<PAGE> 1
As filed with the Securities and Exchange Commission on December 31, 1998
File No. 333-43329
File No. 811-08581
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. _____ [ ]
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 2 [X]
THE SAGE VARIABLE ANNUITY 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) 324-6338
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
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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 flexible payment
deferred combination fixed and variable annuity 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.
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CROSS REFERENCE SHEET
PURSUANT TO RULE 481(a) AND 495(a)
Showing location in Part A (Prospectus) and Part B (Statement of Additional
Information) of Registration Statement of Information required by Form N-4
PART A
<TABLE>
<CAPTION>
ITEM OF FORM N-4 PROSPECTUS CAPTION
- ---------------- ------------------
<S> <C>
1. Cover Page .................................. Cover Page
2. Definitions .................................. Index of Terms
3. Synopsis ..................................... Fee Table; Profile
4. Condensed Financial Information............... How is Contract Performance Presented?
5. General
(a) Depositor............................. What other information should I know?
(b) Registrant............................ What other information should I know?
(c) Portfolio Company..................... What are my investment options?
(d) Fund Prospectus....................... Cover Page
(e) Voting Rights......................... What other information should I know?
(f) Administrators........................ What other information should I know?
6. Deductions and Expenses
(a) General .............................. What are the expenses under a Contract?
(b) Sales Load %.......................... Fee Table; Example
(c) Special Purchase Plan................. What are the expenses under a Contract?
(d) Commissions........................... What other information should I know?
(e) Fund Expenses ........................ Fee Table; Example
(f) Expenses - Registrant................. Fee Table; What are the expenses under a Contract?
(g) Organizational Expenses............... N/A
7. Contracts
(a) Persons with Rights................... What are the Contracts?; What are my income payment
options?; How do I purchase a Contract?; How do I
access my money?; What other information should I know?
(b) (i) Allocation of Purchase Payments What are my investment options?
(ii) Transfers What are my investment options?
(iii) Exchanges....................... N/A
(c) Changes .............................. What other information should I know?
(d) Inquiries ............................ What are my investment options?; What other information
should I know?
8. Annuity Period.................................. What are my income payment options?
9. Death Benefit................................... Does the Contract have a death benefit?
</TABLE>
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<TABLE>
<S> <C>
10. Purchase and Contract Value
(a) Purchases............................ How do I purchase a Contract?
(b) Valuation............................. What are my investment options?
(c) Daily Calculation.................... What are my investment options?
(d) Underwriter........................... What other information should I know?
11. Redemptions
(a) By Owners............................ How do I access my money?
By Annuitant........................ What are my income payment options?
(b) Texas OR.............................. N/A
(c) Check Delay........................... How do I access my money?
(d) Lapse................................. N/A
(e) Free Look............................. What other information should I know?
12. Taxes.......................................... How will my Contract be taxed?
13. Legal Proceedings.............................. What other information should I know?
14. Table of Contents for the Statement of
Additional Information....................... Table of Contents of the Statement of Additional Information
</TABLE>
PART B
<TABLE>
<CAPTION>
ITEM OF FORM N-4 PART B CAPTION
- ---------------- --------------
<S> <C>
15. Cover Page.................................... Cover Page
16. Table of Contents............................. Table of Contents
17. General Information and History............... N/A
18. Services
(a) Fees and Expenses of Registrant....... N/A
(b) Management Contracts.................. N/A
(c) Custodian ............................ N/A
Independent Accountant........... Experts
(d) Assets of Registrant.................. N/A
(e) Affiliated Person..................... N/A
(f) Principal Underwriter................. Distribution of the Contracts
19. Purchase of Securities Being Offered Distribution of the Contracts
Offering Sales Load....................... N/A
20. Underwriters.................................. Distribution of the Contracts
21. Calculation of Performance Data............... Calculation of Historical Performance Data
22. Annuity Payments.............................. Income Payment Provisions
23. Financial Statements.......................... Financial Statements
</TABLE>
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PART C
OTHER INFORMATION
<TABLE>
<CAPTION>
ITEM OF FORM N-4 PART C CAPTION
- ---------------- --------------
<S> <C> <C>
24. Financial Statements and Exhibits............. Financial Statements and Exhibits
(a) Financial Statements.................. (a) Financial Statements
(b) Exhibits.............................. (b) Exhibits
25. Directors and Officers of the Depositor....... Directors and Officers of the Depositor.
26. Persons Controlled By or Under Common... Persons Controlled By or Under
Control with the Depositor or Registrant... Common Control with the Depositor or Registrant
27. Number of Contract Owners..................... Number of Contract Owners
28. Indemnification............................... Indemnification
29. Principal Underwriters........................ Principal Underwriter
30. Location of Accounts and Records.............. Location of Books and Records
31. Management Services........................... Management Services
32. Undertakings.................................. Undertakings and Representations
Signature Page ............................ Signatures
</TABLE>
<PAGE> 6
PROFILE DATED _________________________, 1999
FLEXIBLE PAYMENT DEFERRED COMBINATION FIXED AND VARIABLE ANNUITY CONTRACTS
Issued By
THE SAGE VARIABLE ANNUITY ACCOUNT A AND
SAGE LIFE ASSURANCE OF AMERICA, INC.
THIS PROFILE IS A SUMMARY OF SOME IMPORTANT POINTS THAT YOU
SHOULD KNOW AND CONSIDER BEFORE PURCHASING A CONTRACT. THE
CONTRACT IS MORE FULLY DESCRIBED IN THE FULL PROSPECTUS THAT
ACCOMPANIES THIS PROFILE. PLEASE READ THAT PROSPECTUS CAREFULLY.
"We," "us," "our", "Sage Life" or the "Company" refer to Sage Life Assurance of
America, Inc. "You" and "your" refer to the Owner of a Contract.
1. WHAT ARE THE CONTRACTS?
The fixed and variable annuity Contract offered by Sage Life Assurance
of America, Inc. is a contract between you, the Owner, and us, Sage Life, an
insurance company.
We designed the Contract for use in your long-term financial and
retirement planning. It provides a means for allocating amounts on a
tax-deferred basis to our Variable Account and Fixed Account.
INVESTMENT FLEXIBILITY. Through our Variable Account you can invest
in up to 33 different investment portfolios (each a "Fund"). These Funds,
listed in Section 4, 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, 5, 7, and 10 years. 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 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.
As your needs or financial or retirement 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.
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SAFETY OF SEPARATE ACCOUNTS. Significantly, both the Fixed and
Variable Accounts are considered separate investment accounts of Sage Life.
This provides you with an important safety feature: the assets supporting your
allocations to these Accounts cannot be charged with liabilities arising out of
any other business we may conduct.
The Contract also provides you with other important features,
including a death benefit, access to your money, and income plan options.
ACCESS TO AMOUNTS INVESTED. The Contract provides access to your
investment should you need it. During the savings, or Accumulation Phase, your
investment grows tax free until withdrawn. You decide how much to take and
when to take it (certain restrictions apply after the Accumulation Phase).
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. Amounts you surrender or withdraw may be
subject to a surrender charge, and a Market Value Adjustment (positive or
negative) may apply if you take the amount from the Fixed Account.
PROTECTION FOR YOUR BENEFICIARIES. The Contract also provides a death
benefit feature to protect your family should you die during the Accumulation
Phase. In the event of your untimely death, the Beneficiary of your choice
will never receive less than you have invested in the Contract, and may even
receive more. Your Beneficiary will decide how he or she wishes to receive the
death benefit.
INCOME PAYMENTS. The payout, or Income Phase, of your Contract begins
when you inform us you want to start receiving regular income payments under
the various income plans we offer. You can use your Account Value to provide
income payments that are guaranteed, or income payments that vary with
underlying investment performance, or a combination of both. The income
payments can be for life, which means you can't outlive them!
A portion of each income payment is ordinarily considered a return of
your investment in the Contract. So, only the portion in excess of this amount
is taxed as income!
2. WHAT ARE MY INCOME PAYMENT OPTIONS?
Once the Income Phase of your Contract begins, we apply your Account
Value to provide you with regular income payments.
You can tailor your income to meet your needs by choosing from five
different income plans described below. In explaining the income plans, we are
assuming that you designate yourself as the Annuitant. Of course, you always
can designate someone other than yourself as Annuitant.
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Income Plan 1 - Life Annuity: You will receive payments for your life.
Income Plan 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.
Income Plan 3 - Joint and Last Survivor Life Annuity: Payments will be
made as long as either you or a second person you select (such
as your spouse) is alive.
Income Plan 4 - Payments for a Specified Period Certain: You will
receive payments for the number of years you select. However,
if you die before the end of that period, your Beneficiary
will receive the payments for the remainder of the guaranteed
certain period.
Income Plan 5 - Annuity Plan: You can use your Account Value to
purchase any other income plan we offer at the time you want to
begin receiving regular income payments for which you and the
Annuitant are eligible.
You tell us how much of your Account Value to apply to fixed income
payments and to variable income payments. During the Income Phase, you still
have all of the investment choices you had prior to beginning income payments.
However, we currently limit transfers among your investment choices.
We will allocate the amount of Account Value you apply to provide
fixed income payments to the Fixed Account. The amount of each income payment
is guaranteed and remains level throughout the period you select.
We will allocate the amount of Account Value 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.
3. HOW DO I PURCHASE A CONTRACT?
In most cases, you may purchase a Contract with $5,000 or more.
For tax-qualified Contracts (like IRAs) we require only $2,000, but,
of course, for rollovers you always have the flexibility to invest more.
In addition, subject to limitations for tax-qualified Contracts, you
can add $250 or more to your Contract at any time during the Accumulation
Phase.
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4. WHAT ARE MY INVESTMENT OPTIONS?
There are 40 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 investment 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 following 33 Funds that are described in the
prospectuses for the Trusts:
- 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. 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
- MFS(R) Variable Insurance Trust(TM)
[ ] MFS Growth With Income Series
[ ] MFS High Income Series
[ ] MFS Research Series
[ ] MFS Total Return Series
[ ] MFS Value Series
- Morgan Stanley Universal Funds, Inc.
[ ] Global Equity Portfolio
[ ] Mid Cap Value Portfolio
[ ] Value Portfolio
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- Oppenheimer Variable Account Funds
[ ] Oppenheimer Bond Fund
[ ] Oppenheimer Growth Fund
[ ] Oppenheimer Small Cap Growth Fund
- Sage Life Investment Trust
[ ] EAFE 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
These Funds do not provide any performance guarantees, and therefore,
their values can increase or decrease depending upon investment performance.
Through our Fixed Account, you can choose to have your money invested
in one or more of 7 different periods for which we will guarantee your
principal and a rate of interest when your investment is left in the Fixed
Account for the entire period of the guarantee. You currently can choose
periods of 1, 2, 3, 4, 5, 7, and 10 years. However, if you decide to surrender
your Contract, or transfer or access amounts before the end of a period you
have chosen, we ordinarily will apply a Market Value Adjustment, which may be
positive or negative depending upon current interest rates.
5. 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:
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 - We deduct Asset-Based Charges for mortality and
expense risks and for certain administrative costs monthly from the amounts you
allocate to the Variable Account. These charges are equal on an annual basis to
1.40% of Variable Account Value, decreasing to 1.25% after the seventh Contract
Year.
Surrender Charge - During the first seven Contract Years only, we
ordinarily will deduct a surrender charge when you surrender your Contract or
withdraw money in excess of the Free Withdrawal Amount. The maximum applicable
percentage is 7% in the first Contract Year, and declines to 0% in the eighth
Contract Year. We calculate the surrender charge as a percentage of the
purchase payment(s) you surrender or withdraw.
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Purchase Payment Tax Charge - During the first seven Contract Years
only, we will deduct any state premium tax that we incur if you surrender your
Contract or begin receiving regular income payments. This tax charge ranges
from 0% to 3.5% depending upon the state. We currently do not intend to deduct
this charge on or after the eighth Contract Year.
Fund Fees and Expenses - There are also Fund fees and expenses that
are based on the average daily value of your money invested in the Funds.
These charges range on an annual basis from 0.55% to 1.25%, depending upon the
Fund.
Sage Life's business strategy is to reward our long-term customers.
So, as you can see, after the seventh Contract Year we
eliminate the Annual Administration Charge
eliminate Surrender Charges
eliminate the Purchase Payment Tax Charge, if any
reduce Asset-Based Charges
This means more of your investment is working for you!
The following chart is designed to help you understand expenses under the
Contract.
<TABLE>
<CAPTION>
Examples of
Total Expenses
Total Annual Total Annual Total Annual Paid at the End
Fund Insurance Charges Fund Charges Charges of 1 Year
---- ----------------- ------------ ------- ---------
<S> <C> <C> <C> <C>
AIM VARIABLE INSURANCE
FUNDS, INC.:
AIM V.I. Government
Securities Fund 1.53% 0.87% 2.40% $25
AIM V.I. Growth and
Income Fund 1.53% 0.69% 2.22% $23
AIM V.I. International
Equity Fund 1.53% 0.93% 2.46% $25
AIM V.I. Value Fund 1.53% 0.70% 2.23% $23
THE ALGER AMERICAN FUND:
Alger American MidCap
Growth Portfolio 1.53% 0.84% 2.37% $24
Alger American Income and
Growth Portfolio 1.53% 0.74% 2.27% $23
</TABLE>
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<TABLE>
<CAPTION>
Examples of
Total Expenses
Total Annual Total Annual Total Annual Paid at the End
Fund Insurance Charges Fund Charges Charges of 1 Year
---- ----------------- ------------ ------- ---------
<S> <C> <C> <C> <C>
Alger American Small
Capitalization Portfolio 1.53% 0.89% 2.42% $25
LIBERTY VARIABLE INVESTMENT TRUST:
Colonial High Yield Securities
Fund, Variable Series 1.53% 0.80% 2.33% $24
Colonial Small Cap Value Fund,
Variable Series 1.53% 1.00% 2.53% $26
Colonial Strategic Income Fund,
Variable Series 1.53% 0.80% 2.33% $24
Colonial U.S. Stock Fund,
Variable Series 1.53% 0.94% 2.47% $25
Liberty All-Star Equity Fund,
Variable Series 1.53% 1.00% 2.53% $26
Newport Tiger Fund,
Variable Series 1.53% 1.25% 2.78% $29
Stein Roe Global Utilities
Fund, Variable Series 1.53% 0.83% 2.36% $24
STEINROE VARIABLE INVESTMENT TRUST:
Stein Roe Growth Stock
Fund, Variable Series 1.53% 0.71% 2.24% $23
Stein Roe Balanced Fund,
Variable Series 1.53% 0.66% 2.19% $23
MFS VARIABLE INSURANCE TRUST:
MFS Growth With
Income Series 1.53% 1.00% 2.53% $26
MFS High Income Series 1.53% 1.00% 2.53% $26
MFS Research Series 1.53% 0.88% 2.41% $25
MFS Total Return Series 1.53% 1.00% 2.53% $26
MFS Value Series 1.53% 1.00% 2.53% $26
MORGAN STANLEY UNIVERSAL FUNDS, INC.:
Global Equity Portfolio 1.53% 1.15% 2.68% $28
Mid Cap Value Portfolio 1.53% 1.05% 2.58% $27
Value Portfolio 1.53% 0.85% 2.38% $24
</TABLE>
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<TABLE>
<CAPTION>
Examples of
Total Expenses
Total Annual Total Annual Total Annual Paid at the End
Fund Insurance Charges Fund Charges Charges of 1 Year
---- ----------------- ------------ ------- ---------
<S> <C> <C> <C> <C>
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
Oppenheimer Bond Fund 1.53% 0.78% 2.31% $24
Oppenheimer Growth Fund 1.53% 0.75% 2.28% $23
Oppenheimer Small Cap
Growth Fund 1.53% 0.83% 2.36% $24
SAGE LIFE INVESTMENT TRUST:
EAFE Equity Index Fund 1.53% 0.90% 2.43% $25
S&P 500 Equity Index
Fund 1.53% 0.55% 2.08% $21
Money Market Fund 1.53% 0.65% 2.18% $22
T. ROWE PRICE EQUITY SERIES, INC.:
T. Rowe Price Equity
Income Portfolio 1.53% 0.85% 2.38% $24
T. Rowe Price Mid-Cap
Growth Portfolio 1.53% 0.85% 2.38% $24
T. Rowe Price Personal Strategy
Balanced Portfolio 1.53% 0.90% 2.43% $25
</TABLE>
Below is an explanation of what we included in each column of the
chart:
The column "Total Annual Insurance Charges" shows the sum
of the Asset-Based Charges and the Annual Administration
Charge (for purposes of the chart, we assume the average
Account Value is $30,000 and the Annual Administration
Charge to be 0.13% of the value of an average Contract).
The column "Total Annual Fund Charges" shows the fees and
expenses for each Fund.
AIM ADVISORS INC. A I M Advisors, Inc. ("AIM") may from time to time
voluntarily waive or reduce its fees. Effective May 1, 1998, the Funds
reimburse AIM in an amount up to 0.25% of the average net asset value of each
Fund, for expenses incurred in providing, or assuring that participating
insurance companies provide, certain administrative services. Currently, the
fee only applies to the average net asset value of each Fund in excess of the
net asset value of each Fund as calculated on April 30, 1998.
Liberty Variable Investment Trust's Colonial High Yield Securities
Fund and Colonial SmallCap Value Fund did not commence Operations until 1998.
The figures shown are based on estimates for the current fiscal year. The
charges shown for Colonial Strategic Income Fund and Liberty All-Star Equity
Fund during 1997 reflect the fact that the Funds' investment adviser agreed to
reimburse the Colonial Strategic Income Fund and Liberty All-Star Equity Fund
for certain expenses incurred by each Fund. Without such reimbursements, the
expenses for the Colonial Strategic Income Fund and Liberty All-Star Equity
Fund would have been 0.82% and 1.45%, respectively.
The charges shown for MFS Variable Insurance Trust's Growth with Income
Series, High Income Series, Total Return Series and Value Series during 1997
reflect the fact that
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<PAGE> 14
the Fund's investment adviser agreed to reimburse MFS Variable Insurance Trust's
Growth with Income Series, High Income Series, Total Return Series and Value
Series for certain expenses incurred by each Fund. Without such
reimbursements, the expenses for the MFS Variable Insurance Trust's Growth with
Income Series, High Income Series, Total Return Series and Value Series would
have been 1.45%, 1.55%, 1.29%, and 3.41%, respectively.
The charges shown for Morgan Stanley Universal Funds, Inc. during 1997
reflect the fact that the Fund's investment advisers agreed to reimburse the
Global Equity Portfolio, Mid Cap Value Portfolio, and Value Portfolio for
certain expenses incurred by each Fund. Without such reimbursements, the
expenses for the Global Equity Portfolio, MidCap Value Portfolio, and Value
Portfolio would have been 2.43%, 2.13% and 1.87%, respectively.
Oppenheimer Variable Account Fund's Small Cap Growth Fund did not
commence operations until 1998. The figures shown are based on estimates for
the current fiscal year.
Sage Life Investment Trust has not commenced operations. The charges
shown are based on estimates and reflect the fact that the Trust's investment
adviser agrees to reimburse each Fund for certain expenses. Without such
reimbursements, the expenses of Sage Life Investment Trust's EAFE Equity Index
Fund, S&P 500 Equity Index Fund, and Money Market Fund would be 1.07%, .72% and
..82%, respectively.
The column "Total Annual Charges" shows the sum of "Total Annual
Insurance Charges" and "Total Annual Fund Charges."
The next column shows you examples of the charges, in dollars, you
could pay under a Contract for each $1,000 you invested. The example assumes
that your Contract earns 5% annually before charges.
For more information about expenses under a Contract, please refer to
the "Fee Table" in the full Prospectus that accompanies this Profile.
6. HOW WILL MY CONTRACT BE TAXED?
During the Accumulation Phase, your earnings are not taxed unless you
take them out. If you take money out, earnings come out first and are taxed as
income. If you are younger than 59 1/2 when you take money out, you also may
be charged a 10% federal tax penalty on the withdrawn earnings.
Income payments during the Income Phase are considered partly a return
of your original investment. That part of each payment is not taxable as
income. However, once you have recovered all of your original investment,
income payments will then be fully taxable.
Special tax rules apply to withdrawals from a new type of IRA called
the Roth IRA.
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<PAGE> 15
7. HOW DO I ACCESS MY MONEY?
There are a number of ways to withdraw money from your Contract. You
can tailor your income to meet your near-term or lifelong liquidity needs.
During the Accumulation Phase, if you want to take money out of your
Contract, you can choose among several different options.
You can withdraw some of your money.
You can surrender your Contract and take all of your money.
You can take withdrawals using our systematic partial withdrawal
program.
You can apply your Account Value to an Income Plan.
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, the
Contract does provide a Free Withdrawal Amount, an amount not subject to a
surrender charge, that is equal to your cumulative earnings, or if greater, 10%
of total purchase payments you have invested. In addition, if you take the
amount from the Fixed Account, a Market Value Adjustment ordinarily will apply,
and if you are younger than 59 1/2 when you take money out, you may owe a 10%
federal tax penalty. Please remember that withdrawals will reduce your death
benefit.
Once you start receiving regular income payments and if you selected
the "payments for a specified period certain" income plan, you may request a
withdrawal.
8. HOW IS CONTRACT PERFORMANCE PRESENTED?
Because our Variable Sub-Accounts have not been in operation for more
than a year, we cannot show you how the Funds performed in the Variable
Account. When they have been in operation for a year or more, we will show you
the Funds' performance using standard methods prescribed by the SEC.
Please remember that the performance data represents past performance.
Amounts you invest in the Variable Account will fluctuate daily based on
underlying Fund investment performance, so the value of your investment may
increase or decrease.
9. DOES THE CONTRACT HAVE A DEATH BENEFIT?
Your Contract provides two different types of death benefits for your
Beneficiary. There is the basic death benefit and the accidental death
benefit.
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<PAGE> 16
BASIC DEATH BENEFIT. We will pay the basic death benefit to the
Beneficiary of your choice in the event of your untimely death prior to the
Income Phase. This provides comfort knowing your Beneficiary will receive the
greatest of the following:
the current Account Value on the date we receive proof of death;
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); or
the highest anniversary value on or before you reach age 80.
The highest anniversary value is equal to the greatest anniversary
value attained in the following manner. When we receive proof of death, we
will calculate an anniversary value for each Contract Anniversary prior to the
date of the Owner's death, but not beyond the Owner's attained age 80. An
anniversary value for a Contract Anniversary is equal to (1) the Account Value
on that Contract Anniversary, (2) increased by the dollar amount of any
purchase payments made since the Contract Anniversary, and (3) reduced
proportionately by any withdrawals (including any associated surrender charge
and Market Value Adjustment incurred) taken since that Contract Anniversary.
(By proportionately, we take the percentage by which the withdrawal decreases
the Account Value and we reduce the sum of (1) and (2) by that percentage.)
ACCIDENTAL DEATH BENEFIT. The Contract also provides an accidental
death benefit during the Accumulation Phase at no additional cost. If you die
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 is equal to 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.
10. 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 and send you a refund equal to your Account Value
plus any charges we have deducted on or before the date we received the
returned Contract, or if required by the law of your state, your initial
purchase payment (less any withdraws previously taken). In the states where we
are required to return purchase payment less withdrawals, if you allocated
amounts
11
<PAGE> 17
to the Variable Account, we will temporarily allocate those amounts to the
Money Market Fund until the Free Look Period expires.
DOLLAR-COST AVERAGING PROGRAM: Under our optional Dollar-Cost
Averaging Program, you may choose to transfer a set dollar amount
systematically from the Money Market Fund 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 proven investment technique 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 strategy to help
meet your long-term or retirement goals. Due to the effect of interest that
continues to be paid on the amount remaining in the Money Market Fund 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.
WAIVER OF SURRENDER CHARGE RIDER: This rider, which is automatically
included in your Contract at no additional cost, 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, or if you have a terminal
illness. Certain restrictions apply, and this feature may not be available in
all states.
11. 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.
12
<PAGE> 18
PROSPECTUS DATED ___________, 1999
SAGE LIFE ASSURANCE OF AMERICA, INC.
FLEXIBLE PAYMENT DEFERRED COMBINATION FIXED AND VARIABLE ANNUITY
CONTRACTS
ISSUED BY
THE SAGE VARIABLE ANNUITY ACCOUNT A AND
SAGE LIFE ASSURANCE OF AMERICA, INC.
<TABLE>
<S> <C>
Executive Office: Customer Service Center:
300 Atlantic Street 1290 Silas Deane Highway
Stamford, CT 06901 Wethersfield, CT 06109
Telephone: (877) 835-7243 (Toll Free)
</TABLE>
UNLESS OTHERWISE INDICATED, THIS PROSPECTUS DESCRIBES THE OPERATION OF
THE CONTRACTS BEFORE THE INCOME DATE. DEFINITIONS OF CERTAIN TERMS USED IN
THIS PROSPECTUS MAY BE FOUND BY REFERRING TO THE INDEX OF TERMS.
This Prospectus describes flexible payment deferred combination fixed
and variable annuity contracts offered by Sage Life Assurance of America, Inc.
We designed the Contracts for use in your long-term financial and retirement
planning. They provide a means for investing 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 any additional purchase payments.
You may allocate purchase payments and transfer Account Value to our
Variable Account and also to our Fixed Account within certain limits. We
divided the Variable Account into 33 Sub-Accounts.
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(TM), Morgan Stanley Universal Funds, Inc., Oppenheimer Variable Account
Funds, Sage Life Investment Trust, or T. Rowe Price Equity Series, Inc.
(collectively, the "Trusts"). The accompanying prospectuses describe each of
the Funds, including the risks of investing in each Fund, and provide other
information about the Trusts.
Your Account Value will vary daily as a function of 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 guarantee a minimum fixed rate of
interest for specified periods of time on the amounts you allocate to the Fixed
Account. However, amounts withdrawn, surrendered, transferred, or applied to an
income plan from the Fixed Account ordinarily will be subject to a Market Value
Adjustment, which may increase or decrease such amounts. The Contracts provide
additional benefits, including five income plan options, a death benefit upon
any Owner's death before the Income Date, and optional programs including
dollar-cost averaging, asset allocation, automatic portfolio rebalancing, and
systematic partial withdrawals.
<PAGE> 19
This Prospectus sets forth basic information about the Contracts, the
Variable Account, and the Fixed Account that you should know before purchasing
a Contract. You should read the Prospectus carefully and retain it for future
reference.
The Statement of Additional Information contains more information about
the Contracts and the Variable Account, is dated the same as this Prospectus,
and is incorporated herein by reference. The Table of Contents for the
Statement of Additional Information is on page ____ of this Prospectus. It has
been filed with the Securities and Exchange Commission. You may obtain a copy
of the Statement of Additional Information free of charge by contacting our
Customer Service Center at the address or phone number shown above. You may
also obtain a copy of the Prospectus and Statement of Additional Information by
accessing the Securities and Exchange Commission's website at
http://www.sec.gov.
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 SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
VARIABLE ANNUITY 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> 20
TABLE OF CONTENTS
Index of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fee Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1. What are the Contracts? . . . . . . . . . . . . . . . . . . . . . . . . . .
2. What are my Income Payment Options? . . . . . . . . . . . . . . . . . . . .
3. How do I Purchase a Contract? . . . . . . . . . . . . . . . . . . . . . . .
Initial Purchase Payment . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of a Contract . . . . . . . . . . . . . . . . . . . . . . . . .
Free Look Right to Cancel Contract . . . . . . . . . . . . . . . . . . .
Making Additional Purchase Payments . . . . . . . . . . . . . . . . . .
4. What are my Investment Options? . . . . . . . . . . . . . . . . . . . . . .
Purchase Payments Allocations . . . . . . . . . . . . . . . . . . . . .
Variable Sub-Account Investment Options . . . . . . . . . . . . . . . .
Fixed Account Investment Options . . . . . . . . . . . . . . . . . . . .
Market Value Adjustment . . . . . . . . . . . . . . . . . . . . . . . .
Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Telephone Transfers . . . . . . . . . . . . . . . . . . . . . . . . . .
Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dollar-Cost Averaging Program . . . . . . . . . . . . . . . . . . . . .
Asset Allocation Program . . . . . . . . . . . . . . . . . . . . . . . .
Automatic Portfolio Rebalancing Program . . . . . . . . . . . . . . . .
Account Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Surrender Value . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Variable Account Value . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulation Unit Value . . . . . . . . . . . . . . . . . . . . . . . .
Net Investment Factor . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed Account Value . . . . . . . . . . . . . . . . . . . . . . . . . .
5. What are the Expenses under a Contract?
Surrender Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Annual Administration Charge . . . . . . . . . . . . . . . . . . . . . .
Transfer Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset-Based Charges . . . . . . . . . . . . . . . . . . . . . . . . . .
Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. How will my Contract be Taxed?
Tax Status of the Contract . . . . . . . . . . . . . . . . . . . . . . .
Tax Treatment of Annuities . . . . . . . . . . . . . . . . . . . . . . .
Taxation of a Non-Qualified Contract . . . . . . . . . . . . . . . . . .
Taxation of a Qualified Contract . . . . . . . . . . . . . . . . . . . .
Other Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . .
i
<PAGE> 21
7. How do I access my Money?
Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Systematic Partial Withdrawal Program . . . . . . . . . . . . . . . . .
IRA Partial Withdrawal Program . . . . . . . . . . . . . . . . . . . . .
Requesting Payments . . . . . . . . . . . . . . . . . . . . . . . . . .
8. How is Contract Performance Presented?
9. Does the Contract have a Death Benefit?
Basic Death Benefit . . . . . . . . . . . . . . . . . . . . . . . . . .
Accidental Death Benefit . . . . . . . . . . . . . . . . . . . . . . . .
Proof of Death . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10. What Other Information Should I Know?
Separate Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution of the Contacts . . . . . . . . . . . . . . . . . . . . . .
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reports to Contract Owners . . . . . . . . . . . . . . . . . . . . . . .
Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change of Owner, Beneficiary, or Annuitant . . . . . . . . . . . . . . .
Misstatement and Proof of Age, Sex, or Survival . . . . . . . . . . . .
Incontestability . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Authority to Make Agreements . . . . . . . . . . . . . . . . . . . . . .
Preparing for the Year 2000 . . . . . . . . . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . .
11. How Can I Make Inquiries?
12. Additional Information about Sage Life Assurance of America, Inc.
History and Business . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . .
Transactions with Sage Insurance Group . . . . . . . . . . . . . . . . .
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors and Executive Officers . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS OF SAGE LIFE ASSURANCE OF AMERICA, INC.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
APPENDIX A
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
ii
<PAGE> 22
INDEX OF TERMS
We have tried to make this Prospectus as readable and understandable as
possible. However, for you to understand how the Contracts work, we have had
to use 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 during the Accumulation Phase. It is equal to the sum of the Variable
Account Value and Fixed Account Value.
Accumulation Phase - The Accumulation Phase is the period during which you
accumulate savings under your Contract.
Accumulation Unit - An Accumulation Unit is the unit of measure we use before
the Income Date to keep track of the value of each Variable Sub-Account.
Annuitant - The Annuitant is the natural person whose age determines the
maximum Income Date and the amount and duration of income payments involving
life contingencies. The Annuitant may also be the person to whom any payment
will be made starting on the Income Date.
Asset-Based Charges - The Asset-Based Charges are charges for mortality and
expense risks and for administrative costs assessed monthly against the assets
of the Variable Account. After the Income Date, these charges are called
Variable Sub-Account Charges and are deducted daily from the assets of the
Variable Account.
Beneficiary - The Beneficiary is the person or persons to whom we pay a death
benefit if any Owner dies before the Income Date.
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.
Code - The Code is the Internal Revenue Code of 1986, as amended.
Contracts - The Contracts are flexible payment deferred combination fixed and
variable annuity contracts offered by us, Sage Life Assurance of America, Inc.
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
1
<PAGE> 23
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 date an individual Contract or a
certificate for a group Contract is issued at our Customer Service Center.
Contract Year - A Contract Year is each and every consecutive twelve-month
period beginning on the Contract Date and the anniversaries thereof.
Customer Service Center - The Customer Service Center is where we provide
service to you. The administrator of our center is Financial Administration
Services, Inc. The mailing address and telephone number of the Customer
Service Center are shown on the first page of this Prospectus.
Excess Withdrawal - An Excess Withdrawal is a withdrawal of Account Value that
exceeds the Free Withdrawal Amount.
Executive Office - The Executive Office is our main office. The mailing
address of our Executive Office is shown on the first page of this Prospectus.
Expiration Date - The Expiration Date is the last day in a Guarantee Period.
In the Contract, this is referred to as the "Expiry Date."
Fixed Account - The Fixed Account is The Sage Fixed Interest Account A. It is
a separate investment account of ours under state insurance law (but is not
required to be nor has it been registered under the federal securities laws)
into which purchase payments may be invested or Account Value may be
transferred. In certain states, we refer to the Fixed Account as the Interest
Account.
Fixed Account Value - The Fixed Account Value is the sum of the value of each
Fixed Sub-Account on a Business Day during the Accumulation Phase.
Fixed Sub-Account - A Fixed Sub-Account is established when a purchase payment
is invested or an amount is transferred to the Fixed Account. Each Fixed
Sub-Account is credited with a Guaranteed Interest Rate for a specified
Guarantee Period.
Free Withdrawal Amount - The Free Withdrawal Amount is the maximum amount that
can be withdrawn within a Contract Year during the Accumulation Phase without
being subject to a surrender charge.
Fund - A Fund is an investment portfolio in which a Variable Sub-Account
invests.
2
<PAGE> 24
General Account - The General Account consists of all our assets other than
those held in any separate investment accounts.
Guaranteed Interest Rate - A Guaranteed Interest Rate is the effective annual
interest rate that we will credit for a specified Guarantee Period for amounts
allocated to a Fixed Sub-Account. The Guaranteed Interest Rate will never be
less than the minimum shown in your Contract.
Guarantee Period - A Guarantee Period is a period of years for which a
specified effective annual interest rate (Guaranteed Interest Rate) is
guaranteed by us. Interest is credited daily at a rate to yield the declared
annual Guaranteed Interest Rate.
Income Date - The Income Date is the date you select for your income payments
to begin.
Income Phase - The Income Phase starts on the Income Date and is the period
during which you receive income payments.
Income Unit - An Income Unit is the unit of measure we use to calculate the
amount of income payments under a variable income plan option.
Market Value Adjustment - A Market Value Adjustment is a positive or negative
adjustment that may apply to a surrender, withdrawal, or transfer, and to
amounts applied to an income plan from a Fixed Sub-Account before the end of
its Guarantee Period.
Net Asset Value - The Net Asset Value is the price of one share of a Fund.
Owner - The Owner is 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 authorized by
you, in a form satisfactory to us, received at our Customer Service Center.
Surrender Value - The Surrender Value is the amount you receive upon surrender
of your Contract before the Income Date.
Valuation Period - The Valuation Period is the period between one calculation
of an Accumulation Unit value and the next calculation. Normally, we calculate
Accumulation Units once each Business Day, but 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 if the SEC permits such
deferral.
Variable Account - The Variable Account is The Sage Variable Annuity Account A.
It is a separate investment account of ours under the federal securities laws
into which purchase payments may be invested or Account Value may be
transferred.
3
<PAGE> 25
Variable Account Value - The Variable Account Value is the sum of the value of
each Variable Sub-Account on a Business Day during the Accumulation Phase.
Variable Sub-Account - A Variable Sub-Account is a division of the Variable
Account that invests in shares of a particular Fund.
Variable Sub-Account Charges - Variable Sub-Account Charges are Asset-Based
Charges that are deducted daily from the assets of the Variable Account after
the Income Date.
"We", "us", "our", "Sage Life" or the "Company" is Sage Life Assurance of
America, Inc.
"You" or "your" is the Owner of a Contract. You are entitled to exercise all
rights under a Contract. However, if you designate an irrevocable beneficiary,
you may need the consent of that beneficiary before you exercise your rights
under your Contract. Your death before the Income Date initiates payment of
the death benefit.
4
<PAGE> 26
FEE TABLE
The purpose of this Fee Table is to assist you in understanding the expenses
that you will pay directly or indirectly when you invest in the Contract.
TRANSACTION EXPENSES
Sales Load Imposed on Purchases (as a percentage of purchase
payments) . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Surrender Charge(1) (as a percentage of purchase payments withdrawn or
surrendered.)
<TABLE>
<CAPTION>
Applicable Maximum Applicable Surrender
Contract Year Charge Percentage
<S> <C>
1 7%
2 7%
3 6%
4 5%
5 4%
6 3%
7 1%
8 and thereafter 0%
</TABLE>
<TABLE>
<S> <C>
Transfer Charge(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0
Annual Administration Charge
Contract Years 1-7(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $40
After Contract Year 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0
</TABLE>
In addition, the amount of any state and local taxes levied by any governmental
entity on purchase payments may be deducted from your Account Value when such
taxes are incurred. We reserve the right to defer the collection of this
charge and deduct it against your Account Value on the surrender of a Contract,
on an Excess Withdrawal, or on application of Account Value to provide income
payments. We refer to this as the Purchase Payment Tax Charge.
VARIABLE ACCOUNT ANNUAL EXPENSES(4) (deducted monthly as a percentage of the
Variable Account Value)
<TABLE>
<CAPTION>
Contract Years
--------------
1 - 7 8 +
----- ---
<S> <C> <C>
Mortality and Expense Risk Charge 1.25% 1.10%
Asset-Based Administrative Charge 0.15% 0.15%
----- -----
Total Asset-Based Charges 1.40% 1.25%
</TABLE>
5
<PAGE> 27
Fund Charges. The fees and expenses for each of the Funds (as a percentage of
net assets) for the year ended December 31, 1997 are set forth in the following
table. For more information on these fees and expenses, see the prospectuses
for the Trusts that accompany this Prospectus.
FUND ANNUAL EXPENSES (as a percentage of average daily net assets of a Fund)
<TABLE>
<CAPTION>
Management Fees Other Expenses
(after fee waiver (after reimbursement- Total
Fund as applicable) as applicable) Expenses
---- -------------- -------------- --------
<S> <C> <C> <C>
AIM VARIABLE INSURANCE
FUNDS, INC.:
AIM V.I. Government
Securities Fund 0.50% 0.37% 0.87%(5)
AIM V.I. Growth and
Income Fund 0.63% 0.06% 0.69%(5)
AIM V.I. International
Equity Fund 0.75% 0.18% 0.93%(5)
AIM V.I. Value Fund 0.62% 0.08% 0.70%(5)
THE ALGER AMERICAN FUND:
Alger American MidCap
Growth Portfolio 0.80% 0.04% 0.84%
Alger American Income and
Growth Portfolio 0.625% 0.115% 0.74%
Alger American Small
Capitalization Portfolio 0.85% 0.04% 0.89%
LIBERTY VARIABLE INVESTMENT TRUST:
Colonial High Yield Securities
Fund, Variable Series 0.60% 0.20% 0.80%(6)
Colonial Small Cap Value Fund,
Variable Series 0.80% 0.20% 1.00%(6)
Colonial Strategic Income Fund,
Variable Series 0.65% 0.15% 0.80%(7)
Colonial U.S. Stock Fund,
Variable Series 0.80% 0.14% 0.94%
Liberty All-Star Equity Fund,
Variable Series 0.80% 0.20% 1.00%(7)
</TABLE>
6
<PAGE> 28
<TABLE>
<CAPTION>
Management Fees Other Expenses
(after fee waiver (after reimbursement- Total
Fund as applicable) as applicable) Expenses
---- -------------- -------------- --------
<S> <C> <C> <C>
Newport Tiger Fund,
Variable Series 0.90% 0.35% 1.25%
Stein Roe Global Utilities
Fund, Variable Series 0.65% 0.18% 0.83%
STEINROE VARIABLE INVESTMENT TRUST:
Stein Roe Growth Stock
Fund, Variable Series 0.65% 0.06% 0.71%
Stein Roe Balanced Fund,
Variable Series 0.60% 0.06% 0.66%
MFS VARIABLE INSURANCE TRUST:
MFS Growth With Income Series 0.75% 0.25%(7) 1.00%(8)
MFS High Income Series 0.75% 0.25%(7) 1.00%(8)
MFS Research Series 0.75% 0.13% 0.88%(8)
MFS Total Return Series 0.75% 0.25%(7) 1.00%(8)
MFS Value Series 0.75% 0.25%(7) 1.00%(8)
MORGAN STANLEY UNIVERSAL FUNDS, INC.:
Global Equity Portfolio 0.00% 1.15% 1.15%(9)
Mid Cap Value Portfolio 0.00% 1.05% 1.05%(9)
Value Portfolio 0.00% 0.85% 0.85%(9)
OPPENHEIMER VARIABLE FUNDS:
Oppenheimer Bond Fund 0.73% 0.05% 0.78%
Oppenheimer Growth Fund 0.73% 0.02% 0.75%
Oppenheimer Small Cap
Growth Fund 0.75% 0.08% 0.83%
SAGE LIFE INVESTMENT TRUST:
EAFE Equity Index Fund 0.73% 0.17% 0.90%(10)
S&P 500 Equity Index Fund 0.38% 0.17% 0.55%(10)
Money Market Fund 0.48% 0.17% 0.65%(10)
T. ROWE PRICE EQUITY SERIES, INC.:
T. Rowe Price Equity
Income Portfolio 0.85% 0.00% 0.85%
</TABLE>
7
<PAGE> 29
<TABLE>
<CAPTION>
Management Fees Other Expenses
(after fee waiver (after reimbursement- Total
Fund as applicable) as applicable) Expenses
---- -------------- -------------- --------
<S> <C> <C> <C>
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/ You may withdraw a portion of your Account Value without incurring a
surrender charge. This amount is called the Free Withdrawal Amount and is equal
to the greater of (i) 10% of your 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).
2/ Currently, there is no transfer charge. However, we reserve the right
to charge up to $25 for the 13th and each subsequent transfer during a Contract
Year.
3/ We waive the Annual Administration Charge if the Account Value is at
least $50,000 on the date of deduction.
4/ We call the Asset-Based Charges Variable Sub-Account Charges and deduct
them on a daily basis after the Income Date. See "What are the Expenses under
the Contract?" on page __.
5/ AIM ADVISORS INC. A I M Advisors, Inc. ("AIM") may from time to time
voluntarily waive or reduce its fees. Effective May 1, 1998, the Funds
reimburse AIM in an amount up to 0.25% of the average net asset value of each
Fund, for expenses incurred in providing, or assuring that participating
insurance companies provide, certain administrative services. Currently, the
fee only applies to the average net asset value of each Fund in excess of the
net asset value of each Fund as calculated on April 30, 1998.
6/ Liberty Variable Investment Trust's Colonial High Yield Securities Fund
and Colonial Small Cap Value Fund did not commence operations until 1998. The
figures shown are based on estimates for the current fiscal year.
7/ Without reimbursements, the total expenses for Liberty Variable
Investment Trust's Colonial Strategic Income Fund and Liberty All-Star Equity
Fund during 1997 would have been 0.82% and 1.45%, respectively.
8/ Without reimbursements, the other expenses and total expenses for MFS
Variable Insurance Trust's Growth with Income Series, High Income Series, Total
Return Series and Value Series during 1997 would have been .35% and 1.10%, .40%
and 1.15%, .27% and 1.02%, and 1.33% and 2.08%, respectively.
9/ Without reimbursements, the total expenses for of Morgan Stanley
Universal Funds, Inc.'s Global Equity Portfolio, Mid Cap Value Portfolio, Value
Portfolio would have been 2.43%, 2.13%, and 1.87%, respectively.
8
<PAGE> 30
10/ These Funds have not commenced operations. The figures shown
are based on estimates. Without reimbursements, the total expenses of Sage
Life Investment Trust's EAFE Equity Index Fund, S&P 500 Equity Index Fund, and
Money Market Fund would be 1.07%, .72%, and .82%, respectively.
EXAMPLES
The purpose of the following examples is to demonstrate the expenses
that you would pay on a $1,000 investment in the Variable Account. We
calculate the examples based on the fees and charges shown in the tables above.
For a more complete description of these expenses, see "What are the Expenses
under a Contract?" beginning on page __ of this Prospectus, and see the
prospectuses for the Trusts. The Examples assume that the average Account
Value is $30,000, and that you have invested all your money in the Variable
Account.
You should not consider the Examples a representation of past or future
expenses. Actual expenses may be greater or less than those shown. In
addition, we do not reflect Purchase Payment Tax Charges. These charges may
apply depending on the state where the Contract is sold. You might also incur
transfer fees if you make more than twelve transfers in a Contract Year. See
"Transfer Charge," page _. The assumed 5% annual rate of return is
hypothetical. You should not consider it to be a representation of past or
future annual returns, which may be greater or less than this assumed rate.
You would pay the following expenses on a $1,000 initial purchase
payment, assuming a 5% annual return on assets and the charges listed
in the Fee Table above.
<TABLE>
<CAPTION>
1. If you surrender 2. If you do not surrender
your Contract at the end of your Contract at the end of
Fund each time period each time period
- ----
1 Year 3Years 1 Year 3 Years
------ ------ ------ -------
<S> <C> <C> <C> <C>
AIM VARIABLE INSURANCE
FUNDS, INC.:
AIM V.I. Government $95 $138 $25 $78
Securities Fund
AIM V.I. Growth and $93 $132 $23 $72
Income Fund
AIM V.I. International $95 $140 $25 $80
Equity Fund
AIM V.I. Value Fund $93 $132 $23 $72
</TABLE>
9
<PAGE> 31
<TABLE>
<CAPTION>
1. If you surrender 2. If you do not surrender
your Contract at the end of your Contract at the end of
Fund each time period each time period
----
1 Year 3Years 1 Year 3 Years
------ ------ ------ -------
<S> <C> <C> <C> <C>
THE ALGER AMERICAN FUND:
Alger American MidCap $94 $137 $24 $77
Growth Portfolio
Alger American Income and $93 $134 $23 $74
Growth Portfolio
Alger American Small $95 $138 $25 $78
Capitalization Portfolio
LIBERTY VARIABLE INVESTMENT TRUST:
Colonial High Yield $94 $136 $24 $76
Securities Fund, Variable Series
Colonial Small Cap Value $96 $142 $26 $82
Fund, Variable Series
Colonial Strategic Income $94 $136 $24 $76
Fund, Variable Series
Colonial U.S. Stock Fund, $95 $140 $25 $80
Variable Series
Liberty All-Star Equity Fund, $96 $142 $26 $82
Variable Series
Newport Tiger Fund, $99 $150 $29 $90
Variable Series
Stein Roe Global Utilities $94 $136 $24 $76
Fund, Variable Series
STEINROE VARIABLE INVESTMENT TRUST:
Stein Roe Growth Stock $93 $133 $23 $73
Fund, Variable Series
Stein Roe Balanced Fund, $93 $131 $23 $71
Variable Series
MFS VARIABLE INSURANCE TRUST:
MFS Growth With Income $96 $142 $26 $82
Series
MFS High Income Series $96 $142 $26 $82
MFS Research Series $95 $138 $25 $78
</TABLE>
10
<PAGE> 32
<TABLE>
<CAPTION>
1. If you surrender 2. If you do not surrender
your Contract at the end of your Contract at the end of
Fund each time period each time period
----
1 Year 3Years 1 Year 3 Years
------ ------ ------ -------
<S> <C> <C> <C> <C>
MFS Total Return Series $96 $142 $26 $82
MFS Value Series $96 $142 $26 $82
MORGAN STANLEY UNIVERSAL FUNDS, INC.:
Global Equity Portfolio $98 $147 $28 $87
Mid Cap Value Portfolio $97 $144 $27 $84
Value Portfolio $94 $137 $24 $77
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
Oppenheimer Bond Fund $94 $135 $24 $75
Oppenheimer Growth Fund $93 $134 $23 $74
Oppenheimer Small Cap $94 $136 $24 $76
Growth Fund
SAGE LIFE INVESTMENT TRUST:
EAFE Equity Index Fund $95 $139 $25 $79
S&P 500 Equity Index Fund $91 $127 $21 $67
Money Market Fund $92 $131 $22 $71
T. ROWE PRICE EQUITY SERIES, INC.:
T. Rowe Price Equity $94 $137 $24 $77
Income Portfolio
T. Rowe Price Mid-Cap $94 $137 $24 $77
Growth Portfolio
T. Rowe Price Personal $95 $139 $25 $79
Strategy Balanced Portfolio
</TABLE>
1. WHAT ARE THE CONTRACTS?
The Contracts are flexible payment deferred combination fixed and
variable annuity Contracts offered by us, Sage Life Assurance of America, Inc.
Throughout this Prospectus, the term "Contracts" refers to individual
Contracts, group Contracts, and certificates for group Contracts. We designed
the Contracts for use in long-term financial and retirement planning. They
provide a means for investing amounts on a tax-deferred basis in our Variable
Account and our Fixed Account.
Under the terms of the Contracts, we promise to pay you (or the
Annuitant, if the Owner is other than an individual) regular income payments
after the Income Date. Until the
11
<PAGE> 33
Income Date, you may make additional purchase payments under the Contract, and
will ordinarily not be taxed on increases in the value of your Contract as long
as you do not take distributions. When you use the Contract in connection with
tax-qualified retirement plans, federal income taxes may be deferred on your
purchase payments, as well as on increases in the value of your Contract. See
"How will my Contract be Taxed?" on page ___. The Contracts may not be
available in all states.
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." Purchase payments allocated to a Variable
Sub-Account will be invested solely in a Fund, as you direct. Your Account
Value in a Variable Sub-Account will vary according to the investment
performance of the corresponding Fund. Depending on market conditions, your
value in each Variable Sub-Account could increase or decrease. No minimum
value is guaranteed. The total of the values in the Variable Sub-Accounts is
called the Variable Account Value.
You can also allocate purchase payments to our Fixed Account. See
"Fixed Account Investment Option, " page ___. The Fixed Account includes Fixed
Sub-Accounts to which we credit fixed rates of interest for the Guarantee
Periods you select. We currently offer Guarantee Periods with durations of 1,
2, 3, 4, 5, 7, and 10 years. If any amount allocated or transferred remains in
a Guarantee Period until the Expiration Date, its value will be equal to the
amount originally allocated or transferred, multiplied, on an annually
compounded basis, by its Guaranteed Interest Rate. Any surrender, withdrawal,
transfer, or amount applied to an income plan from a Fixed Sub-Account before
its Expiration Date ordinarily will be subject to a Market Value Adjustment
that may increase or decrease the value of the Fixed Sub-Account (or portion
thereof) being surrendered, withdrawn, transferred, or applied to an income
plan. See "Market Value Adjustment" page _____.
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
"Transfers," page __.
Sage Life may offer other variable annuity 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. WHAT ARE MY INCOME PAYMENT OPTIONS?
You choose the Income Date or other agreed upon date when you want
regular income payments to begin. The Income Date you choose must be on or
before the first calendar month following the Annuitant's 95th birthday. We
reserve the right to require that your Income Date be at least two years after
the Contract Date. After you choose the Income Date, you select an income plan
from the list below, and indicate whether you want your
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<PAGE> 34
income payments to be fixed or variable or a combination of fixed and variable.
You must give Satisfactory Notice of your choices at least 30 days prior to the
Income Date, and you must have at least $5,000 of Account Value to apply to a
variable or fixed income option.
On the Income Date, the Account Value under the Contract (adjusted for
any Market Value Adjustment, if applicable) will be used to provide income
payments. Unless you request otherwise, we will use any Variable Account Value
to provide variable income payments, and we will use any Fixed Account Value to
provide fixed income payments. If you have not chosen an income plan by the
Income Date, a "life annuity with 10 years certain" (described below) will be
used.
The available income plans are:
- INCOME PLAN 1 - LIFE ANNUITY. An amount payable
during the lifetime of the Annuitant terminating with the last
payment preceding the death of the Annuitant.
- INCOME PLAN 2 - LIFE ANNUITY WITH 10 OR 20 YEARS
CERTAIN. An amount payable during the lifetime of the
Annuitant with the guarantee that payments be made for a
minimum of 10 or 20 years, as elected.
- INCOME PLAN 3 - JOINT AND LAST SURVIVOR LIFE ANNUITY.
An amount payable during the joint lifetime of the Annuitant
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.
- INCOME PLAN 4 - PAYMENTS FOR A SPECIFIED PERIOD
CERTAIN. An amount payable for the number of years selected
which may be from 5 to 30 years.
- INCOME PLAN 5 - ANNUITY PLAN. An amount can be used
to purchase any other income plan we offer on the Income Date
for which you and the Annuitant are eligible.
Your first income payment, whether fixed or variable, will be based on
the amount of proceeds applied under the income plan you have selected and on
the "annuity purchase rates" based on the Annuitant's age and sex, and if
applicable upon the age and sex of a second designated person. The annuity
purchase rate we apply will never be lower than the rate shown in your
Contract.
If you have told us you want fixed income payments, the amount of each
income payment is guaranteed and remains level throughout the period you
selected. If you told us you want variable income payments, the amount of
variable income payments will vary
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<PAGE> 35
according to the investment performance of the Funds you selected to support
your variable income payments. If you told us that you want a life annuity, it
is possible that you could only receive one payment.
Your income payments will be made monthly, unless you choose quarterly,
semi-annual or annual payments by giving us Satisfactory Notice at least 30
days prior to the Income Date. Payments start on the Income Date. 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. Also, if on
the Income Date, the Account Value is less than $5,000, we may pay the
Surrender Value on that date in one sum.
3. HOW DO I PURCHASE A CONTRACT?
INITIAL PURCHASE PAYMENT. Contracts may be purchased for use in
connection with tax-qualified plans ("Qualified Contracts"), or may be
purchased on a non-tax qualified basis ("Non-Qualified Contracts"). To
purchase a Contract, you and the Annuitant you selected may not be more than 85
years old on the Contract Date. A minimum initial purchase payment is required
depending on whether you are purchasing a Non-Qualified or Qualified Contract,
as shown in the following table:
<TABLE>
<CAPTION>
Minimum Initial Purchase Payment Required
<S> <C>
Non-Qualified Contract $5,000
Qualified Contract $2,000
</TABLE>
ISSUANCE OF A CONTRACT. Once we receive your initial purchase payment
and your application at our Customer Service Center, we will usually issue your
Contract within two Business Days. However, if you did not give us all the
information we need, we will try to contact you to get the additional needed
information. If we cannot complete the application within five Business Days,
we will either send your money back or obtain your permission to keep your
money until we receive the necessary information. Your Contract 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 expires 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. You will
receive a refund of your Account Value plus any charges we have deducted on or
before the date we receive your returned Contract at our Customer Service
Center, or if required by the law of your state, your initial purchase payment
(less any withdraws previously taken). In those latter states where this
requirement exists, amounts you allocate to the Variable Account will be
temporarily allocated to the Money Market Fund until the Free Look Period
expires. See "What are my Investment Options," page ___.
14
<PAGE> 36
MAKING ADDITIONAL PURCHASE PAYMENTS. You may make additional purchase
payments of $250 or more at any time before the Income Date, subject to the
following conditions. We will accept additional purchase payments under a
Non-Qualified Contract until the earlier of the year in which you attain age 85
or the year in which the Annuitant attains age 85. We will accept additional
purchase payments under a Qualified Contract until the year in which you attain
70 1/2, except contributions to a Roth IRA or rollover contributions may be
made until the year in which you attain age 85. You must obtain our prior
approval before you make a purchase payment that causes the Account Value of
all annuities that you maintain with us to exceed $1,000,000. We will credit
any purchase payment received after the Contract Date to your Contract as of
the Business Day on which we receive it at our Customer Service Center.
Purchase payments received on other than a Business Day will be deemed received
on the next following Business Day.
In addition, if you have not made a purchase payment for more than two
years and your Account Value is less than $2,000 on a Contract Anniversary, we
may cancel your Contract and pay you the Surrender Value as though you had
surrendered by giving you written notice at your address of record. However,
you will be allowed 61 days from the date of that notice to submit an
additional purchase payment in an amount sufficient to maintain your Account
Value at $2,000 or more. If we have not received the required additional
purchase payment by the end of this period, we may cancel your Contract.
4. 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 may, however, require that an initial purchase payment allocated to
a Variable Sub-Account be temporarily invested in the Money Market Fund 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 your initial purchase payment was temporarily
allocated to the Money Market Fund by us, we will transfer the value of what is
in the Money Market Fund to the Variable Sub-Account(s) you specified in your
application. Solely for the purpose of processing transfers from the Money
Market Fund, we will deem the Free Look Period to end 15 days after the
Contract Date. This transfer from the Money Market Fund to the Variable
Sub-Accounts upon the expiration of the Free Look Period does not count as a
transfer for any other purposes under the Contract.
15
<PAGE> 37
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.
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. GOVERNMENT SECURITIES FUND. This Fund seeks to achieve a high
level of current income consistent with reasonable concern for safety of
principal by investing in debt securities issued, guaranteed, or otherwise
backed by the U.S. Government.
AIM V.I. GROWTH AND INCOME FUND. This Fund seeks to provide growth of
capital, with current income as a secondary objective. The Fund seeks to
achieve its objective by generally investing at least 65% of its net assets in
stocks of companies believed by the management to have the potential for above
average growth in revenues and earnings.
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, the issuers of which are considered by the
Fund's investment adviser 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 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 markets generally. Income is a secondary objective.
AIM 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.
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO. This Fund seeks to provide
a high level of dividend income through investments in equity securities.
Capital appreciation is a secondary objective 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 or the
S&P SmallCap 600 Index.
16
<PAGE> 38
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. STOCK FUND, VARIABLE SERIES ("U.S. Stock Fund"). This
Fund seeks long-term growth by investing primarily in large capitalization
equity securities.
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. Stock 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.
17
<PAGE> 39
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(TM)
MFS GROWTH WITH INCOME SERIES. This Fund seeks to provide reasonable
current income and long-term growth of capital and income. Under normal market
conditions, the MFS Growth with Income Series will invest at least 65% of its
assets in equity securities of companies that are believed to have long-term
prospects for growth 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.
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 of companies 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 VALUE SERIES. This Fund seeks capital appreciation. Dividend
income, if any, is a consideration incidental to the Fund's objective of
capital appreciation.
Massachusetts Financial Services Company advises the MFS(R) Variable
Insurance Trust.(TM)
18
<PAGE> 40
MORGAN STANLEY 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 various measures such
as price/earnings ratios and price/book ratios.
Morgan Stanley Asset Management 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. 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 GROWTH FUND. This Fund seeks to achieve capital
appreciation by investing in securities of well-known, established companies.
OPPENHEIMER SMALL CAP GROWTH FUND. 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 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 EQUITY INDEX FUND. This Fund seeks to replicate as closely as
possible the performance of the Morgan Stanley Capital International Europe,
Australasia, Far East Index before the deduction of Fund expenses.
19
<PAGE> 41
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 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 and also long-term capital appreciation.
T. ROWE PRICE MID-CAP GROWTH PORTFOLIO. This Fund seeks to provide
long-term capital appreciation by investing primarily in common stocks of
medium-sized (mid-cap) growth companies.
T. ROWE PRICE PERSONAL STRATEGY BALANCED PORTFOLIO. The Fund seeks to
provide the highest total return over time consistent with an emphasis on both
capital appreciation 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 the investment objectives and policies 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 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
20
<PAGE> 42
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 whose Account Values are allocated to the
Variable Account, and owners of other contracts whose contract values are
allocated 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 pursuant to 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. The Trusts' prospectuses should be read carefully before any
decision is made concerning the allocation of 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. Each Fixed Sub-Account is guaranteed an interest rate (the
"Guaranteed Interest Rate") for a period of time (a "Guarantee Period"). A
Guaranteed Interest Rate is established on the date that an allocation is made
to the Fixed Sub-Account.
We have no specific formula for establishing the Guaranteed Interest
Rates for the different Guarantee Periods. The determination made 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. These
amounts will be invested 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 grades assigned by Moody's Investor Services,
Inc., Standard & Poor's Corporation, or any
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<PAGE> 43
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
Association, 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, 5, 7, and 10 years. We may offer different Guarantee
Periods in the future. Not all Guarantee Periods may be available in all
states. Any Guarantee Period you select cannot be longer than the number of
full years remaining until your Income Date.
We will notify you at least thirty days prior to an Expiration Date of
a Fixed Sub-Account in which you are invested of your options for renewal. Your
options are:
1. 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 or
extending beyond the Income Date, as of day the previous Fixed
Sub-Account expires. If such Guarantee Period is not
currently available, your value will be transferred to the
next shortest Guarantee Period. If there is no shorter
Guarantee Period, we will transfer your value to the Money
Market option.
2. Elect a new Guarantee Period(s) from among those
offered by us as of the day the previous Fixed Sub-Account
expires.
3. Elect to transfer the value of the Fixed Sub-Account
to one or more Variable Sub-Accounts.
Any amounts surrendered, withdrawn, transferred or applied to an income
plan 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:
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<PAGE> 44
- - Transfers from specially designated Fixed Sub-Accounts made
automatically under our Dollar Cost Averaging Program, and
- - Withdrawals of interest earned made automatically under our Systematic
Partial Withdrawal Program.
In addition, we currently waive any Market Value Adjustment on
withdrawals taken to satisfy IRS minimum distribution requirements in relation
to your Contract.
MARKET VALUE ADJUSTMENT. A Market Value Adjustment reflects the
change in interest rates since a Fixed Sub-Account was established. 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 the Fixed Sub-Account was established, 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 the Fixed Sub-Account was established, the Market Value
Adjustment will be positive.
We will apply a Market Value Adjustment as follows:
For a surrender, withdrawal, transfer, or amount applied to an income
plan, the Market Value Adjustment will be calculated on the total amount
(including any applicable surrender charge) that must be surrendered,
withdrawn, transferred or applied to an income plan 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 applied to an
income plan.
- 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 full amount of the Fixed Sub-Account is
withdrawn, transferred or applied to an income plan, the
Market Value Adjustment increases the amount surrendered,
withdrawn, transferred, or applied to an income plan.
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,
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<PAGE> 45
transferred, or applied to an income plan from the Fixed Sub-Account in order
to provide the amount you requested.
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 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, straight-line interpolation
between the Index Rate for 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.
In the states of Maryland and Washington, state insurance law requires
that the Market Value Adjustment be computed by multiplying the amount being
surrendered, withdrawn, transferred, or applied to an income plan, by the
greater of the factor above and the following factor:
[(1.03)/(1+K)](((G-N)/365))) - 1, where N is as defined above, K equals the
Guarantee Interest Rate for the Guarantee Period, and G equals the initial
number of days in the Guarantee Period.
Examples of how the Market Value Adjustment works are shown in Appendix
A.
TRANSFERS. Prior to the Income Date and while the Annuitant is living,
you may transfer Account Value from and among the Variable and Fixed
Sub-Accounts at any time. However, in certain states, you may not transfer
Account Value until after the end of the Free Look Period. See "What are my
Investment Options?, " page __. The minimum amount of Account Value that may
be transferred from a Variable Sub-Account or a Fixed 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 Variable Sub-Accounts and/or Fixed
Sub-Accounts from which and to which transfers are to be made. 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 Variable or Fixed
Sub-Accounts.
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<PAGE> 46
A transfer ordinarily will take effect on the Business Day Satisfactory
Notice is received at our Customer Service Center. Requests received on other
than a Business Day will be deemed 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, each transfer request
will be considered one transfer, regardless of the number of Variable or Fixed
Sub-Accounts affected by the transfer.
After the Income Date, 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
after the Income Date.
TELEPHONE TRANSACTIONS. You may request transfers or withdrawals by
telephone. We will not be liable for following instructions communicated by
telephone that we reasonably believe to be genuine. To request transfers or
withdrawals 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 and may only be liable for any losses due to
unauthorized or fraudulent instructions where we fail to follow our procedures
properly. Such procedures include the following: (a) upon telephoning a
request, you or your authorized representative will be asked to provide certain
identifying information, (b) all such conversations will be tape recorded, and
(c) all such telephone transactions will be followed by a confirmation
statement of the transaction.
Our telephone transaction authorization form may also allow you to
create a power of attorney by authorizing another person to give telephone
instructions. Unless prohibited by state law, such power will be treated as a
durable power of attorney, and shall not be affected by subsequent incapacity,
disability, or incompetency of the Owner. 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 executed
in good faith reliance upon your power of attorney.
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
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<PAGE> 47
Contracts. We believe that such simultaneous transfers made by such third
parties are not in the best interest of all shareholders of the Funds, and this
position is shared by the managements of the Funds.
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,
these procedures will not prevent Owners from making their own transfer
requests.
DOLLAR-COST AVERAGING PROGRAM. Our optional dollar-cost averaging
program permits you to systematically transfer on a monthly basis, 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 specially designated Fixed Sub-Accounts ("DCA Fixed
Sub-Accounts"). These DCA Fixed Sub-Accounts may have different Guarantee
Periods and different Guaranteed Interest Rates than the Fixed Sub-Accounts.
