<PAGE>
As filed with the Securities and Exchange Commission on September 21, 1999
Registration No. 333-78581
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pre-Effective Amendment No. 1
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED
ON FORM N-8B-2
THE SAGE VARIABLE LIFE ACCOUNT A
(Exact Name of Registrant)
SAGE LIFE ASSURANCE OF AMERICA, INC.
(Name of Depositor)
300 Atlantic Street
Stamford, CT 06901
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number: (203) 602-6500
James F. Bronsdon
Sage Life Assurance of America, Inc.
300 Atlantic Street
Stamford, CT 06901
(Name and Address of Agent for Service of Process)
Copy to:
Stephen E. Roth
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2415
<PAGE>
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the Registration Statement.
Title of Securities: Interests in a separate account under modified single
payment combination fixed and variable life insurance contracts.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant files a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS DATED ___________, 1999
LIFEASSET I, MODIFIED SINGLE PAYMENT COMBINATION FIXED AND VARIABLE LIFE
INSURANCE CONTRACTS
Issued By
The Sage Variable Life Account A and
Sage Life Assurance of America, Inc.
Executive Office: Customer Service Center:
300 Atlantic Street 1290 Silas Deane Highway
Stamford, CT 06901 Wethersfield, CT 06109
Telephone: (877) 835-7243
(Toll Free)
This Prospectus describes individual and group modified single payment
combination fixed and variable life insurance contracts offered by Sage Life
Assurance of America, Inc. ("we", "us", "our", or the "Company"). We designed
the Contracts for your estate planning or other insurance needs, or to
supplement your long-term retirement savings. The Contracts provide a means for
investing your Account Value on a tax-deferred basis in our Variable Account and
our Fixed Account. You can purchase a Contract by making a minimum initial
purchase payment. After purchase, you determine the amount and timing of
additional purchase payments, subject to certain restrictions.
You may allocate purchase payments and transfer Account Value to our
Variable Account and/or our Fixed Account within certain limits. The Variable
Account has 33 Sub-Accounts. Through our Fixed Account, you can choose to invest
your money in one or more of 5 different guarantee periods.
Each Variable Sub-Account invests in a corresponding Fund of AIM Variable
Insurance Funds, Inc., The Alger American Fund, Liberty Variable Investment
Trust, SteinRoe Variable Investment Trust, MFS(R) Variable Insurance Trust,
Morgan Stanley Dean Witter Universal Funds, Inc., Oppenheimer Variable Account
Funds, Sage Life Investment Trust, or T. Rowe Price Equity Series, Inc.
(collectively, the "Trusts").
Your Account Value will vary daily with the investment performance of the
Variable Sub-Accounts and any interest we credit under our Fixed Account. We do
not guarantee any minimum Account Value for amounts you allocate to the Variable
Account. We do guarantee principal and a minimum fixed rate of interest for
specified periods of time on amounts you allocate to the Fixed Account. However,
amounts you withdraw, surrender, transfer, or borrow from the Fixed Account
before the end of an applicable Guarantee Period ordinarily will be subject to a
Market Value Adjustment, which may increase or decrease these amounts.
<PAGE>
The Contracts provide a death benefit, as well as additional benefits,
including five alternative Settlement Options for receiving death or surrender
proceeds as income payments under the Contract, and optional programs including
dollar-cost averaging, asset allocation, automatic portfolio rebalancing, and
systematic partial withdrawals.
If you currently own a life insurance policy on the life of the Insured,
you should consider carefully whether the Contract should be used to replace or
supplement your existing policy.
In almost all cases, the Contracts will be modified endowment contracts for
Federal income tax purposes. This means that a loan or other distribution from
the Contract during the life of the Insured will in almost all cases be taxed as
ordinary income to the extent of any earnings in the Contract, and may be
subject to an additional 10% Federal penalty tax, if taken before the Owner
attains age 59 1/2. Special tax and legal considerations apply if this Contract
is used in connection with a qualified plan or certain other employment
plans.
This Prospectus includes basic information about the Contracts that you
should know before investing. Please read this Prospectus carefully and keep it
for future reference. This Prospectus must be accompanied by the current
prospectus for each of the Trusts.
The Securities and Exchange Commission has not approved these Contracts or
determined that this Prospectus is accurate or complete. Any representation to
the contrary is a criminal offense.
Variable life contracts are not deposits or obligations of, or endorsed or
guaranteed by, any bank, nor are they federally insured or otherwise protected
by the FDIC, the Federal Reserve Board, or any other agency; they are subject to
investment risks, including possible loss of principal.
<PAGE>
TABLE OF CONTENTS
Index of Terms.........................................................
Summary Of The Contracts...............................................
PART I - Description Of The Contracts
1. What Are The Contracts?...........................................
2. How Do I Purchase A Contract?.....................................
. Initial Purchase Payment
. Issuance of a Contract
. Free Look Right to Cancel Contract
. Making Additional Purchase Payments
. Grace Period
. Reinstatement
. Specialized Uses of the Contract
. Illustrations
3. What Are My Investment Options?...................................
. Purchase Payment Allocations
. Variable Sub-Account Investment Options
. Fixed Account Investment Options
. Market Value Adjustment
. Transfers
. Telephone Transactions
. Power of Attorney
. Dollar Cost Averaging Program
. Asset Allocation Program
. Automatic Portfolio Rebalancing Program
. Account Value
. Variable Account Value
. Accumulation Unit Value
. Net Investment Factor
. Fixed Account Value
. Loan Account Value
. Surrender Value
4. What Are The Expenses Under A Contract?...........................
. Monthly Deduction Amount
. Asset-Based Charges
. Cost of Insurance Charge
. Annual Administration Charge
. Surrender Charge
i
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. Transfer Charge
. Fund Annual Expenses
5. How Will My Contract Be Taxed?....................................
. Introduction
. Tax Status of the Contract
. Tax Treatment of Contract Benefits
. Possible Legislative Changes
. Possible Charge for Sage Life's Taxes
6. How Do I Access My Money?.........................................
. Withdrawals
. Systematic Partial Withdrawal Program
. Surrenders
. Loans
. Requesting Payments
7. How Is Contract Performance Presented?............................
8. What Is The Death Benefit Under My Contract?......................
. Death Benefit
. Insurance Amount
. Minimum Death Benefit
. Proof of Death
. Insurance Amount Increases
9. What Supplemental Benefits Are Available Under My Contract?.......
. Accelerated Death Benefit Rider
. Accidental Death Benefit Rider
. Waiver of Surrender Charge Rider
10. What Are My Settlement Options?...................................
. Variable Income Payments
. Income Unit Value
. Exchange of Income Units
11. What Other Information Should I Know?.............................
. Sage Life Assurance of America, Inc.
. Separate Account
. Modification
. Distribution of the Contract
. Experts
. Legal Proceedings
. Reports to Contract Owners
. Assignment
. The Owner
ii
<PAGE>
. The Beneficiary
. Change of Owner or Beneficiary
. Misstatement and Proof of Age, Sex or Survival
. Incontestability
. Suicide
. Authority to Make Agreements
. Participation
. Safekeeping of Account Assets
. Legal Matters
. Preparing for the Year 2000
. Financial Statements
12. How Can I Make Inquiries?..................................................
Hypothetical Illustrations Of Contract Values
PART II - Additional Information
Additional Information About Sage Life Assurance of America, Inc.
History and Business.......................................................
Selected Financial Data....................................................
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Directors and Executive Officers...........................................
Independent Auditors Report................................................
Appendix A - Market Value Adjustment............................................
Appendix B - Dollar-Cost Averaging Program......................................
This Prospectus does not constitute an offering in any jurisdiction in which
such offering may not lawfully be made.
iii
<PAGE>
INDEX OF TERMS
We have tried to make this Prospectus as readable and understandable as
possible. To help you to understand how the Contract works, we have used certain
terms that have special meanings. We define these terms below.
Account Value - The Account Value is the entire amount we hold under your
Contract. It equals the sum of the values in the Variable Account, the Fixed
Account, and the Loan Account.
Accumulation Unit - An Accumulation Unit is the unit of measure we use to keep
track of the Account Value in each Variable Sub-Account.
Attained Age - The Attained Age is the Issue Age plus the number of full years
since the Contract Date.
Asset-Based Charges - The Asset-Based Charges are assessed monthly against your
Account Value and are charges for mortality and expense risks, certain
administrative expenses, certain distribution costs, and certain state and
federal tax expenses. After the proceeds from the Contract are applied to a
Settlement Option, we call these charges Variable Sub-Account Charges and deduct
them daily from the assets of the Variable Account only.
Beneficiary - The Beneficiary is the person or persons to whom we pay the Death
Proceeds when the Insured dies.
Business Day - A Business Day is any day the New York Stock Exchange ("NYSE") is
open for trading and we are open for business, exclusive of (i) Federal
holidays, (ii) any day on which an emergency exists making the disposal or fair
valuation of assets in the Variable Account not reasonably practicable, and
(iii) any day on which the Securities and Exchange Commission ("SEC") permits a
delay in the disposal or valuation of assets in the Variable Account.
Contracts - The Contracts are modified single payment combination fixed and
variable life insurance contracts. In some jurisdictions, we issue the
Contracts directly to individuals. In most jurisdictions, however, the
Contracts are only available as a group contract. We issue a group Contract to
or on behalf of a group. Individuals who are part of a group to which we issue
a Contract receive a certificate that recites substantially all of the
provisions of the group Contract. Throughout this Prospectus and unless
otherwise stated, the term "Contract" refers to individual Contracts, group
Contracts, and certificates for group Contracts.
Contract Anniversary - A Contract Anniversary is each anniversary of the
Contract Date.
Contract Date - The Contract Date is the day we invest your initial purchase
payment in the Sub-Accounts. It is the date from which we measure Contract
Anniversaries and Contract Years. The Contract Date may or may not be the same
as the Issue Date.
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Contract Year - A Contract Year is each and every consecutive twelve-month
period beginning on the Contract Date and the anniversaries thereof.
Death Proceeds - The Death Proceeds is the amount of money that we will pay your
Beneficiary if the Insured dies while your Contract is in force.
Debt - Debt is the sum of all outstanding loans plus accrued interest under a
Contract.
Excess Withdrawal - An Excess Withdrawal is a withdrawal of Account Value that
exceeds the Free Withdrawal Amount.
Expiration Date - The Expiration Date is the last day in a Guarantee Period. In
the Contract, we refer to this as the "Expiry Date."
Fixed Account - The Fixed Account is The Sage Fixed Interest Account A. The
Fixed Account is a separate investment account of ours into which you may invest
purchase payments or transfer Account Value. In certain states, we refer to the
Fixed Account as the Interest Account or the Interest Separate Account. We
divide the Fixed Account into Fixed Sub-Accounts, and establish a Fixed Sub-
Account each time you allocate an amount to the Fixed Account.
Free Withdrawal Amount - A Free Withdrawal Amount is the maximum amount that you
can withdraw within a Contract Year without being subject to a surrender charge.
Fund - A Fund is an investment portfolio in which a Variable Sub-Account
invests.
General Account - The General Account consists of all our assets other than
those held in any separate investment accounts.
Insured - The Insured is the person you named in your application for the
Contract whose life your Contract covers.
Issue Age - The Issue Age is the Insured's age on the last birthday on or before
the Contract Date.
Issue Date - The Issue Date is the date we issue an individual Contract or a
certificate for a group Contract at our Customer Service Center.
Loan Account - The Loan Account is an account in our General Account,
established for any amounts transferred from the Sub-Accounts as a result of a
loan. The Loan Account credits a fixed rate of interest, the loan credited rate,
that is not based on the investment experience of the Variable Account or the
Guaranteed Interest Rates applicable to the Fixed Sub-Accounts of the Fixed
Account.
2
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Market Value Adjustment - A Market Value Adjustment is a positive or negative
adjustment that may apply to a surrender, withdrawal, transfer, or loan from a
Fixed Sub-Account before the end of its Guarantee Period.
Monthly Processing Date - The Monthly Processing Date is the day of each month
that we deduct the Monthly Deduction Amount from the Account Value of your
Contract. See "What Are the Expenses Under A Contract?" Monthly Processing
Dates are the Contract Date and the same day of each month thereafter. If there
is no such date in a particular month, the Monthly Processing Date will be the
last day of that month. If a Monthly Processing Date is not a Valuation Date,
the Monthly Processing Date will be the next Valuation Date. This means that if
your Monthly Processing Date is the 31st, and the current month is April, your
Monthly Processing Date for April will be April 30th. If April 30th is a Sunday
(which is not a Valuation Date), your Monthly Processing Date for that April
will be May 1 (assuming May 1 is a Valuation Date).
Net Asset Value - Net Asset Value is the price of one share of a Fund.
Owner - The person or persons who owns (or own) a Contract. Provisions relating
to action by the Owner mean, in the case of joint Owners, both Owners acting
jointly. In the context of a Contract issued on a group basis, Owners refer to
holders of certificates under the group Contract.
Satisfactory Notice - Satisfactory Notice is a notice or request you make or
authorize, in a form satisfactory to us, received at our Customer Service
Center.
Surrender Value - The Surrender Value is the amount we pay you upon surrender of
your Contract. It reflects the deduction of any applicable surrender charge,
any Market Value Adjustment, and any Debt.
Valuation Date - Valuation Date is the date at the end of a Valuation Period
when we value each Variable Sub-Account.
Valuation Period - A Valuation Period is the period between one calculation of
an Accumulation Unit value and the next calculation.
Variable Account - The Variable Account is The Sage Variable Life Account A. It
is a separate investment account of ours into which you may invest purchase
payments or transfer Account Value. We divide the Variable Account into
Variable Sub-Accounts, each of which invests in shares of a particular Fund.
"We", "us", "our", "Sage Life" or the "Company" is Sage Life Assurance of
America, Inc.
"You" or "Your" is the owner of a Contract.
3
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This Prospectus has three sections:
. Summary of the Contracts;
. Part I - which gives more detailed information on the Summary topics; and
. Part II - which provides additional information.
Please read the entire Prospectus carefully.
SUMMARY OF THE CONTRACTS
1. What Are The Contracts?
The Contracts are modified single payment combination fixed and variable
life insurance contracts offered by Sage Life Assurance of America, Inc. Your
Contract is a contract between you, the Owner, and us, Sage Life. Your Contract
may differ from the description below because of the requirements of the state
where we issued your Contract.
We designed the Contract to meet your estate planning or other insurance
needs, or to supplement your long-term retirement needs. Because life insurance
is not a short-term investment, you should evaluate your need for life insurance
coverage and the suitability of the Contract to meet your long-term financial
objectives before you purchase a Contract.
Under the Contract, you can accumulate Account Value on a tax-deferred
basis in our Variable Account and in our Fixed Account.
Investment Flexibility. You can invest among 33 subdivisions of our
Variable Account, known as "Variable Sub-Accounts," each corresponding to a
different Fund. These Funds, listed in Section 3, are professionally managed
and use a broad range of investment strategies (growth and income, aggressive
growth, etc.), styles (growth, value, etc.) and asset classes (stocks, bonds,
international, etc.). You can select a mix of Funds to meet your financial and
retirement needs and objectives, tolerance for risk, and view of the market.
Amounts you invest in these Funds will fluctuate daily based on underlying
investment performance. So, the value of your investment may increase or
decrease.
Through our Fixed Account, you can invest to receive guaranteed rates of
interest for periods of 1, 2, 3, 4, and 5 years ("Guarantee Periods"). We also
guarantee your principal while it remains in our Fixed Account. However, if you
decide to surrender your Contract, or transfer or access amounts in the Fixed
Account before the end of a Guarantee Period you have chosen, we ordinarily will
apply a Market Value Adjustment. This adjustment reflects changes in prevailing
interest rates since your allocation to the Fixed Account. The Market Value
Adjustment may result in an increase or decrease in the amounts surrendered,
transferred, or accessed.
1
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As your needs or financial goals change, your investment mix can change
with them. You may transfer funds among any of the investment choices in our
Fixed or Variable Accounts while continuing to defer current income taxes.
Safety of Separate Accounts. Significantly, both our Fixed and Variable
Accounts are separate investment accounts of Sage Life. This provides you with
an important feature: we cannot charge the assets supporting your allocations to
these Accounts with liabilities arising out of any other business we may
conduct.
Income Tax-Free Life Insurance Protection For Your Beneficiaries. The
Contract provides a life insurance benefit that can pass free of federal and
state income taxes to your beneficiaries. You can create and preserve a legacy
for loved ones, a favorite charity, or even your Alma Mater.
Access to Amounts Invested. The Contract provides access to your
investment should you need it. ("Access" means a surrender of the Contract, a
withdrawal of Account Value, and a borrowing of Account Value.) During the
Insured's lifetime your investment grows tax-free until withdrawn or borrowed.
You decide how much to take and when to take it.
Ordinarily, once you access earnings, they are taxed as income. If you
access earnings before you are 59 1/2 years old, you may have to pay an
additional 10% federal tax penalty. However, if you acquire a Contract by making
a tax-free exchange from an existing contract that provides tax-free access
through loans, the Contract also may provide tax-free access through loans.
Amounts you access may be subject to a surrender charge, and a Market Value
Adjustment (positive or negative) may apply if you access the amount from the
Fixed Account before the end of the applicable Guarantee Period.
2. How Do I Purchase A Contract?
In most cases, you may purchase a Contract with $10,000 or more through an
authorized registered representative. You must complete an application, and the
proposed Insured must meet our underwriting requirements. We have designed a
simplified underwriting program that could make qualifying easier and let us
issue a Contract faster than would otherwise be possible. Your eligibility for
this program will depend on the amount you want to invest and the proposed
Insured's age, sex, and health.
After the first Contract Anniversary, you may make additional payments of
at least $250, subject to certain conditions. We reserve the right to require
satisfactory evidence of insurability before we accept any additional payment
that increases the life insurance benefit by more than it increases your Account
Value.
2
<PAGE>
Also, if the Surrender Value of your Contract is not sufficient to pay the
charges as they come due, you will have a grace period of 61 days to make a
sufficient additional payment to keep your Contract in force. We will send you
a notice at the start of the Grace Period.
We have included hypothetical illustrations in this Prospectus to show you
how the Contract works. We have based these illustrations on hypothetical rates
of return and we do not guarantee these rates. The rates are illustrative only,
and do not represent past or future investment performance. Your actual
Contract values and benefits will be different from those in the illustrations.
3. What Are My Investment Options?
There are 38 investment options under the Contracts available through our
Variable and Fixed Accounts. These choices are professionally managed and allow
for a broad range of investment strategies, styles, and asset classes.
Additional options may be available in the future.
Through our Variable Account you can choose to have your money invested in
one or more of the Variable Sub-Accounts investing in the following 33 Funds:
AIM Variable Insurance Funds, Inc.
. AIM V.I. Government Securities Fund
. AIM V.I. Growth and Income Fund
. AIM V.I. International Equity Fund
. AIM V.I. Value Fund
The Alger American Fund
. Alger American MidCap Growth Portfolio
. Alger American Income and Growth Portfolio
. Alger American Small Capitalization Portfolio
Liberty Variable Investment Trust
. Colonial High Yield Securities Fund, Variable Series
. Colonial Small Cap Value Fund, Variable Series
. Colonial Strategic Income Fund, Variable Series
. Colonial U.S. Growth & Income Fund, Variable Series
(formerly known as Colonial U.S. Stock Fund, Variable
Series)
. Liberty All-Star Equity Fund, Variable Series
. Newport Tiger Fund, Variable Series
. Stein Roe Global Utilities Fund, Variable Series
SteinRoe Variable Investment Trust
. Stein Roe Growth Stock Fund, Variable Series
. Stein Roe Balanced Fund, Variable Series
3
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MFS(R) Variable Insurance Trust/SM/
. MFS Growth With Income Series
. MFS High Income Series
. MFS Research Series
. MFS Total Return Series
. MFS Capital Opportunities Series (formerly known as MFS
Value Series)
Morgan Stanley Dean Witter Universal Funds, Inc.
. Global Equity Portfolio
. Mid Cap Value Portfolio
. Value Portfolio
Oppenheimer Variable Account Funds
. Oppenheimer Bond Fund/VA
. Oppenheimer Capital Appreciation Fund/VA (formerly known as
Oppenheimer Growth Fund)
. Oppenheimer Small Cap Growth Fund/VA
Sage Life Investment Trust
. EAFE(R) Equity Index Fund
. S&P 500 Equity Index Fund
. Money Market Fund
T. Rowe Price Equity Series, Inc.
. T. Rowe Price Equity Income Portfolio
. T. Rowe Price Mid-Cap Growth Portfolio
. T. Rowe Price Personal Strategy Balanced Portfolio
The prospectuses for the Trusts describe the Funds in detail. These Funds
do not provide any performance guarantees, and their values will increase or
decrease depending upon investment performance.
Through our Fixed Account, you can choose to invest your money in one or
more of 5 different Guarantee Periods. We guarantee your principal and interest
rate when your investment is left in the Guarantee Period until it ends. You
currently can choose periods of 1, 2, 3, 4, and 5 years. However, if you
transfer or access amounts before the end of a period you have chosen, we
ordinarily will apply a Market Value Adjustment. This Adjustment may be
positive or negative depending upon current interest rates.
4. What Are The Expenses Under A Contract?
The Contract has insurance and investment features. Each has related
costs. Below is a brief summary of the Contract's charges:
4
<PAGE>
Annual Administration Charge - During the first seven Contract Years only,
we will deduct an annual $40 administration charge. However, there is no charge
if, at the time of deduction, your Account Value is at least $50,000.
Asset-Based Charges - Each month, we deduct Asset-Based Charges for
mortality and expense risks, certain administrative and distribution costs, and
certain state and Federal tax expenses from your Account Value. The maximum
charges equal, on an annual basis, 1.80% of your Account Value, decreasing to
1.30% after the tenth Contract Year.
Cost of Insurance Charges - Each month, we deduct from the amounts you
allocate to the Variable and Fixed Accounts a charge for providing the life
insurance protection. This charge will never reflect rates greater than those
shown in your Contract.
Surrender Charge - During the first seven Contract Years only, we
ordinarily will deduct a surrender charge when you surrender your Contract or
withdraw amounts in excess of the Free Withdrawal Amount (see Part I). The
maximum applicable percentage is 9% in the first Contract Year. It declines to
0% after the seventh Contract Year. We calculate the surrender charge as a
percentage(s) of the purchase payment(s) you surrender or withdraw.
Fund Fees and Expenses - There are also Fund fees and expenses that are
based on the average daily value of the Funds. Currently, Fund fees and
expenses together range on an annual basis from 0.55% to 1.30%, depending upon
the Fund. A table of the Fund fees and expenses appears below.
Sage Life's business philosophy is to reward our long-term customers. So,
. After the seventh Contract Year we eliminate Surrender Charges.
. After the seventh Contract Year we eliminate the Annual
Administration Charge.
. And after the tenth Contract Year, we reduce the Asset-Based
Charges.
This means more of your investment is working for you over the long-term.
5
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Fund Annual Expenses (as a percentage of average daily net assets of a Fund)
<TABLE>
<CAPTION>
Total Expenses
(after fee
Management Fees Other Expenses waivers and
(after fee waiver, (after reimbursement, reimbursements,
Fund as applicable) as applicable) as applicable)
---- ------------------ --------------------- ---------------
<S> <C> <C> <C>
AIM VARIABLE INSURANCE
FUNDS, INC.:
AIM V.I. Government Se-
curities Fund......... 0.50% 0.26% 0.76%
AIM V.I. Growth and In-
come Fund............. 0.61 0.04 0.65
AIM V.I. International
Equity Fund........... 0.75 0.16 0.91
AIM V.I. Value Fund.... 0.61 0.05 0.66
THE ALGER AMERICAN FUND:
Alger American MidCap
Growth Portfolio...... 0.80 0.04 0.84
Alger American Income
and Growth Portfolio.. 0.625 0.075 0.70
Alger American Small
Capitalization Portfo-
lio................... 0.85 0.04 0.89
LIBERTY VARIABLE INVEST-
MENT TRUST:
Colonial High Yield Se-
curities Fund, Vari-
able Series........... 0.60 0.20 0.80(/1/)
Colonial Small Cap
Value Fund, Variable
Series................ 0.80 0.20 1.00(/1/)
Colonial Strategic In-
come Fund, Variable
Series................ 0.65 0.13 0.78
Colonial U.S. Stock
Fund, Variable Se-
ries.................. 0.80 0.10 0.90
Liberty All-Star Equity
Fund, Variable Se-
ries.................. 0.76 0.24 1.00(/1/)
Newport Tiger Fund,
Variable Series....... 0.90 0.40 1.30
Stein Roe Global Utili-
ties Fund, Variable
Series................ 0.65 0.17 0.82
STEINROE VARIABLE IN-
VESTMENT TRUST:
Stein Roe Growth Stock
Fund, Variable Se-
ries.................. 0.65 0.05 0.70
Stein Roe Balanced
Fund, Variable Se-
ries.................. 0.60 0.05 0.65
</TABLE>
Fund)
<TABLE>
<CAPTION>
Total Expenses
(after fee
Management Fees Other Expenses waivers and
(after fee waiver, (after reimbursement, reimbursements,
Fund as applicable) as applicable) as applicable)
---- ------------------ --------------------- ---------------
<S> <C> <C> <C>
MFS(R) VARIABLE INSUR-
ANCE TRUSTSM:
MFS Growth with Income
Series................ 0.75 0.13 0.88
MFS High Income
Series................ 0.75 0.28 1.03
MFS Research Series.... 0.75 0.11 0.86
MFS Total Return
Series................ 0.75 0.16 0.91
MFS Capital
Opportunities Series
(formerly MFS Value
Series)............... 0.75 0.27(/2/) 1.02(/2/)
MORGAN STANLEY DEAN
WITTER UNIVERSAL FUNDS,
INC.:
Global Equity Portfo-
lio................... 0.32(/3/) 0.83 1.15(/3/)
Mid Cap Value Portfo-
lio................... 0.23(/3/) 0.82 1.05(/3/)
Value Portfolio........ 0.08(/3/) 0.77 0.85(/3/)
OPPENHEIMER VARIABLE
FUNDS:
Oppenheimer Bond
Fund/VA............... 0.72 0.02 0.74
Oppenheimer Capital
Appreciation Fund/VA
(formerly Oppenheimer
Growth Fund).......... 0.72 0.03 0.75
Oppenheimer Small Cap
Growth Fund/VA........ 0.75 0.12 0.87
SAGE LIFE INVESTMENT
TRUST:
EAFE(R) Equity Index
Fund*................. 0.73(/4/) 0.17 0.90(/4/)
S&P 500 Equity Index
Fund**................ 0.38(/4/) 0.17 0.55(/4/)
Money Market Fund...... 0.48(/4/) 0.17 0.65(/4/)
T. ROWE PRICE EQUITY SE-
RIES, INC.:
T. Rowe Price Equity
Income Portfolio...... 0.85% 0.00% 0.85%
T. Rowe Price Mid-Cap
Growth Portfolio...... 0.85 0.00 0.85
T. Rowe Price Personal
Strategy Balanced
Portfolio............. 0.90 0.00 0.90
</TABLE>
- --------
1. Without fee waivers and expense reimbursements, the management fees, the
other expenses and total expenses for each of the following Liberty
Variable Investment Trust Funds' during 1998 would have been: Colonial High
Yield Securities Fund, Variable Series 60%, 1.24%, and 1.84%; Colonial
Small Cap Value Fund, Variable Series .80%, 3.54%, and 4.34%; and Liberty
All-Star Equity Fund, Variable Series .80%, .24%, and 1.04%.
2. Without reimbursements, the management fees, the other expenses, and total
expenses for MFS' Capital Opportunities Series would have been 0.75%,
0.45%, and 1.20%.
3. Without fee waivers, the management fees, the other expenses, and total
expenses for each of the following Morgan Stanley Dean Witter Universal
Funds, Inc. portfolios would have been: Global Equity Portfolio, 0.80%,
0.83%, and 1.63%; Mid Cap Value Portfolio, 0.75%, 0.82%, and 1.57%; Value
Portfolio, 0.55%, 0.77%, and 1.32%.
4. These Funds commenced operations in February 1999. The figures shown are
based on estimates. Without fee waivers, the management fees, the other
expenses, and total expenses for each of the Funds would have been: EAFE(R)
Equity Index Fund, 0.90%, 0.17%, and 1.07%; S&P 500 Equity Index Fund,
0.55%, 0.17%, and 0.72%; and Money Market Fund, 0.65%, 0.17%, and
0.82%.
* The EAFE(R) Index is the exclusive property of Morgan Stanley Capital
International ("MSCI"). This fund is not sponsored, endorsed, sold or
promoted by MSCI or any affiliate of MSCI.
** S&P 500(R) is a trademark of the McGraw-Hill Companies, Inc. and has been
licensed for use by Sage Advisors, Inc. The S&P 500 Equity Index Fund is
not sponsored, endorsed, sold or promoted by Standard & Poor's, and
Standard and Poor's makes no representation regarding the advisability of
investing in the Fund.
5. How Will My Contract Be Taxed?
Under current federal tax law, life insurance contracts receive tax-favored
treatment. The death benefit is fully excludable from the Beneficiary's gross
income for federal income tax purposes. You are not taxed on any increase in
the Account Value while a life insurance contract remains in force. In most
cases, your Contract will be a Modified Endowment Contract ("MEC"). If your
Contract is a MEC, certain distributions made during the Insured's lifetime,
such as loans and withdrawals from, and collateral assignments of, the Contract
are includable in gross income on an income-first basis. A 10% Federal tax
penalty ordinarily will be imposed on income distributed before you attain age
59 1/2. Contracts that are not Modified Endowment Contracts ("non-MECs")
receive preferential tax treatment with respect to certain distributions. See
Part I "How Will My Contract Be Taxed?"
We do not give tax advice, nor is any registered representative authorized
to give tax advice on our behalf. We recommend that you consult your tax
adviser about your particular tax situation.
6. How Do I Access My Money?
If you need to take money out of your Contract, you can choose among
several different options. You can tailor your withdrawals to meet your
liquidity needs.
. You can withdraw some of your money.
. You can surrender the Contract and take the entire proceeds as a
single lump sum payment or apply the proceeds to one of the Settlement
Options we offer.
. You can withdraw money using our systematic partial withdrawal
program.
. If your Contract is a non-MEC, you have tax-free access through loans.
. If your Contract is a MEC, you may take taxable loans that may be
subject to a 10% Federal tax penalty.
Keep in mind that amounts you surrender or withdraw may be subject to a
surrender charge if taken during the first seven Contract Years. However,
during that period the Contract does provide a Free Withdrawal Amount (not
subject to a surrender charge) each year equal to your cumulative earnings, or
if greater, 10% of total purchase payments you have invested.
In addition, if you access amounts from the Fixed Account, we ordinarily
will apply a Market Value Adjustment.
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If you are younger than 59 1/2 when you take money out, you may owe a 10%
federal tax penalty, as well as the income tax that ordinarily would apply.
Please remember that withdrawals will reduce your death benefit.
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7. How Is Contract Performance Presented?
Articles about the Variable Account's investment performance, rankings, or
other characteristics may appear in publications. Publications may use articles
and releases developed by us, the Funds and other parties about the Variable
Account or the Funds.
Please remember that performance data represents past performance. Amounts
----
you invest in the Variable Sub-Accounts will fluctuate daily based on underlying
Fund investment performance, so the value of your investment may increase or
decrease.
8. What Is The Death Benefit Under My Contract?
The Contract provides for a payment to your designated Beneficiary if the
Insured dies while the Contract is in force. This payment is called the "Death
Proceeds" and is equal to the following:
. the death benefit described below; plus
. any additional insurance on the Insured's life that may be provided by
riders to the Contract; minus
. any Debt from Contract loans; minus
. any due and unpaid charges; and minus
. any amounts previously paid under the Accelerated Death Benefit Rider
plus accrued interest.
Your death benefit at issue equals your initial Insurance Amount. On any
Business Day after that it equals the greater of:
. the Insurance Amount; and
. the Minimum Death Benefit.
The initial Insurance Amount depends on the amount of your initial purchase
payment, and the age and sex of the proposed Insured. We show your initial
Insurance Amount in your Contract. Your Insurance Amount remains level unless
you make additional purchase payments or withdrawals.
The Minimum Death Benefit equals the Account Value plus any positive Market
Value Adjustment as of that Business Day, multiplied by a percentage that varies
with the attained age of the Insured. We show these percentages in your
Contract.
Your Beneficiaries decide how they wish to receive the Death Proceeds.
They can elect payment in a single sum, or apply proceeds under one of the
Settlement Options we offer.
9. What Supplemental Benefits Are Available Under My Contract?
Accelerated Death Benefit Rider: If permitted in your state, this rider is
automatically included in your Contract at no additional cost. It allows you to
take an advance payment against the Death
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Proceeds under your Contract if the Insured is diagnosed as having a terminal
illness. You can request up to 50% of the Insurance Amount, to a maximum of
$500,000.
Accidental Death Benefit Rider: If permitted in your state, the Contract
also provides an accidental death benefit at no additional cost. If the Insured
dies as a direct result of an accident before reaching age 81, we will pay an
additional death benefit to the Beneficiary of your choice. This additional
benefit equals 100% of the sum of all purchase payments you have invested in
your Contract, less any withdrawals you have made (including any associated
surrender charge and Market Value Adjustment incurred), up to a maximum of
$250,000.
Waiver of Surrender Charge Rider: If permitted in your state, we will
include this rider automatically in your Contract at no additional cost. It
permits you to withdraw money from your Contract without a surrender charge if
you need it while you are confined to a nursing care facility or hospital.
Certain restrictions apply.
10. What Are My Settlement Options?
You can apply proceeds under your Contract to purchase a stream of regular
income payments under one of the Settlement Options shown below (or under any
other option acceptable to us). Our descriptions assume that you apply the
Surrender Value and receive the income payments from one of the options below.
Of course, you always can designate someone other than yourself to receive the
income payments, and we pay income payments from any Death Proceeds to your
Beneficiary.
Option 1 - Payments for Life: You will receive payments for your life.
Option 2 - Life Annuity with 10 or 20 Years Certain: You will receive
payments for your life. However, if you die before the end of the
guaranteed certain period you select (10 or 20 years), your Beneficiary
will receive the payments for the remainder of that period.
Option 3 - Joint and Last Survivor Life Annuity: We will make payments as
long as either you or a second person you select (such as your spouse) is
alive.
Option 4 - Payments for a Specified Period Certain: You will receive
payments for the number of years you select, which may be from 5-30 years.
However, if you die before the end of that period, your Beneficiary will
receive the payments for the remainder of the guaranteed certain period.
You or your Beneficiary, as the case may be, tell us how much to apply to
fixed income payments and to variable income payments. With variable income
payments, you currently have all of the investment choices you had before income
payments began. However, we currently limit transfers among your investment
choices. Once income payments begin, you may surrender your Contract only if
you choose variable income payments under Option 4.
We will allocate the amount you apply to provide fixed income payments to
the Fixed Account and invest it in the Guarantee Periods you select. We
guarantee the amount of each fixed income payment. The amount of each fixed
income payment will remain level throughout the period you select.
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We will allocate the amount you apply to provide variable income payments
to the Variable Account and invest it in the Funds you select. The amount of
each income payment will vary according to the investment performance of those
Funds.
11. What Other Information Should I Know?
The Contract has several additional features available to you at no
additional charge:
Free Look Right: You have the right to return your Contract to us at our
Customer Service Center or to the registered representative who sold it to you,
and have us cancel the Contract within a certain number of days (usually 10 days
from the date you receive the Contract, but some states require different
periods).
If you exercise this right, we will cancel your Contract as of the Business
Day we receive it. We will send you a refund equal to your Account Value plus
any Asset-Based Charges and cost of insurance charges we have deducted on or
before the date we received the returned Contract. If required by the law of
your state, we will refund your initial purchase payment (less any withdrawals
previously taken). In the states where we are required to return purchase
payment less withdrawals, if you allocated amounts to the Variable Account, we
will temporarily allocate those amounts to the Money Market Sub-Account until we
deem the Free Look Period to end.
Dollar-Cost Averaging Program: Under our optional Dollar-Cost Averaging
Program, you may transfer a set dollar amount systematically from the Money
Market Sub-Account and/or from specially designated Fixed Sub-Accounts to any
other Variable Sub-Account, subject to certain limitations. By investing the
same amount on a regular basis, you don't have to worry about timing the market.
Since you invest the same amount each period, you automatically acquire more
units when market values fall and fewer units when they rise. The potential
benefit is to lower your average cost per unit. This strategy does not
guarantee that any Fund will gain in value. It also will not protect against a
decline in value if market prices fall. However, if you can continue to invest
regularly throughout changing market conditions, this program can be an
effective way to help meet your long-term goals. Due to the effect of interest
that continues to be paid on the amount remaining in the Money Market Sub-
Account or the specially designated Fixed Sub-Account, the amounts that we
transfer will vary slightly from month to month.
Asset Allocation Program: An optional Asset Allocation Program is available
if you do not wish to make your own particular investment decisions. This
investment planning tool is designed to find an asset mix that attempts to
achieve the highest expected return based upon your tolerance for risk, and
consistent with your needs and objectives. Bear in mind that the use of an
asset-allocation model does not guarantee investment results.
Automatic Portfolio Rebalancing Program: Our optional Automatic Portfolio
Rebalancing Program can help prevent a well-conceived investment strategy from
becoming diluted over time. Investment performance will likely cause the
allocation percentages you originally selected to shift. With this program, you
can instruct us to automatically rebalance your Contract to your original
percentages on a quarterly basis. Money invested in the Fixed Account is not
part of this program.
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No Probate: If the Insured dies, we will pay the Death Proceeds to your
heirs or designated beneficiary. Generally, the Death Proceeds will be received
without going through probate.
12. How Can I Make Inquiries?
If you need further information about the Contracts, please write or call
us at our Customer Service Center (877) TEL-SAGE (835-7243), or contact an
authorized registered representative. The address of our Customer Service
Center office is 1290 Silas Deane Highway, Wethersfield, CT 06109.
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Part I
Description of the Contracts
1. What Are The Contracts?
The Contracts are modified single payment combination fixed and variable
life insurance Contracts offered by us, Sage Life Assurance of America, Inc. We
designed the Contracts for your estate planning or other insurance needs, or to
supplement your long-term retirement savings. They provide many benefits
including:
. investing amounts on a tax-deferred basis in our Variable Account and
our Fixed Account;
. access to your investment should you need it (however, a surrender
charge and Market Value Adjustment may apply); and
. life insurance that can pass free of federal and state income taxes
to your heirs.
However, life insurance is not a short-term investment. You should
evaluate your need for life insurance coverage and the Contract's long-term
investment potential and risks before you purchase a Contract.
Under the terms of the Contract, we promise to pay the Death Proceeds to
your designated Beneficiary upon receipt of proof that the Insured died while
your Contract is in force. You purchase the Contract with an initial purchase
payment. While your Contract is in force and the Insured is alive, you may make
additional payments under the Contract (subject to certain conditions) and will
ordinarily not be taxed on increases in the value of your Contract as long as
you do not take distributions. See "How Will My Contract Be Taxed?" The
Contracts may not be available in all states or in all markets. Your Contract
may differ from the description here because of the requirements of the State
where we issued your Contract.
When you make purchase payments, you can allocate those purchase payments
to one or more of the 33 subdivisions of the Variable Account, known as
"Variable Sub-Accounts." We will invest purchase payments you allocate to a
Variable Sub-Account solely in its corresponding Fund. Your Account Value in a
Variable Sub-Account will vary according to the investment performance of that
Fund. Depending on market conditions, your value in each Variable Sub-Account
could increase or decrease. We do not guarantee a minimum value. You bear the
risk of investing in the Variable Account. We call the total of the values in
the Variable Sub-Accounts the "Variable Account Value."
You can also allocate purchase payments to our Fixed Account. See "Fixed
Account Investment Option." The Fixed Account includes "Fixed Sub-Accounts" to
which we credit fixed rates of interest for the Guarantee Periods you select.
We call the total of the values in the Fixed Sub-Accounts, the "Fixed Account
Value." We currently offer Guarantee Periods with durations of 1, 2, 3, 4, and
5 years. If any amount allocated or transferred remains in a Guarantee Period
until the Expiration Date, its value will equal the amount originally allocated
or transferred, multiplied on an annually compounded basis, by its
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guaranteed interest rate. We will ordinarily apply a Market Value Adjustment to
any surrender, withdrawal, transfer, or amount borrowed from a Fixed Sub-Account
before its Expiration Date. The Market Value Adjustment may increase or decrease
the value of the Fixed Sub-Account (or portion thereof) being surrendered,
withdrawn, transferred, or borrowed. See "What Are My Investment Options?"
You can transfer Account Value from one Variable Sub-Account to another,
and from a Fixed Sub-Account to a Variable Sub-Account and from a Variable Sub-
Account to a Fixed Sub-Account, subject to certain conditions. See "What Are My
Investment Options?"
We may offer other variable life insurance contracts that also invest in
the same Funds offered under the Contracts. These contracts may have different
charges and they may offer different benefits.
2. How Do I Purchase A Contract?
Initial Purchase Payment. You must make the initial purchase payment to
put a Contract in force. The minimum initial purchase payment is $10,000. We
will not issue a Contract if the proposed Insured is over age 90.
Issuance of a Contract. Once we receive your initial purchase payment and
your application at our Customer Service Center, we will process your
application to see if the proposed Insured meets our underwriting and other
criteria. Under our current underwriting rules, which are subject to change, a
proposed Insured age 80 and under may be eligible for our simplified
underwriting program. This program does not involve a medical examination, and
may enable us to issue a Contract much faster than we otherwise could. To
qualify, an Insured's application responses must meet our simplified
underwriting standards. The maximum initial purchase payment we currently
accept on a simplified underwriting basis varies with the issue age and gender
of the Insured, but, the difference between the initial Insurance Amount and the
initial purchase payment may never exceed $100,000.
We will apply customary underwriting standards to all other Insureds. Our
current underwriting rules are subject to change.
We reserve the right to reject an application for any lawful reason. If we
do not issue a Contract, we will return to you any purchase payment you
submitted with the application. If we issue a Contract, your Issue Date will be
the date we issue your Contract at our Customer Service Center.
Free Look Right to Cancel Contract. During your "Free Look" Period, you
may cancel your Contract. The Free Look Period usually ends 10 days after you
receive your Contract. Some states may require a longer period. If you decide
to cancel your Contract, you must return it to our Customer Service Center or to
one of our authorized registered representatives. We will send you a refund of
your Account Value plus any Asset-Based Charges and cost of insurance charges we
have deducted on or before the date we receive your returned Contract at our
Customer Service Center. If required by the law of your state, we will refund
your initial purchase payment (less any withdrawals previously taken). In those
latter states where this requirement exists, we will temporarily invest amounts
you allocate to the Variable
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Account to the Money Market Sub-Account until the time we deem the Free Look
Period to end. See "What Are My Investment Options?"
Making Additional Purchase Payments. You may make additional payments at
any time after the first Contract Anniversary, while your Contract is in force
and the Insured is alive, subject to the following conditions:
. Each additional purchase payment must be at least $250.
. You may make only one purchase payment in any Contract Year.
. The Attained Age of the Insured must be less than 81.
. We must approve in advance any payment that would cause the Account
Value of all single payment or modified single payment contracts that
you maintain with us to exceed $1,000,000.
While the Insured is alive, you also may make any additional payment
necessary to keep your Contract in force.
When we accept an additional payment, that payment increases your Account
Value and may increase your death benefit. We reserve the right to require
satisfactory evidence of insurability before accepting any additional payment
that increases your Death Benefit by more than it increases your Account Value.
This is because our risk increases under these circumstances.
All additional payments are payable at our Customer Service Center. We
will credit any payment we receive after the Contract Date to the Contract as of
the Business Day on which our Customer Service Center receives it unless the
payment represents an increase in the Insurance Amount. See "What Is the Death
Benefit Under My Contract?" We will deem purchase payments we receive on other
than a Business Day as received on the next following Business Day.
Unless you tell us otherwise, we will first consider all payments we
receive while a loan is outstanding as a payment of any loan interest, next as a
loan repayment, and last as an additional purchase payment.
Grace Period. If your Surrender Value on a Monthly Processing Date is not
sufficient to cover the Monthly Deduction Amount, we will allow you a Grace
Period of 61 days for you to pay an amount sufficient to cover the Monthly
Deduction Amount due. See "What Are The Expenses Under A Contract?" We will
send you a notice at the start of the Grace Period at your last known address.
The Grace Period will end 61 days after we mail you the notice.
If you do not make the necessary payment by the end of the Grace Period,
your Contract will terminate without value. Subject to the terms and conditions
of your Contract, if the Insured dies during the Grace Period, we will pay the
Death Proceeds.
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Reinstatement. If the Grace Period has ended and you have not paid the
necessary payment and have not surrendered your Contract for its Surrender
Value, you may be able to reinstate your Contract. To do so:
. submit a written request to us for reinstatement within 3 years after
the end of the Grace Period;
. provide us with satisfactory evidence of insurability;
. pay an additional purchase payment equal to the minimum initial
purchase payment for which we would then issue a Contract based upon
the Insured's Attained Age, sex, and health; and
. repay or reinstate any Debt against the Contract that existed at the
end of the Grace Period.
The effective date of a reinstated Contract will be the Monthly Processing
Date on or next following the date we approve your application for reinstatement
and receive the necessary purchase payment.
If we reinstate your Contract, the Account Value on the date of
reinstatement will be the amount provided by the purchase payment that you paid
to reinstate the Contract. Certain charges under the Contract vary depending on
how long the Contract has been in force. We will calculate these charges based
on the length of time from the Contract Date until the date of reinstatement.
Unless you have told us otherwise, we will calculate your Account Value based on
your allocation instructions in effect at the start of the Grace Period.
Specialized Uses of the Contract. The Contract offers potential benefits
such as providing:
. a means for investing on a tax-deferred basis;
. access to your investment if you need it; and
. life insurance that can pass free of federal and state income taxes to
your Beneficiaries under the Contract.
However, purchasing the Contract partly or wholly for such purposes entails
certain risks. For example, poor investment performance in Variable Sub-
Accounts in which you may invest may cause the need for an additional payment in
order to keep the Contract in force (this may be particularly true if there is
outstanding Debt). Such poor investment performance may cause the Account Value
or Surrender Value to be insufficient to fund the purpose for which you
purchased the Contract. Withdrawals and loans may significantly affect current
and future Account Value, Surrender Value, or Death Proceeds. Before purchasing
a Contract, you should consider whether the long-term nature of the Contract is
consistent with the purpose for which it is being considered. Using a Contract
for a specialized purpose may also have tax consequences. See "How Will My
Contract Be Taxed?"
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Illustrations. We have included hypothetical illustrations in this
Prospectus to show you how the Contract works. We have based these
illustrations on hypothetical rates of return and we do not guarantee these
rates. The rates are an illustration only, and do not represent past or future
investment performance. Your actual Contract values will be different from
those in the illustrations.
3. What Are My Investment Options?
Purchase Payment Allocations. When you apply for a Contract, you specify
the percentage of your purchase payment to be allocated to each Variable Sub-
Account and/or to each Fixed Sub-Account. You can change the allocation
percentages at any time by sending Satisfactory Notice to our Customer Service
Center. The change will apply to all purchase payments we receive on or after
the date we receive your request. Purchase payment allocations must be in
percentages totaling 100%, and each allocation percentage must be a whole
number. We currently require that each purchase payment allocation be at least
$250.
We may, however, require that an initial purchase payment allocated to a
Variable Sub-Account be temporarily invested in the Money Market Sub-Account
during the Free Look Period. We will require this if the law of your state
requires us to refund your full initial purchase payment less any withdrawals
previously taken, should you cancel your Contract during the Free Look Period.
At the end of the Free Look Period, if we temporarily allocated your initial
purchase payment to the Money Market Sub-Account, we will transfer the value of
what is in the Money Market Sub-Account to the Variable Sub-Account(s) you
specified in your application. Solely for the purpose of processing this
transfer from the Money Market Sub-Account, we will deem the Free Look Period to
end 15 days after the Contract Date. This transfer from the Money Market Sub-
Account to the Variable Sub-Accounts upon the expiration of the Free Look Period
does not count as a transfer for any other purposes under your Contract.
Variable Sub-Account Investment Options. The Variable Account has 33 Sub-
Accounts, each investing in a specific Fund. Each of the Funds is either an
open-end diversified management investment company or a separate investment
portfolio of such a company, and is managed by a registered investment adviser.
The Funds, as well as brief descriptions of their investment objectives, are
provided below. There is no assurance that these objectives will be met. Not
every Fund may be available in every state or in every market.
AIM Variable Insurance Funds, Inc.
AIM V.I. Government Securities Fund. This Fund seeks to achieve high
current income consistent with reasonable concern for safety of principal by
investing in debt securities issued, guaranteed or otherwise backed by the
United States Government.
AIM V.I. Growth and Income Fund. This Fund's primary objective is growth
of capital with a secondary objective of current income.
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AIM V.I. International Equity Fund. This Fund seeks to provide long-term
growth of capital by investing in a diversified portfolio of international
equity securities, whose issuers are considered to have strong earnings
momentum.
AIM V.I. Value Fund. This Fund seeks to achieve long-term growth of
capital by investing primarily in equity securities judged by the Fund's
investment adviser to be undervalued relative to the investment adviser's
appraisal of the current or projected earnings of the companies issuing the
securities, or relative to current market values of assets owned by the
companies issuing the securities or relative to the equity market generally.
Income is a secondary objective.
A I M Advisors, Inc. advises the AIM Variable Insurance Funds, Inc.
The Alger American Fund
Alger American MidCap Growth Portfolio. This Fund seeks long-term capital
appreciation by investing in a diversified, actively managed portfolio of equity
securities, primarily of companies with total market capitalization within the
range included in the S&P MidCap 400 Index.(R)
Alger American Income and Growth Portfolio. This Fund seeks primarily to
provide a high level of dividend income through investments in dividend-paying
equity securities. Capital appreciation is a secondary goal of this Fund.
Alger American Small Capitalization Portfolio. This Fund seeks long-term
capital appreciation through investment primarily in equity securities that, at
the time of purchase, have total market capitalization within the range of
companies included in the Russell 2000 Growth Index (R) or the S&P SmallCap 600
Index.(R)
Fred Alger Management, Inc. advises The Alger American Fund.
Liberty Variable Investment Trust
Colonial High Yield Securities Fund, Variable Series ("High Yield
Securities Fund"). This Fund seeks high current income and total return by
investing primarily in lower rated corporate debt securities (commonly referred
to as "junk bonds").
Colonial Small Cap Value Fund, Variable Series ("Small Cap Value Fund").
This Fund seeks long-term growth by investing primarily in smaller
capitalization equity securities.
Colonial Strategic Income Fund, Variable Series ("Strategic Income Fund").
This Fund seeks a high level of current income, as is consistent with prudent
risk and maximizing total return, by diversifying investments primarily in U.S.
and foreign government and lower rated corporate debt securities.
Colonial U.S. Growth and Income Fund, Variable Series ("U.S. Growth and
Income Fund") (formerly, Colonial U.S. Stock Fund, Variable Series). This Fund
seeks long-term growth by investing primarily in large capitalization equity
securities.
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Liberty All-Star Equity Fund, Variable Series ("All-Star Fund"). This Fund
seeks total investment return, comprised of long-term capital appreciation and
current income, through investment primarily in a diversified portfolio of
equity securities.
Newport Tiger Fund, Variable Series ("Tiger Fund"). This Fund seeks long-
term capital growth by investing primarily in equity securities of companies
located in the nine Tigers of Asia (Hong Kong, Singapore, South Korea, Taiwan,
Malaysia, Thailand, Indonesia, China and the Philippines).
Stein Roe Global Utilities Fund, Variable Series ("Global Utilities Fund").
This Fund seeks current income and long-term growth of capital. The Global
Utilities Fund normally invests at least 65% of its total assets in U.S. and
foreign equity and debt securities of companies engaged in the manufacture,
production, generation, transmission, sale or distribution of electricity,
natural gas or other types of energy, or water or other sanitary services, and
companies engaged in telecommunication, including telephone, telegraph,
satellite, microwave and other communications media.
Liberty Advisory Services Corp. (formerly "Keyport Advisory Services
Corp.") provides investment management and advisory services to the Liberty
Variable Investment Trust. Colonial Management Associates, Inc. subadvises the
High Yield Securities Fund, the U.S. Growth and Income Fund, the Small Cap Value
Fund, and the Strategic Income Fund. Stein Roe & Farnham Incorporated
subadvises the Global Utility Fund. Newport Fund Management, Inc. subadvises
the Tiger Fund. Liberty Asset Management Company subadvises the All-Star Fund.
SteinRoe Variable Investment Trust
Stein Roe Growth Stock Fund. This Fund seeks long-term growth of capital
through investment primarily in common stocks.
Stein Roe Balanced Fund. This Fund seeks high total investment return
through a changing mix of equities, debt securities, and cash.
Stein Roe & Farnham Incorporated advises the SteinRoe Variable Investment
Trust.
MFS(R) Variable Insurance Trust/SM/
MFS Growth With Income Series. This Fund seeks to provide reasonable
current income and long-term growth of capital and income.
MFS High Income Series. This Fund seeks high current income by investing
primarily in a professionally managed diversified portfolio of fixed income
securities, some of which may involve equity features. Fixed income securities
offering the high current income sought by the High Income Series normally
include those fixed income securities which offer a current yield above that
generally available on debt securities in the three highest rating categories by
recognized rating agencies (commonly known as "junk bonds" if rated below the
four highest categories of recognized rating agencies). See the prospectus for
the Trust for more information.
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MFS Research Series. This Fund seeks to provide long-term growth of
capital and future income. The MFS Research Series' policy is to invest a
substantial proportion of its assets in equity securities believed to possess
better than average prospects for long-term growth.
MFS Total Return Series. This Fund seeks primarily to provide above-
average income (compared to a portfolio invested entirely in equity securities)
consistent with the prudent employment of capital, and secondarily to provide a
reasonable opportunity for growth of capital and income.
MFS Capital Opportunities Series (formerly, MFS Value Series). This Fund
seeks capital appreciation. Dividend income, if any, is a consideration
incidental to the Fund's objective of capital appreciation.
MFS Investment Management(R) advises the MFS(R) Variable Insurance
Trust./SM/
Morgan Stanley Dean Witter Universal Funds, Inc.
Global Equity Portfolio. This Fund seeks long-term capital appreciation by
investing primarily in equity securities of issuers throughout the world,
including U.S. issuers, using an approach that is oriented to the selection of
individual stock that the Fund's investment adviser believes are undervalued.
Mid Cap Value Portfolio. This Fund seeks above-average total return over a
market cycle of three to five years by investing in common stocks and other
equity securities of issuers with equity capitalizations in the range of
companies represented in the S&P MidCap 400 Index.
Value Portfolio. This Fund seeks above-average return over a market cycle
of three to five years by investing primarily in a diversified portfolio of
common stocks and other equity securities that are deemed by the Fund's
investment adviser to be relatively undervalued based on the market as a whole
as measured by the S&P 500 Index.(R)
Morgan Stanley Dean Witter Investment Management Inc. advises the Global
Equity Portfolio. Miller Anderson & Sherrerd, LLP advises the Value Portfolio
and the Mid Cap Value Portfolio.
Oppenheimer Variable Account Funds
Oppenheimer Bond Fund/VA. This Fund seeks a high level of current income.
Secondarily, this Fund seeks capital growth when consistent with its primary
objective. The Fund will, under normal market conditions, invest at least 65%
of its total assets in investment grade debt securities.
Oppenheimer Capital Appreciation Fund/VA (formerly, Oppenheimer Growth
Fund). This Fund seeks to achieve capital appreciation by investing in
securities of well-known, established companies.
Oppenheimer Small Cap Growth Fund/VA. This Fund seeks capital
appreciation. Current income is not an objective. In seeking its investment
objective, the Fund emphasizes investments in securities of "growth type"
companies with market capitalizations of less than $1 billion, including
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common stocks, preferred stocks, convertible securities, rights, warrants and
options, in proportions which may vary from time to time.
Oppenheimer Funds, Inc. manages Oppenheimer Variable Account Funds.
Sage Life Investment Trust
EAFE(R) Equity Index Fund. This Fund seeks to replicate as closely as
possible the performance of the Morgan Stanley Capital International Europe,
Australia, Far East Index before the deduction of Fund expenses.
S&P 500 Equity Index Fund. This Fund seeks to replicate as closely as
possible the performance of the S&P 500 Composite Stock Price Index before the
deduction of Fund expenses.
Money Market Fund. This Fund seeks to provide high current income
consistent with the preservation of capital and liquidity. Although the Fund
seeks to maintain a constant net asset value of $1.00 per share, there can be no
assurance that the Fund can do so on a continuous basis. An investment in the
Money Market Fund is not guaranteed.
Sage Advisors, Inc. is the investment manager to the Sage Life Investment
Trust. State Street Global Advisors subadvises the EAFE(R) Equity Index Fund
and S&P 500 Equity Index Fund. Conning Asset Management Company subadvises the
Money Market Fund.
T. Rowe Price Equity Series, Inc.
T. Rowe Price Equity Income Portfolio. This Fund seeks to provide
substantial dividend income as well as long-term growth of capital through
investments in the common stocks of established companies.
T. Rowe Price Mid-Cap Growth Portfolio. This Fund seeks to provide long-
term capital appreciation by investing in mid-cap stocks with potential for
above-average earnings.
T. Rowe Price Personal Strategy Balanced Portfolio. The Fund seeks to
provide the highest total return over time, with an emphasis on both capital
growth and income. The Personal Strategy Balanced Portfolio invests in a
diversified portfolio of stocks, bonds, and money market securities.
T. Rowe Price Associates, Inc. provides investment management to the T.
Rowe Price Equity Series, Inc.
The investment objectives and policies of certain Funds may be similar to
those of other retail mutual funds which can be purchased outside of a variable
insurance product, and that are managed by the same investment adviser or
manager. The investment results of the Funds, however, may be higher or lower
than the results of such other retail mutual funds. There can be no assurance,
and no representation is made, that the investment results of any of the Funds
will be comparable to the investment results of
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any other retail mutual fund, even if the other retail mutual fund has the same
investment adviser or manager.
Shares of the Funds may be sold to separate accounts of insurance companies
that are not affiliated with us or each other, a practice known as "shared
funding." They also may be sold to separate accounts to serve as the underlying
investment for both variable annuity contracts and variable life insurance
contracts, a practice known as "mixed funding." As a result, there is a
possibility that a material conflict may arise between the interests of Owners
who allocate Account Values to the Variable Account, and owners of other
contracts who allocate contract values to one or more other separate accounts
investing in any of the Funds. Shares of some of the Funds may also be sold
directly to certain qualified pension and retirement plans qualifying under
Section 401 of the Code. As a result, there is a possibility that a material
conflict may arise between the interest of Owners or owners of other contracts
(including contracts issued by other companies), and such retirement plans or
participants in such retirement plans. In the event of any such material
conflicts, we will consider what action may be appropriate, including removing a
Fund from the Variable Account or replacing the Fund with another Fund. There
are certain risks associated with mixed and shared funding and with the sale of
shares to qualified pension and retirement plans, as disclosed in each Trust's
prospectus.
We have entered into agreements with either the investment adviser or
distributor for each of the Funds in which the adviser or distributor pays us a
fee ordinarily based upon an annual percentage of the average aggregate net
amount we have invested on behalf of the Variable Account and other separate
accounts. These percentages differ, and some investment advisers or
distributors pay us a greater percentage than other advisers or distributors.
These agreements reflect administrative services we provide.
More detailed information concerning the investment objectives, policies,
and restrictions of the Funds, the expenses of the Funds, the risks attendant to
investing in the Funds and other aspects of their operations can be found in the
current prospectus for each Trust which accompanies this Prospectus. You should
read the Trusts' prospectuses carefully before you decide to allocate amounts to
the Variable Sub-Accounts.
Fixed Account Investment Options. Each time you allocate purchase payments
or transfer funds to the Fixed Account, we establish a Fixed Sub-Account. We
guarantee an interest rate (the "Guaranteed Interest Rate") for each Fixed Sub-
Account for a period of time (a "Guarantee Period"). When you make an
allocation to the Fixed Sub-Account, we apply the Guaranteed Interest Rate then
in effect. (Keep in mind that we deduct charges from a Fixed Sub-Account, and
these deductions will reduce your actual return. See "What are the Expenses
Under a Contract?") We may establish specially designated Fixed Sub-Accounts
("DCA Fixed Sub-Accounts"), for our Dollar-Cost Averaging Program.
We have no specific formula for establishing the Guaranteed Interest Rates
for the different Guarantee Periods. The determination we make will be
influenced by, but not necessarily correspond to, interest rates available on
fixed income investments that we may acquire with the amounts we receive as
purchase payments or transfers of Account Value under the Contracts. We will
invest these amounts primarily in investment-grade fixed income securities
including: securities issued by the U.S. Government or its agencies or
instrumentalities, which issues may or may not be guaranteed by the U.S.
Government; debt securities that have an investment grade, at the time of
purchase, within the four highest
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grades assigned by Moody's Investor Services, Inc., Standard & Poor's
Corporation, or any other nationally recognized rating service; mortgage-backed
securities collateralized by real estate mortgage loans, or securities
collateralized by other assets, that are insured or guaranteed by the Federal
Home Loan Mortgage Corporation , the Federal National Mortgage Association, or
the Government National Mortgage Association, or that have an investment grade
at the time of purchase within the four highest grades described above; other
debt instruments; commercial paper; cash or cash equivalents. You will have no
direct or indirect interest in these investments, and you do not share in the
investment performance of the assets of the Fixed Account. We will also consider
other factors in determining the Guaranteed Interest Rates, including regulatory
and tax requirements, sales commissions, administrative expenses borne by us,
general economic trends, and competitive factors. The Company's management will
make the final determination of the Guaranteed Interest Rates it declares. We
cannot predict or guarantee the level of future interest rates. However, our
Guaranteed Interest Rates will be at least 3% per year. Guaranteed Interest
Rates do not depend upon and do not reflect the performance of the Fixed
Account.
We measure the length of a Guarantee Period from the end of the calendar
month in which you allocated or transferred the amount to the Fixed Sub-Account.
This means that the Expiration Date of any Guarantee Period will always be the
last day of a calendar month. The currently available Guarantee Periods are 1,
2, 3, 4, and 5 years. We may offer different Guarantee Periods in the future.
Not all Guarantee Periods may be available in all states.
We will notify you of your options for renewal at least thirty days before
an Expiration Date of a Fixed Sub-Account in which you are invested. Your
options are:
. Take no action and we will transfer the value of the expiring Fixed Sub-
Account to the Fixed Sub-Account with the same Guarantee Period, but not
longer than five years, as of the day the previous Fixed Sub-Account
expires. If such Guarantee Period is not currently available, we will
transfer your value to the next shortest Guarantee Period. If there is
no shorter Guarantee Period, we will transfer your value to the Money
Market Sub-Account.
. Elect a new Guarantee Period(s) from among those we offer as of the day
the previous Fixed Sub-Account expires.
. Elect to transfer the value of the Fixed Sub-Account to one or more
Variable Sub-Accounts.
Any amounts surrendered, withdrawn, transferred or borrowed other than
during the thirty days before the Expiration Date of the Guarantee Period are
subject to a Market Value Adjustment with the exception of the following
transactions:
. Transfers from DCA Fixed Sub-Accounts made automatically under our
Dollar-Cost Averaging Program; and
. Withdrawals of earned interest made automatically under our Systematic
Partial Withdrawal Program.
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Market Value Adjustment. A Market Value Adjustment reflects the change in
interest rates since we established a Fixed Sub-Account. It compares: (1) the
current Index Rate for a period equal to the time remaining in the Guarantee
Period, and (2) the Index Rate at the time we established the Fixed Sub-Account
for a period equal to the Guarantee Period.
Ordinarily, if the current Index Rate for a period equal to the time
remaining in the Guarantee Period is higher than the applicable Index Rate at
the time we established the Fixed Sub-Account, the Market Value Adjustment will
be negative. Similarly, if the current Index Rate for a period equal to the
time remaining in the Guarantee Period is lower than the applicable Index Rate
at the time we established the Fixed Sub-Account, the Market Value Adjustment
will be positive.
We will apply a Market Value Adjustment as follows:
. For a surrender, withdrawal, transfer, or amount borrowed, we will
calculate the Market Value Adjustment on the total amount (including any
applicable surrender charge) that must be surrendered, withdrawn,
transferred or borrowed to provide the amount requested.
. If the Market Value Adjustment is negative, it reduces any remaining
value in the Fixed Sub-Account, or amount of Surrender Value. Any
remaining Market Value Adjustment then reduces the amount withdrawn,
transferred, or borrowed.
. If the Market Value Adjustment is positive, it increases any remaining
value in the Fixed Sub-Account. In the case of surrender, or if you
withdraw, transfer or borrow the full amount of the Fixed Sub-Account,
the Market Value Adjustment increases the amount surrendered, withdrawn,
transferred, or borrowed.
We will compute the Market Value Adjustment by multiplying the factor below
by the total amount (including any applicable surrender charge) that must be
surrendered, withdrawn, transferred, or borrowed from the Fixed Sub-Account to
provide the amount you requested.
[(1+I)/(1+J+.0025)]to the Nth power divided by 365 - 1
Where
I is the Index Rate for a maturity equal to the Fixed Sub-Account's
Guarantee Period at the time we established the Sub-Account;
J is the Index Rate for a maturity equal to the time remaining
(rounded up to the next full year) in the Fixed Sub-Account's
Guarantee Period at the time of calculation; and
N is the remaining number of days in the Guarantee Period at the time
of calculation.
We currently base the Index Rate for a calendar week on the reported rate
for the preceding calendar week. We reserve the right to set it less frequently
than weekly but in no event less often than monthly. If there is no Index Rate
for the maturity needed to calculate I or J, we will use straight-line
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interpolation between the Index Rate for the next highest and next lowest
maturities to determine that Index Rate. If the maturity is one year or less,
we will use the Index Rate for a one-year maturity.
In the states of Maryland and Oregon, state insurance law requires that the
Market Value Adjustment be computed by multiplying the amount being surrendered,
withdrawn, transferred, or borrowed, by the greater of the factor above and the
following factor: [(1.03)/(1+K)](to the G power - the Nth power)/365) - 1, where
N is as defined above, K equals the Guaranteed Interest Rate for the Guarantee
Period, and G equals the initial number of days in the Guarantee Period. In the
state of Washington, we will not assess the Market Value Adjustment because of
state insurance law requirements. Because of these requirements, not all
Guarantee Periods are available in Washington state; please contact our Customer
Service Center for available Guarantee Periods.
Examples of how the Market Value Adjustment works are shown in Appendix A.
Transfers. You may transfer Account Value from and among the Variable and
Fixed Sub-Accounts at any time, subject to certain conditions. In certain
states, your right to transfer Account Value is restricted until after the end
of the Free Look Period. See "How Do I Purchase a Contract?" The minimum amount
of Account Value that you may transfer from a Sub-Account is $250, or, if less,
the entire remaining Account Value held in that Sub-Account. You must give us
Satisfactory Notice of the Sub-Accounts from which and to which we are to make
the transfers. Otherwise, we will not transfer your Account Value. A transfer
from a Fixed Sub-Account ordinarily will be subject to a Market Value
Adjustment. There is currently no limit on the number of transfers from and
among the Sub-Accounts.
A transfer ordinarily takes effect on the Business Day we receive
Satisfactory Notice at our Customer Service Center. We will deem requests
received on other than a Business Day as received on the next following Business
Day. We may, however, defer transfers to, from, and among the Variable Sub-
Accounts under the same conditions that we may delay paying proceeds.
We reserve the right to impose a transfer charge of up to $25 on each
transfer in a Contract Year in excess of twelve, and to limit, upon notice, the
maximum number of transfers you may make per calendar month or per Contract
Year. For purposes of assessing any transfer charge, we will consider each
transfer request one transfer, regardless of the number of Sub-Accounts affected
by the transfer.
In addition, we may not honor your transfer request if:
. Any Variable Sub-Account that would be affected by the transfer is
unable to purchase or redeem shares of the Fund in which the Variable
Sub-Account invests;
. We determine the transfer would adversely affect Accumulation Unit
values;
. Any affected Fund determines it would be adversely affected by the
transfer.
We also may not honor certain transfers made by individuals holding muliple
powers of attorney. See "What Are My Investment Options? - Power of Attorney,"
below.
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If you have applied proceeds under your Contract to a Settlement Option,
you must have our prior consent to transfer value from the Fixed Account to the
Variable Account or from the Variable Account to the Fixed Account. A Market
Value Adjustment ordinarily will apply to transfers from the Fixed Account. We
reserve the right to limit the number of transfers among the Variable Sub-
Accounts to one transfer per Contract Year.
Telephone Transactions. You may request transfers, withdrawals or loans by
telephone. We will not be liable for following instructions communicated by
telephone that we reasonably believe to be genuine. To request transfers,
withdrawals or loans by telephone, you must elect the option on our
authorization form. We will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. We may only be liable for
any losses due to unauthorized or fraudulent instructions where we fail to
follow our procedures properly. These procedures include: (a) asking you or
your authorized representative to provide certain identifying information; (b)
tape recording all such conversations; and (c) sending you a confirmation
statement after all such telephone transactions.
Our telephone transaction authorization form also allows you to create a
power of attorney by authorizing another person to give telephone instructions.
Unless prohibited by state law, we will treat such power as a durable power of
attorney. The Owner's subsequent incapacity, disability, or incompetency will
not affect the power of attorney. We may cease to honor the power by sending
written notice to you at your last known address. Neither we nor any person
acting on our behalf shall be subject to liability for any act done in good
faith reliance upon your power of attorney.
In addition to telephone transactions, we expect to be able to offer all of
these transactions via the Internet in the 4th quarter of 1999. We will send
Owners information about our web site and transactions that may be made through
it.
Power of Attorney. As a general rule and as a convenience to you, we allow
the use of powers of attorney whereby you can give a third party the right to
make transfers on your behalf. However, when the same third party possesses
powers of attorney executed by many Owners, the result can be simultaneous
transfers involving large amounts of Account Value. Such transfers can disrupt
the orderly management of the Funds, can result in higher costs to Owners, and
are ordinarily not compatible with the long-range goals of purchasers of the
Contracts. We believe that such simultaneous transfers made by such third
parties are not in the best interest of all shareholders of the Funds. The
managements of the Funds share this position.
Therefore, to the extent necessary to reduce the adverse effects of
simultaneous transfers made by third parties holding multiple powers of
attorney, we may not honor such powers of attorney and have instituted or will
institute procedures to assure that the transfer requests that we receive have,
in fact, been made by the Owners in whose names they are submitted. However,
you will not be prevented by these procedures from making your own transfer
requests.
Dollar-Cost Averaging Program. Our optional dollar-cost averaging program
permits you to systematically transfer (monthly or as frequently as we allow) a
set dollar amount from the Money Market Sub-Account to any combination of
Variable Sub-Accounts. We also allow dollar-cost averaging from the DCA Fixed
Sub-Accounts. These DCA Fixed Sub-Accounts may have different Guarantee Periods
and different Guaranteed Interest Rates than the Fixed Sub-Accounts.
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The dollar-cost averaging method of investment is designed to reduce the
risk of making purchases only when the price of Accumulation Units is high.
However, you should carefully consider your financial ability to continue the
program over a long enough period of time to purchase units when their value is
low as well as when high. Dollar-cost averaging does not assure a profit or
protect against a loss. Due to the effect of interest that continues to be
earned on the balance in the Money Market Sub-Account or a DCA Fixed Sub-
Account, the amounts we transfer will vary slightly from month to month. An
example of how our dollar-cost averaging program works is shown in Appendix B.
You may elect to participate in the dollar-cost averaging program at any
time before the proceeds are applied to a Settlement Option by sending us
Satisfactory Notice. The minimum transfer amount is $250 from the Money Market
Sub-Account or from a DCA Fixed Sub-Account. We will make all dollar-cost
averaging transfers on the day of each month that corresponds to your Contract
Date unless that date is not a Business Day. Otherwise, we will make the
transfer on the next following Business Day. If you want to dollar-cost average
from more than one DCA Fixed Sub-Account at the same time, certain restrictions
may apply.
Once elected, dollar-cost averaging remains in effect from the date we
receive your request until you surrender the Contract, until the value of the
Sub-Account from which transfers are being made is depleted, or until you cancel
the program by written request. If you request to cancel dollar-cost averaging
from a DCA Fixed Sub-Account before the end of the selected period, we reserve
the right to treat this request as a transfer request and transfer any proceeds
that remain to a Fixed Sub-Account that has the duration you request, and we
ordinarily will assess a Market Value Adjustment on the amount canceled. You
can request changes by writing us at our Customer Service Center. There is no
additional charge for dollar-cost averaging. We do not consider a transfer
under this program a transfer for purposes of assessing a transfer charge. We
reserve the right to discontinue offering this program at any time and for any
reason. Dollar-cost averaging is not available while you are participating in
the systematic partial withdrawal program.
Asset Allocation Program. You may select from asset allocation model
portfolios we make available, or you may use these models as a guide to help you
develop your own asset allocation model.
If you participate in the asset allocation program, we will automatically
allocate all initial and additional purchase payments among the Variable Sub-
Accounts indicated by the model you select. The models do not include
allocations to the Fixed Account. Although you may only use one model at a
time, you may elect to change your selection as your tolerance for risk, and/or
your needs and objectives change. Bear in mind, the use of an asset allocation
model does not guarantee investment results. You may use a questionnaire that
is offered to determine the model that best meets your risk tolerance and time
horizons.
Because each Variable Sub-Account performs differently over time, your
portfolio mix may vary from its initial allocations. We will automatically
rebalance your Fund mix quarterly to bring your portfolio back to its original
allocation percentages.
From time to time the models are reviewed and the allocation percentages
among the Variable Sub-Accounts or even some of the Variable Sub-Accounts within
a particular model may need to be
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changed. We will send you a notice at least 30 days before any such change is
made, and give you an opportunity not to make the change.
If you participate in the asset allocation program, the transfers made
under the program are not taken into account in determining any transfer charge.
There is no additional charge for this program. We reserve the right to
discontinue offering this program at any time and for any reason. Please contact
our Customer Service Center for more information about our asset allocation
program.
Automatic Portfolio Rebalancing Program. Once you allocate your money
among the Variable Sub-Accounts, the investment performance of each Variable
Sub-Account may cause your allocation to shift. Before proceeds are applied to
a Settlement Option, you may instruct us to automatically rebalance (on a
calendar quarter, semi-annual, or annual basis) your Variable Account Value to
return it to your original allocation percentages. Your request will be
effective on the Business Day on which we receive your request at our Customer
Service Center. We will deem requests received on other than a Business Day as
received on the next following Business Day. Your allocation percentages must
be in whole percentages. You may start and stop automatic portfolio rebalancing
at any time and make changes to your allocation percentages by written request.
There is no additional charge for using this program. We do not consider a
transfer under this program a transfer for purposes of assessing any transfer
charge. We reserve the right to discontinue offering this program at any time
and for any reason. We do not include any money allocated to the Fixed Account
in the rebalancing.
Account Value. The Account Value is the entire amount we hold under your
Contract for you. The Account Value serves as a starting point for calculating
certain values under your Contract. It equals the sum of the Variable Account
Value, the Fixed Account Value, and the Loan Account Value (each term as defined
below) credited to your Contract. We first determine your Account Value on the
Contract Date and after that on each Business Day. The Account Value will vary
to reflect:
. the performance of the Variable Sub-Accounts you have selected;
. interest credited on amounts you allocated to the Fixed Account;
. interest credited on amounts allocated to the Loan Account;
. any additional purchase payments; and
. charges, transfers, withdrawals, loans, and surrenders.
Your Account Value may be more or less than purchase payments you made.
Variable Account Value. Variable Account Value equals the sum of the
values in each Variable Sub-Account on any particular day. On the Contract
Date, the Variable Account Value for a Variable Sub-Account equals the portion
of the initial purchase payment allocated to the Sub-Account. On each
subsequent Business Day it equals:
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. the Variable Account Value in the Sub-Account on the preceding
Business Day multiplied by its net investment factor for the current
Valuation Period; plus
. the amount of any allocation or transfer to the Sub-Account during the
current Valuation Period; minus
. the amount of any transfer from the Sub-Account during the current
Valuation Period; minus
. the amount of any charges allocated to the Sub-Account during the
current Valuation Period; and minus
. the amount of any withdrawal or loan allocated to the Sub-Account
during the current Valuation Period.
We keep track of the Variable Account Value in each of your Variable Sub-
Accounts by the number of Accumulation Units in that Sub-Account. The value in
each Variable Sub-Account equals the number of Accumulation Units attributable
to that Variable Sub-Account multiplied by the Accumulation Unit value for that
Variable Sub-Account on that Business Day. When you allocate a purchase payment
or transfer Account Value to a Variable Sub-Account, we credit your Contract
with Accumulation Units in that Variable Sub-Account. We determine the number
of Accumulation Units by dividing the dollar amount allocated or transferred to
the Variable Sub-Account by the Sub-Account's Accumulation Unit value for that
Business Day. Similarly, when you transfer, withdraw, borrow, or surrender an
amount from a Variable Sub-Account, we cancel Accumulation Units in that
Variable Sub-Account. We determine the number of Accumulation Units canceled by
dividing the dollar amount you transferred, withdrew, borrowed, or surrendered
by the Variable Sub-Account's Accumulation Unit value for that Business Day.
Accumulation Unit Value. An Accumulation Unit value varies to reflect the
investment experience of the underlying Fund, and may increase or decrease from
one Business Day to the next. We arbitrarily set the Accumulation Unit value
for each Variable Sub-Account at $10 when we established the Sub-Account. For
each Valuation Period after the date of establishment, we determine the
Accumulation Unit value by multiplying the Accumulation Unit value for a Sub-
Account for the prior Valuation Period by the net investment factor for the
Variable Sub-Account for the Valuation Period.
Net Investment Factor. The net investment factor is an index we use to
measure the investment performance of a Variable Sub-Account from one Valuation
Period to the next. We determine the net investment factor for any Valuation
Period by dividing (a) by (b) where:
(a) is the net result of:
(i) the Net Asset Value of the Fund in which the Variable Sub-Account
invests determined at the end of the current Valuation Period; plus
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(ii) the per share amount of any dividend or capital gain
distributions made by the Fund on shares held in the Variable Sub-
Account if the "ex-dividend" date occurs during the current Valuation
Period; and plus or minus
(iii) a per share charge or credit for any taxes reserved for, which
we determine to have resulted from the operations of the Variable Sub-
Account; and
(b) is the Net Asset Value of the Fund in which the Variable Sub-Account
invests determined at the end of the immediately preceding Valuation
Period.
The net investment factor may be more or less than, or equal to, one.
Fixed Account Value. Fixed Account Value is the sum of the values in each
Fixed Sub-Account (including a DCA Fixed Sub-Account) on any particular date.
On the Contract Date the Fixed Account Value for a Sub-Account equals the
portion of the initial purchase payment allocated to the Sub-Account. On each
subsequent Business Day it equals:
. the Fixed Account Value in the Sub-Account on the preceding Business
Day multiplied by the daily equivalent of its Guaranteed Interest Rate
earned for the number of days in the current Valuation Period; plus
. the amount of any allocation or transfer to the Sub-Account during the
current Valuation Period; minus
. the amount of any transfer from the Sub-Account during the current
Valuation Period; minus
. the amount of any charges allocated to the Sub-Account during the
current Valuation Period; and minus
. the amount of any withdrawal or loan allocated to the Sub-Account
during the current Valuation Period.
We also adjust the Fixed Account Value for any Market Value Adjustment, the
value of which could be positive or negative.
Loan Account Value. Unless you take a loan, the Loan Account Value is
zero. If you take a loan, then on the effective date of the loan the Loan
Account Value equals the amount of the loan. On each subsequent Business Day it
equals:
. the Loan Account Value on the preceding Business Day; plus
. the amount of interest earned (at the loan credited rate) on Loan
Account Value during the current Valuation Period; plus
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. any amounts transferred to the Loan Account because of any additional
loans and any due and unpaid loan interest during the current
Valuation Period; minus
. the amount of any loan repayment you make during the current Valuation
Period; and minus
. any amount of interest earned on Loan Account Value and transferred to
the Sub-Accounts during the current Valuation Period.
Surrender Value. The Surrender Value on a Business Day is the Account
Value, plus or minus any applicable Market Value Adjustment, reduced by any
applicable surrender charge or other charges that are due us but not yet
deducted, less any Debt.
4. What Are The Expenses Under A Contract?
We deduct the charges described below. The charges are for the services
and benefits we provide, costs and expenses we incur, and risks we assume under
the Contracts. Services and benefits we provide include:
. the ability of Owners to make withdrawals, surrenders, and take loans
under the Contracts;
. the death benefit paid on the death of the Insured;
. the available investment options, including dollar-cost averaging,
asset allocation, automatic portfolio rebalancing, and systematic
partial withdrawal programs;
. administration of the Settlement Options available under the
Contracts; and
. the distribution of various reports to Owners.
Costs and expenses we incur include:
. those related to various overhead and other expenses associated with
providing the services and benefits provided by the Contracts;
. sales and marketing expenses; and
. other costs of doing business.
Risks we assume include:
. the risks that Insureds may live for a shorter period than we
estimated when we established the mortality factors under the
Contracts; and
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. that the costs of providing the services and benefits under the
Contracts will exceed the charges deducted.
We may realize a profit or loss on one or more of the charges. We may use
any such profits for any corporate purpose, including, among other things,
payment of sales expenses.
To assist you in understanding how the expenses under a Contract will
affect values, we have included hypothetical illustrations beginning on page __.
You can also request a personalized illustration from your registered
representative.
Unless we otherwise specify, we will deduct charges proportionately from
all Variable Sub-Accounts and Fixed Sub-Accounts in which you are invested.
We may reduce or eliminate charges under the Contracts when sales result in
savings, reduction of expenses and/or risks to the Company. Generally, we will
make such reductions based on the following factors:
. the size of the group;
. the total amount of purchase payments to be received from the group;
. the purposes for which the Contracts are purchased;
. the nature of the group for which the Contracts are purchased; and
. any other circumstances that could reduce Contract costs and expenses.
We may also sell the Contracts with lower or no charges to a person who is
an officer, director or employee of Sage Life or of certain affiliates or
service providers of ours. Reductions in Contract charges will not be unfairly
discriminatory against any person. Please contact our Customer Service Center
for more information about those cost reductions.
Monthly Deduction Amount
We deduct the Monthly Deduction Amount on each Monthly Processing Date. It
equals:
. the Asset-Based Charges, plus
. the cost of insurance charge, plus
. the cost of any riders for which a separate charge is assessed, and
plus
. any other applicable charge that we assess.
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On a Monthly Processing Date that is also a Contract Anniversary, the Monthly
Deduction Amount equals the Monthly Deduction Amount described above, plus the
Annual Administration Charge.
Asset-Based Charges. We assess Asset-Based Charges against your Contract for
assuming mortality and expense risks, certain administrative and distribution
costs, and certain state and Federal tax expenses. We calculate the charges as a
percentage of your Account Value as of the date we deduct them. On the Contract
Date, and monthly thereafter, we deduct the charges proportionately from the
Sub-Accounts in which you are invested.
The maximum asset-based charges are:
Annual Charge Asset-Based Charges Monthly Charge
- --------------- ------------------- ---------------
1.80% Contract Years 1-10 0.150000%
1.30% Contract Years 11+ 0.108333%
Asset-Based Charges will also apply to any Loan Account Value you have. (If
you have not taken a loan, then no charges will be assessed.) The current
charges applicable to the Loan Account Value are, on an annual basis, 0.90%
(0.075000% monthly), decreasing to .40% (0.033333% monthly) after the tenth
Contract Year.
If proceeds are applied to a Settlement Option, we will deduct the Asset-Based
Charges daily from the assets in each Variable Sub-Account supporting variable
income payments. We refer to these charges as Variable Sub-Account Charges when
applied to the proceeds under a Settlement Option.
Cost of Insurance Charge. We deduct the cost of insurance charge from your
Account Value to compensate us for providing life insurance for the Insured.
Current Cost of Insurance Charge. The current cost of insurance charge is the
actual monthly charge that we deduct from your Account Value. We calculate this
charge as a percentage of your Account Value on the date of deduction. On the
Contract Date, and monthly thereafter, we deduct the current cost of insurance
charge in proportion to the Sub-Accounts in which you are invested. The maximum
charge will never be more than the guaranteed maximum monthly cost of insurance
charge described below.
We determine the current cost of insurance charge based on our expectation of
future mortality experience. Your cost of insurance charge will depend on the
Insured's risk class. The two standard risk classes are smoker and nonsmoker.
We generally charge higher rates for smokers.
We also place Insureds in various sub-standard risk classes, if the
underwriting warrants doing so. These sub-standard risk classes involve a
higher mortality risk and, therefore, higher charges.
At present, in most states the current cost of insurance charges as an annual
percentage of Account Value are 0.55% and 0.85% for standard nonsmokers and
smokers, respectively, and 0.75% and 1.40% for sub-standard nonsmokers and
smokers, respectively. We will apply any charge we make on a uniform basis for
Insureds of the same risk class and Attained Age.
Guaranteed Maximum Monthly Cost of Insurance Charge. The maximum monthly cost
of insurance charge equals (a) times (b) and then divided by (c), where:
(a) is the maximum Cost of Insurance Rate per $1,000 shown in your
Contract based on the Insured's Attained Age, gender and risk class;
(b) is an amount equal to the death benefit minus the Account Value; and
(c) is $1,000.
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For standard risks, we base the guaranteed cost of insurance charge on the
1980 Commissioners Standard Ordinary Mortality Table, Male/Female, Age Last
Birthday ("1980 CSO"). Because the mortality table differentiates between men
and women, the Contract may pay different benefits to men and women of the same
age, even if all other factors are the same. Certain states, however, may
require unisex rates. We include a table of guaranteed maximum cost of
insurance rates per $1,000 in your Contract. For substandard risks, we base the
guaranteed cost of insurance charge on a multiple of the 1980 CSO. We will base
the multiple on the Insured's substandard rating.
Annual Administration Charge
We will deduct an annual administration charge of $40 for the first seven
Contract Years (i) on each Contract Anniversary, and (ii) on the day of any
surrender if the surrender is not on the Contract Anniversary. We will waive
this charge on and after the eighth Contract Anniversary, or if the Account
Value is at least $50,000 when we would have otherwise deducted the annual
administration charge.
Surrender Charge
If you make an Excess Withdrawal or surrender your Contract during the first
seven Contract Years, we may deduct a surrender charge calculated as a
percentage of the amount of purchase payment(s) withdrawn or surrendered. We
apply the surrender charge to each purchase payment as a percentage of the
payment as follows:
Complete Years Elapsed Maximum Surrender
Since Contract Date Charge Percentage
--------------------------- ---------------------
0 9%
1 9%
2 8%
3 7%
4 6%
5 5%
6 3%
7+ 0%
If you surrender your Contract, we deduct the surrender charge from your
Account Value in determining the Surrender Value. If you take an Excess
Withdrawal, we deduct the surrender charge from your Account Value remaining
after we pay you the amount requested. We include any surrender charge we
assess in the calculation of any applicable Market Value Adjustment for
withdrawals from the Fixed Account. Each year you may withdraw the "Free
Withdrawal Amount" without incurring a surrender charge. The Free Withdrawal
Amount equals the greater of:
(i) 10% of your total purchase payments; less all prior withdrawals in
that Contract Year (including any associated surrender charge and
Market Value Adjustment incurred); or
(ii) cumulative earnings (i.e., the excess of the Account Value on the date
of withdrawal over unliquidated purchase payments).
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With an Excess Withdrawal, we will liquidate purchase payments in whole or
in part on a "first-in, first-out" basis. This means we liquidate purchase
payments in the order you made them: the oldest unliquidated purchase payment
first, the next oldest unliquidated purchase payment second, until all purchase
payments have been liquidated.
The total surrender charge will be the sum of the surrender charges for
each purchase payment being liquidated. The amount you request from a Sub-
Account may not exceed the value of that Sub-Account less any applicable
surrender charge.
Example of Calculation of Surrender Charge. Assume the applicable
surrender charge is 7%, you have requested a withdrawal of $2,000 and no Market
Value Adjustment is applicable. Your total purchase payments are $10,000, your
current Account Value is $10,500, and you made no prior withdrawals during that
Contract Year. Your Free Withdrawal Amount is the greater of (a) or (b), where:
(a) is the excess of 10% of the total purchase payments, over 100% of all
prior withdrawals in that Contract Year (including any associated surrender
charge and Market Value Adjustment incurred) (10% x $10,000 = $1,000); and
(b) is the excess of the Account Value on the date of withdrawal over the
unliquidated purchase payments ($10,500- $10,000 = $500).
Therefore, the Free Withdrawal Amount is $1,000. A surrender charge will
apply to the excess of $2,000 over $1,000. The surrender charge equals $70 (7%
x $1,000).
Waiver of Surrender Charge. We will not deduct a surrender charge if, at
the time we receive your request for a withdrawal or a surrender, we have also
received due proof that you have been confined continuously to a "Qualifying
Hospital or Nursing Care Facility" for at least 45 days in a 60 day period. We
define "Qualifying Hospital or Nursing Care Facility" in your Contract.
Transfer Charge
We currently do not deduct this charge. However, we reserve the right to
deduct a transfer charge of up to $25 for the 13th and each subsequent transfer
during a Contract Year. For the purpose of assessing the transfer charge, we
consider each written or telephone request to be one transfer, regardless of the
number of Sub-Accounts affected by the transfer. In the event that the transfer
charge becomes applicable, we will deduct it proportionately from the Sub-
Accounts from which you made the transfer. Transfers made in connection with
the dollar-cost averaging, asset allocation, and automatic portfolio rebalancing
programs will not count as transfers for purposes of assessing this charge.
Fund Annual Expenses
Because the Variable Account purchases shares of the various Funds you
choose, the net assets of the Variable Account will reflect the investment
management fees and other operating expenses incurred by those Funds. These
Fund fees and other expenses are shown in the Summary under "What Are the
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Expenses Under A Contract?" For a description of each Fund's expenses,
management fees, and other expenses, see the Trusts' prospectuses.
5. How Will My Contract Be Taxed?
Introduction
The following summary provides a general description of the Federal
income tax considerations associated with the Contract and does not purport to
be complete or to cover all situations. This discussion is not intended as tax
advice. Please consult counsel or other competent tax advisers for more
complete information. This discussion is based upon our understanding of the
present Federal income tax laws as they are currently interpreted by the
Internal Revenue Service (the "Service"). No representation is made as to the
likelihood of continuation of the present Federal income tax laws or of the
current interpretations by the Internal Revenue Service.
If you are considering a Contract in connection with a qualified retirement
plan, you should consult a qualified tax adviser.
Tax Status of the Contract
Definition of Life Insurance. Section 7702 of the Code defines a life
insurance contract for Federal income tax purposes.
The Section 7702 definition can be met if a life insurance contract
satisfies either one of two tests in that section. The manner in which these
tests should be applied to certain features of the Contract is not directly
addressed by Section 7702 or proposed regulations issued under that section.
The presence of these Contract features, the absence of final regulations, and
the lack of other pertinent interpretations of Section 7702, thus create some
uncertainty about the application of Section 7702 to the Contract.
Nevertheless, we believe that it is reasonable to conclude that the Contract
qualifies as a life insurance contract for federal tax purposes, so that:
. the death benefit should be fully excludible from the gross income of
the beneficiary under Section 101(a)(1) of the Code; and
. the Owner should not be considered in constructive receipt of the
Surrender Value, including any increases, unless and until they are
distributed from the Contract.
