's total premium income.
As a subsidiary of a mutual insurance company, NYLIAC is subject to a tax on
its equity base. The rates applied to NYLIAC's equity base are determined
annually by the Internal Revenue Service after comparison of mutual life
insurance company earnings for the year to the average earnings of the 50
largest stock life insurance companies for the prior three years. Due to the
timing of earnings information, estimates of the current year's tax must be
made by management. The ultimate amounts of equity base tax incurred may vary
considerably from the original estimates. (See Note 2-Federal Income Taxes and
Change in Accounting Policy for the Equity Base Tax).
- -------------------------------------------------------------------------------
NOTE 3-Investments
- -------------------------------------------------------------------------------
Bonds-Fair values of bonds as shown below are based on published market values,
if available. For investments without readily ascertainable market values, fair
value has been determined using one of the following sources: market dealer
quotations, a discounted cash flow approach, or a proprietary matrix pricing
model. Fair values do not necessarily represent the values for which these
securities could have been sold at December 31, 1995 or 1994; therefore, care
should be exercised in drawing any conclusions from these fair values. The
method for determining statement values is described in Note 2.
At December 31, 1995 and 1994, the maturity distribution of bonds was as
follows (in millions):
1995 1994
------------------- -------------------
Estimated Estimated
Statement Fair Statement Fair
Value Value Value Value
--------- --------- --------- ---------
Due in one year or less................. $756 $763 $218 $218
Due after one year through five years... 3,012 3,082 3,267 3,179
Due after five years through ten years.. 1,853 1,957 1,901 1,801
Due after ten years..................... 1,863 2,042 1,916 1,795
Asset-backed securities:
Government or government agency......... 4,089 4,233 3,310 3,128
Other................................... 689 720 529 523
--------- --------- --------- ---------
Total................................... $12,262 $12,797 $11,141 $10,644
========= ========= ========= =========
New York Life
Insurance and
Annuity Corporation
(A WHOLLY OWNED SUBSIDIARY OF
NEW YORK LIFE INSURANCE COMPANY)
F-9
<PAGE>
At December 31, 1995 and 1994, the distribution of unrealized gains and
losses on bonds was as follows (in millions):
<TABLE>
<CAPTION>
1995
--------------------------------
Estimated
Statement Fair
Value Gains Losses Value
--------- ----- ------ ---------
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government corporations and agencies.. $1,840 $82 $2 $1,920
U.S. agencies, state and municipal........................... 3,563 150 8 3,705
Foreign governments.......................................... 324 20 1 343
Corporate.................................................... 5,846 274 11 6,109
Other........................................................ 689 32 1 720
--------- ----- ------ ---------
Total........................................................ $12,262 $558 $23 $12,797
========= ===== ====== =========
</TABLE>
<TABLE>
<CAPTION>
1994
--------------------------------
Estimated
Statement Fair
Value Gains Losses Value
--------- ----- ------ ---------
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government corporations and agencies.. $1,679 $10 $96 $1,593
U.S. agencies, state and municipal........................... 2,965 14 193 2,786
Foreign governments.......................................... 298 4 21 281
Corporate.................................................... 5,670 60 269 5,461
Other........................................................ 529 10 16 523
--------- ----- ------ ---------
Total........................................................ $11,141 $98 $595 $10,644
========= ===== ====== =========
</TABLE>
Mortgage Loans-NYLIAC attempts to minimize the risk of investing in mortgage
loans by diversification of geographic locations and types of properties,
collateralization of mortgage loans based on management's credit assessment of
the borrower, and by traditionally requiring loan-to-value ratios of 75% or
less on new loans. The maximum and minimum lending rates for mortgage loans
during 1995 were: commercial loans, 9.50% and 7.25% (9.50% and 6.80% for 1994);
residential loans, 7.24% and 7.19% (no residential loans for 1994).
Notes to Financial Statements (Continued)
F-10
<PAGE>
At December 31, 1995 and 1994, the distribution of the mortgage loan
portfolio by geographic location and property type was as follows (in
millions):
<TABLE>
<CAPTION>
1995 1994
----------------- -----------------
Statement % of Statement % of
Value Total Value Total
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Geographic Distribution:
Middle Atlantic......... $421 39.7% $432 44.6%
South Atlantic.......... 275 25.9 202 20.8
Pacific................. 132 12.4 140 14.4
East North Central...... 132 12.4 130 13.4
West South Central...... 52 4.9 15 1.6
East South Central...... 22 2.1 29 3.0
Mountain................ 15 1.4 13 1.4
New England............. 12 1.1 7 .7
West North Central...... 1 .1 1 .1
--------- ------- --------- -------
Total................... $1,062 100.0% $969 100.0%
========= ======= ========= =======
Property Type:
Office Building......... $696 65.5% $649 67.0%
Retail.................. 185 17.4 166 17.1
Apartments.............. 152 14.3 125 12.9
Industrial.............. 21 2.0 29 3.0
Residential............. 8 .8 - -
--------- ------- --------- -------
Total................... $1,062 100.0% $969 100.0%
========= ======= ========= =======
</TABLE>
At December 31, 1995 and 1994, anticipated maturities in NYLIAC's mortgage
loan portfolio were as follows (in millions):
<TABLE>
<CAPTION>
1995 1994
------ ----
<S> <C> <C>
Due in one year or less................. $84 $142
Due after one year through five years... 398 345
Due after five years through ten years.. 460 408
Due after ten years..................... 120 74
------ ----
Total................................... $1,062 $969
====== ====
</TABLE>
Fair values for the mortgage loan portfolio at December 31, 1995 and 1994
were estimated to be $1,103,000,000 and $946,000,000, respectively, and were
determined by discounting the projected cash flow for each individual loan to
determine the current net present value. The discount rate used approximates
the current rate for new mortgages with comparable characteristics and similar
remaining maturities. As mortgage loans are generally intended to be held to
maturity and fair
New York Life
Insurance and
Annuity Corporation
(A WHOLLY OWNED SUBSIDIARY OF
NEW YORK LIFE INSURANCE COMPANY)
F-11
<PAGE>
values do not necessarily represent the values for which these loans could have
been sold at December 31, 1995 or 1994, care should be exercised in drawing any
conclusions from these fair values. The method of determining statement values
is described in Note 2.
Real Estate-At December 31, 1995 and 1994, NYLIAC's real estate portfolio, at
statement value, consisted of the following (in millions):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Commercial:
Investment.................... $101 $90
Acquired through foreclosure.. 40 29
---- ----
Total real estate............. $141 $119
==== ====
</TABLE>
Accumulated depreciation on real estate at December 31, 1995 amounted to
$5,033,000 ($2,379,000 for 1994). Depreciation expense for 1995 was $2,654,000
($1,729,000 for 1994 and $699,000 for 1993), and was recorded as an investment
expense.
Cash and Short-Term Investments-Short-term investments consist of securities
that have maturities of one year or less at acquisition. The carrying amount
reported in the Statement of Financial Position for cash and short-term
investments approximates fair value.
- -------------------------------------------------------------------------------
NOTE 4-Investment Income and Capital Gains and Losses
- -------------------------------------------------------------------------------
The components of net investment income for the years ended December 31, 1995,
1994 and 1993 were as follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Bonds........................ $887 $877 $881
Mortgage loans............... 83 86 98
Preferred and common stocks.. 3 5 7
Real estate.................. 19 15 11
Policy loans................. 34 31 29
Short-term investments....... 25 13 8
Amortization of IMR.......... 16 10 3
Other........................ 5 9 9
------ ------ ------
Gross investment income...... 1,072 1,046 1,046
Investment expenses.......... 35 26 21
------ ------ ------
Net investment income........ $1,037 $1,020 $1,025
====== ====== ======
</TABLE>
Notes to Financial Statements (Continued)
F-12
<PAGE>
For the years ended December 31, 1995, 1994 and 1993 realized capital gains
and losses were as follows (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
Gains Losses Gains Losses Gains Losses
----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Bonds..................................................................... $62 $(31) $94 $(132) $99 $(115)
Mortgage loans............................................................ 4 (8) 1 - 2 -
Preferred and common stocks............................................... 16 (6) 6 (1) 7 -
Real estate............................................................... - (1) - (3) - (3)
Derivative instruments.................................................... 102 (103) 4 (14) - -
Other assets.............................................................. 10 (3) 5 - 3 (13)
----- ------- ----- ------- ----- -------
$194 $(152) $110 $(150) $111 $(131)
===== ======= ===== ======= ===== =======
Net realized capital gains (losses) before capital gains tax and transfers
to the IMR................................................................ 42 (40) (20)
Less:
Capital gains tax (benefit)............................................... 19 (19) (3)
Gains (losses) transferred to the IMR..................................... 23 (25) 44
----- ----- -------
Net realized capital gains (losses) after capital gains tax and transfers
to the IMR................................................................ $0 $4 $(61)
===== ===== =======
</TABLE>
Proceeds from investments in bonds sold, matured or repaid were
$3,395,000,000, $4,520,000,000 and $5,197,000,000 for the years ended December
31, 1995, 1994 and 1993, respectively.
- -------------------------------------------------------------------------------
NOTE 5-Dividends to Stockholder
- -------------------------------------------------------------------------------
No dividends were declared or paid to New York Life in 1995. In 1994 and 1993,
NYLIAC declared and paid dividends of $70,000,000 and $71,000,000,
respectively, to New York Life. These dividends were paid from current year
earnings, as permitted by the Delaware Insurance Department.
- -------------------------------------------------------------------------------
NOTE 6-Service Agreement with New York Life
- -------------------------------------------------------------------------------
New York Life provides NYLIAC with services and facilities for the sale of
insurance and other activities related to the business of insurance. NYLIAC
reimburses New York Life for the identified costs associated with these
services and facilities under the terms of a Service Agreement between New York
Life and NYLIAC. Such costs, amounting to $166,000,000 for the year ended
December 31, 1995 ($147,000,000 for 1994 and $124,000,000 for 1993) are
reflected in operating expenses and net investment income in the accompanying
Statement of Operations.
In 1993, the NAIC approved a new accounting treatment for postretirement
benefits other than pensions which requires the reporting of expected future
benefit costs (primarily life and health benefits) for retirees and fully
eligible active
New York Life
Insurance and
Annuity Corporation
(A WHOLLY OWNED SUBSIDIARY OF
NEW YORK LIFE INSURANCE COMPANY)
F-13
<PAGE>
employees. The liabilities for postretirement benefits are held by New York
Life. However, NYLIAC was allocated $5,000,000 for its share of the net
periodic postretirement benefits expense in 1995 ($5,000,000 and $6,000,000 in
1994 and 1993, respectively) under the provisions of the service agreement.
- -------------------------------------------------------------------------------
NOTE 7-Insurance Liabilities
- -------------------------------------------------------------------------------
Policy Reserves and Deposit Funds-Reserves for life insurance policies are
maintained principally using the 1958 and 1980 Commissioners' Standard Ordinary
(CSO) Mortality Tables under the Commissioners' Reserve Valuation Method (CRVM)
with valuation interest rates ranging from 4% to 6.5%. Reserves for annuities
are based principally on 1971 Individual Annuity and 1983-a Mortality Tables
and the Commissioners' Annuity Reserve Valuation Method (CARVM), with valuation
interest rates ranging from 4% to 10%. Generally, owners of NYLIAC deferred
annuities are able, at their discretion, to withdraw funds from their policies.
The following table reflects the withdrawal characteristics of annuity
reserves and deposit funds (in millions):
<TABLE>
<CAPTION>
1995 1994
------------ ------------
% of % of
Amount Total Amount Total
------ ----- ------ -----
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal:
With market value adjustment........................................... $- -% $- -%
At book value less surrender charge of 5% or more...................... 1,730 19 1,289 16
Market value........................................................... 1,303 14 862 10
------ ----- ------ -----
Total with adjustment or at market value............................... 3,033 33 2,151 26
At book value without adjustment (minimal or no charge or adjustment).. 5,875 65 6,064 72
Not subject to discretionary withdrawal provisions..................... 189 2 184 2
------ ----- ------ -----
Total annuity reserves and deposit fund liabilities.................... $9,097 100% $8,399 100%
====== ===== ====== =====
</TABLE>
NYLIAC's liabilities under investment-type contracts, primarily deferred
annuities, of $7,614,000,000 and $7,343,000,000 at December 31, 1995 and 1994,
respectively, are included in policy reserves on the Statement of Financial
Position. Fair value of these liabilities at December 31, 1995 is approximately
$7,619,000,000 (statement value at December 31, 1994 generally reflects fair
value).
Notes to Financial Statements (Continued)
F-14
<PAGE>
Liability for Unpaid Accident and Health Claims and Claim Adjustment
Expenses-Activity in the liability for unpaid accident and health claims and
claim adjustment expenses is summarized as follows (in millions):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Net Balance at January 1.... $20 $18
Incurred related to:
Current Year................ 22 20
Prior Year.................. - -
---- ----
Total Incurred.............. 22 20
---- ----
Paid related to:
Current Year................ - -
Prior Year.................. 20 18
---- ----
Total Paid.................. 20 18
---- ----
Net Balance at December 31.. $22 $20
</TABLE>
- -------------------------------------------------------------------------------
NOTE 8-Separate Accounts
- -------------------------------------------------------------------------------
NYLIAC maintains seven nonguaranteed separate accounts for its variable
deferred annuity and variable universal life products. The assets of the
separate accounts represent shares of New York Life sponsored MFA Series Fund
and Acacia Capital Corporation Calvert Socially Responsible Portfolio as
follows (in millions):
<TABLE>
<CAPTION>
1995 1994
----------------- -----------------
No. of Statement No. of Statement
Portfolio Shares Value Shares Value
- --------------------------- ------- --------- ------- ---------
<S> <C> <C> <C> <C>
Growth Equity.............. 24.823 $428 22.479 $330
Bond....................... 17.514 235 17.099 207
Capital Appreciation....... 15.784 244 9.952 114
Indexed Equity............. 7.776 105 6.088 63
Total Return............... 14.699 195 11.562 122
Government................. 6.477 65 6.691 62
Cash Management............ 88.930 89 72.526 73
International Equity....... 1.435 15 - -
High Yield Corporate Bond.. 4.105 43 - -
Value...................... 2.109 24 - -
Socially Responsible....... .356 1 - -
------- --------- ------- ---------
Total...................... 184.008 $1,444 146.397 $971
======= ========= ======= =========
</TABLE>
New York Life
Insurance and
Annuity Corporation
(A WHOLLY OWNED SUBSIDIARY OF
NEW YORK LIFE INSURANCE COMPANY)
F-15
<PAGE>
During the second quarter of 1996, NYLIAC is expected to offer for sale a new
variable product, Corporate Owned Life Insurance Variable Universal Life, for
the purpose of investing payments received under new variable universal life
contracts issued by NYLIAC.
NYLIAC's total investment in the separate accounts was $48,000,000 and
$64,000,000 at December 31, 1995 and 1994, respectively.
Variable separate accounts held by NYLIAC for Individual Life and Annuity
policies represent nonguaranteed funds. The assets of these accounts are
carried at market value.
The following is a reconciliation of net transfers from NYLIAC to the
Separate Accounts (in millions):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -----
<S> <C> <C> <C>
Transfers as reported in Summary of Operations of the
Separate Accounts Statement:
Transfers to Separate Accounts........................ $404 $312 $215
Transfers from Separate Accounts...................... (174) (143) (69)
------- ------- -----
Net transfers to Separate Accounts.................... $230 $169 $146
======= ======= =====
Transfers as reported in "additions to other insurance
reserves" on the Statement of Operations of NYLIAC.... $230 $169 $146
======= ======= =====
</TABLE>
- -------------------------------------------------------------------------------
NOTE 9-Federal Income Taxes
- -------------------------------------------------------------------------------
NYLIAC is a member of an affiliated group which joins in the filing of a
consolidated federal income tax return with New York Life. The consolidated
income tax liability is allocated among the members of the group in accordance
with a tax allocation agreement. The tax allocation agreement provides that
NYLIAC is allocated its share of the consolidated tax provision or benefit,
including the equity base tax, determined generally on a separate return basis,
but may, where applicable, recognize the tax benefits of net operating losses
or capital losses utilizable in the consolidated group. Estimated payments for
taxes are made between the members of the consolidated group during the year.
At December 31, 1995 and 1994, federal income taxes payable to New York Life
were $62,000,000 and $19,000,000, respectively.
Notes to Financial Statements (Continued)
F-16
<PAGE>
Set forth below is a reconciliation of the statutory federal income tax rate
to the effective tax rate for 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Statutory federal income tax rate..................................... 35.0% 35.0% 35.0%
Exempt interest....................................................... (1.7) (2.8) (1.0)
Allocable share of equity base tax imposed on New York Life:
Current year estimate................................................. 5.0 2.7 2.3
Change in accounting policy........................................... (8.0) - -
Deferred acquisition costs............................................ 8.3 6.0 5.6
Increase (decrease) in statutory reserves in excess of increase in tax
reserves.............................................................. 1.6 (1.5) 2.1
Other................................................................. (1.4) (.1) (.2)
------ ------ ------
Effective tax rate.................................................... 38.8% 39.3% 43.8%
====== ====== ======
</TABLE>
- -------------------------------------------------------------------------------
NOTE 10-Reinsurance
- -------------------------------------------------------------------------------
NYLIAC enters into reinsurance agreements in the normal course of its insurance
business to reduce overall risks. NYLIAC remains liable for reinsurance ceded
if the reinsurer fails to meet its obligations on the business it has assumed.
Life insurance reinsured was 11% and 9% of total life insurance in-force at
December 31, 1995 and 1994, respectively.
In 1994, NYLIAC entered into a coinsurance/modified coinsurance reinsurance
agreement, covering a specific block of NYLIAC's Single Premium Multi-Life
Corporate Owned Life Insurance business. In 1995, this treaty was amended to
cover 1995 and future years' business. In 1995, NYLIAC ceded $216,000,000 in
premiums ($220,000,000 in 1994) reduced by an experience refund of $8,000,000
($4,000,000 in 1994). In addition, in 1995 NYLIAC recorded a commission and
expense allowance of $22,000,000 ($22,000,000 in 1994), a modco reserve
adjustment of $185,000,000 ($194,000,000 in 1994), and a reserve credit of
$43,000,000 ($22,000,000 in 1994), related to the coinsurance portion of the
agreement.
A group reinsurance agreement between NYLIAC and New York Life was approved
by the New York State Insurance Department in 1981 and was terminated effective
December 31, 1995. Under the terms of the agreement, NYLIAC assumed the
liabilities for group health long-term disability policies issued by New York
Life. NYLIAC assumed premiums of $29,000,000, $26,000,000 and $25,000,000 for
the years 1995, 1994 and 1993, respectively. A settlement is made between the
companies in the subsequent year. In 1995, NYLIAC received $4,000,000 from New
York Life (NYLIAC paid $1,000,000 and received $24,000,000 from New York Life
in 1994 and 1993, respectively), consisting of premiums due to NYLIAC of
$32,000,000 ($33,000,000 in 1994 and $41,000,000 in 1993), reduced by a benefit
reimbursement of $20,000,000 ($18,000,000 in 1994 and $15,000,000 in 1993) and
an experience refund of $8,000,000 ($16,000,000 in 1994 and $2,000,000 in
1993).
New York Life
Insurance and
Annuity Corporation
(A WHOLLY OWNED SUBSIDIARY OF
NEW YORK LIFE INSURANCE COMPANY)
F-17
<PAGE>
As a result of the termination, NYLIAC will transfer an amount to New York
Life equal to the reserves held to support the claims of those disabled lives.
At December 31, 1995 NYLIAC established a liability to New York Life of
$119,000,000 for the transfer of such reserves.
- -------------------------------------------------------------------------------
NOTE 11-Other Adjustments to Surplus
- -------------------------------------------------------------------------------
Other adjustments in the Statement of Changes in Surplus include principally
the effects of the following:
For 1995: (1) $18,000,000 decrease due to a change in accounting policy for
the equity base tax (see Note 2); (2) $14,000,000 decrease due to a change in
valuation basis; (3) $10,000,000 increase due to the change in separate account
surplus; (4) $3,000,000 decrease due to an increase in nonadmitted assets; and
(5) $3,000,000 decrease resulting from an increase in the liability for federal
income taxes of prior years.
For 1994: (1) $6,000,000 decrease due to an increase in nonadmitted assets;
(2) $5,000,000 increase resulting from a decrease in the liability for federal
income taxes of prior years; and (3) $2,000,000 decrease due to the change in
separate account surplus.
For 1993: (1) $18,000,000 decrease due to an adjustment to the Agents'
Progress Sharing Plan liability; (2) $6,000,000 increase due to the change in
separate account surplus; (3) $5,000,000 increase resulting from a decrease in
the liability for federal income taxes of prior years; and (4) $1,000,000
decrease due to the funding of the New York Life Foundation.
- -------------------------------------------------------------------------------
NOTE 12-Derivative Financial Instruments and Risk Management
- -------------------------------------------------------------------------------
NYLIAC uses derivative financial instruments to manage interest rate, currency
and market risk. These derivative financial instruments include foreign
exchange forward contracts, interest rate floors, and interest rate and
commodity swaps. NYLIAC does not engage in derivative financial instrument
transactions for the purpose of trading.
Notional or contractual amounts of derivative financial instruments provide
only a measure of involvement in these types of transactions and do not
represent the amounts exchanged between the parties engaged in the transaction.
The amounts exchanged are determined by reference to the notional amounts and
other terms of the derivative financial instruments which relate to interest
rates, exchange rates, or other financial indices.
Interest Rate Risk Management-NYLIAC enters into various types of interest
rate contracts primarily to minimize exposure of specific assets held by NYLIAC
to fluctuations in interest rates.
Notes to Financial Statements (Continued)
F-18
<PAGE>
The following table summarizes the notional amounts and credit exposures of
interest rate related derivative transactions (in thousands):
<TABLE>
<CAPTION>
1995 1994
----------------- -----------------
Notional Credit Notional Credit
Amount Exposure Amount Exposure
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest Rate Swaps.. $50,000 - $80,000 $2,636
Floors Purchased..... $150,000 - $150,000 $15
</TABLE>
Interest rate swaps are agreements with other parties to exchange, at
specified intervals, the difference between fixedrate and floating-rate
interest amounts calculated by reference to an agreed notional amount. Swap
contracts outstanding at December 31, 1995 are between ten months and eight
years, seven months in maturity. At December 31, 1994 such contracts are
between seven months and eight years, seven months in maturity. NYLIAC does not
act as an intermediary or broker in interest rate swaps.
The following table shows the type of swaps used by NYLIAC and the weighted
average interest rates. Average variable rates are based on the rates which
determine the last payment received or paid on each contract; those rates may
change significantly, affecting future cash flows.
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Receive-fixed swaps-Notional amount (in thousands).. $15,000 $45,000
Average receive rate................................ 7.93% 8.30%
Average pay rate.................................... 7.39% 5.85%
Pay-fixed swaps-Notional amount (in thousands)...... $35,000 $35,000
Average pay rate.................................... 7.46% 7.46%
Average receive rate................................ 6.02% 5.74%
</TABLE>
During the term of the swap, net settlement amounts are recorded as
investment income or expense when earned. Fair values of interest rate swaps at
December 31, 1995 and 1994 were $(2,298,000) and $1,760,000 respectively, based
on quoted market prices.
Interest rate floor agreements entitle NYLIAC to receive amounts from
counterparties based upon the difference between a strike price and current
interest rates. Such agreements serve as hedges against declining interest
rates on a portfolio of assets.
Premiums paid for interest rate floor agreements purchased are included in
other assets in the Statement of Financial Position and are amortized into
interest expense over the terms of the agreements. At December 31, 1995 and
1994, unamortized premiums amounted to $597,000 and $672,000, respectively.
Amounts received during the term of interest rate floor agreements are recorded
as investment income. Fair values of interest rate floors at December 31, 1995
and 1994 were $395,000 and $15,000, respectively, based on quoted market
prices.
NYLIAC is exposed to credit-related losses in the event that a counterparty
fails to perform its obligations under contractual terms. The credit exposure
of derivative financial instruments is represented by the sum of the fair
values of contracts with each counterparty, if the net value is positive, at
the reporting date.
New York Life
Insurance and
Annuity Corporation
(A WHOLLY OWNED SUBSIDIARY OF
NEW YORK LIFE INSURANCE COMPANY)
F-19
<PAGE>
NYLIAC deals with highly rated counterparties and does not expect the
counterparties to fail to meet their obligations. NYLIAC has controls in place
to monitor credit exposures by limiting transactions with specific
counterparties within specified dollar limits and assessing the future
creditworthiness of counterparties. NYLIAC uses master netting agreements and
adjusts transaction levels, when appropriate, to minimize risk.
Foreign Exchange Risk Management-NYLIAC enters into foreign exchange forward
contracts primarily as a portfolio hedge against foreign currency fluctuations.
The purpose of NYLIAC's foreign currency hedging activities is to protect it
from the risk that eventual dollar net cash inflows from investment income, or
the eventual sale, of a foreign currency denominated investment, will be
adversely affected by changes in exchange rates.
NYLIAC's foreign exchange forward contracts involve the exchange of two
currencies at a specified future date and at a specified price. The average
term of the contracts is three to six months.
The table below summarizes, by major currency, the contractual amounts of
NYLIAC's foreign exchange forward contracts. The amounts represent the U.S.
dollar equivalent of commitments to sell foreign currencies, translated at
December 31, 1995 and 1994 exchange rates (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Japanese Yen... $49,000 $29,000
French Francs.. 24,000 27,000
Italian Lire... 21,000 14,000
Other.......... 107,000 92,000
-------- --------
Total.......... $201,000 $162,000
======== ========
</TABLE>
The fair value of foreign exchange forward contracts at December 31, 1995 and
1994 was $(2,746,000) and $(1,046,000), respectively, and was based on current
market rates.
NYLIAC is exposed to credit-related losses in the event of non-performance by
counterparties, which could result in an unhedged position. NYLIAC deals with
highly rated, investment grade counterparties and does not expect the
counterparties to fail to meet their obligations under the contracts. For
contracts with counterparties where no master netting arrangement exists in the
event of default on the part of the counterparty, credit exposure is defined as
the fair value of contracts in a gain position at the reporting date. Credit
exposure to counterparties where a master netting arrangement is in place in
the event of default is defined as the net fair value, if positive, of all
outstanding contracts with each specific counterparty. The credit exposure of
NYLIAC's foreign exchange forward contracts at December 31, 1995 and 1994 was
$137,000 and $26,000, respectively.
Commodity Management-In 1994, NYLIAC entered into a $10,145,000 notional gold
swap in order to hedge variable interest payments on a gold denominated
Eurobond. The bond pays interest in U.S. dollars based upon the prevailing
price of gold. Under the terms of the agreement, NYLIAC pays to the
counterparty the variable interest payments on the bond in exchange for a fixed
payment in U.S. dollars at 8.46%. The counter party is highly rated and NYLIAC
does not expect the
Notes to Financial Statements (Continued)
F-20
<PAGE>
counterparty to fail to meet its obligation. The fair value of the swap at
December 31, 1995 and 1994 was $1,244,000 and $51,000, respectively, based on
current market quotes.
- -------------------------------------------------------------------------------
NOTE 13-Commitments and Contingencies
- -------------------------------------------------------------------------------
Litigation-The New York State Supreme Court on January 31, 1996 approved the
settlement of a consolidated nationwide class action lawsuit alleging certain
sales practice claims against NYLIAC and New York Life. In entering into the
settlement, NYLIAC specifically denied any wrongdoing. The class consists of
approximately three million policyowners who purchased whole life or universal
life policies from January 1, 1982 through December 31, 1994. Appeals from the
order may be filed within the prescribed statutory period. Under the terms of
the settlement, the class members receive benefits intended to address the
issues presented in the case or an opportunity to redress individual claims in
an alternative dispute resolution process. The settlement (including awards
made in an alternative dispute resolution process) will not have a material
adverse effect upon NYLIAC's financial position, and NYLIAC believes that,
after consideration of provisions made, the settlement will not have a material
adverse effect on operating results. NYLIAC, its affiliates and its agents have
been released from liability to class members for transactions during the class
period relating to the sales practice claims in the lawsuits.
There are also actions in various jurisdictions by individual policyowners,
many of whom excluded themselves from the settlement of the nationwide class
action. Most of the these actions seek substantial or unspecified compensatory
and punitive damages.
NYLIAC is also a defendant in other actions arising from its insurance and
investment operations, including actions involving retail sales practices. Most
of these actions also seek substantial or unspecified compensatory and punitive
damages. NYLIAC is also from time to time involved as a party in various
governmental, administrative and investigative proceedings and inquiries.
Given the uncertain nature of litigation and regulatory inquiries, the
outcome of the above and other actions pending against NYLIAC cannot be
predicted. NYLIAC nevertheless believes that the ultimate outcome of all
pending litigation should not have a material adverse effect on NYLIAC's
financial position; however, it is possible that settlements or adverse
determinations in one or more actions or other proceedings in the future could
have a material adverse effect on NYLIAC's operating results for a given year.
