<PAGE> 1
Registration No. (To be assigned)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
THE TRAVELERS VARIABLE LIFE INSURANCE SEPARATE ACCOUNT FOUR
-----------------------------------------------------------
(Exact Name of Trust)
THE TRAVELERS INSURANCE COMPANY
-------------------------------
(Name of Depositor)
One Tower Square, Hartford, Connecticut 06183
----------------------------------------------
(Complete Address of Depositor's Principal Executive Offices)
Ernest J. Wright
Secretary
The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183
----------------------------
(Name and address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
immediately upon filing pursuant to paragraph (b).
- ------
on ___________ pursuant to paragraph (b).
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X 60 days after filing pursuant to paragraph (a)(1).
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on __________ pursuant to paragraph (a)(1).
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Title and amount of securities being registered: Pursuant to Rule 24f-2 of
the Investment Company Act of 1940, the Registrant hereby declares that an
indefinite amount of Variable Life Insurance Contracts is being registered
under the Securities Act of 1933. Proposed maximum aggregate offering price to
the public of the securities being registered: ________________________________
Amount of filing fee: $500.00
Approximate date of proposed public offering: As soon as practicable
following the effectiveness of the 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 Section 8(a), may
determine.
Check the box if it is proposed that this filing will become effective on
_______ at _____ pursuant to Rule 487. ______
<PAGE> 2
RECONCILIATION AND TIE BETWEEN
FORM N-8B-2 AND PROSPECTUS
<TABLE>
<CAPTION>
Item No. of
Form N-8B-2 CAPTION IN PROSPECTUS
- ------------------- ---------------------
<S> <C>
1 Cover page
2 Cover page
3 Safekeeping of the Separate Account's Assets
4 Distribution of the Policy
5 The Separate Account
6 The Separate Account
7 Not applicable
8 Not applicable
9 Legal Proceedings and Opinion
10 Prospectus Summary; The Insurance Company; The Separate Account; The Investment Options; The Policy;
Transfers of Cash Value; Policy Surrenders and Cash Surrender Value; Voting Rights; Dividends
11 The Separate Account; The Investment Options
12 The Investment Options
13 Charges and Deductions; Distribution of the Policies
14 The Policy
15 The Policy
16 The Separate Account; The Investment Options; Allocation of Premium Payments
17 Prospectus Summary; Right to Cancel Period; Policy Surrenders and Cash Surrender Value; Policy Loans;
Exchange Rights
18 The Investment Options; Charges and Deductions; Federal Tax Considerations
19 Reports to Policy Owners
20 The Insurance Company
21 Policy Loans
22 Not applicable
23 Not applicable
24 Not applicable
25 The Insurance Company
26 Not applicable
27 The Insurance Company
28 The Insurance Company; Management
29 The Insurance Company
30 Not applicable
31 Not applicable
32 Not applicable
33 Not applicable
34 Not applicable
35 Distribution of the Policy
36 Not applicable
37 Not applicable
38 Distribution of the Policy
39 Distribution of the Policy
40 Not applicable
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Item No. of
Form N-8B-2 CAPTION IN PROSPECTUS
- ----------- ---------------------
<S> <C>
41 Distribution of the Policy
42 Not applicable
43 Not applicable
44 Valuation of the Separate Account
45 Not applicable
46 The Policy; Valuation of the Separate Account; Transfers of Cash Value; Policy Surrenders and Cash
Surrender Value
47 The Separate Account; The Investment Options
48 The Insurance Company
49 Safekeeping of the Separate Account's Assets
50 Not applicable
51 Prospectus Summary; The Insurance Company; The Policy; Death Benefits; Policy Lapse and Reinstatement
52 The Separate Account; The Investment Options; Investment Managers
53 Federal Tax Considerations
54 Not applicable
55 Not applicable
56 Not applicable
57 Not applicable
58 Not applicable
59 Financial Statements
</TABLE>
<PAGE> 4
THE TRAVELERS VARIABLE LIFE INSURANCE
SEPARATE ACCOUNT FOUR
PROSPECTUS
This Prospectus describes a modified single premium individual variable life
insurance policy (the "Policy") offered by The Travelers Insurance Company (the
"Company") and funded by a segment of The Travelers Variable Life Insurance
Separate Account Four ("Separate Account Four"). Separate Account Four is a unit
investment trust and is used as a funding mechanism for the variable life policy
described in this prospectus. Other segments of the Separate Account may be used
in connection with insurance products that the company offers. The Separate
Account in accordance with your allocation instructions, invests in certain
underlying mutual funds that are referred to in this Prospectus as "Investment
Options."
These underlying Investment Options are available for purchase only through
variable insurance contracts. Although the Policy can operate as a single
premium policy, additional premium payments may be made under certain
circumstances provided there are no outstanding policy loans. The minimum
Initial Premium required to issue a Policy is $10,000.
The Policy provides for the payment of a Death Benefit upon the death of the
Insured, and for a Cash Value that can be obtained through policy loans (subject
to certain restrictions) or full or partial surrenders of the Policy. The Death
Benefit and Cash Value of a Policy will vary based on the performance of the
underlying Investment Options. There is no guaranteed minimum Cash Value for a
Policy. Additionally, the Cash Value is reduced by the various fees and charges
assessed under the Policy, as described in this Prospectus. Regardless of the
performance of the Investment Options, so long as the Policy is in force, the
Death Benefit can never be less than the current Stated Amount (with proceeds
payable reduced by outstanding policy loans and unpaid interest). The Policy
will remain in force for as long as the Cash Surrender Value is sufficient to
pay the monthly charges imposed under the Policy.
(continued on next page)
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR
THE UNDERLYING INVESTMENT OPTIONS. THESE PROSPECTUSES SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN, OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
THE PURPOSE OF THIS VARIABLE LIFE INSURANCE POLICY IS TO PROVIDE INSURANCE
PROTECTION. LIFE INSURANCE IS A LONG-TERM INVESTMENT. PROSPECTIVE POLICY OWNERS
SHOULD CONSIDER THEIR NEED FOR INSURANCE COVERAGE AND THE POLICY'S LONG-TERM
INVESTMENT POTENTIAL. NO CLAIM IS MADE THAT THE POLICY IS IN ANY WAY SIMILAR OR
COMPARABLE TO AN INVESTMENT IN A MUTUAL FUND.
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 5
From the Issue Date through the end of the Right to Cancel Period, the Initial
Premium will be allocated to the Cash Income Trust, a money market portfolio.
Thereafter, the Cash Value may be allocated to one or more of the following
Investment Options: AIM Capital Appreciation, Alliance Growth, Federated Stock,
Federated High Yield, Large Cap, Equity-Income, Lazard International Stock
Portfolio, Putnam Diversified Income Portfolio, MFS Total Return Portfolio, MFS
Emerging Growth, Cash Income Trust and Capital Appreciation Portfolios, and the
Travelers Quality Bond Portfolio, Travelers Mid-Cap Disciplined Equity
Portfolio, and three Zero Coupon Bond Fund Portfolios (Series 1998, 2000, and
2005) of The Travelers Series Trust. The Policy Owner bears the investment risk
for all amounts allocated to the underlying Investment Options and amounts
allocated to such Investment Options will accumulate on a variable basis.
The Policy has a Right to Cancel Period during which the applicant may return
the Policy to the Company for a refund, as described under "Right To Cancel
Period. "
It may not be advantageous to purchase this Policy as a replacement for another
type of life insurance or as a means to obtain additional insurance protection
if you already own a variable life insurance policy. Because the Policy is
designed to operate generally as a single premium policy, in all but very
limited circumstances the Policy will be treated as a modified endowment
contract ("MEC") for federal income tax purposes. As a modified endowment
contract, any loan, partial withdrawal, or surrender may result in adverse tax
consequences, including possible penalties. As with any life insurance contract,
however, (1) a Policy Owner generally should not be considered in constructive
receipt of the Policy's Cash Value, including incremental increases therein,
unless and until he or she is in actual receipt of distributions from the
Policy, and (2) Death Benefit payments should generally be excluded from the
gross income of the Policy beneficiary. A prospective Policy Owner who wants to
purchase a Policy that is not a modified endowment contract should consult his
or her personal tax adviser.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS.............................................................. 4
PROSPECTUS SUMMARY..................................................................... 6
THE INSURANCE COMPANY.................................................................. 11
THE SEPARATE ACCOUNT................................................................... 11
Separate Account Four................................................................ 11
THE INVESTMENT OPTIONS................................................................. 12
Investment Managers.................................................................. 14
Substitutions and Additions.......................................................... 14
Mixed and Shared Funding............................................................. 14
THE POLICY............................................................................. 15
The Policy Application............................................................... 15
Eligible Purchasers.................................................................. 15
Payments Made Under the Policy....................................................... 15
Allocation of Premium Payments....................................................... 16
Right to Cancel Period............................................................... 17
CHARGES AND DEDUCTIONS................................................................. 17
MONTHLY DEDUCTION AMOUNT............................................................. 17
Cost of Insurance Charge.......................................................... 17
State Premium Tax Charges and Deferred Acquisition Cost (DAC) Tax Charges......... 18
CHARGES AGAINST THE INVESTMENT OPTIONS OF SEPARATE ACCOUNT FOUR...................... 18
Mortality and Expense Risk Charge................................................. 18
Administrative Expense Charges.................................................... 19
Income Taxes...................................................................... 19
INVESTMENT OPTION EXPENSES............................................................. 19
SURRENDER CHARGES...................................................................... 19
TRANSFER CHARGE........................................................................ 20
REDUCTION OR ELIMINATION OF CHARGES.................................................... 20
VALUATION OF THE SEPARATE ACCOUNT...................................................... 21
How the Cash Value Varies............................................................ 21
How the Investment Experience is Determined.......................................... 21
Accumulation Unit Value.............................................................. 21
Net Investment Factor................................................................ 21
Valuation Periods and Valuation Dates................................................ 22
TRANSFERS OF CASH VALUE................................................................ 22
Telephone Transfers.................................................................. 22
Automated Transfers (Dollar Cost Averaging).......................................... 22
DEATH BENEFIT.......................................................................... 23
Changes in Death Benefit Option...................................................... 24
Changes in Stated Amount............................................................. 24
Maturity and Maturity Extension Benefits............................................. 24
Policy Lapse and Reinstatement....................................................... 25
</TABLE>
2
<PAGE> 7
<TABLE>
<S> <C>
Lapse Protection Guarantee Rider..................................................... 25
Lost Term Care Rider................................................................. 26
Exchange Rights...................................................................... 26
POLICY SURRENDERS AND CASH SURRENDER VALUE............................................. 26
Right to Surrender................................................................... 26
Full Surrenders...................................................................... 27
Partial Surrenders................................................................... 27
POLICY LOANS........................................................................... 27
Risks Associated with Loans Taken Against a Variable Life Insurance Policy........... 28
PAYMENT OPTIONS........................................................................ 28
OTHER MATTERS.......................................................................... 29
Voting Rights........................................................................ 29
Reports to Policy Owners............................................................. 29
Limit on Right to Contest and Suicide Exclusion...................................... 30
Misstatement as to Sex and Age....................................................... 30
Suspension of Valuation.............................................................. 30
Beneficiary.......................................................................... 30
Assignment........................................................................... 30
Dividends............................................................................ 30
FEDERAL TAX CONSIDERATIONS............................................................. 31
General.............................................................................. 31
TAX STATUS OF THE POLICY............................................................... 31
Definition of Life Insurance......................................................... 31
Diversification...................................................................... 31
Investor Control..................................................................... 32
TAX TREATMENT OF POLICY BENEFITS....................................................... 32
In General........................................................................... 32
Modified Endowment Contracts......................................................... 33
Exchanges............................................................................ 33
Treatment of Loan Interest........................................................... 33
Aggregation of Modified Endowment Contracts.......................................... 34
THE COMPANY'S INCOME TAXES............................................................. 34
MANAGEMENT............................................................................. 34
SENIOR OFFICERS OF THE TRAVELERS INSURANCE COMPANY..................................... 35
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS........................................... 35
DISTRIBUTION OF THE POLICY............................................................. 35
LEGAL PROCEEDINGS AND OPINION.......................................................... 36
REGISTRATION STATEMENT................................................................. 36
INDEPENDENT ACCOUNTANTS................................................................ 36
FINANCIAL STATEMENTS................................................................... 37
ILLUSTRATIONS.......................................................................... 38
APPENDIX A: PERFORMANCE INFORMATION.................................................... 42
APPENDIX B: DEATH BENEFIT EXAMPLES..................................................... 44
APPENDIX C: REPRESENTATIVE STATED AMOUNTS.............................................. 46
</TABLE>
3
<PAGE> 8
GLOSSARY OF SPECIAL TERMS
- --------------------------------------------------------------------------------
The following terms are used throughout the Prospectus, and have the indicated
meanings:
ACCUMULATION UNIT -- a standard of measurement used to calculate the values
allocated to the investment options.
AVERAGE NET GROWTH RATE -- an annual measurement of growth, used to determine
the next year's mortality and expense risk charge. For each Policy Owner, the
rate is determined each Policy Year as follows: total daily earnings of the
Investment Option(s) you select, divided by the average amount you allocated
during the Policy Year. The daily earnings are measured using the net asset
value per share of the Investment Options.
BENEFICIARY(IES) -- the person(s) named to receive the benefits of this Policy
at the Insured's death.
CASH SURRENDER VALUE -- the Cash Value less any Loan Account Value and surrender
charges.
CASH VALUE -- the current value of Accumulation Units credited to each of the
Investment Options available under the Policy, plus the value of the Loan
Account.
COMPANY'S HOME OFFICE -- the principal executive offices of The Travelers
Insurance Company located at One Tower Square, Hartford, Connecticut 06183.
COVERAGE AMOUNT -- an amount equal to the Death Benefit minus the Cash Value.
DEATH BENEFIT -- the amount payable to the Beneficiary if the Insured dies while
the Policy is in force.
DEDUCTION DATE -- the day in each Policy Month on which the Monthly Deduction
Amount is deducted from the Policy's Cash Value.
GRACE PERIOD -- the period during which the Policy remains in force after the
Company has given notice to the Policy Owner that the Cash Surrender Value of
the Policy is insufficient to pay the Monthly Deduction Amount due.
INITIAL PREMIUM -- the Premium Payment made in connection with the issuance of a
Policy.
INSURED -- the person on whose life the Policy is issued.
INVESTMENT OPTIONS -- the open-end management investment companies or portfolios
thereof to which you may allocate premiums under Separate Account Four.
ISSUE DATE -- the date on which the Policy is issued by the Company for delivery
to the Policy Owner.
LOAN ACCOUNT -- an account in the Company's general account to which we transfer
the amount of any policy loan, and to which we credit a fixed rate of interest.
LOAN ACCOUNT VALUE -- the amount of any policy loan, plus capitalized loan
interest, plus the net rate of return credited to the Loan Account.
MATURITY DATE -- the anniversary of the Policy Date on which the Insured is age
100.
MINIMUM AMOUNT INSURED -- a percentage of Cash Value required to qualify this
Policy as life insurance under federal tax law.
MONTHLY DEDUCTION AMOUNT -- a monthly charge, deducted from the Policy's Cash
Value, which is comprised of the Cost of Insurance charge, the deductions for
premium tax and deferred acquisition charge ("DAC") taxes, any administrative
charge and any charge for supplemental benefits.
POLICY DATE -- the date on which the Policy becomes effective, which date is
used to determine all future cyclical transactions under the Policy (i.e.,
Deduction Dates, Policy Months, Policy Years).
POLICY MONTH -- monthly periods computed from the Policy Date.
POLICY OWNER (YOU, YOUR OR OWNER) -- the person(s) having rights to benefits
under the Policy during the lifetime of the Insured; the Policy Owner may or may
not be the Insured.
4
<PAGE> 9
POLICY YEARS -- annual periods computed from the Policy Date.
SEPARATE ACCOUNT FOUR -- The Travelers Variable Life Insurance Separate Account
Four, a separate account established by The Travelers Insurance Company, a
portion of which is designated to fund Portfolio Architect life insurance
policies. The Separate Account consists of segments that correspond to each
Investment Option.
STATED AMOUNT -- the amount used to determine the Death Benefit under the
Policy.
VALUATION DATE -- a day on which Accumulation Units are valued. A Valuation Date
is any day on which the New York Stock Exchange is open for trading. The value
of Accumulation Units will be determined as of the close of trading on the New
York Stock Exchange.
VALUATION PERIOD -- the period between the close of business on successive
Valuation Dates.
5
<PAGE> 10
PORTFOLIO ARCHITECT LIFE INSURANCE
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
INTRODUCTION
The Policy described in this Prospectus is an individual variable life insurance
contract which provides for Cash Value to be allocated to one or more of the
available Investment Options available under Separate Account Four. The Policy
is credited with Accumulation Units of the applicable Investment Options.
The Policy has a death benefit, cash surrender value and other features
traditionally associated with a fixed benefit whole life insurance policy. The
Policy is "variable" because unlike the fixed benefits of an ordinary whole life
insurance contract, the Cash Value and, under certain circumstances, the Death
Benefit of the Policy may increase or decrease depending on the investment
experience of the Investment Options to which the premium payment(s) have been
allocated. The Cash Value will also vary to reflect partial cash surrenders and
Monthly Deduction Amounts. In accordance with the Continuation of Insurance
provision of the Policy, the Policy will remain in effect until the Cash
Surrender Value is insufficient to cover the Monthly Deduction Amount due. There
is no minimum guaranteed Cash Value or Cash Surrender Value and the Policy Owner
bears the investment risk associated with an investment in the Investment
Options. (See "Valuation of the Separate Account," page 21.)
WHAT TYPES OF INVESTMENT OPTIONS ARE AVAILABLE UNDER THE POLICY?
The Travelers Variable Life Insurance Separate Account Four ("Separate Account
Four"), a registered unit investment trust separate account was established by
The Travelers Insurance Company (the "Company"), to fund the Policy. A Policy
Owner may allocate Cash Value among one or more of the following investment
options ("Investment Options"):
AIM Capital Appreciation Portfolio
Alliance Growth Portfolio
Large Cap Portfolio
Equity-Income Portfolio
Lazard International Stock Portfolio
MFS Total Return Portfolio
MFS Emerging Growth Portfolio
Travelers Mid-Cap Disciplined Equity Portfolio
Capital Appreciation Fund (Janus subadviser)
Federated Stock Portfolio
Federated High Yield Portfolio
Travelers Cash Income Trust
Travelers Quality Bond Portfolio
Putnam Diversified Income Portfolio
Travelers Zero Coupon Bond Fund Portfolio 1998
Travelers Zero Coupon Bond Fund Portfolio 2000
Travelers Zero Coupon Bond Fund Portfolio 2005
Additional Portfolios may be added from time to time.
Further information regarding the investment objectives for each Investment
Option (including the investment manager) is contained under "The Investment
Options" Section beginning on page of this Prospectus. Refer to each
Investment Option's prospectus for a complete description of the investment
objectives, restrictions and other material information.
WHAT ARE THE REQUIRED AND PERMISSIBLE PREMIUM PAYMENTS?
The minimum Initial Premium is $10,000. Although the Policy can operate as a
single premium policy, additional payments may be made under certain
circumstances, provided there are no outstanding policy loans. If there are any
outstanding loans, any payment received will be treated first as a repayment of
the loan rather than an additional premium payment. (See "Additional Premium
Payments," page 16.) No premiums can be accepted if they would disqualify the
Policy as life insurance under federal tax law. (We will test any payment
received to ensure the Policy's continued status as life insurance).
6
<PAGE> 11
The Initial Premium purchases a Death Benefit initially equal to the Policy's
Stated Amount (if Option 1 is selected), or to the Stated Amount plus the Cash
Value (if Option 2 is selected). The relationship between the Initial Premium
and the Stated Amount depends on the age and sex of the Insured (as permitted by
state law). Generally, the same Initial Premium will purchase a slightly higher
stated amount for a female Insured than for a male Insured of the same age.
Representative Stated Amounts per dollar of Initial Premium are set forth in
Appendix C.
HOW WILL PREMIUM PAYMENTS BE ALLOCATED?
During the Right to Cancel Period (as described below), the Initial Premium will
be allocated to the Cash Income Trust, a money market portfolio. After the
expiration of the Right to Cancel Period, the values in the Cash Income Trust
will be allocated to the Investment Options selected on the Policy Application
(or according to your most recent instructions), and the Policy will be credited
with the applicable Accumulation Units. (See "Allocation of Premium Payments,"
page 16.)
AFTER THE INITIAL ALLOCATION, MAY I CHANGE THE ALLOCATION OF MY CASH VALUE?
As long as the Policy remains in force, you may transfer all or a portion of
your Policy's Cash Value (not including the Loan Account Value) among any of the
Investment Options. Currently, transfers may be made at any time without charge.
You may request a reallocation of your investment either through written
request, or by telephone in accordance with the Company's telephone transfer
procedures. (See "Transfers of Cash Value," page 22.)
You may also request that the Company establish automated transfers of Cash
Values from any Investment Option to any other Investment Option through written
request in good order or other method acceptable to the Company. The minimum
automated transfer amount is $100 per month. (See "Automated Transfers," page
22.)
DOES THIS POLICY HAVE A RIGHT TO CANCEL PERIOD?
You have a limited right to return the Policy for cancellation and receive a
full refund. You must return the Policy, by mail or hand delivery, to the
Company or to the agent who sold the Policy during the Right to Cancel Period,
which ends 10 days after the Policy has been delivered to you, 45 days after
completion of the application, or 10 days after the Notice of Right to Cancel
has been mailed or delivered to you, whichever is latest. Within seven (7) days
following our receipt of your request for a refund, we will refund to you the
greater of (1) any premium paid, or (2) the Cash Value of the Policy on the date
we receive the returned policy, plus any charges and expenses which may have
been deducted, less any Loan Account Value. (See "Right to Cancel Period," page
17.)
WHAT TYPES OF CHARGES ARE DEDUCTED UNDER THE POLICY?
MONTHLY DEDUCTION AMOUNT. Beginning on the Policy Date, the Company will make
monthly deductions from the Policy's Cash Value on a pro rata basis from amounts
allocated to the Investment Options. The Deduction Amount may vary from month to
month and includes the cost of insurance charges, the deduction for premium tax
and Deferred Acquisition Cost (DAC) taxes charges, any administrative charge and
any charges for certain supplemental benefits. For Policies with an initial
premium of less than $25,000, a monthly charge of $5.00 will apply for the life
of the Policy. (See "Monthly Deduction Amount," page 17.)
CHARGES AGAINST THE INVESTMENT OPTIONS UNDER SEPARATE ACCOUNT FOUR. In order to
cover the Company's assumption of mortality and expense risks under the Policy,
the Company assesses a daily charge against the assets of each of the Investment
Options on a pro rata basis at an annual rate of 0.90% of such assets. This rate
will be reduced to 0.75% for the current Policy Year if the Average Net Growth
Rate of the investment options which you have selected under your Policy was
6.5% or greater for the previous Policy Year. This determination will be made
annually on the Policy Anniversary Date.
7
<PAGE> 12
The Company also assesses a daily charge against the amounts allocated to the
Investment Options at an annual rate of 0.40% to cover administrative expenses
assumed by the Company. This administrative expense charge does not exceed the
expected cost of administrative services provided by the Company under the
Policy and the Company does not expect to make a profit from the application of
this charge. (See "Charges Against the Investment Options of Separate Account
Four," page 18.)
SUMMARY OF ASSET BASED POLICY CHARGES (ASSUMING A SINGLE PREMIUM PAYMENT):
<TABLE>
<CAPTION>
STATE PREMIUM MORTALITY &
POLICY AND DAC EXPENSE
YEARS TAX CHARGES RISK CHARGE ADMINISTRATIVE CHARGE TOTAL
<S> <C> <C> <C> <C>
.40% +$5 per month if initial
1-10 .35% .90% prem is less than $25,000 1.65% (+$5. per month)
.40% +$5 per month if initial
11+ N/A .90% prem is less than $25,000 1.30% (+$5. per month)
</TABLE>
SUMMARY OF ASSET BASED POLICY CHARGES IF THE AVERAGE NET GROWTH RATE IS 6.5% OR
MORE (ASSUMING A SINGLE PREMIUM PAYMENT):
<TABLE>
<CAPTION>
STATE PREMIUM MORTALITY &
POLICY AND DAC EXPENSE
YEARS TAX CHARGES RISK CHARGE ADMINISTRATIVE CHARGE TOTAL
<S> <C> <C> <C> <C>
.40% +$5 per month if initial
2-10 .35% .75% prem is less than $25,000 1.50% (+$5. per month)
.40% +$5 per month if initial
11+ N/A .75% prem is less than $25,000 1.15% (+$5. per month)
</TABLE>
SURRENDER CHARGES. A percent of premium surrender charge will be assessed upon
a full surrender of the Policy during the first nine policy years after a
Premium Payment is received by the Company. For the first two years following a
Premium Payment, the surrender charge will be 7.5% of such Premium Payment.
Thereafter, the charge will decline in years three (3) through nine (9),
respectively, as follows: 7%, 7%, 6.5%, 6%, 5%, 4% and 3%. The surrender charge
will be 0% starting in the tenth year following a Premium Payment. Partial
surrenders will also be subject to a surrender charge, except that after the
first Policy Year the Company will permit partial surrenders of the Policy's
earnings in an amount of up to 10% of the Policy's Cash Value as of the
beginning of the current Policy Year. For partial surrenders in excess of the
free withdrawal amount, a charge equal to a percentage of the amount
surrendered, not to exceed the charge that would apply to a full surrender, will
apply. (See "Surrender Charges," page 19.)
TRANSFER CHARGES. The Company reserves the right to charge up to $10 for each
transfer in excess of four (4) per Policy Year, and reserves the right to assess
a processing fee for the Automated Transfer (Dollar Cost Averaging) service.
WHAT IS THE DEATH BENEFIT UNDER THE POLICY?
The Policy provides for a death benefit upon the death of the Insured. You may
choose one of two options to be used for the calculation of the Death Benefit
payable under the Policy. Under Option 1 (the Level Option), the Death Benefit
will be equal to the greater of the Stated Amount of the Policy or the Minimum
Amount Insured. Under Option 2 (the Variable Option), the Death Benefit will be
equal to the greater of the Stated Amount of the Policy plus the Cash Value
(determined as of the date of the Insured's death) or the Minimum Amount
Insured. Under both options, the Death Benefit will be reduced by any applicable
Loan Account Value, unpaid Monthly Deduction Amount, and any amount payable to
an assignee pursuant to a collateral assignment of the Policy or amounts
advanced as an accelerated death benefit to pay costs associated with a long
term care rider. You may change the Death Benefit option or the Stated Amount
subject to certain conditions. (See "Death Benefit," page 23.)
8
<PAGE> 13
MAY I TAKE A POLICY LOAN AGAINST THE CASH VALUE OF MY POLICY?
You may request a Policy Loan in an amount not to exceed 90% of the Policy's
Cash Value minus surrender penalties (determined at the time the Company
receives the written loan request). If there is a loan outstanding at the time a
subsequent loan request is made, the amount of the outstanding loan will be
added to the new loan amount. The Company will charge interest on the
outstanding amounts of the loan. Such interest must be paid in advance by the
Policy Owner.
The amount of any loan will be transferred on a pro rata basis from each of the
Investment Options (unless the Owner states otherwise in writing) to the Loan
Account, which is part of the Company's general account. The Loan Account is
credited with a fixed annual rate of interest set forth in the Policy. The Loan
Account Value does not vary with the performance of the Investment Options;
therefore, the Policy's Death Benefit and Cash Value will be permanently
affected by a loan. Additionally, any outstanding Loan Account Value will be
subtracted from any Death Benefit or surrender proceeds payable under the
Policy. Subject to state law, no loan requests may be made for amounts of less
than $500. Policy loans may have federal income tax consequences, especially
when the contract is a Modified Endowment Contract. (See "Policy Loans," page
27, and "Federal Tax Considerations," page 31.)
WHAT ARE THE CONDITIONS UNDER WHICH MY POLICY MIGHT LAPSE?
If the Cash Surrender Value of a Policy on any Deduction Date is insufficient to
cover the Monthly Deduction Amount due, the Company will send you a written
notice of the required premium. If the required premium is not paid within 31
days after notice is sent, the Policy may lapse. In addition, outstanding loans
decrease the Cash Surrender Value and could, therefore, cause the Policy to
lapse. (See "Policy Loans," page 27, and "Policy Lapse and Reinstatement," page
25.) If a Policy lapses with a loan outstanding, adverse tax consequences may
result. (See "Federal Tax Considerations," page 31.)
ARE THERE ANY OTHER POLICY PROVISIONS THAT I SHOULD KNOW ABOUT?
SURRENDERS AND PARTIAL WITHDRAWALS. The Policy may be surrendered at any time
for its Cash Surrender Value. In addition, subject to surrender charges, partial
withdrawals may be made. Surrenders or partial withdrawals made within nine
years of a premium payment may be subject to a surrender charge. (See "Policy
Surrenders and Cash Surrender Value," page 26.)
RIGHT TO EXCHANGE THE POLICY. Once the Policy is in effect, you may exchange it
at any time during the first two Policy Years for an individual permanent life
insurance policy issued by the Company (or one of its affiliates, if allowed) on
the life of the Insured without submitting proof of insurability. (See "Exchange
Rights," page 26.)
PAYMENT OF POLICY BENEFITS. The Policy's Cash Value or full or partial
surrender and the death benefits under the Policy may be paid in a lump sum or
under one of the payment options set forth in the Policy. (See "Payment
Options," page 28.)
LONG TERM CARE COVERAGE. Subject to underwriting guidelines and state
availability, a policy owner may elect to purchase Long Term Care Coverage. This
coverage is optional and may only be added by rider at the time the Policy is
issued. The rider is intended to be a qualified long term care rider pursuant to
Section 7702 B of the Code. The Company will take such action as may be
necessary to qualify for such favorable tax treatment.
If elected and utilized, a portion of the Death Benefit will be advanced to
cover long-term care claims. The portion advanced may not exceed 48% of the
Stated Amount.
SPECIAL TAX CONSIDERATIONS. The Company believes that a Policy issued on a
standard rate class basis generally should meet the Section 7702 definition of a
life insurance contract. With respect to a Policy issued on a substandard basis,
there is insufficient guidance to determine if such a Policy would satisfy the
Section 7702 definition of a life insurance contract, particularly if you pay
the full amount of premiums permitted under such a Policy. Assuming that a
Policy qualifies as a
9
<PAGE> 14
life insurance contract for federal income tax purposes, you should not be
deemed to be in constructive receipt of Cash Value under a Policy until there is
a distribution from the Policy. Moreover, death benefits payable under a Policy
should be completely excludable from the gross income of the Beneficiary. As a
result, the Beneficiary generally should not be taxed on these proceeds. (See
"Tax Status of the Policy," page 31.)