If a Contract were determined not to be a life insurance contract for
purposes of Section 7702, it would not provide most of the tax advantages
normally provided by a life insurance contract. Therefore, we reserve the right
to make changes in the Contract if we deem them necessary to attempt to assure
its qualification as a life insurance contract for tax purposes.
Diversification and Investor Control. Section 817(h) of the Code requires
that the investments of each of the Sub-Accounts must be "adequately
diversified" in accordance with Treasury regulations in
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order for the Contract to qualify as a life insurance contract under the Code.
The Sub-Accounts, through the Funds, intend to comply with the diversification
requirements prescribed in Treas. Reg. Sec.1.817-5, which affect how a Fund's
---
assets are to be invested. We believe that the Sub-Accounts will, therefore,
meet the diversification requirements, and we will monitor continued compliance
with this requirement.
In certain circumstances, owners of variable life insurance contracts may
be considered the owners, for federal income tax purposes, of the assets of the
sub-accounts used to support their contracts. In those circumstances, income
and gains from the sub-account assets would be included 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 sub-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 Department
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 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 sub-accounts without being treated as owners of the underlying
assets."
The ownership rights under the Contract are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of sub-account assets. For
example, an Owner has additional flexibility in allocating purchase payments and
Contract values and the investment objective of certain Funds may be narrower.
These differences could result in an Owner being treated as the owner of a pro
rata portion of the assets of the Sub-Accounts. In addition, we do not know
what standards will be set forth, if any, in the regulations or rulings that the
Treasury Department has stated it expects to issue. Therefore, we reserve the
right to modify the Contract as necessary to attempt to prevent an Owner from
being considered the owner of a pro rata share of the assets of the Sub-
Accounts.
The following discussion assumes that the Contract will qualify as a life
insurance contract for federal income tax purposes.
Tax Treatment of Contract Benefits
In General. We believe that the proceeds and Account Value increases of a
Contract should be treated in a manner consistent with a fixed-benefit life
insurance contract for federal income tax purposes. Thus, the death benefit
under the Contract should be excludible from the gross income of the Beneficiary
under Section 101(a)(1) of the Code.
Depending on the circumstances, the exchange of a Contract, a Contract
loan, a withdrawal, a surrender, a change in ownership, or an assignment of the
Contract may have federal income tax consequences. In addition, federal, state
and local transfer, and other tax consequences of ownership or receipt of
Contract proceeds depend on the circumstances of each Owner or Beneficiary.
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The Contract may continue after the Insured attains age 100. The tax
consequences associated with continuing a Contract beyond age 100 are unclear.
A qualified tax adviser should be consulted on this issue.
The Contract may also be used in various arrangements, including non-
qualified deferred compensation or salary continuation plans, split dollar
insurance plans, executive bonus plans, retiree medical benefit plans and
others. The tax consequences of these plans may vary depending on the
particular facts and circumstances of each individual arrangement. Therefore,
if you are considering using a Contract in any arrangement the value of which
depends in part on its tax consequences, you should consult a qualified tax
adviser regarding the tax attributes of the particular arrangement. Moreover,
in recent years, Congress has adopted new rules relating to corporate owned life
insurance. Any business considering the purchase of a new life insurance
contract or a change in an existing contract should consult a qualified tax
adviser.
Generally, the Owner will not be deemed to be in constructive receipt of
the Contract Account Value, including increments thereof, until there is a
distribution. The tax consequences of distributions from, and loans taken from
or secured by, a Contract depend on whether the Contract is classified as a
"Modified Endowment Contract" ("MEC"). You should be aware that in almost all
cases, the Contracts will be MECs. Whether a Contract is or is not a MEC,
upon a surrender or lapse of a Contract, if the amount received plus the amount
of indebtedness exceeds the total investment in the Contract, the excess will
generally be treated as ordinary income subject to tax.
Modified Endowment Contracts. Section 7702A establishes a class of life
insurance contracts designated as "Modified Endowment Contracts." In general, a
Contract will be a MEC if the accumulated premiums paid at any time during the
first seven Contract Years exceed the sum of the net level premiums that would
have been paid on or before such time if the Contract provided for paid-up
future benefits after the payment of seven level annual premiums. The
determination of whether a Contract will be a MEC after a material change
generally depends upon the relationship of the death benefit and Contract
Account Value at the time of the change and the additional premiums paid in the
seven years following the material change. While classification as a MEC
therefore will depend on the individual circumstances of each Contract, in
almost all cases the Contracts are expected to be MECs.
Distributions from Contracts Classified as Modified Endowment Contracts.
Contracts classified as MECs will be subject to the following tax rules: First,
all distributions, including distributions upon surrender and withdrawals, are
treated as ordinary income subject to tax up to the amount equal to the excess
(if any) of the Contract Account Value immediately before the distribution over
the investment in the Contract (described below) at such time. Second, loans
taken from or secured by such a Contract are treated as distributions and taxed
accordingly. Past due loan interest that is added to the loan amount will be
treated as a loan. Third, a 10 percent additional Federal income tax is imposed
on the portion of any distribution from, or loan taken from or secured by, such
a Contract that is included in income except where the distribution or loan is
made on or after the Owner attains age 59 1/2, is attributable to the Owner's
becoming disabled, or is part of a series of substantially equal periodic
payments for the life (or life expectancy) of the Owner or the joint lives (or
joint life expectancies) of the Owner and the Owner's beneficiary.
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If a Contract becomes a MEC after we issue it, distributions made during
the Contract Year in which it becomes a Modified Endowment Contract,
distributions in any subsequent Contract Year and distributions within two years
before the Contract becomes a MEC will be subject to the tax treatment
described above. This means that a distribution from a Contract that is not a
MEC could later become taxable as a distribution from a MEC.
Distributions From Contracts Not Classified as Modified Endowment
Contracts. Any Contract we issue in exchange for a MEC will be subject to the
tax treatment accorded to MECs. However, we believe that any Contract we issue
in exchange for a life insurance contract that is not a MEC ("non-MEC")
generally will not be treated as a MEC if the death benefit of the Contract is
greater than or equal to the death benefit of the contract being exchanged. The
payment of any premiums at the time of or after the exchange may, however, cause
the Contract to become a MEC. A Contract Owner may, of course, choose not to
exercise the right to make additional payments in order to prevent a Contract
from being treated as a MEC. Since the rules as to whether that Contract could
become a MEC as the result of a proposed Contract transaction are complex and
cannot be fully described in this summary, Owners should consult with a
qualified tax advisor to determine whether such a Contract transaction would
cause a Contract that is not a MEC to be treated as a MEC.
If your Contract is not a MEC because of an exchange described above,
distributions from the Contract are generally treated as first recovering the
investment in the Contract (described below) and then, only after the return of
all such investment in the Contract, as distributing taxable income. An
exception to this general rule occurs in the case of a decrease in the
Contract's death benefit or any other change that reduces benefits under the
Contract in the first 15 years after the Contract is issued and that results in
a cash distribution to the Owner in order for the Contract to continue complying
with the Section 7702 definitional limits. Such a cash distribution will be
taxed in whole or in part as ordinary income (to the extent of any gain in the
Contract) under rules prescribed in Section 7702.
Loans from, or secured by, a Contract that is not a MEC are not treated as
distributions. Instead, such loans are generally treated as indebtedness of the
Owner. However, the tax consequences associated with a preferred loan from, or
secured by, a contract that is not a MEC are unclear and a tax advisor should
be consulted before effecting such a loan. See "How Do I Access My Money?"
Finally, the 10 percent additional penalty tax does not apply to
distributions (including distributions upon surrender) and loans from, or
secured by, a Contract that is not a MEC.
Withdrawals from Settlement Option 4. When withdrawals (other than
scheduled settlement option income payments) are taken from the cash value of
life insurance after the effective date of a settlement option, such as that
offered by this Prospectus under the term certain option (Settlement Option 4.
See "What Are My Settlement Options?"), then all amounts received by the
taxpayer are likely taxable at ordinary income rates as amounts "not received as
an annuity." In addition, such amounts are taxable to the recipient without
regard to the owner's investment in the contract or any investment gain which
might be present in the current settlement option value. For example, under
this view, an Owner with a cash value of $100,000 seeking to obtain $20,000 of
the Account Value immediately after application of proceeds to a Settlement
Option under a term certain payout, would pay income taxes on the entire $20,000
amount in that tax year. This adverse tax result means that Owners should
consider carefully the
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tax implications of any withdrawal requests and their need for Contract funds
before the exercise of this right. Owners should also contact their tax adviser
before making such withdrawals.
Market Value Adjustments. There is no definitive guidance on the proper
tax treatment of a Market Value Adjustment. An Owner should consult with a
qualified tax adviser with respect to the potential tax consequences of such an
adjustment.
Contract Loan Interest. Interest paid on any loan under a Contract
generally is not deductible. An Owner should consult a tax adviser before
deducting any Contract loan interest.
Investment in the Contract. Investment in the Contract means: (i) the
aggregate amount of any premiums or other consideration paid for a Contract,
minus (ii) the aggregate amount received under the Contract that is excluded
from gross income of the Owner (except that the amount of any loan from, or
secured by, a Contract that is a MEC, to the extent the amount is excluded from
gross income, will be disregarded), plus (iii) the amount of any loan from, or
secured by, a Contract that is a MEC to the extent that the amount is included
in the gross income of the Owner.
Multiple Policies. All MECs that we (or our affiliates) issue to the same
Owner during any calendar year are treated as one MEC for purposes of
determining the amount includable in the gross income under Section 72(e) of the
Code.
Pension or Profit-Sharing Plan or Similar Deferred Compensation
Arrangement. If the Contract is used in connection with a pension or
profit-sharing plan, or similar deferred compensation arrangement, the Federal,
state and estate tax consequences could differ. The amounts of life insurance
that may be purchased on behalf of a participant in a pension or profit-sharing
plan are limited. The current cost of insurance for the net amount at risk is
treated as a "current fringe benefit" and must be included annually in the plan
participant's gross income. We report this cost (generally referred to as the
"P.S. 58" cost) to the participant annually. If the plan participant dies while
covered by the plan and the Contract proceeds are paid to the participant's
beneficiary, then the excess of the death benefit over the cash value is not
taxable. However, the cash value will generally be taxable to the extent it
exceeds the participant's cost basis in the Contract. Contracts owned under
these types of plans may be subject to restrictions under the Employee
Retirement Income Security Act of 1974 ("ERISA"). You should consult a qualified
adviser regarding ERISA.
Department of Labor ("DOL") regulations impose requirements for participant
loans under retirement plans covered by ERISA. Plan loans must also satisfy tax
requirements to be treated as non-taxable. Plan loan requirements and
provisions may differ from Contract loan provisions. Failure of plan loans to
comply with the requirements and provisions of the DOL regulations and of tax
law may result in adverse tax consequences and/or adverse consequences under
ERISA. Plan fiduciaries and participants should consult a qualified adviser
before requesting a loan under a Contract held in connection with a retirement
plan.
Other Arrangements. If the Contract is used in connection with various
other arrangements, including non-qualified deferred compensation or salary
continuance plans, split dollar insurance plans, executive bonus plans, tax
exempt and non-exempt welfare benefit plans, retiree medical benefit plans and
others, the tax consequences of such plans may vary depending on the particular
facts and
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circumstances. If you are purchasing the Contract for any arrangement the value
of which depends in part on its tax consequences, you should consult a qualified
tax adviser. In recent years, moreover, Congress has adopted new rules relating
to life insurance owned by businesses. Any business contemplating the purchase
of a new Contract or a change in an existing Contract should consult a tax
adviser.
Possible Legislative Changes
Although the likelihood of legislative changes is uncertain, there is
always the possibility that tax treatment of the Contract could change by
legislation or other means. Moreover, it is also possible that any change could
be retroactive (that is, effective prior to the date of the change). You should
consult a qualified tax adviser with respect to legislative developments and
their effect on the Contract.
Possible Charge for Sage Life's Taxes
At the present time, we make no charge for any Federal, state or local
taxes that we incur that may be attributable to the Sub-Accounts or to the
Contracts. However, we reserve the right to make additional charges in the
future for any such tax or other economic burden resulting from the application
of the tax laws that we determine to be properly attributable to the Sub-
Accounts or to the Contracts. If any tax charges are made in the future, they
will be accumulated daily and transferred from the applicable Sub-Account to our
General Account. We will retain any investment earnings on tax charges
accumulated in a Sub-Account.
6. How Do I Access My Money?
You may access the money in your Contract: (1) by making a withdrawal or a
surrender, or (2) by taking a loan from your Contract. If you surrender your
Contract, you can take the proceeds in a single sum, or you can request that we
pay the proceeds over a period of time under one of our Settlement Options. See
"What Are My Settlement Options?"
Withdrawals
You may withdraw all or part of your Surrender Value at any time while your
Contract is in force during the Insured's lifetime. (If you have elected
variable Settlement Option 4, Payments for a Specified Period Certain, you may
request a full or partial withdrawal after the date the Settlement Option
becomes effective; otherwise, no withdrawals are permitted after the effective
date of a Settlement Option.) You may make your withdrawal request in writing
or by telephone. See "Requesting Payments." Any withdrawal must be at least
$250. If a withdrawal request would reduce your Account Value remaining in a
Sub-Account below $250, we will treat the withdrawal request as a request to
withdraw the entire amount. If a requested withdrawal would reduce your Account
Value below $5,000, we reserve the right to treat the request as a withdrawal of
only the excess over $5,000. We will pay you the withdrawal amount in one sum.
Under certain circumstances, we may delay this payment. See "Requesting
Payments."
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When you request a withdrawal, you can direct how we deduct the withdrawal
from your Account Value. If you provide no directions, we will deduct the
withdrawal from your Account Value in the Sub-Accounts on a pro-rata basis.
When you make a withdrawal, we reduce the Account Value by the amount of
the withdrawal (including any associated surrender charges and Market Value
Adjustment incurred). We also reduce the Insurance Amount by the same
percentage that the withdrawal (including any associated surrender charge and
Market Value Adjustment incurred) reduced Account Value.
A withdrawal may have adverse tax consequences. See "How Will My Contract
Be Taxed?"
Systematic Partial Withdrawal Program
The systematic partial withdrawal program provides automatic monthly,
quarterly, semi-annual, or annual payments to you from the amounts you have
accumulated in the Sub-Accounts. You select the day we take the withdrawals,
but this day can be no later than the 28th day of the month. If you do not
select a day, we will use the day of each month that corresponds to your
Contract Date. If that date is not a Business Day, we will use the next
following Business Day. The minimum payment is $100. You can elect to withdraw
either earnings in a prior period (for example, prior month for monthly
withdrawals or prior quarter for quarterly withdrawals) or a specified dollar
amount.
. If you elect earnings, we will deduct the withdrawals from the
Sub-Accounts in which you are invested on a pro-rata basis.
. If you elect a specified dollar amount, we will deduct the withdrawals
from the Sub-Accounts in which you are invested on a pro-rata basis
unless you tell us otherwise. Any amount in excess of the Free
Withdrawal Amount may be subject to a surrender charge. See "What Are
The Expenses Under A Contract?" Also, any amount in excess of interest
earned on a Fixed Sub-Account in the prior Guarantee Period ordinarily
will be subject to a Market Value Adjustment. See "What Are My
Investment Options?"
You may participate in the systematic partial withdrawal program at any
time during the Insured's lifetime by providing Satisfactory Notice. Once we
receive your request, the program will begin and will remain in effect until
your Account Value drops to zero. You may cancel or make changes in the program
at any time by providing us with Satisfactory Notice. We do not deduct any other
charges for this program. We reserve the right to discontinue the systematic
partial withdrawal program at any time and for any reason. Systematic partial
withdrawals are not available while you are participating in the dollar-cost
averaging program.
A systematic withdrawal may have adverse tax consequences. See "How Is My
Contract Taxed?"
Surrenders
You may cancel and surrender your Contract at any time during the Insured's
lifetime. Your Contract will terminate on the Valuation Date we receive your
request or a later date as you might request. We will pay you the Surrender
Value in one sum unless you choose a Settlement Option. (Unless you
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choose Settlement Option 4, you cannot surrender your Contract once payments
have begun under a Settlement Option.) Under certain circumstances, we may delay
payments of proceeds from a surrender. See "Requesting Payments."
A surrender may have adverse tax consequences. See "How Will My Contract
Be Taxed?"
Loans
While your Contract is in force and after the Free Look Period, you may
request a loan by giving us Satisfactory Notice. Unless you tell us otherwise,
we will transfer an amount equal to the loan from the Sub-Accounts to the Loan
Account in proportion to the Account Value in each Sub-Account in which you are
invested as of the date we process the loan. We use the Loan Account Value as
collateral for your loan. Your Contract will be the only security we require
for the loan. Any loan must be at least $250.
A loan may have adverse tax consequences. See "How Is My Contract Taxed?"
Maximum Loanable Value. The maximum amount that you may borrow ("maximum
loanable value") is 90% of the Account Value less any surrender charge and less
any due and unpaid Monthly Deduction Amount. The amount of the loan and all
existing loans may not be more than the maximum loanable value as of the loan
date, which is the date we process the loan.
If on any Business Day where there is Debt outstanding and the Surrender
Value is negative, we will send you an overloan notice at your last known
address. You will then have 61 days from the date we send the notice to avoid
termination of your Contract by paying us at least the minimum repayment amount
listed in the notice.
Loan Repayment. You may repay all or part of your loan at any time while
your Contract is in force during the Insured's lifetime. Any loan repayment
must be at least $250. If the Grace Period has expired and the Contract has
terminated, any Debt that exists at the end of the Grace Period may not be
repaid unless you reinstate your Contract.
Unless you tell us otherwise, we will transfer an amount equal to the loan
repayment from the Loan Account to the Sub-Accounts in the same proportion as
your most recent purchase payment.
Loan Interest. Interest on the loan accrues daily at a loan interest rate
of 6% per annum, and is due on each Contract Anniversary. If you do not pay
loan interest when due, we will transfer the difference between the Loan Account
and Debt from the Sub-Accounts to the Loan Account in proportion to the Account
Value in each Sub-Account in which you are invested.
Interest Credited. The portion of your Account Value represented by the
Loan Account will earn interest daily from the date of transfer at a minimum
loan credited rate of 4% per annum.
However, the Preferred Loan Amount will earn interest daily at a Loan
Credited Rate that is currently 6% per annum. We can change this rate at any
time, however, it will never be less than 4% per annum. The Preferred Loan
Amount equals:
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. The part of a Loan equal to cumulative earnings (i.e., the excess of
the Account Value on the date of the Loan over unliquidated purchase
payments), and
. Any loan carried over from an existing contract to a Contract as part
of a valid 1035 Exchange, as defined by the Internal Revenue Code.
Effects of a Loan. When you take out a loan, we transfer funds
proportionately from the Sub-Accounts in which you are invested to the Loan
Account. We also will transfer any loan interest that becomes due that you do
not pay from your Sub-Accounts to the Loan Account. A Market Value Adjustment
may apply to amounts taken from the Fixed Sub-Accounts.
Since we transfer the amount you borrow from the Sub-Accounts, a loan
whether or not repaid, will have a permanent effect on your Surrender Value and
may have a permanent effect on your death benefit. This is because the Loan
Account does not share in the investment results of the Sub-Accounts. Rather,
the Loan Account earns interest daily at the Loan Credited Rate. Depending upon
how the investment results compare to the Loan Credited Rate, this effect may be
favorable or unfavorable. This is true whether you repay the loan or not. If
not repaid, the loan will reduce the amount of Death Proceeds and could cause
your Contract to terminate if investment results are not as expected. See "How
Do I Purchase A Contract? - Grace Period" and "How Is My Contract Taxed?"
Requesting Payments
You must provide us with Satisfactory Notice of your request for payment.
We will ordinarily pay any Death Proceeds, loan, withdrawal, or surrender
proceeds within seven days after receipt at our Customer Service Center of all
requirements. We will determine the amount as of the Valuation Date our
Customer Service Center receives all requirements.
We may delay making a payment, applying proceeds to a Settlement Option, or
processing a transfer request if:
. the disposal or valuation of the Variable Account's assets is not
reasonably practicable because the New York Stock Exchange is closed
for other than a regular holiday or weekend, trading is restricted by
the SEC, or the SEC declares that an emergency exists; or
. the SEC, by order, permits postponement of payment to protect our
Owners.
We also may defer making payments attributable to a check that has not
cleared (which may take up to 15 days), and we may defer payment of proceeds
from the Fixed Account for a withdrawal, surrender, loan, or transfer request
for up to six months from the date we receive the request, if permitted by state
law.
If we defer payment 30 days or more, the amount deferred will earn interest
at a rate not less than the minimum required in the jurisdiction in which we
delivered the Contract.
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7. How Is Contract Performance Presented?
Articles discussing the Variable Account's investment performance,
rankings, and other characteristics may appear in publications. Some or all of
these publishers or ranking services (including, but not limited to, Lipper
Analytical Services and Morningstar, Inc.) may publish their own rankings or
performance review of variable contract separate accounts, including the
Variable Account. We may use references to or reprints of such articles or
rankings as sales material, and may include rankings that indicate the names of
other variable contract separate accounts and their investment experience.
Publications may use articles and releases, developed by us, the Funds and
other parties, about the Variable Account or the Funds. We may use references
to or reprints of such articles in sales material for the Contracts or the
Variable Account. Such literature may refer to personnel of the advisers, who
have portfolio management responsibility, and their investment style and include
excerpts from media articles.
If we quote performance data, the data will represent past performance and
you should not view it as any indication of future performance. Amounts you
invest in the Variable Sub-Accounts will fluctuate daily based on Fund
investment performance, so the value of your investment may increase or
decrease. The hypothetical illustrations beginning on page ___ of this
Prospectus show how the performance of the Funds may affect Contract values.
8. What Is The Death Benefit Under My Contract?
The Contract provides for a payment to your designated Beneficiary if the
Insured dies while the Contract is in force. This payment is called the "Death
Proceeds," and equals:
. the death benefit described below; plus
. any additional insurance on the Insured's life that may be provided by
riders to the Contract; minus
. any Debt from Contract loans; minus
. any due and unpaid charges; and minus
. any amounts previously paid under the Accelerated Death Benefit Rider
plus accrued interest.
The Death Proceeds will be adjusted in certain circumstances. See
"Incontestability," "Suicide," and "Misstatement of Age or Sex" in "What Other
Information Should I Know?"
You or your Beneficiary decide how to receive the Death Proceeds. You or
your Beneficiary can elect payment in a single sum, in which case your Contract
will terminate; or you or your Beneficiary may apply proceeds under one of the
Settlement Options in your Contract. See "What Are My Settlement Options?"
Unless you or your Beneficiary specify otherwise, we will pay the Death Proceeds
in one sum within 90 days after we receive proof of death. If required by the
law of your state, we also will pay interest from the date of death until we
distribute the Death Proceeds.
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Death Benefit. At issue, your death benefit equals your Insurance Amount
shown in your Contract. On any Business Day after that, it equals the greater
of:
. the Insurance Amount; or
. the Minimum Death Benefit.
However, if the state in which we issue a Contract does not allow us to
deduct a cost of insurance charge on or after the Contract Anniversary when the
Insured reaches age 100, we will limit the death benefit on and after that
anniversary to the Minimum Death Benefit. The tax consequences associated with
continuing a Contract after the Insured reaches age 100 are unclear.
Insurance Amount. The initial Insurance Amount depends on the amount of
your initial purchase payment and the age and sex of the proposed Insured. It
remains level unless you make additional purchase payments or withdrawals.
Additional payments may increase the Insurance Amount. See "Insurance Amount
Increases" below. Withdrawals reduce the Insurance Amount in the same
proportion as the Account Value is reduced.
Minimum Death Benefit. To ensure that the Contract continues to qualify as
life insurance under the Code, each Business Day we will calculate a Minimum
Death Benefit. The Minimum Death Benefit equals (a) times (b), where:
(a) is the Account Value plus any positive Market Value Adjustment on the
date of calculation; and
(b) is the Minimum Death Benefit Percentage from the table below.
Table of Minimum Death Benefit Percentages
------------------------------------------
Attained Attained Attained
Age Percentage Age Percentage Age Percentage
--- ---------- --- ---------- --- ----------
0-40 250% 54 157% 68 117%
41 243% 55 150% 69 116%
42 236% 56 146% 70 115%
43 229% 57 142% 71 113%
44 222% 58 138% 72 111%
45 215% 59 134% 73 109%
46 209% 60 130% 74 107%
47 203% 61 128% 75-90 105%
48 197% 62 126% 91 104%
49 191% 63 124% 92 103%
50 185% 64 122% 93 102%
51 178% 65 120% 94-99 101%
52 171% 66 119% 100+ 100%
53 164% 67 118%
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Since positive investment performance increases your Account Value, it may
increase your death benefit to the extent that the Minimum Death Benefit is
greater than the Insurance Amount. Conversely, since negative investment
performance decreases your Account Value, it may decrease your death benefit,
but never below the Insurance Amount.
Proof of Death. We will pay the Death Proceeds to your Beneficiary after
we receive satisfactory proof of death at our Customer Service Center. We will
accept one of the following items:
1. An original certified copy of an official death certificate, or
2. An original certified copy of a decree of a court of competent
jurisdiction as to the finding of death, or
3. Any other proof satisfactory to us.
Insurance Amount Increases. If you make additional purchase payments, we
may have to increase your Insurance Amount so that your Contract continues to
qualify as life insurance under the Code. We reserve the right to require
satisfactory evidence of insurability as to any increase in the Insurance
Amount. In addition, we reserve the right to require that the Insured's risk
class be identical to that on the Contract Date. Other than in connection
with making additional purchase payments, we do not currently permit you to
request an increase in your Insurance Amount.
9. What Supplemental Benefits Are Available Under My Contract?
The following supplemental benefits are available under the Contracts by
rider. We include these riders automatically in your Contract at no additional
cost. The riders have certain conditions and use special terms and may not be
available in all states.
Accelerated Death Benefit Rider. The Accelerated Death Benefit Rider
provides you with access to a portion of the death benefit during the Insured's
lifetime, if the Insured is diagnosed as having a terminal illness. You can
request to receive up to 50% of the Insurance Amount up to a maximum of
$500,000.
You must provide us with proof that the Insured has a terminal illness.
You may receive an accelerated benefit amount only once. The accelerated
benefit amount will first be used to repay any outstanding Debt. We will pay
any amount in excess of the outstanding Debt to you in a lump sum. Other
conditions apply.
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Accidental Death Benefit Rider. The Accidental Death Benefit Rider
provides an additional death benefit called the accidental death benefit. This
additional benefit will equal the purchase payments made minus any withdrawals
(including any associated surrender charge or Market Value Adjustment incurred),
determined as of the date of the Insured's death (or the next Business Day if
the Insured dies on other than a Business Day), up to a maximum of $250,000.
To qualify for this benefit, the Insured's death must: (i) occur before
the first Contract Anniversary after the Insured attains age 80; and (ii) be a
direct result of accidental bodily injury, independent of all other causes.
Further, all the terms and conditions described in the Contract must be
satisfied, including the requirement that we receive satisfactory proof of
accidental death at our Customer Service Center within 30 days after an
accidental death or as soon thereafter as reasonably possible. We will pay the
accidental death benefit to the Beneficiary or the person entitled to receive
the death benefit under the Contract, after receipt of satisfactory proof of
accidental death.
We terminate the accidental death benefit provision:
. when we pay the benefit;
. when you surrender the Contract or apply the entire Surrender Value to
a Settlement Option;
. when we distribute the interest in the Contract due to the death of an
Insured; or
. when you request termination of the benefit.
Waiver of Surrender Charge Rider. The Waiver of Surrender Charge Rider
provides that we will not deduct a surrender charge if, when you submit your
request for a withdrawal or a surrender, you also submit due proof that you have
been confined continuously to a "Qualifying Hospital or Nursing Care Facility"
for at least 45 days in a 60 day period. We define "Qualifying Hospital or
Nursing Care Facility" in your Contract.
10. What Are My Settlement Options?
You may elect to have the Surrender Value or Death Proceeds paid in a
single sum or under one of our Settlement Options if the amount is at least
$5,000. You select a Settlement Option from the list below, and indicate
whether you want your income payments to be fixed or variable or a combination
of fixed and variable. Once payments have begun under a Settlement Option, (i)
our prior approval is necessary for transfers from the Fixed Account to the
Variable Account and from the Variable Account to the Fixed Account, and (ii) we
reserve the right to limit transfers between Variable Sub-Accounts to one per
Contract Year. Any other changes require our prior approval.
On the date the Settlement Option becomes effective, the Surrender Value
under the Contract will be used to provide income payments. Unless you request
otherwise, we will use any Variable Account
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Value to provide variable income payments, and we will use any Fixed Account
Value to provide fixed income payments.
You may elect one of the Settlement Options shown below (or any other
option acceptable to us). For ease of describing these Settlement Options, we
assume that you apply the Surrender Value and receive the income payments from
one of the options below. Of course, you may always designate someone other
than yourself to receive the income payments, and your designated Beneficiary
will receive the income payments from any Death Proceeds.
Option 1 - Payments for Life: You will receive payments for your
life.
Option 2 - Life Annuity with 10 or 20 Years Certain: You will
receive payments for your life. However, if you die before the end of
the guaranteed certain period you select (10 or 20 years), your
Beneficiary will receive the payments for the remainder of that
period.
Option 3 - Joint and Last Survivor Life Annuity: We will make
payments as long as either you or a second person you select (such as
your spouse) is alive.
Option 4 - Payments for a Specified Period Certain: You will receive
payments for the number of years you select, which may be from 5-30
years. However, if you die before the end of that period, your
Beneficiary will receive the payments for the remainder of the
guaranteed certain period.
Your income payments will be made monthly, unless you or the Beneficiary,
as the case may be, choose quarterly, semi-annual or annual payments by giving
us Satisfactory Notice. Each payment must be at least $100. If any payment
would be less than $100, we may change the payment frequency to the next longer
interval, but in no event less frequent than annual.
If you told us that you want a life annuity, it is possible that you could
only receive one payment.
We will base your first income payment, whether fixed or variable, on the
amount of proceeds applied under the Settlement Option you or the Beneficiary,
as the case may be, have selected and on the applicable "purchase rates." If
applicable, these rates will vary based on: (i) the age and sex of the person
that will receive the income payments (the "Payee"); (ii) the age and sex of a
second designated person; and (iii) the specified period certain. The purchase
rate we apply will never be lower than the rate shown in your Contract.
If you told us you want fixed income payments, we guarantee the amount of
each income payment and it remains level throughout the period you selected.
If you told us you want variable income payments, the amount of each
payment will vary according to the investment performance of the Funds you
selected.
Variable Income Payments. To calculate your initial and future variable
income payments, we need to make an assumption regarding the investment
performance of the Funds you select. We call this
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your assumed investment rate. This rate is simply the total return, after
expenses, you need to earn to keep your variable income payments level. Rather
than building in our own estimate, we will allow you to tailor your variable
income payments to meet your needs by giving you a choice of rates. Currently,
you may select either 3% or 6%; if you do not select a rate, we will apply the
3% rate. (We may offer other rates in the future). The lower the rate, the lower
your initial variable income payment, but the better your payments will keep
pace with inflation (assuming net positive investment performance greater than
the assumed investment rate). Conversely, the higher the rate, the higher your
initial variable income payment, but the less likely your payments will keep
pace with inflation (assuming net positive investment performance greater than
the assumed investment rate).
For example, if you select 6%, this means that if the investment
performance, after expenses, of your Funds is less than 6%, then the dollar
amount of your variable income payment will decrease. Conversely, if the
investment performance, after expenses, of your Funds is greater than 6%, then
the dollar amount of your income payments will increase.
Your variable payments will fluctuate based on Variable Sub-Account
performance. The dollar amount of each payment attributable to each Variable
Sub-Account is the number of Income Units for each Variable Sub-Account times
the Income Unit value of that Sub-Account. The sum of the dollar amounts for
each Variable Sub-Account is the amount of the total variable income payment.
We will determine the Income Unit values for each payment no earlier than five
Business Days preceding the due date of the variable income payment (except for
Option 4, which is determined on the due date). We guarantee the payment will
not vary due to changes in mortality or expenses.
Income Unit Value. We calculate the value of an Income Unit at the same
time that we calculate the value of an Accumulation Unit and base it on the same
values for Fund shares and other assets and liabilities. The Income Unit value
for a Variable Sub-Account's first Business Day was set at $10. After that, we
determine the Income Unit value for every Business Day by multiplying (a) by
(b), and then dividing by (c) where:
(a) is the Income Unit value for the immediately preceding Valuation
Period;
(b) is the "net investment factor" for the Variable Sub-Account for the
Valuation Period for which the value is being determined; and
(c) is the daily equivalent of the assumed investment rate that you have
selected for the number of days in the Valuation Period.
Under a Settlement Option, we calculate the net investment factor slightly
different than is otherwise the case. Before a Settlement Option is elected, we
calculate Asset-Based Charges as a percentage of the Account Value on the date
of deduction. These charges on an annual basis equal 1.80%, decreasing to 1.30%
after the tenth Contract Year. However, once a Settlement Option is elected, we
call these charges Variable Sub-Account Charges and deduct them from the assets
in each Variable Sub-Account on a daily basis. Therefore, we determine the "net
investment factor" in (b), above, by dividing (i) by (ii), and then subtracting
(iii) where:
(i) is the Accumulation Unit value for the current Valuation Period;
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(ii) is the Accumulation Unit value for the immediately preceding
Valuation Period; and
(iii) is the daily equivalent Variable Sub-Account Charges (adjusted for
the number of days in the Valuation Period).
Exchange of Income Units. Under a Settlement Option, if there is an
exchange of value of a designated number of Income Units of particular Variable
Sub-Accounts into other Income Units, the value will be such that the dollar
amount of the income payment made on the date of exchange will be unaffected by
the exchange.
11. What Other Information Should I Know?
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Sage Life Assurance of America, Inc.
We are a Delaware stock life insurance company that is wholly owned by Sage
Life Holdings of America, Inc., also a Delaware corporation. Sage Life Holdings
is, in turn, wholly owned by Sage Insurance Group Inc., also a Delaware
corporation. Our Executive Office is located at 300 Atlantic Street, Stamford,
CT 06901. We were incorporated in 1981 and have been engaged in the life
insurance business since that year. We are subject to regulation by the
Insurance Department of the State of Delaware as well as by the insurance
departments of all other states and jurisdictions in which we do business. We
sell insurance in 49 states and the District of Columbia. We submit annual
statements on our operations and finance to insurance officials in such states
and jurisdictions where required. The Contracts described in this Prospectus
have been filed with and/or approved by insurance officials in jurisdictions
where they are sold.
Separate Accounts
The Sage Variable Life Account A. We established the Variable Account as a
separate investment account under Delaware law on December 3, 1997. The
Variable Account may invest in mutual funds, unit investment trusts, and other
investment portfolios. We own the assets in the Variable Account and are
obligated to pay all benefits under the Contracts. We use the Variable Account
to support the Contracts as well as for other purposes permitted by law. We
registered the Variable Account with the SEC as a unit investment trust under
the 1940 Act and it qualifies as a "separate account" within the meaning of the
federal securities laws. Such registration does not involve any supervision by
the SEC of the management of the Variable Account or Sage Life.
We divided the Variable Account into Variable Sub-Accounts, each of which
currently invests in shares of a specific Fund of AIM Variable Insurance Funds,
Inc., The Alger American Fund, Liberty Variable Investment Trust, SteinRoe
Variable Investment Trust, MFS(R) Variable Investment Trust SM, Morgan Stanley
Dean Witter Universal Funds, Inc., Oppenheimer Variable Account Funds, Sage Life
Investment Trust, and T. Rowe Price Equity Series, Inc. Variable Sub-Accounts
buy and redeem Fund shares at net asset value without any sales charge. We
reinvest any dividends from net investment income and distributions from
realized gains from security transactions of a Fund at net asset value in shares
of the same Fund. Income, gains and losses, realized or unrealized, of the
Variable Account are credited to or charged against the Variable Account without
regard to any other income, gains or losses of Sage Life. Assets equal to the
reserves and other Contract liabilities with respect to the Variable Account are
not chargeable with liabilities arising out of any other business or account of
Sage Life. If the assets exceed the required reserves and other liabilities, we
may transfer the excess to our General Account.
The Sage Fixed Interest Account A. The Fixed Account is a separate
investment account under state insurance law. We maintain it separate from our
General Account and separate from any other separate account that we may have.
We own the assets in the Fixed Account, and also offer the Fixed Account with
our variable annuity contracts. Assets equal to the reserves and other
liabilities of the Fixed Account will not be charged with liabilities that arise
from any other business that we conduct. Thus, the Fixed Account represents
pools of assets that provide an additional measure of assurance that Owners will
receive full payment of benefits under the Contracts. We may transfer to our
General Account assets that
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exceed the reserves and other liabilities of the Fixed Account. Notwithstanding
the foregoing, our obligations under (and values and benefits under) the Fixed
Account do not vary as a function of the investment performance of the Fixed
Account. Owners and Beneficiaries with rights under the Contracts do not
participate in the investment gains or losses of the assets of the Fixed
Account. These gains or losses accrue solely to us. We retain the risk that the
value of the assets in the Fixed Account may fall below the reserves and other
liabilities that we must maintain in connection with our obligations under the
Fixed Account. In such an event, we will transfer assets from our General
Account to the Fixed Account to make up the difference. We are not required to
register the Fixed Account as an investment company under the 1940 Act.
Voting of Fund Shares. We are the legal owner of shares held by the
Variable Sub-Accounts and as such, have the right to vote on all matters
submitted to shareholders of the Funds. However, as required by law, we will
vote shares held in the Variable Sub-Accounts at regular and special meetings of
shareholders of the Funds according to instructions received from Owners with
Account Value in the Variable Sub-Accounts. To obtain your voting instructions
before a Fund shareholder meeting, we will send you voting instruction
materials, a voting instruction form, and any other related material. We will
vote shares held by a Variable Sub-Account for which we received no timely
instructions in the same proportion as those shares for which we received voting
instructions. Should the applicable federal securities laws, regulations, or
interpretations thereof change so as to permit us to vote shares of the Funds in
our own right, we may elect to do so.
Modification
When permitted by applicable law, we may modify the Contracts as follows:
. deregister the Variable Account under the 1940 Act;
. operate the Variable Account as a management company under the 1940
Act if it is operating as a unit investment trust;
. operate the Variable Account as a unit investment trust under the 1940
Act if it is operating as a managed separate account;
. restrict or eliminate any voting rights of Owners, or other persons
who have voting rights as to the Variable Account;
. combine the Variable Account with other separate accounts; and
. combine a Variable Sub-Account with another Variable Sub-Account.
We also reserve the right, subject to applicable law, to make additions to,
deletions from, or substitutions of shares of a Fund that are held by the
Variable Account or that the Variable Account may purchase; and to establish
additional Variable Sub-Accounts or eliminate Variable Sub-Accounts, if
marketing, tax, or investment conditions so warrant. Subject to any required
regulatory approvals, we reserve the right to transfer assets of a Variable Sub-
Account that we determine to be associated with the
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class of Contracts to which the Contract belongs, to another separate account or
to another separate account sub-account.
If the actions we take result in a material change in the underlying
investments of a Variable Sub-Account in which you are invested, we will notify
you of the change. You may then make a new choice of Variable Sub-Accounts.
Distribution of the Contracts
Sage Distributors, Inc. ("Sage Distributors"), acts as the distributor
(principal underwriter) of the Contracts. Sage Distributors is a Delaware
corporation registered as a broker-dealer under the Securities Exchange Act of
1934, and is a member of the National Association of Securities Dealers, Inc.
(the "NASD"). Sage Distributors is a wholly owned subsidiary of Sage Insurance
Group Inc. We compensate Sage Distributors for acting as principal underwriter
under a distribution agreement. We offer the Contracts on a continuous basis,
and do not anticipate discontinuing their sale. The Contracts may not be
available in all states.
The Contracts are sold by broker-dealers through their registered
representatives who are also appointed and licensed as insurance agents of Sage
Life. These broker-dealers receive commissions for selling Contracts calculated
as a percentage of purchase payments (up to a maximum of 7.5%). Broker-dealers
who meet certain productivity and profitability standards may be eligible for
additional compensation.
Experts
Ernst & Young LLP, independent auditors, have audited our financial
statements for the years ended December 31, 1998 and 1997, as set forth in their
report, which is included in this Prospectus. We included our financial
statements in this Prospectus in reliance on their report, given on their
authority as experts in accounting and auditing.
Legal Proceedings
Sage Life and its subsidiaries, as of the date of this Prospectus, are not
involved in any lawsuits. However, our direct and indirect parent companies,
like other companies, are involved in lawsuits. In some lawsuits involving
insurers, substantial damages have been sought and/or material settlement
payments have been made. Although the outcome of any litigation cannot be
predicted with certainty, we believe that at the present time there are no
pending or threatened lawsuits that are reasonably likely to have a material
adverse impact on the Variable Account, the Fixed Account, the General Account,
or Sage Life.
Reports to Contract Owners
We maintain records and accounts of all transactions involving the
Contracts, the Variable Account, and the Fixed Account at our Customer Service
Center. Each year, or more often if required by law, we will send you a report
showing information about your Contract for the period covered by the report.
We will also send you an annual and a semi-annual report for each Fund
underlying a Variable
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Sub-Account in which you are invested as required by the 1940 Act. In addition,
when you make purchase payments, or if you make transfers or withdrawals, we
will send you a confirmation of these transactions.
Assignment
You may assign your Contract at any time during the Insured's lifetime. No
assignment will be binding on us unless we receive Satisfactory Notice. We will
not be liable for any payments made or actions we take before we accept the
assignment. An absolute assignment will revoke the interest of any revocable
Beneficiary. We are not responsible for the validity of any assignment. An
assignment may be a taxable event.
The Owner
You are the Owner of the Contract. You are also the Insured unless you
named another Insured in the application. You have the rights and options
described in the Contract while the Insured is living and the Contract is in
force. One or more people may own the Contract.
The Beneficiary
We pay the Death Proceeds to the primary Beneficiary. If the primary
Beneficiary dies before the Insured, we pay the Death Proceeds to the Contingent
Beneficiary, if any. If there is no surviving Beneficiary, we pay the Death
Proceeds to the Owner's estate.
You may name one or more persons as primary Beneficiary or Contingent
Beneficiary. We will assume any Death Proceeds are to be paid in equal shares
to the multiple surviving Beneficiaries, unless you tell us otherwise.
You have the right to change Beneficiaries. However, if you designate the
primary Beneficiary as irrevocable, you may need the consent of that Beneficiary
to exercise the rights and options under your Contract.
Change of Owner or Beneficiary
During your lifetime and while your Contract is in force you can transfer
ownership of your Contract or change the Beneficiary. To make any of these
changes, you must send us Satisfactory Notice. If accepted, any change in Owner
or Beneficiary will take effect on the date you signed the notice. Any of these
changes will not affect any payment made or action we took before our
acceptance. A change of Owner may be a taxable event.
Misstatement And Proof of Age, Sex, or Survival
We may require proof of age, sex, or survival of any person on whose age,
sex, or survival any payments depend. If the age or sex of the Insured has been
misstated, the benefits will be those that the initial purchase payment and any
additional purchase payments would have provided for the correct age and sex.
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Incontestability
We will not contest the payment of the Death Proceeds based upon the
initial purchase payment after the Contract has been in force during the
Insured's lifetime for two years from the Issue Date.
For any increase in Insurance Amount requiring evidence of insurability, we
will not contest payment of the Death Proceeds based on such an increase after
it has been in force during the Insured's lifetime for two year from its
effective date.
Suicide
If the Insured dies by suicide, while sane or insane, within two years from
the Issue Date, we will not pay the Death Proceeds normally payable on the
Insured's death. Instead, we will limit the death benefit to the Account Value
as of the date we receive proof of death. We will otherwise calculate Death
Proceeds in the usual manner.
If the Insured dies by suicide, while sane or insane, within two years of
any date we receive and accept an additional purchase payment, any amount of
death benefit that would not be payable except for the fact the additional
purchase payment was made will be limited to the amount of such payment.
Authority to Make Agreements
One of our officers must sign all agreements we make. No other person,
including an insurance agent or registered representative, can change the terms
of your Contract or make changes to it without our consent.
Participation
The Contract does not participate in the surplus or profits of the Company,
and the Company does not pay dividends on the Contracts.
Safekeeping of Account Assets
We hold the title to the assets of the Variable Account. We keep the assets
physically segregated and hold them separate and apart from our General Account
assets and from the assets in any other separate account.
We maintain records of all purchases and redemptions of Fund shares held by
each of the Variable Sub-Accounts.
Lloyd's of London has issued a fidelity bond in the amount of approximately
$10 million per occurrence covering our directors, officers, and employees.
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Legal Matters
All matters relating to Delaware law pertaining to the Contracts, including
the validity of the Contracts and our authority to issue the Contracts, have
been passed upon by James F. Bronsdon, our Vice President, Legal and Compliance.
Sutherland Asbill & Brennan LLP has provided advice on certain matters relating
to the federal securities laws.
Preparing for the Year 2000
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or at the year
2000. This potential problem has become known as the "Year 2000 issue." The
Year 2000 issue affects virtually all companies and organizations.
Computer applications that are affected by the Year 2000 issue could impact
our business functions in various ways, ranging from a complete inability to
perform critical business functions to a loss of productivity in varying
degrees. Likewise, the failure of some computer applications could have no
impact on critical business functions. We used these issues as critical
components in the evaluation and selection of in-house systems and of third
party administrators.
Since we outsource most of our operating functions, there are only a
limited number of in-house systems utilized. At present, the only in-house
systems we utilize are the accounting system and a reserve valuation system.
These systems were certified as Year 2000 compliant before we selected and
installed them for operation.
We have various third party administrators (including investment advisors,
brokers, transfer agents, and other financial services institutions) for the
processing of such tasks as contract administration, fund administration,
underwriting and investment administration. The quality of these third party
administrators was of paramount importance in the selection process.
Although we have received assurances from all of our third party
administrators, we are currently working with them to assess all Year 2000
issues associated with the processing of our applications. This assessment
involves the testing of the data being processed by third party administrators
and electronically interfaced into our accounting system. We anticipate
completing all testing in advance of January 1, 2000. As this testing has and
continues to be done in the normal course of system development, we have not
budgeted any costs associated with the Year 2000 issue. In addition, Year 2000
costs have been deemed immaterial.
If any of our third party administrators fail to achieve complete
compliance, it could have a material adverse effect on our ability to conduct
our business, including delays in calculating unit values, redeeming shares,
delivering account statements and providing other information, communication and
servicing to Owners. We believe that we have taken the necessary provisions,
both through selection and testing, to assure that we will not experience any
material adverse effects on our ability to conduct our business. We do,
however, realize the importance of this issue, and we have developed a
contingency plan for operations in the unlikely event one or more of our third
party administrators is unable to fulfill its obligations.
56
<PAGE>
Financial Statements
No financial statements are presented for the Variable Account because the
operations to date are insignificant.
We have included unaudited financial statements for the six months ended
June 30, 1999 as well as the audited financial statements for Sage Life for the
years ended December 31, 1998 and 1997 in this Prospectus. You should consider
these financial statements only as bearing on the ability of Sage Life to meet
its obligations under the Contracts. You should not consider them as bearing on
the investment performance of the assets held in the Variable Account.
12. How Can I Make Inquiries?
You may make inquiries about your Contract by writing to us at our Customer
Service Center, by calling us at 877-835-7243 (Toll Free), or by contacting one
of our authorized registered representatives.
57
<PAGE>
Hypothetical Illustrations of Contract Values
To show you how the Contract works, we have included some hypothetical
illustrations for the following Insureds: a male issue age 45, a female issue
age 55, and a male issue age 65. These illustrations show how Account Values,
Surrender Values and death benefits under a Contract vary over time assuming the
following circumstances:
. An initial purchase payment of $10,000 allocated entirely to Variable
Sub-Accounts and remaining there for the entire period;
. The Insured is in good health, does not smoke and qualifies under our
simplified underwriting program;
. There are no additional purchase payments, no withdrawals, no charges
for supplemental benefits; and
. The Funds earn gross (that is, before deductions for investment
management fees and other operating expenses of the Funds) annual
rates of return of 0%, 6%, and 12%.
It is important to understand that the illustrations assume a level rate of
return for all years. The values under a Contract would be different from those
shown if the hypothetical returns averaged 0%, 6%, or 12% but fluctuated over
and under those averages throughout the years shown.
The illustrations also reflect an average daily charge equal to an annual
charge of 0.85% of the average daily net assets of the Funds for investment
management fees and other operating expenses. We calculated these fees based on
an average of the expense ratios of each of the Funds (in some cases, we
estimated those fees) for the last year of operations. Taking into account this
average charge, the net annual rates of return for the Variable Sub-Accounts are
- - 0.85%, 5.15% and 11.15%, respectively. The average daily charge for the Fund
expenses, reflects voluntary expense agreements between certain of the Funds and
their investment managers. These expense agreements could terminate at any
time. See "What Are The Expenses Under A Contract?" If these agreements
terminate, the values shown on the following pages would be less.
The illustrations also reflect the Monthly Deduction Amount and other
applicable charges for the hypothetical Insured. These include the Asset-Based
Charges and the cost of insurance charges that we deduct on each Monthly
Processing Date, and any annual administration charge that we deduct on a
Contract Anniversary. Our current charges and the higher guaranteed charges we
have the contractual right to charge are reflected in separate illustrations on
each of the following pages. All the illustrations reflect the fact that no
charges for Federal or state income taxes are currently made against the
Variable Account.
58
<PAGE>
Each illustration also has a column labeled "Payments Accumulated at 5%
Interest Per Year." This column shows the amount that would accumulate if the
initial purchase payment was invested to earn interest, after taxes, of 5% per
year, compounded annually.
Upon request, we will furnish you a personalized illustration based upon the
proposed Insured's individual circumstances. Such illustrations will reflect
the current cost of insurance charges and the guaranteed maximum cost of
insurance charges and may assume different hypothetical rates of return than
those shown in the following illustrations.
The investment rates of return we have chosen to use in the illustrations
are hypothetical only, and you should understand that they do not represent
actual past or future rates of return. The actual rates of return under a
Contract may be more or less than the hypothetical rates of return in the
illustrations.
59
<PAGE>
<TABLE>
<CAPTION>
Modified Single Payment Combination Fixed and Variable Life Insurance
Male Nonsmoker $10,000 Initial Purchase Payment
Issue Age 45 $34,078 Initial Insurance Amount
Maximum Charges Basis
Assumed Gross Annual Investment Assumed Gross Annual Investment Assumed Gross Annual Investment
Return of 0.00% (-0.85% Net) Return of 6.00% (5.15% Net) Return of 12.00% (11.15% Net)
---------------------------- --------------------------- ----------------------------
Payments
End of Accumulated
Contract at 5% Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
---- -------- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,624 8,684 34,078 10,211 9,271 34,078 10,798 9,858 34,078
2 11,025 9,208 8,268 34,078 10,380 9,440 34,078 11,621 10,681 34,078
3 11,576 8,791 7,951 34,078 10,544 9,704 34,078 12,513 11,673 34,078
4 12,155 8,371 7,631 34,078 10,705 9,965 34,078 13,483 12,743 34,078
5 12,763 7,946 7,306 34,078 10,860 10,220 34,078 14,538 13,898 34,078
6 13,401 7,517 6,977 34,078 11,008 10,468 34,078 15,687 15,147 34,078
7 14,071 7,078 6,738 34,078 11,147 10,807 34,078 16,937 16,597 34,078
8 14,775 6,629 6,629 34,078 11,275 11,275 34,078 18,300 18,300 34,078
9 15,513 6,205 6,205 34,078 11,432 11,432 34,078 19,831 19,831 34,078
10 16,289 5,763 5,763 34,078 11,574 11,574 34,078 21,506 21,506 34,078
11 17,103 5,330 5,330 34,078 11,760 11,760 34,078 23,457 23,457 35,186
12 17,959 4,871 4,871 34,078 11,933 11,933 34,078 25,594 25,594 37,367
13 18,856 4,385 4,385 34,078 12,089 12,089 34,078 27,926 27,926 39,654
14 19,799 3,869 3,869 34,078 12,228 12,228 34,078 30,472 30,472 42,052
15 20,789 3,318 3,318 34,078 12,345 12,345 34,078 33,256 33,256 44,563
16 21,829 2,728 2,728 34,078 12,438 12,438 34,078 36,302 36,302 47,192
17 22,920 2,090 2,090 34,078 12,500 12,500 34,078 39,622 39,622 50,716
18 24,066 1,396 1,396 34,078 12,526 12,526 34,078 43,242 43,242 54,485
19 25,270 637 637 34,078 12,509 12,509 34,078 47,189 47,189 58,514
20 26,533 - - - 12,442 12,442 34,078 51,493 51,493 62,822
25 33,864 - - - 11,039 11,039 34,078 79,520 79,520 92,244
30 43,219 - - - 6,164 6,164 34,078 122,979 122,979 131,588
35 55,160 - - - - - - 191,437 191,437 201,009
</TABLE>
We emphasize that the assumed gross annual investment rates of return shown
above and elsewhere in this prospectus are illustrative only and should not be
deemed a representation of past or future gross annual investment rates of
return. Actual gross annual rates of return may be more or less than those shown
and will depend on a number of factors, including investment allocations made to
the Sub-Accounts. The death benefit, Account Values and Surrender Values for a
Contract would be different from those shown if the actual gross annual rates
of return averaged 0%, 6% and 12% over a period of years, but varied above or
below that average during the period. They would also be different if you take a
loan or withdrawal during the period of time illustrated. No representation can
be made that those assumed gross annual rates of return can be achieved for any
one year or sustained over any period of time.
60
<PAGE>
<TABLE>
<CAPTION>
Modified Single Payment Combination Fixed and Variable Life Insurance
Male Nonsmoker $10,000 Initial Purchase Payment
Issue Age 45 $34,078 Initial Insurance Amount
Current Charges Basis
Assumed Gross Annual Investment Assumed Gross Annual Investment Assumed Gross Annual Investment
Return of 0.00% (-0.85% Net) Return of 6.00% (5.15% Net) Return of 12.00% (11.15% Net)
---------------------------- --------------------------- ----------------------------
Payments
End of Accumulated
Contract at 5% Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
---- -------- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,685 8,745 34,078 10,271 9,331 34,078 10,857 9,917 34,078
2 11,025 9,340 8,400 34,078 10,507 9,567 34,078 11,743 10,803 34,078
3 11,576 9,007 8,167 34,078 10,751 9,911 34,078 12,706 11,866 34,078
4 12,155 8,684 7,944 34,078 11,001 10,261 34,078 13,751 13,011 34,078
5 12,763 8,372 7,732 34,078 11,257 10,617 34,078 14,886 14,246 34,078
6 13,401 8,069 7,529 34,078 11,521 10,981 34,078 16,117 15,577 34,078
7 14,071 7,775 7,435 34,078 11,792 11,452 34,078 17,455 17,115 34,078
8 14,775 7,491 7,491 34,078 12,070 12,070 34,078 18,907 18,907 34,078
9 15,513 7,255 7,255 34,078 12,396 12,396 34,078 20,526 20,526 34,078
10 16,289 7,026 7,026 34,078 12,732 12,732 34,078 22,285 22,285 34,987
11 17,103 6,839 6,839 34,078 13,142 13,142 34,078 24,315 24,315 36,473
12 17,959 6,656 6,656 34,078 13,565 13,565 34,078 26,531 26,531 38,735
13 18,856 6,479 6,479 34,078 14,002 14,002 34,078 28,948 28,948 41,107
14 19,799 6,306 6,306 34,078 14,453 14,453 34,078 31,588 31,588 43,592
15 20,789 6,138 6,138 34,078 14,919 14,919 34,078 34,474 34,474 46,195
16 21,829 5,974 5,974 34,078 15,400 15,400 34,078 37,631 37,631 48,920
17 22,920 5,814 5,814 34,078 15,896 15,896 34,078 41,073 41,073 52,573
18 24,066 5,659 5,659 34,078 16,408 16,408 34,078 44,825 44,825 56,480
19 25,270 5,508 5,508 34,078 16,937 16,937 34,078 48,917 48,917 60,657
20 26,533 5,361 5,361 34,078 17,482 17,482 34,078 53,379 53,379 65,122
25 33,864 4,683 4,683 34,078 20,486 20,486 34,078 82,561 82,561 95,771
30 43,219 4,091 4,091 34,078 24,005 24,005 34,078 127,873 127,873 136,824
35 55,160 3,574 3,574 34,078 28,130 28,130 34,078 199,055 199,055 209,007
</TABLE>
We emphasize that the assumed gross annual investment rates of return shown
above and elsewhere in this prospectus are illustrative only and should not be
deemed a representation of past or future gross annual investment rates of
return. Actual gross annual rates of return may be more or less than those shown
and will depend on a number of factors, including investment allocations made to
the Sub-Accounts. The death benefit, Account Values and Surrender Values for a
Contract would be different from those shown if the actual gross annual rates of
return averaged 0%, 6% and 12% over a period of years, but varied above or below
that average during the period. They would also be different if you take a loan
or withdrawal during the period of time illustrated. No representation can be
made that those assumed gross annual rates of return can be achieved for any one
year or sustained over any period of time.
61
<PAGE>
<TABLE>
<CAPTION>
Modified Single Payment Combination Fixed and Variable Life Insurance
Female Nonsmoker $10,000 Initial Purchase Payment
Issue Age 55 $29,068 Initial Insurance Amount
Current Charges Basis
Assumed Gross Annual Investment Assumed Gross Annual Investment Assumed Gross Annual Investment
Return of 0.00% (-0.85% Net) Return of 6.00% (5.15% Net) Return of 12.00% (11.15% Net)
---------------------------- --------------------------- ----------------------------
Payments
End of Accumulated
Contract at 5% Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
---- -------- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,685 8,745 29,068 10,271 9,331 29,068 10,857 9,917 29,068
2 11,025 9,340 8,400 29,068 10,507 9,567 29,068 11,743 10,803 29,068
3 11,576 9,007 8,167 29,068 10,751 9,911 29,068 12,706 11,866 29,068
4 12,155 8,684 7,944 29,068 11,001 10,261 29,068 13,751 13,011 29,068
5 12,763 8,372 7,732 29,068 11,257 10,617 29,068 14,886 14,246 29,068
6 13,401 8,069 7,529 29,068 11,521 10,981 29,068 16,117 15,577 29,068
7 14,071 7,775 7,435 29,068 11,792 11,452 29,068 17,455 17,115 29,068
8 14,775 7,491 7,491 29,068 12,070 12,070 29,068 18,907 18,907 29,068
9 15,513 7,255 7,255 29,068 12,396 12,396 29,068 20,526 20,526 29,068
10 16,289 7,026 7,026 29,068 12,732 12,732 29,068 22,294 22,294 29,068
11 17,103 6,839 6,839 29,068 13,142 13,142 29,068 24,365 24,365 29,238
12 17,959 6,656 6,656 29,068 13,565 13,565 29,068 26,646 26,646 31,708
13 18,856 6,479 6,479 29,068 14,002 14,002 29,068 29,138 29,138 34,383
14 19,799 6,306 6,306 29,068 14,453 14,453 29,068 31,861 31,861 37,277
15 20,789 6,138 6,138 29,068 14,919 14,919 29,068 34,836 34,836 40,410
16 21,829 5,974 5,974 29,068 15,400 15,400 29,068 38,086 38,086 43,799
17 22,920 5,814 5,814 29,068 15,896 15,896 29,068 41,645 41,645 47,059
18 24,066 5,659 5,659 29,068 16,408 16,408 29,068 45,546 45,546 50,556
19 25,270 5,508 5,508 29,068 16,937 16,937 29,068 49,824 49,824 54,309
20 26,533 5,361 5,361 29,068 17,482 17,482 29,068 54,524 54,524 58,341
25 33,864 4,683 4,683 29,068 20,486 20,486 29,068 85,547 85,547 89,824
30 43,219 4,091 4,091 29,068 24,005 24,005 29,068 132,922 132,922 139,568
35 55,160 3,574 3,574 29,068 28,130 28,130 29,536 205,566 205,566 215,845
</TABLE>
We emphasize that the assumed gross annual investment rates of return shown
above and elsewhere in this prospectus are illustrative only and should not be
deemed a representation of past or future gross annual investment rates of
return. Actual gross annual rates of return may be more or less than those shown
and will depend on a number of factors, including investment allocations made to
the Sub-Accounts. The death benefit, Account Values and Surrender Values for a
Contract would be different from those shown if the actual gross annual rates of
return averaged 0%, 6% and 12% over a period of years, but varied above or below
that average during the period. They would also be different if you take a loan
or withdrawal during the period of time illustrated. No representation can be
made that those assumed gross annual rates of return can be achieved for any one
year or sustained over any period of time.
62
<PAGE>
<TABLE>
<CAPTION>
Modified Single Payment Combination Fixed and Variable Life Insurance
Female Nonsmoker $10,000 Initial Purchase Payment
Issue Age 55 $29,068 Initial Insurance Amount
Maximum Charges Basis
Assumed Gross Annual Investment Assumed Gross Annual Investment Assumed Gross Annual Investment
Return of 0.00% (-0.85% Net) Return of 6.00% (5.15% Net) Return of 12.00% (11.15% Net)
---------------------------- --------------------------- ----------------------------
Payments
End of Accumulated
Contract at 5% Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
---- -------- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,598 8,658 29,068 10,185 9,245 29,068 10,772 9,832 29,068
2 11,025 9,155 8,215 29,068 10,326 9,386 29,068 11,567 10,627 29,068
3 11,576 8,712 7,872 29,068 10,465 9,625 29,068 12,435 11,595 29,068
4 12,155 8,267 7,527 29,068 10,601 9,861 29,068 13,382 12,642 29,068
5 12,763 7,819 7,179 29,068 10,733 10,093 29,068 14,416 13,776 29,068
6 13,401 7,367 6,827 29,068 10,859 10,319 29,068 15,547 15,007 29,068
7 14,071 6,905 6,565 29,068 10,977 10,637 29,068 16,784 16,444 29,068
8 14,775 6,430 6,430 29,068 11,082 11,082 29,068 18,136 18,136 29,068
9 15,513 5,975 5,975 29,068 11,212 11,212 29,068 19,661 19,661 29,068
10 16,289 5,496 5,496 29,068 11,325 11,325 29,068 21,335 21,335 29,068
11 17,103 5,016 5,016 29,068 11,476 11,476 29,068 23,296 23,296 29,068
12 17,959 4,504 4,504 29,068 11,609 11,609 29,068 25,469 25,469 30,308
13 18,856 3,959 3,959 29,068 11,724 11,724 29,068 27,851 27,851 32,865
14 19,799 3,378 3,378 29,068 11,819 11,819 29,068 30,454 30,454 35,631
15 20,789 2,755 2,755 29,068 11,889 11,889 29,068 33,298 33,298 38,626
16 21,829 2,080 2,080 29,068 11,930 11,930 29,068 36,404 36,404 41,865
17 22,920 1,337 1,337 29,068 11,929 11,929 29,068 39,807 39,807 44,981
18 24,066 506 506 29,068 11,875 11,875 29,068 43,535 43,535 48,324
19 25,270 - - - 11,753 11,753 29,068 47,624 47,624 51,910
20 26,533 - - - 11,546 11,546 29,068 52,116 52,116 55,765
25 33,864 - - - 8,534 8,534 29,068 81,769 81,769 85,858
30 43,219 - - - - - - 127,017 127,017 133,368
35 55,160 - - - - - - 193,852 193,852 203,545
</TABLE>
We emphasize that the assumed gross annual investment rates of return shown
above and elsewhere in this prospectus are illustrative only and should not be
deemed a representation of past or future gross annual investment rates of
return. Actual gross annual rates of return may be more or less than those shown
and will depend on a number of factors, including investment allocations made to
the Sub-Accounts. The death benefit, Account Values and Surrender Values for a
Contract would be different from those shown if the actual gross annual rates of
return averaged 0%, 6% and 12% over a period of years, but varied above or below
that average during the period. They would also be different if you take a loan
or withdrawal during the period of time illustrated. No representation can be
made that those assumed gross annual rates of return can be achieved for any one
year or sustained over any period of time.
63
<PAGE>
<TABLE>
<CAPTION>
Modified Single Payment Combination Fixed and Variable Life Insurance
Male Nonsmoker $10,000 Initial Purchase Payment
Issue Age 65 $18,552 Initial Insurance Amount
Current Charges Basis
Assumed Gross Annual Investment Assumed Gross Annual Investment Assumed Gross Annual Investment
Return of 0.00% (-0.85% Net) Return of 6.00% (5.15% Net) Return of 12.00% (11.15% Net)
---------------------------- --------------------------- ----------------------------
Payments
End of Accumulated
Contract at 5% Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
---- -------- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,685 8,745 18,552 10,271 9,331 18,552 10,857 9,917 18,552
2 11,025 9,340 8,400 18,552 10,507 9,567 18,552 11,743 10,803 18,552
3 11,576 9,007 8,167 18,552 10,751 9,911 18,552 12,706 11,866 18,552
4 12,155 8,684 7,944 18,552 11,001 10,261 18,552 13,751 13,011 18,552
5 12,763 8,372 7,732 18,552 11,257 10,617 18,552 14,886 14,246 18,552
6 13,401 8,069 7,529 18,552 11,521 10,981 18,552 16,117 15,577 18,552
7 14,071 7,775 7,435 18,552 11,792 11,452 18,552 17,455 17,115 19,724
8 14,775 7,491 7,491 18,552 12,070 12,070 18,552 18,907 18,907 20,986
9 15,513 7,255 7,255 18,552 12,396 12,396 18,552 20,534 20,534 22,382
10 16,289 7,026 7,026 18,552 12,732 12,732 18,552 22,318 22,318 23,880
11 17,103 6,839 6,839 18,552 13,142 13,142 18,552 24,401 24,401 25,621
12 17,959 6,656 6,656 18,552 13,565 13,565 18,552 26,669 26,669 28,003
13 18,856 6,479 6,479 18,552 14,002 14,002 18,552 29,138 29,138 30,595
14 19,799 6,306 6,306 18,552 14,453 14,453 18,552 31,823 31,823 33,414
15 20,789 6,138 6,138 18,552 14,919 14,919 18,552 34,741 34,741 36,478
16 21,829 5,974 5,974 18,552 15,400 15,400 18,552 37,910 37,910 39,806
17 22,920 5,814 5,814 18,552 15,896 15,896 18,552 41,365 41,365 43,433
18 24,066 5,659 5,659 18,552 16,408 16,408 18,552 45,134 45,134 47,390
19 25,270 5,508 5,508 18,552 16,937 16,937 18,552 49,246 49,246 51,709
20 26,533 5,361 5,361 18,552 17,482 17,482 18,552 53,733 53,733 56,420
25 33,864 4,683 4,683 18,552 20,486 20,486 21,510 83,100 83,100 87,255
30 43,219 4,091 4,091 18,552 24,050 24,050 24,290 128,754 128,754 130,041
35 55,160 3,574 3,574 18,552 28,221 28,221 28,504 199,400 199,400 201,394
</TABLE>
We emphasize that the assumed gross annual investment rates of return shown
above and elsewhere in this prospectus are illustrative only and should not be
deemed a representation of past or future gross annual investment rates of
return. Actual gross annual rates of return may be more or less than those shown
and will depend on a number of factors, including investment allocations made to
the Sub-Accounts. The death benefit, Account Values and Surrender Values for a
Contract would be different from those shown if the actual gross annual rates of
return averaged 0%, 6% and 12% over a period of years, but varied above or below
that average during the period. They would also be different if you take a loan
or withdrawal during the period of time illustrated. No representation can be
made that those assumed gross annual rates of return can be achieved for any one
year or sustained over any period of time.
64
<PAGE>
<TABLE>
<CAPTION>
Modified Single Payment Combination Fixed and Variable Life Insurance
Male Nonsmoker $10,000 Initial Purchase Payment
Issue Age 65 $18,552 Initial Insurance Amount
Maximum Charges Basis
Assumed Gross Annual Investment Assumed Gross Annual Investment Assumed Gross Annual Investment
Return of 0.00% (-0.85% Net) Return of 6.00% (5.15% Net) Return of 12.00% (11.15% Net)
---------------------------- --------------------------- ----------------------------
Payments
End of Accumulated
Contract at 5% Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
---- -------- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,504 8,564 18,552 10,093 9,153 18,552 10,683 9,743 18,552
2 11,025 8,944 8,004 18,552 10,127 9,187 18,552 11,382 10,442 18,552
3 11,576 8,355 7,515 18,552 10,139 9,299 18,552 12,149 11,309 18,552
4 12,155 7,731 6,991 18,552 10,126 9,386 18,552 12,994 12,254 18,552
5 12,763 7,066 6,426 18,552 10,083 9,443 18,552 13,932 13,292 18,552
6 13,401 6,348 5,808 18,552 10,005 9,465 18,552 14,979 14,439 18,552
7 14,071 5,566 5,226 18,552 9,883 9,543 18,552 16,157 15,817 18,552
8 14,775 4,702 4,702 18,552 9,706 9,706 18,552 17,485 17,485 19,408
9 15,513 3,779 3,779 18,552 9,505 9,505 18,552 18,990 18,990 20,699
10 16,289 2,733 2,733 18,552 9,228 9,228 18,552 20,639 20,639 22,084
11 17,103 1,550 1,550 18,552 8,905 8,905 18,552 22,566 22,566 23,694
12 17,959 187 187 18,552 8,475 8,475 18,552 24,663 24,663 25,897
13 18,856 - - - 7,915 7,915 18,552 26,946 26,946 28,294
14 19,799 - - - 7,196 7,196 18,552 29,430 29,430 30,901
15 20,789 - - - 6,276 6,276 18,552 32,129 32,129 33,735
16 21,829 - - - 5,100 5,100 18,552 35,059 35,059 36,812
17 22,920 - - - 3,586 3,586 18,552 38,238 38,238 40,150
18 24,066 - - - 1,621 1,621 18,552 41,681 41,681 43,765
19 25,270 - - - - - - 45,404 45,404 47,674
20 26,533 - - - - - - 49,425 49,425 51,896
25 33,864 - - - - - - 74,654 74,654 78,387
30 43,219 - - - - - - 113,670 113,670 114,807
35 55,160 - - - - - - 174,106 174,106 175,847
</TABLE>
We emphasize that the assumed gross annual investment rates of return shown
above and elsewhere in this prospectus are illustrative only and should not be
deemed a representation of past or future gross annual investment rates of
return. Actual gross annual rates of return may be more or less than those shown
and will depend on a number of factors, including investment allocations made to
the Sub-Accounts. The death benefit, Account Values and Surrender Values for a
Contract would be different from those shown if the actual gross annual rates of
return averaged 0%, 6% and 12% over a period of years, but varied above or below
that average during the period. They would also be different if you take a loan
or withdrawal during the period of time illustrated. No representation can be
made that those assumed gross annual rates of return can be achieved for any one
year or sustained over any period of time.
65
<PAGE>
Part II
Additional Information
Additional Information about Sage Life Assurance of America, Inc.
History and Business
Ownership
- ---------
Sage Life was incorporated under the laws of the state of Delaware in 1981.
The Company is authorized to write general life insurance and fixed and variable
annuity contracts in all states except New York, and also is licensed to conduct
variable life insurance business in a majority of states.
Fidelity Mutual Life Insurance Company, a Pennsylvania insurer, sponsored
the Company's formation in 1981 under the name of Fidelity Standard Life
Insurance Company ("Fidelity Life"). Security First Life Insurance Company
"Security First" of Los Angeles, California acquired Fidelity Life in December
1984. In January 1997, Sage Insurance Group, Inc. ("Sage Insurance Group")
(formerly Finplan Investment Corp.), a Delaware corporation and an indirect
subsidiary of Sage Group Limited ("Sage Group"), a South African corporation and
the Company's ultimate parent, acquired Fidelity Life. The Company changed to
its present name in September 1997. In December 1998, Sage Insurance Group
formed a new company, Sage Life Holdings of America, Inc. ("Sage Life
Holdings"), to act as the new immediate parent of the Company. The transaction
is discussed more fully in the section below entitled "Holding Company Structure
and Background."
Prior Business Operations
- -------------------------
As a Security First subsidiary, the Company specialized in the marketing of
annuities qualifying under Section 403(b) of the Code. Under an assumption
reinsurance agreement, Fidelity Life's annuity business was irrevocably
transferred to Security First in January 1997 except for a small number of
contracts. During 1998, Security First assumption reinsured all of the
remaining annuity business of Fidelity Life. Security First is now a subsidiary
of The Metropolitan Life Insurance Company.
Holding Company Structure and Background
- -----------------------------------------
We are an indirect, wholly owned subsidiary of Sage Insurance Group, which
is a holding company for us and affiliated entities conducting life and annuity
insurance business in the United States. We also are an indirect, wholly owned
subsidiary of Sage Group, a corporation quoted on the Johannesburg Stock
Exchange. Sage Group is a holding company with a thirty-year history of
extensive operating experience in mutual funds, life assurance and investment
management. Sage Group has directly and indirectly engaged in insurance
marketing activities in the United States since 1977 through its financial
interests in Independent Financial Marketing Group Inc., a financial planning
and bank insurance marketing company. Sage Group sold its interest in
Independent Financial Marketing Group in March 1996 to the Liberty Financial
Companies of Boston.
66
<PAGE>
Sage Group entered into an agreement with Swiss Re Life and Health America,
Inc. ("Swiss Re") on December 1, 1998, whereby Swiss Re will enter into
reinsurance arrangements with us. In addition, Swiss Re invested $12.5 million
in non-voting non-redeemable cumulative preferred stock in a newly formed
company, Sage Life Holdings, that became our immediate parent and a wholly-owned
subsidiary of Sage Insurance Group. It is anticipated that during the third
quarter of 1999, Swiss Re will exchange part of its preferred stock for a voting
interest of not more than 9.9% in Sage Life Holdings. Swiss Re's ultimate
parent is Swiss Reinsurance Company, Switzerland, one of the world's largest
life and health reinsurance groups. The arrangements contemplated by the
agreement may be subject to regulatory approval.
Selected Financial Data
We cannot compare our historical financial results for the calendar year
1996 and all prior years, to the results for the years 1997, 1998 and 1999 due
to the substantial change in our business operations. We effectively disposed
of all in-force business existing as of December 31, 1996 and, therefore, on
January 1, 1997, had no insurance liabilities under any of our policies other
than the small number of policies that were not 100% assumption reinsured to our
former parent company. We subsequently novated these insurance liabilities
during 1998. Effectively, therefore, since January 1997, we became comparable
to a new company that had not yet begun its business activities.
We present the following selected financial data as of June 30, 1999 and
1998 and the six months then ended, which have been derived from unaudited
financial statements and include all adjustments (consisting only of normal
recurring accruals) that the Company considers necessary for a fair presentation
of such financial information for those periods. We also present selected
financial data as of December 31, 1998 and 1997 and for the years then ended,
which have been derived from our audited financial statements. Please read the
information below along with the financial statements, including related notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" we included elsewhere in this Prospectus.
67
<PAGE>
Selected Financial Data
(in thousands)
<TABLE>
<CAPTION>
Six months ended Six months ended Year ended Year ended
June 30, June 30, December 31, December 31,
1999 1998 1998 1997
------------------- ------------------- ---------------- ---------------
Income Statement Data:
Revenues:
<S> <C> <C> <C> <C>
Net investment income $ 647 $ 685 $ 1,244 $ 989
Other income 15 - - -
------- ------- ------- -------
Total revenue 662 685 1,244 989
Expenses:
Amortization expense 117 183 549 325
General and administrative expenses 2,394 1,000 1,264 1,016
------- ------- ------- -------
Total expenses 2,511 1,183 1,813 1,341
Loss from operations before (1,849) (498) (569) (352)
income taxes
Income tax expense - - - -
------- ------- ------- -------
Net loss before cumulative (1,849) (498) (569) (352)
effect adjustment
Cumulative effect adjustment/1/ (4,269) - - -
------- ------- ------- -------
Net loss $(6,118) $ (498) $ (569) $ (352)
======= ======= ======= =======
Balance Sheet Data:
Total Assets $31,452 $34,815 $36,542 $36,689
Total Stockholder's Equity $31,342 $34,546 $36,472 $33,202
</TABLE>
/1/ Represents the adaption of SOP 98-5, "Reporting on the Costs of Start-up
Activities" (SOP 98-05) on January 1, 1999.
68
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Introduction
- ------------
The following discussion highlights the significant factors that influence
our operations. Please read this discussion along with our financial statements
and the related notes included in this Prospectus.
History and Business Overview
- -----------------------------
During February 1999, we began to market our new variable annuities. Sage
Insurance Group acquired the Company on December 31, 1996, and since that date,
we have prepared for the recommencement of our insurance underwriting and
marketing activities. (Before the acquisition of the Company, all new business
production and marketing ended in October 1996.) We totally reengineered our
products, systems and administration since the change of ownership. All of our
current senior management are experienced in the insurance industry (either in
the United States or in South Africa). We recruited most of the senior
management team since January 1997. Our ongoing business strategy is to focus
on the development, underwriting, and marketing of variable annuity and variable
life insurance products. Our obligations under these contracts are supported by
(1) variable accounts -- determined by the value of investments held in separate
accounts, and (2) fixed accounts -- backed by investments held in separate
accounts. We may not use the assets of these separate accounts that equal the
reserves and other liabilities supporting the contracts to which they relate, to
pay any of our other obligations or creditors. Currently, we anticipate
distributing the contracts through banks. We anticipate that, over the long-
term, our distribution channels will expand to include wirehouses, regional
broker-dealers, and financial planners.
Results of Operations
- ---------------------
Net losses for the six months ended June 30, 1999 and 1998 were $6,118,543
and $497,973, respectively. During the first six months of 1999 and 1998,
investment income was $646,840 and $685,360, respectively. Management fees
earned from invested assets have produced income of $15,517 during 1999.
Annuity charges and fee income for 1999 are $134. Effective investment yields
for our General Account were 5.4% for the six months ended June 30, 1999 and
5.2% for the six months ended June 30, 1998.
Insurance expenses and taxes for the six months ended June 30, 1999 were
$891,359 and $1,000,321 for the corresponding period during 1998. In accordance
with SOP 98-5, development costs of $1,502,953 were expensed during 1999. Prior
to this year, all development costs were capitalized and amortized. In
addition, the adoption of SOP 98-5 resulted in a cumulative effect adjustment in
the amount of $4,269,488 being deducted from earnings. This amount was the
amount of unamortized development costs as of January 1, 1999.
Net losses for the years ended December 31, 1998 and 1997 were $568,974,
and $351,786, respectively. As the Company was not underwriting or marketing
insurance products, all revenue for 1998 and 1997 was derived from investing
activities. Effective investment yields for our General Account were
69
<PAGE>
5.1% for the year ended December 31, 1998, and 5.4% for the year ended December
31, 1997. General expenses incurred in financing our daily activities more than
offset investment revenue.
Liquidity and Capital Resources
- -------------------------------
Since the beginning of 1997, we have needed money primarily to develop our
insurance products and related infrastructure, and to fund our daily operations.
We have met our cash needs through interest income and capital contributions
from Sage Insurance Group.
During 1999, we expect our cash needs will continue to increase as we have
begun our underwriting and marketing activities. As discussed below, we intend
to enter into a reinsurance arrangement with Swiss Re that will provide an
additional source of cash. We still anticipate that we will be unable to meet
all of our liquidity requirements in 1999 without capital contributions from
Sage Insurance Group. However, as discussed above, Swiss Re has made an equity
investment in a newly formed holding company that will provide an additional
source of funds to us for new business expenses. In addition, although not
required to do so, we believe that Sage Insurance Group will continue to provide
capital to us for our non-recurring costs associated with new products and
business development during 1999. Our future marketing efforts could be
hampered in the unlikely event that Swiss Re, Sage Insurance Group and/or their
affiliates are unwilling to commit additional funding.
Segment Information
- -------------------
We currently plan to conduct our business as a single segment, and
anticipate that this segment will eventually include all of the following
products:
. Combination fixed and variable deferred annuities.
. Combination fixed and variable immediate annuities.
. Combination fixed and variable life insurance products.
Reinsurance
- -----------
We intend to enter into a coinsurance reinsurance arrangement with Swiss
Re, pursuant to which Swiss Re will reinsure a significant portion of our
liabilities under our variable insurance contracts. This arrangement will
provide additional capacity for growth of our variable insurance business.
In addition, we intend to reinsure certain mortality risks associated with
the guaranteed minimum death benefit and accidental death benefit features of
the Contracts. We intend to use only highly rated reinsurance companies to
reinsure these risks.
Reinsurance does not relieve us from our obligations to Owners. We remain
primarily liable to our Owners to the extent that any reinsurer does not meet
its obligations under the reinsurance agreements.
70
<PAGE>
Reserves
- --------
The insurance laws and regulations under which we operate obligate us to
carry on our books, as liabilities, actuarially determined reserves to meet our
obligations on outstanding Contracts. We base our reserves involving life
contingencies on mortality tables in general use in the United States. Where
applicable, we compute our reserves to equal amounts which, together with
interest on such reserves computed annually at certain assumed rates, will be
sufficient to meet our Contract obligations at their maturities or in the event
of the Owner's death. In the financial statements included in this Prospectus,
all reserves have been determined in accordance with generally accepted
accounting principles. As previously noted, all of Fidelity Life's existing
annuity business has been irrevocably transferred to Security First, resulting
in no remaining contract obligations at December 31, 1998.
Investments
- -----------
We invested our General Account cash and invested assets of $24.4 million,
$25.5 million, and 25.4 million at June 30, 1999 and December 31, 1998 and 1997,
respectively, entirely in investment grade securities and money market funds.
It is our stated policy to refrain from investing in securities having
speculative characteristics. Our entire portfolio is classified as available-
for-sale, and is reported at fair value, with resulting unrealized gains or
losses included as a separate component of stockholder's equity.
Dividend Restrictions
- ---------------------
We are subject to state regulatory restrictions that limit the maximum
amount of dividends payable. Subject to certain net income carryforward
provisions described below, we must obtain approval of the Insurance
Commissioner of the State of Delaware to pay, in any 12-month period,
"extraordinary" dividends which are defined as those in excess of the greater of
10% of surplus as regard to shareholders as of the prior year-end and statutory
net income less realized capital gains for such prior year. We may pay
dividends only out of unassigned surplus. In addition, we must provide notice
to the Insurance Commissioner of the State of Delaware of all dividends and
other distributions to shareholders within five business days after declaration
and at least ten days prior to payment. At December 31, 1998 the maximum amount
of dividends we could have paid out to our parent without prior approval from
state regulatory authorities was $2,310,910.
New Accounting Standards
- ------------------------
As of January 1, 1998, we adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS 130), which
establishes new rules for the reporting and display of comprehensive income and
its components, consisting of net income and other comprehensive income. SFAS
130 requires us to report separately in stockholder's equity the accumulated
balance of other comprehensive income. Our only component of other
comprehensive income is net unrealized gains or losses on available-for-sale
securities, which we report separately in stockholder's equity. The adoption of
SFAS 130 had no impact on our net income or stockholder's equity.
In June 1998, SFAS No. 133 "Accounting for Derivative Instruments and
Hedging Activities" (SFAS 133) was issued. SFAS 133 standardizes the accounting
for derivative instruments and the derivative portions of certain other
contracts that have similar characteristics by requiring that an entity
71
<PAGE>
recognize those instruments at fair value. This statement also requires a new
method of accounting for hedging transactions, prescribes the types of items and
transactions that may be hedged, and specifies detailed criteria to be met to
qualify for hedge accounting. This statement is effective for fiscal years
beginning after June 15, 2000. Earlier adoption is permitted. Upon adoption,
the Company will be required to record the cumulative effect adjustment to
reflect this accounting change. The Company has not completed its analysis and
evaluation of the requirements and impact of this statement.
Competition
We are engaged in a business that is highly competitive due to the large
number of stock and mutual life insurance companies as well as other entities
marketing insurance products comparable to our products. There are
approximately 1,600 stock, mutual and other types of insurers in the life
insurance business in the United States, a substantial number of which are
significantly larger than we are. We are unique in that we are one of the few
life insurers confining its activities to the marketing of separate account
variable insurance products.
Transactions with Sage Insurance Group
In 1997, we entered into a Cost Sharing Agreement with Sage Insurance Group
to share personnel costs, office rent, and equipment costs. These costs are
allocated between the companies based upon the estimated time worked, square
footage of space utilized and upon monitored usage of the equipment,
respectively. Under this agreement, we have received $184,962 from Sage
Insurance Group for the six months ended June 30, 1999, and we have paid
expenses of $79,463 for the six months ended June 30, 1998. For the year ended
December 31, 1998, we have received $151,348 for Sage Insurance Group and paid
$76,048 for the year ended December 31, 1997. In addition, Sage Insurance Group
provides funds to us to meet various operating expenses. We pay these amounts
back to Sage Insurance Group at the end of each quarter.
Sage Insurance Group has also incurred expenditures in connection with the
costs of establishing new systems, new products, and premises for us. The
amount of these developmental costs paid for by companies affiliated with Sage
Life on June 30, 1999, December 31, 1998, and December 31, 1997 were $1,502,953,
$3,270,219, and $1,404,558, respectively. Sage Insurance Group regards these
expenditures as being of a developmental nature and does not intend to recover
these expenditures from us. Accordingly, these expenditures have been reflected
as contributed capital in our financial statements.
Employees
Due to our business strategy of outsourcing our primary administrative and
investment functions to organizations that specialize in these areas, the number
of full time personnel we employ is limited. As of June 30, 1999, we had 18
employees. As of December 31, 1998, we had 14 employees.
Properties
Our executive office is located at 300 Atlantic Street, in Stamford,
Connecticut, where we maintain our primary corporate records. We maintain
customer records at our Customer Service Center.
72
<PAGE>
Sage Insurance Group leases our office space. We reimburse Sage Insurance
Group for the office space under the Cost Sharing Agreement described above.
State Regulation
We are subject to the laws of the State of Delaware governing insurance
companies and to the regulations of the Delaware Department of Insurance (the
"Insurance Department"). We file a detailed financial statement in the
prescribed form (the "Statement") with the Insurance Department each year
covering our operations for the preceding year and our financial condition as of
the end of that year. Regulation by the Insurance Department means that the
Insurance Department may examine us and our books and records to determine,
among other things, whether contract liabilities and reserves as we state them
are correct. The Insurance Department, under the auspices of the National
Association of Insurance Commissioners ("NAIC"), will periodically conduct a
full examination of our operations.
In addition, we are subject to regulation under the insurance laws of all
jurisdictions in which we operate. The laws of the various jurisdictions
establish supervisory agencies with broad administrative powers with respect to
various matters, including licensing to transact business, overseeing trade
practices, licensing agents, approving contract forms, establishing reserve
requirements, fixing maximum interest rates on life insurance contract loans and
minimum rates for accumulation of surrender values, prescribing the form and
content of required financial statements and regulating the type and amounts of
investments permitted. We must file the Statement with supervisory agencies in
each of the jurisdictions in which we do business, and our operations and
accounts are subject to examination by these agencies at regular intervals.
The NAIC has adopted several regulatory initiatives designed to improve the
surveillance and financial analysis regarding the solvency of insurance
companies in general. These initiatives include the development and
implementation of a risk-based capital formula for determining adequate levels
of capital and surplus. Insurance companies are required to calculate their
risk-based capital in accordance with this formula and to include the results in
their Statements. We anticipate that these standards will have no significant
effect upon us.
Further, many states regulate affiliated groups of insurers like us and our
affiliates, under insurance holding company legislation. Under such laws,
inter-company transfers of assets and dividend payments from insurance
subsidiaries may be subject to prior notice or approval, depending on the size
of the transfers and payments in relation to the financial positions of the
companies involved.
73
<PAGE>
Under insurance guaranty fund laws in most states, insurers doing business
therein can be assessed (up to prescribed limits) for contract owner losses
incurred when other insurance companies have become insolvent. Most of these
laws provide that an assessment may be excused or deferred if it would threaten
an insurer's own financial strength.
Although the federal government ordinarily does not directly regulate the
business of insurance, federal initiatives often have an impact on the business
in a variety of ways. Our insurance products are subject to various federal
securities laws and regulations. In addition, current and proposed federal
measures that may significantly affect the insurance business include:
. regulation of insurance company solvency,
. employee benefit regulation,
. removal of barriers preventing banks from engaging in the insurance
business,
. tax law changes affecting the taxation of insurance companies, and
. tax treatment of insurance products and its impact on the relative
desirability of various personal investment vehicles.
74
<PAGE>
Directors and Executive Officers
<TABLE>
<CAPTION>
Position held with the Other Principal Positions
Name (Age) Company/Year Commenced During Past Five Years
<S> <C> <C>
Ronald S. Scowby/1/ Director, 1/97 to present, Chairman and Trustee, Sage
Age 60 Chairman, 2/98 to present Life Investment Trust, 7/98
to present; Director, Sage
Life Assurance Company of New
York, 5/98 to present; Deputy
Chairman 2/98 to present,
President, 1/97 to 2/98,
Director, 1/97 to present,
Sage Insurance Group Inc.;
Director, Sage Advisors,
Inc., 1/98 to present;
President, Chief Executive
Officer, Sage Life Assurance
of America Inc., 1/97-2/98;
Director, Sage Distributors,
Inc., 1/98 to present;
Director, President, Chief
Executive Officer, Sage
Management Services (USA),
Inc., 6/96 to present; Owner,
Sheldon Scowby Resources
7/95-6/96; Executive Vice
President, Mutual of America
Life Insurance Group,
6/91-7/95; President, Mutual
of America Financial
Services, 6/91-7/95
Director, 1/97 to President and Trustee, Sage
Robin I. Marsden/1/ present, President and Life Investment Trust, 7/98
Age 34 Chief Executive Officer, to present; Director, Sage
2/98 to present Life Assurance Company of New
York, 5/98 to present;
Director, President, Sage
Advisors, Inc., 1/98 to
present; Director, Sage
Distributors, Inc., 1/98 to
present; Director, 1/97 to
present, President and Chief
Executive Officer, 2/98 to
present, Sage Insurance
Group, Inc.; Chief Investment
Officer, Sage Life Holdings,
Ltd., 11/94 to
</TABLE>
75
<PAGE>
<TABLE>
<S> <C> <C>
1/98; Executive-Strategic
Developments, Sage Group Ltd.,
11/94 to 1/98; Partner and
Management Consultant Deloitte
& Touche 1/89-10/94
H. Louis Shill/2/ Director, Director, Sage Life Assurance
Age 68 1/97 to present Company of New York, 5/98 to
present; Chairman, Sage Life
Assurance of America, Inc.
1/97 to 2/98; Chairman, Sage
Insurance Group, Inc., 1/97
to present; Founder,
Chairman, Sage Group Limited,
1965 to present
Paul C. Meyer/3/ Director, Director, Sage Life Assurance
Age 46 1/97 to present Company of New York 5/98 to
present; Partner, Rogers &
Wells, 1986 to present
Richard D. Starr/4/ Director, Director, Sage Life Assurance
Age 55 1/97 to present Company of New York, 5/98 to
present; President, First
Interstate Securities,
1/95-12/95; Chairman & Chief
Executive Officer, Financial
Institutions Group, Inc.,
10/78 to present
Mitchell R. Katcher/1/ Director, 12/97 to Vice President, Sage Life
Age 46 present, Senior Investment Trust, 7/98 to
Executive Vice present; Director, Sage Life
President, Chief Assurance Company of New
Financial Officer, York, 5/98 to present;
Chief Actuary Director, Treasurer, Sage
5/97 to present Advisors, Inc., 1/98 to
present; Director, Sage
Distributors, Inc., 1/98 to
present; Treasurer, 7/97 to
present, Senior Executive
Vice President, 12/97 to
present, Sage Insurance
Group, Inc.; Executive Vice
President,
Golden American Life
Insurance Company, 7/93-2/97.