Please consult your registered representative about the DCA Fixed Sub-Accounts.
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 Fund or a DCA Fixed Sub-Account, the
amounts that are actually transferred 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 Income Date by sending us Satisfactory Notice. The minimum
transfer amount is $250 from the Money Market Sub-Account or from a DCA Fixed
Sub-Account. All dollar-cost averaging transfers will be made on the day of
each month that corresponds to your Contract Date unless that date is not a
Business Day. Otherwise, the transfer will be made 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 the Income Date, until the Contract is surrendered,
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 a Market Value Adjustment ordinarily will be assessed on the
amount cancelled. You can request changes by writing us at our Customer
Service Center. There is
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<PAGE> 48
no additional charge for dollar-cost averaging. A transfer under this program
is not considered 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 withdrawal program.
ASSET ALLOCATION PROGRAM. You may select from six asset allocation
model portfolios, or you may use these models as a guide to help you develop
your own asset allocation model. The models are as follows:
<TABLE>
<CAPTION>
Model Investment and Risk Profile
----- ---------------------------
<S> <C>
I Stable Capital
II Stable Income
III Moderate Income
IV Moderate Growth
V Capital Growth
VI Aggressive Growth
</TABLE>
If you elect to participate in the asset allocation program, all initial and
additional purchase payments will automatically be allocated 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. It may be found that
allocation percentages among the Variable Sub-Accounts or even some of the
Variable Sub-Accounts within a particular model need to be changed. You will
be sent notice at least 30 days before any such change is made, and you will be
given 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.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM. Once your money has been
allocated among the Variable Sub-Accounts, the investment performance of each
Variable Sub-Account may cause your allocation to shift. Prior to the Income
Date, you may instruct us to
27
<PAGE> 49
automatically rebalance (on a calendar quarter, semi-annual, or annual basis)
Variable Account Value to return 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. Requests received on other than a Business Day
will be deemed 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. A transfer under this program is not considered 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. Any money allocated to
the Fixed Account will not be included 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 your
Variable Account Value and your Fixed Account Value. We determine your Account
Value first on the Contract Date and thereafter on each Business Day. The
Account Value will vary to reflect: (i) the performance of the Variable
Sub-Accounts you have selected, (ii) interest credited on amounts allocated to
the Fixed Account, and (iii) charges, transfers, withdrawals, and surrenders.
Account Value may be more or less than purchase payments paid.
SURRENDER VALUE. The Surrender Value on a Business Day before the
Income Date, is the Account Value, adjusted for any applicable Market Value
Adjustment that may be positive or negative, less any applicable surrender
charge that would be deducted if your Contract were surrendered that day, less
any applicable annual administration charge, and less any applicable Purchase
Payment Tax Charge.
VARIABLE ACCOUNT VALUE. On any Business Day, the Variable Account
Value equals the sum of the values in each Variable 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, 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, 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
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<PAGE> 50
Sub-Account at $10 when we established the Sub-Account. For each Valuation
Period after the date of establishment, the Accumulation Unit value is
determined 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 used to
measure the investment performance of a Variable Sub-Account from one Valuation
Period to the next during the Accumulation Phase. The net investment factor
for any Valuation Period is determined 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
(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 is determined by us 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. The Fixed Account Value is the sum of the value
of each Fixed Sub-Account (including a DCA Fixed Sub-Account) on any particular
day. The value in each Fixed Sub-Account is equal to: (1) the portion of the
purchase payment(s) allocated or amount transferred to the Sub-Account; plus
(2) interest at the Guaranteed Interest Rate; minus (3) any transfers from the
Sub-Account; minus (4) any withdrawals (including any associated surrender
charges) from the Sub-Account; and minus (5) any charges allocated to the
Sub-Account. We also adjust the Fixed Sub-Account Value for any Market Value
Adjustment, the value of which could be positive or negative.
5. 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 and surrenders under the Contracts; the
death benefit paid on the death of the Owner; the available investment options,
including dollar-cost averaging, asset allocation, automatic portfolio
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<PAGE> 51
rebalancing, and systematic partial withdrawal programs; administration of the
income plan options available under the Contracts; and the distribution of
various reports to Owners. Costs and expenses we incur include those
associated with various overhead and other expenses related to 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
Annuitants may live longer than estimated when the annuity factors under the
Contracts were established, that the amount of the death benefit will be
greater than Account Value, and that the costs of providing the services and
benefits under the Contracts will exceed the charges deducted. We may also
deduct a charge for taxes. See "Fee Table," page ___.
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.
Unless otherwise specified, charges are deducted proportionately from
all Variable Sub-Accounts and Fixed Sub-Accounts in which you are invested.
Charges under the Contracts may be reduced or eliminated 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:
(i) the size of the group;
(ii) the total amount of purchase payments to be received from the
group;
(iii) the purposes for which the Contracts are purchased;
(iv) the nature of the group for which the Contracts are purchased; and
(v) 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 of
ours. Reductions in Contract charges will not be unfairly discriminatory
against any person.
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. The
applicable percentage is 7% in the first Contract Year, and declines until it
reaches 0% in the eighth Contract Year.
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<PAGE> 52
If you surrender your Contract, we deduct the surrender charge from the
Account Value in determining the Surrender Value. If you take an Excess
Withdrawal, we deduct the surrender charge from the 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 a "Free
Withdrawal Amount" without incurring a surrender charge. For a table of
surrender charges and a description of the Free Withdrawal Amount, see the "Fee
Table," page __.
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 they were made: 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 requested 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 $1,000, and no
Market Value Adjustment is applicable. Your initial purchase payment was
$5,000, your current Account Value is $5,250, 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 (including any associated surrender charge and
Market Value Adjustment incurred) in that Contract Year (10% x $5,000 =
$500); and
(b) is the excess of the Account Value on the date of withdrawal over
the unliquidated purchase payments ($5,250 - $5,000 = $250).
Therefore, the Free Withdrawal amount is $500. A surrender charge will apply
to the excess of $1,000 over $500. The surrender charge is equal to $35 (7% x
$500).
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 (or the Annuitant, if the Owner is not an
individual) have a "Qualifying Terminal Illness" or have been confined
continuously to a "Qualifying Hospital or Nursing Care Facility" for at least
45 days in a 60 day period. "Qualifying Terminal Illness" and "Qualifying
Hospital or Nursing Care Facility" are defined in your Contract.
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<PAGE> 53
ANNUAL ADMINISTRATION CHARGE
We will deduct an annual administration charge of $40 during 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 fee on and after the eighth Contract Anniversary, or if the Account
Value is at least $50,000 when the annual administration charge would have
otherwise been deducted.
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, each written or telephone request is considered to be one transfer,
regardless of the number of Sub-Accounts affected by the transfer. In the event
that the transfer charge becomes applicable, it will be deducted
proportionately from the Sub-Accounts from which the transfer is made.
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.
ASSET-BASED CHARGES
We deduct Asset-Based Charges for mortality and expense risks and
administrative costs assumed by us. Prior to the Income Date, Asset-Based
Charges are deducted monthly and calculated as a percentage of the Variable
Account Value on the date of deduction. On the Contract Date and monthly
thereafter, the Asset-Based Charges are deducted proportionately from the
Variable Sub-Accounts in which you are invested. After the Income Date,
however, these charges are called Variable Sub-Account Charges and are deducted
daily from the assets of such Variable Sub-Accounts. The maximum charges are:
<TABLE>
<CAPTION>
Combined Asset-Based Charges
----------------------------
Annual Charge Monthly Charge Daily Charge
------------- -------------- ------------
<S> <C> <C> <C>
Contract Years 1-7 1.40% .116667% .0038626%
Contract Years 8+ 1.25% .104167% .0034462%
</TABLE>
We reserve the right to deduct Asset-Based Charges on the effective date of any
transfer from the Fixed Account, or allocation of purchase payment to the
Variable Account, based on the amount transferred or allocated and based on the
number of days remaining until the next date of deduction. These charges do
not apply to any Fixed Account Value.
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<PAGE> 54
FUND EXPENSES
Because the Variable Account purchases shares of the various Funds
chosen by you, the net assets of the Variable Account will reflect the
investment management fees and other operating expenses incurred by those
Funds. A table of each Fund's management fees and other expenses can be found
in the front of this Prospectus in the Fee Table. For a description of each
Fund's expenses, management fees, and other expenses, see the Trusts'
prospectuses.
6. HOW WILL MY CONTRACT BE TAXED?
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE.
COUNSEL OR OTHER COMPETENT TAX ADVISERS SHOULD BE CONSULTED FOR MORE COMPLETE
INFORMATION.
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 tax situations. This discussion is based upon our
understanding of the present federal income tax laws. No representation is
made as to the likelihood of continuation of the present federal income tax
laws or as to how they may be interpreted by the Internal Revenue Service (the
"IRS").
The Contract may be purchased on a non-tax-qualified basis or purchased
on a tax-qualified basis. A Qualified Contract is designed for use by
individuals whose purchase payments are comprised solely of proceeds from
and/or contributions under retirement plans that are intended to qualify as
plans entitled to special income tax treatment under Sections 408 or 408A of
the Code. The ultimate effect of federal income taxes on the amounts held
under a Contract, or income payments, depends on the type of retirement plan,
on the tax and employment status of the individual concerned, and on our tax
status. In addition, certain requirements must be satisfied in purchasing a
Qualified Contract with proceeds from a tax-qualified plan and receiving
distributions from a Qualified Contract in order to continue receiving
favorable tax treatment. Some retirement plans are subject to distribution and
other requirements that are not incorporated into our Contract administration
procedures. Owners, participants, and Beneficiaries are responsible for
determining whether contributions, distributions, and other transactions with
respect to the Contract comply with applicable law. Therefore, purchasers of a
Qualified Contract should seek competent legal and tax advice regarding the
suitability of a Contract for their situation. The following discussion
assumes that the Qualified Contract is purchased with proceeds from and/or
contributions under retirement plans that qualify for the intended special
federal income tax treatment.
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TAX STATUS OF THE CONTRACT
DIVERSIFICATION REQUIREMENTS. The Code requires that the investments
of the Variable Account be "adequately diversified" in order for the Contract
to be treated as an annuity contract for federal income tax purposes. It is
intended that the Variable Account, through the Funds, will satisfy these
diversification requirements.
In certain circumstances, owners of variable annuity contracts have
been considered for federal income tax purposes to be the owners of the assets
of the variable account supporting their contracts due to their ability to
exercise investment control over those assets. When this is the case, the
contract owners have been currently taxed on income and gains attributable to
the variable account assets. There is little guidance in this area, and some
features of the Contract, such as the flexibility of an Owner to allocate
purchase payments and transfer Account Values, have not been explicitly
addressed in published rulings. While we believe that the Contract does not
give an Owner investment control over Variable Account assets, we reserve the
right to modify the Contract as necessary to prevent an Owner from being
treated as the owner of the Variable Account assets supporting the Contract.
REQUIRED DISTRIBUTIONS. To be treated as an annuity contract for
federal income tax purposes, the Code requires a Non-Qualified Contract to
contain certain provisions specifying how your interest in the Contract will be
distributed in the event of your death. The Non-Qualified Contracts contain
provisions that are intended to comply with these Code requirements, although
no regulations interpreting these requirements have yet been issued. We intend
to review such provisions and modify them if necessary to assure that they
comply with the applicable requirements when such requirements are clarified by
regulation or otherwise.
Other rules may apply to a Qualified Contract.
The following discussion assumes that the Contract will qualify as an
annuity contract for federal income tax purposes.
TAX TREATMENT OF ANNUITIES
IN GENERAL. We believe that if you are a natural person you will not be
taxed on increases in the value of a Contract until a distribution occurs or
until income payments begin. (An agreement to assign or pledge any portion of
the Account Value, and, in the case of a Qualified Contract, any portion of an
interest in the qualified plan, ordinarily will be treated as a distribution.)
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TAXATION OF A NON-QUALIFIED CONTRACT
NON-NATURAL PERSON. The Owner of any annuity contract who is not a
natural person ordinarily must include in income any increase in the excess of
the Account Value over the "investment in the contract" (ordinarily, the
purchase payments or other consideration paid for the contract) during the
taxable year. There are some exceptions to this rule and a prospective Owner
that is not a natural person may wish to discuss these with a tax adviser.
The following discussion generally applies to Contracts owned by natural
persons.
WITHDRAWALS. When a withdrawal (including Systematic Withdrawals) from
a Non-Qualified Contract occurs, the amount received will be treated as
ordinary income subject to tax up to an amount equal to the excess (if any) of
the Account Value immediately before the distribution over the Owner's
investment in the Contract at that time. It is possible that a positive Market
Value Adjustment at the time of a withdrawal may be treated as part of the
Account Value immediately before the distribution. You may want to consult a
tax adviser on the tax consequences of market value adjustments.
SURRENDERS. In the case of a surrender under a Non-Qualified Contract,
the amount received ordinarily will be taxable only to the extent it exceeds
the Owner's investment in the Contract.
PENALTY TAX ON SURRENDER AND CERTAIN WITHDRAWALS. In the case of a
distribution from a Non-Qualified Contract, a federal tax penalty equal to 10%
of the amount treated as income ordinarily will be imposed. In general,
however, there is no penalty on distributions:
- made on or after the taxpayer reaches age 59 1/2;
- made on or after the death of an Owner;
- attributable to the taxpayer's becoming disabled; or
- made as part of a series of substantially equal
periodic payments for the life (or life expectancy) of
the taxpayer.
Other exceptions may be applicable under certain circumstances and
special rules may be applicable in connection with the exceptions enumerated
above. A tax adviser should be consulted regarding exceptions from the penalty
tax.
INCOME PAYMENTS. Although tax consequences may vary depending on the
payment option elected under an annuity contract, a portion of each income
payment is ordinarily not taxed and the remainder is taxed as ordinary income.
The non-taxable portion of an income payment is ordinarily determined in a
manner that is designed to allow you to recover your investment in the Contract
ratably on a tax-free basis over the expected stream of income payments, as
determined when income payments start. Once your investment in the Contract
has been fully recovered, however, the full amount of each income payment is
subject to tax as ordinary income.
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TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be distributed from a
Contract because of your death or the death of the Annuitant. Ordinarily, such
amounts are includible in the income of the recipient as follows: (i) if
distributed in a lump sum, they are taxed in the same manner as a surrender of
the Contract, or (ii) if distributed under an income payment option, they are
taxed in the same way as income payments.
TRANSFERS, ASSIGNMENTS OF A CONTRACT. A transfer or assignment of
ownership of a Contract, the designation of an Annuitant, the designation of a
payee other than yourself, the selection of certain Income Dates, or the
exchange of a Contract may result in certain tax consequences to you that are
not discussed herein. An Owner contemplating any such transfer or assignment
should consult a tax adviser as to the tax consequences.
WITHHOLDING. Annuity distributions are ordinarily subject to
withholding for the recipient's federal income tax liability. Recipients can
ordinarily elect, however, not to have tax withheld from distributions.
MULTIPLE CONTRACTS. All annuity contracts that we or our affiliates
issue to the same Owner during any calendar year are treated as one annuity
contract for purposes of determining the amount includible in such Owner's
income when a taxable distribution occurs.
TAXATION OF A QUALIFIED CONTRACT
The Contract is designed for use with several types of qualified plans.
The tax rules applicable to participants in these qualified plans vary
according to the type of plan and the terms and conditions of the plan itself.
Special favorable tax treatment may be available for certain types of
contributions and distributions. Adverse tax consequences may result from
contributions in excess of specified limits; distributions prior to age 59 1/2
(subject to certain exceptions); distributions that do not conform to specified
commencement and minimum distribution rules; and in other specified
circumstances. Therefore, no attempt is made to provide more than general
information about the use of the Contract with the various types of qualified
retirement plans. Contract Owners, Annuitants, and Beneficiaries are cautioned
that the rights of any person to any benefits under these qualified retirement
plans may be subject to the terms and conditions of the plans themselves,
regardless of the terms and conditions of the Contract, but we shall not be
bound by the terms and conditions of such plans to the extent such terms
contradict the Contract, unless we consent. For IRAs under Section 408 of the
Code (described below), distributions generally must commence no later than
April 1 of the calendar year following the calendar year in which the Owner
reaches age 70 1/2. Roth IRAs under Section 408A of the Code do not require
distributions at any time prior to the Owner's death.
WITHDRAWALS. When a withdrawal from a Qualified Contract occurs, a
pro-rata portion of the amount received is taxable, ordinarily based on the
ratio of the Owner's
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investment in the contract (ordinarily, any non-deductible purchase payments or
other consideration paid for the Contract) to the Owner's total accrued benefit
balance under the retirement plan. For a Qualified Contract, the investment in
the contract can be zero. Special tax rules apply to withdrawals from Roth
IRAs (see below). Distributions from Qualified Contracts generally are subject
to withholding for the Owner's federal income tax liability. The withholding
rate varies according to the type of distribution and the Owner's tax status.
The Owner will be provided the opportunity to elect not to have tax withheld
from distributions.
Brief descriptions follow of the various types of qualified retirement
plans in connection with a Contract. We will endorse the Contract as necessary
to conform it to the requirements of such plan.
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits
eligible individuals to contribute to an individual retirement program known as
an "Individual Retirement Annuity" or "IRA." These IRAs are subject to limits
on the amount that may be contributed, the persons who may be eligible, and on
the time when distributions may commence. IRA contributions may be deductible
in whole or in part depending on the Owner's income and whether the Owner is a
participant in a qualified plan. Earnings in the IRA are not taxed until
distributed. Also, distributions from certain other types of qualified
retirement plans may be rolled over on a tax-deferred basis into an IRA.
Distributions prior to age 591/2 (unless certain exceptions apply) are subject
to a 10% federal penalty tax.
SIMPLE IRAS. Certain small employers may establish SIMPLE plans as
provided by Section 408(p) of the Code, under which employees may elect to
defer to a SIMPLE IRA a percentage of compensation up to $6,000 (as increased
for cost of living adjustments). The sponsoring employer is required to make
matching or non-elective contributions on behalf of employees. Distributions
from SIMPLE IRAs are subject to the same restrictions that apply to IRA
distributions and are taxed as ordinary income. Subject to certain exceptions,
premature distributions prior to age 59 1/2 are subject to a 10% federal
penalty tax, which is increased to 25% if the distribution occurs within the
first two years after the commencement of the employee's participation in the
plan.
ROTH IRAS. Section 408A of the Code permits certain eligible
individuals to contribute to a Roth IRA. Contributions to a Roth IRA, which
are subject to certain limitations, are not deductible and must be made in cash
or as a rollover or transfer from another Roth IRA or other IRA. A conversion
of an IRA to a Roth IRA may be subject to tax and other special rules may
apply. You should consult a tax adviser before combining any converted amounts
with any other Roth IRA contributions, including any other conversion amounts
from other tax years. Distributions from a Roth IRA ordinarily are not taxed,
except that, once aggregate distributions exceed contributions to the Roth IRA,
income tax and a 10% federal penalty tax may apply to distributions made (1)
before age 59 1/2 (subject to certain exceptions) or (2) during the five
taxable years starting with the year in which the first contribution is made to
the Roth IRA. A
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10% federal penalty tax may apply to amounts attributable to a conversion from
an IRA if they are distributed during the five taxable years beginning with the
year in which the conversion was made.
OTHER TAX CONSEQUENCES
As noted above, the foregoing comments about the federal tax
consequences under the Contract are not exhaustive, and special rules are
provided with respect to other tax situations not discussed in this Prospectus.
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of distributions under a Contract depend
on the individual circumstances of each Owner or recipient of the distribution.
A competent tax adviser should be consulted for further information.
Further, the federal income tax consequences discussed herein reflect
our understanding of current law, and the law may change. Although the
likelihood of legislative change is uncertain, there is always the possibility
that the tax treatment of the Contracts could change by legislation or other
means. It is also possible that any change could be retroactive (that is,
effective prior to the date of the change). A tax adviser should be consulted
with respect to legislative developments and their effect on the Contract.
7. HOW DO I ACCESS MY MONEY?
You can partially withdraw from or surrender your Contract. When you
surrender your Contract, you can take the proceeds in a single sum, or you can
request that we pay the proceeds under one of our income plans. See "What are
my Income Payment Options?," page __.
WITHDRAWALS
You may withdraw all or part of your Surrender Value at any time before
the Income Date. (If you have elected the "payments for a specified period
certain" income plan option, you may request a full withdrawal after the Income
Date; otherwise, no withdrawals are permitted after the Income Date). You may
make your withdrawal request in writing or by telephone. See "Requesting
Payments," page __. Any withdrawal must be at least $250. We will pay you the
withdrawal amount in one sum. Under certain circumstances, we may delay this
payment. See "Requesting Payments," page __ .
When you request a withdrawal, you can direct how the withdrawal will
be deducted 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.
A PARTIAL WITHDRAWAL WILL REDUCE YOUR DEATH BENEFIT AND MAY BE SUBJECT
TO A SURRENDER CHARGE AND MARKET VALUE ADJUSTMENT. (SEE "WHAT ARE THE EXPENSES
UNDER A CONTRACT?" AND "DOES THE CONTRACT HAVE A DEATH BENEFIT?")
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Please note that if your requested withdrawal would reduce your Account
Value below $2,000, we reserve the right to treat the request as a withdrawal
of only the excess over $2,000.
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 Variable Sub-Accounts and/or the Fixed Sub-Accounts. You
select the day withdrawals will be taken, but this day can be no later than the
28th day of the month. If a day is not selected, the day of each month that
corresponds to your Contract Date will be used. 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 specify otherwise. Any amount in
excess of the Free Withdrawal Amount may be subject to a
surrender charge (see "Surrender Charge," page ___). Also, any
amount in excess of interest earned on a Fixed Sub-Account in
the prior period ordinarily will be subject to a Market Value
Adjustment (see "Market Value Adjustment," page ___).
You may elect to participate in the systematic partial withdrawal
program at any time before the Income Date by providing Satisfactory Notice.
Once we have received 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
offering 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.
IRA PARTIAL WITHDRAWAL PROGRAM
If your Contract is an IRA Contract and you will attain age 70 1/2 in
the current calendar year, distributions may be made to satisfy requirements
imposed by federal tax law. An IRA partial withdrawal provides payout of
amounts required to be distributed by the IRS rules governing mandatory
distributions under qualified plans. A notice before distributions must
commence will be sent, and you may elect this program at that time, or at a
later date.
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The IRA Partial Withdrawal program may not be elected while you are
participating in the systematic partial withdrawal program. IRA partial
withdrawals may be taken on a monthly, quarterly, semi-annual, or annual basis.
A minimum withdrawal of $100 is required. You select the day withdrawals will
be taken, but this day can be no later than the 28th day of the month. If a
day is not elected, the day of each month that corresponds to your Contract
date will be used.
REQUESTING PAYMENTS
You must provide us with Satisfactory Notice of your request for
payment. We will ordinarily pay any death benefit, withdrawal, or surrender
proceeds within seven days after receipt at our Customer Service Center of all
the requirements for such a payment. The amount will be determined as of the
date our Customer Service Center receives all such requirements.
We may delay making a payment, applying Account Value to an income
plan, or processing a transfer request if: (1) 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 (2) the SEC, by order, permits postponement of payment to protect our
Contract 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, or transfer
request for up to six months from the date we receive the request. If payment
is deferred 30 days or more, the amount deferred will earn interest at a rate
not less than the minimum required in the jurisdiction in which the Contract is
delivered.
8. HOW IS CONTRACT PERFORMANCE PRESENTED?
We may advertise or include in sales literature yields, effective
yields, and total returns for the Variable Sub-Accounts. Effective yields and
total returns for the Variable Sub-Accounts are based on the investment
performance of the corresponding Funds. THESE FIGURES ARE BASED ON HISTORICAL
PERFORMANCE AND DO NOT INDICATE OR PROJECT FUTURE RESULTS. We may also
advertise or include in sales literature a Variable Sub-Account's performance
compared to certain performance rankings and indexes compiled by independent
organizations, and we may present performance rankings and indexes without such
a comparison.
The yield of the Money Market Sub-Account refers to the annualized
income generated by an investment in the Sub-Account over a specified seven-day
period. The yield is calculated by assuming that the income generated for that
seven-day period is generated each seven-day period over a 52-week period. The
effective yield is calculated similarly but, when annualized, the income earned
by an investment in the Money Market Sub-Account is assumed to be reinvested.
The effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
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The yield of a Variable Sub-Account (except the Money Market
Sub-Account) refers to the annualized income generated by an investment in the
Variable Sub-Account over a specified 30-day or one-month period. The yield is
calculated by assuming that the income generated by the investment during that
30-day or one-month period is generated each period over a 12-month period.
The total return of a Variable Sub-Account refers to return quotations
assuming an investment under a Contract has been held in the Variable
Sub-Account for the stated times. Average annual total return of a Variable
Sub-Account tells you the return you would have experienced if you allocated a
$1,000 purchase payment to a Variable Sub-Account for the specified period.
Standardized average annual total return reflects all historical investment
results for the Variable Sub-Account, less all charges and deductions applied
against the Variable Sub-Account, including any surrender charge that would
apply if you surrendered your Contract at the end of each period indicated, but
excluding any deductions for purchase payment taxes. Standardized total return
may be quoted for various periods including 1 year, 5 years, and 10 years, or
from inception of the Variable Sub-Account if any of those periods are not
available. "Non-Standard" average annual total return information may be
presented, computed on the same basis as described above, except that
deductions will not include the Surrender Charge. In addition, we may from
time to time disclose average annual total return for non-standard periods and
cumulative total return for a Variable Sub-Account.
We may, from time to time, also disclose yield, standard total returns,
and non-standard total returns for the Funds. We may also disclose yield,
standard total returns, and non-standard total returns of funds or other
accounts managed by the Adviser or Sub-adviser with investment objectives
similar to those of the Funds, and Variable Sub-Account performance based on
that performance data. Non-standard performance will be accompanied by
standard performance.
In advertising and sales literature, the performance of each Variable
Sub-Account may be compared to the performance of other variable annuity
issuers in general or to the performance of particular types of variable
annuities investing in mutual funds, or investment series of mutual funds with
investment objectives similar to each of the Variable Sub-Accounts. Advertising
and sales literature may also compare the performance of a Variable Sub-Account
to the S&P 500 Composite Stock Price Index, a widely used measure of stock
performance. This unmanaged index assumes the reinvestment of dividends but
does not reflect any deduction for the expense of operating or managing an
investment portfolio. Other independent ranking services and indexes may also
be used as a source of performance comparison. We may also report other
information, including the effect of tax-deferred compounding on a Variable
Sub-Account's investment returns, or returns in general, which may be
illustrated by tables, graphs, or charts.
9. DOES THE CONTRACT HAVE A DEATH BENEFIT?
Your Contract provides two different types of death benefits for your
Beneficiary. There is the basic death benefit and the accidental death
benefit.
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BASIC DEATH BENEFIT
If any Owner dies before the Income Date, we will pay the Beneficiary
the greatest of:
(i) the Account Value determined as of the Business Day we receive
proof of death (if proof of death is received on other than a
Business Day, the proof will be deemed received on the next
following Business Day);
(ii) 100% of the sum of all purchase payments made under the
Contract, reduced by the amount of any prior withdrawal
(including any associated surrender charge and Market Value
Adjustment incurred); or
(iii) the highest anniversary value (the "Highest Anniversary
Value").
The Highest Anniversary Value is equal to the greatest anniversary
value attained in the following manner. When we receive proof of death, we
will calculate an anniversary value for each Contract Anniversary prior to the
date of the Owner's death, but not beyond the Owner's attained age 80. An
anniversary value for a Contract Anniversary is equal to (1) the Account Value
on that Contract Anniversary, (2) increased by the dollar amount of any
purchase payments made since the Contract Anniversary, and (3) reduced
proportionately by any withdrawals (including any associated surrender charge
and Market Value Adjustment incurred) taken since that Contract Anniversary.
(By proportionately, we take the percentage by which the withdrawal decreases
the Account Value and we reduce the sum of (1) and (2) by that percentage.)
If there are multiple Owners, the age of the oldest Owner will be used
to determine the applicable death benefit. If there is no Owner who is a
natural person (that is, an individual), we will treat the Annuitant as Owner
for the purpose of determining when the Owner dies and the Annuitant's age will
determine the death benefit payable to the Beneficiary.
OWNER'S DEATH BEFORE THE INCOME DATE. If an Owner dies before the
Income Date, the Beneficiary has up to five years from the Owner's date of
death to request that the death benefit be paid in one lump sum. If the lump
sum is elected and paid, the Contract will terminate, and we will have no
further obligations under the Contract. Alternatively, the Beneficiary may
provide us with Satisfactory Notice and request that the Contract continue, in
which case we will continue the Contract subject to the following conditions:
1. If there are joint Owners, the surviving Owner becomes
the new Owner. Otherwise, the Beneficiary becomes the
new Owner.
2. Unless otherwise specified, any excess of the death
benefit over the Account Value will be allocated to
and among the Variable and Fixed Accounts in
proportion to their values as of the date on which the
death benefit is
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determined. We will establish a new Fixed Sub-Account
for any allocation to the Fixed Account based on the
Guarantee Period the new Owner then elects.
3. No additional purchase payments may be applied to the
Contract.
However, certain distribution rules will apply to the continued
Contract. If the new Owner is not the deceased Owner's spouse, we must
distribute the entire interest in the Contract either: (i) over the life of
the new Owner, but not extending beyond the life expectancy of the new Owner,
with distributions beginning within one year of the prior Owner's death; or
(ii) within five years of the deceased Owner's death. These distributions, if
from the Fixed Account, are subject to our Market Value Adjustment rules.
Alternatively, if the new Owner is the deceased Owner's spouse, the
Contract will continue with the surviving spouse as the new Owner. The
surviving spouse may name a new Beneficiary. If no Beneficiary is so named,
the surviving spouse's estate will be the Beneficiary. Upon the death of the
surviving spouse, the death benefit will equal the Account Value as of the
Business Day we receive proof of the spouse's death. We will distribute the
entire interest in this contract to the new Beneficiary in accordance with the
provisions that apply in the case when the new Owner is not the surviving
spouse.
If there is more than one Beneficiary, the distribution provisions will
independently apply to each Beneficiary.
If no Owner of the Contract is an individual, the death of any
Annuitant under the Contract will be treated as the death of an Owner.
In all events, death benefit distributions will be made in accordance
with section 72(s) of the Code, or any applicable successor provision.
OWNER'S DEATH AFTER THE INCOME DATE. If any Owner dies on or after the
Income Date, but before the time the entire interest in the Contract has been
distributed, the remaining portion will be distributed at least as rapidly as
under the method of distribution being used as of the date of the Owner's
death.
If income payments have been selected based on an income plan providing
for payments for a guaranteed period and the Annuitant dies on or after the
Income Date, we will make the remaining guaranteed payments to the Beneficiary.
Any remaining payments will be made as rapidly as under the method of
distribution being used as of the date of the Annuitant's death. If no
Beneficiary is living, we will commute any unpaid guaranteed payments to a
single sum (on the basis of the interest rate used in determining the payments)
and pay that single sum to the estate of the last to die of the Annuitant or
the Beneficiary.
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ACCIDENTAL DEATH BENEFIT
Under certain circumstances, if the Owner dies before the Income Date,
we will provide an additional death benefit called the accidental death
benefit. This additional benefit will be equal to the purchase payments made
minus any withdrawals (including any associated surrender charge or Market
Value Adjustment incurred), determined as of the date of the Owner's death (or
the next Business Day if the Owner dies on other than a Business Day), up to a
maximum of $250,000.
To qualify for this benefit, the Owner's death must: (i) occur prior
to the first Contract Anniversary after the Owner attains age 80; and (ii) be a
direct result of accidental bodily injury, independent of all other causes. If
there is no Owner who is a natural person (that is, an individual), we will
treat the Annuitant as Owner and use the Annuitant's age for purposes of
determining whether the accidental death benefit is payable.
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 the benefit is
paid, when the Contract is surrendered or the entire Account Value is applied
to an income plan, when the interest in the Contract is distributed due to the
death of an Owner, or when you request termination of the benefit.
PROOF OF DEATH
Proof of death must be received at our Customer Service Center before
we will pay any death benefit. 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.
10. WHAT OTHER INFORMATION SHOULD I KNOW?
SEPARATE ACCOUNTS
THE SAGE VARIABLE ANNUITY 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. The
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Variable Account is used to support the Contracts as well as for other purposes
permitted by law. The Variable Account is registered with the SEC as a unit
investment trust under the 1940 Act and 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.
The Variable Account is divided 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 (TM),
Morgan Stanley 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. Any dividend from net investment income and distribution from realized
gains from security transactions of a Fund are reinvested 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. It is maintained separate from
our General Account and separate from any other separate account that we may
have. We own the assets in the Fixed Account. 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 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. 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. In
such an event, we will transfer assets from our General Account to the Fixed
Account to make up the difference. The Fixed Account is not required to be
registered 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 in accordance with instructions
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<PAGE> 67
received from Owners with Account Value in the Variable Sub-Accounts. To
obtain voting instructions from Owners, before a meeting of shareholders of the
Funds, we will send Owners voting instruction materials, a voting instruction
form, and any other related material. Shares held by a Variable Sub-Account
for which no timely instructions are received will be voted by us in the same
proportion as those shares for which voting instructions are received. 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: (1) deregister the Variable Account under the 1940 Act; (2) operate
the Variable Account as a management company under the 1940 Act if it is
operating as a unit investment trust; (3) operate the Variable Account as a
unit investment trust under the 1940 Act 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 accounts; and (6) 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 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 corporation
organized under the laws of the state of Delaware in 1997, is 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. The Contracts are offered on a continuous basis and we
do not anticipate discontinuing their sale. The Contracts may not be available
in all states.
The Contracts are sold by broker-dealers through registered
representatives of such broker-dealers 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
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<PAGE> 68
payments (up to a maximum of 6%). 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 as of October 31, 1998 and for the year ended December 31, 1997, as
set forth in their report, which is included in this Prospectus. Our financial
statements are included 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, Sage Life's 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, Sage Life believes 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, you will be sent a report
showing information about your Contract for the period covered by the report.
You will also be sent an annual and a semi-annual report for each Fund
underlying a Variable 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, you will receive a confirmation of these
transactions.
ASSIGNMENT
You may assign your Contract at any time prior to the Income Date. 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 the
assignment is accepted by us. 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.
CHANGE OF OWNER, BENEFICIARY, OR ANNUITANT
During your lifetime and while your Contract is in force, you can
transfer ownership of your Contract, change the Beneficiary, or change the
Annuitant. However, the Annuitant cannot be changed after the Income Date. To
make any of these changes, you must send us Satisfactory
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<PAGE> 69
Notice. If accepted, any change in Owner, Beneficiary, or Annuitant 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 IN
OWNER MAY BE A TAXABLE EVENT AND MAY ALSO EFFECT THE AMOUNT OF DEATH BENEFIT
PAYABLE UNDER YOUR CONTRACT.
MISSTATEMENT AND PROOF OF AGE, SEX, OR SURVIVAL
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 the Annuitant
has been misstated, or if the age of the Owner has been misstated, the benefits
will be those that the Account Value applied would have provided for the
correct age and sex. If we have made incorrect income payments, we will pay
the amount of any underpayment. The amount of any overpayment will be deducted
from future income payments.
INCONTESTABILITY
Your Contract is incontestable from its Contract Date.
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 registered representative, can
change the terms of your Contract or make changes to it without our consent.
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 the Company's 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. The Company
used these issues as critical components in the evaluation and selection of
in-house systems and of third party administrators.
Since the Company plans to outsource most of its operating functions,
there will only be a limited number of in-house systems utilized. At present,
the only in-house system utilized is the accounting system. This system was
certified as Year 2000 compliant before it was selected and installed for
operation. The Company also intends to purchase a reserve valuation system
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<PAGE> 70
and a reinsurance system. Year 2000 compliance will be a critical component in
the evaluation and selection process for those two systems.
The Company has 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 the Company has received assurances from all of its third
party administrators, it is currently working with them to assess all Year 2000
issues associated with the processing of the Company's applications. This
assessment involves the testing of the data being processed by third party
administrators and electronically interfaced into the Company's accounting
system. As to outside organizations from which the Company will not be relying
on electronic interface, the Company will be relying on responses to
questionnaires supplied to these service providers as to their status on Year
2000 compliance. Based upon the responses received from these third party
administrators, the Company will develop a plan to assure Year 2000 compliance
by all third party administrators. The Company anticipates completing all
testing well in advance of January 1, 2000. As this testing has and continues
to be done in the normal course of system development, the Company has not
budgeted any costs associated with the Year 2000 issue. In addition, Year 2000
costs have been deemed immaterial.
The failure of any of the Company's third party administrators to
achieve complete compliance could have a material adverse effect on the
Company's ability to conduct its business, including delays in calculating unit
values, redeeming shares, delivering account statements and providing other
information, communication and servicing to Contract Owners. The Company
believes that it has taken the necessary provisions, both through selection and
testing, to assure that it will not experience any material adverse effects on
the Company's ability to conduct its business. The Company does however
realize the importance of this issue and is currently developing a detailed
contingency plan for operations in the unlikely event one or more of its third
party administrators is unable to fulfill its obligations.
FINANCIAL STATEMENTS
No financial statements are presented for the Variable Account because
it has yet to commence operations.
The audited financial statements for Sage Life for the year ended
December 31, 1997 are included in this Prospectus. These financial statements
should be considered only as bearing on the ability of Sage Life to meet its
obligations under the Contracts. They should not be considered as bearing on
the investment performance of the assets held in the Variable Account.
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<PAGE> 71
11. HOW CAN I MAKE INQUIRIES?
Inquiries regarding your Contract may be made 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.
12. ADDITIONAL INFORMATION ABOUT SAGE LIFE ASSURANCE OF AMERICA, INC.
HISTORY AND BUSINESS
Ownership
Sage Life Assurance of America, Inc. 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.
The Company's formation was sponsored in 1981 by Fidelity Mutual Life
Insurance Company, a Pennsylvania insurer, under the name of Fidelity Standard
Life Insurance Company ("Fidelity Life"). Fidelity Life was acquired by
Security First Life Insurance Company ("Security First") of Los Angeles,
California in December 1984. In January 1997, Fidelity Life was acquired by
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, which is the
Company's ultimate parent. The Company changed to its present name in September
1997.
Prior Business Operations
As a Security First subsidiary, the Company specialized in the
marketing of annuities qualifying under Section 403(b) of the Internal Revenue
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, all of the remaining annuity
business of Fidelity Life was assumption reinsured by Security First. Security
First is now a subsidiary of The Metropolitan Life Insurance Company.
Holding Company Structure and Background
The Company is a wholly owned subsidiary of Sage Insurance Group, which
is a holding company for the Company and affiliated entities connected with
life and annuity insurance business in the United States. The Company is also
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
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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.
Sage Group signed a letter of intent with Swiss Re Life and Health
America, Inc. ("Swiss Re") on December 1, 1998. Swiss Re's ultimate parent is
Swiss Reinsurance Company, Switzerland, one of the world's largest life and
health reinsurance groups. The letter of intent contemplates that Swiss Re
will enter into reinsurance arrangements with the Company. In addition, it
provides for an investment by Swiss Re in a newly formed company that will
become the immediate parent of the Company and a wholly-owned subsidiary of
Sage Insurance Group. The arrangements contemplated by the letter of intent
may be subject to regulatory approval.
SELECTED FINANCIAL DATA
The historical financial results of the Company for the calendar year
1996 and all prior years are not comparable to the results for the years 1997
and 1998 due to the substantial change in the business operations of the
Company. The Company 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 policy contracts of the Company other than the small
number of contracts that were not 100% assumption reinsured to the Company's
former parent company. These insurance liabilities were subsequently reinsured
during 1998. Effectively, therefore, since January 1997, the Company became
comparable to a new company that had not yet commenced business activities.
The following selected financial data as of December 31, 1997 and for
the year then ended, has been derived from the audited financial statements of
the Company. The following selected financial data as of October 31, 1998 and
for the ten months then ended, has been derived from the unaudited financial
statements of the Company, which have been prepared on the same basis as the
Company's audited financial statements and, in the opinion of management,
contain all adjustments consisting of only normal recurring adjustments
necessary for a fair presentation of the financial position and results of
operations for this period. The results of operations for the ten months ended
October 31, 1998 may not be indicative of results for the full year. The data
set forth below should be read in conjunction with the financial statements,
including related notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
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<PAGE> 73
Selected Financial Data
(in thousands)
<TABLE>
<CAPTION>
Ten months
ended Year ended
October 31, December 31,
1998 1997
---- ----
<S> <C> <C>
Income Statement Data:
Revenues:
Net investment income $1,075 $ 989
Expenses:
Amortization expense 337 325
General and administrative expenses 1,071 1,016
------- ------
Total expenses 1,408 1,341
Loss before taxes (332) (352)
Income tax expense - -
-------- -------
Net loss $ (332) $ (352)
======== =======
Balance Sheet Data:
Total Assets $36,317 $36,689
Stockholder's Equity $36,242 $33,202
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Introduction
The following discussion highlights significant factors influencing the
results of operations of the Company. It should be read in conjunction with
the Company's financial statements and the related notes included in this
Prospectus.
History and Business Overview
In early 1999, the Company plans to commence marketing of new variable
insurance products. The Company was acquired by Sage Insurance Group on
December 31, 1996, and since that date has been preparing for the
recommencement of insurance underwriting and marketing activities. (Prior to
the acquisition of the Company, all new business production and marketing
ceased in October 1996.) There has been a total reengineering of the Company's
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<PAGE> 74
products, systems and administration since the change of ownership. All of the
Company's current senior management are experienced in the insurance industry
(either in the United States or in South Africa) and most have been recruited
since January 1997. The ongoing business strategy of the Company is to focus
its activities on the development, underwriting, and marketing of variable
insurance products. The Company's obligations under these contracts are (1)
variable accounts -- determined by the value of investments held in separate
accounts, and (2) fixed accounts -- backed by investments held in separate
accounts. Assets of these separate accounts that equal the reserves and other
liabilities supporting the contracts to which they relate, may not be used to
pay any other obligations or creditors of the Company. The Contracts initially
will be distributed through banks. The Company currently anticipates that,
over the long-term, its distribution channels will expand to include
wirehouses, regional broker-dealers and financial planners.
Results of Operations
Net losses for the ten months ended October 31, 1998 were $332,442 and
were $351,786 for the year ended December 31, 1997. As the Company is not
currently underwriting or marketing insurance products, all revenue for 1998
and 1997 is derived from investing activities. Effective investment yields for
the Company's General Account were 5.3% for the ten months ended October 31,
1998, and 5.4% for the year ended December 31, 1997. General expenses incurred
in financing of the Company's daily activities more than offset investment
revenue. As the Company commences business in 1999, management anticipates
that revenues will increase primarily by charges and fees associated with
products being offered, while expenses will increase by acquisition expenses,
the cost of administering this new business and the payment of benefits.
The Company has capitalized certain costs that have been incurred in
the development and registration of the Company's insurance products and have
been paid for by Sage Insurance Group. These development costs are being
amortized on a straight line basis over fifteen years. Accumulated amortization
at October 31, 1998 and December 31, 1997 was $234,474 and $93,637,
respectively.
In April 1998, Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities" (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
start-up costs. Accordingly, the Company will be required to write-off any
unamortized capitalized development costs on January 1, 1999.
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<PAGE> 75
Liquidity and Capital Resources
Since the beginning of 1997, the Company's primary cash needs have been
for the development of its insurance products and related infrastructure and to
fund the daily operations of the Company. The Company's cash needs have been
met through interest income and capital contributions from Sage Insurance
Group.
During 1999, the Company expects its cash needs will continue to
increase as its underwriting and marketing activities begin. The Company
anticipates that it will be unable to meet all of its liquidity requirements in
1999 without capital contributions from Sage Insurance Group. However, as
discussed above, Swiss Re has committed to making an equity investment in a
newly formed holding company that will provide an additional source of funds to
the Company for new business expenses. In addition, although not required to
do so, the Company believes that Sage Insurance Group will continue to provide
capital to the Company for its non-recurring costs associated with new products
and business development during 1999. The Company's 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
The Company currently plans to conduct its business as a single
segment. 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
The Company intends to enter into a coinsurance reinsurance arrangement
with Swiss Re, pursuant to which Swiss Re will reinsure a significant portion
of the Company's liabilities under its variable insurance contracts. This
arrangement will provide additional capacity for growth of the Company's
variable insurance business.
In addition, the Company intends to reinsure certain mortality risks
associated with the guaranteed minimum death benefit and accidental death
benefit features of the Contracts. The Company intends to use only highly
rated reinsurance companies to reinsure these risks.
Reinsurance does not relieve the Company from its obligations to
Contract Owners. The Company remains primarily liable to its Contract Owners
to the extent that any reinsurer does not meet its obligations under the
reinsurance agreements.
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Reserves
In accordance with the insurance laws and regulations under which it
operates, the Company is obligated to carry on its books, as liabilities,
actuarially determined reserves to meet its obligations on outstanding
contracts. Reserves involving life contingencies are based on mortality tables
in general use in the United States and, where applicable, are computed to
equal amounts which, together with interest on such reserves computed annually
at certain assumed rates, will be sufficient to meet the Company's Contract
obligations at their maturities, or the event of the Contract 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 October 31, 1998.
Investments
The Company's General Account cash and invested assets of $25.6 million
and $25.3 million at October 31, 1998 and December 31, 1997, respectively, were
invested entirely in investment grade securities and money market funds. It is
the stated policy of the Company to refrain from investing in securities having
speculative characteristics. The Company's 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
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 Contract Owners 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, 1997, the maximum amount of dividends the Company
could have paid its parent without prior approval from state regulatory
authorities was $2,501,775.
New Accounting Standards
As of January 1, 1998, the Company 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. The accumulated balance of other comprehensive income is required to
be reported separately in stockholder's equity. The Company's only
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<PAGE> 77
component of other comprehensive income is net unrealized gains or losses on
available-for-sale securities, which is reported separately in stockholder's
equity. The adoption of SFAS 130 had no impact on the Company's net income or
stockholder's equity.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131). SFAS 131 establishes standards
for the reporting of operating segment information in both annual financial
reports and interim financial reports issued to shareholders. Operating
segments are components of an entity for which separate financial information
is available and is evaluated regularly by the entity's chief operating
management. SFAS is effective for fiscal year 1998 and is not anticipated to
have a material impact on the Company.
COMPETITION
The Company is 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 those being offered by the
Company. 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 the Company. The Company is
unique in that it is one of the few life insurers that confines its activities
to the marketing of separate account variable insurance products.
TRANSACTIONS WITH SAGE INSURANCE GROUP
In 1997 the Company 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. Pursuant to this agreement, the Company has received
$109,923 from Sage Insurance Group for the ten months ended October 31, 1998
and paid expenses of $76,048 for the year ended December 31, 1997. In
addition, Sage Insurance Group provides funds to the Company to meet various
operating expenses. These amounts are paid 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 the
Company. The amount of these developmental costs paid for by companies
affiliated with Sage Life on October 31, 1998 and December 31, 1997 were
$2,749,628 and $1,504,558, respectively. Sage Insurance Group regards these
expenditures as being of a developmental nature and does not intend to recover
these expenditures from the Company. Accordingly, these expenditures have been
capitalized as development costs and reflected as contributed capital in the
Company's financial statements.
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EMPLOYEES
Due to the Company's business strategy of outsourcing its primary
administrative and investment functions to organizations that specialize in
these areas, the number of full time personnel employed by the Company will be
limited. As of October 31, 1998, the Company had 14 employees. As of December
31, 1997, the Company had 8 employees.
PROPERTIES
The Company's executive office is located at 300 Atlantic Street, in
Stamford, Connecticut, where the Company's primary records are maintained.
Customer records, however, are maintained at the Company's Customer Service
Center.
Sage Insurance Group leases the Company's office space. The Company
reimburses Sage Insurance Group for the office space under the Cost Agreement
described above.
STATE REGULATION
The Company is 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"). A detailed financial statement in the
prescribed form (the "Statement") is filed with the Insurance Department each
year covering the Company's operations for the preceding year and its financial
condition as of the end of that year. Regulation by the Insurance Department
means that the Insurance Department may examine the Company and its books and
records to determine, among other things, whether contract liabilities and
reserves as stated by the Company are correct. A full examination of the
Company's operations will be conducted periodically by the Insurance Department
under the auspices of the NAIC.
In addition, the Company is subject to regulation under the insurance
laws of all jurisdictions in which it operates. 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. The Company is
required to file the Statement with supervisory agencies in each of the
jurisdictions in which it does business, and its 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
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calculate their risk-based capital in accordance with this formula and to
include the results in their Statement. It is anticipated that these standards
will have no significant effect upon the Company.
Further, many states regulate affiliated groups of insurers, such as
the Company and its 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.
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. The insurance products of the Company 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 the tax treatment of insurance products and its impact on the
relative desirability of various personal investment vehicles.
<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS
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, Director, Sage Life Assurance
Age 59 Chairman, 2/98 to present Company of New York, 5/98 to
present; Vice 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
</TABLE>
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<TABLE>
<S> <C> <C>
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
Robin I. Marsden(1) Director, 1/97 to Director, Sage Life Assurance
Age 33 present, President and Chief Company of New York, 5/98 to
Executive Officer, 2/98 to present; Director, President,
present 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.; Investments Director, Sage
Life Holdings, Ltd., 11/94 to
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 45 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 54 1/97 to present Company of New York, 5/98 to
present; President, First
Interstate Securities,
1/95-
</TABLE>
59
<PAGE> 81
<TABLE>
<S> <C> <C>
12/95; Chairman & Chief
Executive Officer, Financial
Institutions Group, Inc., 10/78
to present
Mitchell R. Katcher(1) Director, 12/97 to Director, Sage Life Assurance
Age 45 present, Senior Company of New York, 5/98 to
Executive Vice present; Director, Treasurer,
President, Chief Sage Advisors, Inc., 1/98 to
Financial Officer, present; Director, Sage
Chief Actuary Distributors, Inc., 1/98 to
5/97 to present 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>
(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
Executive officers of the Company also serve as officers of its parent
and of certain affiliated companies. Cost allocations to the Company have been
made as to certain individual's time devoted to their duties with the Company.
No allocation was made during 1997 nor will any be made for 1998 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 Sage Life 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, 1997.
60
<PAGE> 82
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Name and Principal Position Year Salary Bonus(1) All Other Compensation(2)
- --------------------------- ---- ------ -------- -------------------------
<S> <C> <C> <C> <C>
Ronald S. Scowby, 1997 $337,500 $100,000 $0
President and Chief Executive
Officer(3)
Mitchell R. Katcher, 1997 $114,583 $265,000 $0
Senior Executive
Vice President, Chief Financial
Officer and Chief Actuary
</TABLE>
(1) The amount shown relates to bonuses paid in 1998 for services rendered in
1997.
(2) The amount shown relates to deferred compensation earned in 1997.
(3) Mr. Scowby's salary and bonus are paid by Sage Management Services (USA),
Inc.
Outside directors of the Company are paid $12,000 and $2,000 per meeting
attended. For the year ended December 31, 1997, the outside directors each were
paid $20,000. Directors who are officers or employees of the Company or its
affiliates are not compensated for serving on the Board. Directors do not
receive retirement benefits.
61
<PAGE> 83
Report of Independent Auditors
Board of Directors
Sage Life Assurance of America, Inc.
We have audited the accompanying balance sheet of Sage Life Assurance of
America, Inc. (formerly Fidelity Standard Life Insurance Company) as of
December 31, 1997, and the related statements of operations, stockholder's
equity and cash flows for the year 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 audit.
We conducted our audit 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 audit provides 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, 1997, and the results of its operations and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles.
Stamford, Connecticut
April 22, 1998
/s/Ernst & Young LLP
62
<PAGE> 84
Sage Life Assurance of America, Inc.
Balance Sheets
<TABLE>
<CAPTION>
OCTOBER 31, 1998
(UNAUDITED) DECEMBER 31, 1997
---------------- -----------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available for sale, at fair value $3,604,066 $ 3,595,326
Short-term investments 2,579,083 21,530,888
------------ ----------
Total investments 6,183,149 25,126,214
Cash and cash equivalents 19,422,092 228,605
Accrued investment income 130,929 58,039
Receivable from affiliates 48,769 25,941
Reinsurance recoverable - 2,728,284
Other assets 5,000 11,443
Goodwill 6,606,236 6,802,300
Development costs 3,919,711 1,310,921
Separate account assets - 396,992
------------ ------------
Total assets $36,315,886 $36,688,739
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accrued expenses $ 2,005 $ 180,442
Policy liabilities 2,728,284
Deferred income taxes 36,220 26,227
Amounts payable to affiliates 36,454 154,366
Separate account liabilities - 396,992
------------ ------------
Total liabilities 74,679 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
Additional paid-in capital 34,355,127 31,005,508
Unrealized gains on investment 70,308 48,706
Retained deficit (684,228) (351,786)
------------ ------------
36,241,207 33,202,428
------------ ------------
$36,315,886 $ 36,688,739
=========== ============
</TABLE>
See accompanying notes to financial statements.
63
<PAGE> 85
Sage Life Assurance of America, Inc.
Statements of Operations
<TABLE>
<CAPTION>
TEN MONTHS ENDED
OCTOBER 31, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
------------------- -----------------
<S> <C> <C>
REVENUES
Investment income $ 1,075,251 $ 989,494
EXPENSES
Amortization expense 336,901 325,406
General and administrative expenses 1,070,792 1,015,874
--------- ---------
Total expenses 1,407,693 1,341,280
--------- ---------
Loss before taxes (332,442) (351,786)
Income tax expense - -
------------ ------------
Net loss $ (332,442) $ (351,786)
============ ===========
</TABLE>
See accompanying notes to financial statements.
64
<PAGE> 86
Sage Life Assurance of America, Inc.
Statements of Stockholder's Equity
<TABLE>
<CAPTION>
TEN MONTHS ENDED
OCTOBER 31, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
------------------- -----------------
<S> <C> <C>
Common stock; balance at beginning and end of year: $ 2,500,000 $ 2,500,000
Additional paid-in capital:
Balance at beginning of year 31,005,508 15,505,558
Additional capital contributions 3,349,619 15,500,000
------------ ----------
Balance at end of year 34,355,127 31,005,508
Unrealized investment gains:
Balance at beginning of year 48,706 -
Change in unrealized gain 21,602 48,706
------ ------
Balance at end of year 70,308 48,706
Retained earnings:
Balance at beginning of year (351,786) -
Net loss (332,442) (351,786)
--------- ---------
Balance at end of year (684,228) (351,786)
--------- ---------
Total stockholder's equity $36,241,207 $33,202,428
=========== ===========
</TABLE>
See accompanying notes to financial statements.
65
<PAGE> 87
Sage Life Assurance of America, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
TEN MONTHS
ENDED
OCTOBER 31, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
------------------- -----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (332,442) $ (351,786)
Adjustments to reconcile net loss to net cash (used in) provided
by operating activities:
Amortization expense 336,901 325,406
Changes in:
Accrued investment income (72,890) (29,638)
Receivable from affiliates (22,828) (25,941)
Other assets 6,443 (11,443)
Accrued expenses (178,437) 116,216
Amounts payable to affiliates (117,912) 154,366
--------- -------
Net cash (used in) provided by operating activities (381,165) 177,180
INVESTING ACTIVITIES
Proceeds from sales, maturities and repayments of - 42,941
fixed maturity securities
Net sales [purchases] of short-term investments 18,974,652 (15,507,987)
---------- ------------
Net cash provided by (used in) investing activities 18,974,652 (15,465,046)
FINANCING ACTIVITIES
Capital contribution from the parent 600,000 15,500,000
------- ----------
Net cash provided by financing activities 600,000 15,500,000
------- ----------
Increase in cash and cash equivalents 19,193,487 212,134
Cash and cash equivalents at beginning of period 228,605 16,471
------- ------
Cash and cash equivalents at end of period $ 19,422,092 $ 228,605
================= ===============
</TABLE>
See accompanying notes to financial statements.
66
<PAGE> 88
Sage Life Assurance of America, Inc.
Notes to Financial Statements
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 Insurance Group, Inc., ("SIGI") which is a wholly-owned
indirect subsidiary of Sage Group Limited, a South African company.
DESCRIPTION OF BUSINESS
Effective December 31, 1996, 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, Fidelity Standard entered into a modified
coinsurance arrangement to cede all of its separate account liabilities to its
then parent, SFLIC. Assets equal to the total reserves and related liabilities
were transferred to 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.
The Company is in the process of developing and preparing to market variable
annuity and variable life insurance products. The marketing of these products
is expected to begin in the first quarter 1999. Sage Distributors Inc.
(formerly Finplan of America, Inc.), an affiliated broker/dealer, will
distribute the variable products as principal underwriter. (Selling agreements
will be entered into with other broker/dealers that will sell the variable
insurance products). Sage Advisors, Inc., an affiliate, will provide investment
management services to registered investment companies (mutual funds). These
mutual funds are in the process of being developed.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles. The information presented herein
with respect to the period as of and for the ten months ended October 31, 1998,
is unaudited.
NEW ACCOUNTING PRONOUNCEMENT
As of January 1, 1998, the Company 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. The
accumulated balance of other comprehensive income is required to be reported
separately in stockholder's equity. The Company's only component of other
comprehensive income is net unrealized gains or losses on available-for-sale
securities, which is reported separately in stockholder's equity. The adoption
of SFAS 130 had no impact on the Company's net income or stockholder's equity.
67
<PAGE> 89
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131). SFAS 131 establishes standards
for the reporting of operating segment information in both annual financial
reports and interim financial reports issued to shareholders. Operating
segments are components of an entity for which separate financial information
is available and is evaluated regularly by the entity's chief operating
management. SFAS 131 is effective for fiscal year 1998 and is not anticipated
to have a material impact on the Company.
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 statement of operations.
POLICY LIABILITIES
Policy liabilities consist 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%.
68
<PAGE> 90
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 October 31, 1998 and December 31,
1997 was $427,833 and $231,769, respectively.
DEVELOPMENT COSTS
The Company has capitalized certain costs that have been incurred in the
development and registration of the Company's insurance products. These
development costs are being amortized on a straight line basis over fifteen
years. Accumulated amortization at October 31, 1998 and December 31, 1997 was
$234,474 and $93,637, respectively.
In April 1998, Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities" (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 start-up
costs. Accordingly, the Company will be required to write-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.
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.
69
<PAGE> 91
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
2. INVESTMENTS
Investments in fixed maturity securities as of October 31, 1998 consist of the
following:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COSTS GAINS LOSSES VALUE
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government Obligations $ 3,497,538 $106,528 - $3,604,066
===========================================================================
</TABLE>
Investments in fixed maturity securities as of December 31, 1997 consisted of
the following:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COSTS 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 October 31, 1998 and December 31, 1997 are summarized below.
Actual maturities will differ from contractual maturities because certain
borrowers have the right to call or prepay obligations.
<TABLE>
<CAPTION>
October 31, 1998 AMORTIZED FAIR
COST VALUE
<S> <C> <C>
Due in one year or less $ 815,082 $ 816,019
Due after five years through ten years 2,682,456 2,788,047
----------- -----------
Total $3,497,538 $3,604,066
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997 AMORTIZED FAIR
COST VALUE
<S> <C> <C>
Due in one year or less $ 815,495 $ 811,308
Due after five years through ten years 2,704,898 2,784,018
----------- ----------
Total $3,520,393 $3,595,326
=========== ==========
</TABLE>
70
<PAGE> 92
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
Investment income by major category of investment for October 31, 1998 and
December 31, 1997 is summarized as follows:
<TABLE>
<CAPTION>
TEN MONTHS
ENDED YEAR ENDED
OCTOBER 31, 1998 DECEMBER 31, 1997
---------------- -----------------
<S> <C> <C>
Bonds $193,303 $255,778
Short-term investments 823,179 720,556
Cash and cash equivalents 71,892 49,035
------ ------
Total investment income 1,088,374 1,025,369
Investment expenses 13,123 35,875
------ ------
Net investment income $1,075,251 $989,494
========== ========
</TABLE>
At October 31, 1998 and December 31, 1997, investment securities with an
amortized cost value of $6,076,620 and $6,128,048 and a fair value of
$6,184,066 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 (USA),
Inc. and its subsidiaries.
The provision for income taxes varies from the amount that would be computed
using the federal statutory income tax rate as follows:
<TABLE>
<CAPTION>
OCTOBER 31, 1998 DECEMBER 31, 1997
---------------- -----------------
<S> <C> <C>
Pre-tax loss $ (332,442) $ (351,786)
Application of the federal statutory tax rate - 34% (113,030) (119,607)
Tax effect of:
State income taxes - (75)
Change in valuation allowance 113,030 119,532
------- -------
Total income tax provision $ - $ -
=========== ===========
</TABLE>
71
<PAGE> 93
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
Significant components of the Company's deferred tax assets and
liabilities as of October 31, 1998 and December 31, 1977 are as follows:
<TABLE>
<CAPTION>
OCTOBER 31, 1998 DECEMBER 31, 1997
---------------- -----------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 1,844,098 $ 756,521
--------------------- --------------------
Total deferred tax assets $ 1,844,098 $ 756,521
Deferred tax liabilities:
Unrealized gain on appreciation of investments (36,220) (26,227)
Amortization of goodwill and development costs (1,611,536) (636,989)
-------------------- -------------------
Total deferred tax liabilities (1,647,756) (663,216)
Valuation allowance for deferred tax assets (232,562) (119,532)
-------------------- -------------------
Net deferred tax liability $ (36,220) $ (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 October 31, 1998, the Company has net operating loss carryforwards of $3.2
million for federal income tax purposes that expire in 2013 and $2.2 million
that expire in the year 2012.
4. REINSURANCE AND OTHER AGREEMENTS
Effective September 1, 1998, all of the in-force business of the Company was
novated to SFLIC, a subsidiary of the Metropolitan Life Insurance Company.
5. RETAINED EARNINGS AND DIVIDEND RESTRICTIONS
Statutory-basis capital and surplus and net income are $25,017,752 and $51,133
at and for the year ended December 31, 1997, respectively. The required
statutory capital and surplus at December 31, 1997 is $17,257,518.
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, 1997, the maximum amount of dividends the Company
could pay SIGI without prior approval from state regulatory authorities is
$2,501,775.
72
<PAGE> 94
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
6. RELATED PARTY TRANSACTIONS
In 1997, the Company entered into a Cost Sharing Agreement with SIGI 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 recorded income of
$109,923 from SIGI for the ten months ended October 31, 1998 and expenses of
$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. At October 31, 1998 and December 31, 1997,
$12,315 and $100,000 of the amounts transferred to the Company remained payable
to SIGI, respectively.
All non-recurring development costs of the Company are paid by SIGI or its
parent, Sage Group Limited, and treated as capital contributions. The amount
of development costs paid for by affiliated companies at October 31, 1998 and
December 31, 1997 were $2,749,628 and $1,504,558, respectively.
73
<PAGE> 95
Table of Contents of the
Statement of Additional Information
Additional information about the Contracts and The Sage Variable Annuity
Account A is contained in the Statement of Additional Information. You can
obtain a free copy of the Statement of Additional Information by writing to us
at the address shown on the front cover or by calling (877) 835-7243 (Toll
Free). The following is the Table of Contents for the Statement of Additional
Information.
Statement of Additional Information
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beneficiary Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Calculation of Historical Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Money Market Sub-Account Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Sub-Account Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average Annual Total Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Total Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of the Annual Administration Charge on Performance Data . . . . . . . . . . . . . . . . . . . . . . . . .
Use of Indexes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Payment Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount of Fixed Income Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount of Variable Income Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Unit Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange of Income Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Safekeeping of Account Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
74
<PAGE> 96
APPENDIX A
Market Value Adjustment
We will apply a Market Value Adjustment to amounts surrendered, withdrawn,
transferred or applied to an income plan 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 amount applied to an income plan,
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 applied to an income plan in order to
provide the amount requested.
(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, 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 application to an income plan; 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 apply to an income plan.
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 apply to an income plan the full amount of the Fixed
Sub-Account, we add the Market Value Adjustment to the amount you
withdraw, transfer, or apply to an income plan.
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 or withdrawals affecting this Fixed Sub-Account
have been made, and no
A-1
<PAGE> 97
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(3))
2. N = 2,555 (365 x 7)
2555/365
3. Market Value Adjustment = $124,230 x {[(1.07)/(1.0825)] -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 or withdrawals 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
3
surrender is $124,230 ($100,000 x 1.075 )
2. N = 2,555 (365 x 7)
2555/365
3. Market Value Adjustment = $124,230 x {[(1.07)/(1.0625)] -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 or withdrawals affecting this Fixed Sub-Account
have been made, and no surrender charge is applicable.