In almost all cases, the Policy will be a modified endowment contract ("MEC").
If a Policy is a MEC, certain distributions made during an Insured's lifetime,
such as loans and partial withdrawals from, and collateral assignments of, the
Policy, are taxable to you on an income-first basis. A 10% penalty tax may be
imposed on income distributed before you attain age 59 1/2. Policies that are
not MECs receive preferential tax treatment with respect to certain
distributions. For a discussion of the tax issues associated with this Policy,
see "Federal Tax Considerations" on page 31.
WRITTEN REQUESTS
Certain changes and elections must be made in writing to the Company. Where the
term "written request" is used, it means that written information must be sent
to the Company's Home Office in a form and content satisfactory to the Company.
10
<PAGE> 15
THE INSURANCE COMPANY
- --------------------------------------------------------------------------------
The Travelers Insurance Company (the "Company") is a stock insurance company
which has been continuously engaged in the insurance business since its
incorporation in the state of Connecticut in 1864. The Company writes individual
life insurance and individual and group annuity contracts on a nonparticipating
basis, and acts as the depositor for Separate Account Four. The Company is
licensed to conduct life insurance business in all states of the United States,
the District of Columbia, Puerto Rico, Guam, the British and U.S. Virgin Islands
and the Bahamas. The Company's obligations as depositor for Separate Account
Four may not be transferred without notice to and consent of Policy Owners.
The Company is a wholly owned subsidiary of The Travelers Insurance Group Inc.,
which is an indirect wholly owned subsidiary of Travelers Group Inc. The
Company's principal executive offices are located at One Tower Square, Hartford,
Connecticut 06183, telephone number (860) 277-0111.
The Company is subject to Connecticut law and regulations governing insurance
companies. It is regulated and supervised by the Connecticut Insurance
Commissioner ("Commissioner"). An annual statement in a prescribed form must be
filed with the Commissioner on or before March 1 in each year covering the
operations of the Company for the preceding year and its financial condition on
December 31 of such year. The Company's books and assets are subject to review
or examination by the Commissioner or his agents at all times, and a full
examination of its operations is conducted by the National Association of
Insurance Commissioners at least once every four years. In addition, the Company
is subject to the insurance laws and regulations of any jurisdiction in which it
sells its insurance contracts, as well as to various federal and state
securities laws and regulations.
THE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT FOUR
The Company established the Separate Account Four on October 16, 1996 pursuant
to the insurance laws of the state of Connecticut. Separate Account Four is
registered with the Securities and Exchange Commission ("SEC") as a unit
investment trust under the Investment Company Act of 1940, as amended (the "1940
Act"). Separate Account Four meets the definition of a separate account under
the federal securities laws. Registration of Separate Account Four with the SEC
does not involve supervision by the SEC of the management or investment policies
of Separate Account Four. It was established to accept premiums paid by policy
holders of the Contract. Subject to Policy Owner approval and applicable law,
the Company reserves the right to end Separate Account Four's registration under
the 1940 Act.
Additionally, the operations of Separate Account Four are subject to the
provisions of Section 38a-433 of the Connecticut General Statutes which
authorizes the Connecticut Insurance Commissioner to adopt regulations under it.
Connecticut law provides that the assets of Separate Account Four will be held
for the exclusive benefit of Policy Owners and the persons entitled to payments
under the Policy offered by this Prospectus and other policies that may be
funded through the Portfolio Architect segment of Separate Account Four. The
Policies provide that the assets of Separate Account Four are not chargeable
with liabilities arising out of any other business which the Company may
conduct. Any obligations arising under the Policy are general corporate
obligations of the Company.
11
<PAGE> 16
THE INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
You may allocate Premium Payments and Cash Value to one or more of the available
Investment Options. The investments of each option are subject to the risks of
changing economic conditions and the ability of each Investment Option's
investment manager or subadviser to anticipate such changes. There is no
assurance that the Investment Options will achieve their stated objectives.
Since there are varying degrees of risk inherent in each option, please read
carefully the complete risk disclosure in each Portfolio's prospectus before
investing.
The Investment Options and their investment objectives are as follows:
CASH INCOME TRUST. Cash Income Trust, a management investment company, seeks to
provide high current income while emphasizing preservation of capital and
maintaining a high degree liquidity by investing in short-term money market
securities deemed to present minimal credit risks.
CAPITAL APPRECIATION FUND. The objective of the Capital Appreciation Fund, a
management investment company, is growth of capital through the use of common
stocks. Income is not an objective. The Fund invests principally in common
stocks of small to large companies which are expected to experience wide
fluctuations in price in both rising and declining markets.
TRAVELERS SERIES FUND, INC.
AIM CAPITAL APPRECIATION PORTFOLIO. The investment objective of the AIM Capital
Appreciation Portfolio is to seek capital appreciation by investing principally
in common stock, with emphasis on medium sized and smaller emerging growth
companies.
ALLIANCE GROWTH PORTFOLIO. The objective of the Growth Portfolio is long-term
growth of capital by investing predominantly in equity securities of companies
with a favorable outlook for earnings and whose rate of growth is expected to
exceed that of the U.S. economy over time. Current income is only an incidental
consideration.
PUTNAM DIVERSIFIED INCOME PORTFOLIO. The objective of the Diversified Income
Portfolio is to seek high current income consistent with preservation of
capital. The Portfolio will allocate its investments among the U.S. Government
Sector, the High Yield Sector, and the International Sector of the fixed income
securities markets.
MFS TOTAL RETURN PORTFOLIO. The Total Return Portfolio's objective is to obtain
above-average income (compared to a portfolio entirely invested in equity
securities) consistent with the prudent employment of capital. Generally, at
least 40% of the Portfolio's assets will be invested in equity securities.
TRAVELERS SERIES TRUST
TRAVELERS QUALITY BOND PORTFOLIO. The basic investment objective of Travelers
Bond Portfolio is to seek current income, moderate capital volatility and total
return.
LAZARD INTERNATIONAL STOCK PORTFOLIO. The investment objective of the
International Stock Portfolio is to seek capital appreciation through investing
primarily in the equity securities of non-United States companies (i.e.,
incorporated or organized outside the United States).
MFS EMERGING GROWTH PORTFOLIO. MFS Portfolio's investment objective is to seek
to provide long-term growth of capital. Dividend and interest income from
portfolio securities, if any, is incidental to the MFS Portfolio's investment
objective.
FEDERATED STOCK PORTFOLIO. The investment objective of the Portfolio is to
provide growth of income and capital by investing principally in a
professionally managed and diversified portfolio of
12
<PAGE> 17
common stock of high-quality companies. These companies generally are leaders in
their industries and are characterized by sound management and the ability to
finance expected growth.
FEDERATED HIGH YIELD PORTFOLIO. The investment objective of the Federated High
Yield Portfolio is to seek high current income by investing primarily in a
professionally managed, diversified portfolio of fixed income securities.
LARGE CAP PORTFOLIO. Large Cap Portfolio seeks long-term growth of capital by
investing primarily in equity securities of companies with large market
capitalizations. Normally, at least 65% of the Portfolio's total assets will be
invested in these securities. The Portfolio has the flexibility, however, to
invest the balance in other market capitalizations and security types.
EQUITY INCOME PORTFOLIO. The Portfolio seeks reasonable income by investing
primarily in income-producing equity securities. Normally, at least 65% of the
Portfolio's total assets will be invested in these securities. The Portfolio has
the flexibility, however, to invest the balance in all types of domestic and
foreign securities, including bonds. The Portfolio seeks to achieve a yield that
exceeds that of the securities comprising the S&P 500. The Portfolio does not
expect to invest in debt securities of companies that do not have proven
earnings or credit. When choosing the Portfolio's investments, the Subadviser
also considers the potential for capital appreciation.
MID-CAP DISCIPLINED EQUITY PORTFOLIO. The investment objective of the Portfolio
is to seek growth of capital by investing primarily in a broadly diversified
portfolio of common stocks.
TRAVELERS ZERO COUPON BOND FUND PORTFOLIOS (THREE PORTFOLIOS: SERIES 1998, 2000
AND 2005). The investment objectives of each of the Zero Coupon Bond Fund
Portfolios is to provide as high an investment return as is consistent with the
preservation of capital investing in primarily zero coupon securities that pay
cash income but are acquired by the Portfolio at substantial discounts from
their values at maturity. THE ZERO COUPON BOND FUND PORTFOLIOS MAY NOT BE
APPROPRIATE FOR POLICY OWNERS WHO DO NOT PLAN TO HAVE THEIR PREMIUMS INVESTED IN
SHARES OF THE PORTFOLIOS FOR THE LONG-TERM OR UNTIL MATURITY.
13
<PAGE> 18
FUNDING OPTION INVESTMENT MANAGERS:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
FUNDING OPTION INVESTMENT ADVISER SUB-ADVISER
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Travelers Capital Travelers Asset Management Janus Capital Corporation
Appreciation Fund International Corporation
("TAMIC")
- ----------------------------------------------------------------------------------------------
Cash Income Trust TAMIC
- ----------------------------------------------------------------------------------------------
AIM Capital Appreciation Fund SBMFM AIM Capital Management, Inc.
- ----------------------------------------------------------------------------------------------
Alliance Growth Portfolio Travelers Investment Adviser, Alliance Capital Management
Inc. ("TIA") L.P.
- ----------------------------------------------------------------------------------------------
MFS Total Return Portfolio TIA Massachusetts Financial
Services Company
- ----------------------------------------------------------------------------------------------
Putnam Diversified Income TIA Putnam Investment Management,
Portfolio Inc.
- ----------------------------------------------------------------------------------------------
Travelers Quality Bond TAMIC
Portfolio
- ----------------------------------------------------------------------------------------------
Lazard International Stock TAMIC Lazard Freres Asset
Portfolio Management
- ----------------------------------------------------------------------------------------------
MFS Emerging Growth Portfolio TAMIC MFS
- ----------------------------------------------------------------------------------------------
Federated Stock Portfolio TAMIC Federated Management, Inc.
- ----------------------------------------------------------------------------------------------
Federated High Yield TAMIC Federated Management, Inc.
Portfolio
- ----------------------------------------------------------------------------------------------
Large Cap Portfolio TAMIC Fidelity Management &
Research Company
- ----------------------------------------------------------------------------------------------
Equity Income Portfolio TAMIC Fidelity Management &
Research Company
- ----------------------------------------------------------------------------------------------
Mid-Cap Disciplined Equity TAMIC TIMCO
Portfolio
- ----------------------------------------------------------------------------------------------
Zero Coupon Bond Fund TAMIC
Portfolios (Series 1998, 2000
and 2005)
- ----------------------------------------------------------------------------------------------
</TABLE>
SUBSTITUTIONS AND ADDITIONS
If any of the Investment Options become unavailable for allocating purchase
payments, or if, in our judgment further investment in a Investment Option
becomes inappropriate for the purposes of the Policy, we may substitute another
registered, open-end management investment company. Substitution may be made
with respect to both existing investments and the investment of any future
Premium Payments. No such substitution will be made without notice to Contract
Owners, state approval if applicable, and without prior approval of the SEC, to
the extent required by the 1940 Act, or other applicable law. Additional
Investment Options may also be added at our discretion.
MIXED AND SHARED FUNDING
It is conceivable that in the future it may be disadvantageous for both variable
annuity accounts and variable life accounts, or for variable accounts of
different insurance companies, to invest simultaneously in the same portfolios
(called "mixed" and "shared" funding). Currently neither the insurance companies
nor the portfolios foresee any such disadvantages to the companies or to
variable contract owners. Each portfolio's board of trustees, directors or
managers intends to
14
<PAGE> 19
monitor events in order to identify any material conflicts between such policy
owners and to determine what action, if any, should be taken in response
thereto.
THE POLICY
- --------------------------------------------------------------------------------
The Policy is subject to the insurance laws and regulations of each state or
jurisdiction in which it is available for distribution. There may be differences
between the Policy issued and the general policy description contained in this
Prospectus because of requirements of the state where your Policy is issued. Any
such differences will be described in your Policy.
THE POLICY APPLICATION
Individuals wishing to purchase a Policy must submit an application to the
Company. The initial premium must be at least $10,000. You may request an
increase or decrease in the Stated Amount of the Policy in writing from time to
time. (See "Changes in Stated Amount," page 24.) No change in the terms or
conditions of the Policy will be made without your consent.
ELIGIBLE PURCHASERS
A person can purchase a Policy to insure the life of another person provided
that the Policy Owner has an insurable interest in the life of the Insured, and
the Insured consents to the purchase. In most states, any person between the
ages of 16 and 80 is eligible to be insured subject to the submission of a
Policy Application to the Company. In some states, the maximum issue age may be
lower. Insurance coverage under a Policy will begin only after the applicant has
satisfied all outstanding underwriting delivery requirements, and after the
Company has received the Initial Premium. Acceptance of an application is
subject to the Company's underwriting rules. The Company reserves the right to
reject an application for any lawful reason, provided that such rejection is
made in a manner consistent with that with which similarly situated risks are
treated and provided that unfair discrimination is avoided.
The Company assigns Insureds to risk classes which determine the current cost of
insurance rates used in calculating the cost of insurance charge under the
Policy. Policies are issued in either the standard non-smoker or smoker risk
class. To the extent permitted by state law, Policies may also be issued on the
basis of the sex of the Insured. Policies may also be issued on Insureds in a
sub-standard underwriting class. (For a discussion of the effect of risk class
on the cost of insurance charge, see "Cost of Insurance Charge" on page 17.)
PAYMENTS MADE UNDER THE POLICY
INITIAL PREMIUM. The Initial Premium is due on or before the Policy Date and is
payable in full at the Company's Home Office. The Initial Premium is the
guideline single premium for the life insurance coverage provided under the
Policy, as determined in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"). The minimum Initial Premium is $10,000. Additional Premium
Payments may be made under the Policy, as described below.
The Initial Premium purchases a Death Benefit equal to the Policy's Stated
Amount (if Option 1 is selected), or to the Policy's Stated Amount plus the Cash
Value (if Option 2 is selected). The relationship between the Initial Premium
and the Stated Amount depends on the age, sex (where permitted by state law) and
risk class of the Insured. Generally, the same Initial Premium will purchase a
higher Stated Amount for a younger insured than for an older insured. Likewise,
the same Initial Premium will purchase a slightly higher Stated Amount for a
female insured than for a male insured of the same age. Also, the same Initial
Premium will purchase a higher Stated Amount for a standard Insured than for a
substandard Insured. Representative Stated Amounts per dollar of Initial Premium
are set forth in Appendix C.
15
<PAGE> 20
ADDITIONAL PREMIUM PAYMENTS. Although the Policy can operate as a single
premium policy, additional Premium Payments may be made under certain
circumstances, provided there are no outstanding loans. If there are any
outstanding loans, any payment received by the Company will be considered
repayment of that debt. The circumstances under which additional Premium
Payments can be made under the Policy are as follows:
1. Increases in Stated Amount -- Subject to applicable underwriting
guidelines, you may request an increase in Stated Amount at any time
(prior to the Insured's attaining age 80). If your request is approved,
the Company will require you to make an additional Premium Payment in
order for an increase in Stated Amount to become effective. The minimum
additional Premium Payment that the Company permits in connection with
an increase in Stated Amount is $1,000. (See "Changes in Stated Amount,"
page 17.)
2. To Prevent Lapse -- If the Cash Surrender Value on any Deduction Day is
insufficient to cover the Monthly Deduction Amount due on that day, then
you must make an additional Premium Payment during the Grace Period
sufficient to cover the Monthly Deduction Amount in order to prevent
lapse. The minimum amount of any payment that may be required to be made
in this circumstance will be stated in the Notice mailed to you in
accordance with the Policy; payments in excess of the amount required to
prevent lapse will be considered a payment "at your discretion" and
consequently subject to the rules described below. If you do not make a
sufficient payment, the Policy will lapse and terminate without value.
(See "Policy Lapse and Reinstatement," page 25.)
3. At Your Discretion -- Additional Premium Payments may be made at your
discretion so long as the payment plus the total of all premiums
previously paid does not exceed the maximum premium limitation derived
from the guideline premium test for life insurance prescribed by the
Internal Revenue Code. Because of the test, the maximum premium
limitation will ordinarily equal the Initial Premium for a number of
years after the Policy has been issued. Therefore, discretionary
additional Premium Payments normally will not be permitted during the
early years of the Policy. Discretionary additional Premium Payments
must be at least $250, and may not be paid on or after the Maturity
Date.
Any Additional Premium Payments made under the Policy may be subject to new
evidence of insurability. Payments received in excess of any Loan Account Value
will be treated as an additional Premium Payment.
ALLOCATION OF PREMIUM PAYMENTS
You specify on the Policy Application how the Initial Premium will be allocated
among the Investment Options of Separate Account Four. You may allocate premium
to one or more Investment Options, provided that such allocation is made in
whole percentages of at least five 5%.
Regardless of the allocation made in the application, during the period between
premium receipt and policy issuance (the "Underwriting Period"), the Initial
Premium will be held by the Company in a general suspense account established
for such purposes. At the time a Policy is issued, the Initial Premium
attributable to such Policy will be credited with interest comparable to the
effective yield during the Underwriting Period of the Cash Income Trust (e.g.,
as if the Policy had been issued and the premium allocated to the Cash Income
Trust on the date the premium was received in good order by the Company), which
amount will become the initial Cash Value of the Policy. The Cash Value will
then be allocated to the Cash Income Trust until the expiration of the Right to
Cancel Period. At the end of the Right to Cancel Period, the Cash Value in the
Cash Income Trust will be allocated (in whole percentages of 5% or more) among
the Investment Options designated on the Policy Application. The number of
Accumulation Units to be credited to the Policy once a Premium Payment has been
received by the Company will be determined by dividing the amount of Premium
Payment applied to each Investment Option by the Accumulation
16
<PAGE> 21
Unit Value of that Investment Option, as computed on the next Valuation Date
following receipt of the payment.
You may change the allocation of Cash Value or any Additional Premiums received
on or after the expiration of the Right to Cancel Period among any of the
Investment Options then available under the Policy. (See "Transfers of Cash
Value," page 22.) You should periodically review the allocation of Cash Value in
light of market conditions and overall financial planning requirements to ensure
that such allocation continues to be consistent with your investment objectives.
RIGHT TO CANCEL PERIOD
A Policy may be returned to the Company for cancellation by mailing or
delivering it to the Company or to the agent who sold the Policy within the
latest of (1) 10 days after delivery of the Policy to you, (2) 45 days of
completion of the policy application, or (3) 10 days after the Notice of Right
to Cancel has been mailed or delivered to you (or later, if state law requires).
Within seven days following the Company's receipt of your request for a refund,
the Company will refund the greater of (1) any premium paid, or (2) the Cash
Value of the Policy on the date we receive the returned policy. For options (1)
and (2), the amounts will be increased by any charges or expenses which may have
been deducted and will be decreased by any Loan Account Value. After the Policy
is returned, it will be considered as if it were never in effect.
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
MONTHLY DEDUCTION AMOUNT
The Company will deduct a Monthly Deduction Amount from the Policy's Cash Value
attributable to the Investment Options to cover certain charges and expenses
incurred in connection with the Policy. The Monthly Deduction Amount will be
deducted pro rata from each of the Investment Options attributable to the Policy
on the first day of each Policy Month (the "Deduction Date"), beginning on the
Policy Date. The dollar amount of the Deduction Amount may vary from month to
month.
The following is a summary of monthly charges and expenses which make up the
Monthly Deduction Amount.
COST OF INSURANCE CHARGE
The cost of insurance charge is to cover the Company's expected mortality
cost for basic insurance coverage, not including supplemental benefit
provisions. The cost of insurance charge is deducted monthly, and is equal
to the difference between the Death Benefit payable under the Policy
(discounted at the rate set forth in the Policy) and the Cash Value of the
Policy (each determined on the Deduction Date) (the "Coverage Amount"),
multiplied by a monthly "cost of insurance rate," i.e., a monthly rate
charged for each dollar of insurance coverage. The cost of insurance rate
varies annually and is based on the attained age, sex (where permitted by
state law) and risk class of the Insured.
The cost of insurance rate for standard risks will not exceed those based
on the 1980 Commissioners Standard Ordinary Mortality Tables ("1980
Tables"). Substandard risks will have monthly deductions based on cost of
insurance rates which may be higher than those set forth in the 1980
Tables. A table of guaranteed cost of insurance rates per $1,000 will be
included in each Policy; however, the Company reserves the right to use
rates lower than those shown in the Policy. Any changes in the cost of
insurance rates will be made uniformly for all Insureds in the same class.
Because the Cash Value and, under certain conditions, the Death Benefit of
a Policy may vary from month to month, the cost of insurance charge may
also vary on each Deduction Date. In
17
<PAGE> 22
addition, you should note that the cost of insurance charge is based on
the difference between the Death Benefit payable under the Policy and the
Cash Value of the Policy. An increase in the Cash Value or a decrease in
the Death Benefit would result in a smaller cost of insurance charge
assuming that everything else remains the same; while a decrease in the
Cash Value or an increase in the Death Benefit would result in a larger
cost of insurance charge.
Changes in the Policy's Death Benefit option and in the Stated Amount will
affect how the cost of insurance charge is calculated. See "Changes in
Death Benefit Option," page 24 and "Changes in Stated Amount," page 24 for
a discussion of the effect of changes in the Stated Amount on the cost of
insurance.
STATE PREMIUM TAX CHARGES AND DAC TAX CHARGES
Premium tax charges are not deducted at the time that a premium payment is
made, although the Company does pay state premium taxes attributable to a
particular Policy when those taxes are incurred. To reimburse the Company
for the payment of such taxes, during the first ten years following a
premium payment made before the 10th Policy Anniversary, a premium tax
charge of .20% per year will apply.
Premium taxes vary from state to state and currently range from 0.75% to
3.5%. Because there is a range of premium tax rates, you may pay premium
tax charges in total that are higher or lower than the premium tax actually
assessed in your jurisdiction. In addition, a DAC (deferred acquisition
cost) tax of 0.15% annually will apply for the first ten years after each
premium payment.
An annual total of 0.0291667% will be deducted from the Policy's Cash Value
on each Deduction Date (0.0166667% for the premium tax, and 0.0125% for the
DAC tax). If no additional Premium Payments are made during the first ten
Policy Years, no deductions for the premium and DAC tax charges will be
made after Policy Year 10.
If an additional Premium Payment is made during the first ten Policy Years,
then after Policy Year 10, the Company will deduct a total tax charge of
0.0291667% of the portion of the Cash Value attributable to the additional
Premium Payment. The portion of the Cash Value attributable to the
additional Premium Payment is calculated by dividing (a) by (b), where (a)
is the amount of the additional Premium Payment, and (b) is the Policy's
Cash Value immediately after receipt of the additional Premium Payment. In
calculating the charges described above, the Company will use this ratio to
determine the portion of Cash Value in the Separate Account attributable to
that payment until an additional Premium Payment is made.
CHARGES AGAINST THE INVESTMENT OPTIONS OF SEPARATE ACCOUNT FOUR
MORTALITY AND EXPENSE RISK CHARGE
A mortality and expense risk charge of 0.90% on a current basis annually is
deducted from amounts allocated to each Investment Option. The charge is
deducted daily and equals 0.002466% for each day in the Valuation Period.
The annual rate of the mortality and expense risk charge will be reduced to
0.75% for the current Policy Year if the Average Net Growth Rate is 6.5% or
greater during the previous Policy Year. This determination is made
annually.
The mortality risk assumed is that Insureds may live for a shorter period
of time than estimated and, therefore, a greater amount of Death Benefit
proceeds than expected will be payable. The expense risk assumed is that
expenses incurred in issuing and administering the Policy will be greater
than estimated and, therefore, will exceed the administrative expense
charge imposed by the Policy. The Company reserves the right to adjust this
charge, although it guarantees that the adjusted charge will not exceed
0.90%. If not all money collected by the
18
<PAGE> 23
Company from this charge is needed to cover the mortality and expense
costs, the excess will be contributed to the Company's general account.
ADMINISTRATIVE EXPENSE CHARGES
A charge will be deducted from amounts allocated to each Investment Option
to compensate the Company for certain administrative expenses incurred in
connection with the Policy. The charge will be deducted daily and equals
0.001096% for each day in a Valuation Period. The annual rate of this
charge is 0.40%. Additionally, for policies with an initial premium of less
than $25,000, a monthly fee of $5 will apply for the life of the policy.
The administrative expense charges will compensate the Company for the
issuance, underwriting, processing, start-up and ongoing administrative
expenses of the Policy and the Separate Account. These expenses include the
cost of processing applications; conducting medical examinations;
determining insurability; establishing and maintaining policy and Separate
Account records; processing death benefit claims, surrenders, transfers,
policy loans and changes; and reporting and overhead costs. The Company has
set this charge at a level which is intended to recover no more than the
actual expected costs of the administrative services to be provided while
the Policies are in force, and it does not expect to make a profit from the
application of such administrative charges.
INCOME TAXES
Although the Company does not currently incur any charge for income taxes
as a result of the operations of the Investment Options, the Company
reserves the right to assess a charge for such taxes if it determines that
such taxes will be incurred. (See "Federal Tax Considerations," page 31.)
INVESTMENT OPTION EXPENSES
- --------------------------------------------------------------------------------
Separate Account Four purchases shares of the Investment Options at net asset
value. The net asset value of the Investment Option shares reflects investment
advisory fees and other expenses already deducted. The investment advisory fees
and other expenses applicable to each of the Investment Options are described in
the individual Investment Option prospectuses.
SURRENDER CHARGES
- --------------------------------------------------------------------------------
A percent of premium surrender charge will be imposed upon full surrenders of
the Policy that occur within nine (9) years after the Company has received any
Premium Payments under the Policy. For partial surrenders a percentage of amount
surrendered will be charged. This charge is intended to cover certain expenses
relating to the sale of the Policy, including commissions to registered
representatives and other promotional expenses. To the extent that the surrender
charges assessed under the Policy are less than the sales commissions paid with
respect to the Policy, the Company will pay the shortfall from its general
account assets, which will include any
19
<PAGE> 24
profits it may derive from charges imposed under the Policy. (See also "Policy
Surrenders and cash Surrender Value," page 26.) Surrenders charges are
determined as follows:
<TABLE>
<CAPTION>
LENGTH OF TIME AFTER FROM FULL SURRENDERS FROM PARTIAL SURRENDERS
PREMIUM PAYMENT (% OF PREMIUM) (% OF AMOUNT SURRENDERED)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
1-2 years 7.5% 7.5%
3-4 7% 7%
5 6.5% 6.5%
6 6% 6%
7 5% 5%
8 4% 4%
9 3% 3%
Year 10 and Thereafter 0% 0%
</TABLE>
PARTIAL SURRENDERS. The Company will impose a surrender charge equal to a
percentage of the amount surrendered for partial surrenders in excess of the
free withdrawal amount described below. The surrender charge will be limited so
that the total charge for partial surrenders will not exceed the charge that
would apply to a full surrender of the Policy.
For purposes of determining the surrender charge percentage that will apply to a
partial surrender, surrender charges are calculated on a "last-in, first-out
basis." This means that any partial withdrawal in excess of the free withdrawal
amount will be taken against premiums in the reverse order in which they were
made, if more than one premium was paid under the Policy. Surrender charges will
be assessed only against that portion of the partial withdrawal taken from
premium payment(s).
FREE WITHDRAWAL ALLOWANCE. The Company will permit partial surrenders of the
Policy's earnings in an amount of up to 10% of the Policy's Cash Value each year
(beginning with the Second Policy Year) without the imposition of a surrender
charge. The amount of Cash Value available for free withdrawal will be
determined on the Policy Anniversary on or immediately prior to the date that
the partial surrender request is received. The amount of earnings available for
withdrawal will be determined on the date the request for such withdrawal is
received by the Company.
TRANSFER CHARGE
- --------------------------------------------------------------------------------
Although there are currently no charges for transfers among the investment
alternatives provided under this Policy, the Company reserves the right to limit
the number of free transfers to no more than four in any Policy Year, and to
charge up to $10 for any transfer request in excess of four in any Policy Year.
The Company also reserves the right to assess a processing fee for the Automated
Transfer (Dollar Cost Averaging) service. (See "Transfers of Cash Value," page
22.)
REDUCTION OR ELIMINATION OF CHARGES
- --------------------------------------------------------------------------------
The Company may offer the Policy in arrangements where an employer or trustee
will own a group of policies on the lives of certain employees, or in other
situations where groups of policies will be purchased at one time, or where
policies are sold on a discretionary group basis. The Company may reduce or
eliminate sales charges and administrative charges in such arrangements to
reflect the reduced sales expenses and administrative costs expected as a result
of sales to a particular group. The Company makes any reductions according to
rules in effect when an application for a Policy or additional Premium Payment
is approved. While it may change these rules from time to time, the Company will
attempt not to discriminate unfairly against any person.
20
<PAGE> 25
VALUATION OF THE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
HOW THE CASH VALUE VARIES
The Policy's Cash Value is determined daily. A Policy's Cash Value is not
guaranteed, and will vary to reflect a number of factors, including Premium
Payments made, partial withdrawals, loans, charges assessed in connection with
the Policy, and the investment experience of each Investment Option to which
Cash Value is allocated. The Policy's total Cash Value on a Valuation Date
equals the Accumulation Unit Value(s) times the number of Accumulation Units for
each applicable Investment Option, plus the Loan Account Value, on that date.
Separate Account Four purchases the shares of each Investment Option at net
asset value (i.e., without a sales charge). All dividends and capital gains
distributions received from an Investment Option are reinvested by Separate
Account Four in that Fund's shares at net asset value and will increase the
associated Accumulation Unit Value. Investment Option shares will be redeemed by
Separate Account Four at their net asset value to the extent necessary to make
payments under the Policy.
All valuations made under the Policy (e.g., the determination of Cash Value or
Cash Surrender Value, policy loans, and the determination of the number of
Accumulation Units to be credited to a Policy), will be determined as of the
Valuation Date on which the Company receives the Policy Owner's written request
for a transaction under the Policy, or on which the Company is assessing charges
under the Policy.