</TABLE>
76
<PAGE>
/1/ The principal business address of these persons is 300 Atlantic Street,
Stamford, CT 06901.
/2/ Mr. Shill's principal business address is Sage Centre, 10 Fraser Street,
Johannesburg, South Africa 2000.
/3/ Mr. Meyer's principal business address is 200 Park Avenue, New York, N.Y.
10166.
/4/ Mr. Starr's principal business address is 22507 SE 47th Place, Issaquah, WA
98029.
Compensation
Our executive officers also serve as officers of our parent and of certain
affiliated companies. Cost allocations have been made to us as to the time
these individuals devoted to their duties with us. No allocation has been made
during 1997, 1998 nor 1999 for the services of Mr. Shill. No allocation was made
during 1997 for the services of Mr. Marsden.
The following table includes compensation paid by us for services rendered
in all capacities for the years indicated for the Chief Executive Officer and
the other Executive Officers compensated more than $100,000 for the year ended
December 31, 1998.
<TABLE>
<CAPTION>
Annual Compensation
- -------------------------------------------------------------------------------------------------
All Other
Name and Principal Position Year Salary Bonus Compensation
--------------------------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Ronald S. Scowby,
Chairman(1) 1997 $337,500 $100,000
1998 $350,000 $100,000 $22,097
Robin I. Marsden,
President and Chief 1998 $275,000 $150,000 $20,956
Executive Officer(1)
Mitchell R. Katcher,
Senior Executive 1997 $114,583 $265,000
Vice President, Chief 1998 $250,000 $125,000 $19,037
Financial Officer and Chief
Actuary(1)
</TABLE>
(1) All salaries and bonuses are paid by Sage Insurance Group.
We pay outside directors $12,000 and $2,000 per meeting attended. For the
years ended December 31, 1998 and 1997, we paid each outside director $20,000.
We do not compensate directors who are officers or employees of ours or our
affiliates for serving on the Board. Directors do not receive retirement
benefits.
77
<PAGE>
Report of Independent Auditors
Board of Directors
Sage Life Assurance of America, Inc.
We have audited the accompanying balance sheets of Sage Life Assurance of
America, Inc. (formerly Fidelity Standard Life Insurance Company) as of December
31, 1998 and 1997, and the related statements of operations, stockholder's
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sage Life Assurance of America,
Inc. as of December 31, 1998 and 1997, and the results of its operations and its
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Stamford, Connecticut
February 15, 1999
78
<PAGE>
Sage Life Assurance of America, Inc.
Balance Sheets
<TABLE>
<CAPTION>
(Unaudited) December 31, December 31,
June 30, 1999 1998 1997
---------------------------------------------
Assets
Investments:
<S> <C> <C> <C>
Fixed maturities available for sale, at fair value
(amortized cost: 1999 - $16,853,372; 1998 -- $12,967,022
and 1997 $3,520,393) $16,099,509 $12,992,917 $ 3,595,326
Short-term investments 7,977,060 10,975,402 21,530,888
---------------------------------------------
Total investments 24,076,569 23,968,319 25,126,214
Cash and cash equivalents 372,144 1,531,165 228,605
Accrued investment income 206,169 203,425 58,039
Receivable from affiliates 15,517 25,941
Reinsurance recoverable - - 2,728,284
Goodwill 6,447,900 6,565,134 6,802,300
Development costs - 4,269,488 1,310,921
Deferred income taxes 256,314 - -
Other assets 5,000 5,000 11,443
Separate account assets 72,699 396,992
---------------------------------------------
Total assets $31,452,312 $36,542,531 $36,688,739
=============================================
Liabilities and stockholder's equity
Liabilities:
Accrued expenses $ 37,784 $ 61,670 $ 180,442
Policy liabilities - - 2,728,284
Deferred income taxes - 8,804 26,227
Amounts payable to affiliates - - 154,366
Separate account liabilities 72,699 - 396,992
---------------------------------------------
Total liabilities 110,483 70,474 3,486,311
Stockholder's equity:
Common stock, $2,500 par value, 1,000 shares
authorized, issued and outstanding 2,500,000 2,500,000 2,500,000
Additional paid-in capital 36,378,682 34,875,727 31,005,508
Retained deficit (7,039,303) (920,760) (351,786)
Accumulated other comprehensive income (497,550) 17,090 48,706
---------------------------------------------
Total stockholder's equity 31,341,829 36,472,057 33,202,428
---------------------------------------------
Total liabilities and stockholder's equity $31,452,312 $36,542,531 $36,688,739
=============================================
</TABLE>
See accompanying notes to financial statements.
79
<PAGE>
Sage Life Assurance of America, Inc.
Statements of Operations
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Six Months Six Months Year Ended
Ended Ended December 31, Year Ended
June 30, 1999 June 30, 1998 1998 December 31, 1997
------------------------------------------------------------------
Revenues:
<S> <C> <C> <C> <C>
Annuity charges and fees $ 134 $ - $ - $ -
Management fees 15,517 - -
Net investment income 646,840 685,360 1,243,522 989,494
----------- ---------- ---------- ----------
Total Revenues 662,491 685,360 1,243,522 989,494
Benefits and Expenses:
Expenses:
Insurance expenses and taxes 891,359 1,000,321 1,263,678 1,015,874
Development expenses 1,502,953 - - -
Amortization of goodwill and
development costs 117,234 183,012 548,818 325,406
----------- ---------- ---------- ----------
Total Benefits and Expenses 2,511,546 1,183,333 1,812,496 1,341,280
----------- ---------- ---------- ----------
Loss from operations before income taxes (1,849,055) (497,973) (568,974) (351,786)
--------
Income tax expense - - - -
----------- ---------- ---------- ----------
Net loss before cumulative effect adjustment (1,849,055) (497,973) (568,974) (351,786)
Cumulative effect adjustment of change
in accounting for development costs (4,269,488)
(net of taxes) -----------
Net loss $(6,118,543) $ 497,973) $ (568,974) $ (351,786)
==================================================================
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
80
<PAGE>
Sage Life Assurance of America, Inc.
Statements of Stockholder's Equity
<TABLE>
<CAPTION>
Accumulated Other
Additional Comprehensive (Unaudited)
Common Stock Paid-In Capital Retained Deficit Income Total
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $2,500,000 $15,505,508 $18,005,508
Net loss $ (351,786) (351,786)
Change in unrealized gain on
investments $ 48,706 48,706
---------------
Comprehensive income (303,080)
Additional capital contributions 15,500,000 15,500,000
----------------------------------------------------------------------------------------
Balance at December 31, 1997 2,500,000 31,005,508 (351,786) 48,706 33,202,428
Net loss (568,974) (568,974)
Change in unrealized gain on
investments (31,616) (31,616)
---------------
Comprehensive income (600,590)
Additional capital contributions 3,870,219 3,870,219
----------------------------------------------------------------------------------------
Balance at December 31, 1998 2,500,000 34,875,727 (920,760) 17,090 36,472,057
Net loss (6,118,543) (6,118,543)
Change in unrealized gain on
investments (514,640) (514,640)
---------------
Comprehensive income (6,633,183)
Additional capital contributions 1,502,955 1,502,955
----------------------------------------------------------------------------------------
Balance at June 30, 1999 $2,500,000 $36,378,682 $(7,039,303) $(497,550) $31,341,829
========================================================================================
</TABLE>
See accompanying notes to financial statements.
81
<PAGE>
Sage Life Assurance of America, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Six Months Six Months Year Ended Year Ended
Ended Ended December 31 December 31
June 30, 1999 June 30, 1998 1998 1997
--------------------------------------------------------------
Operating activities
<S> <C> <C> <C> <C>
Net loss $(6,118,543) $(497,973) $ (568,974) $ (351,786)
Adjustments to reconcile net loss to net
cash (used in) provided by operating
activities:
Amortization expense 117,234 183,012 548,818 325,406
Development costs paid by parent 1,502,953 - -
Cumulative effect adjustment 4,269,488 - -
Changes in:
Accrued investment income (2,744) (6,985) (145,386) (29,638)
Receivable from affiliates (15,517) 25,941 25,941 (25,941)
Other assets (256,314) (38,199) 6,443 (11,443)
Accrued expenses (23,886) (50,488) (118,772) 116,216
Amounts payable to affiliates - (41,226) (154,366) 154,366
--------------------------------------------------------------
Net cash (used in) provided by operating
activities (527,329) (425,918) (406,296) 177,180
Investing activities
Purchase of fixed maturity securities $(3,947,436) - $(10,295,783) -
Proceeds from sales, maturities and
repayments of fixed maturity securities 75,212 - 849,153 42,941
Net sales (purchases) of short-term
investments 3,240,532 357,960 10,555,486 (15,507,987)
--------------------------------------------------------------
Net cash provided by (used in) investing
activities (631,692) 357,960 1,108,856 (15,465,046)
Financing activities
Capital contribution from the parent - 600,000 600,000 15,500,000
--------------------------------------------------------------
Net cash provided by financing activities - 600,000 600,000 15,500,000
--------------------------------------------------------------
(Decrease) increase in cash and cash
equivalents (1,159,021) 532,042 1,302,560 212,134
Cash and cash equivalents at beginning of
period 1,531,165 228,605 228,605 16,471
--------------------------------------------------------------
Cash and cash equivalents at end of period $ 372,144 $ 760,647 $ 1,531,165 $ 228,605
==============================================================
</TABLE>
See accompanying notes to financial statements.
82
<PAGE>
Sage Life Assurance of America, Inc.
Notes to Financial Statements
For the Six Months Ended June 30, 1999 (Unaudited) and
Years Ended December 31, 1998 and 1997
1. Nature of Operations and Significant Accounting Policies
Organization and Operation
Sage Life Assurance of America, Inc. (the "Company") is a wholly-owned
subsidiary of Sage Life Holdings of America, Inc. ("SLHA"), which is a wholly-
owned indirect subsidiary of Sage Group Limited, a South African company.
Description of Business
Effective December 31, 1996, Sage Insurance Group, Inc. (SIGI) purchased from
Security First Life Insurance Company (SFLIC) all of the outstanding stock of
Fidelity Standard Life Insurance Company (Fidelity Standard), a Delaware
domiciled life insurance company licensed to sell fixed and variable annuity
contracts. As a result of the purchase, Fidelity Standard was renamed Sage Life
Assurance of America, Inc. Effective October 31, 1996, all new business
production and marketing was ceased and Fidelity Standard entered into a
modified coinsurance arrangement to cede all of its separate account liabilities
to its then parent, SFLIC. The remaining general account liabilities were ceded
under a 100% coinsurance arrangement with SFLIC. In connection with the purchase
of Fidelity Standard, the Company entered into a service agreement with SFLIC to
provide all necessary administrative services for all ceded business. Effective
September 1, 1998, all of the in-force business of the Company was novated to
SFLIC. There was no gain or loss in connection with the novation. Accordingly,
no insurance liabilities exist at December 31, 1998.
The Company is in the process of developing and preparing to market variable
annuity and variable life insurance products. The marketing of these products
began in the first quarter of 1999. The Company has mutually agreed to enter
into a coinsurance reinsurance arrangement with Swiss Re Life & Health America
(Swiss Re), pursuant to which Swiss Re will reinsure a significant portion of
the liabilities under the variable insurance contracts. There were $72,699 of
insurance liabilities at June 30, 1999.
Basis of Presentation
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles.
New Accounting Pronouncements
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standard No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130
establishes standards for the reporting and display of comprehensive income and
its components; however, adoption of this Statement had no impact on the
Company's net income or stockholder's equity. Comprehensive income is defined as
the change in equity during the financial reporting period of a business
83
<PAGE>
Safe Life Assurance of America, Inc.
Notes to Financial Statements (continued)
For the Six Months Ended June 30, 1999 (Unaudited) and
Years Ended December 31, 1998 and 1997
1. Nature of Operations and Significant Accounting Policies (continued)
For the Six Months Ended June 30, 1999 (Unaudited) and enterprise resulting from
non-owner sources. The primary element of comprehensive income is the unrealized
gains and losses on investments. Prior year financial statements have been
reclassified to conform to the requirements of SFAS 130.
In June 1998, SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133) was issued. SFAS 133 standardizes the accounting for
derivative instruments and the derivative portions of certain other contracts
that have similar characteristics by requiring that an entity recognize those
instruments at fair value. This statement also requires a new method of
accounting for hedging transactions, prescribes the types of items and
transactions that may be hedged, and specifies detailed criteria to be met to
qualify for hedge accounting. This statement is effective for fiscal years
beginning after June 15, 2000. Earlier adoption is permitted. Upon adoption,
the Company will be required to record the cumulative effect adjustment to
reflect this accounting change. The Company has not completed its analysis and
evaluation of the requirements and impact of this statement.
Investments
The Company has classified all of its fixed maturity investments as available-
for-sale. Those investments are carried at fair value and changes in unrealized
gains and losses are reported as a component of stockholder's equity, net of
applicable deferred income taxes. Fair values are determined by quoted market
prices.
Short-term investments are carried at cost, which approximates fair value.
Realized gains and losses on disposal of investments are determined by the
specific identification method and are included in revenues.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of
three months or less from the date of purchase to be cash equivalents. Cash and
cash equivalents are carried at cost, which approximates fair value.
Separate Accounts
The separate account assets and liabilities reported in the accompanying balance
sheet represent funds that are separately administered, principally for the
benefit of certain policyholders who bear the investment risk. The separate
account assets and liabilities are carried at fair value. Revenues and expenses
related to the separate account assets and liabilities, to the extent of
benefits paid or provided to the separate account policyholders, are excluded
from the amounts reported in the accompanying statements of operations. The
separate account balances existing at December 31, 1997 were novated to SFLIC
effective September 1, 1998. As a result, no separate account assets or
liabilities are reported at December 31, 1998. As the Company began
84
<PAGE>
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
For the Six Months Ended June 30, 1999 (Unaudited) and
Years Ended December 31, 1998 and 1997
1. Nature of Operations and Significant Accounting Policies (continued)
underwriting new business during 1999, separate account assets and liabilities
were both $72,699 as of June 30, 1999.
Policy Liabilities
Policy liabilities at December 31, 1997 consisted of deposits received plus
credited interest, less accumulated policyholder charges, assessments, and
withdrawals related to annuities of a nonguaranteed return nature. Interest
crediting rates ranged from 5.5 % to 7.0%. There were no policy liabilities at
December 31, 1998 as all in-force business was novated to SFLIC, effective
September 1, 1998.
Goodwill
Goodwill represents the excess of the fair value of assets exchanged over the
net assets acquired. Goodwill is being amortized on a straight-line basis over
thirty years. The carrying value of goodwill is regularly reviewed for
indications of impairment in value, which, in the view of management, is other
than temporary. Accumulated amortization at June 30, 1999, December 31, 1998 and
December 31, 1997 was $586,169, $468,935 and $231,769, respectively.
Development Costs
Prior to the adoption of Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities" (SOP 98-5), the Company capitalized certain costs incurred
in the development and registration of the Company's insurance products. These
development costs were being amortized on a straight line basis over fifteen
years. Accumulated amortization at December 31, 1998 and December 31, 1997 was
$405,287 and $93,637, respectively.
In April 1998, SOP 98-5 was issued. SOP 98-5 requires entities to charge to
expense all start-up costs as incurred. SOP 98-5 is effective for years
beginning after December 15, 1998 (i.e., January 1, 1999). In addition, SOP 98-5
requires entities upon adoption to write-off as the cumulative effect of a
change in accounting principle any previously unamortized capitalized
development costs. Accordingly, the Company wrote-off any unamortized
capitalized development costs on January 1, 1999.
Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires that management makes estimates and assumptions
that affect the reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
85
<PAGE>
Safe Life Assurance of America, Inc.
Notes to Financial Statements (continued)
For the Six Months Ended June 30, 1999 (Unaudited) and
Years Ended December 31, 1998 and 1997
Income Taxes
Income taxes are accounted for using the liability method. Using this method,
deferred tax assets and liabilities are determined based on differences between
the financial reporting and tax basis of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse.
2. Investments
Investments in fixed maturity securities as of June 30, 1999 consisted of the
following:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Fair
Amortized Cost Gains Losses Value
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government Obligations $ 9,304,635 $42,692 $481,380 $ 8,865,947
Corporate Obligations 7,548,737 4,429 319,604 7,233,562
--------------------------------------------------------------------
$16,853,372 $47,121 $800,984 $16,099,509
====================================================================
</TABLE>
Investments in fixed maturity securities as of December 31, 1998 consisted of
the following:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Fair
Amortized Cost Gains Losses Value
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government Obligations $ 9,356,479 $89,549 $54,974 $ 9,391,054
Corporate Obligations 3,610,543 4,282 12,962 3,601,863
--------------------------------------------------------------------
$12,967,022 $93,831 $67,936 $12,992,917
====================================================================
</TABLE>
Investments in fixed maturity securities as of December 31, 1997 consisted of
the following:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Fair
Amortized Cost Gains Losses Value
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government Obligations $3,520,393 $79,120 $4,187 $3,595,326
====================================================================
</TABLE>
The amortized cost and fair value of fixed maturity securities by contractual
maturity at December 31, 1998 are summarized below. Actual maturities will
differ from contractual maturities because certain borrowers have the right to
call or prepay obligations.
86
<PAGE>
Safe Life Assurance of America, Inc.
Notes to Financial Statements (continued)
For the Six Months Ended June 30, 1999 (Unaudited) and
Years Ended December 31, 1998 and 1997
2. Investment (continued)
Amortized Fair
Cost Value
--------------------------------
Due after one year through five years $ 4,750,473 $ 4,811,245
Due after five years through ten years 8,216,549 8,181,672
--------------------------------
Total $12,967,022 $12,992,917
================================
Investment income by major category of investment for the periods ended June 30,
1999, December 31, 1998, June 30, 1998 and December 31, 1997 is summarized as
follows:
<TABLE>
<CAPTION>
June 30, June 30, December 31, December 31,
1999 1998 1998 1997
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bonds $460,698 $149,255 $ 261,781 $ 255,778
Short-term investments 207,221 552,764 787,873 720,556
Cash and cash equivalents 2,462 16,761 239,700 49,035
--------------------------------------------------------------------------
Total investment income 670,376 718,780 1,289,354 1,025,369
Investment expenses 23,536 33,420 45,832 35,875
--------------------------------------------------------------------------
Net investment income $646,840 $685,360 $1,243,522 $ 989,494
==========================================================================
</TABLE>
At December 31, 1998 and 1997, investment securities with an amortized cost of
$6,678,745 and $6,128,048, respectively, and a fair value of $6,623,770 and
$6,202,980, respectively, are held by trustees in various amounts in accordance
with the statutory requirements of certain states in which the Company is
licensed to conduct business.
3. Income Taxes
The Company has filed a separate life insurance company Federal income tax
return for the period January 1, 1997 through December 31, 1997. The Company
will continue to file a separate life insurance company Federal income tax
return through the year 2001. Beginning in the year 2002, the Company will be
included in the consolidated Federal income tax return of Sage Holdings
(U.S.A.), Inc. and its subsidiaries.
The provision for income taxes varies from the amount which would be computed
using the federal statutory income tax rate as follows:
87
<PAGE>
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
For the Six Months Ended June 30, 1999 (Unaudited) and
Years Ended December 31, 1998 and 1997
3. Income Taxes (continued)
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998 December 31, 1997
-----------------------------------------------------------
<S> <C> <C> <C>
Pre-tax loss $(6,118,543) $(568,974) $(351,786)
Application of the federal statutory
tax rate 34% 2,080,306 (193,451) (119,607)
Tax effect of:
State income taxes - (75)
Change in valuation allowance 2,080,306 193,451 119,532
-----------------------------------------------------------
Total income tax provision $ - $ - $ -
===========================================================
</TABLE>
Significant components of the Company's deferred tax assets and liabilities as
of June 30, 1999, December 31, 1998 and December 31, 1997 are as follows:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998 December 31, 1997
-----------------------------------------------------------
Deferred tax assets:
<S> <C> <C> <C>
Net operating loss carryforwards $ 2,596,207 $ 1,967,528 $ 756,521
Unrealized loss on depreciation of 256,314
investments
----------- ----------- ----------
Total deferred tax assets 2,852,521 1,967,528 756,521
Deferred tax liabilities:
Unrealized gain on appreciation of investments (8,804) (26,227)
Amortization of goodwill and development costs (202,918) (1,654,545) (636,989)
----------- ----------- ----------
Total deferred tax liabilities (202,918) (1,663,349) (663,216)
Valuation allowance for deferred tax assets (2,393,289) (312,983) (119,532)
-----------------------------------------------------------
Net deferred tax liability $ 256,314 $ (8,804) $ (26,227)
===========================================================
</TABLE>
Based upon the lack of historical operating results and the uncertainty of
operating earnings in the future, management has determined that it is not more
likely than not that the deferred tax assets will be fully recognized.
Accordingly, a valuation allowance has been recorded.
At June 30, 1999, the Company has net operating loss carryforwards of $7.6
million which expire through 2019.
88
<PAGE>
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
For the Six Months Ended June 30, 1999 (Unaudited) and
Years Ended December 31, 1998 and 1997
4. Retained Deficit and Dividend Restrictions
Statutory-basis net income and surplus of the Company are as follows:
<TABLE>
<CAPTION>
June 30, December 31, December 31,
1999 1998 1997
-----------------------------------------------------------
<S> <C> <C> <C>
Net (loss) income $ (241,090) $ 27,002 $ 51,133
Surplus 25,367,629 25,609,097 25,017,752
</TABLE>
The Company is subject to state regulatory restrictions that limit the maximum
amount of dividends payable. Subject to certain net income carryforward
provisions as described below, the Company must obtain approval of the Insurance
Commissioner of the State of Delaware in order to pay, in any 12-month period,
"extraordinary" dividends which are defined as those in excess of the greater of
10% of surplus as regards policyholders as of the prior year-end and statutory
net income less realized capital gains for such prior year. Dividends may be
paid by the Company only out of earned surplus. In addition, the Company must
provide notice to the Insurance Commissioner of the State of Delaware of all
dividends and other distributions to shareholders within five business days
after declaration and at least ten days prior to payment. At December 31, 1998,
the maximum amount of dividends the Company could pay SLHA without prior
approval from state regulatory authorities is $2,310,910.
5. Related Party Transactions
In 1997, the Company entered into a Cost Sharing Agreement with Sage Insurance
Group, Inc. (SIGI), the parent of SLHA, to share the personnel costs, office
rent and equipment costs. These costs are allocated between the companies based
upon the estimated time worked, square footage of space utilized and upon
monitored usage of the equipment, respectively. Pursuant to this agreement, the
Company has received $184,962 from SIGI for the six months ended June 30, 1999,
and have paid expenses of $79,463 for the six months ended June 30, 1998. For
the year ended December 31, 1998, we have received $151,348 from SIGI and paid
$76,048 for the year ended December 31, 1997. In addition, SIGI provides funds
to the Company to meet various operating expenses. These amounts are paid back
to SIGI at the end of each quarter.
SIGI has also incurred expenditures in connection with the costs of establishing
new systems, new products, and premises for us. The amount of development costs
paid for by affiliated companies during the six months ended June 30, 1999 were
$1,502,953 and for the years ended December 31, 1998 and December 31, 1997 were
$3,270,219 and $1,404,558, respectively.
89
<PAGE>
Appendix A
Market Value Adjustment
We will apply a Market Value Adjustment to amounts surrendered, withdrawn,
transferred, or borrowed when taken from a Fixed Sub-Account more than 30 days
before its Expiration Date. We apply a Market Value Adjustment separately to
each Fixed Sub-Account. Surrender charges also may apply.
For a surrender, withdrawal, transfer or borrowed amount, we will calculate
the Market Value Adjustment by applying the factor below to the total amount
(including any applicable surrender charge) that must be surrendered, withdrawn,
transferred or borrowed in order to provide the amount requested.
[(1+I)/(1+J+.0025)](to the Nth power divided by 365) - 1
Where
. I is the Index Rate for a maturity equal to the Fixed Sub-Account's
Guarantee Period, at the time that we established the Sub-Account;
. J is the Index Rate for a maturity equal to the time remaining
(rounded up to the next full year) in the Fixed Sub-Account's
Guarantee Period, at the time of surrender, withdrawal, transfer, or
loan; and
. N is the remaining number of days in the Guarantee Period at the time
of calculation.
We will apply Market Value Adjustments as follows:
. If the Market Value Adjustment is negative, we first deduct it from
any remaining value in the Fixed Sub-Account. We then deduct any
remaining negative Market Value Adjustment from the amount you
surrender, withdraw, transfer, or borrow.
A-1
<PAGE>
. If the Market Value Adjustment is positive, we add it to any remaining
value in the Fixed Sub-Account or the amount you surrender. If you
withdraw, transfer or borrow the full amount of the Fixed Sub-Account,
we add the Market Value Adjustment to the amount you withdraw,
transfer, or borrow.
MVA Examples
Example #1: Surrender -- Example of a Negative Market Value Adjustment
Assume you invest $100,000 in a Fixed Sub-Account with a Guarantee Period of ten
years, with a Guaranteed Interest Rate of 7.5% and an Index Rate ("I") of 7.0%
based on the U.S. Treasury Constant Maturity Series at the time we established
the Sub-Account. You request a surrender three years into the Guarantee Period,
the Index Rate based on the U.S. Treasury Constant Maturity Series for a seven-
year Guarantee Period ("J") is 8.0% at the time of the surrender, no prior
transfers, withdrawals, or loans affecting this Fixed Sub-Account have been
made, and no surrender charge is applicable.
Calculate the Market Value Adjustment
1. The Account Value of the Fixed Sub-Account on the date of surrender is
$124,230 ($100,000 x 1.075 to the third power)
2. N = 2,555 (365 x 7)
3. Market Value Adjustment = $124,230 x {[(1.07)/(1.0825)] to the 2555th
power divided by 365-1} = -$9,700
Therefore, the amount paid on full surrender is $114,530 ($124,230 - $9,700).
Example #2: Surrender -- Example of a Positive Market Value Adjustment
Assume you invest $100,000 in a Fixed Sub-Account with a Guarantee Period of ten
years, with a Guaranteed Interest Rate of 7.5% and an Index Rate ("I") of 7.0%
based on the U.S. Treasury Constant Maturity Series at the time we established
the Sub-Account. You request a surrender three years into the Guarantee Period,
the Index Rate based on the U.S. Treasury Constant Maturity Series for a seven-
year Guarantee Period ("J") is 6.0% at the time of the surrender, no prior
transfers, withdrawals, or loans affecting this Fixed Sub-Account have been
made, and no surrender charge is applicable.
A-2
<PAGE>
Calculate the Market Value Adjustment
1. The Account Value of the Fixed Sub-Account on the date of surrender is
$124,230 ($100,000 x 1.075 to the third power)
2. N = 2,555 (365 x 7)
3. Market Value Adjustment = $124,230 x {[(1.07)/(1.0625)] to the 2555th
power divided by 365-1} = +$6,270
Therefore, the amount paid on full surrender is $130,500 ($124,230 + $6,270).
Example #3: Withdrawal -- Example of a Negative Market Value Adjustment
Assume you invest $200,000 in a Fixed Sub-Account with a Guarantee Period of ten
years, with a Guaranteed Interest Rate of 7.5% and an Index Rate ("I") of 7.0%
based on the U.S. Treasury Constant Maturity Series at the time we established
the Sub-Account. You request a withdrawal of $100,000 three years into the
Guarantee Period, the Index Rate based on the U.S. Treasury Constant Maturity
Series for a seven-year Guarantee Period ("J") is 8.0% at the time of
withdrawal, no prior transfers, withdrawals, or loans affecting this Fixed Sub-
Account have been made, and no surrender charge is applicable.
Calculate the Market Value Adjustment
1. The Account Value of the Fixed Sub-Account on the date of withdrawal
is $248,459 ($200,000 x 1.075 to the third power).
2. N = 2,555 (365 x 7)
3. Market Value Adjustment = $100,000 x {[(1.07)/(1.0825)] to the 2555 th
power divided by 365 -1} = -$7,808
Therefore, the amount of the withdrawal paid is $100,000, as requested. The
Fixed Sub-Account will be reduced by the amount of the withdrawal paid
($100,000) and by the Market Value Adjustment ($7,808), for a total reduction in
the Fixed Sub-Account of $107,808.
A-3
<PAGE>
Example #4: Withdrawal -- Example of a Positive Market Value Adjustment
Assume you invest $200,000 in a Fixed Sub-Account with a Guarantee Period of ten
years, with a Guaranteed Interest Rate of 7.5% and an initial Index Rate ("I")
of 7.0% based on the U.S. Treasury Constant Maturity Series at the time we
established the Sub-Account. You request a withdrawal of $100,000 three years
into the Guarantee Period, the Index Rate based on the U.S. Treasury Constant
Maturity Series for a seven-year Guarantee Period ("J") is 6.0% at the time of
the withdrawal, no prior transfers, withdrawals, or loans affecting this Fixed
Sub-Account have been made, and no surrender charge is applicable.
Calculate the Market Value Adjustment
1. The Account Value of the Fixed Sub-Account on the date of withdrawal
is $248,459 ($200,000 x 1.075 to the third power)
2. N = 2,555 (365 x 7)
3. Market Value Adjustment = $100,000 x {[(1.07)/(1.0625)](to the 2555th
power divided by 365) - 1} = +$5,047
Therefore, the amount of the withdrawal paid is $100,000, as requested. The
Fixed Sub-Account will be reduced by the amount of the withdrawal paid
($100,000) and increased by the amount of the Market Value Adjustment
($5,047), for a total reduction of $94,953 from your Sub-Accounts to the Loan
Account.
A-4
<PAGE>
Appendix B
Dollar-Cost Averaging Program
Below is an example of how the Dollar-Cost Averaging Program works. Assume
that the Dollar-Cost Averaging Program has been elected and that $24,000 is
invested in a DCA Fixed Sub-Account with a Guarantee Period of two years and an
annual Guaranteed Interest Rate of 6.0%.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
--- --- --- --- ---
Beginning of Dollar Cost Interest
Beginning Month Averaging Amount Dollar Credited End of Month
Of Month Account Value Monthly Factor Cost Averaged For Month Account Value
- --------- -------------- -------------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C>
1 24,000 - - 117 24,117
2 24,117 1 / 24 1,005 112 23,224
3 23,224 1 / 23 1,010 108 22,323
4 22,323 1 / 22 1,015 104 21,412
5 21,412 1 / 21 1,020 99 20,492
6 20,492 1 / 20 1,025 95 19,562
7 19,562 1 / 19 1,030 90 18,622
8 18,622 1 / 18 1,035 86 17,673
9 17,673 1 / 17 1,040 81 16,715
10 16,715 1 / 16 1,045 76 15,746
11 15,746 1 / 15 1,050 72 14,768
12 14,768 1 / 14 1,055 67 13,780
13 13,780 1 / 13 1,060 62 12,782
14 12,782 1 / 12 1,065 57 11,774
15 11,774 1 / 11 1,070 52 10,756
16 10,756 1 / 10 1,076 47 9,727
17 9,727 1 / 9 1,081 42 8,688
18 8,688 1 / 8 1,086 37 7,639
19 7,639 1 / 7 1,091 32 6,580
20 6,580 1 / 6 1,097 27 5,510
21 5,510 1 / 5 1,102 21 4,429
22 4,429 1 / 4 1,107 16 3,338
23 3,338 1 / 3 1,113 11 2,236
24 2,236 1 / 2 1,118 5 1,124
25 1,124 1 / 1 1,124 - -
</TABLE>
Note:
Column (3) = Column (1) x Column (2)
Column (5) = Column (1) - Column (3) + Column(4)
B-1
<PAGE>
Other Information
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
Sage Life's Articles of Incorporation provide that a director of the Company
shall not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except that (i) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which would involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived any personal benefit. Notwithstanding the foregoing, the
Articles provide that if the Delaware General Corporation Law is amended to
authorize further limitations of the liability of a director or a corporation,
then a director of the Company, in addition to circumstances in which a director
is not personally liable as set forth in the preceding sentence, shall be held
free from liability to the fullest extent permitted by the Delaware General
Corporation Law as amended.
Sage Life's Bylaws provide that the Company shall indemnify its officers,
directors, employees and agents to the extent permitted by the General
Corporation Law of Delaware.
Further, Section 145 of Delaware General Corporation Law provides that a
corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit, or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit, or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had a reasonable cause to believe that his conduct was not unlawful.
OI-1
<PAGE>
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.
Representation Pursuant to Section 26(e)(2)(A)
Sage Life Assurance of America, Inc. hereby represents that the fees and
charges deducted under the modified single payment combination fixed and
variable
life insurance contracts described in this registration statement, in the
aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by Sage Life Assurance of
America, Inc.
Contents of Registration Statement
This Registration Statement comprises the following papers and documents:
The facing sheet.
A reconciliation and tie-in of the information shown in the prospectus
with the items of Form N-8B-2. N/A
The prospectus consisting of 102 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484(b) under the Securities Act of 1933.
The representation pursuant to Section 26(e)(2)(A).
The signatures.
Written consents of the following persons:
James F. Bronsdon
Ralph Gorter
Sutherland Asbill & Brennan LLP
Ernst & Young LLP
OI-2
<PAGE>
The following exhibits:
1 A. (1) Resolution of the Board of Directors of Sage Life
Assurance of America, Inc. establishing The Sage
Variable Life Account A.*
1 A. (2) Not applicable.
1 A. (3)(a) Form of Distribution Agreement with Sage Distributors,
Inc. and Form of Selling Agreement./2/
1 A. (3)(b) N/A
1 A. (4) None
1 A. (5)(a)(i) Form of Individual Contract. (Form MSPVL1-9906).*
1 A. (5)(a)(ii) Form of Individual Contract with Interest Account (Form
MSPVL1-9906 VT). *
1 A. (5)(a)(iii) Form of Individual Contract with Market Value Adjustment
with Floor (Form MSPVL1-9906 OR).*
1 A. (5)(a)(iv) Form of Individual Contract without Market Value
Adjustment (Form MSPVL1-9908 WA).*
1 A. (5)(a)(v) Form of Group Contract (Form MSPVL-MGC-9906).*
1 A. (5)(a)(vi) Form of Group Certificate (Form MSPVL-C-9906).*
1 A. (5)(a)(vii) Form of Individual Certificate of Insurance Coverage
(Form MSPVL-CIC-9811).*
1 A. (5)(a)(viii) Form of Group Certificate of Insurance Coverage (Form
MSPVL-C-CIC-9811).*
1 A. (5)(a)(ix) Form of Individual Temporary Insurance Certificate (Form
TIA-MSPVL-9806).*
1 A. (5)(a)(x) Form of Group Temporary Insurance Certificate (Form TIA-
MSPVL-C-9806).*
1 A. (5)(b)(i) Form of Individual Accelerated Death Benefit Rider (Form
MSPVL-ACCDB-9801).*
1 A. (5)(b)(ii) Form of Group Accelerated Death Benefit Rider (Form
MSPVL-C-ACCDB-9801).*
1 A. (5)(b)(iii) Form of Individual Accidental Death Benefit Rider (Form
MSPVL-ADB-9801).*
1 A. (5)(b)(iv) Form of Group Accidental Death Benefit Rider (Form
MSPVL-C-ADB-9801).*
OI-3
<PAGE>
1 A. (5)(b)(v) Form of Individual Waiver of Surrender Charge Rider (Form
MSPVL-WSC-9801).*
1A. (5)(b)(vi) Form of Group Waiver of Surrender Charge Rider (Form
MSPVL-C-WSC-9801).*
1 A. (6)(a) Articles of Incorporation of the Company./1/
1 A. (6)(b) By-Laws of the Company./1/
1 A. (7) None.
1 A. (8)(i) Form of Participation Agreement with AIM Variable
Insurance Funds, Inc./2/
1 A. (8)(ii) Form of Participation Agreement with The Alger American
Fund./2/
1 A. (8)(iii) Form of Participation Agreement with Liberty Variable
Investment./3/
1 A. (8)(iv) Form of Participation Agreement with MFS(R) Variable
Insurance Trust./2/
1 A. (8)(v) Form of Participation Agreement with Morgan Stanley
Universal Funds, Inc./3/
1 A. (8)(vi) Form of Participation Agreement with Oppenheimer Variable
Account Funds./3/
1 A. (8)(vii) Form of Participation Agreement with Sage Life Investment
Trust./2/
1 A. (8)(viii) Form of Participation Agreement with SteinRoe Variable
Investment Trust./3/
1 A. (8)(ix) Form of Participation Agreement with T. Rowe Price Equity
Series, Inc./3/
1 A. (9)(i) Service Agreement with Financial Administrative Services,
Inc./3/
1 A. (9)(ii) Service Agreement with PMSI.*
1 A. (10)(a)(i) Form of Individual Contract Application - Part I. (Form
AP-MSPVL-9806)*
1 A. (10)(a)(ii) Form of Individual Contract Application - Part II. (Form
AP II-MSPVL-9806)*
1 A. (10)(b)(i) Form of Group Certificate Application - Part I. (Form AP-
MSPVL-C-9806)*
OI-4
<PAGE>
1 A. (10)(b)(ii) Form of Group Certificate Application - Part II. (Form AP
II-MSPVL-C-9806)*
2. Opinion and Consent of James F. Bronsdon.*
3. (i) Consent of Sutherland Asbill & Brennan LLP.*
(ii) Consent of Ernst & Young LLP.*
4. Not applicable.
5. Not applicable.
6. Opinion and Consent of Ralph Gorter.*
7. Consolidated memorandum describing certain procedures,
filed pursuant to Rule 6e-2(b)(12)(ii) and Rule 6e-
3(T)(b)(12)(iii).*
8. (i) Power of Attorney for Ronald S. Scowby./3/
(ii) Power of Attorney for H. Louis Shill./4/
(iii) Power of Attorney for Paul C. Meyer./5/
(iv) Power of Attorney for Richard D. Starr./5/
(v) Power of Attorney for Robin I. Marsden./6/
(vi) Power of Attorney for Mitchell R. Katcher./4/
____________________________________________________________________
* Filed herewith.
/1/ This exhibit was previously filed in the Registration Statement on From N-4
dated December 24, 1997 (File No. 333-43329), and is incorporated herein by
reference.
/2/ This exhibit was previously filed in Pre-Effective Amendment No. 1 to
the Registration Statement on Form N-4 (File No. 333-43329) dated December 31,
1998, and is incorporated herein by reference.
/3/ This exhibit was previously filed in Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-4 (File No. 333-43329) dated January 28, 1999,
and is incorporated herein by reference.
/4/ This exhibit was previously filed in Pre-Effective Amendment No. 2 to the
Registration Statement filed on Form N-4 (file No. 333-44751) dated February 10,
1999, and is incorporated herein by reference.
- ------------------
* filed herewith
OI-5
<PAGE>
herein by reference.
/5/ This exhibit was previously filed in the Registration Statement filed on
Form S-6 (File No. 333-78581) dated May 17, 1999, and is incorporated herein by
reference.
/6/ This exhibit was previously filed in Post-Effective Amendment No. 1 to the
Registration Statement filed on Form N-4 (File No. 333-43329) dated February 26,
1999, and is incorporated herein by reference.
* Filed herewith.
OI-6
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, the registrant has caused Pre-
Effective Amendment No. 1 to this registration statement to be signed on its
behalf, in the City of Stamford, and the State of Connecticut, on this 8th day
of September, 1999.
The Sage Variable Life Account A (Registrant)
By: Sage Life Assurance of America, Inc.
Attest:
/s/William J. Evers By: /s/ Robin I. Marsden
- ------------------- ---------------------
William J. Evers Robin I. Marsden
Director, President, Chief Executive
Officer, Sage Life Assurance of America, Inc.
By: Sage Life Assurance of America, Inc.
(Depositor)
Attest:
/s/William J. Evers By: /s/ Robin I. Marsden
- ------------------- --------------------
William J. Evers Robin I. Marsden
Director, President, Chief Executive Officer
<PAGE>
As required by the Securities Act of 1933, Pre-Effective Amendment No. 1 to
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
---------
/s/ Ronald S. Scowby* Chairman September 8, 1999
----------------------
Ronald S. Scowby
/s/ H. Louis Shill* Director September 8, 1999
-----------------------
H. Louis Shill
/s/ Paul C. Meyer* Director September 8, 1999
-----------------------
Paul C. Meyer
/s/ Richard D. Starr* Director September 8, 1999
-----------------------
Richard D. Starr
/s/ Mitchell R. Katcher* Director, September 8, 1999
------------------------- Senior Executive Vice
Mitchell R. Katcher President, Chief Financial
Officer, Chief Actuary
*By: /s/ James F. Bronsdon
----------------------
James F. Bronsdon
As Attorney-In-Fact pursuant to a
Power of Attorney as dated below.
Director Date
-------- ----
Ronald S. Scowby January 26, 1999
H. Louis Shill February 8, 1999
Paul C. Meyer May 12, 1999
Richard D. Starr May 13, 1999
Mitchell R. Katcher January 26, 1999
Robin I. Marsden January 26, 1999
<PAGE>
EXHIBIT LIST
1 A. (1) Resolution of the Board of Directors of Sage Life
Assurance of America, Inc. establishing The Sage
Variable Life Account A.
1 A. (5)(a)(i) Form of Individual Contract. (Form MSPVL1-9906).
1 A. (5)(a)(ii) Form of Individual Contract with Interest Account (Form
MSPVL1-9906 VT).
1 A. (5)(a)(iii) Form of Individual Contract with Market Value Adjustment
with Floor (Form MSPVL1-9906 OR).
1 A. (5)(a)(iv) Form of Individual Contract without Market Value
Adjustment (Form MSPVL1-9908 WA).
1 A. (5)(a)(v) Form of Group Contract (Form MSPVL-MGC-9906).
1 A. (5)(a)(vi) Form of Group Certificate (Form MSPVL-C-9906).
1 A. (5)(a)(vii) Form of Individual Certificate of Insurance Coverage
(Form MSPVL-CIC-9811).
1 A. (5)(a)(viii) Form of Group Certificate of Insurance Coverage (Form
MSPVL-C-CIC-9811).
1 A. (5)(a)(ix) Form of Individual Temporary Insurance Certificate (Form
TIA-MSPVL-9806).
1 A. (5)(a)(x) Form of Group Temporary Insurance Certificate (Form TIA-
MSPVL-C-9806).
1 A. (5)(b)(i) Form of Individual Accelerated Death Benefit Rider (Form
MSPVL-ACCDB-9801).
1 A. (5)(b)(ii) Form of Group Accelerated Death Benefit Rider (Form
MSPVL-C-ACCDB-9801).
1 A. (5)(b)(iii) Form of Individual Accidental Death Benefit Rider (Form
MSPVL-ADB-9801).
1 A. (5)(b)(iv) Form of Group Accidental Death Benefit Rider (Form
MSPVL-C-ADB-9801).
<PAGE>
1 A. (5)(b)(v) Form of Individual Waiver of Surrender Charge Rider (Form
MSPVL-WSC-9801).
1A. (5)(b)(vi) Form of Group Waiver of Surrender Charge Rider (Form
MSPVL-C-WSC-9801).
1 A. (9)(ii) Service Agreement with PMSI.
1 A. (10)(a)(i) Form of Individual Contract Application - Part I. (Form
AP-MSPVL-9806)
1 A. (10)(a)(ii) Form of Individual Contract Application - Part II. (Form
AP II-MSPVL-9806)
1 A. (10)(b)(i) Form of Group Certificate Application - Part I. (Form AP-
MSPVL-C-9806)
<PAGE>
1 A. (10)(b)(ii) Form of Group Certificate Application - Part II. (Form AP
II-MSPVL-C-9806)
2. Opinion and Consent of James F. Bronsdon.
3. (i) Consent of Sutherland Asbill & Brennan LLP.
(ii) Consent of Ernst & Young LLP.
6. Opinion and Consent of Ralph Gorter.
7. Consolidated memorandum describing certain procedures,
filed pursuant to Rule 6e-2(b)(12)(ii) and Rule 6e-
3(T)(b)(12)(iii).
<PAGE>
Exhibit 1 A. (1)
The Sage Variable Life Account A
--------------------------------
RESOLVED, that the Board of Directors of the Company, hereby establishes a
separate account, pursuant to the provisions of 18 Del. C. (S)2932 of the
Insurance Laws of the State of Delaware, designated The Sage Variable Life
Account A (hereinafter the "Variable Account"), for the following use and
purposes, and subject to such conditions as hereinafter set forth; and
FURTHER RESOLVED, that the Variable Account is established for the purpose of
providing for the issuance by the Company of certain variable life insurance
policies (the "Policies"), and shall constitute a funding medium to support
reserves under such Policies issued by the Company; and
FURTHER RESOLVED, that the income, gains and losses, realized or unrealized,
from assets allocated to the Variable Account shall be credited to or charged
against the Variable Account, without regard to other income, gains or losses of
the Company; and
FURTHER RESOLVED, that the assets of the Variable Account equal to the reserves
and other liabilities under the Policies and any other variable life insurance
policies issued through the Variable Account may not be charged with liabilities
arising out of any other business the Company may conduct; and
FURTHER RESOLVED, that the Variable Account shall be divided into investment
subaccounts (the "Subaccounts"), each of which shall invest in the shares of a
mutual fund portfolio, and net premiums under the Policies shall be allocated in
accordance with instructions received from owners of the Policies; and
FURTHER RESOLVED, that the President, Chief Executive Officer and Chief
Financial Officer (hereafter, the "empowered officers") and each of them, with
full power to act without the others, be, and they hereby are, severally
authorized to add or remove any Subaccount of the Variable Account or add or
remove any mutual fund portfolio as may hereafter be deemed necessary or
appropriate; and
FURTHER RESOLVED, that the income, gains and losses, realized or unrealized,
from assets allocated to each Subaccount of the Variable Account shall be
credited to or charged against such Subaccount of the Variable Account, without
regard to other income, gains or losses of any other Subaccount of the Variable
Account; and
FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, be, and they hereby are, severally authorized to
invest such amount or amounts of the Company's cash in the Variable Account or
in any Subaccount thereof or in any mutual fund portfolio as may be deemed
necessary or appropriate to facilitate the commencement of the Variable
Account's and/or the mutual fund portfolio's operations and/or to meet any
1
<PAGE>
minimum capital requirements under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, be, and they hereby are, severally authorized to
transfer cash from time to time from the Company's general account to the
Variable Account, or from the Variable Account to the general account, as deemed
necessary or appropriate and consistent with the terms of the Policies; and
FURTHER RESOLVED, that the Board of Directors of the Company reserves the right
to change the designation of the Variable Account hereafter to such other
designation as it may deem necessary or appropriate; and
FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, with such assistance from the Company's independent
certified public accountants, legal counsel and independent consultants or
others as they may require, be, and they hereby are, severally authorized and
directed to take all action necessary to: (a) register the Variable Account as
a unit investment trust under the 1940 Act; (b) register the Policies under the
Securities Act of 1933 (the "1933 Act"); and (c) take all other actions that are
necessary in connection with the offering of the Policies for sale and the
operation of the Variable Account in order to comply with the 1940 Act, the 1933
Act, the Securities Exchange Act of 1934 and other applicable Federal laws,
including the filing of any registration statements, any undertakings, no-action
requests, consents, applications for exemptions from the 1940 Act or other
applicable federal laws, and any amendments to the foregoing as the empowered
officers of the Company shall deem necessary or appropriate; and
FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, are severally authorized and empowered to prepare,
execute and cause to be filed with the Securities and Exchange Commission on
behalf of the Variable Account, and by the Company as sponsor and depositor, a
Notification of Registration on Form N-8A, a registration statement on Form N-
8B-2, and a registration statement on Form S-6 registering the Variable Account
as an investment company under the 1940 Act and registering the Policies under
the 1933 Act, and any and all amendments to the foregoing on behalf of the
Variable Account and the Company and on behalf of and as attorneys-in-fact for
the empowered officers and/or any other officer of the Company; and
FURTHER RESOLVED, that James F. Bronsdon, Jr. Vice President, Legal and
Compliance (and any successor to such position), is duly appointed as agent for
service under any such registration statement, duly authorized to receive
communications and notices from the Securities and Exchange Commission with
respect thereto; and
FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, are severally authorized on behalf of the Variable
Account and on behalf of the Company to take any and all action that each of
them may deem necessary or advisable in
2
<PAGE>
order to offer and sell the Policies, including any registrations, filings and
qualifications both of the Company, its officers, agents and employees, and of
the Policies, under the insurance and securities laws of any of the states of
the United States of America or other jurisdictions, and in connection therewith
to prepare, execute, deliver and file all such applications, requests,
undertakings, reports, covenants, resolutions, applications for exemptions,
consents to service of process and other papers and instruments as may be
required under such laws, and to take any and all further action which such
officers or legal counsel of the Company may deem necessary or desirable
(including entering into whatever agreements and contracts may be necessary) in
order to maintain such registrations or qualifications for as long as the
officers or legal counsel deem it to be in the best interests of the Variable
Account and the Company; and
FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, be, and they hereby are, severally authorized in the
names and on behalf of the Variable Account and the Company to execute and file
irrevocable written consents on the part of the Variable Account and of the
Company to be used in such states wherein such consents to service of process
may be required under the insurance or securities laws therein in connection
with the registration or qualification of the Policies and to appoint the
appropriate state official, or such other person as may be allowed by insurance
or securities laws, agent of the Variable Account and of the Company for the
purpose of receiving and accepting process; and
FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, be, and hereby are, severally authorized to establish
procedures under which the Company will provide voting rights for owners of the
Policies with respect to securities owned by the Variable Account; and
FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, are hereby severally authorized to execute such
agreement or agreements as deemed necessary and appropriate (i) with a qualified
entity under which such entity will be appointed principal underwriter and
distributor for the Policies, (ii) with one or more qualified entities to
provide administrative services in connection with the establishment and
maintenance of the Variable Account and the administration of the Policies, and
(iii) with the designated mutual fund portfolios and/or the principal
underwriter and distributor of such mutual fund portfolios for the purchase and
redemption of portfolio shares; and
FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, are hereby severally authorized to execute and
deliver such agreements and other documents and do such acts and things as each
of them may deem necessary or desirable to carry out the foregoing resolutions
and the intent and purposes thereof.
FURTHER RESOLVED, that the Company hereby adopts and establishes the following
Standards of Suitability for its officers, employees, and agents with respect to
the suitability of the Policies for applicants:
1. No recommendation shall be made to an applicant to purchase a Policy,
and no
3
<PAGE>
Policy shall be issued, in the absence of reasonable grounds to
believe that the purchase of the Policy is suitable for the applicant
on the basis of information furnished after reasonable inquiry of the
applicant concerning the applicant's insurance and investment
objectives, financial situation and needs, and any other information
known to the Company or to the agent making the recommendation;
2. A good faith, reasonable inquiry shall be made as to the facts and
circumstances concerning a prospective Policy owner's insurance and
financial needs and no recommendation shall be made that the
prospective Policy owner purchase a Policy when such a purchase is not
reasonably consistent with the information that is known or reasonably
should be known to the Company or its agents. In making such
recommendation, factors which may be considered are: age, earnings,
marital status, number and age of dependents, the value of savings or
other assets, and current life insurance program.
Additionally, the Company's agents, as registered representatives, will be
subject to supervision by a registered broker-dealer with respect to suitability
and other sales practices under the NASD Conduct Rules of NASD Regulation, Inc.;
and
FURTHER RESOLVED, that the Company hereby adopts and establishes the following
Standards of Conduct for itself and its officers, directors, and employees
(each, an "Employee") with respect to the purchase or sale of investments of the
Variable Account:
No Employee shall:
1. Employ any device, scheme or artifice to defraud the Variable Account
or the owners of the policies;
2. Make any untrue statement of a material fact with respect to the
investments of the Variable Account or omit to state a material fact
necessary in order to make the statements made, in light of the
circumstances in which they were made, not misleading;
3. Engage in any act, practice or course of business that operates or
would operate as a fraud or deceit upon the Variable Account or the
owners of the Policies;
4. Engage in any manipulative practice with respect to the Variable
Account or the owners of the Policies;
5. Sell to, or purchase from, the Variable Account any securities or
other property, except as permitted under applicable laws, rules,
regulations, order, or other interpretation of any government, agency,
or self-regulatory organization.
6. Purchase or allow to be purchased for the Variable Account any
securities of
4
<PAGE>
which the Company or an affiliated company is the issuer, except as
permitted under applicable laws, rules, regulations, order, or other
interpretation of any government, agency, or self-regulatory
organization.
7. Accept any compensation other than a regular salary or wages from the
Company or an affiliated company for the sale or purchase of
investment securities to or from the Variable Account except as
permitted under applicable laws, rules, regulations, orders, or other
interpretations of any government, agency or self-regulatory
organization;
8. Engage in any joint transaction, participation or common undertaking
whereby the Company or an affiliated company participates with the
Variable Account in any transaction in which the Company or an
affiliated company obtains an advantage in the price or quality of the
item purchased, the service received or in the cost of such service,
and the Variable Account or the owners of the Policies are
disadvantaged in any of these respects by the same transaction; or
9. Borrow money or securities from the Variable Account other than under
a Policy loan provision.
FURTHER RESOLVED, that the Company shall require any third party providing
administrative services to the Variable Account to adopt Standards of Conduct
encompassing the standards set forth above.
5
<PAGE>
EXHIBIT 1A(5)(a)(i)
[LOGO OF SAGE LIFE APPEARS HERE]
------------------------------------
SAGE LIFE ASSURANCE OF AMERICA, INC.
Member of Sage Insurance Group, Inc.
A Stock Company
Home Office Customer Service Center
300 Atlantic Street P.O. Box 290680
Stamford, CT 06901 Wethersfield, CT 06109
1-877-TEL-SAGE
PLEASE READ THIS CONTRACT CAREFULLY. This Contract is a legal contract between
the Owner (you) and Sage Life Assurance of America, Inc. You have the rights
described in the Contract. We agree to pay the Death Proceeds to the Beneficiary
upon receipt of proof that an Insured died while coverage under this Contract is
in force.
RIGHT TO EXAMINE THIS CONTRACT:
If for any reason you are not satisfied with this Contract, you may return it to
us or the agent who sold it to you within 10 days after you receive it (the
Free-Look Period). When we receive the returned Contract at our Customer Service
Center, we will promptly refund you the Account Value plus any charges shown in
the Schedule that we have deducted from the Account Value on or before the date
the returned Contract was received by us at our Customer Service Center, or if
greater and required by the law of your state, the initial purchase payment
(minus any withdrawals).
The amount and duration of the death benefit and all payments and values, when
based on the investment experience of the Variable Account, may increase or
decrease, depending on this Contract's investment results and are not guaranteed
as to dollar amount. All payments and values based on the Fixed Account may be
subject to a Market Value Adjustment, the operation of which may cause such
payments and values to increase or decrease.
/s/
Chairman
MODIFIED SINGLE PAYMENT COMBINATION FIXED AND VARIABLE LIFE INSURANCE CONTRACT
Limited purchase payment flexibility
Death benefit payable at Insured's death while this
Contract is in force
Nonparticipating
<PAGE>
TABLE OF CONTENTS
SCHEDULE.......................................................................3
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES PER $1,000......8
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES PER $1,000......9
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES.................................10
DEFINITIONS...................................................................11
MAKING PURCHASE PAYMENTS......................................................13
ACCOUNT VALUE.................................................................14
VARIABLE ACCOUNT..............................................................15
FIXED ACCOUNT.................................................................17
TRANSFERS AMONG ACCOUNTS......................................................18
SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE.......................19
BORROWING PART OF YOUR ACCOUNT VALUE..........................................19
CHARGES.......................................................................20
OWNER AND BENEFICIARY.........................................................21
DEATH PROCEEDS................................................................21
GENERAL PROVISIONS............................................................22
SETTLEMENT OPTIONS............................................................24
Page 2
<PAGE>
SCHEDULE
Contract No.:
Owner: Issue Date: XX/XX/XXXX
Insured: Contract Date: XX/XX/XXXX
Issue Age/Sex: Initial Purchase Payment $
Risk Class: Initial Insurance Amount: $
This Schedule sets forth additional information that relates to the provisions
in this Contract with the corresponding headings.
MAKING PURCHASE PAYMENTS
Additional purchase payments may be made at any time and in any amount necessary
to avoid termination of this Contract. Other additional purchase payments may be
made at any time after the first Contract Anniversary, subject to the following
conditions:
1. each additional purchase payment must be at least $250;
2. only one purchase payment may be paid in any Contract Year;
3. the attained age of the Insured must be less than 81; and
4. our prior approval is required before you make a purchase payment that
causes the Account Value of all single payment or modified single
payment Contracts that you maintain with us to exceed $1,000,000.
We reserve the right to require satisfactory evidence of insurability before we
accept any additional purchase payment that increases the death benefit by more
than it increases the Account Value.
The minimum reinstatement payment is the minimum purchase payment for which we
would then issue a Contract based upon the Insured's attained age and risk class
as of the effective date of the reinstated Contract.
No purchase payment, whether initial or additional, may be allocated such that
any Sub-Account would have a value less than $250.
The Designated Sub-Account is the Money Market Sub-Account.
VARIABLE ACCOUNT
The Variable Account for this Contract is The Sage Variable Life Account A. It
is a unit investment trust variable account.
Page 3
<PAGE>
FIXED ACCOUNT
The Fixed Account for this Contract is The Sage Fixed Interest Account A.
The Minimum Guaranteed Interest Rate is 3%.
The Minimum Deferral Interest Rate is 3%.
Index Rate: The Index Rate is the U.S. Treasury Constant Maturity Series as
reported in Federal Reserve Bulletin Release H.15. We currently base the Index
Rate for a calendar week on the reported rate for the preceding calendar week.
We reserve the right to set it less frequently but in no event less often than
monthly.
TRANSFERS AMONG ACCOUNTS
The minimum amount that can be transferred is $250. However, if less remains in
a Sub-Account, that amount may be transferred. If a transfer request would
reduce the Account Value remaining in a Sub-Account below $250, we will treat
the transfer request as a request to transfer the entire amount.
Your transfer request must clearly state the Sub-Accounts from which and to
which transfers are to be made.
We reserve the right to limit, upon notice, the maximum number of transfers you
may make to one per calendar month or 12 per Contract Year.
Under a Settlement Option, we reserve the right to:
1. disallow transfers from the Fixed Account to the Variable Account, or
from the Variable Account to the Fixed Account; and
2. limit the maximum number of transfers between Variable Sub-Accounts to
1 per Contract Year.
SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE The Free Withdrawal
Amount is the greater of (a) and (b) where:
(a) is the excess of 10% of the total purchase payments over 100% of all
prior withdrawals including any associated surrender charges and
Market Value Adjustment incurred in that Contract Year; and
(b) is the excess of the Account Value on the date of withdrawal over the
unliquidated purchase payments.
The minimum amount that can be withdrawn is $250. If a withdrawal request would
reduce the Account Value remaining in a Sub-Account below $250, we will treat
the withdrawal request as a request to withdraw the entire amount.
If a requested withdrawal would reduce the Account Value below $5,000, we
reserve the right to treat the request as a withdrawal of only the excess over
$5,000.
Unless you specify otherwise, we will make withdrawals proportionately from all
Sub-Accounts in which you are invested.
Page 4
<PAGE>
BORROWING PART OF YOUR ACCOUNT VALUE
The maximum loanable value is 90% of the Account Value less any surrender charge
less any due and unpaid Monthly Deduction Amount, adjusted for any Market Value
Adjustment.
The minimum loan amount is $250.
The Loan Interest Rate is 6%.
The minimum loan repayment amount is $250.
The Loan Credited Rate is a minimum of 4%. We may credit a higher rate to that
portion of the Loan Account equal to the Free Withdrawal Amount.
CHARGES
Surrender Charge - A surrender charge may be imposed upon surrender of this
Contract or when an Excess Withdrawal is made. The surrender charge is applied
to each purchase payment and is a percentage of each purchase payment as
follows:
Maximum
Contract Surrender Charge
Year Percentage
---- ----------
1 9%
2 9%
3 8%
4 7%
5 6%
6 5%
7 3%
8+ 0%
Transfer Charge - We reserve the right to charge a maximum of $25 for each
transfer after the 12th in a Contract Year. Each request is considered to be one
transfer regardless of the number of Sub-Accounts affected by the transfer. The
transfer charge will be deducted proportionately from all Sub-Accounts from
which transfers are made.
Administration Charge - $40 a year. This charge is incurred at the beginning of
each Contract Year and deducted on each Contract Anniversary or upon surrender.
The charge will be waived:
o if the Account Value is at least $50,000 at the time of deduction; or
o beginning on and after the 8th Contract Anniversary.
Page 5
<PAGE>
Asset-Based Charges - We deduct asset-based charges from your Account Value to
compensate us for assuming mortality and expense risks, certain administrative
expenses, certain distribution costs and certain state and Federal tax expenses.
Asset-based charges are calculated as a percentage of the Account Value on the
date of deduction. On the Contract Date, and monthly thereafter, the asset-based
charges are deducted in proportion to the Sub-Accounts in which you are
invested. The maximum charges are:
Asset-Based Charges Annual Charge Monthly Charge
------------------- ------------- --------------
Contract Years 1-10 1.80% .150000%
Contract Years 11+ 1.30% .108333%
We also reserve the right to deduct asset-based charges on the effective date of
any allocation of purchase payment to the Sub-Accounts, based on the amount
allocated, and based on the number of days remaining until the next date of
deduction.
Variable Sub-Account Charges - If proceeds are applied to a Settlement Option,
we will deduct the asset-based charges above from the assets in each Variable
Sub-Account supporting Variable Payments on a daily basis rather than as
described above. The maximum charges are:
Variable Sub-Account Charges Annual Charge Daily Charge
---------------------------- ------------- ------------
Contract Years 1-10 1.80% .0049763%
Contract Years 11+ 1.30% .0035849%
Charge Deduction Rules - Unless specified above, charges are deducted from the
Account Value proportionately from all Sub-Accounts in which you are invested.
SETTLEMENT OPTIONS
The minimum amount that can be applied under any Variable or Fixed Payment is
$5,000.
The minimum payment is $100.
We currently allow assumed investment rates of 3% and 6%.
RIDERS
Accelerated Death Benefit Rider
The maximum Accelerated Benefit Amount is 50% of the Insurance Amount, but not
greater than $500,000.
Accidental Death Benefit Rider
The maximum Accidental Death Benefit Amount is $250,000.
Change of Insured Rider
The minimum Attained Ages of the original and new Insureds as of the effective
date of change must be 25. The maximum Attained Ages of the original and new
Insureds as of the effective date of change is 75.
The maximum Change of Insured Rider charge is $1.50 per $1,000 of death benefit.
Page 6
<PAGE>
Settlement Option Tables
Values for other ages, and for other payment periods, joint life combinations,
or assumed investment rates that we offer (Tables below assume 3%) are available
on request. Monthly payments are shown for each $1,000 applied.
Settlement Option Table for a Fixed Period
<TABLE>
<CAPTION>
Monthly Payment Monthly Payment Monthly Payment
Fixed Period --------------- Fixed Period --------------- Fixed Period ---------------
of Years of Years of Years
-------- -------- --------
<S> <C> <C> <C> <C> <C>
11 $8.88 21 $5.33
12 8.26 22 5.16
13 7.73 23 5.00
14 7.28 24 4.85
5 $17.95 15 6.89 25 4.72
6 15.18 16 6.54 26 4.60
7 13.20 17 6.24 27 4.49
8 11.71 18 5.98 28 4.38
9 10.56 19 5.74 29 4.28
10 9.64 20 5.53 30 4.19
</TABLE>
Settlement Option Table for Life
<TABLE>
<CAPTION>
Male/Female Male/Female Male/Female
Age Life Only 10 Years Guaranteed 20 Years Guaranteed
--- --------- ------------------- -------------------
<S> <C> <C> <C>
50 $4.28 / 3.92 $4.24 / 3.90 $4.10 / 3.84
55 4.72 / 4.27 4.64 / 4.24 4.40 / 4.12
60 5.31 / 4.74 5.17 / 4.68 4.73 / 4.45
65 6.13 / 5.38 5.84 / 5.25 5.04 / 4.81
70 7.28 / 6.29 6.65 / 6.00 5.29 / 5.14
75 8.90 / 7.62 7.53 / 6.92 5.43 / 5.37
80 11.19 / 9.62 8.37 / 7.93 5.50 / 5.48
85 14.36 / 12.63 9.00 / 8.77 5.52 / 5.52
</TABLE>
Page 7
<PAGE>
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES PER
$1,000
MALE - STANDARD RISK CLASS
<TABLE>
<CAPTION>
Attained Monthly Attained Monthly Attained Monthly Attained Monthly
Age Rate Age Rate Age Rate Age Rate
--- ---- --- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C>
0 0.2194 25 0.1460 50 0.5852 75 5.7847
1 0.0859 26 0.1434 51 0.6381 76 6.3595
2 0.0825 27 0.1426 52 0.6968 77 6.9577
3 0.0809 28 0.1418 53 0.7640 78 7.5852
4 0.0775 29 0.1434 54 0.8380 79 8.2619
5 0.0734 30 0.1460 55 0.9180 80 9.0119
6 0.0692 31 0.1501 56 1.0030 81 9.8582
7 0.0650 32 0.1560 57 1.0932 82 10.8223
8 0.0625 33 0.1626 58 1.1894 83 11.9024
9 0.0617 34 0.1710 59 1.2942 84 13.0775
10 0.0625 35 0.1810 60 1.4109 85 14.3247
11 0.0675 36 0.1935 61 1.5430 86 15.6263
12 0.0767 37 0.2077 62 1.6923 87 16.9762
13 0.0892 38 0.2236 63 1.8597 88 18.3754
14 0.1034 39 0.2420 64 2.0454 89 19.8343
15 0.1184 40 0.2629 65 2.2459 90 21.3788
16 0.1326 41 0.2854 66 2.4605 91 23.0518
17 0.1434 42 0.3097 67 2.6886 92 24.9371
18 0.1518 43 0.3365 68 2.9344 93 27.2442
19 0.1568 44 0.3649 69 3.2068 94 30.4453
20 0.1585 45 0.3950 70 3.5147 95 35.4922
21 0.1585 46 0.4277 71 3.8670 96 44.5151
22 0.1568 47 0.4620 72 4.2723 97 62.8314
23 0.1535 48 0.4989 73 4.7329 98 83.3333
24 0.1501 49 0.5399 74 5.2401 99 83.3333
100+ 83.3333
</TABLE>
Rates shown are based on the Commissioner's Male 1980 Standard Ordinary
Mortality Table, Age Last Birthday. These rates are based on the Insured's
attained age as of each Contract Anniversary and do not change during a Contract
Year.
Page 8
<PAGE>
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES PER
$1,000
FEMALE - STANDARD RISK CLASS
<TABLE>
<CAPTION>
Attained Monthly Attained Monthly Attained Monthly Attained Monthly
Age Rate Age Rate Age Rate Age Rate
--- ---- --- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C>
0 0.1568 25 0.0976 50 0.4285 75 3.4445
1 0.0700 26 0.1001 51 0.4595 76 3.8688
2 0.0667 27 0.1034 52 0.4947 77 4.3247
3 0.0650 28 0.1067 53 0.5332 78 4.8190
4 0.0642 29 0.1101 54 0.5726 79 5.3700
5 0.0625 30 0.1142 55 0.6129 80 5.9999
6 0.0609 31 0.1184 56 0.6523 81 6.7294
7 0.0592 32 0.1226 57 0.6901 82 7.5789
8 0.0584 33 0.1284 58 0.7279 83 8.5491
9 0.0575 34 0.1343 59 0.7699 84 9.6289
10 0.0567 35 0.1418 60 0.8204 85 10.8111
11 0.0584 36 0.1518 61 0.8826 86 12.0908
12 0.0609 37 0.1635 62 0.9626 87 13.4694
13 0.0642 38 0.1777 63 1.0586 88 14.9520
14 0.0684 39 0.1935 64 1.1675 89 16.5557
15 0.0725 40 0.2111 65 1.2832 90 18.3060
16 0.0767 41 0.2295 66 1.4033 91 20.2498
17 0.0800 42 0.2487 67 1.5235 92 22.4699
18 0.0834 43 0.2671 68 1.6473 93 25.1552
19 0.0859 44 0.2871 69 1.7866 94 28.7360
20 0.0884 45 0.3072 70 1.9508 95 34.1581
21 0.0900 46 0.3273 71 2.1528 96 43.5428
22 0.0917 47 0.3498 72 2.4040 97 62.1940
23 0.0934 48 0.3741 73 2.7057 98 83.3333
24 0.0959 49 0.4000 74 3.0550 99 83.3333
100+ 83.3333
</TABLE>
Rates shown are based on the Commissioner's Female 1980 Standard Ordinary
Mortality Table, Age Last Birthday. These rates are based on the Insured's
attained age as of each Contract Anniversary and do not change during a Contract
Year.
Page 9
<PAGE>
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES
<TABLE>
<CAPTION>
Minimum Death Minimum Death Minimum Death
Attained Benefit Attained Benefit Attained Benefit
Age Percentage Age Percentage Age Percentage
--- ---------- --- ---------- --- ----------
<S> <C> <C> <C> <C> <C>
0-40 250% 60 130% 80 105%
41 243% 61 128% 81 105%
42 236% 62 126% 82 105%
43 229% 63 124% 83 105%
44 222% 64 122% 84 105%
45 215% 65 120% 85 105%
46 209% 66 119% 86 105%
47 203% 67 118% 87 105%
48 197% 68 117% 88 105%
49 191% 69 116% 89 105%
50 185% 70 115% 90 105%
51 178% 71 113% 91 104%
52 171% 72 111% 92 103%
53 164% 73 109% 93 102%
54 157% 74 107% 94 101%
55 150% 75 105% 95 101%
56 146% 76 105% 96 101%
57 142% 77 105% 97 101%
58 138% 78 105% 98 101%
59 134% 79 105% 99 101%
100+ 100%
</TABLE>
Page 10
<PAGE>
DEFINITIONS
- --------------------------------------------------------------------------------
"Account Value" is the entire amount we hold under this Contract for you while
this Contract is in force. It is equal to the sum of the Variable Account Value,
the Fixed Account Value and the Loan Account Value.
"Accumulation Unit" is the unit of measure we use to keep track of the value of
each Variable Sub-Account.
"Attained Age" is the Issue Age plus the number of full years since the Contract
Date.
"Beneficiary" is the person or persons to whom we pay the Death Proceeds when
the Insured dies.
"Contract Date" is the date from which Contract Anniversaries and Contract Years
are measured. The Contract Date may or may not be the same as the Issue Date and
is shown in the Schedule. While this Contract is in force, every anniversary of
the Contract Date is a Contract Anniversary, and each and every consecutive
twelve-month period beginning on the Contract Date and each Contract Anniversary
is a Contract Year.
"Contingent Beneficiary" is the person that becomes the Beneficiary if the named
Beneficiary dies before the Insured.
"Contingent Owner" is the person that becomes the Owner if the named Owner dies
before the Insured.
"Customer Service Center" is where we provide service to you. The mailing
address and telephone number of the Customer Service Center are shown on the
first page of this Contract.
"Death Proceeds" is the amount of money that we will pay the Beneficiary if the
Insured dies while this Contract is in force.
"Debt" is the sum of all outstanding loans plus accrued interest under this
Contract.
"Excess Withdrawal" is a withdrawal of Account Value that exceeds the Free
Withdrawal Amount.
"Expiry Date" is the last day in a Guarantee Period.
"Fixed Account" is a separate investment account of ours into which purchase
payments may be invested or Account Value may be transferred.
"Fixed Account Value" is the sum of the value of each Fixed Sub-Account on any
particular day.
A "Fixed Sub-Account" is established when purchase payments are invested or
amounts are transferred to the Fixed Account. The value of each Fixed
Sub-Account is equal to the amount invested, increased by interest and reduced
by any withdrawals, loans or transfers from, or charges assessed against the
Fixed Sub-Account.
"Free Withdrawal Amount" is the maximum amount that can be withdrawn in a
Contract Year without being subject to a surrender charge. This amount is
described in the Schedule.
"General Account" consists of all our assets other than those held in any
separate investment accounts.
"Guaranteed Interest Rate" is the effective annual interest rate we will credit
for a specified Guarantee Period. The Guaranteed Interest Rate will never be
less than the minimum shown in the Schedule.
Page 11
<PAGE>
"Guarantee Period" is a period of years for which a specified effective annual
interest rate is guaranteed by us. Interest is credited daily at a rate to yield
the declared annual Guaranteed Interest Rate.
"Home Office" is our main office. The mailing address is shown on the first page
of this Contract.
"Income Unit" is the unit of measure we use to calculate the amount of payments
under the Variable Payment Settlement Option.
"Insurance Amount" is a dollar amount used to determine the death benefit of
this Contract. It is shown in the Schedule.
"Insured" is the person named in the application whose life is covered by this
Contract The Insured is shown in the Schedule.
"Issue Age" is the Insured's age on the last birthday on or before the Contract
Date. It is shown in the Schedule.
"Issue Date" is the date this Contract is issued at our Customer Service Center.
It is shown in the Schedule.
"Loan Account" is an account in our General Account, established for any amounts
transferred from the Sub-Accounts as a result of a loan. The Loan Account
credits a fixed rate of interest, the Loan Credited Rate, that is not based on
the investment experience of the Variable Sub-Account or the Guaranteed Interest
Rates applicable to the Fixed Sub-Accounts of the Fixed Account. The Loan
Credited Rate is shown in the Schedule.
"Loan Account Value" is the amount of all loans under this Contract that have
not been repaid, adjusted for interest we credit to the Loan Account at the Loan
Credited Rate and for any due and unpaid loan interest we charge at the Loan
Interest Rate. The Loan Interest Rate is shown in the Schedule.
"Market Value Adjustment" is a positive or negative adjustment that may apply to
surrender, withdrawals, loans, or transfers from a Fixed Sub-Account before the
end of a Guarantee Period.
"Monthly Processing Date" is the day of each month that the Monthly Deduction
Amount is deducted from the Account Value of this Contract. Monthly Processing
Dates are the Contract Date and the same day of each month thereafter. If there
is no such date in a particular month, the Monthly Processing Date will be the
last day of that month. If a Monthly Processing Date is not a Valuation Date,
the Monthly Processing Date will be the next Valuation Date.
"Net Asset Value" is the price of one share of an investment portfolio.
"Payee" is the natural person receiving payments under a Settlement Option.
"Satisfactory Notice" is a notice or request authorized by you, in a form
satisfactory to us, received at our Customer Service Center.
"Sub-Account" includes both Variable Sub-Accounts and Fixed Sub-Accounts, unless
the context indicates otherwise.
"Surrender Value" is the amount you receive upon surrender of this Contract. It
is your Account Value, plus or minus any applicable Market Value Adjustment, and
less any applicable surrender charges or other charges shown in the Schedule
that are due us but not yet deducted, less any Debt.
"Valuation Date" is the date at the end of a Valuation Period when each Variable
Sub-Account is valued.
Page 12
<PAGE>
"Valuation Period" is the period between one calculation of an Accumulation Unit
value and the next calculation. Normally, we calculate Accumulation Units daily
when the New York Stock Exchange is open for trading and we are open for
business. We can delay this calculation if an emergency exists, making disposal
of or fair valuation of assets in the Variable Account not reasonably
practicable, or the Securities and Exchange Commission (SEC) permits the delay.
We may change when we calculate the Accumulation Unit value by giving you 30
days notice, or such notice as may be required by law.
"Variable Account" is a separate investment account of ours into which purchase
payments may be invested or Account Value may be transferred. The Variable
Account is shown in the Schedule.
"Variable Account Value" is the sum of the value of each Variable Sub-Account on
a Valuation Date.
"Variable Sub-Account" is a division of the Variable Account that invests in
shares of a particular investment portfolio. The value of a Variable Sub-Account
is determined by multiplying (a) times (b) where:
(a) equals the number of Accumulation Units held in the Variable
Sub-Account; and
(b) equals the value of the Accumulation Unit for the Variable
Sub-Account.
"We", "us" or "our" is Sage Life Assurance of America, Inc.
"You" or "your" is the Owner of this Contract. Your name appears in the
Schedule. You are entitled to exercise all rights under this Contract. However,
if you designate an irrevocable beneficiary, you may need that beneficiary's
consent before you exercise your rights under this Contract.
MAKING PURCHASE PAYMENTS
- --------------------------------------------------------------------------------
Initial Purchase Payment - You must make the initial purchase payment in order
to put this Contract in force. The amount of your initial purchase payment is
shown in the Schedule.
Additional Purchase Payments - Subject to our acceptance and the limits
described in the Schedule, additional purchase payments may be made at any time
while this Contract is in force. All purchase payments after the first are
payable at our Customer Service Center.
If additional purchase payments are accepted, they may increase the death
benefit. We reserve the right to require satisfactory evidence of insurability
before accepting any additional purchase payment that increases the death
benefit by more than it increases the Account Value.
Unless specified otherwise, all payments received while a loan is outstanding,
will first be considered as a payment of any loan interest, next as a loan
repayment, and last as an additional purchase payment to this Contract.
Allocation of Purchase Payments Among the Fixed and Variable Accounts - Subject
to limits described in the Schedule, you tell us how to allocate your purchase
payments by notifying us of your choices. You specified how to allocate your
initial purchase payment in your application for this Contract. Initial purchase
payments allocated to the Fixed Account will be invested in Fixed Sub-Accounts
with the Guarantee Periods that you specified in your application. We may,
however, require that an initial purchase payment allocated to a Variable
Sub-Account be invested in the Designated Sub-Account shown in the Schedule
during the Free-Look Period. At the end of the Free-Look Period, if your initial
purchase payment was allocated to the Designated Sub-Account by us, we will
transfer the value of that Designated Sub-Account to the Sub-Account(s) you
specified in your application. For the purpose of processing transfers from the
Designated Sub-Account, the Free-Look Period will be assumed to end 15 days
after the Contract Date.
If you do not tell us how to allocate any additional purchase payments, they
will be allocated in the same manner as your most recent purchase payment.
Page 13
<PAGE>
Grace Period - If the Surrender Value on a Monthly Processing Date is not
sufficient to cover the Monthly Deduction Amount, a grace period of 61 days will
be allowed for you to pay an amount sufficient to cover the Monthly Deduction
Amount due. We will send you a notice at the start of the Grace Period at your
last known address. The Grace Period will end 61 days after we mail you the
notice.
If you do not make the necessary payment by the end of the Grace Period, this
Contract will terminate without value. Subject to the terms and conditions of
this Contract, if the Insured dies during the Grace Period, we will pay the
Death Proceeds.
Reinstatement - If the Grace Period has ended and you have not paid the required
purchase payment and have not surrendered this Contract for its Surrender Value,
you may be able to reinstate this Contract. To do so you must:
1. submit a written request for reinstatement within 3 years after the
end of the Grace Period;
2. provide evidence of insurability satisfactory to us;
3. pay an additional purchase payment equal to at least the minimum
reinstatement payment shown in the Schedule; and
4. repay or reinstate any Debt against this Contract that existed at
the end of the Grace Period.
The effective date of a reinstated Contract will be the Monthly Processing Date
on or next following the date we approve your application for reinstatement and
receive the necessary purchase payment.
If your Contract is reinstated, the Account Value on the date of reinstatement
will be the amount provided by the purchase payment paid. Any applicable charges
will be based on the length of time from the Contract Date to the effective date
of the reinstatement. Unless you have provided otherwise, the allocation of the
Account Value will be based on the allocation instructions in effect at the
start of the Grace Period.
ACCOUNT VALUE
- --------------------------------------------------------------------------------
The Account Value is the entire amount we hold under this Contract for you. It
is equal to the sum of the Variable Account Value, the Fixed Account Value and
the Loan Account Value.
Variable Account Value - On the Contract Date the Variable Account Value for a
Sub-Account is equal to the portion of the initial purchase payment allocated to
the Sub-Account. On each subsequent Valuation Date, it is equal to (a) + (b) -
(c) - (d) - (e), where:
(a) is the Variable Account Value in the Sub-Account on the preceding
Valuation Date multiplied by its net investment factor for the current
Valuation Period;
(b) is the amount of any allocation or transfer to the Sub-Account during
the current Valuation Period;
(c) is the amount of any transfer from the Sub-Account during the current
Valuation Period;
(d) is the amount of any charges allocated to the Sub-Account during the
current Valuation Period; and
(e) is the amount of any withdrawal or loan allocated to the Sub-Account
during the current Valuation Period.
Fixed Account Value - On the Contract Date the Fixed Account Value for a
Sub-Account is equal to the portion of the initial purchase payment allocated to
the Sub-Account. On each subsequent Valuation Date, it is equal to (a) + (b) -
(c) - (d) - (e), where:
(a) is the Fixed Account Value in the Sub-Account on the preceding
Valuation Date multiplied by the daily equivalent of its Guaranteed
Interest Rate earned for the number of days in the current Valuation
Period;
Page 14
<PAGE>
(b) is the amount of any allocation or transfer to the Sub-Account during
the current Valuation Period;
(c) is the amount of any transfer from the Sub-Account during the current
Valuation Period;
(d) is the amount of any charges allocated to the Sub-Account during the
current Valuation Period; and
(e) is the amount of any withdrawal or loan allocated to the Sub-Account
during the current Valuation Period.
The Fixed Account Value is also adjusted for any Market Value Adjustment you
incur that results from a transaction in (b), (c) or (e).
Loan Account Value - Unless you take a loan, the Loan Account Value is zero.
(Amounts you take as a loan are sometimes referred to in this Contract as
amounts you "borrow".) If you take a loan, then on the effective date of the
loan the Loan Account Value is equal to the amount of the loan. On each
subsequent Valuation Date, it is equal to (a) + (b) + (c) - (d) - (e), where:
(a) is the Loan Account Value on the preceding Valuation Date;
(b) is the amount of interest earned (at the Loan Credited Rate shown in
the Schedule) on item (a) during the current Valuation Period;
(c) is any amounts transferred to the Loan Account because of any
additional loans and any due and unpaid loan interest during the
current Valuation Period;
(d) is the amount of any loan repayment you make during the current
Valuation Period; and
(e) is any amount of interest earned on item (a) and transferred to the
Sub-Accounts during the current Valuation Period.
VARIABLE ACCOUNT
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Variable Account - A variable account is an investment account we maintain
separate from our General Account and any other separate investment accounts we
may have. We own the assets in a variable account. A variable account will not
be charged with liabilities that arise from any other business that we conduct.
We may transfer to our General Account assets that exceed the reserves and other
liabilities of a variable account.
A variable account may invest in mutual funds, unit investment trusts and other
investment portfolios. Such a variable account is treated as a unit investment
trust under Federal securities laws and is registered with the SEC under the
Investment Company Act of 1940.
We may offer certain series or variable accounts that may not be registered with
the SEC under the Securities Act of 1933. Any such series or variable account,
if offered, will be described in the applicable offering document.
The Variable Account for this Contract is shown in the Schedule. The laws of our
state of domicile govern this Variable Account.
Variable Sub-Accounts - A unit investment trust variable account includes
variable sub-accounts, each investing in a designated investment portfolio. The
sub-accounts and the investment portfolios in which they invest are specified in
the prospectus or offering document. Income, gains or losses, realized and
unrealized from assets in each variable sub-account are credited to or charged
against that variable sub-account without regard to other income, gains or
losses in the other sub-accounts or our other income, gains or losses.
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Changes Within the Variable Account - We may, from time to time, make additional
Variable Sub-Accounts available to you. These Sub-Accounts will invest in
investment portfolios we find suitable for the Contract. We also have the right
to eliminate Sub-Accounts, to combine two or more Sub-Accounts or to substitute
a new investment portfolio for the portfolio in which a Sub-Account invests.
Such an action may become necessary if, in our judgment, a portfolio or
Sub-Account no longer suits the purposes of the Contract. This may happen due to
a change in laws or regulations, or a change in a portfolio's or Sub-Account's
investment objectives or restrictions, or because the portfolio or Sub-Account
is no longer available for investment, or for some other reason. We will get
prior approval from the insurance department of our state of domicile before
taking such action. If required, this approval process will be on file with the
insurance department of the jurisdiction in which the Contract is delivered. We
will also get any required approval from the SEC and any other required
approvals before taking such an action.
Subject to any required regulatory approvals, we reserve the right to transfer
assets of the Variable Sub-Accounts that we determine to be associated with the
class of Contracts to which the Contract belongs, to another variable account or
variable sub-account.
When permitted by law, we reserve the right to:
1. Deregister the Variable Account under the Investment Company Act of
1940;
2. Operate the Variable Account as a management company under the
Investment Company Act of 1940, if it is operating as a unit investment
trust;
3. Operate the Variable Account as a unit investment trust under the
Investment Company Act of 1940, if it is operating as a Managed
Separate Account;
4. Restrict or eliminate any voting rights of Owners, or other persons who
have voting rights as to the Variable Account;
5. Combine the Variable Account with other separate investment accounts;
and
6. Combine a Variable Sub-Account with another Variable Sub-Account.
If any actions we take result in a material change in the underlying investments
of a Variable Sub-Account in which you are invested, we will notify you of the
change. You may then choose a new Sub-Account.
Accumulation Units - We keep track of the value of each of your Variable
Sub-Accounts by the number of Accumulation Units in that Sub-Account.
Accumulation Units are credited to a Sub-Account when a purchase payment is
allocated to that Sub-Account or when an amount is transferred to that
Sub-Account. Accumulation Units will be canceled from a Sub-Account when amounts
are transferred from a Sub-Account or on payment of death proceeds, a
withdrawal, a loan, a surrender, or assessment of charges shown in the Schedule
(other than the variable sub-account charges). The number of Accumulation Units
credited to or canceled from a Sub-Account in a transaction is determined by
dividing (a) by (b) where:
(a) is the dollar amount of the transaction; and
(b) is the value of the Accumulation Unit for that Sub-Account for the
Valuation Date for that transaction.
Value of Accumulation Units - The Accumulation Unit value for any Valuation
Period is determined by multiplying (a) by (b) where:
(a) is the Accumulation Unit value for the immediately preceding Valuation
Period; and
(b) is the "net investment factor" for the Variable Sub-Account for the
Valuation Period for which the value is being determined.
The value of an Accumulation Unit may increase, decrease or remain the same from
one Valuation Period to the next.
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Net Investment Factor - The net investment factor for a Variable Sub-Account is
an index that measures the investment performance of that Sub-Account from one
Valuation Period to the next. The net investment factor for any Valuation Period
is determined by dividing (a) by (b) and then subtracting (c) where:
(a) is the net result of:
(i) the Net Asset Value per share of the investment portfolio
share in which the Sub-Account invests determined at the end
of the current Valuation Period; plus
(ii) the per share amount of any dividend or capital gains
distribution made by that investment portfolio on shares
held in the Sub-Account if the "ex-dividend" date occurs
during the current Valuation Period; and plus or minus
(iii) a per share charge or credit for any taxes reserved for,
which is determined by us to have resulted from the
operations of that Sub-Account;
(b) is the Net Asset Value per share of the investment portfolio
share in which the Sub-Account invests determined at the end of
the immediately preceding Valuation Period; and
(c) is the daily variable sub-account charges shown in the Schedule
(adjusted for the number of days in the Valuation Period).
The net investment factor may be more or less than, or equal to, one.
FIXED ACCOUNT
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Fixed Account - The Fixed Account is a separate investment account under state
insurance law. It is maintained separate from our General Account and separate
from any other separate investment account that we may have. We own the assets
in the Fixed Account. Notwithstanding the foregoing, our obligations under (and
the values and benefits under) the Fixed Account option of this Contract do not
vary as a function of the investment performance of the Fixed Account. Owners
and Beneficiaries with rights under this Contract do not participate in the
investment gains or losses of the assets of the Fixed Account. Such gains or
losses accrue solely to us. We retain the risk that the value of the assets in
the Fixed Account may fall below the reserves and other liabilities that we must
maintain in connection with our obligations under the Fixed Account option of
this Contract. In such event, we will transfer assets from our General Account
to the Fixed Account to make up the difference. The Fixed Account will not be
charged with liabilities that arise from any other business that we conduct. We
may transfer to our General Account assets that exceed the reserves and other
liabilities of the Fixed Account. The Fixed Account is not required to be
registered with the SEC as an investment company under the Investment Company
Act of 1940.
Fixed Sub-Account - We will establish a separate Fixed Sub-Account for you each
time you allocate amounts to the Fixed Account. Amounts invested in these Fixed
Sub-Accounts earn interest at the Guaranteed Interest Rate in effect on the date
the amounts are allocated.
Guarantee Periods - Each Fixed Sub-Account is guaranteed an interest rate for a
period we refer to as a Guarantee Period. The Guaranteed Interest Rate for a
Fixed Sub-Account is effective for the entire Guarantee Period. The length of a
Guarantee Period is measured from the end of the calendar month in which the
amount is allocated to the Fixed Sub-Account. The last day of the Guarantee
Period is its Expiry Date. Surrender, or withdrawals, or transfers, or loans
from all or part of a Fixed Sub-Account made prior to the Expiry Date of a
Guarantee Period may be subject to a Market Value Adjustment.
We will notify you at least thirty days prior to an Expiry Date of your options
for renewal, which include:
1. electing a new Guarantee Period from among those then offered by
us; or
2. transferring the value of the Fixed Sub-Account to one or more
Variable Sub-Accounts.
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If we do not receive Satisfactory Notice prior to the Expiry Date, we will
transfer the value of the expiring Fixed Sub-Account to a Fixed Sub-Account with
the same Guarantee Period, but not longer than 5 years. The transfer will be
effective as of the Expiry Date of the previous Guarantee Period.
Guaranteed Interest Rates - Periodically, we will declare Guaranteed Interest
Rates for then available Guarantee Periods. These rates will be guaranteed for
the duration of the respective Guarantee Periods. Guaranteed Interest Rates will
never be less than the Minimum Guaranteed Interest Rate shown in the Schedule.
Market Value Adjustment - A Market Value Adjustment may be applied to surrender,
withdrawals, transfers or loans when taken from a Fixed Sub-Account other than
the thirty-day period prior to its Expiry Date. A Market Value Adjustment is
applied separately to each Fixed Sub-Account.
A Market Value Adjustment is determined by multiplying the amount surrendered,
withdrawn, transferred or borrowed by the following factor:
N/365
[(1+I) / (1+J+.0025)] - 1
Where:
o I is the Index Rate for a maturity equal to the Fixed
Sub-Account's Guarantee Period;
o J is the Index Rate for a maturity equal to the time remaining
(rounded up to the next full year) in the Fixed Sub-Account's
Guarantee Period; and
o N is the remaining number of days in the Guarantee Period at the
time of calculation.
If there is no Index Rate for the maturity needed to calculate I or J, straight
line interpolation between the Index Rate of the next highest and next lowest
maturities will be used to determine that Index Rate. If the maturity is one
year or less, we will use the Index Rate for a one-year maturity.
Market Value Adjustments will be applied as follows:
1. For a surrender, withdrawal, transfer or loan, the Market Value
Adjustment will be calculated on the total amount that must be
surrendered, withdrawn, transferred or borrowed in order to
provide the amount requested.
2. If the Market Value Adjustment is negative, it is deducted from
any remaining value in the Fixed Sub-Account or amount
surrendered. Any remaining Market Value Adjustment is deducted
from the amount withdrawn, transferred or borrowed.
3. If the Market Value Adjustment is positive, it is added to any
remaining value in the Fixed Sub-Account or amount surrendered.
If the full amount of the Fixed Sub-Account is withdrawn,
transferred or borrowed, the Market Value Adjustment is added to
the amount withdrawn, transferred or borrowed.