A-2
<PAGE> 98
1. The Account Value of the Fixed Sub-Account on the date of
withdrawal is $248,459 ($200,000 x 1.075(3)).
2. N = 2,555 (365 x 7)
2555/365
3. Market Value Adjustment = $100,000 x {[(1.07)/(1.0825)]
-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.
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 or withdrawals affecting this Fixed
Sub-Account have been made, and no surrender charge is applicable.
1. The Account Value of the Fixed Sub-Account on the date of
withdrawal is $248,459 ($200,000 x 1.075(3))
2. N = 2,555 (365 x 7)
2555/365
3. Market Value Adjustment = $100,000 x {[(1.07)/(1.0625)]
- 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.
A-3
<PAGE> 99
APPENDIX B
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 Beginning of Month Dollar Cost Amount Dollar Interest End of Month
of Month Account Value Averaging Cost Averaged Credited Account Value
- ---------- ------------- Monthly Factor ------------- For Month -------------
-------------- ---------
<S> <C> <C> <C> <C> <C>
24,117
1 24,000 - - 117 23,224
2 24,117 1 / 24 1,005 112 22,323
3 23,224 1 / 23 1,010 108 21,412
4 22,323 1 / 22 1,015 104 20,492
5 21,412 1 / 21 1,020 99 19,562
6 20,492 1 / 20 1,025 95 18,622
7 19,562 1 / 19 1,030 90 17,673
8 18,622 1 / 18 1,035 86 16,715
9 17,673 1 / 17 1,040 81 15,746
10 16,715 1 / 16 1,045 76 14,768
11 15,746 1 / 15 1,050 72 13,780
12 14,768 1 / 14 1,055 67 12,782
13 13,780 1 / 13 1,060 62 11,774
14 12,782 1 / 12 1,065 57 10,756
15 11,774 1 / 11 1,070 52 9,727
16 10,756 1 / 10 1,076 47 8,688
17 9,727 1 / 9 1,081 42 7,639
18 8,688 1 / 8 1,086 37 6,580
19 7,639 1 / 7 1,091 32 5,510
20 6,580 1 / 6 1,097 27 4,429
21 5,510 1 / 5 1,102 21 3,338
22 4,429 1 / 4 1,107 16 2,236
23 3,338 1 / 3 1,113 11 1,124
24 2,236 1 / 2 1,118 5 -
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> 100
STATEMENT OF ADDITIONAL INFORMATION
DATED _____________ ____, 1999
FLEXIBLE PAYMENT DEFERRED COMBINATION FIXED AND VARIABLE ANNUITY
CONTRACTS
issued by
THE SAGE VARIABLE ANNUITY ACCOUNT A AND SAGE LIFE ASSURANCE OF
AMERICA, INC.
Customer Service Center:
1290 Silas Deane Highway
Wethersfield, CT 06109
Telephone: (877) 835-7243
(Toll Free)
This Statement of Additional Information expands upon subjects discussed in the
current Prospectus for the Flexible Deferred Combination Fixed and Variable
Annuity Contracts (the "Contracts" offered by Sage Life Assurance of America,
Inc. ("we," "us," "our," "Sage Life," or the "Company"). You may obtain a copy
of the Prospectus dated ___________, by calling 1-877-835-7243 (Toll Free) or
by writing to our Customer Service Center at the above address. You may also
obtain a copy of the Prospectus by accessing the Securities and Exchange
Commission's website at http://www.sec.gov. Terms used in the current
Prospectus for the Contracts are incorporated into and made a part of this
Statement of Additional Information.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
SHOULD BE READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR
THE CONTRACTS AND THE PROSPECTUSES FOR THE TRUSTS.
<PAGE> 101
Statement of Additional Information
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beneficiary Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Calculation of Historical Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Money Market Sub-Account Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Variable Sub-Account Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average Annual Total Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Total Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of the Annual Administration Charge on Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . .
Use of Indexes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Payment Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount of Fixed Income Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount of Variable Income Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Unit Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange of Income Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Safekeeping of Account Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
i
<PAGE> 102
PARTICIPATION
The Contracts do not participate in the surplus or profits of the Company,
and the Company does not pay dividends on the Contracts.
BENEFICIARY DESIGNATION
This is as shown in the application. It includes the name of the
Beneficiary and the order and method of payment. If you name "estate" as a
Beneficiary, it means the executors or administrators of your estate. If you
name "children" of a person as a Beneficiary, only children born to or legally
adopted by that person as of an Owner's date of death will be included.
We may rely on an affidavit as to the ages, names, and other facts about
all Beneficiaries. We will incur no liability if we act on such affidavit.
CALCULATION OF HISTORICAL PERFORMANCE DATA
From time to time, we may disclose yields, total returns, and other
performance data of the Variable Sub-Accounts and the Funds. Such performance
data will be computed, or accompanied by performance data computed, in
accordance with the standards defined by the SEC.
MONEY MARKET SUB-ACCOUNT YIELDS
From time to time, advertisements and sales literature may quote the
current annualized yield of the Variable Sub-Account investing in the Money
Market Fund (the "Money Market Sub-Account") of the Sage Life Investment Trust
for a seven-day period in a manner that does not take into consideration any
realized or unrealized gains or losses on shares of the Money Market Fund.
This current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities and
unrealized appreciation and depreciation) at the end of the seven-day period in
the value of a hypothetical account under a Contract having a balance of one
Accumulation Unit of the Money Market Sub-Account at the beginning of the
period, dividing such net change in Account Value by the value of the
hypothetical account at the beginning of the period to determine the base
period return, and annualizing this quotient on a 365-day basis. The net change
in Account Value reflects (i) net income from the Money Market Fund
attributable to the hypothetical account; and (ii) charges and deductions
imposed under a Contract which are attributable to the hypothetical account.
The charges and deductions include the per unit charges for the hypothetical
account for the annual administration charge and the Asset-Based Charges. For
purposes of calculating current yields for a Contract, an average per unit
annual administration charge is used based on the $40 Annual Administration
Charge. Current yield is calculated according to the following formula:
1
<PAGE> 103
<TABLE>
<S> <C>
Current Yield = ((NCS - ES)/UV) (365/7)
Where:
NCS = the net change in the value of the Money Market Fund (exclusive of realized gains or losses on the
sale of securities, unrealized appreciation and depreciation, and income other than investment income)
for the seven-day period attributable to a hypothetical account having a balance of one Accumulation
Unit.
ES = per unit expenses attributable to the hypothetical account for the seven-day period.
UV = the unit value for the first day of the seven-day period.
(365/7)
Effective Yield = (1+((NCS - ES)/UV)) -1
Where:
NCS = the net change in the value of the Money Market Fund (exclusive of realized gains or losses on the
sale of securities, unrealized appreciation and depreciation and income other than investment income)
for the seven-day period attributable to a hypothetical account having a balance of one Accumulation
Unit.
ES = per unit expenses attributable to the hypothetical account for the seven-day period.
UV = the unit value for the first day of the seven-day period.
</TABLE>
Because of the charges and deductions imposed under the Contracts, the
yield for the Money Market Sub-Account is lower than the yield for the Money
Market Fund. Yield calculations do not take into account the surrender charge
that is assessed on certain withdrawals and surrender of Account Value.
The current and effective yields on amounts held in the Money Market
Sub-Account normally fluctuate on a daily basis. THEREFORE, THE DISCLOSED
YIELD FOR ANY GIVEN PAST PERIOD IS NOT AN INDICATION OR REPRESENTATION OF
FUTURE YIELDS OR RATES OF RETURN. The Money Market Sub-Account's actual yield
is affected by changes in interest rates on money market securities, average
portfolio maturity of the Money Market Fund, the types and quality of portfolio
securities held by the Money Market Fund and the Money Market Fund's operating
expenses. Yields on amounts held in the Money Market Sub-Account may also be
presented for periods other than a seven-day period.
2
<PAGE> 104
OTHER VARIABLE SUB-ACCOUNT YIELDS
The yield is computed by: 1) dividing the net investment income of the
Fund attributable to the Variable Sub-Account units less expenses allocated to
a Variable Sub-Account for the period; by 2) the maximum offering price per
unit on the last day of the period times the daily average number of
Accumulation Units outstanding for the period; and then 3) compounding that
yield for a six-month period; and then 4) multiplying that result by two (2).
Expenses allocated to a Variable Sub-Account include the Annual Administration
Charge and the Asset-Based Charges. The yield calculation assumes an annual
administration charge of $40 per Contract deducted at the end of each Contract
Year on the Contract Anniversary. For purposes of calculating the 30-day or
one-month yield, an average administration cost charge based on the average
Account Value in the Variable Sub-Account is used to determine the amount of
the charge attributable to the Variable Sub-Account for the 30-day or one-month
period. The 30-day or one-month yield is calculated according to the following
formula:
6
Yield = 2 x ((((NI - ES)/(U x UV)) + 1) -1)
Where:
NI = net income of the portfolio for the 30-day or one-month
period attributable to the Variable Sub-Account's units.
ES = expenses of the Variable Sub-Account for the 30-day or
one-month period.
U = the average number of units outstanding.
UV = the unit value at the close (highest) of the last day in
the 30-day or one-month period.
Because of the charges and deductions imposed under the Contracts, the
yield for the Variable Sub-Account is lower than the yield for the
corresponding Fund.
The yield on amounts invested in the Variable Sub-Accounts normally
fluctuates over time. THEREFORE, THE DISCLOSED YIELD FOR ANY GIVEN PAST PERIOD
IS NOT AN INDICATION OR REPRESENTATION OF FUTURE YIELDS OR RATES OF RETURN. A
Variable Sub-Account's actual yield is affected by the types and quality of
securities held by the corresponding Fund and that Fund's operating expenses.
Yield calculations do not take into account the surrender charge that is
assessed on certain withdrawals and surrenders of Account Value.
AVERAGE ANNUAL TOTAL RETURNS
From time to time, sales literature or advertisements may also quote
average annual total returns for one or more of the Variable Sub-Accounts for
various periods of time.
When a Variable Sub-Account or Fund has been in operation for 1, 5, and 10
years, respectively, the average annual total return for these periods will be
provided. Otherwise,
3
<PAGE> 105
average annual total return will be shown from inception of the Variable
Sub-Account. Average annual total returns for other periods of time may, from
time to time, also be disclosed.
Standard average annual total returns represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Contract to the Surrender Value of that investment as of the last day
of each of the periods. The ending date for each period for which total return
quotations are provided will be for the most recent calendar quarter-end
practicable, considering the type of the communication and the media through
which it is communicated.
Standard average annual total returns are calculated using Variable
Sub-Account unit values which we calculate on each Business Day based on the
performance of the Variable Sub-Account's underlying Fund. The calculation
assumes that annual Asset-Based Charges of 1.40% during the first seven
Contract Years (decreasing to 1.25% during Contract Years 8 and later) are
deducted monthly beginning on the Contract Date. The calculation also assumes
that the Annual Administration Charge is $40 per year per Contract deducted at
the end of each Contract Year during the first seven contract years. For
purposes of calculating average annual total return, an average per-dollar
per-day annual administration charge attributable to the hypothetical account
for the period is used. The calculation also assumes surrender of Account
Value at the end of the period for the return quotation taking into account any
applicable Free Withdrawal Amount. The total return is calculated according to
the following formula:
1/N
TR = (ESV/P) -1
Where:
TR = the average annual total return for the period.
ESV = the Surrender Value of the hypothetical account
at the end of the period.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
OTHER TOTAL RETURNS
From time to time, sales literature or advertisements may also quote
average annual total returns that do not reflect deduction of the Surrender
Charge. Other total returns are calculated in exactly the same way as average
annual total returns described above, except that the ending Surrender Value of
the hypothetical account for the period is replaced with an ending value for
the period that does not take into account any charges on amounts surrendered
or withdrawn.
4
<PAGE> 106
The Company may disclose cumulative total returns in conjunction with the
standard formats described above. The cumulative total returns will be
calculated using the following formula:
CTR = (ESV/P) - 1
Where:
CTR = The cumulative total return for the period.
ESV = The ending Surrender Value of the hypothetical investment
at the end of the period net of recurring charges.
P = A hypothetical single payment of $1,000.
EFFECT OF THE ANNUAL ADMINISTRATION CHARGE ON PERFORMANCE DATA
The Contracts provide for a $40 Annual Administration Charge (waived for
Contracts with Account Value of at least $50,000, or beginning on and after the
eighth Contract Year) that is deducted from the Sub-Accounts proportionately.
For purposes of reflecting the Annual Administration Charge in yield and total
return quotations, the average Account Value is assumed to be $30,000, so that
the annual administration charge is .1333%.
USE OF INDEXES
From time to time, the performance of certain historical indexes may be
presented in advertisements or sales literature. The performance of these
indexes may be compared to the performance of certain Variable Sub-Accounts or
Funds, or may be presented without such a comparison.
OTHER INFORMATION
The following is a partial list of those publications which may be noted in the
Funds' sales literature and/or shareholder materials which contain articles
describing investment results or other data relative to one or more of the
Variable Sub-Accounts. Other publications may also be cited.
Broker World Financial World
Across the Board Advertising Age
American Banker Barron's
Best's Review Business Insurance
Business Month Business Week
Changing Times Consumer Reports
The Economist Financial Planning
Forbes Fortune
Inc. Institutional Investor
Insurance Forum insurance Sales
Insurance Week Journal of Accountancy
Journal of Financial Service Professionals Journal of Commerce
Life Insurance Selling Life Association News
MarketFacts Manager's Magazine
5
<PAGE> 107
National Underwriter Money
Morningstar, Inc. Nation's Business
New Choices (formerly 50 Plus) The New York Times
Pension World Pensions & Investments
Rough Notes Round the Table
U.S. Banker VARDs
The Wall Street Journal Working Woman
INCOME PAYMENT PROVISIONS
AMOUNT OF FIXED INCOME PAYMENTS. On the Income Date, the amount you have
chosen to apply to provide fixed income payments will be applied under the
income plan you have chosen. The monthly income payment factor in effect on the
Income Date times that amount and then divided by $1,000 will be the dollar
amount of each monthly payment. Each of these payments are guaranteed and
remain level throughout the period you selected.
The monthly income payment factor used to determine the amount of the
fixed income payments will not be less than the guaranteed minimum monthly
income payment factor shown in your Contract.
AMOUNT OF VARIABLE INCOME PAYMENTS. These payments will vary in amount.
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. The Income Unit
values for each payment will be determined no earlier than five Business Days
preceding the due date of the variable income payment. We guarantee the
payment will not vary due to changes in mortality or expenses.
INCOME UNITS. On the Income Date, the number of Income Units for an
applicable Variable Sub-Account is determined by multiplying (1) by (2),
dividing the result by (3), and then dividing that result by (4) where:
(1) is the amount you have chosen to allocate to that Variable
Sub-Account;
(2) is the monthly income payment factor for the income plan chosen;
(3) is $1,000; and
(4) is the Income Unit value for the Variable Sub-Account for the
Valuation Period ending on that date.
INCOME UNIT VALUE. The value of an Income Unit is calculated at the same
time that the value of an Accumulation Unit is calculated and is based 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.
Thereafter, the Income Unit value for every Business Day is determined by
multiplying (a) by (b), and then dividing by (c) where:
6
<PAGE> 108
(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 and that is shown in your Contract for the number of
days in the Valuation Period.
After the Income Date the net investment factor is calculated slightly
different than before the Income Date. Before the Income Date Asset-Based
Charges are calculated as a percentage of the Variable Account Value on the
date of deduction. These charges are equal on an annual basis to 1.40%,
decreasing to 1.25% after the seventh Contract Year. However, on and after the
Income Date, we call these charges Variable Sub-Account Charges and deduct them
from the assets in each Variable Sub-Account on a daily basis. Therefore, the
"net investment factor" in (b), above, is determined by dividing (i) by (ii),
and then subtracting (iii) where:
(i) is the Accumulation Unit value for the current Valuation Period;
(ii) is the Accumulation Unit value for the immediately preceding
Valuation Period; and
(iii) is the daily Variable Sub-Account Charges (adjusted for the number
of days in the Valuation Period).
ILLUSTRATION OF CALCULATION OF INCOME UNIT VALUE
<TABLE>
<S> <C>
1. Accumulation Unit value for current Valuation Period . . . . . . . . . . . . . . . . . . . . . . . . . 10.0026116
2. Accumulation Unit value for immediately preceding Valuation
Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.0000000
3. Net Investment Factor prior to the Income date (1)/(2) . . . . . . . . . . . . . . . . . . . . . . . . 1.00026116
4. Adjustment for Variable Sub-Account Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.000038626
5. Net Investment Factor on and after the Income Date (3)-(4) . . . . . . . . . . . . . . . . . . . . . . 1.00022253
6. Income Unit value for the immediately preceding Valuation
Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.00000000
7. Daily equivalent of the assumed investment rate for the number of days in the
Valuation Period (assuming you select 3%)=(1.03(1/365)). . . . . . . . . . . . . . . . . . . . . . . . . 1.00008099
8. Income Unit value for current Valuation Period
[(5) x (6)]/(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.00141533
</TABLE>
7
<PAGE> 109
ILLUSTRATION OF VARIABLE INCOME PAYMENTS
<TABLE>
<S> <C>
1. Number of Accumulation Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
2. Accumulation Unit value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.0026116
3. Account Value (1) x (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,002.61
4. Minimum monthly income payment factor per $1,000 applied . . . . . . . . . . . . . . . . . . . . . . . 10.50
5. First monthly variable income payment [(3) x (4)]/$1,000 . . . . . . . . . . . . . . . . . . . . . . . 105.03
6. Income Unit value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.00141533
7. Number of Income Units (5)/(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.50151
8. Assume Income Unit value at the end of the second month is . . . . . . . . . . . . . . . . . . . . . . 10.05
9. Second monthly variable income payment (7) x (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.54
10. Assume Income Unit value at the end of the third month is. . . . . . . . . . . . . . . . . . . . . . . . 10.10
11. Third monthly variable income payment (7) x (10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106.07
</TABLE>
EXCHANGE OF INCOME UNITS. After the Income Date, 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.
SAFEKEEPING OF ACCOUNT ASSETS
The Company holds the title to the assets of the Variable Account. The
assets are kept physically segregated and held separate and apart from the
Company's General Account assets and from the assets in any other separate
account.
Records are maintained of all purchases and redemptions of Fund shares
held by each of the Variable Sub-Accounts.
A fidelity bond in the amount of approximately $10 million per occurrence
covering the Company's directors, officers, and employees has been issued by
Lloyd's of London.
LEGAL MATTERS
All matters relating to Delaware law pertaining to the Contracts,
including the validity of the Contracts and the Company's authority to issue
the Contracts, have been passed upon by James F. Bronsdon, the Company's Vice
President, Legal and Compliance. Sutherland Asbill & Brennan LLP has provided
advice on certain matters relating to the federal securities laws.
8
<PAGE> 110
OTHER INFORMATION
A registration statement has been filed with the SEC under the Securities
Act of 1933, as amended, with respect to the Contracts discussed in this
Statement of Additional Information. Not all the information set forth in the
registration statement, amendments and exhibits thereto has been included in
this Statement of Additional Information. Statements contained in this
Statement of Additional Information concerning the content of the Contracts and
other legal instruments are intended to be summaries. For a complete statement
of the terms of these documents, reference should be made to the instruments
filed with the SEC.
FINANCIAL STATEMENTS
The Statement of Additional Information contains no financial statements
for the Variable Account because the Variable Account had not commenced
operations as of the date of this Statement of Additional Information.
Financial statements of the Company are presented in the Prospectus.
9
<PAGE> 111
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
All required financial statements are included in Part A. Financial
statements for The Sage Variable Annuity Account A (the "Variable Account") are
not included in Part B because the Variable Account had not yet commenced
operations as of the date of this Registration Statement.
(b) Exhibits
(1)(a) Resolutions of the Board of Directors of Sage Life Assurance
of America, Inc. establishing The Sage Variable Annuity
Account A.*
(2) Not Applicable.
(3) Form of Distribution Agreement with Sage Distributors, Inc. and
Form of Selling Agreement.**
4(a)(i)(B) Amended Form of Individual Contract.**
(ii)(B) Amended Form of Individual Contract with Interest Account.
(iii)(B) Amended Form of Group Contract.**
(iv)(B) Amended Form of Group Certificate.**
(b)(i)(B) Amended Form of Individual IRA Rider.**
(ii)(B) Amended Form of Group IRA Rider.**
(iii)(B) Amended Form of Individual SIMPLE IRA Rider.**
(iv)(B) Amended Form of Group SIMPLE IRA Rider.**
(v)(A) Form of Individual Roth IRA Rider.*
(vi)(A) Form of Group Roth IRA Rider.*
(vii) Form of Individual Waiver of Surrender Charge Rider.*
(viii) Form of Group Waiver of Surrender Charge Rider.*
1
<PAGE> 112
(ix) Form of Individual Accidental Death Benefit Rider.*
(x) Form of Group Accidental Death Benefit Rider.*
(5)(i) Form of Individual Contract Application.**
(ii) Form of Group Certificate Application.*
(6)(a) Articles of Incorporation of the Company.*
(b) By-Laws of the Company.*
(7) Not Applicable.
(8)(a)(i) Form of Participation Agreement with AIM Variable Insurance
Funds, Inc.**
(ii) Form of Participation Agreement with The Alger American
Fund.**
(iii) Form of Participation Agreement with Liberty Variable
Investment Trust.
(iv) Form of Participation Agreement with MFS(R) Variable
Insurance Trust.(TM)**
(v) Form of Participation Agreement with Morgan Stanley
Universal Funds, Inc.
(vi) Form of Participation Agreement with Oppenheimer Variable
Account Funds.
(vii) Form of Participation Agreement with Sage Life Investment
Trust.**
(viii) Form of Participation Agreement with SteinRoe Variable
Investment Trust.
(ix) Form of Participation Agreement with T. Rowe Price Equity
Series, Inc.
(b) Form of Services Agreement with Financial Administration
Services, Inc.
(9)(i) Opinion and Consent of James F. Bronsdon.
(ii) Consent of Sutherland Asbill & Brennan LLP.
(10) Consent of Ernst & Young LLP.**
(11) Not Applicable.
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
2
<PAGE> 113
* Previously filed.
** Filed herewith.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Incorporated herein by reference to the section titled "Directors and
Executive Officers" of the Prospectus filed as Part A of this Registration
Statement.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The registrant is a segregated asset account of the Company and
therefore is owned and controlled by the Company. The Company is a stock life
insurance company of which all the voting securities are owned by Sage
Insurance Group, Inc., a Delaware corporation. (The Company in turn owns all of
the voting securities of Sage Life Assurance Company of New York, a New York
domiciled company which is pursuing a license to conduct insurance business in
that state.) In addition to the Company, Sage Insurance Group also owns all of
the voting securities of Sage Distributors, Inc. (a broker-dealer), Sage
Advisors, Inc. (a registered investment adviser), and Finplan Holdings, Inc. (a
financing company), all of which are Delaware corporations. All the voting
securities of Sage Insurance Group, Inc. are owned by Sage Insurance Holdings,
Inc, a Delaware corporation. Sage Insurance Holdings, Inc. is a wholly owned
subsidiary of Sage Holdings (USA), Inc., a Delaware corporation. (Sage Holdings
(USA), Inc. also owns all of the voting securities of Sage Properties (USA),
Inc., a Virginia corporation whose principal assets are real estate.) Sage
Holdings (USA), Inc. is a wholly owned subsidiary of Sage Life Holdings
Limited, a South African corporation. The nature of the business of the
companies listed above is insurance and financial services. Sage Life Holdings
is 100% owned by Sage Group Limited, a South African corporation that is the
ultimate holding company. Sage Group Limited is a controlling company operating
in life insurance, mutual funds and investment management. Various companies
and other entities controlled by Sage Group Limited may be considered to be
under common control with the registrant or the Company. Such other companies
and entities and the nature of their businesses are set forth below. These
companies are incorporated in South Africa and are wholly owned subsidiaries
unless otherwise noted.
In addition, Sage Group Limited signed a letter of intent with Swiss Re
Life and Health America, Inc. on December 1, 1998. Swiss Re's ultimate parent is
Swiss Reinsurance Company, Switzerland, one of the world's largest life and
health reinsurance groups. The letter of intent contemplates that Swiss Re will
enter into reinsurance arrangements with the Company. In addition, it provides
for an investment by Swiss Re in a newly formed company that will become the
immediate parent of the Company and a wholly-owned subsidiary of Sage Insurance
Group Inc. The arrangements contemplated by the letter of intent may be subject
to regulatory approval.
<TABLE>
<CAPTION>
DIRECT AND INDIRECT SUBSIDIARIES OF SAGE GROUP LIMITED
<S> <C>
COMPANY NAME PRINCIPAL BUSINESS
Alexotel (Pty) Ltd Property holding
Allied Financial Planning Services (Pty) Ltd Investment consultants
Bentley Office Park (Pty) Ltd Property development & investment
Blackreef Properties (Pty) Ltd Property holding
Consumer Classics (Pty) Ltd Manufacturing & distribution
Corporate Marketing Services (Pty) Ltd Investment marketing
Dinwiddie Township (Pty) Ltd Property holding
Edenston Properties (Pty) Ltd Property development
Educational Information Services (Pty) Ltd Publishing
Ensiklopedie Afrikana (Edms) Beperk Publishing
Estromin Properties & Investments (Pty) Ltd Property investment
Everest Construction (Pty) Ltd Construction
FPS (South Vaal) Investments (Pty) Ltd Property investment
FPS (Vaal) Investments (Pty) Ltd Investment holding
FPS Consultants Ltd Investment consultants
FPS Corporate Services (Pty) Ltd Pension advisors
FPS Investment Holdings Ltd Investment holding
FPS Investments (Pty) Ltd Investment holding
FPS Ltd Investment consultants
FPS Marketing & Management Systems (Pty) Ltd Training
Fraser Street Registrars (Pty) Ltd Transfer secretaries
Hatfield Properties (Block A) (Pty) Ltd Property investment
Hatfield Properties (Block B) (Pty) Ltd Property investment
Hatfield Properties (Block C) (Pty) Ltd Property investment
Highrise Home Investments (Pty) Ltd Property investment
Home Mortgage Investments (Pty) Ltd (50% owner) Financing
J van Streepen (Kempton Park) (Pty) Ltd (51% owner) Property development
Kemparkto (Pty) Ltd Property investment & development
Lakeview Management Properties (Pty) Ltd (75% owner) Property management
Lanrov Investments (Pty) Ltd Investment holding
Lot 26 of Portion 8 Parktown (Pty) Ltd Property development
Lot 26 of Portion 9 Parktown (Pty) Ltd Property investment
Mardin Agency (Pty) Ltd Real estate agents
Marlands Flats (Pty) Ltd Property holding
Meumann & Heyneke (Pty) Ltd Retail merchants
Nedrep Investments Ltd Investment holding
Netherlands Properties (Pty) Ltd Property investment
New Smal Construction Co. (Pty) Ltd Construction
Noordwyk Developments (Pty) Ltd Property development
Palmiet Townships (Pty) Ltd Property development
PJP Properties (Pty) Ltd Investment
R/E 105 Rosebank (Pty) Ltd Investment holding
Residential Mortgage Investments (Pty) Ltd (50% owner) Financing
S A Cultural Holdings (Pty) Ltd Investment
S A Kultuur Beleggings (Edms) Beperk Investment
S.B. Plant Hire (Pty) Ltd Plant hire
SACI Finance (Pty) Ltd Finance company
Sage Business Park (Eight) (Pty) Ltd Property investment
Sage Business Park (Five) (Pty) Ltd Property investment
Sage Business Park (Four) (Pty) Ltd Property investment
Sage Business Park (Nine) (Pty) Ltd Property investment
Sage Business Park (One) (Pty) Ltd Property investment
Sage Business Park (Seven) (Pty) Ltd Property investment
Sage Business Park (Six) (Pty) Ltd Property investment
Sage Business Park (Three) (Pty) Ltd Property investment
Sage Business Park (Two) (Pty) Ltd Property investment
Sage Centre (Pty) Ltd Property investment
Sage Corporate Services (Pty) Ltd Investment holding
Sage Family Benefits (Pty) Ltd Insurance consultants
Sage Holdings Ltd Financial, investment &
management
Sage Investment Trust Ltd Insurance & investment
Sage Land Finance (Pty) Ltd Financiers
Sage Land Holdings (Pty) Ltd Investment holding
Sage Library Gardens Ltd Investment holding
Sage Life Holdings Ltd Investment holding
Sage Life Ltd Life insurance
Sage Management Services (Pty) Ltd Management
Sage Parking (Pty) Ltd Own & operate parking garages
Sage Personal Investment Marketing (Pty) Ltd Investment consultants
Sage Properties (549 Sandown) (Pty) Ltd Property holding
Sage Properties (Menlyn) (Pty) Ltd Property investment
Sage Properties (Rivonia Four) (Pty) Ltd Property holding
Sage Properties (Sunnyside) (Pty) Ltd Property holding
Sage Properties Ltd Investment holding
Sage Property Holdings Ltd Property holding
Sage Property Management Services (Pty) Ltd Property management
Sage Property Portfolio Managers (Pty) Ltd Property investment & management
Sage Property Trust Managers, Ltd. (77.2% owner) Management of unit trusts
Sage Schachat Developments (Pty) Ltd Builders
Sage Schachat Ltd Investment holding
Sage Secretarial Services (Pty) Ltd Management & secretarial
Sage Selections (Pty) Ltd Investment
Sage Specialized Insurances Ltd Short term insurance
Sage Strategic Investments (Pty) Ltd Investment holding
Sage Trustees (Pty) Ltd Trustees
Sage Unit Trusts Ltd Management of unit trusts
Sagemed (Pty) Ltd Health & medical insurance
SAK Executive Investments (Pty) Ltd Investment holding
SAK Holdings (Pty) Ltd Investment holding
Sandhurst Properties (Block A) (Pty) Ltd Property investment & management
Sandhurst Properties (Block B) (Pty) Ltd Property investment & management
Sandhurst Properties (Block C) (Pty) Ltd Property investment & management
Sandhurst Properties (Block D) (Pty) Ltd Property investment & management
Sandhurst Properties (Block E) (Pty) Ltd Property investment & management
Sandhurst Properties (Block F) (Pty) Ltd Property investment & management
Sandhurst Properties (Block G) (Pty) Ltd Property investment & management
Sandown Development Holdings (Pty) Ltd Property holding
Sandown Developments (Pty) Ltd Property development
Schachat Ciskei (Pty) Ltd Property development
Schachat Construction (Pty) Ltd Construction
Schachat Cullum (Pty) Ltd Property development & management
Schachat Finance Company (Pty) Ltd Financiers
Schachat Land Resources (Pty) Ltd Investment holding
Schachat Natal (Pty) Ltd Farming & other
Schalab Townships (Pty) Ltd (51% owner) Property development
Sectional Title (Pty) Ltd Property development
SLR Land Development (Pty) Ltd Building contractors
SMH Land Development (Pty) Ltd Property investment
SPTM Holdings (Pty) Ltd Investment holding
SSI Securities (Pty) Ltd Financiers
Stonehouse Investments (Pty) Ltd Property investment
Strandbou (Pty) Ltd Property investment
Sunnyside Erf 26 (Block B) (Pty) Ltd Property investment & management
Sunnyside Erf 26 (Block C) (Pty) Ltd Property investment & management
Sunnyside Erf 26 (Block D) (Pty) Ltd Property investment & management
Table Classics (Pty) Ltd Deal in tableware products
The Gold Jewelry Corporation (Pty) Ltd Manufacture & sale of coins &
jewelry
Townhomes (Pty) Ltd Building contractors
Von Brandis Square Development Co. (Pty) Ltd Property development
Wereldspekium (Edms) Beperk Distributors & publishers of books
Witch Construction Company (Pty) Ltd Property investment & development
Witch Construction Company (Transvaal) (Pty) Ltd Property investment & development
Witch Management (Pty) Ltd Management services
Sage International B.V. (Netherlands corporation) Holding
Sage International Assets Ltd (BVI corporation) Holding
Sage Management Services (USA), Inc. (New York corporation) Management services
</TABLE>
ITEM 27. NUMBER OF CONTRACT OWNERS
Not applicable.
ITEM 28. INDEMNIFICATION
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.
3
<PAGE> 114
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.
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.
ITEM 29. PRINCIPAL UNDERWRITER
(a) Sage Distributors, Inc. ("Sage Distributors") is the registrant's
principal underwriter.
(b) Officers and Directors of Sage Distributors
4
<PAGE> 115
<TABLE>
<CAPTION>
Name and Principal Business Address* Positions and Offices With Sage Distributors
- ----------------------------------- --------------------------------------------
<S> <C>
Robin I. Marsden Director
Mitchell R. Katcher Director
Ronald S. Scowby Director
James F. Bronsdon President, Chief Executive Officer, Chief Legal Officer
James F. Renz Chief Financial Officer, Treasurer, Assistant Secretary
Robert J. Kiggins Secretary
</TABLE>
* The principal business address of all of the persons listed above is
300 Atlantic Street, Stamford, CT 06901, except for Mr. Kiggins whose
principal business address is 11 Martine Avenue, 12th Floor, White
Plains, New York 10606.
ITEM 30. LOCATION OF BOOKS AND RECORDS
All of the accounts, books, records or other documents required to be
kept by Section 31(a) of the Investment Company Act of 1940 and rules
thereunder, are maintained at our Customer Service Center.
ITEM 31. MANAGEMENT SERVICES
All management contracts are discussed in Part A or Part B of this
registration statement.
ITEM 32. UNDERTAKINGS AND REPRESENTATIONS
(a) The registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as is
necessary to ensure that the audited financial statements in
the statement are never more than 16 months old for as long
as purchase payments under the Contracts offered herein are
being accepted.
(b) The registrant undertakes that it will include either (1) as
part of any application to purchase a Contract offered by the
prospectus, a space that an applicant can check to request a
Statement of Additional Information, or (2) a post card or
similar written communication affixed to or included in the
prospectus that the applicant can remove and send to the
Company for a Statement of Additional Information.
Additional Information.
(c) The registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made
available under this Form N-4
5
<PAGE> 116
promptly upon written or oral request to the Company at the
address or phone number listed in the prospectus.
(d) The Company represents that the fees and charges under the
Contracts, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the
risks assumed by the Company.
6
<PAGE> 117
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company
Act of 1940, the registrant has caused this Pre-Effective Amendment to be signed
on its behalf, in the City of Stamford, and the State of Connecticut, on this
22nd day of December 1998.
The Sage Variable Annuity Account A
(Registrant)
By: Sage Life Assurance of America, Inc.
Attest: /s/
/s/James F. Bronsdon By: /s/Robin I. Marsden
- --------------------------- -------------------------------------------
Robin I. Marsden
Director, President, Chief Executive
Officer, Sage Life Assurance of America, Inc.
By: Sage Life Assurance of America, Inc.
(Depositor)
Attest: /s/
/s/James F. Bronsdon By: /s/Robin I. Marsden
- --------------------------- -------------------------------------------
Robin I. Marsden
Director, President, Chief Executive
Officer
As required by the Securities Act of 1933, this Pre-Effective Amendment
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/Ronald S. Scowby Chairman December 22, 1998
- -------------------
Ronald S. Scowby
/s/H. Louis Shill Director December 23, 1998
- -----------------
H. Louis Shill
/s/Paul C. Meyer Director December 22, 1998
- ----------------
Paul C. Meyer
/s/Richard D. Starr Director December 22, 1998
- -------------------
Richard D. Starr
</TABLE>
7
<PAGE> 118
<TABLE>
<S> <C> <C>
/s/Mitchell R. Katcher Director, December 22, 1998
- ---------------------- Senior Executive Vice
Mitchell R. Katcher President, Chief Financial
Officer, Chief Actuary
</TABLE>
8
<PAGE> 1
EXHIBIT 3
DISTRIBUTION AGREEMENT
AGREEMENT dated as of _________________ by and between SAGE LIFE
ASSURANCE OF AMERICA, INC. ("Insurer"), a Delaware insurance company, on its
behalf and on behalf of each separate account identified in Schedule 1 hereto,
and SAGE DISTRIBUTORS, INC. ("Distributor"), a Delaware corporation.
WITNESSETH:
WHEREAS, Distributor is a broker-dealer that engages in the distribution
of variable insurance products and other investment products; and
WHEREAS, Insurer desires to issue certain variable insurance products
described more fully below to the public through Distributor acting as principal
underwriter;
NOW, THEREFORE, in consideration of their mutual promises, Insurer and
Distributor hereby agree as follows:
1. DEFINITIONS
a. CONTRACTS -- The class or classes of variable insurance products
set forth on Schedule 1 to this Agreement as in effect at the time
this Agreement is executed, and such other classes of variable
insurance products that may be added to Schedule 1 from time to
time in accordance with Section 11.b of this Agreement, and
including any riders to such contracts and any other contracts
offered in connection therewith. For this purpose and under this
Agreement generally, a "class of Contracts" shall mean those
Contracts issued by Insurer on the same policy form or forms and
covered by the same Registration Statement.
b. REGISTRATION STATEMENT -- At any time that this Agreement is in
effect, each currently effective registration statement filed with
the SEC under the 1933 Act on a prescribed form, or currently
effective post-effective amendment thereto, as the case may be,
relating to a class of Contracts, including financial statements
included in, and all exhibits to, such registration statement or
post-effective amendment. For purposes of Section 9 of this
Agreement, the term "Registration Statement" means any document
which is or at any time was a Registration Statement within the
meaning of this Section 1.b.
c. PROSPECTUS -- The prospectus included within a Registration
Statement, except that, if the most recently filed version of the
prospectus (including any supplements thereto) filed pursuant to
Rule 497 under the 1933 Act subsequent to the date on which a
Registration Statement became effective differs from the
prospectus included within such Registration Statement at the time
it became effective, the term "Prospectus" shall refer to the most
recently filed prospectus filed under Rule 497 under the 1933 Act,
from and after the date on which it shall
<PAGE> 2
have been filed. For purposes of Section 9 of this Agreement, the
term "any Prospectus" means any document which is or at any time
was a Prospectus within the meaning of this Section 1.c.
d. FUND -- An investment company in which a Separate Account invests.
e. SEPARATE ACCOUNT -- A separate account supporting a class or
classes of Contracts and specified on Schedule 1 as in effect at
the time this Agreement is executed, or as it may be amended from
time to time in accordance with Section 11.b of this Agreement.
f. 1933 ACT -- The Securities Act of 1933, as amended.
g. 1934 ACT -- The Securities Exchange Act of 1934, as amended.
h. 1940 ACT -- The Investment Company Act of 1940, as amended.
i. SEC -- The Securities and Exchange Commission.
j. NASD -- The National Association of Securities Dealers, Inc.
k. REGULATIONS -- The rules and regulations promulgated by the SEC
under the 1933 Act, the 1934 Act and the 1940 Act as in effect at
the time that this Agreement is executed or thereafter promulgated
or amended.
l. SELLING BROKER-DEALER -- A person registered as a broker-dealer
and licensed as a life insurance agent or affiliated with a person
so licensed, and authorized to dis tribute the Contracts pursuant
to a sales agreement as provided for in Section 4 of this
Agreement.
m. INTERMEDIARY DISTRIBUTOR -- A person authorized to recruit other
persons to become Selling Broker-Dealers pursuant to sales
agreements as provided for in Section 2 of this Agreement.
n. AGENTS MANUAL -- Written rules, regulations and procedures
provided by Insurer to insurance agents appointed to sell its
insurance contracts, which may be in the form of one or more
manuals, as revised from time to time.
o. REPRESENTATIVE -- When used with reference to Distributor, an
Intermediary Distributor or a Selling Broker-Dealer, an individual
who is an associated person, as that term is defined in the 1934
Act, thereof.
p. APPLICATION -- An application for a Contract.
- 2 -
<PAGE> 3
q. PURCHASE PAYMENT -- A payment made under a Contract by an
applicant or purchaser to purchase benefits under the Contract.
r. CUSTOMER SERVICE CENTER -- The service center identified in the
Prospectus for a class of Contracts as the location at which
Purchase Payments and Applications for such class of Contracts are
accepted.
s. TERRITORY -- All states and commonwealths of the United States
(other than New York), the District of Columbia and the
territories identified on Schedule 3 to this Agreement as amended
from time to time.
2. AUTHORIZATION AND APPOINTMENT
a. SCOPE OF AUTHORITY. Insurer hereby authorizes Distributor on an
exclusive basis, and Distributor accepts such authority, subject
to the registration requirements of the 1933 Act and the 1940 Act
and the provisions of the 1934 Act and conditions herein, to be
the distributor and principal underwriter for the sale of the
Contracts to the public in each state or other jurisdiction in the
Territory. As distributor and principal underwriter, Distributor
shall have authority to engage in the following activities in the
Territory, subject to the terms and conditions of this Agreement
and applicable laws and regulations, including rules of the NASD:
(1) the solicitation of Applications and Purchase Payments
directly from customers and prospective customers located
in the Territory;
(2) the selection of all persons who will be authorized to
engage in solicitation activities with respect to the
Contracts as Selling Broker-Dealers in each state and other
jurisdiction in the Territory in which the Contracts may
lawfully be sold, provided that each such person shall have
entered into a Selling Agreement substantially in the form
attached hereto as Exhibit A and complying with the terms
and conditions hereof; and
(3) the selection of all persons who will be authorized as
Intermediary Distributors to recruit persons in the
Territory to act as Selling Broker- Dealers, provided that
each such person shall have entered into a Marketing
Agreement satisfactory to Insurer and Distributor and
consistent with the terms and conditions of this Agreement;
Provided, however, that nothing herein shall be deemed to
require Distributor to engage in the retail sale of the
Contracts. The Contracts shall be offered for sale and
distribution at premium rates set from time to time by
Insurer. The Contracts shall not be offered in any state or
other jurisdiction as to which the Insurer has informed
Distributor in writing that the insurance departments and
securities
- 3 -
<PAGE> 4
departments, if applicable, have not approved the Contracts for
sale or that the Insurer has determined to cease offering the
Contracts therein.
b. LIMITS ON AUTHORITY. Distributor shall act as an independent
contractor vis-a-vis Insurer and nothing herein contained shall
constitute Distributor or its agents, officers or employees as
agents, officers or employees of Insurer solely by virtue of their
activities in connection with the distribution of the Contracts
hereunder. Distributor and its Representatives shall not have
authority, on behalf of Insurer: to make, alter or discharge any
Contract or other insurance policy or annuity entered into
pursuant to a Contract; to waive any Contract forfeiture
provision; to extend the time of paying any Purchase Payment; or
to receive any monies or Purchase Payments (except for the sole
purpose of forwarding monies or Purchase Payments to Insurer).
Distributor shall not expend, nor contract for the expenditure of,
the funds of Insurer. Distributor shall not possess or exercise
any authority on behalf of Insurer other than that expressly
conferred on Distributor by this Agreement.
c. TRADEMARKS. An affiliate of Insurer owns all right, title and
interest in and to the name, "Sage," and has authorized Insurer to
use and license other persons to use such name.
(1) Pursuant to such authority, Insurer hereby grants to
Distributor a non- exclusive license to use the name "Sage"
in connection with its performance of the services
contemplated under this Agreement, subject to (i) the
termination provisions in Section 10; (ii) Insurer's right
to terminate this license at any time for any reason
whatsoever; and (iii) any rights to terminate or otherwise
limit use of the name that may be reserved by such
affiliate of Sage. Upon any such termination, Distributor
shall promptly take steps to remove the name "Sage" from
all materials bearing its name, subject to compliance with
NASD rules.
(2) Distributor: (i) acknowledges and stipulates that Insurer's
name is a valid and enforceable trademark and/or service
mark; and that Distributor does not own Insurer's name and
claims no rights therein other than as a Distributor under
this Agreement; (ii) agrees never to contend otherwise in
legal proceedings or in other circumstances; and (iii)
acknowledges and agrees that the use of Insurer's name
pursuant to this grant of license shall inure to the
benefit of Insurer.
3. DISTRIBUTOR ACTIVITIES
a. DISTRIBUTOR REPRESENTATIVES. No Distributor Representative shall
solicit the sale of a Contract unless at the time of such
solicitation such individual is duly registered and in good
standing with the NASD and duly licensed with all
- 4 -
<PAGE> 5
applicable state insurance and securities regulatory authorities,
and is also duly appointed as an insurance agent of Insurer.
b. COMPLIANCE. All activities engaged in by Distributor and the
Distributor Representatives with respect to this Agreement shall
be in compliance with all applicable federal and state securities
laws and regulations and the Agents Manual. In particular, without
limiting the generality of the foregoing:
(1) Distributor shall train, supervise and be solely
responsible for the conduct of Distributor Representatives
in their activities in connection with the distribution of
the Contracts hereunder, and shall supervise their
compliance with applicable rules and regulations of any
securities regulatory agencies in the Territory that have
jurisdiction over variable insurance product activities.
(2) Neither Distributor nor any Distributor Representative
shall offer, attempt to offer, or solicit Applications for,
or deliver, the Contracts, in any state or other
jurisdiction in the Territory unless Insurer has notified
Distributor that such Contracts may lawfully be sold or
offered for sale in such state, and has not subsequently
revised such notice.
(3) Neither Distributor nor any Distributor Representative
shall give any information or make any representation to
any purchaser or prospective purchaser of a Contract in
connection with the offer or sale of such Contract that is
not in accordance with the Prospectus for such Contract, or
in the then-currently effective prospectus or statement of
additional information for a Fund underlying such Contract,
or in current advertising materials for such Contract or
Fund authorized by Insurer.
(4) All Purchase Payments paid by check or money order that are
collected by Distributor or any of Distributor
Representatives shall be remitted promptly, and in any
event not later than two business days, together with any
Applications, forms and any other required documentation,
to the Customer Service Center. Checks or money orders in
payment of Purchase Payments shall be drawn to the order of
"Sage Life Assurance of America, Inc." or "Sage Life".
Purchase Payments may be transmitted by wire order from
Distributor to the Customer Service Center in accordance
with the procedures set forth in the Agents Manual. If any
Purchase Payment is held at any time by Distributor,
Distributor shall hold such Purchase Payment in a fiduciary
capacity and such Purchase Payment shall be remitted
promptly, and in any event not later than two business
days, to Insurer. Distributor acknowledges that all such
Purchase Payments, whether by check, money order or wire,
shall be the property of Insurer. Distributor acknowledges
that Insurer shall have the
- 5 -
<PAGE> 6
unconditional right to reject, in whole or in part, any
Application or Purchase Payment.
c. REPRESENTATIONS AND WARRANTIES OF DISTRIBUTOR. Distributor
represents and warrants to Insurer that Distributor is and shall
remain registered during the term of this Agreement as a
broker-dealer under the 1934 Act, is a member with the NASD, and
is duly registered under applicable state securities laws, and
that Distributor is and shall remain during the term of this
Agreement in compliance with Section 9(a) of the 1940 Act.
4. SELLING BROKER-DEALERS
a. STANDARDS FOR SELLING BROKER-DEALERS. Distributor shall ensure
that Selling Broker-Dealers satisfy the standards set forth in
Schedule 4, as revised from time to time.
b. SALES AGREEMENT REQUIRED. Every Selling Broker-Dealer must enter
into a written sales agreement with Distributor which sales
agreement, among other things, will require such Selling
Broker-Dealer to use its best efforts to solicit applications for
Contracts and to comply with applicable laws and regulations,
including the Insurer's rules and regulations as reflected in the
Agents Manual or otherwise communicated to agents appointed by
Insurer, and will contain such other provisions as the Distributor
deems to be consistent herewith, including, without limitation,
the provisions of Section 3 of this Agreement governing activities
of Representatives of Distributor.
c. APPOINTMENT REQUIRED. Insurer shall appoint duly-qualified Selling
Broker- Dealers and their Representatives provided that Insurer
reserves the right to refuse to appoint any person proposed for
appointment, or once appointed, to terminate or refuse to renew
such appointment.
d. SUITABILITY STANDARDS. In view of Insurer's desire to ensure that
Contracts will be sold to purchasers for whom the Contracts will
be suitable, the sales agreement shall require that Selling
Broker-Dealers and their Representatives not make recommendations
to an applicant to purchase a Contract in the absence of
reasonable grounds to believe that the purchase of the Contract is
suitable for the applicant on the basis of information furnished
after a reasonable inquiry of the applicant's insurance and
investment objectives, financial situation and needs, and any
other information known to the person making the recommendation.
Further, a good faith, reasonable inquiry shall be made as to the
facts and circumstances concerning a prospective Contract owner's
insurance and financial needs and no recommendation shall be made
that the prospective Contract owner purchase a Contract when such
a purchase is not reasonably consistent with the information that
is known or reasonably should be known to the Selling
Broker-Dealer or its
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<PAGE> 7
Representatives. 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.
e. ROLLOVERS AND REPLACEMENTS DISCOURAGED. Sales agreements entered
into with Selling Broker-Dealers shall require them to agree not
to encourage a prospective applicant to surrender or exchange an
insurance contract in order to purchase a Contract, nor to
encourage a Contract owner to lapse, terminate, surrender,
exchange or cancel his or her Contract or discontinue making
Purchase Payments thereunder, except to the extent consistent with
their suitability obligations under applicable law.
5. MARKETING MATERIALS
a. PREPARATION AND FILING. Distributor shall be primarily responsible
for the design and preparation of all promotional, sales and
advertising material relating to the Contracts. Distributor shall
be responsible for filing such material, as required, with the
NASD and any state securities regulatory authorities. Insurer
shall be responsible for filing all promotional, sales or
advertising material, as required, with any state insurance
regulatory authorities. Insurer shall be responsible for preparing
the Contract forms and filing them with applicable state insurance
regulatory authorities, and for preparing the Prospectuses and
Registration Statements and filing them with the SEC and state
regulatory authorities, to the extent required. The parties shall
notify each other expeditiously of any comments provided by the
SEC, NASD or any securities or insurance regulatory authority on
such material, and will cooperate expeditiously in resolving and
implementing any comments, as applicable.
b. USE IN SOLICITATION ACTIVITIES. Insurer shall be responsible for
furnishing Distributor with such Applications, Prospectuses and
other materials for use by Distributor, any Intermediary
Distributors and any Selling Broker-Dealers in their activities
with respect to the Contracts. Insurer shall notify Distributor of
those states or jurisdictions which require delivery of a
statement of additional information with a prospectus to a
prospective purchaser.
6. COMPENSATION AND EXPENSES
a. COMPENSATION. Insurer shall pay compensation for sales of the
Contracts in accordance with Schedule 2 hereto.
b. EXPENSES RELATING TO THE CONTRACTS. Subject to the provisions of
this Section 6, Insurer shall be responsible vis-a-vis Distributor
for the payment of any and all expenses in connection with the
Contracts including, but not limited to:
- 7 -
<PAGE> 8
(1) the preparation and filing of each Registration Statement
(including each pre-effective and post-effective amendment
thereto) and the preparation and filing of each Prospectus
(including any preliminary and each definitive Prospectus);
(2) the preparation, printing and delivery of all Prospectuses,
marketing materials, confirmations, reports and all other
materials prepared for or provided to Contract Owners or
prospective Contract Owners;
(3) the preparation, underwriting, issuance and administration
of the Contracts;
(4) any registration, qualification or approval or other filing
of the Contracts or Contract forms required under the
securities or insurance laws of the states in which the
Contracts will be offered; and
(5) all registration fees for the Contracts payable to the SEC.
c. EXPENSES OF DISTRIBUTOR. Insurer shall bear, as principal, all
expenses of Distributor, except for the responsibility and
obligation to pay compensation to Distributor Representatives,
Intermediary Distributors and Selling Broker- Dealers, without any
present or future expectation or obligation of Distributor to
incur such expenses as principal, to pay for such expenses or to
reimburse Insurer for such expenses. Such expenses to be paid by
Insurer (or that the insurer will cause to be paid) shall include,
but not be limited to:
(1) all expenses for the preparation and filing of all
contracts, reports and other communications with federal,
state and local agencies;
(2) all legal fees, auditing fees and consulting fees;
(3) all fees and expenses associated with the licensing,
training and supervision of Representatives and other
associated persons of Distributor;
(4) all administrative, clerical, stenographic, data processing
and other support services expenses;
(5) all office supplies and equipment expenses;
(6) all expenses related to office space;
(7) all NASD, SEC and other regulatory registration fees,
membership fees and assessments for Distributor and for
Distributor's registered personnel; and
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<PAGE> 9
(8) all other corporate expenses of Distributor.
It is understood that, if Distributor enters into a distribution
agreement with another insurance company affiliated with Insurer,
Insurer's obligations pursuant to this Section 6.c shall be
allocated between Insurer and such other insurer based on existing
insurance regulations, agreements and procedures.
7. COMPLIANCE
a. MAINTAINING REGISTRATION AND APPROVALS. Insurer shall be
responsible for maintaining the registration of the Contracts with
the SEC and any state securities regulatory authority with which
such registration is required, and for gaining and maintaining
approval of the Contract forms where required under the insurance
laws and regulations of each state or other jurisdiction in the
Territory.
b. CONFIRMATIONS AND 1934 ACT COMPLIANCE. Insurer, as agent for
Distributor, shall confirm to each applicant for, and purchaser
of, a Contract in accordance with Rule 10b-10 under the 1934 Act
acceptance of Purchase Payments and such other transactions as are
required by Rule 10b-10 or administrative interpretations
thereunder. Insurer shall maintain and preserve books and records
with respect to such confirmations in conformity with the
requirements of Rules 17a-3 and 17a-4 under the 1934 Act to the
extent such requirements apply. The books, accounts and records of
Insurer, the Separate Account and Distributor as to all
transactions hereunder and with respect to the Contracts shall be
maintained so as to disclose clearly and accurately the nature and
details of the transactions. Insurer shall maintain, as agent for
Distributor, such books and records of Distributor pertaining to
the offer and sale of the Contracts as are required by the 1934
Act as may be mutually agreed upon by Insurer and Distributor,
including but not limited to maintaining a record of Distributor
Representatives and of the payment of commissions and other
payments or service fees to Distributor Representatives. In
addition, Insurer, as agent for Distributor, shall maintain and
preserve such additional accounts, books and other records as are
required of Distributor by the 1934 Act. Insurer shall maintain
all such books and records and hold such books and records on
behalf of and as agent for Distributor whose property they are and
shall remain, and acknowledges that such books and records are at
all times subject to inspection by the SEC in accordance with
Section 17(a) of the 1934 Act, NASD, and all other regulatory
bodies having jurisdiction.
c. REPORTS. Distributor shall cause Insurer to be furnished with such
reports as Insurer may reasonably request for the purpose of
meeting its reporting and recordkeeping requirements under the
1933 Act, the 1934 Act and the 1940 Act and regulations thereunder
as well as the insurance laws of the State of Delaware and any
other applicable states or jurisdictions.
- 9 -
<PAGE> 10
d. ISSUANCE AND ADMINISTRATION OF CONTRACTS. Insurer shall be fully
responsible vis-a-vis Distributor for issuing the Contracts and
administering the Contracts and the Separate Account in accordance
with applicable laws, rules and regulations, provided, however,
that Distributor shall have full responsibility for the securities
activities of all persons employed by the Insurer, engaged
directly or indirectly in Contract operations, and for the
training, supervision and control of such persons to the extent of
such activities.
8. COMPLAINTS, INVESTIGATIONS AND PROCEEDINGS
a. NOTICE OF CUSTOMER COMPLAINTS, REGULATORY INVESTIGATIONS AND
PROCEEDINGS. Distributor and Insurer shall notify each other
promptly of any customer complaint or notice of any regulatory
investigation or proceeding or judicial proceeding received by
either of them with respect to the Contracts or the activities
contemplated by this Agreement.
b. CUSTOMER COMPLAINTS. In the case of a customer complaint,
Distributor and Insurer shall cooperate in investigating such
complaint and any response by either party to such complaint will
be sent to the other party for approval not less than five
business days prior to its being sent to the customer or other
interested party, except that if a more prompt response is
required, the proposed response shall be communicated by facsimile
or in person. Distributor and Insurer shall each be responsible
for compliance with regulatory requirements applicable to each of
them with regard to the handling, processing, resolution and
reporting of customer complaints. Distributor and Insurer shall
cooperate with each other in order to assist the other in
complying with requirements under applicable law, rules or
regulations governing the handling, processing and resolution of
customer complaints.
c. INVESTIGATIONS AND PROCEEDINGS. Distributor and Insurer shall
cooperate fully in any securities or insurance regulatory
investigation or proceeding or judicial proceeding arising in
connection with the offering, sale or distribution of the
Contracts distributed under this Agreement, and shall make books
and records maintained by each of them available for inspection by
regulatory authorities to which the other is subject, to the
extent provided for in this Agreement or required by applicable
law, subject to the rights such party may have to the
attorney-client privilege or nondisclosure obligations such party
may have under applicable confidentiality requirements.
d. RIGHT TO INDEMNIFICATION. It is expressly acknowledged and agreed
that the parties may seek indemnification from the other for
liabilities arising as a result of customer complaints, regulatory
investigations or other proceedings, to the extent consistent with
the terms and conditions of Section 9 of this Agreement.
- 10 -
<PAGE> 11
9. INDEMNIFICATION
A. BY INSURER. Insurer shall indemnify and hold harmless Distributor
and each person who controls or is associated with Distributor
within the meaning of such terms under the federal securities
laws, and any officer, director, employee or agent of the
foregoing, against any and all losses, claims, damages or
liabilities, joint or several (including any investigative, legal
and other expenses reasonably incurred in connection with, and any
amounts paid in settlement of, any action, suit or proceeding or
any claim asserted), to which Distributor and/or any such person
may become subject, under any statute or regulation, any NASD rule
or interpretation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities:
(1) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact or omission or
alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein
not misleading, in light of the circumstances in which they
were made, contained in any Registration Statement or in
any Prospectus; provided that Insurer shall not be liable
in any such case to the extent that such loss, claim,
damage or liability arises out of, or is based upon, an
untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon information
furnished in writing to Insurer by Distributor specifically
for use in the preparation of any such Registration
Statement or any amendment thereof or supplement thereto;
(2) result because any promotional, sales or advertising
material or sales practice authorized by Insurer violates
state insurance laws or regulations; or
(3) result from any material breach by Insurer of any provision
of this Agreement.
This indemnification agreement shall be in addition to any
liability that Insurer may otherwise have; provided, however, that
no person shall be entitled to indemnification pursuant to this
provision if such loss, claim, damage or liability is due to the
willful misfeasance, bad faith, gross negligence or reckless
disregard of duty by the person seeking indemnification.
b. BY DISTRIBUTOR. Distributor shall indemnify and hold harmless
Insurer and each person who controls or is associated with Insurer
within the meaning of such terms under the federal securities
laws, and any officer, director, employee or agent of the
foregoing, against any and all losses, claims, damages or
liabilities, joint or several (including any investigative, legal
and other expenses reasonably
- 11 -
<PAGE> 12
incurred in connection with, and any amounts paid in settlement
of, any action, suit or proceeding or any claim asserted), to
which Insurer and/or any such person may become subject under any
statute or regulation, any NASD rule or interpretation, at common
law or otherwise, insofar as such losses, claims, damages or
liabilities:
(1) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact or omission or
alleged omission to state a material fact required to be
stated therein or necessary in order to make the statements
therein not misleading, in light of the circumstances in
which they were made, contained in any Registration
Statement or in any Prospectus, to the extent, but only to
the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in
reliance upon information furnished in writing by
Distributor to Insurer specifically for use in the
preparation of any such Registration Statement or any
amendment thereof or supplement thereto;
(2) result because of any use by Distributor or any Distributor
Representative of promotional, sales or advertising
material not authorized by Insurer or any verbal or written
misrepresentations by Distributor or any Distributor
Representative or any unlawful sales practices employed by
Distributor or any Distributor Representative in relation
to the Contracts under federal securities laws or NASD
regulations; or
(3) result from any material breach by Distributor of any
provision of this Agreement.
This indemnification shall be in addition to any liability that
Distributor may otherwise have; provided, however, that no person
shall be entitled to indemnification pursuant to this provision if
such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of
duty by the person seeking indemnification.
c. GENERAL. Promptly after receipt by a party entitled to
indemnification ("indemnified person") under this Section 9 of
notice of the commencement of any action as to which a claim will
be made against any person obligated to provide indemnification
under this Section 9 ("indemnifying party"), such indemnified
person shall notify the indemnifying party in writing of the
commencement thereof as soon as practicable thereafter, but
failure to so notify the indemnifying party shall not relieve the
indemnifying party from any liability which it may have to the
indemnified person otherwise than on account of this Section 9.
The indemnifying party will be entitled to participate in the
defense of the indemnified person but such participation will not
relieve such indemnifying party of the obligation to reimburse the
indemnified person for reasonable legal
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<PAGE> 13
and other expenses incurred by such indemnified person in
defending himself or itself.
The indemnification provisions contained in this Section 9
shall remain operative and in full force and effect,
regardless of any termination of this Agreement. A
successor by law of Distributor or Insurer, as the case may
be, shall be entitled to the benefits of the
indemnification provisions contained in this Section 9.
10. TERMINATION. This Agreement shall terminate automatically if it is
assigned by a party without the prior written consent of the other
party. This Agreement may be terminated at any time for any reason
by either party upon 60 days' written notice to the other party,
or sooner if agreed to by the parties, in either case without
payment of any penalty. (The term "assigned" shall not include any
transaction exempted from Section 15(b)(2) of the 1940 Act.) This
Agreement may be terminated at the option of either party to this
Agreement upon the other party's material breach of any provision
of this Agreement or of any representation or warranty made in
this Agreement, unless such breach has been cured within 10 days
after receipt of written notice of breach from the non-breaching
party. Upon termination of this Agreement all authorizations,
rights and obligations shall cease except: (a) the obligation to
settle accounts hereunder, including commissions on Purchase
Payments subsequently received for Contracts in effect at the time
of termination or issued pursuant to Applications received by
Insurer prior to termination; (b) the duty under Section 8 of this
Agreement to notify and cooperate with respect to customer
complaints, regulatory investigations and proceedings; and (c) the
indemnification provisions of Section 9 of this Agreement.
11. MISCELLANEOUS
a. BINDING EFFECT. This Agreement shall be binding on and shall inure
to the benefit of the respective successors and assigns of the
parties hereto provided that neither party shall assign this
Agreement or any rights or obligations hereunder without the prior
written consent of the other party.
b. SCHEDULES. The parties to this Agreement may amend the Schedules
to this Agreement from time to time to reflect additions of any
class of Contracts and Separate Accounts or changes in the
compensation for the sale of the Contracts. The provisions of this
Agreement shall be equally applicable to each such class of
Contracts and each Separate Account that may be added to the
Schedules, unless the context otherwise requires. Any other change
in the terms or provisions of this Agreement shall be by written
agreement between Insurer and Distributor.
c. RIGHTS, REMEDIES, ETC., ARE CUMULATIVE. The rights, remedies and
obligations contained in this Agreement are cumulative and are in
addition to any and all rights, remedies and obligations, at law
or in equity, which the parties hereto are entitled to under state
and federal laws. Failure of either party to insist upon strict
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<PAGE> 14
compliance with any of the conditions of this Agreement shall not
be construed as a waiver of any of the conditions, but the same
shall remain in full force and effect. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute,
a waiver of any other provisions, whether or not similar, nor
shall any waiver constitute a continuing waiver.
d. NOTICES. All notices hereunder are to be made in writing and shall
be given:
if to Insurer, to:
Mr. Robin I. Marsden
President and Chief Executive Officer
Sage Life Assurance of America, Inc.
300 Atlantic Street, Suite 302
Stamford, CT 06901
if to Distributor, to:
Mr. James F. Bronsdon, Jr.
President and Chief Executive Officer
Sage Distributors, Inc.
300 Atlantic Street
Stamford, CT 06901
or such other address as such party may hereafter specify in
writing. Each such notice to a party shall be either hand
delivered or transmitted by registered or certified United States
mail with return receipt requested, or by overnight mail by a
nationally recognized courier, and shall be effective upon
delivery.
e. INTERPRETATION; JURISDICTION. This Agreement constitutes the whole
agreement between the parties hereto with respect to the subject
matter hereof, and supersedes all prior oral or written
understandings, agreements or negotiations between the parties
with respect to such subject matter. No prior writings by or
between the parties with respect to the subject matter hereof
shall be used by either party in connection with the
interpretation of any provision of this Agreement. This Agreement
shall be construed and its provisions interpreted under and in
accordance with the internal laws of the state of Delaware without
giving effect to principles of conflict of laws.
f. SEVERABILITY. This is a severable Agreement. In the event that any
provision of this Agreement would require a party to take action
prohibited by applicable federal or state law or prohibit a party
from taking action required by applicable federal or state law,
then it is the intention of the parties hereto that such provision
shall be enforced to the extent permitted under the law, and, in
any
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<PAGE> 15
event, that all other provisions of this Agreement shall remain
valid and duly enforceable as if the provision at issue had never
been a part hereof.
g. SECTION AND OTHER HEADINGS. The headings in this Agreement are
included for convenience of reference only and in no way define or
delineate any of the provisions hereof or otherwise affect their
construction or effect.
h. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which taken together shall constitute one
and the same instrument.
i. REGULATION. This Agreement shall be subject to the provisions of
the 1933 Act, 1934 Act and 1940 Act and the Regulations and the
rules and regulations of the NASD, from time to time in effect,
including such exemptions from the 1940 Act as the SEC may grant,
and the terms hereof shall be interpreted and construed in
accordance therewith.