HOW THE INVESTMENT EXPERIENCE IS DETERMINED
The Cash Value is related to the rate of return of the Investment Option(s) to
which Premium Payments made under the Policy have been allocated. The Cash Value
on any Valuation Date is calculated by multiplying the number of Accumulation
Units credited to the Policy for each Investment Option by the corresponding
Accumulation Unit Value, then adding the result for each Investment Option
credited to the Policy, and adding any value of the Loan Account.
ACCUMULATION UNIT VALUE
The value of an Accumulation Unit for each Investment Option of Separate Account
Four (the "Accumulation Unit Value") is established on each Valuation Date. For
each Investment Option, the Accumulation Unit Value for a Valuation Period is
determined by multiplying the Accumulation Unit Value on the preceding Valuation
Period by the Net Investment Factor for the Investment Option during the
subsequent Valuation Period.
The Accumulation Unit Value may increase or decrease from Valuation Period to
Valuation Period. The number of Accumulation Units credited to your Policy will
not change as a result of the investment experience of the Investment Options.
The Accumulation Unit Value of the Investment Options reflects the reinvestment
of any dividends or capital gains distributions declared by the Investment
Option.
NET INVESTMENT FACTOR
The value of an Accumulation Unit for each subsequent Valuation Period
fluctuates based upon the net rate of return for that period. The Company
determines the net rate of return for each Investment Option at the end of each
Valuation Period. The net rate of return reflects the investment performance of
the Investment Option for the Valuation Period and is net of the charges to
Separate Account Four described above.
21
<PAGE> 26
VALUATION PERIODS AND VALUATION DATES
A Valuation Period is the period commencing at the close of business of the New
York Stock Exchange on any Valuation Date and ending at the close of business on
the next succeeding Valuation Date. A Valuation Date is each day that the New
York Stock Exchange is open for trading.
TRANSFERS OF CASH VALUE
- --------------------------------------------------------------------------------
As long as the Policy remains in effect, the Policy Owner may transfer all or a
portion of the Cash Value (less the Loan Account) among any of the Investment
Option(s) then available. Although there are currently no charges, penalties or
restrictions on the amount or frequency of free transfers between the Investment
Options, the Company reserves the right to limit the number of transfers to no
more than four in any Policy Year, and to charge an administrative fee (not to
exceed $10) for any transfer request in excess of four per Policy Year.
Some Investment Options have higher investment advisory fees and/or other
expenses than others; therefore, a transfer from one Investment Option to
another could result in a Policy becoming subject to higher or lower fees and
expenses. A transfer between Investment Options has no other effect on the
amount or timing of any of the other charges under the Policy.
The number of Accumulation Units credited to the Investment Options involved in
the transfer will be determined by dividing the amount transferred from or to
that Investment Option by the Accumulation Unit Value of that Investment Option.
The Accumulation Unit Values will be determined on the Valuation Date on which
the Company receives the written request for a transfer.
TELEPHONE TRANSFERS
You may request a transfer of Cash Value either in writing or by telephone. The
telephone transfer privilege is available automatically; no special election is
necessary for a Policy Owner to elect this option. All transfers must be in
accordance with the terms of the Policy. Transfer instructions are currently
accepted on each Valuation Date between 9:00 a.m. and 4:00 p.m., Eastern time,
by calling 1-800-334-4298. Once instructions have been accepted, they may not be
rescinded; however, new telephone instructions may be given the following day.
If the transfer instructions are not in good order, the Company will not execute
the transfer and will promptly notify the caller. The Company will make
reasonable efforts to make certain that telephone transfer requests are genuine.
These measures may include taping telephone requests and/or requiring the use of
a personal identification number. If it fails to take such measures, the Company
may be liable for losses resulting from fraudulent transfer requests.
AUTOMATED TRANSFERS (DOLLAR COST AVERAGING)
You may establish automated transfers of Cash Value on a monthly basis from any
Investment Option to any other Investment Option through a written request or
other method acceptable to the Company. You must have a minimum Cash Value of
$5,000 allocated to the Investment Option(s) from which the transfers are to be
made in order to enroll in the Dollar Cost Averaging Program. The minimum
automated transfer amount is $100 per month. Such transfers will be effected on
a certain date each month, as specified by the Policy Owner at the time of
election.
You may start or stop participation in the Dollar Cost Averaging Program at any
time, but you must give the Company at least 30 days' notice to change any
automated transfer instructions that are currently in place. Automated transfers
are subject to all of the provisions and terms of the Policy, including
provisions relating to the transfer of money between Investment Options. The
Company reserves the right to suspend or modify automated transfers at any time
and to assess a processing fee for this service.
22
<PAGE> 27
Before transferring any part of the Cash Value, Policy Owners should consider
the risks involved in switching between investments available under the Policy.
Dollar cost averaging requires regular investments regardless of fluctuating
price levels, and does not guarantee profits or prevent losses in a declining
market. A potential investor should consider his or her financial ability to
continue purchases through periods of low price levels.
DEATH BENEFIT
- --------------------------------------------------------------------------------
As long as the Policy remains in force, the Policy provides a Death Benefit upon
the death of the Insured. The death benefit proceeds will be paid to a named
Beneficiary. The amount of the death benefit proceeds will be determined on the
date on which the Insured's death occurred. The death benefit proceeds may be
paid in a lump sum or under any optional payment plan.
Death Benefits are payable within seven days of the Company's receipt of
satisfactory proof of the Insured's death. To the extent permitted by state law,
the amount of Death Benefit actually paid to the Policy beneficiary may be
adjusted to reflect any policy loan, suicide by the Insured within two years
after the Issue Date of the Policy, any material misstatements in the policy
application as to age or sex of the Insured, and any amounts payable to an
assignee under a collateral assignment of the Policy. (See "Assignment," page
30.) In addition, if the Insured dies during the Grace Period, the Death Benefit
actually paid to the Policy Owner's beneficiary will be reduced by the amount of
the Deduction Amount that is due and unpaid, and by the amount of any
outstanding Policy Loan. (See "Policy Surrenders and Cash Surrender Value," page
26, for the effects of partial cash surrenders on Death Benefits.)
The Policy provides for two Death Benefit options. Under Option 1 (the Level
Option), the Death Benefit will be equal to the Policy's Stated Amount or, if
greater, a specified multiple of Cash Value determined as of the date of the
Insured's death (the "Minimum Amount Insured"). Under Option 2 (the Variable
Option), the Death Benefit will be equal to the Policy's Stated Amount plus the
Cash Value (determined as of the date of the Insured's death) or, if greater,
the Minimum Amount Insured. The Minimum Amount Insured is the amount required to
qualify the Policy as a life insurance contract under the current federal tax
law. Under that law, the Minimum Amount Insured is equal to a stated percentage
of the Cash Value of the Policy determined daily. The percentages, which differ
according to the attained age of the Insured, may change as federal income tax
laws or regulations change. The percentages used to calculate the Minimum Amount
Insured decrease after the Insured is age 40. The following is a schedule of the
applicable percentages:
<TABLE>
<CAPTION>
- ------------------------------------------------
% SHALL
DECREASE BY
A RATABLE
PORTION FOR
EACH FULL
ATTAINED AGE YEAR:
- ------------------------------- ------------
MORE THAN BUT NOT MORE THAN FROM TO
- ------------------------------------------------
<S> <C> <C> <C>
0 40 250 250
40 45 250 215
45 50 215 185
50 55 185 150
55 60 150 130
60 65 130 120
65 70 120 115
70 75 115 105
75 90 105 105
90 95 105 100
</TABLE>
Federal tax law imposes another cash funding limitation on cash value life
insurance policies that, when applicable, may increase the Minimum Amount
Insured in excess of the figures shown in the schedule above. (See Appendix B
for examples demonstrating the relationship between the Death
23
<PAGE> 28
Benefit, the Cash Surrender Value and the Minimum Amount Insured under the Level
and Variable Options of the Policy.)
CHANGES IN DEATH BENEFIT OPTION
The Company will change your Death Benefit Option at any time prior to the
Insured's death, upon receipt in good order of a written request to do so, and,
if required, acceptable evidence of insurability. There is no direct tax
consequence of changing a Death Benefit option, except as described under
"Modified Endowment Contracts" on page . However, the change could affect
future values of the Coverage Amount, and with some Variable Option to Level
Option changes involving substantially funded policies, there may be a cash
distribution which is included in the gross income of the Policy Owner.
Additionally, the cost of insurance charge, which is based on the Coverage
Amount, may be different in the future. A change from the Level Option to the
Variable Option will not be permitted if the change would result in a Stated
Amount of less than the minimum amount of $10,000. (See "Changes in Stated
Amount" below.) Contact your registered representative for more information. IF
YOU ACCELERATED YOUR STATED AMOUNT PURSUANT TO THE LONG TERM CARE RIDER
AVAILABLE UNDER THE POLICY, YOU MAY NOT CHANGE YOUR DEATH BENEFIT OPTION.
CHANGES IN STATED AMOUNT
A Policy Owner may request in writing that the Stated Amount of the Policy be
increased or decreased. A minimum premium payment of $1,000 is required for any
increase and the Company will require satisfactory evidence of insurability. An
increase may only be requested prior to the earlier of the Policy anniversary in
the year in which the Insured attains age 81 and the date of the Insured's
death. The effective date of any increase will be as shown on the new Policy
Summary Page which the Company will send to the Policy Owner. The effective date
of any increase in the Stated Amount will generally be the Deduction Date next
following either the date of a new application or, if different, the date
requested by the Policy Owner.
There is no additional charge for a decrease in Stated Amount. However, the
Stated Amount after any decrease may not be less than $10,000. A decrease in
Stated Amount in a substantially funded Policy may cause a cash distribution
that is includable in the gross income of the Policy Owner. (See "Federal Tax
Considerations," page 31.)
For purposes of determining the cost of insurance charge, a decrease in the
Stated Amount will reduce the Stated Amount in the following order:
1) against the most recent increase in the Stated Amount;
2) to other increases in the reverse order in which they occurred;
3) to the initial Stated Amount.
MATURITY AND MATURITY EXTENSION BENEFITS
If the Insured is living on the Maturity Date (the anniversary of the Policy
Date on which the Insured is age 100), the Company will pay the Policy Owner the
Cash Value of the Policy as of the Maturity Date, less any Loan Account Value,
amounts payable to an assignee under a collateral assignment of the Policy, and
any Deduction Amount due and unpaid. The Policy Owner must surrender the Policy
to the Company before such payment can be made, at which point the Policy will
terminate and the Company will have no further obligations under the Policy.
Where permitted by state law, the Policy provides for a Maturity Extension
Benefit which effectively allows the Policy Owner to request that coverage be
extended beyond the Maturity Date. Such request may only be made during the
twelve months following the Policy anniversary for the year in which the Insured
attains age 99. If the Maturity Extension Benefit is elected, any past due
Monthly Deduction Amounts must first be paid in order for the benefit to become
effective on the Maturity Date. After the Company receives a request for the
Maturity Extension
24
<PAGE> 29
Benefit, the Policy will continue in force until the earlier of the death of the
Insured or the date on which the Policy Owner surrenders the Policy for its Cash
Surrender Value. After the Maturity Date, the Death Benefit will be the Cash
Value less any Loan Account Value and any amounts payable to an assignee under a
collateral assignment of the Policy. The Death Benefit is based on the
experience of the Investment Options selected and is variable and is not
guaranteed. After the Maturity Date, the Monthly Deduction Amount will no longer
be charged against the Cash Value, and additional premiums will not be accepted.
Any loan outstanding need not be extinguished as of the Maturity Date. The loan
may be continued into the maturity extension period. New loans may also be
initiated during the maturity extension period. Restrictions on loans prior to
the Maturity Date of the Policy are still valid.
The Company intends that the Policy and the Maturity Extension Benefit be
considered life insurance for tax purposes. The Death Benefit is designed to
comply with Section 7702 of the Code, or other equivalent section of the Code.
Please note, however, that the Company does not give tax advice, and cannot
guarantee that the Death Benefit and Cash Value will be exempt from any future
tax liability. The tax results of any benefits under the Maturity Extension
provision depend upon interpretation of the Internal Revenue Code. The Policy
Owner should consult his or her own personal tax adviser prior to the exercise
of the Maturity Extension Benefit to assess any potential tax liability.
POLICY LAPSE AND REINSTATEMENT
The Policy will remain in effect until the Cash Surrender Value of the Policy is
insufficient to cover the Monthly Deduction Amount. 30 days after such event
occurs, the Company will give written notice to the Policy Owner indicating that
if the amount shown in the notice (which will be sufficient to cover the
Deduction Amount due) is not paid within 31 days, the Policy will lapse. The
Policy will continue through the Grace Period, but if the required payment is
not received, the Policy will terminate without value at the end of the Grace
Period. If the Insured dies during the Grace Period, the Death Benefit payable
under the Policy will be reduced by the Monthly Deduction Amount due plus the
amount of any Loan Account Balance. (See "Death Benefit," page 23.) If the
Policy is surrendered during the Grace Period, the Policy's Cash Surrender Value
will be reduced by the Monthly Deduction Amount due. (See "Policy Surrenders and
Cash Surrender Value," page 26.)
If the Policy lapses, the Policy Owner may reinstate the Policy upon payment of
the reinstatement premium (and any applicable charges) shown in the Policy. A
request for reinstatement may be made at any time within three years of lapse
(five years for policies issued in Missouri and North Carolina) provided that
(1) the Policy was not surrendered for cash; (2) satisfactory evidence of
insurability is provided; (3) all Monthly Deduction Amounts past due are paid,
subject to state law; (4) premium at least equal to three Monthly Deduction
Amounts is paid, subject to state law; and (5) all Loan Account Value is repaid
or restored. The Cash Value of the Policy upon reinstatement will be equal to
the amount provided by the premium paid.
The tax consequences of a lapse may not be reversible by a reinstatement. Policy
Owners should also refer to "Risks Associated with Loans Taken Against a
Variable Life Insurance Policy" (on page 28) to consider the effects of loans on
their Policy.
LAPSE PROTECTION GUARANTEE RIDER
A Policy Owner may add a Lapse Protection Guarantee Rider. This rider will
prevent a policy from lapsing if the Policy's Cash Surrender Value is
insufficient to pay the Monthly Deduction Amount due. The guarantee will be in
effect only if Premium Payments less amounts surrendered and outstanding loans
is greater than or equal to the initial Premium Payment plus any premiums paid
for increases in Stated Amount. The premium requirement will increase in
connection with an increase in Stated Amount. This rider is available only with
Death Benefit 1, for standard risks, and
25
<PAGE> 30
only at issue. A charge equal to 0.0041667% of the Policy's Cash Value will be
deducted on each Deduction Date to pay for the cost of this benefit.
LONG TERM CARE RIDER
Subject to state availability, a Long Term Care rider may be added to the
Policy. This rider must be added at issue and is a supplemental benefit to the
Policy. The Company intends that the rider will be a qualified long term care
rider as that term is defined under Section 7702B of the Code.
The long term care benefit is payable upon certification by a licensed health
care practicioner that the Insured's become a chronically ill individual
requiring nursing facility care, home health care or adult day care. A
"chronically ill" individual is classified as such by an inability to be able to
perform two out of five specified activities of daily living. Activities of
daily living include eating, transferring, toileting, bathing and dressing.
Additionally, an individual is classified as chronically ill if he or she
possesses a severe cognitive impairment necessitating substantial supervisions
to protect such individual from threats to health or safety due to such
impairment.
The cost of the Long Term Care Rider will depend on your age. We will disclose
the additional charge that will be deducted in connection with the provision of
coverage. Up to 2% per month of the Stated Amount (to a maximum of 48%) may be
advanced to reimburse for eligible Long Term Care expenses.
Once you have begun to receive benefits under this rider, you may not reduce
your Coverage Amount. Further, if you have incurred loans against the policy,
the amount of your Coverage Amount that you may use for this benefit will be
reduced by an amount equal to the outstanding loan balance.
EXCHANGE RIGHTS
Once the Policy is in effect, it may be exchanged at any time during the first
24 months after its issuance for a general account life insurance policy issued
by the Company (or an affiliated company, if allowed) on the life of the
Insured. Benefits under the new life insurance policy will be as described in
that policy. No evidence of insurability will be required. The Policy Owner has
the right to select the same Death Benefit or Coverage Amount as the former
Policy had at the time of the exchange. Cost of insurance rates will be based on
the same risk classification as those of the former Policy. Any outstanding
policy loan must be repaid before the Company will make an exchange. In
addition, there may be an adjustment for the difference in Cash Value between
the two policies.
POLICY SURRENDERS AND CASH SURRENDER VALUE
- --------------------------------------------------------------------------------
RIGHT TO SURRENDER
At any time during the lifetime of the Insured and while the Policy is in force,
the Policy Owner may make a written request for a full or partial surrender of
the Policy, without the consent of the Beneficiary (provided the designation of
Beneficiary is not irrevocable). In the case of full surrenders, the Policy
should be returned to the Company. The amount available upon surrender is the
Cash Surrender Value (i.e., the Cash Value of the Policy determined as of the
Valuation Date on which the Company receives the Policy Owner's written request,
less any outstanding policy loan, and less any applicable Surrender Charges).
(See "Surrender Charges," page 19.)
Upon full or partial surrender, the Company will generally pay the Cash
Surrender Value of the Policy within seven days following its receipt of the
written request, or on the date requested by the Policy Owner, whichever is
later.
26
<PAGE> 31
FULL SURRENDERS
If the Policy is fully surrendered, the Policy will terminate on the surrender
effective date . The Policy must be returned to the Company along with a written
release and surrender of all claims under the Policy in a form satisfactory to
the Company. The Policy Owner may elect to have the surrender amount paid in a
lump sum or under a payment option.
PARTIAL SURRENDERS
The Company will permit partial surrenders of the Cash Value in the Policy at
any time during the lifetime of the Insured and while the Policy is in effect. A
partial surrender reduces the Policy's Cash Value by the amount of the partial
surrender requested, plus the amount of the surrender charge imposed in
connection with the partial surrender. The deduction from Cash Value for a
partial surrender will be made on a pro rata basis against the Cash Value of
each of the Investment Options attributable to the Policy (unless the Policy
Owner states otherwise in writing).
In addition to reducing the Cash Value of the Policy, partial cash surrenders
will reduce the Death Benefit payable under the Policy and may reduce the Stated
Amount. The Company may require return of the Policy to record such reduction.
After a partial surrender, the remaining Stated Amount must not be less than
$10,000. Partial surrenders will not be permitted if they would cause the Policy
to fail to qualify as "life insurance" under applicable federal income tax laws.
Reductions in Stated Amount will be processed as described under "Changes in
Stated Amount."
POLICY LOANS
- --------------------------------------------------------------------------------
A Policy Owner may obtain a cash loan from the Company secured by the Policy not
to exceed 90% of the Policy's Cash Value minus surrender charges (determined on
the day on which the Company receives the written loan request). The Company
generally will make the loan to the Policy Owner within seven days after receipt
of the written request. No loan requests may be made for amounts of less than
$500 (subject to state law). If there is a loan outstanding at the time a
subsequent loan request is made, the amount of the outstanding loan will be
added to the new loan request. The amount of the loan will be transferred as of
the date the loan is made on a pro rata basis from the Investment Options
(unless the Policy Owner states otherwise) to another temporary account (the
"Loan Account").
The Company will charge interest on the outstanding amounts of the loan, which
interest must be paid in advance by the Policy Owner at the beginning of each
Policy Year. Interest not paid when due will be capitalized, and an amount equal
to such interest will be transferred to the Loan Account pro rata from the
Investment Options. Loans made during the first ten Policy Years will be made at
a 2% net cost on principal, and a 2% net cost on earnings. Loans made after the
tenth Policy Year will be made at 2% net cost on principal and up to 2% net cost
on earnings (we currently charge 0% net cost on earnings).
For these purposes, "earnings" represents any unloaned Cash Value, minus the
total premiums paid under the Policy. Loans will be taken from earnings first,
and then from principal. Loans taken against earnings will be charged an
interest rate of 5.65% during the first ten Policy Years, and currently 3.85%
(5.65% maximum) for Policy Year 11 and thereafter. Loans taken against principal
will be charged an interest rate of 5.65% in all Policy Years. Amounts in the
Loan Account will be credited by the Company with a fixed annual rate of return
of 4%, and will not be affected by the investment performance of the Investment
Options. The rate of return credited to amounts held in the Loan Account will be
transferred back to the Investment Options on a pro rata basis after each Policy
Year. The Policy's "Loan Account Value" is equal to amounts transferred from the
Investment Options to the Loan Account when a loan is taken, plus capitalized
loan interest, plus the net rate of return credited to the Loan Account that has
not yet been transferred back to the Investment Options.
27
<PAGE> 32
While the Insured is living and the Policy is in effect, loans may be repaid.
Loan repayments will be first applied to that portion of the loan comprised of
principal. Loan repayments reduce the Loan Account Value, and increase the Cash
Value in the Investment Options. The amount of the repayment will be transferred
from the Loan Account and will be allocated among the Investment Options in
proportion to the outstanding loan amount associated with each Investment
Option.
RISKS ASSOCIATED WITH LOANS TAKEN AGAINST A VARIABLE LIFE INSURANCE POLICY
An outstanding loan amount decreases the Cash Surrender Value. If a loan is not
repaid, it permanently decreases the Cash Surrender Value, which could cause the
Policy to lapse (see "Policy Lapse and Reinstatement," page 25). For example, if
a Policy has a Cash Surrender Value of $100,000, the Policy Owner may take a
loan of 90% or $90,000, leaving a new Cash Surrender Value of $10,000 In
addition, the Death Benefit actually payable would be decreased because of the
outstanding loan. Furthermore, even if the loan is repaid, the Death Benefit and
Cash Surrender Value may be permanently affected since the Policy Owner was not
credited with the investment experience of an Investment Option on the amount in
the Loan Account while the loan was outstanding. All or any part of a loan
secured by a Policy may be repaid while the Policy is still in force. Any
payment received while there is an outstanding loan on the Policy will be
considered a loan repayment rather than an additional Premium Payment. A loan
outstanding at the end of the Grace Period cannot be repaid unless the Policy is
reinstated. Loans from a modified endowment contract are treated as
distributions to the Policy Owner (see "Federal Tax Considerations, Tax
Treatment of Policy Benefits -- Modified Endowment Contracts," page 33).
PAYMENT OPTIONS
- --------------------------------------------------------------------------------
Proceeds payable upon the death of the Insured or upon surrender of the Policy,
and the benefits payable upon maturity, may be paid in a lump sum, or in whole
or in part under any of the payment options available under the Policy. Payment
of proceeds which exceed the Death Benefit may be deferred for up to six months
from the date of the request for the payment. A combination of options may be
used. The minimum amount that may be placed under a payment option is $5,000
unless the Company consents to a lesser amount. Proceeds applied under an option
will no longer be affected by the investment experience of the Investment
Options or Trusts. Once in effect, some of the payment options may not provide
any surrender rights.
The following payment options are available under the Policy:
OPTION 1 -- PAYMENTS OF A FIXED AMOUNT
OPTION 2 -- PAYMENTS FOR A FIXED PERIOD
OPTION 3 -- AMOUNTS HELD AT INTEREST
OPTION 4 -- MONTHLY LIFE INCOME
OPTION 5 -- JOINT AND SURVIVOR LEVEL AMOUNT MONTHLY LIFE INCOME
OPTION 6 -- JOINT AND SURVIVOR MONTHLY LIFE INCOME -- TWO-THIRDS TO SURVIVOR
OPTION 7 -- JOINT AND LAST SURVIVOR MONTHLY LIFE INCOME -- MONTHLY PAYMENT
REDUCES ON DEATH OF FIRST PERSON NAMED
OPTION 8 -- OTHER OPTIONS
The Company will make any other arrangements for periodic payments as may be
agreed upon. If any periodic payment due any payee is less than $100, the
Company may make payments less often. If the Company has declared a higher rate
under an option at the date the first payment under an option is due, the
Company will base the payments on the higher rate.
28
<PAGE> 33
OTHER MATTERS
- --------------------------------------------------------------------------------
VOTING RIGHTS
VOTING RIGHTS OF THE INVESTMENT OPTIONS. In accordance with its view of present
applicable law, the Company will vote the shares of the Investment Options at
regular and special meetings of the shareholders of the Investment Options in
accordance with instructions from Policy Owners having a voting interest in
Separate Account Four. The Company will vote shares for which no instructions
have been given or shares which are not otherwise attributable to Policy Owners
in the same proportion as it votes shares for which it has received
instructions. If the 1940 Act or any rule promulgated thereunder should be
amended, however, or if the Company's present interpretation should change and,
as a result, the Company determines it is permitted to vote the shares of the
Investment Options in its own right, it may elect to do so.
The voting interests of the Policy Owner in the Investment Options will be
determined as follows: Policy Owners may cast one vote for each $100 of Cash
Value of the Policy allocated to the Investment Option, the assets of which are
invested in the particular Investment Option on the record date for the
shareholder meeting for that Fund. Fractional votes are counted. If, however, a
Policy Owner has taken a loan secured by the Policy, amounts transferred from
the Investment Option(s) to the Loan Account in connection with the loan will
not be considered in determining the voting interests of the Policy Owner.
Policy Owners should review the prospectuses for the Investment Options to
determine matters on which shareholders may vote and the definition of a
majority vote required on some matters.
DISREGARD OF VOTING INSTRUCTIONS. When permitted by state insurance regulatory
authorities, the Company may disregard voting instructions if the instructions
require that the shares be voted so as to cause a change in the investment
objective or policies of Separate Account Four or one of the Investment Options,
or to approve or disapprove an investment advisory contract of one of the
Investment Options. In addition, the Company may disregard voting instructions
in favor of changes in the investment policies or the investment adviser of any
of the Investment Options which are initiated by a Policy Owner if the Company
reasonably disapproves of such changes. A change would be disapproved only if
the proposed change is contrary to state law or prohibited by state regulatory
authorities, or if the Company determines that the change would have an adverse
effect on its general account in that the proposed investment policy for an
Investment Option may result in overly speculative or unsound investments.
Should the Company disregard voting instructions, a summary of that action and
the reasons for such action would be included in the next annual report to
Policy Owners.
REPORTS TO POLICY OWNERS
The Company will maintain all records relating to Separate Account Four and the
Investment Options. At least once in each Policy Year, the Company will send to
Policy Owners a statement containing the following information: (1) the Stated
Amount and the Cash Value of the Policy (indicating the number of Accumulation
Units credited to the Policy in each Investment Option and the corresponding
Accumulation Unit Value); (2) the date and amount of each Premium Payment; (3)
the date and amount of each Monthly Deduction; (4) the amount of any outstanding
policy loan as of the date of the statement, and the amount of any loan interest
charged on the Loan Account; (5) the date and amount of any partial cash
surrenders and the amount of any partial surrender charges; (6) the annualized
cost of any supplemental benefits purchased under the Policy; and (7) a
reconciliation since the last report of any change in Cash Value and Cash
Surrender Value. The Company will also send any other reports required by any
applicable state or federal laws or regulations.
29
<PAGE> 34
Each Policy Owner will also receive semiannual and annual reports containing
financial statements for each of the Investment Options in which premium
payments are allocated at the time of the report.
LIMIT ON RIGHT TO CONTEST AND SUICIDE EXCLUSION
The Company may not contest the validity of the Policy after it has been in
effect during the Insured's lifetime for two years from the Issue Date. If the
Policy is reinstated, the two-year period will be measured from the date of
reinstatement (subject to state regulation). Each requested increase in Stated
Amount is contestable for two years from its effective date (subject to state
regulation).
In addition, if the Insured commits suicide during the two-year period following
issue, subject to state law, the Death Benefit will be limited to the premiums
paid less the amount of any partial surrender and the amount of any Loan Account
Value. During the two-year period following an increase, the portion of the
Death Benefit attributable to the increase in the case of suicide will be
limited to an amount equal to the premium paid for such increase (subject to
state law).
MISSTATEMENT AS TO SEX AND AGE
If there has been a misstatement with regard to sex or age in the Policy
Application, benefits payable will be adjusted to what the Policy would have
purchased at the correct age or sex based on the most recent cost of insurance
charge. A misstatement with regard to sex or age in a substantially funded
Policy may cause a cash distribution that is includable in whole or in part in
the gross income of the Policy Owner.
SUSPENSION OF VALUATION
The Company reserves the right to suspend or postpone the date of any payment of
any benefit or values for any Valuation Period (1) when the New York Stock
Exchange is closed (except holidays or weekends); (2) when trading on the
Exchange is restricted; (3) when an emergency exists as determined by the SEC so
that disposal of the securities held in the Investment Options is not reasonably
practicable or it is not reasonably practicable to determine the value of the
Investment Options' net assets; or (4) during any other period when the SEC, by
order, so permits for the protection of security holders.
BENEFICIARY
The Applicant names the beneficiary in the application for the Policy. The
Policy Owner may change the beneficiary (unless irrevocably named) during the
Insured's lifetime, and while the Policy is in force, by sending a written
request to the Company. Any change will be effective from the date the written
request was signed. The Company has no responsibility for payments made or
actions taken prior to receipt of the written request. If no beneficiary is
living when the Insured dies, the Death Benefit will be paid to the Policy
Owner, if living; otherwise, the Death Benefit will be paid to the Policy
Owner's estate.
The rights of any collateral assignee may affect the interest of the
Beneficiary.
ASSIGNMENT
The Policy Owner is specified in the Policy Application. The Policy may be
assigned as collateral for a loan or other obligation. The Company is not
responsible for any payment made or action taken before receipt of written
notice of such assignment, and is not responsible for determining the validity
of any assignment. Proof of interest must be filed with any claim under a
collateral assignment.
DIVIDENDS
No dividends will be paid under the Policy.
30
<PAGE> 35
FEDERAL TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
GENERAL
The following is a general discussion of the federal income tax considerations
relating to the Policies. This discussion is based upon the Company's
understanding of the federal income tax laws as they are currently interpreted
by the Internal Revenue Service ("IRS"). These laws are complex, and tax results
may vary among individuals. A person contemplating the purchase of or the
exercise of elections under a Policy should seek competent tax advice.
IT SHOULD BE UNDERSTOOD THAT THIS IS NOT AN EXHAUSTIVE DISCUSSION OF ALL TAX
QUESTIONS THAT MIGHT ARISE UNDER THE POLICIES. NO ATTEMPT HAS BEEN MADE TO
ADDRESS ANY FEDERAL ESTATE TAX OR STATE AND LOCAL TAX CONSIDERATIONS WHICH MAY
ARISE IN CONNECTION WITH A POLICY. FOR COMPLETE INFORMATION, A QUALIFIED TAX
ADVISOR SHOULD BE CONSULTED.
THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF ANY POLICY AND THE FOLLOWING
TAX DISCUSSION IS BASED ON THE COMPANY'S UNDERSTANDING OF FEDERAL INCOME TAX
LAWS AS THEY ARE CURRENTLY INTERPRETED. THE COMPANY CANNOT GUARANTEE THAT THOSE
LAWS OR INTERPRETATIONS WILL REMAIN UNCHANGED.
TAX STATUS OF THE POLICY
- --------------------------------------------------------------------------------
DEFINITION OF LIFE INSURANCE
Section 7702 of the Code sets forth a definition of a life insurance contract
for federal tax purposes. Guidance as to how Section 7702 is to be applied,
however, is limited. Although the Secretary of the Treasury (the "Treasury") is
authorized to prescribe regulations implementing Section 7702, and while
proposed regulations and other limited, interim guidance has been issued, final
regulations have not been adopted. If a Policy were determined not to be a life
insurance contract for purposes of Section 7702, such Policy would not provide
the tax advantages normally provided by a life insurance policy.
With respect to a Policy issued on the basis of a standard rate class, the
Company believes (largely in reliance on IRS Notice 88-128 and the proposed
regulations under Section 7702) that such a Policy should meet the Section 7702
definition of a life insurance contract. With respect to a Policy that is issued
on a substandard basis (i.e., a premium class involving higher than standard
mortality risk), there is less guidance. Thus, it is not clear whether such a
Policy would satisfy Section 7702, particularly if the Policy Owner pays the
full amount of premiums permitted under the Policy.
The Company reserves the right to make changes in the Policy if such changes are
deemed necessary to attempt to assure its qualification as a life insurance
contract for tax purposes.
DIVERSIFICATION
Section 817(h) of the Code provides that separate account investments (or the
investments of a mutual fund, the shares of which are owned by separate accounts
of insurance companies) underlying the Policy must be "adequately diversified"
in accordance with Treasury regulations in order for the Policy to qualify as
life insurance. The Treasury Department has issued regulations prescribing the
diversification requirements in connection with variable contracts. Separate
Account Four, through the Investment Options, intends to comply with these
requirements. Although the Company does not control the Investment Options, it
intends to monitor the investments of the Investment Options to ensure
compliance with the requirements prescribed by the Treasury Department.
31
<PAGE> 36
INVESTOR CONTROL
In certain circumstances, owners of variable life insurance contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support their contract. In those circumstances, income
and gains from the separate account assets would be includable in the variable
contract owner's gross income. The IRS has stated in published rulings that a
variable contract owner will be considered the owner of separate account assets
if the contract owner possesses incidents of ownership in those assets, such as
the ability to exercise investment control over the assets. The Treasury has
also announced, in connection with the issuance of regulations concerning
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor (i.e., the Policy Owner), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular Investment Options without being treated as owners of
the underlying assets." As of the date of this prospectus, no such guidance has
been issued.
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it determined that
the owners were not owners of separate account assets. For example, a Policy
Owner of this Policy has additional flexibility in allocating payments and cash
values. These differences could result in the Policy Owner being treated as the
owner of the assets of Separate Account Four. In addition, the Company does not
know what standard will be set forth in the regulations or rulings which the
Treasury is expected to issue, nor does the Company know if such guidance will
be issued. The Company therefore reserves the right to modify the Policy as
necessary to attempt to prevent the Policy Owner from being considered the owner
of a pro rata share of the assets of Separate Account Four.
The remaining tax discussion assumes that the Policy qualifies as a life
insurance contract for federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
- --------------------------------------------------------------------------------
IN GENERAL
The Company believes that the proceeds and cash value increases of a Policy
should be treated in a manner consistent with a fixed-benefit life insurance
policy for federal income tax purposes. Thus, the Death Benefit under the Policy
should be excludable from the gross income of the Beneficiary.
In addition, the Policy Owner will generally not be deemed to be in constructive
receipt of the Cash Value, including increments thereof, until there is a
distribution. The tax consequences of distribution from, and loans taken from or
secured by, a Policy depend on whether the Policy is classified as a "Modified
Endowment Contract." However, whether a Policy is or is not a Modified Endowment
Contract, upon a complete surrender or lapse of a Policy or when benefits are
paid at a Policy's maturity date, if the amount received plus the amount of
indebtedness exceeds the total investment in the Policy, the excess will
generally be treated as ordinary income subject to tax.
Depending on the circumstances, the exchange of a Policy, a change in the
Policy's Death Benefit Option, a Policy loan, a partial withdrawal, a surrender,
a change in ownership, or an assignment of the Policy may have federal income
tax consequences. In addition, federal, state and local transfer, and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Owner or beneficiary.
32
<PAGE> 37
MODIFIED ENDOWMENT CONTRACTS
In light of Policy premium requirements, a Policy will, in almost all cases, be
a modified endowment contract. (See, however, the discussion below on a Policy
issued in exchange for another life insurance contract.)
Loans and partial withdrawals from, as well as collateral assignments of,
Policies that are modified endowment contracts will be treated as distributions
to the Policy Owner. All pre-death distributions (including loans, partial
withdrawals and collateral assignments) from these Policies will be included in
gross income on an income-first basis to the extent of any income in the Policy
(the cash value less the Policy Owner's investment in the Policy) immediately
before the distribution.
The law also imposes a 10% penalty tax on pre-death distributions (including
loans, collateral assignments, partial withdrawals and complete surrenders) from
modified endowment contracts to the extent they are included in income, unless
such amounts are distributed on or after the date on which the taxpayer attains
age 59 1/2, because the taxpayer is disabled, or as substantially equal periodic
payments over the taxpayer's life (or life expectancy) or over the joint lives
(or joint life expectancies) of the taxpayer and his or her beneficiary.
Furthermore, if the loan interest is capitalized by adding the amount due to the
balance of the loan, the amount of the capitalized interest will be treated as
an additional distribution subject to income tax as well as the 10% penalty tax,
if applicable, to the extent of income in the Policy.
EXCHANGES
Any Policy issued in exchange for a modified endowment contract will be subject
to the tax treatment accorded to modified endowment contracts. However, the
Company believes that any Policy received in exchange for a life insurance
contract that is not a modified endowment contract will generally not be treated
as a modified endowment contract if the face amount of the Policy is greater
than or equal to the death benefit of the policy being exchanged. The payment of
any premiums at the time of or after the exchange may, however, cause the Policy
to become a modified endowment contract. A prospective purchaser should consult
a qualified tax advisor before authorizing the exchange of his or her current
life insurance contract for a Policy.
Unlike loans from modified endowment contracts, a loan from a Policy that is not
a modified endowment contract will be considered indebtedness of the owner and
no part of a loan will constitute income to the owner. However, the treatment of
loans taken on earnings after the tenth Policy Year, or of loans taken to
acquire a Travelers long-term care policy is unclear; such loans might be
considered a withdrawal instead of indebtedness for federal tax purposes.
Pre-death distributions from a Policy that is not a modified endowment contract
will generally not be included in gross income to the extent that the amount
received does not exceed the Policy Owner's investment in the Policy. (An
exception to this general rule may occur in the case of a decrease or change
that reduces the benefits provided under a Policy in the first 15 years after
the Policy is issued and that results in a cash distribution to the Policy
Owner. Such a cash distribution may be taxed in whole or in part as ordinary
income to the extent of any gain in the Policy.) Further, the 10% penalty tax on
pre-death distributions does not apply to Policies that are not modified
endowment contracts.
Certain changes to Policies that are not modified endowment contracts may cause
such Policies to be treated as modified endowment contracts. A Policy Owner
should therefore consult a tax advisor before effecting any change to a Policy
that is not a modified endowment contract.
TREATMENT OF LOAN INTEREST
If there is any borrowing against the Policy, the interest paid on loans may not
be tax deductible.
33
<PAGE> 38
AGGREGATION OF MODIFIED ENDOWMENT CONTRACTS
In the case of a pre-death distribution (including a loan, partial withdrawal,
collateral assignment or complete surrender) from a Policy that is treated as a
modified endowment contract, a special aggregation requirement may apply for
purposes of determining the amount of the income on the Policy. Specifically, if
the Company or any of its affiliates issues to the same Policy Owner more than
one modified endowment contract within a calendar year, then for purposes of
measuring the income on the Policy with respect to a distribution from any of
those Policies, the income on the Policy for all those Policies will be
aggregated and attributed to that distribution.
THE COMPANY'S INCOME TAXES
- --------------------------------------------------------------------------------
The Company currently makes no charge to Separate Account Four for any federal,
state or local taxes that it incurs that may be attributable to Separate Account
Four or to the Policies. The Company reserves the right, however, to make a
charge for any tax or other economic burden responsibility from the application
of tax laws that it determines to be properly attributable to Separate Account
Four or to the Policies.
MANAGEMENT
- --------------------------------------------------------------------------------
DIRECTORS OF THE TRAVELERS INSURANCE COMPANY
The following are the Directors and Executive Officers of The Travelers
Insurance Company. Unless otherwise indicated, the principal business address
for all individuals is the Company's Home Office at One Tower Square, Hartford,
Connecticut 06183. References to Travelers Group Inc. include, prior to December
31, 1993, Primerica Corporation or its predecessors.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND POSITION SINCE PRINCIPAL BUSINESS
- ------------------------- -------- -------------------------------------------------------
<S> <C> <C>
Jay S. Benet............. 1996 Senior Vice President since February 1994 and Vice
Director President (1990-1994) of The Travelers Insurance
Company; Partner (1986-1990) of Coopers & Lybrand.
Ian R. Stuart............ 1996 Chief Financial Officer; Chief Accounting Officer and
Director Controller since March 1996, Vice President since March
1991 of The Travelers Insurance Company.
Katherine M. Sullivan.... 1996 Senior Vice President and General Counsel since May
Director 1996 of The Travelers Insurance Company; Senior Vice
President and General Counsel (1994-1996) Connecticut
Mutual; Special Counsel & Chief of Staff (1988-1994)
Aetna Life & Casualty.
George C. Kokulis........ 1996 Senior Vice President since September 1995, Vice
Director President (1993-1995) of The Travelers Insurance
Company.
Michael A. Carpenter..... 1995 Chairman since June 1996 and President and Chief
Director Executive Officer since June 1995 of The Travelers
Insurance Company; Executive Vice President of
Travelers Group Inc. since January 1995; Chairman,
President and Chief Executive Officer (1989-1994),
Kidder Peabody Group Inc.
</TABLE>
34
<PAGE> 39
<TABLE>
<CAPTION>
DIRECTOR
NAME AND POSITION SINCE PRINCIPAL BUSINESS
- ------------------------- -------- -------------------------------------------------------
<S> <C> <C>
Robert I. Lipp........... 1992 Chairman, President and Chief Executive Officer since
Director April 1996 of Travelers/Aetna Property Casualty Corp.;
Chief Executive Officer and Director since December
1993 of The Travelers Insurance Group Inc.; Vice
Chairman and Director of Travelers Group Inc. since
1991; Chairman and Chief Executive Officer of
Commercial Credit Company (1991-1993); Executive Vice
President (1986-1991), Primerica Corporation.
Marc P. Weill............ 1994 Senior Vice President-Investments since 1993 and Chief
Director Investment Officer since 1995 of The Travelers
Insurance Group Inc.; Senior Vice President and Chief
Investment Officer of Travelers Group Inc. since 1992;
Vice President (1990-1992), Primerica Corporation; Vice
President (1989-1990), Smith Barney Inc.
</TABLE>
- ---------------
* Principal business address: Travelers Group Inc., 388 Greenwich Street, New
York, New York
SENIOR OFFICERS OF THE TRAVELERS INSURANCE COMPANY
- --------------------------------------------------------------------------------
The following are the Senior Officers of The Travelers Insurance Company, other
than the Directors listed above, as of the date of this Prospectus. Unless
otherwise indicated, the principal business address for all individuals listed
is One Tower Square, Hartford, Connecticut 06183.
<TABLE>
<CAPTION>
NAME POSITION WITH INSURANCE COMPANY
- --------------------------------------------------------------- -------------------------------
<S> <C>
Stuart Baritz.................................................. Senior Vice President
Barry Jacobson................................................. Senior Vice President
Russell H. Johnson............................................. Senior Vice President
Warren H. May.................................................. Senior Vice President
Jay S. Fishman................................................. Senior Vice President
David A. Tyson................................................. Senior Vice President
F. Denney Voss................................................. Senior Vice President
W. Douglas Willet.............................................. Senior Vice President
William H. White............................................... Vice President and Treasurer
</TABLE>
Information relating to the management of the Investment Options is contained in
the Investment Option prospectuses.
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS
- --------------------------------------------------------------------------------
The assets of Separate Account Four are held by the Company and are kept
physically segregated and held separate and apart from the Company's general
account. Premium payments allocated under the Portfolio Architect Life Insurance
policies are held in a segment of Separate Account Four. The Company maintains
records of all of Separate Account Four's purchases and redemptions of shares of
the Investment Options.
DISTRIBUTION OF THE POLICY
- --------------------------------------------------------------------------------
The Company intends to sell the Policy in all jurisdictions where it is licensed
to do business and where the Policy is approved.
Policies may be purchased from agents who are licensed by state insurance
authorities to sell variable life insurance policies issued by the Company, and
who are also registered representatives of Tower Square Securities Inc. ("Tower
Square") or of broker-dealers who have entered into Selling Agreements with
Tower Square. Tower Square, whose principal business address is One
35
<PAGE> 40
Tower Square, Hartford, Connecticut, serves as the principal underwriter for the
variable life insurance policies described herein. Tower Square is registered as
a broker-dealer with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, and is a member of the National Association of Securities
Dealers, Inc. ("NASD"). Tower Square is an affiliate of the Company and an
indirect wholly owned subsidiary of Travelers Group Inc., and serves as
principal underwriter pursuant to an Underwriting Agreement to which Separate
Account Four, the Company, and Tower Square are parties. No amounts have been or
will be retained by Tower Square for acting as principal underwriter for the
Policies.
Agents will be compensated for sales of the Policies on a commission and service
fee basis. The maximum sales commissions to be paid under the Policy will be
8.20% of premiums. In addition, certain production, persistency and managerial
bonuses may be paid.
LEGAL PROCEEDINGS AND OPINION
- --------------------------------------------------------------------------------
There are no pending material legal proceedings affecting the Policy, Separate
Account Four or any of the Investment Options.
Legal matters in connection with federal laws and regulations affecting the
issue and sale of the Policy described in this Prospectus and the organization
of the Company, its authority to issue the Policy under Connecticut law and the
validity of the forms of the Policy under Connecticut law have been passed on by
the General Counsel of the Life and Annuities Division of The Travelers
Insurance Company.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended. This Prospectus does
not contain all information set forth in the Registration Statement, its
amendments and exhibits, to which reference is made for further information
concerning Separate Account Four, the Company and the Policy.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Coopers & Lybrand L.L.P., certified public accountants, 100 Pearl Street,
Hartford, Connecticut, are the independent auditors for Separate Account Four.
The services provided to Separate Account Four include primarily the examination
of Separate Account Four's financial statements. The financial statements of
Separate Account Four have been audited by Coopers & Lybrand L.L.P., as
indicated in their report thereon in reliance upon the authority of said firm as
experts in accounting and auditing.
The consolidated balance sheet of The Travelers Insurance Company and
Subsidiaries (the "Company") as of December 31, 1995 and 1994 and the
consolidated statements of operations and retained earnings and cash flows for
the years then ended, have been included herein in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, and upon the
authority of said firm as experts in accounting and auditing. The report of KPMG
Peat Marwick LLP covering the December 31, 1995 consolidated financial
statements of the Company refers to a change in the accounting for investments
in accordance with provisions of Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities," in
1994.
The statements of operations and retained earnings and cash flows of the Company
for the year ended December 31, 1993, included in the Company's Form 10-K for
the year ended December 31, 1995, have been included herein in reliance upon the
report dated January 24, 1994 of Coopers & Lybrand, L.L.P., certified public
accountants, and upon the authority of said firm as experts in accounting and
auditing.
36
<PAGE> 41
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The financial statements of the Company contained herein (see page F-1) should
be considered only as bearing upon the Company's ability to meet its obligations
under the Policy, and they should not be considered as bearing on the investment
performance of Separate Account Four or its Investment Options.
ILLUSTRATIONS
- --------------------------------------------------------------------------------
The following pages are intended to illustrate hypothetically how the Cash
Value, Cash Surrender Value and Death Benefit can change over time for Policies
issued to a 45-year old male. The difference between the Cash Value and the Cash
Surrender Value in these illustrations reflects the Surrender Charge that would
be incurred upon a full surrender of the Policy.
Two pages of values are shown for each Death Benefit Option (Level and
Variable). One page illustrates the assumption that the maximum Guaranteed Cost
of Insurance Rates allowable under the Policy are charged in all years. The
other page illustrates the assumption that the current scale of Cost of
Insurance Rates are charged in all years. The Cost of Insurance Rates charged
vary by age, sex (where permitted by state law) and underwriting classification.
The illustrations also reflect a monthly deduction of 0.016667% for the first
ten years following the Initial Premium for premium taxes.
The values shown in these illustrations vary according to assumptions used for
charges, and gross rates of investment returns. The charges consist of 0.90% for
mortality and expense risks, 0.40% for administrative expenses, and .79% for
Investment Option expenses. The 12% illustration will assume that the mortality
and expense risk charge has been reduced to 0.75% in the second policy year and
thereafter. The charge for Investment Option expenses reflected in the
illustrations uses an average of the investment advisory fees and other expenses
charged by each of the Investment Options during 1995 and assumes that no Policy
Loans are outstanding. After deduction of these amounts, the illustrated gross
annual investment rates of return of 0% and 6% correspond to approximate net
annual rates of -2.01% and 3.91%, respectively. The illustrated gross annual
investment rate of return of 12% corresponds to an approximate net annual rate
of return of 9.91% in the first Policy Year, and 10.06% thereafter. The actual
charges under a Policy for expenses of the Investment Options will depend on the
actual allocation of Cash Value and may be higher or lower than those
illustrated.
As stated above, the examples illustrate values that would result based upon
hypothetical uniform gross investment rates of return of 0%, 6% and 12%. The
values would be different from those shown if the gross rates averaged 0%, 6%,
and 12% over a period of years, but fluctuated above and below those averages.
The illustrations also assume that premiums are paid as indicated, no policy
loans are made, no increases or decreases to the Stated Amount are requested, no
partial surrenders are made, and no charges for transfers between funds are
incurred.
The illustrations do not reflect any charges for federal income taxes against
Separate Account Four, since the Company is not currently deducting such charges
from Separate Account Four. However, such charges may be made in the future, and
in that event, the gross annual investment rates of return would have to exceed
0%, 6% and 12% by an amount sufficient to cover the tax charges in order to
produce the Death Benefits, Cash Values and Cash Surrender Values illustrated.
The second column of each Illustration shows the amount that would accumulate if
an amount equal to the Premium Payment was invested to earn interest (after
taxes) at 5%, compounded annually.
Upon request, the Company will provide a comparable personalized illustration
based upon the proposed Insured's age, sex, underwriting classification, the
specified insurance benefits, and the premium requested. The hypothetical gross
annual investment return assumed in such an illustration will not exceed 12%.
37
<PAGE> 42
PORTFOLIO ARCHITECT
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH GUARANTEED COST OF INSURANCE CHARGES
<TABLE>
<S> <C>
Male, Issue Age 45 Face Amount: $106,918
Non-Smoker Single Premium: $25,000.00
</TABLE>
<TABLE>
<CAPTION>
DEATH BENEFIT* CASH VALUE* CASH SURRENDER VALUE*
----------------------------- ----------------------------- ------------------------------
TOTAL PREMIUMS WITH 0% 6% 12% 0% 6% 12% 0% 6% 12%
YEAR 5% INTEREST (-2.01%) (3.91%) (9.95%)# (-2.01%) (3.91%) (9.95%)# (-2.01%) (3.91%) (9.95%)#
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250
2 27,562
3 28,941
4 30,388
5 31,907
6 33,502
7 35,178
8 36,936
9 38,783
10 40,722
15 51,973
20 66,332
</TABLE>
These hypothetical rates of return are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6% or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representations can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
<TABLE>
<C> <S>
# 9.95% is increased to 10.06% in years 2 and thereafter due to a reduction in the
mortality and expense risk charge.
* Net Interest Rates are shown in parenthesis.
** Insufficient cash value would be developed to continue the contract without additional
premium payments.
</TABLE>
38
<PAGE> 43
PORTFOLIO ARCHITECT
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
LEVEL DEATH BENEFIT OPTION
ILLUSTRATED WITH CURRENT COST OF INSURANCE CHARGES
<TABLE>
<S> <C>
Male, Issue Age 45 Face Amount: $106,918
Non-Smoker Single Premium: $25,000.00
</TABLE>
<TABLE>
<CAPTION>
DEATH BENEFIT* CASH VALUE* CASH SURRENDER VALUE*
----------------------------- ----------------------------- ------------------------------
TOTAL PREMIUMS WITH 0% 6% 12% 0% 6% 12% 0% 6% 12%
YEAR 5% INTEREST (-2.01%) (3.91%) (9.95%)# (-2.01%) (3.91%) (9.95%)# (-2.01%) (3.91%) (9.95%)#
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250
2 27,562
3 28,941
4 30,388
5 31,907
6 33,502
7 35,178
8 36,936
9 38,783
10 40,722
15 51,973
20 66,332
</TABLE>
These hypothetical rates of return are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representations can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
<TABLE>
<C> <S>
# 9.95% is increased to 10.06% in years 2 and thereafter due to a reduction in the
mortality and expense risk charge.
* Net Interest Rates are shown in parenthesis.
** Insufficient cash value would be developed to continue the contract without additional
premium payments.
</TABLE>
39
<PAGE> 44
PORTFOLIO ARCHITECT
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
VARIABLE DEATH BENEFIT OPTION
ILLUSTRATED WITH GUARANTEED COST OF INSURANCE CHARGES
<TABLE>
<S> <C>
Male, Issue Age 45 Face Amount: $106,918
Non-Smoker Single Premium: $25,000.00
</TABLE>
<TABLE>
<CAPTION>
DEATH BENEFIT* CASH VALUE* CASH SURRENDER VALUE*
----------------------------- ----------------------------- ------------------------------
TOTAL PREMIUMS WITH 0% 6% 12% 0% 6% 12% 0% 6% 12%
YEAR 5% INTEREST (-2.01%) (3.91%) (9.95%)# (-2.01%) (3.91%) (9.95%)# (-2.01%) (3.91%) (9.95%)#
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250
2 27,562
3 28,941
4 30,388
5 31,907
6 33,502
7 35,178
8 36,936
9 38,783
10 40,722
15 51,973
20 66,332
</TABLE>
These hypothetical rates of return are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representations can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
<TABLE>
<C> <S>
# 9.95% is increased to 10.06% in years 2 and thereafter due to a reduction in the
mortality and expense risk charge.
* Net Interest Rates are shown in parenthesis.
** Insufficient cash value would be developed to continue the contract without additional
premium payments.
</TABLE>
40
<PAGE> 45
PORTFOLIO ARCHITECT
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
VARIABLE DEATH BENEFIT OPTION
ILLUSTRATED WITH CURRENT COST OF INSURANCE CHARGES
<TABLE>
<S> <C>
Male, Issue Age 45 Face Amount: $106,918
Non-Smoker Single Premium: $25,000.00
</TABLE>
<TABLE>
<CAPTION>
DEATH BENEFIT* CASH VALUE* CASH SURRENDER VALUE*
----------------------------- ----------------------------- ------------------------------
TOTAL PREMIUMS WITH 0% 6% 12% 0% 6% 12% 0% 6% 12%
YEAR 5% INTEREST (-2.01%) (3.91%) (9.95%)# (-2.01%) (3.91%) (9.95%)# (-2.01%) (3.91%) (9.95%)#
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250
2 27,562
3 28,941
4 30,388
5 31,907
6 33,502
7 35,178
8 36,936
9 38,783
10 40,722
15 51,973
20 66,332
</TABLE>
These hypothetical rates of return are illustrative only and should not be
considered a representation of past or future investment results. Actual
investment results may be more or less than those shown and will depend on a
number of factors. The Account Values and Cash Surrender Values will be
different from those shown if the actual rates of return averaged 0%, 6%, or 12%
over a period of years but fluctuated above or below the average for individual
contract years. No representations can be made that these rates of return can be
achieved for any one year or sustained over a period of time.
<TABLE>
<C> <S>
# 9.95% is increased to 10.06% in years 2 and thereafter due to a reduction in the
mortality and expense risk charge.
* Net Interest Rates are shown in parenthesis.
** Insufficient cash value would be developed to continue the contract without additional
premium payments.
</TABLE>
41
<PAGE> 46
APPENDIX A
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, Separate Account Four's Investment Options may show the
percentage change in the value of an Accumulation Unit based on the performance
of the Investment Option over a period of time, determined by dividing the
increase (decrease) in value for that unit by the Accumulation Unit Value at the
beginning of the period. Separate Account Four commenced operations on September
5, 1995. Separate Account Four invest in Investment Options that were in
existence prior to the date on which the Investment Options became available
under the Policy. Average annual rates of return include periods prior to the
inception of the Investment Option, and are calculated by adjusting the actual
returns of the Investment Options to reflect the charges that would have been
assessed under the Investment Options had the Investment Option been available
under Separate Account Four during the period shown.
The following performance information represents the percentage change in the
value of an Accumulation Unit of the Investment Options for the periods
indicated, and reflects all expenses of the Investment Options, as well as the
0.90% mortality and expense risk charge and the 0.40% administrative expense
charge assessed against the Investment Options. The rates of return do not
reflect surrender charges or Monthly Deduction Amounts (which are depicted in
the Example following the Rates of Return), nor do they reflect a reduction in
mortality and expense risk charges which may apply under certain circumstances.
For information about the Charges and Deductions assessed under the Policy, see
page 17. For illustrations of how these charges affect Cash Values and Death
Benefits, see the Illustrations beginning on page 38.
AVERAGE RATES OF RETURN (SINCE INCEPTION) FOR
PERIODS ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
AVERAGE ANNUAL INCEPTION
INVESTMENT OPTION RATE OF RETURN DATE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Federated High Yield Bond Portfolio*.............................. N/A 7/31/96
Travelers Cash Income Trust....................................... * 10/1/81
Travelers Quality Bond Portfolio.................................. N/A 7/31/96
Large Cap Portfolio............................................... N/A 7/31/96
Equity-Income Portfolio........................................... N/A 7/31/96
Lazard International Stock Portfolio.............................. N/A 7/31/96
MFS Emerging Growth Portfolio..................................... N/A 7/31/96
Travelers Mid-Cap Disciplined Equity Portfolio.................... N/A N/A
Capital Appreciation Fund (Janus subadviser)...................... * 5/83
Federated Stock Portfolio......................................... N/A 7/31/96
Alliance Growth Portfolio......................................... 23.94% 6/20/94
Putnam Diversified Income Portfolio............................... 10.25% 6/20/94
MFS Total Return Portfolio........................................ 14.13% 6/20/94
AIM Capital Appreciation Portfolio................................ (4.24)% 10/10/95
Travelers Zero Coupon Bond Fund Portfolio 1998.................... 1.98% 10/11/95
Travelers Zero Coupon Bond Fund Portfolio 2000.................... 2.78% 10/11/95
Travelers Zero Coupon Bond Fund Portfolio 2005.................... 5.00% 10/11/95
</TABLE>
42
<PAGE> 47
EXAMPLE OF POLICY CHARGES
- --------------------------------------------------------------------------------
The following chart illustrates the surrender charges and Monthly Deduction
Amounts (including the Cost of Insurance charges and the deduction for premium
and DAC tax) that would apply under a Policy based on the assumptions listed
below. Surrender charges and Monthly Deduction Amounts generally will be higher
for an Insured who is older than the assumed Insured, and lower for an Insured
who is younger (assuming the Insureds have the same risk classification). Cost
of insurance rates increase each year as the Insured becomes a year older.
<TABLE>
<S> <C>
Male, Age 35, Non-Smoker Face Amount: $167,193
$25,000 Single Premium Level Death Benefit Option
Hypothetical Gross Annual Investment Rate of Return: 10%* Current Charges
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
MONTHLY DEDUCTION AMOUNTS:
CUMULATIVE SURRENDER CHARGE AS -----------------------------------------
YEAR PREMIUMS % OF CUM PREM. COST OF INSURANCE CHARGES PREMIUM TAX
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 $ 25,000 7.5%
2 $ 25,000 7.5%
3 $ 25,000 7.0%
5 $ 25,000 6.5%
10 $ 25,000 0%
</TABLE>
* Hypothetical investment results shown above are illustrative only and should
not be deemed a representation of past or future investment results. Actual
investment results may be more or less than those shown. Hypothetical
investment results may be different from those shown if the actual rates of
return averaged 10%, but fluctuated above or below that average for individual
policy years. No representations can be made that the hypothetical rates
assumed can be achieved for any one year or sustained over any period of time.
43
<PAGE> 48
APPENDIX B
DEATH BENEFIT EXAMPLES
- --------------------------------------------------------------------------------
The following examples demonstrate the relationship between the Death Benefit,
the Cash Surrender Value and the Minimum Amount Insured under the Level and
Variable Death Benefit Options available under the Policy. Both sets of examples
assume an Insured of age 40, a Minimum Amount Insured of 250% of Cash Value (in
accordance with the table on page of this Prospectus), no outstanding policy
loans and a Stated Amount of $25,000.
OPTION 1 -- LEVEL DEATH BENEFIT
- --------------------------------------------------------------------------------
Under a "Level" Death Benefit, the Death Benefit under the Policy is generally
equal to the Stated Amount of $25,000. Since the Policy is designed to qualify
as a life insurance contract, the Death Benefit cannot be less than the Minimum
Amount Insured (or, in this example, 250% of the Cash Value).
EXAMPLE ONE. If the Cash Value of the Policy equals $8,000, the Minimum Amount
Insured would be $20,000 ($8,000 X 250%). If the Death Benefit in the Policy is
the greater of the Stated Amount ($25,000) or the Minimum Amount Insured
($20,000), then the Death Benefit would be $25,000.
EXAMPLE TWO. If the Cash Value of the Policy equals $40,000, the Minimum Amount
Insured would be $100,000 ($40,000 X 250%). The resulting Death Benefit would be
$100,000 since the Death Benefit is the greater of the Stated Amount ($25,000)
or the Minimum Amount Insured ($100,000).