TRANSFERS AMONG ACCOUNTS
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While this Contract is in force, you may transfer your Account Value among
Sub-Accounts. Certain restrictions may apply during the Free-Look Period. To
make a transfer, you must give us Satisfactory Notice. Transfers generally take
effect on the Valuation Date we receive the notice. The number of free transfers
that we allow each Contract Year is shown in the Charges section of the
Schedule. Restrictions for transfers are shown in the Schedule. A transfer from
a Fixed Sub-Account may be subject to a Market Value Adjustment.
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SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE
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While this Contract is in force, you may withdraw all or part of your Account
Value by giving us Satisfactory Notice. The minimum withdrawal is shown in the
Schedule.
When a partial withdrawal is made, we will reduce the Account Value by the
amount of the partial withdrawal. We will also reduce the Insurance Amount in
proportion to the reduction in the Account Value that results from the partial
withdrawal (including any associated surrender charge and Market Value
Adjustment incurred).
If you request a surrender, we will terminate your Contract and pay you the
Surrender Value. This amount may also be applied to a Settlement Option, subject
to any restrictions described in this Contract. Unless specified otherwise, we
will make partial withdrawals as described in the Schedule. Surrender and
withdrawals generally take effect on the date we receive Satisfactory Notice.
If you make a withdrawal from your Contract in excess of the Free Withdrawal
Amount described in the Schedule, a surrender charge may be assessed. Surrender
charges are described in the Schedule. A withdrawal from the Fixed Account may
also be subject to a Market Value Adjustment.
Excess Withdrawals - If a partial withdrawal is made for an amount greater than
the Free Withdrawal Amount, a surrender charge may be applicable. For purposes
of calculating the surrender charge only, purchase payments will be liquidated
in whole or in part on a "first-in-first-out-basis." This means we liquidate
purchase payments in the order they were made: the oldest unliquidated purchase
payment first, the next oldest unliquidated purchase payment second, etc. until
all purchase payments have been liquidated.
The surrender charge as to any liquidated purchase payment is determined by
multiplying the amount of the purchase payment being liquidated by the
applicable percentage shown in the Schedule. The total surrender charge will be
the sum of the surrender charges for each purchase payment being liquidated.
In a partial withdrawal, the surrender charge is deducted from the Account Value
remaining after you are paid the amount requested. The amount requested from a
Sub-Account may not exceed the value of that Sub-Account less any applicable
surrender charge. In a complete withdrawal (or surrender of this Contract), it
is deducted from the amount otherwise payable.
BORROWING PART OF YOUR ACCOUNT VALUE
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While this Contract is in force and after the Free-Look Period, you may request
a loan by giving us Satisfactory Notice. Unless specified otherwise, an amount
equal to the loan will be transferred from the Sub-Accounts to the Loan Account
in proportion to the Account Value in each Sub-Account in which you are invested
as of the date we process the loan. This Contract will be the only security we
require for the loan. The minimum loan amount is also shown in the Schedule. A
loan may be a taxable event and may affect the amount of the Death Proceeds
payable under this Contract.
Maximum Loanable Value - The maximum loanable value is shown in the Schedule.
The amount of the loan and all existing loans may not be more than the maximum
loanable value as of the loan date. The loan date is the date we process the
loan.
If on any Valuation Date where there is Debt outstanding and the Surrender Value
is negative, we will send you an overloan notice at your last known address. You
will then have 61 days from the date we send the notice to avoid termination by
paying us at least the minimum repayment amount listed in the notice.
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Loan Repayment - All or part of a loan may be repaid to us at any time while
this Contract is in force during the Insured's lifetime. The minimum loan
repayment amount is shown in the Schedule. If the Grace Period has expired and
this Contract has terminated, any Debt that exists at the end of the Grace
Period may not be repaid unless the Contract is reinstated.
Unless specified otherwise, an amount equivalent to a loan repayment will be
transferred from the Loan Account to the Sub-Accounts in proportion to the
Account Value in each Sub-Account in which you are invested.
Loan Interest - Interest on the loan accrues daily at the Loan Interest Rate
shown in the Schedule. It is due on each Contract Anniversary. If loan interest
is not paid when due, the difference between the Loan Account and Debt will be
transferred from the Sub-Accounts to the Loan Account in proportion to the
Account Value in each Sub-Account in which you are invested.
Effects of a Loan - A loan will be transferred from the Sub-Accounts to the Loan
Account. Any loan interest that becomes due and is not paid will also be so
transferred. A repayment or loan interest payment will be transferred from the
Loan Account into the Sub-Accounts. Amounts transferred to the Loan Account will
earn interest daily at the Loan Credited Rate shown in the Schedule from the
date of transfer.
Since the amount you borrow is transferred from the Sub-Accounts, a loan whether
or not repaid, will have a permanent effect on the Surrender Value and may have
a permanent effect on the death benefit. The effect may be favorable or
unfavorable. This is true whether you repay the loan or not. If not repaid, the
loan will reduce the amount of Death Proceeds.
CHARGES
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Monthly Deduction Amount - The Monthly Deduction Amount is deducted on each
Monthly Processing Date. It is equal to (a) + (b) + (c) + (d), where:
(a) is the cost of insurance charge described below;
(b) is the asset-based charges described in the Schedule;
(c) is the cost of any riders for which a separate charge is shown in
the Schedule; and
(d) is any other applicable charge shown in the Schedule.
Monthly Deduction Amount on a Contract Anniversary - On a Monthly Processing
Date that is also a Contract Anniversary, the Monthly Deduction Amount is equal
to (a) + (b), where:
(a) is the Monthly Deduction Amount as described above; and
(b) is the administration charge shown in the Schedule.
Cost of Insurance Charge - The maximum monthly cost of insurance charge is equal
to (a) times (b) and then divided by (c), where:
(a) is the Maximum Cost of Insurance Rate per $1,000 shown in the
Table in the Schedule;
(b) is an amount equal to the death benefit minus the Account Value;
and
(c) is $1,000.
The actual monthly cost of insurance charge may be less than, but never more
than, the maximum monthly cost of insurance charge.
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OWNER AND BENEFICIARY
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The Owner - You are the Owner of this Contract. You are also the Insured unless
another Insured has been named in the application and is shown in the Schedule.
You have the rights and options described in this Contract while the Insured is
living and this Contract is in force. One or more people may own this Contract.
The Beneficiary - We pay the Death Proceeds to the primary Beneficiary. If the
primary Beneficiary dies before the Insured, we pay the Death Proceeds to the
Contingent Beneficiary, if any. If there is no surviving Beneficiary, we pay the
Death Proceeds to the Owner's estate.
One or more persons may be named as primary Beneficiary or Contingent
Beneficiary. We will assume any Death Proceeds are to be paid in equal shares to
the multiple surviving Beneficiaries, unless you specify otherwise.
You have the right to change Beneficiaries. However, if you designate the
primary Beneficiary as irrevocable, you may need the consent of that Beneficiary
to exercise the rights and options under this Contract.
Change of Owner or Beneficiary - During your lifetime and while this Contract is
in force you can transfer ownership of this Contract or change the Beneficiary.
To make any of these changes, you must send us Satisfactory Notice. If accepted,
any change in Owner or Beneficiary will take effect on the date you signed the
notice. Any of these changes will not affect any payment made or action taken by
us before our acceptance. A change of Owner may be a taxable event.
DEATH PROCEEDS
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Death Benefit - If the Insured dies while this Contract is in force, the death
benefit will be the greater of (a) or (b), where:
(a) is the Insurance Amount on the date of death; and
(b) is the Minimum Death Benefit on the date of death.
However, if the state in which this Contract is issued does not allow us to
deduct a cost of insurance charge on or after the Contract Anniversary when the
Insured reaches age 100, the death benefit thereafter will be limited to (b)
above.
Minimum Death Benefit - To ensure that this Contract continues to qualify as
life insurance under the Internal Revenue Code of 1986, as amended (the "Code"),
we will also calculate a Minimum Death Benefit for each Valuation Date. The
Minimum Death Benefit on a Valuation Date is equal to (a) times (b), where:
(a) is the Account Value plus any positive Market Value Adjustment on
the Valuation Date; and
(b) is the Minimum Death Benefit Percentage shown in the Table in the
Schedule.
Death Proceeds - The actual amount payable to the Beneficiary if the Insured
dies while this Contract is in force is called the Death Proceeds. The Death
Proceeds are equal to (a) + (b) - (c) - (d) - (e), where:
(a) is the death benefit described above;
(b) is any insurance on the Insured's life that may be provided by
riders to this Contract;
(c) is any Debt;
(d) is any due and unpaid Monthly Deduction Amount accruing during
the Grace Period; and
(e) is any Contract values previously paid pursuant to any riders
attached to this Contract.
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We will pay the Death Proceeds to the Beneficiary after we receive satisfactory
proof of death. The Death Proceeds will be adjusted under certain conditions.
Refer to the Incontestability, Suicide, and Misstatement of Age or Sex
provisions.
You may choose to have the Death Proceeds paid in one sum, in which case this
Contract will terminate, or under a Settlement Option. If you have not made a
choice before the Insured dies, the Beneficiary may make this choice. Unless you
or the Beneficiary specify otherwise, we reserve the right to pay the Death
Proceeds in one sum within 90 days after we receive satisfactory proof of death.
Proof of Death - Satisfactory proof of death must be received at our Customer
Service Center before we will pay any Death Proceeds. We will accept one of the
following items:
1. An original certified copy of an official death Contract, or
2. An original certified copy of a decree of a court of competent
jurisdiction as to the finding of death, or
3. Any other proof satisfactory to us.
Insurance Amount Increases - Payment of additional purchase payments may require
us to increase the Insurance Amount so that this Contract continues to qualify
as life insurance under the Code. We reserve the right to require satisfactory
evidence of insurability for any increase in the Insurance Amount. In addition,
we reserve the right to require that your risk class be identical to that on the
Contract Date.
GENERAL PROVISIONS
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Application - All statements made in an application for this Contract are
considered representations and not warranties. We have issued this Contract
based on the statements made in any such application and we rely on such
statements to be true and complete. No such statement will be used to void the
coverage under this Contract or to deny a claim unless that statement is a
material misrepresentation.
Assignment - You may assign this Contract at any time while the Insured is
living and this Contract is in force. No assignment will be binding on us unless
we receive Satisfactory Notice. We will not be liable for any payments made or
actions we take before we accept the assignment. An absolute assignment will
revoke the interest of any revocable Beneficiary. We will not be responsible for
the validity of any assignment. An assignment may be a taxable event.
Claims of Creditors - To the extent permitted by law, no benefits payable under
this Contract will be subject to the claims of creditors.
Entire Contract - This Contract including any attached riders, endorsements,
amendments and the initial and any subsequent applications for a change in
coverage attached to this Contract constitutes the entire contract between you
and us.
Misstatement and Proof of Age or Sex - If the age or sex of the Insured has been
misstated, the benefits under this Contract will be those which the initial
purchase payment and any additional purchase payments would have provided for
the correct age and sex.
No Dividends Payable - This Contract is non-participating and does not share in
any distribution of our surplus. We will not pay any dividends.
Incontestability - We will not contest the payment of the Death Proceeds based
upon the initial purchase payment after this Contract has been in force during
the Insured's lifetime for two years from the Issue Date.
For any increase in Insurance Amount requiring evidence of insurability, we will
not contest payment of the Death Proceeds based on such an increase after it has
been in force during the Insured's lifetime for two years from its effective
date.
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Suicide - If the Insured dies by suicide, while sane or insane, within two years
from the Issue Date, we will not pay the Death Proceeds normally payable on the
Insured's death. Instead, we will limit the death benefit to the Account Value
as of the date we receive proof of death, and Death Proceeds will otherwise be
calculated in the usual manner.
If the Insured dies by suicide, while sane or insane, within two years of any
date we receive and accept an additional purchase payment, any amount of death
benefit that would not be payable except for the fact that the additional
purchase payment was made will be limited to the amount of such payment.
Required Reports - We will furnish a report to you as often as required by law,
but at least once in each Contract Year that this Contract is in force. The
report will show the number of Accumulation Units credited to each Variable
Sub-Account in which you are invested and the corresponding Accumulation Unit
value as of the date of the report. It will also show your Fixed Account Value.
The report will also include any other information required by the laws and
regulations of the jurisdiction in which this Contract is delivered.
Changes in Contract Cost Factors - Changes in cost of insurance rates, credited
interest rates, or other Contract expense charges will be applied on a uniform
basis for insureds of the same sex, attained age and risk class whose Contracts
have been in force for the same length of time. Changes in these nonguaranteed
elements will be based on changes in future expectations for factors such as
investment earnings, mortality, persistency, expenses and taxes. Any changes
will be determined in accordance with the procedures on file, if required, with
the insurance regulator in the state in which this Contract was delivered.
Taxes Based Upon Purchase Payments or Value - If there is a law or change in law
assessing taxes against us based upon purchase payments or value of this
Contract, we reserve the right to charge you and all similarly situated Owners
proportionately for that tax. This would include a tax based upon our realized
net capital gains in the Variable Sub-Accounts and on earnings in the Fixed
Account, on which we are not currently taxed.
Payments We May Defer - We may not be able to determine the value of the assets
of the Variable Sub-Accounts because:
1. The New York Stock Exchange is closed for trading, or trading on
the New York Stock Exchange is restricted;
2. The SEC determines that a state of emergency exists; or
3. An order or pronouncement of the SEC permits a delay for the
protection of Owners.
If this happens, we may delay:
1. Determination and payment of the Surrender Value or any
withdrawal;
2. Determination and payment of any death benefit;
3. Transfers of the Account Value; or
4. Granting of any loan.
We reserve the right to delay payment or transfer of amounts from the Fixed
Account for up to six months. If deferred 30 days or more, the amount deferred
will earn interest at a rate not less than the Minimum Deferral Interest Rate
shown in the Fixed Account section of the Schedule.
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We may also defer payments for any amount attributable to a purchase payment
made in the form of a check for a reasonable amount of time (not to exceed 15
days) to permit the check to clear.
Authority to Make Agreements - All agreements made by us must be signed by one
of our officers. No other person, including an insurance agent or broker, can
change the terms of this Contract or make any agreement binding on us.
Required Note on Our Computations - We have filed a detailed statement of our
computations with the insurance supervisory official in the appropriate
jurisdictions. The values are not less than those required by the law of that
state or jurisdiction. Any benefit provided by an attached rider will not
increase these values unless otherwise stated in that rider.
SETTLEMENT OPTIONS
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The Surrender Value or Death Proceeds may be paid in a single sum or under one
of our Settlement Options. If the amount available to apply under any Variable
or Fixed Settlement Option is less than the minimum amount shown in the
Schedule, we reserve the right to require that such amount be paid in a lump
sum.
If at any time payments under the Settlement Option become less than the minimum
payment shown in the Schedule, we reserve the right to reduce the frequency of
payment to an interval that results in each payment being at least equal to the
minimum payment. In no event will the interval be less frequent than annual.
At the time you elect the Settlement Option, you may also elect to have the
Account Value applied to provide Variable Payments, Fixed Payments, or a
combination of both. Unless you specify otherwise, we will provide either
variable or fixed payments, or a combination of variable and fixed payments in
proportion to the Sub-Accounts in which you are invested as of a date not more
than 5 Valuation Days before the due date of the first payment.
Once payments have begun under a Settlement Option, we reserve the right to
disallow further changes without our prior approval.
We may require proof of age, sex or survival of any person upon whose age, sex
or survival any payments depend. If the age or sex of a Payee has been
misstated, the amount payable will be the amount that the Surrender Value or
Death Proceeds would have provided for the correct age and sex. If we have made
incorrect payments, the amount of any underpayment will be paid immediately. The
amount of any overpayment will be deducted from future payments until the amount
of the overpayment is repaid.
VARIABLE PAYMENTS
Amount of First Variable Payment - The Settlement Option Tables shown in the
Schedule are used to determine the first monthly variable payment for an assumed
investment rate of 3%. The Settlement Option Tables show the dollar amount of
the first monthly variable payment that can be purchased with each $1,000
applied. The assumed investment rates we currently allow are shown in the
Schedule.
Value of Income Units - The Income Unit value for any Valuation Period is
determined by multiplying (a) by (b), and then dividing by (c) where:
(a) is the Income Unit value for the immediately preceding Valuation
Period;
(b) is the "net investment factor" for the Variable Sub-Account for
the Valuation Period for which the value is being determined; and
(c) is the daily equivalent of the assumed investment rate for the
number of days in the Valuation Period.
The value of an Income Unit may increase, decrease or remain the same from one
Valuation Period to
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the next.
Number of Income Units - We determine the number of Income Units in each
Variable Sub-Account by dividing the first monthly variable payment attributable
to that Sub-Account by its Income Unit value as of a date not more than 5
Valuation Days before the due date of the first variable payment.
Amount of Second and Subsequent Variable Payments - The dollar amount of the
second and subsequent variable payments may change with the investment
performance of the Variable Sub-Accounts. The total amount of each variable
payment will be equal to the sum of the variable payments in each Variable
Sub-Account. The dollar amount of each payment for a Variable Sub-Account is
determined by multiplying the number of Income Units by the Income Unit value
for the Variable Sub-Account for the Valuation Period which ends on a
consistently applied date not more than 5 Valuation Days before the payment is
due.
We guarantee that the dollar amount of each payment after the first will not be
affected by variations in our expenses or mortality experience.
Exchange of Income Units - If there is an exchange of value of a designated
number of Income Units of particular Variable Sub-Accounts into other Income
Units, the value will be such that the dollar amount of payment made on the date
of exchange would be unaffected by the exchange.
FIXED PAYMENTS
Fixed Payments are payments that remain fixed as to dollar amount throughout the
payment period. The Settlement Option Tables shown in the Schedule are used to
determine the monthly fixed payment. The Settlement Option Tables show the
dollar amount of the monthly fixed payment that can be purchased with each
$1,000 applied.
SETTLEMENT OPTIONS
The following list of Settlement Options or any option acceptable to us may be
elected.
Option 1 - Payments for Life: Payments during the lifetime of the Payee and
terminating with the last payment preceding the death of the Payee.
Option 2 - Payments for Life with 10 or 20 Years Guaranteed: Payments during the
lifetime of the Payee with the guarantee that payments will be made for a
minimum of 10 or 20 years, as elected. If at the death of the Payee, payments
have been made for less than the guaranteed number of years elected, payments
will be made to the Beneficiary for the remainder of the guaranteed number of
years elected.
Option 3 - Joint and Last Survivor Payments: Payments during the joint lifetime
of the Payee and a designated second person, and thereafter during the remaining
lifetime of the survivor, ceasing with the last payment prior to the death of
the survivor.
Option 4 - Payments for a Fixed Period: An amount payable for the number of
years selected which may be from 5 to 30 years. If the Payee dies before the end
of the period selected, payments will be continued to the Beneficiary for the
remainder of the selected period.
Page 25
<PAGE>
[LOGO OF SAGE LIFE APPEARS HERE]
------------------------------------
SAGE LIFE ASSURANCE OF AMERICA, INC.
Member of Sage Insurance Group, Inc.
MODIFIED SINGLE PAYMENT COMBINATION FIXED AND VARIABLE LIFE INSURANCE CONTRACT
Limited purchase payment flexibility
Death benefit payable at Insured's death while this Contract is in force
Nonparticipating
<PAGE>
EXHIBIT 1A(5)(a)(ii)
[LOGO OF SAGE LIFE APPEARS HERE]
--------------------------------------
SAGE LIFE ASSURANCE COMPANY OF AMERICA
Member of Sage Insurance Group, Inc.
A Stock Company
Home Office Customer Service Center
300 Atlantic Street [P.O. Box 290680
Stamford, CT 06901 Wethersfield, CT 06109]
[1-877-TEL-SAGE]
PLEASE READ THIS CONTRACT CAREFULLY. This Contract is a legal contract between
the Owner (you) and Sage Life Assurance of America, Inc. You have the rights
described in the Contract. We agree to pay the Death Proceeds to the
Beneficiary upon receipt of proof that an Insured died while coverage under this
Contract is in force.
RIGHT TO EXAMINE THIS CONTRACT:
If for any reason you are not satisfied with this Contract, you may return it to
us or the agent who sold it to you within 10 days after you receive it (the
Free-Look Period). When we receive the returned Contract at our Customer
Service Center, we will promptly refund you the Account Value plus any charges
shown in the Schedule that we have deducted from the Account Value on or before
the date the returned Contract was received by us at our Customer Service
Center, or if greater and required by the law of your state, the initial
purchase payment (minus any withdrawals).
The amount and duration of the death benefit and all payments and values, when
based on the investment experience of the Variable Account, may increase or
decrease, depending on this Contract's investment results and are not guaranteed
as to dollar amount. All payments and values based on the Interest Account may
be subject to a Market Value Adjustment, the operation of which may cause such
payments and values to increase or decrease.
/s/
Chairman
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
Limited purchase payment flexibility
Death benefit payable at Insured's death while this Contract is in force
Nonparticipating
<PAGE>
TABLE OF CONTENTS
SCHEDULE................................................................. 3
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES PER $1,000.. 8
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES PER $1,000.. 9
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES.............................. 10
DEFINITIONS.............................................................. 11
MAKING PURCHASE PAYMENTS................................................. 13
ACCOUNT VALUE............................................................ 14
VARIABLE ACCOUNT......................................................... 15
INTEREST ACCOUNT......................................................... 17
TRANSFERS AMONG ACCOUNTS................................................. 19
SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE.................. 19
BORROWING PART OF YOUR ACCOUNT VALUE..................................... 19
CHARGES.................................................................. 20
OWNER AND BENEFICIARY.................................................... 21
DEATH PROCEEDS........................................................... 21
GENERAL PROVISIONS....................................................... 22
SETTLEMENT OPTIONS....................................................... 24
Page 2
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE
<S> <C> <C>
Contract No.:
Owner: Issue Date:
Insured: Contract Date:
Issue Age/Sex: Initial Purchase Payment $
Risk Class: Initial Insurance Amount: $
</TABLE>
This Schedule sets forth additional information that relates to the provisions
in this Contract with the corresponding headings.
MAKING PURCHASE PAYMENTS
Additional purchase payments may be made at any time and in any amount necessary
to avoid termination of this Contract. Other additional purchase payments may
be made at any time after the [first] Contract Anniversary, subject to the
following conditions:
1. each additional purchase payment must be at least [$250];
2. only one purchase payment may be paid in any Contract Year;
3. the attained age of the Insured must be less than [81]; and
4. our prior approval is required before you make a purchase payment
that causes the Account Value of all single payment or modified
single payment Contracts that you maintain with us to exceed
[$1,000,000].
We reserve the right to require satisfactory evidence of insurability before we
accept any additional purchase payment that increases the death benefit by more
than it increases the Account Value.
The minimum reinstatement payment is the minimum purchase payment for which we
would then issue a Contract based upon the Insured's attained age and risk class
as of the effective date of the reinstated Contract.
No purchase payment, whether initial or additional, may be allocated such that
any Sub-Account would have a value less than [$250].
The Designated Sub-Account is the [Money Market Sub-Account].
VARIABLE ACCOUNT
The Variable Account for this Contract is [The Sage Variable Life Account A].
[It is a unit investment trust variable account].
Page 3
<PAGE>
INTEREST ACCOUNT
The Interest Account for this Contract is [The Sage Fixed Interest Account A].
The Minimum Guaranteed Interest Rate is [3%].
The Minimum Deferral Interest Rate is [3%].
Index Rate: [The Index Rate is the U.S. Treasury Constant Maturity Series as
reported in Federal Reserve Bulletin Release H.15. We currently base the Index
Rate for a calendar week on the reported rate for the preceding calendar week.
We reserve the right to set it less frequently but in no event less often than
monthly.]
TRANSFERS AMONG ACCOUNTS
The minimum amount that can be transferred is [$250]. However, if less remains
in a Sub-Account, that amount may be transferred. If a transfer request would
reduce the Account Value remaining in a Sub-Account below [$250], we will treat
the transfer request as a request to transfer the entire amount.
Your transfer request must clearly state the Sub-Accounts from which and to
which transfers are to be made.
We reserve the right to limit, upon notice, the maximum number of transfers you
may make to [one] per calendar month or [12] per Contract Year.
Under a Settlement Option, we reserve the right to:
1. disallow transfers from the Interest Account to the Variable
Account, or from the Variable Account to the Interest Account; and
2. limit the maximum number of transfers between Variable Sub-
Accounts to [1] per Contract Year.
SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE
The Free Withdrawal Amount is the greater of (a) and (b) where:
[(a) is the excess of 10% of the total purchase payments over 100% of
all prior withdrawals including any associated surrender charges
and Market Value Adjustment incurred in that Contract Year; and
(b) is the excess of the Account Value on the date of withdrawal over
the unliquidated purchase payments.]
The minimum amount that can be withdrawn is [$250]. If a withdrawal request
would reduce the Account Value remaining in a Sub-Account below [$250], we will
treat the withdrawal request as a request to withdraw the entire amount.
If a requested withdrawal would reduce the Account Value below [$5,000], we
reserve the right to treat the request as a withdrawal of only the excess over
[$5,000].
Unless you specify otherwise, we will make withdrawals [proportionately from all
Sub-Accounts in which you are invested].
Page 4
<PAGE>
BORROWING PART OF YOUR ACCOUNT VALUE
The maximum loanable value is [90% of the Account Value less any surrender
charge less any due and unpaid Monthly Deduction Amount], adjusted for any
Market Value Adjustment.
The minimum loan amount is [$250].
The Loan Interest Rate is [6%].
The minimum loan repayment amount is [$250].
The Loan Credited Rate is a minimum of [4%]. We may credit a higher rate to
that portion of the Loan Account equal to the Free Withdrawal Amount.
CHARGES
Surrender Charge - A surrender charge may be imposed upon surrender of this
Contract or when an Excess Withdrawal is made. The surrender charge is applied
to each purchase payment and is a percentage of each purchase payment as
follows:
Maximum
Contract Surrender Charge
Year Percentage
---- ----------
1 9%
2 9%
3 8%
4 7%
5 6%
6 5%
7 3%
8+ 0%
Transfer Charge - We reserve the right to charge a maximum of [$25] for each
transfer after the [12th] in a Contract Year. Each request is considered to be
one transfer regardless of the number of Sub-Accounts affected by the transfer.
The transfer charge will be deducted proportionately from all Sub-Accounts from
which transfers are made.
Administration Charge - [$40] a year. This charge is incurred at the beginning
of each Contract Year and deducted on each Contract Anniversary or upon
surrender. The charge will be waived:
. if the Account Value is at least [$50,000] at the time of deduction; or
. beginning on and after the [8th] Contract Anniversary.
Page 5
<PAGE>
Asset-Based Charges We deduct asset-based charges from your Account Value to
compensate us for assuming mortality and expense risks, certain administrative
expenses, certain distribution costs and certain state and Federal tax expenses.
Asset-based charges are calculated as a percentage of the Account Value on the
date of deduction. On the Contract Date, and monthly thereafter, the asset-
based charges are deducted in proportion to the Sub-Accounts in which you are
invested. The maximum charges are:
Asset-Based Charges Annual Charge Monthly Charge
------------------- ------------- --------------
Contract Years 1-10 [1.80% .150000%
Contract Years 11+ 1.30% .108333%]
We also reserve the right to deduct asset-based charges on the effective date of
any allocation of purchase payment to the Sub-Accounts, based on the amount
allocated, and based on the number of days remaining until the next date of
deduction.
Variable Sub-Account Charges If proceeds are applied to a Settlement Option, we
will deduct the asset-based charges above from the assets in each Variable Sub-
Account supporting Variable Payments on a daily basis rather than as described
above. The maximum charges are:
Variable Sub-Account Charges Annual Charge Daily Charge
---------------------------- ------------- ------------
Contract Years 1-10 [1.80% .0049763%
Contract Years 11+ 1.30% .0035849%]
Charge Deduction Rules Unless specified above, charges are deducted from the
Account Value [proportionately from all Sub-Accounts in which you are invested].
SETTLEMENT OPTIONS
The minimum amount that can be applied under any Variable or Fixed Payment is
[$5,000].
The minimum payment is [$100].
We currently allow assumed investment rates of [3%] and [6%].
RIDERS
Accelerated Death Benefit Rider
The maximum Accelerated Benefit Amount is 50% of the Insurance Amount, but not
greater than $500,000.
Accidental Death Benefit Rider
The maximum Accidental Death Benefit Amount is [$250,000].
Change of Insured Rider
The minimum Attained Ages of the original and new Insureds as of the effective
date of change must be [25].
The maximum Attained Ages of the original and new Insureds as of the effective
date of change is [75].
The maximum Change of Insured Rider charge is [$1.50] per $1,000 of death
benefit.
Page 6
<PAGE>
Settlement Option Tables
Values for other ages, and for other payment periods, joint life combinations,
or assumed investment rates that we offer (Tables below assume 3%) are available
on request. Monthly payments are shown for each $1,000 applied.
Settlement Option Table for a Fixed Period
<TABLE>
<CAPTION>
Fixed Period Monthly Fixed Period Monthly Fixed Period Monthly
of Years Payment of Years Payment of Years Payment
--------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
11 $8.88 21 $5.33
12 8.26 22 5.16
13 7.73 23 5.00
14 7.28 24 4.85
5 $17.95 15 6.89 25 4.72
6 15.18 16 6.54 26 4.60
7 13.20 17 6.24 27 4.49
8 11.71 18 5.98 28 4.38
9 10.56 19 5.74 29 4.28
10 9.64 20 5.53 30 4.19
</TABLE>
Settlement Option Table for Life
<TABLE>
<CAPTION>
Male/Female Male/Female Male/Female
Age Life Only 10 Years Guaranteed 20 Years Guaranteed
--- --------- ------------------ -------------------
<S> <C> <C> <C>
50 $4.28 / 3.92 $4.24 / 3.90 $4.10 / 3.84
55 4.72 / 4.27 4.64 / 4.24 4.40 / 4.12
60 5.31 / 4.74 5.17 / 4.68 4.73 / 4.45
65 6.13 / 5.38 5.84 / 5.25 5.04 / 4.81
70 7.28 / 6.29 6.65 / 6.00 5.29 / 5.14
75 8.90 / 7.62 7.53 / 6.92 5.43 / 5.37
80 11.19 / 9.62 8.37 / 7.93 5.50 / 5.48
85 14.36 / 12.63 9.00 / 8.77 5.52 / 5.52
</TABLE>
Page 7
<PAGE>
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES PER $1,000
MALE - STANDARD RISK CLASS
<TABLE>
<CAPTION>
Attained Monthly Attained Monthly Attained Monthly Attained Monthly
Age Rate Age Rate Age Rate Age Rate
--- ---- --- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C>
0 0.2194 25 0.1460 50 0.5852 75 5.7847
1 0.0859 26 0.1434 51 0.6381 76 6.3595
2 0.0825 27 0.1426 52 0.6968 77 6.9577
3 0.0809 28 0.1418 53 0.7640 78 7.5852
4 0.0775 29 0.1434 54 0.8380 79 8.2619
5 0.0734 30 0.1460 55 0.9180 80 9.0119
6 0.0692 31 0.1501 56 1.0030 81 9.8582
7 0.0650 32 0.1560 57 1.0932 82 10.8223
8 0.0625 33 0.1626 58 1.1894 83 11.9024
9 0.0617 34 0.1710 59 1.2942 84 13.0775
10 0.0625 35 0.1810 60 1.4109 85 14.3247
11 0.0675 36 0.1935 61 1.5430 86 15.6263
12 0.0767 37 0.2077 62 1.6923 87 16.9762
13 0.0892 38 0.2236 63 1.8597 88 18.3754
14 0.1034 39 0.2420 64 2.0454 89 19.8343
15 0.1184 40 0.2629 65 2.2459 90 21.3788
16 0.1326 41 0.2854 66 2.4605 91 23.0518
17 0.1434 42 0.3097 67 2.6886 92 24.9371
18 0.1518 43 0.3365 68 2.9344 93 27.2442
19 0.1568 44 0.3649 69 3.2068 94 30.4453
20 0.1585 45 0.3950 70 3.5147 95 35.4922
21 0.1585 46 0.4277 71 3.8670 96 44.5151
22 0.1568 47 0.4620 72 4.2723 97 62.8314
23 0.1535 48 0.4989 73 4.7329 98 83.3333
24 0.1501 49 0.5399 74 5.2401 99 83.3333
100+ 83.3333
</TABLE>
Rates shown are based on the Commissioner's Male 1980 Standard Ordinary
Mortality Table, Age Last Birthday. These rates are based on the Insured's
attained age as of each Contract Anniversary and do not change during a Contract
Year.
Page 8
<PAGE>
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES
PER $1,000
FEMALE - STANDARD RISK CLASS
<TABLE>
<CAPTION>
Attained Monthly Attained Monthly Attained Monthly Attained Monthly
Age Rate Age Rate Age Rate Age Rate
--- --- -- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C>
0 0.1568 25 0.0976 50 0.4285 75 3.4445
1 0.0700 26 0.1001 51 0.4595 76 3.8688
2 0.0667 27 0.1034 52 0.4947 77 4.3247
3 0.0650 28 0.1067 53 0.5332 78 4.8190
4 0.0642 29 0.1101 54 0.5726 79 5.3700
5 0.0625 30 0.1142 55 0.6129 80 5.9999
6 0.0609 31 0.1184 56 0.6523 81 6.7294
7 0.0592 32 0.1226 57 0.6901 82 7.5789
8 0.0584 33 0.1284 58 0.7279 83 8.5491
9 0.0575 34 0.1343 59 0.7699 84 9.6289
10 0.0567 35 0.1418 60 0.8204 85 10.8111
11 0.0584 36 0.1518 61 0.8826 86 12.0908
12 0.0609 37 0.1635 62 0.9626 87 13.4694
13 0.0642 38 0.1777 63 1.0586 88 14.9520
14 0.0684 39 0.1935 64 1.1675 89 16.5557
15 0.0725 40 0.2111 65 1.2832 90 18.3060
16 0.0767 41 0.2295 66 1.4033 91 20.2498
17 0.0800 42 0.2487 67 1.5235 92 22.4699
18 0.0834 43 0.2671 68 1.6473 93 25.1552
19 0.0859 44 0.2871 69 1.7866 94 28.7360
20 0.0884 45 0.3072 70 1.9508 95 34.1581
21 0.0900 46 0.3273 71 2.1528 96 43.5428
22 0.0917 47 0.3498 72 2.4040 97 62.1940
23 0.0934 48 0.3741 73 2.7057 98 83.3333
24 0.0959 49 0.4000 74 3.0550 99 83.3333
100+ 83.3333
</TABLE>
Rates shown are based on the Commissioner's Female 1980 Standard Ordinary
Mortality Table, Age Last Birthday. These rates are based on the Insured's
attained age as of each Contract Anniversary and do not change during a Contract
Year.
Page 9
<PAGE>
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES
<TABLE>
<CAPTION>
Minimum Death Minimum Death Minimum Death
Attained Benefit Attained Benefit Attained Benefit
Age Percentage Age Percentage Age Percentage
--- ---------- --- ---------- --- ----------
<S> <C> <C> <C> <C> <C>
0-40 250% 60 130% 80 105%
41 243% 61 128% 81 105%
42 236% 62 126% 82 105%
43 229% 63 124% 83 105%
44 222% 64 122% 84 105%
45 215% 65 120% 85 105%
46 209% 66 119% 86 105%
47 203% 67 118% 87 105%
48 197% 68 117% 88 105%
49 191% 69 116% 89 105%
50 185% 70 115% 90 105%
51 178% 71 113% 91 104%
52 171% 72 111% 92 103%
53 164% 73 109% 93 102%
54 157% 74 107% 94 101%
55 150% 75 105% 95 101%
56 146% 76 105% 96 101%
57 142% 77 105% 97 101%
58 138% 78 105% 98 101%
59 134% 79 105% 99 101%
100+ 100%
</TABLE>
Page 10
<PAGE>
DEFINITIONS
- --------------------------------------------------------------------------------
"Account Value" is the entire amount we hold under this Contract for you while
this Contract is in force. It is equal to the sum of the Variable Account Value,
the Interest Account Value and the Loan Account Value.
"Accumulation Unit" is the unit of measure we use to keep track of the value of
each Variable Sub-Account.
"Attained Age" is the Issue Age plus the number of full years since the Contract
Date.
"Beneficiary" is the person or persons to whom we pay the Death Proceeds when
the Insured dies.
"Contract Date" is the date from which Contract Anniversaries and Contract Years
are measured. The Contract Date may or may not be the same as the Issue Date and
is shown in the Schedule. While this Contract is in force, every anniversary of
the Contract Date is a Contract Anniversary, and each and every consecutive
twelve-month period beginning on the Contract Date and each Contract Anniversary
is a Contract Year.
"Contingent Beneficiary" is the person that becomes the Beneficiary if the named
Beneficiary dies before the Insured.
"Contingent Owner" is the person that becomes the Owner if the named Owner dies
before the Insured.
"Customer Service Center" is where we provide service to you. The mailing
address and telephone number of the Customer Service Center are shown on the
first page of this Contract.
"Death Proceeds" is the amount of money that we will pay the Beneficiary if the
Insured dies while this Contract is in force.
"Debt" is the sum of all outstanding loans plus accrued interest under this
Contract.
"Excess Withdrawal" is a withdrawal of Account Value that exceeds the Free
Withdrawal Amount.
"Expiry Date" is the last day in a Guarantee Period.
"Free Withdrawal Amount" is the maximum amount that can be withdrawn in a
Contract Year without being subject to a surrender charge. This amount is
described in the Schedule.
"General Account" consists of all our assets other than those held in any
separate investment accounts.
"Guaranteed Interest Rate" is the effective annual interest rate we will credit
for a specified Guarantee Period. The Guaranteed Interest Rate will never be
less than the minimum shown in the Schedule.
"Guarantee Period" is a period of years for which a specified effective annual
interest rate is guaranteed by us. Interest is credited daily at a rate to yield
the declared annual Guaranteed Interest Rate.
"Home Office" is our main office. The mailing address is shown on the first page
of this Contract.
"Income Unit" is the unit of measure we use to calculate the amount of payments
under the Variable Payment Settlement Option.
"Insurance Amount" is a dollar amount used to determine the death benefit of
this Contract. It is shown in the Schedule.
Page 11
<PAGE>
"Insured" is the person named in the application whose life is covered by this
Contract The Insured is shown in the Schedule.
"Interest Account" is a separate investment account of ours into which purchase
payments may be invested or Account Value may be transferred.
"Interest Account Value" is the sum of the value of each Interest Sub-Account on
any particular day.
A "Interest Sub-Account" is established when purchase payments are invested or
amounts are transferred to the Interest Account. The value of each Interest Sub-
Account is equal to the amount invested, increased by interest and reduced by
any withdrawals, loans or transfers from, or charges assessed against the
Interest Sub-Account.
"Issue Age" is the Insured's age on the last birthday on or before the Contract
Date. It is shown in the Schedule.
"Issue Date" is the date this Contract is issued at our Customer Service Center.
It is shown in the Schedule.
"Loan Account" is an account in our General Account, established for any amounts
transferred from the Sub-Accounts as a result of a loan. The Loan Account
credits a fixed rate of interest, the Loan Credited Rate, that is not based on
the investment experience of the Variable Sub-Account or the Guaranteed Interest
Rates applicable to the Interest Sub-Accounts of the Interest Account. The Loan
Credited Rate is shown in the Schedule.
"Loan Account Value" is the amount of all loans under this Contract that have
not been repaid, adjusted for interest we credit to the Loan Account at the Loan
Credited Rate and for any due and unpaid loan interest we charge at the Loan
Interest Rate. The Loan Interest Rate is shown in the Schedule.
"Market Value Adjustment" is a positive or negative adjustment that may apply to
surrender, withdrawals, loans, or transfers from a Interest Sub-Account before
the end of a Guarantee Period.
"Monthly Processing Date" is the day of each month that the Monthly Deduction
Amount is deducted from the Account Value of this Contract. Monthly Processing
Dates are the Contract Date and the same day of each month thereafter. If there
is no such date in a particular month, the Monthly Processing Date will be the
last day of that month. If a Monthly Processing Date is not a Valuation Date,
the Monthly Processing Date will be the next Valuation Date.
"Net Asset Value" is the price of one share of an investment portfolio.
"Payee" is the natural person receiving payments under a Settlement Option.
"Satisfactory Notice" is a notice or request authorized by you, in a form
satisfactory to us, received at our Customer Service Center.
"Sub-Account" includes both Variable Sub-Accounts and Interest Sub-Accounts,
unless the context indicates otherwise.
"Surrender Value" is the amount you receive upon surrender of this Contract. It
is your Account Value, plus or minus any applicable Market Value Adjustment, and
less any applicable surrender charges or other charges shown in the Schedule
that are due us but not yet deducted, less any Debt.
"Valuation Date" is the date at the end of a Valuation Period when each Variable
Sub-Account is valued.
Page 12
<PAGE>
"Valuation Period" is the period between one calculation of an Accumulation Unit
value and the next calculation. Normally, we calculate Accumulation Units daily
when the New York Stock Exchange is open for trading and we are open for
business. We can delay this calculation if an emergency exists, making disposal
of or fair valuation of assets in the Variable Account not reasonably
practicable, or the Securities and Exchange Commission (SEC) permits the delay.
We may change when we calculate the Accumulation Unit value by giving you 30
days notice, or such notice as may be required by law.
"Variable Account" is a separate investment account of ours into which purchase
payments may be invested or Account Value may be transferred. The Variable
Account is shown in the Schedule.
"Variable Account Value" is the sum of the value of each Variable Sub-Account on
a Valuation Date.
"Variable Sub-Account" is a division of the Variable Account that invests in
shares of a particular investment portfolio. The value of a Variable Sub-Account
is determined by multiplying (a) times (b) where:
(a) equals the number of Accumulation Units held in the Variable Sub-
Account; and
(b) equals the value of the Accumulation Unit for the Variable Sub-
Account.
"We", "us" or "our" is Sage Life Assurance of America, Inc.
"You" or "your" is the Owner of this Contract. Your name appears in the
Schedule. You are entitled to exercise all rights under this Contract. However,
if you designate an irrevocable beneficiary, you may need that beneficiary's
consent before you exercise your rights under this Contract.
MAKING PURCHASE PAYMENTS
- --------------------------------------------------------------------------------
Initial Purchase Payment - You must make the initial purchase payment in order
to put this Contract in force. The amount of your initial purchase payment is
shown in the Schedule.
Additional Purchase Payments - Subject to our acceptance and the limits
described in the Schedule, additional purchase payments may be made at any time
while this Contract is in force. All purchase payments after the first are
payable at our Customer Service Center.
If additional purchase payments are accepted, they may increase the death
benefit. We reserve the right to require satisfactory evidence of insurability
before accepting any additional purchase payment that increases the death
benefit by more than it increases the Account Value.
Unless specified otherwise, all payments received while a loan is outstanding,
will first be considered as a payment of any loan interest, next as a loan
repayment, and last as an additional purchase payment to this Contract.
Allocation of Purchase Payments Among the Interest and Variable Accounts -
Subject to limits described in the Schedule, you tell us how to allocate your
purchase payments by notifying us of your choices. You specified how to allocate
your initial purchase payment in your application for this Contract. Initial
purchase payments allocated to the Interest Account will be invested in Interest
Sub-Accounts with the Guarantee Periods that you specified in your application.
We may, however, require that an initial purchase payment allocated to a
Variable Sub-Account be invested in the Designated Sub-Account shown in the
Schedule during the Free-Look Period. At the end of the Free-Look Period, if
your initial purchase payment was allocated to the Designated Sub-Account by us,
we will transfer the value of that Designated Sub-Account to the Sub-Account(s)
you specified in your application. For the purpose of processing transfers from
the Designated Sub-Account, the Free-Look Period will be assumed to end 15 days
after the Contract Date.
If you do not tell us how to allocate any additional purchase payments, they
will be allocated in the same manner as your most recent purchase payment.
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Grace Period - If the Surrender Value on a Monthly Processing Date is not
sufficient to cover the Monthly Deduction Amount, a grace period of 61 days will
be allowed for you to pay an amount sufficient to cover the Monthly Deduction
Amount due. We will send you a notice at the start of the Grace Period at your
last known address. The Grace Period will end 61 days after we mail you the
notice.
If you do not make the necessary payment by the end of the Grace Period, this
Contract will terminate without value. Subject to the terms and conditions of
this Contract, if the Insured dies during the Grace Period, we will pay the
Death Proceeds.
Reinstatement - If the Grace Period has ended and you have not paid the required
purchase payment and have not surrendered this Contract for its Surrender Value,
you may be able to reinstate this Contract. To do so you must:
1. submit a written request for reinstatement within 3 years after the
end of the Grace Period;
2. provide evidence of insurability satisfactory to us;
3. pay an additional purchase payment equal to at least the minimum
reinstatement payment shown in the Schedule; and
4. repay or reinstate any Debt against this Contract that existed at
the end of the Grace Period.
The effective date of a reinstated Contract will be the Monthly Processing Date
on or next following the date we approve your application for reinstatement and
receive the necessary purchase payment.
If your Contract is reinstated, the Account Value on the date of reinstatement
will be the amount provided by the purchase payment paid. Any applicable charges
will be based on the length of time from the Contract Date to the effective date
of the reinstatement. Unless you have provided otherwise, the allocation of the
Account Value will be based on the allocation instructions in effect at the
start of the Grace Period.
ACCOUNT VALUE
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The Account Value is the entire amount we hold under this Contract for you. It
is equal to the sum of the Variable Account Value, the Interest Account Value
and the Loan Account Value.
Variable Account Value - On the Contract Date the Variable Account Value for a
Sub-Account is equal to the portion of the initial purchase payment allocated to
the Sub-Account. On each subsequent Valuation Date, it is equal to (a) + (b) -
(c) - (d) - (e), where:
(a) is the Variable Account Value in the Sub-Account on the preceding
Valuation Date multiplied by its net investment factor for the
current Valuation Period;
(b) is the amount of any allocation or transfer to the Sub-Account
during the current Valuation Period;
(c) is the amount of any transfer from the Sub-Account during the
current Valuation Period;
(d) is the amount of any charges allocated to the Sub-Account during
the current Valuation Period; and
(e) is the amount of any withdrawal or loan allocated to the Sub-
Account during the current Valuation Period.
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Interest Account Value - On the Contract Date the Interest Account Value for a
Sub-Account is equal to the portion of the initial purchase payment allocated to
the Sub-Account. On each subsequent Valuation Date, it is equal to (a) + (b) -
(c) - (d) - (e), where:
(a) is the Interest Account Value in the Sub-Account on the preceding
Valuation Date multiplied by the daily equivalent of its Guaranteed
Interest Rate earned for the number of days in the current
Valuation Period;
(b) is the amount of any allocation or transfer to the Sub-Account
during the current Valuation Period;
(c) is the amount of any transfer from the Sub-Account during the
current Valuation Period;
(d) is the amount of any charges allocated to the Sub-Account during
the current Valuation Period; and
(e) is the amount of any withdrawal or loan allocated to the Sub-
Account during the current Valuation Period.
The Interest Account Value is also adjusted for any Market Value Adjustment you
incur that results from a transaction in (b), (c) or (e).
Loan Account Value - Unless you take a loan, the Loan Account Value is zero.
(Amounts you take as a loan are sometimes referred to in this Contract as
amounts you "borrow".) If you take a loan, then on the effective date of the
loan the Loan Account Value is equal to the amount of the loan. On each
subsequent Valuation Date, it is equal to (a) + (b) + (c) - (d) - (e), where:
(a) is the Loan Account Value on the preceding Valuation Date;
(b) is the amount of interest earned (at the Loan Credited Rate shown
in the Schedule) on item (a) during the current Valuation Period;
(c) is any amounts transferred to the Loan Account because of any
additional loans and any due and unpaid loan interest during the
current Valuation Period;
(d) is the amount of any loan repayment you make during the current
Valuation Period; and
(e) is any amount of interest earned on item (a) and transferred to the
Sub-Accounts during the current Valuation Period.
VARIABLE ACCOUNT
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Variable Account - A variable account is an investment account we maintain
separate from our General Account and any other separate investment accounts we
may have. We own the assets in a variable account. A variable account will not
be charged with liabilities that arise from any other business that we conduct.
We may transfer to our General Account assets that exceed the reserves and other
liabilities of a variable account.
A variable account may invest in mutual funds, unit investment trusts and other
investment portfolios. Such a variable account is treated as a unit investment
trust under Federal securities laws and is registered with the SEC under the
Investment Company Act of 1940.
We may offer certain series or variable accounts that may not be registered with
the SEC under the Securities Act of 1933. Any such series or variable account,
if offered, will be described in the applicable offering document.
The Variable Account for this Contract is shown in the Schedule. The laws of our
state of domicile govern this Variable Account.
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Variable Sub-Accounts - A unit investment trust variable account includes
variable sub-accounts, each investing in a designated investment portfolio. The
sub-accounts and the investment portfolios in which they invest are specified in
the prospectus or offering document. Income, gains or losses, realized and
unrealized from assets in each variable sub-account are credited to or charged
against that variable sub-account without regard to other income, gains or
losses in the other sub-accounts or our other income, gains or losses.
Changes Within the Variable Account - We may, from time to time, make additional
Variable Sub-Accounts available to you. These Sub-Accounts will invest in
investment portfolios we find suitable for the Contract. We also have the right
to eliminate Sub-Accounts, to combine two or more Sub-Accounts or to substitute
a new investment portfolio for the portfolio in which a Sub-Account invests.
Such an action may become necessary if, in our judgment, a portfolio or Sub-
Account no longer suits the purposes of the Contract. This may happen due to a
change in laws or regulations, or a change in a portfolio's or Sub-Account's
investment objectives or restrictions, or because the portfolio or Sub-Account
is no longer available for investment, or for some other reason. We will get
prior approval from the insurance department of our state of domicile before
taking such action. If required, this approval process will be on file with the
insurance department of the jurisdiction in which the Contract is delivered. We
will also get any required approval from the SEC and any other required
approvals before taking such an action.
Subject to any required regulatory approvals, we reserve the right to transfer
assets of the Variable Sub-Accounts that we determine to be associated with the
class of Contracts to which the Contract belongs, to another variable account or
variable sub-account.
When permitted by law, we reserve the right to:
1. Deregister the Variable Account under the Investment Company
Act of 1940;
2. Operate the Variable Account as a management company under the
Investment Company Act of 1940, if it is operating as a unit investment
trust;
3. Operate the Variable Account as a unit investment trust under the
Investment Company Act of 1940, if it is operating as a Managed Separate
Account;
4. Restrict or eliminate any voting rights of Owners, or other persons who
have voting rights as to the Variable Account;
5. Combine the Variable Account with other separate investment accounts;
and
6. Combine a Variable Sub-Account with another Variable Sub-Account.
If any actions we take result in a material change in the underlying investments
of a Variable Sub-Account in which you are invested, we will notify you of the
change. You may then choose a new Sub-Account.
Accumulation Units - We keep track of the value of each of your Variable Sub-
Accounts by the number of Accumulation Units in that Sub-Account. Accumulation
Units are credited to a Sub-Account when a purchase payment is allocated to that
Sub-Account or when an amount is transferred to that Sub-Account. Accumulation
Units will be canceled from a Sub-Account when amounts are transferred from a
Sub-Account or on payment of death proceeds, a withdrawal, a loan, a surrender,
or assessment of charges shown in the Schedule (other than the variable sub-
account charges). The number of Accumulation Units credited to or canceled from
a Sub-Account in a transaction is determined by dividing (a) by (b) where:
(a) is the dollar amount of the transaction; and
(b) is the value of the Accumulation Unit for that Sub-Account for the
Valuation Date for that transaction.
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Value of Accumulation Units - The Accumulation Unit value for any Valuation
Period is determined by multiplying (a) by (b) where:
(a) is the Accumulation Unit value for the immediately preceding Valuation
Period; and
(b) is the "net investment factor" for the Variable Sub-Account for the
Valuation Period for which the value is being determined.
The value of an Accumulation Unit may increase, decrease or remain the same from
one Valuation Period to the next.
Net Investment Factor - The net investment factor for a Variable Sub-Account is
an index that measures the investment performance of that Sub-Account from one
Valuation Period to the next. The net investment factor for any Valuation Period
is determined by dividing (a) by (b) and then subtracting (c) where:
(a) is the net result of:
(i) the Net Asset Value per share of the investment portfolio
share in which the Sub-Account invests determined at the end
of the current Valuation Period; plus
(ii) the per share amount of any dividend or capital gains
distribution made by that investment portfolio on shares
held in the Sub-Account if the "ex-dividend" date occurs
during the current Valuation Period; and plus or minus
(iii) a per share charge or credit for any taxes reserved for,
which is determined by us to have resulted from the
operations of that Sub-Account;
(b) is the Net Asset Value per share of the investment portfolio share
in which the Sub-Account invests determined at the end of the
immediately preceding Valuation Period; and
(c) is the daily variable sub-account charges shown in the Schedule
(adjusted for the number of days in the Valuation Period).
The net investment factor may be more or less than, or equal to, one.
INTEREST ACCOUNT
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Interest Account - The Interest Account is a separate investment account under
state insurance law. It is maintained separate from our General Account and
separate from any other separate investment account that we may have. We own the
assets in the Interest Account. Notwithstanding the foregoing, our obligations
under (and the values and benefits under) the Interest Account option of this
Contract do not vary as a function of the investment performance of the Interest
Account. Owners and Beneficiaries with rights under this Contract do not
participate in the investment gains or losses of the assets of the Interest
Account. Such gains or losses accrue solely to us. We retain the risk that the
value of the assets in the Interest Account may fall below the reserves and
other liabilities that we must maintain in connection with our obligations under
the Interest Account option of this Contract. In such event, we will transfer
assets from our General Account to the Interest Account to make up the
difference. The Interest Account will not be charged with liabilities that arise
from any other business that we conduct. We may transfer to our General Account
assets that exceed the reserves and other liabilities of the Interest Account.
The Interest Account is not required to be registered with the SEC as an
investment company under the Investment Company Act of 1940.
Interest Sub-Account - We will establish a separate Interest Sub-Account for
you each time you allocate amounts to the Interest Account. Amounts invested in
these Interest Sub-Accounts earn interest at the Guaranteed Interest Rate in
effect on the date the amounts are allocated.
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Guarantee Periods - Each Interest Sub-Account is guaranteed an interest rate for
a period we refer to as a Guarantee Period. The Guaranteed Interest Rate for a
Interest Sub-Account is effective for the entire Guarantee Period. The length of
a Guarantee Period is measured from the end of the calendar month in which the
amount is allocated to the Interest Sub-Account. The last day of the Guarantee
Period is its Expiry Date. Surrender, or withdrawals, or transfers, or loans
from all or part of a Interest Sub-Account made prior to the Expiry Date of a
Guarantee Period may be subject to a Market Value Adjustment.
We will notify you at least thirty days prior to an Expiry Date of your options
for renewal, which include:
1. electing a new Guarantee Period from among those then offered by
us; or
2. transferring the value of the Interest Sub-Account to one or more
Variable Sub-Accounts.
If we do not receive Satisfactory Notice prior to the Expiry Date, we will
transfer the value of the expiring Interest Sub-Account to a Interest Sub-
Account with the same Guarantee Period, but not longer than 5 years. The
transfer will be effective as of the Expiry Date of the previous Guarantee
Period.
Guaranteed Interest Rates - Periodically, we will declare Guaranteed Interest
Rates for then available Guarantee Periods. These rates will be guaranteed for
the duration of the respective Guarantee Periods. Guaranteed Interest Rates will
never be less than the Minimum Guaranteed Interest Rate shown in the Schedule.
Market Value Adjustment - A Market Value Adjustment may be applied to surrender,
withdrawals, transfers or loans when taken from a Interest Sub-Account other
than the thirty-day period prior to its Expiry Date. A Market Value Adjustment
is applied separately to each Interest Sub-Account.
A Market Value Adjustment is determined by multiplying the amount surrendered,
withdrawn, transferred or borrowed by the following factor:
N/365
[ ( 1 + J + .0025 )] - 1
Where:
o I is the Index Rate for a maturity equal to the Interest
Sub-Account;s Guarantee Period;
o J is the Index Rate for a maturity equal to the time remaining
(rounded up to the next full year) in the Interest Sub-Account's
Guarantee Period; and
o N is the remaining number of days in the Guarantee Period at the
time of calculation.
If there is no Index Rate for the maturity needed to calculate I or J, straight
line interpolation between the Index Rate of the next highest and next lowest
maturities will be used to determine that Index Rate. If the maturity is one
year or less, we will use the Index Rate for a one-year maturity.
Market Value Adjustments will be applied as follows:
1. For a surrender, withdrawal, transfer or loan, the Market Value
Adjustment will be calculated on the total amount that must be
surrendered, withdrawn, transferred or borrowed in order to
provide the amount requested.
2. If the Market Value Adjustment is negative, it is deducted from any
remaining value in the Interest Sub-Account or amount surrendered.
Any remaining Market Value Adjustment is deducted from the amount
withdrawn, transferred or borrowed.
3. If the Market Value Adjustment is positive, it is added to any
remaining value in the Interest Sub-Account or amount surrendered. If
the full amount of the Interest Sub-Account is withdrawn, transferred
or borrowed, the Market Value Adjustment is added to the amount
withdrawn, transferred or borrowed.
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TRANSFERS AMONG ACCOUNTS
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While this Contract is in force, you may transfer your Account Value among Sub-
Accounts. Certain restrictions may apply during the Free-Look Period. To make a
transfer, you must give us Satisfactory Notice. Transfers generally take effect
on the Valuation Date we receive the notice. The number of free transfers that
we allow each Contract Year is shown in the Charges section of the Schedule.
Restrictions for transfers are shown in the Schedule. A transfer from a Interest
Sub-Account may be subject to a Market Value Adjustment.
SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE
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While this Contract is in force, you may withdraw all or part of your Account
Value by giving us Satisfactory Notice. The minimum withdrawal is shown in the
Schedule.
When a partial withdrawal is made, we will reduce the Account Value by the
amount of the partial withdrawal. We will also reduce the Insurance Amount in
proportion to the reduction in the Account Value that results from the partial
withdrawal (including any associated surrender charge and Market Value
Adjustment incurred).
If you request a surrender, we will terminate your Contract and pay you the
Surrender Value. This amount may also be applied to a Settlement Option, subject
to any restrictions described in this Contract. Unless specified otherwise, we
will make partial withdrawals as described in the Schedule. Surrender and
withdrawals generally take effect on the date we receive Satisfactory Notice.
If you make a withdrawal from your Contract in excess of the Free Withdrawal
Amount described in the Schedule, a surrender charge may be assessed. Surrender
charges are described in the Schedule. A withdrawal from the Interest Account
may also be subject to a Market Value Adjustment.
Excess Withdrawals - If a partial withdrawal is made for an amount greater than
the Free Withdrawal Amount, a surrender charge may be applicable. For purposes
of calculating the surrender charge only, purchase payments will be liquidated
in whole or in part on a "first-in-first-out-basis." This means we liquidate
purchase payments in the order they were made: the oldest unliquidated purchase
payment first, the next oldest unliquidated purchase payment second, etc. until
all purchase payments have been liquidated.
The surrender charge as to any liquidated purchase payment is determined by
multiplying the amount of the purchase payment being liquidated by the
applicable percentage shown in the Schedule. The total surrender charge will be
the sum of the surrender charges for each purchase payment being liquidated.
In a partial withdrawal, the surrender charge is deducted from the Account Value
remaining after you are paid the amount requested. The amount requested from a
Sub-Account may not exceed the value of that Sub-Account less any applicable
surrender charge. In a complete withdrawal (or surrender of this Contract), it
is deducted from the amount otherwise payable.
BORROWING PART OF YOUR ACCOUNT VALUE
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While this Contract is in force and after the Free-Look Period, you may request
a loan by giving us Satisfactory Notice. Unless specified otherwise, an amount
equal to the loan will be transferred from the Sub-Accounts to the Loan Account
in proportion to the Account Value in each Sub-Account in which you are invested
as of the date we process the loan. This Contract will be the only security we
require for the loan. The minimum loan amount is also shown in the Schedule. A
loan may be a taxable event and may affect the amount of the Death Proceeds
payable under this Contract.
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Maximum Loanable Value - The maximum loanable value is shown in the Schedule.
The amount of the loan and all existing loans may not be more than the maximum
loanable value as of the loan date. The loan date is the date we process the
loan.
If on any Valuation Date where there is Debt outstanding and the Surrender Value
is negative, we will send you an overloan notice at your last known address. You
will then have 61 days from the date we send the notice to avoid termination by
paying us at least the minimum repayment amount listed in the notice.
Loan Repayment - All or part of a loan may be repaid to us at any time while
this Contract is in force during the Insured's lifetime. The minimum loan
repayment amount is shown in the Schedule. If the Grace Period has expired and
this Contract has terminated, any Debt that exists at the end of the Grace
Period may not be repaid unless the Contract is reinstated.
Unless specified otherwise, an amount equivalent to a loan repayment will be
transferred from the Loan Account to the Sub-Accounts in proportion to the
Account Value in each Sub-Account in which you are invested.
Loan Interest - Interest on the loan accrues daily at the Loan Interest Rate
shown in the Schedule. It is due on each Contract Anniversary. If loan interest
is not paid when due, the difference between the Loan Account and Debt will be
transferred from the Sub-Accounts to the Loan Account in proportion to the
Account Value in each Sub-Account in which you are invested.
Effects of a Loan - A loan will be transferred from the Sub-Accounts to the Loan
Account. Any loan interest that becomes due and is not paid will also be so
transferred. A repayment or loan interest payment will be transferred from the
Loan Account into the Sub-Accounts. Amounts transferred to the Loan Account will
earn interest daily at the Loan Credited Rate shown in the Schedule from the
date of transfer.
Since the amount you borrow is transferred from the Sub-Accounts, a loan whether
or not repaid, will have a permanent effect on the Surrender Value and may have
a permanent effect on the death benefit. The effect may be favorable or
unfavorable. This is true whether you repay the loan or not. If not repaid, the
loan will reduce the amount of Death Proceeds.
CHARGES
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Monthly Deduction Amount - The Monthly Deduction Amount is deducted on each
Monthly Processing Date. It is equal to (a) + (b) + (c) + (d), where:
(a) is the cost of insurance charge described below;
(b) is the asset-based charges described in the Schedule;
(c) is the cost of any riders for which a separate charge is shown in
the Schedule; and
(d) is any other applicable charge shown in the Schedule.
Monthly Deduction Amount on a Contract Anniversary - On a Monthly Processing
Date that is also a Contract Anniversary, the Monthly Deduction Amount is equal
to (a) + (b), where:
(a) is the Monthly Deduction Amount as described above; and
(b) is the administration charge shown in the Schedule.
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Cost of Insurance Charge - The maximum monthly cost of insurance charge is equal
to (a) times (b) and then divided by (c), where:
(a) is the Maximum Cost of Insurance Rate per $1,000 shown in the
Table in the Schedule;
(b) is an amount equal to the death benefit minus the Account Value;
and
(c) is $1,000.
The actual monthly cost of insurance charge may be less than, but never more
than, the maximum monthly cost of insurance charge.
OWNER AND BENEFICIARY
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The Owner - You are the Owner of this Contract. You are also the Insured unless
another Insured has been named in the application and is shown in the Schedule.
You have the rights and options described in this Contract while the Insured is
living and this Contract is in force. One or more people may own this Contract.
The Beneficiary - We pay the Death Proceeds to the primary Beneficiary. If the
primary Beneficiary dies before the Insured, we pay the Death Proceeds to the
Contingent Beneficiary, if any. If there is no surviving Beneficiary, we pay the
Death Proceeds to the Owner's estate.
One or more persons may be named as primary Beneficiary or Contingent
Beneficiary. We will assume any Death Proceeds are to be paid in equal shares to
the multiple surviving Beneficiaries, unless you specify otherwise.
You have the right to change Beneficiaries. However, if you designate the
primary Beneficiary as irrevocable, you may need the consent of that Beneficiary
to exercise the rights and options under this Contract.
Change of Owner or Beneficiary - During your lifetime and while this Contract is
in force you can transfer ownership of this Contract or change the Beneficiary.
To make any of these changes, you must send us Satisfactory Notice. If accepted,
any change in Owner or Beneficiary will take effect on the date you signed the
notice. Any of these changes will not affect any payment made or action taken by
us before our acceptance. A change of Owner may be a taxable event.
DEATH PROCEEDS
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Death Benefit - If the Insured dies while this Contract is in force, the death
benefit will be the greater of (a) or (b), where:
(a) is the Insurance Amount on the date of death; and
(b) is the Minimum Death Benefit on the date of death.
However, if the state in which this Contract is issued does not allow us to
deduct a cost of insurance charge on or after the Contract Anniversary when the
Insured reaches age 100, the death benefit thereafter will be limited to (b)
above.
Minimum Death Benefit - To ensure that this Contract continues to qualify as
life insurance under the Internal Revenue Code of 1986, as amended (the "Code"),
we will also calculate a Minimum Death Benefit for each Valuation Date. The
Minimum Death Benefit on a Valuation Date is equal to (a) times (b), where:
(a) is the Account Value plus any positive Market Value Adjustment on
the Valuation Date; and
(b) is the Minimum Death Benefit Percentage shown in the Table in the
Schedule.
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Death Proceeds - The actual amount payable to the Beneficiary if the Insured
dies while this Contract is in force is called the Death Proceeds. The Death
Proceeds are equal to (a) + (b) - (c) - (d) - (e), where:
(a) is the death benefit described above;
(b) is any insurance on the Insured's life that may be provided by
riders to this Contract;
(c) is any Debt;
(d) is any due and unpaid Monthly Deduction Amount accruing during the
Grace Period; and
(e) is any Contract values previously paid pursuant to any riders
attached to this Contract.
We will pay the Death Proceeds to the Beneficiary after we receive satisfactory
proof of death. The Death Proceeds will be adjusted under certain conditions.
Refer to the Incontestability, Suicide, and Misstatement of Age or Sex
provisions.
You may choose to have the Death Proceeds paid in one sum, in which case this
Contract will terminate, or under a Settlement Option. If you have not made a
choice before the Insured dies, the Beneficiary may make this choice. Unless you
or the Beneficiary specify otherwise, we reserve the right to pay the Death
Proceeds in one sum within 90 days after we receive satisfactory proof of death.
Proof of Death - Satisfactory proof of death must be received at our Customer
Service Center before we will pay any Death Proceeds. We will accept one of the
following items:
1. An original certified copy of an official death Contract, or
2. An original certified copy of a decree of a court of competent
jurisdiction as to the finding of death, or
3. Any other proof satisfactory to us.
Insurance Amount Increases - Payment of additional purchase payments may require
us to increase the Insurance Amount so that this Contract continues to qualify
as life insurance under the Code. We reserve the right to require satisfactory
evidence of insurability for any increase in the Insurance Amount. In addition,
we reserve the right to require that your risk class be identical to that on the
Contract Date.
GENERAL PROVISIONS
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Application - All statements made in an application for this Contract are
considered representations and not warranties. We have issued this Contract
based on the statements made in any such application and we rely on such
statements to be true and complete. No such statement will be used to void the
coverage under this Contract or to deny a claim unless that statement is a
material misrepresentation.
Assignment - You may assign this Contract at any time while the Insured is
living and this Contract is in force. No assignment will be binding on us unless
we receive Satisfactory Notice. We will not be liable for any payments made or
actions we take before we accept the assignment. An absolute assignment will
revoke the interest of any revocable Beneficiary. We will not be responsible for
the validity of any assignment. An assignment may be a taxable event.
Claims of Creditors - To the extent permitted by law, no benefits payable under
this Contract will be subject to the claims of creditors.
Entire Contract - This Contract including any attached riders, endorsements,
amendments and the initial and any subsequent applications for a change in
coverage attached to this Contract constitutes the entire contract between you
and us.
Misstatement and Proof of Age or Sex - If the age or sex of the Insured has been
misstated, the benefits under this Contract will be those which the initial
purchase payment and any additional purchase payments would have provided for
the correct age and sex.
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No Dividends Payable - This Contract is non-participating and does not share in
any distribution of our surplus. We will not pay any dividends.
Incontestability - We will not contest the payment of the Death Proceeds based
upon the initial purchase payment after this Contract has been in force during
the Insured's lifetime for two years from the Issue Date.
For any increase in Insurance Amount requiring evidence of insurability, we will
not contest payment of the Death Proceeds based on such an increase after it has
been in force during the Insured's lifetime for two years from its effective
date.
Suicide - If the Insured dies by suicide, while sane or insane, within two years
from the Issue Date, we will not pay the Death Proceeds normally payable on the
Insured's death. Instead, we will limit the death benefit to the Account Value
as of the date we receive proof of death, and Death Proceeds will otherwise be
calculated in the usual manner.
If the Insured dies by suicide, while sane or insane, within two years of any
date we receive and accept an additional purchase payment, any amount of death
benefit that would not be payable except for the fact that the additional
purchase payment was made will be limited to the amount of such payment.
Required Reports - We will furnish a report to you as often as required by law,
but at least once in each Contract Year that this Contract is in force. The
report will show the number of Accumulation Units credited to each Variable Sub-
Account in which you are invested and the corresponding Accumulation Unit value
as of the date of the report. It will also show your Interest Account Value. The
report will also include any other information required by the laws and
regulations of the jurisdiction in which this Contract is delivered.
Changes in Contract Cost Factors - Changes in cost of insurance rates, credited
interest rates, or other Contract expense charges will be applied on a uniform
basis for insureds of the same sex, attained age and risk class whose Contracts
have been in force for the same length of time. Changes in these nonguaranteed
elements will be based on changes in future expectations for factors such as
investment earnings, mortality, persistency, expenses and taxes. Any changes
will be determined in accordance with the procedures on file, if required, with
the insurance regulator in the state in which this Contract was delivered.
Taxes Based Upon Purchase Payments or Value - If there is a law or change in law
assessing taxes against us based upon purchase payments or value of this
Contract, we reserve the right to charge you and all similarly situated Owners
proportionately for that tax. This would include a tax based upon our realized
net capital gains in the Variable Sub-Accounts and on earnings in the Interest
Account, on which we are not currently taxed.
Payments We May Defer - We may not be able to determine the value of the assets
of the Variable Sub-Accounts because:
1. The New York Stock Exchange is closed for trading, or trading on the
New York Stock Exchange is restricted;
2. The SEC determines that a state of emergency exists; or
3. An order or pronouncement of the SEC permits a delay for the
protection of Owners.
If this happens, we may delay:
1. Determination and payment of the Surrender Value or any withdrawal;
2. Determination and payment of any death benefit;
3. Transfers of the Account Value; or
4. Granting of any loan.
Page 23
<PAGE>
We reserve the right to delay payment or transfer of amounts from the Interest
Account for up to six months. If deferred 30 days or more, the amount deferred
will earn interest at a rate not less than the Minimum Deferral Interest Rate
shown in the Interest Account section of the Schedule.We may also defer payments
for any amount attributable to a purchase payment made in the form of a check
for a reasonable amount of time (not to exceed 15 days) to permit the check to
clear.
Authority to Make Agreements - All agreements made by us must be signed by one
of our officers. No other person, including an insurance agent or broker, can
change the terms of this Contract or make any agreement binding on us.
Required Note on Our Computations - We have filed a detailed statement of our
computations with the insurance supervisory official in the appropriate
jurisdictions. The values are not less than those required by the law of that
state or jurisdiction. Any benefit provided by an attached rider will not
increase these values unless otherwise stated in that rider.
SETTLEMENT OPTIONS
- --------------------------------------------------------------------------------
The Surrender Value or Death Proceeds may be paid in a single sum or under one
of our Settlement Options. If the amount available to apply under any Variable
or Fixed Settlement Option is less than the minimum amount shown in the
Schedule, we reserve the right to require that such amount be paid in a lump
sum.
If at any time payments under the Settlement Option become less than the minimum
payment shown in the Schedule, we reserve the right to reduce the frequency of
payment to an interval that results in each payment being at least equal to the
minimum payment. In no event will the interval be less frequent than annual.
At the time you elect the Settlement Option, you may also elect to have the
Account Value applied to provide Variable Payments, Fixed Payments, or a
combination of both. Unless you specify otherwise, we will provide either
variable or fixed payments, or a combination of variable and fixed payments in
proportion to the Sub-Accounts in which you are invested as of a date not more
than 5 Valuation Days before the due date of the first payment.
Once payments have begun under a Settlement Option, we reserve the right to
disallow further changes without our prior approval.
We may require proof of age, sex or survival of any person upon whose age, sex
or survival any payments depend. If the age or sex of a Payee has been
misstated, the amount payable will be the amount that the Surrender Value or
Death Proceeds would have provided for the correct age and sex. If we have made
incorrect payments, the amount of any underpayment will be paid immediately. The
amount of any overpayment will be deducted from future payments until the amount
of the overpayment is repaid.
VARIABLE PAYMENTS
Amount of First Variable Payment - The Settlement Option Tables shown in the
Schedule are used to determine the first monthly variable payment for an assumed
investment rate of 3%. The Settlement Option Tables show the dollar amount of
the first monthly variable payment that can be purchased with each $1,000
applied. The assumed investment rates we currently allow are shown in the
Schedule.
Page 24
<PAGE>
Value of Income Units - The Income Unit value for any Valuation Period is
determined by multiplying (a) by (b), and then dividing by (c) where:
(a) is the Income Unit value for the immediately preceding
Valuation Period;
(b) is the "net investment factor" for the Variable Sub-Account
for the Valuation Period for which the value is being
determined; and
(c) is the daily equivalent of the assumed investment rate for
the number of days in the Valuation Period.
The value of an Income Unit may increase, decrease or remain the same from one
Valuation Period to the next.
Number of Income Units - We determine the number of Income Units in each
Variable Sub-Account by dividing the first monthly variable payment attributable
to that Sub-Account by its Income Unit value as of a date not more than 5
Valuation Days before the due date of the first variable payment.
Amount of Second and Subsequent Variable Payments - The dollar amount of the
second and subsequent variable payments may change with the investment
performance of the Variable Sub-Accounts. The total amount of each variable
payment will be equal to the sum of the variable payments in each Variable Sub-
Account. The dollar amount of each payment for a Variable Sub-Account is
determined by multiplying the number of Income Units by the Income Unit value
for the Variable Sub-Account for the Valuation Period which ends on a
consistently applied date not more than 5 Valuation Days before the payment is
due.
We guarantee that the dollar amount of each payment after the first will not be
affected by variations in our expenses or mortality experience.
Exchange of Income Units - If there is an exchange of value of a designated
number of Income Units of particular Variable Sub-Accounts into other Income
Units, the value will be such that the dollar amount of payment made on the date
of exchange would be unaffected by the exchange.
FIXED PAYMENTS
Fixed Payments are payments that remain fixed as to dollar amount throughout the
payment period. The Settlement Option Tables shown in the Schedule are used to
determine the monthly fixed payment. The Settlement Option Tables show the
dollar amount of the monthly fixed payment that can be purchased with each
$1,000 applied.
SETTLEMENT OPTIONS
The following list of Settlement Options or any option acceptable to us may be
elected.
Option 1 - Payments for Life: Payments during the lifetime of the Payee and
terminating with the last payment preceding the death of the Payee.
Option 2 - Payments for Life with 10 or 20 Years Guaranteed: Payments during the
lifetime of the Payee with the guarantee that payments will be made for a
minimum of 10 or 20 years, as elected. If at the death of the Payee, payments
have been made for less than the guaranteed number of years elected, payments
will be made to the Beneficiary for the remainder of the guaranteed number of
years elected.
Option 3 - Joint and Last Survivor Payments: Payments during the joint lifetime
of the Payee and a designated second person, and thereafter during the remaining
lifetime of the survivor, ceasing with the last payment prior to the death of
the survivor.
Option 4 - Payments for a Fixed Period: An amount payable for the number of
years selected which may be from 5 to 30 years. If the Payee dies before the end
of the period selected, payments will be continued to the Beneficiary for the
remained of the selected period.
Page 25
<PAGE>
[LOGO OF SAGE LIFE APPEARS HERE]
-----------------------------------
SAGE LIFE ASSURANCE OF AMERICA, INC.
Member of Sage Insurance Group, Inc.
MODIFIED SINGLE PAYMENT VARIABLE LIFE INSURANCE CONTRACT
Limited purchase payment flexibity
Death benefit payable at Insured's death while this Contract is in force
Nonparticipating
<PAGE>
EXHIBIT 1A(5)(a)(iii)
[LOGO OF SAGE APPEARS HERE]
SAGE LIFE ASSURANCE OF AMERICA INC.
Member of Sage Insurance Group, Inc.
A Stock Company
Home Office Customer Service Center
300 Atlantic Street [P. O. Box 290680
Stamford, CT 06901 Wethersfield, CT 06109]
[1-877-TEL-SAGE]
PLEASE READ THIS CONTRACT CAREFULLY. This Contract is a legal contract between
the Owner (you) and Sage Life Assurance of America, Inc. You have the rights
described in the Contract. We agree to pay the Death Proceeds to the
Beneficiary upon receipt of proof that an Insured died while coverage under this
Contract is in force.
RIGHT TO EXAMINE THIS CONTRACT:
If for any reason you are not satisfied with this Contract, you may return it to
us or the agent who sold it to you within 10 days after you receive it (the
Free-Look Period). When we receive the returned Contract at our Customer
Service Center, we will promptly refund you the Account Value plus any charges
shown in the Schedule that we have deducted from the Account Value on or before
the date the returned Contract was received by us at our Customer Service
Center, or if greater and required by the law of your state, the initial
purchase payment (minus any withdrawals).
The amount and duration of the death benefit and all payments and values, when
based on the investment experience of the Variable Account, may increase or
decrease, depending on this Contract's investment results and are not guaranteed
as to dollar amount. All payments and values based on the Fixed Account may be
subject to a Market Value Adjustment, the operation of which may cause such
payments and values to increase or decrease.
/s/ [SIGNATURE ILLEGIBLE]
Chairman
MODIFIED SINGLE PAYMENT COMBINATION FIXED AND VARIABLE LIFE INSURANCE CONTRACT
Limited purchase payment flexibility
Death benefit payable at Insured's death while this Contract is in force
Nonparticipating
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SCHEDULE................................................................... 3
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES PER $1,000.... 8
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES PER $1,000.... 9
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES................................ 10
DEFINITIONS................................................................ 11
MAKING PURCHASE PAYMENTS................................................... 13
ACCOUNT VALUE.............................................................. 14
VARIABLE ACCOUNT........................................................... 15
FIXED ACCOUNT.............................................................. 17
TRANSFERS AMONG ACCOUNTS................................................... 19
SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE.................... 19
BORROWING PART OF YOUR ACCOUNT VALUE....................................... 19
CHARGES.................................................................... 20
OWNER AND BENEFICIARY...................................................... 21
DEATH PROCEEDS............................................................. 21
GENERAL PROVISIONS......................................................... 22
SETTLEMENT OPTIONS......................................................... 24
</TABLE>
Page 2
<PAGE>
SCHEDULE
Contract No.:
Owner: Issue Date:
Insured: Contract Date:
Issue Age/Sex: Initial Purchase Payment $
Risk Class: Initial Insurance Amount: $
This Schedule sets forth additional information that relates to the provisions
in this Contract with the corresponding headings.
MAKING PURCHASE PAYMENTS
Additional purchase payments may be made at any time and in any amount necessary
to avoid termination of this Contract. Other additional purchase payments may
be made at any time after the first Contract Anniversary, subject to the
following conditions:
1. each additional purchase payment must be at least $250;
2. only one purchase payment may be paid in any Contract Year;
3. the attained age of the Insured must be less than 81; and
4. our prior approval is required before you make a purchase payment that
causes the Account Value of all single payment or modified single
payment Contracts that you maintain with us to exceed $1,000,000.
We reserve the right to require satisfactory evidence of insurability before we
accept any additional purchase payment that increases the death benefit by more
than it increases the Account Value.
The minimum reinstatement payment is the minimum purchase payment for which we
would then issue a Contract based upon the Insured's attained age and risk class
as of the effective date of the reinstated Contract.
No purchase payment, whether initial or additional, may be allocated such that
any Sub-Account would have a value less than $250.
The Designated Sub-Account is the [Money Market Sub-Account].
VARIABLE ACCOUNT
The Variable Account for this Contract is [The Sage Variable Life Account A].
[It is a unit investment trust variable account.]
Page 3
<PAGE>
FIXED ACCOUNT
The Fixed Account for this Contract is [The Sage Fixed Interest Account A].
The Minimum Guaranteed Interest Rate is 3%.
The Minimum Deferral Interest Rate is 3%.
Index Rate: The Index Rate is the U.S. Treasury Constant Maturity Series as
reported in Federal Reserve Bulletin Release H.15. We currently base the Index
Rate for a calendar week on the reported rate for the preceding calendar week.
We reserve the right to set it less frequently but in no event less often than
monthly.
A Fixed Sub-Account with a Guarantee Period longer than 7 years is not available
in Oregon.
TRANSFERS AMONG ACCOUNTS
The minimum amount that can be transferred is $250. However, if less remains in
a Sub-Account, that amount may be transferred. If a transfer request would
reduce the Account Value remaining in a Sub-Account below $250, we will treat
the transfer request as a request to transfer the entire amount.
Your transfer request must clearly state the Sub-Accounts from which and to
which transfers are to be made.
We reserve the right to limit, upon notice, the maximum number of transfers you
may make to one per calendar month or 12 per Contract Year.
Under a Settlement Option, we reserve the right to:
1. disallow transfers from the Fixed Account to the Variable Account, or
from the Variable Account to the Fixed Account; and
2. limit the maximum number of transfers between Variable Sub-Accounts to
1 per Contract Year.
SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE
The Free Withdrawal Amount is the greater of (a) and (b) where:
(a) is the excess of 10% of the total purchase payments over 100% of all
prior withdrawals including any associated surrender charges and
Market Value Adjustment incurred in that Contract Year; and
(b) is the excess of the Account Value on the date of withdrawal over the
unliquidated purchase payments.
The minimum amount that can be withdrawn is $250. If a withdrawal request would
reduce the Account Value remaining in a Sub-Account below $250, we will treat
the withdrawal request as a request to withdraw the entire amount.
If a requested withdrawal would reduce the Account Value below $5,000, we
reserve the right to treat the request as a withdrawal of only the excess over
$5,000.
Unless you specify otherwise, we will make withdrawals proportionately from all
Sub-Accounts in which you are invested.
<PAGE>
BORROWING PART OF YOUR ACCOUNT VALUE
The maximum loanable value is 90% of the Account Value less any surrender charge
less any due and unpaid Monthly Deduction Amount, adjusted for any Market Value
Adjustment.
The minimum loan amount is $250.
The Loan Interest Rate is 6%.
The minimum loan repayment amount is $250.
The Loan Credited Rate is a minimum of 4%. We may credit a higher rate to that
portion of the Loan Account equal to the Free Withdrawal Amount.
CHARGES
Surrender Charge - A surrender charge may be imposed upon surrender of this
Contract or when an Excess Withdrawal is made. The surrender charge is applied
to each purchase payment and is a percentage of each purchase payment as
follows:
<TABLE>
<CAPTION>
Maximum
Contract Surrender Charge
Year Percentage
---- ----------
<S> <C>
1 9%
2 9%
3 8%
4 7%
5 6%
6 5%
7 3%
8+ 0%
</TABLE>
Transfer Charge - We reserve the right to charge a maximum of $25 for each
transfer after the 12th in a Contract Year. Each request is considered to be one
transfer regardless of the number of Sub-Accounts affected by the transfer. The
transfer charge will be deducted proportionately from all Sub-Accounts from
which transfers are made.
Administration Charge - $40 a year. This charge is incurred at the beginning of
each Contract Year and deducted on each Contract Anniversary or upon surrender.
The charge will be waived:
. if the Account Value is at least $50,000 at the time of deduction; or
. beginning on and after the 8th Contract Anniversary.
Page 5
<PAGE>
Asset-Based Charges - We deduct asset-based charges from your Account Value to
compensate us for assuming mortality and expense risks, certain administrative
expenses, certain distribution costs and certain state and Federal tax expenses.
Asset-based charges are calculated as a percentage of the Account Value on the
date of deduction. On the Contract Date, and monthly thereafter, the asset-based
charges are deducted in proportion to the Sub-Accounts in which you are
invested. The maximum charges are:
<TABLE>
<CAPTION>
Asset-Based Charges Annual Charge Monthly Charge
------------------- ------------- --------------
<S> <C> <C>
Contract Years 1-10 1.80% .150000%
Contract Years 11+ 1.30% .108333%
</TABLE>
We also reserve the right to deduct asset-based charges on the effective date of
any allocation of purchase payment to the Sub-Accounts, based on the amount
allocated, and based on the number of days remaining until the next date of
deduction.
There are no purchase payment taxes in the state of Oregon.
Variable Sub-Account Charges - If proceeds are applied to a Settlement Option,
we will deduct the asset-based charges above from the assets in each Variable
Sub-Account supporting Variable Payments on a daily basis rather than as
described above. The maximum charges are:
<TABLE>
<CAPTION>
Variable Sub-Account Charges Annual Charge Daily Charge
---------------------------- ------------- ------------
<S> <C> <C>
Contract Years 1-10 1.80% .0049763%
Contract Years 11+ 1.30% .0035849%
</TABLE>
Charge Deduction Rules - Unless specified above, charges are deducted from the
Account Value [proportionately from all Sub-Accounts in which you are invested.]
SETTLEMENT OPTIONS
The minimum amount that can be applied under any Variable or Fixed Payment is
$5,000.
The minimum payment is $100.
We currently allow assumed investment rates of 3% and 5%.
1983 Table "a" mortality table was used to calculate the income payments in the
Settlement Option Table for Life and the Settlement Option Table for Joint and
Last Survivor.
RIDERS
Accelerated Death Benefit Rider
The maximum Accelerated Benefit Amount is 50% of the Insurance Amount, but not
greater than $500,000.
Accidental Death Benefit Rider
The maximum Accidental Death Benefit Amount is $250,000.
Change of Insured Rider
The minimum Attained Ages of the original and new Insureds as of the effective
date of change must be 25.
The maximum Attained Ages of the original and new Insureds as of the effective
date of change is 75.
The maximum Change of Insured Rider charge is $1.50 per $1,000 of death benefit.
Page 6
<PAGE>
Settlement Option Tables
Values for other ages, and for other payment periods, joint life combinations,
or assumed investment rates that we offer are available on request. Monthly
payments are shown for each $1,000 applied.
Settlement Option Table for a Fixed Period
Income Table for a Fixed Period
<TABLE>
<CAPTION>
Variable or Fixed Income Payment (3%) Variable Income Payment Only (5%)
Fixed Fixed Fixed Fixed Fixed Fixed
Period Monthly Period Monthly Period Monthly Period Monthly Period Monthly Period Monthly
Of Income Of Income Of Income Of Income Of Income Of Income
-- -- -- -- -- --
Years Payment Years Payment Years Payment Years Payment Years Payment Years Payment
- ----- -------- ----- ------- ----- ------- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11 $8.88 21 $5.33 11 $9.81 21 $6.36
12 8.26 22 5.16 12 9.19 22 6.19
13 7.73 23 5.00 13 8.67 23 6.04
14 7.28 24 4.85 14 8.23 24 5.91
5 17.95 15 6.89 25 4.72 5 18.82 15 7.85 25 5.78
6 15.18 16 6.54 26 4.60 6 16.05 16 7.52 26 5.67
7 13.20 17 6.24 27 4.49 7 14.08 17 7.23 27 5.56
8 11.71 18 5.98 28 4.38 8 12.61 18 6.97 28 5.47
9 10.56 19 5.74 29 4.28 9 11.46 19 6.74 29 5.38
10 9.64 20 5.53 30 4.19 10 10.55 20 6.54 30 5.30
</TABLE>
Settlement Option Table for Life
<TABLE>
<CAPTION>
Variable or Fixed Monthly Income Payments Variable Monthly Income Payments Only
(3%) (5%)
Male/Female Male/Female Male/Female Male/Female
Age Male/Female 10 Years 20 Years Male/Female 10 Years 20 Years
--- -------- -------- -------- --------
Life Only Certain Certain Life Only Certain Certain
--------- ------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
50 $ 4.28 / 3.92 $4.24 / 3.90 $4.10 / 3.84 $ 5.51 / 5.14 $5.44 / 5.11 $5.27 / 5.03
55 4.72 / 4.27 4.64 / 4.24 4.40 / 4.12 5.93 / 5.47 5.82 / 5.42 5.54 / 5.28
60 5.31 / 4.74 5.17 / 4.68 4.73 / 4.45 6.50 / 5.92 6.32 / 5.83 5.83 / 5.58
65 6.13 / 5.38 5.84 / 5.25 5.04 / 4.81 7.33 / 6.55 6.96 / 6.38 6.10 / 5.90
70 7.28 / 6.29 6.65 / 6.00 5.29 / 5.14 8.49 / 7.45 7.33 / 7.09 6.32 / 6.19
75 8.90 / 7.62 7.53 / 6.92 5.43 / 5.37 10.12 / 8.80 8.57 / 7.98 6.46 / 6.40
80 11.19 / 9.62 8.37 / 7.93 5.50 / 5.48 12.45 / 10.83 9.36 / 8.94 6.52 / 6.50
85 14.36 / 12.63 9.00 / 8.77 5.52 / 5.52 15.67 / 13.89 9.95 / 9.74 6.54 / 6.53
</TABLE>
Settlement Option Income Table for Joint and Last Survivor
<TABLE>
<CAPTION>
Variable or Fixed Variable Only
(3%) (5%)
Male/Female Monthly Income Monthly Income
Age of Each Payee Payment Payment
----------------- ------- -------
<S> <C> <C>
50/50 $3.62 4.83
55/55 3.89 5.07
60/60 4.25 5.40
65/65 4.75 5.87
70/70 5.43 6.53
75/75 6.42 7.50
80/80 7.84 8.92
85/85 9.89 10.98
</TABLE>
Page 7
<PAGE>
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES
PER $1,000
MALE - STANDARD RISK CLASS
<TABLE>
<CAPTION>
Attained Monthly Attained Monthly Attained Monthly Attained Monthly
Age Rate Age Rate Age Rate Age Rate
--- ---- --- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C>
0 0.2194 25 0.1460 50 0.5852 75 5.7847
1 0.0859 26 0.1434 51 0.6381 76 6.3595
2 0.0825 27 0.1426 52 0.6968 77 6.9577
3 0.0809 28 0.1418 53 0.7640 78 7.5852
4 0.0775 29 0.1434 54 0.8380 79 8.2619
5 0.0734 30 0.1460 55 0.9180 80 9.0119
6 0.0692 31 0.1501 56 1.0030 81 9.8582
7 0.0650 32 0.1560 57 1.0932 82 10.8223
8 0.0625 33 0.1626 58 1.1894 83 11.9024
9 0.0617 34 0.1710 59 1.2942 84 13.0775
10 0.0625 35 0.1810 60 1.4109 85 14.3247
11 0.0675 36 0.1935 61 1.5430 86 15.6263
12 0.0767 37 0.2077 62 1.6923 87 16.9762
13 0.0892 38 0.2236 63 1.8597 88 18.3754
14 0.1034 39 0.2420 64 2.0454 89 19.8343
15 0.1184 40 0.2629 65 2.2459 90 21.3788
16 0.1326 41 0.2854 66 2.4605 91 23.0518
17 0.1434 42 0.3097 67 2.6886 92 24.9371
18 0.1518 43 0.3365 68 2.9344 93 27.2442
19 0.1568 44 0.3649 69 3.2068 94 30.4453
20 0.1585 45 0.3950 70 3.5147 95 35.4922
21 0.1585 46 0.4277 71 3.8670 96 44.5151
22 0.1568 47 0.4620 72 4.2723 97 62.8314
23 0.1535 48 0.4989 73 4.7329 98 83.3333
24 0.1501 49 0.5399 74 5.2401 99 83.3333
100+ 83.3333
</TABLE>
Rates shown are based on the Commissioner's Male 1980 Standard Ordinary
Mortality Table, Age Last Birthday. These rates are based on the Insured's
attained age as of each Contract Anniversary and do not change during a Contract
Year.