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by such authorized officers on the date specified below.
SAGE LIFE ASSURANCE OF AMERICA, INC.
By:
--------------------------------------------
Name: Robin I. Marsden
------------------------------------------
Title: President and Chief Executive Officer
-----------------------------------------
SAGE DISTRIBUTORS, INC.
By:
--------------------------------------------
Name: James F. Bronsdon, Jr.
-----------------------------------------
Title: President and Chief Executive Officer
----------------------------------------
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<PAGE> 17
SCHEDULE 1
CLASSES OF CONTRACTS
SUPPORTED BY SEPARATE ACCOUNTS
Effective as of the date the Agreement was executed, the following classes of
Contracts are subject to the Agreement:
<TABLE>
<CAPTION>
Contract Marketing SEC 1933 Act Name of Supporting
Name Registration Number Account Annuity or Life
========================== ========================== ======================= =======================
<S> <C> <C> <C>
Asset I The Sage Variable Annuity
Annuity Account A
- -----------------------------------------------------------------------------------------------------------
Asset II The Sage Variable Annuity
Annuity Account A
========================== ========================== ======================= =======================
</TABLE>
Effective as of _______, the following classes of Contracts are hereby added to
this Schedule 1 and made subject to the Agreement:
<TABLE>
<CAPTION>
Contract Marketing SEC 1933 Act Name of Supporting
Name Registration Number Account Annuity or Life
========================== ========================== ======================= =======================
<S> <C> <C> <C>
========================== ========================== ======================= =======================
</TABLE>
IN WITNESS WHEREOF, Distributor and Insurer hereby amend this Schedule 1 in
accordance with Section 11.b. of the Agreement.
- ------------------------------- ---------------------------------
Sage Distributors, Inc. Sage Life Assurance of America, Inc.
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- 18 -
<PAGE> 19
SCHEDULE 2
COMPENSATION SCHEDULE
[TO BE DETERMINED]
<PAGE> 20
SCHEDULE 3
TERRITORY
AS OF __________, 1999
THE DISTRICT OF COLUMBIA AND
ALL STATES OTHER THAN NEW YORK
<PAGE> 21
SCHEDULE 4
STANDARDS FOR SELLING BROKER-DEALERS
(1) Every Selling Broker-Dealer shall be registered as a
broker-dealer with the SEC, admitted as a member of the
NASD, and licensed as an insurance agent with authority to
sell variable products or associated with an insurance
agent so licensed in each state or other jurisdiction in
the Territory in which each such Selling Broker-Dealer
proposes to act, such association to be in compliance with
the terms and conditions of applicable SEC no-action
letters.
(2) Any individuals to be authorized to act on behalf of
Selling Broker-Dealer shall be duly registered with the
NASD as principals or representatives of Selling
Broker-Dealer with authority to sell variable products, and
shall be licensed as insurance agents and, where
applicable, with authority to sell variable products in
each state or other jurisdiction in the Territory in which
each such individual proposes to act.
(3) Intermediary Distributor shall have verified that Selling
Broker-Dealer and its Representatives are duly licensed
under applicable state insurance law to sell the Contracts
(or, if Broker-Dealer is not so licensed, that it is
associated with an entity so licensed).
(4) Every Selling Broker-Dealer (or, if applicable, its
associated insurance agency) and each of its
Representatives shall be qualified to be appointed by
Insurer in the relevant states if its proposed activities
in such state on behalf of Insurer require such
appointment.
(5) Every Selling Broker-Dealer must be willing to use
reasonable efforts to sell the Contracts.
(6) A Selling Broker-Dealer's compliance and complaint record
also shall be considered.
<PAGE> 22
Specimen
Agreement
SELLING FIRM AGREEMENT
MARKETING AND SELLING AGREEMENT
FOR
SELLING BROKER DEALERS & SELLING AGENCIES
<PAGE> 23
MARKETING AND SELLING AGREEMENT
INDEX
<TABLE>
<CAPTION>
SECTION Page
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<S> <C>
1. DEFINITIONS 3
2. APPOINTMENT 6
3. TERRITORY AND PRODUCTS 6
4. TERM AND TERMININATION 7
5. SALE OF THE PRODUCTS AND COMPENSATION 8
6. COMPENSATION VESTING RIGHTS 9
7. YOUR DUTIES AND OBLIGATIONS 9
8. LIMITATION OF AUTHORITY 13
9. SAGE'S ADMINISTRATIVE PROCEDURES 14
10. CLIENT SERVICE RESPONSIBILITIES 15
11. ADVERTISING AND SALES PROMOTIONAL MATERIAL 16
12. RECORDKEEPING 16
13. REPRESENTATIONS AND WARRANTIES 17
14. INDEMNIFICATIONS 17
15. ENTIRE AGREEMENT 18
16. CONDITIONS SURVIVING TERMINATION OF AGREEMENT 19
17. GENERAL PROVISIONS 19
18. SIGNATURE PAGE(S) AND EXECUTION 22
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
--------
<S> <C>
AUTHORIZED TERRITORIES EXHIBIT A
AUTHORIZED PRODUCTS EXHIBIT B
COMPENSATION SCHEDULES EXHIBIT C
PRODUCER APPOINTMENT PROCEDURES EXHIBIT D
SELLING FIRM RECRUITING STANDARDS EXHIBIT E
AFFILIATE AGREEMENT EXHIBIT F
PRODUCER APPOINTMENT AGREEMENT EXHIBIT G
PRIOR AGREEMENTS EXHIBIT H
</TABLE>
2
<PAGE> 24
MARKETING AND SELLING AGREEMENT
AGREEMENT (THIS "AGREEMENT") MADE BY AND AMONG THE FOLLOWING ENTITIES, EACH
INDIVIDUALLY REFERRED TO AS A "PARTY" AND COLLECTIVELY REFERRED TO AS THE
"PARTIES":
SAGE LIFE ASSURANCE of AMERICA, INC. ("SAGE LIFE"), a life insurance company
incorporated in Delaware; and SAGE DISTRIBUTORS, INC. ("DISTRIBUTOR"), a
Broker-Dealer incorporated in Delaware (SAGE LIFE and DISTRIBUTOR are hereafter
collectively referred to as "SAGE"), or as We, or Us or Our;
AND
THE SELLING FIRM named on the signature page of this Agreement, together with
the other corporations and/or partnerships and/or entities and/or persons named
on the signature pages of this Agreement or any Affiliate Agreement, all of
which are hereafter collectively referred to as "Your Firm," or as "You", or
"Your."
RECITALS
WHEREAS, SAGE LIFE is a life insurance company conducting life insurance and
annuity business, including variable life insurance and variable annuity
business in the Territories; and,
WHEREAS, DISTRIBUTOR is a Broker-Dealer, and has been appointed by SAGE LIFE as
the principal underwriter and distributor for the Products (as defined herein);
and,
WHEREAS, You conduct the business of a financial products marketing company, are
experienced in the marketing of financial products, and wish to promote, market
and sell the Products of SAGE LIFE; and,
WHEREAS, The purpose of this Agreement is to establish the terms and conditions
under which You will arrange for the Products to be promoted, marketed and sold
by Your Producers and Your Selling Firms to the customers of Banks, or of such
other financial institutions, or of such other intermediaries operating in such
other markets as You and SAGE may agree upon from time to time in writing.
NOW THEREFORE, In consideration of the mutual benefits to be derived and
intending to be legally bound, the Parties hereby agree to the following terms
and conditions.
1. DEFINITIONS
The following additional definitions when used in this Agreement apply when used
in the singular or plural, and apply whether capitalized or not capitalized.
Affiliate:
Means, (i) any Broker/Dealer or Agency Associated With Your Broker/Dealer or
Your Agency for purposes of satisfying licensing, registration or qualification
requirements under applicable law, which becomes a party to this Agreement by
executing an Affiliate Agreement, and/or (ii) any corporation which controls, is
controlled by or under common control with any of the Parties.
Affiliate Agreement:
The Agreement by which an Affiliate agrees to be bound by the terms and
conditions of this Agreement.
Agency, Agencies :
A corporation, partnership or sole proprietorship licensed as an insurance agent
organization.
Agent(s):
An individual who is licensed as a life insurance agent by one or more states.
Application: Applicant:
Any application for a policy or contract relating to any of the Products. An
Applicant is a person who has signed a completed Application which has been
submitted to SAGE for approval.
Appointment Agreement: An agreement substantially in the form attached hereto as
Exhibit G that is entered into between SAGE LIFE and a Producer.
3
<PAGE> 25
1. DEFINITIONS (CONTINUED)
Associated; Associated With; Association:
Has the same meaning as contemplated by Section 3(a)(18) of the 1934 Act which
defines, as of the date of this Agreement, a "person associated with a broker or
dealer" and "associated person of a broker or dealer," to mean any partner,
officer, director or branch manager of such broker/dealer (or any person
occupying a similar status or performing similar functions), any person directly
or indirectly controlling, controlled by or under common control with such
broker/dealer, or any employee of such broker/dealer.
Bank(s):
Any insured depository institution, as that term is defined in Federal Deposit
Insurance Act, U.S.C. 1813(c)(2), including but not limited to a bank; savings
bank; savings and loan association; credit union; any uninsured branch or agency
of a foreign bank or a commercial lending company owned or controlled by a
foreign bank; or any other similar institution.
Broker-Dealer:
A person, corporation or entity registered as a broker-dealer under the 1934 Act
and who is also a member of the NASD.
Client:
Any individual, corporation, partnership or legal entity who has become a
Policyholder of SAGE LIFE directly as a result of a solicitation by Your Firm,
or by any Affiliate, or by any of Your Producers.
Compensation: Compensation Schedules:
The amounts payable or recoverable under this Agreement and specified in the
respective Exhibits and Compensation Schedules attached to this Agreement.
Contract and Contract Owner:
Means the same as Policy and Policyholder.
Code of Conduct:
A code of conduct governing business practices adopted by SAGE, and distributed
by SAGE from time to time.
Customer Service Center:
The service center identified in the Prospectus for a class of contracts as the
location at which Purchase Payments and Applications for such class of contracts
are accepted and underwritten.
Duly Licensed and Authorized:
With respect to a Producer, an individual who (i) is licensed and in good
standing as an Agent in the Territory(ies) where such Producer will solicit and
sell Products, (ii) is registered and in good standing with the NASD as a
Registered Representative of Your Broker-Dealer or a Selling Broker-Dealer;
(iii) is registered and in good standing with state securities regulatory
authorities as a securities agent of Your Broker-Dealer or a Selling
Broker-Dealer in state(s) in the Territory(ies) in which such registration is
required for such Producer to solicit and sell the Products; (iv) is appointed
as an Agent of SAGE LIFE; (v) is trained to sell and understand the Products,
product features and marketing methods and the role and purpose of the Products
in serving the financial needs of Clients; (vi) is trained in Your
administrative procedures and SAGE's administrative procedures relating to the
Products; and (vii) is trained in the procedures relating to all applicable
regulatory and product compliance requirements governing the sale of the
Products. With respect to a Broker-Dealer or Agency, an organization that, (i)
is licensed and in good standing as an Agency in the Territory(ies) where such
organization will solicit and sell Products; (ii) is registered with the SEC and
with state securities regulatory authorities, where required, as a Broker-Dealer
in the Territory(ies) and is a member in good standing with the NASD; (iii) is
appointed as an Agency of SAGE LIFE, it being understood that an organization
can rely on an insurance agency networking arrangement meeting the terms and
conditions of SEC no-action letters culminating in Howard & Howard (avail. Sept.
28, 1995), in order to satisfy all of the foregoing conditions; and (iv) offers
and sells the Products through Producers Associated With it who are Duly
Licensed and Authorized.
Effective Date:
The date shown on the signature page of this Agreement as the Effective Date.
Fund:
An investment company as defined in 1940 Act, or a portfolio thereof in which
premiums or cash value for the Products allocated to the Separate Account are
invested.
4
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1. DEFINITIONS (CONTINUED)
NASD:
The National Association of Securities Dealers, Inc.
Policy and Policyholder:
The respective written contracts and contractual documents issued in respect of
a Product. The terms "contract" or "policy contract" or "certificate" or "group
certificate" or "group policy" all have the same meaning as Policy. A
Policyholder is the owner of a Policy and has the same meaning as contract
owner, or certificate owner.
Prior Agreements:
The agreement(s) (if any) described in Exhibit H and incorporated by reference
as forming an integral part of this Agreement.
Procedures Manual: Agent(cy) Procedures Manual:
The manual containing a description of the administrative rules, regulations or
special procedures applicable to You and all of Your Producers appointed by SAGE
to sell the Products.
Producer:
An individual who is a Registered Representative and/or Agent associated with
Your Firm or with one of Your Selling Firm and who has executed an Appointment
Agreement.
Products: Variable Products:
The insurance and annuity products, including the variable life insurance and
variable annuity products (the "Variable Products"), and the applicable policy
riders, described in Exhibit B as amended from time to time.
Purchase Payments:
A payment, including a payment of premiums, deposits or partial payments, made
by an Applicant in respect of an Application for a Product, or by a Policyholder
in respect of a Policy.
Prospectus:
With respect to each class of contracts, the prospectus for each class of
contracts included within the Registration Statement for such class of
contracts; provided, however, that, if the most recently filed prospectus filed
pursuant to Rule 497 under the 1933 Act subsequent to the date on which the
Registration Statement became effective differs from the prospectus on file at
the time the Registration Statement became effective, the term prospectus shall
refer to the most recently filed prospectus filed under Rule 497 from and after
the date on which it shall have been filed.
Registered Representative:
An individual person who is registered as a principal or representative with the
NASD and as a securities agent with the securities commissions of the
Territories in which such person conducts business activities.
Registration Statement:
With respect to each class of contracts, the most recent effective registration
statement(s) filed with the SEC or the most recent post-effective amendment(s)
thereto, including financial statements included therein and all exhibits
thereto.
Regulations, Regulators:
The federal and state securities laws; state insurance laws; the by-laws of the
NASD; and the laws, rules and regulations promulgated at any time under or
pursuant to such laws or by-laws or by the SEC, NASD and/or the state insurance
departments having jurisdiction over the respective activities.
Replacement Sale:
Is the sale of a Product which is funded by the Applicant with money obtained
from the liquidation of another life insurance or annuity contract issued by
SAGE or issued by any other insurance company.
SEC:
The Securities and Exchange Commission.
Selling Agency:
An Agency associated with a Selling Broker-Dealer.
Selling Agreement:
An agreement entered into by SAGE and a Selling Firm, including an Affiliate
Agreement.
Selling Broker-Dealer:
A Broker-Dealer that has entered into a Selling Agreement with SAGE for the sale
of the Products.
Selling Firm:
A Selling Broker-Dealer and / or a Selling Agency (including any Affiliated or
Associated Selling
5
<PAGE> 27
1. DEFINITIONS (CONTINUED)
Broker Dealers or Selling Agency(ies) that have entered into a Selling Agreement
for the Products. The term includes Your Selling Firms, when applicable.
Selling Firm Producers:
A Duly Licensed and Authorized Producer Associated With a Selling Firm.
Separate Account:
A legal entity separate and distinct from the life insurance company under which
portfolios and cash values attributable to the Contracts are held.
Side; Other Side:
With reference to the Parties to this Agreement, those parties collectively
defined as either "SAGE" or "You" are a Side or Other Side, depending on the
context.
Territory(ies):
The region(s) and/or state(s) or other jurisdiction(s) shown in Exhibit A, or
any one, or any combination of them.
Written, in Writing:
Shall include communications delivered in conventional print as well as
electronic forms capable of being printed without the use of special equipment
or programs not maintained by the recipient of the communication.
Your Agency:
The Agency(ies) named on the signature pages to this Agreement or an Affiliate
Agreement.
Your Broker-Dealer:
The Broker-Dealer(s) named on the signature pages to this Agreement or an
Affiliate Agreement.
Your Firm, Firm:
The corporations and/or partnerships and/or entities and/or persons, other than
SAGE, named on the signature page(s) of this Agreement.
Your Selling Firm(s):
A Selling Firm(s) recruited by You that has entered into a Selling Agreement
with SAGE.
Your Producers or Producers with Your Firm:
A Duly Licensed and Authorized Producer Associated With Your Firm.
1933 Act:
The Securities Act of 1933, as amended.
1934 Act:
The Securities Exchange Act of 1934, as amended.
1940 Act:
The Investment Company Act of 1940, as amended.
2. APPOINTMENT
The DISTRIBUTOR, in its capacity as principal underwriter and distributor for
the Products, hereby appoints Your Broker-Dealer and, where so required by state
insurance law, SAGE LIFE, in its capacity as the issuer of the Products, hereby
appoints Your Agency, with authority to offer the Products and recruit Selling
Firms, subject to the terms and conditions of this Agreement. Your Firm hereby
accepts such appointments and agrees to undertake the duties and
responsibilities outlined herein in return for the payment by SAGE of the
Compensation specified in the Compensation Schedules. You understand that no
Territory is exclusively assigned hereunder to Your Firm and that We may enter
into agreements with other Selling Firms or Producers as SAGE in its sole
discretion may decide to appoint for the purpose of selling the Products in any
market or territory or geographic region, including any or all of the
Territories.
3. TERRITORY AND PRODUCTS
You are authorized to market the Products, in the Territories where (i) SAGE has
advised You in writing that the Products are approved for sale, and (ii) Your
Firm and Your Producers or Your Selling Firm and Selling Firm's Producers are
Duly Licensed and Authorized to conduct the selling of the Products. SAGE
reserves the right upon the giving of written notice to (i) add new Products, or
(ii) amend or withdraw any of the existing Products, or (iii) add new state(s)
or region(s), or (iv) withdraw from any state(s) or region(s), or (v) restrict
activities in any state(s) or region(s), and to amend Exhibit A and or Exhibit B
accordingly from time to time.
6
<PAGE> 28
4. TERM AND TERMINATION
4.1 Automatic Renewal
This Agreement is for an initial period (the "Initial Period") commencing on the
Effective Date and ending on the final day of December in the year following the
anniversary of the Effective Date. Unless notice of termination has been given
as required herein, this Agreement will automatically renew for successive
calendar years (the "Renewal Period") commencing at the end of the Initial
Period or at the end of each succeeding Renewal Period.
4.2 Termination not for Cause
Subject to the over-riding provisions and continuing obligations and rights of
the Parties under any Prior Agreements, and except as may be provided in any
such Prior Agreements, this Agreement may be terminated by a Party upon the
giving of sixty (60) days written notice to all other Party(ies).
4.3 Termination for Cause
You or SAGE may terminate this Agreement at any time for cause, and such
termination will become effective upon the giving of written notice, in the
event of:
a) intentional misappropriation by a Party on the Other Side of the funds or
property of a Client or of one of the Parties;
b) cancellation or refusal by any regulatory authority to renew any material
license, certificate or other requirement for a Party on the Other Side
to perform its obligations and duties as a Duly Licensed and Authorized
entity;
c) a Party on the Other Side becoming a debtor in bankruptcy including
voluntary bankruptcy, or becoming the subject of an insolvency
proceeding;
d) any action by a regulatory authority with jurisdiction over the
activities of a Party on the Other Side that would have the effect of
preventing the Party on the Other Side from performing its obligations
hereunder, or would place the Party in receivership or conservatorship or
under similar legal status.
4.4 Termination for Cause by SAGE
SAGE may terminate this Agreement for cause, and such termination will become
effective upon the giving of written notice, in the event of:
a) Your conviction or the conviction of any of Your Producers, or
conviction of any of Your officers or employees of any act of felony, or
act of fraud, or any crime involving dishonesty; or
b) Misconduct by You or any of Your Producers involving marketing
malpractice or misrepresentation of the Products; or
c) Failure by You or any of Your Producers to comply with any regulatory
requirements governing the activities undertaken by You or any of Your
Producers, or violation of any Regulations of any jurisdiction where You
or any of Your Producers or Your Selling Firms conducts, or has
conducted, any insurance business during the term of this Agreement; or
d) Your failure to exercise reasonable good faith efforts to recruit,
train and motivate Your Producers and Your Selling Firms and their
Producers to market and distribute the Products; or
e) Failure to deliver when due or on demand any Purchase Payments,
premiums, deposits, monies, records, files, or other property belonging
to SAGE in Your possession; or
f) Failure to comply with any substantial condition or provision of this
Agreement including those requiring You to cooperate with Us in
connection with any audit, examination or other inquiry by any regulatory
body having authority over You or Your activities, or over Us or Our
activities; or
g) Unbecoming conduct or conduct that serves to discredit SAGE, by You or
any of Your Producers; or
h) The assignment or transfer by You of Your rights, responsibilities,
duties and liabilities under this Agreement to any third party without
the prior written consent of SAGE; or
i) The failure to achieve the reasonable sales expectations and
performance goals agreed upon by the Parties from time to time.
4.4 Notice Requirements for Termination
Any written notice by a Party to terminate this Agreement for cause shall state
the cause with specificity. Prior to SAGE giving notice to terminate, SAGE may
at its sole discretion offer a reasonable time to cure any default.
7
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4. TERM AND TERMINATION (CONTINUED)
4.5 Effect of Termination Notice
Subject to Section 16 hereof (Conditions Surviving Termination ), any notice of
termination by SAGE to any one of the Parties comprising Your Firm under this
Agreement, or any notice of termination given to SAGE by any of the Parties
comprising Your Firm, does not automatically terminate the rights, duties and
obligations of the other Parties comprising Your Firm under the Agreement, or
the rights, duties and obligations of any Selling Firm(s) appointed and
contracted with SAGE pursuant to this Agreement, unless separate written notices
of termination have been served to, or by, each of such other Parties or such
other Selling Firms.
5. SALE OF THE PRODUCTS AND COMPENSATION
5.1 Sale of Products
You undertake to exercise utmost good faith efforts to recruit, train and
motivate Your Producers and Your Selling Firms and their Producers to sell the
Products and in return SAGE undertakes to pay the Compensation due according to
the terms of this Agreement.
5.2 Compensation
The Compensation which becomes owing to Your Firm under the Compensation
Schedules in respect of a specific application submitted to SAGE, will be due
and payable to Your Firm only when: (i) the Application has been approved for
issue by SAGE; (ii) any insurable risk under the contract has been accepted by
an authorized officer of SAGE in accordance with SAGE's standard underwriting
procedures; and (iii) the Purchase Payment has been banked in a SAGE bank
account approved by SAGE.
5.3 Payment of Compensation to Your Selling Firms and Producers
If SAGE is required by this Agreement or an Affiliate Agreement to pay directly
to any of Your Selling Firms or to any of Your Producers, any portion of the
Compensation specified in the Compensation Schedules, any such amounts will be
deducted from the Compensation otherwise due to Your Firm. Any Selling Firm's or
Producer's right to receive any such direct Compensation payments is effective
only from the date that the respective Selling Agreement or Appointment
Agreement has been executed. SAGE will pay such Selling Firm or such Producer
only the Compensation due at the rates agreed between Your Firm and SAGE and
specified in the appropriate Compensation Schedules applicable to and made an
integral part of the respective Selling Agreement or Appointment Agreement.
5.4 Right to Change Compensation Schedules
SAGE has the right upon giving thirty (30) days written notice to change the
Compensation payable in respect of the Products, provided that such change will
be effective only for new Applications received by SAGE after the effective date
of the change.
5.5 Recovery of Compensation and Indebtedness
SAGE will have the right to deduct from any Compensation otherwise due and
payable to Your Firm, any indebtedness or obligation due to SAGE, (i) in terms
of the charge back practices specified in the Compensation Schedules, and/or
(ii) otherwise due to SAGE for any reason. Your responsibility to refund such
monies to SAGE shall include any Compensation not recoverable from Your
Producers.
5.6 Compensation Payment Practices and Procedures for terminated or
transferred Selling Firms
Except for Terminations by SAGE for cause, the continuing payment procedures
outlined in the Compensation Schedules will be applied in those situations where
any of Your Selling Firms have (i) voluntarily terminated their Selling
Agreement with SAGE or (ii) terminated their Association with Your Firm, and
have continued their Selling Agreement with SAGE or (iii) have transferred their
Association to another Selling Firm not Affiliated with You or (iv) have
terminated their Association with Your Firm and have entered into a new Selling
Agreement directly with SAGE.
8
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5. SALE OF THE PRODUCTS AND COMPENSATION (CONTINUED)
5.7 Right to Commute Compensation
If at any time before or after termination of this Agreement, the total
Compensation paid under this agreement over a twelve (12) month period has been
less than $1,000, SAGE may elect to commute future estimated Compensation
payments, by paying Your Firm a single sum equal to the present value of future
Compensation determined on a reasonable basis, less any indebtedness due by Your
Firm or Your Producers to SAGE.
6. COMPENSATION VESTING RIGHTS
Following any Termination of this Agreement, Your Firm's rights to receive
continuing Compensation from new Policies issued as a result of Applications
submitted by Your Firm and Your Producers, or by Your Selling Firms and their
Producers prior to the date of such Termination, shall continue in accordance
with the payment practices and procedures specified in the Compensation
Schedules. SAGE shall be obligated to continue to pay such amounts as become due
to Your Firm, subject to SAGE's right to deduct from any such Compensation
payments, (i) any portion of the Compensation payable to Your Selling Firms or
to Your Producers, and (ii) any Compensation charge-backs or other amounts owing
by Your Firm or Your Selling Firms or Your Producers to SAGE for any reason, and
(iii) any costs which SAGE is obliged to incur in effecting such payments.
7. YOUR DUTIES AND OBLIGATIONS
7.1 General Matters and Joint and Several Responsibility
Commencing on the Effective Date, You will faithfully perform Your duties within
the scope of the relationship created under this Agreement, to the best of Your
knowledge, skill and judgment. All parties comprising Your Firm, are jointly and
severally responsible and liable to SAGE LIFE and the DISTRIBUTOR for the
faithful performance of all obligations or duties, except those duties and
obligations which may be performed only by Your Broker-Dealer or Your Agency, as
applicable, as to which Your Broker-Dealer or Your Agency, as applicable, shall
be responsible and liable to SAGE LIFE and the DISTRIBUTOR.
7.2 Compliance Duties
You and Your Producers will use best efforts to comply with (i) all
instructions, rules, bulletins, manuals and underwriting guidelines issued in
writing by SAGE to You and Your Producers, including any Code of Conduct, and
(ii) all Regulations. If You are a Broker-Dealer owned by a Bank or other
financial institution, or operating within or adjacent to a bank's retail area,
You shall take all steps necessary to comply with NASD Rule 2350, the "bank
broker-dealer rule," and the Inter-Agency Statement on Retail Sales of
Non-deposit Investment Products, issued in 1994, including any supplements,
amendments or modifications thereto or successor Regulations.
7.3 Duties with Respect to Your Producers.
Your duties and obligations with respect to Your Producers include but are not
limited to the following:
a) Recommendation of Producers
You will make a thorough and diligent inquiry and investigation relative
to each Producer You recommend to be appointed to sell the Products,
including an investigation of the Producer's identity and business
reputation. SAGE shall retain sole authority to approve and make
appointments and reserves the right for reasonable cause, to not appoint
a Producer recommended by You, or to refuse to permit an appointed
Producer to continue to solicit from the public Applications for any of
the Products.
b) Licensing and Appointment Procedures for Your Producers
You are responsible for the preparation and submission of proper
insurance agent appointment and licensing forms, and the assurance that
all Producers recommended by You are Duly Licensed and Authorized in the
Territories where such Producers will solicit and sell the Products. Your
Broker-Dealer shall be responsible for the preparation and submission to
the NASD of all documentation and representative registration forms, and
the assurance that all Your Producers are properly registered with the
NASD as Registered Representatives of Your Broker-Dealer and as an Agent
of Your Agency before any such Producer is recommended to SAGE for
appointment with authority to solicit Applications for the Products. You
will maintain a list of all Your Producers and will notify SAGE of any
change in the NASD registration status or the insurance licensing status
of any of Your Producers.
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YOUR DUTIES AND OBLIGATIONS (CONTINUED)
c) Duly Licensed and Authorized Producers
You will not permit any of Your Producers to act as Agents until they are
properly trained, licensed and appointed, nor will You pay Compensation
to, or permit Compensation splitting with, any person who is not Duly
Licensed and Authorized by SAGE to sell the Products (unless otherwise
permitted by law and agreed to by SAGE).
d) Supervision of Producers
You are responsible for the supervision and administration of the
marketing, sales and customer service activities of Your Producers and
shall be responsible for all acts or omissions of each of Your Producers.
Each of Your Producers will receive close and adequate supervision by
You. Your supervisory and administrative duties and support services
shall include but are not limited to:
i) Ensuring that Your Producers comply with SAGE's written procedures
communicated to You from time to time, including communications
regarding changes in rates, details of regulatory notices or new
Product announcements; and in particular, but not by way of
limitation, ensuring that Your Producers:
A) Comply with and abide by all Regulations concerning the
sale and delivery of Products;
B) Have obtained and continuously maintain the required
state insurance licenses in the state where such Producers
will solicit and sell Products;
C) Have been appointed by SAGE in accordance with the law
of each respective state(s) in the Territories in which the
sale(s) occur and the prospective Applicant or Client
resides;
ii) Notifying SAGE if any of Your Producers fails to maintain their
good standing with the Regulators or to maintain the required
state insurance license or becomes inactive to the extent
that such information is or should reasonably be known to You;
iii) Informing SAGE promptly of any violation of law or of any
material procedures of SAGE.
iv) Providing Your Producers advice and assistance with regard to
the marketing and advertising of Products, and ensuring that no
sales literature or advertising is used unless SAGE has given
prior written approval;
g) Training of Your Producers
You are primarily responsible for training all of Your Producers
regarding Product features, marketing methods and the compliance
requirements of any applicable Regulations. Such training is (i) to be
conducted prior to any such Producer selling the Products and, (ii) is to
be ongoing thereafter and (iii) is to include direct training by
marketing representatives of SAGE given on a regular basis at such
facilities and during such reasonable business hours as the Parties agree
from time to time.
7.4 Duties with respect to Soliciting Applications for the Products
You are hereby authorized and required by SAGE to solicit Applications for the
Products through Duly Licensed and Authorized Producers with Your Firm from
Applicants who meet SAGE's underwriting and suitability standards. You may
solicit new business only in those Territories where Your Firm and Your
Producers are Duly Licensed and Authorized, and where SAGE has advised You in
writing that the Products are approved for sale. You acknowledge that SAGE will
be required to process only those Applications bearing the signature of a Duly
Licensed and Authorized Producer with Your Firm who is on Your list of approved
Producers as agreed between You and SAGE from time to time. You will review,
when necessary, any Applications or contracts issued for Products sold or
written by Your Producers.
a) Solicitation Process
You shall be responsible for:
i) Supplying to Your Producers necessary sales literature and
Application forms provided by and approved by SAGE;
ii) Ensuring that Your Producers:
A) Promptly submit to SAGE for underwriting any Applications
for the Products;
B) Submit premium payments directly and immediately to SAGE
in accordance with SAGE's procedures, but in no event more
than two (2) business days after receipt;
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YOUR DUTIES AND OBLIGATIONS (CONTINUED)
C) Deliver to Clients within five (5) days or on a timely
basis in compliance with applicable Regulations, all Policy
and other contractual documents relating to the Products;
and
D) Document transactions, including where so required by
Regulation, the fact of delivery, and maintain any other
documentation reasonably requested by SAGE.
b) Suitability Requirements
SAGE wishes to ensure that the Products solicited by Your Firm through
Your Producers will be issued to persons for whom they will be suitable.
Your Firm will undertake best efforts to ensure that none of Your
Producers makes recommendations to any Applicant to purchase a SAGE
Product unless Your Firm and Your Producers have reasonable grounds to
believe that the purchase is suitable for the Applicant. Any
determination of suitability for the purchase of a Product should
include, but not be limited to, in respect of each Application submitted
to SAGE, a reasonable inquiry concerning the Applicant's investment
sophistication, insurance and investment objectives, financial situation
and needs, other securities holdings, tax status, tolerance for risk, and
any other pertinent information known to Your Producer or required, so as
to be in compliance with NASD Rule 2310 governing suitability
determinations and interpretations.
c) Delivery of Prospectus(es)
You and Your Producers will ensure that the current Prospectus(es), the
Statement(s) of Additional Information where required by law and all
Supplements, relating to the Products where applicable, are delivered to
every prospective Applicant including an existing Client seeking to
purchase a Product, prior to the completion of an Application. No
information shall be given, or any representations made concerning the
Products, unless the information or representations are contained in the
current Prospectus(es) or are contained in sales literature or
advertisements confirmed to You in writing by SAGE as available for
distribution and use and as having been approved by the NASD and where
applicable by the appropriate Regulators. For purposes of this section
the terms Prospectus(es) shall include the Prospectus(es) or where
approved by the SEC as an alternative valid form of delivery, the
applicable Prospectus Profile(s) for the Products or each respective
investment fund choice available under the Product.
d) Sales Illustrations and Asset Allocation Models
Any illustration of projected values and benefits under any of the
Products provided to any Applicant, must be in a format approved by SAGE
and be in full compliance with all Regulations.
e) Market Timing
You and Your Producers will not solicit Applications, Policies or
Purchase Payments in connection with any so-called "market timing" or
"asset allocation" program that has not been approved or otherwise agreed
to in advance by SAGE and You.
f) Replacement Sales
You are required to ensure that on all Replacement Sales by Your
Producers, all Producers comply with all applicable requirements under
the Regulations and in particular, without limiting or modifying the
foregoing, provide sufficient information to prospective and existing
customers, Applicants and Clients as to the suitability of the
Replacement Sale. Such information is in addition to the suitability
requirements referred to in Section 7.4(b) above, and includes but may
not be limited to:
i) The amount of the surrender charge to be incurred on the
investment to be liquidated;
ii) All fees and possible charges, such as surrender charges, on
the new Product;
iii) Any change in the investment risk to the Applicant or prospective
Client;
iv) Any change in the nature of, or the provider of, any guarantees
under the respective contracts or Products to be surrendered or
canceled;
v) Any changes in the expenses associated with the Product and the
surrendered contract or policy;
vi) For life insurance-to-annuity Replacement Sales, the difference
in the amount and tax treatment and status of the death benefit,
and the implications of surrendering the insurance, including any
requirements for new or additional underwriting evaluation;
vii) Recommending to the Applicant or Client that they obtain
independent advice from tax counsel as to the transaction
qualifying under Internal Revenue Code section 1035 for deferral
of gain;
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YOUR DUTIES AND OBLIGATIONS (CONTINUED)
viii) Any material change in premiums payable, cost of insurance,
contractual benefits and types of coverage, or important terms and
conditions, or restrictions or limitations including any new
contestable and suicide periods, or any change in disability
coverages or important rider benefits.
7.5 Duties with respect to Recruiting and Supporting Selling Firms
You shall recommend only Selling Firms and Selling Firm Producers who are
qualified to be Duly Licensed and Authorized to sell the Products and meet the
recruiting standards and conditions set forth in Exhibit E.
a) Recommendation of Selling Firm
If a Selling Firm recommended by You is deemed acceptable to Us, We shall
enter into a Selling Agreement with such firm, and such firm shall be
deemed one of Your Selling Firms for purposes of Your duties hereunder to
Your Selling Firms and Your entitlement to Compensation relating to
Products sold by Your Selling Firms. Your Firm shall assist Us in
entering into Selling Agreements with Your Selling Firms and Appointment
Agreements with Your Selling Firm's Producers in conformity with the
applicable Regulations. We shall have sole discretion to appoint, refuse
to appoint, discontinue, or terminate the appointment of any Your Selling
Firms or any of Your Selling Firm's Producers. Upon termination of
appointment of a Selling Firm, Your Firm shall take all action necessary
to terminate the sales activities of such Selling Firm.
b) Support and Servicing of Selling Firms
Your Firm shall use its best efforts to provide services and support to
Your Selling Firms to facilitate the offering and sale of the Products.
Such efforts shall include but not be limited to: (i) Your Firm's
assistance and participation in the marketing, product training, and
administrative activities of Your Selling Firms, and (ii) Your Firm
ensuring that reasonable access to Your Selling Firm's Producers is
afforded to SAGE's marketing representatives for the purpose of providing
Product training and marketing assistance. The specific services to be
provided by Your Firm to Your Selling Firms will be negotiated and agreed
upon by Your Firm and Your Selling Firms, separate and apart from this
Agreement.
c) Related Supervisory Practices
In meeting its obligations pursuant to this section, Your Firm shall,
during the term of this Agreement, engage in the following activities:
i) Continuously utilize only those training, sales, advertising,
and promotional materials which have been approved by SAGE;
ii) Establish and implement reasonable procedures for periodic
inspection and supervision of sales practices of Your Selling Firm
Producers and submit periodic reports to SAGE, as may be
requested, on the results of such inspections and the compliance
with such procedures; provided however that Your Firm shall retain
sole responsibility for the supervision, inspection and control of
Your Producers;
iii) Take reasonable steps to ensure that Your Selling Firms and
their Producers shall not make recommendations to an Applicant to
purchase a Product in the absence of reasonable grounds to believe
that the purchase of a Product is suitable for such Applicant
consistent with applicable suitability requirements and any
suitability guidelines provided by Us from time to time.
7.6 General Duties and Responsibilities
a) Expenses
Except as otherwise provided in this Agreement, or as otherwise agreed in
writing from time to time, You and Your Producers will be responsible for all
costs and expenses of any kind and nature incurred in the performance of Your
duties under this Agreement. SAGE will be responsible for the payment of initial
and ongoing state insurance agent appointment fees relating to the appointment
of Producers who actively solicit Applications and submit new business under
this Agreement. SAGE will also pay for SAGE authorized promotional and marketing
materials provided to You in the normal course of business, and such other
reasonable costs incurred in the promotion of the Products as SAGE in its sole
discretion may agree from time to time, including reimbursement of the actual
cost of any promotional material SAGE has authorized You to prepare.
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YOUR DUTIES AND OBLIGATIONS (CONTINUED)
b) Bonding
Your directors, officers and employees, and any Producers who have access to
funds of SAGE, including but not limited to funds submitted with Applications
for Products, or funds being returned to Applicants or Clients, are and shall be
covered by an appropriate blanket fidelity bond, including coverage for larceny
and embezzlement, issued by a reputable bonding company acceptable to SAGE. SAGE
will have the right to receive evidence, satisfactory to SAGE that such coverage
is in force. You are required to give written notice to SAGE not less than
thirty (30) days before any proposed cancellation or any change of coverage.
c) Independent Contractor
You and Your Producers are independent contractors in relation to SAGE. Nothing
contained in this Agreement shall create, or shall be construed to create, the
relationship of employer and employee (i) between SAGE and You, or (ii) between
SAGE and any of Your Producers, or (iii) between SAGE and Your respective
directors, officers, employees, or agents. SAGE shall not be liable for any
expenses incurred by You or any of Your Producers except those specifically
authorized in writing by SAGE.
d) Compensation Reporting
You are responsible for ensuring that any Compensation, whether in form of
commissions and or/fees relating to the Products, will be reflected in the
quarterly FOCUS reports and the fee assessment reports filed with the NASD by
Your Broker-Dealer.
e) Approval of Marketing Materials
Your Firm agrees that any material it develops, approves or uses for sales,
training, explanatory or other purposes in connection with the solicitation of
Applicants for Products hereunder other than generic advertising material which
does not make specific reference to Us or the Products will not be used without
Our prior written consent.
f) Other Duties
You shall undertake any other duties necessary or appropriate to the performance
of Your obligations under this Agreement.
8. LIMITATION OF AUTHORITY
This Agreement does not entitle You or any of Your Producers or any Selling Firm
or any Selling Firm's Producers to perform on behalf of SAGE or its Affiliates
any of the following actions, which can only be undertaken by an authorized
officer of SAGE:
a) Make, alter or discharge any Policy;
b) Waive or modify any terms, conditions or limitations of any Application
or any Policy;
c) Extend the time for payment of any premiums, or bind SAGE to the
reinstatement of any terminated Policy, or accept notes for payment of
premiums;
d) Accept payments on behalf of SAGE which are not in the form of a check
or a wire transfer payable to "Sage Life Assurance of America, Inc.," or
payable to "SAGE LIFE";
e) Adjust or settle any claim or commit SAGE with respect thereto;
f) Incur any indebtedness or liability, or expend or contract for the
expenditure of funds;
g) Enter into legal proceedings in connection with any matter pertaining
to SAGE's business without the prior written consent of SAGE, provided
that You have the right to enter into any such legal proceeding where You
or any of the Parties comprising You are named as a party to the
proceedings, provided You have given SAGE adequate notice of such
intended proceedings;
h) Make, accept or endorse notes, or endorse checks payable to SAGE or
otherwise incur any expense or liability on behalf of SAGE;
i) Offer to pay or pay, directly or indirectly, any rebate of premium or
any other inducement not specified in the Products or in this Agreement
to any person seeking to complete an Application or to any Client;
j) Misrepresent the Products for the purpose of inducing a Client or
owner of a Policy of this or any other insurance company to lapse,
forfeit or surrender their insurance with that company;
k) Give or offer to give any advice or opinion regarding the taxation of
any Applicant's or Client's income or estate in connection with the
purchase of any Product;
l) Enter into an agreement with any person or entity to market or sell
the Products without the written consent of SAGE;
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8. LIMITATION OF AUTHORITY (CONTINUED)
m) Agree to the payment of Compensation to any Producer other than in terms
of a scale of Compensation agreed to in writing by SAGE.
9. SAGE'S ADMINISTRATIVE PROCEDURES
SAGE will administer all Products issued by SAGE LIFE in accordance with the
terms and conditions set forth in the respective Policy and SAGE's standard
administrative procedures as advised to you from time to time in writing. These
procedures will include but not be limited to the following:
9.1 Procedures for Issuance of a Policy for the Products
SAGE, at its sole discretion, will determine whether to issue a Policy for any
of the Products for which an Application has been submitted by Your Firm or by a
Producer with Your Firm. Except where required by Regulation, SAGE will not be
bound by the terms of any Policy relating to a Product, until You or the
Applicant has been advised in writing of the approval by SAGE of the
Application, and SAGE's acceptance of the risk under the Policy. Once a Policy
has been issued, SAGE undertakes to:
a) Mail the Policy together with any required notice of withdrawal rights,
and any additional required documents, to You or where so required by
You directly to the Client, or to such other person designated by You and
acceptable to SAGE as having the authority to receive the Policy on
behalf of the Client. SAGE reserves the right where so mandated by
Regulation, to require You to provide proof of delivery of any Policies
and other documents delivered by You to the Client.
b) Confirm in writing to the Client, with a copy to Your Selling Firm(s)
or to Your Selling Firm(s) designee, the allocation of the initial
Purchase Payment or any premium or any other payments under the Policy.
Such confirmation shall comply with Rule 10b-10 under the 1934 Act.
c) Provide confirmation notices to the Client showing the name of the
Selling Broker-Dealer.
9.2 Procedures for use of Marketing Materials Provided by SAGE
SAGE will provide You and Your Producers with reasonable quantities of the
following materials:
a) Marketing brochures and other advertising materials approved by SAGE
for the Products, including the current Prospectus(es) for the Products
and for any underlying mutual funds, or separate accounts;
b) Any Prospectus Supplement for the Products and for any underlying mutual
funds or separate accounts, including any Statement(s) of Additional
Information if requested by Client or required by law;
c) Applications and all other standard forms required for the selling of
the Products.
9.3 Procedures for Collection and Remittance of Purchase Payments and Other
Considerations Due to SAGE
SAGE will determine in consultation with You which of the following
administrative procedures are acceptable to SAGE for the collection and
remittance to SAGE of the Purchase Payments due in respect of Policies issued by
SAGE or Applications submitted by Your Producers or by the Producers of Your
Selling Firms:
a) "Standard Procedure - Check with Application"
Where the Application and the corresponding check for the Purchase
Payment will be sent to a national processing center designated by SAGE.
b) "Direct Gross Deposit Procedure"
Where gross funds due to SAGE are deposited or wired to a designated SAGE
bank account established for this purpose, and where the corresponding
Applications together with evidence of payment will be sent to a national
processing center designated by SAGE.
c) "Net Wire Procedure"
Where the Selling Firm is a financial institution approved by SAGE,
Compensation may be deducted from gross amounts remitted to SAGE under
written procedures acceptable to SAGE which are in compliance with
Regulations.
Except as provided by the special Net Wire Procedures referred to in this
section, all money due to SAGE shall be forwarded without any deduction or
offset for any reason, including by example, and not by limitation, any
deduction or offset for Compensation claimed by You or any Producer with Your
Firm.
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9. SAGE'S ADMINISTRATIVE PROCEDURES (CONTINUED)
A payment due to SAGE under a Product is valid only if it is in the form of a
check or money order payable to the order of "Sage Life Assurance of America,
Inc." or "SAGE LIFE," or a wire transfer to a SAGE LIFE bank account. Wire
transfers for the account of SAGE shall be in accordance with the administrative
procedures communicated by SAGE. You are not permitted to accept third party
checks or cash for any Purchase Payment or premium or any other consideration
due to SAGE.
All Purchase Payments collected by You or by any of Your Producers in connection
with the Products are the property of SAGE. Such payments must be deposited in
SAGE's bank account, or otherwise remitted to SAGE, immediately upon receipt by
You or Your Producers in accordance with the administrative procedures of SAGE.
Until You or Your Producers have remitted such monies to SAGE, any sums received
or collected by You or Your Producers under this Agreement are regarded as being
held by You or Your Producers in a fiduciary capacity on behalf of SAGE, and may
not be banked in any account that is not a SAGE bank account.
9.4 Procedures regarding Declined and Cancelled Applications
a) Declined Applications
The depositing of any payment relating to an Application into a SAGE bank
account does not imply that SAGE is obligated to accept the risk under the
Application. SAGE shall have the unconditional right to reject, in whole or in
part, any Application. In the event SAGE rejects an Application involving risks
not accepted by SAGE's underwriters or SAGE's reinsurers, We will return to the
Applicant any payments (together with appropriate interest or investment
earnings adjustments where applicable in accordance with the requirements of the
Prospectus and SAGE's administrative procedures and We will notify the Selling
Firm of such action.
b) Cancelled Applications
In the event that any Applicant elects to cancel the Application and the sale
pursuant to any law or contractual free look period, We will refund to the
Applicant the amounts required by law or otherwise determined according to the
terms of the Prospectus and We will notify the Selling Firm or its designee of
such action.
9.4 Procedures for Complaints and Grievances
You and Your Producers shall immediately notify in writing addressed to the
Senior Compliance Officer of SAGE LIFE at the Home Office address of SAGE LIFE,
details of any complaint or grievance made by or on behalf of a Client or
Applicant or of which You or any of Your Producers become aware. This includes,
but is not limited to, complaints or grievances arising out of or based on
advertising approved by SAGE, or arising from any other complaint or grievance
relating to the sale or presentation of the Products, or the service provided to
an Applicant or a Client concerning any of the Products, or the performance of
any Product. You and Your Producers shall promptly furnish all written materials
requested by SAGE in connection with the investigation of any such complaint or
grievance of which You or Your Producers or SAGE may become aware, and will
cooperate in the investigation and resolution of such complaint or grievance.
10. CLIENT SERVICE RESPONSIBILITIES
The Parties acknowledge that it is their joint responsibility to provide post
sales service, and continuing customer service to Your Clients and to the
Clients of Your Selling Firms.
10.1 Standards of Service
SAGE will provide to Your Clients its customary and usual standard of customer
service. Such service will include a toll-free access to a Customer Service
Center, and such other appropriate administrative, accounting and policyholder
services as SAGE provides to all its Policyholders.
10.2 Client Service
You and Your Producers undertake to act in the best interests of Your Clients in
rendering reasonable and satisfactory standards of pre-sale and post-sale
service, and reasonable and satisfactory ongoing customer service to the Client,
including but not limited to assistance with the following:
a) Explanation of and completion of any forms and procedures that may be
required under the insurance contract, including the completion of
Applications, underwriting questionnaires, claim forms; and
b) Delivery of and explanation of the Prospectus and Policy contract
documents
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11. ADVERTISING AND SALES PROMOTIONAL MATERIAL
Except for materials supplied to You by SAGE, You may not, nor may any of Your
Producers or Your Selling Firms or their Producers without the prior written
consent of SAGE, advertise any of the Products, or use SAGE's name, logo or
trademarks or service marks in any advertisement, nor use any sales literature
or advertisements or other materials for the Products without the prior written
approval of SAGE. This includes Product specific brochures, letters,
illustrations, training materials, materials prepared for oral presentations and
all other similar materials. SAGE's consent in one instance does not imply
consent in another, and SAGE's consent must be obtained on each and every
separate advertising occasion, or whenever any modification is proposed to any
of the materials referred to herein. SAGE reserves the right to recall any
materials or to place time limits for the approved use of any materials provided
to You or Your Producers or Your Selling Firms and their Producers.
12. RECORDKEEPING
12.1 Maintenance of Records
Each Party agrees to keep all records required by the Regulations, to maintain
such books, accounts, and records so as to clearly and accurately disclose the
precise nature and details of transactions, and to assist one another in the
timely preparation of records. You also agree to maintain such other records as
SAGE may reasonably require. Such records will include but are not limited to
records of:
a) All marketing and advertising materials, brochures, illustrations,
asset allocation models and work sheets, application and contract forms,
sales and internal training materials, and Client correspondence
concerning SAGE or the Products, and persons to whom such materials have
been distributed.
b) Payments, premiums and other amounts collected from a Client or an
Applicant.
c) All complaints or, grievances against SAGE or You or any of Your
Producers reported by a Client or a Producer concerning the Products, or
concerning any actions by SAGE or You or any such Producer.
12.2 Safekeeping of Property
You and Your Producers will safeguard, maintain and account for all policies,
forms, manuals, equipment, supplies, electronic software including sales
illustration software and supporting materials, advertising and sales literature
furnished by SAGE, and will destroy or return the same to SAGE promptly upon
request.
12.3 Records Retention
All information and records required to be maintained under this Agreement will
be retained by You and Your Producers for the time periods required by the
Regulations, but in no event shall they be retained for a period less than seven
(7) years, (or where required by state law for the duration of the Policy or
otherwise as required by state law), whether or not the Product was ever sold,
and will be made available to SAGE for audit and inspection under section 12.4
below. Micro-fiche and electronic forms of data maintenance are acceptable
records under this Agreement only to the extent they satisfy applicable
securities laws requirements with respect to such storage mediums.
12.4 Right of Inspection and Audit
All books, records and files established and maintained by You or Your Producers
for SAGE under this Agreement, including, without limitation, marketing
materials and agent licensing information, shall be the property of SAGE and
shall be subject to examination at all times during the term of this Agreement,
and for a period of twelve (12) months after the date of termination of this
Agreement. Unless we are required to provide immediate access to a regulatory
authority, SAGE will normally give You five (5) business days prior notice of
intention to examine the records during Your regular business hours, provided
that such right of access by SAGE shall not unreasonably interfere with Your
normal course of business.
12.5 Right to Receive Copies of Records
SAGE shall have the right, at its expense, to the prompt delivery of originals
of any such records retained by You within five (5) business days after any
reasonable request by SAGE. SAGE shall be responsible for payment of all
documented costs of copying and mailing or otherwise transporting any
documentation as required under this Agreement.
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13. REPRESENTATIONS AND WARRANTIES
13.1 Representations by SAGE
SAGE hereby undertakes and represents that as of the time the Products are
available for sale to the public:
a) the Products listed on Exhibit B as being available for sale have been
approved for sale by the respective Regulators as advised to You in
writing by SAGE from time to time, and where so required have been duly
registered with the SEC under the 1933 Act;
b) The DISTRIBUTOR is a Broker-Dealer that is Duly Licensed and Authorized
to promote, offer and sell the Products as the principal underwriter and
the distributor for the Products;
c) SAGE has full power and authority to enter into this Agreement and has
all the appropriate licenses to carry on its business to market the
Products;
d) the 1933 Act Registration Statements pertaining to the Products filed
with the SEC have been declared effective;
e) the 1933 Act Registration Statements pertaining to the Products comply
in all material respects with the provisions of the 1933 Act, the 1934
Act, the 1940 Act and the rules and regulations of the SEC;
f) the 1933 Act Registration Statements do not contain any untrue statement
of a material fact or fail to state a material fact required to be
stated and of which SAGE should reasonably be aware.
The above undertakings by SAGE shall not apply to statements made in or
omissions from Registration Statements, and any related material in which
statements or omissions were made in reliance upon written statements furnished
by You.
13.2 Representations by Your Firm
Each of the parties comprising Your Firm jointly and severally represent and
warrant that:
a) They have full power and authority to enter into this Agreement and
that they are Duly Licensed and Authorized to carry on Your business and
to market the Products;
b) Together, You are a Duly Licensed and Authorized Broker-Dealer and
Agency in the states where they intend to market the Products;
c) You are in compliance with the terms and conditions of Howard & Howard
(sub.nom. First of America Brokerage Service, Inc) (avail. Sept.28,1995)
issued by the Staff of the SEC with respect to the non-registration as a
broker-dealer of an insurance agency associated with a registered
broker-dealer. You will notify SAGE immediately in writing if You fail to
comply with any such terms and conditions and shall take such measures as
necessary and as promptly as practicable under the circumstances to cure
any such non-compliance;
d) All individuals recommended for licensing and appointment as a Producer
of Your Firm to sell the Products possess or can obtain all required
insurance licenses under state insurance regulations, and are also
Registered Representatives of Your Broker-Dealer who are appropriately
registered with the NASD;
e) All examinations, educational and training requirements have been or
will be met for the specific state(s) or territories in which any
Producer of Your Firm proposes to act;
f) If any items of identification are required by the regulatory
authorities in conjunction with an application for an insurance license
for a Producer, any such items forwarded to SAGE will be those for such
Producer and any evidence of a securities registration or state insurance
license forwarded to SAGE will be a true copy of the original.
14. INDEMNIFICATION
14.1 Indemnification by SAGE
SAGE LIFE agrees to indemnify and hold You harmless against any losses, claims,
damages, liabilities or expenses, including reasonable attorney fees, to which
You may be liable to the extent that the losses, claims, damages, liabilities or
expenses, including reasonable attorney fees, arise out of or are based upon:
a) Any untrue statement or alleged untrue statement of a material fact,
contained in the 1933 Act Registration Statement covering the Products or
in the Prospectuses for the Products or in any written information or
sales materials authorized and furnished by SAGE to You or to any of Your
Producers;
b) Any material breach by SAGE of any covenant under this Agreement;
c) A material inaccuracy or breach of any representation by SAGE under this
Agreement.
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14. INDEMNIFICATION (CONTINUED)
SAGE will not be liable to the extent that such loss, claim, damage, liability
or expense, including reasonable attorney fees, arises out of or is based upon
any untrue statement or alleged untrue statement made in reliance upon
information, including, without limitation, negative responses to inquiries
furnished to SAGE by or on behalf of You specifically for use in the preparation
of the 1933 Act Registration Statement covering the Products or in any related
Prospectuses.
14.2 Indemnification by You
Each of the parties comprising Your Firm, jointly and severally, agree to
indemnify and hold SAGE, its directors, officers and employees, harmless against
any losses, claims, damages, liabilities or expenses, including reasonable
attorney fees, to which SAGE may be liable to the extent that the losses,
claims, damages, liabilities or expenses, including reasonable attorney fees,
arise out of or are based upon:
a) Any untrue statement or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact contained in the
Registration Statement covering the Products or related Prospectuses but
only to the extent that such untrue statement or alleged untrue statement
or omission or alleged omission is made in reliance upon information,
including, without omission, negative responses to inquiries, furnished
to SAGE by or on behalf of You or any of the parties comprising You
specifically for use in the preparation of the 1933 Act Registration
Statement covering the Products or in any related Prospectuses;
b) Any acts or omissions including but not limited to failure to remit
Purchase Payments or remit the correct Purchase Payments or to submit
Applications or to deliver Policies, by You or an employee or any of Your
Producers while acting, whether under actual or apparent authority, on
Your behalf or on SAGE's behalf in connection with this Agreement;
c) Any unauthorized use of advertising materials or any verbal or written
misrepresentations, or unauthorized actions concerning the right to make
discretionary purchases or changes to a Client's asset allocation
instructions, or any unlawful sales practices concerning the Products, by
You or any of Your Producers or employees;
d) Claims by Your Producers or employees or Your Selling Firms, for
commissions or other Compensation or remuneration of any type other than
payments which are contractually due by SAGE to such persons;
e) The inaccuracy or breach by You of any representation or provision, or
breach of any covenant made by You under this Agreement.
14.3 Notice of Demand for Indemnification
The Party seeking indemnification agrees to notify the indemnifying Party within
a reasonable time of any claim or demand. In the case of a lawsuit, the Party
seeking indemnification must notify the indemnifying Party within five (5)
calendar days (i) of receipt of written notification that a lawsuit has been
filed, or (ii) becoming aware of a pending lawsuit for which indemnification
will be sought.
14.4 Right to Settle Disputes
SAGE may negotiate, settle and/or pay any claim or demand against SAGE which
arises from:
a) Any wrongful act or transaction by You or Your Producers. For this
purpose wrongful act or transaction includes, but is not limited to,
fraud, misrepresentation, deceptive marketing or business practices,
negligence, error or omission; or,
b) The breach of any provision of this Agreement; or,
c) The violation or alleged violation of any insurance or securities laws.
Upon sufficient proof that the claim or demand arose from the occurrences listed
above, SAGE may request reimbursement for any amount paid plus any reasonable
expenses incurred in investigating, defending against and/or settling the claim
or demand, and You agree upon receiving written notice to reimburse SAGE for all
reasonable costs incurred including the costs of outside counsel.
15. ENTIRE AGREEMENT
This Agreement together with the Exhibits attached hereto, and including but not
by way of limitation the continuing terms of any Prior Agreements specified in
Exhibit H, all of which are hereby incorporated by reference and made an
18
<PAGE> 40
16. ENTIRE AGREEMENT(CONTINUED)
integral part of this Agreement, represents the entire agreement of the Parties.
Except for the continuing and overriding obligations and understandings arising
from the Prior Agreements and rules of construction or interpretations set forth
in Exhibit H, this Agreement supersedes and replaces any prior or other
understandings and agreements, including oral agreements and understandings
between the Parties.
16. CONDITIONS SURVIVING TERMINATION OF AGREEMENT
All of the conditions of any Prior Agreements referred to in Exhibit H, and the
following provisions of this Agreement, shall survive any Termination of this
Agreement.
Section 1. Definitions
Section 6. Compensation Vesting Rights
Section 9. SAGE'S Administrative Procedures
Section 10. Client Service Responsibilities
Section 12. Recordkeeping
Section 13. Representations and Warranties
Section 14. Indemnifications
Section 15. Entire Agreement
Section 17. General Provisions
17. GENERAL PROVISIONS
17.1 Effective Date
This Agreement shall be effective upon execution by all of the Parties from the
date shown on the signature page as the Effective Date, and will remain in
effect unless terminated as provided in Section 4 of this Agreement.
17.2 Assignment
This Agreement may not be assigned or transferred to any third party (whether or
not affiliated with a Party) by either SAGE or You without prior written consent
of all Parties to this Agreement.
17.3 Governing Law
This Agreement shall be governed by and construed in accordance with the laws of
the State of Connecticut, except for its conflicts of law provisions.
17.4 Severability
If any provision of this Agreement shall be held or rendered invalid by a court
decision, state, or federal statute, administrative rule or otherwise, the
remainder of this Agreement shall not be rendered invalid.
17.5 Rights, Remedies, etc. are Cumulative; No Waivers
The rights, remedies and obligations contained in this Agreement are cumulative
and are in addition to any and all rights, remedies and obligations, at law or
in equity, which the Parties hereto are entitled to under state and federal
laws. Failure of any Party to insist upon strict compliance with any of the
conditions of this Agreement shall not be construed as a waiver of any of the
conditions, but the same shall remain in full force and effect. No waiver of any
of the terms of this Agreement shall be deemed, or shall constitute, a waiver of
any of the other provisions, whether or not similar, nor shall any waiver
constitute a continuing waiver. Any waiver, including a waiver of this section,
must be in writing and signed by the parties hereto.
17.6 Counterparts
This Agreement may be executed in two or more counterparts, of which each copy
shall be deemed an original, and all such signed copies together shall
constitute one and the same instrument.
17.7 Co-operation
Each Party to this Agreement agrees to cooperate with the other and with all
governmental authorities, including, without limitation, the SEC, the NASD and
any state insurance or securities regulators, and will permit such
19
<PAGE> 41
17. GENERAL PROVISIONS (CONTINUED)
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated under this Agreement.
17.8 Confidential Information
The Parties covenant and agree that they will not at any time during or after
the termination of this Agreement, reveal, divulge or make known to any person
(other than their respective directors, officers, employees, agents,
professional advisors or affiliates of the Parties who need to know such
information for the performance of obligations hereunder), or use for their own
account or purposes or for the account or purposes of any other person, any
confidential or proprietary business plans, product designs, marketing
strategies, action plans, pricing, methods, processes, records, financial or
other data, trade secrets, customer lists or any other confidential or
proprietary information whatever, whether any of such information is in oral or
printed form or on any computer tapes, computer disks or other forms of
electronic or magnetic media (the "Confidential Information") used or owned by a
Party or any of its Affiliates and made known (whether or not with the knowledge
and permission of such Party or any of its Affiliates, and whether or not
developed, devised or otherwise created in whole or in part by the efforts of
the Parties) to the other Party at any time by reason of their association;
provided, however, that Confidential Information shall not include any
information: (i) that was previously known by a Party from a source other than
the other Party or any Affiliate without obligation of confidence; or (ii) that
was previously disclosed in a lawful manner to a Party without breach of this
Agreement or of any other applicable agreement, and without any requirement of
confidentiality; or (iii) that was or is rightfully received from a third party
without obligations of confidence or from publicly available sources without
obligations of confidence; (iv) that is in the public domain; or (v) that was or
is developed by means independent of information provided by a Party or its
Affiliates. The Parties further covenant and agree that they shall retain all
such knowledge and information that they acquire or develop respecting such
Confidential Information in trust for the sole benefit of the Parties, and their
respective successors and assigns; provided, further, that this Agreement shall
not restrict any disclosure required to be made by order of a court or
governmental agency of competent jurisdiction, except that no such disclosure
shall be made sooner (unless otherwise compelled) than five (5) business days
after a Party's receipt of written notice from the other Party of such order,
and such notice will include a copy of such order.
17.9 Interpretation
It is the intention of the Parties hereto that customs and usage of the business
of life insurance and annuities and variable insurance contracts shall be given
full effect in the interpretation of this Agreement other than to the extent the
unique aspects of the transaction render such customs and usage inapplicable.
The Parties hereto shall act in all things with the utmost good faith. Unless
otherwise agreed to by the Parties at the time of any dispute, any dispute
arising out of or relating to this Agreement shall be resolved in accordance
with the arbitration procedures described herein.
17.10 Arbitration Procedures
The Parties agree to attempt to settle any misunderstandings or disputes arising
out of this Agreement through consultation and negotiation in good faith and a
spirit of mutual cooperation. However, if those attempts fail, the Parties agree
that any misunderstandings or disputes arising from this Agreement will be
decided by arbitration which will be conducted, upon request of either Party,
before three arbitrators (unless both Parties agree on one arbitrator)
designated by the American Arbitration Association located in the city of SAGE's
principal place of business. The Parties further agree that the arbitrator(s)
will decide which Party must bear the expenses of the arbitration. This
Agreement to arbitrate shall not preclude either Party from obtaining
provisional remedies such as injunctive relief or the appointment of a receiver
from a court having jurisdiction, before, during or after the pendency of the
arbitration. The institution and maintenance of such provisional remedies shall
not constitute a waiver of the right of a Party to submit a dispute to
arbitration.
17.11 Amendment of Agreement
20
<PAGE> 42
SAGE and You reserve the right to amend this Agreement at any time, but no
amendment shall be effective until approved in writing by all the Parties.