EXAMPLE THREE. If the Insured is age 41, and the Cash Value of the Policy
equals $44,000, the Minimum Amount Insured would be $106,920 ($44,000 X 243%)
(243% is the applicable percentage for a 41-year old insured). The Death Benefit
would be equal to $106,920 which is the greater of the Stated Amount ($25,000)
and the Minimum Amount Insured ($106,920).
EXAMPLE FOUR. The Death Benefit may also increase or decrease with the
investment experience of the applicable Underlying Funds to the extent the
Minimum Amount Insured exceeds the Stated Amount. Consequently, if the 41-year
old Insured has a Cash Value equal to $35,000 instead of $44,000, the Death
Benefit would be $85,050 ($35,000 X 243%).
OPTION 2 -- VARIABLE DEATH BENEFIT
- --------------------------------------------------------------------------------
Under a "Variable" Death Benefit, the Death Benefit under the Policy will vary
with the investment experience of the Investment Option(s) to which Premium
Payments are allocated under the Policy. The Variable Death Benefit will
generally be equal to the Stated Amount ($25,000) plus the Cash Value of the
Policy (determined on the date of the Insured's death). The Death Benefit
cannot, however, be less than the Minimum Amount Insured (or, in this example,
250% of the Cash Value).
EXAMPLE ONE. If the Cash Value of the Policy equals $10,000, the Minimum Amount
Insured would be $25,000 ($10,000 X 250%). The Death Benefit ($35,000) would be
equal to the Stated Amount ($25,000) plus the Cash Value ($10,000), unless the
Minimum Amount Insured ($25,000) was greater.
EXAMPLE TWO. If the Cash Value of the Policy equals $60,000, then the Minimum
Amount Insured would be $150,000 ($60,000 X 250%). The resulting Death Benefit
would be $150,000 because the Minimum Amount Insured ($150,000) is greater than
the Stated Amount plus the Cash Value ($25,000 + $60,000 = $85,000).
EXAMPLE THREE. If the Insured is age 41, and the Cash Value of the Policy
equals $65,000, the Minimum Amount Insured would be $157,950 ($65,000 X 243%)
(243% is the applicable
44
<PAGE> 49
percentage for a 41-year old insured). The resulting Death Benefit under the
Policy would be equal to $157,950 because the Minimum Amount Insured ($157,950)
is greater than the Stated Amount plus the Cash Value ($25,000 + $65,000 =
$90,000).
As long as the Policy remains in effect, the Company guarantees that the Death
Benefit under either option will not be less than the current Stated Amount of
the Policy less any outstanding policy loan, Deduction Amount due but unpaid,
and any amount payable pursuant to a collateral assignment of the Policy. The
Death Benefit under either option may vary with the Cash Value of the Policy.
Under Option 1, the Death Benefit equals the Stated Amount and will vary only
when the Minimum Amount Insured exceeds the Stated Amount of the Policy. Under
Option 2, the Death Benefit equals the greater of the Stated Amount plus the
Cash Value, and the Minimum Amount Insured.
45
<PAGE> 50
APPENDIX C
REPRESENTATIVE STATED AMOUNTS
- --------------------------------------------------------------------------------
The following table represents the Single Premium Factors for the determination
of the Stated Amount per dollar of Gross Premium, varying by Male and Female
(applicable to standard lives).
<TABLE>
<CAPTION>
MALE FEMALE
- ------------------------------------- -------------------------------------
AGE SP FAC AGE SP FAC AGE SP FAC AGE SP FAC
- --- -------- --- -------- --- -------- --- --------
<S> <C> <C> <C> <C> <C> <C> <C>
20 12.65742 51 3.32670 20 16.15463 51 4.13678
21 12.20773 52 3.19482 21 15.48558 52 3.97060
22 11.76323 53 3.06987 22 14.83810 53 3.81237
23 11.32222 54 2.95167 23 14.21155 54 3.66170
24 10.88482 55 2.83985 24 13.60662 55 3.51803
25 10.45123 56 2.73405 25 13.02272 56 3.38078
26 10.02300 57 2.63380 26 12.45932 57 3.24928
27 9.60257 58 2.53865 27 11.91653 58 3.12290
28 9.19198 59 2.44827 28 11.39430 59 3.00125
29 8.79287 60 2.36238 29 10.89240 60 2.88420
30 8.40647 61 2.28087 30 10.41067 61 2.77188
31 8.03383 62 2.20360 31 9.94865 62 2.66457
32 7.67547 63 2.13053 32 9.50535 63 2.56258
33 7.33157 64 2.06153 33 9.08002 64 2.46607
34 7.00238 65 1.99645 34 8.67288 65 2.37482
35 6.68772 66 1.93500 35 8.28367 66 2.28843
36 6.38750 67 1.87688 36 7.91217 67 2.20637
37 6.10155 68 1.82180 37 7.55883 68 2.12805
38 5.82963 69 1.76950 38 7.22327 69 2.05307
39 5.57132 70 1.71990 39 6.90517 70 1.98132
40 5.32610 71 1.67297 40 6.60400 71 1.91287
41 5.09358 72 1.62875 41 6.31898 72 1.84795
42 4.87303 73 1.58733 42 6.04912 73 1.78683
43 4.66378 74 1.54873 43 5.79305 74 1.72965
44 4.46520 75 1.51285 44 5.54958 75 1.67632
45 4.27672 76 1.47945 45 5.31792 76 1.62663
46 4.09775 77 1.44823 46 5.09715 77 1.58023
47 3.92765 78 1.41890 47 4.88652 78 1.53675
48 3.76588 79 1.39115 48 4.68553 79 1.49587
49 3.61205 80 1.36485 49 4.49387 80 1.45742
50 2.46573 50 4.31108
</TABLE>
46
<PAGE> 51
PORTFOLIO ARCHITECT
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
PROSPECTUS
INDIVIDUAL VARIABLE LIFE INSURANCE POLICIES
ISSUED BY
THE TRAVELERS INSURANCE COMPANY
HARTFORD, CONNECTICUT
, 1997
<PAGE> 52
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
Section 33-320a of the Connecticut General Statutes regarding indemnification
of directors and officers of Connecticut corporations provides in general that
Connecticut corporations shall indemnify their officers, directors and certain
other defined individuals against judgments, fines, penalties, amounts paid in
settlement and reasonable expenses actually incurred in connection with
proceedings against the corporation. The corporation's obligation to provide
such indemnification generally does not apply unless (1) the individual is
successful on the merits in the defense of any such proceeding; or (2) a
determination is made (by persons specified in the statute) that the individual
acted in good faith and in the best interests of the corporation; or (3) the
court, upon application by the individual, determines in view of all of the
circumstances that such person is fairly and reasonably entitled to be
indemnified, and then for such amount as the court shall determine. With
respect to proceedings brought by or in the right of the corporation, the
statute provides that the corporation shall indemnify its officers, directors
and certain other defined individuals, against reasonable expenses actually
incurred by them in connection with such proceedings, subject to certain
limitations.
C.G.S. Section 33-320a provides an exclusive remedy; a Connecticut corporation
cannot indemnify a director or officer to an extent either greater or less than
that authorized by the statute, e.g., pursuant to its certificate of
incorporation, by-laws, or any separate contractual arrangement. However, the
statute does specifically authorize a corporation to procure indemnification
insurance to provide greater indemnification rights. The premiums for such
insurance may be shared with the insured individuals on an agreed basis.
Travelers Group Inc. also provides liability insurance for its directors and
officers and the directors and officers of its subsidiaries, including the
Depositor. This insurance provides for coverage against loss from claims made
against directors and officers in their capacity as such, including, subject to
certain exceptions, liabilities under the federal securities laws.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE> 53
RULE 6e-3 (T) REPRESENTATIONS
A. With regard to the maximum sales load deductions permitted under the Rule,
the Registrant hereby elects to be governed by subparagraph (b)(13)(i)(B)
of the Rule.
B. With regard to the deduction from the Separate Account of a charge to
cover the mortality risk and expense risk, the Registrant is relying on
subparagraph (b)(13)(iii)(F) to permit such deduction. Furthermore, the
depositor does hereby represent that the level of the risk charge is
within the range of industry practice for comparable flexible contracts.
C. With regard to explicit sales loads not covering the expected costs of
distributing the flexible contracts, the Registrant hereby represents that
the distribution financing arrangement of the Separate Account will
benefit the Separate Account and Policy Owners. Furthermore, the
Depositor hereby represents that the Separate Account will invest only in
management investment companies which have undertaken to have a board of
directors, a majority of whom are not interested persons of the company,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
- - The facing sheet.
- - The Prospectus.
- - The undertaking to file reports.
- - The signatures.
- - Written consents of the following persons:
A. Consent of Katherine M. Sullivan, General Counsel, to the filing
of her opinion as an exhibit to this Registration Statement and
to the reference to her opinion under the caption "Legal
Proceedings and Opinion" in the Prospectus. (See Exhibit 11
below.)
B. Consent and Actuarial Opinion of Mahir A. Dugentas, ASA,
pertaining to the illustrations contained in the Prospectus.
C. Consent of Coopers & Lybrand L.L.P., Certified Public
Accountants. To be filed by amendment.
D. Consent of KPMG Peat Marwick LLP, Independent Certified Public
Accountants. To be filed by amendment.
- - The following Exhibits:
1. Resolution of the Board of Directors of The Travelers Insurance
Company authorizing the establishment of the Registrant.
2. Not applicable.
3(a). Form of Distribution Agreement among the Registrant, The
Travelers Insurance Company and Tower Square Securities, Inc.
<PAGE> 54
3(b). Specimen Form of Selling Agreement.
4. None
5. Variable Life Insurance Policy.
6(a). Charter of The Travelers Insurance Company, as amended on
October 19, 1994.
6(b). By-Laws of The Travelers Insurance Company, as amended on
October 20, 1994.
7. None
8. None
9. None
10. Application for Variable Life Insurance Policy. To be filed by
amendment.
11. Opinion of Katherine M. Sullivan, General Counsel, regarding the
legality of securities being registered.
12. Powers of Attorney authorizing Ernest J. Wright or Kathleen A.
McGah as signatory for Michael A. Carpenter, Jay S. Benet,
George C. Kokulis, Robert I. Lipp, Ian R. Stuart, Katherine M.
Sullivan and Marc P. Weill.
13. Memorandum concerning transfer and redemption procedures, as
required by Rule 6e-3(T)(b)(12)(ii).
<PAGE> 55
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, The
Travelers Variable Life Insurance Separate Account Four, has duly caused this
registration statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the City of Hartford, and State of Connecticut, on the 29th
day of October, 1996.
THE TRAVELERS VARIABLE LIFE INSURANCE SEPARATE ACCOUNT FOUR
(Registrant)
By: *IAN R. STUART
Ian R. Stuart
Vice President, Chief Financial Officer
Chief Accounting Officer and Controller
The Travelers Insurance Company
Attest:
*/s/ Ernest J. Wright
- -------------------------------
Ernest J. Wright
Secretary
The Travelers Insurance Company
<PAGE> 56
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Depositor, The
Travelers Insurance Company has duly caused this registration statement to be
signed on its behalf by the undersigned thereunto duly authorized, in the City
of Hartford, and State of Connecticut, on the 29th day of October, 1996.
THE TRAVELERS INSURANCE COMPANY
(Depositor)
By: *IAN R. STUART
---------------------------------------
Ian R. Stuart
Vice President, Chief Financial Officer
Chief Accounting Officer and Controller
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities indicated
on October 29, 1996.
<TABLE>
<S> <C>
*MICHAEL A. CARPENTER Director and Chairman of the Board,
- ---------------------------------- President and Chief Executive Officer
(Michael A. Carpenter)
*JAY S. BENET Director
- ----------------------------------
(Jay S. Benet)
*GEORGE C. KOKULIS Director
- ----------------------------------
(George C. Kokulis)
*ROBERT I. LIPP Director
- ----------------------------------
(Robert I. Lipp)
*IAN R. STUART Vice President, Chief Financial Officer
- ---------------------------------- Chief Accounting Officer and Controller
(Ian R. Stuart)
*KATHERINE M. SULLIVAN Director
- ----------------------------------
(Katherine M. Sullivan)
*MARC P. WEILL Director
- ----------------------------------
(Marc P. Weill)
*By: /s/Ernest J. Wright
------------------------------------
Ernest J. Wright, Attorney-in-Fact
</TABLE>
<PAGE> 57
EXHIBIT INDEX
<TABLE>
<CAPTION>
Attachment
or
Exhibit
No. Description Method of Filing
- ------- ----------- ------------------
OPINIONS AND CONSENTS:
<S> <C>
A. Consent of Katherine M. Sullivan, General Counsel, to the Electronically
filing of her opinion as an exhibit to this Registration
Statement and to the reference to her opinion under
the caption "Legal Proceedings and Opinion" in the
Prospectus.
B. Consent and Actuarial Opinion of Mahir A. Electronically
Dugentas, ASA, pertaining to the illustrations
contained in the Prospectus.
C. Consent of Coopers & Lybrand L.L.P., Certified To be filed by
Public Accountants. amendment
D. Consent of KPMG Peat Marwick LLP, Independent To be filed by
Certified Public Accountants amendment
The following Exhibits:
1. Resolution of the Board of Directors of The Travelers Electronically
Insurance Company authorizing the establishment
of the Registrant.
3(a). Form of Distribution Agreement among the Registrant, Electronically
The Travelers Insurance Company and Tower
Square Securities, Inc.
3(b). Specimen Form of Selling Agreement. Electronically
5. Variable Life Insurance Policy. Electronically
6(a). Charter of The Travelers Insurance Company, Electronically
as amended on October 19, 1994.
6(b). By-Laws of The Travelers Insurance Company, Electronically
as amended on October 20, 1994.
10. Application for Variable Life Insurance Policy To be filed by
amendment
11. Opinion of Katherine M. Sullivan, General Counsel, Electronically
regarding the legality of securities being registered.
12. Powers of Attorney authorizing Ernest J. Wright or Electronically
Kathleen A. McGah as signatory for Michael A. Carpenter,
Jay S. Benet, George C. Kokulis, Robert I. Lipp, Ian R.
Stuart, Katherine M. Sullivan and Marc P. Weill.
</TABLE>
<PAGE> 58
<TABLE>
<S> <C> <C>
13. Memorandum concerning transfer and redemption Electronically
procedures, as required by Rule 6e-3(T)(b)(12)(ii)
</TABLE>
<PAGE> 1
ACTUARIAL OPINION
The illustrations included in the prospectus have been based on assumptions and
charges which are consistent with the provisions of the Portfolio Architect Life
contract. The rate structure of the contract has not been designed to make the
relationship between premiums and benefits, as shown in the illustrations,
appear more favorable for contract owners at the ages illustrated than for
contract owners at other ages.
/s/ MAHIR DUGENTAS
- ------------------
Mahir Dugentas, A.S.A.
Director of Life Pricing
<PAGE> 1
EXHIBIT 1
RESOLUTION
I, ERNEST J. WRIGHT, Secretary of THE TRAVELERS INSURANCE
COMPANY, DO HEREBY CERTIFY that by unanimous consent action of the Board of
Directors of The Travelers Insurance Company effective the 22nd day of October,
1993, the following resolutions were adopted:
VOTED: That pursuant to authority granted by Section 38a-433a of the
Connecticut General Statutes, the Chairman of the Board, the
President or Chief Investment Officer, or any one of them acting
alone, for the purpose of doing variable life insurance or
variable annuity business, is authorized to establish a separate
account or accounts to invest in shares of investment companies
pursuant to plans and contracts issued and sold by the Company
in connection therewith.
VOTED: That the proper officers are authorized to take such action as
may be necessary to register as unit investment trust investment
companies under the Investment Company Act of 1940 the separate
account or accounts to be established to hold shares of
investment companies; to file any necessary or appropriate
exemptive requests, and any amendments thereto, for such
separate account or accounts under the Investment Company Act of
1940; to file one or more registration statements, and any
amendments, exhibits and other documents thereto, in order to
register plans and contracts of the Company and interests in
such separate account or accounts in connection therewith under
the Securities Act of 1933; and to take any and all action as
may in their judgment be necessary or appropriate in connection
therewith.
I FURTHER CERTIFY that by unanimous consent action of the Board
of Directors of The Travelers Insurance Company effective the 21st day of
September, 1994, the following resolution was adopted:
VOTED: That each officer and director who may be required, on their own
behalf and in the name and on behalf of the Company, to execute
one or more registration statements, and any amendments thereto,
under the Securities Act of 1933 and the Investment Company Act
of 1940 relating to the separate account or accounts to be
established to invest in shares of investment companies is
authorized to execute a power of attorney appointing
representatives to act as their attorney and agent to execute
said registration statement, and any amendments thereto, in
their name, place and stead; and that the Secretary, or any
Assistant Secretary designated by the Secretary, is designated
and appointed the agent for service of process of the Company
under the Securities Act of 1933 and the Investment Company Act
of 1940 in connection with such registration statement, and any
amendments thereto, with all the powers incident to such
appointment.
AND I DO FURTHER CERTIFY that the foregoing actions of the said
Board of Directors is still in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and the
seal of THE TRAVELERS INSURANCE at Hartford, Connecticut, this 29th day
of October, 1996.
/s/Ernest J. Wright
Ernest J. Wright
Secretary
<PAGE> 1
EXHIBIT 3(a)
FORM OF
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT (the "Agreement") made this ____ day of
_________, 1996, by and among The Travelers Insurance Company, a Connecticut
stock insurance company (hereinafter the "Company"), Tower Square Securities,
Inc., a Connecticut general business corporation (hereinafter "Tower Square"),
and The Travelers Variable Life Insurance Separate Account Four (hereinafter
"Separate Account Four"), a separate account of the Company established on
October 16, 1996 by its President in accordance with a resolution adopted by
the Company's Board of Directors and pursuant to Section 38a-433 of the
Connecticut General Statutes.
1. The Company hereby agrees to provide all administrative
services relative to variable life insurance contracts and revisions thereof
(hereinafter "Contracts") sold by the Company, the net proceeds of which or
reserves for which are maintained in Separate Account Four.
2. Tower Square hereby agrees to perform all sales functions
relative to the Contracts. The Company agrees to reimburse Tower Square for
commissions paid, other sales expenses and properly allocable overhead expenses
incurred in performance thereof.
3. For providing the administrative services referred to in
paragraph 1 above and for reimbursing Tower Square for the sales functions
referred to in paragraph 2 above, the Company will receive the deductions for
sales and administrative expenses which are stated in the Contracts.
4. The Company will furnish at its own expense and without cost
to Separate Account Four the administrative expenses of Separate Account Four,
including but not limited to:
(a) office space in the offices of the Company or in such other
place as may be agreed upon from time to time, and all
necessary office facilities and equipment;
(b) necessary personnel for managing the affairs of Separate
Account Four, including clerical, bookkeeping, accounting and
other office personnel;
(c) all information and services, including legal services,
required in connection with registering and qualifying
Separate Account Four or the Contracts with federal and state
regulatory authorities, preparation of registration
statements and prospectuses, including amendments and
revisions thereto, and annual, semi-annual and periodic
reports, notices and proxy solicitation materials furnished
to variable life insurance
1
<PAGE> 2
Policy Owners or regulatory authorities, including the costs
of printing and mailing such items;
(d) the costs of preparing, printing, and mailing all sales
literature;
(e) all registration, filing and other fees in connection with
compliance requirements of federal and state regulatory
authorities;
(f) the charges and expenses of any custodian or depository
appointed by Separate Account Four for the safekeeping of its
cash, securities and other property; and
(g) the charges and expenses of independent accountants retained
by Separate Account Four.
5. The services of the Company and Tower Square to Separate
Account Four hereunder are not to be deemed exclusive and the Company or Tower
Square shall be free to render similar services to others so long as its
services hereunder are not impaired or interfered with thereby.
6. The Company agrees to guarantee that the death benefit
payments will not be affected by mortality experience (under Contracts the
reserves for which are invested in Separate Account Four) and as such assumes
the risks (a) that the actuarial estimate of mortality rates among insureds may
prove erroneous and that reserves set up on the basis of such estimates will
not be sufficient to meet the Company's death benefit payment obligations, and
(b) that the charges for services and expenses of the Company set forth in the
Contracts may not prove sufficient to cover its actual expenses. For providing
these mortality and expense risk guarantees, the Company will receive from
Separate Account Four an amount per valuation period of Separate Account Four,
as provided from time to time.
7. This Agreement will be effective on the date executed, and
will remain effective until terminated by any party upon sixty (60) days
notice; provided, however, that this Agreement will terminate automatically in
the event of its assignment by any of the parties hereto.
8. Notwithstanding termination of this Agreement, the Company
shall continue to provide administrative services and mortality and expense
risk guarantees provided for herein with respect to Contracts in effect on the
date of termination, and the Company shall continue to receive the compensation
provided under this Agreement.
9. This Agreement is subject to the provisions of the Investment
Company Act of 1940, as amended, and the rules of the Securities and Exchange
Commission.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officials thereunto duly authorized and, in the case
of the Company and Tower Square, seals to be affixed as of the day and year
first above written.
THE TRAVELERS INSURANCE COMPANY
(Seal)
By:
-----------------------------------------
Title: President
--------------------------------------
ATTEST:
- ----------------------------
Assistant Secretary
THE TRAVELERS VARIABLE LIFE INSURANCE
SEPARATE ACCOUNT FOUR
By:
-----------------------------------------
WITNESS:
- ----------------------------
TOWER SQUARE SECURITIES, INC.
By:
-----------------------------------------
Title:
--------------------------------------
ATTEST: (SEAL)
- ----------------------------
Corporate Secretary
3
<PAGE> 1
EXHIBIT 3(b)
FORM OF
SELLING AGREEMENT
FOR VARIABLE CONTRACTS
THIS AGREEMENT, effective _________________________, is made among TOWER SQUARE
SECURITIES, INC. ("Tower Square") a corporation organized and existing under
the laws of the state of Connecticut and
__________________________________________. (hereafter referred to as
"Broker/Dealer") a corporation organized and existing under the laws of the
state of ___________, and [__, and a corporation organized and existing under
the laws of the state of _______________________, operating as an insurance
agency.]
WHEREAS, Tower Square and the Broker/Dealer enter into this agreement for the
purpose of authorizing the Broker/Dealer, through its insurance licensed
individual agents as described in Section ________________, to solicit
applications for such variable life insurance, variable annuity and modified
guaranteed annuity contracts identified by policy form in the Compensation
Schedules relating to this agreement as such schedules may be amended from time
to time (the "Contract(s)") as may be issued by The Travelers Insurance
Company, the Travelers Life and Annuity Company and any affiliated companies
(hereafter referred to as the Insurance Companies),
WHEREAS the Contracts, if required to be, are registered with the Securities
and Exchange Commission ("SEC") as securities under the Securities Act of 1933,
as amended (the "1933 Act"); and
WHEREAS, to facilitate the distribution of the Contracts the Insurance
Companies have each respectively appointed Tower Square to serve as the
distributor and principal underwriter of the Contract, and
WHEREAS Tower Square is registered with the SEC, the National Association of
Securities Dealers, Inc. ("NASD") and all appropriate state securities
regulatory authorities as a broker-dealer; and
WHEREAS Broker/Dealer is registered with the SEC, and NASD and all appropriate
state securities regulatory authorities as a broker-dealer; and
WHEREAS Tower Square and Broker/Dealer desire that Broker/Dealer through its
registered representatives ("Registered Representatives") be authorized to sell
the Contracts.
NOW, THEREFORE in consideration of the promises and the mutual covenants
hereinafter contained, the parties agree as follows:
1. Appointment of Broker/Dealer. Tower Square hereby appoints
Broker/Dealer to sell the Contracts through its validly
appointed and licensed registered
<PAGE> 2
representatives (the "Registered Representatives").
Broker/Dealer is also appointed to perform certain
administrative services necessary to facilitate the
solicitation and sales of the Contracts.
2. Securities Licensing. Broker/Dealer shall, at all times when
performing its functions under this agreement, be registered
as a securites broker with the SEC and NASD and licensed or
registered as a securities broker-dealer in the states and
other local jurisdictions that require such licensing or
registration in connection with sales of the Contracts.
Additionally, Broker-Dealer shall monitor the activities or
the supervision of its Registered Representative who are
engaged in sales or solicitation of the Contracts to ensure
compliance with applicable NASD rules concerning solicitation
and sales of variable products.
3. Insurance Licensing. Broker/Dealer (or its insurance agency
affiliate) agrees that at all times when performing its
functions under this agreement, such Broker/Dealer will be
validly licensed as an insurance agency in the states and
other jurisdictions that require such licensing or
registration in connection with Broker/Dealer sales and
solicition of the Contracts. If applicable, Broker/Dealer
represents that it or its insurance agency affiliate is
properly authorized under applicable state law to receive
insurance commissions generated from sales of the Contracts.
If the Broker/Dealer is not insurance licensed but has an
insurance agency (whether such agency is affiliated or not),
the Broker/Dealer must comply with the following requirements:
(1) All securities services provided in connection with
the sale of insurance securities will be through
registered representatives of the broker-dealer
("Dual Representatives");
(2) Dual Representatives also will be licensed under the
insurance laws of the states in which they do
business and will be appointed agents by each
insurance company for which Dual Representatives may
solicit applications in connection with the offer and
sale of insurance securities;
(3) Unregistered employees will not engage in any
securities activities, nor receive any compensation
based on transactions in insurance securities or the
provision of securities advice;
(4) A designated principal of the broker-dealer will
approve all advertisements;
(5) The broker-dealer sill maintain books and records
relating to transactions in insurance securities at
its home office;
2
<PAGE> 3
(6) Customers purchasing variable insurance products will
make their checks payable to the insurance company
issuing the products, and/or only Dual
Representatives will handle checks routed through the
broker-dealer and the insurance agencies;
(7) Commission will be reported on FOCUS and NASD Fee
Assessment reports by the broker-dealer.
4. Compliance with Applicable Laws/Insurance Companies.
Insurance Companies each represent that they are engaged in
the issuance of the Contracts in accordance with federal
securities laws and the applicable insurance laws of those
states in which the Contracts have been qualified for sale.
5. Compliance with Applicable Laws/Broker/Dealer. The
Broker/Dealer certified that it is a registered Broker/Dealer
under the Securities Exchange Act of 1934, as amended, and
that it is a member of the NASD. The Broker/Dealer agrees to
abide by all rules and regulations of the NASD and to comply
with all applicable state and federal laws and the rules and
regulations of the authorized regulatory agencies affecting
the sale of the Contracts.
6. Responsibility for Registered Representatives Activities. The
Broker/Dealer will select persons whom it will employ and
supervise and who will be trained and qualified to solicit
applications for the Contracts in conformance with applicable
state and federal laws and regulations. Persons so trained
and qualified will be registered representatives of the
Broker/Dealer in accordance with the rules of the NASD and
they will be properly licensed in accordance with the state
insurance laws of those jurisdictions in which the Contracts
may lawfully be distributed and in which they solicit
applications for such Contracts. The Insurance Companies
shall have ultimate authority to determine whether they shall
appoint or terminate a particular registered representative as
an agent of the Insurance Companies with the various state
insurance departments. Broker/Dealer agrees to cooperate in
supplying information or making recommendations necessary to
complete such insurance agent appointments.
Broker/Dealer will establish such rules and procedures as may
be necessary to cause diligent supervision of the securities
activities of its Registered Representatives engaged in the
solicitation of sales of the Contracts. Upon request by Tower
Square, Broker/Dealer shall furnish such appropriate records
as may be necessary to establish such diligent supervision.
In the event a Registered Representative fails or refuses to
sumit to supervision of Broker/Dealer or otherwise fails to
meet the fules and standards imposed by Broker/Dealer on its
representatives, Broker-Dealer shall certify such fact to
Tower Square and shall immediately notify such Registered
Representative that he or she is no longer authorized to sell
the Contracts. Broker/Dealer shall take
3
<PAGE> 4
whatever additional action may be necessary to terminate the
sales activities of such Registered Representative relating to
the Contracts. Broker/Dealer shall notify Tower Square if any
Registered Representative ceases to be a registered
representative of Broker/Dealer or ceases to maintain the
proper licensing required for the sale of the Contracts.
7. Suitability of Sales of Contract. The Broker/Dealer will
review all contract proposals and applications for suitability
and for completeness and correctness as to form. The
Broker/Dealer shall also be responsible for ensuring
compliance with NASD suitability rules and standards
applicable to purchases of the Contracts. A registered
principal of the Broker/Dealer will make and record such
determination with respect to the sale of the Contracts. The
Broker/Dealer will promptly, but in no case later than the end
of the business day that the Broker/Dealer receives
applications and payment, forward to the applicable Insurance
Company, at addresses provided, all such applications found
sutitable and in good form, together with any payments
received with such applications without deduction or
reduction. The Broker/Dealers will immediately return to the
applicant all applications together with any payments received
therewith deemed by the Broker/Dealer to be unsuitable or not
complete and correct as to form. The Insurance Companies
reserve the right to reject any Contract application and
return any payment made in connection with an application
which is rejected. Contracts issued on applications accepted
by the Insurance Companies will be forwarded to the
Broker/Dealer or at the direction of the Broker/Dealer to the
registered representative for delivery to the Contract Owner.
The Boker/Dealer shall obtain and retain a written receipt for
each Contract which the Broker/Dealer delivers.
The parties acknowledge that sales and solicitations may,
where consistent with state insurance laws and regulations, be
conducted either without an application, or on a basis where
an application is submitted subsequent to a sale. If such
sales procedures are permitted, Broker/Dealer agrees that it
will continue to be responsible for compliance with applicable
laws concerning among other things, suitability and policy
delivery requirements. Broker/Dealer agrees to hold Tower
Square harmless for any failure to follow such rules or
regulations.
8. Solicitation/Representatives Concerning the Contracts. The
Broker/Dealer will perform the selling functions required by
this Agreement only in accordance with ther terms and
conditions of the then current prospectus(es) applicable to
the Contract and will make no representations not included in
the prospectus or in any authorized supplemental material. No
sales solicitations, including the delivery of supplemental
sales literature or other such materials, shall occur, be
delivered to, or used with a prospective purchaser unless
accompanies or preceded by appropriate and then-current
prospectus(es).