Page 8
<PAGE>
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES
PER $1,000
<TABLE>
<CAPTION>
FEMALE - STANDARD RISK CLASS
Attained Monthly Attained Monthly Attained Monthly Attained Monthly
Age Rate Age Rate Age Rate Age Rate
---- ---- ---- ---- ---- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C>
0 0.1568 25 0.0976 50 0.4285 75 3.4445
1 0.0700 26 0.1001 51 0.4595 76 3.8688
2 0.0667 27 0.1034 52 0.4947 77 4.3247
3 0.0650 28 0.1067 53 0.5332 78 4.8190
4 0.0642 29 0.1101 54 0.5726 79 5.3700
5 0.0625 30 0.1142 55 0.6129 80 5.9999
6 0.0609 31 0.1184 56 0.6523 81 6.7294
7 0.0592 32 0.1226 57 0.6901 82 7.5789
8 0.0584 33 0.1284 58 0.7279 83 8.5491
9 0.0575 34 0.1343 59 0.7699 84 9.6289
10 0.0567 35 0.1418 60 0.8204 85 10.8111
11 0.0584 36 0.1518 61 0.8826 86 12.0908
12 0.0609 37 0.1635 62 0.9626 87 13.4694
13 0.0642 38 0.1777 63 1.0586 88 14.9520
14 0.0684 39 0.1935 64 1.1675 89 16.5557
15 0.0725 40 0.2111 65 1.2832 90 18.3060
16 0.0767 41 0.2295 66 1.4033 91 20.2498
17 0.0800 42 0.2487 67 1.5235 92 22.4699
18 0.0834 43 0.2671 68 1.6473 93 25.1552
19 0.0859 44 0.2871 69 1.7866 94 28.7360
20 0.0884 45 0.3072 70 1.9508 95 34.1581
21 0.0900 46 0.3273 71 2.1528 96 43.5428
22 0.0917 47 0.3498 72 2.4040 97 62.1940
23 0.0934 48 0.3741 73 2.7057 98 83.3333
24 0.0959 49 0.4000 74 3.0550 99 83.3333
100+ 83.3333
</TABLE>
Rates shown are based on the Commissioner's Female 1980 Standard Ordinary
Mortality Table, Age Last Birthday. These rates are based on the Insured's
attained age as of each Contract Anniversary and do not change during a Contract
Year.
Page 9
<PAGE>
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES
<TABLE>
<CAPTION>
Minimum Minimum Minimum
Attained Death Benefit Attained Death Benefit Attained Death Benefit
Age Percentage Age Percentage Age Percentage
--- ---------- --- ---------- --- ----------
<S> <C> <C> <C> <C> <C>
0-40 250% 60 130% 80 105%
41 243% 61 128% 81 105%
42 236% 62 126% 82 105%
43 229% 63 124% 83 105%
44 222% 64 122% 84 105%
45 215% 65 120% 85 105%
46 209% 66 119% 86 105%
47 203% 67 118% 87 105%
48 197% 68 117% 88 105%
49 191% 69 116% 89 105%
50 185% 70 115% 90 105%
51 178% 71 113% 91 104%
52 171% 72 111% 92 103%
53 164% 73 109% 93 102%
54 157% 74 107% 94 101%
55 150% 75 105% 95 101%
56 146% 76 105% 96 101%
57 142% 77 105% 97 101%
58 138% 78 105% 98 101%
59 134% 79 105% 99 101%
100+ 100%
</TABLE>
Page 10
<PAGE>
DEFINITIONS
- --------------------------------------------------------------------------------
"Account Value" is the entire amount we hold under this Contract for you while
this Contract is in force. It is equal to the sum of the Variable Account
Value, the Fixed Account Value and the Loan Account Value.
"Accumulation Unit" is the unit of measure we use to keep track of the value of
each Variable Sub-Account.
"Attained Age" is the Issue Age plus the number of full years since the Contract
Date.
"Beneficiary" is the person or persons to whom we pay the Death Proceeds when
the Insured dies.
"Contract Date" is the date from which Contract Anniversaries and Contract Years
are measured. The Contract Date may or may not be the same as the Issue Date and
is shown in the Schedule. While this Contract is in force, every anniversary of
the Contract Date is a Contract Anniversary, and each and every consecutive
twelve-month period beginning on the Contract Date and each Contract Anniversary
is a Contract Year.
"Contingent Beneficiary" is the person that becomes the Beneficiary if the named
Beneficiary dies before the Insured.
"Contingent Owner" is the person that becomes the Owner if the named Owner dies
before the Insured.
"Customer Service Center" is where we provide service to you. The mailing
address and telephone number of the Customer Service Center are shown on the
first page of this Contract.
"Death Proceeds" is the amount of money that we will pay the Beneficiary if the
Insured dies while this Contract is in force.
"Debt" is the sum of all outstanding loans plus accrued interest under this
Contract.
"Excess Withdrawal" is a withdrawal of Account Value that exceeds the Free
Withdrawal Amount.
"Expiry Date" is the last day in a Guarantee Period.
"Fixed Account" is a separate investment account of ours into which purchase
payments may be invested or Account Value may be transferred.
"Fixed Account Value" is the sum of the value of each Fixed Sub-Account on any
particular day.
A "Fixed Sub-Account" is established when purchase payments are invested or
amounts are transferred to the Fixed Account. The value of each Fixed Sub-
Account is equal to the amount invested, increased by interest and reduced by
any withdrawals, loans or transfers from, or charges assessed against the Fixed
Sub-Account.
"Free Withdrawal Amount" is the maximum amount that can be withdrawn in a
Contract Year without being subject to a surrender charge. This amount is
described in the Schedule.
"General Account" consists of all our assets other than those held in any
separate investment accounts.
"Guaranteed Interest Rate" is the effective annual interest rate we will credit
for a specified Guarantee Period. The Guaranteed Interest Rate will never be
less than the minimum shown in the Schedule.
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"Guarantee Period" is a period of years for which a specified effective annual
interest rate is guaranteed by us. Interest is credited daily at a rate to yield
the declared annual Guaranteed Interest Rate.
"Home Office" is our main office. The mailing address is shown on the first page
of this Contract.
"Income Unit" is the unit of measure we use to calculate the amount of payments
under the Variable Payment Settlement Option.
"Insurance Amount" is a dollar amount used to determine the death benefit of
this Contract. It is shown in the Schedule.
"Insured" is the person named in the application whose life is covered by this
Contract The Insured is shown in the Schedule.
"Issue Age" is the Insured's age on the last birthday on or before the Contract
Date. It is shown in the Schedule.
"Issue Date" is the date this Contract is issued at our Customer Service Center.
It is shown in the Schedule.
"Loan Account" is an account in our General Account, established for any amounts
transferred from the Sub-Accounts as a result of a loan. The Loan Account
credits a fixed rate of interest, the Loan Credited Rate, that is not based on
the investment experience of the Variable Sub-Account or the Guaranteed Interest
Rates applicable to the Fixed Sub-Accounts of the Fixed Account. The Loan
Credited Rate is shown in the Schedule.
"Loan Account Value" is the amount of all loans under this Contract that have
not been repaid, adjusted for interest we credit to the Loan Account at the Loan
Credited Rate and for any due and unpaid loan interest we charge at the Loan
Interest Rate. The Loan Interest Rate is shown in the Schedule.
"Market Value Adjustment" is a positive or negative adjustment that may apply to
surrender, withdrawals, loans, or transfers from a Fixed Sub-Account before the
end of a Guarantee Period.
"Monthly Processing Date" is the day of each month that the Monthly Deduction
Amount is deducted from the Account Value of this Contract. Monthly Processing
Dates are the Contract Date and the same day of each month thereafter. If there
is no such date in a particular month, the Monthly Processing Date will be the
last day of that month. If a Monthly Processing Date is not a Valuation Date,
the Monthly Processing Date will be the next Valuation Date.
"Net Asset Value" is the price of one share of an investment portfolio.
"Payee" is the natural person receiving payments under a Settlement Option.
"Satisfactory Notice" is a notice or request authorized by you, in a form
satisfactory to us, received at our Customer Service Center.
"Sub-Account" includes both Variable Sub-Accounts and Fixed Sub-Accounts, unless
the context indicates otherwise.
"Surrender Value" is the amount you receive upon surrender of this Contract. It
is your Account Value, plus or minus any applicable Market Value Adjustment, and
less any applicable surrender charges or other charges shown in the Schedule
that are due us but not yet deducted, less any Debt.
"Valuation Date" is the date at the end of a Valuation Period when each Variable
Sub-Account is valued.
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"Valuation Period" is the period between one calculation of an Accumulation Unit
value and the next calculation. Normally, we calculate Accumulation Units daily
when the New York Stock Exchange is open for trading. We can delay this
calculation if the Securities and Exchange Commission (SEC) permits the delay.
We may change when we calculate the Accumulation Unit value, subject to any
required regulatory approvals, by giving you 30 days notice, or such notice as
may be required by law.
"Variable Account" is a separate investment account of ours into which purchase
payments may be invested or Account Value may be transferred. The Variable
Account is shown in the Schedule.
"Variable Account Value" is the sum of the value of each Variable Sub-Account on
a Valuation Date.
"Variable Sub-Account" is a division of the Variable Account that invests in
shares of a particular investment portfolio. The value of a Variable Sub-Account
is determined by multiplying (a) times (b) where:
(a) equals the number of Accumulation Units held in the Variable Sub-
Account; and
(b) equals the value of the Accumulation Unit for the Variable Sub-Account.
"We", "us" or "our" is Sage Life Assurance of America, Inc.
"You" or "your" is the Owner of this Contract. Your name appears in the
Schedule. You are entitled to exercise all rights under this Contract. However,
if you designate an irrevocable beneficiary, you may need that beneficiary's
consent before you exercise your rights under this Contract.
MAKING PURCHASE PAYMENTS
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Initial Purchase Payment - You must make the initial purchase payment in order
to put this Contract in force. The amount of your initial purchase payment is
shown in the Schedule.
Additional Purchase Payments - Subject to our acceptance and the limits
described in the Schedule, additional purchase payments may be made at any time
while this Contract is in force. All purchase payments after the first are
payable at our Customer Service Center.
If additional purchase payments are accepted, they may increase the death
benefit. We reserve the right to require satisfactory evidence of insurability
before accepting any additional purchase payment that increases the death
benefit by more than it increases the Account Value.
Unless specified otherwise, all payments received while a loan is outstanding,
will first be considered as a payment of any loan interest, next as a loan
repayment, and last as an additional purchase payment to this Contract.
Allocation of Purchase Payments Among the Fixed and Variable Accounts - Subject
to limits described in the Schedule, you tell us how to allocate your purchase
payments by notifying us of your choices. You specified how to allocate your
initial purchase payment in your application for this Contract. Initial purchase
payments allocated to the Fixed Account will be invested in Fixed Sub-Accounts
with the Guarantee Periods that you specified in your application. We may,
however, require that an initial purchase payment allocated to a Variable Sub-
Account be invested in the Designated Sub-Account shown in the Schedule during
the Free-Look Period. At the end of the Free-Look Period, if your initial
purchase payment was allocated to the Designated Sub-Account by us, we will
transfer the value of that Designated Sub-Account to the Sub-Account(s) you
specified in your application. For the purpose of processing transfers from the
Designated Sub-Account, the Free-Look Period will be assumed to end 15 days
after the Contract Date.
If you do not tell us how to allocate any additional purchase payments, they
will be allocated in the same manner as your most recent purchase payment.
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Grace Period - If the Surrender Value on a Monthly Processing Date is not
sufficient to cover the Monthly Deduction Amount, a grace period of 61 days will
be allowed for you to pay an amount sufficient to cover the Monthly Deduction
Amount due. We will send you a notice at the start of the Grace Period at your
last known address. The Grace Period will end 61 days after we mail you the
notice.
If you do not make the necessary payment by the end of the Grace Period, this
Contract will terminate without value. Subject to the terms and conditions of
this Contract, if the Insured dies during the Grace Period, we will pay the
Death Proceeds.
Reinstatement - If the Grace Period has ended and you have not paid the required
purchase payment and have not surrendered this Contract for its Surrender Value,
you may be able to reinstate this Contract. To do so you must:
1. submit a written request for reinstatement within 3 years after the end
of the Grace Period;
2. provide evidence of insurability satisfactory to us;
3. pay an additional purchase payment equal to at least the minimum
reinstatement payment shown in the Schedule; and
4. repay or reinstate any Debt against this Contract that existed at the
end of the Grace Period.
The effective date of a reinstated Contract will be the Monthly Processing Date
on or next following the date we approve your application for reinstatement and
receive the necessary purchase payment.
If your Contract is reinstated, the Account Value on the date of reinstatement
will be the amount provided by the purchase payment paid. Any applicable charges
will be based on the length of time from the Contract Date to the effective date
of the reinstatement. Unless you have provided otherwise, the allocation of the
Account Value will be based on the allocation instructions in effect at the
start of the Grace Period.
ACCOUNT VALUE
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The Account Value is the entire amount we hold under this Contract for you. It
is equal to the sum of the Variable Account Value, the Fixed Account Value and
the Loan Account Value.
Variable Account Value - On the Contract Date the Variable Account Value for a
Sub-Account is equal to the portion of the initial purchase payment allocated to
the Sub-Account. On each subsequent Valuation Date, it is equal to (a) + (b) -
(c) - (d) - (e), where:
(a) is the Variable Account Value in the Sub-Account on the preceding
Valuation Date multiplied by its net investment factor for the current
Valuation Period;
(b) is the amount of any allocation or transfer to the Sub-Account during
the current Valuation Period;
(c) is the amount of any transfer from the Sub-Account during the current
Valuation Period;
(d) is the amount of any charges allocated to the Sub-Account during the
current Valuation Period; and
(e) is the amount of any withdrawal or loan allocated to the Sub-Account
during the current Valuation Period.
Fixed Account Value - On the Contract Date the Fixed Account Value for a Sub-
Account is equal to the portion of the initial purchase payment allocated to the
Sub-Account. On each subsequent Valuation Date, it is equal to (a) + (b) - (c)-
(d) - (e), where:
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(a) is the Fixed Account Value in the Sub-Account on the preceding
Valuation Date multiplied by the daily equivalent of its Guaranteed
Interest Rate earned for the number of days in the current Valuation
Period;
(b) is the amount of any allocation or transfer to the Sub-Account during
the current Valuation Period;
(c) is the amount of any transfer from the Sub-Account during the current
Valuation Period;
(d) is the amount of any charges allocated to the Sub-Account during the
current Valuation Period; and
(e) is the amount of any withdrawal or loan allocated to the Sub-Account
during the current Valuation Period.
The Fixed Account Value is also adjusted for any Market Value Adjustment you
incur that results from a transaction in (b), (c) or (e).
Loan Account Value - Unless you take a loan, the Loan Account Value is zero.
(Amounts you take as a loan are sometimes referred to in this Contract as
amounts you "borrow".) If you take a loan, then on the effective date of the
loan the Loan Account Value is equal to the amount of the loan. On each
subsequent Valuation Date, it is equal to (a) + (b) + (c) - (d) - (e), where:
(a) is the Loan Account Value on the preceding Valuation Date;
(b) is the amount of interest earned (at the Loan Credited Rate shown in
the Schedule) on item (a) during the current Valuation Period;
(c) is any amounts transferred to the Loan Account because of any
additional loans and any due and unpaid loan interest during the
current Valuation Period;
(d) is the amount of any loan repayment you make during the current
Valuation Period; and
(e) is any amount of interest earned on item (a) and transferred to the
Sub-Accounts during the current Valuation Period.
VARIABLE ACCOUNT
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Variable Account - A variable account is an investment account we maintain
separate from our General Account and any other separate investment accounts we
may have. We own the assets in a variable account. A variable account will not
be charged with liabilities that arise from any other business that we conduct.
We may transfer to our General Account assets that exceed the reserves and other
liabilities of a variable account.
A variable account may invest in mutual funds, unit investment trusts and other
investment portfolios. Such a variable account is treated as a unit investment
trust under Federal securities laws and is registered with the SEC under the
Investment Company Act of 1940.
Subject to regulatory approval, we may offer certain series or variable accounts
that may not be registered with the SEC under the Securities Act of 1933. Any
such series or variable account, if offered, will be described in the applicable
offering document.
The Variable Account for this Contract is shown in the Schedule. The laws of our
state of domicile govern this Variable Account.
Variable Sub-Accounts - A unit investment trust variable account includes
variable sub-accounts, each investing in a designated investment portfolio. The
sub-accounts and the investment portfolios in which they invest are specified in
the prospectus or offering document. Income, gains or losses, realized and
unrealized from assets in each variable sub-account are credited to or charged
against that variable sub-account without regard to other income, gains or
losses in the other sub-accounts or our other income, gains or losses.
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Changes Within the Variable Account - We may, from time to time, make additional
Variable Sub-Accounts available to you. These Sub-Accounts will invest in
investment portfolios we find suitable for the Contract. We also have the right
to eliminate Sub-Accounts, to combine two or more Sub-Accounts or to substitute
a new investment portfolio for the portfolio in which a Sub-Account invests.
Such an action may become necessary if, in our judgment, a portfolio or Sub-
Account no longer suits the purposes of the Contract. This may happen due to a
change in laws or regulations, or a change in a portfolio's or Sub-Account's
investment objectives or restrictions, or because the portfolio or Sub-Account
is no longer available for investment, or for some other reason. We will get
prior approval from the insurance department of our state of domicile before
taking such action. If required, this approval process will be on file with the
insurance department of the jurisdiction in which the Contract is delivered. We
will also get any required approval from the SEC and any other required
approvals before taking such an action.
Subject to any required regulatory approvals, we reserve the right to transfer
assets of the Variable Sub-Accounts that we determine to be associated with the
class of Contracts to which the Contract belongs, to another variable account or
variable sub-account.
When permitted by law, we reserve the right to:
1. Deregister the Variable Account under the Investment Company Act of
1940;
2. Operate the Variable Account as a management company under the
Investment Company Act of 1940, if it is operating as a unit investment
trust;
3. Operate the Variable Account as a unit investment trust under the
Investment Company Act of 1940, if it is operating as a Managed
Separate Account;
4. Restrict or eliminate any voting rights of Owners, or other persons who
have voting rights as to the Variable Account;
5. Combine the Variable Account with other separate investment accounts;
and
6. Combine a Variable Sub-Account with another Variable Sub-Account.
If any actions we take result in a material change in the underlying investments
of a Variable Sub-Account in which you are invested, we will notify you of the
change. You may then choose a new Sub-Account.
Accumulation Units - We keep track of the value of each of your Variable Sub-
Accounts by the number of Accumulation Units in that Sub-Account. Accumulation
Units are credited to a Sub-Account when a purchase payment is allocated to that
Sub-Account or when an amount is transferred to that Sub-Account. Accumulation
Units will be canceled from a Sub-Account when amounts are transferred from a
Sub-Account or on payment of death proceeds, a withdrawal, a loan, a surrender,
or assessment of charges shown in the Schedule (other than the variable sub-
account charges). The number of Accumulation Units credited to or canceled from
a Sub-Account in a transaction is determined by dividing (a) by (b) where:
(a) is the dollar amount of the transaction; and
(b) is the value of the Accumulation Unit for that Sub-Account for the
Valuation Date for that transaction.
Value of Accumulation Units - The Accumulation Unit value for any Valuation
Period is determined by multiplying (a) by (b) where:
(a) is the Accumulation Unit value for the immediately preceding Valuation
Period; and
(b) is the "net investment factor" for the Variable Sub-Account for the
Valuation Period for which the value is being determined.
The value of an Accumulation Unit may increase, decrease or remain the same from
one Valuation Period to the next.
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Net Investment Factor - The net investment factor for a Variable Sub-Account is
an index that measures the investment performance of that Sub-Account from one
Valuation Period to the next. The net investment factor for any Valuation Period
is determined by dividing (a) by (b) and then subtracting (c) where:
(a) is the net result of:
(i) the Net Asset Value per share of the investment portfolio share
in which the Sub-Account invests determined at the end of the
current Valuation Period; plus
(ii) the per share amount of any dividend or capital gains
distribution made by that investment portfolio on shares held in
the Sub-Account if the "ex-dividend" date occurs during the
current Valuation Period; and plus or minus
(iii) a per share charge or credit for any taxes reserved for, which is
determined by us to have resulted from the operations of that
Sub-Account;
(b) is the Net Asset Value per share of the investment portfolio share in
which the Sub-Account invests determined at the end of the immediately
preceding Valuation Period; and
(c) is the daily variable sub-account charges shown in the Schedule
(adjusted for the number of days in the Valuation Period).
The net investment factor may be more or less than, or equal to, one.
FIXED ACCOUNT
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Fixed Account - The Fixed Account is a separate investment account under state
insurance law. It is maintained separate from our General Account and separate
from any other separate investment account that we may have. We own the assets
in the Fixed Account. Notwithstanding the foregoing, our obligations under (and
the values and benefits under) the Fixed Account option of this Contract do not
vary as a function of the investment performance of the Fixed Account. Owners
and Beneficiaries with rights under this Contract do not participate in the
investment gains or losses of the assets of the Fixed Account. Such gains or
losses accrue solely to us. We retain the risk that the value of the assets in
the Fixed Account may fall below the reserves and other liabilities that we must
maintain in connection with our obligations under the Fixed Account option of
this Contract. In such event, we will transfer assets from our General Account
to the Fixed Account to make up the difference. The Fixed Account will not be
charged with liabilities that arise from any other business that we conduct. We
may transfer to our General Account assets that exceed the reserves and other
liabilities of the Fixed Account. The Fixed Account is not required to be
registered with the SEC as an investment company under the Investment Company
Act of 1940.
Fixed Sub-Account - We will establish a separate Fixed Sub-Account for you each
time you allocate amounts to the Fixed Account. Amounts invested in these Fixed
Sub-Accounts earn interest at the Guaranteed Interest Rate in effect on the date
the amounts are allocated.
Guarantee Periods - Each Fixed Sub-Account is guaranteed an interest rate for a
period we refer to as a Guarantee Period. The Guaranteed Interest Rate for a
Fixed Sub-Account is effective for the entire Guarantee Period. The length of a
Guarantee Period is measured from the end of the calendar month in which the
amount is allocated to the Fixed Sub-Account. The last day of the Guarantee
Period is its Expiry Date. Surrender, or withdrawals, or transfers, or loans
from all or part of a Fixed Sub-Account made prior to the Expiry Date of a
Guarantee Period may be subject to a Market Value Adjustment.
We will notify you at least thirty days prior to an Expiry Date of your options
for renewal, which include:
1. electing a new Guarantee Period from among those then offered by us; or
2. transferring the value of the Fixed Sub-Account to one or more Variable
Sub-Accounts.
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If we do not receive Satisfactory Notice prior to the Expiry Date, we will
transfer the value of the expiring Fixed Sub-Account to a Fixed Sub-Account with
the same Guarantee Period, but not longer than 5 years. The transfer will be
effective as of the Expiry Date of the previous Guarantee Period.
Guaranteed Interest Rates - Periodically, we will declare Guaranteed Interest
Rates for then available Guarantee Periods. These rates will be guaranteed for
the duration of the respective Guarantee Periods. Guaranteed Interest Rates will
never be less than the Minimum Guaranteed Interest Rate shown in the Schedule.
Market Value Adjustment - A Market Value Adjustment may be applied to surrender,
withdrawals, transfers or loans when taken from a Fixed Sub-Account other than
during the thirty-day period prior to its Expiry Date. A Market Value
Adjustment is applied separately to each Fixed Sub-Account.
A Market Value Adjustment is determined by multiplying the amount surrendered,
withdrawn, transferred or borrowed by the greater of (a) or (b) where:
(a) is [(1+I)/(1+J+.0025)]/N/365/ ___ 1; and
(b) is [(1.03)/(1+K)]/[(G-N)/365]/___ 1
Where:
. I is the Index Rate for a maturity equal to the Fixed Sub-Account's
Guarantee Period;
. J is the Index Rate for a maturity equal to the time remaining (rounded
up to the next full year) in the Fixed Sub-Account's Guarantee Period;
. K is the Guaranteed Interest Rate for the Guarantee Period
. N is the remaining number of days in the Guarantee Period at the time of
calculation; and
. G is the initial number of days in the Guarantee Period
If there is no Index Rate for the maturity needed to calculate I or J, straight
line interpolation between the Index Rate of the next highest and next lowest
maturities will be used to determine that Index Rate. If the maturity is one
year or less, we will use the Index Rate for a one-year maturity.
Market Value Adjustments will be applied as follows:
1. For a surrender, withdrawal, transfer or loan, the Market Value
Adjustment will be calculated on the total amount that must be
surrendered, withdrawn, transferred or borrowed in order to provide the
amount requested.
2. If the Market Value Adjustment is negative, it is deducted from any
remaining value in the Fixed Sub-Account or amount surrendered. Any
remaining Market Value Adjustment is deducted from the amount
withdrawn, transferred or borrowed.
3. If the Market Value Adjustment is positive, it is added to any
remaining value in the Fixed Sub-Account or amount surrendered. If the
full amount of the Fixed Sub-Account is withdrawn, transferred or
borrowed, the Market Value Adjustment is added to the amount withdrawn,
transferred or borrowed.
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TRANSFERS AMONG ACCOUNTS
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While this Contract is in force, you may transfer your Account Value among Sub-
Accounts. Certain restrictions may apply during the Free-Look Period. To make a
transfer, you must give us Satisfactory Notice. Transfers generally take effect
on the Valuation Date we receive the notice. The number of free transfers that
we allow each Contract Year is shown in the Charges section of the Schedule.
Restrictions for transfers are shown in the Schedule. A transfer from a Fixed
Sub-Account may be subject to a Market Value Adjustment.
SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE
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While this Contract is in force, you may withdraw all or part of your Account
Value by giving us Satisfactory Notice. The minimum withdrawal is shown in the
Schedule.
When a partial withdrawal is made, we will reduce the Account Value by the
amount of the partial withdrawal. We will also reduce the Insurance Amount in
proportion to the reduction in the Account Value that results from the partial
withdrawal (including any associated surrender charge and Market Value
Adjustment incurred).
If you request a surrender, we will terminate your Contract and pay you the
Surrender Value. This amount may also be applied to a Settlement Option, subject
to any restrictions described in this Contract. Unless specified otherwise, we
will make partial withdrawals as described in the Schedule. Surrender and
withdrawals generally take effect on the date we receive Satisfactory Notice.
If you make a withdrawal from your Contract in excess of the Free Withdrawal
Amount described in the Schedule, a surrender charge may be assessed. Surrender
charges are described in the Schedule. A withdrawal from the Fixed Account may
also be subject to a Market Value Adjustment.
Excess Withdrawals - If a partial withdrawal is made for an amount greater than
the Free Withdrawal Amount, a surrender charge may be applicable. For purposes
of calculating the surrender charge only, purchase payments will be liquidated
in whole or in part on a "first-in-first-out-basis." This means we liquidate
purchase payments in the order they were made: the oldest unliquidated purchase
payment first, the next oldest unliquidated purchase payment second, etc. until
all purchase payments have been liquidated.
The surrender charge as to any liquidated purchase payment is determined by
multiplying the amount of the purchase payment being liquidated by the
applicable percentage shown in the Schedule. The total surrender charge will be
the sum of the surrender charges for each purchase payment being liquidated.
In a partial withdrawal, the surrender charge is deducted from the Account Value
remaining after you are paid the amount requested. The amount requested from a
Sub-Account may not exceed the value of that Sub-Account less any applicable
surrender charge. In a complete withdrawal (or surrender of this Contract), it
is deducted from the amount otherwise payable.
BORROWING PART OF YOUR ACCOUNT VALUE
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While this Contract is in force and after the Free-Look Period, you may request
a loan by giving us Satisfactory Notice. Unless specified otherwise, an amount
equal to the loan will be transferred from the Sub-Accounts to the Loan Account
in proportion to the Account Value in each Sub-Account in which you are invested
as of the date we process the loan. This Contract will be the only security we
require for the loan. The minimum loan amount is also shown in the Schedule. A
loan may be a taxable event and may affect the amount of the Death Proceeds
payable under this Contract.
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Maximum Loanable Value - The maximum loanable value is shown in the Schedule.
The amount of the loan and all existing loans may not be more than the maximum
loanable value as of the loan date. The loan date is the date we process the
loan.
If on any Valuation Date where there is Debt outstanding and the Surrender Value
is negative, we will send you an overloan notice at your last known address.
You will then have 61 days from the date we send the notice to avoid termination
by paying us at least the minimum repayment amount listed in the notice.
Loan Repayment - All or part of a loan may be repaid to us at any time while
this Contract is in force during the Insured's lifetime. The minimum loan
repayment amount is shown in the Schedule. If the Grace Period has expired and
this Contract has terminated, any Debt that exists at the end of the Grace
Period may not be repaid unless the Contract is reinstated.
Unless specified otherwise, an amount equivalent to a loan repayment will be
transferred from the Loan Account to the Sub-Accounts in proportion to the
Account Value in each Sub-Account in which you are invested.
Loan Interest - Interest on the loan accrues daily at the Loan Interest Rate
shown in the Schedule. It is due on each Contract Anniversary. If loan
interest is not paid when due, the difference between the Loan Account and Debt
will be transferred from the Sub-Accounts to the Loan Account in proportion to
the Account Value in each Sub-Account in which you are invested.
Effects of a Loan - A loan will be transferred from the Sub-Accounts to the Loan
Account. Any loan interest that becomes due and is not paid will also be so
transferred. A repayment or loan interest payment will be transferred from the
Loan Account into the Sub-Accounts. Amounts transferred to the Loan Account will
earn interest daily at the Loan Credited Rate shown in the Schedule from the
date of transfer.
Since the amount you borrow is transferred from the Sub-Accounts, a loan whether
or not repaid, will have a permanent effect on the Surrender Value and may have
a permanent effect on the death benefit. The effect may be favorable or
unfavorable. This is true whether you repay the loan or not. If not repaid, the
loan will reduce the amount of Death Proceeds.
CHARGES
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Monthly Deduction Amount - The Monthly Deduction Amount is deducted on each
Monthly Processing Date. It is equal to (a) + (b) + (c) + (d), where:
(a) is the cost of insurance charge described below;
(b) is the asset-based charges described in the Schedule;
(c) is the cost of any riders for which a separate charge is shown in the
Schedule; and
(d) is any other applicable charge shown in the Schedule.
Monthly Deduction Amount on a Contract Anniversary - On a Monthly Processing
Date that is also a Contract Anniversary, the Monthly Deduction Amount is equal
to (a) + (b), where:
(a) is the Monthly Deduction Amount as described above; and
(b) is the administration charge shown in the Schedule.
Cost of Insurance Charge - The maximum monthly cost of insurance charge is equal
to (a) times (b) and then divided by (c), where:
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(a) is the Maximum Cost of Insurance Rate per $1,000 shown in the Table in
the Schedule;
(b) is an amount equal to the death benefit minus the Account Value; and
(c) is $1,000.
The actual monthly cost of insurance charge may be less than, but never more
than, the maximum monthly cost of insurance charge.
OWNER AND BENEFICIARY
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The Owner - You are the Owner of this Contract. You are also the Insured unless
another Insured has been named in the application and is shown in the Schedule.
You have the rights and options described in this Contract while the Insured is
living and this Contract is in force. One or more people may own this Contract.
The Beneficiary - We pay the Death Proceeds to the primary Beneficiary. If the
primary Beneficiary dies before the Insured, we pay the Death Proceeds to the
Contingent Beneficiary, if any. If there is no surviving Beneficiary, we pay the
Death Proceeds to the Owner's estate.
One or more persons may be named as primary Beneficiary or Contingent
Beneficiary. We will assume any Death Proceeds are to be paid in equal shares
to the multiple surviving Beneficiaries, unless you specify otherwise.
You have the right to change Beneficiaries. However, if you designate the
primary Beneficiary as irrevocable, you may need the consent of that Beneficiary
to exercise the rights and options under this Contract.
Change of Owner or Beneficiary - During your lifetime and while this Contract is
in force you can transfer ownership of this Contract or change the Beneficiary.
To make any of these changes, you must send us Satisfactory Notice. If accepted,
any change in Owner or Beneficiary will take effect on the date you signed the
notice. Any of these changes will not affect any payment made or action taken by
us before our acceptance. A change of Owner may be a taxable event.
DEATH PROCEEDS
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Death Benefit - If the Insured dies while this Contract is in force, the death
benefit will be the greater of (a) or (b), where:
(a) is the Insurance Amount on the date of death; and
(b) is the Minimum Death Benefit on the date of death.
However, if the state in which this Contract is issued does not allow us to
deduct a cost of insurance charge on or after the Contract Anniversary when the
Insured reaches age 100, the death benefit thereafter will be limited to (b)
above.
Minimum Death Benefit - To ensure that this Contract continues to qualify as
life insurance under the Internal Revenue Code of 1986, as amended (the "Code"),
we will also calculate a Minimum Death Benefit for each Valuation Date. The
Minimum Death Benefit on the Valuation Date is equal to (a) times (b), where:
(a) is the Account Value plus any positive Market Value Adjustment on the
Valuation Date; and
(b) is the Minimum Death Benefit Percentage shown in the Table in the
Schedule.
Page 21
<PAGE>
Death Proceeds - The actual amount payable to the Beneficiary if the Insured
dies while this Contract is in force is called the Death Proceeds. The Death
Proceeds are equal to (a) + (b) - (c) - (d) -(e), where:
(a) is the death benefit described above;
(b) is any insurance on the Insured's life that may be provided by riders
to this Contract;
(c) is any Debt;
(d) is any due and unpaid Monthly Deduction Amount accruing during the
Grace Period; and
(e) is any Contract values previously paid pursuant to any riders attached
to this Contract.
We will pay the Death Proceeds to the Beneficiary after we receive satisfactory
proof of death. The Death Proceeds will be adjusted under certain conditions.
Refer to the Incontestability, Suicide, and Misstatement of Age or Sex
provisions.
You may choose to have the Death Proceeds paid in one sum, in which case this
Contract will terminate, or under a Settlement Option. If you have not made a
choice before the Insured dies, the Beneficiary may make this choice. Unless
you or the Beneficiary specify otherwise, we reserve the right to pay the Death
Proceeds in one sum within 90 days after we receive satisfactory proof of death.
Proof of Death - Satisfactory proof of death must be received at our Customer
Service Center before we will pay any Death Proceeds. We will accept one of the
following items:
1. An original certified copy of an official death Contract, or
2. An original certified copy of a decree of a court of competent
jurisdiction as to the finding of death, or
3. Any other proof satisfactory to us.
Insurance Amount Increases - Payment of additional purchase payments may require
us to increase the Insurance Amount so that this Contract continues to qualify
as life insurance under the Code. We reserve the right to require satisfactory
evidence of insurability for any increase in the Insurance Amount. In addition,
we reserve the right to require that your risk class be identical to that on the
Contract Date.
GENERAL PROVISIONS
- ------------------------------------------------------------------------------
Application - All statements made in an application for this Contract are
considered representations and not warranties. We have issued this Contract
based on the statements made in any such application and we rely on such
statements to be true and complete. No such statement will be used to void the
coverage under this Contract or to deny a claim unless that statement is a
material misrepresentation.
Assignment - You may assign this Contract at any time while the Insured is
living and this Contract is in force. No assignment will be binding on us unless
we receive Satisfactory Notice. We will not be liable for any payments made or
actions we take before we accept the assignment. An absolute assignment will
revoke the interest of any revocable Beneficiary. We will not be responsible for
the validity of any assignment. An assignment may be a taxable event.
Claims of Creditors - To the extent permitted by law, no benefits payable under
this Contract will be subject to the claims of creditors.
Entire Contract - This Contract including any attached riders, endorsements,
amendments and the initial and any subsequent applications for a change in
coverage attached to this Contract constitutes the entire contract between you
and us.
Page 22
<PAGE>
Misstatement and Proof of Age or Sex - If the age or sex of the Insured has been
misstated, the benefits under this Contract will be those which the initial
purchase payment and any additional purchase payments would have provided for
the correct age and sex.
No Dividends Payable - This Contract is non-participating and does not share in
any distribution of our surplus. We will not pay any dividends.
Incontestability - We will not contest the payment of the Death Proceeds based
upon the initial purchase payment after this Contract has been in force during
the Insured's lifetime for two years from the Issue Date.
For any increase in Insurance Amount requiring evidence of insurability, we will
not contest payment of the Death Proceeds based on such an increase after it has
been in force during the Insured's lifetime for two years from its effective
date.
Suicide - If the Insured dies by suicide, while sane or insane, within two years
from the Issue Date, we will not pay the Death Proceeds normally payable on the
Insured's death. Instead, we will limit the death benefit to the Account Value
as of the date we receive proof of death, and Death Proceeds will otherwise be
calculated in the usual manner.
If the Insured dies by suicide, while sane or insane, within two years of any
date we receive and accept an additional purchase payment, any amount of death
benefit that would not be payable except for the fact that the additional
purchase payment was made will be limited to the amount of such payment.
Required Reports - We will furnish a report to you as often as required by law,
but at least once in each Contract Year that this Contract is in force. The
report will show the number of Accumulation Units credited to each Variable Sub-
Account in which you are invested and the corresponding Accumulation Unit value
as of the date of the report. It will also show your Fixed Account Value. The
report will also include any other information required by the laws and
regulations of the jurisdiction in which this Contract is delivered.
Changes in Contract Cost Factors - Changes in cost of insurance rates, credited
interest rates, or other Contract expense charges will be applied on a uniform
basis for insureds of the same sex, attained age and risk class whose Contracts
have been in force for the same length of time. Changes in these nonguaranteed
elements will be based on changes in future expectations for factors such as
investment earnings, mortality, persistency, expenses and taxes. Any changes
will be determined in accordance with the procedures on file, if required, with
the insurance regulator in the state in which this Contract was delivered.
Taxes Based Upon Value - If there is a law or change in law assessing taxes
against us based upon the value of this Contract, we reserve the right to charge
you and all similarly situated Owners proportionately for that tax. This would
include a tax based upon our realized net capital gains in the Variable Sub-
Accounts and on earnings in the Fixed Account, on which we are not currently
taxed.
Payments We May Defer - We may not be able to determine the value of the assets
of the Variable Sub-Accounts because:
1. The New York Stock Exchange is closed for trading, or trading on the
New York Stock Exchange is restricted;
2. The SEC determines that a state of emergency exists; or
3. An order or pronouncement of the SEC permits a delay for the
protection of Owners.
Page 23
<PAGE>
If this happens, we may delay:
1. Determination and payment of the Surrender Value or any withdrawal;
2. Determination and payment of any death benefit;
3. Transfers of the Account Value; or
4. Granting of any loan.
We reserve the right to delay payment or transfer of amounts from the Fixed
Account for up to six months, except to pay premiums on policies with us. If
deferred 30 days or more, the amount deferred will earn interest at a rate not
less than the Minimum Deferral Interest Rate shown in the Fixed Account section
of the Schedule.
We may also defer payments for any amount attributable to a purchase payment
made in the form of a check for a reasonable amount of time (not to exceed 15
days) to permit the check to clear.
Authority to Make Agreements - All agreements made by us must be signed by one
of our officers. No other person, can change the terms of this Contract or make
any agreement binding on us.
Required Note on Our Computations - We have filed a detailed statement of our
computations with the insurance supervisory official in the appropriate
jurisdictions. The values are not less than those required by the law of that
state or jurisdiction. Any benefit provided by an attached rider will not
increase these values unless otherwise stated in that rider.
SETTLEMENT OPTIONS
- ------------------------------------------------------------------------------
The Surrender Value or Death Proceeds may be paid in a single sum or under one
of our Settlement Options. If the amount available to apply under any Variable
or Fixed Settlement Option is less than the minimum amount shown in the
Schedule, we reserve the right to require that such amount be paid in a lump
sum.
If at any time payments under the Settlement Option become less than the minimum
payment shown in the Schedule, we reserve the right to reduce the frequency of
payment to an interval that results in each payment being at least equal to the
minimum payment. In no event will the interval be less frequent than annual.
At the time you elect the Settlement Option, you may also elect to have the
Account Value applied to provide Variable Payments, Fixed Payments, or a
combination of both. Unless you specify otherwise, we will provide either
variable or fixed payments, or a combination of variable and fixed payments in
proportion to the Sub-Accounts in which you are invested as of a date not more
than 5 Valuation Days before the due date of the first payment.
Once payments have begun under a Settlement Option, we reserve the right to
disallow further changes without our prior approval.
We may require proof of age, sex or survival of any person upon whose age, sex
or survival any payments depend. If the age or sex of a Payee has been
misstated, the amount payable will be the amount that the Surrender Value or
Death Proceeds would have provided for the correct age and sex. If we have made
incorrect payments, the amount of any underpayment will be paid immediately.
The amount of any overpayment will be deducted from future payments until the
amount of the overpayment is repaid.
Page 24
<PAGE>
VARIABLE PAYMENTS
Amount of First Variable Payment - The Settlement Option Tables shown in the
Schedule are used to determine the first monthly variable payment for an assumed
investment rate of 3% and 5%. The Settlement Option Tables show the dollar
amount of the first monthly variable payment that can be purchased with each
$1,000 applied. The assumed investment rates we currently allow are shown in the
Schedule.
Value of Income Units - The Income Unit value for any Valuation Period is
determined by multiplying (a) by (b), and then dividing by (c) where:
(a) is the Income Unit value for the immediately preceding Valuation
Period;
(b) is the "net investment factor" for the Variable Sub-Account for the
Valuation Period for which the value is being determined; and
(c) is the daily equivalent of the assumed investment rate for the
number of days in the Valuation Period.
The value of an Income Unit may increase, decrease or remain the same from one
Valuation Period to the next.
Number of Income Units - We determine the number of Income Units in each
Variable Sub-Account by dividing the first monthly variable payment attributable
to that Sub-Account by its Income Unit value as of a date not more than 5
Valuation Days before the due date of the first variable payment.
Amount of Second and Subsequent Variable Payments - The dollar amount of the
second and subsequent variable payments may change with the investment
performance of the Variable Sub-Accounts. The total amount of each variable
payment will be equal to the sum of the variable payments in each Variable Sub-
Account. The dollar amount of each payment for a Variable Sub-Account is
determined by multiplying the number of Income Units by the Income Unit value
for the Variable Sub-Account for the Valuation Period which ends on a
consistently applied date not more than 5 Valuation Days before the payment is
due.
We guarantee that the dollar amount of each payment after the first will not be
affected by variations in our expenses or mortality experience.
Exchange of Income Units - If there is an exchange of value of a designated
number of Income Units of particular Variable Sub-Accounts into other Income
Units, the value will be such that the dollar amount of payment made on the date
of exchange would be unaffected by the exchange.
FIXED PAYMENTS
Fixed Payments are payments that remain fixed as to dollar amount throughout the
payment period. The Settlement Option Tables shown in the Schedule are used to
determine the monthly fixed payment. The Settlement Option Tables show the
dollar amount of the monthly fixed payment that can be purchased with each
$1,000 applied.
Page 25
<PAGE>
SETTLEMENT OPTIONS
The following list of Settlement Options or any option acceptable to us may be
elected.
Option 1 - Payments for Life: Payments during the lifetime of the Payee and
terminating with the last payment preceding the death of the Payee.
Option 2 - Payments for Life with 10 or 20 Years Guaranteed: Payments during the
lifetime of the Payee with the guarantee that payments will be made for a
minimum of 10 or 20 years, as elected. If at the death of the Payee, payments
have been made for less than the guaranteed number of years elected, payments
will be made to the Beneficiary for the remainder of the guaranteed number of
years elected.
Option 3 - Joint and Last Survivor Payments: Payments during the joint lifetime
of the Payee and a designated second person, and thereafter during the remaining
lifetime of the survivor, ceasing with the last payment prior to the death of
the survivor.
Option 4 - Payments for a Fixed Period: An amount payable for the number of
years selected which may be from 5 to 30 years. If the Payee dies before the
end of the period selected, payments will be continued to the Beneficiary for
the remainder of the selected period.
Page 26
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
[LOGO OF SAGE APPEARS HERE]
SAGE LIFE ASSURANCE OF AMERICA,INC.
Member of Sage Insurance Group, Inc.
MODIFIED SINGLE PAYMENT COMBINATION FIXED AND VARIABLE LIFE INSURANCE CONTRACT
Limited purchase payment flexibility
Death benefit payable at Insured's death while this Contract is in force
Nonparticipating
<PAGE>
EXHIBIT 1A(5)(a)(iv)
[LOGO] SAGE
SAGE LIFE ASSURANCE COMPANY OF AMERICA INC.
Member of Sage Insurance Group. Inc.
A Stock Company
Home Office Customer Service Center
300 Atlantic Street [P. O. Box 290680
Stamford, CT 06901 Wethersfield, CT 06109]
[1-877-TEL-SAGE]
PLEASE READ THIS CONTRACT CAREFULLY. This Contract is a legal contract between
the Owner (you) and Sage Life Assurance of America, Inc. You have the rights
described in the Contract. We agree to pay the Death Proceeds to the Beneficiary
upon receipt of proof that an Insured died while coverage under this Contract is
in force.
RIGHT TO EXAMINE THIS CONTRACT:
If for any reason you are not satisfied with this Contract, you may return it to
us or the agent who sold it to you within 10 days after you receive it (the
Free-Look Period). When we receive the returned Contract at our Customer Service
Center, we will promptly refund the entire purchase payment (minus any
withdrawals).
The amount and duration of the death benefit and all payments and values, when
based on the investment experience of the Variable Account, may increase or
decrease, depending on this Contract's investment results and are not guaranteed
as to dollar amount.
[SIGNATURE ILLEGIBLE]
Chairman
MODIFIED SINGLE PAYMENT COMBINATION FIXED AND VARIABLE LIFE INSURANCE CONTRACT
Limited purchase payment flexibility
Death benefit payable at Insured's death while this Contract is in force
Nonparticipating
Page 1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SCHEDULE................................................................. 3
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES PER $1,000.. 8
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES PER $1,000.. 9
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES.............................. 10
DEFINITIONS.............................................................. 11
MAKING PURCHASE PAYMENTS................................................. 13
ACCOUNT VALUE............................................................ 14
VARIABLE ACCOUNT......................................................... 15
FIXED ACCOUNT............................................................ 17
TRANSFERS AMONG ACCOUNTS................................................. 18
SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE.................. 18
BORROWING PART OF YOUR ACCOUNT VALUE..................................... 19
CHARGES.................................................................. 20
OWNER AND BENEFICIARY.................................................... 20
DEATH PROCEEDS........................................................... 21
GENERAL PROVISIONS....................................................... 22
SETTLEMENT OPTIONS....................................................... 23
</TABLE>
Page 2
<PAGE>
SCHEDULE
Contract No.:
Owner: Issue Date:
Insured: Contract Date:
Issue Age/Sex: Initial Purchase Payment $
Risk Class: Initial Insurance Amount: $
This Schedule sets forth additional information that relates to the provisions
in this Contract with the corresponding headings.
MAKING PURCHASE PAYMENTS
Additional purchase payments may be made at any time and in any amount necessary
to avoid termination of this Contract. Other additional purchase payments may be
made at any time after the first Contract Anniversary, subject to the following
conditions:
1. each additional purchase payment must be at least $250;
2. only one purchase payment may be paid in any Contract Year;
3. the attained age of the Insured must be less than 81; and
4. our prior approval is required before you make a purchase payment
that causes the Account Value of all single payment or modified
single payment Contracts that you maintain with us to exceed
$1,000,000.
We reserve the right to require satisfactory evidence of insurability before we
accept any additional purchase payment that increases the death benefit by more
than it increases the Account Value.
The minimum reinstatement payment is the minimum purchase payment for which we
would then issue a Contract based upon the Insured's attained age and risk class
as of the effective date of the reinstated Contract.
No purchase payment, whether initial or additional, may be allocated such that
any Sub-Account would have a value less than $250.
The Designated Sub-Account is the [Money Market Sub-Account].
No premium taxes apply to Washington contracts.
VARIABLE ACCOUNT
The Variable Account for this Contract is [The Sage Variable Life Account A].
[It is a unit investment trust variable account.]
FIXED ACCOUNT
The Fixed Account for this Contract is [The Sage Fixed Interest Account A].
The Minimum Guaranteed Interest Rate is 3%.
The Minimum Deferral Interest Rate is 3%.
Page 3
<PAGE>
TRANSFERS AMONG ACCOUNTS
The minimum amount that can be transferred is $250. However, if less remains in
a Sub-Account, that amount may be transferred. If a transfer request would
reduce the Account Value remaining in a Sub-Account below $250, we will treat
the transfer request as a request to transfer the entire amount.
Your transfer request must clearly state the Sub-Accounts from which and to
which transfers are to be made.
We reserve the right to limit, upon notice, the maximum number of transfers you
may make to one per calendar month or 12 per Contract Year.
Under a Settlement Option, we reserve the right to:
1. disallow transfers from the Fixed Account to the Variable Account, or
from the Variable Account to the Fixed Account; and
2. limit the maximum number of transfers between Variable Sub-Accounts to
1 per Contract Year.
SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE
The Free Withdrawal Amount is the greater of (a) and (b) where:
(a) is the excess of 10% of the total purchase payments over 100% of all
prior withdrawals including any associated surrender charges incurred
in that Contract Year; and
(b) is the excess of the Account Value on the date of withdrawal over the
unliquidated purchase payments.
The minimum amount that can be withdrawn is $250. If a withdrawal request would
reduce the Account Value remaining in a Sub-Account below $250, we will treat
the withdrawal request as a request to withdraw the entire amount.
If a requested withdrawal would reduce the Account Value below $5,000, we
reserve the right to treat the request as a withdrawal of only the excess over
$5,000.
Unless you specify otherwise, we will make withdrawals proportionately from all
Sub-Accounts in which you are invested.
BORROWING PART OF YOUR ACCOUNT VALUE
The maximum loanable value is 90% of the Account Value less any surrender charge
less any due and unpaid Monthly Deduction Amount.
The minimum loan amount is $250.
The Loan Interest Rate is 6%.
The minimum loan repayment amount is $250.
The Loan Credited Rate is a minimum of 4%. We may credit a higher rate to that
portion of the Loan Account equal to the Free Withdrawal Amount.
Page 4
<PAGE>
CHARGES
Surrender Charge - A surrender charge may be imposed upon surrender of this
Contract or when an Excess Withdrawal is made. The surrender charge is applied
to each purchase payment and is a percentage of each purchase payment as
follows:
Maximum
Contract Surrender Charge
Year Percentage
-------- ----------------
1 9%
2 9%
3 8%
4 7%
5 6%
6 5%
7 3%
8+ 0%
Transfer Charge - We reserve the right to charge a maximum of $25 for each
transfer after the 12th in a Contract Year. Each request is considered to be
one transfer regardless of the number of Sub-Accounts affected by the transfer.
The transfer charge will be deducted proportionately from all Sub-Accounts from
which transfers are made.
Administration Charge - $40 a year. This charge is incurred at the beginning
of each Contract Year and deducted on each Contract Anniversary or upon
surrender. The charge will be waived:
. if the Account Value is at least $50,000 at the time of deduction; or
. beginning on and after the 8th Contract Anniversary.
Asset-Based Charges - We deduct asset-based charges from your Account Value to
compensate us for assuming mortality and expense risks, certain administrative
expenses, certain distribution costs and certain state and Federal tax expenses.
Asset-based charges are calculated as a percentage of the Account Value on the
date of deduction. On the Contract Date, and monthly thereafter, the asset-
based charges are deducted in proportion to the Sub-Accounts in which you are
invested. The maximum charges are:
Asset-Based Charges Annual Charge Monthly Charge
------------------- -------------- ---------------
Contract Years 1-10 1.80% .150000%
Contract Years 11+ 1.30% .108333%
We also reserve the right to deduct asset-based charges on the effective date of
any allocation of purchase payment to the Sub-Accounts, based on the amount
allocated, and based on the number of days remaining until the next date of
deduction.
Variable Sub-Account Charges - If proceeds are applied to a Settlement Option,
we will deduct the asset-based charges above from the assets in each Variable
Sub-Account supporting Variable Payments on a daily basis rather than as
described above. The maximum charges are:
Variable Sub-Account Charges Annual Charge Daily Charge
---------------------------- ------------- ------------
Contract Years 1-10 1.80% .0049763%
Contract Years 11+ 1.30% .0035849%
Charge Deduction Rules - Unless specified above, charges are deducted from the
Account Value [proportionately from all Sub-Accounts in which you are invested.]
Page 5
<PAGE>
SETTLEMENT OPTIONS
The minimum amount that can be applied under any Variable or Fixed Payment is
$5,000.
The minimum payment is $100.
We currently allow assumed investment rates of 3% and 6%.
RIDERS
Accelerated Death Benefit Rider
The maximum Accelerated Benefit Amount is 50% of the Insurance Amount, but not
greater than $500,000.
Accidental Death Benefit Rider
The maximum Accidental Death Benefit Amount is $250,000.
Change of Insured Rider
The minimum Attained Ages of the original and new Insureds as of the effective
date of change must be 25.
The maximum Attained Ages of the original and new Insureds as of the effective
date of change is 75.
The maximum Change of Insured Rider charge is $1.50 per $1,000 of death benefit.
Page 6
<PAGE>
Settlement Option Tables
Values for other ages, and for other payment periods, joint life combinations,
or assumed investment rates that we offer (Tables below assume 3%) are available
on request. Monthly payments are shown for each $1,000 applied.
Settlement Option Table for a Fixed Period
<TABLE>
<CAPTION>
Monthly Monthly Monthly
Fixed Period Payment Fixed Period Payment Fixed Period Payment
of Years of Years ------- of Years -------
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
11 $8.88 21 $5.33
12 8.26 22 5.16
13 7.73 23 5.00
14 7.28 24 4.85
5 $17.95 15 6.89 25 4.72
6 15.18 16 6.54 26 4.60
7 13.20 17 6.24 27 4.49
8 11.71 18 5.98 28 4.38
9 10.56 19 5.74 29 4.28
10 9.64 20 5.53 30 4.19
</TABLE>
Settlement Option Table for Life
<TABLE>
<CAPTION>
Male/Female Male/Female Male/Female
Age Life Only 10 Years Guaranteed 20 Years Guaranteed
--- --------- ------------------- -------------------
<S> <C> <C> <C>
50 $ 4.28 / 3.92 $4.24 / 3.90 $4.10 / 3.84
55 4.72 / 4.27 4.64 / 4.24 4.40 / 4.12
60 5.31 / 4.74 5.17 / 4.68 4.73 / 4.45
65 6.13 / 5.38 5.84 / 5.25 5.04 / 4.81
70 7.28 / 6.29 6.65 / 6.00 5.29 / 5.14
75 8.90 / 7.62 7.53 / 6.92 5.43 / 5.37
80 11.19 / 9.62 8.37 / 7.93 5.50 / 5.48
85 14.36 / 12.63 9.00 / 8.77 5.52 / 5.52
</TABLE>
Page7
<PAGE>
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES PER $1,000
MALE - STANDARD RISK CLASS
<TABLE>
<CAPTION>
Attained Monthly Attained Monthly Attained Monthly Attained Monthly
Age Rate Age Rate Age Rate Age Rate
--- ---- --- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C>
0 0.2194 25 0.1460 50 0.5852 75 5.7847
1 0.0859 26 0.1434 51 0.6381 76 6.3595
2 0.0825 27 0.1426 52 0.6968 77 6.9577
3 0.0809 28 0.1418 53 0.7640 78 7.5852
4 0.0775 29 0.1434 54 0.8380 79 8.2619
5 0.0734 30 0.1460 55 0.9180 80 9.0119
6 0.0692 31 0.1501 56 1.0030 81 9.8582
7 0.0650 32 0.1560 57 1.0932 82 10.8223
8 0.0625 33 0.1626 58 1.1894 83 11.9024
9 0.0617 34 0.1710 59 1.2942 84 13.0775
10 0.0625 35 0.1810 60 1.4109 85 14.3247
11 0.0675 36 0.1935 61 1.5430 86 15.6263
12 0.0767 37 0.2077 62 1.6923 87 16.9762
13 0.0892 38 0.2236 63 1.8597 88 18.3754
14 0.1034 39 0.2420 64 2.0454 89 19.8343
15 0.1184 40 0.2629 65 2.2459 90 21.3788
16 0.1326 41 0.2854 66 2.4605 91 23.0518
17 0.1434 42 0.3097 67 2.6886 92 24.9371
18 0.1518 43 0.3365 68 2.9344 93 27.2442
19 0.1568 44 0.3649 69 3.2068 94 30.4453
20 0.1585 45 0.3950 70 3.5147 95 35.4922
21 0.1585 46 0.4277 71 3.8670 96 44.5151
22 0.1568 47 0.4620 72 4.2723 97 62.8314
23 0.1535 48 0.4989 73 4.7329 98 83.3333
24 0.1501 49 0.5399 74 5.2401 99 83.3333
100+ 83.3333
</TABLE>
Rates shown are based on the Commissioner's Male 1980 Standard Ordinary
Mortality Table, Age Last Birthday. These rates are based on the Insured's
attained age as of each Contract Anniversary and do not change during a Contract
Year.
Page 8
<PAGE>
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES PER $1,000
FEMALE - STANDARD RISK CLASS
<TABLE>
<CAPTION>
Attained Monthly Attained Monthly Attained Monthly Attained Monthly
Age Rate Age Rate Age Rate Age Rate
--- ---- --- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C>
0 0.1568 25 0.0976 50 0.4285 75 3.4445
1 0.0700 26 0.1001 51 0.4595 76 3.8688
2 0.0667 27 0.1034 52 0.4947 77 4.3247
3 0.0650 28 0.1067 53 0.5332 78 4.8190
4 0.0642 29 0.1101 54 0.5726 79 5.3700
5 0.0625 30 0.1142 55 0.6129 80 5.9999
6 0.0609 31 0.1184 56 0.6523 81 6.7294
7 0.0592 32 0.1226 57 0.6901 82 7.5789
8 0.0584 33 0.1284 58 0.7279 83 8.5491
9 0.0575 34 0.1343 59 0.7699 84 9.6289
10 0.0567 35 0.1418 60 0.8204 85 10.8111
11 0.0584 36 0.1518 61 0.8826 86 12.0908
12 0.0609 37 0.1635 62 0.9626 87 13.4694
13 0.0642 38 0.1777 63 1.0586 88 14.9520
14 0.0684 39 0.1935 64 1.1675 89 16.5557
15 0.0725 40 0.2111 65 1.2832 90 18.3060
16 0.0767 41 0.2295 66 1.4033 91 20.2498
17 0.0800 42 0.2487 67 1.5235 92 22.4699
18 0.0834 43 0.2671 68 1.6473 93 25.1552
19 0.0859 44 0.2871 69 1.7866 94 28.7360
20 0.0884 45 0.3072 70 1.9508 95 34.1581
21 0.0900 46 0.3273 71 2.1528 96 43.5428
22 0.0917 47 0.3498 72 2.4040 97 62.1940
23 0.0934 48 0.3741 73 2.7057 98 83.3333
24 0.0959 49 0.4000 74 3.0550 99 83.3333
100+ 83.3333
</TABLE>
Rates shown are based on the Commissioner's Female 1980 Standard Ordinary
Mortality Table, Age Last Birthday. These rates are based on the Insured's
attained age as of each Contract Anniversary and do not change during a Contract
Year.
Page9
<PAGE>
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES
<TABLE>
<CAPTION>
Minimum Minimum Minimum
Attained Death Benefit Attained Death Benefit Attained Death Benefit
Age Percentage Age Percentage Age Percentage
--- ---------- --- ---------- --- ----------
<S> <C> <C> <C> <C> <C>
0-40 250% 60 130% 80 105%
41 243% 61 128% 81 105%
42 236% 62 126% 82 105%
43 229% 63 124% 83 105%
44 222% 64 122% 84 105%
45 215% 65 120% 85 105%
46 209% 66 119% 86 105%
47 203% 67 118% 87 105%
48 197% 68 117% 88 105%
49 191% 69 116% 89 105%
50 185% 70 115% 90 105%
51 178% 71 113% 91 104%
52 171% 72 111% 92 103%
53 164% 73 109% 93 102%
54 157% 74 107% 94 101%
55 150% 75 105% 95 101%
56 146% 76 105% 96 101%
57 142% 77 105% 97 101%
58 138% 78 105% 98 101%
59 134% 79 105% 99 101%
100+ 100%
</TABLE>
Page 10
<PAGE>
DEFINITIONS
- --------------------------------------------------------------------------------
"Account Value" is the entire amount we hold under this Contract for you while
this Contract is in force. It is equal to the sum of the Variable Account
Value, the Fixed Account Value and the Loan Account Value.
"Accumulation Unit" is the unit of measure we use to keep track of the value of
each Variable Sub-Account.
"Attained Age" is the Issue Age plus the number of full years since the Contract
Date.
"Beneficiary" is the person or persons to whom we pay the Death Proceeds when
the Insured dies.
"Contract Date" is the date from which Contract Anniversaries and Contract Years
are measured. The Contract Date may or may not be the same as the Issue Date and
is shown in the Schedule. While this Contract is in force, every anniversary of
the Contract Date is a Contract Anniversary, and each and every consecutive
twelve-month period beginning on the Contract Date and each Contract Anniversary
is a Contract Year.
"Contingent Beneficiary" is the person that becomes the Beneficiary if the named
Beneficiary dies before the Insured.
"Contingent Owner" is the person that becomes the Owner if the named Owner dies
before the Insured.
"Customer Service Center" is where we provide service to you. The mailing
address and telephone number of the Customer Service Center are shown on the
first page of this Contract.
"Death Proceeds" is the amount of money that we will pay the Beneficiary if the
Insured dies while this Contract is in force.
"Debt" is the sum of all outstanding loans plus accrued interest under this
Contract.
"Excess Withdrawal" is a withdrawal of Account Value that exceeds the Free
Withdrawal Amount.
"Expiry Date" is the last day in a Guarantee Period.
"Fixed Account" is a separate investment account of ours into which purchase
payments may be invested or Account Value may be transferred.
"Fixed Account Value" is the sum of the value of each Fixed Sub-Account on any
particular day.
A "Fixed Sub-Account" is established when purchase payments are invested or
amounts are transferred to the Fixed Account. The value of each Fixed Sub-
Account is equal to the amount invested, increased by interest and reduced by
any withdrawals, loans or transfers from, or charges assessed against the Fixed
Sub-Account.
"Free Withdrawal Amount" is the maximum amount that can be withdrawn in a
Contract Year without being subject to a surrender charge. This amount is
described in the Schedule.
"General Account" consists of all our assets other than those held in any
separate investment accounts.
"Guaranteed Interest Rate" is the effective annual interest rate we will credit
for a specified Guarantee Period. The Guaranteed Interest Rate will never be
less than the minimum shown in the Schedule.
Page 11
<PAGE>
"Guarantee Period" is a period of years for which a specified effective annual
interest rate is guaranteed by us. Interest is credited daily at a rate to
yield the declared annual Guaranteed Interest Rate.
"Home Office" is our main office. The mailing address is shown on the first
page of this Contract.
"Income Unit" is the unit of measure we use to calculate the amount of payments
under the Variable Payment Settlement Option.
"Insurance Amount" is a dollar amount used to determine the death benefit of
this Contract. It is shown in the Schedule.
"Insured" is the person named in the application whose life is covered by this
Contract The Insured is shown in the Schedule.
"Issue Age" is the Insured's age on the last birthday on or before the Contract
Date. It is shown in the Schedule.
"Issue Date" is the date this Contract is issued at our Customer Service Center.
It is shown in the Schedule.
"Loan Account" is an account in our General Account, established for any amounts
transferred from the Sub-Accounts as a result of a loan. The Loan Account
credits a fixed rate of interest, the Loan Credited Rate, that is not based on
the investment experience of the Variable Sub-Account or the Guaranteed Interest
Rates applicable to the Fixed Sub-Accounts of the Fixed Account. The Loan
Credited Rate is shown in the Schedule.
"Loan Account Value" is the amount of all loans under this Contract that have
not been repaid, adjusted for interest we credit to the Loan Account at the Loan
Credited Rate and for any due and unpaid loan interest we charge at the Loan
Interest Rate. The Loan Interest Rate is shown in the Schedule.
"Monthly Processing Date" is the day of each month that the Monthly Deduction
Amount is deducted from the Account Value of this Contract. Monthly Processing
Dates are the Contract Date and the same day of each month thereafter. If there
is no such date in a particular month, the Monthly Processing Date will be the
last day of that month. If a Monthly Processing Date is not a Valuation Date,
the Monthly Processing Date will be the next Valuation Date.
"Net Asset Value" is the price of one share of an investment portfolio.
"Payee" is the natural person receiving payments under a Settlement Option.
"Satisfactory Notice" is a notice or request authorized by you, in a form
satisfactory to us, received at our Customer Service Center.
"Sub-Account" includes both Variable Sub-Accounts and Fixed Sub-Accounts, unless
the context indicates otherwise.
"Surrender Value" is the amount you receive upon surrender of this Contract. It
is your Account Value less any applicable surrender charges or other charges
shown in the Schedule that are due us but not yet deducted, less any Debt.
"Valuation Date" is the date at the end of a Valuation Period when each Variable
Sub-Account is valued.
Page 12
<PAGE>
"Valuation Period" is the period between one calculation of an Accumulation Unit
value and the next calculation. Normally, we calculate Accumulation Units daily
when the New York Stock Exchange is open for trading and we are open for
business. We can delay this calculation if an emergency exists, making disposal
of or fair valuation of assets in the Variable Account not reasonably
practicable, or the Securities and Exchange Commission (SEC) permits the delay.
We may change when we calculate the Accumulation Unit value by giving you 30
days notice, or such notice as may be required by law.
"Variable Account" is a separate investment account of ours into which purchase
payments may be invested or Account Value may be transferred. The Variable
Account is shown in the Schedule.
"Variable Account Value" is the sum of the value of each Variable Sub-Account on
a Valuation Date.
"Variable Sub-Account" is a division of the Variable Account that invests in
shares of a particular investment portfolio. The value of a Variable Sub-
Account is determined by multiplying (a) times (b) where:
(a) equals the number of Accumulation Units held in the Variable Sub-
Account; and
(b) equals the value of the Accumulation Unit for the Variable Sub-
Account.
"We", "us" or "our" is Sage Life Assurance of America, Inc.
"You" or "your" is the Owner of this Contract. Your name appears in the
Schedule. You are entitled to exercise all rights under this Contract. However,
if you designate an irrevocable beneficiary, you may need that beneficiary's
consent before you exercise your rights under this Contract.
MAKING PURCHASE PAYMENTS
- --------------------------------------------------------------------------------
Initial Purchase Payment - You must make the initial purchase payment in order
to put this Contract in force. The amount of your initial purchase payment is
shown in the Schedule.
Additional Purchase Payments - Subject to our acceptance and the limits
described in the Schedule, additional purchase payments may be made at any time
while this Contract is in force. All purchase payments after the first are
payable at our Customer Service Center.
If additional purchase payments are accepted, they may increase the death
benefit. We reserve the right to require satisfactory evidence of insurability
before accepting any additional purchase payment that increases the death
benefit by more than it increases the Account Value.
Unless specified otherwise, all payments received while a loan is outstanding,
will first be considered as a payment of any loan interest, next as a loan
repayment, and last as an additional purchase payment to this Contract.
Allocation of Purchase Payments Among the Fixed and Variable Accounts - Subject
to limits described in the Schedule, you tell us how to allocate your purchase
payments by notifying us of your choices. You specified how to allocate your
initial purchase payment in your application for this Contract. Initial purchase
payments allocated to the Fixed Account will be invested in Fixed Sub-Accounts
with the Guarantee Periods that you specified in your application. We may,
however, require that an initial purchase payment allocated to a Variable Sub-
Account be invested in the Designated Sub-Account shown in the Schedule during
the Free-Look Period. At the end of the Free-Look Period, if your initial
purchase payment was allocated to the Designated Sub-Account by us, we will
transfer the value of that Designated Sub-Account to the Sub-Account(s) you
specified in your application. For the purpose of processing transfers from the
Designated Sub-Account, the Free-Look Period will be assumed to end 15 days
after the Contract Date.
Page 13
<PAGE>
If you do not tell us how to allocate any additional purchase payments, they
will be allocated in the same manner as your most recent purchase payment.
Grace Period - If the Surrender Value on a Monthly Processing Date is not
sufficient to cover the Monthly Deduction Amount, a grace period of 61 days will
be allowed for you to pay an amount sufficient to cover the Monthly Deduction
Amount due. We will send you a notice at the start of the Grace Period at your
last known address. The Grace Period will end 61 days after we mail you the
notice.
If you do not make the necessary payment by the end of the Grace Period, this
Contract will terminate without value. Subject to the terms and conditions of
this Contract, if the Insured dies during the Grace Period, we will pay the
Death Proceeds.
Reinstatement - If the Grace Period has ended and you have not paid the required
purchase payment and have not surrendered this Contract for its Surrender Value,
you may be able to reinstate this Contract. To do so you must:
1. submit a written request for reinstatement within 3 years after the
end of the Grace Period;
2. provide evidence of insurability satisfactory to us;
3. pay an additional purchase payment equal to at least the minimum
reinstatement payment shown in the Schedule; and
4. repay or reinstate any Debt against this Contract that existed at the
end of the Grace Period.
The effective date of a reinstated Contract will be the Monthly Processing Date
on or next following the date we approve your application for reinstatement and
receive the necessary purchase payment.
If your Contract is reinstated, the Account Value on the date of reinstatement
will be the amount provided by the purchase payment paid. Any applicable charges
will be based on the length of time from the Contract Date to the effective date
of the reinstatement. Unless you have provided otherwise, the allocation of the
Account Value will be based on the allocation instructions in effect at the
start of the Grace Period.
ACCOUNT VALUE
- --------------------------------------------------------------------------------
The Account Value is the entire amount we hold under this Contract for you. It
is equal to the sum of the Variable Account Value, the Fixed Account Value and
the Loan Account Value.
Variable Account Value - On the Contract Date the Variable Account Value for a
Sub-Account is equal to the portion of the initial purchase payment allocated to
the Sub-Account. On each subsequent Valuation Date, it is equal to (a) + (b) -
(c) - (d) - (e), where:
(a) is the Variable Account Value in the Sub-Account on the preceding
Valuation Date multiplied by its net investment factor for the current
Valuation Period;
(b) is the amount of any allocation or transfer to the Sub-Account during
the current Valuation Period;
(c) is the amount of any transfer from the Sub-Account during the current
Valuation Period;
(d) is the amount of any charges allocated to the Sub-Account during the
current Valuation Period; and
(e) is the amount of any withdrawal or loan allocated to the Sub-Account
during the current Valuation Period.
<PAGE>
Fixed Account Value - On the Contract Date the Fixed Account Value for a Sub-
Account is equal to the portion of the initial purchase payment allocated to the
Sub-Account. On each subsequent Valuation Date, it is equal to (a) + (b) - (c)
- - (d) - (e), where:
(a) is the Fixed Account Value in the Sub-Account on the preceding
Valuation Date multiplied by the daily equivalent of its Guaranteed
Interest Rate earned for the number of days in the current Valuation
Period;
(b) is the amount of any allocation or transfer to the Sub-Account during
the current Valuation Period;
(c) is the amount of any transfer from the Sub-Account during the current
Valuation Period;
(d) is the amount of any charges allocated to the Sub-Account during the
current Valuation Period; and
(e) is the amount of any withdrawal or loan allocated to the Sub-Account
during the current Valuation Period.
Loan Account Value - Unless you take a loan, the Loan Account Value is zero.
(Amounts you take as a loan are sometimes referred to in this Contract as
amounts you "borrow".) If you take a loan, then on the effective date of the
loan the Loan Account Value is equal to the amount of the loan. On each
subsequent Valuation Date, it is equal to (a) + (b) + (c) - (d) - (e), where:
(a) is the Loan Account Value on the preceding Valuation Date;
(b) is the amount of interest earned (at the Loan Credited Rate shown in
the Schedule) on item (a) during the current Valuation Period;
(c) is any amounts transferred to the Loan Account because of any
additional loans and any due and unpaid loan interest during the
current Valuation Period;
(d) is the amount of any loan repayment you make during the current
Valuation Period; and
(e) is any amount of interest earned on item (a) and transferred to the
Sub-Accounts during the current Valuation Period.
VARIABLE ACCOUNT
- --------------------------------------------------------------------------------
Variable Account - A variable account is an investment account we maintain
separate from our General Account and any other separate investment accounts we
may have. We own the assets in a variable account. A variable account will not
be charged with liabilities that arise from any other business that we conduct.
We may transfer to our General Account assets that exceed the reserves and other
liabilities of a variable account.
A variable account may invest in mutual funds, unit investment trusts and other
investment portfolios. Such a variable account is treated as a unit investment
trust under Federal securities laws and is registered with the SEC under the
Investment Company Act of 1940.
We may offer certain series or variable accounts that may not be registered with
the SEC under the Securities Act of 1933. Any such series or variable account,
if offered, will be described in the applicable offering document.
The Variable Account for this Contract is shown in the Schedule. The laws of
our state of domicile govern this Variable Account.
Page 15
<PAGE>
Variable Sub-Accounts - A unit investment trust variable account includes
variable sub-accounts, each investing in a designated investment portfolio. The
sub-accounts and the investment portfolios in which they invest are specified in
the prospectus or offering document. Income, gains or losses, realized and
unrealized from assets in each variable sub-account are credited to or charged
against that variable sub-account without regard to other income, gains or
losses in the other sub-accounts or our other income, gains or losses.
Changes Within the Variable Account - We may, from time to time, make additional
Variable Sub-Accounts available to you. These Sub-Accounts will invest in
investment portfolios we find suitable for the Contract. We also have the right
to eliminate Sub-Accounts, to combine two or more Sub-Accounts or to substitute
a new investment portfolio for the portfolio in which a Sub-Account invests.
Such an action may become necessary if, in our judgment, a portfolio or Sub-
Account no longer suits the purposes of the Contract. This may happen due to a
change in laws or regulations, or a change in a portfolio's or Sub-Account's
investment objectives or restrictions, or because the portfolio or Sub-Account
is no longer available for investment, or for some other reason. We will get
prior approval from the insurance department of our state of domicile before
taking such action. If required, this approval process will be on file with the
insurance department of the jurisdiction in which the Contract is delivered. We
will also get any required approval from the SEC and any other required
approvals before taking such an action.
Subject to any required regulatory approvals, we reserve the right to transfer
assets of the Variable Sub-Accounts that we determine to be associated with the
class of Contracts to which the Contract belongs, to another variable account or
variable sub-account.
When permitted by law, we reserve the right to:
1. Deregister the Variable Account under the Investment Company Act of
1940;
2. Operate the Variable Account as a management company under the
Investment Company Act of 1940, if it is operating as a unit
investment trust;
3. Operate the Variable Account as a unit investment trust under the
Investment Company Act of 1940, if it is operating as a Managed
Separate Account;
4. Restrict or eliminate any voting rights of Owners, or other persons
who have voting rights as to the Variable Account;
5. Combine the Variable Account with other separate investment accounts;
and
6. Combine a Variable Sub-Account with another Variable Sub-Account.
If any actions we take result in a material change in the underlying investments
of a Variable Sub-Account in which you are invested, we will notify you of the
change. You may then choose a new Sub-Account.
Accumulation Units - We keep track of the value of each of your Variable Sub-
Accounts by the number of Accumulation Units in that Sub-Account. Accumulation
Units are credited to a Sub-Account when a purchase payment is allocated to that
Sub-Account or when an amount is transferred to that Sub-Account. Accumulation
Units will be canceled from a Sub-Account when amounts are transferred from a
Sub-Account or on payment of death proceeds, a withdrawal, a loan, a surrender,
or assessment of charges shown in the Schedule (other than the variable sub-
account charges). The number of Accumulation Units credited to or canceled from
a Sub-Account in a transaction is determined by dividing (a) by (b) where:
(a) is the dollar amount of the transaction; and
(b) is the value of the Accumulation Unit for that Sub-Account for the
Valuation Date for that transaction.
Page 16
<PAGE>
Value of Accumulation Units - The Accumulation Unit value for any Valuation
Period is determined by multiplying (a) by (b) where:
(a) is the Accumulation Unit value for the immediately preceding Valuation
Period; and
(b) is the "net investment factor" for the Variable Sub-Account for the
Valuation Period for which the value is being determined.
The value of an Accumulation Unit may increase, decrease or remain the same from
one Valuation Period to the next.
Net Investment Factor - The net investment factor for a Variable Sub-Account is
an index that measures the investment performance of that Sub-Account from one
Valuation Period to the next. The net investment factor for any Valuation
Period is determined by dividing (a) by (b) and then subtracting (c) where:
(a) is the net result of:
(i) the Net Asset Value per share of the investment portfolio share
in which the Sub-Account invests determined at the end of the
current Valuation Period; plus
(ii) the per share amount of any dividend or capital gains
distribution made by that investment portfolio on shares held in
the Sub-Account if the "ex-dividend" date occurs during the
current Valuation Period; and plus or minus
(iii) a per share charge or credit for any taxes reserved for, which
is determined by us to have resulted from the operations of that
Sub-Account;
(b) is the Net Asset Value per share of the investment portfolio share in
which the Sub-Account invests determined at the end of the immediately
preceding Valuation Period; and
(c) is the daily variable sub-account charges shown in the Schedule
(adjusted for the number of days in the Valuation Period).
The net investment factor may be more or less than, or equal to, one.
FIXED ACCOUNT
- --------------------------------------------------------------------------------
Fixed Account - The Fixed Account is a separate investment account under state
insurance law. It is maintained separate from our General Account and separate
from any other separate investment account that we may have. We own the assets
in the Fixed Account. Notwithstanding the foregoing, our obligations under (and
the values and benefits under) the Fixed Account option of this Contract do not
vary as a function of the investment performance of the Fixed Account. Owners
and Beneficiaries with rights under this Contract do not participate in the
investment gains or losses of the assets of the Fixed Account. Such gains or
losses accrue solely to us. We retain the risk that the value of the assets in
the Fixed Account may fall below the reserves and other liabilities that we must
maintain in connection with our obligations under the Fixed Account option of
this Contract. In such event, we will transfer assets from our General Account
to the Fixed Account to make up the difference. The Fixed Account will not be
charged with liabilities that arise from any other business that we conduct. We
may transfer to our General Account assets that exceed the reserves and other
liabilities of the Fixed Account. The Fixed Account is not required to be
registered with the SEC as an investment company under the Investment Company
Act of 1940.
Fixed Sub-Account - We will establish a separate Fixed Sub-Account for you each
time you allocate amounts to the Fixed Account. Amounts invested in these Fixed
Sub-Accounts earn interest at the Guaranteed Interest Rate in effect on the date
the amounts are allocated.
Page 17
<PAGE>
Guarantee Periods - Each Fixed Sub-Account is guaranteed an interest rate for a
period we refer to as a Guarantee Period. The Guaranteed Interest Rate for a
Fixed Sub-Account is effective for the entire Guarantee Period. The length of a
Guarantee Period is measured from the end of the calendar month in which the
amount is allocated to the Fixed Sub-Account. The last day of the Guarantee
Period is its Expiry Date.
We will notify you at least thirty days prior to an Expiry Date of your options
for renewal, which include:
1. electing a new Guarantee Period from among those then offered by us; or
2. transferring the value of the Fixed Sub-Account to one or more Variable
Sub-Accounts.
If we do not receive Satisfactory Notice prior to the Expiry Date, we will
transfer the value of the expiring Fixed Sub-Account to a Fixed Sub-Account with
the same Guarantee Period, but not longer than 5 years. The transfer will be
effective as of the Expiry Date of the previous Guarantee Period.
Guaranteed Interest Rates - Periodically, we will declare Guaranteed Interest
Rates for then available Guarantee Periods. These rates will be guaranteed for
the duration of the respective Guarantee Periods. Guaranteed Interest Rates
will never be less than the Minimum Guaranteed Interest Rate shown in the
Schedule.
TRANSFERS AMONG ACCOUNTS
- --------------------------------------------------------------------------------
While this Contract is in force, you may transfer your Account Value among Sub-
Accounts. Certain restrictions may apply during the Free-Look Period. To
make a transfer, you must give us Satisfactory Notice. Transfers generally take
effect on the Valuation Date we receive the notice. The number of free
transfers that we allow each Contract Year is shown in the Charges section of
the Schedule. Restrictions for transfers are shown in the Schedule.
SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE
- --------------------------------------------------------------------------------
While this Contract is in force, you may withdraw all or part of your Account
Value by giving us Satisfactory Notice. The minimum withdrawal is shown in the
Schedule.
When a partial withdrawal is made, we will reduce the Account Value by the
amount of the partial withdrawal. We will also reduce the Insurance Amount in
proportion to the reduction in the Account Value that results from the partial
withdrawal (including any associated surrender charge).
If you request a surrender, we will terminate your Contract and pay you the
Surrender Value. This amount may also be applied to a Settlement Option,
subject to any restrictions described in this Contract. Unless specified
otherwise, we will make partial withdrawals as described in the Schedule.
Surrender and withdrawals generally take effect on the date we receive
Satisfactory Notice.
If you make a withdrawal from your Contract in excess of the Free Withdrawal
Amount described in the Schedule, a surrender charge may be assessed. Surrender
charges are described in the Schedule.
Excess Withdrawals - If a partial withdrawal is made for an amount greater than
the Free Withdrawal Amount, a surrender charge may be applicable. For purposes
of calculating the surrender charge only, purchase payments will be liquidated
in whole or in part on a "first-in-first-out-basis." This means we liquidate
purchase payments in the order they were made: the oldest unliquidated purchase
payment first, the next oldest unliquidated purchase payment second, etc. until
all purchase payments have been liquidated.
Page 18
<PAGE>
The surrender charge as to any liquidated purchase payment is determined by
multiplying the amount of the purchase payment being liquidated by the
applicable percentage shown in the Schedule. The total surrender charge will be
the sum of the surrender charges for each purchase payment being liquidated.
In a partial withdrawal, the surrender charge is deducted from the Account Value
remaining after you are paid the amount requested. The amount requested from a
Sub-Account may not exceed the value of that Sub-Account less any applicable
surrender charge. In a complete withdrawal (or surrender of this Contract), it
is deducted from the amount otherwise payable.
BORROWING PART OF YOUR ACCOUNT VALUE
- --------------------------------------------------------------------------------
While this Contract is in force and after the Free-Look Period, you may request
a loan by giving us Satisfactory Notice. Unless specified otherwise, an amount
equal to the loan will be transferred from the Sub-Accounts to the Loan Account
in proportion to the Account Value in each Sub-Account in which you are invested
as of the date we process the loan. This Contract will be the only security we
require for the loan. The minimum loan amount is also shown in the Schedule. A
loan may be a taxable event and may affect the amount of the Death Proceeds
payable under this Contract.
Maximum Loanable Value - The maximum loanable value is shown in the Schedule.
The amount of the loan and all existing loans may not be more than the maximum
loanable value as of the loan date. The loan date is the date we process the
loan.
If on any Valuation Date where there is Debt outstanding and the Surrender Value
is negative, we will send you an overloan notice at your last known address.
You will then have 61 days from the date we send the notice to avoid termination
by paying us at least the minimum repayment amount listed in the notice.
Loan Repayment - All or part of a loan may be repaid to us at any time while
this Contract is in force during the Insured's lifetime. The minimum loan
repayment amount is shown in the Schedule. If the Grace Period has expired and
this Contract has terminated, any Debt that exists at the end of the Grace
Period may not be repaid unless the Contract is reinstated.
Unless specified otherwise, an amount equivalent to a loan repayment will be
transferred from the Loan Account to the Sub-Accounts in proportion to the
Account Value in each Sub-Account in which you are invested.
Loan Interest - Interest on the loan accrues daily at the Loan Interest Rate
shown in the Schedule. It is due on each Contract Anniversary. If loan
interest is not paid when due, the difference between the Loan Account and Debt
will be transferred from the Sub-Accounts to the Loan Account in proportion to
the Account Value in each Sub-Account in which you are invested.
Effects of a Loan - A loan will be transferred from the Sub-Accounts to the Loan
Account. Any loan interest that becomes due and is not paid will also be so
transferred. A repayment or loan interest payment will be transferred from the
Loan Account into the Sub-Accounts. Amounts transferred to the Loan Account will
earn interest daily at the Loan Credited Rate shown in the Schedule from the
date of transfer.
Since the amount you borrow is transferred from the Sub-Accounts, a loan whether
or not repaid, will have a permanent effect on the Surrender Value and may have
a permanent effect on the death benefit. The effect may be favorable or
unfavorable. This is true whether you repay the loan or not. If not repaid,
the loan will reduce the amount of Death Proceeds.
Page 19
<PAGE>
CHARGES
- --------------------------------------------------------------------------------
Monthly Deduction Amount - The Monthly Deduction Amount is deducted on each
Monthly Processing Date. It is equal to (a) + (b) + (c) + (d), where:
(a) is the cost of insurance charge described below;
(b) is the asset-based charges described in the Schedule;
(c) is the cost of any riders for which a separate charge is shown in the
Schedule; and
(d) is any other applicable charge shown in the Schedule.
Monthly Deduction Amount on a Contract Anniversary - On a Monthly Processing
Date that is also a Contract Anniversary, the Monthly Deduction Amount is equal
to (a) + (b), where:
(a) is the Monthly Deduction Amount as described above; and
(b) is the administration charge shown in the Schedule.
Cost of Insurance Charge - The maximum monthly cost of insurance charge is equal
to (a) times (b) and then divided by (c), where:
(a) is the Maximum Cost of Insurance Rate per $1,000 shown in the Table in
the Schedule;
(b) is an amount equal to the death benefit minus the Account Value; and
(c) is $1,000.
The actual monthly cost of insurance charge may be less than, but never more
than, the maximum monthly cost of insurance charge.
OWNER AND BENEFICIARY
- --------------------------------------------------------------------------------
The Owner - You are the Owner of this Contract. You are also the Insured unless
another Insured has been named in the application and is shown in the Schedule.
You have the rights and options described in this Contract while the Insured is
living and this Contract is in force. One or more people may own this Contract.
The Beneficiary - We pay the Death Proceeds to the primary Beneficiary. If the
primary Beneficiary dies before the Insured, we pay the Death Proceeds to the
Contingent Beneficiary, if any. If there is no surviving Beneficiary, we pay
the Death Proceeds to the Owner's estate.
One or more persons may be named as primary Beneficiary or Contingent
Beneficiary. We will assume any Death Proceeds are to be paid in equal shares
to the multiple surviving Beneficiaries, unless you specify otherwise.
You have the right to change Beneficiaries. However, if you designate the
primary Beneficiary as irrevocable, you may need the consent of that Beneficiary
to exercise the rights and options under this Contract.
Change of Owner or Beneficiary - During your lifetime and while this Contract is
in force you can transfer ownership of this Contract or change the Beneficiary.
To make any of these changes, you must send us Satisfactory Notice. If
accepted, any change in Owner or Beneficiary will take effect on the date you
signed the notice. Any of these changes will not affect any payment made or
action taken by us before our acceptance. A change of Owner may be a taxable
event.
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<PAGE>
DEATH PROCEEDS
- --------------------------------------------------------------------------------
Death Benefit - If the Insured dies while this Contract is in force, the death
benefit will be the greater of (a) or (b), where:
(a) is the Insurance Amount on the date of death; and
(b) is the Minimum Death Benefit on the date of death.
However, if the state in which this Contract is issued does not allow us to
deduct a cost of insurance charge on or after the Contract Anniversary when the
Insured reaches age 100, the death benefit thereafter will be limited to (b)
above.
Minimum Death Benefit - To ensure that this Contract continues to qualify as
life insurance under the Internal Revenue Code of 1986, as amended (the "Code"),
we will also calculate a Minimum Death Benefit for each Valuation Date. The
Minimum Death Benefit on a Valuation Date is equal to (a) times (b), where:
(a) is the Account Value on the Valuation Date; and
(b) is the Minimum Death Benefit Percentage shown in the Table in the
Schedule.
Death Proceeds - The actual amount payable to the Beneficiary if the Insured
dies while this Contract is in force is called the Death Proceeds. The Death
Proceeds are equal to (a) + (b) - (c) - (d), - (e) where:
(a) is the death benefit described above;
(b) is any insurance on the Insured's life that may be provided by riders
to this Contract;
(c) is any Debt;
(d) is any due and unpaid Monthly Deduction Amount accruing during the
Grace Period; and
(e) is any Contract values previously paid pursuant to any riders attached
to this Contract.
We will pay the Death Proceeds to the Beneficiary after we receive satisfactory
proof of death. The Death Proceeds will be adjusted under certain conditions.
Refer to the Incontestability, Suicide, and Misstatement of Age or Sex
provisions.
You may choose to have the Death Proceeds paid in one sum, in which case this
Contract will terminate, or under a Settlement Option. If you have not made a
choice before the Insured dies, the Beneficiary may make this choice. Unless
you or the Beneficiary specify otherwise, we reserve the right to pay the Death
Proceeds in one sum within 90 days after we receive satisfactory proof of death.
Proof of Death - Satisfactory proof of death must be received at our Customer
Service Center before we will pay any Death Proceeds. We will accept one of the
following items:
1. An original certified copy of an official death Contract, or
2. An original certified copy of a decree of a court of competent
jurisdiction as to the finding of death, or
3. Any other proof satisfactory to us.
Insurance Amount Increases - Payment of additional purchase payments may require
us to increase the Insurance Amount so that this Contract continues to qualify
as life insurance under the Code. We reserve the right to require satisfactory
evidence of insurability for any increase in the Insurance Amount. In addition,
we reserve the right to require that your risk class be identical to that on the
Contract Date.
Page 21
<PAGE>
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
Application - All statements made in an application for this Contract are
considered representations and not warranties. We have issued this Contract
based on the statements made in any such application and we rely on such
statements to be true and complete. No such statement will be used to void the
coverage under this Contract or to deny a claim unless that statement is a
material misrepresentation.
Assignment - You may assign this Contract at any time while the Insured is
living and this Contract is in force. No assignment will be binding on us
unless we receive Satisfactory Notice. We will not be liable for any payments
made or actions we take before we accept the assignment. An absolute assignment
will revoke the interest of any revocable Beneficiary. We will not be
responsible for the validity of any assignment. An assignment may be a taxable
event.
Claims of Creditors - To the extent permitted by law, no benefits payable under
this Contract will be subject to the claims of creditors.
Entire Contract - This Contract including any attached riders, endorsements,
amendments and the initial and any subsequent applications for a change in
coverage attached to this Contract constitutes the entire contract between you
and us.
This Contract is in compliance with the laws of the state in which it was
delivered.
Misstatement and Proof of Age or Sex - If the age or sex of the Insured has been
misstated, the benefits under this Contract will be those which the initial
purchase payment and any additional purchase payments would have provided for
the correct age and sex.
No Dividends Payable - This Contract is non-participating and does not share in
any distribution of our surplus. We will not pay any dividends.
Incontestability - We will not contest the payment of the Death Proceeds based
upon the initial purchase payment after this Contract has been in force during
the Insured's lifetime for two years from the Issue Date.
For any increase in Insurance Amount requiring evidence of insurability, we will
not contest payment of the Death Proceeds based on such an increase after it has
been in force during the Insured's lifetime for two years from its effective
date.
Suicide - If the Insured dies by suicide, while sane or insane, within two years
from the Issue Date, we will not pay the Death Proceeds normally payable on the
Insured's death. Instead, we will limit the death benefit to the Account Value
as of the date we receive proof of death, and Death Proceeds will otherwise be
calculated in the usual manner.