Provided however that the aforementioned amendment procedure does not affect
SAGE's right to (i) amend any of the Exhibits except Exhibit H ("Prior
Agreements'), as SAGE may decide
17. GENERAL PROVISIONS (CONTINUED)
from time to time, or (ii) remove any Affiliate who is a Party to this Agreement
or an Affiliate Agreement upon the receipt by SAGE of a written request from You
for termination of that Affiliate's status under this Agreement, or (iii) cancel
the Selling Agreement of any of Your Selling Firms, or cancel the Appointment
Agreement of any Producer for cause.
17.12 Binding Effect
This Agreement shall be binding upon and inure to the benefit of the Parties
hereto and their respective successors and assigns subject to the provisions of
this Agreement limiting assignment.
17.13 Headings
The headings in this Agreement are for convenience only and are not intended to
have any legal effect.
17.14 Defined Terms
The terms defined in this Agreement are to be interpreted in accordance with
this Agreement. Such defined terms are not intended to conform to specific
statutory definitions of any state.
17.15 Notices
All notices, requests, demands and other communications which must be provided
under this Agreement shall be in writing and shall be deemed to have been given
(i) on the date of service, if served personally on the Party to whom notice is
to be given, or (ii) on a date which is three (3) days after the date of mailing
if sent by United States registered or certified mail, postage prepaid, or (iii)
on the next day, if sent for "next day delivery" via a national courier service
with the capacity to track its shipments, or (iv) in the case of notices
provided pursuant to any provision of the Agreement other than Sections 2 and
14, to the email address or other electronic delivery sites with receipt
acknowledgement, in every such case addressed to the last known address of
record described below:
a) If to You. All notices shall be sent to You or the respective Affiliate,
c/o The President, at the primary business address reflected in our
records for You. It is Your responsibility to advise SAGE of any change
in the address of record and any other information pertaining to You or
any of Your Affiliates shown on the signature pages of this Agreement,
or any other Affiliates who have completed an Affiliate Agreement.
b) If to SAGE. All notices to SAGE shall be sent to each respective
company for the attention of the President, at the home office address
shown below. SAGE will advise You of any change in the following home
office addresses.
Sage Life Assurance of America, Inc.
300 Atlantic Street, Third Floor
Stamford, CT 06901
Sage Distributors, Inc.
300 Atlantic Street, Third Floor
Stamford, CT 06901
21
<PAGE> 43
18. SIGNATURE PAGE(S) AND EXECUTION
By signing these pages, the Parties hereby approve this Agreement and approve
the attached Exhibits which form an integral part of this Agreement, to become
effective on________________________________(the Effective Date).
In witness whereof, the Parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
and representatives.
THUS DONE AND EXECUTED BY THE RESPECTIVE PARTIES.
<TABLE>
<CAPTION>
BY SAGE LIFE ASSURANCE BY SAGE DISTRIBUTORS, INC.
- ---------------------- --------------------------
OF AMERICA, INC.
- ----------------
<S> <C>
Signature Signature
-------------------------- --------------------------
Name Name
------------------------------- -------------------------------
Title Title
------------------------------ ------------------------------
</TABLE>
BY THE SELLING FIRM
Corporate Name of the Selling Firm
Signature Date
-------------------------------------- ----------------------
Name and Title:
----------------------------------------------------------
Address of Record:
-------------------------------------------------------
City, State and Zip Code:
------------------------------------------------
BY YOUR BROKER-DEALER
NAME OF THE BROKER DEALER IF DIFFERENT THAN ABOVE
Signature Date
-------------------------------------- ----------------------
Name and Title:
----------------------------------------------------------
Address of Record:
-------------------------------------------------------
City, State and Zip Code:
------------------------------------------------
BY YOUR BROKER-DEALER
NAME OF SECOND BROKER DEALER IF APPLICABLE
Signature Date
-------------------------------------- ----------------------
Name and Title:
----------------------------------------------------------
Address of Record:
-------------------------------------------------------
City, State and Zip Code:
------------------------------------------------
BY YOUR AGENCY
NAME OF THE SELLING GENERAL AGENCY
Signature Date
-------------------------------------- ----------------------
22
<PAGE> 44
Name and Title:
----------------------------------------------------------
Address of Record:
-------------------------------------------------------
City, State and Zip Code:
------------------------------------------------
23
<PAGE> 1
EXHIBIT 4(a)(i)(B)
[SAGE LOGO]
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
PLEASE READ THIS CONTRACT CAREFULLY. This Contract is a legal contract between
the Contractholder (you) and Sage Life Assurance of America, Inc. You have the
rights described in the Contract. We will make Income Payments beginning on the
Income Date shown in the Schedule if the Annuitant is living on that date.
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 IT, 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, OR IF
REQUIRED BY THE LAW OF YOUR STATE, THE INITIAL PURCHASE PAYMENT (MINUS ANY
WITHDRAWALS).
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.
[GRAPHIC OMITTED]
Chairman
FLEXIBLE PAYMENT DEFERRED COMBINATION FIXED AND VARIABLE ANNUITY CONTRACT
Surrender Values while you are living and prior to the Income Date
Income Payments begin on the Income Date
Nonparticipating
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SCHEDULE......................................................................3
DEFINITIONS...................................................................7
MAKING PURCHASE PAYMENTS......................................................9
VARIABLE ACCOUNT..............................................................9
FIXED ACCOUNT................................................................11
TRANSFERS AMONG ACCOUNTS.....................................................13
SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE......................13
CHARGES......................................................................13
OWNER, ANNUITANT AND BENEFICIARY.............................................13
DEATH BENEFITS...............................................................14
GENERAL PROVISIONS...........................................................16
ANNUITY INCOME BENEFITS......................................................17
</TABLE>
Page 2
<PAGE> 3
SCHEDULE
<TABLE>
<CAPTION>
Contract No.:
<S> <C> <C>
Owner: Contract Date: XX/XX/XXXX
Issue Age/Sex:
Annuitant: Income Date: XX/XX/XXXX
Issue Age/Sex:
Initial Purchase Payment: $
</TABLE>
This Schedule sets forth additional information that relates to the provisions
in this Contract with the corresponding headings.
MAKING PURCHASE PAYMENTS
The Designated Sub-Account is the Money Market Sub-Account.
No purchase payment, whether initial or additional, may be allocated such that
any Sub-Account would have a value less than $250.
Additional purchase payments are subject to the following limits:
1. [Non-qualified plan: Additional purchase payments may be made
until the earlier of the year in which you attain age 85 or the
year in which the Annuitant attains age 85.]
OR
[Qualified plan: Additional purchase payments may be made until
the year in which you attain age 70 1/2, except rollover
contributions may be made until the year in which you attain age
85.]
2. The minimum additional purchase payment we will accept is $250.
3. Our prior approval is required before you make a purchase payment
that causes the Account Value of all annuities that you maintain
with us to exceed $1,000,000.
VARIABLE ACCOUNT
The Variable Account for this Contract is The Sage Variable Annuity 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%.
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> 4
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.
After the Income Date, 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 charge 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 $2,000, we
reserve the right to treat the request as a withdrawal of only the excess over
$2,000.
Unless you specify otherwise, we will make withdrawals proportionately from all
Sub-Accounts in which you are invested.
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 7%
2 7%
3 6%
4 5%
5 4%
6 3%
7 1%
8+ 0%
</TABLE>
Page 4
<PAGE> 5
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 the transfer is 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:
1. if the Account Value is at least $50,000 at the time of deduction;
or
2. beginning on and after the 8th Contract Anniversary.
PURCHASE PAYMENT TAX CHARGE - The amount of any state and local taxes levied by
any governmental entity on purchase payments may be deducted from the Account
Value when such taxes are incurred. We reserve the right to defer the collection
of this charge and deduct it against your Account Value on the surrender of this
Contract, or Excess Withdrawal, or application of the Account Value to provide
income payments.
ASSET-BASED CHARGES - We deduct asset-based charges to compensate us for
assuming mortality and expense risks, and certain administrative expenses. Prior
to the Income Date asset-based charges are calculated as a percentage of the
Variable Account Value on the date of deduction. On the Contract Date, and
monthly thereafter, the asset-based charges are deducted in proportion to the
Variable 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 1-7 1.40% .116667%
Contract Years 8+ 1.25% .104167%
</TABLE>
We also reserve the right to deduct asset-based charges on the effective date of
any transfer from the Fixed Account, or allocation of purchase payment to the
Variable Account, based on the amount transferred or allocated, and based on the
number of days remaining until the next date of deduction.
VARIABLE SUB-ACCOUNT CHARGES - On and after the Income Date we deduct the
asset-based charges above from the assets in each Variable Sub-Account on a
daily basis. The maximum charges are:
<TABLE>
<CAPTION>
Variable Sub-Account Charges Annual Charge Daily Charge
------------------- ------------- --------------
<S> <C> <C>
Contract Years 1-7 1.40% .0038626%
Contract Years 8+ 1.25% .0034462%
</TABLE>
CHARGE DEDUCTION RULES - Unless otherwise specified above, charges are deducted
from the Account Value proportionately from all Sub-Accounts in which you are
invested.
ANNUITY INCOME BENEFITS
If you have not chosen an income plan, Life Annuity with 10 Years Certain will
automatically apply.
The Maximum Income Date is the first day of the first calendar month following
the Annuitant's 95th birthday.
We reserve the right to require that the Income Date be at least 2 years after
the Contract Date.
The minimum amount that can be applied under any Variable or Fixed Income
Annuity is $5,000.
The minimum income payment is $100.
We currently allow assumed investment rates of 3% and 5%. If you do not specify
one of these rates when you choose an income plan, the assumed investment rate
will be 3%.
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 income payments are shown for each $1,000 applied.
Page 5
<PAGE> 6
INCOME TABLE FOR A FIXED PERIOD
<TABLE>
<CAPTION>
Monthly Monthly Monthly
Fixed Period Income Fixed Period Income Fixed Period Income
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>
INCOME TABLE FOR LIFE
<TABLE>
<CAPTION>
Male/Female Male/Female Male/Female
Age Life Only 10 Years Certain 20 Years Certain
--- --------- ---------------- ----------------
<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>
RIDERS
Accidental Death Benefit Rider
The Maximum Accidental Death Benefit is $250,000.
Page 6
<PAGE> 7
DEFINITIONS
- --------------------------------------------------------------------------------
"ACCOUNT VALUE" is the entire amount we hold under this Contract for you before
the Income Date. It is equal to the sum of the Variable Account Value and the
Fixed Account Value.
"ACCUMULATION UNIT" is the unit of measure we use before the Income Date to keep
track of the value of each Variable Sub-Account.
"ANNUITANT" is the natural person whose age determines the Maximum Income Date
and the amount and duration of income payments involving life contingencies. The
Annuitant may also be the person to whom any payment will be made starting on
the Income Date. The Annuitant's name appears in the Schedule.
"BENEFICIARY" is the person or persons to whom we pay a death benefit if any
Owner dies prior to the Income Date.
"CONTRACT DATE" is the date this Contract is issued at our Customer Service
Center. The Contract Date is shown in the Schedule. While this Contract is in
force, every anniversary of the Contract Date is the CONTRACT ANNIVERSARY, and
each and every consecutive twelve-month period beginning on the Contract Date
and each Contract Anniversary is a CONTRACT YEAR.
"CONTINGENT ANNUITANT" is the natural person who becomes the Annuitant if the
Annuitant dies prior to the Income Date.
"CONTINGENT BENEFICIARY" is the person that becomes the Beneficiary if the named
Beneficiary dies prior to the Income Date.
"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.
"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 or transfers from, or charges assessed against the Fixed
Sub-Account.
"FREE WITHDRAWAL AMOUNT" is the maximum amount that can be withdrawn in the
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.
Page 1
<PAGE> 8
"HOME OFFICE" is our main office. The mailing address is shown on the first page
of this Contract.
"INCOME DATE" is the date when income payments under this Contract commence.
This date is shown in the Schedule.
"INCOME UNIT" is the unit of measure we use to calculate the amount of income
payments under the Variable Income Annuity.
"MARKET VALUE ADJUSTMENT" is a positive or negative adjustment that may apply to
surrender, withdrawals, transfers, and amounts applied to an income plan, from a
Fixed Sub-Account before the end of a Guarantee Period.
"NET ASSET VALUE" is the price of one share of an investment portfolio.
"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
before the Income Date. 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.
"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
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. The death of any
Owner before the Income Date initiates payment of the death benefit.
Page 2
<PAGE> 9
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 - After the initial purchase payment, additional
purchase payments may be made at any time while this Contract is in force and
before the Income Date. The amount of any additional purchase payments may vary
but are subject to limits described in the Schedule.
ALLOCATION OF PURCHASE PAYMENTS AMONG THE VARIABLE AND FIXED ACCOUNTS - Subject
to limits described in the Schedule, you tell us how to allocate your purchase
payment, less any applicable taxes, 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 the 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
end 15 days after the Contract Date.
Subject to our rules, you may tell us how to allocate any additional purchase
payments. If you do not tell us, they will be allocated in the same manner as
your most recent purchase payment.
CANCELLATION OF CONTRACT - If you have not made a purchase payment for more than
2 years and your Account Value is less than $2,000 on a Contract Anniversary, we
may cancel this Contract and pay you the Surrender Value as though you had made
a full withdrawal. We will send you written notice at your address of record.
You will be allowed 61 days from the date we mail you the notice to submit an
additional purchase payment to us in an amount not less than the difference
between $2,000 and the Account Value on the last Contract Anniversary. The
additional purchase payment is subject to the limits and minimums shown in the
Schedule.
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-
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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 this 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 this 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 this 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 this 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 crediting you with Accumulation Units for each Sub-Account. The
number of Accumulation Units credited to you for each Sub-Account is determined
by dividing (a) by (b) where:
(a) is the dollar amount allocated to that Sub-Account; and
(b) is the value of the Accumulation Unit for that Sub-Account for the
Valuation Date on which the purchase payment or transferred amount
is invested in that Sub-Account.
Accumulation Units will be adjusted for any transfers and will be canceled on
payment of a death benefit, a withdrawal, a surrender, the application of
Account Value to an income plan on the Income Date, or assessment of charges
shown in the Schedule (other than the variable sub-account charges) based on
their value for the Valuation Period in which the transaction occurs.
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.
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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
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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 from all or
part of a Fixed Sub-Account, and amounts applied to an income plan, made prior
to the Expiry Date of a Guarantee Period may be subject to a Market Value
Adjustment.
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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, but excluding any that extend beyond your Income Date; 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, nor extending beyond
your Income Date. This 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 amounts applied to an income plan 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 applied to an income plan by the following factor:
[(1+I)/(1+J+.0025)](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 amount applied to an
income plan, the Market Value Adjustment will be calculated on the
total amount that must be surrendered, withdrawn, transferred or
applied to an income plan 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 applied to an income
plan.
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 applied to an income plan, the Market Value Adjustment is added
to the amount withdrawn, transferred or applied to an income plan.
TRANSFERS AMONG ACCOUNTS
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Prior to the Income Date and while the Annuitant is living, you may transfer
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 when 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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Prior to the Income Date and while the Annuitant is living, you may withdraw all
or part of your Account Value by giving us Satisfactory Notice. The minimum
withdrawal is shown in the Schedule.
If you request a surrender, we will terminate this Contract and pay you the
Surrender Value. This amount may also be applied to the income plans 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 this 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.
CHARGES
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The types and amounts of charges and when and how they are deducted are
described in the Schedule.
OWNER, ANNUITANT AND BENEFICIARY
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THE OWNER - You are the Owner of this Contract. You have the rights and options
described in this Contract, including but not limited to the right to receive
the income payments beginning on the Income Date. One or more people may own
this Contract.
THE ANNUITANT - Unless another Annuitant is shown in the Schedule, you are also
the Annuitant. You
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may name a Contingent Annuitant. You will be the Contingent Annuitant unless you
name someone else. If there are joint Owners, we will treat the youngest Owner
as the Contingent Annuitant, unless you elect otherwise.
If you are not the Annuitant and the Annuitant dies before the Income Date, the
Contingent Annuitant becomes the Annuitant. If the Annuitant dies and no
Contingent Annuitant has been named, we will allow you sixty days to designate
someone other than yourself as Annuitant.
THE BENEFICIARY - We pay the death benefit to the primary Beneficiary (unless
there are joint Owners in which case proceeds are payable to the surviving
Owner). If the primary Beneficiary dies before the Owner, the death benefit is
paid to the Contingent Beneficiary, if any. If there is no surviving
Beneficiary, we pay the death benefit to the Owner's estate.
One or more persons may be named as primary Beneficiary or Contingent
Beneficiary. We will assume any death benefit is 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 irrevocable
Beneficiary to exercise the rights and options under this Contract.
CHANGE OF OWNER, BENEFICIARY OR ANNUITANT - During your lifetime and while this
Contract is in force you can transfer ownership of this Contract or change the
Beneficiary, or change the Annuitant. (However, the Annuitant cannot be changed
after the Income Date.) To make any of these changes, you must send us
Satisfactory Notice. If accepted, any change in Owner, Beneficiary or Annuitant
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 and may also affect the amount of death
benefit payable under this Contract.
DEATH BENEFITS
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DEATH BENEFIT BEFORE THE INCOME DATE - If any Owner dies before the Income Date,
we will pay the Beneficiary the greatest of the following:
(a) the Account Value determined as of the day we receive proof of
death; or
(b) 100% of the sum of all purchase payments made to this Contract,
reduced by any prior withdrawals (including any associated
surrender charge and Market Value Adjustment incurred); or
(c) the Highest Anniversary Value.
HIGHEST ANNIVERSARY VALUE - The Highest Anniversary Value is equal to the
greatest anniversary value attained from the following:
Upon our receipt of proof of death, we will calculate an anniversary
value for each Contract Anniversary before the Owner's death excluding,
however, Contract Anniversaries that come after the Owner attains age 80.
An anniversary value is equal to the Account Value on a Contract
Anniversary, increased by the dollar amount of any purchase payments made
since that Contract Anniversary and reduced for any withdrawals
(including any associated surrender charge and Market Value Adjustment
incurred) taken since that anniversary. This reduction will be made in
proportion to the reduction in the Account Value that results from a
withdrawal.
MULTIPLE OWNERS - If there are multiple Owners, the age of the oldest Owner will
be used to determine the death benefit.
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DEATH BENEFIT WHEN NO NATURAL OWNERS - If there is no Owner who is a natural
person, we will treat the Annuitant as Owner for the purpose of paying the death
benefit, and the Annuitant's age will determine the death benefit payable to the
Beneficiary.
REQUIRED DISTRIBUTION OF PROCEEDS ON THE DEATH OF THE OWNER - The three
sub-sections indented below are required to qualify this Contract as an annuity
contract under Section 72(s) of the Internal Revenue Code of 1986, as amended.
Where the terms of these three sub-sections are in conflict with any other
sections or sub-sections of this Contract, these three sub-sections will
control. We reserve the right to amend or administer this Contract as necessary
to comply with the applicable tax requirements. These three sub-sections and
this Contract should be construed so that they comply with the applicable tax
requirements.
DEATH BENEFIT OPTIONS BEFORE INCOME DATE - In the event any Owner dies
before the Income Date, the death benefit may be taken in one sum, in
which case this Contract will terminate. Such sum shall be paid within
five years of the Owner's death unless one of the options for
continuation of this Contract below is elected by the person entitled to
make that election.
CONTRACT CONTINUATION OPTION - If the death benefit is not taken in one
sum immediately, this Contract will continue subject to the following
provisions:
1. If there are joint Owners, the surviving Owner becomes the
new Owner. Otherwise, the Beneficiary becomes the new
Owner.
2. Unless specified otherwise, any excess of the death benefit
over the Account Value will be allocated to and among the
Variable and Fixed Accounts in proportion to their values
as of the date on which the death benefit is determined. We
will establish a new Fixed Sub-Account for any allocation
to the Fixed Account based on the Guarantee Period you then
elect.
3. No additional purchase payments may be applied to this
Contract.
4. If the new Owner is not the deceased Owner's spouse, the
entire interest in this Contract must be distributed under
one of the following options:
a. The entire interest in this Contract must be
distributed over the life of the new Owner, or over
a period not extending beyond the life expectancy of
the new Owner, with distributions beginning within
one year of the Owner's death; or
b. The entire interest in this Contract must be
distributed within 5 years of the Owner's death.
5. If the new Owner is the deceased Owner's spouse, this
Contract will continue with the surviving spouse as the new
Owner. The surviving spouse may name a new Beneficiary. If
no Beneficiary is so named, the surviving spouse's estate
will be the Beneficiary. Upon the death of the surviving
spouse, the death benefit will equal the Account Value as
of the date we receive proof of the spouse's death, and the
entire interest in this Contract must be distributed to the
new Beneficiary in accordance with the provisions of 4 (a)
or 4 (b) above.
If there is more than one Beneficiary, the foregoing provisions
will independently apply to each Beneficiary.
DEATH BENEFIT ON OR AFTER THE INCOME DATE - If any Owner dies on or after
the Income Date but before the time the entire interest in this Contract
has been distributed, the remaining portion will be distributed at least
as rapidly as under the method of distribution being used as of the date
of the Owner's death.
If income payments have been selected based on an income plan providing
for payments for a guaranteed period, and the Annuitant dies on or after
the Income Date, we will make the remaining guaranteed payments to the
Beneficiary. Any remaining payments will be made as
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rapidly as under the method of distribution being used as of the date of
the Annuitant's death. If no Beneficiary is living, we will commute any
unpaid guaranteed payments to a single sum (on the basis of the interest
rate used in determining the payments) and pay that single sum to the
estate of the last to die of the Annuitant or the Beneficiary.
PROOF OF DEATH - Proof of death must be received at our Customer Service Center
before we will pay any death benefit. 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.
GENERAL PROVISIONS
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ENTIRE CONTRACT - This Contract including any attached riders, endorsements,
amendments and the application, if one is attached to this contract when issued,
constitutes the entire contract between you and us. All statements made by you,
or any Owner, or any Annuitant will be deemed representations and not
warranties.
ASSIGNMENT - You may assign this Contract at any time prior to the Income Date.
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 the
assignment is accepted by us. 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 your, the Beneficiary's, or the
Annuitant's creditors.
MISSTATEMENT AND PROOF OF AGE, SEX OR SURVIVAL - 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 the Annuitant has been misstated, or if the age of
the Owner has been misstated, the benefits will be those that the Account Value
applied would have provided for the correct age and sex. If we have made
incorrect income payments, the amount of any underpayment will be paid
immediately. The amount of any overpayment will be deducted from future income
payments.
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 - This Contract is incontestable from its Contract Date.
REQUIRED REPORTS - We will furnish a report to you as often as required by law,
but at least once each Contract Year before the Income Date. 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.
MORTALITY AND EXPENSES - Our actual mortality and expense experience will not
affect the amount of any income payments or any other values under this
Contract.
TAXES BASED UPON PURCHASE PAYMENT 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.
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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;
2. The SEC determines that a state of emergency exists;
3. An order or pronouncement of the SEC permits a delay for the
protection of Owners; or
4. The check used to pay the purchase payment has not cleared through
the banking system. This may take up to 15 days.
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 if death occurs
before the Income Date;
3. Transfers of the Account Value; or
4. Application of the Account Value under an income plan.
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.
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 officials in the appropriate
jurisdictions. The values are not less than those required by the laws of those
states or jurisdictions. Any benefit provided by an attached rider will not
increase these values unless otherwise stated in that rider.
ANNUITY INCOME BENEFITS
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CHOOSING AN INCOME DATE AND INCOME PLAN - On the Income Date, if the Annuitant
is alive and this Contract is in force, income payments will begin under the
income plan you have chosen. If you have not chosen an income plan, the option
shown in the Schedule will automatically apply. If you have not selected an
Income Date, the Maximum Income Date shown in the Schedule will automatically
apply.
You may choose or change an income plan or the Income Date by giving us
Satisfactory Notice at least 30 days before the Income Date. However, any Income
Date must meet the restrictions described in the Schedule.
Once income payments have begun, we reserve the right to disallow further
changes without our prior approval.
MINIMUM AMOUNTS - If the amount available to apply under any variable or fixed
option is less than the minimum amount shown in the Schedule, we reserve the
right to pay such amount in a lump sum in lieu of the payment otherwise provided
for.
Income payments will be made monthly unless quarterly, semi-annual or annual
payments are chosen by giving us Satisfactory Notice at least 30 days before the
Income Date. However, if at any time the payment becomes less than the minimum
income 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 income payment. In no event will the interval be less
frequent than annual.
ALLOCATION OF ANNUITY - At the time you elect the income plan, you may also
elect to have the Account
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Value applied to provide a Variable Income Annuity, a Fixed Income Annuity, or a
combination of both. Unless you specify otherwise, we will provide either
variable or fixed, or a combination of variable and fixed income 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 income payment. If any
applicable purchase payment taxes are then due us, we will also deduct them
proportionately.
VARIABLE INCOME ANNUITY
AMOUNT OF FIRST VARIABLE PAYMENT - The Income Tables shown in the Schedule are
used to determine the first monthly variable income payment for an assumed
investment rate of 3%. The Income Tables show the dollar amount of the first
monthly variable income payment that can be purchased with each $1,000 applied.
The assumed investment rates we currently allow are shown on 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 income 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 income payment.
AMOUNT OF SECOND AND SUBSEQUENT VARIABLE PAYMENTS - The dollar amount of the
second and subsequent variable income payments may change with the investment
performance of the Variable Sub-Accounts. The total amount of each variable
income payment will be equal to the sum of the variable income 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 - After the Income Date, 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 income
payment made on the date of exchange would be unaffected by the exchange.
FIXED INCOME ANNUITY
A Fixed Income Annuity is an annuity with income payments that remain fixed as
to dollar amount throughout the payment period. The Income Tables shown in the
Schedule are used to determine the monthly fixed income payment. The Income
Tables show the dollar amount of the monthly fixed income payment that can be
purchased with each $1,000 applied.
INCOME PLANS
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<PAGE> 19
The following is a list of income plans we guarantee to make available.
INCOME PLAN 1. LIFE ANNUITY - An annuity payable during the lifetime of the
Annuitant and terminating with the last payment preceding the death of the
Annuitant.
INCOME PLAN 2. LIFE ANNUITY WITH 10 OR 20 YEARS CERTAIN - An annuity payable
during the lifetime of the Annuitant with the provision that payments will be
made for a minimum of 10 or 20 years, as elected.
INCOME PLAN 3. JOINT AND LAST SURVIVOR ANNUITY - An annuity payable during the
joint lifetime of the Annuitant 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.
INCOME PLAN 4. PAYMENTS FOR A SPECIFIED PERIOD CERTAIN - An amount payable for
the number of years selected which may be from 5 to 30 years.
INCOME PLAN 5. ANNUITY PLAN - An amount can be used to purchase any single
premium annuity we offer on the Income Date for which you and the Annuitant are
eligible.
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THIS PAGE INTENTIONALLY LEFT BLANK
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<PAGE> 22
[SAGA LOGO]
FLEXIBLE PAYMENT DEFERRED COMBINATION FIXED AND VARIABLE ANNUITY CONTRACT
Surrender Values while you are living and prior to the Income Date
Income Payments begin on the Income Date
Nonparticipating
<PAGE> 1
EXHIBIT 4(a)(iii)(B)
[SAGE LOGO]
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
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
Annuitant are named in each Certificate. We will make Income Payments
beginning on the Income Date shown in each Certificate if the Annuitant is
living on that date.
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 REQUIRED BY THE LAW OF THE OWNER'S STATE, THE INITIAL
PURCHASE PAYMENT (MINUS ANY WITHDRAWALS).
ALL PAYMENTS AND VALUES, WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE
VARIABLE ACCOUNT, MAY INCREASE OR DECREASE, DEPENDING ON 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/ [SIG]
Chairman
GROUP FLEXIBLE PAYMENT DEFERRED COMBINATION FIXED AND
VARIABLE ANNUITY CONTRACT
Surrender Values while the Owner is living and prior to the Income Date
Income Payments begin on the Income Date
Nonparticipating
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
MAKING PURCHASE PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
VARIABLE ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FIXED ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
TRANSFERS AMONG ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . .13
SURRENDERING, OR WITHDRAWING PART OF THE ACCOUNT VALUE . . . . . . . . . . .13
CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
OWNER, ANNUITANT AND BENEFICIARY . . . . . . . . . . . . . . . . . . . . . .14
DEATH BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
ANNUITY INCOME BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . .18
</TABLE>
Page 2
<PAGE> 3
SCHEDULE
Group Contract No.: 123456789 Effective Date: 1/1/1998
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
The Designated Sub-Account is the [Money Market Sub-Account].
No purchase payment, whether initial or additional, may be allocated such that
any Sub-Account would have a value less than [$250].
Additional purchase payments are subject to the following limits:
1. [Non-qualified plan: Additional purchase payments may be made
until the earlier of the year in which the Owner attains age
[85] or the year in which the Annuitant attains age [85].]
[Qualified plan: Additional purchase payments may be made until
the year in which the Owner attains age [70 1/2], except rollover
contributions may be made until the year in which the Owner
attains age [85].]
2. The minimum additional purchase payment we will accept is [$250;
$1,000(for Certificate without surrender charge)].
3. Our prior approval is required before the Owner makes a purchase
payment that causes the Account Value of all annuities that
the Owner maintains with us to exceed [$1,000,000].
VARIABLE ACCOUNT
The Variable Account for a Certificate is [The Sage Variable Annuity Account
A]. [It is a unit investment trust variable account.]
FIXED ACCOUNT
The Fixed Account for a 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.
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<PAGE> 4
The Owner's 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.
After the Income Date, 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 [$2,000], we
reserve the right to treat the request as a withdrawal of only the excess over
[$2,000].
Unless the Owner specifies otherwise, we will make withdrawals [proportionately
from all Sub-Accounts in which the Owner is invested].
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:
<TABLE>
<CAPTION>
Complete Years Maximum
Elapsed Since Surrender Charge
Payment Accepted Percentage
---------------- ----------
<S> <C>
[0 7%
1 7%
2 6%
3 5%
4 4%
5 3%
6 1%
7+ 0%]
</TABLE>
OR
Page 4
<PAGE> 5
<TABLE>
<CAPTION>
Maximum
Certificate Surrender Charge
Year Percentage
---- ----------
<S> <C>
[1 7%
2 7%
3 6%
4 5%
5 4%
6 3%
7 1%
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 [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 the
Sub-Accounts from which the transfer is 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:
1. if the Account Value is at least [$50,000] at the time of
deduction; or
2. beginning on and after the [8th] Certificate Anniversary.
PURCHASE PAYMENT TAX CHARGE - The amount of any state and local taxes levied by
any governmental entity on purchase payments may be deducted from the Account
Value when such taxes are incurred. We reserve the right to defer the
collection of this charge and deduct it against the Owner's Account Value on
the surrender of a Certificate, or Excess Withdrawal, or application of the
Account Value to provide income payments.
ASSET-BASED CHARGES - We deduct asset-based charges to compensate us for
assuming mortality and expense risks, and certain administrative expenses.
[Prior to the Income Date] asset-based charges are calculated as a percentage
of the Variable Account Value on the date of deduction. On the Certificate
Date, and monthly thereafter, the asset-based charges are deducted in
proportion to the Variable Sub-Accounts in which the Owner is invested. The
maximum charges are:
<TABLE>
<CAPTION>
Asset-Based Charges Annual Charge Monthly Charge
------------------- ------------- --------------
<S> <C> <C>
Certificate Years 1-7 [1.40% .116667%
Certificate Years 8+ 1.25% .104167%]
</TABLE>
We also reserve the right to deduct asset-based charges on the effective date
of any transfer from the Fixed Account, or allocation of purchase payment to
the Variable Account, based on the amount transferred or allocated, and based
on the number of days remaining until the next date of deduction.
VARIABLE SUB-ACCOUNT CHARGES - [On and after the Income Date] we deduct the
asset-based charges above from the assets in each Variable Sub-Account on a
daily basis. The maximum charges are:
<TABLE>
<CAPTION>
Variable Sub-Account Charges Annual Charge Daily Charge
---------------------------- ------------- ------------
<S> <C> <C>
Certificate Years 1-7 [1.40% .0038626%
Certificate Years 8+ 1.25% .0034462%]
</TABLE>
CHARGE DEDUCTION RULES - Unless otherwise specified above, charges are deducted
from the Account Value [proportionately from all Sub-Accounts in which you are
invested.]
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ANNUITY INCOME BENEFITS
If the Owner has not chosen an income plan, [Life Annuity with 10 Years
Certain] will automatically apply.
The Maximum Income Date is the first day of the first calendar month following
the Annuitant's [95th] birthday.
We reserve the right to require that the Income Date be at least [2 years]
after the Certificate Date.
The minimum amount that can be applied under any Variable or Fixed Income
Annuity is [$5,000].
The minimum income payment is [$100].
We currently allow assumed investment rates of [3%] and [6%]. If the Owner
does not specify one of these rates when the Owner chooses an income plan, the
assumed investment rate will be [3%].
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 income payments are shown for each $1,000
applied.
<TABLE>
<CAPTION>
INCOME TABLE FOR A FIXED PERIOD
Monthly Monthly Monthly
Fixed Period Income Fixed Period Income Fixed Period Income
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>
<TABLE>
<CAPTION>
INCOME TABLE FOR LIFE
Male/Female Male/Female Male/Female
Age Life Only 10 Years Certain 20 Years Certain
--- --------- ---------------- ----------------
<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>
RIDERS
Accidental Death Benefit Rider
The Maximum Accidental Death Benefit is [$250,000].
Page 6
<PAGE> 7
DEFINITIONS
- -------------------------------------------------------------------------------
"ACCOUNT VALUE" is the entire amount we hold under a Certificate for the Owner
before the Income Date. It is equal to the sum of the Variable Account Value
and the Fixed Account Value.
"ACCUMULATION UNIT" is the unit of measure we use before the Income Date to
keep track of the value of each Variable Sub-Account.
"ANNUITANT" is the natural person whose age determines the Maximum Income Date
and the amount and duration of income payments involving life contingencies.
The Annuitant may also be the person to whom any payment will be made starting
on the Income Date. The Annuitant's name appears in the Certificate Schedule.
"BENEFICIARY" is the person or persons to whom we pay a death benefit if any
Owner dies prior to the Income Date.
"CERTIFICATE DATE" is the date the Certificate is issued at our Customer
Service Center. The Certificate Date is shown in the Certificate Schedule.
While a 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 ANNUITANT" is the natural person who becomes the Annuitant if the
Annuitant dies prior to the Income Date.
"CONTINGENT BENEFICIARY" is the person that becomes the Beneficiary if the
named Beneficiary dies prior to the Income Date.
"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 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 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.
"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.
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<PAGE> 8
"HOME OFFICE" is our main office. The mailing address is shown on the first
page of a Certificate.
"INCOME DATE" is the date when income payments under a Certificate commence.
This date is shown in the Certificate Schedule.
"INCOME UNIT" is the unit of measure we use to calculate the amount of income
payments under the Variable Income Annuity.
"MARKET VALUE ADJUSTMENT" is a positive or negative adjustment that may apply
to surrender, withdrawals, transfers and amounts applied to an income plan,
from a Fixed Sub-Account before the end of a Guarantee Period.
"NET ASSET VALUE" is the price of one share of an investment portfolio.
"OWNER" is the Owner of a Certificate. The Owner's name appears in the
Certificate Schedule. The Owner is entitled to exercise all rights under his
or her Certificate. However, if the Owner designates an irrevocable
beneficiary, the Owner may need that beneficiary's consent before he or she may
exercise the Owner's rights under a Certificate. The death of any Owner before
the Income Date initiates payment of the death benefit.
"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 his or her
Certificate before the Income Date. 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 Schedule.
"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 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.
Page 8
<PAGE> 9
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 - After the initial purchase payment, additional
purchase payments may be made at any time while a Certificate is in force and
before the Income Date. The amount of any additional purchase payments may
vary but are subject to limits described in the Schedule.
ALLOCATION OF PURCHASE PAYMENTS AMONG THE VARIABLE AND FIXED ACCOUNTS - Subject
to limits described in the Schedule, the Owner tells us how to allocate the
Owner's purchase payment, less any applicable taxes, by notifying us of the
Owner's choices. The Owner specified how to allocate the Owner's initial
purchase payment in the Owner's application for a Certificate. Initial
purchase payments allocated to the Fixed Account will be invested in Fixed
Sub-Accounts with the Guarantee Periods that the Owner 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 the 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 end 15 days after the Certificate Date.
Subject to our rules, the Owner may tell us how to allocate any additional
purchase payments. If the Owner does not tell us, they will be allocated in
the same manner as the Owner's most recent purchase payment.
CANCELLATION OF CERTIFICATE - If the Owner has not made a purchase payment for
more than [2] years and the Owner's Account Value is less than [$2,000] on a
Certificate Anniversary, we may cancel a Certificate and pay the Owner the
Surrender Value as though the Owner had made a full withdrawal. We will send
the Owner written notice at the Owner's address of record. The Owner will be
allowed 61 days from the date we mail the Owner the notice to submit an
additional purchase payment to us in an amount not less than the difference
between [$2,000] and the Account Value on the last Certificate Anniversary.
The additional purchase payment is subject to the limits and minimums shown in
the Schedule.
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 9
<PAGE> 10
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 the Owner. 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 an 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 crediting the Owner with Accumulation Units for each
Sub-Account. The number of Accumulation Units credited to the Owner for each
Sub-Account is determined by dividing (a) by (b) where:
(a) is the dollar amount allocated to that Sub-Account; and
(b) is the value of the Accumulation Unit for that Sub-Account for
the Valuation Date on which the purchase payment or
transferred amount is invested in that Sub-Account.
Accumulation Units will be adjusted for any transfers and will be canceled on
payment of a death benefit, a withdrawal, a surrender, the application of
Account Value to an income plan on the Income Date, or assessment of charges
shown in the Schedule (other than the variable sub-account charges) based on
their value for the Valuation Period in which the transaction occurs.
Page 10
<PAGE> 11
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 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.
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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 from all or
part of a Fixed Sub-Account, and amounts applied to an income plan, 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, but excluding any that extend beyond the Owner's Income
Date; 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, nor extending
beyond the Owner's Income Date. 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 amounts applied to an income plan 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 applied to an income plan 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:
- For a surrender, withdrawal, transfer or amount applied to an
income plan, the Market Value Adjustment will be calculated on
the total amount that must be surrendered, withdrawn,
transferred or applied to an income plan in order to provide
the amount requested.
- 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
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deducted from the amount withdrawn, transferred or applied to an
income plan.
- 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 applied to an income plan, the
Market Value Adjustment is added to the amount withdrawn,
transferred or applied to an income plan.
TRANSFERS AMONG ACCOUNTS
- -------------------------------------------------------------------------------
Prior to the Income Date and while the Annuitant is living, the Owner may
transfer 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 when 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
- -------------------------------------------------------------------------------
Prior to the Income Date and while the Annuitant is living, the Owner may
withdraw all or part of the Owner's Account Value by giving us Satisfactory
Notice. The minimum withdrawal is shown in the Schedule.
If the Owner requests a surrender, we will terminate the Certificate and pay
the Owner the Surrender Value. This amount may also be applied to the income
plans subject to any restrictions described in a 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 a 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 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.
CHARGES
- -------------------------------------------------------------------------------
The types and amounts of charges and when and how they are deducted are
described in the Schedule. Charges under this Group Contract and the
Certificates may be reduced or eliminated when certain sales or administration
of the Group Contract result in savings or reduction of expenses and or risks.
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OWNER, ANNUITANT AND BENEFICIARY
- -------------------------------------------------------------------------------
THE OWNER - The Owner has the rights and options described in this Group
Contract, including but not limited to the right to receive income payments
beginning on the Income Date. One or more people may own a Certificate.
THE ANNUITANT - Unless another Annuitant is shown in the Schedule, the Owner is
also the Annuitant. The Owner may name a Contingent Annuitant. The Owner will
be the Contingent Annuitant unless the Owner names someone else. If there are
joint Owners, we will treat the youngest Owner as the Contingent Annuitant,
unless the Owner elects otherwise.
If the Owner is not the Annuitant and the Annuitant dies before the Income
Date, the Contingent Annuitant becomes the Annuitant. If the Annuitant dies and
no Contingent Annuitant has been named, we will allow the Owner sixty days to
designate someone other than himself or herself as Annuitant.
THE BENEFICIARY - We pay the death benefit to the primary Beneficiary (unless
there are joint Owners in which case proceeds are payable to the surviving
Owner). If the primary Beneficiary dies before the Owner, the death benefit is
paid to the Contingent Beneficiary, if any. If there is no surviving
Beneficiary, we pay the death benefit to the Owner's estate.
One or more persons may be named as primary Beneficiary or Contingent
Beneficiary. We will assume any death benefit is 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 irrevocable Beneficiary to exercise the rights and options
under a Certificate.
CHANGE OF OWNER, BENEFICIARY OR ANNUITANT - During the Owner's lifetime and
while a Certificate is in force the Owner can transfer ownership of a
Certificate or change the Beneficiary, or change the Annuitant. (However, the
Annuitant cannot be changed after the Income Date.) To make any of these
changes, the Owner must send us Satisfactory Notice. If accepted, any change
in Owner, Beneficiary or Annuitant 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 and may also affect the amount of death benefit payable under a
Certificate.
DEATH BENEFITS
- -------------------------------------------------------------------------------
DEATH BENEFIT BEFORE THE INCOME DATE - If any Owner dies before the Income
Date, we will pay the Beneficiary the greatest of the following:
(a) the Account Value determined as of the day we receive proof of death; or
(b) 100% of the sum of all purchase payments made to a Certificate,
reduced by any prior withdrawals (including any associated
surrender charge and Market Value Adjustment incurred); or
(c) the Highest Anniversary Value.
HIGHEST ANNIVERSARY VALUE - The Highest Anniversary Value is equal to the
greatest anniversary value attained from the following:
Upon our receipt of proof of death, we will calculate an anniversary
value for each Certificate Anniversary before the Owner's death
excluding, however, Certificate Anniversaries that come
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after the Owner attains age 80. An anniversary value is equal to the
Account Value on a Certificate Anniversary, increased by the dollar
amount of any purchase payments made since that Certificate
Anniversary and reduced for any withdrawals (including any associated
surrender charge and Market Value Adjustment incurred) taken since
that anniversary. This reduction will be made in proportion to the
reduction in the Account Value that results from a withdrawal.
MULTIPLE OWNERS - If there are multiple Owners, the age of the oldest Owner
will be used to determine the death benefit.
DEATH BENEFIT WHEN NO NATURAL OWNERS - If there is no Owner who is a natural
person, we will treat the Annuitant as Owner for the purpose of paying the
death benefit, and the Annuitant's age will determine the death benefit payable
to the Beneficiary.
REQUIRED DISTRIBUTION OF PROCEEDS ON THE DEATH OF THE OWNER - The three
sub-subsections indicated below are required to qualify a Certificate as an
annuity contract under Section 72(s) of the Internal Revenue Code of 1986, as
amended. Where the terms of these three sub-sections are in conflict with any
other sections or sub-sections of a Certificate, these three sub-sections will
control. We reserve the right to amend or administer the Group Contract and
any Certificate as necessary to comply with the applicable tax requirements.
These three sub-sections and each Certificate should be construed so that they
comply with the applicable tax requirements.
DEATH BENEFIT OPTIONS BEFORE INCOME DATE - In the event any Owner dies
before the Income Date, the death benefit may be taken in one sum, in
which case that Certificate will terminate. Such sum shall be paid
within five years of the Owner's death unless one of the options for
continuation of the Certificate below is elected by the person
entitled to make that election.
CERTIFICATE CONTINUATION OPTION - If the death benefit is not taken in
one sum immediately, the Certificate will continue subject to the
following provisions:
1. If there are joint Owners, the surviving Owner becomes the new
Owner. Otherwise, the Beneficiary becomes the new Owner.
2. Unless specified otherwise, any excess of the death benefit
over the Account Value will be allocated to and among the
Variable and Fixed Accounts in proportion to their values as
of the date on which the death benefit is determined. We will
establish a new Fixed Sub-Account for any allocation to the
Fixed Account based on the Guarantee Period the Owner then
elects.
3. No additional purchase payments may be applied to a
Certificate.
4. If the new Owner is not the deceased Owner's spouse, the
entire interest in a Certificate must be distributed under one
of the following options:
a. The entire interest in a Certificate must be distributed
over the life of the new Owner, or over a period not
extending beyond the life expectancy of the new Owner,
with distributions beginning within one year of the
Owner's death; or
b. The entire interest in a Certificate must be distributed
within 5 years of the Owner's death.
5. If the new Owner is the deceased Owner's spouse, a Certificate
will continue with the surviving spouse as the new Owner. The
surviving spouse may name a new Beneficiary. If no
Beneficiary is so named, the surviving spouse's estate will be
the Beneficiary. Upon the death of the surviving spouse, the
death benefit will equal the Account Value as of the date we
receive proof of the spouse's death, and the entire interest
in a Certificate must be distributed to the new Beneficiary in
accordance with the provisions of 4 (a) or 4 (b) above.
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If there is more than one Beneficiary, the foregoing provisions will
independently apply to each Beneficiary.
DEATH BENEFIT ON OR AFTER THE INCOME DATE - If any Owner dies on or
after the Income Date but before the time the entire interest in a
Certificate has been distributed, the remaining portion will be
distributed at least as rapidly as under the method of distribution
being used as of the date of the Owner's death.
If income payments have been selected based on an income plan
providing for payments for a guaranteed period, and the Annuitant dies
on or after the Income Date, we will make the remaining guaranteed
payments to the Beneficiary. Any remaining payments will be made as
rapidly as under the method of distribution being used as of the date
of the Annuitant's death. If no Beneficiary is living, we will
commute any unpaid guaranteed payments to a single sum (on the basis
of the interest rate used in determining the payments) and pay that
single sum to the estate of the last to die of the Annuitant or the
Beneficiary.
PROOF OF DEATH - Proof of death must be received at our Customer Service Center
before we will pay any death benefit. 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.
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, or any Owner will be deemed representations and not
warranties.
ASSIGNMENT - The Owner may assign a Certificate at any time prior to the Income
Date. 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
the assignment is accepted by us. 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 the Owner's, the Beneficiary's,
or the Annuitant's creditors.
MISSTATEMENT AND PROOF OF AGE, SEX OR SURVIVAL - 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 the Annuitant has been misstated, or if the age
of the Owner has been misstated, the benefits will be those that the Account
Value applied would have provided for the correct age and sex. If we have made
incorrect income payments, the amount of any underpayment will be paid
immediately. The amount of any overpayment will be deducted from future income
payments.
NO DIVIDENDS PAYABLE - A Certificate is non-participating and does not share in
any distribution of our surplus. We will not pay any dividends.
INCONTESTABILITY - This Group Contract is incontestable from its Effective
Date. A Certificate is incontestable from its Certificate Date.
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REQUIRED REPORTS - We will furnish a report to the Owner as often as required
by law, but at least once each Certificate Year before the Income Date. 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.
MORTALITY AND EXPENSES - Our actual mortality and expense experience will not
affect the amount of any income payments or any other values under a
Certificate.
TAXES BASED UPON PURCHASE PAYMENT 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;
2. The SEC determines that a state of emergency exists;
3. An order or pronouncement of the SEC permits a delay for the
protection of Owners; or
4. The check used to pay the purchase payment has not cleared through
the banking system. This may take up to 15 days.
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 if death occurs
before the Income Date;
3. Transfers of the Account Value; or
4. Application of the Account Value under an income plan.
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.
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 Group Certificate or 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 an
Owner's consent.
REQUIRED NOTE ON OUR COMPUTATIONS - We have filed a detailed statement of our
computations with the insurance supervisory officials in the appropriate
jurisdictions. The values are not less than those required by the laws of
those states or jurisdictions. 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.
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ANNUITY INCOME BENEFITS
- -------------------------------------------------------------------------------
CHOOSING AN INCOME DATE AND INCOME PLAN - On the Income Date, if the Annuitant
is alive and a Certificate is in force, income payments will begin under the
income plan the Owner has chosen. If the Owner has not chosen an income plan,
the option shown in the Schedule will automatically apply. If the Owner has
not selected an Income Date, the Maximum Income Date shown in the Schedule will
automatically apply.
The Owner may choose or change an income plan or the Income Date by giving us
Satisfactory Notice at least 30 days before the Income Date. However, any
Income Date must meet the restrictions described in the Schedule.
Once income payments have begun, we reserve the right to disallow further
changes without our prior approval.
MINIMUM AMOUNTS - If the amount available to apply under any variable or fixed
option is less than the minimum amount shown in the Schedule, we reserve the
right to pay such amount in a lump sum in lieu of the payment otherwise
provided for.
Income payments will be made monthly unless quarterly, semi-annual or annual
payments are chosen by giving us Satisfactory Notice at least 30 days before
the Income Date. However, if at any time the payment becomes less than the
minimum income 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 income payment. In no event will the interval be
less frequent than annual.
ALLOCATION OF ANNUITY - At the time the Owner elects the income plan, the Owner
may also elect to have the Account Value applied to provide a Variable Income
Annuity, a Fixed Income Annuity, or a combination of both. Unless the Owner
specifies otherwise, we will provide either variable or fixed, or a combination
of variable and fixed income 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 income payment. If any applicable purchase
payment taxes are then due us, we will also deduct them proportionately.
VARIABLE INCOME ANNUITY
AMOUNT OF FIRST VARIABLE PAYMENT - The Income Tables shown in the Schedule are
used to determine the first monthly variable income payment for an assumed
investment rate of 3%. The Income Tables show the dollar amount of the first
monthly variable income payment that can be purchased with each $1,000 applied.
The assumed investment rates we currently allow are shown on 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 income 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 income
payment.
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AMOUNT OF SECOND AND SUBSEQUENT VARIABLE PAYMENTS - The dollar amount of the
second and subsequent variable income payments may change with the investment
performance of the Variable Sub-Accounts. The total amount of each variable
income payment will be equal to the sum of the variable income 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 - After the Income Date, 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 income payment made on the date of exchange would be unaffected by
the exchange.
FIXED INCOME ANNUITY
A Fixed Income Annuity is an annuity with income payments that remain fixed as
to dollar amount throughout the payment period. The Income Tables shown in the
Schedule are used to determine the monthly fixed income payment. The Income
Tables show the dollar amount of the monthly fixed income payment that can be
purchased with each $1,000 applied.
INCOME PLANS
The following is a list of income plans we guarantee to make available.
INCOME PLAN 1. LIFE ANNUITY - An annuity payable during the lifetime of the
Annuitant and terminating with the last payment preceding the death of the
Annuitant.
INCOME PLAN 2. LIFE ANNUITY WITH 10 OR 20 YEARS CERTAIN - An annuity payable
during the lifetime of the Annuitant with the provision that payments will be
made for a minimum of 10 or 20 years, as elected.
INCOME PLAN 3. JOINT AND LAST SURVIVOR ANNUITY - An annuity payable during the
joint lifetime of the Annuitant 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.
INCOME PLAN 4. PAYMENTS FOR A SPECIFIED PERIOD CERTAIN - An amount payable for
the number of years selected which may be from 5 to 30 years.
INCOME PLAN 5. ANNUITY PLAN - An amount can be used to purchase any single
premium annuity we offer on the Income Date for which the Owner and the
Annuitant are eligible.
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[SAGE LOGO]
A Stock Company
GROUP FLEXIBLE PAYMENT DEFERRED COMBINATION FIXED AND
VARIABLE ANNUITY CONTRACT
Surrender Values while the Owner is living and prior to the Income Date
Income Payments begin on the Income Date
Nonparticipating
<PAGE> 1
EXHIBIT 4(a)(iv)(B)
[SAGE LOGO]
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
Sage Life Assurance of America, Inc. has issued this Certificate to you. We
certify that you and the Annuitant named in the Schedule are 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.
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 IT, 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,
OR IF REQUIRED BY THE LAW OF YOUR STATE, THE INITIAL PURCHASE PAYMENT (MINUS ANY
WITHDRAWALS).
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/ [SIG]
Chairman
FLEXIBLE PAYMENT DEFERRED COMBINATION FIXED AND VARIABLE ANNUITY CERTIFICATE
Surrender Values while you are living and prior to the Income Date
Income Payments begin on the Income Date
Nonparticipating
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SCHEDULE.......................................................................3
DEFINITIONS....................................................................7
MAKING PURCHASE PAYMENTS.......................................................9
VARIABLE ACCOUNT...............................................................9
FIXED ACCOUNT.................................................................11
TRANSFERS AMONG ACCOUNTS......................................................13
SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE.......................13
CHARGES.......................................................................13
OWNER, ANNUITANT AND BENEFICIARY..............................................13
DEATH BENEFITS................................................................14
GENERAL PROVISIONS............................................................16
ANNUITY INCOME BENEFITS.......................................................17
</TABLE>
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SCHEDULE
<TABLE>
<CAPTION>
Group Contract No.: Certificate No.:
<S> <C> <C>
Owner: Certificate Date: XX/XX/XXXX
Issue Age/Sex:
Annuitant: Income Date: XX/XX/XXXX
Issue Age/Sex:
Initial Purchase Automatic INCOME PLAN 2 WITH
Payment: $ Income Plan: 10 YEARS CERTAIN
</TABLE>
This Schedule sets forth additional information that relates to the provisions
in this Certificate with the corresponding headings.
MAKING PURCHASE PAYMENTS
The Designated Sub-Account is the Money Market Sub-Account.
No purchase payment, whether initial or additional, may be allocated such that
any Sub-Account would have a value less than $250.
Additional purchase payments are subject to the following limits:
1. [Non-qualified plan: Additional purchase payments may be made
until the earlier of the year in which you attain age 85 or the
year in which the Annuitant attains age 85.]
OR
[Qualified plan: Additional purchase payments may be made until
the year in which you attain age 70 1/2, except rollover
contributions may be made until the year in which you attain age
85.]
2. The minimum additional purchase payment we will accept is [$250 -
Surrender Charge].
3. Our prior approval is required before you make a purchase payment
that causes the Account Value of all annuities that you maintain
with us to exceed $1,000,000.
VARIABLE ACCOUNT
The Variable Account for this Certificate is The Sage Variable Annuity Account
A. It is a unit investment trust variable account.
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.
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<PAGE> 4
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.
After the Income Date, 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 $2,000, we
reserve the right to treat the request as a withdrawal of only the excess over
$2,000.
Unless you specify otherwise, we will make withdrawals proportionately from all
Sub-Accounts in which you are invested.
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 7%
2 7%
3 6%
4 5%
5 4%
6 3%
7 1%
8+ 0%
</TABLE>
Page 4
<PAGE> 5
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 the transfer is 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:
1. if the Account Value is at least $50,000 at the time of deduction;
or
2. beginning on and after the 8th Certificate Anniversary.
PURCHASE PAYMENT TAX CHARGE - The amount of any state and local taxes levied by
any governmental entity on purchase payments may be deducted from the Account
Value when such taxes are incurred. We reserve the right to defer the collection
of this charge and deduct it against your Account Value on the surrender of this
Certificate, or Excess Withdrawal, or application of the Account Value to
provide income payments.
ASSET-BASED CHARGES - We deduct asset-based charges to compensate us for
assuming mortality and expense risks, and certain administrative expenses. Prior
to the Income Date asset-based charges are calculated as a percentage of the
Variable Account Value on the date of deduction. On the Certificate Date, and
monthly thereafter, the asset-based charges are deducted in proportion to the
Variable Sub-Accounts in which you are invested. The maximum charges are:
<TABLE>
<CAPTION>
Asset-Based Charges Annual Charge Monthly Charge
--------------------- ------------- --------------
<S> <C> <C>
Certificate Years 1-7 1.40% .116667%
Certificate Years 8+ 1.25% .104167%
</TABLE>
We also reserve the right to deduct asset-based charges on the effective date of
any transfer from the Fixed Account, or allocation of purchase payment to the
Variable Account, based on the amount transferred or allocated, and based on the
number of days remaining until the next date of deduction.
VARIABLE SUB-ACCOUNT CHARGES - On and after the Income Date we deduct the
asset-based charges above from the assets in each Variable Sub-Account on a
daily basis. The maximum charges are:
<TABLE>
<CAPTION>
Variable Sub-Account Charges Annual Charge Daily Charge
---------------------------- ------------- ------------
<S> <C> <C>
Certificate Years 1-7 1.40% .0038626%
Certificate Years 8+ 1.25% .0034462%
</TABLE>
CHARGE DEDUCTION RULES - Unless otherwise specified above, charges are deducted
from the Account Value proportionately from all Sub-Accounts in which you are
invested.
ANNUITY INCOME BENEFITS
If you have not chosen an income plan, Life Annuity with 10 Years Certain will
automatically apply.
The Maximum Income Date is the first day of the first calendar month following
the Annuitant's 95th birthday.
We reserve the right to require that the Income Date be at least 2 years after
the Certificate Date.
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<PAGE> 6
The minimum amount that can be applied under any Variable or Fixed Income
Annuity is $5,000.
The minimum income payment is $100.
We currently allow assumed investment rates of 3% and 6%. If you do not specify
one of these rates when you choose an income plan, the assumed investment rate
will be 3%.
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 income payments are shown for each $1,000 applied.
INCOME TABLE FOR A FIXED PERIOD
<TABLE>
<CAPTION>
Monthly Monthly Monthly
Fixed Period Income Fixed Period Income Fixed Period Income
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>
INCOME TABLE FOR LIFE
<TABLE>
<CAPTION>
Male/Female Male/Female Male/Female
Age Life Only 10 Years Certain 20 Years Certain
--- --------- ---------------- ----------------
<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>
RIDERS
Accidental Death Benefit Rider
The Maximum Accidental Death Benefit is $250,000.
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<PAGE> 7
DEFINITIONS
- --------------------------------------------------------------------------------
"ACCOUNT VALUE" is the entire amount we hold under this Certificate for you
before the Income Date. It is equal to the sum of the Variable Account Value and
the Fixed Account Value.
"ACCUMULATION UNIT" is the unit of measure we use before the Income Date to keep
track of the value of each Variable Sub-Account.
"ANNUITANT" is the natural person whose age determines the Maximum Income Date
and the amount and duration of income payments involving life contingencies. The
Annuitant may also be the person to whom any payment will be made starting on
the Income Date. The Annuitant's name appears in the Schedule.
"BENEFICIARY" is the person or persons to whom we pay a death benefit if any
Owner dies prior to the Income Date.
"CERTIFICATE DATE" is the date this Certificate is issued at our Customer
Service Center. The Certificate Date 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 ANNUITANT" is the natural person who becomes the Annuitant if the
Annuitant dies prior to the Income Date.
"CONTINGENT BENEFICIARY" is the person that becomes the Beneficiary if the named
Beneficiary dies prior to the Income Date.
"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.
"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 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.
"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.
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<PAGE> 8
"HOME OFFICE" is our main office. The mailing address is shown on the first page
of this Certificate.
"INCOME DATE" is the date when income payments under this Certificate commence.
This date is shown in the Schedule.
"INCOME UNIT" is the unit of measure we use to calculate the amount of income
payments under the Variable Income Annuity.
"MARKET VALUE ADJUSTMENT" is a positive or negative adjustment that may apply to
surrender, withdrawals, transfers and amounts applied to an income plan, from a
Fixed Sub-Account before the end of a Guarantee Period.
"NET ASSET VALUE" is the price of one share of an investment portfolio.
"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
before the Income Date. 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.
"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
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. Your name appears in the
Schedule. You are entitled to exercise all rights under this Certificate.
However, if you designate an irrevocable beneficiary, you may need that
beneficiary's consent before you exercise your rights under this Certificate.
The death of any Owner before the Income Date initiates payment of the death
benefit.
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<PAGE> 9
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 - After the initial purchase payment, additional
purchase payments may be made at any time while this Certificate is in force and
before the Income Date. The amount of any additional purchase payments may vary
but are subject to limits described in the Schedule.
ALLOCATION OF PURCHASE PAYMENTS AMONG THE VARIABLE AND FIXED ACCOUNTS - Subject
to limits described in the Schedule, you tell us how to allocate your purchase
payment, less any applicable taxes, 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 the 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
end 15 days after the Certificate Date.
Subject to our rules, you may tell us how to allocate any additional purchase
payments. If you do not tell us, they will be allocated in the same manner as
your most recent purchase payment.
CANCELLATION OF CERTIFICATE - If you have not made a purchase payment for more
than 2 years and your Account Value is less than $2,000 on a Certificate
Anniversary, we may cancel this Certificate and pay you the Surrender Value as
though you had made a full withdrawal. We will send you written notice at your
address of record. You will be allowed 61 days from the date we mail you the
notice to submit an additional purchase payment to us in an amount not less than
the difference between $2,000 and the Account Value on the last Certificate
Anniversary. The additional purchase payment is subject to the limits and
minimums shown in the Schedule.
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.
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<PAGE> 10
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 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 crediting you with Accumulation Units for each Sub-Account. The
number of Accumulation Units credited to you for each Sub-Account is determined
by dividing (a) by (b) where:
(a) is the dollar amount allocated to that Sub-Account; and
(b) is the value of the Accumulation Unit for that Sub-Account for the
Valuation Date on which the purchase payment or transferred amount
is invested in that Sub-Account.
Accumulation Units will be adjusted for any transfers and will be canceled on
payment of a death benefit, a withdrawal, a surrender, the application of
Account Value to an income plan on the Income Date, or assessment of charges
shown in the Schedule (other than the variable sub-account charges) based on
their value for the Valuation Period in which the transaction occurs.
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<PAGE> 11
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 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.
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<PAGE> 12
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 from all or
part of a Fixed Sub-Account, and amounts applied to an income plan, 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, but excluding any that extend beyond your Income Date; 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, nor extending beyond
your Income Date. 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 amounts applied to an income plan 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 applied to an income plan by the following factor:
[(1+I)/(1+J+.0025)](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 amount applied to an
income plan, the Market Value Adjustment will be calculated on the
total amount that must be surrendered, withdrawn, transferred or
applied to an income plan 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 applied to an income
plan.
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<PAGE> 13
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 applied to an income plan, the Market Value Adjustment is added
to the amount withdrawn, transferred or applied to an income plan.
TRANSFERS AMONG ACCOUNTS
- --------------------------------------------------------------------------------
Prior to the Income Date and while the Annuitant is living, you may transfer
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 when 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 YOUR ACCOUNT VALUE
- --------------------------------------------------------------------------------
Prior to the Income Date and while the Annuitant is living, you may withdraw all
or part of your Account Value by giving us Satisfactory Notice. The minimum
withdrawal is shown in the Schedule.
If you request a surrender, we will terminate this Certificate and pay you the
Surrender Value. This amount may also be applied to the income plans 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 this 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.
CHARGES
- --------------------------------------------------------------------------------
The types and amounts of charges and when and how they are deducted are
described in the Schedule.
OWNER, ANNUITANT AND BENEFICIARY
- --------------------------------------------------------------------------------
THE OWNER - You are the Owner of this Certificate. You have the rights and
options described in this Certificate, including but not limited to the right to
receive the income payments beginning on the Income Date. One or more people may
own this Certificate.
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<PAGE> 14
THE ANNUITANT - Unless another Annuitant is shown in the Schedule, you are also
the Annuitant. You may name a Contingent Annuitant. You will be the Contingent
Annuitant unless you name someone else. If there are joint Owners, we will treat
the youngest Owner as the Contingent Annuitant, unless you elect otherwise.
If you are not the Annuitant and the Annuitant dies before the Income Date, the
Contingent Annuitant becomes the Annuitant. If the Annuitant dies and no
Contingent Annuitant has been named, we will allow you sixty days to designate
someone other than yourself as Annuitant.
THE BENEFICIARY - We pay the death benefit to the primary Beneficiary (unless
there are joint Owners in which case proceeds are payable to the surviving
Owner). If the primary Beneficiary dies before the Owner, the death benefit is
paid to the Contingent Beneficiary, if any. If there is no surviving
Beneficiary, we pay the death benefit to the Owner's estate.
One or more persons may be named as primary Beneficiary or Contingent
Beneficiary. We will assume any death benefit is 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 irrevocable
Beneficiary to exercise the rights and options under this Certificate.
CHANGE OF OWNER, BENEFICIARY OR ANNUITANT - During your lifetime and while this
Certificate is in force you can transfer ownership of this Certificate or change
the Beneficiary, or change the Annuitant. (However, the Annuitant cannot be
changed after the Income Date.) To make any of these changes, you must send us
Satisfactory Notice. If accepted, any change in Owner, Beneficiary or Annuitant
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 and may also affect the amount of death
benefit payable under this Certificate.