Loaned Securities and Repurchase Agreements-NYLIAC participates in a
securities lending program for the purpose of enhancing income on securities
held. At December 31, 1995, $1,222,000,000 ($1,143,000,000 at December 31,
1994) of NYLIAC's bonds were on loan to others, but were fully collateralized
in an account held in trust for NYLIAC. Such assets reflect the extent of
NYLIAC's involvement in securities lending, not its risk of loss.
NYLIAC has entered into agreements to sell and repurchase securities for the
purpose of enhancing income on securities held. Under these agreements, NYLIAC
obtains the use of funds from a broker for approximately one month. The
liability reported in the Statement of Financial Position at December 31, 1995
of $86,000,000 ($254,000,000 at December 31, 1994) is considered to be fair
value. The investments acquired with the funds received from the securities
sold are generally included in short-term investments.
New York Life
Insurance and
Annuity Corporation
(A WHOLLY OWNED SUBSIDIARY OF
NEW YORK LIFE INSURANCE COMPANY)
F-21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- -------------------------------------------------------------------------------
To the Board of Directors and Stockholder of
New York Life Insurance and Annuity Corporation
In our opinion, the accompanying statement of financial position and the
related statements of operations, of changes in surplus and of cash flows
present fairly, in all material respects, the financial position of New York
Life Insurance and Annuity Corporation at December 31, 1995 and 1994, and the
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 (practices prescribed or permitted by insurance regulatory
authorities, see Note 2). These financial statements are the responsibility of
the Corporation's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As described in Note 2, in 1995 the Corporation changed its accounting policy
for reporting the effect of changes in the Differential Earnings Rate on its
equity base tax.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
February 16, 1996
F-22
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934 , the undersigned Registrant hereby undertakes to file
with the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Reference is made to Article VIII of the Depositor's By-Laws.
New York Life maintains Directors and Officers Liability/Company
Reimbursement ("D&O") insurance which covers directors, officers and trustees
of New York Life, its subsidiaries, and its subsidiaries and certain affiliates
including the Depositor while acting in their capacity as such. The total
annual aggregate of D&O coverage is $100 million applicable to all insureds
under the D&O policies. There is no assurance that such coverage will be
maintained by New York Life or for the Depositor in the future as, in the past,
there have been large variances in the availability of D&O insurance for
financial institutions.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Depositor pursuant to the foregoing provisions, or otherwise, the Depositor
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 indemnification against
such liabilities (other than the payment by the Depositor of expenses incurred
or paid by a director, officer or controlling person of the Depositor 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 Depositor 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.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and
documents:
The facing sheet.
The prospectus consisting of 72 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484.
The signatures.
Written consents of the following persons:
(a) Robert J. Hebron, Esq. - to be filed by Amendment.
(b) Fred Garland, Actuary
II-1
<PAGE>
(c) Price Waterhouse, LLP - previously filed as Exhibit 7
to the initial registration statement.
The following exhibits:
1. The following exhibits correspond to those required by paragraph A of
the instructions as to exhibits in Form N-8B-2:
(1) Resolution of the Board of Directors of NYLIAC establishing
the Separate Account - previously filed as Exhibit 1.(1) to
the initial registration statement.
(2) Not applicable.
(3) (a) Distribution Agreement between NYLIFE Distributors Inc.
and NYLIAC - filed herewith.
(b) Form of Sales Agreement, by and between NYLIFE
Distributors Inc., as Underwriter, NYLIAC as Issuer,
and Dealers - filed herewith.
(c) Not applicable.
(4) Not applicable.
(5) Form of Policy - previously filed as Exhibit 1.(5) to the
initial registration statement.
(6) (a) Restated Certificate of Incorporation of NYLIAC -
previously filed as Exhibit 1.(6)(a) to the initial
registration statement.
(b) By-Laws of NYLIAC - previously filed as Exhibit 1.(6)(b)
to the initial registration statement.
(7) Not applicable.
(8) Not applicable.
(9) (a) Stock Sales Agreement between NYLIAC and MainStay VP
Series Fund, Inc. (formerly New York Life MFA Series
Fund, Inc.) - filed herewith.
(b)(1) Participation Agreement among Acacia Capital
Corporation, Calvert Asset Management Company, Inc.
and NYLIAC, as amended - filed herewith.
(b)(2) Participation Agreement among The Alger American
Fund, Fred Alger and Company, Incorporated and
NYLIAC - filed herewith.
(b)(3) Participation Agreement between Janus Aspen Series and
NYLIAC - filed herewith.
(b)(4) Participation Agreement among Morgan Stanley Universal
Funds, Inc., Morgan Stanley Asset Management Inc. and
NYLIAC - filed herewith.
(b)(5) Participation Agreement among Variable Insurance
Products Fund, Fidelity Distributors Corporation and
NYLIAC - filed herewith.
(b)(6) Participation Agreement among Variable Insurance
Products Fund II, Fidelity Distributors
II-2
<PAGE>
Corporation and NYLIAC - filed herewith.
(c) Powers of Attorney for the Directors and Officers of
NYLIAC - previously filed as Exhibit (10)(b) to
Post-Effective Amendment No. 5 to Form N-4 for NYLIAC
Variable Annuity Separate Account-I (File No.
33-53342) for the following:
Jay S. Calhoun, Vice President, Treasurer and Director
(Principal Financial Officer) Richard M. Kernan, Jr.,
Director Robert D. Rock, Senior Vice President and
Director Frederick J. Sievert, Executive Vice
President and Director Stephen N. Steinig, Senior Vice
President, Chief Actuary and Director Seymour
Sternberg, President and Director (Principal Executive
Officer)
(d) Power of Attorney for Maryann L. Ingenito, Vice
President and Controller (Principal Accounting
Officer) - filed herewith
(e) Memorandum describing NYLIAC's issuance, transfer and
redemption procedures for the Policies - to be filed
by Amendment.
(10) Form of Application - to be filed by Amendment.
2. Opinion and Consent of Robert J. Hebron, Esq. - to be filed by
Amendment.
3. Not applicable.
4. Not applicable.
5. Not applicable.
6. Opinion and Consent of Fred Garland, Actuary - filed herewith.
7. Consent of Price Waterhouse, LLP. - previously filed as Exhibit 7 to the
initial registration statement.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I, has duly
caused this Pre-effective Amendment No.1 to the Registration Statement to be
signed on its behalf by the undersigned thereunto duly authorized, in the City
and State of New York on the 2nd day of January, 1997.
NYLIAC CORPORATE SPONSORED VARIABLE
UNIVERSAL LIFE SEPARATE ACCOUNT-I
(Registrant)
By /s/ Lawrence R. Stoehr
---------------------------------
Lawrence R. Stoehr
Vice President
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION
(Depositor)
By /s/ Lawrence R. Stoehr
---------------------------------
Lawrence R. Stoehr
Vice President
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the date indicated.
Jay S. Calhoun, III* Vice President, Treasurer and Director
(Principal Financial Officer)
Maryann L. Ingenito* Vice President and Controller (Principal
Accounting Officer)
Richard M. Kernan, Jr.* Director
Robert D. Rock* Senior Vice President and Director
Frederick J. Sievert* Executive Vice President and Director
Stephen N. Steinig* Senior Vice President, Chief Actuary and
Director
Seymour Sternberg* President and Director (Principal Executive
Officer)
*By /s/ Lawrence R. Stoehr
---------------------------
Lawrence R. Stoehr
Attorney-in-Fact
January 2, 1997
II-4
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
1.(3)(a) Distribution Agreement between NYLIFE Distributors Inc. and
NYLIAC
1.(3)(b) Form of Sales Agreement, by and between NYLIFE Distributors
Inc., as Underwriter, NYLIAC as Issuer, and Dealers
1.(9)(a) Stock Sale Agreement between NYLIAC and MainStay VP Series
Fund, Inc.
1.(9)(b)(1) Participation Agreement by and among Acacia Capital
Corporation, Calvert Asset Management Company, Inc. and
NYLIAC, as amended
1.(9)(b)(2) Participation Agreement by and among The Alger American Fund,
Fred Alger and Company, Incorporated and NYLIAC
1.(9)(b)(3) Participation Agreement by and between Janus Aspen Series and
NYLIAC
1.(9)(b)(4) Participation Agreement by and among Morgan Stanley Universal
Funds, Inc., Morgan Stanley Asset Management Inc. and NYLIAC
1.(9)(b)(5) Participation Agreement by and among Variable Insurance
Products Fund, Fidelity Distributors Corporation and NYLIAC
1.(9)(b)(6) Participation Agreement by and among Variable Insurance
Products Fund II, Fidelity Distributors Corporation and
NYLIAC
1.(9)(d) Power of Attorney for Maryann L. Ingenito, Vice President and
Controller (Principal Accounting Officer)
6. Opinion and Consent of Fred Garland, Actuary
<PAGE>
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT made and effective this 1st day of August,
1996, by and between NYLIFE Distributors Inc. ("Distributor"), a Delaware
corporation, and New York Life Insurance and Annuity Corporation, ("NYLIAC"), a
Delaware corporation, on its own behalf and on behalf of Corporate Sponsored
Variable Universal Life Separate Account of NYLIAC (the "Account").
WITNESSETH:
WHEREAS, the Account was established by NYLIAC under the laws of the
State of Delaware, pursuant to a resolution of NYLIAC's Board of Directors in
order to set aside the investment assets attributable to certain corporate
sponsored variable universal life insurance policies ("Policies") issued by
NYLIAC;
WHEREAS, NYLIAC has registered the Account with the Securities and
Exchange Commission ("SEC") as a unit investment trust under the Investment
Company Act of 1940 ("1940 Act");
WHEREAS, Distributor is and will be registered as a broker-dealer with
the SEC under the Securities Exchange Act of 1934 ("1934 Act"), and a member of
the National Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, NYLIAC has registered the Policies under the Securities Act
of 1933 and proposes to have the Policies sold and distributed through
Distributor, and Distributor is willing to sell and distribute such Policies
under the terms stated herein:
NOW, THEREFORE, the parties, intending to be legally bound, hereby
agree as follows:
1. Appointment As Distributor/Principal Underwriter. NYLIAC grants to
Distributor the exclusive right to be, and Distributor agrees to serve as,
distributor and principal underwriter of the Policies during the term of this
Agreement. Distributor agrees to use its best efforts to solicit applications
for the Policies and otherwise perform all duties and functions which are
necessary and proper for the distribution of the Policies.
2. Prospectus. Distributor agrees to offer the Policies for sale in
accordance with the registration statement and prospectus therefor then in
effect. Distributor is not authorized to give any information or to make any
representations concerning the Policies other than those contained in the
current prospectus therefor filed with the SEC or in such sales literature as
may be authorized by NYLIAC.
3. Considerations. All premiums, purchase payments or other monies
payable under the Policies shall be remitted promptly in full together with
such application, forms and any other required documentation to NYLIAC or its
designated servicing agent and shall become the exclusive property of NYLIAC.
Checks or money orders in payment under the Policies shall be drawn to the
order of "New York Life Insurance and Annuity Corporation" and may be remitted
by wire if prior written approval is obtained from NYLIAC.
4. Copies of Information. On behalf of the Account, NYLIAC shall
furnish Distributor with copies of all prospectuses, financial statements and
other documents which Distributor reasonably requests for use in connection
with the distribution of the Policies.
5. Registration Representation. Distributor represents that it is or
will be prior to the offer and sale of the Policies (i) duly registered as a
broker-dealer under the 1934 Act, (ii) a member in good standing of the NASD
and, (iii) to the extent necessary to offer the Policies, duly registered or
otherwise qualified under the securities laws of any state or other
jurisdiction. Distributor shall be responsible for carrying out its sales and
underwriting obligations hereunder in continued compliance with the NASD Rules
of Fair Practice and federal and state securities and insurance laws and
regulations.
6. Other Broker/Dealer Agreements. Distributor is hereby authorized to
enter into written sales agreements with other independent broker-dealers for
the sale of the Policies. All such sales agreements entered into by Distributor
shall provide that each independent broker-dealer will assume full
responsibility for continued compliance by itself and by its associated persons
with the NASD Rules of Fair Practice and applicable federal and state
securities and insurance laws, and shall be in such form and contain such other
provisions as NYLIAC may from time to time require. All associated persons of
such independent broker-dealers soliciting applications for the Policies shall
be duly and appropriately registered by the NASD and licensed and appointed by
NYLIAC for the sale of the Policies under the insurance laws of the applicable
states or jurisdictions in which such Policies may be lawfully sold. All
applications for the Policies solicited by such broker-dealers through their
representatives, together with any other required documentation and
<PAGE>
premiums, purchase payments and other monies, shall be handled as set forth in
paragraph 3 above.
7. NYLIFE Securities Inc. Registered Representatives. In addition to
entering into sales agreements with other independent broker-dealers,
Distributor is hereby authorized to utilize representatives of NYLIFE
Securities Inc. ("NYLSEC"), acting on behalf of Distributor, to effect offers
and sales of the Policies. In this regard, Distributor agrees that it shall be
fully responsible for the following: (a) ensuring that no person shall offer or
sell the Policies on its behalf until such person is duly registered as a
representative of NYLSEC, duly licensed and appointed by NYLIAC, and
appropriately licensed, registered or otherwise qualified to offer and sell
such Policies under state and federal securities, insurance and other laws of
all states in which such Policies shall be sold; (b) ensuring that NYLSEC
supervises and controls its representatives who are soliciting applications for
the Policies; c) ensuring that NYLSEC takes all necessary and proper steps to
adequately train its representatives who are soliciting applications for the
Policies; and (d) taking all necessary and proper steps to ensure compliance on
a continuous basis with the NASD Rules of Fair Practice and with federal and
state securities and insurance law requirements concerning the offer and sale
of the Policies.
8. Insurance Licensing and Appointments. NYLIAC shall apply for the
proper insurance licenses and appointments in appropriate states or
jurisdictions for the designated persons acting on behalf of Distributor or
associated with other independent broker-dealers which have entered into sales
agreements with Distributor for the sale of the Policies; provided that NYLIAC
reserves the right to refuse to appoint any proposed registered representative
as an agent or broker, and to terminate an agent or broker once appointed.
9. Recordkeeping. NYLIAC and Distributor shall cause to be maintained
and preserved for the periods prescribed such accounts, books, and other
documents as are required of them by the 1940 Act, the 1934 Act, and any other
applicable laws and regulations. The books, accounts and records of NYLIAC, of
the Account, and of Distributor as to all transactions hereunder shall be
maintained so as to disclose clearly and accurately the nature and details of
the transactions. NYLIAC (or such other entity engaged by NYLIAC for this
purpose), on behalf of and as agent for Distributor, shall maintain
Distributor's books and records pertaining to the sale of the Policies to the
extent as mutually agreed upon from time to time by NYLIAC and Distributor;
provided that such books and records shall be the property of Distributor, and
shall at all times be subject to such reasonable periodic, special or other
audit or examination by the SEC, NASD, any state insurance commissioner and/or
all other regulatory bodies having jurisdiction. NYLIAC shall be responsible
for sending on behalf of and as agent for Distributor all required
confirmations on customer transactions in compliance with applicable
regulations, as modified by an exemption or other relief obtained by NYLIAC.
Distributor shall cause NYLIAC to be furnished with such reports as NYLIAC may
reasonably request for the purpose of meeting its reporting and recordkeeping
requirements under the insurance laws of the State of New York and any other
applicable states or jurisdictions. NYLIAC agrees that its records relating to
the sale of the Policies shall be subject to such reasonable periodic, special
or other audit or examination by the SEC, NASD, and any state insurance
commissioner and/or all other regulatory bodies having jurisdiction.
10. Commissions. NYLIAC shall have the responsibility for paying on
behalf of Distributor (i) any compensation to other broker-dealers and their
associated persons due under the terms of any sales agreements entered into
pursuant to paragraph 6 above, between Distributor and such broker-dealers as
agreed by NYLIAC; and (ii) all commissions or other fees to persons acting on
behalf of Distributor which are due for the sale of the Policies in the amounts
and on such terms and conditions as NYLIAC and Distributor shall determine.
Notwithstanding the preceding sentence, no broker-dealer, associated person or
other individual or entity shall have an interest in any deductions or other
fees payable to Distributor as set forth herein.
11. Expense Reimbursement. NYLIAC shall reimburse Distributor for all
costs and expenses incurred by Distributor in furnishing the services,
materials, and supplies required by the terms of this Agreement.
12. Indemnification. NYLIAC agrees to indemnify Distributor for any
losses incurred as a result of any action taken or omitted by Distributor, or
any of its officers, agents or employees, in performing their responsibilities
under this Agreement in good faith and without willful misfeasance, gross
negligence, or reckless disregard of such obligations.
13. Regulatory Investigations. Distributor and NYLIAC agree to
cooperate fully in any insurance or judicial regulatory investigation or
proceeding arising in connection with the Policies distributed under this
Agreement. Distributor and NYLIAC further agree to cooperate fully in any
securities regulatory inspection,
<PAGE>
inquiry, investigation or proceeding or any judicial proceeding with respect to
NYLIAC, Distributor, their affiliates and their representatives to the extent
that such inspection, inquiry, investigation or proceeding or judicial
proceeding is in connection with the Policies distributed under this Agreement.
Without limiting the foregoing:
(a) Distributor will be notified promptly of any notice of
any regulatory inspection, inquiry, investigation or proceeding or
judicial proceeding received by NYLIAC with respect to Distributor or
any representative or which may affect NYLIAC's issuance of any
Policies marketed under this Agreement; and
(b) Distributor will promptly notify NYLIAC of any notice of
any regulatory inspection, inquiry, investigation or judicial
proceeding received by Distributor or any representative with respect
to NYLIAC or its affiliates in connection with any Policies
distributed under this Agreement. In the case of a customer complaint,
Distributor and NYLIAC will cooperate in investigating such
complaint and shall arrive at a mutually satisfactory response.
14. Termination.
(a) This Agreement may be terminated by either party hereto upon
60 days prior written notice to the other party.
(b) This Agreement may be terminated upon written notice of one
party to the other party hereto in the event of bankruptcy or insolvency of
such party to which notice is given.
(c) This Agreement may be terminated at any time upon the mutual
written consent of the parties hereto.
(d) Distributor shall not assign or delegate its responsibilities
under this Agreement without the written consent of NYLIAC.
(e) Upon termination of this Agreement, all authorizations, rights
and obligations shall cease except the obligations to settle accounts
hereunder, including payments or premiums or contributions subsequently
received for Policies in effect at the time of termination or issued pursuant
to applications received by NYLIAC prior to termination.
15. Regulatory Impact. This Agreement shall be subject to, among other
laws, the provisions of the 1940 Act and the 1934 Act and the rules,
regulations, and rulings thereunder and of the NASD, from time to time in
effect, including such exemptions from the 1940 Act as the SEC may grant, and
the terms hereof shall be interpreted and construed in accordance therewith.
Without limiting the generality of the foregoing, the term "assigned" shall not
include any transaction exempted from section 15(b)(2) of the 1940 Act.
Distributor shall submit to all regulatory and administrative bodies
having jurisdiction over the operations of the Account, and will provide any
information, reports or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws or regulations.
16. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
17. Choice of Law. This Agreement shall be construed, enforced and
governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their respective duly authorized officials as of the day and year
first above written.
Attest: NYLIFE DISTRIBUTORS INC.
/s/Joanna Lattarulo By /s/Jefferson C. Boyce
- ------------------------ --------------------------
Attest: NEW YORK LIFE INSURANCE
AND ANNUITY CORPORATION
/s/Lawrence R. Stoehr By /s/ Robert A. Slepicka
- ------------------------ --------------------------
<PAGE>
SALES AGREEMENT
Agreement, made as of the ____ day of ____________, 199__, by and
between NYLIFE Distributors Inc. ("Distributor"), a Delaware corporation; New
York Life Insurance and Annuity Corporation ("NYLIAC"), a Delaware Corporation,
(collectively referred to herein as "NYL"); and _______________________, a
____________ corporation ("Dealer").
WITNESSETH
WHEREAS, Distributor is a broker-dealer registered with the Securities
and Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as
amended ("1934 Act") and a member of the National Association of Securities
Dealers, Inc. ("NASD"), and Dealer is also a broker-dealer registered with the
SEC under the 1934 Act, is a member of the NASD, and also possesses appropriate
insurance licenses;
WHEREAS, NYLIAC has appointed Distributor as principal underwriter for
the variable contracts issued by NYLIAC, which are described on Schedule A
hereto, as from time to time amended ("Variable Contracts") and it is intended
that Dealer shall be authorized to solicit applications for Variable Contracts
or to make applications for Variable Contracts available, subject to the terms
and conditions as set forth more fully herein;
WHEREAS, NYLIAC has authorized Distributor to enter into separate
written agreements with broker-dealers, which agree to solicit applications for
Variable Contracts or to make applications for Variable Contracts available,
and the parties desire that Dealer, through its registered representatives who
are not operating pursuant to a "Career Agent Contract" with New York Life
Insurance Company, as defined in Section B(5) of this Agreement, be authorized
to solicit applications for Variable Contracts or to make applications for
Variable Contracts available.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and promises herein contained, the parties agree as follows:
A. Agreements of NYL
(1) NYLIAC hereby appoints Dealer as an independent agent of NYLIAC to
solicit applications for Variable Contracts or to make applications
for Variable Contracts available during the term of this Agreement.
(2) During the term of this Agreement, Dealer is hereby authorized to
solicit applications for Variable Contracts or to make applications
for Variable Contracts available, provided there is an effective
registration statement under the Securities Act of 1933 ("1933 Act")
and Investment Company Act of 1940 ("Registration Statement") relating
to such Variable Contracts and, with respect to each state in which
applications are to be solicited or made available, it is further
provided that Dealer has been notified by NYL that the Variable
Contracts are qualified for sale under all applicable federal and
state securities laws and state insurance laws. NYL agrees that it
will use its best efforts to secure and maintain all necessary
qualifications of the Variable Contracts for sale under applicable
securities and insurance laws in all states and in any other
territories or jurisdictions in which the parties agree to sell the
Variable Contracts.
(3) NYL will be responsible for approving and filing all sales material
and promotional material respecting the Variable Contracts or any
underlying fund ("Fund") to be used by Dealer, with the NASD and with
the appropriate state insurance authorities. No sales material
respecting the Variable Contracts or any Fund will be used by Dealer,
without the prior written approval of NYL.
(4) NYL agrees to notify Dealer of the following:
(a) When the Registration Statement for the Variable Contracts or
the Registration Statement for any Fund has become effective
or when any post-effective amendment with respect to such
Variable Contract or Fund Registration Statement thereafter
becomes effective;
<PAGE>
(b) Of the issuance by the SEC of any stop order with respect to
any Variable Contract or Fund Registration Statement or of
any amendments thereto or the initiation of any proceedings
for that purpose or for any other purpose relating to the
registration and/or offering of the Variable Contracts or
Fund shares;
(c) In which states or jurisdictions approval of the Variable
Contracts is required under the applicable insurance laws and
regulations, and when such approvals have been obtained; and
(d) In which states or jurisdictions Variable Contracts may not
be lawfully sold.
(5) NYL agrees to provide Dealer with as many copies of the Prospectus for
the Variable Contracts and the Fund (and any amendments or supplements
thereto) and application kits as may be reasonably requested by
Dealer. Upon termination of this Agreement, any prospectuses,
applications and other materials or supplies furnished by NYL to
Dealer or duly appointed agents of Dealer shall be promptly returned
to NYL.
B. Agreements of Dealer
(1) Dealer must at all times when performing its functions under this
Agreement, be registered as a broker-dealer under the 1934 Act and be
a member of the NASD.
(2) Dealer must at all times when performing its functions under this
Agreement, be registered as a broker-dealer with applicable state
authorities under the laws of any applicable states where necessary in
connection with its obligations under this agreement.
(3) Dealer must at all times when performing its functions under this
Agreement, be duly licensed under applicable insurance laws in the
states or other jurisdictions where required to solicit applications
for the purchase of the Variable Contracts or to make applications for
Variable Contracts available.
(4) Dealer shall notify NYL if Dealer is no longer duly registered as a
broker-dealer under the 1934 Act or a member of the NASD, is no longer
fully licensed by the proper authorities under the applicable
insurance laws or registered under applicable state securities laws in
the jurisdictions in which Dealer is engaged to solicit applications
for the purchase of Variable Contracts or to make applications for
Variable Contracts available, is the subject of any investigation or
disciplinary action by any governmental, regulatory, or judicial
authority that has resulted, or for which it appears reasonably likely
may result, in loss or suspension of any registration, membership, or
license referred to above or undergoes a change in management,
control, or ownership other than a change in its internal management
personnel.
(5) Dealer will select and recommend to NYL individuals who are its
"associated persons," as defined in Section 3(a)(18) of the 1934 Act
and employees, representatives, or agents of Dealer for appointment as
agents by NYLIAC. It is understood that NYLIAC reserves the right to
refuse to appoint any proposed agent, or once appointed, to thereafter
terminate the same. It is further agreed and understood that NYL shall
refuse to allow any agent who is operating pursuant to a Career Agent
Contract with New York Life Insurance Company to solicit applications
for Variable Contracts or to make applications for Variable Contracts
available through Dealer. For purposes of this Agreement, agents
operating pursuant to a "Career Agent Contract" with New York Life
Insurance Company shall include, but shall not be limited to, all
agents operating pursuant to the N- 6, P-7 or N-8 Contracts, or any
additional or successor career agent contracts that New York Life
Insurance Company shall make available.
(6) All initial premium payments made by owners of the Variable Contracts
will be collected by Dealer who in turn will promptly transmit the
payment to NYL. Additional payments and loan repayments will be sent
by contract owners to NYL. In the event such additional payments and
loan repayments are sent to Dealer rather than NYL, such payments
received by Dealer shall be remitted promptly in full together with
such application, forms and any other required documentation to NYL.
Checks or money orders drawn for payments by policy owners, or
contract owners, as the case may be, shall be drawn to the order of
NYLIAC. Dealer acknowledges
<PAGE>
that NYL shall have the unconditional right to reject, in whole or in
part, any application for a Variable Contract. It is further agreed
and understood that NYL shall reject any application for a Variable
Contract that is submitted by Dealer for any individual operating
pursuant to a Career Agent Contract with New York Life Insurance
Company, as defined above in Section B(5).
(7) Dealer shall be responsible for carrying out its sales and
administrative obligations under this Agreement in continued
compliance with applicable regulations relating to the offer and sale
of the Variable Contracts, including all applicable federal and state
securities laws and NASD regulations and all applicable insurance laws
and regulations. Dealer is not authorized to give any information or
make any representations concerning NYL, the Funds, any separate
account funding the Variable Contracts ("Separate Account"), and the
Variable Contracts, other than those contained in the prospectus or
Registration Statement for the Variable Contracts or Funds or in such
sales literature, advertisements or reports that are approved, in
writing, by NYL.
(8) Dealer agrees to (a) train, supervise and be solely responsible for
the conduct of its employees, representatives, and agents in
connection with their solicitation or acceptance of applications for
the Variable Contracts, (b) be solely responsible for the supervision
as to such persons' strict compliance with applicable rules and
regulations of any governmental or other agencies that have
jurisdiction over variable contract activities, and (c) train,
supervise and be solely responsible for the conduct of its employees,
representatives, and agents as to their strict compliance with NYL's
rules and procedures, as such rules and procedures are committed in
writing and furnished to Dealer.
(9) Dealer agrees to comply with applicable federal and state securities
laws requirements, NASD or other self-regulatory organization
requirements and state insurance law requirements in connection with
the marketing program by its personnel. Dealer will also be
responsible for having all of its employees, representatives, or
agents, who must be registered pursuant to federal or state securities
laws and/or licensed pursuant to state insurance laws in order to sell
the Variable Contracts, be duly registered and/or licensed. Dealer
agrees to maintain appropriate books and records concerning the
activities of duly appointed agents and registered representatives as
are required by the SEC, NASD, state insurance or securities
authorities, or any other governmental or regulatory authorities that
have jurisdiction. Dealer further agrees to submit to all
administrative and regulatory bodies that have jurisdiction any
information, reports or other materials required pursuant to
applicable laws or regulations. Such books and records are to be made
available to NYL during business hours upon reasonable written request
by NYL for the purpose of inspection, auditing, making extracts
therefrom or making copies thereof.
(10) Dealer agrees that it shall be fully responsible for ensuring that no
person shall offer the Variable Contracts on its behalf or make
contracts for the Variable Contracts available until such person is
duly licensed and has been appointed by NYLIAC.
(11) Dealer understands that the public offering of the Variable Contracts
will commence as soon as practicable after the effective date of the
Registration Statement for the Variable Contracts and the Registration
Statement for any Fund. Beginning at that time and during the term of
this Agreement, Dealer agrees that it will use its best efforts to
solicit applications for the Variable Contracts or to make
applications for Variable Contracts available.
(12) Dealer shall not directly or by means of its employees offer, nor
attempt to offer, nor solicit applications for the Variable Contracts,
nor deliver Variable Contracts, nor make applications for Variable
Contracts available, in any state or jurisdiction in which the
Variable Contracts may not legally be sold or offered for sale. For
purposes of determining where the Variable Contracts may be offered
and applications solicited or made available, Dealer may rely on the
notification it receives from NYL pursuant to Section A(4) above
regarding the jurisdictions in which the Variable Contracts may be
sold or applications solicited.