If the Insured dies by suicide, while sane or insane, within two years of any
date we receive and accept an additional purchase payment, any amount of death
benefit that would not be payable except for the fact that the additional
purchase payment was made will be limited to the amount of such payment.
Required Reports - We will furnish a report to you as often as required by law,
but at least once in each Contract Year that this Contract is in force. The
report will show the number of Accumulation Units credited to each Variable Sub-
Account in which you are invested and the corresponding Accumulation Unit value
as of the date of the report. It will also show your Fixed Account Value. The
report will also include any other information required by the laws and
regulations of the jurisdiction in which this Contract is delivered.
Page 22
<PAGE>
Changes in Contract Cost Factors - Changes in cost of insurance rates, credited
interest rates, or other Contract expense charges will be applied on a uniform
basis for insureds of the same sex, attained age and risk class whose Contracts
have been in force for the same length of time. Changes in these nonguaranteed
elements will be based on changes in future expectations for factors such as
investment earnings, mortality, persistency, expenses and taxes. Any changes
will be determined in accordance with the procedures on file, if required, with
the insurance regulator in the state in which this Contract was delivered.
Taxes Based Upon Purchase Payments or Value - If there is a law or change in law
assessing taxes against us based upon purchase payments or value of this
Contract, we reserve the right to charge you and all similarly situated Owners
proportionately for that tax. This would include a tax based upon our realized
net capital gains in the Variable Sub-Accounts and on earnings in the Fixed
Account, on which we are not currently taxed.
Payments We May Defer - We may not be able to determine the value of the assets
of the Variable Sub-Accounts because:
1. The New York Stock Exchange is closed for trading or trading on the
New York Stock Exchange is restricted;
2. The SEC determines that a state of emergency exists; or
3. An order or pronouncement of the SEC permits a delay for the
protection of Owners.
If this happens, we may delay:
1. Determination and payment of the Surrender Value or any withdrawal;
2. Determination and payment of any death benefit;
3. Transfers of the Account Value; or
4. Granting of any loan.
We reserve the right to delay payment of amounts from the Fixed Account for up
to six months. If deferred 30 days or more, the amount deferred will earn
interest at a rate not less than the Minimum Deferral Interest Rate shown in the
Fixed Account section of the Schedule.
We may also defer payments for any amount attributable to a purchase payment
made in the form of a check for a reasonable amount of time (not to exceed 15
days) to permit the check to clear.
Authority to Make Agreements - All agreements made by us must be signed by one
of our officers. No other person, including an insurance agent or broker, can
change the terms of this Contract or make any agreement binding on us.
Required Note on Our Computations - We have filed a detailed statement of our
computations with the insurance supervisory official in the appropriate
jurisdictions. The values are not less than those required by the law of that
state or jurisdiction. Any benefit provided by an attached rider will not
increase these values unless otherwise stated in that rider.
SETTLEMENT OPTIONS
- --------------------------------------------------------------------------------
The Surrender Value or Death Proceeds may be paid in a single sum or under one
of our Settlement Options. If the amount available to apply under any Variable
or Fixed Settlement Option is less than the minimum amount shown in the
Schedule, we reserve the right to require that such amount be paid in a lump
sum.
If at any time payments under the Settlement Option become less than the minimum
payment shown in the Schedule, we reserve the right to reduce the frequency of
payment to an interval that results in each payment being at least equal to the
minimum payment. In no event will the interval be less frequent than annual.
Page 23
<PAGE>
At the time you elect the Settlement Option, you may also elect to have the
Account Value applied to provide Variable Payments, Fixed Payments, or a
combination of both. Unless you specify otherwise, we will provide either
variable or fixed payments, or a combination of variable and fixed payments in
proportion to the Sub-Accounts in which you are invested as of a date not more
than 5 Valuation Days before the due date of the first payment.
Once payments have begun under a Settlement Option, we reserve the right to
disallow further changes without our prior approval.
We may require proof of age, sex or survival of any person upon whose age, sex
or survival any payments depend. If the age or sex of a Payee has been
misstated, the amount payable will be the amount that the Surrender Value or
Death Proceeds would have provided for the correct age and sex. If we have made
incorrect payments, the amount of any underpayment will be paid immediately.
The amount of any overpayment will be deducted from future payments until the
amount of the overpayment is repaid.
VARIABLE PAYMENTS
Amount of First Variable Payment - The Settlement Option Tables shown in the
Schedule are used to determine the first monthly variable payment for an assumed
investment rate of 3%. The Settlement Option Tables show the dollar amount of
the first monthly variable payment that can be purchased with each $1,000
applied. The assumed investment rates we currently allow are shown in the
Schedule.
Value of Income Units - The Income Unit value for any Valuation Period is
determined by multiplying (a) by (b), and then dividing by (c) where:
(a) is the Income Unit value for the immediately preceding Valuation
Period;
(b) is the "net investment factor" for the Variable Sub-Account for the
Valuation Period for which the value is being determined; and
(c) is the daily equivalent of the assumed investment rate for the number
of days in the Valuation Period.
The value of an Income Unit may increase, decrease or remain the same from one
Valuation Period to the next.
Number of Income Units - We determine the number of Income Units in each
Variable Sub-Account by dividing the first monthly variable payment attributable
to that Sub-Account by its Income Unit value as of a date not more than 5
Valuation Days before the due date of the first variable payment.
Amount of Second and Subsequent Variable Payments - The dollar amount of the
second and subsequent variable payments may change with the investment
performance of the Variable Sub-Accounts. The total amount of each variable
payment will be equal to the sum of the variable payments in each Variable Sub-
Account. The dollar amount of each payment for a Variable Sub-Account is
determined by multiplying the number of Income Units by the Income Unit value
for the Variable Sub-Account for the Valuation Period which ends on a
consistently applied date not more than 5 Valuation Days before the payment is
due.
We guarantee that the dollar amount of each payment after the first will not be
affected by variations in our expenses or mortality experience.
Exchange of Income Units - If there is an exchange of value of a designated
number of Income Units of particular Variable Sub-Accounts into other Income
Units, the value will be such that the dollar amount of payment made on the date
of exchange would be unaffected by the exchange.
Page 24
<PAGE>
FIXED PAYMENTS
Fixed Payments are payments that remain fixed as to dollar amount throughout the
payment period. The Settlement Option Tables shown in the Schedule are used to
determine the monthly fixed payment. The Settlement Option Tables show the
dollar amount of the monthly fixed payment that can be purchased with each
$1,000 applied.
SETTLEMENT OPTIONS
The following list of Settlement Options or any option acceptable to us may be
elected.
Option 1 - Payments for Life: Payments during the lifetime of the Payee and
terminating with the last payment preceding the death of the Payee.
Option 2 - Payments for Life with 10 or 20 Years Guaranteed: Payments during the
lifetime of the Payee with the guarantee that payments will be made for a
minimum of 10 or 20 years, as elected. If at the death of the Payee, payments
have been made for less than the guaranteed number of years elected, payments
will be made to the Beneficiary for the remainder of the guaranteed number of
years elected.
Option 3 - Joint and Last Survivor Payments: Payments during the joint lifetime
of the Payee and a designated second person, and thereafter during the remaining
lifetime of the survivor, ceasing with the last payment prior to the death of
the survivor.
Option 4 - Payments for a Fixed Period: An amount payable for the number of
years selected which may be from 5 to 30 years. If the Payee dies before the
end of the period selected, payments will be continued to the Beneficiary for
the remained of the selected period.
Page 25
<PAGE>
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Page 26
<PAGE>
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Page 27
<PAGE>
[LOGO] SAGE
MODIFIED SINGLE PAYMENT COMBINATION FIXED AND VARIABLE LIFE INSURANCE CONTRACT
Limited purchase payment flexibility
Death benefit payable at Insured's death while this Contract is in force
Nonparticipating
<PAGE>
EXHIBIT 1A(5)(a)(v)
[LOGO] SAGE
====================================
SAGE LIFE ASSURANCE OF AMERICA, INC.
Member of Sage Insurance Group. Inc.
A Stock Company
Home Office Customer Service Center
300 Atlantic Street [P. O. Box 290680]
Stamford, CT 06901 Wethersfield, CT 06109
1-877-TEL-SAGE
PLEASE READ THIS CONTRACT CAREFULLY. This group contract is a legal contract
between the Contractholder and Sage Life Assurance of America, Inc. The
Contractholder has the rights described in the Contract. The Owner and Insured
are named in each Certificate. We agree to pay the Death Proceeds to the
Beneficiary upon receipt of proof that an Insured died while coverage under this
Group Contract is in force.
RIGHT TO EXAMINE A CERTIFICATE:
Each Owner may return his or her Certificate to us or the agent who sold it to
the Owner within 10 days after receipt of it (the Free Look Period). When we
receive the returned Certificate, we will promptly refund to the Owner his or
her Account Value plus any charges shown in the Schedule that we have deducted
from such Account Value on or before the date the returned Certificate was
received by us, or if greater and required by the law of the Owner's state, the
initial purchase payment (minus any withdrawals).
The amount and duration of the death benefit and all payments and values, when
based on the investment experience of the Variable Account, may increase or
decrease, depending on a Certificate's investment results and are not guaranteed
as to dollar amount. All payments and values based on the Fixed Account may be
subject to a Market Value Adjustment, the operation of which may cause such
payments and values to increase or decrease.
/s/
Chairman
GROUP MODIFIED SINGLE PAYMENT COMBINATION FIXED AND VARIABLE LIFE INSURANCE
CONTRACT
Limited purchase payment flexibility
Death benefit payable at Insured's death while coverage under this Group
Contract is in force
Nonparticipating
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SCHEDULE...........................................................................3
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES PER $1,000..........8
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES PER $1,000..........9
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES......................................10
DEFINITIONS........................................................................11
MAKING PURCHASE PAYMENTS...........................................................13
ACCOUNT VALUE......................................................................14
VARIABLE ACCOUNT...................................................................15
FIXED ACCOUNT......................................................................17
TRANSFERS AMONG ACCOUNTS...........................................................19
SURRENDERING, OR WITHDRAWING PART OF THE ACCOUNT VALUE.............................19
BORROWING PART OF THE ACCOUNT VALUE................................................20
CHARGES............................................................................20
OWNER AND BENEFICIARY..............................................................21
DEATH PROCEEDS.....................................................................21
GENERAL PROVISIONS.................................................................22
SETTLEMENT OPTIONS.................................................................25
</TABLE>
Page 2
<PAGE>
SCHEDULE
Group Contract No.: 123456789 Effective Date: 1/1/1999
Contractholder: ABC TRUST
Issued In: Illinois (and subject to its laws)
This Schedule sets forth additional information that relates to the provisions
in this Group Contract with the corresponding headings.
MAKING PURCHASE PAYMENTS
Additional purchase payments may be made at any time and in any amount necessary
to avoid termination of a Certificate. Other additional purchase payments may
be made at any time after the [first] Certificate Anniversary, subject to the
following conditions:
1. each additional purchase payment must be at least [$250];
2. only one purchase payment may be paid in any Certificate Year;
3. the attained age of the Insured must be less than [81]; and
4. our prior approval is required before the Owner makes a purchase
payment that causes the Account Value of all single payment or
modified single payment Certificates that the Owner maintain with us
to exceed [$1,000,000].
We reserve the right to require satisfactory evidence of insurability before we
accept any additional purchase payment that increases the death benefit by more
than it increases the Account Value.
The minimum reinstatement payment is the minimum purchase payment for which we
would then issue a Certificate based upon the Insured's attained age and risk
class as of the effective date of the reinstated Certificate.
No purchase payment, whether initial or additional, may be allocated such that
any Sub-Account would have a value less than [$250].
The Designated Sub-Account is the [Money Market Sub-Account].
VARIABLE ACCOUNT
The Variable Account for a Certificate is [The Sage Variable Life Account A].
[It is a unit investment trust variable account.]
FIXED ACCOUNT
The Fixed Account is [The Sage Fixed Interest Account A].
The Minimum Guaranteed Interest Rate is [3%].
The Minimum Deferral Interest Rate is [3%].
Index Rate: [The Index Rate is the U.S. Treasury Constant Maturity Series as
reported in Federal Reserve Bulletin Release H.15. We currently base the Index
Rate for a calendar week on the reported rate for the preceding calendar week.
We reserve the right to set it less frequently but in no event less often than
monthly.]
Page 3
<PAGE>
TRANSFERS AMONG ACCOUNTS
The minimum amount that can be transferred is [$250]. However, if less remains
in a Sub-Account, that amount may be transferred. If a transfer request would
reduce the Account Value remaining in a Sub-Account below [$250], we will treat
the transfer request as a request to transfer the entire amount.
The transfer request must clearly state the Sub-Accounts from which and to which
transfers are to be made.
We reserve the right to limit, upon notice, the maximum number of transfers the
Owner may make to [one] per calendar month or [12] per Certificate Year.
Under a Settlement Option, we reserve the right to:
1. disallow transfers from the Fixed Account to the Variable Account,
or from the Variable Account to the Fixed Account; and
2. limit the maximum number of transfers between Variable Sub-Accounts
to [1] per Certificate Year.
SURRENDERING, OR WITHDRAWING PART OF THE ACCOUNT VALUE
The Free Withdrawal Amount is the greater of (a) and (b) where:
[(a) is the excess of 10% of the total purchase payments over 100% of all
prior withdrawals including any associated surrender charge and
Market Value Adjustment incurred in that Certificate Year; and
(b) is the excess of the Account Value on the date of withdrawal over the
unliquidated purchase payments.]
The minimum amount that can be withdrawn is [$250]. If a withdrawal request
would reduce the Account Value remaining in a Sub-Account below [$250], we will
treat the withdrawal request as a request to withdraw the entire amount.
If a requested withdrawal would reduce the Account Value below [$5,000], we
reserve the right to treat the request as a withdrawal of only the excess over
[$5,000].
Unless the Owner specifies otherwise, we will make withdrawals [proportionately
from all Sub-Accounts in which the Owner are invested].
BORROWING PART OF THE OWNER'S ACCOUNT VALUE
The maximum loanable value is [90% of the Account Value less any surrender
charge less any due and unpaid Monthly Deduction Amount.]
The minimum loan amount is [$250].
The Loan Interest Rate is [6%].
The minimum loan repayment amount is [$250].
The Loan Credited Rate is a minimum of [4%]. We may credit a higher rate to
that portion of the Loan Account equal to the Free Withdrawal Amount.
Page 4
<PAGE>
CHARGES
Surrender Charge - A surrender charge may be imposed upon surrender of a
Certificate or when an Excess Withdrawal is made. The surrender charge is
applied to each purchase payment and is a percentage of each purchase payment as
follows:
Maximum
Certificate Surrender Charge
Year Percentage
---- ----------
[1 9%
2 9%
3 8%
4 7%
5 6%
6 5%
7 3%
8+ 0%]
OR
The maximum surrender charge percentage is 0% for all Certificate Years.
Transfer Charge - We reserve the right to charge a maximum of [$25] for each
transfer after the [12th] in a Certificate Year. Each request is considered to
be one transfer regardless of the number of Sub-Accounts affected by the
transfer. The transfer charge will be deducted proportionately from all Sub-
Accounts from which transfers are made.
Administration Charge - [$40] a year. This charge is incurred at the beginning
of each Certificate Year and deducted on each Certificate Anniversary or upon
surrender. The charge will be waived:
. if the Account Value is at least [$50,000] at the time of deduction; or
. beginning on and after the [8th] Certificate Anniversary.
Page 5
<PAGE>
Asset-Based Charges We deduct asset-based charges from the Owner's Account
Value to compensate us for assuming mortality and expense risks, certain
administrative expenses, certain distribution costs and certain state and
Federal tax expenses. Asset-based charges are calculated as a percentage of the
Account Value on the date of deduction. On the Certificate Date, and monthly
thereafter, the asset-based charges are deducted in proportion to the Sub-
Accounts in which the Owner is invested. The maximum charges are:
Asset-Based Charges Annual Charge Monthly Charge
------------------- ------------- --------------
Certificate Years 1-10 [1.80% .150000%
Certificate Years 11+ 1.30% .108333%]
We also reserve the right to deduct asset-based charges on the effective date of
any allocation of purchase payment to the Sub-Accounts, based on the amount
allocated, and based on the number of days remaining until the next date of
deduction.
[Variable Sub-Account Charges If proceeds are applied to a Settlement Option,
we will deduct the asset-based charges above from the assets in each Variable
Sub-Account supporting Variable Payments on a daily basis rather than as
described above. The maximum charges are:
Variable Sub-Account Charges Annual Charge Daily Charge
---------------------------- ------------- ------------
Certificate Years 1-10 [1.80% .0049763%
Certificate Years 11+ 1.30% .0035849%]
Charge Deduction Rules Unless specified above, charges are deducted from the
Account Value [proportionately from all Sub-Accounts in which the Owner are
invested.]
SETTLEMENT OPTIONS
The minimum amount that can be applied under any Variable or Fixed Payment is
[$5,000].
The minimum payment is [$100].
We currently allow assumed investment rates of [3%] and [6%].
RIDERS
Accelerated Death Benefit Rider
The maximum Accelerated Benefit Amount is 50% of the Insurance Amount, but not
greater than $500,000.
Accidental Death Benefit Rider
The Maximum Accidental Death Benefit is [$250,000].
Change of Insured Rider
The minimum Attained Ages of the original and new Insureds as of the effective
date of change must be [25].
The maximum Attained Ages of the original and new Insureds as of the effective
date of change is [75].
The maximum Change of Insured Rider charge is [$1.50] per $1,000 of death
benefit.
Page 6
<PAGE>
Settlement Option Tables
Values for other ages, and for other payment periods, joint life combinations,
or assumed investment rates that we offer (Tables below assume 3%) are available
on request. Monthly payments are shown for each $1,000 applied.
Settlement Option Table for a Fixed Period
<TABLE>
<CAPTION>
Fixed Period Monthly Fixed Period Monthly Fixed Period Monthly
of Years Payment of Years Payment of Years Payment
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
11 $8.88 21 $5.33
12 8.26 22 5.16
13 7.73 23 5.00
14 7.28 24 4.85
5 $17.95 15 6.89 25 4.72
6 15.18 16 6.54 26 4.60
7 13.20 17 6.24 27 4.49
8 11.71 18 5.98 28 4.38
9 10.56 19 5.74 29 4.28
10 9.64 20 5.53 30 4.19
</TABLE>
Settlement Option Table for Life
<TABLE>
<CAPTION>
Male/Female Male/Female Male/Female
Age Life Only 10 Years Guaranteed 20 Years Guaranteed
--- --------- ------------------- -------------------
<S> <C> <C> <C> <C>
50 $4.28 / 3.92 $4.24 / 3.90 $4.10 / 3.84
55 4.72 / 4.27 4.64 / 4.24 4.40 / 4.12
60 5.31 / 4.74 5.17 / 4.68 4.73 / 4.45
65 6.13 / 5.38 5.84 / 5.25 5.04 / 4.81
70 7.28 / 6.29 6.65 / 6.00 5.29 / 5.14
75 8.90 / 7.62 7.53 / 6.92 5.43 / 5.37
80 11.19 / 9.62 8.37 / 7.93 5.50 / 5.48
85 14.36 / 12.63 9.00 / 8.77 5.52 / 5.52
</TABLE>
Page 7
<PAGE>
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES
PER $1,000
MALE - STANDARD RISK CLASS
<TABLE>
<CAPTION>
Attained Monthly Attained Monthly Attained Monthly Attained Monthly
Age Rate Age Rate Age Rate Age Rate
--- --- --- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C>
0 0.2194 25 0.1460 50 0.5852 75 5.7847
1 0.0859 26 0.1434 51 0.6381 76 6.3595
2 0.0825 27 0.1426 52 0.6968 77 6.9577
3 0.0809 28 0.1418 53 0.7640 78 7.5852
4 0.0775 29 0.1434 54 0.8380 79 8.2619
5 0.0734 30 0.1460 55 0.9180 80 9.0119
6 0.0692 31 0.1501 56 1.0030 81 9.8582
7 0.0650 32 0.1560 57 1.0932 82 10.8223
8 0.0625 33 0.1626 58 1.1894 83 11.9024
9 0.0617 34 0.1710 59 1.2942 84 13.0775
10 0.0625 35 0.1810 60 1.4109 85 14.3247
11 0.0675 36 0.1935 61 1.5430 86 15.6263
12 0.0767 37 0.2077 62 1.6923 87 16.9762
13 0.0892 38 0.2236 63 1.8597 88 18.3754
14 0.1034 39 0.2420 64 2.0454 89 19.8343
15 0.1184 40 0.2629 65 2.2459 90 21.3788
16 0.1326 41 0.2854 66 2.4605 91 23.0518
17 0.1434 42 0.3097 67 2.6886 92 24.9371
18 0.1518 43 0.3365 68 2.9344 93 27.2442
19 0.1568 44 0.3649 69 3.2068 94 30.4453
20 0.1585 45 0.3950 70 3.5147 95 35.4922
21 0.1585 46 0.4277 71 3.8670 96 44.5151
22 0.1568 47 0.4620 72 4.2723 97 62.8314
23 0.1535 48 0.4989 73 4.7329 98 83.3333
24 0.1501 49 0.5399 74 5.2401 99 83.3333
100+ 83.3333
</TABLE>
Rates shown are based on the Commissioner's Male 1980 Standard Ordinary
Mortality Table, Age Last Birthday. These rates are based on the Insured's
attained age as of each Certificate Anniversary and do not change during a
Certificate Year.
Page 8
<PAGE>
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES PER $1,000
FEMALE - STANDARD RISK CLASS
<TABLE>
<CAPTION>
Attained Monthly Attained Monthly Attained Monthly Attained Monthly
Age Rate Age Rate Age Rate Age Rate
--- ---- --- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C>
0 0.1568 25 0.0976 50 0.4285 75 3.4445
1 0.0700 26 0.1001 51 0.4595 76 3.8688
2 0.0667 27 0.1034 52 0.4947 77 4.3247
3 0.0650 28 0.1067 53 0.5332 78 4.8190
4 0.0642 29 0.1101 54 0.5726 79 5.3700
5 0.0625 30 0.1142 55 0.6129 80 5.9999
6 0.0609 31 0.1184 56 0.6523 81 6.7294
7 0.0592 32 0.1226 57 0.6901 82 7.5789
8 0.0584 33 0.1284 58 0.7279 83 8.5491
9 0.0575 34 0.1343 59 0.7699 84 9.6289
10 0.0567 35 0.1418 60 0.8204 85 10.8111
11 0.0584 36 0.1518 61 0.8826 86 12.0908
12 0.0609 37 0.1635 62 0.9626 87 13.4694
13 0.0642 38 0.1777 63 1.0586 88 14.9520
14 0.0684 39 0.1935 64 1.1675 89 16.5557
15 0.0725 40 0.2111 65 1.2832 90 18.3060
16 0.0767 41 0.2295 66 1.4033 91 20.2498
17 0.0800 42 0.2487 67 1.5235 92 22.4699
18 0.0834 43 0.2671 68 1.6473 93 25.1552
19 0.0859 44 0.2871 69 1.7866 94 28.7360
20 0.0884 45 0.3072 70 1.9508 95 34.1581
21 0.0900 46 0.3273 71 2.1528 96 43.5428
22 0.0917 47 0.3498 72 2.4040 97 62.1940
23 0.0934 48 0.3741 73 2.7057 98 83.3333
24 0.0959 49 0.4000 74 3.0550 99 83.3333
</TABLE>
Rates shown are based on the Commissioner's Female 1980 Standard Ordinary
Mortality Table, Age Last Birthday. These rates are based on the Insured's
attained age as of each Certificate Anniversary and do not change during a
Certificate Year.
Page 9
<PAGE>
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES
<TABLE>
<CAPTION>
Minimum Death Minimum Death Minimum Death
Attained Benefit Attained Benefit Attained Benefit
Age Percentage Age Percentage Age Percentage
--- ---------- --- ---------- --- -----------
<S> <C> <C> <C> <C> <C>
0-40 250% 60 130% 80 105%
41 243% 61 128% 81 105%
42 236% 62 126% 82 105%
43 229% 63 124% 83 105%
44 222% 64 122% 84 105%
45 215% 65 120% 85 105%
46 209% 66 119% 86 105%
47 203% 67 118% 87 105%
48 197% 68 117% 88 105%
49 191% 69 116% 89 105%
50 185% 70 115% 90 105%
51 178% 71 113% 91 104%
52 171% 72 111% 92 103%
53 164% 73 109% 93 102%
54 157% 74 107% 94 101%
55 150% 75 105% 95 101%
56 146% 76 105% 96 101%
57 142% 77 105% 97 101%
58 138% 78 105% 98 101%
59 134% 79 105% 99 101%
100+ 100%
</TABLE>
Page 10
<PAGE>
DEFINITIONS
- --------------------------------------------------------------------------------
"Account Value" is the entire amount we hold under a Certificate for the Owner
while his or her Certificate is in force. It is equal to the sum of the Variable
Account Value, the Fixed Account Value and the Loan Account Value.
"Accumulation Unit" is the unit of measure we use to keep track of the value of
each Variable Sub-Account.
"Attained Age" is the Issue Age plus the number of full years since the
Certificate Date.
"Beneficiary" is the person or persons to whom we pay the Death Proceeds when
the Insured dies.
"Certificate Date" is the date from which Certificate Anniversaries and
Certificate Years are measured. The Certificate Date may or may not be the same
as the Issue Date and is shown in the Certificate Schedule. While the
Certificate is in force, every anniversary of the Certificate Date is a
Certificate Anniversary, and each and every consecutive twelve-month period
beginning on the Certificate Date and each Certificate Anniversary is a
Certificate Year.
"Contingent Beneficiary" is the person that becomes the Beneficiary if the named
Beneficiary dies before the Insured.
"Contingent Owner" is the person that becomes the Owner if the named Owner dies
before the Insured.
"Customer Service Center" is where we provide service to the Owner. The mailing
address and telephone number of the Customer Service Center are shown on the
first page of the Certificate.
"Death Proceeds" is the amount of money that we will pay the Beneficiary if the
Insured dies while the Certificate is in force.
"Debt" is the sum of all outstanding loans plus accrued interest under a
Certificate.
"Excess Withdrawal" is a withdrawal of Account Value that exceeds the Free
Withdrawal Amount.
"Expiry Date" is the last day in a Guarantee Period.
"Fixed Account" is a separate investment account of ours into which purchase
payments may be invested or Account Value may be transferred.
"Fixed Account Value" is the sum of the value of each Fixed Sub-Account on any
particular day.
A "Fixed Sub-Account" is established when purchase payments are invested or
amounts are transferred to the Fixed Account. The value of each Fixed
Sub-Account is equal to the amount invested, increased by interest and reduced
by any withdrawals, loans or transfers from, or charges assessed against the
Fixed Sub-Account.
"Free Withdrawal Amount" is the maximum amount that can be withdrawn in a
Certificate Year without being subject to a surrender charge. This amount is
described in the Schedule.
"General Account" consists of all our assets other than those held in any
separate investment accounts.
"Guaranteed Interest Rate" is the effective annual interest rate we will credit
for a specified Guarantee Period. The Guaranteed Interest Rate will never be
less than the minimum shown in the Schedule.
Page 11
<PAGE>
"Guarantee Period" is a period of years for which a specified effective annual
interest rate is guaranteed by us. Interest is credited daily at a rate to yield
the declared annual Guaranteed Interest Rate.
"Home Office" is our main office. The mailing address is shown on the first page
of the Certificate.
"Income Unit" is the unit of measure we use to calculate the amount of payments
under the Variable Payment Settlement Option.
"Insurance Amount" is a dollar amount used to determine the death benefit of a
Certificate. It is shown in the Certificate Schedule.
"Insured" is the person named in a Certificate application whose life is covered
under the Group Contract. The Insured is shown in the Certificate Schedule.
"Issue Age" is the Insured's age on the last birthday on or before the
Certificate Date. It is shown in the Certificate Schedule.
"Issue Date" is the date a Certificate is issued at our Customer Service Center.
It is shown in the Certificate Schedule.
"Loan Account" is an account in our General Account, established for any amounts
transferred from the Sub-Accounts as a result of a loan. The Loan Account
credits a fixed rate of interest, the Loan Credited Rate, that is not based on
the investment experience of the Variable Sub-Account or the Guaranteed Interest
Rates applicable to the Fixed Sub-Accounts of the Fixed Account. The Loan
Credited Rate is shown in the Schedule.
"Loan Account Value" is the amount of all loans under a Certificate that have
not been repaid, adjusted for interest we credit to the Loan Account at the Loan
Credited Rate for any due and unpaid loan interest we charge at the Loan
Interest Rate. The Loan Interest Rate is shown in the Schedule.
"Market Value Adjustment" is a positive or negative adjustment that may apply to
surrender, withdrawals, loans or transfers from a Fixed Sub-Account before the
end of a Guarantee Period.
"Monthly Processing Date" is the day of each month that the Monthly Deduction
Amount is deducted from the Account Value of a Certificate. Monthly Processing
Dates are the Certificate Date and the same day of each month thereafter. If
there is no such date in a particular month, the Monthly Processing Date will be
the last day of that month. If a Monthly Processing Date is not a Valuation
Date, the Monthly Processing Date will be the next Valuation Date.
"Net Asset Value" is the price of one share of an investment portfolio.
"Payee" is the natural person receiving payments under a Settlement Option.
"Satisfactory Notice" is a notice or request authorized by the Owner, in a form
satisfactory to us, received at our Customer Service Center.
"Sub-Account" includes both Variable Sub-Accounts and Fixed Sub-Accounts, unless
the context indicates otherwise.
"Surrender Value" is the amount the Owner receives upon surrender of a
Certificate. It is the Owner's Account Value, plus or minus any applicable
Market Value Adjustment, and less any applicable surrender charges or other
charges shown in the Certificate Schedule that are due us but not yet deducted,
less any Debt.
Page 12
<PAGE>
"Valuation Date" is the date at the end of a Valuation Period when each Variable
Sub-Account is valued.
"Valuation Period" is the period between one calculation of an Accumulation Unit
value and the next calculation. Normally, we calculate Accumulation Units daily
when the New York Stock Exchange is open for trading and we are open for
business. We can delay this calculation if an emergency exists, making disposal
of or fair valuation of assets in the Variable Account not reasonably
practicable, or the Securities and Exchange Commission (SEC) permits the delay.
We may change when we calculate the Accumulation Unit value by giving the Owner
30 days notice, or such notice as may be required by law.
"Variable Account" is a separate investment account of ours into which purchase
payments may be invested or Account Value may be transferred. The Variable
Account is shown in the Schedule.
"Variable Account Value" is the sum of the value of each Variable Sub-Account on
a Valuation Date.
"Variable Sub-Account" is a division of the Variable Account that invests in
shares of a particular investment portfolio. The value of a Variable Sub-Account
is determined by multiplying (a) times (b) where:
(a) equals the number of Accumulation Units held in the Variable Sub-
Account; and
(b) equals the value of the Accumulation Unit for the Variable Sub-Account.
"We", "us" or "our" is Sage Life Assurance of America, Inc.
MAKING PURCHASE PAYMENTS
- --------------------------------------------------------------------------------
Initial Purchase Payment - The Owner must make the initial purchase payment in
order to put a Certificate in force. The amount of the Owner's initial purchase
payment is shown in the Certificate Schedule.
Additional Purchase Payments - Subject to our acceptance and the limits
described in the Schedule, additional purchase payments may be made at any time
while a Certificate is in force. All purchase payments after the first are
payable at our Customer Service Center.
If additional purchase payments are accepted, they may increase the death
benefit. We reserve the right to require satisfactory evidence of insurability
before accepting any additional purchase payment that increases the death
benefit by more than it increases the Account Value.
Unless specified otherwise, all payments received while a loan is outstanding,
will first be considered as a payment of any loan interest, next as a loan
repayment, and last as an additional purchase payment to the Certificate.
Allocation of Purchase Payments Among the Fixed and Variable Accounts - Subject
to limits described in the Schedule, the Owner tells us how to allocate purchase
payments by notifying us of his or her choices. The Owner specified how to
allocate the initial purchase payment in an application for a Certificate.
Initial purchase payments allocated to the Fixed Account will be invested in
Fixed Sub-Accounts with the Guarantee Periods specified in the Owner's
application. We may, however, require that an initial purchase payment allocated
to a Variable Sub-Account be invested in the Designated Sub-Account shown in the
Schedule during the Free-Look Period. At the end of the Free-Look Period, if the
Owner's initial purchase payment was allocated to the Designated Sub-Account by
us, we will transfer the value of that Designated Sub-Account to the
Sub-Account(s) the Owner specified in the Owner's application. For the purpose
of processing transfers from the Designated Sub-Account, the Free-Look Period
will be assumed to end 15 days after the Certificate Date.
Page 13
<PAGE>
If the Owner does not tell us how to allocate any additional purchase payments,
they will be allocated in the same manner as the Owner's most recent purchase
payment.
Grace Period - If the Surrender Value on a Monthly Processing Date is not
sufficient to cover the Monthly Deduction Amount, a grace period of 61 days will
be allowed for the Owner to pay an amount sufficient to cover the Monthly
Deduction Amount due. We will send the Owner a notice at the start of the Grace
Period at the Owner's last known address. The Grace Period will end 61 days
after we mail the Owner the notice.
If the Owner does not make the necessary payment by the end of the Grace Period,
his or her Certificate will terminate without value. Subject to the terms and
conditions of the Certificate, if the Insured dies during the Grace Period, we
will pay the Death Proceeds.
Reinstatement - If the Grace Period has ended and the Owner has not paid the
required purchase payment and has not surrendered his or her Certificate for its
Surrender Value, the Owner may be able to reinstate such Certificate. To do so
the Owner must:
1. submit a written request for reinstatement within 3 years after the
end of the Grace Period;
2. provide evidence of insurability satisfactory to us;
3. pay an additional purchase payment equal to at least the minimum
reinstatement payment shown in the Schedule; and
4. repay or reinstate any Debt against such Certificate that existed at
the end of the Grace Period.
The effective date of a reinstated Certificate will be the Monthly Processing
Date on or next following the date we approve the Owner's application for
reinstatement and receive the necessary purchase payment.
If the Owner's Certificate is reinstated, the Account Value on the date of
reinstatement will be the amount provided by the purchase payment paid. Any
applicable charges will be based on the length of time from the Certificate Date
to the effective date of the reinstatement. Unless the Owner has provided
otherwise, the allocation of the Account Value will be based on the allocation
instructions in effect at the start of the Grace Period.
ACCOUNT VALUE
- --------------------------------------------------------------------------------
The Account Value is the entire amount we hold under a Certificate for the
Owner. It is equal to the sum of the Variable Account Value, the Fixed Account
Value and the Loan Account Value.
Variable Account Value - On the Certificate Date the Variable Account Value for
a Sub-Account is equal to the portion of the initial purchase payment allocated
to the Sub-Account. On each subsequent Valuation Date, it is equal to (a) + (b)
- - (c) - (d) - (e), where:
(a) is the Variable Account Value in the Sub-Account on the preceding
Valuation Date multiplied by its net investment factor for the current
Valuation Period;
(b) is the amount of any allocation or transfer to the Sub-Account during
the current Valuation Period;
(c) is the amount of any transfer from the Sub-Account during the current
Valuation Period;
(d) is the amount of any charges allocated to the Sub-Account during the
current Valuation Period; and
(e) is the amount of any withdrawal or loan allocated to the Sub-Account
during the current Valuation Period.
Page 14
<PAGE>
Fixed Account Value - On the Certificate Date the Fixed Account Value for a
Sub-Account is equal to the portion of the initial purchase payment allocated to
the Sub-Account. On each subsequent Valuation Date, it is equal to (a) + (b) -
(c) - (d) - (e), where:
(a) is the Fixed Account Value in the Sub-Account on the preceding
Valuation Date multiplied by the daily equivalent of its Guaranteed
Interest Rate earned for the number of days in the current Valuation
Period;
(b) is the amount of any allocation or transfer to the Sub-Account during
the current Valuation Period;
(c) is the amount of any transfer from the Sub-Account during the current
Valuation Period;
(d) is the amount of any charges allocated to the Sub-Account during the
current Valuation Period; and
(e) is the amount of any withdrawal or loan allocated to the Sub-Account
during the current Valuation Period.
The Fixed Account Value is also adjusted for any Market Value Adjustment the
Owner incurs that results from a transaction in (b), (c) or (e).
Loan Account Value - Unless the Owner takes a loan, the Loan Account Value is
zero. (Amounts the Owner takes as a loan are sometimes referred to in the
Certificate as amounts the Owner "borrows".) If the Owner takes a loan, then on
the effective date of the loan the Loan Account Value is equal to the amount of
the loan. On each subsequent Valuation Date, it is equal to (a) + (b) + (c) -
(d) - (e), where:
(a) is the Loan Account Value on the preceding Valuation Date;
(b) is the amount of interest earned (at the Loan Credited Rate shown in
the Schedule) on item (a) during the current Valuation Period;
(c) is any amounts transferred to the Loan Account because of any
additional loans and any due and unpaid loan interest during the
current Valuation Period;
(d) is the amount of any loan repayment the Owner makes during the current
Valuation Period; and
(e) is any amount of interest earned on item (a) and transferred to the
Sub-Accounts during the current Valuation Period.
VARIABLE ACCOUNT
- --------------------------------------------------------------------------------
Variable Account - A variable account is an investment account we maintain
separate from our General Account and any other separate investment accounts we
may have. We own the assets in a variable account. A variable account will not
be charged with liabilities that arise from any other business that we conduct.
We may transfer to our General Account assets that exceed the reserves and other
liabilities of a variable account.
A variable account may invest in mutual funds, unit investment trusts and other
investment portfolios. Such a variable account is treated as a unit investment
trust under Federal securities laws and is registered with the SEC under the
Investment Company Act of 1940.
We may offer certain series or variable accounts that may not be registered with
the SEC under the Securities Act of 1933. Any such series or variable account,
if offered, will be described in the applicable offering document.
The Variable Account for a Certificate is shown in the Schedule. The laws of our
state of domicile govern this Variable Account.
Page 15
<PAGE>
Variable Sub-Accounts - A unit investment trust variable account includes
variable sub-accounts, each investing in a designated investment portfolio. The
sub-accounts and the investment portfolios in which they invest are specified in
the prospectus or offering document. Income, gains or losses, realized and
unrealized from assets in each variable sub-account are credited to or charged
against that variable sub-account without regard to other income, gains or
losses in the other sub-accounts or our other income, gains or losses.
Changes Within the Variable Account - We may, from time to time, make additional
Variable Sub-Accounts available. These Sub-Accounts will invest in investment
portfolios we find suitable for the Group Contract. We also have the right to
eliminate Sub-Accounts, to combine two or more Sub-Accounts or to substitute a
new investment portfolio for the portfolio in which a Sub-Account invests. Such
an action may become necessary if, in our judgment, a portfolio or Sub-Account
no longer suits the purposes of the Group Contract. This may happen due to a
change in laws or regulations, or a change in a portfolio's or Sub-Account's
investment objectives or restrictions, or because the portfolio or Sub-Account
is no longer available for investment, or for some other reason. We will get
prior approval from the insurance department of our state of domicile before
taking such action. If required, this approval process will be on file with the
insurance department of the jurisdiction in which the Group Contract is
delivered. We will also get any required approval from the SEC and any other
required approvals before taking such an action.
Subject to any required regulatory approvals, we reserve the right to transfer
assets of the Variable Sub-Accounts that we determine to be associated with the
class of Group Contracts to which the Group Contract belongs, to another
variable account or variable sub-account.
When permitted by law, we reserve the right to:
1. Deregister the Variable Account under the Investment Company Act of
1940;
2. Operate the Variable Account as a management company under the
Investment Company Act of 1940, if it is operating as a unit
investment trust;
3. Operate the Variable Account as a unit investment trust under the
Investment Company Act of 1940, if it is operating as a Managed
Separate Account;
4. Restrict or eliminate any voting rights of Owners, or other persons
who have voting rights as to the Variable Account;
5. Combine the Variable Account with other separate investment accounts;
and,
6. Combine a Variable Sub-Account with another Variable Sub-Account.
If any actions we take result in a material change in the underlying investments
of a Variable Sub-Account in which the Owner is invested, we will notify the
Owner of the change. the Owner may then choose a new Sub-Account.
Accumulation Units - We keep track of the value of each of the Owner's Variable
Sub-Accounts by the number of Accumulation Units in that Sub-Account.
Accumulation Units are credited to a Sub-Account when a purchase payment is
allocated to that Sub-Account or when an amount is transferred to that
Sub-Account. Accumulation Units will be canceled from a Sub-Account when amounts
are transferred from a Sub-Account or on payment of death proceeds, a
withdrawal, a loan, a surrender, or assessment of charges shown in the Schedule
(other than the variable sub-account charges). The number of Accumulation Units
credited to or canceled from a Sub-Account in a transaction is determined by
dividing (a) by (b) where:
(a) is the dollar amount of the transaction; and
(b) is the value of the Accumulation Unit for that Sub-Account for the
Valuation Date for that transaction.
Page 16
<PAGE>
Value of Accumulation Units - The Accumulation Unit value for any Valuation
Period is determined by multiplying (a) by (b) where:
(a) is the Accumulation Unit value for the immediately preceding Valuation
Period; and
(b) is the "net investment factor" for the Variable Sub-Account for the
Valuation Period for which the value is being determined.
The value of an Accumulation Unit may increase, decrease or remain the same from
one Valuation Period to the next.
Net Investment Factor - The net investment factor for a Variable Sub-Account is
an index that measures the investment performance of that Sub-Account from one
Valuation Period to the next. The net investment factor for any Valuation Period
is determined by dividing (a) by (b) and then subtracting (c) where:
(a) is the net result of:
(i) the Net Asset Value per share of the investment portfolio
share in which the Sub-Account invests determined at the end
of the current Valuation Period; plus
(ii) the per share amount of any dividend or capital gains
distribution made by that investment portfolio on shares
held in the Sub-Account if the "ex-dividend" date occurs
during the current Valuation Period; and plus or minus
(iii) a per share charge or credit for any taxes reserved for,
which is determined by us to have resulted from the
operations of that Sub-Account;
(b) is the Net Asset Value per share of the investment portfolio share
in which the Sub-Account invests determined at the end of the
immediately preceding Valuation Period; and
(c) is the daily variable sub-account charges shown in the Schedule
(adjusted for the number of days in the Valuation Period).
The net investment factor may be more or less than, or equal to, one.
FIXED ACCOUNT
- --------------------------------------------------------------------------------
Fixed Account - The Fixed Account is a separate investment account under state
insurance law. It is maintained separate from our General Account and separate
from any other separate investment account that we may have. We own the assets
in the Fixed Account. Notwithstanding the foregoing, our obligations under (and
the values and benefits under) the Fixed Account option of a Certificate do not
vary as a function of the investment performance of the Fixed Account. Owners
and Beneficiaries with rights under a Certificate do not participate in the
investment gains or losses of the assets of the Fixed Account. Such gains or
losses accrue solely to us. We retain the risk that the value of the assets in
the Fixed Account may fall below the reserves and other liabilities that we must
maintain in connection with our obligations under the Fixed Account option of a
Certificate. In such event, we will transfer assets from our General Account to
the Fixed Account to make up the difference. The Fixed Account will not be
charged with liabilities that arise from any other business that we conduct. We
may transfer to our General Account assets that exceed the reserves and other
liabilities of the Fixed Account. The Fixed Account is not required to be
registered with the SEC as an investment company under the Investment Company
Act of 1940.
Fixed Sub-Account - We will establish a separate Fixed Sub-Account for the Owner
each time the Owner allocates amounts to the Fixed Account. Amounts invested in
these Fixed Sub-Accounts earn interest at the Guaranteed Interest Rate in effect
on the date the amounts are allocated.
Page 17
<PAGE>
Guarantee Periods - Each Fixed Sub-Account is guaranteed an interest rate for a
period we refer to as a Guarantee Period. The Guaranteed Interest Rate for a
Fixed Sub-Account is effective for the entire Guarantee Period. The length of a
Guarantee Period is measured from the end of the calendar month in which the
amount is allocated to the Fixed Sub-Account. The last day of the Guarantee
Period is its Expiry Date. Surrender, or withdrawals, or transfers, or loans
from all or part of a Fixed Sub-Account made prior to the Expiry Date of a
Guarantee Period may be subject to a Market Value Adjustment.
We will notify the Owner at least thirty days prior to an Expiry Date of the
Owner's options for renewal, which include:
1. electing a new Guarantee Period from among those then offered by us;
or
2. transferring the value of the Fixed Sub-Account to one or more
Variable Sub-Accounts.
If we do not receive Satisfactory Notice prior to the Expiry Date, we will
transfer the value of the expiring Fixed Sub-Account to a Fixed Sub-Account with
the same Guarantee Period, but not longer than 5 years. The transfer will be
effective as of the Expiry Date of the previous Guarantee Period.
Guaranteed Interest Rates - Periodically, we will declare Guaranteed Interest
Rates for then available Guarantee Periods. These rates will be guaranteed for
the duration of the respective Guarantee Periods. Guaranteed Interest Rates will
never be less than the Minimum Guaranteed Interest Rate shown in the Schedule.
Market Value Adjustment - A Market Value Adjustment may be applied to surrender,
withdrawals, transfers or loans when taken from a Fixed Sub-Account other than
the thirty-day period prior to its Expiry Date. A Market Value Adjustment is
applied separately to each Fixed Sub-Account.
A Market Value Adjustment is determined by multiplying the amount surrendered,
withdrawn, transferred or borrowed by the following factor:
[(1+I)/(1+J+.0025)]to the power of N/365 - 1
Where:
. I is the Index Rate for a maturity equal to the Fixed Sub-Account's
Guarantee Period;
. J is the Index Rate for a maturity equal to the time remaining
(rounded up to the next full year) in the Fixed Sub-Account's
Guarantee Period; and
. N is the remaining number of days in the Guarantee Period at the time
of calculation.
If there is no Index Rate for the maturity needed to calculate I or J, straight
line interpolation between the Index Rate of the next highest and next lowest
maturities will be used to determine that Index Rate. If the maturity is one
year or less, we will use the Index Rate for a one-year maturity.
Market Value Adjustments will be applied as follows:
1. For a surrender, withdrawal, transfer or loan, the Market Value
Adjustment will be calculated on the total amount that must be
surrendered, withdrawn, transferred or borrowed in order to provide
the amount requested.
2. If the Market Value Adjustment is negative, it is deducted from any
remaining value in the Fixed Sub-Account or amount surrendered. Any
remaining Market Value Adjustment is deducted from the amount
withdrawn, transferred or borrowed.
3. If the Market Value Adjustment is positive, it is added to any
remaining value in the Fixed Sub-Account or amount surrendered. If the
full amount of the Fixed Sub-Account is withdrawn, transferred or
borrowed, the Market Value Adjustment is added to the amount
withdrawn, transferred or borrowed.
Page 18
<PAGE>
TRANSFERS AMONG ACCOUNTS
- --------------------------------------------------------------------------------
While a Certificate is in force, the Owner may transfer the Owner's Account
Value among Sub-Accounts. Certain restrictions may apply during the Free-Look
Period. To make a transfer, the Owner must give us Satisfactory Notice.
Transfers generally take effect on the Valuation Date we receive the notice. The
number of free transfers that we allow each Certificate Year is shown in the
Charges section of the Schedule. Restrictions for transfers are shown in the
Schedule. A transfer from a Fixed Sub-Account may be subject to a Market Value
Adjustment.
SURRENDERING, OR WITHDRAWING PART OF THE ACCOUNT VALUE
- --------------------------------------------------------------------------------
While a Certificate is in force, the Owner may withdraw all or part of his or
her Account Value by giving us Satisfactory Notice. The minimum withdrawal is
shown in the Schedule.
When a partial withdrawal is made, we will reduce the Account Value by the
amount of the partial withdrawal. We will also reduce the Insurance Amount in
proportion to the reduction in the Account Value that results from the partial
withdrawal (including any associated surrender charge and Market Value
Adjustment incurred).
If the Owner requests a surrender, we will terminate the Owner's Certificate and
pay the Owner the Surrender Value. This amount may also be applied to a
Settlement Option, subject to any restrictions described in the Certificate.
Unless specified otherwise, we will make partial withdrawals as described in the
Schedule. Surrender and withdrawals generally take effect on the date we receive
Satisfactory Notice.
If the Owner makes a withdrawal from his or her Certificate in excess of the
Free Withdrawal Amount described in the Certificate Schedule, a surrender charge
may be assessed. Surrender charges are described in the Certificate Schedule. A
withdrawal from the Fixed Account may also be subject to a Market Value
Adjustment.
Excess Withdrawals - If a partial withdrawal is made for an amount greater than
the Free Withdrawal Amount, a surrender charge may be applicable. For purposes
of calculating the surrender charge only, purchase payments will be liquidated
in whole or in part on a "first-in-first-out-basis." This means we liquidate
purchase payments in the order they were made: the oldest unliquidated purchase
payment first, the next oldest unliquidated purchase payment second, etc. until
all purchase payments have been liquidated.
The surrender charge as to any liquidated purchase payment is determined by
multiplying the amount of the purchase payment being liquidated by the
applicable percentage shown in the Certificate Schedule. The total surrender
charge will be the sum of the surrender charges for each purchase payment being
liquidated.
In a partial withdrawal, the surrender charge is deducted from the Account Value
remaining after the Owner is paid the amount requested. The amount requested
from a Sub-Account may not exceed the value of that Sub-Account less any
applicable surrender charge. In a complete withdrawal (or surrender of a
Certificate), it is deducted from the amount otherwise payable.
Page 19
<PAGE>
BORROWING PART OF THE ACCOUNT VALUE
- --------------------------------------------------------------------------------
While a Certificate is in force and after the Free-Look Period, the Owner may
request a loan by giving us Satisfactory Notice. Unless specified otherwise, an
amount equal to the loan will be transferred from the Sub-Accounts to the Loan
Account in proportion to the Account Value in each Sub-Account in which the
Owner is invested as of the date we process the loan. The Certificate will be
the only security we require for the loan. The minimum loan amount is also shown
in the Certificate Schedule. A loan may be a taxable event and may affect the
amount of the Death Proceeds payable under a Certificate.
Maximum Loanable Value - The maximum loanable value is shown in the Schedule.
The amount of the loan and all existing loans may not be more than the maximum
loanable value as of the loan date. The loan date is the date we process the
loan.
If on any Valuation Date where there is Debt outstanding and the Surrender Value
is negative, we will send the Owner an overloan notice at the Owner's last known
address. The Owner will then have 61 days from the date we send the notice to
avoid termination by paying us at least the minimum repayment amount listed in
the notice.
Loan Repayment - All or part of a loan may be repaid to us at any time while the
Certificate is in force during the Insured's lifetime. The minimum loan
repayment amount is shown in the Certificate Schedule. If the Grace Period has
expired and the Certificate has terminated, any Debt that exists at the end of
the Grace Period may not be repaid unless the Certificate is reinstated.
Unless specified otherwise, an amount equivalent to a loan repayment will be
transferred from the Loan Account to the Sub-Accounts in proportion to the
Account Value in each Sub-Account in which the Owner is invested.
Loan Interest - Interest on the loan accrues daily at the Loan Interest Rate
shown in the Schedule. It is due on each Certificate Anniversary. If loan
interest is not paid when due, the difference between the Loan Account and Debt
will be transferred from the Sub-Accounts to the Loan Account in proportion to
the Account Value in each Sub-Account in which the Owner is invested.
Effects of a Loan - A loan will be transferred from the Sub-Accounts to the Loan
Account. Any loan interest that becomes due and is not paid will also be so
transferred. A repayment or loan interest payment will be transferred from the
Loan Account into the Sub-Accounts. Amounts transferred to the Loan Account will
earn interest daily at the Loan Credited Rate shown in the Schedule from the
date of transfer.
Since the amount the Owner borrows is transferred from the Sub-Accounts, a loan
whether or not repaid, will have a permanent effect on the Surrender Value and
may have a permanent effect on the death benefit. The effect may be favorable or
unfavorable. This is true whether the Owner repays the loan or not. If not
repaid, the loan will reduce the amount of Death Proceeds.
CHARGES
- --------------------------------------------------------------------------------
Monthly Deduction Amount - The Monthly Deduction Amount is deducted on each
Monthly Processing Date. It is equal to (a) + (b) + (c) + (d), where:
(a) is the cost of insurance charge described below;
(b) is the asset-based charges described in the Schedule;
(c) is the cost of any riders for which a separate charge is shown in the
Schedule; and
(d) is any other applicable charge shown in the Schedule.
Page 20
<PAGE>
Monthly Deduction Amount on a Certificate Anniversary - On a Monthly Processing
Date that is also a Certificate Anniversary, the Monthly Deduction Amount is
equal to (a) + (b) where:
(a) is the Monthly Deduction Amount as described above; and
(b) is the administration charge shown in the Schedule.
Cost of Insurance Charge - The maximum monthly cost of insurance charge is equal
to (a) times (b) and then divided by (c), where:
(a) is the Maximum Cost of Insurance Rate per $1,000 shown in the Table in
the Schedule;
(b) is an amount equal to the death benefit minus the Account Value; and
(c) is $1,000.
The actual monthly cost of insurance charge may be less than, but never more
than, the maximum monthly cost of insurance charge.
OWNER AND BENEFICIARY
- --------------------------------------------------------------------------------
The Owner is also the Insured unless another Insured has been named in the
application and is shown in the Certificate Schedule. The Owner has the rights
and options described in the Certificate while the Insured is living and the
Certificate is in force. One or more people may own the Certificate.
The Beneficiary - We pay the Death Proceeds to the primary Beneficiary. If the
primary Beneficiary dies before the Insured, we pay the Death Proceeds to the
Contingent Beneficiary, if any. If there is no surviving Beneficiary, we pay the
Death Proceeds to the Owner's estate.
One or more persons may be named as primary Beneficiary or Contingent
Beneficiary. We will assume any Death Proceeds are to be paid in equal shares to
the multiple surviving Beneficiaries, unless the Owner specifies otherwise.
The Owner has the right to change Beneficiaries. However, if the Owner
designates the primary Beneficiary as irrevocable, the Owner may need the
consent of that Beneficiary to exercise the rights and options under his or her
Certificate.
Change of Owner or Beneficiary - During the Owner's lifetime and while the
Certificate is in force the Owner can transfer ownership of the Certificate or
change the Beneficiary. To make any of these changes, the Owner must send us
Satisfactory Notice. If accepted, any change in Owner or Beneficiary will take
effect on the date the Owner signed the notice. Any of these changes will not
affect any payment made or action taken by us before our acceptance. A change of
Owner may be a taxable event.
DEATH PROCEEDS
- --------------------------------------------------------------------------------
Death Benefit - If the Insured dies while a Certificate is in force, the death
benefit will be the greater of (a) or (b), where:
(a) is the Insurance Amount on the date of death; and
(b) is the Minimum Death Benefit on the date of death.
However, if the state in which a Certificate is issued does not allow us to
deduct a cost of insurance charge on or after the Certificate Anniversary when
the Insured reaches age 100, the death thereafter will be limited to (b) above.
Page 21
<PAGE>
Minimum Death Benefit - To ensure that a Certificate continues to qualify as
life insurance under the Internal Revenue Code of 1986, as amended (the "Code"),
we will also calculate a Minimum Death Benefit for each Valuation Date. The
Minimum Death Benefit on a Valuation Date is equal to (a) times (b), where:
(a) is the Account Value plus any positive Market Value Adjustment on the
Valuation Date; and
(b) is the Minimum Death Benefit Percentage shown in the Table in the
Schedule.
Death Proceeds - The actual amount payable to the Beneficiary if the Insured
dies while a Certificate is in force is called the Death Proceeds. The Death
Proceeds are equal to (a) + (b) - (c) - (d) - (e), where:
(a) is the death benefit described above;
(b) is any insurance on the Insured's life that may be provided by riders
to such Certificate;
(c) is any Debt;
(d) is any due and unpaid Monthly Deduction Amount accruing during the
Grace Period; and
(e) is any Certificate values previously paid pursuant to any riders
attached to such Certificate.
We will pay the Death Proceeds to the Beneficiary after we receive due proof of
death. The Death Proceeds will be adjusted under certain conditions. Refer to
the Incontestability, Suicide, and Misstatement of Age or Sex provisions.
The Owner may choose to have the Death Proceeds paid in one sum, in which case
the Certificate will terminate, or under a Settlement Option. If the Owner has
not made a choice before the Insured dies, the Beneficiary may make this choice.
Unless the Owner or the Beneficiary specify otherwise, we reserve the right to
pay the Death Proceeds in one sum within 90 days after we receive due proof of
death.
Proof of Death - Due proof of death must be received at our Customer Service
Center before we will pay any Death Proceeds.
Insurance Amount Increases - Payment of additional purchase payments may require
us to increase the Insurance Amount so that a Certificate continues to qualify
as life insurance under the Code. We reserve the right to require satisfactory
evidence of insurability for any increase in the Insurance Amount. In addition,
we reserve the right to require that the Owner's risk class be identical to that
on the Certificate Date.
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
Entire Contract - This Group Contract including any attached riders,
endorsements, amendments, and the application of the Contractholder constitutes
the entire contract between the Contractholder and us. All statements made by
the Contractholder, any Owner, or any Insured will be deemed representations and
not warranties.
Assignment -The Owner may assign his or her Certificate at any time while the
Insured is living and his or her Certificate is in force. No assignment will be
binding on us unless we receive Satisfactory Notice. We will not be liable for
any payments made or actions we take before we accept the assignment. An
absolute assignment will revoke the interest of any revocable Beneficiary. We
will not be responsible for the validity of any assignment. An assignment may be
a taxable event.
Claims of Creditors - To the extent permitted by law, no benefits payable under
a Certificate will be subject to the claims of creditors.
Page 22
<PAGE>
Misstatement and Proof of Age or Sex - If the age or sex of the Insured has been
misstated, the benefits under the Certificate will be those which the initial
purchase payment and any additional purchase payments would have provided for
the correct age and sex.
No Dividends Payable - This Group Contract is non-participating and does not
share in any distribution of our surplus. We will not pay any dividends.
Incontestability - We will not contest the payment of the Death Proceeds based
upon the initial purchase payment after a Certificate has been in force during
the Insured's lifetime for two years from the Issue Date.
For any increase in Insurance Amount requiring evidence of insurability, we will
not contest payment of the Death Proceeds based on such an increase after it has
been in force during the Insured's lifetime for two years from its effective
date.
Suicide - If the Insured dies by suicide, while sane or insane, within two years
from the Issue Date, we will not pay the Death Proceeds normally payable on the
Insured's death. Instead, we will limit the death benefit to the Account Value
as of the date we receive proof of death, and Death Proceeds will otherwise be
calculated in the usual manner.
If the Insured dies by suicide, while sane or insane, within two years of any
date we receive and accept an additional purchase payment, any amount of death
benefit that would not be payable except for the fact that the additional
purchase payment was made will be limited to the amount of such payment.
Required Reports - We will furnish a report to the Owner as often as required by
law, but at least once in each Certificate Year that a Certificate is in force.
The report will show the number of Accumulation Units credited to each Variable
Sub-Account in which the Owner is invested and the corresponding Accumulation
Unit value as of the date of the report. It will also show the Owner's Fixed
Account Value. The report will also include any other information required by
the laws and regulations of the jurisdiction in which a Certificate is
delivered.
Changes in Certificate Cost Factors - Changes in cost of insurance rates,
credited interest rates, or other Certificate expense charges will be applied on
a uniform basis for insureds of the same sex, attained age and risk class whose
Certificates have been in force for the same length of time. Changes in these
nonguaranteed elements will be based on changes in future expectations for
factors such as investment earnings, mortality, persistency, expenses and taxes.
Any changes will be determined in accordance with the procedures on file, if
required, with the insurance regulator in the state in which a Certificate was
delivered.
Taxes Based Upon Purchase Payments or Value - If there is a law or change in law
assessing taxes against us based upon purchase payments or value of a
Certificate, we reserve the right to charge the Owner and all similarly situated
Owners proportionately for that tax. This would include a tax based upon our
realized net capital gains in the Variable Sub-Accounts and on earnings in the
Fixed Account, on which we are not currently taxed.
Payments We May Defer - We may not be able to determine the value of the assets
of the Variable Sub-Accounts because:
1. The New York Stock Exchange is closed for trading or trading on the
New York Stock Exchange is restricted;
2. The SEC determines that a state of emergency exists; or
3. An order or pronouncement of the SEC permits a delay for the
protection of Owners.
Page 23
<PAGE>
If this happens, we may delay:
1. Determination and payment of the Surrender Value or any withdrawal;
2. Determination and payment of any death benefit;
3. Transfers of the Account Value; or
4. Granting of any loan.
We reserve the right to delay payment or transfer of amounts from the Fixed
Account for up to six months. If deferred 30 days or more, the amount deferred
will earn interest at a rate not less than the Minimum Deferral Interest Rate
shown in the Fixed Account section of the Schedule.
We may also defer payments for any amount attributable to a purchase payment
made in the form of a check for a reasonable amount of time (not to exceed 15
days) to permit the check to clear.
Reduction or Elimination of Certificate Charges - Certificate charges may be
reduced or eliminated when certain sales or administration of the Group Contract
result in savings or reduction of expenses and/or risks.
Authority to Make Agreements - All agreements made by us must be signed by one
of our officers. No other person, including an insurance agent or broker, can
change the terms of a Certificate or make any agreement binding on us. However,
we can, with the agreement of the Group Contractholder, make changes to the
Group Contract and a Certificate without the Owner's consent.
Required Note on Our Computations - We have filed a detailed statement of our
computations with the insurance supervisory official in the appropriate
jurisdictions. The values are not less than those required by the law of that
state or jurisdiction. Any benefit provided by an attached rider will not
increase these values unless otherwise stated in that rider.
Certificates - We will furnish Certificates to the Owners. Each Certificate will
summarize provisions of this Group Contract affecting an individual Owner.
Facts Relating to Coverage - At any reasonable time we will have the right to
inspect any records of the Contractholder and plan sponsor which relate to this
Group Contract.
Discontinuance of Group Contract - This Group Contract may be discontinued by us
or the Contractholder. The party who initiates the discontinuance will send a
notice to each Owner of record, at his or her last known address, at least 15
days prior to the date of discontinuance. No new Owners will be accepted and no
additional purchase payments will be accepted on or after the date notice of the
discontinuance is received or sent by us, whichever is applicable.
Page 24
<PAGE>
SETTLEMENT OPTIONS
- --------------------------------------------------------------------------------
The Surrender Value or Death Proceeds may be paid in a single sum or under one
of our Settlement Options. If the amount available to apply under any Variable
or Fixed Settlement Option is less than the minimum amount shown in the
Schedule, we reserve the right to require that such amount be paid in a lump
sum.
If at any time payments under the Settlement Option become less than the minimum
payment shown in the Schedule, we reserve the right to reduce the frequency of
payment to an interval that results in each payment being at least equal to the
minimum payment. In no event will the interval be less frequent than annual.
At the time the Owner elects the Settlement Option, the Owner may also elect to
have the Account Value applied to provide Variable Payments, Fixed Payments, or
a combination of both. Unless the Owner specifies otherwise, we will provide
either variable or fixed payments, or a combination of variable and fixed
payments in proportion to the Sub-Accounts in which the Owner is invested as of
a date not more than [5] Valuation Days before the due date of the first
payment.
Once payments have begun under a Settlement Option, we reserve the right to
disallow further changes without our prior approval.
We may require proof of age, sex or survival of any person upon whose age, sex
or survival any payments depend. If the age or sex of a Payee has been
misstated, the amount payable will be the amount that the Surrender Value or
Death Proceeds would have provided for the correct age and sex. If we have made
incorrect payments, the amount of any underpayment will be paid immediately. The
amount of any overpayment will be deducted from future payments until the amount
of the overpayment is repaid.
VARIABLE PAYMENTS
Amount of First Variable Payment - The Settlement Option Tables shown in the
Schedule are used to determine the first monthly variable payment for an assumed
investment rate of 3%. The Settlement Option Tables show the dollar amount of
the first monthly variable payment that can be purchased with each $1,000
applied. The assumed investment rates we currently allow are shown in the
Schedule.
Value of Income Units - The Income Unit value for any Valuation Period is
determined by multiplying (a) by (b), and then dividing by (c) where:
(a) is the Income Unit value for the immediately preceding Valuation
Period;
(b) is the "net investment factor" for the Variable Sub-Account for the
Valuation Period for which the value is being determined; and
(c) is the daily equivalent of the assumed investment rate for the number
of days in the Valuation Period.
The value of an Income Unit may increase, decrease or remain the same from one
Valuation Period to the next.
Number of Income Units - We determine the number of Income Units in each
Variable Sub-Account by dividing the first monthly variable payment attributable
to that Sub-Account by its Income Unit value as of a date not more than [5]
Valuation Days before the due date of the first variable payment.
Page 25
<PAGE>
Amount of Second and Subsequent Variable Payments - The dollar amount of the
second and subsequent variable payments may change with the investment
performance of the Variable Sub-Accounts. The total amount of each variable
payment will be equal to the sum of the variable payments in each Variable
Sub-Account. The dollar amount of each payment for a Variable Sub-Account is
determined by multiplying the number of Income Units by the Income Unit value
for the Variable Sub-Account for the Valuation Period which ends on a
consistently applied date not more than [5] Valuation Days before the payment is
due.
We guarantee that the dollar amount of each payment after the first will not be
affected by variations in our expenses or mortality experience.
Exchange of Income Units - If there is an exchange of value of a designated
number of Income Units of particular Variable Sub-Accounts into other Income
Units, the value will be such that the dollar amount of payment made on the date
of exchange would be unaffected by the exchange.
FIXED PAYMENTS
Fixed Payments are payments that remain fixed as to dollar amount throughout the
payment period. The Settlement Option Tables shown in the Schedule are used to
determine the monthly fixed payment. The Settlement Option Tables show the
dollar amount of the monthly fixed payment that can be purchased with each
$1,000 applied.
SETTLEMENT OPTIONS
The following list of Settlement Options or any option acceptable to us may be
elected.
Option 1 - Payments for Life: Payments during the lifetime of the Payee and
terminating with the last payment preceding the death of the Payee.
Option 2 - Payments for Life with 10 or 20 Years Guaranteed: Payments during the
lifetime of the Payee with the guarantee that payments will be made for a
minimum of 10 or 20 years, as elected. If at the death of the Payee, payments
have been made for less than the guaranteed number of years elected, payments
will be made to the Beneficiary for the remainder of the guaranteed number of
years elected.
Option 3 - Joint and Last Survivor Payments: Payments during the joint lifetime
of the Payee and a designated second person, and thereafter during the remaining
lifetime of the survivor, ceasing with the last payment prior to the death of
the survivor.
Option 4 - Payments for a Fixed Period: An amount payable for the number of
years selected which may be from 5 to 30 years. If the Payee dies before the end
of the period selected, payments will be continued to the Beneficiary for the
remaineder of the selected period.
Page 26
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
[LOGO] SAGE
-----------------------------------
SAGE LIFE ASSURANCE OF AMERICA, INC.
Member of Sage Insurance Group, Inc.
GROUP MODIFIED SINGLE PAYMENT COMBINATION FIXED AND VARIABLE LIFE INSURANCE
CONTRACT
Limited purchase payment flexibility
Death benefit payable at Insured's death while this Group Contract is in force
Nonparticipating
<PAGE>
EXHIBIT 1A(5)(a)(vi)
[LOGO OF SAGE LIFE INSURANCE APPEARS HERE]
A Stock Company
Home Office Customer Service Center
300 Atlantic Street P.O. Box 290680
Stamford, CT 06901 Wethersfield, CT 06109
1-877-TEL SAGE
Sage Life Assurance of America, Inc. has issued this Certificate to you. We
certify that the Insured named in the Schedule is covered under the Group
Contract described in the Schedule. This Certificate becomes effective on the
Certificate Date shown in the Schedule.
This Certificate describes your benefits and rights under the provisions of the
Group Contract. The Group Contract is the agreement under which benefits are
paid and you may obtain a copy by sending us a written request.
We agree to pay the Death Proceeds to the Beneficiary upon receipt of proof that
the Insured died while this Certificate is in force. Refer to Death Proceeds on
page 21 for details.
RIGHT TO EXAMINE THIS CERTIFICATE:
If for any reason you are not satisfied with this Certificate, you may return it
to us or the agent who sold it to you within 10 days after you receive it (the
Free-Look Period). When we receive the returned Certificate at our Customer
Service Center, we will promptly refund you the Account Value plus any charges
shown in the Schedule that we have deducted from the Account Value on or before
the date the returned Certificate was received by us at our Customer Service
Center, or if greater and required by the law of your state, the initial
purchase payment (minus any withdrawals).
The amount and duration of the death benefit and all payments and values, when
based on the investment experience of the Variable Account, may increase or
decrease, depending on this Certificate's investment results and are not
guaranteed as to dollar amount. All payments and values based on the Fixed
Account may be subject to a Market Value Adjustment, the operation of which may
cause such payments and values to increase or decrease.
/s/ [SIGNATURE ILLEGIBLE]
Chairman
MODIFIED SINGLE PAYMENT COMBINATION FIXED AND VARIABLE LIFE INSURANCE
CERTIFICATE
Limited purchase payment flexibility
Death benefit payable at Insured's death while this Certificate is in force
Nonparticipating
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SCHEDULE....................................................................... 3
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES PER $1,000....... 8
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES PER $1,000....... 9
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES................................... 10
DEFINITIONS.................................................................... 11
MAKING PURCHASE PAYMENTS....................................................... 13
ACCOUNT VALUE.................................................................. 14
VARIABLE ACCOUNT............................................................... 15
FIXED ACCOUNT.................................................................. 17
TRANSFERS AMONG ACCOUNTS....................................................... 18
SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE........................ 19
BORROWING PART OF YOUR ACCOUNT VALUE........................................... 19
CHARGES........................................................................ 20
OWNER AND BENEFICIARY.......................................................... 21
DEATH PROCEEDS................................................................. 21
GENERAL PROVISIONS............................................................. 22
SETTLEMENT OPTIONS............................................................. 24
</TABLE>
Page 2
<PAGE>
SCHEDULE
Group Contract No.: Certificate No.:
Owner: Issue Date: XX/XX/XXXX
Insured: Certificate Date: XX/XX/XXXX
Issue Age/Sex: Initial Purchase Payment $
Risk Class: Initial Insurance Amount: $
This Schedule sets forth additional information that relates to the provisions
in this Certificate with the corresponding headings.
MAKING PURCHASE PAYMENTS
Additional purchase payments may be made at any time and in any amount necessary
to avoid termination of this Certificate. Other additional purchase payments
may be made at any time after the first Certificate Anniversary, subject to the
following conditions:
1. each additional purchase payment must be at least $250;
2. only one purchase payment may be paid in any Certificate Year;
3. the attained age of the Insured must be less than 81; and
4. our prior approval is required before you make a purchase payment that
causes the Account Value of all single payment or modified single
payment Certificates that you maintain with us to exceed $1,000,000.
We reserve the right to require satisfactory evidence of insurability before we
accept any additional purchase payment that increases the death benefit by more
than it increases the Account Value.
The minimum reinstatement payment is the minimum purchase payment for which we
would then issue a Certificate based upon the Insured's attained age and risk
class as of the effective date of the reinstated Certificate.
No purchase payment, whether initial or additional, may be allocated such that
any Sub-Account would have a value less than $250.
The Designated Sub-Account is the Money Market Sub-Account.
VARIABLE ACCOUNT
The Variable Account for this Certificate is The Sage Variable Life Account A.
It is a unit investment trust variable account.
Page 3
<PAGE>
FIXED ACCOUNT
The Fixed Account for this Certificate is The Sage Fixed Interest Account A.
The Minimum Guaranteed Interest Rate is 3%.
The Minimum Deferral Interest Rate is 3%.
Index Rate: The Index Rate is the U.S. Treasury Constant Maturity Series as
reported in Federal Reserve Bulletin Release H.15. We currently base the Index
Rate for a calendar week on the reported rate for the preceding calendar week.
We reserve the right to set it less frequently but in no event less often than
monthly.
TRANSFERS AMONG ACCOUNTS
The minimum amount that can be transferred is $250. However, if less remains in
a Sub-Account, that amount may be transferred. If a transfer request would
reduce the Account Value remaining in a Sub-Account below $250, we will treat
the transfer request as a request to transfer the entire amount.
Your transfer request must clearly state the Sub-Accounts from which and to
which transfers are to be made.
We reserve the right to limit, upon notice, the maximum number of transfers you
may make to one per calendar month or 12 per Certificate Year.
Under a Settlement Option, we reserve the right to:
1. disallow transfers from the Fixed Account to the Variable Account, or
from the Variable Account to the Fixed Account; and
2. limit the maximum number of transfers between Variable Sub-Accounts to
1 per Certificate Year.
SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE
The Free Withdrawal Amount is the greater of (a) and (b) where:
(a) is the excess of 10% of the total purchase payments over 100% of all
prior withdrawals including any associated surrender charge and Market
Value Adjustment incurred in that Certificate Year; and
(b) is the excess of the Account Value on the date of withdrawal over the
unliquidated purchase payments.
The minimum amount that can be withdrawn is $250. If a withdrawal request would
reduce the Account Value remaining in a Sub-Account below $250, we will treat
the withdrawal request as a request to withdraw the entire amount.
If a requested withdrawal would reduce the Account Value below $5,000, we
reserve the right to treat the request as a withdrawal of only the excess over
$5,000.
Unless you specify otherwise, we will make withdrawals proportionately from all
Sub-Accounts in which you are invested.
Page 4
<PAGE>
BORROWING PART OF YOUR ACCOUNT VALUE
The maximum loanable value is 90% of the Account Value less any surrender charge
less any due and unpaid Monthly Deduction Amount, adjusted for any Market Value
Adjustment.
The minimum loan amount is $250.
The Loan Interest Rate is 6%.
The minimum loan repayment amount is $250.
The Loan Credited Rate is a minimum of 4%. We may credit a higher rate to that
portion of the Loan Account equal to the Free Withdrawal Amount.
CHARGES
Surrender Charge - A surrender charge may be imposed upon surrender of this
Certificate or when an Excess Withdrawal is made. The surrender charge is
applied to each purchase payment and is a percentage of each purchase payment as
follows:
<TABLE>
<CAPTION>
Maximum
Certificate Surrender Charge
Year Percentage
---- ----------
<S> <C>
1 9%
2 9%
3 8%
4 7%
5 6%
6 5%
7 3%
8+ 0%
</TABLE>
OR
The maximum surrender charge percentage is 0% for all Certificate Years.
Transfer Charge - We reserve the right to charge a maximum of $25 for each
transfer after the 12/th in a Certificate Year. Each request is considered to
be one transfer regardless of the number of Sub-Accounts affected by the
transfer. The transfer charge will be deducted proportionately from all Sub-
Accounts from which transfers are made.
Administration Charge - $40 a year. This charge is incurred at the beginning
of each Certificate Year and deducted on each Certificate Anniversary or upon
surrender. The charge will be waived:
. if the Account Value is at least $50,000 at the time of deduction; or
. beginning on and after the 8/th Certificate Anniversary.
Page 5
<PAGE>
Asset-Based Charges - We deduct asset-based charges from your Account Value to
compensate us for assuming mortality and expense risks, certain administrative
expenses, certain distribution costs and certain state and Federal tax expenses.
Asset-based charges are calculated as a percentage of the Account Value on the
date of deduction. On the Certificate Date, and monthly thereafter, the asset-
based charges are deducted in proportion to the Sub-Accounts in which you are
invested. The maximum charges are:
Asset-Based Charges Annual Charge Monthly Charge
------------------- ------------- --------------
Certificate Years 1-10 1.80% .150000%
Certificate Years 11+ 1.30% .108333%
We also reserve the right to deduct asset-based charges on the effective date of
any allocation of purchase payment to the Sub-Accounts, based on the amount
allocated, and based on the number of days remaining until the next date of
deduction.
Variable Sub-Account Charges - If proceeds are applied to a Settlement Option,
we will deduct the asset-based charges above from the assets in each Variable
Sub-Account supporting Variable Payments on a daily basis rather than as
described above. The maximum charges are:
Variable Sub-Account Charges Annual Charge Daily Charge
---------------------------- ------------- ------------
Certificate Years 1-10 1.80% .0049763%
Certificate Years 11+ 1.30% .0035849%
Charge Deduction Rules - Unless specified above, charges are deducted from the
Account Value proportionately from all Sub-Accounts in which you are invested.
SETTLEMENT OPTIONS
The minimum amount that can be applied under any Variable or Fixed Payment is
$5,000.
The minimum payment is $100.
We currently allow assumed investment rates of 3% and 6%.
RIDERS
Accelerated Death Benefit Rider
The maximum Accelerated Benefit Amount is 50% of the Insurance Amount, but not
greater than $500,000.
Accidental Death Benefit Rider
The Maximum Accidental Death Benefit is $250,000.
Change of Insured Rider
The minimum Attained Ages of the original and new Insureds as of the effective
date of change must be 25.
The maximum Attained Ages of the original and new Insureds as of the effective
date of change is 75.
The maximum Change of Insured Rider charge is $1.50 per $1,000 of death benefit.
Page 6
<PAGE>
Settlement Option Tables
Values for other ages, and for other payment periods, joint life combinations,
or assumed investment rates that we offer (Tables below assume 3%) are available
on request. Monthly payments are shown for each $1,000 applied.
Settlement Option Table for a Fixed Period
<TABLE>
<CAPTION>
Monthly Monthly Monthly
Fixed Period Payment Fixed Period Payment Fixed Period Payment
------- ------- -------
of Years of Years of Years
-------- -------- --------
<S> <C> <C> <C> <C> <C>
11 $8.88 21 $5.33
12 8.26 22 5.16
13 7.73 23 5.00
14 7.28 24 4.85
5 $17.95 15 6.89 25 4.72
6 15.18 16 6.54 26 4.60
7 13.20 17 6.24 27 4.49
8 11.71 18 5.98 28 4.38
9 10.56 19 5.74 29 4.28
10 9.64 20 5.53 30 4.19
</TABLE>
Settlement Option Table for Life
<TABLE>
<CAPTION>
Male/Female Male/Female Male/Female
Age Life Only 10 Years Guaranteed 20 Years Guaranteed
--- --------- ------------------- -------------------
<S> <C> <C> <C>
50 $ 4.28 / 3.92 $4.24 / 3.90 $4.10 / 3.84
55 4.72 / 4.27 4.64 / 4.24 4.40 / 4.12
60 5.31 / 4.74 5.17 / 4.68 4.73 / 4.45
65 6.13 / 5.38 5.84 / 5.25 5.04 / 4.81
70 7.28 / 6.29 6.65 / 6.00 5.29 / 5.14
75 8.90 / 7.62 7.53 / 6.92 5.43 / 5.37
80 11.19 / 9.62 8.37 / 7.93 5.50 / 5.48
85 14.36 / 12.63 9.00 / 8.77 5.52 / 5.52
</TABLE>
Page 7
<PAGE>
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES
PER $1,000
MALE - STANDARD RISK CLASS
<TABLE>
<CAPTION>
Attained Monthly Attained Monthly Attained Monthly Attained Monthly
Age Rate Age Rate Age Rate Age Rate
--- ---- --- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C>
0 0.2194 25 0.1460 50 0.5852 75 5.7847
1 0.0859 26 0.1434 51 0.6381 76 6.3595
2 0.0825 27 0.1426 52 0.6968 77 6.9577
3 0.0809 28 0.1418 53 0.7640 78 7.5852
4 0.0775 29 0.1434 54 0.8380 79 8.2619
5 0.0734 30 0.1460 55 0.9180 80 9.0119
6 0.0692 31 0.1501 56 1.0030 81 9.8582
7 0.0650 32 0.1560 57 1.0932 82 10.8223
8 0.0625 33 0.1626 58 1.1894 83 11.9024
9 0.0617 34 0.1710 59 1.2942 84 13.0775
10 0.0625 35 0.1810 60 1.4109 85 14.3247
11 0.0675 36 0.1935 61 1.5430 86 15.6263
12 0.0767 37 0.2077 62 1.6923 87 16.9762
13 0.0892 38 0.2236 63 1.8597 88 18.3754
14 0.1034 39 0.2420 64 2.0454 89 19.8343
15 0.1184 40 0.2629 65 2.2459 90 21.3788
16 0.1326 41 0.2854 66 2.4605 91 23.0518
17 0.1434 42 0.3097 67 2.6886 92 24.9371
18 0.1518 43 0.3365 68 2.9344 93 27.2442
19 0.1568 44 0.3649 69 3.2068 94 30.4453
20 0.1585 45 0.3950 70 3.5147 95 35.4922
21 0.1585 46 0.4277 71 3.8670 96 44.5151
22 0.1568 47 0.4620 72 4.2723 97 62.8314
23 0.1535 48 0.4989 73 4.7329 98 83.3333
24 0.1501 49 0.5399 74 5.2401 99 83.3333
100+ 83.3333
</TABLE>
Rates shown are based on the Commissioner's Male 1980 Standard Ordinary
Mortality Table, Age Last Birthday. These rates are based on the Insured's
attained age as of each Certificate Anniversary and do not change during a
Certificate Year.
Page 8
<PAGE>
TABLE OF GUARANTEED MONTHLY MAXIMUM COST OF INSURANCE RATES
PER $1,000
FEMALE - STANDARD RISK CLASS
<TABLE>
<CAPTION>
Attained Monthly Attained Monthly Attained Monthly Attained Monthly
Age Rate Age Rate Age Rate Age Rate
--- ---- --- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C>
0 0.1568 25 0.0976 50 0.4285 75 3.4445
1 0.0700 26 0.1001 51 0.4595 76 3.8688
2 0.0667 27 0.1034 52 0.4947 77 4.3247
3 0.0650 28 0.1067 53 0.5332 78 4.8190
4 0.0642 29 0.1101 54 0.5726 79 5.3700
5 0.0625 30 0.1142 55 0.6129 80 5.9999
6 0.0609 31 0.1184 56 0.6523 81 6.7294
7 0.0592 32 0.1226 57 0.6901 82 7.5789
8 0.0584 33 0.1284 58 0.7279 83 8.5491
9 0.0575 34 0.1343 59 0.7699 84 9.6289
10 0.0567 35 0.1418 60 0.8204 85 10.8111
11 0.0584 36 0.1518 61 0.8826 86 12.0908
12 0.0609 37 0.1635 62 0.9626 87 13.4694
13 0.0642 38 0.1777 63 1.0586 88 14.9520
14 0.0684 39 0.1935 64 1.1675 89 16.5557
15 0.0725 40 0.2111 65 1.2832 90 18.3060
16 0.0767 41 0.2295 66 1.4033 91 20.2498
17 0.0800 42 0.2487 67 1.5235 92 22.4699
18 0.0834 43 0.2671 68 1.6473 93 25.1552
19 0.0859 44 0.2871 69 1.7866 94 28.7360
20 0.0884 45 0.3072 70 1.9508 95 34.1581
21 0.0900 46 0.3273 71 2.1528 96 43.5428
22 0.0917 47 0.3498 72 2.4040 97 62.1940
23 0.0934 48 0.3741 73 2.7057 98 83.3333
24 0.0959 49 0.4000 74 3.0550 99 83.3333
100+ 83.3333
</TABLE>
Rates shown are based on the Commissioner's Female 1980 Standard Ordinary
Mortality Table, Age Last Birthday. These rates are based on the Insured's
attained age as of each Certificate Anniversary and do not change during a
Certificate Year.
Page 9
<PAGE>
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES
<TABLE>
<CAPTION>
Minimum Death Minimum Death Minimum Death
Attained Benefit Attained Benefit Attained Benefit
Age Percentage Age Percentage Age Percentage
--- ---------- --- ---------- --- ----------
<S> <C> <C> <C> <C> <C>
0-40 250% 60 130% 80 105%
41 243% 61 128% 81 105%
42 236% 62 126% 82 105%
43 229% 63 124% 83 105%
44 222% 64 122% 84 105%
45 215% 65 120% 85 105%
46 209% 66 119% 86 105%
47 203% 67 118% 87 105%
48 197% 68 117% 88 105%
49 191% 69 116% 89 105%
50 185% 70 115% 90 105%
51 178% 71 113% 91 104%
52 171% 72 111% 92 103%
53 164% 73 109% 93 102%
54 157% 74 107% 94 101%
55 150% 75 105% 95 101%
56 146% 76 105% 96 101%
57 142% 77 105% 97 101%
58 138% 78 105% 98 101%
59 134% 79 105% 99 101%
100+ 100%
</TABLE>
Page 10
<PAGE>
DEFINITIONS
- --------------------------------------------------------------------------------
"Account Value" is the entire amount we hold under this Certificate for you
while this Certificate is in force. It is equal to the sum of the Variable
Account Value, the Fixed Account Value and the Loan Account Value.
"Accumulation Unit" is the unit of measure we use to keep track of the value of
each Variable Sub-Account.
"Attained Age" is the Issue Age plus the number of full years since the
Certificate Date.
"Beneficiary" is the person or persons to whom we pay the Death Proceeds when
the Insured dies.
"Certificate Date" is the date from which Certificate Anniversaries and
Certificate Years are measured. The Certificate Date may or may not be the same
as the Issue Date and is shown in the Schedule. While this Certificate is in
force, every anniversary of the Certificate Date is a Certificate Anniversary,
and each and every consecutive twelve-month period beginning on the Certificate
Date and each Certificate Anniversary is a Certificate Year.
"Contingent Beneficiary" is the person that becomes the Beneficiary if the named
Beneficiary dies before the Insured.
"Contingent Owner" is the person that becomes the Owner if the named Owner dies
before the Insured.
"Customer Service Center" is where we provide service to you. The mailing
address and telephone number of the Customer Service Center are shown on the
first page of this Certificate.
"Death Proceeds" is the amount of money that we will pay the Beneficiary if the
Insured dies while this Certificate is in force.
"Debt" is the sum of all outstanding loans plus accrued interest under this
Certificate.
"Excess Withdrawal" is a withdrawal of Account Value that exceeds the Free
Withdrawal Amount.
"Expiry Date" is the last day in a Guarantee Period.
"Fixed Account" is a separate investment account of ours into which purchase
payments may be invested or Account Value may be transferred.
"Fixed Account Value" is the sum of the value of each Fixed Sub-Account on any
particular day.
A "Fixed Sub-Account" is established when purchase payments are invested or
amounts are transferred to the Fixed Account. The value of each Fixed Sub-
Account is equal to the amount invested, increased by interest and reduced by
any withdrawals, loans or transfers from, or charges assessed against the Fixed
Sub-Account.
"Free Withdrawal Amount" is the maximum amount that can be withdrawn in a
Certificate Year without being subject to a surrender charge. This amount is
described in the Schedule.
"General Account" consists of all our assets other than those held in any
separate investment accounts.
"Guaranteed Interest Rate" is the effective annual interest rate we will credit
for a specified Guarantee Period. The Guaranteed Interest Rate will never be
less than the minimum shown in the Schedule.
Page 11
<PAGE>
"Guarantee Period" is a period of years for which a specified effective annual
interest rate is guaranteed by us. Interest is credited daily at a rate to yield
the declared annual Guaranteed Interest Rate.
"Home Office" is our main office. The mailing address is shown on the first page
of this Certificate.
"Income Unit" is the unit of measure we use to calculate the amount of payments
under the Variable Payment Settlement Option.
"Insurance Amount" is a dollar amount used to determine the death benefit of
this Certificate. It is shown in the Schedule.
"Insured" is the person named in the application whose life is covered by this
Certificate under the Group Contract. The Insured is shown in the Schedule.
"Issue Age" is the Insured's age on the last birthday on or before the
Certificate Date. It is shown in the Schedule.
"Issue Date" is the date this Certificate is issued at our Customer Service
Center. It is shown in the Schedule.
"Loan Account" is an account in our General Account, established for any amounts
transferred from the Sub-Accounts as a result of a loan. The Loan Account
credits a fixed rate of interest, the Loan Credited Rate, that is not based on
the investment experience of the Variable Sub-Account or the Guaranteed Interest
Rates applicable to the Fixed Sub-Accounts of the Fixed Account. The Loan
Credited Rate is shown in the Schedule.
"Loan Account Value" is the amount of all loans under this Certificate that have
not been repaid, adjusted for interest we credit to the Loan Account at the Loan
Credited Rate and for any due and unpaid loan interest we charge at the Loan
Interest Rate. The Loan Interest Rate is shown in the Schedule.
"Market Value Adjustment" is a positive or negative adjustment that may apply to
surrender, withdrawals, loans, or transfers from a Fixed Sub-Account before the
end of a Guarantee Period.
"Monthly Processing Date" is the day of each month that the Monthly Deduction
Amount is deducted from the Account Value of this Certificate. Monthly
Processing Dates are the Certificate Date and the same day of each month
thereafter. If there is no such date in a particular month, the Monthly
Processing Date will be the last day of that month. If a Monthly Processing Date
is not a Valuation Date, the Monthly Processing Date will be the next Valuation
Date.
"Net Asset Value" is the price of one share of an investment portfolio.
"Payee" is the natural person receiving payments under a Settlement Option.
"Satisfactory Notice" is a notice or request authorized by you, in a form
satisfactory to us, received at our Customer Service Center.
"Sub-Account" includes both Variable Sub-Accounts and Fixed Sub-Accounts, unless
the context indicates otherwise.
"Surrender Value" is the amount you receive upon surrender of this Certificate.
It is your Account Value, plus or minus any applicable Market Value Adjustment,
and less any applicable surrender charges or other charges shown in the Schedule
that are due us but not yet deducted, less any Debt.
"Valuation Date" is the date at the end of a Valuation Period when each Variable
Sub-Account is valued.
Page 12
<PAGE>
"Valuation Period" is the period between one calculation of an Accumulation Unit
value and the next calculation. Normally, we calculate Accumulation Units daily
when the New York Stock Exchange is open for trading and we are open for
business. We can delay this calculation if an emergency exists, making disposal
of or fair valuation of assets in the Variable Account not reasonably
practicable, or the Securities and Exchange Commission (SEC) permits the delay.
We may change when we calculate the Accumulation Unit value by giving you 30
days notice, or such notice as may be required by law.
"Variable Account" is a separate investment account of ours into which purchase
payments may be invested or Account Value may be transferred. The Variable
Account is shown in the Schedule.
"Variable Account Value" is the sum of the value of each Variable Sub-Account on
a Valuation Date.
"Variable Sub-Account" is a division of the Variable Account that invests in
shares of a particular investment portfolio. The value of a Variable Sub-Account
is determined by multiplying (a) times (b) where:
(a) equals the number of Accumulation Units held in the Variable Sub-
Account; and
(b) equals the value of the Accumulation Unit for the Variable Sub-
Account.
"We", "us" or "our" is Sage Life Assurance of America, Inc.
"You" or "your" is the Owner of this Certificate.
MAKING PURCHASE PAYMENTS
- --------------------------------------------------------------------------------
Initial Purchase Payment - You must make the initial purchase payment in order
to put this Certificate in force. The amount of your initial purchase payment is
shown in the Schedule.
Additional Purchase Payments - Subject to our acceptance and the limits
described in the Schedule, additional purchase payments may be made at any time
while this Certificate is in force. All purchase payments after the first are
payable at our Customer Service Center.
If additional purchase payments are accepted, they may increase the death
benefit. We reserve the right to require satisfactory evidence of insurability
before accepting any additional purchase payment that increases the death
benefit by more than it increases the Account Value.
Unless specified otherwise, all payments received while a loan is outstanding,
will first be considered as a payment of any loan interest, next as a loan
repayment, and last as an additional purchase payment to this Certificate.