4
<PAGE> 5
Any material prepared or used by the Broker/Dealer or its
registered representative, which describes in whole or in part
or refers by name or form to any of the Insurance Companies'
Contracts or underlying funds or uses the name of the
Insurance Companies, Tower Square, or The Travelers Group,
Inc, or the logos or service marks of any of them, or the
name, logos or service marks of any "Affiliated Company" of
any of them, as that term is defined in Section 2(a)(2) of the
Investment Company Act of 1940, must be approved by Tower
Square in writing prior to any such use.
9. Compensation. Compensation payable to the Broker/Dealer on
sales of the Contracts solicited by the Broker/Dealer will be
paid to the Broker/Dealer, or as necessary to meet any and all
legal requirements, to a licensed insurance affiliate, in
accordance with the Compensation Schedule(s) relating to this
agreement as they may be amended from time to time and are in
effect at the time the Contract payments are received by the
applicable Insurance Company (in the case of annuities) or at
the time the applications are received (in the case of life
insurance). In the event compensation is paid to the licensed
insurance agency affiliate as described in the preceding
sentence, such payment will be reflected in the
Broker/Dealer's "Focus" reports, and in its fee assessment
reports filed with the NASD. The Insurance Companies and
Tower Square reserve the privilege of revising the
Compensation Schedules at any time. The parties understand
that with regard to sales of modified guaranteed annuity
contract, in certain states, commission schedules may be
adjusted without provision of prior notice.
10. Chargebacks of Commission. If the Insurance Companies return
all or a portion of a premium paid with respect to a Contract,
Broker/Dealer shall be obligated to refund to Tower Square
applicable commissions on the amount of such premium only
where:
(a) consistent with section 11 of this Agreement, the
Contract solicited is returned not taken under the
policy "free look" provisions;
(b) premiums are refunded due to overpayments, errors in
billing or in the timing of automatic premium
collection deductions, or errors resulting in policy
reissue;
(c) the check delivered in payment of any contract does
not clear and the premium collection deductions, or
errors resulting in policy reissue;
(d) the Contract is terminated or there is a refund of
premium and an act, error or omission of the
Broker/Dealer or its Registered Representative
materially contributed to the termination of the
Contract or the need to return premium;
(e) the application is rejected by the Insurance Company;
5
<PAGE> 6
(f) the Insurance Company is directed by a judicial or
regulatory authorith to return premium without
assessment of a surrender charge;
(g) the applicant's initial premium on a 1035 exchange is
returned because the expected rollover amount from
another Contract is not transferred due to the
exchange not meeting the legal requirements to
qualify for a tax-free exchange;
(h) the Insurance Company returns unearned premium on a
life insurance contract as required by the provisions
of the contract;
(i) the Insurance Company determines that it has a legal
liability to return premiums on a life insurance
contract within the first year after the Contract is
issued; or
(j) the Insurance Company and Broker/Dealer mutually
agree to return all or a portion of a premium paid
with respect to a Contract.
11. Free Look Provision. If any Contract is repurchased at any
time or if within forty-five (45) days after confirmation by
the Insurance Companies of any premium payments credited to a
Contract, that Contract is tendered for full or partial
surrender, or the life at risk thereunder dies, them, at the
option of the Insurance Companies or Tower Square no
commission will be payable with respect to such premium
payments and any commission previously paid for said premium
payments must be refunded to the applicable Insurance Company
or Tower Square as directed by Tower Square. Tower Square
agrees to notify the Broker/Dealer with ten (10) business days
after the request for repurchase or redemption, or
notification or death of the life at risk is recieved by the
applicable Insurance Company.
12. Assignment of Agreement. This Agreement may not be assigned
except by mutual consent and will continue, subject to the
termination by any party on written notice to the other party,
except that in the event the Broker/Dealer ceases to be a
registered Broker/Dealer or a member of the NASD, this
Agreement will immediately terminate. Tower Square reserves
the right to edsignate, at its sole discretion, an alternative
Principal Underwriter for the distribution of the Contracts
covered by this Agreement without notice to the Broker/Dealer.
The designation will constitute substitution of parties to
this Agreement with assumption of the rights and obligations
created by this Agreement as applicable.
13. Representations. For the purpose of compliance with any
applicable federal or state securities laws or regulations
promulgated under them, the Broker/Dealer acknowledges and
agrees that in performing the Broker/Dealer services covered
by this Agreement, it is acting in the capacity of an
independent broker and dealer
6
<PAGE> 7
as defined by the By-Laws of the NASD and not as an agent or
employee of either Tower Square or any registered investment
company.
The Broker/Dealer represents and warrants that it is
authorized and licensed as an agent under applicable state
insurance laws to solicit, negotiate and effect the contracts
of insurance contemplated hereunder. In the event the
Broker/Dealer is not licensed sa such, an insurance agency
affiliated with the Broker/Dealer shall be licensed as an
agent under applicable state insurance laws to solicit,
negotiate and effect the contracts of insurance contemplated
hereunder.
For the purpose of compliance with any applicable state
insurance laws or regulations promulgated under them, the
Broker/Dealer acknowledges and agrees that solely in
performing the insurance-selling functions reflected by this
agreement, it or its registered representative is acting as
the agent of the Insurance Companies, and in that capacity is
authorized only to solicit applications from the public for
the Contracts. Such Contracts will not become effective until
such applications are accepted after underwriting review by
the Insurance Companies at their Home Office.
In furtherance of its responsibilities as a Broker/Dealer, the
Broker/Dealer acknowledges that it is responsible for
compliance on any business it produces concerning the
Contracts. No Broker/Dealer will be entitled to compensation
with respect to any application for or payment credited to,
any Contract(s) that is rejected by the Insurance Companies in
the event the Insurance Companies or Tower Square determine
the solicitation or obtaining of purchasers, applications or
payments by the Broker/Dealer or any of its Associated persons
was done in violation of the securities or insurance laws of
the United States or any state or other jurisdiction.
No party to this Agreement will be liable for any obligation,
act or omission of the other. Each party to this Agreement
will hold harmless and indemnify the (1) Registered
Investment Companies which are used to fund the Contracts,
(2) Insurance Companies, (3) Tower Square, and (4) the
Broker/Dealer, as appropriate, for any loss or expense
suffered as a result of the violation or noncompliance by that
party or the Associated persons of that party of any
applicable law or regulation or any provision of the
Agreement; provided, however, that no party or any of its
employees or agents will be liable to the other party for any
direct, special or consequential damages arising out of or in
connection with the performance of any services pursuant to
the Agreement.
14. Notices. All notices to the Insurance Companies or Tower
Square relating to this Agreement should be sent to the
attention of The Travelers Insurance Companies, FS Law
Department, One Tower Square, Hartford, Ct 06183. All notices
to the Broker/Dealer will be duly given if mailed or faxed to
the address shown below.
7
<PAGE> 8
15. Definitions. The terms "Associated Person", "member" and
"rules of the Corporation" as used herein shall be defined
consistently with the definition of similar terms as contained
in Artile I of the NASD By-Laws.
16. Independent Contractors. Tower Square and Insurance Companies
are independent contractors with respect to Broker/Dealer,
Insurance Agency, and to Registered Representatives.
17. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the state of
Connecticut.
18. Amendment of Agreement. Tower Square reserves the right to
amend this Agreement at any time, and the submission of an
application by Broker/Dealer after notice of any such
amendment has been sent to the other parties shall constitute
the other parties' agreement to any such amendment.
19. Terminations. This Agreement may be terminated, without
cause, by any party upon thirty (30) days prior written
notice, and may be terminated, for failure to perform
satisfactorily or other cause, by any party immediately; and
shall be terminated if Broker/Dealer shall cease to be
registered Broker/Dealer under the Securities Exchange Act of
1934, as amended, and a member of the NASD.
20. Waiver Upon Termination. Failure of any party to terminate
this Agreement for any of the causes set forth in this
agreement will not constitute a waiver of the right to
terminate this Agreement at a later time for any of these
causes.
21. Rebating. If Broker/Dealer or any Registered Representative
of Broker/Dealer shall rebate or offer to rebate all or any
part of a premium on a Contract issued by the Insurance
Companies in violation of applicable state insurance laws or
regulations, or if Broker/Dealer or any Registered
Representative of Broker/Dealer shall withhold any premium on
any Contract issued by the Insurance Companies, the same may
be grounds for termination of this Agreement by Tower Square.
If Broker/Dealer or any representative of Broker/Dealer shall
at any time induce or endeavor to induce any owner of a
Contract to relinquish the Contract except under circumstances
where there is reasonable grounds for believing the policy,
contract or certificate is not suitable for such person, any
and all compensation due Broker/Dealer hereunder shall cease
and terminate.
22. Books and Records. Broker/Dealer shall maintain all books and
records required by applicable laws and regulations in
connection with the offer and sale of the Contracts. The
books, accounts and records of the Broker/Dealer relating to
the sale of the Contracts shall be maintained so as to clearly
and accurate.y disclose the nature and details of all
transactions.
8
<PAGE> 9
23. Cooperation with Regulatory Investigations. Broker/Dealer and
Tower Square agree to cooperate fully in any insurance,
securities or other regulatory investigation, inquiry,
inspection, or proceeding or in any judicial proceeding
arising in connection with the Contracts. Broker/Dealer and
Tower Square shall cooperate with each other to resolve any
customer complaint, and each agrees to promptly notify the
other upon receipt of notice of any investigation, claim, or
proceeding involving the Contracts.
24. Fidelity Bond. Broker/Dealer represents that all of its
directors, officers, employees and Registered Representatives
are and shall be continuously covered by a blanket fidelity
bond, coverning for larceny and embezzlement, issued by a
reputable bonding company. This bond shall be maintained at
Broker/Dealer's expense and shall be, at least, of the form,
type and amount required under NASD Rules of Fair Practice.
25. Counterparts. This Agreement may be executed in one or more
counterpart, each of which shall be deemed in all respects an
original.
In reliance on the representations set forth and in consideration of the
undertakings described herein, the parties represented below do hereby contract
and agree.
9
<PAGE> 10
TOWER SQUARE SECURITIES, INC.
By:
------------------------------------------
------------------------------------------
Title:
------------------------------------------
------------------------------------------
Date:
------------------------------------------
------------------------------------------
[ ]
--------------------------------------------------
(Broker/Dealer)
By:
------------------------------------------
Title:
------------------------------------------
Taxpayer I.D.:
----------------------------------
Date:
------------------------------------------
FAX:
------------------------------------------
[ ]
--------------------------------------------------
(Insurance Agency)
By:
------------------------------------------
Title:
------------------------------------------
Taxpayer I.D.
------------------------------------
Date:
------------------------------------------
FAX:
------------------------------------------
10
<PAGE> 11
EXHIBIT A
SCHEDULE OF SALES CONCESSIONS
<TABLE>
<CAPTION>
CONTRACTS FORM CONTRACT %
PAYMENT NUMBER PER PURCHASE
- ---------- ------ ------------
<S> <C> <C>
</TABLE>
11
<PAGE> 1
EXHIBIT 5
THE TRAVELERS INSURANCE COMPANY - ONE TOWER SQUARE - HARTFORD, CT 06183
A STOCK COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
We will pay the Death Benefit to the Beneficiary upon receipt at Our Office of
Due Proof of the Insured's Death while this policy was in force. Refer to the
"Death Benefit" provision on Page 6 and to the "Policy Values" section on Page
7 for information on determining the amount payable at death.
READ YOUR POLICY CAREFULLY
This is a legal contract between you and us.
RIGHT TO CANCEL
We want you to be satisfied with the policy you have purchased. We urge you to
examine it closely. If, for any reason, you are not satisfied, you may return
the policy to us or to the agent from whom it was purchased to be cancelled
within the latest of:
1. 10 days after the policy was delivered to you; or
2. 10 days after we have mailed or delivered the Notice of the
Right to Cancel to you; or
3. 45 days after the date the application for this policy was
signed.
Within 7 days after our receipt of your request In Writing for a refund, we
will refund to you the greater of: (1) any premium paid; or (2) the Cash Value
of the policy on the date we receive the returned policy; plus any charges and
expenses which may have been deducted; less any Loan Account value. After the
policy is returned, it will be considered as if it were never in effect.
Signed at Hartford, Connecticut
/s/ M. A. CARPENTER
Chairman
MODIFIED SINGLE PREMIUM
VARIABLE LIFE INSURANCE POLICY
LIMITED PREMIUM FLEXIBILITY
INSURANCE PAYABLE AT INSURED'S DEATH
NON-PARTICIPATING
THE AMOUNT AND DURATION OF THE DEATH BENEFIT AND OTHER VALUES PROVIDED BY THIS
POLICY ARE BASED ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT(S). ALL
VALUES ARE VARIABLE, MAY INCREASE OR DECREASE, AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT.
T-14913
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Right to Cancel Policy Jacket
Policy Summary Page 3
Definitions Page 4
Benefits--Basic Policy Page 5
Policy Values Page 6
Premium and Valuation Provisions Page 8
Continuation of Insurance, Grace Period and Reinstatement Page 9
Exchange Option Page 10
Ownership Rights Page 10
General Provisions Page 11
Settlement Options
</TABLE>
A copy of the application and any riders follows the Settlement Options.
T-14913
<PAGE> 3
POLICY SUMMARY
INSURED: JOHN DOE POLICY NO: 12345
ISSUE AGE: 35 POLICY DATE: SEPT 01, 1996
MATURITY DATE: AUG 31, 2061 ISSUE DATE: SEPT 01, 1996
STATED AMOUNT: $60,051 MONTHLY DEDUCTION DAY: 1ST DAY OF MONTH
- --------------------------------------------------------------------------------
BENEFIT DESCRIPTION
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INITIAL PREMIUM: $10,000
INITIAL STATED AMOUNT: $60,051
MINIMUM STATED AMOUNT $10,000
INSURANCE OPTION: 1 (LEVEL)
MINIMUM AMOUNT INSURED: THE GREATER OF: 250% OF THE CASH VALUE UNTIL AGE 40,
WITH THE % REDUCING TO 100% AT AGE 95; OR THE AMOUNTS
REQUIRED BY FEDERAL INCOME TAX LAWS OR REGULATIONS TO
QUALIFY AS LIFE INSURANCE.
MINIMUM DISCRETIONARY
PAYMENT AMOUNT: $ 250
MONTHLY PREMIUM
TAX CHARGE: POLICY YEARS 1-10: .0166667% OF CASH VALUE ON EACH
DEDUCTION DAY.
POLICY YEARS 11 AND THEREAFTER: .0166667% OF CASH VALUE
ATTRIBUTABLE TO EACH ADDITIONAL PREMIUM PAYMENT MADE
AFTER THE INITIAL PREMIUM PAYMENT AND BEFORE THE TENTH
POLICY ANNIVERSARY. CHARGE EXPIRES TEN YEARS FROM THE
EFFECTIVE DATE OF THE ADDITIONAL PREMIUM PAYMENT.
MONTHLY FEDERAL
TAX CHARGE: POLICY YEARS 1-10: .0125% OF CASH VALUE ON EACH
DEDUCTION DAY.
POLICY YEARS 11 AND THEREAFTER: .0125% OF CASH VALUE
ATTRIBUTABLE TO EACH ADDITIONAL PREMIUM PAYMENT MADE
AFTER THE INITIAL PREMIUM PAYMENT AND BEFORE THE TENTH
POLICY ANNIVERSARY. CHARGE EXPIRES TEN YEARS FROM THE
EFFECTIVE DATE OF THE ADDITIONAL PREMIUM PAYMENT.
MONTHLY ADMINISTRATIVE
CHARGE: $5 PER MONTH
RATE CLASS: MALE NONSMOKER
DEATH BENEFIT INTEREST
FACTOR: 1.0032737
MAXIMUM LOAN AMOUNT: 90% OF: CASH VALUE MINUS SURRENDER PENALTIES
AS OF THE DATE WE RECEIVE YOUR LOAN REQUEST
MINIMUM LOAN AMOUNT: $500
LOAN ACCOUNT ANNUAL
INTEREST RATE CREDITED: 4% PER ANNUM IN ARREARS
</TABLE>
PAGE 3(A)
<PAGE> 4
POLICY SUMMARY
INSURED: JOHN DOE POLICY NO: 12345
ISSUE AGE: 35 POLICY DATE: SEPT 01, 1996
MATURITY DATE: AUG 31, 2061 ISSUE DATE: SEPT 01, 1996
STATED AMOUNT: $60,051 MONTHLY DEDUCTION DAY: 1ST DAY OF MONTH
- --------------------------------------------------------------------------------
BENEFIT DESCRIPTION
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
MAXIMUM LOAN INTEREST
RATE CHARGED: 5.65% IN ADVANCE
MINIMUM PARTIAL
SURRENDER AMOUNT: $ 500
CHARGE FOR FULL
SURRENDER: CHARGE IS EQUAL TO A PERCENTAGE OF EACH
PREMIUM PAID, AS FOLLOWS:
YEARS FROM DATE
OF PREMIUM RECEIPT % OF PREMIUM PAID
------------------ -----------------
1-2 7.5%
3-4 7%
5 6.5%
6 6%
7 5%
8 4%
9 3%
10+ 0%
CHARGE FOR
PARTIAL SURRENDER: NO CHARGE FOR PARTIAL SURRENDERS OF EARNINGS UP TO A
CUMULATIVE AMOUNT, IN ANY ONE POLICY YEAR, OF 10% OF THE
CASH VALUE AS CALCULATED ON THE POLICY ANNIVERSARY IMME-
DIATELY PRECEDING THE REQUEST FOR SURRENDER. PARTIAL SURREN-
DERS IN EXCESS OF THIS AMOUNT WILL INCUR A CHARGE EQUAL TO A
PERCENTAGE OF THE AMOUNT SURRENDERED, NOT TO EXCEED THE
CHARGE THAT WOULD APPLY TO A FULL SURRENDER, AS FOLLOWS:
YEARS FROM DATE % OF AMOUNT
OF PREMIUM RECEIPT SURRENDERED
------------------ -----------
1-2 7.5%
3-4 7%
5 6.5%
6 6%
7 5%
8 4%
9 3%
10+ 0%
</TABLE>
PAGE 3(B)
<PAGE> 5
POLICY SUMMARY
INSURED: JOHN DOE POLICY NO: 12345
ISSUE AGE: 35 POLICY DATE: SEPT 01, 1996
MATURITY DATE: AUG 31, 2061 ISSUE DATE: SEPT 01, 1996
STATED AMOUNT: $60,051 MONTHLY DEDUCTION DAY: 1ST DAY OF MONTH
- --------------------------------------------------------------------------------
BENEFIT DESCRIPTION:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPARATE ACCOUNT:
THE TRAVELERS VARIABLE LIFE MAXIMUM INVESTMENT OPTION
INSURANCE SEPARATE ACCOUNT FOUR DAILY DEDUCTION (In Basis Points)
- -------------------------------- ---------------------------------
<S> <C>
INVESTMENT OPTIONS:
TRAVELERS SERIES FUND, INC.
PUTNAM DIVERSIFIED INCOME PORTFOLIO 0.3562
ALLIANCE GROWTH PORTFOLIO 0.3562
MFS TOTAL RETURN PORTFOLIO 0.3562
AIM CAPITAL APPRECIATION PORTFOLIO 0.3562
TRAVELERS CAPITAL APPRECIATION PORTFOLIO 0.3562
TRAVELERS CASH INCOME TRUST 0.3562
TRAVELERS SERIES TRUST
FEDERATED STOCK PORTFOLIO 0.3562
LARGE CAP PORTFOLIO 0.3562
LAZARD INTERNATIONAL STOCK PORTFOLIO 0.3562
MFS EMERGING GROWTH PORTFOLIO 0.3562
TRAVELERS MID-CAP DISCIPLINED EQUITY PORTFOLIO 0.3562
FEDERATED HIGH YIELD PORTFOLIO 0.3562
EQUITY INCOME PORTFOLIO 0.3562
TRAVELERS QUALITY BOND PORTFOLIO 0.3562
TRAVELERS ZERO COUPON BOND PORTFOLIO 1998 0.3562
TRAVELERS ZERO COUPON BOND PORTFOLIO 2000 0.3562
TRAVELERS ZERO COUPON BOND PORTFOLIO 2005 0.3562
</TABLE>
INFORMATION ABOUT THE SEPARATE ACCOUNT IS PROVIDED IN THE PROSPECTUS
FOR THE SEPARATE ACCOUNT. YOU SHOULD CAREFULLY REVIEW THE PROSPECTUS.
WE RESERVE THE RIGHT TO LIMIT FREE TRANSFERS AMONG THE INVESTMENT OPTIONS TO
FOUR TIMES IN ANY POLICY YEAR AND TO CHARGE A $10 FEE FOR EACH ADDITIONAL
TRANSFER THAT WE ALLOW.
WE WILL ALLOCATE ANY INITIAL PREMIUM TO THE TRAVELERS CASH INCOME TRUST (MONEY
MARKET) INVESTMENT OPTION DURING THE RIGHT TO CANCEL PERIOD.
INSURANCE UNDER THIS POLICY MAY END BEFORE THE MATURITY DATE SHOWN
ABOVE IF PREMIUM AND INVESTMENT EXPERIENCE ARE INSUFFICIENT TO CONTINUE
INSURANCE TO SUCH DATE.
LIFE INSURANCE PREMIUM FOR THE BASIC POLICY MAY BE PAID UNTIL THE EARLIER OF
THE MATURITY DATE (SEE ADDITIONAL PREMIUM PAYMENTS PROVISION, PAGE 9) AND THE
DEATH OF THE INSURED. CHARGES FOR ANY RIDERS ARE PAYABLE UNTIL THE EARLIER OF
THE APPLICABLE EXPIRY DATES AND THE DEATH OF THE INSURED.
NO INSURANCE WILL BE IN EFFECT UNLESS AT LEAST ONE DEDUCTION AMOUNT HAS BEEN
PAID.
Page 3(C)
<PAGE> 6
POLICY SUMMARY
INSURED: JOHN DOE POLICY NO: 12345
ISSUE AGE: 35 POLICY DATE: SEPT 01, 1996
MATURITY DATE: AUG 31, 2061 ISSUE DATE: SEPT 01, 1996
STATED AMOUNT: $ 60,051 MONTHLY DEDUCTION DAY: 1ST DAY OF MONTH
- --------------------------------------------------------------------------------
TABLE OF MAXIMUM MONTHLY GUARANTEED COST OF INSURANCE RATES
(MONTHLY RATE FOR EACH $1,000 OF COVERAGE AMOUNT)
<TABLE>
<CAPTION>
MAXIMUM MAXIMUM MAXIMUM MAXIMUM
AGE RATE AGE RATE AGE RATE AGE RATE
- --- ---------- --- ---------- ---- --------- --- -----
<S> <C> <C> <C> <C> <C> <C> <C>
35 0.18150 52 0.69760 69 3.21700 86 15.87440
36 0.19360 53 0.76490 70 3.52680 87 17.26970
37 0.20780 54 0.83900 71 3.88180 88 18.71940
38 0.22410 55 0.91900 72 4.29100 89 20.23610
39 0.24240 56 1.00420 73 4.75550 90 21.84550
40 0.26340 57 1.09410 74 5.26770 91 23.59540
41 0.28590 58 1.19050 75 5.81880 92 25.57450
42 0.31020 59 1.29590 76 6.40060 93 28.00750
43 0.33650 60 1.41320 77 7.00680 94 31.40160
44 0.36500 61 1.54520 78 7.64310 95 36.79810
45 0.39560 62 1.69490 79 8.33070 96 46.58980
46 0.42780 63 1.86310 80 9.09340 97 67.04150
47 0.46220 64 2.04930 81 9.95610 98 83.33330
48 0.49950 65 2.25090 82 10.94090 99 83.33330
49 0.54020 66 2.46630 83 12.04620
50 0.58590 67 2.69610 84 13.25080
51 0.63840 68 2.94350 85 14.53250
</TABLE>
- --------------------------------------------------------------------------------
THE RATES USED FOR THE COST OF INSURANCE DEDUCTION ARE GUARANTEED NOT TO EXCEED
THE MAXIMUM RATES SHOWN ABOVE. THE RATES ARE BASED ON THE 1980 COMMISSIONER'S
STANDARD ORDINARY MORTALITY TABLE. THE COST OF INSURANCE IS DEDUCTED ON THE
MONTHLY DEDUCTION DAY.
PAGE 3 (COI)
<PAGE> 7
DEFINITIONS
ACCUMULATION UNIT: a standard of measurement used to determine the values in
each Investment Option.
AGE: the Insured's age as of the Insured's last birthday.
AMOUNT INSURED: equals the greatest of the Stated Amount; or the Stated Amount
plus Cash Value (if Death Benefit Option 2 is selected); or any Minimum Amount
Insured described on the Policy Summary.
BENEFICIARY(IES): the person(s) named to receive the benefits of this policy
at the Insured's death.
CASH SURRENDER VALUE: the Cash Value less any Loan Account value and
applicable surrender penalties.
CASH VALUE: the sum of the values held in the Investment Options and the Loan
Account.
COVERAGE AMOUNT: the Amount Insured less the Cash Value.
DEATH BENEFIT: the amount payable to the Beneficiary if the Insured dies while
the policy is in force.
DEDUCTION AMOUNT: a monthly charge, deducted from the Cash Value, which is
comprised of the cost of insurance charge and any other monthly charge shown
on the Policy Summary and any charge for supplemental benefits.
DEDUCTION DAY: the day of each month on which the Deduction Amount is
deducted. Shown on the Policy Summary.
DUE PROOF OF THE INSURED'S DEATH: a copy of a certified death certificate; a
copy of a certified decree of a court of a competent jurisdiction as to the
finding of death; a written statement by a medical doctor who attended the
deceased; or any other proof satisfactory to us.
EARNINGS: an amount calculated in conjunction with a request for a loan or
partial surrender. This amount is equal to (a - b) - c , where a is Cash
Value, b is the value of any loans that are not comprised of premiums paid; and
c equals total premiums paid. The values of a, b and c are calculated as of
the date that we receive the request for the loan or partial surrender.
IN WRITING: in a written form satisfactory to us and received at Our Office.
INSURED: the person on whose life this policy is issued. Shown on the Policy
Summary.
INVESTMENT OPTION: an open-ended management investment company, or a portfolio
thereof, to which values may be directed under the Separate Account. Shown on
the Policy Summary.
ISSUE DATE: the date on which we issue the policy. Shown on the Policy
Summary.
LOAN ACCOUNT: the account to which we transfer the amount of any policy loan.
MATURITY DATE: an anniversary of the Policy Date on which the policy matures
(see Maturity Benefit, page 5). Shown on the Policy Summary.
MAXIMUM INVESTMENT OPTION DAILY DEDUCTION: the maximum charge that we deduct
from each Investment Option to cover our mortality and expense charges and
administrative charges. Shown on the Policy Summary.
MINIMUM AMOUNT INSURED: a stated percentage of the Cash Value determined as of
the first day of the Policy Month. Shown on the Policy Summary.
OUR OFFICE: The Travelers Insurance Company, Policyholder Services,
One Tower Square, Hartford, Connecticut 06183-5071 or any other office which
we may designate for the purpose of administering this policy.
POLICY ANNIVERSARY: an anniversary of the Policy Date.
POLICY DATE: the date on which the policy becomes effective. Shown on the
Policy Summary.
POLICY MONTH: twelve one-month periods during the Policy Year, each of which
begins on the Policy Date or the monthly Deduction Day.
POLICY YEAR: each successive twelve-month period; the first beginning with the
Policy Date.
SEPARATE ACCOUNT(S): the Separate Account(s) which we established for this
class of policies and certain other policies. The Separate Account is shown on
the Policy Summary and is divided into Investment Options.
T-14914 Page 4
<PAGE> 8
STATED AMOUNT: a dollar amount used to determine the Death Benefit of the
policy. Shown on the Policy Summary.
VALUATION DATE: a day on which policy values are determined. This is any day
on which the New York Stock Exchange is open for trading.
VALUATION PERIOD: the period between successive valuations.
WE, US, OUR: The Travelers Insurance Company.
YOU, YOUR: the owner(s) of this policy.
BENEFITS--BASIC POLICY
DEATH BENEFIT
Upon receipt at Our Office of Due Proof of the Insured's Death while the policy
is in force, we will pay to the Beneficiary the Death Benefit of the policy.
The Death Benefit will be the Amount Insured at the time of death, less any:
1. Loan Account value;
2. amount payable to an assignee under a collateral assignment of
the policy; and
3. monthly Deduction Amount due but not paid.
The Death Benefit may be limited as provided under the Misstatement and Suicide
provisions on Page 12. The Death Benefit depends on the Death Benefit Option
in effect at the date of death and any increase or decrease you have made to
the Initial Stated Amount. Benefits provided by any rider attached to this
policy will end according to the termination provision(s) therein.
MATURITY BENEFIT
If the Insured is living on the Maturity Date, we will pay you the Cash Value
as of the Maturity Date, less any:
1. Loan Account value;
2. monthly Deduction Amount due but not paid; and
3. amount payable to an assignee under a collateral assignment of
the policy.
Upon maturity, insurance will end and we will have no other obligation under
this policy.
DEATH BENEFIT OPTIONS AND AMOUNT INSURED
There are two Death Benefit Options. Under Option 1 (the Level Death Benefit
Option), the Amount Insured is the greater of the Stated Amount or any Minimum
Amount Insured on the Insured's date of death. Under Option 2 (the Variable
Death Benefit Option), the Amount Insured is the greater of the Stated Amount
plus the Cash Value or any Minimum Amount Insured on the Insured's date of
death.
You may change the Death Benefit Option at any time prior to the Insured's
death. We will effect the change on the monthly Deduction Day on or following
the day we receive the request. If you request to change from Option 2 to
Option 1, the Stated Amount will be increased by the Cash Value. If you
request to change from Option 1 to Option 2, the Stated Amount will be
decreased by the Cash Value. We may require evidence of insurability
satisfactory to us if you request a change from Option 1 to Option 2.
The remaining Amount Insured and the remaining Stated Amount in effect after
any change may not be less than the respective minimum amounts shown on the
Policy Summary.
REQUESTED CHANGES IN STATED AMOUNT
Increases--You may request an increase to the Stated Amount which requires a
minimum premium payment of $1,000 at any time prior to the earlier of the
Insured's attaining Age 80 or his/her death. The request must be made In
Writing to Our Office. The increase will be effective on the date shown on
the supplemental Policy Summary we will send you. We will require evidence of
insurability satisfactory to us if you request an increase.
T-14914 Page 5
<PAGE> 9
Decreases--You may request decreases to the Stated Amount under this policy
after the first Policy Year. The decrease will be effective on the later of
the monthly Deduction Day on or following our receipt of your request at Our
Office, or the monthly Deduction Day on or immediately following the date you
request it to be effective.