(13) Dealer shall not have authority on behalf of NYL to: (a) make, alter
or discharge any Variable Contracts; and (b) receive any monies or
payments, except as set forth in Section B(6) of this Agreement.
Dealer shall not expend nor contract for the expenditure of the funds
of NYL nor shall Dealer possess or exercise any authority
<PAGE>
on behalf of NYL other than that expressly conferred on Dealer by this
Agreement. Nothing herein contained shall constitute Dealer or any
employees, representatives, or agents thereof, as employees of NYL in
connection with the marketing program for the Variable Contracts.
(14) Dealer shall be obligated to pay all expenses related to its
solicitation of applications for the Variable Contracts or making
applications for Variable Contracts available, including, but not
limited to: (a) expenses associated with the training of Dealer's
agents, representatives, and employees, including any written training
material; and (b) any other expenses incurred by Dealer or its
employees, representatives, or agents for the purpose of carrying out
the obligations of Dealer hereunder.
(15) Dealer is authorized for the term of this Agreement to distribute the
prospectus for the Variable Contracts and the prospectus for any Fund
and, where required by law or upon request from an investor, the
statement of additional information for the Variable Contracts, if
any, or any Fund in connection with the solicitation of applications
for sales of the Variable Contracts or making applications for
Variable Contracts available.
(16) Dealer agrees that neither it nor any of its directors, partners,
officers, employees registered representatives, agents, or affiliated
persons as defined in the Investment Company Act of 1940 will give any
information or make any representations or statements, whether written
or oral, on behalf of the Separate Accounts or the Funds or concerning
the Variable Contracts, the Funds or Fund shares in connection with
the offer or sale of the Variable Contracts other than information or
representations contained in the prospectus, statement of additional
information, or Registration Statement for the Variable Contracts
and/or the Funds, as they may be supplemented or amended from time to
time, or in reports or proxy statements for the Separate Accounts or
the Funds, or in sales literature and promotional material or
information approved by NYL.
(17) Dealer shall train and supervise its employees, representatives, and
agents to ensure that purchase of a Variable Contract is not
recommended to an applicant in the absence of reasonable grounds to
believe the purchase of the Variable Contract is suitable for that
applicant. Dealer shall be solely responsible for determining the
suitability of recommendations to purchase the Variable Contracts that
are made by its registered representatives. While not limited to the
following, a determination of suitability shall be based on
information furnished to Dealer after reasonable inquiry of such
applicant concerning the applicant's investment objectives, financial
situation and needs. For each application for a Variable Contract
solicited or made available by Dealer, Dealer agrees to complete an
agent's report addressing the suitability of the Variable Contract for
the applicant. Dealer shall retain a copy of each such report, and
shall provide NYL with a copy of any such report upon reasonable
request from NYL.
C. REPRESENTATIONS AND WARRANTIES
(1) NYL and Dealer each represents and warrants to each other party that
it has full power and authority to enter into this Agreement.
(2) Dealer represents and warrants that it is (i) registered as a
broker-dealer under the 1934 Act and with applicable state authorities
under the laws of the states where necessary and is a member of the
NASD; and is (ii) fully licensed by the proper authorities under
applicable insurance and other laws to the extent necessary for it to
perform its duties under this Agreement and to receive compensation
for the sale of the Variable Contracts.
D. COMPENSATION
(1) NYLIAC, acting on behalf of Distributor, shall pay to Dealer, for each
Variable Contract issued through a Separate Account, compensation
based on the provisions set forth in Schedule B hereto, as such
Schedule B may be amended or modified from time to time. Duly
appointed agents of Dealer shall have no interest hereunder.
(2) Distributor shall have no obligation to pay Dealer hereunder, and
Dealer shall look solely to NYLIAC, acting on behalf of Distributor,
for payment of compensation pursuant to this Agreement.
<PAGE>
E. INDEMNIFICATION
(1) INDEMNIFICATION BY NYL. Except as provided in Sections E(3) and E(4)
of this Agreement, NYL agrees to indemnify and hold harmless Dealer,
its directors, trustees, and officers, and each person, if any, who
controls the Dealer within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section
E(1)) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of NYL)
or litigation expenses (including 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 litigation expenses are related to the
offer, sale or acquisition of the Variable Contracts or to the
acceptance of applications for the Variable Contracts or to the
solicitation of premiums, and, in any such case:
arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in
the Registration Statement or prospectus relating to the
Variable Contracts or any 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.
(2) INDEMNIFICATION BY DEALER. Except as provided in Section E(3) and E(4)
of this Agreement, Dealer agrees to indemnify and hold harmless NYL
and its directors, trustees, and officers, and each person, if any,
who controls NYL within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section
E(2)) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement) or litigation expenses
(including 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
litigation expenses are related to the offer, sale or acquisition of
the Variable Contracts, to the solicitation or acceptance of
applications for the Variable Contracts, or to the solicitation of
premiums, and in any such case:
arise out of or as a result of any statement or
representation (other than statements or representations
contained in the Registration Statement or prospectus or
other offering materials furnished or approved in writing by
NYL relating to the Variable Contracts or any Fund), any
unauthorized use of any sales materials relating to the
Variable Contracts, or wrongful conduct of the Dealer, any
use of unauthorized sales materials (including sales
materials that have not been approved, in writing, by NYL),
or the affiliates, employees, or agents of the Dealer with
respect to the sale or distribution of the Variable Contracts
or Fund shares or the acceptance of applications for the
Variable Contracts, including but not limited to any verbal
or written misrepresentations, unlawful sales practices, and
failure to deliver the prospectus relating to the Variable
Contracts or Funds.
(3) Indemnification Not Applicable.
No person required to provide indemnification under the terms of
Sections E(1) or E(2) of this Agreement shall be liable under any such
section with respect to any losses, claims, damages, liabilities or
litigation expenses to which an Indemnified Party under any such
section would otherwise be subject by reason of willful misfeasance,
bad faith, or negligence in the performance of such Indemnified
Party's duties, or by reason of such Indemnified Party's reckless
disregard of its obligations or duties under this Agreement.
(4) Notification.
Any person required to provide indemnification under the terms of
Sections E(1) or E(2) of this Agreement ("Indemnifying Party") shall
not be liable under the indemnification provisions of Section E(1) or
E(2) with respect to any claim made against an Indemnified Party under
any such section unless such Indemnified Party shall have notified the
Indemnifying Party in writing within 10 days after the summons or
other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after
such Party shall have received notice of such service on any
designated agent), but failure to notify the
<PAGE>
Indemnifying Party of any such claim shall 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 above- designated indemnification provisions. In
case any such action is brought against an Indemnified Party, the
Indemnifying Party shall be entitled to participate, at its own
expense, in the defense of such action, and counsel selected by any
Indemnifying Party must be satisfactory to the Indemnified Party.
F. TERM OF AGREEMENT
(1) This Agreement shall become effective upon execution by all parties as
of the date first written above. Any party to this agreement shall
have the right to terminate this agreement for any reason, or for no
reason at all, upon thirty days written notice to all other parties.
(2) If any party shall default in any material respect in the performance
of its respective obligations under this Agreement, the non-defaulting
party may, at its option, cancel and terminate this Agreement
immediately without notice.
(3) Upon termination of this Agreement, all authorizations, rights and
obligations hereunder shall cease except (1) the recordkeeping
provisions set forth in Section B(9); (2) the compensation provisions
set forth in D(1) and (2); (3) the indemnification provisions set
forth in Section E; (4) the complaints and investigations provisions
set forth in Section G; (5) the exchange of contract provisions set
forth in Section H; (6) the product name provisions set forth in
Section I; and (7) the confidentiality provisions set forth in Section
J.
G. COMPLAINTS AND INVESTIGATIONS
(1) Dealer and NYL jointly agree to cooperate fully in any insurance
regulatory investigation or proceeding or judicial proceeding arising
in connection with the Variable Contracts. Dealer and NYL further
agree to cooperate fully in any securities regulatory investigation or
proceeding or judicial proceeding arising in connection with the
Variable Contracts. Without limiting the foregoing:
(a) NYL will promptly notify Dealer of any customer complaint or
notice of any regulatory investigation or proceeding or
judicial proceeding received by NYL with respect to Dealer or
any of its agents, representatives or employees or which may
affect NYLIAC's issuance of any Variable Contract.
(b) Dealer will promptly notify NYL of any written customer
complaint or notice of any regulatory investigation or
proceeding or judicial proceeding received by Dealer with
respect to NYL or any of its agents, representatives or
employees in connection with any Variable Contract or any
activity in connection with any such Variable Contract.
H. EXCHANGE OF CONTRACTS
In the absence of NYL's consent, neither Dealer nor any of its
affiliates, agents, employees or registered representatives will at any time
before or after termination of this Agreement solicit or seek to cause the
exchange by any owner of a Variable Contract into another insurance policy,
insurance contract or investment product, unless such exchange is based upon a
determination by Dealer that the Variable Contract is unsuitable given the
Contract Owner's financial situation, needs and other securities holdings.
I. PRODUCT NAME
Dealer agrees that Distributor, New York Life Insurance Company ("New
York Life"), and NYLIAC, and their affiliates have the exclusive right to the
use of the names of the Variable Contracts to be offered, as set forth in
Schedule A hereto, as may be amended from time to time; the names "New York
Life and Annuity," "New York Life," "NYLIAC," and "NYLIFE;" and any words or
phrases including the names of the Variable Contracts described on Schedule A
hereto or the names "New York Life and Annuity," "New York Life," "NYLIAC,"
and/or "NYLIFE." Dealer further agrees not to use any of these names in any
promotional materials or sales literature without the prior
<PAGE>
written consent of NYL.
J. CONFIDENTIALITY
The parties hereto agree that the terms of this Agreement, any
marketing or business plans regarding the Variable Contracts, and the methods
of operations of the parties hereto are confidential and shall not be disclosed
to any other person without the consent of the other parties hereto, except as
required under applicable law. Notwithstanding the foregoing, nothing in this
Agreement shall prohibit any party hereto from advising any other person of the
existence of this Agreement.
K. MODIFICATION OF AGREEMENT
This Agreement supersedes all prior agreements, either oral or
written, between the parties relating to the Variable Contracts. All amendments
to this Agreement shall be in writing. Notwithstanding the foregoing, NYL
reserves the right to amend this Agreement at any time, and Dealer agrees that
its submission of an application to purchase Variable Contracts after written
notice of any such amendment has been sent to Dealer shall constitute Dealer's
agreement to any such amendment.
L. ASSIGNABILITY
No assignment of this Agreement by any party shall be valid without
the prior written consent of the other parties. The change in control or
ownership of a party, other than a change in the internal management personnel
of such party, shall be deemed to be an assignment of this Agreement for
purposes of this Section. Each party to this Agreement agrees to notify the
other parties within 10 business days of such change in control or ownership.
M. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
N. HEADINGS
The headings 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.
O. SEVERABILITY
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
P. NOTICE
Notice given pursuant to any of the provisions of this Agreement
unless otherwise specified, shall be sufficiently given when sent by registered
or certified mail to the other parties at the addresses of such parties as set
forth below (or to such other addresses as such parties may from time to time
specify in writing to the other parties):
To: NYLIFE Distributors Inc.
51 Madison Avenue
New York, New York 10010
Attn..: Jefferson C. Boyce, President
<PAGE>
To: New York Life Insurance and Annuity Corp.
51 Madison Avenue
New York, New York 10010
Attn.: Michael Gallo, Senior Vice President
To: [Dealer]
Attn.:
Q. FAILURE TO ACT NO WAIVER.
If any party fails to require performance by another party of any
provision of this Agreement, that party does not waive its rights to require
such performance at a later time. If any party waives the breach of any
provision of this Agreement by another party, the waiving party still has the
right to require performance of that provision and its conduct shall not be
construed to waive succeeding breaches of that provision or any breaches of any
other provision.
R. ARBITRATION
The parties hereto agree to submit all disputes arising out of, or
relating to, this Agreement to arbitration before the NASD in accordance with
the NASD Code of Arbitration Procedure, and agree that judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof. No party to this Agreement shall be entitled to special or punitive
damages.
S. NO PARTY REQUIRED TO VIOLATE LAWS OR REGULATIONS.
Nothing contained in this Agreement shall require any party hereto to
do anything which, in the judgment of the affected party, would be in violation
of any federal or state securities or banking law, state insurance law or NASD
regulation.
T. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
NYLIFE DISTRIBUTORS INC.
By:
---------------------------
Title:
------------------------
<PAGE>
NEW YORK LIFE INSURANCE and
ANNUITY CORPORATION
By:
---------------------------
Title:
------------------------
[DEALER]
By:
---------------------------
Title:
------------------------
<PAGE>
SCHEDULE A
Variable Contracts
The following Variable Contracts shall be offered pursuant to this Sales
Agreement:
<PAGE>
SCHEDULE B
Compensation
Dealer shall be entitled to receive compensation on Variable Contracts sold
pursuant to this Agreement as follows:
1. GROSS SELLING CONCESSIONS. Except as provided in Paragraph 2
below, for each Variable Contract that is issued as the
result of an application submitted by Dealer, NYLIAC, on
behalf of Distributor, shall pay Gross Selling Concessions in
accordance with its then current compensation schedule, which
is set forth on Exhibit 1 to this Schedule B and as may be
amended from time to time.
2. INTERNAL REPLACEMENTS. NYL shall not be obligated to pay any
Gross Selling Concession on any Variable Contract that NYL,
in its sole discretion, deems to be an "Internal
Replacement." As used herein "Internal Replacement" shall
include any premium payment made into any Variable Contract
within 90 days of the termination of another insurance or
annuity contract issued by New York Life Insurance Company or
NYLIAC.
3. "FREE LOOK" POLICIES. In the event that a Variable Contract
is returned to NYLIAC within the applicable "free look"
period, then Dealer agrees to promptly refund to NYLIAC, or
shall forfeit the right to receive, the full amount of the
applicable Gross Selling Concession for such Variable
Contract.
4. UNDUE DELAY IN DELIVERY. Notwithstanding the provisions of
Paragraph 3 of this Schedule B, in the event that Dealer or
any of its directors, partners, officers, employees,
registered representatives, agents or affiliated persons
shall fail to deliver a Variable Contract within thirty days
of its issuance, and, upon delivery, the owner of such
Variable Contract shall return it to NYLIAC within any
applicable "free look" period, then Dealer shall indemnify
NYLIAC as follows:
(a) for variable life insurance policies, the Dealer
shall indemnify NYLIAC for the difference between the
premiums paid by the Variable Contract owner and the
Cash Value, as defined in the then current prospectus
for such product, that are next calculated after
NYLIAC's receipt of the surrendered Variable
Contract.
(b) for variable annuity contracts, the Dealer shall
indemnify NYLIAC for the difference between the
premiums paid by the Variable Contract owner and the
Accumulation Value, as defined in the then current
prospectus for such product, that are next calculated
after NYLIAC's receipt of the surrendered Variable
Contract.
5. CHARGEBACKS. Dealer shall refund to NYLIAC all or, if
applicable, a pro rata portion of, the Gross Selling
Concession attributable to premiums received by NYLIAC under
Variable Contracts surrendered or from which partial
withdrawals are made as follows:
During the first contract year, the rate of chargeback shall
be:
(a) 100% of the attributable Gross Selling Concession for
Variable Contracts that are surrendered during the
first six months of the contract;
(b) 50% of the attributable Gross Selling Concession for
Variable Contracts that are surrendered during the
seventh through twelfth months of the contract; or,
(c) a pro rata portion of the attributable Gross Selling
Concession for Variable Contracts from which partial
withdrawals are made during the first twelve months
of the contract, in an
<PAGE>
amount equal to the percentage obtained by dividing
the amount of the partial withdrawal by the premiums
paid, which percentage shall in no event exceed 100%
6. AMENDMENTS TO COMPENSATION SCHEDULE. NYL reserves the right
to amend this Compensation Schedule and any exhibits thereto
as set forth in Paragraph K of the Sales Agreement.
<PAGE>
STOCK SALE AGREEMENT
This Agreement dated as of June 4, 1993, between NEW YORK LIFE
INSURANCE AND ANNUITY CORPORATION, a stock company organized under the laws of
Delaware ("NYLIAC"), and NEW YORK LIFE MFA SERIES FUND, INC., a corporation
organized under the laws of Maryland ("MFA Series Fund"):
W I T N E S S E T H:
WHEREAS, MFA Series Fund will serve as the investing medium for
separate accounts established by NYLIAC ("Separate Accounts") under Section
2932 of the Delaware Insurance Code and other separate accounts; and
WHEREAS, the beneficial interests in MFA Series Fund are divided into
several series of shares, each designated a "Portfolio" and representing
interests in a particular managed portfolio of securities and other assets; and
WHEREAS, MFA Series Fund has obtained an order from the Securities and
Exchange Commission, dated October 30, 1992 (File No. 812-7974), granting MFA
Series Fund exemptions from the provisions of sections 9(a), 13(a), 15(a) and
15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940
Act") and Rule 6e-2(b)(15) thereunder, to the extent necessary to permit shares
of MFA Series Fund to be held by certain registered separate accounts of NYLIAC
offering variable annuity contracts and scheduled premium variable life
insurance contracts and in the event that MFA Series Fund offers and sells its
shares to any flexible premium variable life insurance separate account that
NYLIAC or an affiliated insurer may establish (the "Mixed Funding Exemptive
Order"); and
WHEREAS, MFA Series Fund desires to sell its shares to the Separate
Accounts, to NYLIAC itself and to organizations approved by NYLIAC (the
Separate Accounts, NYLIAC and the other organizations being herein collectively
called "Prospective Purchasers"); and
WHEREAS, some of the Prospective Purchasers now desire to purchase
shares of MFA Series Fund and other Prospective Purchasers may desire to do so.
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants herein contained and other good and valuable consideration the
receipt whereof is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Sales of Shares to Prospective Purchasers. MFA Series Fund will
sell its shares (i) on the terms and conditions and (ii) at the "net
asset value" of such shares (as defined in the prospectus, dated
January 29, 1993, as supplemented June 30, 1993, and as hereafter
amended, forming part of the registration statement of MFA Series Fund
(File No. 2-86082 under the Securities Act of 1933)) to such of the
Prospective Purchasers as shall request MFA Series Fund to sell its
shares to them. Such sales will be made by MFA Series Fund in such
amounts as may be requested from time to time by the Prospective
Purchasers at the net asset value as next determined after any such
request is received by MFA Series Fund. MFA Series Fund will take such
steps as may be necessary to provide a sufficient number of its shares
to meet the requests of the Prospective Purchasers. Neither NYLIAC nor
any of the other Prospective Purchasers shall be under any obligation
to purchase shares of MFA Series Fund at any time or in any amount.
2. No Sales to Others; Redemptions. MFA Series Fund will not, so long
as this Agreement remains in effect,
(a) sell its shares to any person other than Prospective
Purchasers; or
<PAGE>
(b) change the terms and conditions for the redemption of its
shares set forth in the prospectus referred to in paragraph 1.
3. Board of Directors. MFA Series Fund undertakes to use all
reasonable efforts to have at all times a board of directors, a
majority of whom are not interested persons of MFA Series Fund. In any
case, to the extent it decides to finance distribution expenses
pursuant to Rule 12b-1, MFA Series Fund undertakes to have a board of
directors, a majority of whom are not interested persons of MFA Series
Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
4. Diversification. MFA Series Fund will at all times invest money
from the sale of its shares in such a manner as to ensure that the
contracts issued by the Separate Accounts will be treated as variable
contracts under the Internal Revenue Code (the "Code") and the
regulations issued thereunder. Without limiting the scope of the
foregoing, MFA Series Fund will use reasonable efforts to comply with
Section 817(h) of the Code and any regulations thereunder, concerning
diversification of the assets of the Portfolios of MFA Series Fund,
provided that NYLIAC will promptly advise MFA Series Fund of any
changes in such Code provisions after the date of this Agreement.
5. Potential Conflicts. (a) The Board of Directors (the "Board") of
MFA Series Fund will monitor MFA Series Fund for the existence of any
material irreconcilable conflict between the interests of the contract
owners of all separate accounts investing in MFA Series Fund. An
irreconcilable material conflict may arise for a variety of reasons,
including: (i) an action by any state insurance regulatory authority;
(ii) 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; (iii) an
administrative or judicial decision in any relevant proceeding; (iv)
the manner in which the investments of any Portfolio are being
managed; (v) a difference in voting instructions given by variable
annuity contract owners and variable life insurance contract owners;
or (vi) a decision by an insurer to disregard the voting instructions
of contract owners. The Board shall promptly inform NYLIAC if it
determines that an irreconcilable material conflict exists and the
implications thereof.
(b) NYLIAC will report any potential or existing conflicts of
which it is aware to the Board. NYLIAC will assist the Board in
carrying out its responsibilities under the relevant provisions of the
federal securities laws including Rule 6e-3(T)(b)(15) and the Mixed
Funding Exemptive Order, by providing the Board with all information
reasonably necessary for the Board to consider any issues raised. This
includes, but is not limited to, an obligation by NYLIAC to inform the
Board whenever contract owner voting instructions are disregarded.
(c) If it is determined by a majority of the Board, or a majority
of its disinterested directors, that a material irreconcilable
conflict exists, NYLIAC and other Prospective Purchasers shall, at
their expense and to the extent reasonably practicable (as determined
by a majority of the disinterested directors), take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict,
up to and including: (i), withdrawing the assets allocable to some or
all of the separate accounts from MFA Series Fund or any Portfolio and
reinvesting such assets in a different investment medium, including
(but not limited to) another Portfolio of MFA Series Fund, or
submitting the question whether such segregation should be implemented
to a vote of all affected contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., annuity
contract owners, life insurance contract owners, or variable contract
owners of one or more Prospective Purchasers) that votes in favor of
such segregation, or offering to the affected contract owners the
option of making such a change; and (ii), establishing a new
registered management investment company or managed separate account.
(d) If a material irreconcilable conflict arises because of a
decision by NYLIAC to disregard contract owner voting instructions and
that decision represents a minority position or would preclude a
majority vote, NYLIAC may be required, at MFA Series Fund's election,
to withdraw the affected
<PAGE>
Separate Account's investment in MFA Series Fund and terminate this
Agreement with respect to such account; provided, however that such
withdrawal and termination shall be limited to the extent required by
the foregoing material irreconcilable conflict as determined by a
majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after
MFA Series Fund gives written notice that this provision is being
implemented, and until the end of that six month period MFA Series
Fund shall continue to accept and implement orders by NYLIAC for the
purchase (and redemption) of shares of MFA Series Fund.
(e) If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to NYLIAC
conflicts with the majority of other state regulators, then NYLIAC
will withdraw the affected Separate Account's investment in MFA Series
Fund and terminate this Agreement with respect to such Separate
Account within six months after the Board informs NYLIAC in writing
that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such
withdrawal and termination shall be limited to the extent required by
the foregoing material irreconcilable conflict as determined by a
majority of the disinterested members of the Board. Until the end of
the foregoing six month period, MFA Series Fund shall continue to
accept and implement orders by NYLIAC for the purchase (and
redemption) of shares of MFA Series Fund.
(f) For purposes of Sections 5(c) through 5(f) of this
Agreement, a majority of the disinterested members of the Board shall
determine whether any proposed action adequately remedies any
irreconcilable material conflict, but in no event will MFA Series Fund
be required to establish a new funding medium for the contracts.
NYLIAC shall not be required by Section 5(c) to establish a new
funding medium for the contracts if an offer to do so has been
declined by vote of a majority of contract owners materially adversely
affected by the irreconcilable material conflict. In the event that
the Board determines that any proposed action does not adequately
remedy any irreconcilable material conflict, then NYLIAC will withdraw
the Separate Account's investment in MFA Series Fund and terminate
this Agreement within six (6) months after the Board informs NYLIAC in
writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by
any such material irreconcilable conflict as determined by a majority
of the disinterested members of the Board.
(g) If and to the extent that Rules 6e-2 and/or 6e-3(T) under
the Act are amended to provide exemptive relief from any provision of
the Act or the rules promulgated thereunder with respect to mixed
funding (as defined in the Mixed Funding Exemptive Order) on terms and
conditions materially different from those contained in the Mixed
Funding Exemptive Order, then (i) MFA Series Fund and/or the
Prospective Purchasers, as appropriate, shall take such steps as may
be necessary to comply with Rules 6e-2 and/or Rule 6e-3(T) to the
extent such rules are applicable; and (ii) Sections 5(a) through 5(f)
of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to such Sections are
contained in such Rule as so amended.
6. Termination of Agreement.
(a) Notice of Termination. This Agreement may be terminated
at any time by NYLIAC on 360 days' written notice to MFA
Series Fund or by MFA Series Fund on 360 days' written notice
to NYLIAC.
(b) Effect of Termination. Notwithstanding any termination of
this Agreement, MFA Series Fund shall at the option of
NYLIAC, continue to make available additional shares of MFA
Series 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 shall be permitted to
reallocate investments in MFA Series Fund, redeem investments
in MFA Series Fund and/or invest in MFA Series Fund upon the
making of additional purchase payments
<PAGE>
under the Existing Contracts. The parties agree that this
Section 6(b) shall not apply to any terminations under
Section 5 and the effect of such Section 5 terminations shall
be governed by Section 5 of this Agreement.
7. Notices. Any notice under this Agreement shall be in writing and if to MFA
Series Fund, delivered or mailed postage prepaid to it at 51 Madison Avenue,
New York, New York 10010, or at any other address that MFA Series Fund may
hereafter designate by written notice to NYLIAC, and if to NYLIAC, delivered or
mailed postage prepaid to it at 51 Madison Avenue, New York, New York 10010, or
at any other address that NYLIAC may hereafter designate by written notice to
MFA Series Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their corporate names, and their respective corporate seals to
be affixed and attached, all as of the date first above written.
NEW YORK LIFE INSURANCE
AND ANNUITY CORPORATION
[Seal] By: /s/Robert D. Rock
----------------------
Attest:
/s/Sallie A. Farrow
- ----------------------
Assistant Secretary
[Seal] NEW YORK LIFE MFA SERIES FUND, INC.
By: /s/Anne F. Pollack
Attest: ----------------------
/s/Sheldon Winicour
- ----------------------
Assistant Secretary
<PAGE>
PARTICIPATION AGREEMENT
Among
ACACIA CAPITAL CORPORATION,
CALVERT ASSET MANAGEMENT COMPANY, INC.
and
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
THIS AGREEMENT, made and entered into this 27th day of April, 1995 by
and among NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION, (hereinafter the
"Company"), on its own behalf and on behalf of each segregated asset account of
the Company set forth on Schedule A hereto as may be amended from time to time
(each such account hereinafter referred to as the "Account"), and ACACIA
CAPITAL CORPORATION, a Maryland corporation (hereinafter the "Fund"), and
CALVERT ASSET MANAGEMENT COMPANY, INC. (hereinafter the "Adviser"), a Maryland
corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as (i) the investment vehicle for
certain qualified pension and retirement plans ("Qualified Plans"), (ii) the
investment vehicle for deferred compensation plans, including section 457 and
403(b) plans and (iii) the investment vehicle for separate accounts established
for variable life insurance policies and variable annuity contracts
(collectively, the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and
the Adviser (hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interests in the Fund are divided into several
series of shares (each designated a "Portfolio") and representing the interest
in a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (hereinafter, the "SEC"), dated November 21, 1988 (File No.
812-7095), granting Participating Insurance Companies and variable annuity and
variable insurance separate accounts exemptions from the provisions of Sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as
amended, (hereinafter 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 and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); 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 (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an Investment Adviser under
the Federal Investment Advisers Act of 1940 and any applicable state securities
law; and
WHEREAS, the Company has registered or will register certain variable
life and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to one or more variable life and annuity
contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to
<PAGE>
purchase shares in the Portfolios on behalf of each Account to fund certain of
the aforesaid variable life and variable annuity contracts,
NOW, THEREFORE, in consideration of their mutual promises the Company,
the Fund and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to the Company those shares of the Fund
which each Account orders, executing such orders on a daily basis at the net
asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section l.l, the Company
shall be the designee of the Fund for receipt of such orders from each Account
and receipt by such designee shall 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" shall mean any day on which the New
York Stock Exchange is open for trading and on which the Accounts and the Fund
calculate their net asset value pursuant to the rules of the SEC.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts 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 each day which the New York Stock Exchange is
open for trading. Notwithstanding the foregoing, the Board of Directors of the
Fund (hereinafter the "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 Board acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary
in the best interest of the shareholders of such Portfolio.
1.3. The Fund and the Adviser agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts and,
in accordance with the terms of the Shared Funding Exemptive Order, certain
Qualified Plans. No shares of any Portfolio will be sold to the general public.