Allocation of Purchase Payments Among the Fixed and Variable Accounts - Subject
to limits described in the Schedule, you tell us how to allocate your purchase
payments by notifying us of your choices. You specified how to allocate your
initial purchase payment in your application for this Certificate. Initial
purchase payments allocated to the Fixed Account will be invested in Fixed Sub-
Accounts with the Guarantee Periods that you specified in your application. We
may, however, require that an initial purchase payment allocated to a Variable
Sub-Account be invested in the Designated Sub-Account shown in the Schedule
during the Free-Look Period. At the end of the Free-Look Period, if your initial
purchase payment was allocated to the Designated Sub-Account by us, we will
transfer the value of that Designated Sub-Account to the Sub-Account(s) you
specified in your application. For the purpose of processing transfers from the
Designated Sub-Account, the Free-Look Period will be assumed to end 15 days
after the Certificate Date.
If you do not tell us how to allocate any additional purchase payments, they
will be allocated in the same manner as your most recent purchase payment.
Page 13
<PAGE>
Grace Period - If the Surrender Value on a Monthly Processing Date is not
sufficient to cover the Monthly Deduction Amount, a grace period of 61 days will
be allowed for you to pay an amount sufficient to cover the Monthly Deduction
Amount due. We will send you a notice at the start of the Grace Period at your
last known address. The Grace Period will end 61 days after we mail you the
notice.
If you do not make the necessary payment by the end of the Grace Period, this
Certificate will terminate without value. Subject to the terms and conditions of
this Certificate, if the Insured dies during the Grace Period, we will pay the
Death Proceeds.
Reinstatement - If the Grace Period has ended and you have not paid the required
purchase payment and have not surrendered this Certificate for its Surrender
Value, you may be able to reinstate this Certificate. To do so you must:
1. submit a written request for reinstatement within 3 years after the
end of the Grace Period;
2. provide evidence of insurability satisfactory to us;
3. pay an additional purchase payment equal to at least the minimum
reinstatement payment shown in the Schedule; and
4. repay or reinstate any Debt against this Certificate that existed at
the end of the Grace Period.
The effective date of a reinstated Certificate will be the Monthly Processing
Date on or next following the date we approve your application for reinstatement
and receive the necessary purchase payment.
If your Certificate is reinstated, the Account Value on the date of
reinstatement will be the amount provided by the purchase payment paid. Any
applicable charges will be based on the length of time from the Certificate Date
to the effective date of the reinstatement. Unless you have provided otherwise,
the allocation of the Account Value will be based on the allocation instructions
in effect at the start of the Grace Period.
ACCOUNT VALUE
- --------------------------------------------------------------------------------
The Account Value is the entire amount we hold under this Certificate for you.
It is equal to the sum of the Variable Account Value, the Fixed Account Value
and the Loan Account Value.
Variable Account Value - On the Certificate Date the Variable Account Value for
a Sub-Account is equal to the portion of the initial purchase payment allocated
to the Sub-Account. On each subsequent Valuation Date, it is equal to (a) + (b)-
(c) - (d) - (e), where:
(a) is the Variable Account Value in the Sub-Account on the preceding
Valuation Date multiplied by its net investment factor for the current
Valuation Period;
(b) is the amount of any allocation or transfer to the Sub-Account during
the current Valuation Period;
(c) is the amount of any transfer from the Sub-Account during the current
Valuation Period;
(d) is the amount of any charges allocated to the Sub-Account during the
current Valuation Period; and
(e) is the amount of any withdrawal or loan allocated to the Sub-Account
during the current Valuation Period.
Fixed Account Value - On the Certificate Date the Fixed Account Value for a Sub-
Account is equal to the portion of the initial purchase payment allocated to the
Sub-Account. On each subsequent Valuation Date, it is equal to (a) + (b) - (c)-
(d) - (e), where:
(a) is the Fixed Account Value in the Sub-Account on the preceding
Valuation Date multiplied by the daily equivalent of its Guaranteed
Interest Rate earned for the number of days in the current Valuation
Period;
Page 14
<PAGE>
(b) is the amount of any allocation or transfer to the Sub-Account during
the current Valuation Period;
(c) is the amount of any transfer from the Sub-Account during the current
Valuation Period;
(d) is the amount of any charges allocated to the Sub-Account during the
current Valuation Period; and
(e) is the amount of any withdrawal or loan allocated to the Sub-Account
during the current Valuation Period.
The Fixed Account Value is also adjusted for any Market Value Adjustment you
incur that results from a transaction in (b), (c) or (e).
Loan Account Value - Unless you take a loan, the Loan Account Value is zero.
(Amounts you take as a loan are sometimes referred to in this Certificate as
amounts you "borrow".) If you take a loan, then on the effective date of the
loan the Loan Account Value is equal to the amount of the loan. On each
subsequent Valuation Date, it is equal to (a) + (b) + (c) - (d) - (e), where:
(a) is the Loan Account Value on the preceding Valuation Date;
(b) is the amount of interest earned (at the Loan Credited Rate shown in
the Schedule) on item (a) during the current Valuation Period;
(c) is any amounts transferred to the Loan Account because of any
additional loans and any due and unpaid loan interest during the
current Valuation Period;
(d) is the amount of any loan repayment you make during the current
Valuation Period; and
(e) is any amount of interest earned on item (a) and transferred to the
Sub-Accounts during the current Valuation Period.
VARIABLE ACCOUNT
- --------------------------------------------------------------------------------
Variable Account - A variable account is an investment account we maintain
separate from our General Account and any other separate investment accounts we
may have. We own the assets in a variable account. A variable account will not
be charged with liabilities that arise from any other business that we conduct.
We may transfer to our General Account assets that exceed the reserves and other
liabilities of a variable account.
A variable account may invest in mutual funds, unit investment trusts and other
investment portfolios. Such a variable account is treated as a unit investment
trust under Federal securities laws and is registered with the SEC under the
Investment Company Act of 1940.
We may offer certain series or variable accounts that may not be registered with
the SEC under the Securities Act of 1933. Any such series or variable account,
if offered, will be described in the applicable offering document.
The Variable Account for this Certificate is shown in the Schedule. The laws of
our state of domicile govern this Variable Account.
Variable Sub-Accounts - A unit investment trust variable account includes
variable sub-accounts, each investing in a designated investment portfolio. The
sub-accounts and the investment portfolios in which they invest are specified in
the prospectus or offering document. Income, gains or losses, realized and
unrealized from assets in each variable sub-account are credited to or charged
against that variable sub-account without regard to other income, gains or
losses in the other sub-accounts or our other income, gains or losses.
Page 15
<PAGE>
Changes Within the Variable Account - We may, from time to time, make additional
Variable Sub-Accounts available to you. These Sub-Accounts will invest in
investment portfolios we find suitable for the Group Contract. We also have the
right to eliminate Sub-Accounts, to combine two or more Sub-Accounts or to
substitute a new investment portfolio for the portfolio in which a Sub-Account
invests. Such an action may become necessary if, in our judgment, a portfolio or
Sub-Account no longer suits the purposes of the Group Contract. This may happen
due to a change in laws or regulations, or a change in a portfolio's or Sub-
Account's investment objectives or restrictions, or because the portfolio or
Sub-Account is no longer available for investment, or for some other reason. We
will get prior approval from the insurance department of our state of domicile
before taking such action. If required, this approval process will be on file
with the insurance department of the jurisdiction in which the Group Contract is
delivered. We will also get any required approval from the SEC and any other
required approvals before taking such an action.
Subject to any required regulatory approvals, we reserve the right to transfer
assets of the Variable Sub-Accounts that we determine to be associated with the
class of Group Contracts to which the Group Contract belongs, to another
variable account or variable sub-account.
When permitted by law, we reserve the right to:
1. Deregister the Variable Account under the Investment Company Act of
1940;
2. Operate the Variable Account as a management company under the
Investment Company Act of 1940, if it is operating as a unit
investment trust;
3. Operate the Variable Account as a unit investment trust under the
Investment Company Act of 1940, if it is operating as a Managed
Separate Account;
4. Restrict or eliminate any voting rights of Owners, or other persons
who have voting rights as to the Variable Account;
5. Combine the Variable Account with other separate investment accounts;
and,
6. Combine a Variable Sub-Account with another Variable Sub-Account.
If any actions we take result in a material change in the underlying investments
of a Variable Sub-Account in which you are invested, we will notify you of the
change. You may then choose a new Sub-Account.
Accumulation Units - We keep track of the value of each of your Variable Sub-
Accounts by the number of Accumulation Units in that Sub-Account. Accumulation
Units are credited to a Sub-Account when a purchase payment is allocated to that
Sub-Account or when an amount is transferred to that Sub-Account. Accumulation
Units will be canceled from a Sub-Account when amounts are transferred from a
Sub-Account or on payment of death proceeds, a withdrawal, a loan, a surrender,
or assessment of charges shown in the Schedule (other than the variable sub-
account charges). The number of Accumulation Units credited to or canceled from
a Sub-Account in a transaction is determined by dividing (a) by (b) where:
(a) is the dollar amount of the transaction; and
(b) is the value of the Accumulation Unit for that Sub-Account for the
Valuation Date for that transaction.
Value of Accumulation Units - The Accumulation Unit value for any Valuation
Period is determined by multiplying (a) by (b) where:
(a) is the Accumulation Unit value for the immediately preceding Valuation
Period; and
(b) is the "net investment factor" for the Variable Sub-Account for the
Valuation Period for which the value is being determined.
The value of an Accumulation Unit may increase, decrease or remain the same from
one Valuation Period to the next.
Page 16
<PAGE>
Net Investment Factor - The net investment factor for a Variable Sub-Account is
an index that measures the investment performance of that Sub-Account from one
Valuation Period to the next. The net investment factor for any Valuation Period
is determined by dividing (a) by (b) and then subtracting (c) where:
(a) is the net result of:
(i) the Net Asset Value per share of the investment portfolio share
in which the Sub-Account invests determined at the end of the
current Valuation Period; plus
(ii) the per share amount of any dividend or capital gains
distribution made by that investment portfolio on shares held
in the Sub-Account if the "ex-dividend" date occurs during the
current Valuation Period; and plus or minus
(iii) a per share charge or credit for any taxes reserved for, which
is determined by us to have resulted from the operations of
that Sub-Account;
(b) is the Net Asset Value per share of the investment portfolio share in
which the Sub-Account invests determined at the end of the immediately
preceding Valuation Period; and
(c) is the daily variable sub-account charges shown in the Schedule
(adjusted for the number of days in the Valuation Period).
The net investment factor may be more or less than, or equal to, one.
FIXED ACCOUNT
- --------------------------------------------------------------------------------
Fixed Account - The Fixed Account is a separate investment account under state
insurance law. It is maintained separate from our General Account and separate
from any other separate investment account that we may have. We own the assets
in the Fixed Account. Notwithstanding the foregoing, our obligations under (and
the values and benefits under) the Fixed Account option of this Certificate do
not vary as a function of the investment performance of the Fixed Account.
Owners and Beneficiaries with rights under this Certificate do not participate
in the investment gains or losses of the assets of the Fixed Account. Such gains
or losses accrue solely to us. We retain the risk that the value of the assets
in the Fixed Account may fall below the reserves and other liabilities that we
must maintain in connection with our obligations under the Fixed Account option
of this Certificate. In such event, we will transfer assets from our General
Account to the Fixed Account to make up the difference. The Fixed Account will
not be charged with liabilities that arise from any other business that we
conduct. We may transfer to our General Account assets that exceed the reserves
and other liabilities of the Fixed Account. The Fixed Account is not required to
be registered with the SEC as an investment company under the Investment Company
Act of 1940.
Fixed Sub-Account - We will establish a separate Fixed Sub-Account for you each
time you allocate amounts to the Fixed Account. Amounts invested in these Fixed
Sub-Accounts earn interest at the Guaranteed Interest Rate in effect on the date
the amounts are allocated.
Guarantee Periods - Each Fixed Sub-Account is guaranteed an interest rate for a
period we refer to as a Guarantee Period. The Guaranteed Interest Rate for a
Fixed Sub-Account is effective for the entire Guarantee Period. The length of a
Guarantee Period is measured from the end of the calendar month in which the
amount is allocated to the Fixed Sub-Account. The last day of the Guarantee
Period is its Expiry Date. Surrenders, or withdrawals, or transfers, or loans
from all or part of a Fixed Sub-Account made prior to the Expiry Date of a
Guarantee Period may be subject to a Market Value Adjustment.
We will notify you at least thirty days prior to an Expiry Date of your options
for renewal, which include:
1. electing a new Guarantee Period from among those then offered by us;
or
2. transferring the value of the Fixed Sub-Account to one or more
Variable Sub-Accounts.
Page 17
<PAGE>
If we do not receive Satisfactory Notice prior to the Expiry Date, we will
transfer the value of the expiring Fixed Sub-Account to a Fixed Sub-Account with
the same Guarantee Period, but not longer than 5 years. The transfer will be
effective as of the Expiry Date of the previous Guarantee Period.
Guaranteed Interest Rates - Periodically, we will declare Guaranteed Interest
Rates for then available Guarantee Periods. These rates will be guaranteed for
the duration of the respective Guarantee Periods. Guaranteed Interest Rates will
never be less than the Minimum Guaranteed Interest Rate shown in the Schedule.
Market Value Adjustment - A Market Value Adjustment may be applied to surrender,
withdrawals, transfers or loans when taken from a Fixed Sub-Account other than
the thirty-day period prior to its Expiry Date. A Market Value Adjustment is
applied separately to each Fixed Sub-Account.
A Market Value Adjustment is determined by multiplying the amount surrendered,
withdrawn, transferred or borrowed by the following factor:
N/365
[(1+I)/(1+J+.0025)] - 1
Where:
. I is the Index Rate for a maturity equal to the Fixed Sub-Account's
Guarantee Period;
. J is the Index Rate for a maturity equal to the time remaining
(rounded up to the next full year) in the Fixed Sub-Account's
Guarantee Period; and
. N is the remaining number of days in the Guarantee Period at the time
of calculation.
If there is no Index Rate for the maturity needed to calculate I or J, straight
line interpolation between the Index Rate of the next highest and next lowest
maturities will be used to determine that Index Rate. If the maturity is one
year or less, we will use the Index Rate for a one-year maturity.
Market Value Adjustments will be applied as follows:
1. For a surrender, withdrawal, transfer or loan, the Market Value
Adjustment will be calculated on the total amount that must be
surrendered, withdrawn, transferred or borrowed in order to provide
the amount requested.
2. If the Market Value Adjustment is negative, it is deducted from any
remaining value in the Fixed Sub-Account or amount surrendered. Any
remaining Market Value Adjustment is deducted from the amount
withdrawn, transferred or borrowed.
3. If the Market Value Adjustment is positive, it is added to any
remaining value in the Fixed Sub-Account or amount surrendered. If the
full amount of the Fixed Sub-Account is withdrawn, transferred or
borrowed, the Market Value Adjustment is added to the amount
withdrawn, transferred or borrowed.
TRANSFERS AMONG ACCOUNTS
- --------------------------------------------------------------------------------
While this Certificate is in force, you may transfer your Account Value among
Sub-Accounts. Certain restrictions may apply during the Free-Look Period. To
make a transfer, you must give us Satisfactory Notice. Transfers generally take
effect on the Valuation Date we receive the notice. The number of free transfers
that we allow each Certificate Year is shown in the Charges section of the
Schedule. Restrictions for transfers are shown in the Schedule. A transfer from
a Fixed Sub-Account may be subject to a Market Value Adjustment.
Page 18
<PAGE>
SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE
- --------------------------------------------------------------------------------
While this Certificate is in force, you may withdraw all or part of your Account
Value by giving us Satisfactory Notice. The minimum withdrawal is shown in the
Schedule.
When a partial withdrawal is made, we will reduce the Account Value by the
amount of the partial withdrawal. We will also reduce the Insurance Amount in
proportion to the reduction in the Account Value that results from the partial
withdrawal (including any associated surrender charge and Market Value
Adjustment incurred).
If you request a surrender, we will terminate this Certificate and pay you the
Surrender Value. This amount may also be applied to a Settlement Option, subject
to any restrictions described in this Certificate. Unless specified otherwise,
we will make partial withdrawals as described in the Schedule. Surrender and
withdrawals generally take effect on the date we receive Satisfactory Notice.
If you make a withdrawal from your Certificate in excess of the Free Withdrawal
Amount described in the Schedule, a surrender charge may be assessed. Surrender
charges are described in the Schedule. A withdrawal from the Fixed Account may
also be subject to a Market Value Adjustment.
Excess Withdrawals - If a partial withdrawal is made for an amount greater than
the Free Withdrawal Amount, a surrender charge may be applicable. For purposes
of calculating the surrender charge only, purchase payments will be liquidated
in whole or in part on a "first-in-first-out-basis." This means we liquidate
purchase payments in the order they were made: the oldest unliquidated purchase
payment first, the next oldest unliquidated purchase payment second, etc. until
all purchase payments have been liquidated.
The surrender charge as to any liquidated purchase payment is determined by
multiplying the amount of the purchase payment being liquidated by the
applicable percentage shown in the Schedule. The total surrender charge will be
the sum of the surrender charges for each purchase payment being liquidated.
In a partial withdrawal, the surrender charge is deducted from the Account Value
remaining after you are paid the amount requested. The amount requested from a
Sub-Account may not exceed the value of that Sub-Account less any applicable
surrender charge. In a complete withdrawal (or surrender of this Certificate),
it is deducted from the amount otherwise payable.
BORROWING PART OF YOUR ACCOUNT VALUE
- --------------------------------------------------------------------------------
While this Certificate is in force and after the Free-Look Period, you may
request a loan by giving us Satisfactory Notice. Unless specified otherwise, an
amount equal to the loan will be transferred from the Sub-Accounts to the Loan
Account in proportion to the Account Value in each Sub-Account in which you are
invested as of the date we process the loan. This Certificate will be the only
security we require for the loan. The minimum loan amount is also shown in the
Schedule. A loan may be a taxable event and may affect the amount of the Death
Proceeds payable under this Certificate.
Maximum Loanable Value - The maximum loanable value is shown in the Schedule.
The amount of the loan and all existing loans may not be more than the maximum
loanable value as of the loan date. The loan date is the date we process the
loan.
If on any Valuation Date where there is Debt outstanding and the Surrender Value
is negative, we will send you an overloan notice at your last known address. You
will then have 61 days from the date we send the notice to avoid termination by
paying us at least the minimum repayment amount listed in the notice.
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Loan Repayment - All or part of a loan may be repaid to us at any time while
this Certificate is in force during the Insured's lifetime. The minimum loan
repayment amount is shown in the Schedule. If the Grace Period has expired and
this Certificate has terminated, any Debt that exists at the end of the Grace
Period may not be repaid unless the Certificate is reinstated.
Unless specified otherwise, an amount equivalent to a loan repayment will be
transferred from the Loan Account to the Sub-Accounts in proportion to the
Account Value in each Sub-Account in which you are invested.
Loan Interest - Interest on the loan accrues daily at the Loan Interest Rate
shown in the Schedule. It is due on each Certificate Anniversary. If loan
interest is not paid when due, the difference between the Loan Account and Debt
will be transferred from the Sub-Accounts to the Loan Account in proportion to
the Account Value in each Sub-Account in which you are invested.
Effects of a Loan - A loan will be transferred from the Sub-Accounts to the Loan
Account. Any loan interest that becomes due and is not paid will also be so
transferred. A repayment or loan interest payment will be transferred from the
Loan Account into the Sub-Accounts. Amounts transferred to the Loan Account will
earn interest daily at the Loan Credited Rate shown in the Schedule from the
date of transfer.
Since the amount you borrow is transferred from the Sub-Accounts, a loan whether
or not repaid, will have a permanent effect on the Surrender Value and may have
a permanent effect on the death benefit. The effect may be favorable or
unfavorable. This is true whether you repay the loan or not. If not repaid, the
loan will reduce the amount of Death Proceeds.
CHARGES
- --------------------------------------------------------------------------------
Monthly Deduction Amount - The Monthly Deduction Amount is deducted on each
Monthly Processing Date. It is equal to (a) + (b) + (c) + (d), where:
(a) is the cost of insurance charge described below;
(b) is the asset-based charges described in the Schedule;
(c) is the cost of any riders for which a separate charge is shown in the
Schedule; and
(d) is any other applicable charge shown in the Schedule.
Monthly Deduction Amount on a Certificate Anniversary - On a Monthly Processing
Date that is also a Certificate Anniversary, the Monthly Deduction Amount is
equal to (a) + (b), where:
(a) is the Monthly Deduction Amount as described above; and
(b) is the administration charge shown in the Schedule.
Cost of Insurance Charge - The maximum monthly cost of insurance charge is equal
to (a) times (b) and then divided by (c), where:
(a) is the Maximum Cost of Insurance Rate per $1,000 shown in the Table in
the Schedule;
(b) is an amount equal to the death benefit minus the Account Value; and
(c) is $1,000.
The actual monthly cost of insurance charge may be less than, but never more
than, the maximum monthly cost of insurance charge.
Page 20
<PAGE>
OWNER AND BENEFICIARY
- --------------------------------------------------------------------------------
The Owner - You are the Owner of this Certificate. You are also the Insured
unless another Insured has been named in the application and is shown in the
Schedule. You have the rights and options described in this Certificate while
the Insured is living and this Certificate is in force. One or more people may
own this Certificate.
The Beneficiary - We pay the Death Proceeds to the primary Beneficiary. If the
primary Beneficiary dies before the Insured, we pay the Death Proceeds to the
Contingent Beneficiary, if any. If there is no surviving Beneficiary, we pay the
Death Proceeds to the Owner's estate.
One or more persons may be named as primary Beneficiary or Contingent
Beneficiary. We will assume any Death Proceeds are to be paid in equal shares to
the multiple surviving Beneficiaries, unless you specify otherwise.
You have the right to change Beneficiaries. However, if you designate the
primary Beneficiary as irrevocable, you may need the consent of that Beneficiary
to exercise the rights and options under this Certificate.
Change of Owner or Beneficiary - During your lifetime and while this Certificate
is in force you can transfer ownership of this Certificate or change the
Beneficiary. To make any of these changes, you must send us Satisfactory Notice.
If accepted, any change in Owner or Beneficiary will take effect on the date you
signed the notice. Any of these changes will not affect any payment made or
action taken by us before our acceptance. A change of Owner may be a taxable
event.
DEATH PROCEEDS
- --------------------------------------------------------------------------------
Death Benefit - If the Insured dies while this Certificate is in force, the
death benefit will be the greater of (a) or (b), where:
(a) is the Insurance Amount on the date of death; and
(b) is the Minimum Death Benefit on the date of death.
However, if the state in which this Certificate is issued does not allow us to
deduct a cost of insurance charge on or after the Certificate Anniversary when
the Insured reaches age 100, the death benefit thereafter will be limited to (b)
above.
Minimum Death Benefit - To ensure that this Certificate continues to qualify as
life insurance under the Internal Revenue Code of 1986, as amended (the "Code"),
we will also calculate a Minimum Death Benefit for each Valuation Date. The
Minimum Death Benefit on a Valuation Date is equal to (a) times (b), where:
(a) is the Account Value plus any positive Market Value Adjustment on the
Valuation Date; and
(b) is the Minimum Death Benefit Percentage shown in the Table in the
Schedule.
Death Proceeds - The actual amount payable to the Beneficiary if the Insured
dies while this Certificate is in force is called the Death Proceeds. The Death
Proceeds are equal to (a) + (b) - (c) - (d) - (e), where:
(a) is the death benefit described above;
(b) is any insurance on the Insured's life that may be provided by riders
to this Certificate;
(c) is any Debt;
(d) is any due and unpaid Monthly Deduction Amount accruing during the
Grace Period; and
(e) is any Certificate values previously paid pursuant to any riders
attached to this Certificate.
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<PAGE>
We will pay the Death Proceeds to the Beneficiary after we receive due proof of
death. The Death Proceeds will be adjusted under certain conditions. Refer to
the Incontestability, Suicide, and Misstatement of Age or Sex provisions.
You may choose to have the Death Proceeds paid in one sum, in which case this
Certificate will terminate, or under a Settlement Option. If you have not made a
choice before the Insured dies, the Beneficiary may make this choice. Unless you
or the Beneficiary specify otherwise, we reserve the right to pay the Death
Proceeds in one sum within 90 days after we receive due proof of death.
Proof of Death - Due proof of death must be received at our Customer Service
Center before we will pay any Death Proceeds.
Insurance Amount Increases - Payment of additional purchase payments may require
us to increase the Insurance Amount so that this Certificate continues to
qualify as life insurance under the Code. We reserve the right to require
satisfactory evidence of insurability for any increase in the Insurance Amount.
In addition, we reserve the right to require that your risk class be identical
to that on the Certificate Date.
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
Application - All statements made in an application for this Certificate are
considered representations and not warranties. We have issued this Certificate
based on the statements made in any such application and we rely on such
statements to be true and complete. No such statement will be used to void the
coverage under this Certificate or to deny a claim unless that statement is a
material misrepresentation.
Assignment - You may assign this Certificate at any time while the Insured is
living and this Certificate is in force. No assignment will be binding on us
unless we receive Satisfactory Notice. We will not be liable for any payments
made or actions we take before we accept the assignment. An absolute assignment
will revoke the interest of any revocable Beneficiary. We will not be
responsible for the validity of any assignment. An assignment may be a taxable
event.
Claims of Creditors - To the extent permitted by law, no benefits payable under
this Certificate will be subject to the claims of creditors.
Misstatement and Proof of Age or Sex - If the age or sex of the Insured has been
misstated, the benefits under this Certificate will be those which the initial
purchase payment and any additional purchase payments would have provided for
the correct age and sex.
No Dividends Payable - This Certificate is non-participating and does not share
in any distribution of our surplus. We will not pay any dividends.
Incontestability - We will not contest the payment of the Death Proceeds based
upon the initial purchase payment after this Certificate has been in force
during the Insured's lifetime for two years from the Issue Date.
For any increase in Insurance Amount requiring evidence of insurability, we will
not contest payment of the Death Proceeds based on such an increase after it has
been in force during the Insured's lifetime for two years from its effective
date.
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<PAGE>
Suicide - If the Insured dies by suicide, while sane or insane, within two years
from the Issue Date, we will not pay the Death Proceeds normally payable on the
Insured's death. Instead, we will limit the death benefit to the Account Value
as of the date we receive proof of death, and Death Proceeds will otherwise be
calculated in the usual manner.
If the Insured dies by suicide, while sane or insane, within two years of any
date we receive and accept an additional purchase payment, any amount of death
benefit that would not be payable except for the fact that the additional
purchase payment was made will be limited to the amount of such payment.
Required Reports - We will furnish a report to you as often as required by law,
but at least once in each Certificate Year that this Certificate is in force.
The report will show the number of Accumulation Units credited to each Variable
Sub-Account in which you are invested and the corresponding Accumulation Unit
value as of the date of the report. It will also show your Fixed Account Value.
The report will also include any other information required by the laws and
regulations of the jurisdiction in which this Certificate is delivered.
Changes in Certificate Cost Factors - Changes in cost of insurance rates,
credited interest rates, or other Certificate expense charges will be applied on
a uniform basis for insureds of the same sex, attained age and risk class whose
Certificates have been in force for the same length of time. Changes in these
nonguaranteed elements will be based on changes in future expectations for
factors such as investment earnings, mortality, persistency, expenses and taxes.
Any changes will be determined in accordance with the procedures on file, if
required, with the insurance regulator in the state in which this Certificate
was delivered.
Taxes Based Upon Purchase Payments or Value - If there is a law or change in law
assessing taxes against us based upon purchase payments or value of this
Certificate, we reserve the right to charge you and all similarly situated
Owners proportionately for that tax. This would include a tax based upon our
realized net capital gains in the Variable Sub-Accounts and on earnings in the
Fixed Account, on which we are not currently taxed.
Payments We May Defer - We may not be able to determine the value of the assets
of the Variable Sub-Accounts because:
1. The New York Stock Exchange is closed for trading, or trading on the
New York Stock Exchange is restricted;
2. The SEC determines that a state of emergency exists; or
3. An order or pronouncement of the SEC permits a delay for the
protection of Owners.
If this happens, we may delay:
1. Determination and payment of the Surrender Value or any withdrawal;
2. Determination and payment of any death benefit;
3. Transfers of the Account Value; or
4. Granting of any loan.
We reserve the right to delay payment or transfer of amounts from the Fixed
Account for up to six months. If deferred 30 days or more, the amount deferred
will earn interest at a rate not less than the Minimum Deferral Interest Rate
shown in the Fixed Account section of the Schedule.
We may also defer payments for any amount attributable to a purchase payment
made in the form of a check for a reasonable amount of time (not to exceed 15
days) to permit the check to clear.
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Authority to Make Agreements - All agreements made by us must be signed by one
of our officers. No other person, including an insurance agent or broker, can
change the terms of this Certificate or make any agreement binding on us.
However, we can, with the agreement of the Group Contractholder, make changes to
the Group Contract and this Certificate without your consent.
Required Note on Our Computations - We have filed a detailed statement of our
computations with the insurance supervisory official in the appropriate
jurisdictions. The values are not less than those required by the law of that
state or jurisdiction. Any benefit provided by an attached rider will not
increase these values unless otherwise stated in that rider.
SETTLEMENT OPTIONS
- --------------------------------------------------------------------------------
The Surrender Value or Death Proceeds may be paid in a single sum or under one
of our Settlement Options. If the amount available to apply under any Variable
or Fixed Settlement Option is less than the minimum amount shown in the
Schedule, we reserve the right to require that such amount be paid in a lump
sum.
If at any time payments under the Settlement Option become less than the minimum
payment shown in the Schedule, we reserve the right to reduce the frequency of
payment to an interval that results in each payment being at least equal to the
minimum payment. In no event will the interval be less frequent than annual.
At the time you elect the Settlement Option, you may also elect to have the
Account Value applied to provide Variable Payments, Fixed Payments, or a
combination of both. Unless you specify otherwise, we will provide either
variable or fixed payments, or a combination of variable and fixed payments in
proportion to the Sub-Accounts in which you are invested as of a date not more
than 5 Valuation Days before the due date of the first payment.
Once payments have begun under a Settlement Option, we reserve the right to
disallow further changes without our prior approval.
We may require proof of age, sex or survival of any person upon whose age, sex
or survival any payments depend. If the age or sex of a Payee has been
misstated, the amount payable will be the amount that the Surrender Value or
Death Proceeds would have provided for the correct age and sex. If we have made
incorrect payments, the amount of any underpayment will be paid immediately. The
amount of any overpayment will be deducted from future payments until the amount
of the overpayment is repaid.
VARIABLE PAYMENTS
Amount of First Variable Payment - The Settlement Option Tables shown in the
Schedule are used to determine the first monthly variable payment for an assumed
investment rate of 3%. The Settlement Option Tables show the dollar amount of
the first monthly variable payment that can be purchased with each $1,000
applied. The assumed investment rates we currently allow are shown in the
Schedule.
Value of Income Units - The Income Unit value for any Valuation Period is
determined by multiplying (a) by (b), and then dividing by (c) where:
(a) is the Income Unit value for the immediately preceding Valuation
Period;
(b) is the "net investment factor" for the Variable Sub-Account for the
Valuation Period for which the value is being determined; and
(c) is the daily equivalent of the assumed investment rate for the number
of days in the Valuation Period.
The value of an Income Unit may increase, decrease or remain the same from one
Valuation Period to the next.
Page 24
<PAGE>
Number of Income Units - We determine the number of Income Units in each
Variable Sub-Account by dividing the first monthly variable payment attributable
to that Sub-Account by its Income Unit value as of a date not more than 5
Valuation Days before the due date of the first variable payment.
Amount of Second and Subsequent Variable Payments - The dollar amount of the
second and subsequent variable payments may change with the investment
performance of the Variable Sub-Accounts. The total amount of each variable
payment will be equal to the sum of the variable payments in each Variable Sub-
Account. The dollar amount of each payment for a Variable Sub-Account is
determined by multiplying the number of Income Units by the Income Unit value
for the Variable Sub-Account for the Valuation Period which ends on a
consistently applied date not more than 5 Valuation Days before the payment is
due.
We guarantee that the dollar amount of each payment after the first will not be
affected by variations in our expenses or mortality experience.
Exchange of Income Units - If there is an exchange of value of a designated
number of Income Units of particular Variable Sub-Accounts into other Income
Units, the value will be such that the dollar amount of payment made on the date
of exchange would be unaffected by the exchange.
FIXED PAYMENTS
Fixed Payments are payments that remain fixed as to dollar amount throughout the
payment period. The Settlement Option Tables shown in the Schedule are used to
determine the monthly fixed payment. The Settlement Option Tables show the
dollar amount of the monthly fixed payment that can be purchased with each
$1,000 applied.
SETTLEMENT OPTIONS
The following list of Settlement Options or any option acceptable to us may be
elected.
Option 1 - Payments for Life: Payments during the lifetime of the Payee and
terminating with the last payment preceding the death of the Payee.
Option 2 - Payments for Life with 10 or 20 Years Guaranteed: Payments during the
lifetime of the Payee with the guarantee that payments will be made for a
minimum of 10 or 20 years, as elected. If at the death of the Payee, payments
have been made for less than the guaranteed number of years elected, payments
will be made to the Beneficiary for the remainder of the guaranteed number of
years elected.
Option 3 - Joint and Last Survivor Payments: Payments during the joint lifetime
of the Payee and a designated second person, and thereafter during the remaining
lifetime of the survivor, ceasing with the last payment prior to the death of
the survivor.
Option 4 - Payments for a Fixed Period: An amount payable for the number of
years selected which may be from 5 to 30 years. If the Payee dies before the end
of the period selected, payments will be continued to the Beneficiary for the
remained of the selected period.
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Page 27
<PAGE>
[LOGO OF SAGE LIFE INSURANCE APPEARS HERE]
MODIFIED SINGLE PAYMENT COMBINATION FIXED AND VARIABLE LIFE INSURANCE
CERTIFICATE
Limited purchase payment flexibility
Death benefit payable at Insured's death while this Certificate is in force
Nonparticipating
<PAGE>
EXHIBIT 1A(5)(a)(vii)
[LOGO OF SAGE LIFE APPEARS HERE]
--------------------------------
SAGE LIFE ASSURANCE OF AMERICA, INC.
Member of Sage Insurance Group, Inc.
A Stock Company
Home Office Customer Service Center
300 Atlantic Street 1290 Silas Deane Highway
Stamford, CT 06901 Wethersfield, CT 06109
1-877-TEL-SAGE (835-7243)
CERTIFICATE OF INSURANCE COVERAGE
SAGE LIFE ASSURANCE OF AMERICA, INC. ("SAGE LIFE")
This CERTIFICATE OF INSURANCE COVERAGE evidences that the application for
insurance on the life of the insured named below has been approved by Sage Life
for the amount and in the risk class shown below, and that the "Death Proceeds"
under the Modified Single Payment Variable Life contract applied for are IN
EFFECT, subject to the provisions of the contract and receipt by Sage Life of
the full amount of the Initial Purchase Payment. Any check received will be
subject to collection.
SCHEDULE
Owner: John Doe Date Prepared: 1/1/1998
Insured: John Doe Initial Purchase Payment: $ 10,000
IssueAge/Sex 35/Male Initial Insurance Amount: $ 100,000
Risk Class: Non-Smoker
Your contract will be issued at our Customer Service Center for delivery to you
in the next few days.
Sage Life thanks you for your business and we look forward to serving your
insurance needs.
/s/
Chairman
SEE CONDITIONS ON PAGE 2
Page 1 of 2
<PAGE>
CERTIFICATE OF INSURANCE COVERAGE
CONDITIONS
1. This Certificate is not valid if the difference between the Initial Purchase
Payment Amount and the Initial Insurance Amount exceeds $[100,000.00].
2. This Certificate is not valid for issue ages in excess of [80].
3. This Certificate is not valid for [sub-standard] risk classes.
4. This Certificate is not valid except for coverage in the amount and the risk
class initially applied for.
5. The Initial Insurance Amount is determined by reference to a rate card.
Errors in the calculation of the Initial Insurance Amount in the issuance of
this Certificate are subject to correction in the contract issued from our
Customer Service Center.
6. Coverage under this Certificate ends upon delivery of the contract to the
Owner.
Page 2 of 2
<PAGE>
EXHIBIT 1A(5)(a)(viii)
[LOGO OF SAGE LIFE APPEARS HERE]
-----------------------------------
SAGE LIFE ASSURANCE OF AMERICA, INC.
Member of Sage Insurance Group, Inc.
A Stock Company
Home Office Customer Service Center
300 Atlantic Street 1290 Silas Deane Highway
Stamford, CT 06901 Wethersfield, CT 06109
1-877-TEL-SAGE (835-7243)
CERTIFICATE OF INSURANCE COVERAGE
SAGE LIFE ASSURANCE OF AMERICA, INC. ("SAGE LIFE")
This CERTIFICATE OF INSURANCE COVERAGE evidences that the application for
insurance on the life of the insured named below has been approved by Sage Life
for the amount and in the risk class shown below, and that the "Death Proceeds"
under the Modified Single Payment Variable Life certificate applied for are IN
EFFECT, subject to the provisions of the certificate and receipt by Sage Life of
the full amount of the Initial Purchase Payment. Any check received will be
subject to collection.
SCHEDULE
Owner: John Doe Date Prepared: 1/1/1998
Insured: John Doe Initial Purchase Payment: $ 10,000
IssueAge/Sex 35/Male Initial Insurance Amount: $ 100,000
Risk Class: Non-Smoker
Your certificate will be issued at our Customer Service Center for delivery to
you in the next few days.
Sage Life thanks you for your business and we look forward to serving your
insurance needs.
/s/
Chairman
SEE CONDITIONS ON PAGE 2
Page 1 of 2
<PAGE>
CERTIFICATE OF INSURANCE COVERAGE
CONDITIONS
1. This Certificate is not valid if the difference between the Initial Purchase
Payment Amount and the Initial Insurance Amount exceeds $[100,000.00].
2. This Certificate is not valid for issue ages in excess of [80].
3. This Certificate is not valid for [sub-standard] risk classes.
4. This Certificate is not valid except for coverage in the amount and the risk
class initially applied for.
5. The Initial Insurance Amount is determined by reference to a rate card.
Errors in the calculation of the Initial Insurance Amount in the issuance of
this Certificate are subject to correction in the certificate issued from
our Customer Service Center.
6. Coverage under this Certificate ends upon delivery of the certificate to the
Owner.
Page 2 of 2
<PAGE>
EXHIBIT 1A(5)(a)(ix)
Detach Here
- --------------------------------------------------------------------------------
This receipt is not valid and may not be issued unless ALL of the following
conditions are met:
1. The full Initial Purchase Payment necessary to provide the coverage applied
for must have been paid at the time of this Application.
2. The Proposed Insured must be age [80] or less.
3. ALL answers to Question 12 must be "No."
No representative of Sage Life is authorized to alter or waive any of these
requirements. IF CONDITIONS 2 OR 3 ARE NOT SATISFIED, NO PAYMENT MAY BE
ACCEPTED WITH THE APPLICATION.
TEMPORARY INSURANCE AGREEMENT
SAGE LIFE ASSURANCE OF AMERICA, INC. ("SAGE LIFE")
Received from __________________________________on [date] _____________________
the sum of ______________________________dollars($______________).
The temporary insurance provided by this Agreement is for the coverage afforded
by the Initial Purchase Payment shown in question 4b. of this Application
bearing the same date as this Agreement; except that the total coverage with
Sage Life under this and all other receipts providing temporary insurance will
not exceed $[500,000] on the Proposed Insured, regardless of the total amount(s)
or number of receipts or applications.
If coverage provided by the Initial Purchase Payment is more than $[500,000] of
insurance under this and/or any other Application pertaining to the Proposed
Insured, Sage Life's liability will be no more than $[500,000] plus a return of
Purchase Payment submitted in excess of the Purchase Payment required to provide
$[500,000] of insurance coverage.
Temporary insurance for the Proposed Insured begins on the date of this
Agreement, subject to the terms of the Contract applied for in this Application.
Coverage will end on the earliest of:
1. The date the Contract is issued. (The Contract will replace the
temporary insurance.)
2. The date Sage Life returns the Initial Purchase Payment and mails a
written notice to the Applicant that the insurance has ended for the
Proposed Insured.
3. The date a request for cancellation or withdrawal of this
Application is sent to Sage Life.
4. The date Sage Life's first offer to issue a Contract is not
accepted.
5. The [60th] day after the date of this Agreement, unless the
Agreement has been replaced earlier.
Sage Life's only liability under this Agreement is a refund of the Initial
Purchase Payment if:
1. There is fraud or material misrepresentation in this Application.
2. The Proposed Insured dies by suicide.
I have received a copy of and have read this Agreement. I understand and agree
to all of its terms.
X___________________________________ X_______________________________________
Signature of Proposed Insured Signature of Applicant if other than
(Parent/Guardian if Proposed Insured
Proposed Insured under the
age of 15)
X___________________________________ _______________________________________
Signature of Agent Date
<PAGE>
DETACH AND GIVE TO PROPOSED INSURED
NOTICE OF INFORMATION PRACTICES
Thank you for your interest in insurance with Sage Life. Your application will
be evaluated as promptly as possible. Since underwriting and administering your
coverage will include the collection of a certain amount of personal information
by Sage Life and its Agent, this notice is intended to tell you more about our
information practices.
Notice of Insurance Information Practices: To issue an insurance contract we
need to obtain information about you as the Proposed Insured. Some of that
information will come from you and some will come from other sources. That
information and any subsequent information collected by us may in certain
circumstances be disclosed to third parties without your specific authorization.
You have a right of access and correction with respect to the information
collected about you except information that relates to a claim or civil
proceeding. If you wish a more detailed explanation of our information
practices, make a written request to Sage Life Assurance of America, Inc.,
Underwriting Department, [300 Atlantic Street, Third Floor, Stamford,
Connecticut 06901].
Fair Credit Reporting Disclosure: This notice is to inform you that as part of
our normal underwriting procedures in connection with an application for
insurance:
1. An investigative consumer report may be made whereby information is obtained
through personal interviews with your friends, neighbors or other persons
with whom you are acquainted. This inquiry will include information as to
character, general reputation, personal characteristics and mode of living,
except as may be related directly or indirectly to your sexual orientation
with respect to you, members of your family, and others having an interest
in or closely connected with the insurance transaction;
2. Upon your written request, made within a reasonable time after you receive
this notice, additional information as to the nature and scope of the
investigation, if one is made, will be provided. Requests for additional
information should be addressed to Sage Life Assurance of America, Inc.,
Underwriting Department, [300 Atlantic Street, Third Floor, Stamford,
Connecticut 06901].
Medical Information Bureau Pre-Notice: Information regarding your insurability
will be treated as confidential. Sage Life, or its reinsurer(s) may, however,
make a brief report thereon to the Medical Information Bureau (the "Bureau"), a
non-profit membership organization of life insurance companies, which operates
an information exchange on behalf of its members. If you apply to another
Bureau member company for life or health insurance coverage, or a claim for
benefits is submitted to such company, the Bureau, upon request, will supply
such company with the information in its file.
Upon receipt of a request from you, the Bureau will arrange disclosure of any
information it may have in your file. (Medical information will be disclosed
only to your attending physician.) If you question the accuracy of information
in the Bureau's file, you may contact the Bureau and seek a correction in
accordance with the procedures set forth in the Federal Fair Credit Reporting
Act. The address of the Bureau's information office is Post Office Box 105,
Essex Station, Boston, Massachusetts 02112, telephone number (617) 426-3660.
Sage Life may also release information in its file to reinsurers and to other
life insurance companies to whom you may apply for life or health insurance, or
to whom a claim for benefits may be submitted.
<PAGE>
EXHIBIT 1A(5)(a)(x)
FRAUD WARNINGS
COLORADO Notice to Applicants: It is unlawful to knowingly provide false,
incomplete, or misleading facts or information to an insurance company for the
purpose of defrauding or attempting to defraud the company. Penalties may
include imprisonment, fines, denial of insurance, and civil damages. Any
insurance company or agent of an insurance company who knowingly provides false,
incomplete, or misleading facts or information to a policyholder or claimant for
the purpose of defrauding or attempting to defraud the policyholder or claimant
with regard to a settlement or award payable from insurance proceeds shall be
reported to the Colorado division of insurance within the department of
regulatory agencies.
ARKANSAS, KENTUCKY, NEW JERSEY, OHIO, PENNSYLVANIA Notice to Applicants: Any
person who knowingly and with intent to defraud any insurance company or other
person files an application for insurance or statement of claim containing any
materially false information or conceals for the purpose of misleading,
information concerning any fact material thereto commits a fraudulent insurance
act, which is a crime and subjects such person to criminal and civil penalties.
FLORIDA Notice to Applicants: Any person who knowingly, and with intent to
injure, defraud, or deceive any insurer files a statement of claim or an
application containing any false, incomplete, or misleading information is
guilty of a felony of the third degree.
Detach Here
________________________________________________________________________________
This receipt is not valid and may not be issued unless ALL of the following
conditions are met:
1. The full Initial Purchase Payment necessary to provide the coverage applied
for must have been paid at the time of this Application.
2. The Proposed Insured must be age [80] or less.
3. ALL answers to Question 12 must be "No."
No representative of Sage Life is authorized to alter or waive any of these
requirements. IF CONDITIONS 2 OR 3 ARE NOT SATISFIED, NO PAYMENT MAY BE
ACCEPTED WITH THE APPLICATION.
TEMPORARY INSURANCE AGREEMENT
SAGE LIFE ASSURANCE OF AMERICA, INC. ("SAGE LIFE")
Received from _______________________________________ on [date] ________________
the sum of _________________________dollars ($______________).
The temporary insurance provided by this Agreement is for the coverage afforded
by the Initial Purchase Payment shown in question 4b. of this Application
bearing the same date as this Agreement; except that the total coverage with
Sage Life under this and all other receipts providing temporary insurance will
not exceed $[500,000] on the Proposed Insured, regardless of the total amount(s)
or number of receipts or applications.
If coverage provided by the Initial Purchase Payment is more than $[500,000] of
insurance under this and/or any other Application pertaining to the Proposed
Insured, Sage Life's liability will be no more than $[500,000] plus a return of
Purchase Payment submitted in excess of the Purchase Payment required to provide
$[500,000] of insurance coverage.
Temporary insurance for the Proposed Insured begins on the date of this
Agreement, subject to the terms of the Certificate applied for in this
Application. Coverage will end on the earliest of:
1. The date the Certificate is issued. (The Certificate will replace the
temporary insurance.)
2. The date Sage Life returns the Initial Purchase Payment and mails a
written notice to the Applicant that the insurance has ended for the
Proposed Insured.
3. The date a request for cancellation or withdrawal of this Application
is sent to Sage Life.
4. The date Sage Life's first offer to issue a Certificate is not
accepted.
5. The [60th] day after the date of this Agreement, unless the Agreement
has been replaced earlier.
Sage Life's only liability under this Agreement is a refund of the Initial
Purchase Payment if:
1. There is fraud or material misrepresentation in this Application.
2. If the Proposed Insured dies by suicide.
I have received a copy of and have read this Agreement. I understand and agree
to all of its terms.
X________________________________ X__________________________________
Signature of Proposed Insured Signature of Applicant if other
(Parent/Guardian if Proposed than Proposed Insured
Insured under the age of 15)
X________________________________ ___________________________________
Signature of Agent Date
<PAGE>
DETACH AND GIVE TO PROPOSED INSURED
NOTICE OF INFORMATION PRACTICES
Thank you for your interest in insurance with Sage Life. Your application will
be evaluated as promptly as possible. Since underwriting and administering your
coverage will include the collection of a certain amount of personal information
by Sage Life and its Agent, this notice is intended to tell you more about our
information practices.
Notice of Insurance Information Practices: To issue an insurance contract we
need to obtain information about you as the Proposed Insured. Some of that
information will come from you and some will come from other sources. That
information and any subsequent information collected by us may in certain
circumstances be disclosed to third parties without your specific authorization.
You have a right of access and correction with respect to the information
collected about you except information that relates to a claim or civil
proceeding. If you wish a more detailed explanation of our information
practices, make a written request to Sage Life Assurance of America, Inc.,
Underwriting Department, [300 Atlantic Street, Third Floor, Stamford,
Connecticut 06901].
Fair Credit Reporting Disclosure: This notice is to inform you that as part of
our normal underwriting procedures in connection with an application for
insurance:
1. An investigative consumer report may be made whereby information is
obtained through personal interviews with your friends, neighbors or other
persons with whom you are acquainted. This inquiry will include information
as to character, general reputation, personal characteristics and mode of
living, except as may be related directly or indirectly to your sexual
orientation with respect to you, members of your family, and others having
an interest in or closely connected with the insurance transaction;
2. Upon your written request, made within a reasonable time after you receive
this notice, additional information as to the nature and scope of the
investigation, if one is made, will be provided. Requests for additional
information should be addressed to Sage Life Assurance of America, Inc.,
Underwriting Department, [300 Atlantic Street, Third Floor, Stamford,
Connecticut 06901].
Medical Information Bureau Pre-Notice: Information regarding your insurability
will be treated as confidential. Sage Life, or its reinsurer(s) may, however,
make a brief report thereon to the Medical Information Bureau (the "Bureau"), a
non-profit membership organization of life insurance companies, which operates
an information exchange on behalf of its members. If you apply to another
Bureau member company for life or health insurance coverage, or a claim for
benefits is submitted to such company, the Bureau, upon request, will supply
such company with the information in its file.
Upon receipt of a request from you, the Bureau will arrange disclosure of any
information it may have in your file. (Medical information will be disclosed
only to your attending physician.) If you question the accuracy of information
in the Bureau's file, you may contact the Bureau and seek a correction in
accordance with the procedures set forth in the Federal Fair Credit Reporting
Act. The address of the Bureau's information office is Post Office Box 105,
Essex Station, Boston, Massachusetts 02112, telephone number (617) 426-3660.
Sage Life may also release information in its file to reinsurers and to other
life insurance companies to whom you may apply for life or health insurance, or
to whom a claim for benefits may be submitted.
<PAGE>
EXHIBIT 1A(5)(b)(i)
[LOGO OF SAGE LIFE APPEARS HERE]
--------------------------------
SAGE LIFE ASSURANCE OF AMERICA, INC.
Member of Sage Insurance Group, Inc.
ACCELERATED DEATH BENEFIT RIDER
PROCEEDS PAYABLE UNDER THIS RIDER MAY BE TAXABLE. CONSULT YOUR TAX ADVISOR
BEFORE REQUESTING BENEFITS UNDER THIS RIDER.
DEATH BENEFITS, ACCOUNT VALUES AND LOANABLE VALUES WILL BE REDUCED IF AN
ACCELERATED BENEFIT IS PAID.
General
This Rider is made part of the Contract to which it is attached. It provides
for payment of a portion of the Insurance Amount of the Contract, the
"Accelerated Benefit Amount," if the Insured is diagnosed with a Terminal
Medical Condition.
Benefit
Subject to the terms and conditions stated below, we will pay the requested
Accelerated Benefit Amount if the Insured is diagnosed with a Terminal Medical
Condition. The maximum amount of the Accelerated Benefit Amount is shown in the
Contract Schedule.
Conditions
We will pay the Accelerated Benefit Amount upon receipt of proof that the
Insured has a Terminal Medical Condition, subject to the following conditions:
1. An Accelerated Benefit Amount is payable once under this Rider.
2. The Accelerated Benefit Amount may not exceed the maximum amount shown in
the Contract Schedule.
3. The request for an Accelerated Benefit Amount, together with a satisfactory
Physician's Statement, must be received at our Customer Service Center. We
may require a second certification by a Physician of our choice. In the
event of a conflict of opinion between Physicians, we reserve the right to
make the final determination.
4.
The Terminal Medical Condition must first be diagnosed by a Physician not
sooner than 30 days after the effective date of this Rider.
5.
We may require the prior consent of any assignee, irrevocable beneficiary,
spouse, insured or other person who we reasonably believe may have an
interest in the Contract. We may further require such satisfactory release
of any interest in the Contract as we reasonably believe necessary.
Definitions
"Immediate family" means parents, grandparents, siblings, children,
stepchildren, grandchildren, or their respective spouses.
"Physician" means a legally-qualified practitioner of the healing arts who is
acting within the scope of his or her license; is not a resident of any Owner's
or Insured's household; and is not a member of the immediate family of any Owner
or Insured.
Page 1
<PAGE>
"Physician's Statement" means a written statement signed by a Physician that
gives the Physician's diagnosis of the Insured's Terminal Medical Condition and
states that with reasonable medical certainty the Terminal Medical Condition
will result in death within 12 months or less from the date the statement is
signed.
"Terminal Medical Condition" means a medical condition that with reasonable
medical certainty will result in the death of the Insured within 12 months or
less from the date of the Physician's Statement.
Claims
We must receive written proof, satisfactory to us, at our Customer Service
Center while this Rider is in force. Such proof must evidence that the Insured
has a Terminal Medical Condition.
Effect on the Contract
The Accelerated Benefit Amount will first be used to repay any outstanding Debt.
Any amount in excess of the outstanding Debt will be paid to you in a lump sum.
Subsequent amounts available for loans or withdrawals or as Death Proceeds will
be reduced by the Accelerated Benefit Amount plus interest accrued at the Loan
Interest Rate shown in the Contract Schedule.
Charge for this Rider
There is no charge for this Rider.
Termination
This Rider will terminate on the date of the first to occur of the following
events:
1. The Contract is surrendered or the entire Surrender Value is
applied under a Settlement Option or the Contract terminates
without value.
2. The interest in the Contract is distributed due to the death of the
Insured.
3. You request the termination of this Rider.
Terms
All of the terms used in this Rider have the same meanings as in the Contract
unless otherwise clearly indicated in this Rider.
/s/
Chairman
Page 2
<PAGE>
EXHIBIT 1A(5)(b)(ii)
[LOGO OF SAGE LIFE INSURANCE APPEARS HERE]
ACCELERATED DEATH BENEFIT RIDER
PROCEEDS PAYABLE UNDER THIS RIDER MAY BE TAXABLE. CONSULT YOUR TAX ADVISOR
BEFORE REQUESTING BENEFITS UNDER THIS RIDER.
DEATH BENEFITS, ACCOUNT VALUES AND LOANABLE VALUES WILL BE REDUCED IF AN
ACCELERATED BENEFIT IS PAID.
General
This Rider is made part of the Group Contract/Certificate to which it is
attached. It provides for payment of a portion of the Insurance Amount of the
Certificate the "Accelerated Benefit Amount," if the Insured is diagnosed with a
Terminal Medical Condition.
Benefit
Subject to the terms and conditions stated below, we will pay the requested
Accelerated Benefit Amount if the Insured is diagnosed with a Terminal Medical
Condition. The maximum amount of the Accelerated Benefit Amount is shown in the
Certificate Schedule.
Conditions
We will pay the Accelerated Benefit Amount upon receipt of proof that the
Insured has a Terminal Medical Condition, subject to the following conditions:
1. An Accelerated Benefit Amount is payable once under this Rider.
2. The Accelerated Benefit Amount may not exceed the maximum amount shown
in the Certificate Schedule.
3. The request for an Accelerated Benefit Amount, together with a
satisfactory Physician's Statement, must be received at our Customer
Service Center. We may require a second certification by a Physician
of our choice. In the event of a conflict of opinion between
Physicians, we reserve the right to make the final determination.
4. The Terminal Medical Condition must first be diagnosed by a Physician
not sooner than 30 days after the effective date of this Rider.
5. We may require the prior consent of any assignee, irrevocable
beneficiary, spouse, insured or other person who we reasonably believe
may have an interest in the Certificate. We may further require such
satisfactory release of any interest in the Certificate as we
reasonably believe necessary.
Definitions
"Immediate family" means parents, grandparents, siblings, children,
stepchildren, grandchildren, or their respective spouses.
"Physician" means a legally-qualified practitioner of the healing arts who is
acting within the scope of his or her license; is not a resident of any Owner's
or Insured's household; and is not a member of the immediate family of any Owner
or Insured.
<PAGE>
"Physician's Statement" means a written statement signed by a Physician that
gives the Physician's diagnosis of the Insured's Terminal Medical Condition and
states that with reasonable medical certainty the Terminal Medical Condition
will result in death within 12 months or less from the date the statement is
signed.
"Terminal Medical Condition" means a medical condition that with reasonable
medical certainty will result in the death of the Insured within 12 months or
less from the date of the Physician's Statement.
Claims
We must receive written proof, satisfactory to us, at our Customer Service
Center while this Rider is in force. Such proof must evidence that the Insured
has a Terminal Medical Condition.
Effect on the Certificate
The Accelerated Benefit Amount will first be used to repay any outstanding Debt.
Any amount in excess of the outstanding Debt will be paid to you in a lump sum.
Subsequent amounts available for loans or withdrawals or as Death Proceeds will
be reduced by the Accelerated Benefit Amount plus interest accrued at the Loan
Interest Rate shown in the Certificate Schedule.
Charge for this Rider
There is no charge for this Rider.
Termination
This Rider will terminate on the date of the first to occur of the following
events:
1. The Certificate is surrendered or the entire Surrender Value is
applied under a Settlement Option or the Certificate terminates
without value.
2. The interest in the Certificate is distributed due to the death of the
Insured.
3. You request the termination of this Rider.
Terms
All of the terms used in this Rider have the same meanings as in the Group
Contract and Certificate unless otherwise clearly indicated in this Rider.
[SIGNATURE ILLEGIBLE]
Chairman
<PAGE>
EXHIBIT 1A(5)(b)(iii)
[LOGO OF SAGE LIFE APPEARS HERE]
--------------------------------
SAGE LIFE ASSURANCE OF AMERICA, INC.
Member of Sage Insurance Group, Inc.
ACCIDENTAL DEATH BENEFIT RIDER
General
This Rider is made part of the Contract to which it is attached. It provides an
additional benefit, the "Accidental Death Benefit," in the event of the
accidental death of the Insured.
Benefit
Subject to the terms and conditions stated below, this Rider provides an
Accidental Death Benefit equal to the purchase payments made minus any
withdrawals (including any associated Market Value Adjustment and surrender
charge incurred) determined as of the date of the Insured's death, up to a
maximum amount shown in the Contract Schedule.
Conditions
1. The Insured's death must be an accidental death.
2. The accidental death must occur while this rider is in force and
prior to the first Contract Anniversary after which the Insured
attains age 80.
3. The accidental death must occur before the Surrender Value is
applied under a Settlement Option.
4. We must receive satisfactory proof of accidental death.
Accidental Death Definition
Accidental death means a death resulting from a bodily injury effected solely
through external, violent, and accidental means independently and exclusively of
all other causes, with death occurring within 90 days after such injury.
Exclusions
This Rider does not provide an additional benefit in the event that death
results from or relates to any of the following:
1. Sickness of mind and/or body, including related medical or surgical
treatment.
2. Overdose due to voluntary ingestion of non-prescribed drugs and/or
alcohol.
3. Suicide, while sane or insane.
4. Air travel, in any type of vehicle, except as a fare-paying
passenger traveling on a regularly scheduled airline.
5. War or any act of war, whether or not the Insured is serving in the
military, naval or air forces of any country or international
organization.
6. Voluntarily committing and/or attempting to commit an assault or
felony, including participation in a riot.
7. Resisting or fleeing from arrest.
Page 1
<PAGE>
Satisfactory Proof of Claim
We must receive written proof that the Insured died an accidental death while
this Rider is in force.
We will have the right to have the Insured's body examined and to request an
autopsy, at our expense, unless law prohibits us from doing so.
Notice of Claim
Written notice of claim must be given to us within thirty (30) days after an
accidental death or as soon as reasonably possible. Notice given to us at our
Customer Service Center with information sufficient to identify the Insured will
be considered notice to us.
Payment of Claim
The Accidental Death Benefit will be paid to the person or persons entitled to
receive the death benefit according to the Contract upon receipt of the written
proof of accidental death. If we elect to have the Insured's body examined
and/or perform an autopsy, payment may be made after satisfactory conclusion of
the examination.
Charge for this Rider
There is no charge for this Rider.
Termination
This Rider will terminate on the date of the first to occur of the following
events:
1. The Accidental Death Benefit is paid.
2. The Contract is surrendered or the entire Surrender Value is applied
under a Settlement Option.
3. The interest in the Contract is distributed due to the death of the
Insured.
4. You request the termination of this Rider.
Terms
All of the terms used in this Rider have the same meanings as in the Contract
unless otherwise clearly indicated in this Rider.
/s/
Chairman
Page 2
<PAGE>
EXHIBIT 1A(5)(b)(iv)
[LOGO OF SAGE LIFE INSURANCE APPEARS HERE]
ACCIDENTAL DEATH BENEFIT RIDER
General
This Rider is made part of the Group Contract/Certificate to which it is
attached. It provides an additional benefit, the "Accidental Death Benefit," in
the event of the accidental death of the Insured.
Benefit
Subject to the terms and conditions stated below, this Rider provides an
Accidental Death Benefit equal to the purchase payments made minus any
withdrawals (including any associated Market Value Adjustment and surrender
charge incurred) determined as of the date of the Insured's death, up to a
maximum amount shown in the Certificate Schedule.
Conditions
1. The Insured's death must be an accidental death.
2. The accidental death must occur while this rider is in force and prior
to the first Certificate Anniversary after which the Insured attains
age 80.
3. The accidental death must occur before the Surrender Value is applied
under a Settlement Option.
4. We must receive satisfactory proof of accidental death.
Accidental Death Definition
Accidental death means a death resulting from a bodily injury effected solely
through external, violent, and accidental means independently and exclusively of
all other causes, with death occurring within 90 days after such injury.
Exclusions
This Rider does not provide an additional benefit in the event that death
results from or relates to any of the following:
1. Sickness of mind and/or body, including related medical or surgical
treatment.
2. Overdose due to voluntary ingestion of non-prescribed drugs and/or
alcohol.
3. Suicide, while sane or insane.
4. Air travel, in any type of vehicle, except as a fare-paying passenger
traveling on a regularly scheduled airline.
5. War or any act of war, whether or not the Insured is serving in the
military, naval or air forces of any country or international
organization.
6. Voluntarily committing and/or attempting to commit an assault or
felony, including participation in a riot.
7. Resisting or fleeing from arrest.
Satisfactory Proof of Claim
<PAGE>
We must receive written proof that the Insured died an accidental death while
this Rider is in force.
We will have the right to have the Insured's body examined and to request an
autopsy, at our expense, unless law prohibits us from doing so.
Notice of Claim
Written notice of claim must be given to us within thirty (30) days after an
accidental death or as soon as reasonably possible. Notice given to us at our
Customer Service Center with information sufficient to identify the Insured will
be considered notice to us.
Payment of Claim
The Accidental Death Benefit will be paid to the person or persons entitled to
receive the death benefit according to the Certificate upon receipt of the
written proof of accidental death. If we elect to have the Insured's body
examined and/or perform an autopsy, payment may be made after satisfactory
conclusion of the examination.
Charge for this Rider
There is no charge for this Rider.
Termination
This Rider will terminate on the date of the first to occur of the following
events:
1. The Accidental Death Benefit is paid.
2. The Certificate is surrendered or the entire Surrender Value is
applied under a Settlement Option.
3. The interest in the Certificate is distributed due to the death of the
Insured.
4. You request the termination of this Rider.
Terms
All of the terms used in this Rider have the same meanings as in the Group
Contract and Certificate unless otherwise clearly indicated in this Rider.
--------------------------------
--------------------------------
Chairman
<PAGE>
EXHIBIT 1A(5)(b)(v)
[LOGO OF SAGE LIFE INSURANCE APPEARS HERE]
WAIVER OF SURRENDER CHARGE RIDER
General
This Rider is made part of the Contract to which it is attached. It provides an
additional benefit in the event you receive Qualifying Extended Medical Care as
defined and limited below.
Benefit
Subject to the terms and conditions stated below, we will waive any surrender
charge incurred under the Contract in the event you receive Qualifying Extended
Medical Care.
Qualifying Extended Medical Care
To qualify for this waiver:
1. You must first begin receiving Qualifying Extended Medical Care while
this Rider is in force and on or after the first Contract Anniversary.
This Rider will continue in force upon a change in ownership of the
Contract if the new Owner is an individual (that is, a natural
person). However, in order to be eligible for this additional benefit,
the new Owner must first begin receiving Qualifying Extended Medical
Care on or after the first anniversary of the effective date of
change.
2. You must receive such care for at least 45 days during any continuous
sixty-day period.
3. The request for a surrender or withdrawal, together with satisfactory
proof of such Qualifying Extended Medical Care, must be received at
our Customer Service Center.
4. The request and proof must be received during the term of the care or
within ninety days after the last day upon which you received such
care.
Definitions
"Qualifying Extended Medical Care" means confinement in a Qualifying Hospital or
Nursing Care Facility prescribed by a Physician.
"Qualifying Hospital or Nursing Care Facility" means a hospital or skilled or
intermediate care nursing facility licensed and operated pursuant to the laws of
the jurisdiction in which it is located. The facility must have medical
treatment available on a daily basis; and daily medical records must be kept on
each patient. Facilities, whose purpose is to provide accommodations, board or
personal care services to individuals who do not need medical or nursing care,
or are mainly places for rest, do not qualify.
"Physician" means a legally-qualified practitioner of the healing arts who is
acting within the scope of his or her license; is not a resident of any Owner's
or Insured's household; and is not a member of the immediate family of any Owner
or Insured.
"Immediate family" means parents, grandparents, siblings, children,
stepchildren, grandchildren, or their respective spouses.
Page 1
<PAGE>
Claims
We must receive written proof, satisfactory to us, at our Customer Service
Center while this Rider is in force. Such proof must evidence that you received
or are receiving Qualifying Extended Medical Care.
Charge for this Rider
There is no charge for this Rider.
Termination
This Rider will terminate on the date of the first to occur of the following
events:
1. The Contract is surrendered or the entire Surrender Value is applied
under a Settlement Option, or the Contract terminates without value.
2. The interest in the Contract is distributed due to the death of the
Insured.
3. You request the termination of this Rider.
Terms
All of the terms used in this Rider have the same meanings as in the Contract
unless otherwise clearly indicated in this Rider.
[SIGNATURE ILLEGIBLE]^^
Chairman
Page 2
<PAGE>
EXHIBIT 1A(5)(b)(vi)
[LOGO OF SAGE LIFE APPEARS HERE]
--------------------------------
SAGE LIFE ASSURANCE OF AMERICA, INC.
Members of Sage Insurance Group, Inc.
WAIVER OF SURRENDER CHARGE RIDER
General
This Rider is made part of the Group Contract/Certificate to which it is
attached. It provides an additional benefit in the event you receive Qualifying
Extended Medical Care as defined and limited below.
Benefit
Subject to the terms and conditions stated below, we will waive any surrender
charge incurred under the Certificate in the event you receive Qualifying
Extended Medical Care.
Qualifying Extended Medical Care
To qualify for this waiver:
1. You must first begin receiving Qualifying Extended Medical Care
while this Rider is in force and on or after the first Certificate
Anniversary. This Rider will continue in force upon a change in
ownership of the Certificate if the new Owner is an individual (that
is, a natural person). However, in order to be eligible for this
additional benefit, the new Owner must first begin receiving
Qualifying Extended Medical Care on or after the first anniversary
of the effective date of change.
2. You must receive such care for at least 45 days during any
continuous sixty-day period.
3. The request for a surrender or withdrawal, together with
satisfactory proof of such Qualifying Extended Medical Care, must be
received at our Customer Service Center.
4. The request and proof must be received during the term of the care
or within ninety days after the last day upon which you received
such care.
Definitions
"Qualifying Extended Medical Care" means confinement in a Qualifying Hospital or
Nursing Care Facility prescribed by a Physician.
"Qualifying Hospital or Nursing Care Facility" means a hospital or skilled or
intermediate care nursing facility licensed and operated pursuant to the laws of
the jurisdiction in which it is located. The facility must have medical
treatment available on a daily basis; and daily medical records must be kept on
each patient. Facilities, whose purpose is to provide accommodations, board or
personal care services to individuals who do not need medical or nursing care,
or are mainly places for rest, do not qualify.
"Physician" means a legally-qualified practitioner of the healing arts who is
acting within the scope of his or her license; is not a resident of any Owner's
or Insured's household; and is not a member of the immediate family of any Owner
or Insured.
"Immediate family" means parents, grandparents, siblings, children,
stepchildren, grandchildren, or their respective spouses.
Page 1
<PAGE>
Claims
We must receive written proof, satisfactory to us, at our Customer Service
Center while this Rider is in force. Such proof must evidence that you received
or are receiving Qualifying Extended Medical Care.
Charge for this Rider
There is no charge for this Rider.
Termination
This Rider will terminate on the date of the first to occur of the following
events:
1. The Certificate is surrendered or the entire Surrender Value is
applied under a Settlement Option, or the Certificate terminates
without value.
2. The interest in the Certificate is distributed due to the death of
the Insured.
3. You request the termination of this Rider.
Terms
All of the terms used in this Rider have the same meanings as in the Group
Contract and Certificate unless otherwise clearly indicated in this Rider.
/s/
Chairman
Page 2
<PAGE>
EXHIBIT 1A(9)(ii)
SERVICE AGREEMENT
This Application Solutions Services Agreement ("Agreement") is deemed effective
as of the 1st day of May, 1999, and is entered into by and between PMSI
Services, Inc. ("PMSI") a Corporation having its principal place of business at
204 Woodhew Drive, Waco, Texas 76712 and Sage Life Assurance of America, Inc.,
("Customer") with its principal place of business at 300 Atlantic Street, 3rd
Floor, Stamford, CT 06901.
PMSI and Customer agree as follows:
1. TERM:
-----
1.1 1.1 The term of this Agreement shall commence upon the effective date in
the first paragraph of this Agreement and shall continue through December
31, 2001.
2. PMSI'S SERVICES:
----------------
2.1 Implementation Period The "Implementation Period" shall begin on this
--- ---------------------
Agreement's effective date and will end on the date PMSI notifies
Customer that PMSI has completed implementing the automated portion of
the services to be provided hereunder. During the Implementation Period,
PMSI shall prepare to perform the "Application Solutions Services" as
defined below. These Preparation Services will include creating
electronic images of Customer's pre-approved insurance applications,
appropriate state variations, consent forms and paramedical forms. All
Preparation Services will be performed in accordance with the assumptions
and limitations delineated in Exhibit I to this Agreement. Customer shall
assist PMSI during the Implementation Period by gathering the appropriate
data information, background, and other facts and approvals as needed to
enable PMSI to perform the Preparation Services and Application Solutions
Services pursuant to this Agreement and providing such to PMSI.
2.2 Application Solutions Services:
--- ---------------------------------
Application Services and Application Solutions Services shall mean: Upon
-------------------------------------------------------------------
PMSI's notifying Customer that PMSI is ready to commence receiving life
insurance applications on behalf of Customer and Customer's subsidiary
life insurance company, Sage Life Assurance Company of New York ("Sage
NY"), PMSI will receive names, phone numbers, addresses and other
relevant information of a prospective insured directly from Customer or
insurance producers appointed by Customer ("Producers"), including the
signature of each prospective insured authorizing the commencement of the
Application Services process and access to the medical records of each
prospective insured. PMSI will order an MIB inquiry and if the MIB search
results are clear (indication of no record), PMSI will notify Customer's
Producer and a binding agreement ("Quick Issue Report") will be sent to
the Producer by PMSI on behalf of Customer, subject to Customer's
underwriting limits provided to PMSI in writing. If the MIB search
results in a hit (indication of impairment or other adverse condition),
PMSI will contact the Producer to facilitate the scheduling of a
telephone interview with prospective insureds. Through telephone
interviews, PMSI shall elicit necessary information to prepare an
Application Report regarding applicants. PMSI will order on behalf of
Customer other third party information gathering services, and Customer
shall pay such third parties directly for such services. PMSI will either
forward electronically or print and mail a copy of each Application
Report and other required forms approved by Customer to a paramedic
organization from list set forth on Exhibit II to this Agreement. After
the paramedic organization receives the documents from PMSI, the
paramedic organization will contact the prospective insured for the
standard paramedic services in gathering data to be utilized by PMSI in
making its Underwriting Recommendation with respect to the prospective
insured. The paramedic organization will be responsible for having each
prospective insured review and sign the Application Report. The paramedic
organization will then return all the completed applications and forms to
PMSI. PMSI will review the Application Report returned by the paramedic
organization and PMSI will then perform certain ministerial functions
pursuant to Customer's written underwriting guidelines provided to PMSI,
and prepare an Underwriting Recommendation ("Underwriting
Recommendation"), if necessary. The completed Application Report and
Underwriting Recommendation will be forwarded to Customer's third party
administrator, ("TPA"), for the TPA to perform policy issue and delivery
<PAGE>
or take other appropriate action if policy issue is not recommended. PMSI
will provide all adverse underwriting action notifications directly to
prospective insureds (by way of form letters preapproved by Customer) and
shall notify TPA of each such action promptly thereafter.
2.3 Claims Services shall mean: Upon appropriate notification of an insurance
---------------
claim from the Customer, PMSI will forward a claimant statement to the
beneficiary for completion. PMSI will notify all appropriate parties
including the TPA and reinsurer and request the original policy file.
PMSI will review the file to determine Customer's requirements to process
the claim. If the claim is within the contestable period, PMSI may order
on behalf of Customer other third party information gathering services in
PMSI's discretion, and Customer shall pay such third parties directly for
such services. After review of the complete file, PMSI will prepare a
Claim Recommendation and forward to TPA for payment or declination.
2.4 PMSI will provide the Telepro services as provided in Exhibit III
attached hereto.
3. DUTIES OF CUSTOMER
------------------
3.1 Customer shall provide the data necessary, in a timely way and in a
format acceptable to PMSI, for PMSI to perform the Application Solutions
Services.
3.2 Apart from those Claims Services specifically described in subsection 2.3
Customer acknowledges that PMSI assumes no risk or responsibility for
Customer's claims administration, claim payment, or claim recovery.
3.3 Customer acknowledges that PMSI assumes no insurance risk for any of
Customer's policyholders/insureds or any of the parties named in this
Agreement.
3.4 Customer will provide PMSI with the information and specifications
necessary to perform the Application Solutions Services and Claims
Services, including but not limited to paramedic organizations, corporate
and subsidiary logos (if applicable), style and specifications of printed
documents such as insurance pre-applications and applications, and all
other information and specifications necessary to perform the Application
Solutions Services and Claims Services.
3.5 Customer shall appoint a project manager with sufficient authority within
Customer's organization to facilitate Customer's role as PMSI performs
the Application Solutions Services and Claims Services.
3.6 Customer shall be responsible for entering all agreements with the
paramedic organizations listed on Exhibit II hereto. The paramedic
organizations will invoice Customer for performing paramedic services for
Customer. PMSI is not responsible for electing to utilize one paramedic
organization over another, and is merely acting as Customer's agent in
this context. PMSI shall not be responsible to Customer for any acts or
omissions to act of the paramedic organizations.
4. AUDIT PROVISIONS
----------------
4.1 PMSI shall maintain records of the Application Solutions Services
performed on behalf of Customer hereunder in accordance with generally
accepted accounting practices. In addition, PMSI shall maintain records
of the data utilized to perform the Application Solutions Services until
two (2) years following the earlier of: (i) the date of final payment for
the Application Solutions Services with respect to such records are
maintained, or (ii) the period to which such data relates, unless such
records are earlier returned to Customer. At Customer's expense, Customer
and an auditor selected by Customer may have access to such records
retained by PMSI relative to the Application Solutions Services performed
by PMSI on behalf of Customer upon 10 days prior written notice for the
purposes of verifying PMSI's compliance with Customer's underwriting
guidelines during normal business hours during the full term of this
Agreement and during the respective periods in which PMSI is required to
maintain such records.
4.2 As necessary as determined by PMSI, PMSI shall have the right, at its
expense and upon ten (10) days prior written notice to Customer to audit
Customer-provided facts and figures in order to independently verify any
information provided by Customer. Such audit will occur during Customer's
normal business hours.
5. PRICE AND PAYMENT
-----------------
5.1 Customer agrees to pay PMSI the following amounts in consideration of
PMSI's performing the services herein.
<PAGE>
5.2 Customer shall pay PMSI monthly insurance application processing charges
for the Quick Issue Reports, Application Reports, and Underwriting
Recommendations requested by Customer or Producers. The insurance
application processing charges shall equal the number of various reports
and recommendations provided in a month times the applicable Charge-per-
Report. Quick Issue Reports shall be deemed serviced and a Charge-per-
Quick Issue Report equal to $24.00 shall apply when PMSI completes and
forwards each such Quick Issue Report to Customer or Producer. For each
Application Report required but not concluded, Customer shall pay PMSI a
minimum Charge-per-Application Report of $20.00 upon termination by PMSI
of its efforts to contact each such prospective insured. Application
Report requests shall be deemed serviced and a Charge-per-Application
Report equal to $45.00 per Application Report shall apply when PMSI
completes an interview with an insurance applicant. When PMSI is required
to perform multiple interviews for an Application Report, Customer shall
pay PMSI a Charge-per-Application Report equal to $45.00 for completion
of each interview. A charge equal to $35.00 shall apply to each
Underwriting Recommendation provided relating to an Application Report.
5.3 A charge equal to $35.00 shall apply to each Claim Recommendation
provided.
5.4 In consideration for the Preparations Services, as described in Section
2.1 and Exhibit I a surcharge of $23.00 shall be assessed to each Quick
Issue Report and to each Application Report for the first 3,600 of such
reports provided by PMSI.
5.5 For the purposes of this Agreement, "Quarter" shall mean three (3)
consecutive calendar months of a calendar year. The first Quarter under
this Agreement shall commence on May 1, 1999. On or before the 15th day
of each Quarter, Customer shall provide PMSI with a written projection of
the number of all Services which Customer estimates it will order from
PMSI during each month of such Quarter. Notwithstanding anything to the
contrary, Customer agrees to order an aggregate Minimum Amount of
Services during each Quarter of this Agreement that will equal or exceed
as follows:
--------------------------------------------------------
Quarter Dollar Amount
--------------------------------------------------------
Quarter I $ 6000.00
--------------------------------------------------------
Quarter 2 $ 8,000.00
--------------------------------------------------------
Quarter 3-12 $12,000.00
--------------------------------------------------------
Customer agrees to pay and shall be invoiced for actual amount ordered
plus the difference between the aggregate Minimum Amount and the
aggregate actual amount ordered in all Quarters. These Minimum Amount
requirements shall not apply prior to May 1, 1999.
5.6 For PMSI's providing Preparation Services during the Implementation
Period which go beyond those described in Section 2.1 and Exhibit I, and
any other business or computer consulting analysis, programming or
training necessary hereunder, or resulting from statutory or regulatory
change, Customer shall pay PMSI on a time and materials basis at the rate
of $8,500.00 per person month during the term of this Agreement, or an
equitable fraction thereof for Preparation Services rendered in lesser
increments of time.
5.7 Customer shall pay PMSI under this Agreement on a monthly basis as any
and all of the services hereunder are performed and invoiced by PMSI. All
amounts due PMSI are stated and payable in United States currency.
Customer shall pay a late charge on any amount which remains unpaid after
thirty days of PMSI's mailing of PMSI's invoice. The late charge shall be
computed daily at the lesser of (i) 1.5% per month, or (ii) the highest
rate permitted by law.
5.8 In the event a communications, hardware or postal vendor supplying a
service or product to PMSI required for PMSI to provide the Application
Solutions Services to Customer increases its rates charged to PMSI, PMSI
may increase the contracted rates set forth herein by an amount not
exceeding the amount of such increases.
5.9 The Application Solutions Services rates may increase if changes in the
Applications Solutions Services mutually agreed to in writing
substantially alter the servicing personnel, equipment, or result in the
servicing being done.
5.10 When Customer requests PMSI personnel to travel to any location for the
purpose of performing work under this Agreement, Customer will, in
addition to the charges specified herein, pay PMSI for all reasonable
travel, living, and out-of-pocket expenses. In
<PAGE>
addition to the charges specified herein, Customer shall pay PMSI for any
telecommunication, data center,and data transfer charges, and all other
charges, which PMSI incurs while performing any work specific to Customer
under this Agreement.
5.11 Customer agrees to pay all tariffs and taxes that are now or may become
applicable to the services rendered hereunder, any equipment used by PMSI
solely to service Customer, the communication lines, PMSI's transmission
of data, and any communications equipment use, lease, operation, control,
transportation or value in connection with this Agreement, or as measured
by payments made by Customer to PMSI under this Agreement, or as required
to be collected by PMSI or paid by PMSI to tax authorities based upon
PMSI's Agreement with Customer. This provision includes but is not
limited to sales, use, and personal property taxes, or any other form of
tax based on services performed, equipment used, and the communication or
storage of data, but does not include taxes based upon the net income of
PMSI.
5.12 Customer shall pay PMSI at the following rates in consideration for
PMSI's providing Customer with the Telepro and Telepro Plus Reports as
shown Exhibit III:
(i) When records are received from a medical facility, Customer shall pay
PMSI for each Telepro Report a service fee of $20.00 plus any medical
record fee and/or search fee charged to PMSI by the medical facility
providing the records. PMSI shall not enter into any agreement for the
payment of medical record or search fees except as an agent for
Customer; Customer acknowledges that Customer is responsible for the
ultimate settlement of all medical record and search fees incurred
pursuant to this Agreement.
(ii) In the event records are not received from a medical facility, Customer
shall pay PMSI a service fee of $12.00 for each Telepro Report that
indicates no record; and
(iii) Customer shall pay PMSI a service fee of $12.00 for each Telepro Plus
Report that is ordered in connection with a Telepro Report.
6. LICENSE, TRADE SECRET AND PROPRIETARY RIGHTS
--------------------------------------------
6.1 This Agreement grants to Customer no right to possess or reproduce the
computer software programs performing all or any part of the Application
Services or their specifications including the Platform (collectively
referred to herein as ("Software") in any tangible or intangible medium.
In the event Customer shall come into possession of any of the Software,
Customer shall immediately notify PMSI and return the Software and all
copies of any kind thereof to PMSI upon PMSI's request. Customer may not
mortgage, hypothecate, sell, assign, pledge, lease, use, transfer,
license or sublicense the Software nor allow any person, firm or
corporation to transmit, copy, or reproduce the Software in whole or in
part in any manner.
6.2 In the event Customer gains access to any of the Software, Customer
promises and agrees not to use, or disclose or otherwise make any of the
Software available to any person, other than employees of Customer
required to have such knowledge for the sole purpose of utilizing the
Application Solutions Services hereunder. Customer agrees to obligate
each such employee to a level of care sufficient to protect the Software
from unauthorized disclosure. THE OBLIGATIONS OF CUSTOMER UNDER THIS
ARTICLE SHALL CONTINUE AFTER THIS AGREEMENT IS TERMINATED.
6.3 PMSI promises and agrees not to disclose or otherwise make information
concerning Customer's clients', insureds', and beneficiaries' identities,
claims, medical records, benefits, rates, agents, financial information
or specific product information ("Confidential Information") available to
any person other than to Customer, Customer's employees and Producers or
other parties required to receive disclosure to enable PMSI to perform
Application Solutions Services and Claims Services under this Agreement,
subject to applicable law. PMSI agrees to obligate PMSI's employees
receiving disclosure to a level of care sufficient to protect Customer's
Confidential Information. THE OBLIGATIONS OF PMSI UNDER THIS ARTICLE
SHALL CONTINUE AFTER THIS AGREEMENT IS TERMINATED.
7. TERMINATION
-----------
7.1 During the first 12 full months of this Agreement and thereafter, either
party may
<PAGE>
terminate this Agreement only for cause because of a material breach by
the other party of any one or more of the terms and conditions of this
Agreement, provided the party in breach is notified in writing by the
other party of the breach, and the breach is not cured or a satisfactory
resolution is not agreed upon in writing within thirty (30) days of such
written notification. After the first 12 full months of this Agreement,
Customer may terminate this Agreement without cause if Customer gives
PMSI at least six (6) months prior written notice of termination and
simultaneously pays PMSI any outstanding amounts owed for Preparation
Services as described in Section 5.4 plus a simple interest rate of the
then current prime rate plus two percent.
7.2 In the event either party makes a general assignment for the benefit of
creditors or files a voluntary petition in bankruptcy or petitions for
reorganization or arrangement under the bankruptcy laws, or if a petition
in bankruptcy is filed against either party and remains undismissed for a
period of thirty (30) days, or if a receiver or trustee is appointed for
all or any part of the property and assets of either party, the other
party may immediately terminate this Agreement.
8. LIMITATION OF LIABILITY AND REMEDIES
------------------------------------
8.1 IF DATA IS PROCESSED IN ERROR DUE TO AN ERROR OR DEFECT IN ANY SERVICE
PROVIDED BY PMSI, THEN UPON PMSI RECEIVING NOTICE OF SUCH ERROR OR
DEFECT, PMSI SHALL REPROCESS SUCH DATA WITHOUT CHARGE TO CUSTOMER.
8.2 EXCEPT FOR VIOLATIONS OF THE CONFIDENTIALITY OBLIGATIONS SET FORTH IN
SECTION 6 OF THIS AGREEMENT, PMSI'S TOTAL AGGREGATE LIABILITY FOR DAMAGES
ARISING FROM BREACHES OF THIS AGREEMENT AND ERRORS, OMISSIONS AND DEFECTS
IN THE ANY SERVICES (WHETHER IN TORT OR CONTRACT, LAW OR EQUITY) SHALL BE
LIMITED TO AN AMOUNT NOT TO CUMULATIVELY EXCEED $300,000.00.
8.3 THE PARTIES AGREE THAT THIS IS A SERVICES AGREEMENT, AND THAT EXCEPT AS
EXPRESSLY STATED IN THIS AGREEMENT, THERE ARE NO OTHER RIGHTS, REMEDIES,
OR WARRANTIES INCLUDING BUT NOT LIMITED TO, ANY EXPRESS OR IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS OR FITNESS FOR A PARTICULAR
PURPOSE, ALL OF WHICH ARE HEREBY DISCLAIMED.
8.4 EXCEPT FOR VIOLATIONS OF THE CONFIDENTIALITY OBLIGATIONS SET FORTH IN
SECTION 6 OF THIS AGREEMENT, NEITHER PMSI NOR CUSTOMER SHALL BE LIABLE
FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT
LIMITED TO LOST PROFITS, PAYMENTS TO THIRD PARTIES, COST OF COVER OR
OTHER ECONOMIC LOSS ARISING OUT OF THIS AGREEMENT OR ANY SERVICES WHETHER
SUCH LIABILITY ARISES IN CONTRACT OR TORT (INCLUDING NEGLIGENCE), LAW OR
EQUITY, OR OTHERWISE.
8.5 PMSI SHALL NOT BE LIABLE OR DEEMED TO BE IN DEFAULT FOR ANY DELAY OR
FAILURE IN PERFORMANCE UNDER THIS AGREEMENT OR INTERRUPTION OF SERVICE
RESULTING, DIRECTLY OR INDIRECTLY, FROM ACTS OF GOD, CIVIL OR MILITARY
AUTHORITY, LABOR DISPUTES, SHORTAGES OF SUITABLE PARTS, MATERIALS, LABOR
OR TRANSPORTATION, OR ANY SIMILAR EVENT BEYOND THE REASONABLE CONTROL OF
PMSI.
8.6 CUSTOMER AGREES TO INDEMNIFY, DEFEND, AND HOLD PMSI HARMLESS FROM ANY
LIABILITY, LOSS, COST, CLAIM OR DAMAGE SUFFERED BY PMSI RELATIVE TO
PERSONAL INJURY OR PROPERTY DAMAGE (INCLUDING LEGAL EXPENSES AND
ATTORNEY'S FEES), CAUSED BY THE NEGLIGENCE OR MISCONDUCT OF CUSTOMER
AND/OR ITS DIRECTORS OR EMPLOYEES, AND CUSTOMER'S CLAIM ADMINISTRATION,
PAYMENT, AND RECOVERY PROCESS, EXCEPT TO THE EXTENT OF PMSI'S INVOLVEMENT
IN CUSTOMER'S CLAIM ADMINISTRATION, PAYMENT AND RECOVERY PROCESSES.
<PAGE>
8.7 SUBJECT TO ARTICLES 8.1, 8.2, 8.3, 8.4, AND 8.5 HEREIN PMSI AGREES TO
INDEMNIFY, DEFEND, AND HOLD CUSTOMER HARMLESS FROM ANY LIABILITY, LOSS,
COST, CLAIM OR DAMAGE SUFFERED BY CUSTOMER (INCLUDING LEGAL EXPENSES AND
ATTORNEY'S FEES), CAUSED BY THE NEGLIGENCE OR MISCONDUCT OF PMSI AND/OR
ITS DIRECTORS OR EMPLOYEES.
8.8 IF A THIRD PARTY CLAIMS THAT ANY SOFTWARE SUPPLIED BY PMSI, IF ANY,
INFRINGES ON A TRADEMARK, SERVICE MARK, COPYRIGHT OR PATENT, PMSI WILL
INDEMNIFY AND DEFEND CUSTOMER AND HOLD CUSTOMER HARMLESS AGAINST THAT
CLAIM, PROVIDED CUSTOMER HAS LAWFUL POSESSION OF THE SOFTWARE, HAS NOT
DIRECTLY OR INDIRECTLY CAUSED SUCH CLAIM TO ARISE, AND NOTIFIES PMSI IN
WRITING AS SOON AS REASONABLY POSSIBLE AFTER CUSTOMER BECOMES AWARE OF
SUCH CLAIM OR ALLEGATION OF TRADEMARK, SERVICE MARK, COPYRIGHT OR PATENT
INFRINGEMENT. PMSI WILL CONTROL THE DEFENSE OF THE INFRINGEMENT CLAIM;
HOWEVER, PMSI AGREES THAT THE DEFENSE OF THE INFRINGEMENT SUIT OR CLAIM
WILL ALSO PROTECT THE INTERESTS OF CUSTOMER. ANY SETTLEMENT OF THE
INFRINGEMENT SUIT OR CLAIM WILL INCLUDE CUSTOMER.
8.9 IF ANY DISPUTE ARISES RELATED TO THIS AGREEMENT OR ANY TRANSACTION
GOVERNED BY IT, SENIOR EXECUTIVES OF BOTH PARTIES, WITH AUTHORITY TO
SETTLE THE DISPUTE WILL MEET TO ATTEMPT TO RESOLVE THE DISPUTE BEFORE
RESORTING TO FORMAL LEGAL ACTION. THIS MEETING WILL BE HELD REASONABLY
PROMPTLY AT THE REQUEST OF EITHER PARTY IN THE OFFICES OF THE
NONREQUESTING PARTY.
8.10 CUSTOMER AND PMSI AGREE THAT THIS ARTICLE SHALL SURVIVE THE TERMINATION
OF THE AGREEMENT.
9. GENERAL
-------
9.1 Customer and PMSI agree that while this Agreement is in effect, neither
will directly or indirectly induce any employee of the other to terminate
his or her employment; nor will either, without the prior written consent
of the other, knowingly offer employment to any employee of the other, or
to former employees during the six (6) month period immediately following
such employee's termination.
9.2 All notices which are required to be given or submitted pursuant to this
Agreement shall be in writing and shall be either delivered in person or
sent by certified mail, return receipt requested, to the address set
forth herein or to such other address as the parties may from time to
time designate in writing for such purposes. Notices shall be deemed to
have been given at the time when personally delivered or, if mailed in a
certified post-paid envelope, upon the fifth day after the date such
notice shall be postmarked. All notices to PMSI shall be addressed to the
attention of the Executive Vice President. All notices to Customer shall
be addressed to the attention of the President.
9.3 Each party covenants and promises not to issue press releases or disclose
the terms and conditions of this Agreement to any third party, except as
required by a court of law or as expressly consented to by the other
party, which consent shall not be unreasonably withheld.