The decrease will be applied as follows: first against the most recent
increase in the Stated Amount; then to other increases in the Stated Amount in
the reverse order in which they occurred; and last, to the Initial Stated
Amount.
After any change, the Stated Amount in effect may not be less than the Minimum
Stated Amount shown on the Policy Summary. We will send you a supplemental
Policy Summary reflecting any change.
POLICY VALUES
CASH VALUE
The Cash Value on the Issue Date is equal to the initial premium paid. On each
Valuation Date, the Cash Value is equal to the sum of the accumulated values in
the Investment Options plus any Loan Account value. The accumulated value in
an Investment Option equals a times b where:
a is the number of Accumulation Units on the Valuation Date;
and
b is the then current Accumulation Unit Value for that
Investment Option.
Policy values on other days are calculated in a manner consistent with this
method.
DEDUCTION AMOUNT
The first monthly Deduction Day is the Policy Date. The monthly Deduction Day
is shown on the Policy Summary.
The Deduction Amount will be charged monthly against each Investment Option in
proportion to the value in each Investment Option on each monthly Deduction
Day. The Deduction Amount is equal to:
1. the cost of insurance; plus
2. the premium tax charge shown on the Policy Summary; plus
3. the federal tax charge shown on the Policy Summary; plus
4. the administrative charge shown on the Policy Summary; plus
5. the cost of supplemental benefits, if any, for which a
separate charge is shown on the Policy Summary; plus
6. any other applicable charges shown on the Policy Summary.
In determing the premium tax and federal tax charge portions of the Deduction
Amount, the Cash Value attributable to an additional premium payment is
calculated by multiplying the entire Cash Value, as of the monthly Deduction
Day for which the Deduction Amount is being calculated, by the result of a
divided by b, where:
a is the amount of the additional premium payment; and
b is the Cash Value immediately following receipt of the
additional premium payment.
The maximum guaranteed cost of insurance for any month is equal to c times the
result of a minus b where:
a is the Amount Insured for the month divided by the Death
Benefit Interest Factor shown on the Policy Summary;
b is the Cash Value on the monthly Deduction Day;
c is the cost for each $1,000 of Coverage Amount shown in the
Maximum Monthly Guaranteed Cost of Insurance table on the
Policy Summary at the Insured's age, divided by $1,000.
The maximum guaranteed cost of insurance rates shown on the Policy Summary are
based on the Insured's age, sex and rate class for the Initial Stated Amount
and each increase in the Stated Amount. We may use rates lower than those
shown. We will base any future changes in these rates only on our future
expectations as to investment earnings, mortality, expenses and persistency.
Nothing in this policy will be affected by our actual mortality and expenses.
We will determine the current rates for the initial Stated Amount and for each
increase to the Stated Amount at the start of each Policy Year and will
guarantee them for that Policy Year. Any change we make in the current rates
will be on a uniform basis for insureds of the same age, sex and rate class.
T-14914 Page 6
<PAGE> 10
When the Amount Insured is equal to the Minimum Amount Insured shown on the
Policy Summary, we will use the rate class for the most recent increase that
required evidence of insurability to determine the cost of insurance.
If you have selected Death Benefit Option 1 and have made increases in the
Stated Amount, the Cash Value will first be considered a part of the Initial
Stated Amount. If the Cash Value exceeds the Initial Stated Amount, it will
then be considered a part of the additional Stated Amount resulting from
increases in the order of those increases.
The monthly Deduction Amount for the following month will be taken out of the
Cash Value on the monthly Deduction Day shown on the Policy Summary. If the
Cash Surrender Value is not enough to pay the Deduction Amount due and no
further premiums are paid, the Grace Period will go into effect (see Grace
Period provision, Page 9).
CASH SURRENDER VALUE
The Cash Surrender Value is equal to the Cash Value less any Loan Account value
and applicable surrender penalties as shown on the Policy Summary. It will not
be less than the minimum Cash Surrender Value required by the insurance laws of
the state in which this policy is delivered. A detailed statement of the
method of calculating the Cash Surrender Values has been filed with the
insurance department of the state in which this policy is delivered.
CASH SURRENDER
While the Insured is living and this policy is in force, you may request, In
Writing, a full or partial surrender. You may do so without the consent of any
Beneficiary, unless irrevocably named. We will calculate your Cash Surrender
Value as of the day we receive your request In Writing and will pay this amount
within seven days after such request. Surrender charges apply as shown on the
Policy Summary.
If you request a full surrender, the policy will end on the effective date of
the surrender.
We will not make a partial surrender to you for less than the Minimum Partial
Surrender Amount shown on the Policy Summary. The amount of any partial cash
surrender may not exceed the Cash Surrender Value. If you request a partial
surrender, then the Death Benefit, Amount Insured, and Cash Value will be
reduced by the amount surrendered, including any applicable surrender penalty.
Additionally, under Death Benefit Option 1, the Stated Amount will be reduced
by the amount of the surrender. The deduction from the Cash Value will be made
on a pro-rata basis against the Cash Value of each Investment Option unless you
request otherwise In Writing. After the reduction, the Amount Insured must be
no less than the Minimum Amount Insured shown on the Policy Summary. In
determining a partial surrender charge, partial surrenders will be allocated to
premium payments in the reverse order in which such payments were made.
POLICY LOANS
We will make a loan to you with the policy as security if you assign this
policy to us while it is in force. We will not make a loan to you or increase
an outstanding loan for less than the Minimum Loan Amount shown on the Policy
Summary. We will pay the loan amount within seven days after we receive your
loan request In Writing.
Loan amounts will be transferred from the Investment Options to the Loan
Account in proportion to the Cash Value in each Investment Option as of the
date the loan is made, unless you request otherwise. A Loan Account will be
maintained while a loan is outstanding and credited at the Loan Account Annual
Interest Rate Credited shown on the Policy Summary. The value of the Loan
Account is the amount of any outstanding loan plus any interest we charge to
the Loan Account, less any interest we may transfer to the Investment Options.
The total Loan Account value may not exceed the Maximum Loan Amount shown on
the Policy Summary. Interest on the loan will be payable in advance, at the
beginning of each Policy Year, at the Loan Interest Rate Charged shown on the
Policy Summary. For loans on Earnings after the tenth Policy Year, we may
charge a rate lower than the rate shown on the Policy Summary. Loans will be
taken first from Earnings, if any, and then from premium payments. Interest
not paid when due will be added to the Loan Account Value and will bear
interest at the same rate.
While the Insured is living and the policy is in effect, all or part of any
loan may be repaid. Payment received while there is an outstanding loan on the
policy will be applied as follows: first, towards repayment of any loan
interest due; next, towards repayment of the loan principal; and last, as a
premium payment to the policy. Loan repayments will be first applied to that
portion of the loan comprised of premiums paid. The amount of the repayment
will be transferred from the Loan Account and will be allocated among the
Investment Options in proportion to the outstanding loan amount associated with
each Investment Option. You may not repay a loan that exists at the end of the
Grace Period (see provision on Page 9) unless you reinstate this policy.
T-14914 Page 7
<PAGE> 11
The Grace Period provision will go into effect if the Loan Account Value
exceeds the Cash Value less applicable surrender penalties.
PREMIUM AND VALUATION PROVISIONS
PREMIUM
An initial lump sum premium payment must be made to the policy and is due and
payable before the policy becomes effective. All premiums are payable at Our
Office or to one of our authorized representatives.
PREMIUM ALLOCATION
During the Right to Cancel period, any premium that has been paid will be
allocated to the money market Investment Option specified on the Policy
Summary. At the end of the Right to Cancel period, we will apply the resulting
premium amount to provide Accumulation Units to be credited to each of the
selected Investment Options in the proportion stated in your application or as
you have instructed us most recently.
ADDITIONAL PREMIUM PAYMENTS
You may make additional premium payments under the following circumstances:
1. upon our approval of a requested increase in Stated Amount
which requires an additional payment of at least $1,000; or
2. when payment is required to keep the policy in force as
described in the Grace Period provision; or
3. when payment is required to reinstate the policy as described
in the Reinstatement provision; or
4. payment at least equal to the Minimum Discretionary Payment
Amount shown on the Policy Summary may be made at any time
before the Maturity Date, provided that the premium payment
plus the total of all premiums already paid does not exceed
the limits prescribed by federal income tax laws or
regulations to qualify the policy as life insurance.
We reserve the right to require evidence of insurability before accepting any
additional premium payments which would increase the Coverage Amount. A
payment received while there is an outstanding loan on the policy will be
considered a loan repayment rather than an additional premium payment.
Any premium received after the initial premium is paid will be applied as of
the Valuation Date following its receipt at Our Office. We will apply such
premium to provide Accumulation Units to be credited to the Investment Options
in the proportion stated in your application, or as you have instructed us most
recently.
INVESTMENT OPTION VALUATION
ACCUMULATION UNITS
The number of Accumulation Units to be credited to each Investment Option once
a premium payment has been received by us will be determined by dividing the
premium applied to that Investment Option by the current Accumulation Unit
Value of that Investment Option.
ACCUMULATION UNIT VALUE
The value of an Accumulation Unit for each Investment Option was initially set
at $1.00. We will determine the Accumulation Unit value for each Investment
Option on each Valuation Date by multiplying the value on the immediately
preceding Valuation Date by the corresponding net investment factor (see Net
Investment Factor provision, Page 9) for that Investment Option for the
Valuation Period just ended.
The value of an Accumulation Unit on any date other than a Valuation Date will
be equal to its value as of the next Valuation Date.
T-14914 Page 8
<PAGE> 12
NET INVESTMENT FACTOR
The net investment factor is a factor applied to measure the investment
performance of an Investment Option from one Valuation Period to the next. The
net investment factor for an Investment Option for any Valuation Period is
determined by dividing a by b and subtracting c where:
a is
1. the net asset value per share of the Investment Option as of
the Valuation Date; plus
2. the per-share amount of any dividend or capital gain
distributions by the Investment Option if the ex-dividend date
occurs in the Valuation Period just ended; plus or minus
3. a per-share charge or credit, as we may determine on the
Valuation Date for tax reserves; and
b is
1. the net asset value per share of the Investment Option as of
the last prior Valuation Date; plus or minus
2. the per-share or per-unit charge or credit for tax reserves as
of the end of the last prior Valuation Date; and
c is the applicable Investment Option deduction applicable to
the Valuation Period. The Maximum Investment Option
Deduction per Day is shown on the Policy Summary.
Assets in each Investment Option will be valued at fair market value in
accordance with accepted accounting practices and applicable laws and
regulations.
TRANSFERS BETWEEN INVESTMENT OPTIONS
As long as the policy is in effect, you may request that we transfer all or a
part of the Cash Value (minus Loan Account value) from an Investment Option to
any other Investment Option available under the policy at the time of request.
Such transfers must be in accordance with our rules. We reserve the right to
limit the number of free transfers between Investment Options as shown on the
Policy Summary. We reserve the right to charge the reasonable administrative
fee specified on the Policy Summary for transfers beyond that number.
Transfers between Investment Options will result in the addition or deletion of
Accumulation Units having a total value equal to the dollar amount being
transferred to or from a particular Investment Option. The number of
Accumulation Units will be determined by dividing the amount transferred by the
Accumulation Unit Value of the Investment Options involved as of the next
Valuation Date after we receive your request for transfer at Our Office.
CONTINUATION OF INSURANCE, GRACE PERIOD AND REINSTATEMENT
CONTINUATION OF INSURANCE
Subject to the Grace Period provision below, if sufficient premium payments are
not made, this policy will continue until the day on which the Cash Surrender
Value would not be enough to pay the monthly Deduction Amount due, or until the
Maturity Date, if earlier.
The Continuation of Insurance benefit will not be less than the minimum benefit
required by the insurance laws of the state in which this policy is delivered.
GRACE PERIOD
Thirty days after the Cash Surrender Value is insufficient to pay the Deduction
Amount due, we will send you a notice of required premium to your last known
address. If the required premium is not paid within 31 days after the notice
is sent, the policy will lapse. The policy will have no Cash Value. The
policy will continue through the Grace Period, but if the required payment has
not been received at Our Office, the policy will terminate at the end of the
Grace Period. If the Insured dies during the Grace Period, the Death Benefit
payable will be reduced by any Deduction Amount due but not paid and by any
Loan Account value.
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REINSTATEMENT
This policy may be reinstated at any time within three years from the date to
which the monthly Deduction Amount had been paid, if:
1. the policy was not surrendered for cash; and
2. evidence of insurability acceptable to us is furnished; and
3. all monthly Deduction Amounts past due are paid; and
4. premium at least equal to the following three monthly
Deduction Amounts is paid; and
5. all Loan Account value is repaid or restored. (Interest
charged will not exceed 5.65% compounded annually.)
Upon reinstatement, the Cash Value of the policy will be the amount provided by
the premium paid.
EXCHANGE OPTION
While this policy is in effect, you may exchange it during the first two Policy
Years for a form of individual permanent life insurance which we, or one of our
affiliates, then regularly issue for the amount exchanged. No evidence of
insurability will be required. We will issue the policy as provided below:
1. the amount of insurance under the new policy cannot exceed
your choice of either:
a. the Coverage Amount of this policy at the time of the
exchange; or
b. the Death Benefit of this policy at the time of the
exchange; and
2. the Issue Date of the new policy will be the same as the Issue
Date of this policy; and
3. the premium for the new policy will be based on the Insured's
Attained Age under this policy; and
4. the new policy will be based on the same rate class as that on
which this policy was issued, or, if the same rate class is
not available under the new policy, then the new policy will
be based on the class for which the Insured qualifies based on
his/her insurability at the time this policy was issued.
Any Loan Account value must be repaid prior to the issuance of the new policy.
Rider benefits included with this policy will be included with the new policy
only if such rider benefits are available with the new policy and will be
subject to our rules then in effect.
An exchange made pursuant to this provision is subject to an equitable
adjustment in payments and Cash Values to reflect variance, if any, in the
payments and Cash Values under this policy and the new policy.
OWNERSHIP RIGHTS
OWNERSHIP
The original owner(s) is (are) shown on the application. During the Insured's
lifetime, you may, without the consent of any Beneficiary unless irrevocably
named, exercise all rights and options that this policy provides and that we
permit.
Ownership is transferable by assignment. No assignment is binding on us until
we receive a copy of the assignment In Writing. We will not determine if an
assignment is valid. Proof of interest must be filed with any claim under a
collateral assignment.
BENEFICIARY
The original Beneficiary is stated in the application. You may name a new
Beneficiary during the Insured's lifetime and while this policy is in force by
notifying us In Writing. Any change will be effective from the date you signed
the notice of change, even if the Insured is not living when we receive it. We
will have no further responsibility for any payment we make before we receive
the notice at Our Office.
If no Beneficiary survives the Insured, you will be the Beneficiary. If you
are the Insured, your estate will be the Beneficiary. The rights of any
collateral assignee may affect the interest of the Beneficiary.
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GENERAL PROVISIONS
ENTIRE CONTRACT
The entire contract consists of this policy and the application, a copy of
which is attached. The policy is issued in consideration of the application
and the payment of premium. We will not use any statement to void this policy
or to deny a claim under it, unless that statement is contained in an attached
written application. All statements in the application will be considered as
being made to the best knowledge and belief of the applicant and not as
promises of truth.
CHANGES
This policy may only be altered by a written agreement signed by one of our
officers.
NO DIVIDENDS
This policy is non-participating. It does not share in our surplus earnings,
so you will receive no dividends under it.
MISSTATEMENT
If the age and/or sex of the Insured was incorrectly stated in the application,
all benefits will be adjusted to the amount which the premiums paid would have
purchased at the correct age and/or sex, based on the most recent cost of
insurance charge. Proof of age may be filed at any time at Our Office.
SUICIDE
If, within two years from the Issue Date, the Insured dies due to suicide,
while sane or insane, the Death Benefit will be limited to the premiums paid,
less any Loan Account value and amount of any partial surrenders. If you have
applied for an increase to the Stated Amount, this Suicide provision will be
measured from the effective date of the increase with respect to payment of the
increase amount.
If this policy is reinstated, this Suicide provision will be measured from the
reinstatement date.
CONTEST
No misstatements made in any application for this policy will be used to
contest payment of any Death Benefit after the policy has been in force during
the Insured's lifetime for two years from the Issue Date.
If you have applied for an increase to the Stated Amount, this Contest
provision will be measured from the effective date of the increase with respect
to payment of the increase amount.
If this policy is reinstated, this Contest provision will be measured from the
reinstatement date.
SEPARATE ACCOUNTS
We have exclusive and absolute ownership and control of the assets of the
Separate Account(s) and its Investment Options. The assets of the Separate
Account(s) will be available to cover the liabilities of our general account
only to the extent that those assets exceed the reserves and other policy
liabilities of that Separate Account(s) arising under the variable life
insurance policies supported by that Separate Account. The assets of the
Separate Account(s) will be valued on each Valuation Date. Our determination
of the value of an Accumulation Unit by the method described in the policy
will be conclusive. To the extent required by law, the investment policy of
the Separate Account(s) will not be changed without the approval of the
Insurance Commissioner of Connecticut. This approval process is on file with
the Commissioner of the state where this policy is issued for delivery.
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SUBSTITUTION OF SEPARATE ACCOUNT OR INVESTMENT OPTION
If the use of a Separate Account or Investment Option is no longer possible, or
in our judgment becomes inappropriate for the purposes of this policy, we may
substitute another Separate Account or Investment Option without your consent.
Substitution may be made with respect to both existing premium payments and
investment of future premium payments. However, no such substitution will be
made without notice to you and without prior approval of the Securities and
Exchange Commission and the approval of the Insurance Commissioner of the state
where this policy is issued for delivery, to the extent required by law. We
may also add other Investment Options under the policy.
EMERGENCY PROCEDURE
We reserve the right to suspend or postpone the date of any payment of any
benefit or values (including the payments of cash surrenders and policy loans)
for any Valuation Period (1) when the New York Stock Exchange is closed (except
for holidays or weekends); (2) when trading on the Exchange is restricted; (3)
when an emergency exists as determined by the Securities and Exchange
Commission so that disposal of the securities held in the Separate Account is
not reasonably practicable or it is not reasonably practicable to determine the
value of the Separate Account's net assets; or (4) when the Securities and
Exchange Commission has ordered that the right of surrender be suspended for
your protection; or (5) during any other period when the Securities and
Exchange Commission, by order, so permits for your protection. Any provision
of this policy which specifies a Valuation Date or provides for surrenders or
loans will be superseded by this Emergency Procedure.
VOTING RIGHTS
You, or the Beneficiary after the Insured's death, will be entitled to certain
voting rights with respect to the Investment Options to which you have
allocated premiums.
If current law requires, you will be entitled to instruct us how to vote at
meetings of the shareholders of the Investment Options. We will determine the
number of votes to which you will be entitled to instruct us. If there is a
change in the law which permits us to vote the shares of the Investment Options
without direction from you, we reserve the right to do so.
MATURITY OF AN INVESTMENT OPTION
If any Cash Value is attributable to an Investment Option having a specified
maturity date, the Cash Value in that Investment Option as of such maturity
date will be allocated to the money market Investment Option specified on the
Policy Summary, unless you request otherwise. We will send written notice to
your last known address at least thirty days in advance of the maturity date of
that Investment Option. To select an allocation to an Investment Option other
than the money market Investment Option, we must receive your notification In
Writing at least seven days before the maturity date of that Investment Option.
ANNUAL STATEMENT
As often as required by law, but at least once in each Policy Year, we will
send you a statement showing:
1. the Cash Value, Stated Amount and Amount Insured; and
2. the premiums paid, deductions, surrenders and loans made
during the preceding Policy Year; and
3. total Loan Account value.
ILLUSTRATIVE REPORTS
You may request an up-to-date illustrative report of values based on past
results and current assumptions.
We will provide the illustrative report within a reasonable time and for a
reasonable service fee, not to exceed $15 (unless prohibited by state law).
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LAPSE PROTECTION GUARANTEE RIDER
This Rider is made a part of the policy to which it is attached. Except where
this Rider provides otherwise, it is subject to all conditions and limitations
of such policy.
DEFINITIONS
Covered Monthly Deduction Day - Any monthly Deduction Day occurring on or after
the Issue Date of this Rider and prior to the Expiry Date of this Rider as
shown on the Policy Summary.
Net Premium Amount - Equal to the total amount of premium paid for the basic
policy, minus any Loan Account value and minus any partial surrender amounts.
BENEFIT
If, on any Covered Monthly Deduction Day, the Net Premium Amount equals or
exceeds the Lapse Protection Premium Requirement shown on the current Policy
Summary for this Rider, then the basic policy will not lapse on that Covered
Monthly Deduction Day, even if the Cash Surrender Value is insufficient to pay
the monthly Deduction Amount due. Other riders attached to the policy will not
be affected by this Rider.
A requested increase in Stated Amount will increase the Lapse Protection
Premium Requirement. We will send you a revised Policy Summary page that shows
the new Lapse Protection Premium Requirement which must be met to continue this
Rider in force. In no event will an increase in Stated Amount cause this Rider
to terminate at a date later than the original Rider Expiry Date.
ISSUE DATE
The Issue Date of this Rider is the same as that of the basic policy unless
otherwise shown on the Policy Summary.
CONTEST
When applied to this Rider, the Contest provision will measured from the
Rider's Issue Date.
CHARGE
This Rider is issued in consideration of the application for it and the
deduction of the additional charge shown on the Policy Summary. The charge for
this Rider is deducted under the same conditions as the charge for the policy.
GRACE PERIOD
If on any Covered Monthly Deduction Day, the Net Premium Amount is less than
the Lapse Protection Premium Requirement, we will send you a notice of the
premium required to keep this Rider in force. If the premium needed to meet
the Lapse Protection Premium Requirement is not received within 31 days from
the date we sent the notice, this Rider will terminate.
TERMINATION
This Rider will terminate on the earliest of:
1. Subject to the Grace Period provision above, the Covered
Monthly Deduction Day on which the Net Premium Amount is less
than the Lapse Protection Premium Requirement shown on the
current Policy Summary; or
2. the date on which a requested Stated Amount increase is issued
at a substandard rate class; or
3. the date on which the Death Benefit Option is changed from
Option 1 to Option 2; or
4. the monthly Deduction Day following receipt of your written
request for termination of this Rider; or
5. the Expiry Date of this Rider as shown on the Policy Summary;
or
6. policy termination or maturity.
REINSTATEMENT
If this Rider terminates, it cannot be reinstated.
THE TRAVELERS INSURANCE COMPANY
/s/ M. A. CARPENTER
President
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MATURITY EXTENSION RIDER
This Rider is made a part of the policy on the date specified on the
supplemental Policy Summary.
BENEFIT-- Upon the Insured's attaining Age 99 and at any time in the twelve
calendar months thereafter, you may request that coverage be extended beyond
the Maturity Date shown on the Policy Summary. If we have received your
request, In Writing, prior to the Maturity Date, and any past due monthly
Deduction Amounts have been paid, then we will continue this policy in force
beyond the Maturity Date. The policy will be continued until the earlier of
the death of the Insured or the date that we receive your request for full
surrender. All other riders attached to the policy will terminate on the
Maturity Date.
The Death Benefit after the Maturity Date will be the Cash Value less any Loan
Account value and any amounts payable under a collateral assignment of the
policy. Monthly Deduction Amounts will no longer be charged against the Cash
Value and additional premiums will not be accepted. Interest on loans will
continue to accrue and will be added to the total Loan Account value. Loan
repayments will be accepted.
All other provisions of the policy relating to the payment of the Death Benefit
apply to the Death Benefit as described in this Rider. THE DEATH BENEFIT IS
BASED ON THE EXPERIENCE OF THE INVESTMENT OPTIONS SELECTED, AND IS VARIABLE AND
NOT GUARANTEED.
TAXATION-- The policy to which this Rider is attached is intended to qualify as
a life insurance policy for Federal tax purposes. The amount payable under
this policy upon the death of the Insured is intended to qualify for the
Federal income tax exclusion. The provisions of the policy are to be
interpreted to ensure such tax qualification, notwithstanding any other
provision to the contrary.
The policy may be surrendered prior to the death of the Insured for its Cash
Surrender Value. Such a surrender will be treated as a taxable distribution.
THE TRAVELERS INSURANCE COMPANY DOES NOT GIVE TAX ADVICE. NO LANGUAGE IN THIS
RIDER SHOULD BE CONSTRUED TO MEAN THAT THE DEATH BENEFIT AND CASH VALUE WILL BE
EXEMPT FROM ANY FUTURE TAX LIABILITY. THE TAX RESULTS OF ANY BENEFITS RECEIVED
UNDER THIS RIDER DEPEND UPON INTERPRETATION OF THE INTERNAL REVENUE CODE. YOU
SHOULD CONSULT YOUR PERSONAL TAX ADVISOR PRIOR TO THE EXERCISE OF THIS OPTION
TO ASSESS ANY POTENTIAL TAX LIABILITY.
THE TRAVELERS INSURANCE COMPANY
/s/ M. A. CARPENTER
Chairman
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EXHIBIT 6(A)
CHARTER
OF
THE TRAVELERS INSURANCE COMPANY
Hartford, Connecticut
AS EFFECTIVE
OCTOBER 19, 1994
SECTION 1. James G. Batterson, John L. Bunce, Gustavus F. Davis,
George Sexton, William L. Collins, Elijah H. Owen, James L. Howard, Charles F.
Howard, Alfred E. Burr, Henry Keeney, William H. D. Callender, George S.
Gilman, and all others who may become associated with them as shareholders, as
is hereinafter provided, their successors and assigns forever be and they
hereby are created and made a body corporate and politic by the name of The
Travelers Insurance Company and under that name shall have all the powers
specially granted to it by law and, in addition, all powers granted by the
general statutes as now enacted or hereafter amended, to corporations formed
under the Connecticut Stock Corporation Act.
SECTION 2. The business, purposes and powers of said corporation,
including all those set forth in special acts of the Connecticut General
Assembly pertaining to it, shall be:
(A) Insuring persons against the accidental loss of life, or
personal injury, sustained while traveling by railways, steamboats or
other modes of conveyance;
(B) To insure persons against and to make all and every insurance
connected with accidental loss of life or personal injury sustained by
accident of every description;
(C) To insure persons against loss of life or personal injury
resulting from any cause;
(D) To confer endowments, grant and purchase annuities upon such
conditions and for such periods of time as may be determined by said
corporation;
(E) To issue policies, stipulated to be with or without
participation in profits, and all dividends allocated to such
participating policies, which shall not be claimed and called for
within two years after the same shall have been declared, shall be
forfeited to said company;
(F) To reinsure any and all risks taken under its charter;
(G) To insure persons and corporations against loss on account of
liability to others for personal injuries, fatal or otherwise, or
injury to property connected with personal injuries, resulting from
accidental causes; and
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(H) To make all investments which insurance companies are now or
hereafter may be authorized to make under the laws of this state.
SECTION 3. The capital with which the corporation shall commence
business shall be an amount not less than one hundred thousand dollars. The
authorized capital stock of the corporation shall be 40,000,000 shares of
common capital stock of the par value of $2.50 per share. Said corporation may
from time to time increase its capital stock to an amount not exceeding one
hundred fifty million dollars by the issue of additional shares of stock with
the par value then authorized, and is authorized from time to time to change
the par value and number of shares of its issued and outstanding capital stock,
provided the par value shall be not less than Two Dollars Fifty Cents ($2.50)
for each share and the aggregate par value be not altered by such change.
SECTION 4. The business, property and affairs of the corporation
shall be managed by the chief executive officer and his delegated officers
under the direction of the Board of Directors. The Board of Directors shall be
charged with the following responsibilities and duties: selection,
surveillance and removal of the chief executive officer and, subject to the
provisions of any applicable by-laws, other corporate officers; provision of
periodic statements to the shareholders concerning the operation and financial
status of the corporation; amendment of the charter and by-laws; authorization
or approval of major acquisitions and dispositions of assets; authorization or
approval of mergers, consolidations and reorganizations; the taking of action
with respect to the issuance, acquisition, retirement or cancellation,
redemption or determination of terms, limitations and relative rights and
preferences of the corporation's capital stock or any class thereof; the
incurrence of major corporate indebtedness; declaration of dividends with
respect to outstanding shares of the corporation's capital stock; action with
respect to the dissolution of the corporation; and such other responsibilities
and duties as may be required by law.
SECTION 5. The personal liability to the corporation or its
shareholders of a person who is or was a director of the corporation for
monetary damages for breach of duty as a director shall be limited to the
amount of the compensation received by the director for serving the corporation
during the year of the violation if such breach did not (a) involve a knowing
and culpable violation of law by the director, (b) enable the director or an
associate, as defined in subdivision (3) of Section 33-374d of the Connecticut
Stock Corporation Act as in effect on the effective date hereof or as it may be
amended from time to time, to receive an improper personal economic gain, (c)
show a lack of good faith and a conscious disregard for the duty of the
director to the corporation under circumstances in which the director was aware
that his conduct or omission created an unjustifiable risk of serious injury to
the corporation, (d) constitute a sustained and unexcused pattern of
inattention that amounted to an abdication of the director's duty to the
corporation, or (e) create liability under Section 33-321 of the Connecticut
Stock Corporation Act as in effect on the effective date hereof or as it may be
amended from time to time. This Section 5 shall not limit or preclude the
liability of a person who is or was a director for any act or omission
occurring prior to the effective date hereof on the date of filing of a
Certificate of
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Amendment amending the Charter of the corporation with the Secretary of the
State of the State of Connecticut. The personal liability of a person who is
or was a director to the corporation or its shareholders for breach of duty as
a director shall further be limited to the full extent allowed by the
Connecticut Stock Corporation Act as it may be amended from time to time. Any
lawful repeal or modification of this Section 5 or the adoption of any
provision inconsistent herewith by the Board of Directors and the shareholders
of the corporation shall not, with respect to a person who is or was a
director, adversely affect any limitation of liability, right or protection
existing at or prior to the effective date of such repeal, modification or
adoption of a provision inconsistent herewith.
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EXHIBIT 6(B)
BY-LAWS
OF
THE TRAVELERS INSURANCE COMPANY
OCTOBER 20, 1994
ARTICLE I.
SHAREHOLDERS AND SHAREHOLDERS' MEETINGS.
SECTION 1. The annual meeting of the shareholders of The Travelers
Insurance Company shall be held at such time and place as the directors may
appoint.