DEATH BENEFITS
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DEATH BENEFIT BEFORE THE INCOME DATE - If any Owner dies before the Income Date,
we will pay the Beneficiary the greatest of the following:
(a) the Account Value determined as of the day we receive proof of
death; or
(b) 100% of the sum of all purchase payments made to this Certificate,
reduced by any prior withdrawals (including any associated
surrender charge and Market Value Adjustment incurred); or
(c) the Highest Anniversary Value.
HIGHEST ANNIVERSARY VALUE - The Highest Anniversary Value is equal to the
greatest anniversary value attained from the following:
Upon our receipt of proof of death, we will calculate an anniversary
value for each Certificate Anniversary before the Owner's death
excluding, however, Certificate Anniversaries that come after the Owner
attains age 80. An anniversary value is equal to the Account Value on a
Certificate Anniversary, increased by the dollar amount of any purchase
payments made since that Certificate Anniversary and reduced for any
withdrawals (including any associated surrender charge and Market Value
Adjustment incurred) taken since that anniversary. This reduction will be
made in proportion to the reduction in the Account Value that results
from a withdrawal.
MULTIPLE OWNERS - If there are multiple Owners, the age of the oldest Owner will
be used to determine the death benefit.
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DEATH BENEFIT WHEN NO NATURAL OWNERS - If there is no Owner who is a natural
person, we will treat the Annuitant as Owner for the purpose of paying the death
benefit, and the Annuitant's age will determine the death benefit payable to the
Beneficiary.
REQUIRED DISTRIBUTION OF PROCEEDS ON THE DEATH OF THE OWNER - The three
sub-sections indented below are required to qualify this Certificate as an
annuity contract under Section 72(s) of the Internal Revenue Code of 1986, as
amended. Where the terms of these three sub-sections are in conflict with any
other sections or sub-sections of this Certificate, these three sub-sections
will control. We reserve the right to amend or administer this Certificate as
necessary to comply with the applicable tax requirements. These three
sub-sections and this Certificate should be construed so that they comply with
the applicable tax requirements.
DEATH BENEFIT OPTIONS BEFORE INCOME DATE - In the event any Owner dies
before the Income Date, the death benefit may be taken in one sum, in
which case this Certificate will terminate. Such sum shall be paid within
five years of the Owner's death unless one of the options for
continuation of this Certificate below is elected by the person entitled
to make that election.
CERTIFICATE CONTINUATION OPTION - If the death benefit is not taken in
one sum immediately, the Certificate will continue subject to the
following provisions:
1. If there are joint Owners, the surviving Owner becomes the
new Owner. Otherwise, the Beneficiary becomes the new
Owner.
2. Unless specified otherwise, any excess of the death benefit
over the Account Value will be allocated to and among the
Variable and Fixed Accounts in proportion to their values
as of the date on which the death benefit is determined. We
will establish a new Fixed Sub-Account for any allocation
to the Fixed Account based on the Guarantee Period you then
elect.
3. No additional purchase payments may be applied to this
Certificate.
4. If the new Owner is not the deceased Owner's spouse, the
entire interest in this Certificate must be distributed
under one of the following options:
a. The entire interest in this Certificate must be
distributed over the life of the new Owner, or over
a period not extending beyond the life expectancy of
the new Owner, with distributions beginning within
one year of the Owner's death; or
b. The entire interest in this Certificate must be
distributed within 5 years of the Owner's death.
5. If the new Owner is the deceased Owner's spouse, this
Certificate will continue with the surviving spouse as the
new Owner. The surviving spouse may name a new Beneficiary.
If no Beneficiary is so named, the surviving spouse's
estate will be the Beneficiary. Upon the death of the
surviving spouse, the death benefit will equal the Account
Value as of the date we receive proof of the spouse's
death, and the entire interest in this Certificate must be
distributed to the new Beneficiary in accordance with the
provisions of 4 (a) or 4 (b) above.
If there is more than one Beneficiary, the foregoing provisions will
independently apply to each Beneficiary.
DEATH BENEFIT ON OR AFTER THE INCOME DATE - If any Owner dies on or after
the Income Date but before the time the entire interest in this
Certificate has been distributed, the remaining portion will be
distributed at least as rapidly as under the method of distribution being
used as of the date of the Owner's death.
If income payments have been selected based on an income plan providing
for payments for a guaranteed period, and the Annuitant dies on or after
the Income Date, we will make the remaining guaranteed payments to the
Beneficiary. Any remaining payments will be made as rapidly as under the
method of distribution being used as of the date of the Annuitant's
death. If
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no Beneficiary is living, we will commute any unpaid guaranteed
payments to a single sum (on the basis of the interest rate used in
determining the payments) and pay that single sum to the estate of the
last to die of the Annuitant or the Beneficiary.
PROOF OF DEATH - Proof of death must be received at our Customer Service Center
before we will pay any death benefit. 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.
GENERAL PROVISIONS
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ASSIGNMENT - You may assign this Certificate at any time prior to the Income
Date. 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 the
assignment is accepted by us. 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 your, the Beneficiary's, or
the Annuitant's creditors.
MISSTATEMENT AND PROOF OF AGE, SEX OR SURVIVAL - 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 the Annuitant has been misstated, or if the age of
the Owner has been misstated, the benefits will be those that the Account Value
applied would have provided for the correct age and sex. If we have made
incorrect income payments, the amount of any underpayment will be paid
immediately. The amount of any overpayment will be deducted from future income
payments.
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 - This Certificate is incontestable from its Certificate Date.
REQUIRED REPORTS - We will furnish a report to you as often as required by law,
but at least once each Certificate Year before the Income Date. 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.
MORTALITY AND EXPENSES - Our actual mortality and expense experience will not
affect the amount of any income payments or any other values under this
Certificate.
TAXES BASED UPON PURCHASE PAYMENT 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;
2. The SEC determines that a state of emergency exists;
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3. An order or pronouncement of the SEC permits a delay for the
protection of Owners; or
4. The check used to pay the purchase payment has not cleared through
the banking system. This may take up to 15 days.
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 if death occurs
before the Income Date;
3. Transfers of the Account Value; or
4. Application of the Account Value under an income plan.
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.
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 officials in the appropriate
jurisdictions. The values are not less than those required by the laws of those
states or jurisdictions. Any benefit provided by an attached rider will not
increase these values unless otherwise stated in that rider.
ANNUITY INCOME BENEFITS
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CHOOSING AN INCOME DATE AND INCOME PLAN - On the Income Date, if the Annuitant
is alive and this Certificate is in force, income payments will begin under the
income plan you have chosen. If you have not chosen an income plan, the option
shown in the Schedule will automatically apply. If you have not selected an
Income Date, the Maximum Income Date shown in the Schedule will automatically
apply.
You may choose or change an income plan or the Income Date by giving us
Satisfactory Notice at least 30 days before the Income Date. However, any Income
Date must meet the restrictions described in the Schedule.
Once income payments have begun, we reserve the right to disallow further
changes without our prior approval.
MINIMUM AMOUNTS - If the amount available to apply under any variable or fixed
option is less than the minimum amount shown in the Schedule, we reserve the
right to pay such amount in a lump sum in lieu of the payment otherwise provided
for.
Income payments will be made monthly unless quarterly, semi-annual or annual
payments are chosen by giving us Satisfactory Notice at least 30 days before the
Income Date. However, if at any time the payment becomes less than the minimum
income 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 income payment. In no event will the interval be less
frequent than annual.
ALLOCATION OF ANNUITY - At the time you elect the income plan, you may also
elect to have the Account Value applied to provide a Variable Income Annuity, a
Fixed Income Annuity, or a combination of both. Unless you specify otherwise, we
will provide either variable or fixed, or a combination of variable and fixed
income 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 income
payment. If any applicable purchase payment taxes are then due us, we will also
deduct them proportionately.
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VARIABLE INCOME ANNUITY
AMOUNT OF FIRST VARIABLE PAYMENT - The Income Tables shown in the Schedule are
used to determine the first monthly variable income payment for an assumed
investment rate of 3%. The Income Tables show the dollar amount of the first
monthly variable income payment that can be purchased with each $1,000 applied.
The assumed investment rates we currently allow are shown on 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 income 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 income payment.
AMOUNT OF SECOND AND SUBSEQUENT VARIABLE PAYMENTS - The dollar amount of the
second and subsequent variable income payments may change with the investment
performance of the Variable Sub-Accounts. The total amount of each variable
income payment will be equal to the sum of the variable income 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 - After the Income Date, 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 income
payment made on the date of exchange would be unaffected by the exchange.
FIXED INCOME ANNUITY
A Fixed Income Annuity is an annuity with income payments that remain fixed as
to dollar amount throughout the payment period. The Income Tables shown in the
Schedule are used to determine the monthly fixed income payment. The Income
Tables show the dollar amount of the monthly fixed income payment that can be
purchased with each $1,000 applied.
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INCOME PLANS
The following is a list of income plans we guarantee to make available.
INCOME PLAN 1. LIFE ANNUITY - An annuity payable during the lifetime of the
Annuitant and terminating with the last payment preceding the death of the
Annuitant.
INCOME PLAN 2. LIFE ANNUITY WITH 10 OR 20 YEARS CERTAIN - An annuity payable
during the lifetime of the Annuitant with the provision that payments will be
made for a minimum of 10 or 20 years, as elected.
INCOME PLAN 3. JOINT AND LAST SURVIVOR ANNUITY - An annuity payable during the
joint lifetime of the Annuitant 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.
INCOME PLAN 4. PAYMENTS FOR A SPECIFIED PERIOD CERTAIN - An amount payable for
the number of years selected which may be from 5 to 30 years.
INCOME PLAN 5. ANNUITY PLAN - An amount can be used to purchase any single
premium annuity we offer on the Income Date for which you and the Annuitant are
eligible.
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[SAGE LOGO]
FLEXIBLE PAYMENT DEFERRED COMBINATION FIXED AND VARIABLE ANNUITY CERTIFICATE
Surrender Values while you are living and prior to the Income Date
Income Payments begin on the Income Date
Nonparticipating
<PAGE> 1
EXHIBIT 4(b)(i)(B)
INDIVIDUAL RETIREMENT ANNUITY RIDER
GENERAL
This Rider is made part of the Contract to which it is attached. The Contract
as amended is intended to qualify as an individual retirement annuity under
Section 408(b) of the Internal Revenue Code of 1986, as amended (the "Code").
APPLICABLE PROVISIONS
The following provisions apply and replace any contrary provisions of the
Contract:
1. You shall be the Owner. Any provision of the Contract that
would allow joint ownership, or that would allow more than one
person to share distributions, is deleted.
2. The Contract is not transferable or assignable (other than
pursuant to a divorce decree in accordance with applicable
law) and is established for the exclusive benefit of you and
your Beneficiaries. It may not be sold, assigned, alienated,
or pledged as collateral for a loan or as security.
3. Your entire interest in the Contract shall be nonforfeitable.
4. Premium payments shall be in cash. The following premium
payments shall be accepted under this Contract:
a. Rollover contributions described in Code Sections
402(c), 403(a)(4), 403(b)(8) and 408(d)(3);
b. Amounts transferred from another individual
retirement account or annuity;
c. Other premium payments in an amount not in excess of
$2,000 for any year;
[d. Contributions pursuant to a Simplified Employee
Pension as provided in Code Section 408(k)].
No contribution will be accepted under a SIMPLE plan
established by any employer pursuant to Code Section 408(p).
No transfer or rollover of funds attributable to contributions
made by a particular employer under its SIMPLE plan will be
accepted from a SIMPLE IRA prior to the expiration of the
2-year period beginning on the date the individual first
participated in that employer's SIMPLE plan.
You shall have the sole responsibility for determining whether
any premium payment meets applicable income tax requirements.
<PAGE> 2
5. This Contract does not require fixed premium payments. Any
refund of premiums (other than those attributable to excess
contributions) will be applied before the close of the
calendar year following the year of the refund toward the
payment of additional premiums or the purchase of additional
benefits.
6. The Income Date is the date your entire Account Value will be
distributed or commence to be distributed to you. Your Income
Date shall be no later than April 1 of the calendar year
following the calendar year in which you attain age 70 1/2.
You shall have the sole responsibility for electing a
distribution that complies with this Rider and applicable law.
7. With respect to any amount which becomes payable under the
Contract during your lifetime, such payment shall commence on
or before the Income Date and shall be payable in
substantially equal amounts, no less frequently than annually.
Payments shall be made in the following manner:
a. in a lump sum; or
b. over your life; or
c. over the lives of you and your designated
beneficiary; or
d. over a period certain not exceeding your life
expectancy; or
e. over a period certain not exceeding the joint and
last survivor expectancy of you and your designated
beneficiary.
If your entire interest is to be distributed in other than a
lump sum, then the minimum amount to be distributed each year
(commencing with the calendar year following the calendar year
in which you attain age 70 1/2 and each year thereafter) shall
be determined in accordance with Code Sections 408(b)(3) and
401(a)(9), including the incidental death benefit requirements
of Code Section 401(a)(9)(G), and the regulations thereunder
including the minimum distribution incidental benefit
requirement of Proposed Treasury Regulation Section
1.401(a)(9)-2. Payments must be either nonincreasing or may
increase only as provided in Proposed Treasury Regulation
Section 1.401(a)(9)-1, Q&A F-3.
8. If you die after distribution of your interest has commenced,
the remaining portion of such interest will continue to be
distributed at least as rapidly as under the method of
distribution being used prior to your death.
If you die before distribution has begun, your entire interest
in the Contract must be distributed no later than December 31
of the calendar year in which the fifth anniversary of your
death occurs. However, proceeds which are payable to a
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named beneficiary who is a natural person may be distributed
in substantially equal installments over the lifetime of the
beneficiary or a period certain not exceeding the life
expectancy of the beneficiary provided such distribution
begins not later than December 31 of the calendar year in
which the first anniversary of your death occurs. If the
beneficiary is your surviving spouse, the surviving spouse may
elect not later than December 31 of the calendar year in which
the fifth anniversary of your death occurs to receive equal or
substantially equal payments over the life or life expectancy
of the surviving spouse commencing at any date prior to the
date on which you would have attained age 70 1/2. Minimum
payments will be calculated in accordance with Code Sections
408(b)(3) and the regulations thereunder.
For the purposes of this requirement, any amount paid to any
of your children will be treated as if it had been paid to
your surviving spouse if the remainder of the interest becomes
payable to the surviving spouse when the child reaches the age
of majority.
If the beneficiary is your surviving spouse, the spouse may
treat the Contract as the spouse's own IRA. This election
will be deemed to have been made if the surviving spouse makes
a regular IRA contribution to the Contract, makes a rollover
to or from the Contract, or fails to elect any of the above
distribution options.
If you die before your entire interest has been distributed,
no additional premiums will be accepted under this Contract
after your death unless the beneficiary is your surviving
spouse.
Distributions under this paragraph are considered to have
begun if distributions are made on account of the individual
reaching his or her required beginning date or if prior to the
required beginning date, distributions irrevocably commence to
an individual over a period permitted and in an annuity form
acceptable under Proposed Treasury Regulation Section
1.401(a)(9).
9. For purposes of the foregoing provisions, life expectancy and
joint and last survivor expectancy shall be determined by use
of the expected return multiples in Table V and VI of Treasury
Regulation Section 1.72-9 in accordance with Code Section
408(b)(3) and the regulations thereunder. In the case of
distributions under paragraph 7 of this Rider, the life
expectancy of you and your beneficiary will be initially
determined on the basis of your attained ages in the year you
reach 70 1/2. In the case of distribution under paragraph 8
of this Rider, life expectancy will be initially determined on
the basis of your beneficiary's attained age in the year
distributions are required to commence. Unless you (or your
spouse) elects otherwise prior to the time distributions are
required to commence, your life expectancy and, if applicable,
your spouse's life expectancy
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will be recalculated annually based on your attained ages in
the year for which the required distribution is being
determined. The life expectancy of a nonspouse beneficiary
will not be recalculated. Instead, life expectancy will be
calculated using the attained age of such beneficiary during
the calendar year in which the individual attains age 70 1/2,
and payments for subsequent years shall be calculated based on
such life expectancy reduced by one for each calendar year
which has elapsed since the calendar year life expectancy was
first calculated.
The annual distribution required to be made by your Income
Date is for the calendar year in which you reached age 70 1/2.
Annual payments for subsequent years, including the year in
which your Income Date occurs, must be made by December 31 of
that year. The amount distributed for each year shall equal
or exceed the annuity value as of the close of business on
December 31 of the preceding year, divided by the applicable
life expectancy or joint and last survivor expectancy.
You may satisfy the minimum distribution requirements under
Code Section 408(b)(3) by receiving a distribution from one
IRA that is equal to the amount required to satisfy the
minimum distribution requirement for two or more IRAs. For
this purpose, if you own two or more IRAs, you may use the
alternative method described in Notice 88-38, 1988-1 C.B. 524,
to satisfy the minimum distribution requirements.
You or your beneficiary, as applicable, shall have the sole
responsibility for requesting a distribution that complies
with this Rider and applicable law.
MODIFICATIONS
We reserve the right to amend the Contract or this Rider to the extent
necessary to qualify as an individual retirement annuity for federal income tax
purposes.
CHARGE FOR THIS RIDER
There is no charge for this Rider.
EFFECTIVE DATE
This Rider is effective as of the Contract Date.
TERMINATION
This Rider will terminate on the date of the first to occur of the following
events:
1. The Contract is surrendered.
2. The entire interest in the Contract has been distributed.
3. You request the termination of this Rider.
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TERMS AND CONDITIONS
All of the terms used in this Rider have the same meanings as in the Contract
unless otherwise clearly indicated in this Rider. This Rider is subject to all
the exclusions, definitions and provisions of the Contract which are not
inconsistent with the terms of this Rider.
Chairman
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EXHIBIT 4(b)(ii)(B)
INDIVIDUAL RETIREMENT ANNUITY RIDER
GENERAL
This Rider is made part of the Group Contract/Certificate to which it is
attached. The Certificate as amended is intended to qualify as an individual
retirement annuity under Section 408(b) of the Internal Revenue Code of 1986,
as amended (the "Code").
APPLICABLE PROVISIONS
The following provisions apply and replace any contrary provisions of the
Certificate:
1. You shall be the Owner. Any provision of the Certificate that
would allow joint ownership, or that would allow more than one
person to share distributions, is deleted.
2. The Certificate is not transferable or assignable (other than
pursuant to a divorce decree in accordance with applicable
law) and is established for the exclusive benefit of you and
your Beneficiaries. It may not be sold, assigned, alienated,
or pledged as collateral for a loan or as security.
3. Your entire interest in the Certificate shall be
nonforfeitable.
4. Premium payments shall be in cash. The following premium
payments shall be accepted under this Certificate:
a. Rollover contributions described in Code Sections
402(c), 403(a)(4), 403(b)(8) and 408(d)(3);
b. Amounts transferred from another individual
retirement account or annuity;
c. Other premium payments in an amount not in excess of
$2,000 for any year;
[d. Contributions pursuant to a Simplified Employee
Pension as provided in Code Section 408(k)].
No contribution will be accepted under a SIMPLE plan
established by any employer pursuant to Code Section 408(p).
No transfer or rollover of funds attributable to contributions
made by a particular employer under its SIMPLE plan will be
accepted from a SIMPLE IRA prior to the expiration of the
2-year period beginning on the date the individual first
participated in that employer's SIMPLE plan.
You shall have the sole responsibility for determining whether
any premium payment meets applicable income tax requirements.
<PAGE> 2
5. This Certificate does not require fixed premium payments. Any
refund of premiums (other than those attributable to excess
contributions) will be applied before the close of the
calendar year following the year of the refund toward the
payment of additional premiums or the purchase of additional
benefits
6. The Income Date is the date your entire Account Value will be
distributed or commence to be distributed to you. Your Income
Date shall be no later than April 1 of the calendar year
following the calendar year in which you attain age 70 1/2. You
shall have the sole responsibility for electing a distribution
that complies with this Rider and applicable law.
7. With respect to any amount which becomes payable under the
Certificate during your lifetime, such payment shall commence
on or before the Income Date and shall be payable in
substantially equal amounts, no less frequently than annually.
Payments shall be made in the following manner:
a. in a lump sum; or
b. over your life; or
c. over the lives of you and your designated
beneficiary; or
d. over a period certain not exceeding your life
expectancy; or
e. over a period certain not exceeding the joint and
last survivor expectancy of you and your designated
beneficiary.
If your entire interest is to be distributed in other than a
lump sum, then the minimum amount to be distributed each year
(commencing with the calendar year following the calendar year
in which you attain age 70 1/2 and each year thereafter) shall
be determined in accordance with Code Sections 408(b)(3) and
401(a)(9), including the incidental death benefit requirements
of Code Section 401 (a)(9)(G), and the regulations thereunder
including the minimum distribution incidental benefit
requirement of Treasury Regulation Section 1.401(a)(9)-2.
Payments must be either nonincreasing or may increase only as
provided in Treasury Regulation Section 1.401(a)(9)-1, Q&A
F-3.
8. If you die after distribution of your interest has commenced,
the remaining portion of such interest will continue to be
distributed at least as rapidly as under the method of
distribution being used prior to your death.
If you die before distribution has begun, your entire interest
in the Certificate must be distributed no later than December
31 of the calendar year in which the fifth anniversary of your
death occurs. However, proceeds which are payable to a
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named beneficiary who is a natural person may be distributed
in substantially equal installments over the lifetime of the
beneficiary or a period certain not exceeding the life
expectancy of the beneficiary provided such distribution
begins not later than December 31 of the calendar year in
which the first anniversary of your death occurs. If the
beneficiary is your surviving spouse, the surviving spouse may
elect not later than December 31 of the calendar year in which
the fifth anniversary of your death occurs to receive equal or
substantially equal payments over the life or life expectancy
of the surviving spouse commencing at any date prior to the
date on which you would have attained age 70 1/2. Minimum
payments will be calculated in accordance with Code Sections
408(b)(3) and the regulations thereunder.
For the purposes of this requirement, any amount paid to any
of your children will be treated as if it had been paid to
your surviving spouse if the remainder of the interest becomes
payable to the surviving spouse when the child reaches the age
of majority.
If the beneficiary is your surviving spouse, the spouse may
treat the Certificate as the spouse's own IRA. This election
will be deemed to have been made if the surviving spouse makes
a regular IRA contribution to the Certificate, makes a
rollover to or from the Certificate, or fails to elect any of
the above distribution options.
If you die before your entire interest has been distributed,
no additional premiums will be accepted under this Certificate
after your death unless the beneficiary is your surviving
spouse.
Distributions under this paragraph are considered to have
begun if distributions are made on account of the individual
reaching his or her required beginning date or if prior to the
required beginning date, distributions irrevocably commence to
an individual over a period permitted and in an annuity form
acceptable under Treasury Regulation Section 1.401(a)(9).
9. For purposes of the foregoing provisions, life expectancy and
joint and last survivor expectancy shall be determined by use
of the expected return multiples in Table V and VI of Treasury
Regulation Section 1.72-9 in accordance with Code Section
408(b)(3) and the regulations thereunder. In the case of
distributions under paragraph 7 of this Rider, the life
expectancy of you and your beneficiary will be initially
determined on the basis of your attained ages in the year you
reach 70 1/2. In the case of distribution under paragraph 8 of
this Rider, life expectancy will be initially determined on
the basis of your beneficiary's attained age in the year
distributions are required to commence. Unless you (or your
spouse) elects otherwise prior to the time distributions are
required to commence, your life expectancy and, if applicable,
your spouse's life expectancy
- 3 -
<PAGE> 4
will be recalculated annually based on your attained ages in
the year for which the required distribution is being
determined. The life expectancy of a nonspouse beneficiary
will not be recalculated. Instead, life expectancy will be
calculated using the attained age of such beneficiary during
the calendar year in which the individual attains age 70 1/2,
and payments for subsequent years shall be calculated based on
such life expectancy reduced by one for each calendar year
which has elapsed since the calendar year life expectancy was
first calculated.
The annual distribution required to be made by your Income
Date is for the calendar year in which you reached age 70 1/2.
Annual payments for subsequent years, including the year in
which your Income Date occurs, must be made by December 31 of
that year. The amount distributed for each year shall equal
or exceed the annuity value as of the close of business on
December 31 of the preceding year, divided by the applicable
life expectancy or joint and last survivor expectancy.
You may satisfy the minimum distribution requirements under
Code Section 408(b)(3) by receiving a distribution from one
IRA that is equal to the amount required to satisfy the
minimum distribution requirement for two or more IRAs. For
this purpose, if you own two or more IRAs, you may use the
alternative method described in Notice 88-38, 1988-1 C.B.
524, to satisfy the minimum distribution requirements.
You or your beneficiary, as applicable, shall have the sole
responsibility for requesting a distribution that complies
with this Rider and applicable law.
MODIFICATIONS
We reserve the right to amend the Certificate or this Rider to the extent
necessary to qualify as an individual retirement annuity for federal income tax
purposes.
CHARGE FOR THIS RIDER
There is no charge for this Rider.
EFFECTIVE DATE
This Rider is effective as of the Certificate Date.
TERMINATION
This Rider will terminate on the date of the first to occur of the following
events:
1. The Certificate is surrendered.
2. The entire interest in the Certificate has been
distributed.
3. You request the termination of this Rider.
- 4 -
<PAGE> 5
TERMS AND CONDITIONS
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.
This Rider is subject to all the exclusions, definitions and provisions of the
Group Contract and the Certificate which are not inconsistent with the terms of
this Rider.
/s/
-----------------------------
Chairman
- 5 -
<PAGE> 1
EXHIBIT 4(b)(iii)(B)
SIMPLE INDIVIDUAL RETIREMENT ANNUITY RIDER
GENERAL
This Rider is made part of the Contract to which it is attached. The Contract
as amended is intended to qualify as a SIMPLE individual retirement annuity
under Section 408(b) of the Internal Revenue Code of 1986, as amended (the
"Code").
APPLICABLE PROVISIONS
The following provisions apply and replace any contrary provisions of the
Contract:
1. You shall be the Owner. Any provision of the Contract that
would allow joint ownership, or that would allow more than one
person to share distributions, is deleted.
2. The Contract is not transferable or assignable (other than
pursuant to a divorce decree in accordance with applicable
law) and is established for the exclusive benefit of you and
your Beneficiaries. It may not be sold, assigned, alienated,
or pledged as collateral for a loan or as security.
3. Your entire interest in the Contract shall be nonforfeitable.
4. This Contract will accept only cash premium payments made on
your behalf pursuant to the terms of a SIMPLE IRA plan
described in Code Section 408(p). A rollover contribution or
a transfer of assets from another of your SIMPLE IRAs will
also be accepted. No other contributions will be accepted.
You shall have the sole responsibility for determining whether
any premium payment meets applicable income tax requirements.
If contributions made on your behalf pursuant to a SIMPLE IRA
plan maintained by your employer are received directly by us
from the employer, we will provide the employer with the
summary description required by Code Section 408(1)(2)(B).
5. This Contract does not require fixed premium payments. Any
refund of premiums (other than those attributable to excess
contributions) will be applied before the close of the
calendar year following the year of the refund toward the
payment of additional premiums or the purchase of additional
benefits.
6. The Income Date is the date your entire Account Value will be
distributed or commence to be distributed to you. Your Income
Date shall be no later than April 1 of the calendar year
following the calendar year in which you attain age 70 1/2. You
shall have the sole responsibility for electing a distribution
that complies with this Rider and applicable law.
<PAGE> 2
7. With respect to any amount which becomes payable under the
Contract during your lifetime, such payment shall commence on
or before the Income Date and shall be payable in
substantially equal amounts, no less frequently than annually.
Payments shall be made in the following manner:
a. in a lump sum; or
b. over your life; or
c. over the lives of you and your designated
beneficiary; or
d. over a period certain not exceeding your life
expectancy; or
e. over a period certain not exceeding the joint and
last survivor expectancy of you and your designated
beneficiary.
If your entire interest is to be distributed in other than a
lump sum, then the minimum amount to be distributed each year
(commencing with the calendar year following the calendar year
in which you attain age 70 1/2 and each year thereafter) shall
be determined in accordance with Code Sections 408(b)(3) and
401(a)(9), including the incidental death benefit requirements
of Code Section 401(a)(9)(G), and the regulations thereunder
including the minimum distribution incidental benefit
requirement of Treasury Regulation Section 1.401(a)(9)-2.
Payments must be either nonincreasing or may increase only as
provided in Treasury Regulation Section 1.401(a)(9)-1, Q&A
F-3.
8. If you die after distribution of your interest has commenced,
the remaining portion of such interest will continue to be
distributed at least as rapidly as under the method of
distribution being used prior to your death.
If you die before distribution has begun, your entire interest
in the Contract must be distributed no later than December 31
of the calendar year in which the fifth anniversary of your
death occurs. However, proceeds which are payable to a named
beneficiary who is a natural person may be distributed in
substantially equal installments over the lifetime of the
beneficiary or a period certain not exceeding the life
expectancy of the beneficiary provided such distribution
begins not later than December 31 of the calendar year in
which the first anniversary of your death occurs. If the
beneficiary is your surviving spouse, the surviving spouse may
elect not later than December 31 of the calendar year in which
the fifth anniversary of your death occurs to receive equal or
substantially equal payments over the life or life expectancy
of the surviving spouse commencing at any date prior to the
date on which you would have attained age 70 1/2. Minimum
payments will be calculated in accordance with Code Sections
408(b)(3) and the regulations thereunder.
- 2 -
<PAGE> 3
For the purposes of this requirement, any amount paid to any
of your children will be treated as if it had been paid to
your surviving spouse if the remainder of the interest becomes
payable to the surviving spouse when the child reaches the age
of majority.
If the beneficiary is your surviving spouse, the spouse may
treat the Contract as the spouse's own SIMPLE IRA. This
election will be deemed to have been made if the surviving
spouse makes a rollover to the Contract from another SIMPLE
IRA of the surviving spouse, makes a rollover from the
Contract, fails to elect any of the above distribution
options, or the surviving spouse's employer makes a SIMPLE
plan contribution to the Contract.
If you die before your entire interest has been distributed,
no additional premiums will be accepted under this Contract
after your death unless the beneficiary is your surviving
spouse.
Distributions under this paragraph are considered to have
begun if distributions are made on account of the individual
reaching his or her required beginning date or if prior to the
required beginning date, distributions irrevocably commence to
an individual over a period permitted and in an annuity form
acceptable under Treasury Regulation Section 1.401(a)(9).
9. For purposes of the foregoing provisions, life expectancy and
joint and last survivor expectancy shall be determined by use
of the expected return multiples in Table V and VI of Treasury
Regulation Section 1.72-9 in accordance with Code Section
408(b)(3) and the regulations thereunder. In the case of
distributions under paragraph 7 of this Rider, the life
expectancy of you and your beneficiary will be initially
determined on the basis of your attained ages in the year you
reach 70 /12. In the case of distribution under paragraph 8 of
this Rider, life expectancy will be initially determined on
the basis of your beneficiary's attained age in the year
distributions are required to commence. Unless you (or your
spouse) elects otherwise prior to the time distributions are
required to commence, your life expectancy and, if applicable,
your spouse's life expectancy will be recalculated annually
based on your attained ages in the year for which the required
distribution is being determined. The life expectancy of a
nonspouse beneficiary will not be recalculated. Instead, life
expectancy will be calculated using the attained age of such
beneficiary during the calendar year in which the individual
attains age 70 1/2, and payments for subsequent years shall be
calculated based on such life expectancy reduced by one for
each calendar year which has elapsed since the calendar year
life expectancy was first calculated.
The annual distribution required to be made by your Income
Date is for the calendar year in which you reached age 70 1/2.
Annual payments for subsequent years, including the year in
which your Income Date occurs, must be made by
- 3 -
<PAGE> 4
December 31 of that year. The amount distributed for each
year shall equal or exceed the annuity value as of the close
of business on December 31 of the preceding year, divided by
the applicable life expectancy or joint and last survivor
expectancy.
You may satisfy the minimum distribution requirements under
Code Section 408(b)(3) by receiving a distribution from one
IRA that is equal to the amount required to satisfy the
minimum distribution requirement for two or more IRAs. For
this purpose, if you own two or more IRAs, you may use the
alternative method described in Notice 88-38, 1988-1 C.B. 524,
to satisfy the minimum distribution requirements.
You or your beneficiary, as applicable, shall have the sole
responsibility for requesting a distribution that complies
with this Rider and applicable law.
10. Prior to the expiration of the 2-year period beginning on the
date you first participated in any SIMPLE IRA plan maintained
by your employer, any rollover or transfer by you of funds
from this SIMPLE IRA must be made to another SIMPLE IRA. Any
distribution of funds to you during this 2-year period may be
subject to a 25 percent additional tax if you do not roll over
the amount distributed into another SIMPLE IRA. After the
expiration of this 2-year period, you may roll over or
transfer funds to any IRA that is qualified under Code
Sections 408(a) or 408(b).
11. We will not act as a designated financial institution as
described in Code Section 408(p)(7) in connection with this
SIMPLE IRA.
MODIFICATIONS
We reserve the right to amend the Contract or this Rider to the extent
necessary to qualify as an individual retirement annuity for federal income tax
purposes.
CHARGE FOR THIS RIDER
There is no charge for this Rider.
EFFECTIVE DATE
This Rider is effective as of the Contract Date.
TERMINATION
This Rider will terminate on the date of the first to occur of the following
events:
1. The Contract is surrendered.
2. The entire interest in the Contract has been distributed.
- 4 -
<PAGE> 5
3. You request the termination of this Rider.
TERMS AND CONDITIONS
All of the terms used in this Rider have the same meanings as in the Contract
unless otherwise clearly indicated in this Rider. This Rider is subject to all
the exclusions, definitions and provisions of the Contract which are not
inconsistent with the terms of this Rider.
Chairman
- 5 -
<PAGE> 1
EXHIBIT 4(b)(iv)(B)
SIMPLE INDIVIDUAL RETIREMENT ANNUITY RIDER
GENERAL
This Rider is made part of the Group Contract/Certificate to which it is
attached. The Certificate as amended is intended to qualify as a SIMPLE
individual retirement annuity under Section 408(b) of the Internal Revenue Code
of 1986, as amended (the "Code").
APPLICABLE PROVISIONS
The following provisions apply and replace any contrary provisions of the
Certificate:
1. You shall be the Owner. Any provision of the Certificate that
would allow joint ownership, or that would allow more than one
person to share distributions, is deleted.
2. The Certificate is not transferable or assignable (other than
pursuant to a divorce decree in accordance with applicable
law) and is established for the exclusive benefit of you and
your Beneficiaries. It may not be sold, assigned, alienated,
or pledged as collateral for a loan or as security.
3. Your entire interest in the Certificate shall be
nonforfeitable.
4. This Certificate will accept only cash premium payments made
on your behalf pursuant to the terms of a SIMPLE IRA plan
described in Code Section 408(p). A rollover contribution or
a transfer of assets from another of your SIMPLE IRAs will
also be accepted. No other contributions will be accepted.
You shall have the sole responsibility for determining whether
any premium payment meets applicable income tax requirements.
If contributions made on your behalf pursuant to a SIMPLE IRA
plan maintained by your employer are received directly by us
from the employer, we will provide the employer with the
summary description required by Code Section 408(1)(2)(B).
5. This Certificate does not require fixed premium payments. Any
refund of premiums (other than those attributable to excess
contributions) will be applied before the close of the
calendar year following the year of the refund toward the
payment of additional premiums or the purchase of additional
benefits.
6. The Income Date is the date your entire Account Value will be
distributed or commence to be distributed to you. Your Income
Date shall be no later than April 1 of the calendar year
following the calendar year in which you attain age 70 1/2. You
shall have the sole responsibility for electing a distribution
that complies with this Rider and applicable law.
<PAGE> 2
7. With respect to any amount which becomes payable under the
Certificate during your lifetime, such payment shall commence
on or before the Income Date and shall be payable in
substantially equal amounts, no less frequently than annually.
Payments shall be made in the following manner:
a. in a lump sum; or
b. over your life; or
c. over the lives of you and your designated
beneficiary; or
d. over a period certain not exceeding your life
expectancy; or
e. over a period certain not exceeding the joint and
last survivor expectancy of you and your designated
beneficiary.
If your entire interest is to be distributed in other than a
lump sum, then the minimum amount to be distributed each year
(commencing with the calendar year following the calendar year
in which you attain age 70 1/2 and each year thereafter) shall
be determined in accordance with Code Sections 408(b)(3) and
401(a)(9), including the incidental death benefit requirements
of Code Section 401(a)(9)(G), and the regulations thereunder
including the minimum distribution incidental benefit
requirement of Treasury Regulation Section 1.401(a)(9)-2.
Payments must be either nonincreasing or may increase only as
provided in Treasury Regulation Section 1.401(a)(9)-1, Q&A
F-3.
8. If you die after distribution of your interest has commenced,
the remaining portion of such interest will continue to be
distributed at least as rapidly as under the method of
distribution being used prior to your death.
If you die before distribution has begun, your entire interest
in the Certificate must be distributed no later than December
31 of the calendar year in which the fifth anniversary of your
death occurs. However, proceeds which are payable to a named
beneficiary who is a natural person may be distributed in
substantially equal installments over the lifetime of the
beneficiary or a period certain not exceeding the life
expectancy of the beneficiary provided such distribution
begins not later than December 31 of the calendar year in
which the first anniversary of your death occurs. If the
beneficiary is your surviving spouse, the surviving spouse may
elect not later than December 31 of the calendar year in which
the fifth anniversary of your death occurs to receive equal or
substantially equal payments over the life or life expectancy
of the surviving spouse commencing at any date prior to the
date on which you would have attained age 70 1/2. Minimum
payments will be calculated in accordance with Code Sections
408(b)(3) and the regulations thereunder.
2
<PAGE> 3
For the purposes of this requirement, any amount paid to any
of your children will be treated as if it had been paid to
your surviving spouse if the remainder of the interest becomes
payable to the surviving spouse when the child reaches the age
of majority.
If the beneficiary is your surviving spouse, the spouse may
treat the Certificate as the spouse's own SIMPLE IRA. This
election will be deemed to have been made if the surviving
spouse makes a rollover to the Certificate from another SIMPLE
IRA of the surviving spouse, makes a rollover from the
Certificate, fails to elect any of the above distribution
options, or the surviving spouse's employer makes a SIMPLE
plan contribution to the Certificate.
If you die before your entire interest has been distributed,
no additional premiums will be accepted under this Certificate
after your death unless the beneficiary is your surviving
spouse.
Distributions under this paragraph are considered to have
begun if distributions are made on account of the individual
reaching his or her required beginning date or if prior to the
required beginning date, distributions irrevocably commence to
an individual over a period permitted and in an annuity form
acceptable under Treasury Regulation Section 1.401(a)(9).
9. For purposes of the foregoing provisions, life expectancy and
joint and last survivor expectancy shall be determined by use
of the expected return multiples in Table V and VI of Treasury
Regulation Section 1.72-9 in accordance with Code Section
408(b)(3) and the regulations thereunder. In the case of
distributions under paragraph 7 of this Rider, the life
expectancy of you and your beneficiary will be initially
determined on the basis of your attained ages in the year you
reach 70 1/2. In the case of distribution under paragraph 8 of
this Rider, life expectancy will be initially determined on
the basis of your beneficiary's attained age in the year
distributions are required to commence. Unless you (or your
spouse) elects otherwise prior to the time distributions are
required to commence, your life expectancy and, if applicable,
your spouse's life expectancy will be recalculated annually
based on your attained ages in the year for which the required
distribution is being determined. The life expectancy of a
nonspouse beneficiary will not be recalculated. Instead, life
expectancy will be calculated using the attained age of such
beneficiary during the calendar year in which the individual
attains age 70 1/2, and payments for subsequent years shall be
calculated based on such life expectancy reduced by one for
each calendar year which has elapsed since the calendar year
life expectancy was first calculated.
The annual distribution required to be made by your Income
Date is for the calendar year in which you reached age 70 1/2.
Annual payments for subsequent years, including the year in
which your Income Date occurs, must be made by
3
<PAGE> 4
December 31 of that year. The amount distributed for each
year shall equal or exceed the annuity value as of the close
of business on December 31 of the preceding year, divided by
the applicable life expectancy or joint and last survivor
expectancy.
You may satisfy the minimum distribution requirements under
Code Section 408(b)(3) by receiving a distribution from one
IRA that is equal to the amount required to satisfy the
minimum distribution requirement for two or more IRAs. For
this purpose, if you own two or more IRAs, you may use the
alternative method described in Notice 88-38, 1988-1 C.B.
524, to satisfy the minimum distribution requirements.
You or your beneficiary, as applicable, shall have the sole
responsibility for requesting a distribution that complies
with this Rider and applicable law.
10. Prior to the expiration of the 2-year period beginning on the
date you first participated in any SIMPLE IRA plan maintained
by your employer, any rollover or transfer by you of funds
from this SIMPLE IRA must be made to another SIMPLE IRA. Any
distribution of funds to you during this 2-year period may be
subject to a 25 percent additional tax if you do not roll over
the amount distributed into another SIMPLE IRA. After the
expiration of this 2-year period, you may roll over or
transfer funds to any IRA that is qualified under Code
Sections 408(a) or 408(b).
11. We will not act as a designated financial institution as
described in Code Section 408(p)(7) in connection with this
SIMPLE IRA.
MODIFICATIONS
We reserve the right to amend the Certificate or this Rider to the extent
necessary to qualify as an individual retirement annuity for federal income tax
purposes.
CHARGE FOR THIS RIDER
There is no charge for this Rider.
EFFECTIVE DATE
This Rider is effective as of the Certificate Date.
TERMINATION
This Rider will terminate on the date of the first to occur of the following
events:
1. The Certificate is surrendered.
2. The entire interest in the Certificate has been distributed.
4
<PAGE> 5
3. You request the termination of this Rider.
TERMS AND CONDITIONS
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.
This Rider is subject to all the exclusions, definitions and provisions of the
Group Contract and the Certificate which are not inconsistent with the terms of
this Rider.
/s/
--------------------------
Chairman
5
<PAGE> 1
EXHIBIT 5(i)
APPLICATION FOR
DEFFERED VARIBLE ANNUITY
Mail to: Sage Life, P.O. Box 3000, Dept 5162, Hartford, CT 06150-5162
[SAGE LOGO]
SAGE LIFE ASSURANCE OF AMERICA, INC.
- ----------------------------------------------------------------------
1. OWNER
- ----------------------------------------------------------------------
First Middle Last
- ----------------------------------------------------------------------
Residence Street Address
- ----------------------------------------------------------------------
City State Zip
- ----------------------------------------------------------------------
Birthdate (Mo/Day/Yr) [ ] M [ ] F [ ] SS# [ ] TIN#
[ ] Trustee
- ----------------------------------------------------------------------
Phone E-Mail Address
- ----------------------------------------------------------------------
1A. JOINT OWNER (OPTIONAL)
- ----------------------------------------------------------------------
Name Relationship to Owner
- ----------------------------------------------------------------------
Birthdate (Mo/Day/Yr) [ ] M [ ] F [ ] SS# [ ] TIN#
- ----------------------------------------------------------------------
2. ANNUITANT (SKIP IF SAME AS OWNER)
- ----------------------------------------------------------------------
First Middle Last
- ----------------------------------------------------------------------
Residence Street Address
- ----------------------------------------------------------------------
City State Zip
- ----------------------------------------------------------------------
Birthdate (Mo/Day/Yr) [ ] M [ ] F [ ] SS# [ ] TIN#
- ----------------------------------------------------------------------
Phone E-Mail Address Relationship to Owner
- ----------------------------------------------------------------------
3. PRIMARY BENEFICIARY
- ----------------------------------------------------------------------
Name(s) SS# Relationship to Owner %
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
3A. CONTINGENT BENEFICIARY (OPTIONAL)
- ----------------------------------------------------------------------
Name(s) SS# Relationship to Owner %
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
4. TYPE OF PLAN
- ----------------------------------------------------------------------
4a. [ ] Non-Qualified [ ] Traditional IRA [ ] Simple IRA
[ ] Roth IRA [ ] Other
-------------------
4b. If IRA: [ ] Regular Tax Year Amount $
---------- -----------
[ ] Rollover Amount $
----------
[ ] Trustee to Trustee Transfer Amount $
----------
4c. Optional Riders
-------------------------------------------------
- ----------------------------------------------------------------------
5. PURCHASE PAYMENT
- ----------------------------------------------------------------------
[ ] Check or wire to Sage Life $ 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
----- ----
% (203) Capital Development % (503) Total Return
- ----- -----
% (204) Government Securities % (504) Growth with Income
- ----- -----
% (205) Growth and Income % (505) High Income
- ----- -----
% (206) Value % (506) Research
- ----- -----
% (207)International Equity % (507) Value
- ----- -----
ALGER MORGAN STANLEY
----- --------------
% (303) Income and Growth % (603) Value
- ----- -----
% (304) MidCap Growth % (604) Mid Cap Value
- ----- -----
% (305) Small Cap % (605) Global Equity
- ----- -----
COLONIAL/LIBERTY STATE STREET
---------------- ------------
% (403) U.S. Stock % (703) S&P 500 Index
- ----- -----
% (404) Growth and Income % (704) Russell 2000 Index
- ----- -----
% (405) Small Cap Value % (705) EAFE Index
- ----- -----
% (406) Strategic Income
- -----
% (407) Newport Tiger T.ROWE PRICE
- ----- ------------
% (408) All-Star Equity % (903) Equity Income
- ----- -----
% (409) Global Utilities % (904) Mid-Cap Growth
- ----- -----
% (905) Pers Strgy Balanced
-----
STEINROE SAGE ADVISORS
-------- -------------
% (803) Growth Stock % (002) Money Market]
- ----- -----
% (804) Special Venture
- -----
To Fixed Sub-Accounts:
[% (101) 1 year % (104) 4 year % (110) 10 year]
- ----- ----- -----
% (102) 2 year % (105) 5 year
- ----- -----
% (103) 3 year % (107) 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
[ ][(002) Sage Money Market] ------------- %
-------- -------- --------
[ ][(111) Fixed - 1 Year] [12] %
-------- --------
[ ][(112) Fixed - 2 Year] [24] %
-------- --------
[ ][(113) Fixed - 3 Year] [36] %
-------- --------
[ ][(114) Fixed - 4 Year] [48] %
-------- --------
[ ][(115) Fixed - 5 Year] [60] %
-------- --------
<PAGE> 2
- ----------------------------------------------------------------------
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 we 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 representative/agent in order for him/her to make [ ] Yes [ ] No
telephone transfers between Sub-Accounts on my behalf.
</TABLE>
- ----------------------------------------------------------------------
10. SPECIAL REQUESTS
- ----------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ----------------------------------------------------------------------
11. AMENDMENTS (H.O. USE ONLY)
- ----------------------------------------------------------------------
COMPANY CORRECTIONS OR ADDITIONS, IF ANY
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ----------------------------------------------------------------------
12. SUITABILITY, AGREEMENT AND SIGNATURES
- ----------------------------------------------------------------------
SUITABILITY: BY SIGNING BELOW, I ACKNOWLEDGE RECEIPT OF THE CURRENT VARIABLE
ANNUITY PROSPECTUS AND UNDERSTAND THAT INCOME PAYMENTS AND SURRENDER VALUES,
WHEN BASED UPON 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.
AGREEMENT: I agree that my acceptance of the annuity applied for will
constitute approval by me of any corrections or additions made in item 11
above. However, I must agree in writing to any changes in: amounts; ages; plan
of annuity; and benefits. (Use of "I", "me", and "my" in this application
includes multiple Owners, if applicable, and the Annuitant, where Annuitant's
consent or other action is required.)
<TABLE>
<S> <C>
Signed at On
------------------------------------------------------------ ------------------------------
CITY STATE DATE
X X X
-------------------------------- ------------------------------- ------------------------------
APPLICANT/OWNER JOINT OWNER ANNUITANT (IF OTHER THAN OWNER)
</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.
- ----------------------------------------------------------------------
13. AGENT'S REPORT
- ----------------------------------------------------------------------
<TABLE>
<S> <C>
Do you have reason to believe that the Contract applied for may replace an
existing annuity or insurance policy? [ ] Yes [ ] No
</TABLE>
(If yes, list carrier, policy number, whether Section 1035
exchange, and attach State Replacement Form if applicable.)
- ------------------------------------------------------------------
<TABLE>
<S> <C>
- --------------------------------------------------------------------- --------------------------------
Agent's Legal Name (PRINTED) SS# License Number (Florida only) AgencyName/Broker-Dealer/Branch
- --------------------------------------------------------------------- --------------------------------------------------
Agent's Business Address Business Phone Signature of Agent Agent's E-Mail Address
</TABLE>
<TABLE>
<S> <C> <C> <C>
Designation: [ ] Program A [ ] Program B [ ] Program C Once selected, Program cannot be changed.
</TABLE>
<PAGE> 1
EXHIBIT 8(a)(i)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.
SAGE LIFE ASSURANCE COMPANY OF AMERICA. INC.,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
UNDERWRITER OF CONTRACTS AND POLICIES
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
DESCRIPTION PAGE
- ----------- ----
<S> <C> <C>
Section 1. Available Funds 2
1.1 Available.....................................................................................2
1.2 Addition, Deletion or Modification of Funds...................................................2
1.3 No Sales to the General Public................................................................2
Section 2. Processing Transactions..........................................................................3
2.1 Timely Pricing and Orders.....................................................................3
2.2 Timely Payments...............................................................................3
2.3 Applicable Price..............................................................................3
2.4 Dividends and Distributions...................................................................4
2.5 Book Entry....................................................................................4
Section 3. Costs and Expenses 4
3.1 General.......................................................................................4
3.2 Parties To Cooperate..........................................................................4
Section 4. Legal Compliance.................................................................................4
4.1 Tax Laws......................................................................................5
4.2 Insurance and Certain Other Laws..............................................................7
4.3 Securities Laws...............................................................................7
4.4 Notice of Certain Proceedings and Other Circumstances.........................................8
4.5 LIFE COMPANY to Provide Documents; Information About AVIF.....................................9
4.6 AVIF To Provide Documents; Information About LIFE COMPANY....................................10
Section 5. Mixed and Shared Funding 11
5.1 General......................................................................................11
5.2 Disinterested Directors......................................................................12
5.3 Monitoring for Material Irreconcilable Conflicts.............................................12
5.4 Conflict Remedies............................................................................13
5.5 Notice to LIFE COMPANY.......................................................................14
5.6 Information Requested by Board of Directors..................................................14
5.7 Compliance with SEC Rules....................................................................14
5.8 Other Requirements...........................................................................14
Section 6. Termination 15
6.1 Events of Termination........................................................................15
6.2 Notice Requierment for Termination...........................................................16
6.3 Funds To Remain Available....................................................................16
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
DESCRIPTION PAGE
- ----------- ----
<S> <C> <C>
6.4 Survival of Warranties and Indemnifications..................................................16
6.5 Continuance of Agreement for Certain Purposes................................................16
Section 7. Parties To Cooperate Respecting Termination....................................................17
Section 8. Assignment.....................................................................................17
Section 9. Notices........................................................................................17
Section 10. Voting Procedures..............................................................................18
Section 11. Foreign Tax Credits............................................................................18
Section 12. Indemnification................................................................................19
12.1 Of AVIF and AIM by LIFE COMPANY..............................................................19
12.2 Of LIFE COMPANY by AVIF and AIM..............................................................21
12.3 Effect of Notice.............................................................................23
12.4 Successors...................................................................................23
Section 13. Applicable Law...............................................................................23
Section 14. Execution in Counterparts....................................................................24
Section 15. Severability.................................................................................24
Section 16. Rights Cumulative............................................................................24
Section 17. Headings.....................................................................................24
Section 18. Confidentiality..............................................................................24
Section 19. Trademarks and Fund Names....................................................................25
Section 20. Parties to Cooperate.........................................................................26
</TABLE>
ii
<PAGE> 4
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the ____ day of ________,1998
("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"), A I M Distributors, Inc., a Delaware corporation ("AIM"),
Sage Life Assurance Company of America, Inc., a Delaware life insurance company
("LIFE COMPANY"), on behalf of itself and each of its segregated asset accounts
listed in Schedule A hereto, as the parties hereto may amend from time to time
(each, an "Account," and collectively, the "Accounts"); and ("UNDERWRITER"), an
affiliate of LIFE COMPANY and the principal underwriter of the Contracts
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of thirteen separate series ("Series"),
shares ("Shares") of each of which are registered under the Securities Act of
1933, as amended (the "1933 Act") and are currently sold to one or more separate
accounts of life insurance companies to fund benefits under variable annuity
contracts and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto
as the Parties hereto may amend from time to time (each a "Fund"; reference
herein to "AVIF" includes reference to each Fund, to the extent the context
requires) available for purchase by the Accounts; and
WHEREAS, LIFE COMPANY will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts") as set forth on
Schedule A hereto, as the Parties hereto may amend from time to time, which
Contracts (hereinafter collectively, the "Contracts"), if required by applicable
law, will be registered under the 1933 Act; and
WHEREAS, LIFE COMPANY will fund the Contracts through the Accounts, each
of which may be divided into two or more subaccounts ("Subaccounts"; reference
herein to an "Account" includes reference to each Subaccount thereof to the
extent the context requires); and
WHEREAS, LIFE COMPANY will serve as the depositor of the Accounts, each
of which is registered as a unit investment trust investment company under the
1940 Act (or exempt therefrom), and the security interests deemed to be issued
by the Accounts under the Contracts will be registered as securities under the
1933 Act (or exempt therefrom); and
1
<PAGE> 5
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase Shares in one or more of the Funds
on behalf of the Accounts to fund the Contracts;
WHEREAS, UNDERWRITER is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, AIM is a broker-dealer registered with the SEC and a member in
good standing of the NASD.
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows;
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
AVIF will make Shares of each Fund available to LIFE COMPANY for purchase
and redemption at net asset value and with no sales charges, subject to the
terms and conditions of this Agreement. The Board of Directors of AVIF may
refuse to sell Shares of any Fund to any person, or suspend or terminate the
offering of Shares of any Fund if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of the
Directors acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, such action is deemed in the best
interests of the shareholders of such Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
AVIF represents and warrants that no Shares of any Fund have been or will
be sold to the general public.
2
<PAGE> 6
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) AVIF or its designated agent will use its best efforts to provide
LIFE COMPANY with the closing net asset value per Share for each Fund by 6:00
p.m. Central Time on each Business Day. As used herein, "Business Day" shall
mean any day on which (i) the New York Stock Exchange is open for regular
trading, (ii) AVIF calculates the Fund's net asset value, and (iii) LIFE COMPANY
is open for business.
(b) LIFE COMPANY will use the data provided by AVIF each Business Day
pursuant to paragraph (a) immediately above to calculate Account unit values and
to process transactions that receive that same Business Day's Account unit
values. LIFE COMPANY will perform such Account processing the same Business Day,
and will place corresponding orders to purchase or redeem Shares with AVIF by
9:00 a.m. Central Time the following Business Day; provided, however, that AVIF
shall provide additional time to LIFE COMPANY in the event that AVIF is unable
to meet the 6:00 p.m. time stated in paragraph (a) immediately above. Such
additional time shall be equal to the additional time that AVIF takes to make
the net asset values available to LIFE COMPANY.
(c) With respect to payment of the purchase price by LIFE COMPANY and of
redemption proceeds by AVIF, LIFE COMPANY and AVIF shall net purchase and
redemption orders with respect to each Fund and shall transmit one net payment
per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value
information (as determined under SEC guidelines), LIFE COMPANY shall be entitled
to an adjustment to the number of Shares purchased or redeemed to reflect the
correct net asset value per Share. Any material error in the calculation or
reporting of net asset value per Share, dividend or capital gain information
shall be reported promptly upon discovery to LIFE COMPANY. Materiality and
reprocessing cost reimbursement shall be determined in accordance with
standards established by the Parties as provided in Schedule B, attached hereto
and incorporated herein.
2.2 TIMELY PAYMENTS.
LIFE COMPANY will wire payment for net purchases to a custodial account
designated by AVIF by 1:00 p.m. Central Time on the same day as the order for
Shares is placed, to the extent practicable. AVIF will wire payment for net
redemptions to an account designated by LIFE COMPANY by 1:00 p.m. Central Time
on the same day as the Order is placed, to the extent practicable, but in any
event within five (5) calendar days after the date the order is placed in order
to enable LIFE COMPANY to pay redemption proceeds within the time specified in
Section 22(e) of the 1940 Act or such shorter period of time as may be required
by law.
3
<PAGE> 7
2.3 APPLICABLE PRICE.
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions under
Contracts (collectively, "Contract transactions") and that LIFE COMPANY receives
prior to the close of regular trading on the New York Stock Exchange on a
Business Day will be executed at the net asset values of the appropriate Funds
next computed after receipt by AVIF or its designated agent of the orders. For
purposes of this Section 2.3(a), LIFE COMPANY shall be the designated agent of
AVIF for receipt of orders relating to Contract transactions on each Business
Day and receipt by such designated agent shall constitute receipt by AVIF;
provided that AVIF receives notice of such orders by 9:00 a.m. Central Time on
the next following Business Day or such later time as computed in accordance
with Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by LIFE COMPANY will be
effected at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the order therefor, and such orders
will be irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
AVIF will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to LIFE COMPANY of any income
dividends or capital gain distributions payable on the Shares of any Fund. LIFE
COMPANY hereby elects to reinvest all dividends and capital gains distributions
in additional Shares of the corresponding Fund at the ex-dividend date net asset
values until LIFE COMPANY otherwise notifies AVIF in writing, it being agreed by
the Parties that the ex-dividend date and the payment date with respect to any
dividend or distribution will be the same Business Day. LIFE COMPANY reserves
the right to revoke this election and to receive all such income dividends and
capital gain distributions in cash.
2.5 BOOK ENTRY. Issuance and transfer of AVIF Shares will be by book
entry only. Stock certificates will not be issued to LIFE COMPANY. Shares
ordered from AVIF will be recorded in an appropriate title for LIFE COMPANY, on
behalf of its Account.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided in Schedule C, attached hereto
and made a part hereof, each Party will bear, or arrange for others to bear, all
expenses incident to its performance under this Agreement.
3.2 PARTIES TO COOPERATE.
Each Party agrees to cooperate with the others, as applicable, in
arranging to print, mail and/or deliver, in a timely manner, combined or
coordinated prospectuses or other materials of AVIF and the Accounts.
4
<PAGE> 8
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) Subject to Sections 4.1(d) and 4.1(b) hereof, AVIF represents and
warrants that each Fund is currently qualified as a regulated investment company
("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), and will use it best efforts to qualify and maintain qualification of
each Fund as a RIC. AVIF will notify LIFE COMPANY immediately upon having a
reasonable basis for believing that a Fund has ceased to so qualify or that it
might not so qualify in the future.
(b) Subject to Sections 4.1(d) and 4.1(e) hereof, AVIF represents that it
will use it best efforts to comply and to maintain each Fund's compliance with
the diversification requirements set forth in Section 1.817(h) of the Code and
Section 1.817-5(b) of the regulations under the Code. AVIF will notify LIFE
COMPANY immediately upon having a reasonable basis for believing that a Fund has
ceased to so comply or that a Fund might not so comply in the future. In the
event of a breach of this Section 4.1(b) by AVIF, it will take all reasonable
steps to adequately diversify the Fund so as to achieve compliance within the
grace period afforded by Section 1.817-5 of the regulations under the Code.
(c) LIFE COMPANY agrees that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review of LIFE
COMPANY or, to LIFE COMPANY's knowledge, of any Participant, that any Fund has
failed to comply with the diversification requirements of Section 817(h) of the
Code or LIFE COMPANY otherwise becomes aware of any facts that could give rise
to any claim against AVIF or its affiliates as a result of such a failure or
alleged failure:
(i) LIFE COMPANY shall promptly notify AVIF of such assertion or
potential claim (subject to the Confidentiality provisions of
Section 18 as to any Participant);
(ii) LIFE COMPANY shall consult with AVIF as to how to minimize any
liability that may arise as a result of such failure or
alleged failure;
(iii) LIFE COMPANY shall use its best efforts to minimize any
liability of AVIF or its affiliates resulting from such
failure, including, without limitation, demonstrating,
pursuant to Treasury Regulations Section 1.817-5(a)(2), to
the Commissioner of the IRS that such failure was inadvertent;
(iv) LIFE COMPANY shall permit AVIF its affiliates and their legal
and accounting advisors to participate in any conferences,
settlement discussions or other administrative or judicial
proceeding or contests (including judicial appeals thereof)
with the IRS, any Participant or any other claimant regarding
any claims that could give rise to liability to AVIF or its
affiliates as a result of such a failure or alleged failure;
provided, however, that LIFE COMPANY
5
<PAGE> 9
will retain control of the conduct of such conferences
discussions, proceedings, contests or appeals;
(v) any written materials to be submitted by LIFE COMPANY to the
IRS, any Participant or any other claimant in connection with
any of the foregoing proceedings or contests (including,
without limitation, any such materials to be submitted to the
IRS pursuant to Treasury Regulations Section 1.817-5(a)(2)),
(a) shall be provided by LIFE COMPANY to AVIF (together with
any supporting information or analysis), subject to the
confidentiality provisions of Section 18, at least ten (10)
business days or such shorter period to which the Parties
hereto agree prior to the day on which such proposed materials
are to be submitted, and (b) shall not be submitted by LIFE
COMPANY to any such person without the express written consent
of AVIF which shall not be unreasonably withheld;
(vi) LIFE COMPANY shall provide AVIF or its affiliates and their
accounting and legal advisors with such cooperation as AVIF
shall reasonably request (including, without limitation, by
permitting AVIF and its accounting and legal advisors to
review the relevant books and records of LIFE COMPANY) in
order to facilitate review by AVIF or its advisors of any
written submissions provided to it pursuant to the preceding
clause or its assessment of the validity or amount of any
claim against its arising from such a failure or alleged
failure;
(vii) LIFE COMPANY shall not with respect to any claim of the IRS or
any Participant that would give rise to a claim against AVIF
or its affiliates (a) compromise or settle any claim, (b)
accept any adjustment on audit, or (c) forego any allowable
administrative or judicial appeals, without the express
written consent of AVIF or its affiliates, which shall not be
unreasonably withheld, provided that LIFE COMPANY shall not be
required, after exhausting all administrative penalties, to
appeal any adverse judicial decision unless AVIF or its
affiliates shall have provided an opinion of independent
counsel to the effect that a reasonable basis exists for
taking such appeal; and provided further that the costs of any
such appeal shall be borne equally by the Parties hereto; and
(viii) Notwithstanding any provision herein to the contrary, AVIF and
its affiliates shall have no liability as a result of such
failure or alleged failure if LIFE COMPANY fails to comply
with any of the foregoing clauses (i) through (vii), and such
failure could be shown to have materially contributed to the
liability.
Should AVIF or any of its affiliates refuse to give its written consent
to any compromise or settlement of any claim or liability hereunder, LIFE
COMPANY may, in its discretion, authorize AVIF or its affiliates to act in the
name of LIFE COMPANY in, and to control the conduct of, such conferences,
discussions, proceedings, contests or appeals and all administrative or judicial
appeals
6
<PAGE> 10
thereof, and in that event AVIF or its affiliates shall bear the fees and
expenses associated with the conduct of the proceedings that it is so authorized
to control; provided, that in no event shall LIFE COMPANY have any liability
resulting from AVIF's refusal to accept the proposed settlement or compromise
with respect to any failure caused by AVIF. As used in this Agreement, the tern
"affiliates" shall have the same meaning as "affiliated person" as defined in
Section 2(a)(3) of the 1940 Act.
(d) Subject to Sections 4.1(a) and 4.1(b) hereof, LIFE COMPANY represents
and warrants that the Contracts currently are and will be treated as annuity
contracts or life insurance contracts under applicable provisions of the Code
and that it will maintain such treatment; LIFE COMPANY will notify AVIF
immediately upon having a reasonable basis for believing that any of the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
(e) LIFE COMPANY represents and warrants that each Account is a
"segregated asset account" and that subject to Sections 4.1(a) and 4.1(b)
hereof, interests in each Account are offered exclusively through the purchase
of or transfer into a "variable contract," within the meaning of such terms
under Section 817 of the Code and the regulations thereunder. LIFE COMPANY will
continue to meet such definitional requirements, and it will notify AVIF
immediately upon having a reasonable basis for believing that such requirements
have ceased to be met or that they might not be met in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) AVIF will use its best efforts to comply with any applicable state
insurance laws or regulations, to the extent specifically requested in writing
by LIFE COMPANY, including, the furnishing of information not otherwise
available to LIFE COMPANY which is required by state insurance law to enable
LIFE COMPANY to obtain the authority needed to issue the Contracts in any
applicable state.
(b) LIFE COMPANY represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing under the laws of
the State of Delaware and has full corporate power, authority and legal right to
execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains each
Account as a segregated asset account under Delaware Insurance Law and the
regulations thereunder, and (iii) the Contracts comply in all material respects
with all other applicable federal and state laws and regulations.