9.4 This Agreement and the Exhibits attached hereto are incorporated by
reference herein, and making a part hereof: (a) constitute the entire
Agreement between the parties and supersede and merge any and all prior
discussions, representations, negotiations, correspondence, writings and
other agreements and together state the entire understanding and
Agreement between PMSI and Customer with respect to the services
described herein; (b) may be amended or modified only in writing agreed
to and signed by PMSI and Customer; and (c) shall be deemed to have been
entered into and executed in the State of Texas and shall be construed,
performed and enforced in all respects in accordance with the laws of
that State without regard to its conflict of law provisions.
9.5 Neither party hereto shall be deemed to have waived any rights or
remedies accruing to it hereunder unless such waiver is in writing and
signed by such party. No delay or omission by either party hereto in
exercising any right shall
<PAGE>
operate as a waiver of said right on any future occasion. All rights and
remedies hereunder shall be cumulative and may be exercised singularly or
concurrently.
9.6 The descriptive headings of this Agreement are intended for reference
only and shall not affect the construction or interpretation of this
Agreement.
9.7 Wherever the singular if any term is used herein it shall be deemed to
include the plural wherever the plural thereof may be applicable.
9.8 Customer shall not assign this Agreement or any of its rights hereunder
without the prior written consent of PMSI.
9.9 If any provision of this Agreement or any Exhibit hereto or the
application thereof to any party or circumstances shall, to any extent,
now or hereafter be or become invalid or unenforceable, the remainder of
this Agreement shall not be affected thereby and every other provision of
this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
9.10 All underwriting and claims files relating to applicant, insureds,
prospective insureds, contractowners, beneficiaries and claimants,
whether developed by PMSI or delivered to PMSI by Customer for provision
of Services, shall be and remain the property of Customer or Sage NY, as
the case may be. PMSI may retain such files for the duration of any
Services it is providing with respect to the file and for ninety (90)
days thereafter. At that point, PMSI shall forward the file and all of
its contents to any person or entity as designated by Customer. Customer
shall bear all shipping costs.
9.11 PMSI shall limit access to the files to those PMSI employees who
reasonably need access to perform the Services described herein. PMSI
shall institute such measures with respect to limitation of access and
confidentiality of medical, genetic testing, alcohol and drug abuse, AIDS
and HIV, and consumer credit records as is necessary to comply with
relevant state and federal law.
9.12 PMSI shall cooperate with Customer to develop and implement procedures
necessary to obtain for Customer access to the services of the Medical
Information Bureau, Inc. ("MIB"). Thereafter, PMSI shall conduct its
activities in the performance of the Services in compliance with
Customer's written Plan of Operation with MIB as such is provided to
PMSI. PMSI shall also cooperate with Customer and MIB with respect to any
internal audits necessary to comply with the MIB Plan of Operations, and
with respect to any audit performed by MIB to monitor Customer's
compliance with its MIB Plan of Operations.
9.13 PMSI shall promptly notify Customer if its operations become the subject
of any investigation or inquiry related to Customer's Confidential
Information by any state of federal regulatory authority having
jurisdiction over persons or entities engaging in the insurance or
securities business. (Such obligation shall not extend to investigations
or inquiries arising out of complaints made by individuals who are
applicants for insurance or insureds or prospective insureds or
beneficiaries or claimants.) To the extent it may be permitted to do so,
PMSI shall share with Customers copies of any reports, recommendations,
orders, subpoenas or other written documents or memoranda relating to
such investigation or inquiry.
9.14 PMSI acknowledges that Customer is developing an internet web site
("Site"), the purpose of which will be to, among other things, (a)
provide general information about Customer and its products, (b) allow
registered representatives, contractowners, and the general public to
access information regarding variable account unit values and offerings
and fixed account interest rate offerings, (c) allow contractowners to
access values and other information regarding their own contracts and
make investment allocations and other changes, and (d) allow registered
representatives and Customer's home office personnel to access
information regarding underwriting status. PMSI agrees to cooperate with
Customer, and any third parties customer has engaged, to enable them to
develop the Site and to provide reasonable access to all of the
information they may need to develop the Site. Furthermore, PMSI agrees
that it will perform the Application Services and Applications Solutions
Services described in Section 2.2 hereof, and the Claims Services
described in Section 2.3 hereof, via the Site and the internet to the
extent Customer has built the capability into the Site, and to the extent
registered representatives and applicants actually use it for its
intended purposes. For any development work related to an Internet web
site performed by PMSI, Sage Life will pay for professional services on a
time and materials basis as described in Section 5.6.
<PAGE>
PMSI AND CUSTOMER CERTIFY BY THEIR UNDERSIGNED AUTHORIZED AGENTS THAT THEY HAVE
READ THIS AGREEMENT, INCLUDING ALL EXHIBITS HERETO, AND AGREE TO BE BOUND BY
THEIR TERMS AND CONDITIONS.
PMSI Services, Inc. Sage Life Assurance of America, Inc.
BY: _____________________________ BY: ____________________________
(AUTHORIZED SIGNATURE) (AUTHORIZED SIGNATURE)
(in non-black ink, please) (in non-black ink, please)
_____________________________ ____________________________
(NAME) (NAME)
_____________________________ ____________________________
(TITLE) (TITLE)
_____________________________ ____________________________
(EXECUTION DATE (EXECUTION DATE)
<PAGE>
EXHIBIT I
to the
SERVICE AGREEMENT
by and between
PMSI, Services Inc.
and
Sage Life Assurance of America, Inc.
dated effective: January 1, 1999
PREPARATION SERVICES
--------------------
Customer agrees to (i) pay PMSI pursuant to Section 5.4 of the Agreement for
Preparation Services described below and in Section 5.2 performed by PMSI and
(ii) pay PMSI pursuant to Section 5.6 of the Agreement for services performed in
addition to the tasks delineated below.
. PMSI will initially establish a Platform for one (1) Single Payment Variable
Life and one (1) Flexible Premium Variable Universal Life product of
Customer. PMSI acknowledges that Customer's riders and benefits include an
Accidental Benefit rider, an Accelerated Death Benefit rider, a Change of
Insured rider and a Waiver of Surrender Charge rider.
. Two (2) applications will be supported with an undetermined number (at this
time) of state forms variations. This estimate is based on supporting two
applications with various state forms variations. Customer will verify and
notify PMSI during the Implementation Period whether PMSI's use of overflow
pages for the risk details on behalf of Customer will be in compliance with
Customer's applications currently approved. This estimate is based on using
overflow pages to print the risk details.
. Customer will work with PMSI to provide the "drill-down" scripts necessary to
interview applicants and gain additional information when necessary. The
---
development of these scripts is not included in this cost.
----------------------------------------------------------
. Data exported to Customer will be in the PMSI standard export format.
Interface to Customer's new business system, and the costs thereof, is the
responsibility of the Customer. If the Customer requires a customized export
record, an additional 3 to 4 person months may be required in addition to
this estimate.
This estimate does not include the work effort required to perform forms
---
composition for Customer.
<PAGE>
EXHIBIT II
to the
SERVICE AGREEMENT
by and between
PMSI Services, Inc.
and
Sage Life Assurance of America, Inc.
dated effective: January 1, 1999
APPROVED PARAMEDIC ORGANIZATIONS
--------------------------------
The following are the paramedical organizations Customer has entered into
agreements with for providing paramedical services for Customer pursuant to
the Agreement:
EMSI John Utley, Sr., President & CEO
1111 W. Mockingbird Lane, 4th Floor
Dallas, TX 75247
. Customer reserves the right to amend this list at any time and for any
reason upon providing PMSI a revised copy of this Exhibit II.
<PAGE>
EXHIBIT III
TO THE
SERVICE AGREEMENT
By and between
PMSI Services, Inc.
And
Sage Life Assurance of America, Inc.
Dated effective: January 1, 1999
TELEPRO SERVICES
----------------
This Exhibit is incorporated into and made a part of the Application Solutions
Services Agreement between PMSI and Customer.
1. Definitions:
The following words will have the following meanings:
1.1. Telepro Report: A report consisting of Attending Physician Statements
("APS") relating to a potential insured of Customer.
1.2. Telepro Plus Report: A report containing information obtained from
either Customer's insurance agent or an applicant for insurance.
2. Services
2.1. PMSI will receive requests from Customer to provide to Customer APS
from Customer specified medical facilities for potential insureds of
Customer. PMSI will contact the medical facility to verify the
existence of records on the prospective insureds. PMSI will continue
follow-up with the medical facility to obtain the requested records
which constitutes a Telepro Report for up to forty-three (43) days
from the initial request, unless Customer requests further inquiry by
PMSI. PMSI will forward each Telepro Report to Customer via overnight
mail, regular U.S. mail or electronically upon receipt of a record
from the medical facility. Customer agrees to pay PMSI for the mailing
costs incurred by PMSI unless the parties mutually agree otherwise.
3. Customer acknowledges and agrees that PMSI will attempt to utilize
guidelines and criteria as clearly specified in writing by Customer in
providing the ministerial functions under this Agreement, which include but
are not limited to any recommendations made by PMSI, in connection with
PMSI's providing Telepro and Telepro Plus Reports. Customer agrees that
Customer is responsible to make any managerial or discretionary decisions
that may be based on any Telepro and Telepro Plus Report or any
recommendation in a Telepro or Telepro Plus Report. Customer further
acknowledges and agrees that PMSI is not providing any discretionary
functions or services on behalf of Customer hereunder and if Customer is in
the insurance business, PMSI assumes no (i) insurance risk for any of
Customer's policyholders/insureds or (ii) risk or responsibility for
Customer's underwriting decisions, claims administration, claim payment, or
claim recovery.
<PAGE>
EXHIBIT 1A(10)(a)(i)
APPLICATION FOR
MODIFIED SINGLE PAYMENT VARIABLE LIFE
[LOGO OF SAGE LIFE APPEARS HERE] Mail to: Sage Life, P.O. Box 30000,
SAGE LIFE ASSURANCE OF AMERICA, INC. Dept. 5162, Hartford, CT 06150-5162
- --------------------------------------------------------------------------------
1. PROPOSED INSURED
- --------------------------------------------------------------------------------
First Middle Last
- --------------------------------------------------------------------------------
Residence Street Address
- --------------------------------------------------------------------------------
City State Zip
- --------------------------------------------------------------------------------
Birthdate (Mo/Day/Yr) Sex [ ] M [ ] SS#
[ ] F
- --------------------------------------------------------------------------------
Phone E-Mail Address Place of Birth
- --------------------------------------------------------------------------------
Occupation/Duties
- --------------------------------------------------------------------------------
2. OWNER (skip if same as Proposed Insured)
- --------------------------------------------------------------------------------
First Middle Last
- --------------------------------------------------------------------------------
Residence Street Address
- --------------------------------------------------------------------------------
City State Zip
- --------------------------------------------------------------------------------
Phone [ ] SS# [ ] TIN#
- --------------------------------------------------------------------------------
E-Mail Address Relationship to Proposed Insured %
- --------------------------------------------------------------------------------
3. PRIMARY BENEFICIARY
- --------------------------------------------------------------------------------
Name(s) SS#/TIN# Relationship to Proposed Insured %
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3A. CONTINGENT BENEFICIARY (optional)
- --------------------------------------------------------------------------------
Name(s) SS#/TIN# Relationship to Proposed Insured %
- --------------------------------------------------------------------------------
4. TYPE OF PLAN
- --------------------------------------------------------------------------------
4a. Plan of Insurance:
[ ] Modified Single Payment Variable Life
[ ] Other _____________________________
4b. Specify one of the following:
[ ] Initial Purchase Payment $ ____________________________ or
[ ] Initial Insurance Amount $ ____________________________
4c. Optional Riders:
[ ] _________________________ Purchase Payment $ _________
[ ] _________________________ Purchase Payment $ _________
- --------------------------------------------------------------------------------
5. PURCHASE PAYMENT
- --------------------------------------------------------------------------------
[ ] Check or wire to Sage Life for $ _________________________ or
[ ] Estimated Amount of 1035 Exchange $ ______________________ or
[ ] Other _______________________
- --------------------------------------------------------------------------------
6. REPLACEMENT
- --------------------------------------------------------------------------------
Will the proposed Contract replace any existing annuity or life
insurance policy? [ ] No [ ] Yes (If yes, list all companies and policy
numbers and attach transfer or exchange form.) _______________
- --------------------------------------------------------------------------------
7. ALLOCATION OF PURCHASE PAYMENT
- --------------------------------------------------------------------------------
- Optional -
7a. To Dollar-Cost Averaging:
_____ % of my payment to be Dollar Cost Averaged to the Asset
Allocation Model Portfolio selected in 7b, or to the Variable
Sub-Accounts in 7c, unless specified otherwise in 8 below.
- Complete 7b or 7c -
7b. To Asset Allocation Model Portfolios:
_____ % to the Asset Allocation Model Portfolio checked below:
[ [ ] I [ ] II [ ] III [ ] IV [ ] V [ ] VI ]
- Or -
7c. To Variable Sub-Accounts:
[AIM MFS
--- ---
_____% (253) Capital Development _____% (553) Total Return
_____% (254) Government Securities _____% (554) Growth with Income
_____% (255) Growth and Income _____% (555) High Income
_____% (256) Value _____% (556) Research
_____% (257) International Equity _____% (557) Value
Alger Morgan Stanley
----- --------------
_____% (353) Income and Growth _____% (653) Value
_____% (354) MidCap Growth _____% (654) Mid Cap Value
_____% (355) Small Cap _____% (655) Global Equity
Colonial/Liberty State Street
---------------- ------------
_____% (453) U.S. Stock _____% (753) S&P 500 Index
_____% (454) Growth and Income _____% (754) Russell 2000 Index
_____% (455) Small Cap Value _____% (755) EAFE Index
_____% (456) Strategic Income T.Rowe Price
_____% (457) Newport Tiger ------------
_____% (458) All-Star Equity _____% (953) Equity Income
_____% (459) Global Utilities _____% (954) Mid-Cap Growth
_____% (955) Pers Strgy Balanced
SteinRoe Sage Advisors
-------- -------------
_____% (853) Growth Stock _____% (003) Money Market]
_____% (854) Special Venture
To Fixed Sub-Accounts:
_____[% (121) 1year _____% (124) 4 year _____% (130) 10 year]
_____ % (122) 2 year _____% (125) 5 year
_____ % (123) 3 year _____% (127) 7 year
- Optional -
[ ] Rebalance my Variable Sub-Account values each calendar quarter.
- --------------------------------------------------------------------------------
8. DOLLAR COST AVERAGING
- --------------------------------------------------------------------------------
DCA Account: Check the box below (only one) that you want us to Dollar Cost
- -----------
Average from.
No. of Months: We will make level monthly transfers from the DCA Account for
- -------------
the number of months shown below. Transfers from the [Sage
Money Market] will be made over a 12-month period, unless you specify
otherwise below.
Variable Sub-Accounts: Transfers will be made monthly from the DCA Account to
- ---------------------
the Asset Allocation Model Portfolio selected in 7b, or to the
same Variable Sub-Accounts and in the same %'s as shown in 7c, unless
you specify otherwise below.
DCA Account No. of Months Variable Sub-Accounts
----------- ------------- ---------------------
[ ] [(003) Sage Money Market] ------ ______%______
[ ] [(131) Fixed - 1 Year] [12] ______%______
[ ] [(132) Fixed - 2 Year] [24] ______%______
[ ] [(133) Fixed - 3 Year] [36] ______%______
[ ] [(134) Fixed - 4 Year] [48] ______%______
[ ] [(135) Fixed - 5 Year] [60] ______%______
<PAGE>
- --------------------------------------------------------------------------------
9. AUTHORITY FOR TELEPHONE TRANSFERS
- --------------------------------------------------------------------------------
I acknowledge that neither Sage Life Assurance of America, Inc. ("Sage Life")
nor any representative of Sage Life will be responsible for any claim, loss,
liability or expense resulting from a telephone transfer request if Sage Life or
such representative acted on the telephone request in good faith.
- --------------------------------------------------------------------------------
I wish to have a Personal Identification Number (PIN) issued [ ] Yes [ ] No
to me in order to make telephone transfers.
I _______ (Owner's initials) authorize you to issue a [ ] Yes [ ] No
Personal Identification Number (PIN) to my registered
representative/agent in order for him/her to make telephone
transfers between Sub-Accounts on my behalf.
- --------------------------------------------------------------------------------
10. SPECIAL REQUESTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11. AMENDMENTS (H.O. use only)
- --------------------------------------------------------------------------------
COMPANY CORRECTIONS OR ADDITIONS, IF ANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12. SIMPLIFIED UNDERWRITING
- --------------------------------------------------------------------------------
12a. During the past five years, has the Proposed Insured:
i. Had or been treated for cancer, insulin dependent [ ] Yes [ ] No
diabetes, heart attack, chest pain, stroke, central
nervous system disorder, muscular disorder,
respiratory disorder or hypertension?
ii. Had or been treated for a nervous psychological [ ] Yes [ ] No
disorder, epilepsy, emphysema, kidney failure, liver
disorder or been advised to have treatment for alcohol
or drug abuse?
iii. Been declined or rated for life insurance? [ ] Yes [ ] No
12b. Has the Proposed Insured ever been diagnosed or treated, [ ] Yes [ ] No
by a member of the medical profession, for AIDS, AIDS
Related Complex or other immune deficiency disorder?
- --------------------------------------------------------------------------------
13. SUPPLEMENTAL INFORMATION
- --------------------------------------------------------------------------------
13a. Has the Proposed Insured in the last 12 months smoked
cigarettes? [ ] Yes [ ] No
13b. If we are unable to issue a variable life insurance
contract, do you wish to apply for a variable annuity? [ ] Yes [ ] No
- --------------------------------------------------------------------------------
14. SUITABILITY, AGREEMENT, AUTHORIZATION, AND SIGNATURE
- --------------------------------------------------------------------------------
SUITABILITY: By signing below, I acknowledge receipt of the current Variable
Life Prospectus and understand that the amount and duration of the death benefit
and all payments and values, when based on the investment experience of the
Variable Account, may increase or decrease, depending upon investment experience
for the Contract and are not guaranteed as to dollar amount. I also understand
that there is no guaranteed minimum Account Value and therefore a Contract may
lapse and provide no further death benefit without additional payments.
AGREEMENT: I agree that to the best of my knowledge and belief, all statements
and answers in this application are complete and true and may be relied upon by
Sage Life in determining whether to issue the Contract. My answers will form a
part of any Contract to be issued, and no medical examiner or registered
representative has authority to modify this agreement or waive any of Sage
Life's rights or requirements. If I make a change as indicated in Section 11, it
will be approved by acceptance of the Contract where permitted by state
regulation. Any change in plan, benefits applied for, amount of insurance, issue
age, or risk class must be agreed to in writing.
I also understand that unless otherwise provided by the Temporary Insurance
Agreement, no Contract will take effect unless, while the Proposed Insured is
living, the initial purchase payment is paid, the Contract is delivered to and
accepted by the Owner, and the answers and statements in this application
continue to be complete and true at the time of such payment and acceptance.
AUTHORIZATION: I, the Proposed Insured, authorize any physician, hospital or
other medical practitioner or facility, insurance company, Medical Information
Bureau, or any other organization, institution or person that has any
information about my health or any non-medical information relevant to my
insurability or that of my minor child who is to be insured to release such
information to Sage Life and its reinsurers. I authorize Sage Life to obtain
investigative consumer reports, if appropriate. I understand that I have a right
to learn the content and receive a copy of any such report. This authorization
is valid for 2 years from the date signed and a photographic copy is as valid as
the original. I acknowledge receipt of the Fair Credit Reporting Act and Medical
Information Bureau Notices.
<TABLE>
<S> <C>
Signed at ________________________________________________ On ____________________________________________________
CITY STATE DATE
X ________________________________________________________ X _____________________________________________________
PROPOSED INSURED (PARENT/GUARDIAN IF UNDER AGE 15) APPLICANT/OWNER (IF OTHER THAN PROPOSED INSURED)
</TABLE>
FLORIDA Notice to Applicants: Any person who knowingly, and with intent to
injure, defraud, or deceive any insurer files a statement of claim or an
application containing any false, incomplete, or misleading information is
guilty of a felony of the third degree.
- --------------------------------------------------------------------------------
15. AGENT'S REPORT
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
1. Do you have reason to believe that the Contract applied for may replace an existing annuity or
insurance policy? [ ] Yes [ ] No
(If yes, list carrier, policy number, whether Section 1035 exchange, and attach State Replacement
Form if applicable.)
- --------------------------------------------------------------------------------
2. Have you provided a Temporary Insurance Agreement to the Applicant? [ ] Yes [ ] No
- --------------------------------------------------------------------------- --------------------------------------------------
Agent's Legal Name (PRINTED) SS# License Number (Florida only) Agency Name/Broker-Dealer/Branch
- --------------------------------------------------------------------------- --------------------------------------------------
Agent's Business Address Business Phone Signature of Agent Agent's E-Mail Address
Designation: [ ] Program A [ ] Program B [ ] Program C Once selected, Program cannot be changed.
</TABLE>
<PAGE>
EXHIBIT 1A(10)(a)(ii)
PART II - APPLICATION FOR
MODIFIED SINGLE PAYMENT VARIABLE LIFE
SAGE LIFE ASSURANCE OF AMERICA, INC. Mail to: Sage Life, P.O. Box 30000,
All Answers Must Be Handwritten Dept. 5162, Hartford, CT 06150-5162
- --------------------------------------------------------------------------------
I. PROPOSED INSURED PERSONAL DETAILS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
First Middle Last Birthdate (Mo/Day/Yr) Social Security # M F
/ / /
</TABLE>
- --------------------------------------------------------------------------------
II. PERSONAL PHYSICIAN
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Personal Physician ______________________________ Date Last Consulted ________________ Telephone No.____________________________
__________________________________________________________________________________________________________________________________
Street Address City State Zip Code
Reason Last Consulted: [] Routine exam and all findings were normal [] See explanation below
(Please include reason, medication, treatment and results)
__________________________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________________________
</TABLE>
- --------------------------------------------------------------------------------
III. PERSONAL PROFILE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
EXPLANATION/DETAILS FOR QUESTIONS ANSWERED "YES"
1. Your current weight in clothing is _____ lbs. and height in shoes is ___
2. Has your weight changed in the past year? (Provide # of [] Yes [] No ____________________________________________
lbs gained/lost)
3. Do you engage in a scheduled exercise program? (Provide [] Yes [] No ____________________________________________
type, duration, frequency)
4. Are you now pregnant? (Provide expected delivery date) [] Yes [] No ____________________________________________
</TABLE>
- --------------------------------------------------------------------------------
IV. PERSONAL MEDICAL HISTORY (during the past ten years)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Have you had, been told you had, or been treated for: (if yes, give details in section VII)
<S> <C> <C>
5. Chest Pain or Angina, Heart Murmur, Heart Attack, Palpitations, Rheumatic Fever, High Blood Pressure, [] Yes [] No
Blood Vessel Disorder, Heart Disorder.
6. Pneumonia, Persistent Cough, Coughing of Blood, Asthma, Bronchitis, Persistent Hoarseness, Emphysema, [] Yes [] No
Pleurisy, Tuberculosis, Allergies, Respiratory Disorder, Chronic Shortness of Breath.
7. Recurrent Headache, Dizziness or Fainting, Brain Disorder, Seizures, Paralysis, Stroke, Speech Loss, [] Yes [] No
Memory Loss.
8. Nervous Disorder, Mental Disorder, Depression, Suicide Attempt. [] Yes [] No
9. Ulcer, Recurring Indigestion, Vomiting Blood, Difficulty Swallowing. [] Yes [] No
10. Colon Polyp, Ileitis or Colitis, Persistent Diarrhea, Bloody Stools. [] Yes [] No
11. Hepatitis, Cirrhosis, Jaundice, Gall Bladder Disorder, Stomach Disorder, Liver Disorder, Intestinal
Disorder, Pancreas Disorder. [] Yes [] No
12. Cancer, Skin Cancer, Tumor, Cyst, Fibroids, Skin Disorder, Lymph Gland Disorder. [] Yes [] No
13. Diabetes, Thyroid Disorder, Breast Disease, Glandular Disorder. [] Yes [] No
14. Sugar in Urine, Pus in Urine, Kidney Disorder, Urinary Disorder, Albumin in Urine, Prostate Disorder, [] Yes [] No
Reproductive System Disorder, Sexually Transmitted Disease.
15. Anemia, Leukemia, Blood Disorder, Recurrent Infections. [] Yes [] No
16. Hernia, Hemorrhoids, Varicose Veins, Rectal Disorder. [] Yes [] No
17. Deformity, Back Pain, Amputation, Arthritis, Rheumatism, Gout, Bone or Muscle Disorder, [] Yes [] No
Back/Spine/Joint Disorder.
18. Eye Disorder, Ear Disorder, Nose Disorder, or Throat Disorder. [] Yes [] No
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
All Answers Must Be Handwritten
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
V. ADDITIONAL INFORMATION
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
19. During the past 5 years have you used marijuana, cocaine, barbiturates, narcotics, excitants, or
hallucinogens, except as prescribed medication? []Yes []No
20. Other than as indicated in Nos. 5-18, during the past 5 years have you:
a) Been or are you now under observation, treatment, therapy, counseling, or medications or have you []Yes []No
had any check up, illness or surgery?
b) Had electrocardiogram, x-ray or blood studies? []Yes []No
c) Been advised to have a test or surgery which was not done? []Yes []No
d) Been treated or received counseling for alcohol or drug use? []Yes []No
e) Been a patient in a hospital, clinic, sanitarium or other medical facility? []Yes []No
f) Consulted any other physician or chiropractor? []Yes []No
21. Have you ever requested or received a pension benefit or payments because of an injury, sickness or []Yes []No
disability?
22. Have you ever changed occupation or residence because of health? []Yes []No
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
VI. FAMILY HISTORY
- -------------------------------------------------------------------------------------------------------------------------
23. Has any member of your family ever had diabetes, cancer, heart or kidney disease, or mental illness? []Yes []No
<S> <C> <C> <C>
24. Relative Age if Living Present State of Health or Cause of Death Age at Death
-------- ------------- ----------------------------------------- ------------
Father _____________ _________________________________________________ ___________
Mother _____________ _________________________________________________ ___________
Brother(s) _____________ _________________________________________________ ___________
_____________ _________________________________________________ ___________
Sister(s) _____________ _________________________________________________ ___________
_____________ _________________________________________________ ___________
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
VII. COMPLETE FOR EACH QUESTION CHECKED "YES" IN NUMBERS 5-23
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Question What Were You Medication/Treatment Date Still Under Physician/Medical Facility Name
No. Treated For? Treatment? (Include Address if not in Section II)
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
I understand and agree that the foregoing statements and answers are complete,
true and correctly recorded to the best of my knowledge and belief, and that
they shall be part of the Certificate or Contract issued.
DATE ________________ X ___________________________ X_____________________
(WITNESS) EXAMINER OR AGENT PROPOSED INSURED
<PAGE>
EXHIBIT 1A(10)(b)(i)
<TABLE>
<CAPTION>
[LOGO OF SAGE LIFE INSURANCE APPEARS HERE]
APPLICATION FOR
MODIFIED SINGLE PAYMENT VARIABlE LIFE CERTIFICATE
SAGE LIFE ASSURANCE OF AMERICA, INC. Mail to: Sage Life, P.O. Box 30000, Dept. 5162, Hartford, CT 06150-5162
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. PROPOSED INSURED 7. ALLOCATION OF PURCHASE PAYMENT
- ------------------------------------------------------------------------------------------------------------------------------------
First Middle Last - Optional -
7a. To Dollar-Cost Averaging:
- ------------------------------------------------------------ _______ % of my payment to be Dollar Cost Averaged to the Asset
Residence Street Address Allocation Model Portfolio selected in 7b, or to the
Variable Sub-Accounts in 7c, unless specified otherwise
- ------------------------------------------------------------ in 8 below.
City State Zip
- Complete 7b or 7c -
- ------------------------------------------------------------
Birthdate (Mo/Day/Yr) Sex [_] M [_] SS# 7b. To Asset Allocation Model Portfolios:
[_] F _______ % to the Asset Allocation Model Portfolio checked below:
- ------------------------------------------------------------ [ [_] I [_] II [_] III [_] IV [_] V [_] VI ]
Phone E-Mail Address Place of Birth
- Or -
- ------------------------------------------------------------
Occupation/Duties 7c. To Variable Sub-Accounts:
- ------------------------------------------------------------ [AIM MFS
2. OWNER (skip if same as Proposed Insured) ---- ---
- ------------------------------------------------------------ _____% (253) Capital Development _____% (553) Total Return
First Middle Last _____% (254) Government Securities _____% (554) Growth with Income
_____% (255) Growth and Income _____% (555) High Income
- ------------------------------------------------------------ _____% (256) Value _____% (556) Research
Residence Street Address _____% (257) International Equity _____% (557) Value
Alger Morgan Stanley
- ------------------------------------------------------------ ----- --------------
City State Zip _____% (353)Income and Growth _____% (653) Value
_____% (354)MidCap Growth _____% (654) Mid Cap Value
- ------------------------------------------------------------ _____% (355)Small Cap _____% (655) Global Equity
Phone [_] SS# [_] TIN# Colonial/Liberty State Street
---------------- ------------
- ------------------------------------------------------------ _____% (453) U.S. Stock _____% (753) S&P 500 Index
E-Mail Address Relationship to Proposed Insured _____% (454) Growth and Income _____% (754) Russell 2000 Index
_____% (455) Small Cap Value _____% (755) EAFE Index
- ------------------------------------------------------------ _____% (456) Strategic Income T.Rowe Price
3. PRIMARY BENEFICIARY ------------
- ------------------------------------------------------------ _____% (457) Newport Tiger _____% (953) Equity Income
Name(s) SS#/TIN# Relationship to Proposed Insurered % _____% (458) All-Star Equity _____% (954) Mid-Cap Growth
_____% (459) Global Utilities _____% (955) Pers Strgy Balanced
- ------------------------------------------------------------ SteinRoe Sage Advisors
-------- -------------
- ------------------------------------------------------------ _____% (853) Growth Stock _____% (003) Money Market]
3A. CONTINGENT BENEFICIARY (optional) _____% (854) Special Venture
- ------------------------------------------------------------
Name(s) SS#/TIN# Relationship to Proposed Insurered % To Fixed Sub-Accounts:
_____[% (121) 1year _____% (124) 4 year _____% (130) 10 year]
- ------------------------------------------------------------ _____ % (122) 2 year _____% (125) 5 year
(123) 3 year _____% (127) 7 year
- ------------------------------------------------------------
- Optional -
4. TYPE OF PLAN
- ------------------------------------------------------------ [_] Rebalance my Variable Sub-Account values each calendar
4a. Plan of Insurance: quarter.
|_| Modified Single Payment Variable Life --------------------------------------------------------------------
|_| Other __________________________ 8. DOLLAR COST AVERAGING
4b. Specify one of the following: --------------------------------------------------------------------
|_| Initial Purchase Payment $ _________________ or DCA Account: Check the box below (only one) that you want us to
|_| Initial Insurance Amount $ _________________ -----------
4c. Optional Riders: Dollar Cost Average from.
|_| ____________________ Purchase Payment $ ______ No. of Months: We will make level monthly transfers from the DCA
|_| ____________________ Purchase Payment $ ______ -------------
- ------------------------------------------------------------ Account for the number of months shown below. Transfers from the
5. PURCHASE PAYMENT [Sage Money Market] will be made over a 12-month period, unless you
- ------------------------------------------------------------ specify otherwise below.
[_] Check to Sage Life for $ ________________________ or Variable Sub-Accounts: Transfers will be made monthly from the DCA
[_] Estimated Amount of 1035 Exchange $ _____________ or ---------------------
[_] Other ____________________________ Account to the Asset Allocation Model Portfolio selected in 7b, or
- ------------------------------------------------------------ to the same Variable Sub-Accounts and in the same %'s as shown in
6. REPLACEMENT 7c, unless you specify otherwise below.
- ------------------------------------------------------------ DCA Account No. of Months Variable Sub-Account
Will the proposed Certificate replace any existing annuity ----------- ------------- --------------------
or life insurance policy? [_] No [_] Yes (If yes, [_] [(003) Sage Money Market] ________ --------%--------
list all companies and policy numbers and attach transfer [_] [(131) Fixed - 1 Year] [12] ________%________
or exchange form.) ______ [_] [(132) Fixed - 2 Year] [24] ________%________
[_] [(133) Fixed - 3 Year] [36] ________%________
[_] [(134) Fixed - 4 Year] [48] ________%________
[_] [(135) Fixed - 5 Year] [60] ________%________
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[LOGO OF SAGE LIFE INSURANCE APPEARS HERE]
- --------------------------------------------------------------------------------
9. AUTHORITY FOR TELEPHONE TRANSFERS
- --------------------------------------------------------------------------------
I acknowledge that neither Sage Life Assurance of America, Inc. ("Sage Life")
nor any representative of Sage Life will be responsible for any claim, loss,
liability or expense resulting from a telephone transfer request if Sage Life or
such representative acted on the telephone request in good faith.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
I wish to have a Personal Identification Number (PIN) issued to me in order to
make telephone transfers. [_] Yes [_] No
I _______ (Owner's initials) authorize you to issue a Personal Identification Number (PIN) to my registered [_] Yes [_] No
representative/agent in order for him/her to make telephone transfers between Sub-Accounts on my behalf.
</TABLE>
- --------------------------------------------------------------------------------
10. SPECIAL REQUESTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11. AMENDMENTS (H.O. use only)
- --------------------------------------------------------------------------------
COMPANY CORRECTIONS OR ADDITIONS, IF ANY (Except in Kentucky and West Virginia)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12. SIMPLIFIED UNDERWRITING
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
12a. During the past five years, has the Proposed Insured:
i. Had or been treated for cancer, insulin dependent diabetes, heart attack, chest pain, stroke, central nervous system
disorder, muscular disorder, respiratory disorder or hypertension ? [_] Yes [_] No
ii. Had or been treated for a nervous psychological disorder, epilepsy, emphysema, kidney failure, liver disorder or been
advised to have treatment for alcohol or drug abuse? [_] Yes [_] No
iii. Been declined or rated for life insurance? [_] Yes [_] No
12b. Has the Proposed Insured ever been diagnosed or treated, by a member of the medical profession, for AIDS, AIDS Related
Complex or other immune deficiency disorder? [_] Yes [_] No
</TABLE>
- --------------------------------------------------------------------------------
13. SUPPLEMENTAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
13a. Has the Proposed Insured in the last 12 months smoked cigarettes? [_] Yes [_] No
13b. If we are unable to issue a variable life insurance certificate, do you wish to apply for a variable annuity? [_]Yes [_] No
</TABLE>
- --------------------------------------------------------------------------------
14. SUITABLY, AGREEMENT, AUTHORIZATION, AND SIGNATURE
- --------------------------------------------------------------------------------
SUITABILITY: By signing below, I acknowledge receipt of the current Variable
Life Prospectus and understand that the amount and duration of the death benefit
and all payments and values, when based on the investment experience of the
Variable Account, may increase or decrease, depending upon investment experience
for the Certificate and are not guaranteed as to dollar amount. I also
understand that there is no guaranteed minimum Account Value and therefore a
Certificate may lapse and provide no further death benefit without additional
payments.
AGREEMENT: I agree that to the best of my knowledge and belief, all
statements and answers in this application are complete and true and may be
relied upon by Sage Life in determining whether to issue the Certificate. My
answers will form a part of any Certificate to be issued, and no medical
examiner or registered representative has authority to modify this agreement or
waive any of Sage Life's rights or requirements. If I make a change as indicated
in Section 11, it will be approved by acceptance of the Certificate where
permitted by state regulation. Any change in plan, benefits applied for, amount
of insurance, issue age, or risk class must be agreed to in writing.
I also understand that unless otherwise provided by the Temporary Insurance
Agreement, no Certificate will take effect unless, while the Proposed Insured is
living, the initial purchase payment is paid, the Certificate is delivered to
and accepted by the Owner, and the answers and statements in this application
continue to be complete and true at the time of such payment and acceptance.
AUTHORIZATION: I, the Proposed Insured, authorize any physician, hospital or
other medical practitioner or facility, insurance company, Medical Information
Bureau, or any other organization, institution or person that has any
information about my health or any non-medical information relevant to my
insurability or that of my minor child who is to be insured to release such
information to Sage Life and its reinsurers. I authorize Sage Life to obtain
investigative consumer reports, if appropriate. I understand that I have a right
to learn the content and receive a copy of any such report. This authorization
is valid for 2 years from the date signed and a photographic copy is as valid as
the original. I acknowledge receipt of the Fair Credit Reporting Act and Medical
Information Bureau Notices.
FRAUD WARNING: By signing below, I agree to have
read the Fraud Warning that is applicable to my State and shown on the next page
of this Application.
<TABLE>
<S> <C>
Signed at ______________________________________________ On ____________________________________________
CITY STATE DATE
X ______________________________________________________ X _____________________________________________
PROPOSED INSURED (PARENT/GUARDIAN IF UNDER AGE 15) APPLICANT/OWNER (IF OTHER THAN PROPOSED INSURED)
</TABLE>
- --------------------------------------------------------------------------------
15. AGENTS REPORT
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
1. Do you have reason to believe that the Certificate applied for may replace an existing annuity or insurance
policy? [_] Yes [_] No
(If yes, list carrier, policy number, whether Section 1035 exchange, and attach State Replacement Form if
applicable.)
- ---------------------------------------------------------------------------------
2. Have you provided a Temporary Insurance Agreement to the Applicant? [_] Yes [_] No
- ---------------------------------------------------------------- -----------------------------------------------------------
Agent's Legal Name (PRINTED) SS# License Number Agency Name/Broker-Dealer/Branch
(Florida only)
- ---------------------------------------------------------------- -----------------------------------------------------------
Agent's Business Address Business Phone Signature of Agent Agent's E-Mail Address
Designation: [_] Program A [_] Program B [_] Program C Once selected, Program cannot be changed.
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</TABLE>
<PAGE>
EXHIBIT 1A(10)(b)(ii)
<TABLE>
<CAPTION>
[LOGO OF SAGE INSURANCE APPEARS HERE]
PART II - Application for
SAGE LIFE ASSURANCE OF AMERICA, INC. MODIFIED SINGLE PAYMENT VARIABLE LIFE CERTIFICATE
All Answers Must Be Handwritten Mail to: Sage Life, P.O. Box 30000, Dept. 5162, Hartford, CT 06150-5162
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I. PROPOSED INSURED - PERSONAL DETAILS
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<S> <C> <C> <C> <C> <C>
First Middle Last Birthdate (Mo/Day/Yr) Social Security # [_] M [_] F
/ / /
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II. PERSONAL PHYSICIAN
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____________________________________________________________________________________________________________________________________
Personal Physician ______________________________ Date Last Consulted ________________ Telephone No. _____________________________
____________________________________________________________________________________________________________________________________
Street Address City State Zip Code
Reason Last Consulted: Routine exam and all findings were normal See explanation below
(Please include reason, medication, treatment and results)
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
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III. PERSONAL PROFILE
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EXPLANATION/DETAILS FOR QUESTIONS ANSWERED "YES"
1. Your current weight in clothing is _____ lbs. and height in shoes is _______
2. Has your weight changed in the past year? (Provide # of lbs [_] Yes [_] No _______________________________________________
gained/lost)
3. Do you engage in a scheduled exercise program? (Provide [_] Yes [_] No _______________________________________________
type, duration, frequency)
4. Are you now pregnant? (Provide expected delivery date) [_] Yes [_] No _______________________________________________
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IV. PERSONAL MEDICAL HISTORY (during the past ten years)
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Have you had, been told you had, or been treated for: (if yes, give details in section VII)
5. Chest Pain or Angina, Heart Murmur, Heart Attack, Palpitations, Rheumatic Fever, High Blood Pressure, [_] Yes [_] No
Blood Vessel Disorder, Heart Disorder.
6. Pneumonia, Persistent Cough, Coughing of Blood, Asthma, Bronchitis, Persistent Hoarseness, Emphysema, [_] Yes [_] No
Pleurisy, Tuberculosis, Allergies, Respiratory Disorder, Chronic Shortness of Breath.
7. Recurrent Headache, Dizziness or Fainting, Brain Disorder, Seizures, Paralysis, Stroke, Speech Loss, [_] Yes [_] No
Memory Loss.
8. Nervous Disorder, Mental Disorder, Depression, Suicide Attempt. [_] Yes [_] No
9. Ulcer, Recurring Indigestion, Vomiting Blood, Difficulty Swallowing. [_] Yes [_] No
10. Colon Polyp, Ileitis or Colitis, Persistent Diarrhea, Bloody Stools. [_] Yes [_] No
11. Hepatitis, Cirrhosis, Jaundice, Gall Bladder Disorder, Stomach Disorder, Liver Disorder, Intestinal Disorder, [_] Yes [_] No
Pancreas Disorder.
12. Cancer, Skin Cancer, Tumor, Cyst, Fibroids, Skin Disorder, Lymph Gland Disorder. [_] Yes [_] No
13. Diabetes, Thyroid Disorder, Breast Disease, Glandular Disorder. [_] Yes [_] No
14. Sugar in Urine, Pus in Urine, Kidney Disorder, Urinary Disorder, Albumin in Urine, Prostate Disorder, [_] Yes [_] No
Reproductive System Disorder, Sexually Transmitted Disease.
15. Anemia, Leukemia, Blood Disorder, Recurrent Infections. [_] Yes [_] No
16. Hernia, Hemorrhoids, Varicose Veins, Rectal Disorder. [_] Yes [_] No
17. Deformity, Back Pain, Amputation, Arthritis, Rheumatism, Gout, Bone or Muscle Disorder, [_] Yes [_] No
Back/Spine/Joint Disorder.
18. Eye Disorder, Ear Disorder, Nose Disorder, or Throat Disorder. [_] Yes [_] No
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
All Answers Must Be Handwritten
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
V. ADDITIONAL INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
19. During the past 5 years have you used marijuana, cocaine, barbiturates, narcotics, excitants, or
hallucinogens, except as prescribed medication?
[_] Yes [_] No
20. Other than as indicated in Nos. 5-18, during the past 5 years have you:
a) Been or are you now under observation, treatment, therapy, counseling, or medications or have you had
any check up, illness or surgery? [_] Yes [_] No
b) Had electrocardiogram, x-ray or blood studies? [_] Yes [_] No
c) Been advised to have a test or surgery which was not done? [_] Yes [_] No
d) Been treated or received counseling for alcohol or drug use? [_] Yes [_] No
e) Been a patient in a hospital, clinic, sanitarium or other medical facility? [_] Yes [_] No
f) Consulted any other physician or chiropractor? [_] Yes [_] No
21. Have you ever requested or received a pension benefit or payments because of an injury, sickness or
disability? [_] Yes [_] No
22. Have you ever changed occupation or residence because of health? [_] Yes [_] No
- -----------------------------------------------------------------------------------------------------------------------------------
VI. FAMILY HISTORY
- -----------------------------------------------------------------------------------------------------------------------------------
23. Has any member of your family ever had diabetes, cancer, heart or kidney disease, or mental illness?
[_] Yes [_] No
24. Relative Age if Living Present State of Health or Cause of Death Age at Death
-------- ------------- ---------------------------------------------------------------- ------------
Father _____________ ________________________________________________________________ ____________
Mother _____________ ________________________________________________________________ ____________
Brother(s) _____________ ________________________________________________________________ ____________
_____________ ________________________________________________________________ ____________
Sister(s) _____________ ________________________________________________________________ ____________
_____________ ________________________________________________________________ ____________
- -----------------------------------------------------------------------------------------------------------------------------------
VII. COMPLETE FOR EACH QUESTION CHECKED "YES" IN NUMBERS 5-23
- -----------------------------------------------------------------------------------------------------------------------------------
Question What Were You Medication/Treatment Date Still Under Physician/Medical Facility Name
No. Treated For? Treatment? (Include Address if not in No. 2)
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- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
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- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
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I understand and agree that the foregoing statements and answers are complete, true and correctly recorded to the best of my
knowledge and belief, and that they shall be part of the Certificate or Contract issued.
DATE ________________ X _____________________________________ X_____________________________________
(WITNESS) EXAMINER OR AGENT PROPOSED INSURED
</TABLE>
<PAGE>
Exhibit 2
[SAGE LIFE INSURANCE OF AMERICA, INC.]
September 20, 1999
Board of Directors
Sage Life Assurance of America, Inc.
300 Atlantic Street
Stamford, CT 06901
To The Board of Directors:
In my capacity as Vice President, Legal and Compliance of Sage Life Assurance of
America, Inc. (the "Company"), a Delaware corporation, I have supervised the
preparation of Pre-Effective Amendment No. 1 to the registration statement on
Form S-6 of the Sage Variable Life Account A (File No. 333-78581) (the
"Account") for certain modified single payment combination fixed and variable
life insurance contracts ("Contracts") to be filed by the Company with the
Securities and Exchange Commission under the Securities Act of 1933 and the
Investment Company Act of 1940.
I am of the following opinion:
1. The Company was organized in accordance with the laws of the State of
Delaware and is a validly existing corporation;
2. The Contracts when issued in accordance with the prospectus contained in
the aforesaid registration statement and upon compliance with applicable
local law, will be legal and binding obligations of the Company in
accordance with their terms;
3. The Account is duly created and validly existing as a separate account
of the Company pursuant to Delaware law;
4. The assets held in the Account equal to the reserves and other contract
liabilities with respect to the Account will not be chargeable with
liabilities arising out of any other business the Company may conduct.
In arriving at the foregoing opinion, I have made such examination of law
and examined such records and other documents as in my judgment are necessary or
appropriate.
I hereby consent to the filing of this opinion as an exhibit to the
aforesaid registration statement and to the reference to me under the caption
"Legal Matters" in the Prospectus contained in said registration statement.
Very truly yours,
/s/ James F. Bronsdon
James F. Bronsdon
Vice President, Legal and Compliance
<PAGE>
STEPHEN E. ROTH
DIRECT LINE: (202) 383-0158
Internet: [email protected]
EXHIBIT 3(i)
CONSENT OF SUTHERLAND ASBILL & BRENNAN LLP
We consent to the reference to our firm under the heading "Legal Matters"
included in Pre-Effective Amendment No. 1 to the Registration Statement on Form
S-6 for certain modified single payment combination fixed and variable life
insurance contracts issued through The Sage Variable Life Account A of Sage Life
Assurance of America, Inc. (File No. 333-78581). In giving this consent, we do
not admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933.
SUTHERLAND ASBILL & BRENNAN LLP
-------------------------------
/s/ Stephen E. Roth, Esq.
Washington, D.C.
September 20, 1999
<PAGE>
Exhibit 3(ii)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Prospectus and to the use of our report dated February 15, 1999, with respect to
the financial statements of Sage Life Assurance of America, Inc. included in the
Pre-Effective Amendment No. 1 to the Registration Statement (Form S-6, No. 333-
78581) and related Prospectus for the registration of its variable life
insurance contracts.
/s/ Ernst & Young LLP
Ernst & Young LLP
Stamford, Connecticut
September 20, 1999
<PAGE>
Exhibit 6
Actuarial Opinion and Consent for S-6
Gentlemen:
This opinion is furnished in connection with the registration by Sage Life
Assurance of America, Inc. of certain modified single payment combination fixed
and variable life insurance contracts ("Contracts") under the Securities Act of
1933. The prospectus included in Pre-Effective Amendment No. 1 to Registration
Statement No. 333-78581 on Form S-6 describes the Contracts. I have provided
actuarial advice concerning the preparation of the Registration Statement and
the preparation of the Contract form described in the Registration Statement and
Exhibits thereto.
In my professional opinion, the illustration of death benefits, account
values, and surrender values included in the prospectus, based on the
assumptions stated in the illustrations, are consistent with the provisions of
the Contracts. The rate structure of the Contracts has not been designed so as
to make the relationship between purchase payments and benefits, as shown in the
illustrations, appear more favorable to a prospective purchaser of a Contract
than at ages or classes not shown.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to my name under the heading
"Experts" in the prospectus.
Sincerely,
Ralph Gorter, FSA, MAAA
Vice President and Actuary
<PAGE>
Exhibit 7
DESCRIPTION OF ISSUANCE, TRANSFER, AND REDEMPTION PROCEDURES FOR VARIABLE LIFE
INSURANCE CONTRACTS ISSUED BY SAGE LIFE ASSURANCE OF AMERICA, INC.
This document sets forth the administrative procedures, as required by Rule 6e-
3(T)(b)(12)(iii) that will be followed by Sage Life Assurance of America, Inc.
("the Company") in connection with the issuance of its modified single payment
combination fixed and variable life insurance contract ("Contract"), and
acceptance of payments thereunder, the transfer of assets held thereunder, and
the redemption by owners of the Contracts ("Owners") of their interests in the
Contracts. Capitalized terms used herein have the same definition as in the
prospectus for the Contract that is included in the current registration
statement on Form S-6 for the Contract (File No. 333-78581) as filed with the
Securities and Exchange Commission ("Commission" or "SEC").
I. Procedures Relating to Purchase and Issuance of the Contracts and Acceptance
of Purchase Payments
A. Offer of the Contracts, Application, and
Issuance
Offer of Contracts. The Contracts are offered and issued for purchase payments
- ------------------
pursuant to underwriting standards in accordance with state insurance laws.
Purchase payments for the Contracts are not the same for all Owners selecting an
Initial Insurance Amount. Insurance is based on the principle of pooling and
distribution of mortality risks, which assumes that each Owner pays purchase
payments commensurate with the Insured's mortality risk as actuarially
determined using factors such as age, sex, and rate class of the Insured.
Uniform purchase payments for all Insureds would discriminate unfairly in favor
of those Insureds representing greater risk. Although there is no uniform
purchase payment for all Insureds, there is a uniform purchase payment for all
Insureds of the same rate class, age, and sex and same Initial Insurance Amount.
(Age is determined by reference to the Insured's last birthday.)
Application. Persons wishing to purchase a Contract must complete an application
- -----------
and submit it to the Company through an authorized agent who is also a
registered representative of a broker-dealer having a selling agreement with the
principal underwriter for the Contract The application must specify the name of
the Insured and provide certain required information about the Insured. The
application must also specify an initial purchase payment or an Initial
Insurance Amount, and name a Beneficiary. Before an application will be deemed
complete so that underwriting can proceed, the application must include the
applicant's signature and the Insured's date of birth, a signed authorization,
and a valid authorized agent's state code. The amount of the initial purchase
payment selected is determined by reference to the Initial Insurance Amount
requested, and must at least equal the $10,000 minimum initial purchase payment.
1
<PAGE>
Receipt of Application and Underwriting. Upon receipt of a completed
- ---------------------------------------
application in good order, the Company will follow either simplified or medical
insurance underwriting procedures for life insurance designed to determine
whether the proposed insured is insurable. This process may involve such
verification procedures as medical examinations and may require that further
information be provided about the proposed Insured before a determination can be
made. The underwriting process determines the rate class to which the Insured is
assigned if the application is accepted. The Company currently places Insureds
in the following rate classes: a male or female, or unisex rate class; a smoker
or nonsmoker, or unismoke rate class; and standard or substandard rate class.
This original rate class applies to the Initial Insurance Amount. The rate
class may change upon an increase in the Insurance Amount.
Currently, the Company has two basic underwriting procedures: simplified
underwriting and medical. Simplified underwriting (called "jet issue" for
marketing purposes) involves no separate medical examination. It is available
for Insureds age 80 and under, who qualify by their answers on the application.
The maximum initial purchase payment we currently accept on a simplified
underwriting basis varies with the age and gender of the Insured, but the net
amount of risk [the difference between the Initial Insurance Amount and the
initial purchase payment] may not exceed $100,000. Applications meeting the
criteria for the simplified underwriting process will be taken by the
authorized agent and immediately faxed to the Company's underwriting department.
The Company's underwriting department will perform its own check to determine
qualification for simplified underwriting, and, if qualified, will immediately
submit an inquiry as to the proposed Insured to the Medical Information Bureau
("MIB"). If no negative information is received from MIB, the underwriting
department will immediately fax back to the authorized agent a Certificate of
Insurance Coverage providing immediate coverage under the Contract for which the
applicant applied. The agent will deliver this Certificate to the applicant,
and the Contract will follow in a few days. If negative information is received
from MIB, the Company's underwriting department will instruct the agent that the
medical underwriting process must be undertaken.
If an application does not qualify for simplified underwriting, or if a Contract
will not be issued as a result of a completed simplified underwriting process,
the Company has the option to perform further underwriting as to the proposed
Insured. An MIB check will be performed as to all proposed Insureds, and a
member of the Company's underwriting department will call the proposed Insured
and ask a pre-determined set of medical and other insurability questions (the
application's "Part II"). Depending on the age and sex of the proposed Insured,
and the net amount of risk, and the results of the MIB check and the Part II,
such items as medical exams, blood tests, EKG and inspection reports may be
ordered. All such requirements are set forth in the Company's underwriting
procedures manual. If the application meets the Company's underwriting criteria
set forth in the underwriting procedures manual, a Contract in the amount and in
the risk class applied for will be issued. See "Issuance of Contracts," below.
If the application does not meet the Company's underwriting criteria for
Contract issuance, the application will be declined, and a declination letter
will be sent to the applicant explaining why the application was declined. If
the application does not meet the
2
<PAGE>
Company's underwriting criteria for the Contract applied for, but it still meets
the Company's criteria for Contract issuance, the Company may issue a Contract
on terms other than as applied for. In this instance, the Company will send an
adverse underwriting action letter to the applicant along with the offered
Contract.
If a purchase payment is submitted with the application in an amount sufficient
to pay for the coverage (Initial Insurance Amount applied for), a temporary
insurance agreement will be provided to the applicant (unless a Certificate of
Insurance Coverage has been provided pursuant to the simplified underwriting
process described above). Under this agreement, the Company will provide
temporary insurance coverage in the amount applied for (subject to a maximum of
$500,000). If the Insured dies before the Contract is issued, the temporary
insurance coverage amount will be paid to the Beneficiary named in the
application.
Applications may be submitted either with or without purchase payments.
Assuming the application is otherwise in good order, processing of the
application and underwriting will commence, as described above, regardless of
whether purchase payments are submitted.
A completed application (part 1 only for simplified underwriting, parts 1 and 2
for medical underwriting) and the initial purchase payment must be received at
the Company's Customer Service Center and determined to be in good order before
the Company will issue a Contract.
The Company reserves the right to reject an application for any reason permitted
by law. If an application is rejected, any purchase payment received will be
returned, without interest.
The Company will participate in the exchange of an existing life insurance
contract for a Company Contract, which exchange would qualify under the Internal
Revenue Section Code Section 1035 as a tax-free exchange, as long as all proper
disclosure and replacement forms have been completed.
Issuance of Contract. When the underwriting process has been completed, and the
- --------------------
application has been approved, the Contract is issued. The Contract Date will
be the date the initial purchase payment is received at our Customer Service
Center regardless of whether a purchase payment is submitted with or after an
application. The Contract Date is used to determine Contract Anniversaries,
Contract Years and Monthly Processing Dates, which are significant for such
things as when Contract charges are assessed, the number of transfers per
Contract Year, etc.
B. Additional Purchase Payments
Additional purchase payments may be made at any time and in any amount necessary
to avoid termination of the Contract. Other additional purchase payments may be
made at any time after the first Contract Anniversary, subject to the following
conditions: 1) each additional purchase payment must be at least $250, 2) only
one purchase payment may be paid in any Contract Year, 3) the attained age of
the Insured must be less than 81, and the Company's prior approval is required
before a purchase payment is made causing the account value of all single
payment or
3
<PAGE>
modified single payment life insurance Contracts that the Owner maintains with
the Company to exceed $1,000,000. Total purchase payments paid in a Contract
Year may not exceed guideline premium limitations for life insurance set forth
in the Internal Revenue Code. If at any time a purchase payment is paid that
would result in total purchase payments exceeding limits established by law to
qualify a Contract as a life insurance policy, the Company will only accept
purchase payments that would make total purchase payments equal at most the
maximum amount that may be paid under the Contract. The Company may either
refuse the entire purchase payment, or refund the excess purchase payment. The
Company also reserves the right to require satisfactory evidence of insurability
before accepting any additional purchase payment that increases the death
benefit by more than it increases Account Value. See section below entitled
"Overpayments and underpayments" for refund procedures on overpayments.
C. Crediting Purchase Payments
Crediting Initial Purchase Payment. If a purchase payment is submitted in
- ----------------------------------
connection with an application, and the applicant elects that some or all of it
be allocated to one or more sub-accounts of The Sage Variable Life Account A
("Variable Account"), and the applicant resides in a state requiring return of
the initial purchase payment in the event of surrender and return of the
Contract in the "free-look" period, those monies will be temporarily transferred
to the Money Market Sub-Account until the expiration of the free-look period
(deemed to be 15 days after the Contract Date). If the applicant resides in a
state that does not require return of the initial purchase payment, the Company
will temporarily transfer any purchase payment allocated to the Variable Account
to the Money Market Sub-Account until such time as the underwriting process is
completed and the Contract approved for issuance. Any amounts the applicant
allocates to The Sage Fixed Interest Account A ("Fixed Account," and when both
the Variable Account and Fixed Account are referred to, the "separate account")
or the Money Market Sub-Account, will be invested the date they are received.
The Company will accept purchase payments only by check or wire transfer. All
checks and wires must be sent to the Company's lock box pursuant to instructions
given to the selling broker-dealer relating to address, bank routing and other
information.
Crediting Additional Purchase Payments. Additional purchase payments may be made
- --------------------------------------
by check sent to the Company's Customer Service Center. The net purchase
payment, after deduction of charges, will be placed in and credited to the Sub-
Account, as directed by the Owner, on the date received by the Company at its
Customer Service Center, or on the next Valuation Date if the date received is
not a Valuation Date. A Valuation Date is the date at the end of a Valuation
Period when each Variable Sub-Account is valued. A Valuation Period is the
period between one calculation of an Accumulation Unit value and the next
calculation. Normally, Accumulation Units are calculated daily when the New
York Stock Exchange is open for trading and the Company is open for business.
Overpayments and Underpayments. In accordance with industry practice, the
- ------------------------------
Company will establish procedures to handle errors in initial and additional
purchase payments to refund overpayments and collect underpayments, except de
minimus amounts. The Company will issue
4
<PAGE>
a refund check for any minimal overpayment in excess of the Guideline Premium
amount. For larger overpayments, the Company will place the payment in a non-
interest paying suspense account to determine whether the purchase payment
actually is in excess of the Guideline Premium or whether the purchase payment
was intended for another contract issued by the Company; if not determined
within five (5) Business Days the Company will promptly refund the money. In the
case of underpayment, if the Surrender Value on a Monthly Processing Date is
less than the cost of insurance charge to be made on that date, the Contract
will be in default and a grace period will begin. The Company will notify the
Owner of the required purchase payment that must be paid before the end of the
grace period.
D. Purchase Payments During a Grace Period and Purchase Payments Upon
Reinstatement
Purchase Payments During a Grace Period. If the Surrender Value on a Monthly
- ---------------------------------------
Processing Date is less than the Monthly Deduction Amount due on that date, the
Contract will be in default and a grace period will begin. The grace period
will end 61 days after the date on which the Company sends a grace period notice
stating the amount required to be paid during the grace period to the Owner's
last known address. The Contract does not lapse, and the insurance coverage
continues, until the expiration of this grace period. Failure to submit a
sufficient purchase payment within the grace period will result in lapse of the
Contract without value or benefits payable.
Purchase Payments Upon Reinstatement. A Contract that lapses without value may
- ------------------------------------
be reinstated at any time within three years after lapse by submitting evidence
of the Insured's insurability satisfactory to the Company, payment of a required
purchase payment equal at least to the minimum initial payment for which the
Company would then issue a Contract based upon the Insured's attained age, sex
and health, and repayment or reinstatement of any Debt against the Contract that
existed at the end of the grace period. Upon reinstatement the Account Value on
the date of reinstatement will be the amount provided by the purchase payment
paid less charges and Debt repayment. Any applicable charges will be based on
the length of time from the Contract Date to the effective date of
reinstatement. The allocation of the Account Value will be based on the
allocation instructions in effect at the start of the grace period, unless the
Owner provides otherwise.
E. Allocations of Net Purchase Payments Between the Variable Account and the
Fixed Account.
The Variable Account. An Owner may allocate net purchase payments to one or more
- --------------------
of the Sub-Accounts of the Variable Account. The Variable Account currently
consists of 33 Sub-Accounts, the assets of which are used to purchase shares of
a designated corresponding investment portfolio (a "Fund") within the following
open-end diversified management investment companies registered under the
Investment Company Act of 1940("Trusts"): AIM Variable Insurance Funds, Inc.,
The Alger American Fund, Liberty Variable Investment Trust, SteinRoe Variable
Investment Trust, MFS Variable Insurance Trust, Morgan Stanley Dean Witter
Universal Funds, Inc., Oppenheimer Variable Account Funds, Sage Life Investment
Trust and T. Rowe Price Equity Series, Inc. Additional sub-accounts may be
added from time to time to invest in any of the Funds of the Trusts or any other
investment company.
5
<PAGE>
When an Owner allocates an amount to a Sub-Account (either by net purchase
payment allocation, transfer of Account Value, or repayment of a loan), the
Contract is credited with Accumulation Units in that Sub-Account. The Company
determines the number of Accumulation Units by dividing the dollar amount
allocated or transferred to the Variable Sub-Account by the Sub-Account's
Accumulation Unit value for that Valuation Date.
Accumulation Unit Value. An Accumulation Unit value varies to reflect the
investment experience of the underlying Fund, and may increase or decrease from
one Valuation Date to the next. The Company arbitrarily set the Accumulation
Unit value for each Variable Sub-Account at $10 when it established the Sub-
Account. For each Valuation Period after the date of establishment, the Company
determines the Accumulation Unit value by multiplying the Accumulation Unit
value for a Sub-Account for the prior Valuation Period by the net investment
factor for the Variable Sub-Account for the Valuation Period.
Net Investment Factor. The net investment factor is an index the Company uses
to measure the investment performance of a Variable Sub-Account from one
Valuation Period to the next. The Company determines the net investment
factor for any Valuation Period by dividing (a) by (b)and then subtracting (c)
where:
(a) is the net result of:
(i) the Net Asset Value of the Fund in which the Variable Sub-
Account invests determined at the end of the current Valuation
Period; plus
(ii) the per share amount of any dividend or capital gain
distributions made by the Fund on shares held in the Variable Sub-
Account if the "ex-dividend" date occurs during the current
Valuation Period; and plus or minus
(iii) a per share charge or credit for any taxes reserved for, which
the Company determines to have resulted from the operations of the
Variable Sub-Account; and
(b) is the Net Asset Value of the Fund in which the Variable Sub-Account
invests determined at the end of the immediately preceding Valuation
Period; and
(c) is the daily Variable Sub-Account charges shown in the Schedule
(adjusted for the number of days in the Valuation Period).
The net investment factor may be more or less than, or equal to, one.
The Fixed Account. Owners may also allocate net purchase payments to the
-----------------
Fixed Account, which provides several periods guaranteeing rates of
interest of at least 3% per year if held for the duration of the period.
Each time an Owner allocates purchase
6
<PAGE>
payments or Account Value to the Fixed Account, the Company establishes a
separate Sub-Account for the specific Guarantee Period elected. (If the
Owner elects to participate in the dollar-cost averaging program described
in section II.B., below, amounts allocated to the Fixed Account will be
placed in specially designated sub-accounts which may have guaranteed
interest rates that differ from those of a like duration but not part of
the dollar-cost averaging Program.) If the Owner elects to withdraw Account
Value from a Fixed Sub-Account before the end of the Guarantee Period, the
Company will normally apply a Market Value Adjustment. A Market Value
Adjustment reflects the change in interest rates since the establishment of
the Fixed Sub-Account. It compares: (1) the current Index Rate for a period
equal to the time remaining in the Guarantee Period, and (2) the Index Rate
at the time the Company established the Fixed Sub-Account for a period
equal to the Guarantee Period.
Market Value Adjustments will be applied as follows:
For a surrender, withdrawal, transfer, or amount borrowed, the Company
will calculate the Market Value Adjustment on the total amount (including
any applicable surrender charge) that must be surrendered, withdrawn,
transferred or borrowed to provide the amount requested.
If the Market Value Adjustment is negative, it reduces any remaining
value in the Fixed Sub-Account, or amount of Surrender Value. Any
remaining Market Value Adjustment then reduces the amount withdrawn,
transferred, or borrowed.
If the Market Value Adjustment is positive, it increases any remaining
value in the Fixed Sub-Account. In the case of surrender, or if the
Owner withdraws, transfers or borrows the full amount of the Fixed Sub-
Account, the Market Value Adjustment increases the amount surrendered,
withdrawn, transferred, or borrowed.
The Company will compute the Market Value Adjustment by multiplying the
factor below by the total amount (including any applicable surrender
charge) that must be surrendered, withdrawn, transferred, or borrowed from
the Fixed Sub-Account to provide the amount the Owner requested.
[(1+I)/(1+J+.0025)] to the Nth power divided by 365 - 1
Where
I is the Index Rate for a maturity equal to the Fixed Sub-Account's
Guarantee Period at the time the Company established the Sub-
Account;
J is the Index Rate for a maturity equal to the time remaining
(rounded up to the next full year) in the Fixed Sub-Account's
Guarantee Period at the time of calculation; and
7
<PAGE>
N is the remaining number of days in the Guarantee Period at the
time of calculation.
The Company currently bases the Index Rate for a calendar week on the
reported rate for the preceding calendar week. The Company reserves the
right to set it less frequently than weekly but in no event less often than
monthly. If there is no Index Rate for the maturity needed to calculate I
or J, the Company will use straight-line interpolation between the Index
Rate for the next highest and next lowest maturities to determine that
Index Rate. If the maturity is one year or less, the Company will use the
Index Rate for a one-year maturity.
In the state of Maryland, state insurance law requires that the Market
Value Adjustment be computed by multiplying the amount being surrendered,
withdrawn, transferred, or borrowed, by the greater of the factor above and
the following factor: [(1.03)/(1+K)]((to the power of G - Nth power)
divided by 365) - 1, where N is as defined above, K equals the Guaranteed
Interest Rate for the Guarantee Period, and G equals the initial number of
days in the Guarantee Period.
Allocations Between the Variable Account and the Fixed Account. Net
--------------------------------------------------------------
purchase payments are allocated to the Sub-Accounts in accordance with the
following procedures:
General. In the application for the Contract, the Owner specifies the
percentage of net purchase payments to be allocated to each Sub-
Account of the Variable Account and/or the Fixed Account. The
percentage of each net purchase payment that may be allocated to any
Sub-Account must be a whole number, and the sum of the allocation
percentages must be 100%. Such allocation percentages may be changed
at any time by the Owner submitting Satisfactory Notice to the
Customer Service Center.
Allocations During the Free-Look Period. During the free-look period,
all net purchase payments which the application specifies should be
allocated to Variable Sub-Accounts will be temporarily placed in the
Money Market Sub-Account for the duration of underwriting.
Thereafter, amounts will be allocated according to whether the Owner's
state requires return of purchase payments less withdrawals if the
free-look right to return the contract is exercised, or permits the
return of Account Value plus any charges deducted. If the former,
amounts allocated to the Variable Account (other than the Money Market
Sub-Account) in the application will be temporarily transferred to the
Money Market Sub-Account until the free-look period is deemed to end
(15 days after the Contract Date). If the latter, amounts will be
allocated as between the Variable and Fixed Accounts according to the
Owner's directions in the application.
Allocation after the Free-Look Period. Unless otherwise specified by
the Owner, additional net purchase payments received after the free-
look period expires will
8
<PAGE>
be credited to the Contract and allocated to the Sub-Accounts in
accordance with the allocation percentages in effect on the Valuation
Date that purchase payment is received at the Customer Service Center.
F. Loan Repayments and Interest Repayments.
Repaying Loans. The Owner may repay all or part of Contract Debt at any
--------------
time while the Contract is in force and the Insured is living. (Debt is
the sum of all outstanding loans plus accrued interest under the Contract.)
The minimum loan repayment is shown in the Contract Schedule. If the grace
period has expired and the Contract has terminated, any Debt that exists at
the end of the Grace Period may not be repaid unless the Contract is
reinstated. Unless specified otherwise, an amount equivalent to a loan
repayment will be transferred from the Loan Account to the Sub-Accounts in
proportion to the Account Value in each Sub-Account in which the Owner is
invested.
Interest on Loan Account. Interest on loans accrues daily at the Loan
------------------------
Interest Rate shown in the Contract Schedule. It is due on each Contract
anniversary. If loan interest is not paid when due, the difference between
the Loan Account and Debt will be transferred from the Sub-Accounts to the
Loan Account in proportion to the Account Value in each Sub-Account in
which the Owner is invested.
II. TRANSFER PROCEDURES
A. Transfers Among the Sub-Accounts
After the free-look period, the Owner may direct that Account Value under the
Contract be transferred from one Sub-Account to another. In any Contract year
the Owner may make an unlimited number of transfers; however, the Contract
provides for a maximum $25 charge for transfers among the Sub-Accounts if more
than twelve transfers take place in a Contract Year. Currently, this fee is
being waived. For purposes of the transfer fee, each transfer request is
considered one transfer, regardless of the number of Sub-Accounts affected by
the transfer. Any unused "free" transfers do not carry over to the next
Contract Year. Transfers will be effected as of the date received at the
Customer Service Center. The Company will allow a)written transfers b)telephone
transfers with a previously signed authorization from the Owner (the Company
will verify the identity of the Owner by asking for certain personal or Contract
information); and c) telephone transfers through a "Voice Response Unit" where
the Owner's identity is determined by use of a personal identification number
(pin). It is anticipated that the Company will offer the ability to effect
transfers on the Company's web site, where the Owner's identity is determined by
use of a pin number.
The minimum amount that may be transferred from each Sub-Account is $250 or, if
less, the balance in the Sub-Account. If a transfer request would cause the
amount remaining in a Sub-Account to be less than $250, the Company will treat
the transfer request as a request to transfer the entire amount.
9
<PAGE>
Transfers from Sub-Accounts of the Fixed Account are permitted without a Market
Value Adjustment only during the 30-day period prior to the end of the Guarantee
Period. Transfers at other times will be subject to the Market Value Adjustment
described above.
The Company reserves the right to limit, upon notice, the maximum number of
transfers an Owner may make per calendar month or per Contract year.
B. Optional Transfer Programs
Dollar-Cost Averaging Program. Under the Company's optional dollar-cost
- -----------------------------
averaging Program, the Owner may transfer a set dollar amount systematically on
a monthly, quarterly, semi-annual or annual basis, from the Money Market Sub-
Account and/or from specially designated DCA Fixed Sub-Accounts to any other
Variable Sub-Account, subject to certain limitations. The Owner may elect this
option at any time before Contract proceeds are applied to a Settlement Option
by sending Satisfactory Notice to the Company. The minimum transfer amount is
$250 from the Money Market Sub-Account or from a DCA Fixed Sub-Account.
Transfers will be made on the day of the month that corresponds to the Owner's
Contract Date unless that day is not a Valuation Date. Otherwise, the Company
will make the transfer on the next following Valuation Date. Once elected,
dollar-cost averaging remains in effect from the date the Company receives the
Owner's request until the Owner surrenders the Contract, the value of the Sub-
Account from which transfers are being made is depleted, or until the Owner
cancels the program by Satisfactory Notice. If dollar-cost averaging from a
Fixed Sub-Account is cancelled before the end of the selected guarantee period,
the Company will ordinarily assess a Market Value Adjustment and will transfer
any proceeds to remain in the DCA Fixed Account (i.e., such amounts as are not
transferred to the Variable Account, withdrawn or surrendered) to a Fixed Sub-
Account having a duration as requested by the Owner. There is no additional
charge for dollar-cost averaging, and transfers under this program are not
considered transfers for purposes of assessing the transfer charge. The Company
reserves the right to discontinue this program at any time and for any reason.
Dollar-cost averaging may not be elected while an Owner participates in the
systematic partial withdrawal program.
Asset Allocation Program. An optional asset allocation program is available.
- ------------------------
The asset allocation models do not include allocations to the Fixed Account. The
Owner may elect this option at any time before Contract proceeds are applied to
a Settlement Option by sending Satisfactory Notice to the Company. Only one
model may be used at a time, however, an Owner may elect to change his selection
any time. The Company will automatically allocate all initial and additional
purchase payments among the Variable Sub-Accounts indicated by the model the
Owner selects. The Company will automatically rebalance each Owner's Fund mix
quarterly to return to the original allocation percentages in the model. The
Company may periodically revise the models by changing allocation percentages
within one or more of the models or even by changing the Funds within the
models. If the Company does so, it will send a notice to each Owner
participating in the affected model and give those Owners an opportunity not to
make the change. There is no additional charge for this program, and transfers
under this program are not
10
<PAGE>
considered transfers for purposes of assessing the transfer charge. The Company
reserves the right to discontinue this program at any time and for any reason.
Automatic Portfolio Rebalancing Program. An optional automatic portfolio
- ----------------------------------------
rebalancing program is available. The Owner may elect this option at any time
before Contract proceeds are applied to a Settlement Option by sending
Satisfactory Notice to the Company. Owners may instruct the Company to
rebalance their Variable Account portfolios on a calendar quarter, semi-annual
or annual basis. On the rebalancing date, portfolios will be returned to the
Owner's original allocation percentages. Allocation percentages must be in
whole numbers. Owners may start and stop automatic portfolio rebalancing at any
time and make changes to allocation percentages by written request. Requests
will be effective on the Valuation Date on which received at the Customer
Service Center; if received on other than a Valuation Date the request will be
effective on the next Valuation Date. Money invested in the Fixed Account is
not part of this program. There is no additional charge for this program, and
transfers under this program are not considered transfers for purposes of
assessing the transfer charge. The Company reserves the right to discontinue
this program at any time and for any reason.
C. Transfer Errors
In accordance with industry practice, the Company will establish procedures to
address and to correct errors in amounts transferred among the Sub-Accounts,
except for de minimis amounts.
In the unlikely event a non-deminis transfer error is made, the Company will
complete an undo-redo transaction and correct the transfer as of the original
request date making the Owner whole. The Company will bear any loss resulting
from the error.
III. REDEMPTION PROCEDURES
A. "Free-Look" Rights
The Contract provides for an initial free-look right during which an Owner may
cancel the Contract by returning it to the Company or to an agent of the Company
before the end of ten (10) days after the Contract is delivered. The free-look
period may be longer in some states. Upon returning the Contract to the Company
or to an authorized agent for forwarding to the Customer Service Center, the
Contract will be deemed void from the beginning. Within seven (7) days after
the Company receives the cancellation request and Contract, the Company will pay
a refund equal to the Account Value plus any charges that have been deducted, or
if greater and required by the law of the Owner's state, the initial purchase
payment minus any withdrawals.
B. Surrenders
Request for Surrender Value. The Owner may surrender the Contract at any time
- ---------------------------
while it is in force for its Surrender Value by giving the Company Satisfactory
Notice. The Surrender Value on any Valuation Date is the Account Value, plus or
minus any Market Value Adjustment, and
11
<PAGE>
less any applicable surrender charges or other charges shown in the Schedule
that are due but not yet deducted, less any Contract debt. The Company will
affix a date and time stamp when the request is received at its Customer Service
Center and pay the Surrender Value computed as of that day, unless the Owner
requests a later date. When a surrender of a Contract is effected, the Company
will pay the Surrender Value out of its general assets. An amount equal to the
interest of the Contract will be transferred from the separate account to the
Company's general account as of the effective date of the surrender. Once a
Contract is surrendered it can never be reinstated.
Surrender of Contract - Surrender Charges. Owners surrendering their Contracts
- -----------------------------------------
during the first seven Contract Years may be subject to a surrender charge.
(The charge is waived if the Owner is receiving qualifying extended medical care
and otherwise meets the conditions of the Waiver of Surrender Charge Rider.)
The surrender charge is calculated as a percentage of the amount of purchase
payment(s) withdrawn or surrendered. The surrender charge is applied to each
purchase payment as a percentage of the payment as follows:
Complete Years Elapsed Maximum Surrender
Since Contract Date Charge Percentage
--------------------------- ---------------------
0 9%
1 9%
2 8%
3 7%
4 6%
5 5%
6 3%
7+ 0%
If the Owner surrenders his Contract, we deduct the surrender charge from his
Account Value in determining the Surrender Value. We include any surrender
charge we assess in the calculation of any applicable Market Value Adjustment
for withdrawals from the Fixed Account. The total surrender charge will be the
sum of the surrender charges for each purchase payment being liquidated.
C. Partial Withdrawal of Account Value
Owners may also request a partial withdrawal of Account Value from the Contract
subject to the following conditions: a) A withdrawal may not reduce the maximum
loanable value, described below, to less than any Contract debt outstanding; b)
the minimum amount for withdrawals is $250; c) if a requested withdrawal would
reduce the Account Value below $5,000, the Company reserves the right to treat
the request as a withdrawal of only the excess over $5,000; and d) the amount
requested from a Sub-Account may not exceed the value of that Sub-Account less
any applicable surrender charge. Unless the Owner specifies otherwise, the
Company will make withdrawals proportionately from all Sub-Accounts in which an
Owner is invested. Each year Owners may withdraw a "Free Withdrawal Amount"
without incurring a surrender charge. The
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<PAGE>
Free Withdrawal Amount equals the greater of:
(i) 10% of total purchase payments less all prior withdrawals (including
any associated surrender charge and Market Value Adjustment
incurred) in that Contract Year, or
(ii) cumulative earnings (i.e., the excess of the Account Value on the
date of withdrawal over unliquidated purchase payments)
Any amount over the Free Withdrawal Amount that is to be withdrawn is considered
an Excess Withdrawal and is subject to surrender charges, as described above.
For purposes of calculating the surrender charge on Excess Withdrawals, the
Company will liquidate purchase payments in whole or in part on a "first-in,
first-out" basis. If the Owner take an Excess Withdrawal, the Company deducts
the surrender charge from the Owner's Account Value remaining after paying the
amount requested. The Company includes any surrender charge assessed in the
calculation of any applicable Market Value Adjustment for withdrawals from the
Fixed Account. Withdrawals may be made by writing or by telephoning the
Company's Customer Service Center. The maximum allowable withdrawal will be
determined by reference to computations as of the close of the Business Day the
request is received. Special handling procedures will be implemented to assure
that withdrawal benefits are paid within seven days after a request is received.
However, delays may be permitted in the circumstances described in Section
III.I., below.
Effect of Withdrawals on Death Benefits. Withdrawals will have a permanent
- ---------------------------------------
effect on death benefits. When a withdrawal is made, Account Value is reduced
by the amount of the withdrawal (including any associated surrender charges and
Market Value Adjustment incurred), and the Insurance Amount is reduced by the
same percentage that the Account Value is reduced.
D. Lapses
If the Surrender Value on a Monthly Processing Date is less than the monthly
charges, a 61 day grace period is allowed for the payment of sufficient
purchase payment to keep the Contract in force. The grace period begins on the
date when a notice is sent to the Owner. The notice will state the minimum
amount of purchase payment required to keep the Contract in force and the date
by which the payment must be paid. The Contract will terminate with no value
unless this payment is made.
E. Monthly Deductions
On each Monthly Deduction Date, redemptions in the form of deductions will be
made from Account Value for the Monthly Deduction Amount. The Monthly Deduction
Amount equals:
the Asset-Based Charges (described below), plus
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<PAGE>
the Cost of Insurance Charge (described below), plus
the cost of any riders for which a separate charge is assessed, and plus
any other applicable charge that we assess.
On a Monthly Processing Date that is also a Contract Anniversary, the Monthly
Deduction Amount equals the Monthly Deduction Amount described above, plus the
Annual Administration Charge.
Asset-Based Charges. Asset-based charges are calculated as a percentage of the
- -------------------
Owner's Account Value as of the date deducted. On the Contract Date, and
monthly thereafter, the Company deducts the charges proportionately from the
Sub-Accounts in which each Owner is invested.
The maximum asset-based charges are:
Annual Charge Asset-Based Charges Monthly Charge
- ------------- ------------------- --------------
1.80% Contract Years 1-10 .150000%
1.30% Contract Years 11+ .108333%
Asset-Based Charges will also apply to any Loan Account Value. (If an Owner has
not taken a loan, then no charges will be assessed.) The charges applicable to
the Loan Account Value are, on an annual basis, .90% (.075000% monthly),
decreasing to .40% (.033333% monthly) after the tenth Contract Year.
If proceeds are applied to a Settlement Option, the Company will deduct the
Asset-Based Charges daily from the assets in each Variable Sub-Account
supporting variable income payments. These charges as referred to as Variable
Sub-Account Charges when applied to the proceeds under a Settlement Option.
Cost of Insurance Charge. The cost of insurance charge is the actual monthly
- ------------------------
charge that the Company deducts from an Owner's Account Value. It will not
exceed the Guaranteed Maximum Monthly Cost of Insurance Charge. This charge is
calculated as a percentage of Account Value on the date of deduction and depends
on a number of variables including age and rate class of the insured. On the
Contract Date, and monthly thereafter, the Company deducts the current cost of
insurance charge in proportion to the Sub-Accounts in which an Owner is
invested.
The cost of insurance charges will vary from Contract to Contract. However, the
Company will apply any charge it makes on a uniform basis for Insureds of the
same risk class and attained age.
14
<PAGE>
F. Annual Administration Charge.
The Company deducts an annual administration charge of $40 for the first seven
Contract Years (i) on each Contract Anniversary, and (ii) on the day of any
surrender if the surrender is not on the Contract Anniversary. The Company will
waive this charge on and after the eighth Contract Anniversary, or if the
Account Value is at least $50,000 when it would have otherwise deducted the
annual administration charge.
G. Death Benefit
Payment of Death Proceeds. The Contract provides for a payment to the
- -------------------------
designated Beneficiary if the Insured dies while the Contract is in force. This
payment is called the "Death Proceeds," and equals:
the death benefit described below; plus
any additional insurance on the Insured's life that may be provided by
riders to the Contract; minus
any Debt from Contract loans, minus
any due and unpaid charges; and minus
any amounts previously paid under the Accelerated Death Benefit Rider
plus accrued interest.
The Owner or his Beneficiary decides how he or she wishes to receive the Death
Proceeds. The Owner or his Beneficiary can elect payment in a single sum, in
which case the Contract will terminate; or the Owner or his Beneficiary may
apply proceeds under one of the Settlement Options in the Contract.
The Company will pay the death benefit for a Contract out of its
general account. If required by state laws, the amount payable will include
interest from the date of death. An amount equal to the interest of the
Contract in the Variable and Fixed Accounts as of the date of death will be
transferred from the Account to the Company's general account.
Death Benefit. At issue, the death benefit equals the Insurance Amount shown in
- -------------
the Contract Schedule. On any Valuation Date after that, it equals the greater
of:
the Insurance Amount; or
the Minimum Death Benefit.
15
<PAGE>
However, if the state in which the Company issues a Contract does not allow it
to deduct a cost of insurance charge on or after the Contract Anniversary when
the Insured reaches age 100, the Company will limit the death benefit on and
after that anniversary to the Minimum Death Benefit.
Insurance Amount. The initial Insurance Amount depends on the amount of the
- ----------------
initial purchase payment and the age and sex of the Insured. It remains level
unless the Owner makemakes additional purchase payments or withdrawals.
Additional payments may increase the Insurance Amount. Withdrawals reduce the
Insurance Amount in the same proportion as the Account Value is reduced.
Minimum Death Benefit. To ensure that the Contract continues to qualify as life
- ---------------------
insurance under the Code, the Company calculates a Minimum Death Benefit for
each Valuation Date. The Minimum Death Benefit equals (a) times (b), where:
(a) is the Account Value plus any positive Market Value Adjustment on the
date of calculation; and
(b) is the Minimum Death Benefit Percentage from the Internal Revenue
Code Section 7702.
Proof of Death. The Company will pay the Death Proceeds to the Beneficiary
- --------------
after it receives satisfactory proof of death at the Customer Service Center.
The Company will accept one of the following items:
1. An original certified copy of an official death certificate, or
2. An original certified copy of a decree of a court of competent
jurisdiction as to the finding of death, or
3. Any other proof satisfactory to the Company.
Insurance Amount Increases. If an Owner makes additional purchase payments, the
- --------------------------
Company may have to increase the Insurance Amount so that the Contract continues
to qualify as life insurance under the Code. The Company reserves the right to
require satisfactory evidence of insurability of any increase in the Insurance
Amount. In addition, the Company reserves the right to require that the
Insured's risk class be identical to that on the Contract Date. Other than in
connection with making additional purchase payments, the Company does not
currently permit Owners to request increases in their Insurance Amounts.
Payment of the death benefit is subject to the suicide and incontestability
provisions of the Contract and any applicable state law requirements. Payment
will be made promptly and in any case within seven days after the last of the
conditions is met.
16
<PAGE>
H. Contract Loans
While the Contract is in force, and after the "free-look" period, the Owner may
borrow from the Company using the Contract as collateral security. The Owner
requests a loan by giving the Company Satisfactory Notice. The maximum amount
the Owner may borrow is the Maximum Loanable Value, described below. The
minimum loan amount is $250.
Loans will be made upon written request. The check for the loan proceeds will
be mailed from the Customer Service Center, usually the next Business Day after
the request is received. The date of the loan will be the date on which the
check for the loan proceeds is issued. The maximum loanable value of the
Contract will be determined by reference to computations at the close of
business the preceding day -- after the request for the loan was submitted but
before processing took place -- and interest will accrue on the loan from the
date of the check.
When a Contract loan is effected, the loan amount is taken from the
Sub-Accounts in proportion to the Account Value in the Sub-Accounts in which an
Owner is invested as of the date the Company processes the loan.
Maximum Loanable Value. The maximum amount that an Owner may borrow ("maximum
- ----------------------
loanable value") is 90% of the Account Value less any surrender charge and less
any due and unpaid Monthly Deduction Amount, adjusted for any Market Value
Adjustment. The amount of the loan and all existing loans may not be more than
the maximum loanable value as of the loan date, which is the date the Company
processes the loan.
If on any Valuation Date where there is Debt outstanding and the Surrender Value
is negative, the Company will send the Owner an overloan notice at his last
known address. The Owner will then have 61 days from the date the notice is
sent to avoid termination of the Contract by paying us at least the minimum
repayment amount listed in the notice.
Loan Repayment. Owners may repay all or part of theirs loan at any time while
- --------------
the Contract is in force during the Insured's lifetime. Any loan repayment must
be at least $250. If the Grace Period has expired and the Contract has
terminated, any Debt that exists at the end of the Grace Period may not be
repaid unless the Owner reinstates the Contract.
Unless told otherwise, the Company will transfer an amount equal to the loan
repayment from the Loan Account to the Sub-Accounts in the same proportion as
most recent purchase payment.
Loan Interest. Interest on the loan accrues daily at a Loan Interest Rate of 6%
- -------------
per annum, and is due on each Contract Anniversary. If an Owner does not pay
loan interest when due, the Company will transfer the difference between the
Loan Account and Debt from the Sub-Accounts to the Loan Account in proportion
to the Account Value in each Sub-Account in which
17
<PAGE>
the Owner is invested.
Interest Credited. The portion of Account Value represented by the Loan Account
- -----------------
will earn interest daily from the date of transfer at a minimum Loan Credited
Rate of 4% per annum. However, the Preferred Loan Amount will earn interest
daily at a Loan Credited Rate that is currently 6% per annum. The Preferred
Loan Amount equals:
The part of a Loan equal to cumulative earnings (i.e., the excess of
the Account Value on the date of the Loan over unliquidated purchase
payments), and
Any loan carried over from an existing contract to a Contract as part
of a valid 1035 Exchange, as defined by the Internal Revenue Code.
Effects of a Loan. When a loan is taken, the Company transfers funds
- -----------------
proportionately from the Sub-Accounts in which the Owner is invested to the Loan
Account. The Company also transfers any loan interest that becomes due that is
not paid from Sub-Accounts to the Loan Account. A Market Value Adjustment may
apply to amounts taken from the Fixed Sub-Accounts. Since the Company transfers
the amount borrowed from the Sub-Accounts, a loan whether or not repaid, will
have a permanent effect on Surrender Value and may have a permanent effect on
the death benefit. This is because the Loan Account does not share in the
investment results of the Sub-Accounts. Rather, the Loan Account earns interest
daily at the Loan Credited Rate. Depending upon how the investment results
compare to the Loan Credited Rate, this effect may be favorable or unfavorable.
This is true whether the loan is repaid or not. If not repaid, the loan will
reduce the amount of Death Proceeds.
I. Settlement Options
The Surrender Value or Death Proceeds may be paid in a single sum or under one
of four (4) Settlement Options. In addition to these Settlement Options,
payment may be made by any other method to which the Company agrees. If the
amount available to apply under any of the Settlement Options is less than a
minimum amount shown in the Contract Schedule, the Company reserves the right to
require that such amount paid in a lump sum. Also, if at any time the payments
under the Settlement Option become less than the minimum payment shown in the
Schedule, the Company reserves the right to reduce the frequency of payment to
an interval that results in each payment being at least equal to the minimum
payment. However, in no event will the interval be less frequent than annual.
Unless the Owner specifies otherwise, the Company will provide either variable
or fixed payments, or a combination of fixed and variable payments, in
proportion to the Sub-Accounts in which the Owner is invested as of a date not
more than five (5) Valuation Days before the due date of the first payment.
Once payments have begun under a Settlement Option, the Company reserves the
right to disallow further changes.
18
<PAGE>
J. Lump Sum Payments by the Company
The Company will normally pay any death proceeds, loan, withdrawal, or surrender
proceeds within seven days after receipt at our Customer Service Center of all
requirements. The Company will determine the amount as of the date our Customer
Service Center receives all requirements. However, the Company may delay making
payments, applying Settlement Options, or processing transfers if:
. The disposal or valuation of the Variable Account's assets is not
reasonably practicable because the New York Stock Exchange is closed for
other than a regular holiday or weekend, trading is restricted by the
SEC, or the SEC declares that an emergency exists; or
. The SEC, by order, permits postponement of payment to protect our Owners.
The Company also may defer making payments attributable to a check that has not
cleared (which may take up to 15 days), and may defer payments proceeds from the
Fixed Account for withdrawal, surrender, loan or transfer request for up to six
months from the date the request is received, if permitted by state law.
K. Redemption Errors
In accordance with industry practice, the Company will establish procedures to
address and to correct errors in amounts redeemed from the Sub-Accounts and the
Fixed Account, except for deminimis amounts. The Company will assume the risk
of any non deminimus errors caused by the Company.
L. Misstatement of Age, Sex or Survival
The Company may require proof of age, sex or survival of any person on whose
age, sex or survival any payments depend. If the age or sex of the Insured has
been mistated, the benefits will be those that the initial purchase payment and
any additional purchase payments would have provided for the correct age or sex.
M. Incontestability
The Company will not contest the payment of the Death Proceeds based upon the
initial purchase payment after the Contract has been in force during the
Insured's lifetime for two years from the Issue Date. For any increase in
Insurance Amount requiring evidence of insurability, the Company will not
contest payment of the Death Proceeds based on such an increase after it has
been in force during the Insured's lifetime for two years from its effective
date.
N. Suicide
If the Insured dies, while sane or insane, within two years from the Issue Date,
the Company will not pay the Death Proceeds normally payable on the Insured's
death. Instead, the Company will limit the death benefit to the Account Value
as of the date the Company receives proof of death. The Company will otherwise
calculate Death Proceeds in the usual manner. If the Insured dies by suicide,
while sane or insane, within two years of any date the Company receives and
accepts an additional purchase payment, any amount of death benefit that would
not be payable except for the fact the additional purchase payment was made will
be limited to the amount of such payment.
19