1.4. The Fund will not sell Fund shares to any insurance company or
separate account unless an agreement containing provisions substantially the
same as Articles I, III, V, VII and Section 2.5 of Article II of this Agreement
is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on 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 by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees to purchase and redeem the shares of each
Portfolio, as listed on Schedule B which is attached hereto, offered by the
then current prospectus of the Fund and in accordance with the provisions of
such prospectus. The Company agrees that all net amounts available under the
variable life and variable annuity contracts (the "Contracts") with the form
number(s) which are listed on Schedule C attached hereto and incorporated
herein by this reference, as such Schedule C may be amended from time to time
hereafter by mutual written agreement of all the parties hereto, shall be
invested in the Fund, in such other Funds advised by the Adviser as may be
mutually agreed to in writing by the parties hereto, or in the Company's
general account, provided that such amounts may also be invested in an
investment company other than the Fund if (a) such other investment company, or
series thereof, has investment objectives or policies that are substantially
different from the investment objectives and policies of all the Portfolios of
the Fund; or (b) the Company gives the Fund and the Adviser 45 days written
notice of its intention to make such other investment company available as a
funding vehicle for the Contracts; or (c) such other investment company was
available as a funding vehicle for the Contracts prior to the date of this
Agreement and the Company so informs the Fund and Adviser prior to their
signing this Agreement; or (d) the Fund or Adviser consents to the use of such
other investment company.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted
by wire. For purpose of Section 2.9 and 2.10, upon receipt by the Fund of the
federal funds so wired, such funds shall cease to be the responsibility of the
Company and shall become the responsibility of the Fund.
<PAGE>
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.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally 6:30 p.m.
Eastern time) and shall use its best efforts to make such net asset value per
share available by 7:00 p.m. Eastern time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws and that the sale of the Contracts shall comply in all material
respects with 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 prior to any issuance or sale thereof as a segregated
asset account under Section 2932 of the Delaware Insurance Code and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of
the 1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Maryland and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or
the Adviser.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will 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.
2.4. The Company represents that the Contacts are currently treated as
endowment, annuity or life insurance contacts, under applicable provisions of
the 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.
2.5. The Fund currently does not make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may 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 a 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.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
polices) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Maryland and the Fund and the Adviser represent that their respective
operations are and shall at all times remain in material compliance with the
laws of the State of Maryland to the extent required to perform this Agreement.
2.7. The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and that it does and will
comply in all material respects with the 1940 Act.
2.8. The Adviser represents and warrants that the Adviser is and shall
remain duly registered in all material respects under all applicable federal
and state securities laws and that the Adviser shall perform its obligations
for the
<PAGE>
Fund in compliance in all material respects with the laws of the State of
Maryland and any applicable state and federal securities laws.
2.9. The Fund and Adviser represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall 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 shall
include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.10. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities
dealing with the money and/or securities of the Fund are and shall 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 entities subject to the requirements of Rule 17g-1 of the
1940 Act or related provisions as may be promulgated from time to time. The
aforesaid Bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Adviser shall provide the Company (at the Company's expense)
with as many copies of the Fund's current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Fund's Expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
for the Fund is amended) to have the prospectus for the Contracts and the
Fund's prospectus printed together in one document (such printing to be at the
Company's expense).
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Adviser (or in the
Fund's discretion, the Prospectus shall state that such Statement is available
from the Fund), and the Adviser (or the Fund), at its expense, shall print and
provide such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such Statement.
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund
shares of such Portfolio for which instructions have
been received so long as and to the extent that the Securities and Exchange
Commission continues to interpret the 1940 Act to require pass-through voting
privileges for owners of Variable Insurance Products. 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 shall
be responsible for assuring that each of their separate accounts participating
in the Fund calculates voting privileges in a manner consistent with this
Section.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either
provide for annual meetings or 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 Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee object to such use within fifteen Business
Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the
<PAGE>
Fund or concerning the Fund in connection with the sale of the Contracts other
than the information or representations contained in the registration statement
or prospectus for the Fund shares, as such registration statement and
prospectus may be amended or supplemented from time to time, or in reports or
proxy statements for the Fund, or in sales literature or other promotional
material approved by the Fund or its designee or by the Adviser, except with
the permission of the Fund or the Adviser or the designee of either.
4.3. The Fund, and the Adviser, or its designee shall furnish, or
shall cause to be furnished, to the Company or its designee, each piece of
sales literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee object to such
use within fifteen Business Days after receipt of such material.
4.4. The Fund and the Adviser shall not give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public
domain or approved by the Company for distribution to Contract owners, or in
sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The 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 Securities and
Exchange Commission or other regulatory authorities.
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 other regulatory authorities.
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 materials published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational
or training materials or other communications distributed or made generally
available to some or all agents, registered representatives or employees, and
registration statements, prospectuses, Statements of Additional Information,
shareholder reports, and proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Fund and Adviser shall pay no fee or other compensation to
the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Adviser may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Adviser in
writing and such payments will be made out of existing fees otherwise payable
to the Adviser, past profits of the Adviser or other resources available to the
Adviser, or by the Fund, to the extent permitted. Currently, no such payments
are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders
(including, if so elected, the costs of printing a prospectus that constitutes
an annual report), the preparation of all statements and notices required by
any federal or state law, and all taxes on the issuance or transfer of the
Fund's shares.
5.3. The Company shall bear the expenses of printing and distributing
the Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
<PAGE>
ARTICLE VI. Diversification
6.1. The Fund will at all times, consistent with instructions from the
Company received initially and from time to time thereafter, invest money from
the Contracts in such a manner as to ensure that the Contracts will be treated
as variable contracts under the Code and the regulations issued thereunder.
Without limiting the scope of the foregoing, the Fund will at all times comply
with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to
the diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such Section
or Regulations.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict among the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (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 interpretive 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 variable annuity contract owners and variable life
insurance contract owners; or (f) a decision by an insurer to disregard the
voting instructions of contract owners. The Board shall 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 Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the 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 Contract owners and, as appropriate, segregating the
assets of any appropriate group (i.e., annuity contract owners, life insurance
contract owners, or variable contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to
the affected contract owners the option of making such a change; and (2)
establishing a new registered management investment company or managed separate
account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and
that decision represents a minority position or would preclude a majority vote,
the Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Any such withdrawal and termination must take place within six (6) months after
the Fund gives written notice that this provision is being implemented, and
until the end of that six month period the Adviser and Fund shall 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 regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company
in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
members of the Board. Until the end of the foregoing six month period, the
Adviser and Fund shall continue to accept and implement orders by the Company
for the purchase (and redemption) of shares of the Fund.
<PAGE>
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no
event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall 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 Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. 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
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive
Order, then (a) the Fund and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T) as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4 and 7.5 of
this Agreement shall 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
8.1(a). The Company agrees to indemnify and hold harmless the Fund and
each of its directors and officers and each person, if any, who controls the
Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including 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 sale or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or contained in
the Contracts or sales literature for the Contracts (or any amendment
or supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or
on behalf of the Fund for use in the Registration Statement or
prospectus for the Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of untrue statements or
representations (other than statements or representations contained in
the Registration Statement, prospectus or sales literature of the Fund
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
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Fund or any amendment thereof
or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company, as limited by and in accordance with the
provisions of Sections 8.1(b) and 8.1(c) hereof. 8.1(b). The Company
shall not be liable under this indemnification provision with respect
to any losses, claims,
<PAGE>
damages, liabilities or litigation incurred or assessed against an Indemnified
Party as such may arise from such Indemnified Party's willful misfeasance, bad
faith, or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement or to the Fund, whichever is
applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Company of
any such service on any designated agent or of any such claim shall not relieve
the Company from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Company shall be entitled to participate, at its own
expense, in the defense of such action. The Company also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Company to such party of the Company's election
to assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Company will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the operations
of the Fund.
8.2. Indemnification by the Adviser
8.2(a). The Adviser agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Adviser) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any
statute, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the Registration Statement or prospectus or sales literature
of the 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, 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 Adviser or Fund by or on behalf
of the Company for use in the Registration Statement or
prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares: or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or sales
literature for the Contracts not supplied by the Adviser or
persons under its control) or wrongful conduct of the Fund
or Adviser or persons under their control, with respect to
the sale or distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus or sales literature covering the
Contracts, or any amendment thereof or supplement thereto,
or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the
Fund; or
(iv) 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
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the
<PAGE>
Adviser in this Agreement or arise out of or result from any
other material breach of this Agreement by the Adviser; as
limited by and in accordance with the provisions of Sections
8.2(b) and 8.2(c) hereof.
8.2(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject by reason
of such Indemnified Party's willful misfeasance, bad faith, or gross negligence
in the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement or to each Company or Account, whichever is applicable.
8.2(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Adviser of
any such claim shall not relieve the Adviser from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Adviser will be entitled to
participate, at its own expense, in the defense thereof. The Adviser also shall
be entitled to assume the defense thereof with counsel satisfactory to the
party named in the action. After notice from the Adviser to such party of the
Adviser's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Adviser will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of New York.
9.2. This Agreement shall be subject to the provisions of the 1933 and
1940 Acts, including the Securities and Exchange Act of 1934, and the rules and
regulations and rulings thereunder, including such exemptions from those
statutes, rules and regulations as the SEC may grant (including, but not
limited to, the Shared Funding Exemptive Order) and the terms hereof shall be
interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon one-year advance
written notice to the other parties unless otherwise agreed in a separate
written agreement among the parties; or
(b) at the option of the Company if shares of the
Portfolios delineated in Schedule B are not reasonably available to meet the
requirements of the Contracts as determined by the Company; or
(c) at the option of the Fund 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
(d) at the option of the Company upon institution of formal
proceedings against the Fund by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body; or
(e) at the option of the Company or the Fund upon receipt of
any necessary regulatory approvals and/or the vote of the contract owners
having an interest in the Account (or any subaccount) to substitute the shares
of another investment company for the corresponding Portfolio shares of the
Fund in accordance with the terms of the Contracts for which those Portfolio
shares had been selected to serve as the underlying investment media. The
Company will give 30 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
(f) 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 (i) all contractowners of variable insurance
products of all separate accounts or (ii) the interests of the Participating
<PAGE>
Insurance Companies investing in the Fund as delineated in Article VII of this
Agreement; or
(g) at the option of the Company 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 believes that the Fund may fail to so qualify; or
(h) at the option of the Company if the Fund fails to meet
the diversification requirements specified in Article VI hereof; or
(i) at the option of any party to this Agreement, upon
another party's material breach of any provision of this Agreement; or
(j) at the option of the Company, if the Company determines
in its sole judgment exercised in good faith, that either the Fund or the
Adviser has suffered a material adverse change in its business, operations or
financial condition since the date of this Agreement or is the subject of
material adverse publicity; or
(k) at the option of the Fund or Adviser, if the Fund or
Adviser respectively, shall determine 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 Adviser; or
(l) 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.
10.2. Notice Requirement
(a) In the event that any termination of this Agreement is
based upon the provisions of Article VII, such prior written notice shall be
given in advance of the effective date of termination as required by such
provisions.
(b) In the event that any termination of this Agreement is
based upon the provisions of Sections 10.1(b)- (d), 10.1(g) - (i), or 10.1(l),
prompt written notice of the election to terminate this Agreement for cause
shall be furnished by the party terminating the Agreement to the
non-terminating parties, with said termination to be effective upon receipt,
but in no event later than five (5) business days from the mailing of such
notice by the non-terminating parties.
(c) In the event that any termination of this Agreement is
based upon the provisions of Sections 10.1(j) or 10.1(k), prior written notice
of the election to terminate this Agreement for cause shall be furnished by the
party terminating this Agreement to the non-terminating parties. Such prior
written notice shall be given by the party terminating this Agreement to the
non-terminating parties at least 30 days before the effective date of
termination.
10.3. It is understood and agreed that the right to terminate this
Agreement pursuant to Section 10.1(a) may be exercised for any reason or for no
reason.
10.4. Effect of Termination
(a) Notwithstanding any termination of this Agreement
pursuant to Section 10.1 of this Agreement, the Fund may, at its option, or in
the event of termination of this Agreement by the Fund or the Adviser pursuant
to Section 10.1(a) of this Agreement, the Company may require the Fund and the
Adviser to, continue to make available additional shares of the Fund for so
long after the termination of this Agreement as the Fund or the Company, if the
Company is so requiring, desires pursuant to the terms and conditions of this
Agreement as provided in paragraph (b) below for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred to as
"Existing Contracts"). Specifically, without limitation, if the Fund so elects
to make available additional shares of the Fund, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, 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 10.4 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of
this Agreement.
(b) In the event of a termination of this agreement
pursuant to Section 10.1 of this Agreement, the Fund shall promptly notify the
Company whether the Fund will continue to make available shares of the Fund
after such termination, except that, with respect to a termination by the Fund
or the Adviser pursuant to Section 10.1(a) of this Agreement, the Company shall
promptly notify the Fund whether it wishes the Fund to continue to make
available additional shares of the Fund. If shares of the Fund continue to be
made available after such termination, the provisions of this Agreement shall
remain in effect except for Section 10.1(a) and thereafter the Fund or the
Company may terminate the Agreement, as so continued pursuant to this Section
10.4 upon written notice to the other party, such notice to be for a period
that is reasonable under the circumstances.
10.5. Except as necessary to implement contractowner initiated or
approved transactions, or as required by state insurance laws or regulations,
the Company shall not redeem Fund shares attributable to the Contracts (as
opposed to Fund shares attributable to the Company's assets held in the
Account), and the Company shall not prevent
<PAGE>
contractowners from allocating payments to a Portfolio that was otherwise
available under the Contracts, until 90 days after the Company shall have
notified the Fund or Adviser of its intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
Calvert Group
Attn: Legal Department
4550 Montgomery Avenue, 10th Floor
Bethesda, Maryland 20814
If to the Company:
New York Life Insurance and Annuity Corporation
Attn: David Krystel
51 Madison Avenue
New York, New York 10010
If to the Adviser:
Calvert Group
Attn: Legal Department
4550 Montgomery Avenue, 10th Floor
Bethesda, Maryland 20814
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 Board, officers, agents, registered representatives or shareholders
assume any personal liability for obligations entered into on behalf of the
Fund.
12.2. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as if confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement shall not disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it
may come into the public domain without the express written consent of the
affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provision 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 shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Each party, at its expense and upon reasonable notice, shall have the right to
inspect the accounts, books and records of the other party as such accounts,
books and records relate to this Agreement or the transactions contemplated
hereby.
12.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative to be hereunder affixed hereto as of the date specified below.
<PAGE>
NEW YORK LIFE INSURANCE
AND ANNUITY CORPORATION:
By its authorized officer,
By: /s/Robert D. Rock
--------------------------
Title: Senior Vice President
Date: April 23, 1995
ACACIA CAPITAL CORPORATION
By its authorized officer
By: /s/William M. Tartikoff
--------------------------
Title: Senior Vice President
Date: April 27, 1995
CALVERT ASSET MANAGEMENT
COMPANY, INC.
By its authorized officer
By: /s/William M. Tartikoff
--------------------------
Title: Senior Vice President
Date: April 21, 1995
<PAGE>
SCHEDULE A
TO PARTICIPATION AGREEMENT
DATED April 27, 1995
The CRI Balanced Portfolio will be made available to the following Separate
Accounts of the Company:
1) Variable Annuity Separate Accounts I and II
2) LifeStages Variable Annuity Separate Account.
<PAGE>
SCHEDULE B
TO PARTICIPATION AGREEMENT
DATED April 27, 1995
CRI Balanced Portfolio (formerly the Calvert Socially Responsible Series)
<PAGE>
SCHEDULE C
TO PARTICIPATION AGREEMENT
DATED April 27, 1995
NYLIAC Variable Annuity Contracts - Qualified and Non-Qualified
NYLIAC LifeStages Annuity Contract
<PAGE>
ADDENDUM TO THE PARTICIPATION AGREEMENT
DATED AS OF APRIL 27, 1995
BETWEEN
ACACIA CAPITAL CORPORATION,
CALVERT ASSET MANAGEMENT COMPANY, INC.
AND
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
Notwithstanding anything to the contrary contained in the above cited
Participation Agreement ("Agreement") between Acacia Capital Corporation
("Fund"), Calvert Asset Management Company, Inc. ("Adviser") and New York Life
Insurance and Annuity Corporation ("Company"), the Fund, the Adviser and the
Company hereby agree that the Agreement is amended hereby to read as follows:
1. Schedule A is completely deleted and the attached Revised
Schedule A is inserted in place of the original.
2. Schedule C is completely deleted and the attached Revised
Schedule C is inserted in place of the original.
Except as amended herein, all other terms and conditions
shall remain in full force and effect.
IN WITNESS WHEREOF, the Fund, the Advisor and the Company have caused
this Addendum to be executed as of June 7, 1996 and hereby made an integral
part thereof.
CALVERT ASSET
ACACIA CAPITAL CORPORATION MANAGEMENT COMPANY, INC.
By: /s/William M. Tartikoff By: /s/William M. Tartikoff
--------------------------- ---------------------------
Name: William M. Tartikoff Name: William M. Tartikoff
Title: Senior Vice President Title: Senior Vice President
Date: June 7, 1996 Date: June 7, 1996
NEW YORK LIFE INSURANCE
AND ANNUITY CORPORATION
By: /s/Michael Gallo
----------------------------
Name: Michael Gallo
Title: Senior Vice President
Date: June 7, 1996
<PAGE>
REVISED SCHEDULE EXHIBIT A
DATED JUNE 7, 1996
TO PARTICIPATION AGREEMENT
DATED APRIL 27, 1995
The CRI Balanced Portfolio will be made available to the following Separate
Accounts of the Company:
1) Variable Annuity Separate Accounts I and II
2) LifeStages Variable Annuity Separate Account
3) Variable Universal Life Separate Accounts I and II
<PAGE>
REVISED SCHEDULE EXHIBIT C
DATED JUNE 7, 1996
TO PARTICIPATION AGREEMENT
DATED APRIL 27, 1995
NYLIAC Variable Annuity Contracts - Qualified and Non-Qualified
NYLIAC LifeStages Annuity Contract
NYLIAC Variable Universal Life Insurance Policy
<PAGE>
ADDENDUM TO THE PARTICIPATION AGREEMENT
DATED AS OF APRIL 27, 1995
BETWEEN
ACACIA CAPITAL CORPORATION,
CALVERT ASSET MANAGEMENT COMPANY, INC.
AND
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
Notwithstanding anything to the contrary contained in the above cited
Participation Agreement ("Agreement") between Acacia Capital Corporation
("Fund"), Calvert Asset Management Company, Inc. ("Adviser") and New York Life
Insurance and Annuity Corporation ("Company"), the Fund, the Adviser and the
Company hereby agree that the Agreement is amended hereby to read as follows:
1. Schedule A is completely deleted and the attached Revised
Schedule A is inserted in place of the original.
2. Schedule C is completely deleted and the attached Revised
Schedule C is inserted in place of the original.
Except as amended herein, all other terms and conditions
shall remain in full force and effect.
IN WITNESS WHEREOF, the Fund, the Advisor and the Company have caused
this Addendum to be executed as of July 11, 1996 and hereby made an integral
part thereof.
CALVERT ASSET
ACACIA CAPITAL CORPORATION MANAGEMENT COMPANY, INC.
By: /s/William M. Tartikoff By: /s/William M. Tartikoff
---------------------------- ---------------------------
Name: William M. Tartikoff Name: William M. Tartikoff
Title: Senior Vice President Title: Senior Vice President
Date: July 11, 1996 Date: July 11, 1996
NEW YORK LIFE INSURANCE
AND ANNUITY CORPORATION
By: /s/Lawrence Stoehr
---------------------------
Name: Lawrence Stoehr
Title: Vice President
Date: July 11, 1996
<PAGE>
REVISED SCHEDULE EXHIBIT A
DATED JULY 11, 1996
TO PARTICIPATION AGREEMENT
DATED APRIL 27, 1995
The CRI Balanced Portfolio will be made available to the following Separate
Accounts of the Company:
1) Variable Annuity Separate Accounts I and II
2) LifeStages Variable Annuity Separate Account
3) Variable Universal Life Separate Accounts I and II
4) Corporate Sponsored Variable Universal Life Separate Account-I
<PAGE>
REVISED SCHEDULE EXHIBIT C
DATED JULY 11, 1996
TO PARTICIPATION AGREEMENT
DATED APRIL 27, 1995
NYLIAC Variable Annuity Contracts - Qualified and Non-Qualified
NYLIAC LifeStages Annuity Contract
NYLIAC Variable Universal Life Insurance Policy
NYLIAC Corporate Sponsored Variable Universal Life Insurance Policy
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 20th day of June 1996, by and among The
Alger American Fund (the "Trust"), an open-end management investment company
organized as a Massachusetts business trust, New York Life Insurance and
Annuity Corporation, a life insurance company organized as a corporation under
the laws of the State of Delaware, (the "Company"), on its own behalf and on
behalf of each segregated asset account of the Company set forth in Schedule A,
as may be amended from time to time (the "Accounts"), and Fred Alger and
Company, Incorporated, a Delaware corporation, the Trust's distributor (the
"Distributor").
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "Commission") as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), and has
an effective registration statement relating to the offer and sale of the
various series of its shares under the Securities Act of 1933, as amended (the
"1933 Act");
WHEREAS, the Trust and the Distributor desire that Trust shares be
used as an investment vehicle for separate accounts established for variable
life insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements with
the Trust (the "Participating Insurance Companies");
WHEREAS, shares of beneficial interest in the Trust are divided into
the following series which are available for purchase by the Company for the
Accounts: Alger American Small Capitalization Portfolio, Alger American Growth
Portfolio, Alger American Income & Growth Portfolio, Alger American Balanced
Portfolio, Alger American MidCap Growth Portfolio, and Alger American Leveraged
AllCap Portfolio;
WHEREAS, the Trust has received an order from the Commission, dated
February 17, 1989 (File No. 812- 7076), granting Participating Insurance
Companies and their separate accounts exemptions from the provisions of
Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15)
and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Portfolios of the Trust to be sold to and held by variable annuity and variable
life insurance separate accounts of both affiliated and unaffiliated life
insurance companies (the "Shared Funding Exemptive Order");
WHEREAS, the Company has registered or will register under the 1933
Act certain variable life insurance policies and variable annuity contracts to
be issued by the Company under which the Portfolios are to be made available as
investment vehicles (the "Contracts");
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act unless an exemption from registration
under the 1940 Act is available and the Trust has been so advised;
WHEREAS, the Company desires to use shares of one or more Portfolios
as investment vehicles for the Accounts;
NOW THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I.
PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES
1.1. For purposes of this Article I, the Company shall be the Trust's agent
for the receipt from each account of purchase orders and requests for
redemption pursuant to the Contracts relating to each Portfolio,
provided that the Company notifies the Trust of such purchase orders
and requests for redemption by 10:00 a.m. Eastern time on the next
following Business Day, as defined in Section 1.3.
1.2. The Trust shall make shares of the Portfolios available to the
Accounts at the net asset value next computed after receipt of a
purchase order by the Trust (or its agent), as established in
accordance with the provisions of the then current prospectus of the
Trust describing Portfolio purchase procedures. The Company will
<PAGE>
transmit orders from time to time to the Trust for the purchase and
redemption of shares of the Portfolios. The Trustees of the Trust (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 if, 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, such action is deemed in the best interests
of the shareholders of such Portfolio.
1.3. The Company shall pay for the purchase of shares of a Portfolio on
behalf of an Account with federal funds to be transmitted by wire to
the Trust, with the reasonable expectation of receipt by the Trust by
2:00 p.m. Eastern time on the next Business Day after the Trust (or
its agent) receives the purchase order. Upon receipt by the Trust of
the federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of
the Trust for this purpose. "Business Day" shall mean any day on which
the New York Stock Exchange is open for trading and on which the Trust
calculates its net asset value pursuant to the rules of the
Commission.
1.4. The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the Company on behalf of an Account, at
the net asset value next computed after receipt by the Trust (or its
agent) of the request for redemption, as established in accordance
with the provisions of the then current prospectus of the Trust
describing Portfolio redemption procedures. The Trust shall make
payment for such shares in the manner established from time to time by
the Trust. Proceeds of redemption with respect to a Portfolio will
normally be paid to the Company for an Account in federal funds
transmitted by wire to the Company by order of the Trust with the
reasonable expectation of receipt by the Company by 2:00 p.m. Eastern
time on the next Business Day after the receipt by the Trust (or its
agent) of the request for redemption. Such payment may be delayed if,
for example, the Portfolio's cash position so requires or if
extraordinary market conditions exist, but in no event shall payment
be delayed for a greater period than is permitted by the 1940 Act. The
Trust reserves the right to suspend the right of redemption,
consistent with Section 22(e) of the 1940 Act and any rules
thereunder.
1.5. Payments for the purchase of shares of the Trust's Portfolios by the
Company under Section 1.3 and payments for the redemption of shares of
the Trust's Portfolios under Section 1.4 on any Business Day may be
netted against one another for the purpose of determining the amount
of any wire transfer.
1.6. Issuance and transfer of the Trust's Portfolio shares will be by book
entry only. Stock certificates will not be issued to the Company or
the Accounts. Portfolio Shares purchased from the Trust will be
recorded in the appropriate title for each Account or the appropriate
subaccount of each Account.
1.7. The Trust shall furnish, on or before the ex-dividend date, notice to
the Company of any income dividends or capital gain distributions
payable on the shares of any Portfolio of the Trust. The Company
hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional
shares of that Portfolio. The Trust shall notify the Company of the
number of shares so issued as payment of such dividends and
distributions.
1.8. The Trust shall calculate the net asset value of each Portfolio on
each Business Day, as defined in Section 1.3. The Trust shall make the
net asset value per share for each Portfolio available to the Company
or its designated agent on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall
use its best efforts to make such net asset value per share available
to the Company by 6:30 p.m. Eastern time each Business Day.
1.9. The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their segregated asset accounts,
to the Fund Sponsor or its affiliates and to such other entities as
may be permitted by Section 817(h) of the Code, the regulations
hereunder, or judicial or administrative interpretations thereof. No
shares of any Portfolio will be sold directly to the general public.
The Company agrees that it will use Trust shares only for the purposes
of funding the Contracts through the Accounts listed in Schedule A, as
amended from time to time.
<PAGE>
1.10. The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding materially to those contained in
Section 2.9 and Article IV of this Agreement.
ARTICLE II.
OBLIGATIONS OF THE PARTIES
2.1. The Trust shall prepare and be responsible for filing with the
Commission and any state regulators requiring such filing all
shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and
statements of additional information of the Trust. The Trust shall
bear the costs of registration and qualification of shares of the
Portfolios, preparation and filing of the documents listed in this
Section 2.1 and all taxes to which an issuer is subject on the
issuance and transfer of its shares.
2.2. The Company shall distribute such prospectuses, proxy statements and
periodic reports of the Trust to the Contract owners as required to be
distributed to such Contract owners under applicable federal or state
law.
2.3. The Trust shall provide such documentation (including a final copy of
the Trust's prospectus as set in type or in camera-ready copy meeting
the size specifications set by the Company) and other assistance as is
reasonably necessary in order for the Company to print together in one
document the current prospectus for the Contracts issued by the
Company and the current prospectus for the Trust. The Trust shall bear
the expense of printing copies of its current prospectus that will be
distributed to existing Contract owners, and the Company shall bear
the expense of printing copies of the Trust's prospectus that are used
in connection with offering the Contracts issued by the Company.
2.4. The Trust and the Distributor shall provide (1) at the Trust's
expense, one copy of the Trust's current Statement of Additional
Information ("SAI") to the Company and to any Contract owner who
requests such SAI, (2) at the Company's expense, such additional
copies of the Trust's current SAI as the Company shall reasonably
request and that the Company shall require in accordance with
applicable law in connection with offering the Contracts issued by the
Company.
2.5. The Trust, at its expense, shall provide the Company with copies of
its proxy material, periodic reports to shareholders and other
communications to shareholders in such quantity as the Company shall
reasonably require for purposes of distributing to Contract owners.
The Trust, at the Company's expense, shall provide the Company with
copies of its periodic reports to shareholders and other
communications to shareholders in such quantity as the Company shall
reasonably request for use in connection with offering the Contracts
issued by the Company. If requested by the Company in lieu thereof,
the Trust shall provide such documentation (including a final copy of
the Trust's proxy materials, periodic reports to shareholders and
other communications to shareholders, as set in type or in
camera-ready copy) and other assistance as reasonably necessary in
order for the Company to print such shareholder communications for
distribution to Contract owners.
2.6. The Company agrees and acknowledges that the Distributor is the sole
owner of the name and mark "Alger" 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 Distributor. Except as provided in
Section 2.5, 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 Distributor. 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.
2.7. The Company shall furnish, or cause to be furnished, to the Trust or
its designee a copy of each Contract prospectus and/or statement of
additional information describing the Contracts, each report to
Contract owners, proxy statement, application for exemption or request
for no-action letter in which the Trust or the Distributor is named
contemporaneously with the filing of such document with the
Commission. The Company shall furnish, or shall cause to be furnished,
to the Trust or its designee each piece of sales
<PAGE>
literature or other promotional material in which the Trust or the
Distributor is named, at least ten Business Days prior to its use. No
such material shall be used if the Trust or its designee reasonably
objects to such use within ten Business Days after receipt of such
material.