(c) AVIF represents and warrants that it is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Maryland
and has full power, authority, and legal right to execute, deliver, and perform
its duties and comply with its obligations under this Agreement.
(d) AIM represents and warrants that it is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Maryland
and has full power, authority, and legal right to execute, deliver, and
perform its duties and comply with its obligations under this Agreement.
7
<PAGE> 11
(e) UNDERWRITER represents and warrants that it is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has full power, authority, and legal right to execute, deliver, and
perform its duties and comply with its obligations under this Agreement.
4.3 SECURITIES LAWS.
(a) LIFE COMPANY and UNDERWRITER represent and warrant that (i) interests
in each Account pursuant to the Contracts will be registered under the 1933 Act
to the extent required by the 1933 Act, (ii) the Contracts will be duly
authorized for issuance and sold in compliance with all applicable federal and
state laws, including, without limitation, the 1933 Act, the 1934 Act, the 1940
Act and Delaware law, (iii) each Account is and will remain registered under the
1940 Act, to the extent required by the 1940 Act, (iv) each Account does and
will comply in all material respects with the requirements of the 1940 Act and
the rules thereunder, to the extent required, (v) each Account's 1933 Act
registration statement relating to the Contracts, together with any amendments
thereto, will at all times comply in all material respects with the requirements
of the 1933 Act and the rules thereunder, (vi) LIFE COMPANY will amend the
registration statement for its Contracts under the 1933 Act and for its Accounts
under the 1940 Act from time to time as required in order to effect the
continuous offering of its Contracts or as may otherwise be required by
applicable law, and (vii) each Account Prospectus will at all times comply in
all material respects with the requirements of the 1933 Act and the rules
thereunder.
(b) AVIF and AIM represent and warrant that (i) Shares sold pursuant to
this Agreement will be registered under the 1933 Act to the extent required by
the 1933 Act and duly authorized for issuance and sold in compliance with
Maryland law, (ii) AVIF is and will remain registered under the 1940 Act to the
extent required by the 1940 Act, (iii) AVIF will amend the registration
statement for its Shares under the 1933 Act and itself under the 1940 Act from
time to time as required in order to effect the continuous offering of its
Shares, (iv) AVIF does and will comply in all material respects with the
requirements of the 1940 Act and the rules thereunder, (v) AVIF's 1933 Act
registration statement, together with any amendments thereto, will at all times
comply in all material respects with the requirements of the 1933 Act and rules
thereunder, and (vi) AVIF's Prospectus will at all times comply in all material
respects with the requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale in
accordance with the laws of any state or other jurisdiction if and to the extent
reasonably deemed advisable by AVIF.
(d) AVIF currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1
AVIF undertakes to have its Board of Directors, a majority of whom are not
"interested" persons of the Fund, formulate and approve any plan under Rule
12b-1 to finance distribution expenses.
8
<PAGE> 12
(e) AVIF represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having access to
the funds and/or securities of the Fund are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less than the minimal coverage as required currently by
Rule 17g-(l) of the 1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) AVIF and/or AIM will immediately notify LIFE COMPANY of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to AVIF's registration statement
under the 1933 Act or AVIF's prospectus, statement of additional information and
any amendments or supplements thereto (collectively the "AVIF Prospectus"), (ii)
any request by the SEC for any amendment to such registration statement or AVIF
Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation
of any proceedings for that purpose or for any other purpose relating to the
registration or offering of AVIF's Shares, or (iv) any other action or
circumstances that may prevent the lawful offer or sale of Shares of any Fund in
any state or jurisdiction, including, without limitation, any circumstances in
which (a) such Shares are not registered and, in all material respects, issued
and sold in accordance with applicable state and federal law, or (b) such law
precludes the use of such Shares as an underlying investment medium of the
Contracts issued or to be issued by LIFE COMPANY. AVIF and AIM will make every
reasonable effort to prevent the issuance, with respect to any Fund, of any such
stop order, cease and desist order or similar order and, if any such order is
issued, to obtain the lifting thereof at the earliest possible time.
(b) LIFE COMPANY and/or UNDERWRITER will immediately notify AVIF of (i)
the issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to each Account's registration
statement under the 1933 Act relating to the Contracts or each Account
Prospectus, (ii) any request by the SEC for any amendment to such registration
statement or Account Prospectus that may affect the offering of Shares of AVIF,
(iii) the initiation of any proceedings for that purpose or for any other
purpose relating to the registration or offering of each Account's interests
pursuant to the Contracts, or (iv) any other action or circumstances that may
prevent the lawful offer or sale of said interests in any state or jurisdiction,
including, without limitation, any circumstances in which said interests are not
registered and, in all material respects, issued and sold in accordance with
applicable state and federal law. LIFE COMPANY and UNDERWRITER will make every
reasonable effort to prevent the issuance of any such stop order, cease and
desist order or similar order and, if any such order is issued, to obtain the
lifting thereof at the earliest possible time.
4.5 LIFE COMPANY TO PROVIDE DOCUMENTS; INFORMATION ABOUT AVIF.
(a) LIFE COMPANY will provide to AVIF or its designated agent at least
one (1) complete copy of all SEC registration statements, Account Prospectuses,
reports, any preliminary and final voting instruction solicitation material,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to each Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
9
<PAGE> 13
(b) LIFE COMPANY will provide to AVIF or its designated agent at least
one (1) complete copy of each piece of sales literature or other promotional
material in which AVIF or any of its affiliates is named, at least five (5)
Business Days prior to its use or such shorter period as the Parties hereto may,
from time to time, agree upon. No such material shall be used if AVIF or its
designated agent objects to such use within five (5) Business Days after receipt
of such material or such shorter period as the Parties hereto may, from time to
time, agree upon. AVIF hereby designates AIM as the entity to receive such sales
literature, until such time as AVIF appoints another designated agent by giving
notice to LIFE COMPANY in the manner required by Section 9 hereof.
(c) Neither LIFE COMPANY, UNDERWRITER nor any of their respective
affiliates, will give any information or make any representations or statements
on behalf of or concerning AVIF or its affiliates in connection with the sale
of the Contracts other than (i) the information or representations contained in
the registration statement, including the AVIF Prospectus contained therein,
relating to Shares, as such registration statement and AVIF Prospectus may be
amended and/or supplemented from time to time; or (ii) in reports or proxy
materials for AVIF; or (iii) in published reports for AVIF that are in the
public domain and approved by AVIF for distribution; or (iv) in sales
literature or other promotional material approved by AVIF, except with the
express written permission of AVIF. The parties agree that this Section 4.5 is
not intended to designate nor otherwise imply that LIFE COMPANY is an
underwriter or distributor of Shares of AVIF.
(d) LIFE COMPANY shall adopt and implement procedures reasonably designed
to ensure that information concerning AVIF and its affiliates that is intended
for use only by brokers or agents selling the Contracts ("broker only
materials") [i.e., information that is not intended for distribution to Contract
owners, annuitants, insureds or participants (as appropriate) under the
Contracts (collectively, "Participants")] is so used, and pursuant to Section
12.1 hereof, neither AVIF nor any of its affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (e.g.,
on-line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT LIFE COMPANY.
(a) AVIF will provide to LIFE COMPANY at least one (1) complete copy of
all SEC registration statements, AVIF Prospectuses, reports, any preliminary and
final proxy material,
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applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to AVIF or the Shares of a Fund,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities. AVIF shall provide LIFE Company with as much notice as
is reasonably practicable of any proxy solicitation for a Fund and of any
material change in the Fund's Prospectus or registration statement, particularly
any changes resulting in a change to the prospectus or registration statement
relating to the Contracts. Where such material changes are an item for
consideration by the Board of AVIF, such notice requirement of AVIF may be
satisfied by providing LIFE COMPANY with a copy of an agenda of the relevant
Board of Directors meeting of AVIF.
(b) AVIF will provide to LIFE COMPANY camera ready copy of all AVIF
prospectuses and printed copies, in an amount specified by LIFE COMPANY, of AVIF
statements of additional information, proxy materials, periodic reports to
shareholders and other materials required by law to be sent to Participants who
have allocated any Contract value to a Fund. AVIF will provide such copies to
LIFE COMPANY in a timely manner so as to enable LIFE COMPANY, as the case may
be, to print and distribute such materials within the time required by law to be
furnished to Participants.
(c) AVIF or AIM will provide to LIFE COMPANY or its designated agent at
least one (1) complete copy of each piece of sales literature or other
promotional material in which LIFE COMPANY, or any of its respective affiliates
is named, or that refers to the Contracts, at least five (5) Business Days prior
to its use or such shorter period as the Parties hereto may, from time to time,
agree upon. No such material shall be used if LIFE COMPANY or its designated
agent objects to such use within five (5) Business Days after receipt of such
material or such shorter period as the Parties hereto may, from time to time,
agree upon. LIFE COMPANY shall receive all such sales literature until such time
as it appoints a designated agent by giving notice to AVIF in the manner
required by Section 9 hereof.
(d) Neither AVIF, AIM nor any of their respective affiliates will give
any information or make any representations or statements on behalf of or
concerning LIFE COMPANY, each Account, or the Contracts other than (i) the
information or representations contained in the registration statement,
including each Account's prospectus, statement of additional information and any
amendments or supplemnents thereto (collectively the "Account Prospectus")
contained therein, relating to the Contracts, as such registration statement and
Account Prospectus may be amended or supplemented from time to time; or (ii) in
published reports for the Account or the Contracts that are in the public domain
and approved by LIFE COMPANY for distribution; or (iii) in sales literature or
other promotional material approved by LIFE COMPANY or its affiliates, except
with the express written permission of LIFE COMPANY.
(e) AIM shall adopt and implement procedures reasonably designed to
ensure that information concerning LIFE COMPANY, and its respective affiliates
that is intended for use only by brokers or agents selling the Contracts (i.e.,
information that is not intended for distribution to Participants) ("broker only
materials") is so used, and pursuant to Section 12.1 hereof, neither LIFE
COMPANY, nor any of its respective affiliates shall be liable for any losses,
damages or expenses relating to the improper use of such broker only materials.
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(f) For purposes of this Section 4.6 and Section 12 hereof, the phrase
"sales literature or other promotional material" includes, but is not limited
to, advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media, (e.g, on-line networks such as the Internet or other electronic
messages), sales literature (i.e., any written communication distributed or made
generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL
The SEC has granted an order to AVIF exempting it from certain provisions
of the 1940 Act and rules thereunder so that AVIF may be available for
investment by certain other entities, including, without limitation, separate
accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with LIFE
COMPANY, and trustees of qualified pension and retirement plans (collectively,
"Mixed and Shared Funding"). The Parties recognize that the SEC has imposed
terms and conditions for such orders that are substantially identical to many of
the provisions of this Section 5. Sections 5.2 through 5.8 below shall apply
pursuant to the exemptive order granted to AVIF. AVIF hereby notifies LIFE
COMPANY that, in the event that AVIF implements Mixed and Shared Funding, it may
be appropriate to include in the prospectus pursuant to which a Contract is
offered disclosure regarding the potential risks of Mixed and Shared Funding.
5.2 DISINTERESTED DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board;(b) for a period of sixty (60) days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
AVIF agrees that its Board of Directors will monitor for the existence of
any material irreconcilable conflict between the interests of the Participants
in all separate accounts of life insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account,
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and participants in all qualified retirement and pension plans investing in AVIF
("Participating Plans"). LIFE COMPANY agrees to inform the Board of Directors of
AVIF of the existence of or any potential for any such material irreconcilable
conflict of which it is aware. The concept of a "material irreconcilable
conflict" is not defined by the 1940 Act or the rules thereunder, but the
Parties recognize that such a conflict may arise for a variety of reasons,
including, without limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax or securities
regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive
orders of the type referred to in Section 5.1 hereof, LIFE COMPANY will assist
the Board of Directors in carrying out its responsibilities by providing the
Board of Directors with all information reasonably necessary for the Board of
Directors to consider any issue raised, including information as to a decision
by LIFE COMPANY to disregard voting instructions of Participants. LIFE COMPANY's
responsibilities in connection with the foregoing shall be carried out with a
view only to the interests of Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members of
the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, LIFE COMPANY will, if it is a
Participating Insurance Company for which a material irreconcilable conflict is
relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, which
steps may include, but are nor limited to:
(i) withdrawing the assets allocable to some or all of the
Accounts from AVIF or any Fund and reinvesting such assets in
a different investment medium, including another Fund of AVIF,
or submitting the question whether such segregation should be
implemented to a vote of all affected Participants and, as
appropriate, segregating the assets of any particular group
(e.g., annuity
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Participants, life insurance Participants or all Participants)
that votes in favor of such segregation, or offering to the
affected Participants the option of making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "management company" in Section 4(3) of the 1940
Act or a new separate account that is operated as a management
company.
(b) If the material irreconcilable conflict arises because of LIFE
COMPANY's decision to disregard Participant voting instructions and that
decision represents a minority position or would preclude a majority vote, LIFE
COMPANY may be required, at AVIF's election, to withdraw each Account's
investment in AVIF or any Fund. No charge or penalty will be imposed as a
result of such withdrawal. Any such withdrawal must take place within six (6)
months after AVIF gives notice to LIFE COMPANY that this provision is being
implemented, and until such withdrawal AVIF shall continue to accept and
implement orders by LIFE COMPANY for the purchase and redemption of Shares of
AVIF.
(c) If a material irreconcilable conflict rises because a particular
state insurance regulator's decision applicable to LIFE COMPANY conflicts with
the majority of other state regulators, then LIFE COMPANY will withdraw each
Account's investment in AVIF within six (6) months after AVIF's Board of
Directors informs LIFE COMPANY that it has determined that such decision has
created a material irreconcilable conflict, and until such withdrawal AVIF shall
continue to accept and implement orders by LIFE COMPANY for the purchase and
redemption of Shares of AVIF. No charge or penalty will be imposed as a result
of such withdrawal.
(d) LIFE COMPANY agrees that any remedial action taken by it in resolving
any material irreconcilable conflict will be carried out at its expense and with
a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Contracts.
LIFE COMPANY will not be required by the terms hereof to establish a new
funding medium for any Contracts if an offer to do so has been declined by vote
of a majority of Participants materially adversely affected by the material
irreconcilable conflict
5.5 NOTICE TO LIFE COMPANY.
AVIF will promptly make known in writing to LIFE COMPANY the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
LIFE COMPANY and AVIF (or its investment adviser) will at least annually
submit to the Board of Directors of AVIF such reports, materials or data as the
Board of Directors may reasonably
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request so that the Board of Directors may fully carry out the obligations
imposed upon it by the provisions hereof or any exemptive order granted by the
SEC to permit Mixed and Shared Funding, and said reports, materials and data
will be submitted at any reasonable time deemed appropriate by the Board of
Directors. All reports received by the Board of Directors of potential or
existing conflicts, and all Board of Directors actions with regard to
determining the existence of a conflict, notifying Participating Insurance
Companies and Participating Plans of a conflict, and determining whether any
proposed action adequately remedies a conflict, will be properly recorded in the
minutes of the Board of Directors or other appropriate records, and such minutes
or other records will be made available to the SEC upon request.
5.7 COMPLIANCE WITH SEC RULES.
If, at any time during which AVIF is serving as an investment medium for
variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable,
6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with
respect to Mixed and Shared Funding, AVIF agrees that it will comply with the
terms and conditions thereof and that the terms of this Section 5 shall be
deemed modified if and only to the extent required in order also to comply with
the terms and conditions of such exemptive relief that is afforded by any of
said rules that are applicable.
5.8 OTHER REQUIREMENT.
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of any party, upon six (6) months advance written
notice to the other parties, or, if later, upon receipt of any required
exemptive relief from the SEC, unless otherwise agreed to in writing by the
Parties; or
(b) at the option of AVIF or AIM upon institution of formal proceedings
against LIFE COMPANY, UNDERWRITER, or their respective affiliates by the NASD,
the SEC, any state insurance regulator or any other regulatory body regarding
LIFE COMPANY's or UNDERWRITER's obligations under this Agreement or related to
the sale of the Contracts, the operation of each Account, or the purchase of
Shares, if, in each case, AVIF or AIM reasonably determines that such
proceedings, or the facts on which such proceedings would be based, have a
material likelihood of imposing material adverse consequences on the Fund with
respect to which the Agreement is to be terminated; or
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(c) at the option of LIFE COMPANY or UNDERWRITER upon institution of
formal proceedings against AVIF, its investment adviser, AIM, or their
respective affiliates, by the NASD, the SEC, or any state insurance regulator or
any other regulatory body regarding AVIF's or AIM's obligations under this
Agreement or related to the operation or management of AVIF or the purchase of
AVIF Shares, if in each case, LIFE COMPANY or UNDERWRITER reasonably determines
that such proceedings, or the facts on which such proceedings would be based,
have a material likelihood of imposing material adverse consequences on LIFE
COMPANY, or the Subaccount corresponding to the Fund with respect to which the
Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares
are not registered and, in all material respects, issued and sold in accordance
with any applicable federal or state law, or (ii) such law precludes the use of
such Shares as an underlying investment medium of the Contracts issued or to be
issued by LIFE COMPANY; or
(e) upon termination of the corresponding Subaccount's investment in the
Fund pursuant to Section 5 hereof; or
(f) at the option of LIFE COMPANY or UNDERWRITER if the Fund ceases to
qualify as a RIC under Subchapter M of the Code or under successor or similar
provisions, or if LIFE COMPANY or UNDERWRITER reasonably believes that the Fund
may fail to so qualify; or
(g) at the option of LIFE COMPANY or UNDERWRITER if the Fund fails to
comply with Section 817(h) of the Code or with successor or similar provisions,
or if LIFE COMPANY or UNDERWRITER reasonably believes that the Fund may fail to
so comply; or
(h) at the option of AVIF or AIM if the Contracts issued by LIFE COMPANY
cease to qualify as annuity contracts or life insurance contracts under the Code
(other than by reason of the Fund's noncompliance with Section 817(h) or
Subchapter M of the Code) or AVIF or AIM reasonably believes that the contracts
may fail to so comply or if interests in an Account under the Contracts are not
registered, where required, and, in all material respects, are not issued or
sold in accordance with any applicable federal or state law; or
(i) upon another Party's failure to cure a material breach of any
provision of this Agreement within thirty (30) days after written notice
thereof; or
(j) at the option of LIFE COMPANY or UNDERWRITER by written notice to
AVIF or AIM, if LIFE COMPANY shall conclude in its sole judgment exercised in
good faith, that AVIF and/or AIM has suffered a material adverse change in its
business, operations, financial condition, or prospects since the date of this
Agreement or is the subject of material adverse publicity; or
(k) at the option of AVIF or AIM by written notice to LIFE COMPANY, if
either AVIF or AIM shall conclude in its sole judgment exercised in good
faith, that LIFE COMPANY and/or UNDERWRITER has suffered a material adverse
change in its business, operations, financial condition, or prospects since the
date of this Agreement or is the subject of material adverse publicity.
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6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Party
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of
Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at
least six (6) months in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Sections 6.1(b), 6.1(c), 6.1(j) or 6.1(k) hereof, such prior written notice
shall be given at least ninety (90) days in advance of the effective date of
termination unless a shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of
Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written
notice shall be given as soon as possible within twenty-four (24) hours after
the terminating Party learns of the event causing termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE.
Notwithstanding any termination of this Agreement, AVIF will, at the
option of LIFE COMPANY, continue to make available additional shares of the
Fund pursuant to the terms and conditions of this Agreement, for all Contracts
in effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts will be permitted to reallocate investments in
the Fund (as in effect on such date), redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts. The Parties agree that this Section 6.3 will not apply to
any terminations under Section 5 and the effect of such terminations will be
governed by Section 5 of this Agreement.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of this
Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund pursuant
to Sections 6.1(b), 6.l(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h), 6.1(i), 6.1(j) or
6.1(k) hereof, this Agreement shall nevertheless continue in effect as to any
Shares of that Fund that are outstanding as of the date of such termination (the
"Initial Termination Date"). This continuation shall extend to the earlier of
the date as of which an Account owns no Shares of the affected Fund or a date
(the "Final Termination Date") six (6) months following the Initial Termination
Date, except that LIFE COMPANY may, by written notice shorten said six (6)
month period.
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SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to
one another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Fund, or otherwise
terminating participation by the Contracts in such Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
SECTION 9. NOTICES
Notices and communications required or permitted by Section 9 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
AIM VARIABLE INSURANCE FUNDS, INC.
A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
SAGE LIFE ASSURANCE COMPANY OF AMERICA, INC.
300 Atlantic Street, Suite 302
Stamford, CT 06903
Facsimile: (203) 324-6173
Attn: James F. Bronsdon, Esq.
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SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3 hereof,
LIFE COMPANY will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. LIFE COMPANY will vote
Shares in accordance with timely instructions received from Participants. LIFE
COMPANY will vote Shares that are (a) not attributable to Participants to whom
pass-through voting privileges are extended, or (b) attributable to
Participants, but for which no timely instructions have been received, in the
same proportion as Shares for which said instructions have been received from
Participants, so long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass through voting privileges for Participants. Except
to the extent as may be required by applicable law, neither LIFE COMPANY nor
any of its affiliates will in any way recommend action in connection with or
oppose or interfere with the solicitation of proxies for the Shares held for
such Participants. LIFE COMPANY reserves the right to vote shares held in any
Account in its own right, to the extent permitted by law. LIFE COMPANY shall be
responsible for assuring that each of its Accounts holding Shares calculates
voting privileges in a manner consistent with that of other Participating
Insurance Companies or in the manner required by the Mixed and Shared Funding
exemptive order obtained by AVIF. AVIF will notify LIFE COMPANY of any changes
of interpretations or amendments to Mixed and Shared Funding exemptive order it
has obtained. AVIF will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular, AVIF either will provide for annual
meetings (except insofar as the SEC may interpret Section 16 of the 1940 Act
not to require such meetings) or will comply with Section 16(c) of the 1940 Act
(although AVIF is not one of the trusts described in Section 16(c) of that Act)
as well as with Sections 16(a) and, if and when applicable, 16(b). Further,
AVIF will act in accordance with the SEC's interpretation of the requirements
of Section 16(a) with respect to periodic elections of directors and with
whatever rules the SEC may promulgate with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with LIFE COMPANY concerning any
decision to elect or not to elect pursuant to Section 853 of the Code to pass
through the benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF AVIF AND AIM BY LIFE COMPANY AND UNDERWRITER.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below,
LIFE COMPANY and UNDERWRITER agree to indemnify and hold harmless AVIF, AIM,
their affiliates, and each person, if any, who controls AVIF, AIM, or their
affiliates within the meaning of Section 15 of the 1933 Act and each of their
respective directors and officers, (collectively, the "Indemnified Parties" for
purposes of this Section 12.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
LIFE COMPANY) or actions in respect thereof (including, to the extent
reasonable, legal and other expenses), to which
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the Indemnified Parties may become subject under any statute, regulation, at
common law or otherwise insofar as such losses, claims, damages, liabilities or
actions.
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any
Account's 1933 Act registration statement, any Account
Prospectus, the Contracts, or sales literature or other
promotional material for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading;
provided, that this agreement to indemnify shall not apply as
to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and
in conformity with information furnished to LIFE COMPANY or
UNDERWRITER by or on behalf of AVIF for use in any Account's
1933 Act registration statement, any Account Prospectus, the
Contracts, or sales literature or other promotional material
or otherwise for use in connection with the sale of Contracts
or Shares (or any amendment or supplement to any of the
foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in AVIF's 1933 Act registration statement, AVIF
Prospectus, sales literature or other promotional material of
AVIF, or any amendment or supplement to any of the foregoing,
not supplied for use therein by or on behalf of LIFE COMPANY,
UNDERWRITER or their respective affiliates and on which such
persons have reasonably relied) or the negligent, illegal or
fraudulent conduct of LIFE COMPANY, UNDERWRITER or their
respective affiliates or persons under their control
(including, without limitation, their employees and "persons
associated with a member," as that term is defined in
paragraph (q) of Article I of the NASD's By-Laws), in
connection with the sale or distribution of the Contracts or
Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933
Act registration statement, AVIF Prospectus, sales literature
or other promotional material of AVIF, or any amendment or
supplement to any of the foregoing, or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in
reliance upon and in conformity with information furnished to
AVIF, AIM or their respective affiliates by or on behalf of
LIFE COMPANY, UNDERWRITER or their respective affiliates for
use in AVIF's 1933 Act registration statement, AVIF
Prospectus, sales literature or other promotional material
of AVIF, or any amendment or supplement to any of the
foregoing; or
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(iv) arise as a result of any failure by LIFE COMPANY or
UNDERWRITER to perform the obligations, provide the services
and furnish the materials required of them under the terms of
this Agreement, or any material breach of any representation
and/or warranty made by LIFE COMPANY or UNDERWRITER in this
Agreement or arise out of or result from any other material
breach of this Agreement by LIFE COMPANY or UNDERWRITER; or
(v) arise as a result of failure by the Contracts issued by LIFE
COMPANY to qualify as annuity contracts or life insurance
contracts under the Code, otherwise than by reason of any
Fund's failure to comply with Subchapter M or Section 817(h)
of the Code.
(b) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this
Section 12.1 with respect to any losses, claims, damages, liabilities or
actions to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that Indemnified Party's
reckless disregard of obligations or duties (i) under this Agreement, or (ii) to
AVIF.
(c) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this
Section 12.1 with respect to any action against an Indemnified Party unless
AVIF or AIM shall have notified LIFE COMPANY and UNDERWRITER in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the action shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify LIFE COMPANY and
UNDERWRITER of any such action shall not relieve LIFE COMPANY and UNDERWRITER
from any liability which they may have to the Indemnified Party against whom
such action is brought otherwise than on account of this Section 12.1. Except as
otherwise provided herein, in case any such action is brought against an
Indemnified Party, LIFE COMPANY and UNDERWRITER shall be entitled to
participate, at their own expense, in the defense of such action and also shall
be entitled to assume the defense thereof, with counsel approved by the
Indemnified Party named in the action, which approval shall not be unreasonably
withheld. After notice from LIFE COMPANY or UNDERWRITER to such Indemnified
Party of LIFE COMPANY's or UNDERWRITER's election to assume the defense
thereof, the Indemnified Party will cooperate fully with LIFE COMPANY and
UNDERWRITER and shall bear the fees and expenses of any additional counsel
retained by it, and neither LIFE COMPANY nor UNDERWRITER will be liable to such
Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently in connection with
the defense thereof, other than reasonable costs of investigation.
12.2 OF LIFE COMPANY AND UNDERWRITER BY AVIF AND AIM.
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e), below, AVIF and AIM agree to indemnify and hold harmless LIFE COMPANY,
UNDERWRITER, their respective affiliates, and each person, if any, who controls
LIFE COMPANY, UNDERWRITER or their respective affiliates within the meaning of
Section 15 of the 1933 Act and each of their respective directors and officers,
(collectively, the "Indemnified Parties" for purposes of this Section
21
<PAGE> 25
12.2) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of AVIF and/or AIM) or
actions in respect thereof (including, to the extent reasonable, legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law, or otherwise insofar as such losses, claims,
damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933
Act registration statement, AVIF Prospectus or sales
literature or other promotional material of AVIF (or any
amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading; provided, that this agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to AVIF or its affiliates by or on behalf of LIFE
COMPANY, UNDERWRITER or their respective affiliates for use
in AVIF's 1933 Act registration statement, AVIF Prospectus,
or in sales literature or other promotional material or
otherwise for use in connection with the sale of Contracts
or Shares (or any amendment or supplement to any of the
foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in any Account's 1933 Act registration statement,
any Account Prospectus, sales literature or other promotional
material for the Contracts, or any amendment or supplement to
any of the foregoing, not supplied for use therein by or on
behalf of AVIF, AIM or their affiliates and on which such
persons have reasonably relied) or the negligent, illegal or
fraudulent conduct of AVIF, AIM or their affiliates or persons
under their control (including, without limitation, their
employees and "persons associated with a member" as that term
is defined in Section (q) of Article I of the NASD By-Laws),
in connection with the sale or distribution of AVIF Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any
Account's 1933 Act registration statement, any Account
Prospectus, sales literature or other promotional material
covering the Contracts, or any amendment or supplement to any
of the foregoing, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if
such statement or omission was made in reliance upon and in
conformity with information furnished to LIFE COMPANY,
UNDERWRITER or their respective affiliates by or on behalf of
AVIF or AIM for use in any Account's 1933 Act registration
statement,
22
<PAGE> 26
any Account Prospectus, sales literature or other promotional
material covering Contracts, or any amendment or supplement to
any of the foregoing; or
(iv) arise as a result of any failure by AVIF or AIM to perform the
obligations, provide the services and furnish the materials
required of it under the terms of this Agreement, or any
material breach of any representation and/or warranty made by
AVIF or AIM in this Agreement or arise out of or result from
any other material breach of this Agreement by AVIF or AIM.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e) hereof, AVIF and AIM agree to indemnify and hold harmless the
Indemnified Parties from and against any and all losses, claims, damages,
liabilities (including amounts paid in settlement thereof with, the written
consent of AVE and/or AIM) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses) to which the Indemnified Parties
may become subject directly or indirectly under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or actions
directly or indirectly result from or arise out of the failure of any Fund to
operate as a regulated investment company in compliance with (i) Subchapter M
of the Code and regulations thereunder, or (ii) Section 817(h) of the Code and
regulations thereunder, including, without limitation, any income taxes and
related penalties, rescission charges, liability under state law to
Participants asserting liability against LIFE COMPANY pursuant to the
Contracts, the costs of any ruling and closing agreement or other settlement
with the IRS, and the cost of any substitution by LIFE COMPANY of Shares of
another investment company or portfolio for those of any adversely affected
Fund as a funding medium for each Account that LIFE COMPANY reasonably deems
necessary or appropriate as a result of the noncompliance.
(c) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance by that Indemnified Party of
its duties or by reason of such Indemnified Party's reckless disregard of its
obligations and duties (i) under this Agreement, or (ii) to LIFE COMPANY,
UNDERWRITER, each Account or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified AVIF and AIM in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify AVIF and AIM of any such action shall not relieve
AVIF or AIM from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
12.2. Except as otherwise provided herein, in case any such action is brought
against an Indemnified Party, AVIF and/or AIM will be entitled to participate,
at its own expense, in the defense of such action and also shall be entitled to
assume the defense thereof (which shall include, without limitation, the
conduct of any ruling request and closing agreement or other settlement
proceeding with the IRS), with counsel approved by the Indemnified Party named
in the action, which approval shall not be unreasonably withheld. After notice
from AVIF and/or AIM to such
23
<PAGE> 27
Indemnified Party of AVIF's or AIM's election to assume the defense thereof, the
Indemnified Party will cooperate fully with AVIF and/or AIM and shall bear the
fees and expenses of any additional counsel retained by it, and AVIF and/or AIM
will not be liable to such Indemnified Party under this Agreement for any legal
or other expenses subsequently incurred by such Indemnified Party independently
in connection with the defense thereof, other than reasonable costs of
investigation.
(e) In no event shall AVIF or AIM be liable under the indemnification
provisions contained in this Agreement to any individual or entity, including,
without limitation, LIFE COMPANY, UNDERWRITER or any other Participating
Insurance Company or any Participant, with respect to any losses, claims,
damages, liabilities or expenses that arise out of or result from (i) a breach
of any repersentation, warranty, and/or covenant made by LIFE COMPANY or
UNDERWRITER hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations, warranties and
covenants; (ii) the failure by LIFE COMPANY or any Participating Insurance
Company to maintain its segregated asset account (which invests in any Fund) as
a legally and validly established segregated asset account under applicable
state law and as a duly registered unit investment trust under the provisions of
the 1940 Act (unless exempt therefrom); or (iii) the failure by LIFE COMPANY or
any Participating Insurance Company to maintain its variable annuity or life
insurance contracts (with respect to which any Fund serves as an underlying
funding vehicle) as annuity contracts or life insurance contracts under
applicable provisions of the Code.
12.3 EFFECT OF NOTICE.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Sections 12.1(c) or 12.2(d) above of participation in or control
of any action by the indemnifying Party will in no event be deemed to be an
admission by the indemnifying Party of liability, culpability or responsibility,
and the indemnifying Party will remain free to contest liability with respect to
the claim among the Parties or otherwise.
12.4 SUCCESSORS.
A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
24
<PAGE> 28
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
SECTION 18. CONFIDENTIALLY
AVIF and AIM acknowledge that the identities of the customers of LIFE
COMPANY and UNDERWRITER or any of their respective affiliates (collectively, the
"LIFE COMPANY Protected Parties" for purposes of this Section 18), information
maintained regarding those customers, and all computer programs and procedures
or other information developed by the LIFE COMPANY Protected Parties or any of
their employees or agents in connection with LIFE COMPANY's performance of its
duties under this Agreement are the valuable property of the LIFE COMPANY
Protected Parties. AVIF and AIM agree that if they come into possession of any
list or compilation of the identities of or other information about the LIFE
COMPANY Protected Parties' customers, or any other information or property of
the LIFE COMPANY Protected Parties, other than such information as may be
independently developed or compiled by AVIF or AIM from information supplied to
it by the LIFE COMPANY Protected Parties' customers who also maintain accounts
directly with AVIF or AIM, AVIF and/or AIM will hold such information or
property in confidence and refrain from using, disclosing or distributing any
of such information or other property except: (a) with LIFE COMPANY's prior
written consent; or (b) as required by law or judicial process. LIFE COMPANY
and UNDERWRITER acknowledge that the identities of the customers of AVIF or AIM
or any of their respective affiliates (collectively, the "AVIF Protected
Parties" for purposes of this Section 18), information maintained regarding
those customers, and all computer programs and procedures or other information
developed by the AVIF Protected Parties or any of their employees or agents in
connection with AVIF's performance of its duties under this Agreement are the
valuable property of the AVIF Protected Parties. LIFE COMPANY and UNDERWRITER
agree that if they comes into possession of any list or compilation of the
identities of or other information about the AVIF Protected Parties' customers
or any other information or property of the AVIF Protected Parties, other than
such information as may be independently developed or compiled by LIFE COMPANY
or UNDERWRITER from information supplied to it by the AVIF Protected Parties'
customers who also maintain accounts directly with LIFE COMPANY or UNDERWRITER.
25
<PAGE> 29
LIFE COMPANY and/or UNDERWRITER will hold such information or property in
confidence and refrain from using, disclosing or distributing any of such
information or other property except: (a) with AVIF's or AIM's prior written
consent; or (b) as required by law or judicial process. Each party
acknowledges that any breach of the agreements in this Section 18 would result
in immediate and irreparable harm to the other parties for which there would be
no adequate remedy at law and agree that in the event of such a breach, the
other parties will be entitled to equitable relief by way of temporary and
permanent injunctions, as well as such other relief as any court of competent
jurisdiction deems appropriate.
SECTION 19. TRADEMARKS AND FUND NAMES
(a) Except as may otherwise be provided in a License Agreement among
A I M Management Group, Inc., LIFE COMPANY and UNDERWRITER, neither LIFE
COMPANY nor UNDERWRITER or any of their respective affiliates, shall use any
trademark, trade name, service mark or logo of AVIF, AIM or any of their
respective affiliates, or any variation of any such trademark, trade name,
service mark or logo, without AVIF's OR AIM's prior written consent, the
granting of which shall be at AVIF's or AIM's sole option.
(b) Except as otherwise expressly provided in this Agreement, neither
AVIF, its investment adviser, its principal underwriter, or any affiliates
thereof shall use any trademark, trade name, service mark or logo of LIFE
COMPANY or any of its affiliates, or any variation of any such trademark, trade
name, service mark or logo, without LIFE COMPANY's prior written consent, the
granting of which shall be at LIFE COMPANY's sole option.
SECTION 20. PARTIES TO COOPERATE
Each party to this Agreement will cooperate with each other party and all
appropriate governmental authorities (including, without limitation, the SEC,
the NASD and state insurance regulators) and will permit each other and such
authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
26
<PAGE> 30
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: By:
---------------------- -----------------------------------
Name: Name: Robert H. Graham
----------------------
Title: Assistant Secretary Title: Title: President
A I M DISTRIBUTORS, INC.
Attest: By:
---------------------- -----------------------------------
Name: Name: Michael J. Cemo
----------------------
Title: Assistant Secretary Title: President
SAGE LIFE ASSURANCE COMPANY OF
AMERICA. INC., on behalf of itself and
its separate accounts
Attest: By:
---------------------- -----------------------------------
Name: Name:
---------------------- ---------------------------------
Title: Title:
---------------------- --------------------------------
--------------------------------------
on behalf of itself and its separate
accounts
Attest: By:
---------------------- -----------------------------------
Name: Name:
---------------------- ---------------------------------
Title: Title:
---------------------- --------------------------------
27
<PAGE> 31
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
- - AIM VARIABLE INSURANCE FUNDS, INC.
[LIST APPLICABLE PORTFOLIOS]
SEPARATE ACCOUNTS UTILIZING THE FUNDS
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
28
<PAGE> 32
SCHEDULE B
AIM's PRICING ERROR POLICIES
Determination of Materiality
In the event that AIM discovers an error in the calculation of Fund's net
asset value, the following policies will apply:
If the amount of the error is less than $.01 per share, it is considered
immaterial and no adjustments are made.
If the amount of the error is $.01 per share or more, then the following
thresholds are applied:
a. If the amount of the difference in the erroneous net asset
value and the correct net asset value is less than .5% of the
correct net asset value, AIM will reimburse the affected Fund
to the extent of any loss resulting from the error. No other
adjustments shall be made.
b. If the amount of the difference in the erroneous net asset
value and the correct net asset value is .5% of the correct
net asset value or greater, then AIM will determine the
impact of the error to the affected Fund and shall reimburse
such Fund (and/or LIFE COMPANY, as appropriate, such as in
the event that the error was not discovered until after LIFE
COMPANY processed transactions using the erroneous net asset
value) to the extent of any loss resulting from the error.
To the extent that an overstatement of net asset value per
share is detected quickly and LIFE COMPANY has not mailed
redemption checks to Participants, LIFE COMPANY and AIM
agree to examine the extent of the error to determine the
feasibility of reprocessing such redemption transaction (for
purposes of reimbursing the Fund to the extent of any such
overpayment).
Reprocessing Cost Reimbursement
To the extent a reprocessing of Participant transactions is required pursuant to
paragraph (b), above, AIM shall reimburse LIFE COMPANY for LIFE COMPANY's
reprocessing costs in the amount of $______ per contract affected by $10 or
more.
The Pricing Policies described herein may be modified by AVIF as approved by its
Board of Directors. AIM agrees to use its best efforts to notify LIFE COMPANY at
least five (5) days prior to any such meeting of the Board of Directors of AVIF
to consider such proposed changes.
29
<PAGE> 33
SCHEDULE C
EXPENSE ALLOCATIONS
<TABLE>
<CAPTION>
===========================================================================================================
LIFE COMPANY AVIF / AIM
- -----------------------------------------------------------------------------------------------------------
<S> <C>
preparing and filing the Account's preparing and filing the Fund's registration
registration statement statement
- -----------------------------------------------------------------------------------------------------------
text composition for Account prospectuses text composition for Fund prospectuses and
and supplements supplements
- -----------------------------------------------------------------------------------------------------------
text alterations of prospectuses (Account) and text alterations of prospectuses (Fund) and
supplements (Account) supplements (Fund)
- -----------------------------------------------------------------------------------------------------------
printing Account and Fund prospectuses and a camera ready Fund prospectus, printing
supplements costs of Fund Prospectuses to existing policy
owners with amounts allocated to the Fund
- -----------------------------------------------------------------------------------------------------------
text composition and printing Account SAIs text composition and printing Fund SAIs
- -----------------------------------------------------------------------------------------------------------
mailing and distributing Account SAIs to mailing and distributing Fund SAIs to policy
policy owners upon request by policy owners owners upon request by policy owners
- -----------------------------------------------------------------------------------------------------------
mailing and distributing prospectuses
(Account and Fund) and supplements
(Account and Fund) to policy owners of
record as required by Federal Securities Laws
and to prospective purchasers
- -----------------------------------------------------------------------------------------------------------
text composition (Account), printing, mailing, and text composition of annual and semi-annual
distributing annual and semi-annual reports (Fund)
reports for Account (Fund and Account as,
applicable)
- -----------------------------------------------------------------------------------------------------------
text composition, printing, mailing, text composition, printing, mailing,
distributing, and tabulation of proxy distributing and tabulation of proxy
statements and voting instruction solicitation statements and voting instruction solicitation
materials to policy owners with respect to materials to policy owners with respect to
proxies related to the Account proxies related to the Fund
- -----------------------------------------------------------------------------------------------------------
preparation, printing and distributing sales
material and advertising relating to the Funds,
insofar as such materials relate to the
Contracts and filing such materials with and
obtaining approval from, the SEC, the NASD,
any state insurance regulatory authority, and
any other appropriate regulatory authority, to
the extent required
===========================================================================================================
</TABLE>
30
<PAGE> 1
EXHIBIT 8(a)(ii)
PARTICIPATION AGREEMENT
THIS AGREEMENT is made this _____ day of ______________ , 1998, by and
among The Alger American Fund (the "Trust"), an open-end management investment
company organized as a Massachusetts business trust, Sage Life Assurance of
America, Inc. a life insurance company organized as a corporation under the laws
of the State of Delaware, (the "Company"), on its own behalf and on behalf of
each segregated asset account of the Company set forth in Schedule A, as may be
amended from time to time (the "Accounts"), and Fred Alger & Company,
Incorporated, a Delaware corporation, the Trust's distributor (the
"Distributor").
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "Commission") as an open-end management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"), and has an
effective registration statement relating to the offer and sale of the various
series of its shares under the Securities Act of 1933, as amended (the "1933
Act");
WHEREAS, the Trust and the Distributor desire that Trust shares be used
as an investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements with
the Trust (the "Participating Insurance Companies");
WHEREAS, shares of beneficial interest in the Trust are divided into the
following series which are available for purchase by the Company for the
Accounts: Alger American Small Capitalization Portfolio, Alger American Growth
Portfolio, Alger American Income and Growth Portfolio, Alger American Balanced
Portfolio, Alger American MidCap Growth Portfolio, and Alger American Leveraged
AllCap Portfolio;
WHEREAS, the Trust has received an order from the Commission, dated
February 17, 1989 (File No. 812-7076), granting Participating Insurance
Companies and their separate accounts exemptions from the provisions of Sections
9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Portfolios of the Trust to be sold to and held by variable annuity and variable
life insurance separate accounts of both affiliated and unaffiliated life
insurance companies (the "Shared Funding Exemptive Order");
WHEREAS, the Company has registered or will register under the 1933 Act
certain variable life insurance policies and/or variable annuity contracts to be
issued by the Company under which the Portfolios are to be made available as
investment vehicles (the "Contracts");
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act unless an exemption from registration
under the 1940 Act is available and the Trust has been so advised;
1
<PAGE> 2
WHEREAS, the Company desires to use shares of the portfolios set forth
in Schedule A ("Portfolios") indicated on Schedule A as investment vehicles for
the Accounts;
NOW THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I.
Purchase and Redemption of Trust Portfolio Shares
1.1. For purposes of this Article I, the Company shall be the Trust's
designee for the receipt from each Account of purchase orders and
requests for redemption pursuant to the Contracts relating to each
Portfolio, provided that the Company notifies the Trust of such purchase
orders and requests for redemption by 9:30 a.m. Eastern time on the next
following Business Day, as defined in Section 1.3.
1.2. The Trust shall make shares of the Portfolios available to the Accounts
at the net asset value next computed after receipt of a purchase order
by the Trust (or its designee), as established in accordance with the
provisions of the then current prospectus of the Trust describing
Portfolio purchase procedures. The Company will transmit orders from
time to time to the Trust for the purchase and redemption of shares of
the Portfolios. The Trustees of the Trust (the "Trustees") may refuse to
sell shares of any Portfolio to any person, or suspend or terminate the
offering of shares of any Portfolio if such action is required by law or
by regulatory authorities having jurisdiction or if, in the sole
discretion of the Trustees acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, such
action is deemed in the best interests of the shareholders of such
Portfolio.
1.3. The Company shall pay for the purchase of shares of a Portfolio on
behalf of an Account with federal funds to be transmitted by wire to the
Trust, with the reasonable expectation of receipt by the Trust by 2:00
p.m. Eastern time on the next Business Day after the Trust (or its
designee) receives the purchase order. Upon receipt by the Trust of the
federal funds so wired, such funds shall cease to be the responsibility
of the Company and shall become the responsibility of the Trust for this
purpose. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Trust calculates its net
asset value pursuant to the rules of the Commission.
1.4. The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the Company on behalf of an Account, at the
net asset value next computed after receipt by the Trust (or its
designee) of the request for redemption, as established in accordance
with the provisions of the then current prospectus of the Trust
describing Portfolio redemption procedures. The Trust shall make payment
for such shares in the manner established from time to time by the
Trust. Proceeds of redemption with respect to a Portfolio will normally
be paid to the Company for an Account in federal funds
2
<PAGE> 3
transmitted by wire to the Company by order of the Trust with the
reasonable expectation of receipt by the Company by 2:00 p.m. Eastern
time on the next Business Day after the receipt by the Trust (or its
designee) of the request for redemption. Such payment may be delayed if,
for example, the Portfolio's cash position so requires or if
extraordinary market conditions exist, but in no event shall payment be
delayed for a greater period than is permitted by the 1940 Act. The
Trust reserves the right to suspend the right of redemption, consistent
with Section 22(e) of the 1940 Act and any rules thereunder.
1.5. Payments for the purchase of shares of the Trust's Portfolios by the
Company under Section 1.3 and payments for the redemption of shares of
the Trust's Portfolios under Section 1.4 on any Business Day may be
netted against one another for the purpose of determining the amount of
any wire transfer.
1.6. Issuance and transfer of the Trust's Portfolio shares will be by book
entry only. Stock certificates will not be issued to the Company or the
Accounts. Portfolio Shares purchased from the Trust will be recorded in
the appropriate title for each Account or the appropriate subaccount of
each Account.
1.7. The Trust shall furnish, on or before the ex-dividend date, notice to
the Company of any income dividends or capital gain distributions
payable on the shares of any Portfolio of the Trust. The Company hereby
elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional
shares of that Portfolio. The Company reserves the right to revoke this
election and to receive all such income dividends and capital gains
distributions in cash. The Trust shall notify the Company of the number
of shares so issued as payment of such dividends and distributions.
1.8. The Trust shall calculate the net asset value of each Portfolio on each
Business Day, as defined in Section 1.3. The Trust shall make the net
asset value per share for each Portfolio available to the Company or its
designated agent on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best
efforts to make such net asset value per share available to the Company
by 6:30 p.m. Eastern time each Business Day. If the Trust provides
incorrect net asset value information, the Company shall be entitled to
an adjustment to the number of shares purchased or redeemed to reflect
the correct net asset value per share. Any error in the calculation or
reporting of net asset value per share, dividend, or capital gains
information shall be reported promptly upon discovery to the Company.
1.9. The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their segregated asset accounts,
to the Fund Sponsor or its affiliates and to such other entities as may
be permitted by Section 817(h) of the Code, the regulations hereunder,
or judicial or administrative interpretations thereof. No shares of any
Portfolio will be sold directly to the general public. The Company
agrees that it will use Trust shares only for the purposes of funding
the Contracts through the Accounts listed in
3
<PAGE> 4
Schedule A, as amended from time to time.
1.10. The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding materially to those contained in
Section 2.9 and Article IV of this Agreement.
ARTICLE II.
Obligations of the Parties
2.1. The Trust shall prepare and be responsible for filing with the
Commission and any state regulators requiring such filing all
shareholder reports, notices, proxy materials (or similar materials such
as voting instruction solicitation materials), registration statement
amendments, prospectuses and statements of additional information of the
Trust. The Trust shall bear the costs of registration and qualification
of shares of the Portfolios, preparation and filing of the documents
listed in this Section 2.1 and all taxes to which an issuer is subject
on the issuance and transfer of its shares.
2.2. The Company shall distribute such prospectuses, proxy statements and
periodic reports of the Trust to the Contract owners as required to be
distributed to such Contract owners under applicable federal or state
law.
2.3. The Trust shall provide such documentation (including a final copy of
the Trust's prospectus as set in type or in camera-ready copy) and other
assistance as is reasonably necessary in order for the Company to print
together in one document the current prospectus for the Contracts issued
by the Company and the current prospectus for the Portfolios. The Trust
shall bear the expense of printing copies of its current prospectus that
will be distributed to existing Contract owners, and the Company shall
bear the expense of printing copies of the Portfolios' prospectuses that
are used in connection with offering the Contracts issued by the
Company. With respect to any Portfolio prospectus that is printed in
combination with any one or more non-Portfolio prospectus (the
"Prospectus Booklet"), the costs of printing such Portfolio prospectus
that will be distributed to existing Contract owners shall be prorated
to the Trust based on the ratio of the number of pages of the Portfolio
prospectus included in the Prospectus Booklet to the number of pages in
the Prospectus Booklet as a whole.
2.4. The Trust and the Distributor shall provide (1) at the Trust's expense,
one copy of the Portfolios' current Statement of Additional Information
("SAI") to the Company and to any Contract owner who requests such SAI,
(2) at the Company's expense, such additional copies of the Portfolios'
current SAI as the Company shall reasonably request and that the Company
shall require in accordance with applicable law in connection with
offering the Contracts issued by the Company.
2.5. The Trust, at its expense, shall provide the Company with copies of its
proxy material, periodic reports to shareholders and other
communications to shareholders in such
4
<PAGE> 5
quantity as the Company shall reasonably require for purposes of
distributing to Contract owners. The Trust, at the Company's expense,
shall provide the Company with copies of its periodic reports to
shareholders and other communications to shareholders in such quantity
as the Company shall reasonably request for use in connection with
offering the Contracts issued by the Company. If requested by the
Company in lieu thereof, the Trust shall provide such documentation
(including a final copy of the Trust's proxy materials, periodic reports
to shareholders and other communications to shareholders, as set in type
or in camera-ready copy) and other assistance as reasonably necessary in
order for the Company to print such shareholder communications for
distribution to Contract owners.
2.6. The Company agrees and acknowledges that the Distributor is the sole
owner of the name and mark "Alger" and that all use of any designation
comprised in whole or part of such name or mark under this Agreement
shall inure to the benefit of the Distributor. Except as provided in
Section 2.5, the Company shall not use any such name or mark on its own
behalf or on behalf of the Accounts or Contracts in any registration
statement, advertisement, sales literature or other materials relating
to the Accounts or Contracts without the prior written consent of the
Distributor. At such time as the Company is no longer invested in the
Fund, the Company shall cease all use of any such name or mark as soon
as reasonably practicable.
2.7. The Company shall furnish, or cause to be furnished, to the Trust or its
designee a copy of each Contract prospectus and/or statement of
additional information describing the Contracts, each report to Contract
owners, proxy statement, application for exemption or request for
no-action letter in which the Trust or the Distributor is named
contemporaneously with the filing of such document with the Commission.
The Company shall furnish, or shall cause to be furnished, to the Trust
or its designee each piece of sales literature or other promotional
material in which the Trust or the Distributor is named, at least five
Business Days prior to its use. No such material shall be used if the
Trust or its designee reasonably objects to such use within three
Business Days after receipt of such material. The Distributor shall
furnish, or shall cause to be furnished, to the Company or its designee
a copy of the Fund's prospectus and/or statement of additional
information upon filing with the Securities and Exchange Commission. The
Distributor shall furnish, or shall cause to be furnished, to the
Company or its designee each piece of sales literature or other
promotional material in which the Company is named, at least five
Business Days prior to its use. No such material shall be used if the
Company or its designee reasonably objects to such use within three
Business Days after receipt of such material.
2.8. The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust or the
Distributor in connection with the sale of the Contracts other than
information or representations contained in and accurately derived from
the registration statement or prospectus for the Trust shares (as such
registration statement and prospectus may be amended or supplemented
from time
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<PAGE> 6
to time), annual and semi-annual reports of the Trust, Trust-sponsored
proxy statements, or in sales literature or other promotional material
approved by the Trust or its designee, except as required by legal
process or regulatory authorities or with the prior written permission
of the Trust, the Distributor or their respective designees. The Trust
and the Distributor agree to respond to any request for approval on a
prompt and timely basis. The Company shall adopt and implement
procedures reasonably designed to ensure that "broker only" materials
including information therein about the Trust or the Distributor are not
distributed to existing or prospective Contract owners. The Trust and
the Distributor shall adopt and implement procedures reasonably designed
to ensure that "broker only" materials including information therein
about the Company are not distributed to existing or prospective
Contract owners.
2.9. The Trust shall use its best efforts to provide the Company, on a timely
basis, with such information about the Trust, the Portfolios and the
Distributor, in such form as the Company may reasonably require, as the
Company shall reasonably request in connection with the preparation of
registration statements, prospectuses and annual and semi-annual reports
pertaining to the Contracts.
2.10. The Trust and the Distributor shall not give, and agree that no
affiliate of either of them shall give, any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from the
registration statement or prospectus for the Contracts (as such
registration statement and prospectus may be amended or supplemented
from time to time), or in materials approved by the Company for
distribution including sales literature or other promotional materials,
except as required by legal process or regulatory authorities or with
the prior written permission of the Company. The Company agrees to
respond to any request for approval on a prompt and timely basis.
2.11. So long as, and to the extent that, the Commission interprets the 1940
Act to require pass- through voting privileges for Contract owners, the
Company will provide pass-through voting privileges to Contract owners
whose cash values are invested, through the registered Accounts, in
shares of one or more Portfolios of the Trust. The Trust shall require
all Participating Insurance Companies to calculate voting privileges in
the same manner and the Company shall be responsible for assuring that
the Accounts calculate voting privileges in the manner established by
the Trust. With respect to each registered Account, the Company will
vote shares of each Portfolio of the Trust held by a registered Account
and for which no timely voting instructions from Contract owners are
received in the same proportion as those shares for which voting
instructions are received. Unless required by applicable law, the
Company and its agents will in no way recommend or oppose or interfere
with the solicitation of proxies for Portfolio shares held to fund the
Contracts without the prior written consent of the Trust, which consent
may be withheld in the Trust's sole discretion. The Company reserves the
right, to the extent permitted by law, to vote shares held in any
Account in its sole discretion.
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2.12. The Company and the Trust and Distributor will each provide to the other
information about the results of any regulatory examination relating to
the Contracts or the Trust, including relevant portions of any
"deficiency letter" and any response thereto.
2.13. No compensation shall be paid by the Trust to the Company, or by the
Company to the Trust, under this Agreement (except for specified expense
reimbursements). However, nothing herein shall prevent the parties
hereto from otherwise agreeing to perform, and arranging for appropriate
compensation for, other services relating to the Trust, the Accounts or
both.
2.14 The Trust will comply with all provisions of the 1940 Act pertaining to
voting by shareholders and annual meetings or comply with Section 16(c)
of the 1940 Act as well as with Section 16(a) and, if and when
applicable, 16(b). Further, the Trust will act in accordance with the
Securities and Exchange Commission's interpretation of the requirements
of Section 16(a) with respect to periodic elections of trustees and with
whatever rules the Commission may promulgate with respect thereto.
ARTICLE III.
Representations and Warranties
3.1. The Company represents and warrants that it is an insurance company duly
organized and in good standing under the laws of the State of Delaware
and that it has legally and validly established each Account as a
segregated asset account under such law as of the date set forth in
Schedule A, and that _________________________________, the principal
underwriter for the Contracts, is registered as a broker-dealer under
the Securities Exchange Act of 1934 and is a member in good standing of
the National Association of Securities Dealers, Inc.
3.2. The Company represents and warrants that it has registered or, prior to
any issuance or sale of the Contracts, will register each Account as a
unit investment trust in accordance with the provisions of the 1940 Act
and cause each Account to remain so registered to serve as a segregated
asset account for the Contracts, unless an exemption from registration
is available.
3.3. The Company represents and warrants that the Contracts will be
registered under the 1933 Act unless an exemption from registration is
available prior to any issuance or sale of the Contracts; the Contracts
will be issued and sold in compliance in all material respects with all
applicable federal and state laws; and the sale of the Contracts shall
comply in all material respects with state insurance law suitability
requirements.
3.4. The Trust represents and warrants that it is and shall remain duly
organized and validly existing under the laws of the Commonwealth of
Massachusetts and that it does and will
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comply in all material respects with the 1940 Act and the rules and
regulations thereunder.
3.5. The Trust and the Distributor represent and warrant that the Portfolio
shares offered and sold pursuant to this Agreement will be registered
under the 1933 Act and sold in accordance with all applicable federal
and state laws, and the Trust shall be registered under the 1940 Act
prior to and at the time of any issuance or sale of such shares. The
Trust shall amend its registration statement under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Trust shall register and qualify its shares
for sale in accordance with the laws of the various states only if and
to the extent deemed advisable by the Trust.
3.6. The Trust represents and warrants that the investments of each portfolio
of the Trust comply and will continue to comply with the diversification
requirements for variable annuity, endowment or life insurance contracts
set forth in Section 817(h) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the rules and regulations thereunder,
including without limitation Treasury Regulation 1.817-5, and will
notify the Company immediately upon having a reasonable basis for
believing any portfolio has ceased to comply or might not so comply and
will immediately take all reasonably necessary steps to adequately
diversify the Portfolio to achieve compliance within the grace period
afforded by Regulation 1.817-5.
3.7. The Trust represents and warrants that it is currently qualified as a
"regulated investment company" under Subchapter M of the Code, that it
will make every effort to maintain such qualification and will notify
the Company immediately upon having a reasonable basis for believing it
has ceased to so qualify or might not so qualify in the future.
3.8. The Trust represents and warrants that it, its directors, officers,
employees and others dealing with the money or securities, or both, of a
Portfolio shall at all times be covered by a blanket fidelity bond or
similar coverage for the benefit of the Trust in an amount not less than
the minimum coverage required by Rule 17g-1 or other applicable
regulations under the 1940 Act. Such bond shall include coverage for
larceny and embezzlement and be issued by a reputable bonding company.
3.9. The Trust currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule
12b-1, the Rule 12b-1 Plan adopted by the Trust will comply with the
1940 Act.
3.10. The Trust represents and warrants that it will use its best efforts to
ensure that the investment policies, fees and expenses of the Portfolios
are and shall at all times remain in compliance with applicable
insurance and other applicable laws of
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Delaware and any other applicable state as such laws are described by
and specifically requested in writing by the Company to the extent that
said compliance is reasonably necessary for the Trust to perform its
duties under this Agreement.
3.11. The Distributor represents that it is duly organized and validly
existing under the laws of the State of Delaware and that it is
registered, and will remain registered, during the term of this
Agreement, as a broker-dealer under the Securities Exchange Act of 1934,
as amended (the "1934 Act") and is a member in good standing of the
National Association of Securities Dealers, Inc. The Distributor further
represents that it shall perform its obligations to the Trust in
accordance with all applicable state and federal securities laws,
including the 1933 Act, the 1934 Act, and the 1940 Act.
ARTICLE IV.
Potential Conflicts
4.1. The parties acknowledge that a Portfolio's shares may be made available
for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any
material irreconcilable conflict between the interests of the contract
owners of all Participating Insurance Companies. A material
irreconcilable conflict may arise for a variety of reasons, including:
(a) an action by any state insurance regulatory authority; (b) a change
in applicable federal or state insurance, tax or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in
voting instructions given by variable annuity contract and variable life
insurance contract owners; or (f) a decision by an insurer to disregard
the voting instructions of contract owners. The Trust shall promptly
inform the Company of any determination by the Trustees that a material
irreconcilable conflict exists and of the implications thereof.
4.2. The Company agrees to report promptly any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist
the Trustees in carrying out their responsibilities under the Shared
Funding Exemptive Order by providing the Trustees with all information
reasonably necessary for and requested by the Trustees to consider any
issues raised including, but not limited to, information as to a
decision by the Company to disregard Contract owner voting instructions.
All communications from the Company to the Trustees may be made in care
of the Trust.
4.3. If it is determined by a majority of the Trustees, or a majority of the
disinterested Trustees, that a material irreconcilable conflict exists
that affects the interests of contract owners, the Company shall, in
cooperation with other Participating Insurance Companies whose contract
owners are also affected, at its own expense and to the extent
reasonably practicable (as determined by the Trustees) take whatever
steps are necessary to remedy
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or eliminate the material irreconcilable conflict, which steps could
include: (a) withdrawing the assets allocable to some or all of the
Accounts from the Trust or any Portfolio and reinvesting such assets in
a different investment medium, including (but not limited to) another
Portfolio of the Trust, or submitting the question of whether or not
such segregation should be implemented to a vote of all affected
Contract owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners, life insurance
contract owners, or variable contract owners of one or more
Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contract owners the option of
making such a change; and (b) establishing a new registered management
investment company or managed separate account.
4.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority
vote, the Company may be required, at the Trust's election, to withdraw
the affected Account's investment in the Trust and terminate this
Agreement with respect to such Account; provided, however that such
withdrawal and termination shall be limited to the extent required by
the foregoing material irreconcilable conflict as determined by a
majority of the disinterested Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust gives
written notice that this provision is being implemented. Until the end
of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of
shares of the Trust.
4.5. If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw
the affected Account's investment in the Trust and terminate this
Agreement with respect to such Account within six (6) months after the
Trustees inform the Company in writing that the Trust has determined
that such decision has created a material irreconcilable conflict;
provided, however, that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested Trustees. Until the end
of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of
shares of the Trust.
4.6. For purposes of Section 4.3 through 4.6 of this Agreement, a majority of
the disinterested Trustees shall determine whether any proposed action
adequately remedies any material irreconcilable conflict, but in no
event will the Trust be required to establish a new funding medium for
any Contract. The Company shall not be required to establish a new
funding medium for the Contracts if an offer to do so has been declined
by vote of a majority of Contract owners materially adversely affected
by the material irreconcilable conflict. In the event that the Trustees
determine that any proposed action does not adequately remedy any
material irreconcilable conflict, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement within
six (6) months after the Trustees inform the Company in writing of the
foregoing determination;
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provided, however, that such withdrawal and termination shall be limited
to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested Trustees.
4.7. The Company shall at least annually submit to the Trustees such reports,
materials or data as the Trustees may reasonably request so that the
Trustees may fully carry out the duties imposed upon them by the Shared
Funding Exemptive Order, and said reports, materials and data shall be
submitted more frequently if reasonably deemed appropriate by the
Trustees.
4.8. If and to the extent that Rule 6e-3(T) is amended, or Rule 6e-3 is
adopted, to provide exemptive relief from any provision of the 1940 Act
or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared
Funding Exemptive Order, then the Trust and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may be
necessary to comply with Rule 6e-3(T), as amended, or Rule 6e-3, as
adopted, to the extent such rules are applicable.
ARTICLE V.
Indemnification
5.1. Indemnification By the Company. The Company agrees to indemnify and hold
harmless the Distributor, the Trust and each of its Trustees, officers,
employees and agents and each person, if any, who controls the Trust
within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 5.1) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Company, which consent shall
not be unreasonably withheld) or expenses (including the reasonable
costs of investigating or defending any alleged loss, claim, damage,
liability or expense and reasonable legal counsel fees incurred in
connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common
law or otherwise, insofar as such Losses are related to the sale or
acquisition of the Contracts or Trust shares and:
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in a
registration statement or prospectus for the Contracts or in the
Contracts themselves or in sales literature generated or
approved by the Company on behalf of the Contracts or Accounts
(or any amendment or supplement to any of the foregoing)
(collectively, "Company Documents" for the purposes of this
Article V), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein
not misleading,
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provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was
accurately derived from written information furnished to the
Company by or on behalf of the Trust for use in Company
Documents or otherwise for use in connection with the sale of
the Contracts or Trust shares; or
(b) arise out of or result from statements or representations (other
than statements or representations contained in and accurately
derived from Trust Documents as defined in Section 5.2(a)) or
wrongful conduct of the Company or persons under its control,
with respect to the sale or acquisition of the Contracts or
Trust shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Trust Documents
as defined in Section 5.2(a) or the omission or alleged omission
to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading if
such statement or omission was made in reliance upon and
accurately derived from written information furnished to the
Trust by or on behalf of the Company; or
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under the
terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(f) arise out of or result from the provision by the Company to the
Trust of insufficient or incorrect information regarding the
purchase or sale of shares of any Portfolio, or the failure of
the Company to provide such information on a timely basis.