SECTION 2. Special meetings of the shareholders may be held at such
time and place as may be designated in the notice thereof and may be called at
any time by the Chairman of the Board or the President or by a majority of the
directors.
SECTION 3. At each meeting of the shareholders the Chairman of the
Board, or in his absence the President, or, in the absence of both, such other
person as may be appointed by the Board of Directors, shall act as chairman of
the meeting and the Corporate Secretary shall act as clerk of the meeting, and
in his absence, an Assistant Corporate Secretary, or in the absence of the
Corporate Secretary or an Assistant Corporate Secretary, such company officer
as the Chairman may appoint shall act as clerk of the meeting.
SECTION 4(a). There shall be a minimum of three and a maximum of
twelve directorships and the number of directorships at any time within such
minimum and maximum shall be the number fixed by resolution of the Board of
Directors. At each annual meeting of the company directors shall be elected,
each to hold office until the next succeeding annual meeting of shareholders
following such election or until a successor has been elected and qualified,
except as provided hereafter. Whenever any vacancy shall occur in the Board of
Directors by death, resignation or otherwise, such vacancy may be filled by a
majority of the directors then in office whether or not they constitute a
quorum.
(b). The Board of Directors may increase the number of directorships,
within a minimum of three and a maximum of twelve, and fill any vacancy created
by reason of such increase in the number of directorships, by the concurring
vote of directors holding a majority of the directorships, which number of
directorships shall be the number prior to the vote on the increase. Directors
elected to fill such vacancies shall serve until the next annual meeting of
shareholders and until a successor has been elected and qualified.
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(c). Any adult person in good standing in his/her community is
eligible to be a director of the Company.
SECTION 5. A majority of the shares of voting capital stock
outstanding of all classes shall constitute a quorum for the transaction of
business at such meetings.
ARTICLE II.
DIRECTORS.
SECTION 1. The regular meetings of the directors shall be held at
such place and at such time as the directors may by vote designate. The
directors may authorize the Chairman of the Board or the President to change
the time of any regular meeting.
SECTION 2. Special meetings of the directors may be called at any
time by the Chairman of the Board or the President or by any three directors.
SECTION 3. Written notice by mail shall be given by the Corporate
Secretary of each regular and special meeting of the board and each committee
thereof to all directors or members of the committee, as the case may be, at
least two days before the time appointed therefor or notice to such directors
or committee members may be personally delivered or given by telegraph or
telephone not later than the day before the meeting.
SECTION 4. Not less than one-third of the board shall constitute a
quorum for the transaction of business at any meeting of the board, and at
every meeting the presiding officer shall have the right to vote, but at any
special meeting called by three directors not less than seven directors shall
constitute a quorum.
SECTION 5. The Board of Directors annually at the first meeting of
the board held after the annual election of directors or at some adjourned
meeting thereof by a majority vote of the directors present shall elect from
their own number a Chairman of the Board and may elect from their own number a
President and one or more Vice Chairmen, each to hold office for one year and
until his successor is chosen, and may at any time fill any vacancy which may
occur in said offices for the unexpired term. In the absence of the Chairman of
the Board, the President, if he is a member of the Board of Directors, shall
preside when present at all meetings of the board; in the absence of the
Chairman of the Board and the President, the Board of Directors may choose from
among their own number a Chairman or a President pro tem to preside at its
meetings. Any two or more offices may be held by the same person, except the
offices of President and Corporate Secretary.
SECTION 6. By the same vote but at any time and from time to time the
Board of Directors shall appoint a President (if not elected from their own
number) and may appoint one or more Executive Vice Presidents, Senior Vice
Presidents, a General Counsel, a Corporate Secretary, a Treasurer, an Auditor
and such other officers under appropriate titles as the board may deem
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necessary for the proper conduct of the Company's business, to hold office
during the pleasure of the chief executive officer.
ARTICLE III.
COMMITTEES.
SECTION 1. The Board of Directors by resolution adopted by the
affirmative vote of the directors holding a majority of the directorships shall
annually appoint an Investment Committee and an Audit Committee, the members of
which may be selected from the members of the Board of Directors or otherwise,
and may from time to time appoint and prescribe the duties and authority of
other committees. Appointments to any committee may be revoked and annulled
and new appointments made by the board at any time in its discretion. The
Board of Directors may appoint from among its members two directors as
alternates to each such committee to serve in the order of their appointment
and the chairman of any committee may appoint a director as an alternate to
serve as a member of such committee in the absence or disqualification of any
committee member and any alternate appointed by the Board of Directors.
SECTION 2. The Investment Committee shall consist of not less than
three members. It shall be the duty of the Investment Committee to authorize
or approve each loan or investment transaction made by the Company and to
review the investment policy and program of the Company.
SECTION 3. Not less than two members of the Investment Committee
shall constitute a quorum for the transaction of business at any meeting of the
Committee, and at every meeting the presiding officer shall have the right to
vote.
SECTION 4. The Investment Committee may appoint from among the
officers of the Company or an affiliated company a Management Investment
Committee and assign to the Management Investment Committee, subject to such
limitations as the Investment Committee may from time to time establish, the
review and authorization of loans and investments of the Company.
ARTICLE IV.
OFFICERS.
SECTION 1. The Chairman of the Board shall be the chief executive
officer, charged with the management of the business, property and affairs of
the Company under the direction of the Board of Directors. The Board of
Directors may appoint as the chief executive officer the President or some
other officer, provided that no such appointment shall become effective unless
notice thereof is included in a notice of the meeting at which the change is
made, or such appointment was considered at a meeting of the board at which a
majority of the directors were present held at least twenty-four hours prior to
the appointment. At his discretion, the chief executive officer may act as
Chairman of any Committee of which he is a member. When
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present, the Chairman of the Board shall preside at all meetings of the board.
He shall be a member ex officio of all committees, except the Audit Committee.
The chief executive officer may at any time and from time to time appoint such
other officers, not specified in or appointed by the Board of Directors
pursuant to Section 6 of Article II, under appropriate titles as he may deem
necessary for the proper conduct of the Company's business to hold office
during his pleasure. The chief executive officer may at his discretion
delegate such power of appointment to any of the officers designated in
Sections 5 and 6 of Article II.
SECTION 2. In the absence of the chief executive officer or his
inability to act, the Board of Directors may designate the Chairman of the
Board or the President or such other officer of the Company as it may select to
perform the duties imposed upon the chief executive officer by these by-laws.
SECTION 3. Each officer appointed by the Board of Directors shall be
subject to the direction of and shall have such authority and perform such
duties as may be assigned to him from time to time by the Board of Directors,
the chief executive officer and his delegated officers. Each officer appointed
pursuant to Section 1 of this Article IV shall be subject to the direction of
and shall have such authority and perform such duties as may be assigned to him
from time to time by the chief executive officer and his delegated officers.
SECTION 4. The compensation of all officers, agents and employees of
the Company may be fixed either by the Board of Directors, by a committee
appointed by the board for that purpose or by the chief executive officer or
other officer within the limits of authority conferred upon him by the board or
by such committee.
ARTICLE V.
CORPORATE SEAL.
The corporate seal shall hereafter, as heretofore, consist of the
corporate name in a circle enclosing the word "seal." The Corporate Secretary
shall be the keeper of the corporate seal with authority in him and in each
Department Secretary or Assistant Corporate Secretary or Assistant Department
Secretary to affix the same and attest it by his signature to all sealed
instruments.
ARTICLE VI.
AMENDMENTS.
These by-laws may be altered, repealed or amended and additional
by-laws enacted at any annual or special meeting of the shareholders provided
notice be given of the action proposed in the notice of such meeting, or by
vote of a majority of the entire Board of Directors at a meeting of said board
called for the purpose upon notice to each director of the action proposed to
be taken in regard to said by-laws, provided, however, that Article II, Section
4, and Article III, Section 3 of the by-laws shall not be amended except at a
meeting of the shareholders.
4
<PAGE> 1
EXHIBIT 11
October 29, 1996
The Travelers Insurance Company
The Travelers Variable Life Insurance
Separate Account Four
One Tower Square
Hartford, Connecticut 06183
Gentlemen:
With reference to the Registration Statement on Form S-6 filed by The
Travelers Insurance Company and The Travelers Variable Life Insurance Separate
Account Four with the Securities and Exchange Commission covering modified
single premium individual variable life insurance policies, I have examined
such documents and such law as I have considered necessary and appropriate, and
on the basis of such examination, it is my opinion that:
1. The Travelers Insurance Company is duly organized and existing
under the laws of the State of Connecticut and has been duly
authorized to do business and to issue variable life insurance
policies by the Insurance Commissioner of the State of
Connecticut.
2. The Travelers Variable Life Insurance Separate Account Four is a
duly authorized and existing separate account established pursuant
to Section 38a-433 of the Connecticut General Statutes.
3. The variable life insurance policies covered by the above
Registration Statement, and all pre- and post-effective amendments
relating thereto, have been or will be approved and authorized by
the Insurance Commissioner of the State of Connecticut and when
issued will be valid, legal and binding obligations of The
Travelers Insurance Company and of The Travelers Variable Life
Insurance Separate Account Four.
4. Assets of The Travelers Variable Life Insurance Separate Account
Four are not chargeable with liabilities arising out of any other
business The Travelers Insurance Company may conduct.
I hereby consent to the filing of this opinion as an exhibit to the
above-referenced Registration Statement and to the reference to this opinion
under the caption "Legal Proceedings and Opinion" in the Prospectus
constituting a part of the Registration Statement.
Very truly yours,
/s/Katherine M. Sullivan
Katherine M. Sullivan
General Counsel
The Travelers Insurance Company
<PAGE> 1
EXHIBIT 12
THE TRAVELERS VARIABLE LIFE INSURANCE SEPARATE ACCOUNT FOUR
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, MICHAEL A. CARPENTER of Greenwich, Connecticut,
Chairman of the Board, President and Chief Executive Officer of The Travelers
Insurance Company (hereafter the "Company"), do hereby make, constitute and
appoint ERNEST J. WRIGHT, Secretary of said Company, and KATHLEEN A. McGAH,
Assistant Secretary of said Company, or either one of them acting alone, my
true and lawful attorney-in-fact, for me, and in my name, place and stead to
sign registration statements on behalf of said Company on Form S-6 or other
appropriate Form under the securities Act of 1933 for The Travelers Variable
Life Insurance Separate Account Four, a separate account of the Company
dedicated specifically to the funding of variable life insurance contracts to
be offered by said Company, and further, to sign any and all amendments
thereto, including post-effective amendments, that may be filed by the Company
on behalf of said registrant.
IN WITNESS WHEREOF I have hereunto set my hand this 18th day
of October, 1996.
/s/Michael A. Carpenter
Chairman of the Board, President
and Chief Executive Officer
The Travelers Insurance Company
<PAGE> 2
THE TRAVELERS VARIABLE LIFE INSURANCE SEPARATE ACCOUNT FOUR
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, JAY S. BENET of West Hartford, Connecticut, a director
of The Travelers Insurance Company (hereafter the "Company"), do hereby make,
constitute and appoint ERNEST J. WRIGHT, Secretary of said Company, and
KATHLEEN A. McGAH, Assistant Secretary of said Company, or either one of them
acting alone, my true and lawful attorney-in-fact, for me, and in my name,
place and stead to sign registration statements on behalf of said Company on
Form S-6 or other appropriate Form under the securities Act of 1933 for The
Travelers Variable Life Insurance Separate Account Four, a separate account of
the Company dedicated specifically to the funding of variable life insurance
contracts to be offered by said Company, and further, to sign any and all
amendments thereto, including post-effective amendments, that may be filed by
the Company on behalf of said registrant.
IN WITNESS WHEREOF I have hereunto set my hand this 18th day
of October, 1996.
/s/Jay S. Benet
Director
The Travelers Insurance Company
<PAGE> 3
THE TRAVELERS VARIABLE LIFE INSURANCE SEPARATE ACCOUNT FOUR
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, GEORGE C. KOKULIS of Simsbury, Connecticut a director
of The Travelers Insurance Company (hereafter the "Company"), do hereby make,
constitute and appoint ERNEST J. WRIGHT, Secretary of said Company, and
KATHLEEN A. McGAH, Assistant Secretary of said Company, or either one of them
acting alone, my true and lawful attorney-in-fact, for me, and in my name,
place and stead to sign registration statements on behalf of said Company on
Form S-6 or other appropriate Form under the securities Act of 1933 for The
Travelers Variable Life Insurance Separate Account Four, a separate account of
the Company dedicated specifically to the funding of variable life insurance
contracts to be offered by said Company, and further, to sign any and all
amendments thereto, including post-effective amendments, that may be filed by
the Company on behalf of said registrant.
IN WITNESS WHEREOF I have hereunto set my hand this 18th day
of October, 1996.
/s/George C. Kokulis
Director
The Travelers Insurance Company
<PAGE> 4
THE TRAVELERS VARIABLE LIFE INSURANCE SEPARATE ACCOUNT FOUR
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, ROBERT I. LIPP of Scarsdale, New York a director of
The Travelers Insurance Company (hereafter the "Company"), do hereby make,
constitute and appoint ERNEST J. WRIGHT, Secretary of said Company, and
KATHLEEN A. McGAH, Assistant Secretary of said Company, or either one of them
acting alone, my true and lawful attorney-in-fact, for me, and in my name,
place and stead to sign registration statements on behalf of said Company on
Form S-6 or other appropriate Form under the securities Act of 1933 for The
Travelers Variable Life Insurance Separate Account Four, a separate account of
the Company dedicated specifically to the funding of variable life insurance
contracts to be offered by said Company, and further, to sign any and all
amendments thereto, including post-effective amendments, that may be filed by
the Company on behalf of said registrant.
IN WITNESS WHEREOF I have hereunto set my hand this 18th day
of October, 1996.
Robert I. Lipp
Director
The Travelers Insurance Company
<PAGE> 5
THE TRAVELERS VARIABLE LIFE INSURANCE SEPARATE ACCOUNT FOUR
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, IAN R. STUART of East Hampton, Connecticut a director,
Vice President, Chief Financial Officer, Chief Accounting Officer and
Controller of The Travelers Insurance Company (hereafter the "Company"), do
hereby make, constitute and appoint ERNEST J. WRIGHT, Secretary of said
Company, and KATHLEEN A. McGAH, Assistant Secretary of said Company, or either
one of them acting alone, my true and lawful attorney-in-fact, for me, and in
my name, place and stead to sign registration statements on behalf of said
Company on Form S-6 or other appropriate Form under the securities Act of 1933
for The Travelers Variable Life Insurance Separate Account Four, a separate
account of the Company dedicated specifically to the funding of variable life
insurance contracts to be offered by said Company, and further, to sign any and
all amendments thereto, including post-effective amendments, that may be filed
by the Company on behalf of said registrant.
IN WITNESS WHEREOF I have hereunto set my hand this 18th day
of October, 1996.
/s/Ian R. Stuart
Director, Vice President
Chief Financial Officer,
Chief Accounting Officer and Controller
The Travelers Insurance Company
<PAGE> 6
THE TRAVELERS VARIABLE LIFE INSURANCE SEPARATE ACCOUNT FOUR
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, KATHERINE M. SULLIVAN of Longmeadow, Massachusetts,
Director, Senior Vice President and General Counsel of The Travelers Insurance
Company (hereafter the "Company"), do hereby make, constitute and appoint
ERNEST J. WRIGHT, Secretary of said Company, and KATHLEEN A. McGAH, Assistant
Secretary of said Company, or either one of them acting alone, my true and
lawful attorney-in-fact, for me, and in my name, place and stead to sign
registration statements on behalf of said Company on Form S-6 or other
appropriate Form under the securities Act of 1933 for The Travelers Variable
Life Insurance Separate Account Four, a separate account of the Company
dedicated specifically to the funding of variable life insurance contracts to
be offered by said Company, and further, to sign any and all amendments
thereto, including post-effective amendments, that may be filed by the Company
on behalf of said registrant.
IN WITNESS WHEREOF I have hereunto set my hand this 18th day
of October, 1996.
/s/Katherine M. Sullivan
Director, Senior Vice President
and General Counsel
The Travelers Insurance Company
<PAGE> 7
THE TRAVELERS VARIABLE LIFE INSURANCE SEPARATE ACCOUNT FOUR
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, MARC P. WEILL of New York, New York a director of The
Travelers Insurance Company (hereafter the "Company"), do hereby make,
constitute and appoint ERNEST J. WRIGHT, Secretary of said Company, and
KATHLEEN A. McGAH, Assistant Secretary of said Company, or either one of them
acting alone, my true and lawful attorney-in-fact, for me, and in my name,
place and stead to sign registration statements on behalf of said Company on
Form S-6 or other appropriate Form under the securities Act of 1933 for The
Travelers Variable Life Insurance Separate Account Four, a separate account of
the Company dedicated specifically to the funding of variable life insurance
contracts to be offered by said Company, and further, to sign any and all
amendments thereto, including post-effective amendments, that may be filed by
the Company on behalf of said registrant.
IN WITNESS WHEREOF I have hereunto set my hand this 18th day
of October, 1996.
/s/Marc P. Weill
Director
The Travelers Insurance Company
<PAGE> 1
EXHIBIT 13
October 23, 1996
This document sets forth, as required by Rule 6E-3(T)(b)(12)(iii), the
administrative procedures that will be followed by the Travelers Insurance
Company (TIC) in connection with the issuance of its modified single premium
Variable Life insurance contract, the transfer of assets held thereunder, and
the redemption by Policyowners of their interest in the contracts. The
document also describes the method that TIC will use in adjusting the payment
and cash values when a Contract is exchanged for a fixed benefit insurance
policy, as required by Rule 6E- 3(T)(b)(13)(v)(B).
Transfer and Redemption Procedures
I. PURCHASE AND RELATED TRANSACTIONS
A. Premium Schedules and Underwriting Standards
This Contract is a modified single premium contract. The Initial
Premium purchases a Death Benefit equal to the Policy's Stated Amount
if Option 1 is selected, and Stated Amount plus Cash Value if Option 2
is selected. The relationship between the Initial Premium and the
Stated Amount depends on the age, sex (where permitted by state law),
and underwriting class of the insured. Generally, the same Initial
Premium will purchase a higher Stated Amount for a younger insured
than for an older insured. Likewise, the same Initial Premium will
purchase a slightly higher Stated Amount for a female insured than for
a male insured of the same age. Also, the same Initial Premium will
purchase a higher Stated Amount for a standard insured than for a
substandard insured.
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Although the Policy can operate as a single premium policy, Additional
Premium Payments may be made under certain circumstances. The
circumstances under which Additional Premium Payments can be made
under the Policy are as follows:
1) Increases in Stated Amount- The policy owner may request an
increase in Stated Amount at any time. The Company will require
the policy owner to make an Additional Premium Payment in order
for the increase to become effective.
2) To Prevent Lapse- If the Surrender Value on any Deduction Day is
insufficient to cover the Monthly Deduction Amount due on that
day, then in order to prevent lapse, the policy owner must make a
payment during the Grace Period sufficient to cover the Monthly
Deduction Amount.
3) At Policy Owner's Discretion- Additional Premium Payments may be
made at the policyholder's discretion so long as the payment plus
the total of all premiums previously paid does not exceed the
maximum premiums limitation derived from the guideline premium
test for life insurance prescribed by the Internal Revenue Code.
Because of the test, the maximum premiums limitation will
ordinarily equal the Initial Premium for a number of years after
the policy has been issued. Therefore, discretionary Additional
Premium Payments normally will not be permitted during the early
years of the Policy.
Any Additional Premium Payments made under the Policy may be subject
to new evidence of insurability. The Contract will be offered and sold
pursuant to established underwriting standards and in accordance with
state insurance laws, which prohibit unfair discrimination among
Contract owners, but recognize that premiums must be based upon
factors such as age, health, or occupation.
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<PAGE> 3
B. Application and Initial Premium Processing
Upon receipt of a completed application, the Travelers will follow
certain insurance underwriting (i.e. evaluation of risk) procedures
designed to determine whether the applicant is insurable. This
process may involve such verification procedures as medical
examinations and may require that further information be provided by
the proposed Insured before a determination can be made. A contract
will not be issued until this underwriting procedure has been
completed.
Insurance coverage under a Policy will begin only after the Applicant
has satisfied all outstanding underwriting delivery requirements, and
after the Company has received the Initial Premium Payment. The
Policy Date is the date used to determine all future cyclical
transactions on the Policy, e.g., Deduction Dates, Policy Months, and
Policy Years. The Policy Date may be prior to, or the same date as,
the date on which the Policy is issued (the "Issue Date").
C. Premium Allocation
When the Policy is issued, the Cash Value will be allocated to the
Cash Income Trust Investment Option until the expiration of the Right
to Cancel Period. At the end of the Right to Cancel Period, shares of
the Underlying Investment Options will be purchased at net asset
value, and the Cash Values in the Cash Income Trust will be allocated
(in whole percentages of 5% or more) among the Investment Options
selected on the Application.
D. Contract Loans
A Policy Owner may obtain a cash loan from the Company secured by the
Policy not to exceed 90% of the Policy's Cash Surrender Value
(determined on the day on which the Company receives the written loan
request). No loan request may be made for amounts less than $500.
If there is a loan outstanding at the time a subsequent loan request
is made, the amount of the outstanding loan will be added to the new
request. The Company will charge interest on the outstanding amounts
of the loan. Interest must be paid in advance by the Policy Owner.
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<PAGE> 4
Loans are considered to be loans on the Policy Owner's Earnings first.
Once all of the earnings have been loaned out, loans are considered to
be loans of premium. During the first ten Policy Years, the Loan
Interest Rate on the portion of loan comprised of Earnings is 5.65%.
During policy years eleven and thereafter, the current Loan Interest
Rate on the Earnings is 3.85% and is guaranteed to never be greater
than 5.65%. For all Policy Years, the Loan Interest Rate on the
portion of the loan comprised of Premium is 5.65%.
The amount of the loan will be transferred as of the date the loan is
made on a pro rata basis from each of the Investment Options
attributable to the Policy (unless the Policy Owner states otherwise)
to the Loan Account, which is part of the Company's general account.
The Loan Account is credited with a fixed annual rate of interest set
forth in the policy which does not vary with the performance of the
Underlying Investment Options. When loan repayments are made, the
amount of the repayment will be deducted from the Loan Account and
will be reallocated based upon premium allocation percentages among
the Investment Options applicable to the Policy (unless the Policy
Owner states otherwise). The Company will make the loan to the Policy
Owner within seven days after receipt of the written loan request.
An outstanding loan amount decreases the Cash Surrender Value. If a
loan is not repaid, it permanently decreases the Cash Surrender Value,
which could cause the Policy to lapse. In addition, the Death Benefit
actually payable would be decreased because of the outstanding loan.
Furthermore, even if the loan is repaid, the Death Benefit and Cash
Surrender Value may be permanently affected since the Policy Owner was
not credited with the investment experience of an Underlying
Investment Option on the amount in the Loan Account while the loan was
outstanding. All or any part of a loan secured by a Policy may be
repaid while the Policy is still in effect.
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E. Reinstatement
If the Policy lapses, the Policy owner may reinstate the Contract on
payment of the reinstatement premium, (and any applicable charges)
shown in the Contract. A request for reinstatement may be made at any
time within three years of lapse (five years for policies issued in
Missouri). The premium on reinstatement is at least equal to the
Monthly Deduction Amount, calculated as of the Deduction Date next
following receipt of premium. The Cash Value of the Policy on
reinstatement will be equal to the premium paid in conjunction with
the reinstatement. In addition, TIC reserves the right to require
satisfactory evidence of insurability.
F. Transfer of Cash Value
As long as the Policy remains in effect, the Policy Owner may transfer
all or a portion of the Cash Value (less the Loan Account) among any
of the Investment Options. Although there are currently no charges,
penalties or restrictions on the amount or frequency of transfers, the
Company reserves the right to limit the number of transfers to no more
than four in any Policy Year, and to charge a reasonable fee for any
transfer request in excess of four.
G. Misstatement as to Sex and Age
If there has been a misstatement with regard to sex or age, benefits
payable will be adjusted to what the Contract would have provided with
the correct information.
II. REDEMPTION PROCEDURES: SURRENDER AND RELATED TRANSACTIONS
A. Surrender for Cash Value
As long as the Contract is in effect, a Contract Owner may elect to
surrender the Contract and receive its Cash Surrender Value, or Cash
Value less any outstanding policy loan less any applicable Surrender
Charges.
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Upon full or partial surrender, the Travelers will generally pay the
Cash Surrender Value of the Contract within seven days of receipt of
the written request or on the date requested by the Contract owner, if
later. The Cash Surrender Value for partial surrenders will be equal
to the net amount requested to be surrendered minus any applicable
surrender charges. There will be no charge for partial surrenders on
Earnings (calculated on the date of policyholder request) up to a
cumulative amount, in any one Policy Year, of 10% of the Cash Value
(calculated on the first Valuation Date of the year in which the
surrender is requested). The deduction from Cash Value for a partial
surrender will be made on a pro rata basis against the Cash Value of
each of the Investment Options attributable to the policy, unless the
Contract owner states otherwise in writing. In addition to reducing
the Cash Value of the policy, partial cash surrenders will reduce the
death benefit payable under the policy.
B. Benefit Claims
As long as the Policy remains in force, the Policy provides a Death
Benefit upon the death of the insured. The death benefit proceeds
will be paid to a named Beneficiary. The amount of the death benefit
proceeds will be determined on the date on which the Insured's death
occurred. The death benefit proceeds may be paid in a lump sum or
under any optional payment plan. In determining the proceeds payable,
the Death Benefit provided by the Policy will be reduced by any
outstanding charges, fees, and policy loans. The proceeds will be
paid within seven days after the Company receives due proof of death.
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The Policy provides for two death benefit options. Under Option 1
(the Level Option) the Death Benefit will be equal to the Policy's
Stated Amount or, if greater, a specified multiple of Cash Value (the
"Minimum Amount Insured"). Under Option 2 (the Variable Option), the
Death Benefit will be equal to the Policy's Stated Amount plus the
Cash Value (determined as of the date of the Insured's death) or, if
greater, the Minimum Amount Insured. The Minimum Amount Insured is
the amount required to qualify the Policy as a life insurance contract
under the current federal tax law. Under that law, the Minimum Amount
Insured is equal to a stated percentage of the Cash Value of the
Policy determined daily. The percentages differ according to the
attained age of the insured. The Minimum Amount Insured will be set
forth in the Policy and may change as federal income tax laws or
regulations change.
A Policy Owner may request in writing that the Stated Amount of the
Policy be increased or decreased provided that the Stated Amount after
any decrease may not be less than the minimum amount of $10,000. A
decrease in the Stated Amount in a substantially funded Policy may
cause a cash distribution that is includable in the gross income of
the Policy Owner.
For increases in the Stated Amount, the Company may require a new
application and evidence of insurability as well as an additional
Premium Payment. The effective date of any increase will be as shown
on the new Policy Summary which the Company will send to the Policy
Owner. The effective date of any increase in the Stated Amount will
generally be the Deduction Date next following either the date of a
new application or, if different, the date requested by the Policy
Owner. There is no additional charge for a decrease in Stated Amount.
A Policy Owner may change the Death Benefit option at any time prior
to the Insured's death by sending a written request to the Company.
There is no direct consequence of changing a Death Benefit option,
except as described in the prospectus under "Tax Consequences of
Modified
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Endowment Contracts". However, the change could affect future value
of the Coverage Amount, and with some Option 2 to Option 1 changes
involving substantially funded Policies, there may be a cash
distribution which is included in the gross income of the Policy
Owner. Consequently, the cost of insurance charge which is based on
the Coverage Amount may be different in the future. If the change is
from Option 2 to Option 1, the Stated Amount of the Policy will be
increased by the Cash Value (determined on the day the Company
receives the written change request or on the date the change is
requested to become effective, if later). If the change is from
Option 1 to Option 2, the Stated Amount of the Policy will be
decreased by the Cash Value (determined on the date the Company
receives the written change request) so that the Death Benefit payable
under Option 2 at the time of the change will equal that which would
have been payable under Option 1. No change from Option 1 to Option 2
will be permitted if the change results in a Stated Amount of less
than the minimum amount of $10,000.
If the Insured is living on the Maturity Date (the anniversary of the
Policy Date on which the Insured is age 100), the Company will pay the
Policy Owner the Cash Value of the Policy, less any outstanding policy
loan, amounts payable to an assignee under a collateral assignment of
the Policy, or Deduction Amount due and unpaid. The Policy Owner must
surrender the Policy to the Company before such payment can be made,
at which point the Policy will terminate and the Company will have no
further obligations under the Policy.
C. Lapse
The Policy will remain in effect until the Cash Surrender Value of the
Policy is insufficient to cover the Monthly Deduction Amount. If such
event occurs, the Company will give written notice to the Policy Owner
indicating that if the amount shown in the notice (which will be
sufficient to cover the Deduction Amount due) is not paid within 61
days (the "Late Period"), the Policy will lapse. The Policy will
continue through the Late Period, but if not payment is
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<PAGE> 9
forthcoming, it will terminate without value at the end of the Late
Period. If the person insured under the Policy dies during the Grace
Period, the Death Benefit payable under the Policy will be reduced by
the Monthly Deduction Amount due plus the amount of any outstanding
loan. If the Policy lapses, the Policy Owner may reinstate the Policy
upon payment of the reinstatement premium (and any applicable charges)
shown in the Policy. A request for reinstatement may be made at any
time within three years of lapse (five years for policies issued in
Missouri). The Cash Value of the Policy upon reinstatement will be
equal to the premium paid in conjunction with the reinstatement. In
addition, the Company reserves the right to require satisfactory
evidence of insurability.
D. Contract Loans
See Purchase and Related Transactions- Contract Loans.
E. Transfers
See Purchase and Related Transactions- Transfer of Cash Value
III. CASH ADJUSTMENT UPON EXCHANGE OF CONTRACT
Once the Policy is in effect, it may be exchanged at any time during
the first 24 months after its issuance for a general account life
insurance policy issued by the Company (or an affiliated company) on
the life of the Insured. Benefits under the new life insurance policy
will be as described in that policy. No evidence of insurability will
be required. The Policy Owner has the right to select the same Death
Benefit or Net Amount at Risk as the former Policy. Cost of insurance
rates will be based on the same risk classification as those of the
former Policy. Any outstanding policy loan must be repaid before the
Company will make an exchange. In addition, there may be an
adjustment for the difference in Cash Value between the two policies.
MAHIR DUGENTAS
------------------------
Mahir Dugentas, A.S.A.
Director of Life Pricing
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