2.8 The Trust shall furnish, or cause to be furnished, to the Company or
its designee a copy of each Fund prospectus and/or statement of
additional information, each report to shareholders, proxy statement,
application for exemption or request for no-action letter in which the
Company or the Contracts are named contemporaneously with the filing
of such document with the Commission. The Trust shall furnish, or
shall cause to be furnished, to the Company or its designee each piece
of sales literature or other promotional material in which the Company
or the Contracts are named, at least ten Business Days prior to its
use. No such material shall be used if the Company or its designee
reasonably objects to such use within ten Business Days after receipt
of such material.
2.9. The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust or the
Distributor in connection with the sale of the Contracts other than
information or representations contained in and accurately derived
from the registration statement or prospectus for the Trust shares (as
such registration statement and prospectus may be amended or
supplemented from time to time), annual and semi-annual reports of the
Trust, Trust-sponsored proxy statements, or in sales literature or
other promotional material approved by the Trust or its designee,
except as required by legal process or regulatory authorities or with
the prior written permission of the Trust, the Distributor or their
respective designees. The Trust and the Distributor agree to respond
to any request for approval on a prompt and timely basis. The Company
shall adopt and implement procedures reasonably designed to ensure
that "broker only" materials including information therein about the
Trust or the Distributor are not distributed to existing or
prospective Contract owners.
2.10. The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the Portfolios
and the Distributor, in such form as the Company may reasonably
require, as the Company shall reasonably request in connection with
the preparation of registration statements, prospectuses and annual
and semi-annual reports pertaining to the Contracts.
2.11. The Trust and the Distributor shall not give, and agree that no
affiliate of either of them shall give, any information or make any
representations or statements on behalf of the Company or concerning
the Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from the
registration statement or prospectus for the Contracts (as such
registration statement and prospectus may be amended or supplemented
from time to time), or in materials approved by the Company for
distribution including sales literature or other promotional
materials, except as required by legal process or regulatory
authorities or with the prior written permission of the Company. The
Company agrees to respond to any request for approval on a prompt and
timely basis.
2.12. So long as, and to the extent that, the Commission interprets the 1940
Act to require pass-through voting privileges for Contract owners, the
Company will provide pass-through voting privileges to Contract owners
whose cash values are invested, through the registered Accounts, in
shares of one or more Portfolios of the Trust. The Trust shall require
all Participating Insurance Companies to calculate voting privileges
in the same manner and the Company shall be responsible for assuring
that the Accounts calculate voting privileges in the manner
established by the Trust. With respect to each registered Account, the
Company will vote shares of each Portfolio of the Trust held by a
registered Account and for which no timely voting instructions from
Contract owners are received in the same proportion as those shares
for which voting instructions are received. The Company and its agents
will in no way recommend or oppose or interfere with the solicitation
of proxies for Portfolio shares held to fund the Contacts without the
prior written consent of the Trust, which consent may be withheld in
the Trust's sole discretion. The Company reserves the right, to the
extent permitted by law, to vote shares held in any Account in its
sole discretion.
2.13. The Company and the Trust will each provide to the other information
about the results of any regulatory examination relating to the
Contracts or the Trust, including relevant portions of any "deficiency
letter" and any response thereto.
<PAGE>
2.14. No compensation shall be paid by the Trust to the Company, or by the
Company to the Trust, under this Agreement (except for specified
expense reimbursements). However, nothing herein shall prevent the
parties hereto from otherwise agreeing to perform, and arranging for
appropriate compensation for, other services relating to the Trust,
the Accounts or both.
2.15 The Trust must obtain prior written approval of the Company prior to
visiting the Company's offices or communicating with the Company
personnel (except for routine communications necessary for the day to
day operations of the Trust and the Contracts or for the processing of
trades for Trust shares). Such approval shall not be unreasonably
withheld as agreed upon by the parties.
2.16 The Trust agrees to make available to the Company senior personnel to
conduct training and seminars. The Company agrees to give the Trust
reasonable advance notice of its need for such training and seminars.
2.17 The Trust and the Distributor shall promptly notify the Company of any
event which causes the responses to the Preliminary Request for
Information to be materially untrue or misleading or to have a
potential material adverse impact on the Company or the Contracts.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1. The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of
Delaware and that it has legally and validly established each Account
as a segregated asset account under such law as of the date set forth
in Schedule A, and that NYLIFE Distributors, Inc., the principal
underwriter for the Contracts, is registered as a broker-dealer under
the Securities Exchange Act of 1934 and is a member in good standing
of the National Association of Securities Dealers, Inc.
3.2. The Company represents and warrants that it has registered or, prior
to any issuance or sale of the Contracts, will register each Account
as a unit investment trust in accordance with the provisions of the
1940 Act and cause each Account to remain so registered to serve as a
segregated asset account for the Contracts, unless an exemption from
registration is available.
3.3. The Company represents and warrants that the Contracts will be
registered under the 1933 Act unless an exemption from registration is
available prior to any issuance or sale of the Contracts; the
Contracts will be issued and sold in compliance in all material
respects with all applicable federal and state laws; and the sale of
the Contracts shall comply in all material respects with state
insurance law suitability requirements.
3.4. The Trust represents and warrants that it is duly organized and
validly existing under the laws of the Commonwealth of Massachusetts
and that it does and will comply in all material respects with the
1940 Act and the rules and regulations thereunder.
3.5. The Trust and the Distributor represent and warrant that the Portfolio
shares offered and sold pursuant to this Agreement will be registered
under the 1933 Act and sold in accordance with all applicable federal
and state laws, and the Trust shall be registered under the 1940 Act
prior to and at the time of any issuance or sale of such shares. The
Trust shall amend its registration statement under the 1933 Act and
the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Trust shall register and
qualify its shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Trust.
3.6. The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements for
variable annuity, endowment or life insurance contracts set forth in
Section 817(h) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the rules and regulations thereunder, including without
limitation Treasury Regulation 1.817-5, and will notify the Company
immediately upon having a reasonable basis for believing any Portfolio
has ceased to comply or might not
<PAGE>
so comply and will immediately take all reasonable steps to adequately
diversify the Portfolio to achieve compliance within the grace period
afforded by Regulation 1.817-5.
3.7. The Trust represents and warrants that it is currently qualified as a
"regulated investment company" under Subchapter M of the Code, that it
will make every effort to maintain such qualification and will notify
the Company immediately upon having a reasonable basis for believing
it has ceased to so qualify or might not so qualify in the future.
3.8. The Trust represents and warrants that it, its directors, officers,
employees and others dealing with the money or securities, or both, of
a Portfolio shall at all times be covered by a blanket fidelity bond
or similar coverage for the benefit of the Trust in an amount not less
than the minimum coverage required by Rule 17g-1 or other applicable
regulations under the 1940 Act. Such bond shall include coverage for
larceny and embezzlement and be issued by a reputable bonding company.
3.9. The Distributor represents that it is duly organized and validly
existing under the laws of the State of Delaware and that it is
registered, and will remain registered, during the term of this
Agreement, as a broker-dealer under the Securities Exchange Act of
1934 and is a member in good standing of the National Association of
Securities Dealers, Inc.
ARTICLE IV.
POTENTIAL CONFLICTS
4.1. The parties acknowledge that a Portfolio's shares may be made
available for investment to other Participating Insurance Companies.
In such event, the Trustees will monitor the Trust for the existence
of any material irreconcilable conflict between the interests of the
contract owners of all Participating Insurance Companies. A material
irreconcilable 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 variable
annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of
contract owners. The Trust shall promptly inform the Company of any
determination by the Trustees that a material irreconcilable conflict
exists and of the implications thereof.
4.2. The Company agrees to report promptly any potential or existing
conflicts of which it is aware to the Trustees. The Company will
assist the Trustees in carrying out their responsibilities under the
Shared Funding Exemptive Order by providing the Trustees with all
information reasonably necessary for and requested by the Trustees to
consider any issues raised including, but not limited to, information
as to a decision by the Company to disregard Contract owner voting
instructions. All communications from the Company to the Trustees may
be made in care of the Trust.
4.3. If it is determined by a majority of the Trustees, or a majority of
the disinterested Trustees, that a material irreconcilable conflict
exists that affects the interests of contract owners, the Company
shall, in cooperation with other Participating Insurance Companies
whose contract owners are also affected, at its own expense and to the
extent reasonably practicable (as determined by the Trustees) take
whatever steps are necessary to remedy or eliminate the material
irreconcilable conflict, which steps could include: (a) withdrawing
the assets allocable to some or all of the Accounts from the Trust or
any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Trust,
or submitting the question of whether or not such segregation should
be implemented to a vote of all affected Contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e.,
annuity contract owners, life insurance contract owners, or variable
contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected
Contract owners the option of making such a change; and (b)
establishing a new registered management investment company or managed
separate account.
<PAGE>
4.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority
vote, the Company may be required, at the Trust's election, to
withdraw the affected Account's investment in the Trust and terminate
this Agreement with respect to such Account; provided, however that
such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested Trustees. Any such
withdrawal and termination must take place within six (6) months after
the Trust gives written notice that this provision is being
implemented. Until the end of such six (6) month period, the Trust
shall continue to accept and implement orders by the Company for the
purchase and redemption of shares of the Trust.
4.5. 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 regulators, then the
Company will withdraw the affected Account's investment in the Trust
and terminate this Agreement with respect to such Account within six
(6) months after the Trustees inform the Company in writing that the
Trust has determined that such decision has created a material
irreconcilable conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested Trustees. Until the end of such six (6) month period,
the Trust shall continue to accept and implement orders by the Company
for the purchase and redemption of shares of the Trust.
4.6. For purposes of Section 4.3 through 4.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed
action adequately remedies any material irreconcilable conflict, but
in no event will the Trust be required to establish a new funding
medium for any Contract. The Company shall 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 Contract owners materially
adversely affected by the material irreconcilable conflict. In the
event that the Trustees determine that any proposed action does not
adequately remedy any material irreconcilable conflict, then the
Company will withdraw the Account's investment in the Trust and
terminate this Agreement within six (6) months after the Trustees
inform the Company in writing of the foregoing determination;
provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable
conflict as determined by a majority of the disinterested Trustees.
4.7. The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so
that the Trustees may fully carry out the duties imposed upon them by
the Shared Funding Exemptive Order, and said reports, materials and
data shall be submitted more frequently if reasonably deemed
appropriate by the Trustees.
4.8. If and to the extent that Rule 6e-3(T) is amended, or Rule 6e-3 is
adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Shared Funding Exemptive Order) on
terms and conditions materially different from those contained in the
Shared Funding Exemptive Order, then the Trust and/or the
Participating Insurance Companies, as appropriate, shall take such
steps as may be necessary to comply with Rule 6e-3(T), as amended, or
Rule 6e-3, as adopted, to the extent such rules are applicable.
ARTICLE V.
INDEMNIFICATION
5.1. Indemnification By the Company. The Company agrees to indemnify and
hold harmless the Distributor, the Trust and each of its Trustees,
officers, employees and agents and each person, if any, who controls
the Trust within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section
5.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Company, which consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal
counsel fees incurred in connection therewith) (collectively,
"Losses"), to which the Indemnified Parties may become subject under
any statute or regulation, or at
<PAGE>
common law or otherwise, insofar as such Losses are related to the
sale or acquisition of the Contracts or Trust shares and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
registration statement or prospectus for the Contracts or in
the Contracts themselves or in sales literature generated or
approved by the Company on behalf of the Contracts or
Accounts (or any amendment or supplement to any of the
foregoing) (collectively, "Company Documents" for the
purposes of this Article V), 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 indemnity 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 was accurately derived
from written information furnished to the Company by or on
behalf of the Trust for use in Company Documents or otherwise
for use in connection with the sale of the Contracts or Trust
shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived from Trust Documents as defined in Section
5.2(a)) or wrongful conduct of the Company or persons under
its control, with respect to the sale or acquisition of the
Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a) 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 accurately derived from written information
furnished to the Trust by or on behalf of the Company; or
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under
the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(f) arise out of or result from the provision by the Company to
the Trust of insufficient or incorrect information regarding
the purchase or sale of shares of any Portfolio, or the
failure of the Company to provide such information on a
timely basis.
5.2. Indemnification by the Distributor. The Distributor agrees to
indemnify and hold harmless the Company and each of its directors,
officers, employees, and agents and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for the purposes of this
Section 5.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Distributor, which consent shall not be unreasonably withheld) or
expenses (including the reasonable costs of investigating or defending
any alleged loss, claim, damage, liability or expense and reasonable
legal counsel fees incurred in connection therewith) (collectively,
"Losses"), to which the Indemnified Parties may become subject under
any statute or regulation, or at common law or otherwise, insofar as
such Losses are related to the sale or acquisition of the Contracts or
Trust shares and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the registration statement or prospectus for the Trust (or
any amendment or supplement thereto) (collectively, "Trust
Documents" for the purposes of this Article V), 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 indemnity 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
was accurately derived from written information furnished to
the Distributor or the Trust by or on behalf of the Company
for use in Trust Documents or otherwise for use in connection
with the sale of the Contracts or Trust shares and; or
<PAGE>
(b) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived form Company Documents) or wrongful
conduct of the Distributor or persons under its control, with
respect to the sale or acquisition of the Contracts or
Portfolio shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Company
Documents 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
accurately derived from written information furnished to the
Company by or on behalf of the Trust; or
(d) arise out of or result from any failure by the Distributor or
the Trust to provide the services or furnish the materials
required under the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor or the
Trust in this Agreement or arise out of or result from any
other material breach of this Agreement by the Distributor or
the Trust.
5.3. None of the Company, the Trust or the Distributor shall be liable
under the indemnification provisions of Sections 5.1 or 5.2, as
applicable, with respect to any Losses incurred or assessed against an
Indemnified Party that arise from such Indemnified Party's willful
misfeasance, bad faith or negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement.
5.4. None of the Company, the Trust or the Distributor shall be liable
under the indemnification provisions of Sections 5.1 or 5.2, as
applicable, with respect to any claim made against an Indemnified
party unless such Indemnified Party shall have notified the other
party in writing within a reasonable time after the summons, or other
first written notification, giving information of the nature of the
claim shall have been served upon or otherwise received by such
Indemnified Party (or after such Indemnified Party shall have received
notice of service upon or other notification to any designated agent),
but failure to notify the party against whom indemnification is sought
of any such claim shall not relieve that party from any liability
which it may have to the Indemnified Party in the absence of Sections
5.1 and 5.2.
5.5. In case any such action is brought against an Indemnified Party, the
indemnifying party shall be entitled to participate, at its own
expense, in the defense of such action. The indemnifying party also
shall be entitled to assume the defense thereof, with counsel
reasonably satisfactory to the party named in the action. After notice
from the indemnifying party to the Indemnified Party of an election to
assume such defense, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the
indemnifying party will not be liable to the Indemnified 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.
ARTICLE VI.
TERMINATION
6.1. This Agreement shall terminate:
(a) at the option of any party upon 60 days advance written
notice to the other parties, unless a shorter time is agreed
to by the parties;
(b) at the option of the Trust or the Distributor if the
Contracts issued by the Company cease to qualify as annuity
contracts or life insurance contracts, as applicable, under
the Code or if the Contracts are not registered, issued or
sold in accordance with applicable state and/or federal law;
or
<PAGE>
(c) at the option of any party upon a determination by a majority
of the Trustees of the Trust, or a majority of its
disinterested Trustees, that a material irreconcilable
conflict exists; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust or the Distributor by the NASD,
the SEC, or any state securities or insurance department or
any other regulatory body regarding the Trust's or the
Distributor's duties under this Agreement or related to the
sale of Trust shares or the operation of the Trust; or
(e) at the option of the Company if the Trust or a Portfolio
fails to meet the diversification requirements specified in
Section 3.6 hereof; or.
(f) at the option of the Company if shares of the Series are not
reasonably available to meet the requirements of the Variable
Contracts issued by the Company, as determined by the
Company, and upon prompt notice by the Company to the other
parties; or
(g) at the option of the Company in the event any of the shares
of the Portfolio 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 Variable Contracts issued or to be
issued by the Company; or
(h) at the option of the Company, if the Portfolio fails to
qualify as a Regulated Investment Company under Subchapter M
of the Code; or
(i) at the option of the Distributor if it shall determine in its
sole judgment exercised in good faith, that the Company
and/or its affiliated companies has suffered a material
adverse change in its business, operations, financial
condition or prospects since the date of this Agreement or is
the subject of material adverse publicity; or
(j) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement;
or
(k) at the option of the Company, if the Company determines in
its sole judgment exercised in good faith, that either the
Fund or the Adviser has suffered a material adverse change in
its business, operations or financial condition since the
date of this Agreement or is the subject of material adverse
publicity; or
(l) at the option of the Company or the Trust upon receipt of any
necessary regulatory approvals and/or the vote of the
Contract owners having an interest in the Account (or any
subaccount) to substitute the shares of another investment
company for the corresponding Portfolio shares of the Trust
in accordance with the terms of the Contracts for which those
Portfolio shares had been selected to serve as the underlying
investment media. The Company will give 30 days prior written
notice to the Trust of the date of any proposed vote or other
action taken to replace the Trust's shares.
6.2. Notwithstanding any termination of this Agreement, the Trust shall, at
the option of the Company, continue to make available additional
shares of any Portfolio and redeem shares of any Portfolio pursuant to
the terms and conditions of this Agreement for all Contracts in effect
on the effective date of termination of this Agreement.
6.3. The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.9 shall
survive the termination of this Agreement as long as shares of the
Trust are held on behalf of Contract owners in accordance with Section
6.2.
ARTICLE VII.
NOTICES
<PAGE>
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust or its Distributor:
Fred Alger Management, Inc.
30 Montgomery Street
Jersey City, NJ 07302
Attn: Gregory S. Duch
Fax: (201) 434-1459
If to the Company:
New York Life Insurance and Annuity Corporation
51 Madison Avenue
New York, NY 10010
Attn: Robert D. Rock
Fax: (212) 576-6905
ARTICLE VIII.
MISCELLANEOUS
8.1. 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.
8.2. This Agreement may be executed in two or more counterparts, each of
which taken together shall constitute one and the same instrument.
8.3. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
8.4. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New
York. It shall also be subject to the provisions of the federal
securities laws and the rules and regulations thereunder and to any
orders of the Commission granting exemptive relief therefrom and the
conditions of such orders. Copies of any such orders shall be promptly
forwarded by the Trust to the Company.
<PAGE>
8.5. All liabilities of the Trust arising, directly or indirectly, under
this Agreement, of any and every nature whatsoever, shall be satisfied
solely out of the assets of the Trust and no Trustee, officer, agent
or holder of shares of beneficial interest of the Trust shall be
personally liable for any such liabilities.
8.6. Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Commission,
the National Association of Securities Dealers, Inc. and state
insurance regulators) and shall permit such authorities reasonable
access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated
hereby.
8.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are
entitled to under state and federal laws.
8.8. This Agreement shall not be exclusive in any respect.
8.9. Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the
other party.
8.10. No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by both parties.
8.11. Each party hereto shall, except as required by law or otherwise
permitted by this Agreement, treat as confidential the names and
addresses of the owners of the Contracts and all information
reasonably identified as confidential in writing by any other party
hereto, and shall not disclose such confidential information without
the written consent of the affected party unless such information has
become publicly available.
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
Fred Alger and Company, Incorporated
By: /s/ Gregory S. Duch
---------------------------------
Name: Gregory S. Duch
Title: Executive Vice President
The Alger American Fund
By: /s/ Gregory S. Duch
---------------------
Name: Gregory S. Duch
Title: Treasurer
New York Life Insurance and Annuity Corporation
By: /s/ Robert D. Rock
---------------------
Name: Robert D. Rock
Title: Senior Vice President
<PAGE>
JANUS ASPEN SERIES
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 20th day of June, 1996, between JANUS
ASPEN SERIES, an open-end management investment company organized as a Delaware
business trust (the "Trust"), and New York Life Insurance and Annuity
Corporation, a life insurance company organized under the laws of the State of
Delaware (the "Company"), on its own behalf and on behalf of each segregated
asset account of the Company set forth on Schedule A, as may be amended from
time to time (the "Accounts").
W I T N E S S E T H:
WHEREAS, the Trust has registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and has registered the offer
and sale of its shares under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts to be offered by insurance companies that have entered into
participation agreements with the Trust (the "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Trust has received an order from the Securities and
Exchange Commission granting Participating Insurance Companies and their
separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a)
and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder,
to the extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Exemptive Order"); and
WHEREAS, the Company has registered or will register (unless
registration is not required under applicable law) certain variable life
insurance policies and/or variable annuity contracts under the 1933 Act (the
"Contracts"); and
WHEREAS, the Company has registered or will register (unless
registration is not required under applicable law) each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Company desires to utilize shares of one or more
Portfolios as an investment vehicle of the Accounts;
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I
Sale of Trust Shares
1.1 The Trust shall make shares of its Portfolios available to the
Accounts at the net asset value next computed after receipt of such purchase
order by the Trust (or its agent), as established in accordance with the
provisions of the then current prospectus of the Trust. Shares of a particular
Portfolio of the Trust shall be ordered in such quantities and at such times as
determined by the Company to be necessary to meet the requirements of the
Contracts. The Trustees of the Trust (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 in the best interests of the shareholders of
such Portfolio.
1.2 The Trust will redeem any full or fractional shares of any
Portfolio when requested by the Company on behalf of an Account at the net
asset value next computed after receipt by the Trust (or its agent) of the
request for redemption, as established in accordance with the provisions of the
then current prospectus of the Trust. The Trust shall
<PAGE>
make payment for such shares in the manner established from time to time by the
Trust, but in no event shall payment be delayed for a greater period than is
permitted by the 1940 Act.
1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby
appoints the Company as its agent for the limited purpose of receiving and
accepting purchase and redemption orders resulting from investment in and
payments under the Contracts. Receipt by the Company shall constitute receipt
by the Trust provided that i) such orders are received by the Company in good
order prior to the time the net asset value of each Portfolio is priced in
accordance with its prospectus and ii) the Trust receives notice of such orders
by 11:00 a.m. New York time on the next following Business Day. "Business Day"
shall mean any day on which the New York Stock Exchange is open for trading and
on which the Trust calculates its net asset value pursuant to the rules of the
Securities and Exchange Commission.
1.4 Purchase orders that are transmitted to the Trust in accordance
with Section 1.3 shall be paid for no later than 12:00 noon New York time on
the same Business Day that the Trust receives notice of the order. Payments
shall be made in federal funds transmitted by wire.
1.5 Issuance and transfer of the Trust's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Trust will be recorded in the appropriate title for
each Account or the appropriate subaccount of each Account.
1.6 The Trust shall furnish prompt notice to the Company of any income
dividends or capital gain distributions payable on the Trust's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional shares of
that Portfolio. The Trust shall notify the Company of the number of shares so
issued as payment of such dividends and distributions.
1.7 The Trust shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 6 p.m. New
York time.
1.8 The Trust agrees that its shares will be sold only to
Participating Insurance Companies and their separate accounts and to certain
qualified pension and retirement plans to the extent permitted by the Exemptive
Order. No shares of any Portfolio will be sold directly to the general public.
The Company agrees that Trust shares will be used only for the purposes of
funding the Contracts and Accounts listed in Schedule A, as amended from time
to time.
1.9 The Trust agrees that all Participating Insurance Companies shall
have the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding to those contained in Section 2.8 and
Article IV of this Agreement.
ARTICLE II
Obligations of the Parties
2.1 The Trust shall prepare and be responsible for filing with the
Securities and Exchange Commission and any state regulators requiring such
filing all shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and statements
of additional information of the Trust. The Trust shall bear the costs of
registration and qualification of its shares, preparation and filing of the
documents listed in this Section 2.1 and all taxes to which an issuer is
subject on the issuance and transfer of its shares.
2.2 At the option of the Company, the Trust shall either (a) provide
the Company (at the Company's expense) with as many copies of the Trust's
current prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments or supplements to any of the
foregoing, as the Company shall reasonably request; or (b) provide the Company
with a camera ready copy of such documents in a form suitable for printing. The
Trust shall provide the Company with a copy of its statement of additional
information in a form suitable for duplication by the Company. The Trust (at
its expense) shall provide the Company with copies of any Trust-sponsored proxy
materials in such quantity as the Company shall reasonably require for
distribution to Contract owners.
2.3 The Company shall bear the costs of printing and distributing the
Trust's prospectus, statement of additional information, shareholder reports
and other shareholder communications to owners of and applicants for policies
for which the Trust is serving or is to serve as an investment vehicle. The
Company shall bear the costs of
<PAGE>
distributing proxy materials (or similar materials such as voting solicitation
instructions) to Contract owners, except that the Trust's investment adviser
shall bear the cost of distributing any such materials initiated by the Trust.
The Company assumes sole responsibility for ensuring that such materials are
delivered to Contract owners in accordance with applicable federal and state
securities laws. The Trust's investment adviser will assist in creating,
preparing and printing marketing materials including but not limited to, sales
brochures for the Portfolios of the Trust included as investment vehicles for
the Contracts. In addition, the Trust's investment adviser will share the
expense of creating, preparing and printing such materials.
2.4 The Company agrees and acknowledges that the Trust's adviser,
Janus Capital Corporation ("Janus Capital"), is the sole owner of the name and
mark "Janus" and that all use of any designation comprised in whole or part of
Janus (a "Janus Mark") under this Agreement shall inure to the benefit of Janus
Capital. Except as provided in Section 2.5, the Company shall not use any Janus
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
Janus Capital. Upon termination of this Agreement for any reason, the Company
shall cease all use of any Janus Mark(s) as soon as reasonably practicable.
2.5 The Company shall furnish, or cause to be furnished, to the Trust
or its designee, a copy of each Contract prospectus or statement of additional
information in which the Trust or its investment adviser is named prior to the
filing of such document with the Securities and Exchange Commission. The
Company shall furnish, or shall cause to be furnished, to the Trust or its
designee, each piece of sales literature or other promotional material in which
the Trust or its investment adviser is named, at least ten Business Days prior
to its use. No such material shall be used if the Trust or its designee
reasonably objects to such use within ten Business Days after receipt of such
material.
2.6 The Trust shall furnish, or cause to be furnished, to the Company
or its designee, a copy of each prospectus or statement of additional
information in which the Company is named prior to the filing of such document
with the Securities and Exchange Commission. The Trust shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company is named, at
least ten Business Days prior to its use. No such material shall be used if the
Company or its designee reasonably objects to such use within ten Business Days
after receipt of such material.
2.7 The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust or
its investment adviser in connection with the sale of the Contracts other than
information or representations contained in and accurately derived from the
registration statement or prospectus for the Trust shares (as such registration
statement and prospectus may be amended or supplemented from time to time),
reports of the Trust, Trust-sponsored proxy statements, or in sales literature
or other promotional material approved by the Trust or its designee, except as
required by legal process or regulatory authorities or with the written
permission of the Trust or its designee.
2.8 The Trust shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from the registration
statement or prospectus for the Contracts (as such registration statement and
prospectus may be amended or supplemented from time to time), or in materials
approved by the Company for distribution including sales literature or other
promotional materials, except as required by legal process or regulatory
authorities or with the written permission of the Company.
2.9 So long as, and to the extent that the Securities and Exchange
Commission interprets the 1940 Act to require pass-through voting privileges
for variable policyowners, the Company will provide pass-through voting
privileges to owners of policies whose cash values are invested, through the
Accounts, in shares of the Trust. The Trust shall require all Participating
Insurance Companies to calculate voting privileges in the same manner and the
Company shall be responsible for assuring that the Accounts calculate voting
privileges in the manner established by the Trust. With respect to each
Account, the Company will vote shares of the Trust held by the Account and for
which no timely voting instructions from policyowners are received as well as
shares it owns that are held by that Account, in the same proportion as those
shares for which voting instructions are received. The Company and its agents
will in no way recommend or oppose or interfere with the solicitation of
proxies for Trust shares held by Contract owners without the prior written
consent of the Trust, which consent may be withheld in the Trust's sole
discretion.
2.10 The Company shall inform the Trust of any investment restrictions
imposed by state insurance law that may become applicable to the Trust from
time to time as a result of the Account's investment therein (including,
<PAGE>
but not limited to, restrictions with respect to fees and expenses and
investment policies), other than those set forth on Schedule B to this
Agreement. Upon receipt of such information from the Company, the Trust shall
determine whether it is in the best interests of shareholders to comply with
any such restrictions. If the Trust determines that it is not in the best
interests of shareholders (it being understood that "shareholders" for this
purpose shall mean Contract Owners), the Trust shall so inform the Company, and
the Trust and the Company shall discuss alternative accommodations in the
circumstances. If the Trust determines that it is in the best interests of
shareholders to comply with such restrictions, the Trust and the Company shall
amend Schedule B to this Agreement to reflect such restrictions.
ARTICLE III
Representations and Warranties
3.1 The Company represents and warrants that it is an insurance
company duly organized and in good standing under the laws of the State of
Delaware and that it has legally and validly established each Account as a
segregated asset account under such law on the date set forth in Schedule A.
3.2 The Company represents and warrants that each Account (1) has been
registered or, prior to any issuance or sale of the Contracts, will be
registered as a unit investment trust in accordance with the provisions of the
1940 Act or, alternatively (2) has not been registered in proper reliance upon
an exclusion from registration under the 1940 Act.
3.3 The Company represents and warrants that the Contracts or
interests in the Accounts (1) are or, prior to issuance, will be registered as
securities under the 1933 Act or, alternatively (2) are not registered because
they are properly exempt from registration under the 1933 Act or will be
offered exclusively in transactions that are properly exempt from registration
under the 1933 Act. The Company further represents and warrants that the
Contracts will be issued and sold in compliance in all material respects with
all applicable federal and state laws; and the sale of the Contracts shall
comply in all material respects with state insurance suitability requirements.
3.4 The Trust represents and warrants that it is duly organized and
validly existing under the laws of the State of Delaware.
3.5 The Trust represents and warrants that the Trust shares offered
and sold pursuant to this Agreement will be registered under the 1933 Act and
the Trust shall be registered under the 1940 Act prior to any issuance or sale
of such shares. The Trust shall amend its registration statement under the 1933
Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Trust shall register and qualify its
shares for sale in accordance with the laws of the various states only if and
to the extent deemed advisable by the Trust. The Trust shall inform the Company
as to the states in which the shares of the Trust have been qualified for sale
under, or are exempt from the requirements of, the respective securities laws
of such states.
3.6 The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements set forth in
Section 817(h) of the Internal Revenue Code of 1986, as amended, and the rules
and regulations thereunder.
3.7 The Trust represents and warrants on behalf of the Trust's
investment adviser that the adviser is and shall remain duly registered as an
investment adviser under the Investment Advisers Act of 1940 and any applicable
state laws and that the adviser shall perform its obligations for the Trust in
compliance in all material respects with the laws of the State of Delaware and
any applicable state and federal securities laws.
ARTICLE IV
Potential Conflicts
4.1 The parties acknowledge that the Trust's shares may be made
available for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. 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 variable annuity contract
<PAGE>
and variable life insurance contract owners; or (f) a decision by an insurer to
disregard the voting instructions of contract owners. The Trustees shall
promptly inform the Company if they determine that an irreconcilable material
conflict exists and the implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Exemptive Order by
providing the Trustees with all information reasonably necessary for the
Trustees to consider any issues raised including, but not limited to,
information as to a decision by the Company to disregard Contract owner voting
instructions.
4.3 If it is determined by a majority of the Trustees, or a majority
of its disinterested Trustees, that a material irreconcilable conflict exists
that affects the interests of Contract owners, and if the Trustees determine
that the Company is responsible in full or in part for causing or creating said
conflict, the Company (and other responsible participating insurance
companies), shall, in cooperation with other Participating Insurance Companies
whose contract owners are also affected, at its expense and to the extent
reasonably practicable (as determined by the Trustees) take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict, which
steps could include: (a) withdrawing the assets allocable to some or all of the
Accounts from the Trust or any Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another Portfolio
of the Trust, or submitting the question of whether or not such segregation
should be implemented to a vote of all affected Contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e., annuity
contract owners, life insurance contract owners, or variable contract owners of
one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contract owners the option of making
such a change; and (b) establishing a new registered management investment
company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Trust's election, to withdraw the affected
Account's investment in the Trust and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees. Any such
withdrawal and termination must take place within six (6) months after the
Trust gives written notice that this provision is being implemented. Until the
end of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of shares of
the Trust. No charge or penalty will be imposed as a result of such withdrawal.
4.5 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 regulators, then the Company will withdraw the
affected Account's investment in the Trust and terminate this Agreement with
respect to such Account within six (6) months after the Trustees inform the
Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. Until the end of such six (6) month period, the Trust shall continue
to accept and implement orders by the Company for the purchase and redemption
of shares of the Trust. No charge or penalty will be imposed as a result of
such withdrawal.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no
event will the Company 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
Contract owners materially adversely affected by the irreconcilable material
conflict. In the event that the Trustees determine that any proposed action
does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the Account's investment in the Trust and terminate this
Agreement within six (6) months after the Trustees inform the Company in
writing of the foregoing determination; provided, however, that such withdrawal
and termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested
Trustees.
4.7 The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonable request so that the
Trustees may fully carry out the duties imposed upon them by the Exemptive
Order, and said reports, materials and data shall be submitted more frequently
if deemed appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide
<PAGE>
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 Exemptive
Order) on terms and conditions materially different from those contained in the
Exemptive Order, then the Trust and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable.
ARTICLE V
Indemnification
5.1 Indemnification By the Company. The Company agrees to indemnify
and hold harmless the Trust and each of its Trustees, officers, employees and
agents and each person, if any, who controls the Trust within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for
purposes of this Article V) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or expenses (including the reasonable costs of investigating or
defending any alleged loss, claim, damage, liability or expense and reasonable
legal counsel fees incurred in connection therewith) (collectively, "Losses"),
to which the Indemnified Parties may become subject under any statute or
regulation, or at common law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact
contained in a registration statement or prospectus
for the Contracts or in the Contracts themselves or
in sales literature generated or approved by the
Company on behalf of the Contracts or Accounts (or
any amendment or supplement to any of the foregoing)
(collectively, "Company Documents" for the purposes
of this Article V), 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 indemnity 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 was
accurately derived from written information
furnished to the Company by or on behalf of the
Trust for use in Company Documents or otherwise for
use in connection with the sale of the Contracts or
Trust shares; or
(b) arise out of or result from statements or
representations (other than statements or
representations contained in and accurately derived
from Trust Documents as defined in Section 5.2(a))
or wrongful conduct of the Company or persons under
its control, with respect to the sale or acquisition
of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact
contained in Trust Documents as defined in Section
5.2(a) 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 accurately derived from
written information furnished to the Trust by or on
behalf of the Company; or
(d) arise out of or result from any failure by the
Company to provide the services or furnish the
materials required under the terms of this
Agreement; or
(e) arise out of or result from any material breach of
any representation and/or warranty made by the
Company in this Agreement or arise out of or result
from any other material breach of this Agreement by
the Company.
5.2 Indemnification By the Trust. The Trust agrees to indemnify and
hold harmless the Company and each of its directors, officers, employees and
agents and each person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for
purposes of this Article V) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Trust) or expenses (including the reasonable costs of investigating or
defending any alleged loss, claim, damage, liability or expense and reasonable
legal counsel fees incurred in connection therewith) (collectively, "Losses"),
to which the Indemnified Parties may become subject under any statute or
regulation, or at common law or otherwise, insofar as such
<PAGE>
Losses:
(a) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact
contained in the registration statement, prospectus,
statement of additional information or sales
literature for the Trust (or any amendment or
supplement thereto), (collectively, "Trust
Documents" for the purposes of this Article V), 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 indemnity 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
was accurately derived from written information
furnished to the Trust by or on behalf of the
Company for use in Trust Documents or otherwise for
use in connection with the sale of the Contracts or
Trust shares; or
(b) arise out of or result from statements or
representations (other than statements or
representations contained in and accurately derived
from Company Documents) or wrongful conduct of the
Trust or persons under its control, with respect to
the sale or acquisition of the Contracts or Trust
shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact
contained in Company Documents 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
accurately derived from written information
furnished to the Company by or on behalf of the
Trust; or
(d) arise out of or result from any failure by the Trust
to provide the services or furnish the materials
required under the terms of this Agreement; or
(e) arise out of or result from any material breach of
any representation and/or warranty made by the Trust
in this Agreement or arise out of or result from any
other material breach of this Agreement by the
Trust.
5.3 Neither the Company nor the Trust shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any Losses incurred or assessed against an Indemnified Party that arise from
such Indemnified Party's willful misfeasance, bad faith or negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
5.4 Neither the Company nor the Trust shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified the other party in writing within a reasonable time after
the summons, or other first written notification, giving information of the
nature of the claim shall have been served upon or otherwise received by such
Indemnified Party (or after such Indemnified Party shall have received notice
of service upon or other notification to any designated agent), but failure to
notify the party against whom indemnification is sought of any such claim shall
not relieve that party from any liability which it may have to the Indemnified
Party in the absence of Sections 5.1 and 5.2.
5.5 In case any such action is brought against the Indemnified
Parties, the indemnifying party shall be entitled to participate, at its own
expense, in the defense of such action. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel reasonably satisfactory to
the party named in the action. After notice from the indemnifying party to the
Indemnified Party of an election to assume such defense, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the indemnifying party will not be liable to the Indemnified 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.
ARTICLE VI
Termination
<PAGE>
6.1 This Agreement may be terminated by either party for any reason by
sixty (60) days advance written notice delivered to the other party.
6.2 This Agreement may be terminated at the option of the Company, if
the Company determines in its sole judgment exercised in good faith, that
either the Trust or the Trust's investment adviser has suffered a material
adverse change in its business, operations or financial condition since the
date of this Agreement or is the subject of material adverse publicity which is
likely to have a material adverse impact upon the business and operations of
the Trust.
6.3 This Agreement may be terminated at the option of the Trust, if
the Trust shall determine 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 Trust.
6.4 Notwithstanding any termination of this Agreement, the Trust
shall, at the option of the Company, continue to make available additional
shares of the Trust (or any Portfolio) pursuant to the terms and conditions of
this Agreement for all Contracts in effect on the effective date of termination
of this Agreement, provided that the Company continues to pay the costs set
forth in Section 2.3.
6.5 The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.9 shall survive the
termination of this Agreement as long as shares of the Trust are held on behalf
of Contract owners in accordance with Section 6.2.
ARTICLE VII
Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust:
Janus Aspen Series
100 Fillmore Street
Denver, Colorado 80206
Attention: David C. Tucker, Esq.
General Counsel
If to the Company:
New York Life Insurance and Annuity Corporation
51 Madison Avenue
New York, New York 10010
Attention: Robert D. Rock
Senior Vice President
ARTICLE VIII
Miscellaneous
8.1 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.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or
<PAGE>
otherwise, the remainder of the Agreement shall not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of State of Colorado.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6 Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers, Inc., and state insurance regulators) and shall permit such
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
8.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
8.8 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect.
8.9 Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the prior written approval of the other
party.
8.10 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
8.11 The Trust must obtain prior written approval of the Company prior
to visiting the Company's offices or communicating with the Company personnel
(except for routine communications necessary for the day to day operations of
the Trust and the Contracts or for the processing of trades for Trust shares.)
8.12 The Trust agrees to make available to the Company senior
personnel to conduct training and seminars. The Company agrees to give the
Trust reasonable advance notice of its need for such training and seminars.
8.13 The Trust shall promptly notify the Company of any material
changes to the investment policies or restrictions, portfolio managers, or
portfolio management style of any portfolios of the Trust purchased by the
Separate Accounts listed on Schedule A.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION
By: /s/Robert D. Rock
----------------------
Name: Robert D. Rock
Title: Senior Vice President
JANUS ASPEN SERIES
By: /s/ Deborah E. Bielicke
----------------------
Name: Deborah E. Bielicke
Title: Assistant Vice President
<PAGE>
Schedule A
Separate Accounts and Associated Contracts
Name of Separate Account and Policy Form Numbers of Contracts
Date Established by Board of Directors Funded By Separate Account
- -------------------------------------- --------------------------------
NYLIAC Variable Universal Life Separate 793-90
Account I
(June 4, 1993)
NYLIAC Variable Universal Life Separate 793-90
Account II
(June 4, 1993)
NYLIAC Variable Annuity Separate Account I 993190
(October 15, 1992)
NYLIAC Variable Annuity Separate Account II 993190
(October 15, 1992)
NYLIAC LifeStages Annuity Separate Account 995190
(November 30, 1994)
<PAGE>
Schedule B
Investment Restrictions Applicable to the Trust
Effective as of the date the Agreement was executed, the following state
insurance investment guidelines are applicable to the Trust:
California Bulletin 95-2
<PAGE>
PARTICIPATION AGREEMENT
Among
MORGAN STANLEY UNIVERSAL FUNDS, INC.
MORGAN STANLEY ASSET MANAGEMENT INC.
and
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
THIS AGREEMENT, made and entered into this 28th day of June, 1996 by
and among NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION, (hereinafter the
"Company"), on its own behalf and on behalf of each segregated asset account of
the Company set forth on Schedule A hereto as may be amended from time to time
(each such account hereinafter referred to as the "Account"), and MORGAN
STANLEY UNIVERSAL FUNDS, INC., a Maryland corporation (hereinafter the "Fund"),
and MORGAN STANLEY ASSET MANAGEMENT INC. (hereinafter the "Adviser"), a
Delaware corporation.
WHEREAS, the Fund intends to engage in business as an open-end
management investment company and is available to act as (i) the investment
vehicle for certain qualified pension and retirement plans ("Qualified Plans")
and (ii) the investment vehicle for separate accounts established for variable
life insurance policies and variable annuity contracts (collectively, the
"Variable Insurance Products") to be offered by insurance companies which will
enter into participation agreements with the Fund and the Adviser (hereinafter
"Participating Insurance Companies"); and
WHEREAS, the shares of the Fund are divided into several series (each
designated a "Portfolio") and representing the interest in a particular managed
portfolio of securities and other assets; and
WHEREAS, the Fund has filed an application for an order from the
Securities and Exchange Commission (hereinafter the "SEC"), granting
Participating Insurance Companies and variable annuity and variable insurance
separate accounts exemptions from the provisions of Sections 9(a), 13(a),
15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter 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 and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies, as well as certain
Qualified Plans (hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is or will be registered as an open-end management
investment company under the 1940 Act and its shares are or will be registered
under the Securities Act of 1933, as amended (hereinafter the "1933 Act") prior
to the issuance and sale of shares to the Company; and
WHEREAS, the Adviser is duly registered as an Investment Adviser under
the Federal Investment Advisers Act of 1940 and any applicable state securities
law; and
WHEREAS, the Company has registered or will register certain variable
life and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to one or more variable life and annuity
contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts,
NOW, THEREFORE, in consideration of their mutual promises the Company,
the Fund and the Adviser agree as follows:
<PAGE>
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to the Company those shares of each
Portfolio of the Fund listed on Schedule B attached hereto which each Account
orders, executing such orders on a daily basis at the net asset value next
computed after receipt by the Fund or its designee of the order for the shares
of the Fund. For purposes of this Section 1.l, the Company shall be the
designee of the Fund for receipt of such orders from each Account and receipt
by such designee shall 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" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Accounts and the Fund calculate
their net asset value pursuant to the rules of the SEC.
1.2. The Fund agrees, so long as the Agreement is in effect, to make
its shares available indefinitely (for so long as the respective Portfolios are
in existence) for purchase at the applicable net asset value per share by the
Company and its Accounts 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 each day which the New York Stock
Exchange is open for trading. Notwithstanding the foregoing, the Board of
Directors of the Fund (hereinafter the "Board") may refuse to permit the Fund
to sell shares of any Portfolio to any person, or suspend or terminate the
offering of shares of any Portfolio if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of the
Board acting in good faith and in light of their fiduciary duties under federal
and any applicable state laws, necessary in the best interest of the
shareholders of such Portfolio.
1.3. The Fund and the Adviser agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts and,
in accordance with the terms of the Shared Funding Exemptive Order, certain
Qualified Plans. No shares of any Portfolio will be sold to the general public.
1.4. The Fund will not sell Fund shares to any insurance company or
separate account unless an agreement containing provisions substantially the
same as Articles I, III, V, VII and Section 2.5 of Article II of this Agreement
is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on 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 by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees to purchase and redeem the shares of each
Portfolio, as listed on Schedule B which is attached hereto, offered by the
then current prospectus of the Fund and in accordance with the provisions of
such prospectus. The Company agrees that all net amounts available under the
variable life and variable annuity contracts (the "Contracts") with the form
number(s) which are listed on Schedule A attached hereto and incorporated
herein by this reference, as such Schedule A may be amended from time to time
hereafter by mutual written agreement of all the parties hereto, shall be
invested in the Fund, in such other Funds advised by the Adviser, or an
affiliate of the Adviser, as may be mutually agreed to in writing by the
parties hereto, or in the Company's general account, provided that such amounts
may also be invested in an investment company other than the Fund if (a) such
other investment company, or series thereof, has investment objectives or
policies that are substantially different from the investment objectives and
policies of all the Portfolios of the Fund; or (b) the Company gives the Fund
and the Adviser 45 days written notice of its intention to make such other
investment company available as a funding vehicle for the Contracts; or (c)
such other investment company was available as a funding vehicle for the
Contracts prior to the date of this Agreement and the Company so informs the
Fund and Adviser prior to their signing this Agreement; or (d) the Fund or
Adviser consents to the use of such other investment company.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted
by wire. For purpose of Section 2.9 and 2.10, upon receipt by the Fund of the
federal funds so wired, such funds shall cease to be the responsibility of the
Company and shall become the responsibility of the Fund.
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.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally 5:00 p.m.
Eastern time) and shall use its best efforts to make such net asset value per
share available by 6:00 p.m. Eastern time.
<PAGE>
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws and that the sale of the Contracts shall comply in all material
respects with 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 prior to any issuance or sale thereof as a segregated
asset account under Section 2932 of the Delaware Insurance Code and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of
the 1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Maryland and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or
the Adviser.
2.3. The Fund represents that it intends to qualify as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "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.
2.4. The Company represents that the Contracts are currently treated
as endowment, annuity or life insurance contracts, under applicable provisions
of the 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.
2.5. The Fund may adopt a plan to finance distribution expenses
pursuant to Rule 12b-1 under the 1940 Act. To the extent that it decides to
finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes to
have a 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.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
polices) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Maryland and the Fund and the Adviser represent that their respective
operations are and shall at all times remain in material compliance with the
laws of the State of Delaware to the extent required to perform this Agreement.
2.7. The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and that it does and will
comply in all material respects with the 1940 Act.
2.8. The Adviser represents and warrants that the Adviser is and shall
remain duly registered in all material respects under all applicable federal
and state securities laws and that the Adviser shall perform its obligations
for the Fund in compliance in all material respects with the laws of the State
of Delaware and any applicable state and federal securities laws.
2.9. The Fund and Adviser represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
(or at the time the Fund's Registration Statement is granted effectiveness will
be) and shall 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 shall
include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.10. The Company represents and warrants that all of its directors,
officers and employees dealing with the money and/or securities of the Fund are
(or at the time the Fund's Registration Statement is granted effectiveness will
be) and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage, in an amount not less than the minimal coverage as required
currently by entities subject to the requirements of Rule 17g-1 of the 1940
<PAGE>
Act or related provisions as may be promulgated from time to time. The
aforesaid Bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Fund shall provide such documentation (including a final copy
of the new prospectus and SAI meeting the size requirements specified by the
Company as set in type or in camera ready copy at the Fund's expense) and other
assistance as is reasonably necessary in order for the Company once each year
(or more frequently if the prospectus for the Fund is amended) to have the
prospectus for the Contracts and the Fund's prospectus printed together in one
document and sent to existing contract owners (such portion of the printing
attributable to the Fund's prospectus to be at the Fund's expense). In
determining the number of prospectuses, shareholder reports and other materials
reasonably required by the Company, the Adviser and the Company shall jointly
and in good faith consider a number of factors, including, but not limited to,
the number of registered representatives supporting the Contracts.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information (hereinafter the "SAI") for the Fund is available from
the Adviser (or in the Fund's discretion, the Prospectus shall state that such
SAI is available from the Fund), and the Adviser (or the Fund), at its expense,
shall print and provide such SAI free of charge to the Company and to any owner
of a Contract or prospective owner who requests such SAI. If requested by the
Company in lieu thereof, the Fund shall provide such documentation (including a
final copy of the current SAI meeting the size requirements specified by the
Company as set in type at the Fund's expense) and other assistance as is
reasonably necessary in order for the Company once each year (or more
frequently if the SAI for the Fund is amended) to have the SAI for the
Contracts and the Fund's SAI printed together in one document (such portion of
the printing attributable to the Fund's SAI to be at the Fund's expense).
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as
Fund shares of such Portfolio for which instructions
have been received so long as and to the extent that the Securities and
Exchange Commission continues to interpret the 1940 Act to require pass-through
voting privileges for owners of Variable Insurance Products. 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 shall be responsible for assuring that each of their separate
accounts participating in the Fund calculates voting privileges in a manner
consistent with this Section.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either
provide for annual meetings or 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 Commission may promulgate with respect thereto.
3.6. The Company shall be responsible for delivering prospectuses,
SAIs, shareholder reports, proxy materials and others shareholder
communications to owners of and applicants for Contracts, as applicable, in
accordance with pertinent laws.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the underwriter is
named, at least ten Business Days prior to its use. No such material shall be
used if the Fund or its designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or
its designee or by the Adviser, except with the permission of the Fund or the
Adviser or the designee of either.
4.3. The Fund, and the Adviser, or its designee shall furnish, or
shall cause to be furnished, to the Company or its designee, each piece of
sales literature or other promotional material in which the Company and/or its
separate account(s), is named at least ten Business Days prior to its use. No
such material shall be used if the Company or its designee reasonably objects
to such use within ten Business Days after receipt of such material.
<PAGE>
4.4. The Fund and the Adviser shall not give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public
domain or approved by the Company for distribution to Contract owners, or in
sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, SAI, 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, or immediately
following, the filing of such document with the Securities and Exchange
Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, SAI, 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, or immediately following, the filing of such document
with the SEC or other regulatory authorities.
4.7. The Adviser will assist the Company in creating, preparing and
printing sales literature and other promotional materials, including, but not
limited to, sales brochures for series of the Fund included as investment
vehicles for the Contracts. The Adviser will share equally with the Company the
expense of creating, preparing and printing such materials, but in no event
will the Adviser be required to pay more than $15,000 per year under this
Section 4.7.
4.8. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as materials published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational
or training materials or other communications distributed or made generally
available by the Company to some or all agents, registered representatives or
employees, and registration statements, prospectuses, SAI, shareholder reports,
and proxy materials.
4.9. The Fund must obtain written approval of the Company prior to
visiting any Company office or communicating with Company personnel (except for
communications between the legal departments of the Company and the Adviser or
legal counsel to the Company, the Fund or the Adviser or routine communications
necessary for the day to day operations of the Fund and the Contracts or for
the processing of trades for Fund shares).
4.10. The Fund agrees to use best efforts to make available to the
Company personnel to conduct training and seminars. The Company agrees to give
the Fund reasonable advance notice of its need for such training and seminars.
The Fund also agrees to make available to the Company a representative
designated to perform services in connection with the marketing and sale of the
Fund, including, but not limited, to (a) responding to inquiries regarding the
Fund from the Company; and (b) providing general information regarding the
Fund.
ARTICLE V. Fees and Expenses
5.1. The Adviser shall pay the Company a fee computed daily at an
annual rate equal to (1) .15% of the aggregate net asset value of shares of the
Fund and of any other Funds distributed or advised by an affiliate of the
Adviser (the "Morgan Funds") purchased by the Company and any of its
affiliates, including shares of the Morgan Funds purchased through reinvestment
of dividends and distributions, until the aggregate net asset value of such
shares equals $250 million and (2) .20% of the aggregate net asset value of all
shares of the Morgan Funds purchased by the Company and any of its affiliates,
including shares of the Morgan Funds purchased through reinvestment of
dividends and distributions, when the aggregate net asset value of all shares
of the Morgan Funds (including the shares referenced in 5.1(1) above) exceeds
$250 million. The parties agree that the Adviser's payments to the Company are
to assist the Company in providing administrative services to its Contract
owners.
5.2. The Fund shall see to it that all its shares are registered and
authorized for issuance in accordance with applicable federal law and, if and
to the extent deemed advisable by the Fund, in accordance with applicable state
laws prior to their sale. The Fund shall bear the expenses for the cost of
registration and qualification of the Fund's shares, preparation and filing of
the Fund's prospectus and registration statement, proxy materials and reports,
setting in type and printing the prospectus, proxy materials and reports to
shareholders (including, if so elected, the costs of printing a prospectus that
constitutes an annual report), the preparation of all statements and notices
required by any federal or state law as applicable, and all taxes on the
issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the Fund's
prospectus, proxy statements, shareholder reports and other communications, and
reports to such Contract owners except that the Fund shall bear the cost of
distributing any proxy materials initiated by the Fund or the Adviser.
<PAGE>
5.4. The Adviser will reimburse the Company for costs as set forth in
this paragraph 5.4 incurred by it as a result of (1) the failure of the Fund to
be registered as an open-end management investment company under the Investment
Company Act of 1940 prior to October 1, 1996; and (2) the failure of the Fund
shares to be registered under the Securities Act of 1933 prior to October 1,
1996. Costs include but are not limited to: preparation, printing and
distribution of prospectus supplements and plans of operations, including
regulatory filing fees; and revising, preparing, printing and distributing
sales support training and marketing materials with respect to the Contracts.
If the Company elects to sticker the prospectus for the Contracts as a result
of failure of the Fund or Fund shares to be registered under (1) or (2) above,
the Adviser will bear all expenses in connection therewith. Such expenses shall
not exceed $15,000. If the Company elects to reprint the prospectus for the
Contracts as a result of the failure of the Fund or Fund shares to be
registered under (1) or (2) above, the Company and the Adviser will bear
equally all expenses in connection therewith. Such expenses shall not exceed
$250,000.
5.5. If the Fund or any Portfolio adopts and implements a plan
pursuant to Rule 12b-1 to finance distribution expenses, then the Company, the
Fund, the Adviser and the Fund's underwriter will consider appropriate
amendments to this Agreement.
ARTICLE VI. Diversification
6.1. The Fund will at all times, consistent with instructions from the
Company received initially and from time to time thereafter, invest money from
the Contracts in such a manner as to ensure that the Contracts will be treated
as variable contracts under the Code and the regulations issued thereunder.
Without limiting the scope of the foregoing, the Fund will at all times comply
with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to
the diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such Section
or Regulations.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict among the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (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 interpretive 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 variable annuity contract owners and variable life
insurance contract owners; or (f) a decision by an insurer to disregard the
voting instructions of contract owners. The Board shall 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 Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation of the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested directors that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the 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 Contract owners and, as appropriate, segregating the
assets of any appropriate group (i.e., annuity contract owners, life insurance
contract owners, or variable contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to
the affected contract owners the option of making such a change; and (2)
establishing a new registered management investment company or managed separate
account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and
that decision represents a minority position or would preclude a majority vote,
the Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
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 regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months
<PAGE>
after the Board informs the Company in writing that it has determined that such
decision has created an irreconcilable material conflict; provided, however,
that such withdrawal and termination shall be limited to the extent required by
the foregoing material irreconcilable conflict as determined by a majority of
the disinterested members of the Board. Until the end of the foregoing six
month period, the Adviser and Fund shall 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 Board shall 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 shall 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 Contract owners materially adversely affected by the
irreconcilable material conflict.
7.7. 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
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive
Order, then (a) the Fund and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T) as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4 and 7.5 of
this Agreement shall 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
8.1(a). The Company agrees to indemnify and hold harmless the Fund,
the Adviser and each of their directors and officers and each person, if any,
who controls the Fund or the Adviser within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including 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 sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or contained in
the Contracts or sales literature for the Contracts (or any amendment
or supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or
on behalf of the Fund for use in the Registration Statement or
prospectus for the Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of untrue statements or
representations (other than statements or representations contained in
the Registration Statement, prospectus or sales literature of the Fund
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
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Fund or any amendment thereof
or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company, as limited by and in accordance with the
provisions of Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such
may arise from such Indemnified Party's willful misfeasance, bad faith, or
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have
<PAGE>
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but failure to
notify the Company of any such service on any designated agent or of any such
claim shall not relieve the Company from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on account
of this indemnification provision. In case any such action is brought against
the Indemnified Parties, the Company shall be entitled to participate, at its
own expense, in the defense of such action. The Company also shall be entitled
to assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Company to such party of the Company's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Company
will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the operations
of the Fund.
8.2. Indemnification by the Adviser
8.2(a). The Adviser agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Adviser) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any
statute, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the Registration Statement or prospectus or sales literature
of the 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, 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 Adviser or Fund by or on behalf
of the Company for use in the Registration Statement or
prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares: or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or sales
literature for the Contracts not supplied by the Adviser or
the Fund or persons under their control) or wrongful conduct
of the Fund or Adviser or persons under their control, with
respect to the sale or distribution of the Contracts or Fund
shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statement or statements therein not misleading, if such
statement or omission was made in reliance upon information
furnished to the Company by or on behalf of the Fund; or
(iv) 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 requirements specified in Article VI of this
Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Adviser; as limited by and in
accordance with the provisions of Sections 8.2(b) and 8.2(c)
hereof.
8.2(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject by reason
of such Indemnified Party's willful misfeasance, bad faith, or negligence in
the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement or to each Company or Account, whichever is applicable.
8.2(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Adviser of
any such claim shall not relieve the Adviser from any
<PAGE>
liability which it may have to the Indemnified Party against whom such action
is brought otherwise than on account of this indemnification provision. In case
any such action is brought against the Indemnified Parties, the Adviser will be
entitled to participate, at its own expense, in the defense thereof. The
Adviser also shall be entitled to assume the defense thereof with counsel
satisfactory to the party named in the action. After notice from the Adviser to
such party of the Adviser's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Adviser will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
8.2(d). The Company agrees promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of New York.
9.2. This Agreement shall be subject to the provisions of the 1933 and
1940 Acts and the Securities and Exchange Act of 1934, and the rules and
regulations and rulings thereunder, including such exemptions from those
statutes, rules and regulations as the SEC may grant (including, but not
limited to, the Shared Funding Exemptive Order) and the terms hereof shall be
interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon 30 days' advance
written notice to the other parties unless otherwise agreed in a separate
written agreement among the parties; or
(b) at the option of the Company if shares of the
Portfolios delineated in Schedule B are not reasonably available to meet the
requirements of the Contracts as determined by the Company; or
(c) at the option of the Fund 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
(d) at the option of the Company upon institution of formal
proceedings against the Fund by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body; or
(e) at the option of the Company or the Fund upon receipt
of any necessary regulatory approvals and/or the vote of the Contract owners
having an interest in the Account (or any subaccount) to substitute the shares
of another investment company for the corresponding Portfolio shares of the
Fund in accordance with the terms of the Contracts for which those Portfolio
shares had been selected to serve as the underlying investment media. The
Company will give 30 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
(f) 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 (i) all contract owners of variable insurance
products of all separate accounts or (ii) the interests of the Participating
Insurance Companies investing in the Fund as delineated in Article VII of this
Agreement; or
(g) at the option of the Company 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 believes that the Fund may fail to so qualify; or
(h) at the option of the Company if the Fund fails to meet
the diversification requirements specified in Article VI hereof; or
(i) at the option of any party to this Agreement, upon
another party's material breach of any provision of this Agreement; or
(j) at the option of the Company, if the Company determines
in its sole judgment exercised in good faith, that either the Fund or the
Adviser has suffered a material adverse change in its business, operations or
financial condition since the date of this Agreement or is the subject of
material adverse publicity which is likely to have a material adverse impact
upon the business and operations of the Company or the Contracts; or
(k) at the option of the Fund or Adviser, if the Fund or
Adviser respectively, shall determine 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 Adviser; or
(l) 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.
10.2. Notice Requirement
(a) In the event that any termination of this Agreement is
based upon the provisions of Article VII, such prior written notice shall be
given in advance of the effective date of termination as required by such
provisions.
<PAGE>
(b) In the event that any termination of this Agreement is
based upon the provisions of Sections 10.1(b)- (d), 10.1(g) - (i), or 10.1(l),
prompt written notice of the election to terminate this Agreement for cause
shall be furnished by the party terminating the Agreement to the
non-terminating parties, with said termination to be effective upon receipt,
but in no event later than five (5) business days from the mailing of such
notice by the non-terminating parties.
(c) In the event that any termination of this Agreement is
based upon the provisions of Sections 10.1(j) or 10.1(k), prior written notice
of the election to terminate this Agreement for cause shall be furnished by the
party terminating this Agreement to the non-terminating parties. Such prior
written notice shall be given by the party terminating this Agreement to the
non-terminating parties at least 30 days before the effective date of
termination.
10.3. It is understood and agreed that the right to terminate this
Agreement pursuant to Section 10.1(a) may be exercised for any reason or for no
reason.
10.4. Effect of Termination
(a) Notwithstanding any termination of this Agreement
pursuant to Section 10.1 of this Agreement, the Fund may, at its option, or in
the event of termination of this Agreement by the Fund or the Adviser pursuant
to Section 10.1(a) of this Agreement, the Company may require the Fund and the
Adviser to, continue to make available additional shares of the Fund for so
long after the termination of this Agreement as the Fund or the Company, if the
Company is so requiring, desires pursuant to the terms and conditions of this
Agreement as provided in paragraph (b) below for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred to as
"Existing Contracts"). Specifically, without limitation, if the Fund so elects
to make available additional shares of the Fund, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, 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 10.4 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of
this Agreement.
(b) In the event of a termination of this agreement
pursuant to Section 10.1 of this Agreement, the Fund shall promptly notify the
Company whether the Fund will continue to make available shares of the Fund
after such termination, except that, with respect to a termination by the Fund
or the Adviser pursuant to Section 10.1(a) of this Agreement, the Company shall
promptly notify the Fund whether it wishes the Fund to continue to make
available additional shares of the Fund. If shares of the Fund continue to be
made available after such termination, the provisions of this Agreement shall
remain in effect except for Section 10.1(a) and thereafter the Fund or the
Company may terminate the Agreement, as so continued pursuant to this Section
10.4 upon written notice to the other party, such notice to be for a period
that is reasonable under the circumstances.
10.5. Except as necessary to implement contract owner initiated or
approved transactions, or as required by state insurance laws or regulations,
the Company shall not redeem Fund shares attributable to the Contracts (as
opposed to Fund shares attributable to the Company's assets held in the
Account), and the Company shall not prevent contract owners from allocating
payments to a Portfolio that was otherwise available under the Contracts, until
90 days after the Company shall have notified the Fund or Adviser of its
intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
Morgan Stanley Universal Funds, Inc.
c/o Morgan Stanley Asset Management Inc.
Attention: Harold J. Schaaff, Jr., Esq.
1221 Avenue of Americas
New York, NY 10020
If to the Company:
New York Life Insurance and Annuity Corporation
Attn: Robert D. Rock
51 Madison Avenue
New York, New York 10010
If to the Adviser:
Morgan Stanley Asset Management Inc.
Attn: Harold J. Schaaff, Jr., Esq.
1221 Avenue of the Americas
New York, New York 10020
<PAGE>
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 Board, officers, agents, registered representatives or shareholders
assume any personal liability for obligations entered into on behalf of the
Fund.
12.2. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as if confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement shall not disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it
may come into the public domain without the express written consent of the
affected party.
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 shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Each party, at its expense and upon reasonable notice, shall have the right to
inspect the accounts, books and records of the other party as such accounts,
books and records relate to this Agreement or the transactions contemplated
hereby.
12.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
12.8. The Fund and the Adviser shall promptly notify the Company of
any event which causes the responses to the Preliminary Request for Information
to be materially untrue or misleading or to have a potential material adverse
impact on the Company or the Contracts.
12.9. No provisions of this Agreement may be amended or modified in
any manner except by a written agreement properly executed by both parties. The
Company understands and agrees that it may be necessary to amend this Agreement
to include terms and conditions that the SEC may require in the Shared
Exemptive Order expected to be issued prior to October 1, 1996. The Company
shall not unreasonably withhold consent to any such amendment requested or
required by the SEC.
12.10. Neither this Agreement nor any rights or obligations hereunder
may be assigned by either party without the written consent of the other party.
Such consent may not be unreasonably withheld.
12.11. The Fund shall use its best efforts to provide the Company, on
a timely basis, with such information about the Fund, the Portfolios and the
Adviser, in such form as the Company may reasonably require, as the Company
shall reasonably request in connection with the preparation of registration
statements, prospectuses and annual and semiannual reports pertaining to the
Contracts.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative to be hereunder affixed hereto as of the date specified below.
NEW YORK LIFE INSURANCE
AND ANNUITY CORPORATION:
By its authorized officer,
By: /s/Robert D. Rock
-------------------------
Title: Senior Vice President
MORGAN STANLEY UNIVERSAL
FUNDS, INC.:
By its authorized officer,
By: /s/ Michael Klein
-------------------------
Title: President
<PAGE>
MORGAN STANLEY ASSET
MANAGEMENT INC.
By its authorized officer,
By: /s/Warren J. Olsen
-------------------------
Title: Principal
<PAGE>
SCHEDULE A
TO PARTICIPATION AGREEMENT
DATED JUNE 28, 1996
Morgan Stanley Universal Funds, Inc. Emerging Markets Equity Portfolio will be
made available to the following Separate Accounts of the Company:
Name of Separate Account and Policy Form Numbers of Contracts
Established by Board of Directors Date Funded By Separate Account
NYLIAC Variable Universal Life Separate 93-90
Account I
(June 4, 1993)
NYLIAC Variable Universal Life Separate 93-90
Account II
(June 4, 1993)
NYLIAC Variable Annuity Separate Account I 993190
(October 15, 1992)
NYLIAC Variable Annuity Separate Account II 993190
(October 15, 1992)
NYLIAC LifeStages Annuity Separate Account 995190
(November 30, 1994)
<PAGE>
SCHEDULE B
TO PARTICIPATION AG
DATED JUNE 28, 1996
Morgan Stanley Universal Funds, Inc. Emerging Markets Equity Portfolio
<PAGE>
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND,
FIDELITY DISTRIBUTORS CORPORATION
and
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
THIS AGREEMENT, made and entered into as of the 1st day of
July, 1996 by and among NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION,
(hereinafter the "Company"), a Delaware corporation, on its own behalf and on
behalf of each segregated asset account of the Company set forth on Schedule A
hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account"), and the VARIABLE INSURANCE PRODUCTS FUND, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION
(hereinafter the "Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares, each representing the interest in a particular
managed portfolio of securities and other assets, any one or more of which may
be made available under this Agreement, as may be amended from time to time by
mutual agreement of the parties hereto (each such series hereinafter referred
to as a "Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated October 15, 1985 (File No. 812-6102), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter 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 and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); 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 (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser")
is duly registered as an investment adviser under the federal Investment
Advisers Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain
variable life insurance and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of Directors
of the Company, on the date shown for such Account on Schedule A hereto, to set
aside and invest assets attributable to the aforesaid variable annuity
contracts; and
<PAGE>
WHEREAS, the Company has registered or will register each
Account as a unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with
the Securities and Exchange Commission ("SEC") under the Securities Exchange
Act of 1934, as amended, (hereinafter the "1934 Act"), and is a member in good
standing of the National Association of Securities Dealers, Inc. (hereinafter
"NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, the Company intends to purchase shares in the Portfolios on
behalf of each Account to fund certain of the aforesaid variable life and
variable annuity contracts and the Underwriter is authorized to sell such
shares to unit investment trusts such as each 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 of Fund Shares
1.1. The Underwriter agrees to sell to the Company those shares
of the Fund which each Account orders, executing such orders on a daily basis
at the net asset value next computed after receipt by the Fund or its designee
of the order for the shares of the Fund. For purposes of this Section 1.1, the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by 10:00 a.m. Boston time
on the next following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange is open for trading and on which the Fund
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely
for purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value
pursuant to rules of the Securities and Exchange Commission and the Fund shall
use reasonable efforts to calculate such net asset value on each day which the
New York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "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 Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund
will be sold only to Participating Insurance Companies and their separate
accounts. No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to
any insurance company or separate account unless an agreement containing
provisions substantially the same as Articles I, III, V, VII and Section 2.5 of
Article II of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on 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 by the Fund or its designee of the request for redemption. For
purposes of this Section 1.5, the Company shall be the designee of the Fund for
receipt of requests for redemption from each Account and receipt by such
designee shall constitute receipt by the Fund; provided that the Fund receives
notice of such request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of
Portfolio shares offered by the then current prospectus of the Fund shall be
made in accordance with the provisions of such prospectus. The Company agrees
that all net amounts available under the variable annuity contracts with the
form number(s) which are listed on Schedule A attached hereto and incorporated
herein by this reference, as such Schedule A may be amended from time to time
hereafter by mutual written agreement of all the parties hereto, (the
"Contracts") shall be invested in the Fund, in such other Funds advised by the
Adviser as may be mutually agreed to in writing by the parties hereto, or in
the Company's general account,
<PAGE>
provided that such amounts may also be invested in an investment company other
than the Fund if (a) such other investment company, or series thereof, has
investment objectives or policies that are substantially different from the
investment objectives and policies of all the Portfolios of the Fund; or (b)
the Company gives the Fund and the Underwriter 45 days written notice of its
intention to make such other investment company available as a funding vehicle
for the Contracts; or (c) such other investment company was available as a
funding vehicle for the Contracts prior to the date of this Agreement and the
Company so informs the Fund and Underwriter prior to their signing this
Agreement (a list of such funds appearing on Schedule C to this Agreement); or
(d) the Fund or Underwriter consents to the use of such other investment
company.
1.7. The Company shall pay for Fund shares on the next Business
Day after an order to purchase Fund shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted
by wire. For purpose of Section 2.10 and 2.11, upon receipt by the Fund of the
federal funds so wired, such funds shall cease to be the responsibility of the
Company and shall become the responsibility of the Fund.
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. Shares ordered from the Fund will be recorded in an appropriate title
for each Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or
telephone, followed by written confirmation) to the Company of any income,
dividends or capital gain distributions payable on the Fund's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Portfolio shares in additional shares of
that Portfolio. The Company reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash. The
Fund shall notify the Company of the number of shares so issued as payment of
such dividends and distributions.
1.10. The Fund shall make the net asset value per share for
each Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Boston time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Boston time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are
or will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws and that the sale of the Contracts shall comply in all material
respects with 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 prior to any issuance or sale thereof as a segregated
asset account under Section 2932 of the Delaware Insurance Code and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of
the 1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of the State of
Delaware and all applicable federal and state securities laws and that the Fund
is and shall remain registered under the 1940 Act. The Fund shall amend the
Registration Statement for its shares under the 1933 Act and the 1940 Act from
time to time as required in order to effect the continuous offering of its
shares. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent that the Fund or
the Underwriter deems such registration or qualification to be required by
applicable law.
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will 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.
<PAGE>
2.4. The Company represents that the Contracts are currently
treated as endowment or annuity insurance contracts, under applicable
provisions of the 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.
2.5. 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 may make such payments in the future. The Fund has
adopted a "no fee" or "defensive" Rule 12b-1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a
board of 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.
2.6. The Fund makes no representation as to whether any aspect
of its operations (including, but not limited to, fees and expenses and
investment policies) complies with the insurance laws or regulations of the
various states except that the Fund represents that the Fund's investment
policies, fees and expenses are and shall at all times remain in compliance
with the laws of the State of Delaware and the Fund and the Underwriter
represent that their respective operations are and shall at all times remain in
material compliance with the laws of the State of Delaware to the extent
required to perform this Agreement.
2.7. The Underwriter represents and warrants that it is a
member in good standing of the NASD and is registered as a broker-dealer with
the SEC. The Underwriter further represents that it will sell and distribute
the Fund shares in accordance with the laws of the State of Delaware and all
applicable state and federal securities laws, including without limitation the
1933 Act, the 1934 Act, and the 1940 Act.
2.8. 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 the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser
is and shall remain duly registered in all material respects under all
applicable federal and state securities laws and that the Adviser shall perform
its obligations for the Fund in compliance in all material respects with the
laws of the State of Delaware and any applicable state and federal securities
laws.
2.10. The Fund and Underwriter represent and warrant that all
of their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall 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
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its
directors, officers, employees, and other individuals/entities dealing with the
money and/or securities of the Fund are covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund, and that said bond is issued by a
reputable bonding company, includes coverage for larceny and embezzlement, and
is in an amount not less than $5 million. The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company with as many
printed copies of the Fund's current prospectus and Statement of Additional
Information as the Company may reasonably request. If requested by the Company
in lieu thereof, the Fund shall provide camera-ready film containing the Fund's
prospectus and Statement of Additional Information (in 8.5" by 11" or 5" by 9"
size), and such other assistance as is reasonably necessary in order for the
Company once each year (or more frequently if the prospectus and/or Statement
of Additional Information for the Fund is amended during the year) to have the
prospectus for the Contracts and the Fund's prospectus printed together in one
document, and to have the Statement of Additional Information for the Fund and
the Statement of Additional Information for
<PAGE>
the Contracts printed together in one document. Alternatively, the Company may
print the Fund's prospectus and/or its Statement of Additional Information in
combination with other fund companies' prospectuses and statements of
additional information. Except as provided in the following three sentences,
all expenses of printing and distributing Fund prospectuses and Statements of
Additional Information shall be the expense of the Company. For prospectuses
and Statements of Additional Information provided by the Company to its
existing owners of Contracts in order to update disclosure as required by the
1933 Act and/or the 1940 Act, the cost of printing shall be borne by the Fund.
If the Company chooses to receive camera-ready film in lieu of receiving
printed copies of the Fund's prospectus, the Fund will reimburse the Company in
an amount equal to the product of A and B where A is the number of such
prospectuses distributed to owners of the Contracts, and B is the Fund's per
unit cost of typesetting and printing the Fund's prospectus. The same
procedures shall be followed with respect to the Fund's Statement of Additional
Information.
The Company agrees to provide the Fund or its designee with
such information as may be reasonably requested by the Fund to assure that the
Fund's expenses do not include the cost of printing any prospectuses or
Statements of Additional Information other than those actually distributed to
existing owners of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with
copies of its proxy statements, reports to shareholders, and other
communications (except for prospectuses and Statements of Additional
Information, which are covered in Section 3.1) to shareholders in such quantity
as the Company shall reasonably require for distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with
instructions received from Contract owners; and
(iii) vote Fund shares for which no instructions have
been received in a particular separate account
in the same proportion as Fund shares of such
portfolio for which instructions have been
received in that separate account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set
forth on Schedule B attached hereto and incorporated herein by this reference,
which standards will also be provided to the other Participating Insurance
Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either
provide for annual meetings or 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 Securities and Exchange
Commission's interpretation of the requirements of Section 16(a) with respect
to periodic elections of trustees and with whatever rules the Commission may
promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished,
to the Fund or its designee, each piece of sales literature or other
promotional material created or approved by the Company in which the Fund or
its investment adviser or the Underwriter is named, at least ten Business Days
prior to its use. No such material shall be used if the Fund or its designee
reasonably objects to such use within ten Business Days after receipt of such
material.
<PAGE>
4.2. The Company shall 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 or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or
its designee or by the Underwriter, except with the permission of the Fund or
the Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or
shall cause to be furnished, to the Company or its designee, each piece of
sales literature or other promotional material in which the Company and/or its
separate account(s), is named at least ten Business Days prior to its use. No
such material shall be used if the Company or its designee reasonably objects
to such use within ten Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any
information or make any representations on behalf of the Company or concerning
the Company, each Account, or the Contracts other than the information or
representations contained in a registration statement or prospectus for the
Contracts, as such registration statement and prospectus may be amended or
supplemented from time to time, or in published reports for each Account which
are in the public domain or approved by the Company for distribution to
Contract owners, or in sales literature or other promotional material approved
by the Company or its designee, except with the permission of the Company.
4.5. The 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 Securities and
Exchange Commission or other regulatory authorities.
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 other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales
literature or other promotional material" includes, but is not limited to, any
of the following that refer to the Fund or any affiliate of the Fund:
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media), sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees, and
registration statements, prospectuses, Statements of Additional Information,
shareholder reports, and proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Fund and Underwriter shall pay no fee or other
compensation to the Company under this agreement, except that if the Fund or
any Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance
distribution expenses, then the Underwriter may make payments to the Company or
to the underwriter for the Contracts if and in amounts agreed to by the
Underwriter in writing and such payments will be made out of existing fees
otherwise payable to the Underwriter, past profits of the Underwriter or other
resources available to the Underwriter. No such payments shall be made directly
by the Fund.
5.2. All expenses incident to performance by the Fund under
this Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and
<PAGE>
registration statement, proxy materials and reports, setting the prospectus in
type, setting in type and printing the proxy materials and reports to
shareholders (including the costs of printing a prospectus that constitutes an
annual report), the preparation of all statements and notices required by any
federal or state law, and all taxes on the issuance or transfer of the Fund's
shares.
5.3. The Company shall bear the expenses of distributing the
Fund's prospectus, proxy materials and reports to owners of Contracts issued by
the Company.
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
contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance with the grace period
afforded by Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners
of all separate accounts investing in the Fund. An irreconcilable material
conflict may arise for a variety of reasons, including: (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 variable annuity contract and variable life
insurance contract owners; or (f) a decision by an insurer to disregard the
voting instructions of contract owners. The Board shall 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 Board. The Company will assist the Board
in carrying out its responsibilities under the Shared Funding Exemptive Order,
by providing the Board with all information reasonably necessary for the Board
to consider any issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Board whenever contract owner voting
instructions are disregarded.
7.3. If it is determined by a majority of the Board, or a
majority of its disinterested trustees, that a material irreconcilable conflict
exists, the Company and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a majority
of the disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the 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 Contract owners and, as appropriate, segregating the
assets of any appropriate group (i.e., annuity contract owners, life insurance
contract owners, or variable contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to
the affected contract owners the option of making such a change; and (2),
establishing a new registered management investment company or managed separate
account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and
that decision represents a minority position or would preclude a majority vote,
the Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Any such withdrawal and termination must take place within six (6) months after
the Fund gives written
<PAGE>
notice that this provision is being implemented, and until the end of that six
month period the Underwriter and Fund shall 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 regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board
informs the Company in writing that it has determined that such decision has
created an irreconcilable material conflict; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Until the end of the foregoing six month
period, the Underwriter and Fund shall 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 Board shall 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 shall 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 Contract owners materially adversely affected
by the irreconcilable material conflict. In the event that the Board determines
that any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. 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 Act or the rules promulgated thereunder with respect to mixed
or shared funding (as defined in the Shared Funding Exemptive Order) on terms
and conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3,
7.4, and 7.5 of this Agreement shall 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
8.1(a). The Company agrees to indemnify and hold harmless the
Fund and each trustee of the Board and officers and each person, if any, who
controls the Fund within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including 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 sale or acquisition of the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue
statements or alleged untrue statements of any material fact
contained in the Registration Statement or prospectus for the
Contracts or contained in the Contracts or sales literature for
the Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information
furnished to the Company by or on behalf of the Fund for use in
the Registration Statement or prospectus for the Contracts or
in the Contracts or sales
<PAGE>
literature (or any amendment or supplement) or otherwise for
use in connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or sales
literature of the Fund 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
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a Registration
Statement, prospectus, or sales literature of the Fund or any
amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading if such a statement or omission was made in
reliance upon information furnished to the Fund by or on behalf
of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under the terms
of this Agreement; or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company, as limited by and in
accordance with the provisions of Sections 8.1(b) and 8.1(c)
hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed against
an Indemnified Party as such may arise from such Indemnified
Party's willful misfeasance, bad faith, or negligence in the
performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to the Fund, whichever is
applicable.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made
against an Indemnified Party unless such Indemnified Party
shall have notified the Company in writing within a reasonable
time after the summons or other first legal process giving
information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated
agent), but failure to notify the Company of any such claim
shall not relieve the Company from any liability which it may
have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification
provision. In case any such action is brought against the
Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such action.
The Company also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the
action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Company will not be
liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify
the Company of the commencement of any litigation or
proceedings 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
8.2(a). The Underwriter agrees to indemnify and hold harmless
the Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages,
<PAGE>
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the Registration Statement or prospectus
or sales literature of the 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, 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 Underwriter or Fund
by or on behalf of the Company for use in the
Registration Statement or prospectus for the Fund or in
sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Registration
Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons
under its control) or wrongful conduct of the Fund,
Adviser or Underwriter or persons under their control,
with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
Registration Statement, prospectus, or sales literature
covering the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission
to state therein a material fact required to be stated
therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information
furnished to the Company by or on behalf of the Fund;
or
(iv) 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 requirements specified
in Article VI of this Agreement); or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the
Underwriter in this Agreement or arise out of or result
from any other material breach of this Agreement by the
Underwriter; as limited by and in accordance with the
provisions of Sections 8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith,
or negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, whichever is
applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Underwriter
of any such claim shall not relieve the Underwriter from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by
it, and the
<PAGE>
Underwriter will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of each Account.
8.3. Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold harmless the
Company, and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Fund) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements result from the negligence, bad faith or willful
misconduct of the Board or any member thereof, are related to the operations of
the Fund and:
(i) 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 to
comply with the diversification requirements specified
in Article VI of this Agreement);or
(ii) 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;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such may arise
from such Indemnified Party's willful misfeasance, bad faith, or negligence in
the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement or to the Company, the Fund, the Underwriter or each Account,
whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to
notify the Fund of the commencement of any litigation or proceedings against it
or any of its respective officers or directors in connection with this
Agreement, the issuance or sale of the Contracts, with respect to the operation
of either Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
<PAGE>
9.1. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to,
the Shared Funding Exemptive Order) and the terms hereof shall be interpreted
and construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect
until the first to occur of:
(a) termination by any party for any reason by sixty
(60) days advance written notice delivered to the other
parties; or
(b) termination by the Company by written notice to
the Fund and the Underwriter with respect to any Portfolio
based upon the Company's determination that shares of such
Portfolio are not reasonably available to meet the
requirements of the Contracts; or
(c) termination by the Company by written notice to
the Fund and the Underwriter with respect to any Portfolio
in the event any of the Portfolio's shares are not
registered, issued or sold in accordance with applicable
state and/or federal law or such law precludes the use of
such shares as the underlying investment media of the
Contracts issued or to be issued by the Company; or
(d) termination by the Company by written notice to
the Fund and the Underwriter with respect to any Portfolio
in the event that such Portfolio ceases to qualify as a
Regulated Investment Company under Subchapter M of the
Code or under any successor or similar provision, or if
the Company reasonably believes that the Fund may fail to
so qualify; or
(e) termination by the Company by written notice to
the Fund and the Underwriter with respect to any Portfolio
in the event that such Portfolio fails to meet the
diversification requirements specified in Article VI
hereof; or
(f) termination by either the Fund or the Underwriter
by written notice to the Company, if either one or both of
the Fund or the Underwriter respectively, shall determine,
in their sole judgment exercised in good faith, that the
Company and/or its affiliated companies has suffered a
material adverse change in its business, operations,
financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity;
or
(g) termination by the Company by written notice to
the Fund and the Underwriter, if the Company shall
determine, 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,
financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity;
or
(h) termination by the Fund or the Underwriter by
written notice to the Company, if the Company gives the
Fund and the Underwriter the written notice specified in
Section 1.6(b) hereof and at the time such notice was
given there was no notice of termination outstanding under
any other provision of this Agreement; provided, however
any termination under this Section 10.1(h) shall be
effective forty five (45) days after the notice specified
in Section 1.6(b) was given.
<PAGE>
10.2. Effect of Termination. Notwithstanding any termination of
this Agreement, the Fund and the Underwriter shall 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 shall be permitted to reallocate investments in the Fund,
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 10.2 shall not apply to any terminations under Article VII
and the effect of such Article VII terminations shall be governed by Article
VII of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to
the Contracts (as opposed to Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or federal
laws or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act.
Upon request, the Company will promptly furnish to the Fund and the Underwriter
the opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or
the Underwriter 90 days notice of its intention to do so.
ARTICLE XI.Notices
Any notice shall be sufficiently given when sent by registered
or certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify in
writing to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
New York Life Insurance and Annuity Corporation
51 Madison Avenue
New York, NY 10010
Attention: Robert D. Rock
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
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 Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and
regulatory authority, each party hereto shall treat as confidential the names
and addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it
may come into the public domain without the express written consent of the
affected party.
<PAGE>
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 shall constitute one and the
same instrument.
12.5 If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party
and all appropriate governmental authorities (including without limitation the
SEC, the NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7 The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies
and obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
12.8. This Agreement or any of the rights and obligations
hereunder may not be assigned by any party without the prior written consent of
all parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed
and registered to perform the obligations of the Underwriter under this
Agreement.
12.9. The Company shall furnish, or shall cause to be
furnished, to the Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under
statutory accounting principles) and annual report
(prepared under generally accepted accounting
principles ("GAAP"), if any), as soon as practical
and in any event within 90 days after the end of each
fiscal year;
(b) the Company's quarterly statements (statutory) (and
GAAP, if any), as soon as practical and in any event
within 45 days after the end of each quarterly
period:
(c) any financial statement, proxy statement, notice or
report of the Company sent to stockholders and/or
policyholders, as soon as practical after the
delivery thereof to stockholders;
(d) any registration statement (without exhibits) and
financial reports of the Company filed with the
Securities and Exchange Commission or any state
insurance regulator, as soon as practical after the
filing thereof;
(e) any other report submitted to the Company by
independent accountants in connection with any
annual, interim or special audit made by them of the
books of the Company, as soon as practical after the
receipt thereof.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
By: \s\ Robert D. Rock
---------------------------
Robert D. Rock
Senior Vice President
VARIABLE INSURANCE PRODUCTS FUND
By: \s\ J. Gary Burkhead
---------------------------
J. Gary Burkhead
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By: \s\ Neal Litvack
---------------------------
Neal Litvack
President
<PAGE>
Schedule A
Separate Accounts and Associated Contracts
Name of Separate Account and Policy Form Numbers of Contracts
Date Established by Board of Directors Funded By Separate Account
- -------------------------------------- --------------------------------
NYLIAC Variable Universal Life Separate 793-90
Account I
(June 4, 1993)
NYLIAC Variable Universal Life Separate 793-90
Account II
(June 4, 1993)
NYLIAC Variable Annuity Separate Account I 993190
(October 15, 1992)
NYLIAC Variable Annuity Separate Account II 993190
(October 15, 1992)
NYLIAC LifeStages Annuity Separate Account 995190
(November 30, 1994)
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for
the handling of proxies relating to the Fund by the Underwriter, the Fund and
the Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the
steps delineated below.
1. The number of proxy proposals is given to the Company by the
Underwriter as early as possible before the date set by the Fund
for the shareholder meeting to facilitate the establishment of
tabulation procedures. At this time the Underwriter will inform
the Company of the Record, Mailing and Meeting dates. This will be
done verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape
run", or other activity, which will generate the names, addresses
and number of units which are attributed to each
contractowner/policyholder (the "Customer") as of the Record Date.
Allowance should be made for account adjustments made after this
date that could affect the status of the Customers' accounts as of
the Record Date.
Note: The number of proxy statements is determined by the
activities described in Step #2. The Company will use its best
efforts to call in the number of Customers to Fidelity, as soon as
possible, but no later than two weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each
Customer by the Company either before or together with the
Customers' receipt of a proxy statement. Underwriter will provide
the last Annual Report to the Company pursuant to the terms of
Section 3.3 of the Agreement to which this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at
its expense, shall produce and personalize the Voting Instruction
Cards. The Legal Department of the Underwriter or its affiliate
("Fidelity Legal") must approve the Card before it is printed.
Allow approximately 2-4 business days for printing information on
the Cards. Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification
of votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
<PAGE>
5. During this time, Fidelity Legal will develop, produce, and the
Fund will pay for the Notice of Proxy and the Proxy Statement (one
document). Printed and folded notices and statements will be sent
to Company for insertion into envelopes (envelopes and return
envelopes are provided and paid for by the Insurance Company).
Contents of envelope sent to Customers by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid byCompany) addressed to
the Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a
small, single sheet of paper that requests Customers to vote
as quickly as possible and that their vote is important. One
copy will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed
and approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately
3-5 business days before mail date. Individual in charge at
Company reviews and approves the contents of the mailing package
to ensure correctness and completeness. Copy of this approval sent
to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to
the Company as the shareowner. (A 5-week period is
recommended.) Solicitation time is calculated as calendar
days from (but not including) the meeting, counting
backwards.
8. Collection and tabulation of Cards begins. Tabulation usually
takes place in another department or another vendor depending on
process used. An often used procedure is to sort Cards on arrival
by proposal into vote categories of all yes, no, or mixed replies,
and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal
procedure and has not been required by Fidelity in the past.
9. Signatures on Card checked against legal name on account
registration which was printed on the Card.
Note: For Example, If the account registration is under "Bertram
C. Jones, Trustee," then that is the exact legal name to be
printed on the Card and is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an
explanatory letter, a new Card and return envelope. The mutilated
or illegible Card is disregarded and considered to be not received
for purposes of vote tabulation. Any Cards that
<PAGE>
have "kicked out" (e.g. mutilated, illegible) of the procedure are
"hand verified," i.e., examined as to why they did not complete
the system. Any questions on those Cards are usually remedied
individually.
11. There are various control procedures used to ensure proper
tabulation of votes and accuracy of that tabulation. The most
prevalent is to sort the Cards as they first arrive into
categories depending upon their vote; an estimate of how the vote
is progressing may then be calculated. If the initial estimates
and the actual vote do not coincide, then an internal audit of
that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then
converted to shares. (It is very important that the Fund receives
the tabulations stated in terms of a percentage and the number of
shares.) Fidelity Legal must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to
Fidelity Legal on the morning of the meeting not later than 10:00
a.m. Boston time. Fidelity Legal may request an earlier deadline
if required to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will
be required from the Company as well as an original copy of the
final vote. Fidelity Legal will provide a standard form for each
Certification.
15. The Company will be required to box and archive the Cards received
from the Customers. In the event that any vote is challenged or if
otherwise necessary for legal, regulatory, or accounting purposes,
Fidelity Legal will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must
always be followed up in writing.
<PAGE>
SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
New York Life MFA Series Fund, Inc.
Bond Portfolio
Capital Appreciation Portfolio
Cash Management Portfolio
Government Portfolio
Growth Equity Portfolio
High Yield Corporate Bond Portfolio
Indexed Equity Portfolio
International Equity Portfolio
Total Return Porfolio
Value Portfolio
Acacia Capital Corporation
Calvert Responsibly Invested Balanced Portfolio
<PAGE>
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND II,
FIDELITY DISTRIBUTORS CORPORATION
and
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
THIS AGREEMENT, made and entered into as of the 1st day of
July, 1996 by and among NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION,
(hereinafter the "Company"), a Delaware corporation, on its own behalf and on
behalf of each segregated asset account of the Company set forth on Schedule A
hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account"), and the VARIABLE INSURANCE PRODUCTS FUND II, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION
(hereinafter the "Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares, each representing the interest in a particular
managed portfolio of securities and other assets, any one or more of which may
be made available under this Agreement, as may be amended from time to time by
mutual agreement of the parties hereto (each such series hereinafter referred
to as a "Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 17, 1986 (File No. 812-6422), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter 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 and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); 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 (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser")
is duly registered as an investment adviser under the federal Investment
Advisers Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain
variable life insurance and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of Directors
of the Company, on the date shown for such Account on Schedule A hereto, to set
aside and invest assets attributable to the aforesaid variable annuity
contracts; and
WHEREAS, the Company has registered or will register each
Account as a unit investment trust under the 1940 Act; and
<PAGE>
WHEREAS, the Underwriter is registered as a broker dealer with
the Securities and Exchange Commission ("SEC") under the Securities Exchange
Act of 1934, as amended, (hereinafter the "1934 Act"), and is a member in good
standing of the National Association of Securities Dealers, Inc. (hereinafter
"NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, the Company intends to purchase shares in the Portfolios on
behalf of each Account to fund certain of the aforesaid variable life and
variable annuity contracts and the Underwriter is authorized to sell such
shares to unit investment trusts such as each 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 of Fund Shares
1.1. The Underwriter agrees to sell to the Company those shares
of the Fund which each Account orders, executing such orders on a daily basis
at the net asset value next computed after receipt by the Fund or its designee
of the order for the shares of the Fund. For purposes of this Section 1.1, the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by 10:00 a.m. Boston time
on the next following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange is open for trading and on which the Fund
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely
for purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value
pursuant to rules of the Securities and Exchange Commission and the Fund shall
use reasonable efforts to calculate such net asset value on each day which the
New York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "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 Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund
will be sold only to Participating Insurance Companies and their separate
accounts. No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to
any insurance company or separate account unless an agreement containing
provisions substantially the same as Articles I, III, V, VII and Section 2.5 of
Article II of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on 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 by the Fund or its designee of the request for redemption. For
purposes of this Section 1.5, the Company shall be the designee of the Fund for
receipt of requests for redemption from each Account and receipt by such
designee shall constitute receipt by the Fund; provided that the Fund receives
notice of such request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of
Portfolio shares offered by the then current prospectus of the Fund shall be
made in accordance with the provisions of such prospectus. The Company agrees
that all net amounts available under the variable annuity contracts with the
form number(s) which are listed on Schedule A attached hereto and incorporated
herein by this reference, as such Schedule A may be amended from time to time
hereafter by mutual written agreement of all the parties hereto, (the
"Contracts") shall be invested in the Fund, in such other Funds advised by the
Adviser as may be mutually agreed to in writing by the parties hereto, or in
the Company's general account, provided that such amounts may also be invested
in an investment company other than the Fund if (a) such other investment
company, or series thereof, has investment objectives or policies that are
substantially different from the investment objectives and policies of all the
Portfolios of the Fund; or (b) the Company gives the Fund and the Underwriter
45 days written notice of its intention to make such other investment company
available as a funding vehicle for the Contracts; or (c) such other investment
company was available as a funding vehicle for the Contracts prior to the date
of this Agreement and the Company so informs the Fund and Underwriter prior to
their signing this Agreement (a list of such funds appearing on Schedule C to
this Agreement); or (d) the Fund or Underwriter consents to the use of such
other investment company.
<PAGE>
1.7. The Company shall pay for Fund shares on the next Business
Day after an order to purchase Fund shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted
by wire. For purpose of Section 2.10 and 2.11, upon receipt by the Fund of the
federal funds so wired, such funds shall cease to be the responsibility of the
Company and shall become the responsibility of the Fund.
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. Shares ordered from the Fund will be recorded in an appropriate title
for each Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or
telephone, followed by written confirmation) to the Company of any income,
dividends or capital gain distributions payable on the Fund's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Portfolio shares in additional shares of
that Portfolio. The Company reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash. The
Fund shall notify the Company of the number of shares so issued as payment of
such dividends and distributions.
1.10. The Fund shall make the net asset value per share for
each Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Boston time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Boston time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are
or will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws and that the sale of the Contracts shall comply in all material
respects with 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 prior to any issuance or sale thereof as a segregated
asset account under Section 2932 of the Delaware Insurance Code and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of
the 1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of the State of
Delaware and all applicable federal and state securities laws and that the Fund
is and shall remain registered under the 1940 Act. The Fund shall amend the
Registration Statement for its shares under the 1933 Act and the 1940 Act from
time to time as required in order to effect the continuous offering of its
shares. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent that the Fund or
the Underwriter deems such registration or qualification to be required by
applicable law.
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will 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.
2.4. The Company represents that the Contracts are currently
treated as endowment or annuity insurance contracts, under applicable
provisions of the 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.
2.5. 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 may make such payments in the future. The Fund has
adopted a "no fee" or "defensive" Rule 12b-1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a
board of 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.
2.6. The Fund makes no representation as to whether any aspect
of its operations (including, but not limited to, fees and expenses and
investment policies) complies with the insurance laws or regulations of the
various states except that the Fund represents that the Fund's investment
policies, fees and expenses are and shall at all times
<PAGE>
remain in compliance with the laws of the State of Delaware and the Fund and
the Underwriter represent that their respective operations are and shall at all
times remain in material compliance with the laws of the State of Delaware to
the extent required to perform this Agreement.
2.7. The Underwriter represents and warrants that it is a
member in good standing of the NASD and is registered as a broker-dealer with
the SEC. The Underwriter further represents that it will sell and distribute
the Fund shares in accordance with the laws of the State of Delaware and all
applicable state and federal securities laws, including without limitation the
1933 Act, the 1934 Act, and the 1940 Act.
2.8. 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 the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser
is and shall remain duly registered in all material respects under all
applicable federal and state securities laws and that the Adviser shall perform
its obligations for the Fund in compliance in all material respects with the
laws of the State of Delaware and any applicable state and federal securities
laws.
2.10. The Fund and Underwriter represent and warrant that all
of their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall 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
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its
directors, officers, employees, and other individuals/entities dealing with the
money and/or securities of the Fund are covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund, and that said bond is issued by a
reputable bonding company, includes coverage for larceny and embezzlement, and
is in an amount not less than $5 million. The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company with as many
printed copies of the Fund's current prospectus and Statement of Additional
Information as the Company may reasonably request. If requested by the Company
in lieu thereof, the Fund shall provide camera-ready film containing the Fund's
prospectus and Statement of Additional Information (in 8.5" by 11" or 5" by 9"
size), and such other assistance as is reasonably necessary in order for the
Company once each year (or more frequently if the prospectus and/or Statement
of Additional Information for the Fund is amended during the year) to have the
prospectus for the Contracts and the Fund's prospectus printed together in one
document, and to have the Statement of Additional Information for the Fund and
the Statement of Additional Information for the Contracts printed together in
one document. Alternatively, the Company may print the Fund's prospectus and/or
its Statement of Additional Information in combination with other fund
companies' prospectuses and statements of additional information. Except as
provided in the following three sentences, all expenses of printing and
distributing Fund prospectuses and Statements of Additional Information shall
be the expense of the Company. For prospectuses and Statements of Additional
Information provided by the Company to its existing owners of Contracts in
order to update disclosure as required by the 1933 Act and/or the 1940 Act, the
cost of printing shall be borne by the Fund. If the Company chooses to receive
camera-ready film in lieu of receiving printed copies of the Fund's prospectus,
the Fund will reimburse the Company in an amount equal to the product of A and
B where A is the number of such prospectuses distributed to owners of the
Contracts, and B is the Fund's per unit cost of typesetting and printing the
Fund's prospectus. The same procedures shall be followed with respect to the
Fund's Statement of Additional Information.
The Company agrees to provide the Fund or its designee with
such information as may be reasonably requested by the Fund to assure that the
Fund's expenses do not include the cost of printing any prospectuses or
Statements of Additional Information other than those actually distributed to
existing owners of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).
<PAGE>
3.3. The Fund, at its expense, shall provide the Company with
copies of its proxy statements, reports to shareholders, and other
communications (except for prospectuses and Statements of Additional
Information, which are covered in Section 3.1) to shareholders in such quantity
as the Company shall reasonably require for distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with
instructions received from Contract owners; and
(iii) vote Fund shares for which no instructions have
been received in a particular separate account in
the same proportion as Fund shares of such
portfolio for which instructions have been received
in that separate account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set
forth on Schedule B attached hereto and incorporated herein by this reference,
which standards will also be provided to the other Participating Insurance
Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either
provide for annual meetings or 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 Securities and Exchange
Commission's interpretation of the requirements of Section 16(a) with respect
to periodic elections of trustees and with whatever rules the Commission may
promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished,
to the Fund or its designee, each piece of sales literature or other
promotional material created or approved by the Company in which the Fund or
its investment adviser or the Underwriter is named, at least ten Business Days
prior to its use. No such material shall be used if the Fund or its designee
reasonably objects to such use within ten Business Days after receipt of such
material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or
its designee or by the Underwriter, except with the permission of the Fund or
the Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or
shall cause to be furnished, to the Company or its designee, each piece of
sales literature or other promotional material in which the Company and/or its
separate account(s), is named at least ten Business Days prior to its use. No
such material shall be used if the Company or its designee reasonably objects
to such use within ten Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any
information or make any representations on behalf of the Company or concerning
the Company, each Account, or the Contracts other than the information or
representations contained in a registration statement or prospectus for the
Contracts, as such registration statement and prospectus may be amended or
supplemented from time to time, or in published reports for each Account which
are in the public domain or approved by the Company for distribution to
Contract owners, or in sales literature or other promotional material approved
by the Company or its designee, except with the permission of the Company.
4.5. The 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 Securities and
Exchange Commission or other regulatory authorities.
<PAGE>
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 other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales
literature or other promotional material" includes, but is not limited to, any
of the following that refer to the Fund or any affiliate of the Fund:
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media), sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees, and
registration statements, prospectuses, Statements of Additional Information,
shareholder reports, and proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Fund and Underwriter shall pay no fee or other
compensation to the Company under this agreement, except that if the Fund or
any Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance
distribution expenses, then the Underwriter may make payments to the Company or
to the underwriter for the Contracts if and in amounts agreed to by the
Underwriter in writing and such payments will be made out of existing fees
otherwise payable to the Underwriter, past profits of the Underwriter or other
resources available to the Underwriter. No such payments shall be made directly
by the Fund.
5.2. All expenses incident to performance by the Fund under
this Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the
Fund's prospectus, proxy materials and reports to owners of Contracts issued by
the Company.
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
contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance with the grace period
afforded by Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners
of all separate accounts investing in the Fund. An irreconcilable material
conflict may arise for a variety of reasons, including: (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 variable annuity contract and variable life
insurance contract owners; or (f) a decision by an insurer to disregard the
voting instructions of contract owners. The Board shall
<PAGE>
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 Board. The Company will assist the Board
in carrying out its responsibilities under the Shared Funding Exemptive Order,
by providing the Board with all information reasonably necessary for the Board
to consider any issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Board whenever contract owner voting
instructions are disregarded.
7.3. If it is determined by a majority of the Board, or a
majority of its disinterested trustees, that a material irreconcilable conflict
exists, the Company and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a majority
of the disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the 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 Contract owners and, as appropriate, segregating the
assets of any appropriate group (i.e., annuity contract owners, life insurance
contract owners, or variable contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to
the affected contract owners the option of making such a change; and (2),
establishing a new registered management investment company or managed separate
account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and
that decision represents a minority position or would preclude a majority vote,
the Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Any such withdrawal and termination must take place within six (6) months after
the Fund gives written notice that this provision is being implemented, and
until the end of that six month period the Underwriter and Fund shall 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 regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board
informs the Company in writing that it has determined that such decision has
created an irreconcilable material conflict; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Until the end of the foregoing six month
period, the Underwriter and Fund shall 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 Board shall 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 shall 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 Contract owners materially adversely affected
by the irreconcilable material conflict. In the event that the Board determines
that any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. 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 Act or the rules promulgated thereunder with respect to mixed
or shared funding (as defined in the Shared Funding Exemptive Order) on terms
and conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3,
7.4, and 7.5 of this Agreement shall 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.
<PAGE>
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the
Fund and each trustee of the Board and officers and each person, if any, who
controls the Fund within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including 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 sale or acquisition of the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue
statements or alleged untrue statements of any material fact
contained in the Registration Statement or prospectus for the
Contracts or contained in the Contracts or sales literature for
the Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information
furnished to the Company by or on behalf of the Fund for use in
the Registration Statement or prospectus for the Contracts or
in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of
the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or sales
literature of the Fund 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
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a Registration
Statement, prospectus, or sales literature of the Fund or any
amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading if such a statement or omission was made in
reliance upon information furnished to the Fund by or on behalf
of the Company; or
(iv) arise as a result of any failure by the Company
to provide the services and furnish the materials under the
terms of this Agreement; or
(v) arise out of or result from any material breach
of any representation and/or warranty made by the Company in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Company, as limited by
and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed against
an Indemnified Party as such may arise from such Indemnified
Party's willful misfeasance, bad faith, or negligence in the
performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to the Fund, whichever is
applicable.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made
against an Indemnified Party unless such Indemnified Party
shall have notified the Company in writing within a reasonable
time after the summons or other first legal process giving
information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated
agent), but failure to notify the Company of any such claim
shall not relieve the Company from any liability which it may
have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification
provision. In case any such action is brought against the
Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such action.
The Company also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the
action. After notice from the Company to such party of the
Company's election to assume
<PAGE>
the defense thereof, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such
party independently in connection with the defense thereof
other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify
the Company of the commencement of any litigation or
proceedings 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
8.2(a). The Underwriter agrees to indemnify and hold harmless
the Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any
material fact contained in the Registration
Statement or prospectus or sales literature of
the 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, 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
Underwriter or Fund by or on behalf of the
Company for use in the Registration Statement
or prospectus for the Fund or in sales
literature (or any amendment or supplement) or
otherwise for use in connection with the sale
of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Registration
Statement, prospectus or sales literature for
the Contracts not supplied by the Underwriter
or persons under its control) or wrongful
conduct of the Fund, Adviser or Underwriter or
persons under their control, with respect to
the sale or distribution of the Contracts or
Fund shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained
in a Registration Statement, prospectus, or
sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statement or statements
therein not misleading, if such statement or
omission was made in reliance upon information
furnished to the Company by or on behalf of the
Fund; or
(iv) 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 requirements specified in
Article VI of this Agreement); or
(v) arise out of or result from any material
breach of any representation and/or warranty
made by the Underwriter in this Agreement or
arise out of or result from any other material
breach of this Agreement by the Underwriter; as
limited by and in accordance with the
provisions of Sections 8.2(b) and 8.2(c)
hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith,
or negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, whichever is
applicable.
<PAGE>
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Underwriter
of any such claim shall not relieve the Underwriter from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by
it, and the Underwriter will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of each Account.
8.3. Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold harmless the
Company, and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Fund) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements result from the negligence, bad faith or willful
misconduct of the Board or any member thereof, are related to the operations of
the Fund and:
(i) 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 to
comply with the diversification requirements specified
in Article VI of this Agreement);or
(ii) 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;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such may arise
from such Indemnified Party's willful misfeasance, bad faith, or negligence in
the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement or to the Company, the Fund, the Underwriter or each Account,
whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to
notify the Fund of the commencement of any litigation or proceedings against it
or any of its respective officers or directors in connection with this
Agreement,
<PAGE>
the issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to,
the Shared Funding Exemptive Order) and the terms hereof shall be interpreted
and construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect
until the first to occur of:
(a) termination by any party for any reason by
sixty (60) days advance written notice delivered to the
other parties; or
(b) termination by the Company by written notice
to the Fund and the Underwriter with respect to any
Portfolio based upon the Company's determination that
shares of such Portfolio are not reasonably available to
meet the requirements of the Contracts; or
(c) termination by the Company by written notice
to the Fund and the Underwriter with respect to any
Portfolio in the event any of the Portfolio's shares are
not registered, issued or sold in accordance with
applicable state and/or federal law or such law precludes
the use of such shares as the underlying investment media
of the Contracts issued or to be issued by the Company;
or
(d) termination by the Company by written notice
to the Fund and the Underwriter with respect to any
Portfolio in the event that such Portfolio ceases to
qualify as a Regulated Investment Company under
Subchapter M of the Code or under any successor or
similar provision, or if the Company reasonably believes
that the Fund may fail to so qualify; or
(e) termination by the Company by written notice
to the Fund and the Underwriter with respect to any
Portfolio in the event that such Portfolio fails to meet
the diversification requirements specified in Article VI
hereof; or
(f) termination by either the Fund or the
Underwriter by written notice to the Company, if either
one or both of the Fund or the Underwriter respectively,
shall determine, in their sole judgment exercised in good
faith, that the Company and/or its affiliated companies
has suffered a material adverse change in its business,
operations, financial condition or prospects since the
date of this Agreement or is the subject of material
adverse publicity; or
(g) termination by the Company by written notice
to the Fund and the Underwriter, if the Company shall
determine, 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,
financial condition or prospects since the date of this
Agreement or is the subject of material adverse
publicity; or
(h) termination by the Fund or the Underwriter by
written notice to the Company, if the Company gives the
Fund and the Underwriter the written notice specified in
Section 1.6(b) hereof and at the time such notice was
given there was no notice of termination outstanding
under any other provision of this Agreement; provided,
however any termination under this Section 10.1(h) shall
be effective forty five (45) days after the notice
specified in Section 1.6(b) was given.
10.2. Effect of Termination. Notwithstanding any termination of
this Agreement, the Fund and the Underwriter shall 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
<PAGE>
referred to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts shall be permitted to reallocate investments
in the Fund, 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 10.2 shall not apply to any terminations under
Article VII and the effect of such Article VII terminations shall be governed
by Article VII of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to
the Contracts (as opposed to Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or federal
laws or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act.
Upon request, the Company will promptly furnish to the Fund and the Underwriter
the opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or
the Underwriter 90 days notice of its intention to do so.
ARTICLE XI.Notices
Any notice shall be sufficiently given when sent by registered
or certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify in
writing to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
New York Life Insurance and Annuity Corporation
51 Madison Avenue
New York, NY 10010
Attention: Robert D. Rock
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
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 Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and
regulatory authority, each party hereto shall treat as confidential the names
and addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it
may come into the public domain without the express written consent of the
affected party.
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 shall constitute one and the
same instrument.
12.5 If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
<PAGE>
12.6 Each party hereto shall cooperate with each other party
and all appropriate governmental authorities (including without limitation the
SEC, the NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7 The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies
and obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
12.8. This Agreement or any of the rights and obligations
hereunder may not be assigned by any party without the prior written consent of
all parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed
and registered to perform the obligations of the Underwriter under this
Agreement.
12.9. The Company shall furnish, or shall cause to be
furnished, to the Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared
under statutory accounting principles) and annual
report (prepared under generally accepted
accounting principles ("GAAP"), if any), as soon
as practical and in any event within 90 days
after the end of each fiscal year;
(b) the Company's quarterly statements
(statutory) (and GAAP, if any), as soon as
practical and in any event within 45 days after
the end of each quarterly period:
(c) any financial statement, proxy statement,
notice or report of the Company sent to
stockholders and/or policyholders, as soon as
practical after the delivery thereof to
stockholders;
(d) any registration statement (without exhibits)
and financial reports of the Company filed with
the Securities and Exchange Commission or any
state insurance regulator, as soon as practical
after the filing thereof;
(e) any other report submitted to the Company by
independent accountants in connection with any
annual, interim or special audit made by them of
the books of the Company, as soon as practical
after the receipt thereof.
IN WITNESS WHEREOF, each of the parties hereto
has caused this Agreement to be executed in its name and
on its behalf by its duly authorized representative and
its seal to be hereunder affixed hereto as of the date
specified below.
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
By: \s\ Robert D. Rock
------------------------------
Robert D. Rock
Senior Vice President
VARIABLE INSURANCE PRODUCTS FUND II
By: \s\ J. Gary Burkhead
------------------------------
J. Gary Burkhead
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By: \s\ Neal Litvack
------------------------------
Neal Litvack
President
<PAGE>
Schedule A
Separate Accounts and Associated Contracts
Name of Separate Account and Policy Form Numbers of Contracts
Date Established by Board of Directors Funded By Separate Account
- -------------------------------------- --------------------------------
NYLIAC Variable Universal Life Separate 793-90
Account I
(June 4, 1993)
NYLIAC Variable Universal Life Separate 793-90
Account II
(June 4, 1993)
NYLIAC Variable Annuity Separate Account I 993190
(October 15, 1992)
NYLIAC Variable Annuity Separate Account II 993190
(October 15, 1992)
NYLIAC LifeStages Annuity Separate Account 995190
(November 30, 1994)
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for
the handling of proxies relating to the Fund by the Underwriter, the Fund and
the Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the
steps delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of units
which are attributed to each contractowner/policyholder (the "Customer") as
of the Record Date. Allowance should be made for account adjustments made
after this date that could affect the status of the Customers' accounts as
of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by the
Company either before or together with the Customers' receipt of a proxy
statement. Underwriter will provide the last Annual Report to the Company
pursuant to the terms of Section 3.3 of the Agreement to which this Schedule
relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the Card
before it is printed. Allow approximately 2-4 business days for printing
information on the Cards. Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of votes
(already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document). Printed
and folded notices and statements will be sent to Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by the
Insurance Company). Contents of envelope sent to Customers by Company will
include:
a. Voting Instruction Card(s)
<PAGE>
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly as
possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but not
including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For Example, If the account registration is under "Bertram C. Jones,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, a new
Card and return envelope. The mutilated or illegible Card is disregarded
and considered to be not received for purposes of vote tabulation. Any
Cards that have "kicked out" (e.g. mutilated, illegible) of the procedure
are "hand verified," i.e., examined as to why they did not complete the
system. Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
<PAGE>
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated
in terms of a percentage and the number of shares.) Fidelity Legal must
review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
Fidelity Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
<PAGE>
SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
New York Life MFA Series Fund, Inc.
Bond Portfolio
Capital Appreciation Portfolio
Cash Management Portfolio
Government Portfolio
Growth Equity Portfolio
High Yield Corporate Bond Portfolio
Indexed Equity Portfolio
International Equity Portfolio
Total Return Porfolio
Value Portfolio
Acacia Capital Corporation
Calvert Responsibly Invested Balanced Portfolio
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer of New York
Life Insurance and Annuity Corporation, does hereby constitute and appoint each
of Robert D. Rock, David J. Krystel, Melbourne Nunes, Robert J. Hebron and
Nancy Brenner and each of them singly her true and lawful attorney-in-fact and
agent, each with full power of substitution and resubstitution for her in her
name, place and stead, to sign any and all Registration Statements to be filed
with the Securities and Exchange Commission, and any and all amendments or
supplements thereto, for the purposes of registering variable annuity and/or
life insurance contracts of New York Life Insurance and Annuity Corporation for
sale pursuant to the Securities Act of 1933.
Signature Date
- --------- ----
/s/Maryann L. Ingenito April 18,1995
- ----------------------
Maryann L. Ingenito
<PAGE>
NEW YORK LIFE INSURANCE COMPANY
920 Main Street, Suite 2100
Kansas City, MO 64105-2008
(816) 889-4004 Fax: (816) 889-4097
FREDERICK J. GARLAND, JR., CLU, FSA, MAAA
Brokerage Actuary
July 8, 1996
Re:New York Life Insurance and Annuity Corporation
NYLIAC Corporate Sponsored Variable Universal Life Separate Account- I
Ladies and Gentlemen:
This opinion is furnished in connection with the referenced registration
statement filed by New York Life Insurance and Annuity Corporation ("NYLIAC")
under the Securities Act of 1933 (the "Registration Statement"). The prospectus
included in the Registration Statement on Form S-6 describes flexible premium
corporate sponsored variable universal life policies (the "Policies"). The
forms of the Policies were prepared under my direction, and I am familiar with
the Registration Statement and Exhibits thereto.
In my opinion, the illustrations of benefits under the Policies included in the
section of the prospectus entitled "Appendix A: Illustrations", based on the
assumptions stated in the illustrations, are consistent with the provisions of
the respective forms of the Policies. The age selected in the illustrations is
representative of the manner in which the Policies operate.
In addition, I have reviewed the discount rate used in calculating the present
value of NYLIAC's future tax deductions resulting from the amortization of its
deduction for certain acquisition costs. In my opinion, the DAC tax charge is
reasonable in relation to NYLIAC's increased federal tax burden under Section
848 resulting from the receipt of premium; the targeted rate of return used in
calculating such charges is reasonable; and the factors taken into account by
NYLIAC in determining the targeted rate of return are appropriate.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
prospectus.
Very truly yours,
/s/Frederick J. Garland, Jr.
- ----------------------------
Frederick J. Garland, Jr.
Actuary
New York Life Insurance Company
NYLIFE for New York Life Insurance and Annuity
Corporation
Financial Products & Services (A Delaware Corporation)
NYLIFE Securities Inc.
51 Madison Avenue, New York, NY
10010