5.2. Indemnification by the Distributor. The Distributor agrees to indemnify
and hold harmless the Company and each of its directors, officers,
employees, and agents and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for the purposes of this Section 5.2) against any
and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Distributor, which consent
shall not be unreasonably withheld) or expenses (including the
reasonable costs of investigating or defending any alleged loss, claim,
damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the
Indemnified Parties may become subject under any statute or regulation,
or at common law or otherwise, insofar as such Losses are related to the
sale or acquisition of the Contracts or Trust shares and:
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(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
registration statement or prospectus for the Trust or in sales
literature generated or approved by the Distributor on behalf of
the Trust (or any amendment or supplement thereto)
(collectively, "Trust Documents" for the purposes of this
Article V), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein
not misleading, provided that this indemnity shall not apply as
to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and was
accurately derived from written information furnished to the
Distributor or the Trust by or on behalf of the Company for use
in Trust Documents or otherwise for use in connection with the
sale of the Contracts or Trust shares and; or
(b) arise out of or result from statements or representations (other
than statements or representations contained in and accurately
derived from Company Documents) or wrongful conduct of the Trust
or Distributor or persons under its control, with respect to the
sale or acquisition of the Contracts or Portfolio shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading if such statement or
omission was made in reliance upon and accurately derived from
written information furnished to the Company by or on behalf of
the Trust; or
(d) arise out of or result from any failure by the Distributor or
the Trust to provide the services or furnish the materials
required under the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor or the
Trust in this Agreement or arise out of or result from any other
material breach of this Agreement by the Distributor or the
Trust.
5.3. None of the Company, the Trust or the Distributor shall be liable under
the indemnification provisions of Sections 5.1 or 5.2, as applicable,
with respect to any Losses incurred or assessed against an Indemnified
Party that arise from such Indemnified Party's willful misfeasance, bad
faith or negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement.
5.4. None of the Company, the Trust or the Distributor shall be liable under
the indemnification provisions of Sections 5.1 or 5.2, as applicable,
with respect to any claim made against an Indemnified party unless such
Indemnified Party shall have notified the
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other party in writing within a reasonable time after the summons, or
other first written notification, giving information of the nature of
the claim shall have been served upon or otherwise received by such
Indemnified Party (or after such Indemnified Party shall have received
notice of service upon or other notification to any designated agent),
but failure to notify the party against whom indemnification is sought
of any such claim shall not relieve that party from any liability which
it may have to the Indemnified Party in the absence of Sections 5.1 and
5.2.
5.5. In case any such action is brought against an Indemnified Party, the
indemnifying party shall be entitled to participate, at its own expense,
in the defense of such action. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel reasonably
satisfactory to the party named in the action. After notice from the
indemnifying party to the Indemnified Party of an election to assume
such defense, the Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it, and the indemnifying party will
not be liable to the Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation.
ARTICLE VI.
Termination
6.1. This Agreement shall terminate:
(a) at the option of any party upon 6 months advance written notice
to the other parties, unless a shorter time is agreed to by the
parties;
(b) at the option of the Trust or the Distributor if the Contracts
issued by the Company cease to qualify as annuity contracts or
life insurance contracts, as applicable, under the Code or if the
Contracts are not registered, issued or sold in accordance with
applicable state and/or federal law; or
(c) at the option of any party upon a determination by a majority of
the Trustees of the Trust, or a majority of its disinterested
Trustees, that a material irreconcilable conflict exists; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust or the Distributor by the NASD, the
SEC, or any state securities or insurance department or any other
regulatory body regarding the Trust's or the Distributor's duties
under this Agreement or related to the sale of Trust shares or
the operation of the Trust; or
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(e) at the option of the Company if the Trust or a Portfolio fails to
meet the diversification requirements specified in Section 3.6
hereof; or
(f) at the option of the Company if shares of the Portfolios are not
reasonably available to meet the requirements of the Variable
Contracts issued by the Company, as determined by the Company,
and upon prompt notice by the Company to the other parties; or
(g) at the option of the Company in the event any of the shares of
the PortfolioS are not registered, issued or sold in accordance
with applicable state and/or federal law, or such law precludes
the use of such shares as the underlying investment media of the
Variable Contracts issued or to be issued by the Company; or
(h) at the option of the Company, if the Portfolio fails to qualify
as a Regulated Investment Company under Subchapter M of the Code;
or
(i) at the option of the Distributor if it shall determine in its
sole judgment exercised in good faith, that the Company and/or
its affiliated companies has suffered a material adverse change
in its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity; or
(j) at the option of the Company if it shall determine in its sole
judgement exercised in good faith, that the Trust and/or its
Distributor has suffered a material adverse change in its
business, operation, financial condition, or prospects since the
date of this Agreement or is the subject of material adverse
publicity; or
(k) upon another party's failure to cure a material breach of any
provision of this Agreement within thirty (30) days after
written notice thereof.
6.2. Notwithstanding any termination of this Agreement, the Trust shall, at
the option of the Company, continue to make available additional shares
of any Portfolio and redeem shares of any Portfolio pursuant to the
terms and conditions of this Agreement for all Contracts in effect on
the effective date of termination of this Agreement.
6.3. The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article II, Article III, Article IV and
Sections 8.6 and 8.11 shall survive the termination of this Agreement as
long as shares of the Trust are held on behalf of Contract owners in
accordance with Section 6.2.
ARTICLE VII.
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Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust or its Distributor:
Fred Alger & Company Inc.
30 Montgomery Street
Jersey City, NJ 07302
Attn: Gregory S. Duch
If to the Company:
Sage Life Assurance of America, Inc.
300 Atlantic Street, Suite 302
Stamford, CT 06903
Attn: James F. Bronsdon, Esquire
ARTICLE VIII.
Miscellaneous
8.1. The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2. This Agreement may be executed in two or more counterparts, each of
which taken together shall constitute one and the same instrument.
8.3. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
8.4. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of New York, without
giving effect to its conflict of laws principles. It shall also be
subject to the provisions of the federal securities laws and the rules
and regulations thereunder and to any orders of the Commission granting
exemptive relief therefrom and the conditions of such orders. Copies of
any such orders shall be promptly forwarded by the Trust to the Company.
8.5. All liabilities of the Trust arising, directly or indirectly, under this
Agreement, of any and
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every nature whatsoever, shall be satisfied solely out of the assets of
the Trust and no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6. Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Commission,
the National Association of Securities Dealers, Inc. and state insurance
regulators) and shall permit such authorities reasonable access to its
books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto
further agrees to furnish the California Insurance Commissioner with any
information or reports in connection with services provided under this
Agreement which such Commissioner may request in order to ascertain
whether the insurance operations of the Company are being conducted in a
manner consistent with the California Insurance Regulations and any
other applicable law or regulations.
8.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws.
8.8. This Agreement shall not be exclusive in any respect.
8.9. Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the other
party.
8.10. No provisions of this Agreement may be amended or modified in any manner
except by a written agreement properly authorized and executed by both
parties.
8.11. Each party hereto shall, except as required by law or otherwise
permitted by this Agreement, treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto, and
shall not disclose such confidential information without the written
consent of the affected party unless such information has become
publicly available.
8.12 To the best of their belief, the Trust and the Distributor have taken
all necessary steps to address all Year 2000 transition issues and do
not anticipate that the Company and its affiliates will sustain any
material negative effect as a result of the Trust's and the
Distributor's Year 2000 transition.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
17
<PAGE> 18
Fred Alger & Company, Incorporated
By:
--------------------------------
Name:
Title:
The Alger American Fund
By:
---------------------------------
Name:
Title:
Sage Life Assurance of America, Inc.
By:
-----------------------------------
Name:
Title:
SCHEDULE A
The Alger American Fund:
-Alger American Small Capitalization Portfolio
-Alger American MidCap Growth Portfolio
-Alger American Income and Growth Portfolio
18
<PAGE> 1
EXHIBIT 8(a)(iv)
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
SAGE LIFE ASSURANCE OF AMERICA, INC.
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this __ day of October 1998, by
and among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), SAGE LIFE ASSURANCE OF AMERICA, INC., a Delaware corporation (the
"Company") on its own behalf and on behalf of each of the segregated asset
accounts of the Company set forth in Schedule A hereto, as may be amended from
time to time (the "Accounts"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a
Delaware corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or
variable life insurance contracts (individually, the "Policy" or, collectively,
the "Policies") which, if required by applicable law, will be registered under
the 1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated
asset accounts, established by resolution of the Board of Directors of the
Company, to set aside and invest assets attributable to the aforesaid variable
annuity and/or variable life insurance contracts that are allocated to the
Accounts (the Policies and the Accounts covered by this Agreement, and each
corresponding Portfolio covered by this Agreement in which the Accounts invest,
is specified in Schedule A attached hereto as may be modified from time to
time);
WHEREAS, the Company has registered or will register the Accounts as
unit investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered
as a broker-dealer with the Securities and Exchange Commission (the "SEC")
under the Securities Exchange Act of 1934, as
<PAGE> 2
amended (hereinafter the "1934 Act"), and is a member in good standing of the
National Association of Securities Dealers, Inc. (the "NASD");
WHEREAS, Sage Distributors, Inc., the underwriter for the individual
variable annuity and the variable life policies, is registered as a
broker-dealer with the SEC under the 1934 Act and is a member in good standing
of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust,
MFS, and the Company agree as follows:
ARTICLE I. SALE OF TRUST SHARES
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that
Business Day, as defined below) and which are available for purchase
by such Accounts, executing such orders on a daily basis at the
closing net asset value next computed after receipt by the Trust or
its designee of the order for the Shares. For purposes of this
Section 1.1, the Company shall be the designee of the Trust for
receipt of such orders from Policy owners and receipt by such
designee shall constitute receipt by the Trust; provided that the
Trust receives notice of such orders by 9:30 a.m. New York time on
the next following Business Day. "Business Day" shall mean any day on
which the New York Stock Exchange, Inc. (the "NYSE") is open for
trading and on which the Trust calculates its net asset value
pursuant to the rules of the SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company
and the Accounts on those days on which the Trust calculates its net
asset value pursuant to rules of the SEC and the Trust shall
calculate such net asset value on each day which the NYSE is open for
trading. Notwithstanding the foregoing, the Board of Trustees of the
Trust (the "Board") may refuse to sell any Shares to the Company and
the Accounts, or suspend or terminate the offering of the Shares if
such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board acting in
good faith and in light of its fiduciary duties under federal and any
applicable state laws, necessary in the best interest of the
Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to
insurance companies which have entered into participation agreements
with the Trust and MFS (the "Participating Insurance Companies") and
their separate accounts, qualified pension and retirement plans and
MFS or its affiliates. The Trust and MFS will not sell Trust shares
to any insurance company or separate account unless an agreement
containing provisions substantially the same as Articles III and VII
of this Agreement is in effect to govern such sales. The Company will
not resell the Shares except to the Trust or its agents.
1.4. The Trust agrees to redeem for cash, on the Company's request,
any full or fractional Shares held by the Accounts (based on orders
placed by Policy owners on that Business Day), executing such
requests on a daily basis at the closing net asset value next
computed after receipt
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<PAGE> 3
by the Trust or its designee of the request for redemption. For
purposes of this Section 1.4, the Company shall be the designee of
the Trust for receipt of requests for redemption from Policy owners
and receipt by such designee shall constitute receipt by the Trust;
provided that the Trust receives notice of such request for
redemption by 9:30 a.m. New York time on the next following Business
Day.
1.5. Each purchase, redemption and exchange order placed by the
Company shall be placed separately for each Portfolio and shall not
be netted with respect to any Portfolio. However, with respect to
payment of the purchase price by the Company and of redemption
proceeds by the Trust, the Company and the Trust shall net purchase
and redemption orders with respect to each Portfolio and shall
transmit one net payment for all of the Portfolios in accordance with
Section 1.6 hereof.
1.6. In the event of net purchases, the Company shall pay for the
Shares by 2:00 p.m. New York time on the next Business Day after an
order to purchase the Shares is made in accordance with the
provisions of Section 1.1. hereof. In the event of net redemptions,
the Trust shall pay the redemption proceeds by 2:00 p.m. New York
time on the next Business Day after an order to redeem the shares is
made in accordance with the provisions of Section 1.4. hereof. All
such payments shall be in federal funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only.
Stock certificates will not be issued to the Company or the Accounts.
The Shares ordered from the Trust will be recorded in an appropriate
title for the Accounts or the appropriate subaccounts of the
Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any dividends or
capital gain distributions payable on the Shares. The Company hereby
elects to receive all such dividends and distributions as are
payable on a Portfolio's Shares in additional Shares of that
Portfolio. The Company reserves the right to revoke this election
and to receive all such dividends or capital gains distributions in
cash. The Trust shall notify the Company of the number of Shares so
issued as payment of such dividends and distributions.
1.9. The Trust or its custodian shall make the closing net asset
value per share for each Portfolio available to the Company on each
Business Day as soon as reasonably practical after the closing net
asset value per share is calculated and shall use its best efforts
to make such closing net asset value per share available by 6:30
p.m. New York time. In the event that the Trust is unable to meet
the 6:30 p.m. time stated herein, it shall provide additional time
for the Company to place orders for the purchase and redemption of
Shares. Such additional time shall be equal to the additional time
which the Trust takes to make the closing net asset value available
to the Company. If the Trust provides materially incorrect share net
asset value information, the Trust shall make an adjustment to the
number of shares purchased or redeemed for the Accounts to reflect
the correct closing net asset value per share. Any material error in
the calculation or reporting of net asset value per share, dividend
or capital gains information shall be reported promptly upon
discovery to the Company.
ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. The Company represents and warrants that the Policies are or
will be registered under the 1933 Act or are exempt from or not
subject to registration thereunder, and that the Policies will be
issued, sold, and distributed in compliance in all material respects
with all applicable state and
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<PAGE> 4
federal laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act. The Company further represents and warrants
that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established
the Account as a segregated asset account under applicable law and
has registered or, prior to any issuance or sale of the Policies,
will register the Accounts as unit investment trusts in accordance
with the provisions of the 1940 Act (unless exempt therefrom) to
serve as segregated investment accounts for the Policies, and that it
will maintain such registration for so long as any Policies are
outstanding. The Company shall amend the registration statements
under the 1933 Act for the Policies and the registration statements
under the 1940 Act for the Accounts from time to time as required in
order to effect the continuous offering of the Policies or as may
otherwise be required by applicable law. The Company shall register
and qualify the Policies for sales in accordance with the securities
laws of the various states only if and to the extent deemed necessary
by the Company.
2.2. Subject to Article VI hereof, the Company represents and
warrants that the Policies are currently and at the time of issuance
will be treated as life insurance, endowment or annuity contract
under applicable provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), that it will maintain such treatment and that
it will notify the Trust or MFS immediately upon having a reasonable
basis for believing that the Policies have ceased to be so treated or
that they might not be so treated in the future.
2.3. The Company represents and warrants that Sage Distributors,
Inc., the underwriter for the individual variable annuity and the
variable life policies, is a member in good standing of the NASD and
is a registered broker-dealer with the SEC. The Company represents
and warrants that the Company and Sage Distributors, Inc. will sell
and distribute such policies in accordance in all material respects
with all applicable state and federal securities laws, including
without limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.4. The Trust and MFS represent and warrant that the Shares sold
pursuant to this Agreement shall be registered under the 1933 Act,
duly authorized for issuance and sold in compliance with the laws of
The Commonwealth of Massachusetts and all applicable federal and
state securities laws and that the Trust is and shall remain
registered under the 1940 Act. The Trust shall amend the registration
statement for its Shares under the 1933 Act and the 1940 Act from
time to time as required in order to effect the continuous offering
of its Shares. The Trust shall register and qualify the Shares for
sale in accordance with the laws of the various states only if and to
the extent deemed necessary by the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in
good standing of the NASD and is registered as a broker-dealer with
the SEC. The Trust and MFS represent that the Trust and the
Underwriter will sell and distribute the Shares in accordance in all
material respects with all applicable state and federal securities
laws, including without limitation the 1933 Act, the 1934 Act, and
the 1940 Act.
2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that
it does and will comply in all material respects with the 1940 Act
and Subchapter M of the Code and any applicable regulations
thereunder.
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it
shall perform its obligations for the Trust in compliance in all
material respects with any applicable federal securities laws and
with the securities laws of The Commonwealth of Massachusetts. MFS
represents and warrants that it is not subject to state
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<PAGE> 5
securities laws other than the securities laws of The Commonwealth of
Massachusetts and that it is exempt from registration as an
investment adviser under the securities laws of The Commonwealth of
Massachusetts.
2.8. No less frequently than annually, the Company shall submit to
the Board such reports, material or data as the Board may reasonably
request so that it may carry out fully the obligations imposed upon
it by the conditions contained in the exemptive application pursuant
to which the SEC has granted exemptive relief to permit mixed and
shared funding (the "Mixed and Shared Funding Exemptive Order").
2.9. The Trust and MFS represent that they will comply with state
insurance law restrictions applicable to them in connection with
rendering services to the Company under this Agreement, as determined
and provided in writing and described to them by the Company,
including the furnishing of information not otherwise available to
the Company which is required by state insurance law to enable the
Company to obtain the authority needed to issue the Contracts in any
applicable state.
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current
prospectus (describing only the Portfolios listed in Schedule A
hereto) for the Shares as the Company may reasonably request for
distribution to existing Policy owners whose Policies are funded by
such Shares. The Trust or its designee shall provide the Company, at
the Company's expense, with as many copies of the current prospectus
for the Shares as the Company may reasonably request for distribution
to prospective purchasers of Policies. If requested by the Company in
lieu thereof, the Trust or its designee shall provide such
documentation (including a "camera ready" copy of the new prospectus
as set in type or, at the request of the Company, as a diskette in
the form sent to the financial printer) and other assistance as is
reasonably necessary in order for the parties hereto once each year
(or more frequently if the prospectus for the Shares is supplemented
or amended) to have the prospectus for the Policies and the
prospectus for the Shares printed together in one document; the
expenses of such printing to be apportioned between (a) the Company
and (b) the Trust or its designee in proportion to the number of
pages of the Policy and Shares' prospectuses, taking account of other
relevant factors affecting the expense of printing, such as covers,
columns, graphs and charts; the Trust or its designee to bear the
cost of printing the Shares' prospectus portion of such document for
distribution to owners of existing Policies funded by the Shares and
the Company to bear the expenses of printing the portion of such
document relating to the Accounts; provided, however, that the Company
shall bear all printing expenses of such combined documents where
used for distribution to prospective purchasers or to owners of
existing Policies not funded by the Shares. In the event that the
Company requests that the Trust or its designee provides the Trust's
prospectus in a "camera ready" or diskette format, the Trust shall be
responsible for providing the prospectus in the format in which it or
MFS is accustomed to formatting prospectuses and shall bear the
expense of providing the prospectus in such format (e.g., typesetting
expenses), and the Company shall bear the expense of adjusting or
changing the format to conform with any of its prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or
its designee. The Trust or its designee, at its expense, shall print
and provide such statement of additional information to the Company
(or a master of such statement suitable for duplication by the
Company) for distribution to any owner of a Policy
-5-
<PAGE> 6
funded by the Shares. The Trust or its designee, at the Company's
expense, shall print and provide such statement to the Company (or a
master of such statement suitable for duplication by the Company) for
distribution to a prospective purchaser who requests such statement
or to an owner of a Policy not funded by the Shares.
3.3. The Trust or its designee shall provide the Company free of
charge copies, if and to the extent applicable to the Shares, of the
Trust's proxy materials, reports to Shareholders and other
communications to Shareholders in such quantity as the Company shall
reasonably require for distribution to Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3
above, or of Article V below, the Company shall pay the expense of
printing or providing documents to the extent such cost is considered
a distribution expense. Distribution expenses would include by way of
illustration, but are not limited to, the printing of the Shares'
prospectus or prospectuses for distribution to prospective purchasers
or to owners of existing Policies not funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate
to include in the prospectus pursuant to which a Policy is offered
disclosure regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions
received from Policy owners; and
(c) vote the Shares for which no instructions have been
received in the same proportion as the Shares of such
Portfolio for which instructions have been received
from Policy owners;
so long as and to the extent that the SEC continues to interpret the
1940 Act to require pass through voting privileges for variable
contract owners. Subject to applicable law, the Company will in no way
recommend action in connection with or oppose or interfere with the
solicitation of proxies for the Shares held for such Policy owners.
The Company reserves the right to vote shares held in any segregated
asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring
that each of their separate accounts holding Shares calculates voting
privileges in the manner required by the Mixed and Shared Funding
Exemptive Order. The Trust and MFS will notify the Company of any
changes of interpretations or amendments to the Mixed and Shared
Funding Exemptive Order.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to
the Trust or its designee, each piece of sales literature or other
promotional material in which the Trust, MFS, any other investment
adviser to the Trust, or any affiliate of MFS are named, at least
three (3) Business Days prior to its use. No such material shall be
used if the Trust, MFS, or their respective designees reasonably
objects to such use within three (3) Business Days after receipt of
such material.
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<PAGE> 7
4.2. The Company shall not give any information or make any
representations or statement on behalf of the Trust, MFS, any other
investment adviser to the Trust, or any affiliate of MFS or concerning
the Trust or any other such entity in connection with the sale of the
Policies other than the information or representations contained in
the registration statement, prospectus or statement of additional
information for the Shares, as such registration statement, prospectus
and statement of additional information may be amended or supplemented
from time to time, or in reports or proxy statements for the Trust, or
in sales literature or other promotional material approved by the
Trust, MFS or their respective designees, except with the permission
of the Trust, MFS or their respective designees. The Trust, MFS or
their respective designees each agrees to respond to any request for
approval on a prompt and timely basis. The Company shall adopt and
implement procedures reasonably designed to ensure that information
concerning the Trust, MFS or any of their affiliates which is intended
for use only by brokers or agents selling the Policies (i.e.,
information that is not intended for distribution to Policy owners or
prospective Policy owners) is so used, and neither the Trust, MFS nor
any of their affiliates shall be liable for any losses, damages or
expenses relating to the improper use of such broker only materials.
The parties hereto agree that this Section 4.2 is not intended to
designate or otherwise imply that the Company is an underwriter or
distributor of the Trust's shares.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or
the Accounts is named, at least three (3) Business Days prior to its
use. No such material shall be used if the Company or its designee
reasonably objects to such use within three (3) Business Days after
receipt of such material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter
shall not give, any information or make any representations on behalf
of the Company or concerning the Company, the Accounts, or the
Policies in connection with the sale of the Policies other than the
information or representations contained in a registration statement,
prospectus, or statement of additional information for the Policies,
as such registration statement, prospectus and statement of additional
information may be amended or supplemented from time to time, or in
reports for the Accounts, or in sales literature or other promotional
material approved by the Company or its designee, except with the
permission of the Company. The Company or its designee agrees to
respond to any request for approval on a prompt and timely basis. If
the Trust or MFS produces information concerning the Company, any of
its affiliates, or the Policies which is intended for use only by
brokers or agents (i.e., information that is not intended for
distribution to Policy owners or prospective Policy owners), the Trust
or MFS shall add an appropriate legend on the cover designating the
materials as "broker only" and not intended for distribution to
members of the public. Neither the Company nor any of its affiliates
shall be liable for any losses, damages, or expenses relating to the
improper use of "broker only" materials produced by the Trust or MFS
which does not include such a legend. The parties hereto agree that
this Section 4.4. is neither intended to designate nor otherwise imply
that MFS is an underwriter or distributor of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company
or the Trust, as appropriate) will each provide to the other at least
one complete copy of all registration statements, prospectuses,
statements of additional information, reports, proxy statements, sales
literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any
of the above, that relate to the Policies, or to the Trust or its
Shares, prior to or contemporaneously with the filing of such document
with the SEC or other regulatory authorities. The Company and the
Trust shall also each promptly inform the other of the results of any
examination by the SEC (or other regulatory authorities) that relates
to the Policies, the Trust or its
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<PAGE> 8
Shares, and the party that was the subject of the examination shall
provide the other party with a copy of relevant portions of any
"deficiency letter" or other correspondence or written report
regarding any such examination.
4.6. The Trust and MFS will provide the Company with as much notice
as is reasonably practicable (but in any event, such notice shall be
provided at least thirty days prior to the anticipated date of such
solicitation or change) of any proxy solicitation for any Portfolio,
and of any material change in the Trust's registration statement,
particularly any change resulting in change to the registration
statement or prospectus or statement of additional information for
any Account. The Trust and MFS will cooperate with the Company so as
to enable the Company to solicit proxies from Policy owners or to make
changes to its prospectus, statement of additional information or
registration statement, in an orderly manner. The Trust and MFS will
make reasonable efforts to attempt to have changes affecting Policy
prospectuses become effective simultaneously with the annual updates
for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, the phrase
"sales literature or other promotional material" includes but is not
limited to advertisements (such as material published, or designed for
use in, a newspaper, magazine, or other periodical, radio, television,
telephone or tape recording, videotape display, signs or billboards,
motion pictures, or other public media), and sales literature (such as
brochures, circulars, reprints or excerpts or any other advertisement,
sales literature, or published articles), distributed or made
generally available to customers or the public, educational or
training materials or communications distributed or made generally
available to some or all agents or employees.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no fee or other compensation to the Company
under this Agreement, and the Company shall pay no fee or other
compensation to the Trust, except that if the Trust or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act
to finance distribution and Shareholder servicing expenses, then,
subject to obtaining any required exemptive orders or regulatory
approvals, the Trust may make payments to the Company or to the
underwriter for the Policies if and in amounts agreed to by the Trust
in writing. Each party, however, shall, in accordance with the
allocation of expenses specified in Articles III and V hereof,
reimburse other parties for expenses initially paid by one party but
allocated to another party. In addition, nothing herein shall prevent
the parties hereto from otherwise agreeing to perform, and arranging
for appropriate compensation for, other services relating to the Trust
and/or to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable
federal and state laws, including preparation and filing of the
Trust's registration statement, and payment of filing fees and
registration fees; preparation and filing of the Trust's proxy
materials and reports to Shareholders; setting in type and printing
its prospectus and statement of additional information (to the extent
provided by and as determined in accordance with Article III above);
setting in type and printing the proxy materials and reports to
Shareholders (to the extent provided by and as determined in
accordance with Article III above); the preparation of all statements
and notices required of the Trust by any federal or state law with
respect to its Shares; all taxes on the issuance or transfer of the
Shares; and the costs of distributing the Trust's prospectuses and
proxy materials to owners of Policies funded by the Shares and any
expenses permitted to be paid or assumed by the Trust pursuant to a
plan, if
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<PAGE> 9
any, under Rule 12b-l under the 1940 Act. The Trust shall not bear
any expenses of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the
Policies and of distributing the Trust's Shareholder reports to Policy
owners. The Company shall bear all expenses associated with the
registration, qualification, and filing of the Policies under
applicable federal securities and state insurance laws; the cost of
preparing, printing and distributing the Policy prospectus and
statement of additional information; and the cost of preparing,
printing and distributing annual individual account statements for
Policy owners as required by state insurance laws.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1. The Trust and MFS represent and warrant that each Portfolio of
the Trust meets and will continue to meet the diversification
requirements of Section 817 (h) (1) of the Code and Treas. Reg.
1.817-5, relating to the diversification requirements for variable
annuity, endowment, or life insurance contracts, as they may be
amended from time to time (and any revenue rulings, revenue
procedures, notices, and other published announcements of the Internal
Revenue Service interpreting these sections), as if those requirements
applied directly to each such Portfolio. In the event that any
Portfolio is not so diversified at the end of any applicable quarter,
the Trust and MFS will make every effort to (a) adequately diversify
the Portfolio so as to achieve compliance within the grace period
afforded by Treas. Reg. 1.817.5 and (b) notify the Company.
6.2. The Trust and MFS represent that each Portfolio is qualified as a
Regulated Investment Company under Subchapter M of the Code and that
they will maintain such qualification (under Subchapter M or any
successor or similar provision).
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The Trust agrees that its Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for
the existence of any material irreconcilable conflict between the
interests of the variable annuity contract owners and the variable
life insurance policy owners of the Company and/or affiliated
companies ("contract owners") investing in the Trust. The Board shall
have the sole authority to determine if a material irreconcilable
conflict exists, and such determination shall be binding on the
Company only if approved in the form of a resolution by a majority of
the Board, or a majority of the disinterested trustees of the Board.
The Board will give prompt notice of any such determination to the
Company.
7.2. The Company agrees that it will be responsible for assisting the
Trust's Board in carrying out its responsibilities under the
conditions set forth in the Trust's exemptive application pursuant to
which the SEC has granted the Mixed and Shared Funding Exemptive Order
by providing the Board, as it may reasonably request, with all
information necessary for the Board to consider any issues raised and
agrees that it will be responsible for promptly reporting any
potential or existing conflicts of which it is aware to the Board
including, but not limited to, an obligation by the Company to inform
the Board whenever contract owner voting instructions are disregarded.
The Company also agrees that, if a material irreconcilable conflict
arises, it will at its own cost remedy such conflict up to and
including (a) withdrawing the assets allocable to some or all of the
Accounts from the Trust or any Portfolio and reinvesting such assets
in a different investment
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<PAGE> 10
medium, including (but not limited to) another Portfolio of the
Trust, or submitting to a vote of all affected contract owners
whether to withdraw assets from the Trust or any Portfolio and
reinvesting such assets in a different investment medium and, as
appropriate, segregating the assets attributable to any appropriate
group of contract owners that votes in favor of such segregation, or
offering to any of the affected contract owners the option of
segregating the assets attributable to their contracts or policies,
and (b) establishing a new registered management investment company
and segregating the assets underlying the Policies, unless a majority
of Policy owners materially adversely affected by the conflict have
voted to decline the offer to establish a new registered management
investment company.
7.3. A majority of the disinterested trustees of the Board shall
determine whether any proposed action by the Company adequately
remedies any material irreconcilable conflict. In the event that the
Board determines that any proposed action does not adequately remedy
any material irreconcilable conflict, the Company will withdraw from
investment in the Trust each of the Accounts designated by the
disinterested trustees and terminate this Agreement within six (6)
months after the Board informs the Company in writing of the
foregoing determination; provided, however, that such withdrawal and
termination shall be limited to the extent required to remedy any
such material irreconcilable conflict as determined by a majority of
the disinterested trustees of the Board.
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the 1940 Act or the rules promulgated thereunder with
respect to mixed or shared funding (as defined in the Mixed and
Shared Funding Exemptive Order) on terms and conditions materially
different from those contained in the Mixed and Shared Funding
Exemptive Order, then (a) the Trust and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may be
necessary to comply with Rule 6e-2 and 6e-3(T), as amended, and Rule
6e-3, as adopted, to the extent such rules are applicable; and (b)
Sections 3.5, 3.6, 7.1, 7.2, 7.3 and 7.4 of this Agreement shall
continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
The Company agrees to indemnify and hold harmless the Trust,
MFS, any affiliates of MFS, and each of their respective
directors/trustees, officers and each person, if any, who controls the
Trust or MFS within the meaning of Section 15 of the 1933 Act, and any
agents or employees of the foregoing (each an "Indemnified Party," or
collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Company) or expenses (including reasonable counsel fees) to which any
Indemnified Party may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Shares or the Policies
and:
(a) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement, prospectus
or statement of additional information for the
Policies or contained in sales literature or other
-10-
<PAGE> 11
promotional material for the Policies (or any
amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or
the alleged omission to state therein a material
fact required to be stated therein or necessary to
make the statements therein not misleading provided
that this agreement to indemnify shall not apply as
to any Indemnified Party if such statement or
omission or such alleged statement or omission was
made in reasonable reliance upon and in conformity
with information furnished to the Company or its
designee by or on behalf of the Trust or MFS or the
Underwriter for use in the registration statement,
prospectus or statement of additional information
for the Policies or sales literature or other
promotional material (or any amendment or
supplement) or otherwise for use in connection with
the sale of the Policies or Shares; or
(b) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus, statement of additional
information or sales literature or other
promotional material of the Trust not supplied by
the Company or its designee, or persons under its
control and on which the Company has reasonably
relied) or wrongful conduct of the Company or
persons under its control, with respect to the sale
or distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the
registration statement, prospectus, statement of
additional information, or sales literature or
other promotional literature of the Trust, or any
amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statement or statements
therein not misleading, if such statement or
omission was made in reliance upon information
furnished to the Trust by or on behalf of the
Company; or
(d) arise out of or result from any material breach of
any representation and/or warranty made by the
Company in this Agreement or arise out of or result
from any other material breach of this Agreement by
the Company; or
(e) arise as a result of any failure by the Company to
provide the services and furnish the materials
under the terms of this Agreement;
as limited by and in accordance with the provisions of this Article
VIII.
8.2. INDEMNIFICATION BY THE TRUST
The Trust agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act,
and any agents or employees of the foregoing (each an "Indemnified
Party," or collectively, the "Indemnified Parties" for purposes of
this Section 8.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written
consent of the Trust) or expenses (including reasonable counsel fees)
to which any Indemnified Party may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Shares or the Policies
and:
-11-
<PAGE> 12
(a) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement,
prospectus, statement of additional information or
sales literature or other promotional material of
the Trust (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon
the omission or the alleged omission to state
therein a material fact required to be stated
therein or necessary to make the statement therein
not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reasonable
reliance upon and in conformity with information
furnished to the Trust, MFS, the Underwriter or
their respective designees by or on behalf of the
Company for use in the registration statement,
prospectus or statement of additional information
for the Trust or in sales literature or other
promotional material for the Trust (or any
amendment or supplement) or otherwise for use in
connection with the sale of the Policies or Shares;
or
(b) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus, statement of additional
information or sales literature or other
promotional material for the Policies not supplied
by the Trust, MFS, the Underwriter or any of their
respective designees or persons under their
respective control and on which any such entity has
reasonably relied) or wrongful conduct of the Trust
or persons under its control, with respect to the
sale or distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the
registration statement, prospectus, statement of
additional information, or sales literature or
other promotional literature of the Accounts or
relating to the Policies, or any amendment thereof
or supplement thereto, or the omission or alleged
omission to state therein a material fact required
to be stated therein or necessary to make the
statement or statements therein not misleading, if
such statement or omission was made in reliance
upon information furnished to the Company by or on
behalf of the Trust, MFS or the Underwriter; or
(d) arise out of or result from any material breach of
any representation and/or warranty made by the
Trust in this Agreement (including a failure,
whether unintentional or in good faith or
otherwise, to comply with the diversification
requirements specified in Article VI of this
Agreement) or arise out of or result from any other
material breach of this Agreement by the Trust; or
(e) arise out of or result from the materially
incorrect or untimely calculation or reporting of
the daily net asset value per share or dividend or
capital gain distribution rate; or
(f) arise as a result of any failure by the Trust to
provide the services and furnish the materials
under the terms of the Agreement;
as limited by and in accordance with the provisions of this Article
VIII.
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any
- 12 -
<PAGE> 13
Participating Insurance Company or any Policy holder, with respect to
any losses, claims, damages, liabilities or expenses that arise out
of or result from (i) a breach of any representation, warranty,
and/or covenant made by the Company hereunder or by any Participating
Insurance Company under an agreement containing substantially similar
representations, warranties and covenants; (ii) the failure by the
Company or any Participating Insurance Company to maintain its
segregated asset account (which invests in any Portfolio) as a
legally and validly established segregated asset account under
applicable state law and as a duly registered unit investment trust
under the provisions of the 1940 Act (unless exempt therefrom); or
(iii) subject to the Trust's compliance with the diversification
requirements specified in Article VI, the failure by the Company or
any Participating Insurance Company to maintain its variable annuity
and/or variable life insurance contracts (with respect to which any
Portfolio serves as an underlying funding vehicle) as life insurance,
endowment or annuity contracts under applicable provisions of the
Code.
8.4. In no event shall the Company be liable under the
indemnification provisions contained in this Agreement to any
individual or entity, including without limitation, the Trust or
MFS, or any other Participating Insurance Company or any Policy
holder, with respect to any losses, claims, damages, liabilities or
expenses that arise out of or result from (i) a breach of any
representation, warranty, and/or covenant made by the Trust or MFS
hereunder or by any other Participating Insurance Company under an
agreement containing substantially similar representations,
warranties and covenants; (ii) the failure by any other
Participating Insurance Company to maintain its segregated asset
account (which invests in any Portfolio) as a legally and validly
established segregated asset account under applicable state law and
as a duly registered unit investment trust under the provisions of
the 1940 Act (unless exempt therefrom); or (iii) subject to the
Company's compliance with Section 2.2 hereof, the failure by any
other Participating Insurance Company to maintain its variable
annuity and/or variable life insurance contracts (with respect to
which any Portfolio serves as an underlying funding vehicle) as life
insurance, endowment or annuity contracts under applicable
provisions of the Code.
8.5. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect
to any losses, claims, damages, liabilities or expenses to which an
Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, willful misconduct, or
gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard
of obligations and duties under this Agreement.
8.6. Promptly after receipt by an Indemnified Party under this
Section 8.5 of notice of commencement of any action, such
Indemnified Party will, if a claim in respect thereof is to be made
against the indemnifying party under this section, notify the
indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it from any
liability which it may have to any Indemnified Party otherwise than
under this section. In case any such action is brought against any
Indemnified Party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, assume the
defense thereof, with counsel satisfactory to such Indemnified
Party. After notice from the indemnifying party of its intention to
assume the defense of an action, the Indemnified Party shall bear
the expenses of any additional counsel obtained by it, and the
indemnifying party shall not be liable to such Indemnified Party
under this section for any legal or other expenses subsequently
incurred by such Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation.
- 13 -
<PAGE> 14
8.7. Each of the parties agrees promptly to notify the other parties
of the commencement of any litigation or proceeding against it or
any of its respective officers, directors, trustees, employees or
1933 Act control persons in connection with the Agreement, the
issuance or sale of the Policies, the operation of the Accounts, or
the sale or acquisition of Shares.
8.8. A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this
Article VIII. The indemnification provisions contained in this
Article VIII shall survive any termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of The Commonwealth
of Massachusetts, without giving effect to conflict of laws
principles.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the SEC may grant and the terms hereof shall be
interpreted and construed in accordance therewith.
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
The Trust, MFS, and the Company agree that each such party shall
promptly notify the other parties to this Agreement, in writing, of the
institution of any formal proceedings brought against such party or its
designees by the NASD, the SEC, or any insurance department or any other
regulatory body regarding such party's duties under this Agreement or related to
the sale of the Policies, the operation of the Accounts, or the purchase of the
Shares.
ARTICLE XI. TERMINATION
11.1. This Agreement shall terminate with respect to the Accounts, or
one, some, or all Portfolios:
(a) at the option of any party upon six (6) months'
advance written notice to the other parties; or
(b) at the option of the Company to the extent that the
Shares of Portfolios are not reasonably available
to meet the requirements of the Policies or are not
"appropriate funding vehicles" for the Policies, as
reasonably determined by the Company. Without
limiting the generality of the foregoing, the
Shares of a Portfolio would not be "appropriate
funding vehicles" if, for example, such Shares did
not meet the diversification or other requirements
referred to in Article VI hereof; or if the Company
would be permitted to disregard Policy owner voting
instructions pursuant to Rule 6e-2 or 6e-3(T) under
the 1940 Act. Prompt notice of the election to
terminate for such cause and an explanation of such
cause shall be furnished to the Trust by the
Company; or
- 14 -
<PAGE> 15
(c) at the option of the Trust or MFS upon institution
of formal proceedings against the Company by the
NASD, the SEC, or any insurance department or any
other regulatory body regarding the Company's
duties under this Agreement or related to the sale
of the Policies, the operation of the Accounts, or
the purchase of the Shares; or
(d) at the option of the Company upon institution of
formal proceedings against the Trust by the NASD,
the SEC, or any state securities or insurance
department or any other regulatory body regarding
the Trust's or MFS' duties under this Agreement or
related to the sale of the Shares; or
(e) at the option of the Company, the Trust or MFS
upon receipt of any necessary regulatory approvals
and/or the vote of the Policy owners having an
interest in the Accounts (or any subaccounts) to
substitute the shares of another investment company
for the corresponding Portfolio Shares in
accordance with the terms of the Policies for which
those Portfolio Shares had been selected to serve
as the underlying investment media. The Company
will give thirty (30) days' prior written notice to
the Trust of the Date of any proposed vote or other
action taken to replace the Shares; or
(f) termination by either the Trust or MFS by written
notice to the Company, if either one or both of the
Trust or MFS respectively, shall determine, in
their sole judgment exercised in good faith, that
the Company has suffered a material adverse change
in its business, operations, financial condition,
or prospects since the date of this Agreement or is
the subject of material adverse publicity; or
(g) termination by the Company by written notice to the
Trust and MFS, if the Company shall determine, in
its sole judgment exercised in good faith, that the
Trust or MFS has suffered a material adverse
change in this business, operations, financial
condition or prospects since the date of this
Agreement or is the subject of material adverse
publicity; or
(h) at the option of any party to this Agreement, upon
another party's failure to cure a material breach
of any provision of this Agreement within thirty
days after written notice thereof; or
(i) upon assignment of this Agreement, unless made with
the written consent of the parties hereto; or
(j) at the option of the Company if a Portfolio ceases
to qualify as a Regulated Investment Company under
Subchapter M of the Code or under any successor or
similar provisions, or if the Company reasonably
believes that a Portfolio may fail to so qualify.
11.2. The notice shall specify the Portfolio or Portfolios, Policies
and, if applicable, the Accounts as to which the Agreement is to be
terminated.
11.3. It is understood and agreed that the right of any party hereto
to terminate this Agreement pursuant to Section 11.1(a) may be
exercised for cause or for no cause.
- 15 -
<PAGE> 16
11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations,
the Company shall not redeem the Shares attributable to the Policies
(as opposed to the Shares attributable to the Company's assets held
in the Accounts), and the Company shall not prevent Policy owners from
allocating payments to a Portfolio that was otherwise available under
the Policies, until thirty (30) days after the Company shall have
notified the Trust of its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and
MFS shall, at the option of the Company, continue to make available
additional shares of the Portfolios pursuant to the terms and
conditions of this Agreement, for all Policies in effect on the
effective date of termination of this Agreement (the "Existing
Policies"), except as otherwise provided under Article VII of this
Agreement. Specifically, without limitation, the owners of the
Existing Policies shall be permitted to transfer or reallocate
investment under the Policies, redeem investments in any Portfolio
and/or invest in the Trust upon the making of additional purchase
payments under the Existing Policies.
- 16 -
<PAGE> 17
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail, overnight courier or facsimile to the other party at the address
of such party set forth below or at such other address as such party may from
time to time specify in writing to the other party.
If to the Trust:
MFS VARIABLE INSURANCE TRUST
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, Secretary
If to the Company:
SAGE LIFE ASSURANCE OF AMERICA, INC.
300 Atlantic Street, Suite 302
Stamford, Ct 06903
Facsimile No.: (203) 324-6173
Attn: James F. Bronsdon, Esquire
If to MFS:
MASSACHUSETTS FINANCIAL SERVICES COMPANY
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, General Counsel
ARTICLE XIII. MISCELLANEOUS
13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names
and addresses of the owners of the Policies and all information
reasonably identified as confidential in writing by any other party
hereto and, except as permitted by this Agreement or as otherwise
required by applicable law or regulation, shall not disclose,
disseminate or utilize such names and addresses and other
confidential information without the express written consent of the
affected party until such time as it may come into the public domain.
13.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and
the same instrument.
13.4. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement shall not be affected thereby.
- 17 -
<PAGE> 18
13.5. The schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions
contemplated hereby.
13.7. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights,
remedies and obligations, at law or in equity, which the parties
hereto are entitled to under state and federal laws.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this
instrument are not binding upon any of the Trust's trustees,
officers, employees, agents or shareholders individually, but are
binding solely upon the assets and property of the Trust in
accordance with its proportionate interest hereunder. The Company
further acknowledges that the assets and liabilities of each
Portfolio are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or
property of the Portfolio on whose behalf the Trust has executed this
instrument. The Company also agrees that the obligations of each
Portfolio hereunder shall be several and not joint, in accordance
with its proportionate interest hereunder, and the Company agrees not
to proceed against any Portfolio for the obligations of another
Portfolio.
13.9 Except as otherwise expressly provided in this Agreement, neither
the Trust nor MFS, nor any affiliate thereof shall use any trademark,
trade name, service mark or logo of the Company or any of its
affiliates, or any variation of any such trademark, trade name,
service mark or logo, without the Company's prior written consent, the
granting of which shall be at the Company's sole option. Except as
otherwise expressly provided in this Agreement, neither the Company
nor any of its affiliates shall use any trademark, trade name, service
mark or logo of the Trust or of MFS, or any variation of any such
trademark, Trade name, service mark or logo, without the prior written
consent of either the Trust or MFS, as appropriate, the granting of
which shall be at the sole option of the Trust or MFS, as applicable.
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<PAGE> 19
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified above.
SAGE LIFE ASSURANCE OF AMERICA, INC.
By its authorized officer,
By:
-----------------------------------
Title:
--------------------------------
MFS VARIABLE INSURANCE TRUST,
ON BEHALF OF THE PORTFOLIOS
By its authorized officer and not individually,
By: /s/ JAMES R. BORDEWICK, JR.
--------------------------------------
James R. Bordewick, Jr.
Assistant Secretary
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: /s/ ARNOLD D. SCOTT
--------------------------------------
Arnold D. Scott
Senior Executive Vice President
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<PAGE> 20
As of ________________
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
<S> <C> <C>
The Sage Variable Annuity Deferred Variable Annuity MFS Growth with Income Series
Account A (with Surrender Charge) MFS Research Series
December 3, 1997 ASSET I MFS Total Return Series
MFS High Income Series
Deferred Variable Annuity MFS Value Series
(without Surrender Charge)
ASSET II
</TABLE>
- 20 -
<PAGE> 1
EXHIBIT 8(a)(vii)
PARTICIPATION AGREEMENT
By and Among
SAGE LIFE INVESTMENT TRUST
And
SAGE LIFE ASSURANCE OF AMERICA, INC.
And
SAGE DISTRIBUTORS, INC.
THIS AGREEMENT, made and entered into this __th day of _______, 1998,
by and among Sage Life Assurance of America, Inc., a Delaware corporation (the
"Company"), on its own behalf and on behalf of each separate account of the
Company named in Exhibit A to this Agreement, as may be amended from time to
time (each separate account, a "Separate Account"), and Sage Life Investment
Trust, an open-end diversified management investment company organized under
the laws of the State of Delaware (the "Trust"), and Sage Distributors, Inc., a
Delaware Corporation (the "Underwriter").
WHEREAS, the Trust engages in business as an open-end diversified,
management investment company and was established for the purpose of serving as
the investment vehicle for separate accounts established for variable life
insurance contracts and variable annuity contracts to be offered by insurance
companies which have entered into participation agreements substantially
identical to this Agreement ("Participating Insurance Companies"); and
WHEREAS, beneficial interests in the Trust are divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets (the "Fund"); and
<PAGE> 2
WHEREAS, the Trust has obtained an order from the U.S. Securities and
Exchange Commission (the "SEC" or "Commission"), dated June 2, 1998 (File No.
812-11062), granting Participating Insurance Companies and variable annuity
separate accounts and variable life insurance separate accounts relief from the
provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the Investment Company
Act of 1940, as amended (the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Trust to be sold to and held by variable annuity separate accounts and variable
life insurance separate accounts of both affiliated and unaffiliated
Participating Insurance Companies and qualified pension and retirement plans
("Mixed and Shared Funding Order"), and
WHEREAS, the Trust is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Company has registered or will register certain variable
annuity and variable life insurance contracts under the 1933 Act and named in
Exhibit A to this Agreement, as it may be amended from time to time (the
"Contracts"); and
WHEREAS, the Separate Accounts are duly organized, validly existing
segregated asset accounts, established by resolution of the Board of Directors
of the Company under the insurance laws of the State of Delaware, to set aside
and invest assets attributable to the Contracts; and
WHEREAS, the Company has registered the Separate Accounts as unit
investment trusts under the 1940 Act; and
-2-
<PAGE> 3
WHEREAS, the Underwriter is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD");
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Funds named in
Exhibit B on behalf of the Separate Accounts to fund the Contracts, and the
Underwriter is authorized to sell such shares to unit investment trusts such as
the Separate Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Trust, and the Underwriter agree as follows:
ARTICLE I SALE OF TRUST SHARES
1.1. The Underwriter agrees to sell to the Company those shares of the
Trust which the Company orders on behalf of the Separate Accounts,
executing such orders on a daily basis at the net asset value next
computed after receipt and acceptance by the Trust or its designee of
the order for the shares of the Trust. For purposes of this Section
1.1, the Company shall be the designee of the Trust for receipt of
such orders from each Separate Account and receipt by such designee
shall constitute receipt by the Trust; provided that the Trust
receives notice of such order by 9:30 a.m. Eastern Time on the next
following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange is open for trading and on which the Trust
calculates its net asset value pursuant to the rules of the SEC.
1.2. The Trust agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by Participating
Insurance Companies and their separate
-3-
<PAGE> 4
accounts on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC; provided, however, that the Board
of Trustees of the Trust (hereinafter the "Trustees") may refuse to
sell shares of any Fund to any person, or suspend or terminate the
offering of shares of any Fund, if such action is required by law or
by regulatory authorities having jurisdiction, or is, in the sole
discretion of the Trustees, acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of any Fund.
1.3. The Trust and the Underwriter agree that shares of the Trust will be
sold only to Participating Insurance Companies and their separate
accounts, and to qualified pension and retirement plans. No shares of
the Trust will be sold to the general public.
1.4. The Trust and the Underwriter will not sell Trust shares to any
insurance company or separate account unless an agreement containing
provisions substantially the same as Article VII and Sections 2.9,
3.5, 3.6 and 5.1 of this Agreement are in effect to govern such sales.
1.5. The Trust will not accept a purchase order from qualified pension or
retirement plan if such purchase would make the plan shareholder an
owner of 10 percent or more of the assets of a Fund unless such plan
executes an agreement with the Trust governing participation in such
Fund that includes the conditions set forth herein to the extent
applicable. A qualified pension or retirement plan will execute an
application containing an acknowledgment of this condition at the time
of its initial purchase of shares of any Fund.
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1.6. The Trust agrees to redeem for cash, upon the Company's request, any
full or fractional shares of the Trust held by the Company, executing
such requests on a daily basis at the net asset value next computed
after receipt and acceptance by the Trust or its designee of the
request for redemption. For purposes of this Section 1.6, the Company
shall be the designee of the Trust for receipt of requests for
redemption from each Separate Account and receipt by such designee
shall constitute receipt by the Trust; provided the Trust receives
notice of request for redemption by 9:30 a.m. Eastern Time on the next
following Business Day. Payment shall be in federal funds transmitted
by wire to the Company's account as designated by the Company in
writing from time to time.
1.7. Each purchase, redemption, and exchange order placed by the Company
shall be placed separately for each Fund and shall not be netted with
respect to any Fund. However, with respect to payment of the purchase
price by the Company and of redemption proceeds by the Trust, the
Company and the Trust shall net purchase and redemption orders with
respect to each Fund and shall transmit one net payment for all Funds
in accordance with Section 1.8.
1.8. In the event of net purchase, the Company shall pay for shares by 2:00
p.m. Eastern Time on the next Business Day after an order to purchase
the Shares is deemed to be received in accordance with the provisions
of Section 1.1 hereof. In the event of net redemptions, the Trust
shall pay the redemption proceeds by 2:00 p.m. Eastern Time on the
next Business Day after an order to redeem the shares is deemed to be
received in accordance with the provision of Section 1.6 hereof. All
such payments shall be in federal funds transmitted by wire.
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1.9. Issuance and transfer of the Trust's shares will be by book entry
only. Stock certificates will not be issued to the Company or any
Separate Account. Purchase and redemption orders for Trust shares
will be recorded in an appropriate title for each Separate Account or
the appropriate subaccount of each Separate Account.
1.10. The Trust shall furnish notice as soon as reasonably practicable to
the Company of any income, dividends, or capital gain distributions
payable on the Trust's shares. The Company hereby elects to receive
all such dividends and distributions as are payable on the Fund shares
in the form of additional shares of that Fund. The Company reserves
the right to revoke this election and to receive all such dividends
and distributions in cash. The Trust shall notify the Company of the
number of shares so issued as payment of such dividends and
distributions.
1.11. The Trust shall make the net asset value per share for each Fund
available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall
use its best efforts to make such net asset value per share available
by 6:30 p.m. Eastern Time, each business day.
ARTICLE II REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act, unless exempt therefrom, and that the
Contracts will be issued and sold in compliance with all applicable
federal and state laws. The Company further represents and warrants
that: (i) it is an insurance company duly organized and in good
standing under applicable law; (ii) it has legally and validly
established each Separate Account as a segregated asset account under
applicable state law and has registered each Separate
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Account as a unit investment trust in accordance with the provisions
of the 1940 Act, unless exempt therefrom, to serve as segregated
investment accounts for the Contracts; and (iii) it will maintain such
registration, if required, for so long as any Contracts are
outstanding. The Company shall amend any registration statement under
the 1933 Act for the Contracts and any registration statement under
the 1940 Act for the Separate Accounts from time to time as required
in order to effect the continuous offering of the Contracts or as may
otherwise be required by applicable law. The Company shall register
and qualify the Contracts for sale in accordance with the securities
laws of the various states only if, and to the extent, deemed
necessary by the Company.
2.2. Subject to Article VI hereof, the Company represents that it believes
that the Contracts are currently and at the time of issuance will be
treated as life insurance, endowment, or annuity contracts under
applicable provisions of the Internal Revenue Code and that it will
make every effort to maintain such treatment and that it will notify
the Trust and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or
that they might not be so treated in the future.
2.3. The Company represents that any prospectus offering a Contract that is
a life insurance contract where it is reasonably probable that such
Contract would be a "modified endowment contract," as that term is
defined in Section 7702A of the Internal Revenue Code will identify
such Contract as a modified endowment contract (or policy).
2.4. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the
Trust are covered by a blanket fidelity bond or similar coverage in an
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amount not less than $5 million. The aforesaid includes coverage for
larceny and embezzlement and is issued by a reputable bonding company.
The Company agrees that any amounts received under such bond in
connection with claims that derive from arrangements described in this
Agreement will be held by the Company for the benefit of the Trust.
The Company agrees to make all reasonable efforts to see that this
bond or another bond containing these provisions is always in effect,
and agrees to notify the Trust and the Underwriter in the event that
such coverage no longer applies.
2.5. The Company represents and warrants that it has taken all necessary
steps to ensure that it has addressed all Year 2000 transition issues,
and that neither the Trust nor the Underwriter and their affiliates,
nor the owners of the Contracts will experience any material negative
effect as a result of the Company's Year 2000 transition.
2.6. The Trust represents and warrants that Trust shares sold pursuant to
this Agreement shall be registered under the 1933 Act and duly
authorized for issuance in accordance with applicable law, and that
the Trust is and shall remain registered under the 1940 Act for as
long as the Trust shares are sold. The Trust shall amend the
registration statement for its shares under the 1933 and the 1940 Acts
from time to time as required in order to effect the continuous
offering of its shares. The Trust shall register and qualify the
shares for sale in accordance with the laws of the various states only
if, and to the extent, deemed advisable by the Trust or the
Underwriter.
2.7. The Trust represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code,
and that it will make every effort to maintain such qualification
(under Subchapter M or any successor or similar provision).
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2.8. The Trust makes no representations as to whether any aspect of its
operations, including but not limited to, investment policies, fees
and expenses, complies with the insurance and other applicable laws of
the various states, except that the Trust represents that it is and
shall at all times remain in compliance with the laws of the state of
Delaware to the extent required to perform this Agreement and shall
comply with applicable insurance laws of all states to the extent that
the Company advises the Trust, in writing, of such laws or any changes
in such laws, including the furnishing of information not otherwise
available to the Company which is required by state insurance law to
enable the Company to obtain the authority needed to issue the
Contracts in any applicable state.
2.9. The Trust represents and warrants that to the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1 under the 1940
Act, the Trust undertakes to have its Board of Trustees, a majority of
whom are not interested persons of the Trust, formulate and approve
any plan under Rule 12b-1 ("Rule 12b-1 Plan") to finance distribution
expenses. The Trust shall notify the Company immediately upon
determining to finance distribution expenses pursuant to Rule 12b-1.
2.10. The Trust represents that it is lawfully organized and validly
existing under the laws of Delaware and that it does and will comply
with applicable provisions of the 1940 Act.
2.11. The Trust represents and warrants that it and all of its trustees,
officers, employees and other individuals/entities having access to
the funds and/or securities of the Trust are and continue to be at all
times covered by a blanket fidelity bond or similar coverage for the
benefit of the Trust in an amount not less than the minimal coverage
as required currently by Rule 17g-1 of the 1940 Act or related
provisions as may be promulgated from time to
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time. The aforesaid bond includes coverage for larceny and
embezzlement and is issued by a reputable bonding company.
2.12. The Trust represents and warrants that it has taken all necessary
steps to ensure that it has addressed all Year 2000 transition issues,
and that none of the Company, the Underwriter and their affiliates,
nor the owners of the Contracts will experience any material negative
effect as a result of the Trust's Year 2000 transition.
2.13. The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the
SEC. The Underwriter further represents that it will sell and
distribute the Trust's shares in accordance with all applicable
federal and state securities laws, including without limitation the
1933 Act, the 1934 Act, and the 1940 Act.
2.14. The Underwriter represents and warrants that the Trust's investment
manager, Sage Advisors, Inc., is and shall remain duly registered as
an investment adviser under all applicable federal and state
securities laws and that the investment manager will perform its
obligations to the Trust in accordance with any applicable state and
federal securities laws.
2.15. The Underwriter represents and warrants that it has taken all
necessary steps to ensure that it has addressed all Year 2000
transition issues, and that none of the Company and its affiliates,
the Trust, nor the owners of the Contracts will experience any
material negative effect as a result of the Underwriter's Year 2000
transition.
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ARTICLE III PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company, at the Company's expense,
with as many copies of the Trust's current prospectus as the Company
may reasonably request for use with prospective contract owners and
applicants. The Underwriter shall print and distribute, at the
Trust's or Underwriter's expense, as many copies of said prospectus as
necessary for distribution to existing Contract owners or
participants. If requested by the Company in lieu thereof, the Trust
shall provide such documentation including a final copy of a current
prospectus set in type at the Trust's expense and other assistance as
is reasonably necessary in order for the Company at least annually (or
more frequently if the Trust's prospectus is amended more frequently)
to have the new prospectus for the Contracts and the Trust's new
prospectus printed together in one document; in such case the Trust
shall bear its share of expenses as described above.
3.2. The Trust's prospectus shall state that the statement of additional
information for the Trust is available from the Underwriter or
alternatively from the Company (or, in the Trust's discretion, the
Prospectus shall state that such statement is available from the
Trust), and the Underwriter (or the Trust) shall provide such
statement, at its expense, to the Company and to any owner of or
participant under a Contract who requests such statement or, at the
Company's expense, to any prospective Contract owner and applicant who
requests such statement.
3.3. The Trust, at its expense, shall provide the Company with copies of
its proxy material, if any, reports to shareholders and other
communications to shareholders in such quantity
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as the Company shall reasonably require and the Company shall bear the
costs of distributing them to existing Contract owners or
participants.
3.4. The Trust hereby notifies the Company that it is appropriate to
include in the prospectuses pursuant to which the Contracts are
offered disclosure regarding the potential risks of mixed and shared
funding.
3.5. To the extent required by law the Company shall:
(i) solicit voting instructions from Contract
owners or participants;
(ii) vote the Trust shares held in each Separate
Account in accordance with instructions
received from Contract owners or
participants; and
(iii) vote Trust shares held in each Separate
Account for which no timely instructions
have been received, in the same proportion
as Trust shares of such Fund for which
instructions have been received from the
Company's Contract owners or participants;
for so long as and to the extent that the 1940 Act requires
pass-through voting privileges for variable contract owners. The
Company reserves the right to vote Trust shares held in any segregated
asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring
that each of their separate accounts participating in the Trust
calculates voting privileges in a manner consistent with other
Participating Insurance Companies and as required by the Mixed and
Shared Funding Order. The Trust will notify the Company of any
changes of interpretation or amendment to the Mixed and Shared Funding
Order.
3.6. The Trust will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular, the Trust will either
provide for annual meetings (except to the extent that the Commission
may interpret Section 16 of the 1940 Act not to require
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such meetings) or comply with Section 16(c) of the 1940 Act (although
the Trust is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b)
of the 1940 Act. Further, the Trust will act in accordance with the
Commission's interpretation of the requirements of Section 16(a) with
respect to periodic elections of Trustees and with whatever rules the
Commission may promulgate with respect thereto.
ARTICLE IV SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or the Underwriter, each piece of sales literature or other
promotional material in which the Trust or the Trust's investment
manager, sub-advisers or Underwriter is named, at least fifteen
business days prior to its use. No such material shall be used if the
Trust or the Underwriter reasonably objects in writing to such use
within fifteen business days after receipt of such material.
4.2. The Company represents and agrees that sales literature for the
Contracts prepared by the Company or its affiliates will be consistent
with every law, rule, and regulation of any regulatory agency or
self-regulatory agency that applies to the Contracts or to the sale of
the Contracts, including, but not limited to, NASD Conduct Rule 2210
and IM-2210-2 thereunder.
4.3. The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust in
connection with the sale of the Contracts other than the information
or representations contained in the registration statement or
prospectus for the Trust shares as such registration statement and
prospectus may be
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<PAGE> 14
amended or supplemented from time to time, or in reports or proxy
statements for the Trust, or in sales literature or other promotional
material approved by the Trust or by the Underwriter, except with the
permission of the Trust or the Underwriter. The Trust and the
Underwriter agree to respond to any request for approval on a prompt
and timely basis. The Company shall adopt and implement procedures
reasonably designed to ensure that information concerning the Trust,
the Underwriter, or any of their affiliates which is intended for use
by brokers or agents selling the Contracts (i.e., information that is
not intended for distribution to Contract owners or prospective
Contract owners) is so used, and neither the Trust, the Underwriter,
nor any of their affiliates shall be liable for any losses, damages,
or expenses relating to the improper use of such broker only materials
by agents of the Company or its affiliates who are unaffiliated with
the Company or the Underwriter. The parties hereto agree that this
Section 4.3 is not intended to designate nor otherwise imply that the
Company is an underwriter or distributor of the Trust's shares.
4.4. The Trust or the Underwriter shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company, its
Separate Account, or the Contracts are named, at least fifteen
business days prior to its use. No such material shall be used if the
Company reasonably objects in writing to such use within fifteen
business days after receipt of such material.
4.5. The Trust represents and agrees that sales literature for the Trust
prepared by the Trust or its affiliates will be consistent with every
law, rule, and Regulation of any regulatory
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agency or self regulatory agency that applies to the Trust or to the
sale of Trust shares, including, but not limited to, NASD Conduct Rule
2210 and IM-2210-2 thereunder.
4.6. The Trust and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the
Company, each Separate Account, or the Contracts other than the
information or representations contained in a registration statement
or prospectus for the Contracts, as such registration statement and
prospectus may be amended or supplemented from time to time, or in
published reports for each Separate Account which are in the public
domain or approved by the Company for distribution to Contract owners
or participants, or in sales literature or other promotional material
approved by the Company, except with the permission of the Company.
The Company agrees to respond to any request for approval on a prompt
and timely basis. The Trust and the Underwriter shall mark information
produced by or on behalf of the Trust "FOR BROKER USE ONLY" which is
intended for use by brokers or agents selling the Contracts (i.e.,
information that is not intended for distribution to Contract owners
or prospective Contract owners) is so used, and neither the Company
nor any of its affiliates shall be liable for any losses, damages, or
expenses arising on account of the use by brokers of such information
with third parties in the event that is not so marked.
4.7. The Trust will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other
promotional materials, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate
to the Trust or its
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shares, contemporaneously with the filing of such document with the
SEC or other regulatory authorities.
4.8. The Company will provide to the Trust at least one complete copy of
all registration statements, prospectuses, statements of additional
information, reports, solicitations for voting instructions, sales
literature and other promotional materials, applications for
exemptions, requests for no action letters, and all amendments to any
of the above, that relate to the Contracts or each Separate Account,
contemporaneously with the filing of such document with the SEC or
other regulatory authorities. The Company shall promptly inform the
Trust of the results of any examination by the SEC (or other
regulatory authorities) that relates to the Contracts, and the Company
shall provide the Trust with a copy of relevant portions of any
"deficiency letter" or other correspondence or written report
regarding any such examination.
4.9. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper,
magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or
other public media), sales literature (i.e., any written communication
distributed or made generally available to customers or the public,
including brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made
generally available to some or all agents or employees, registration
statements, prospectuses, statements of additional information,
shareholder reports, and
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proxy materials and any other material constituting sales literature
or advertising under NASD Conduct Rules, the 1940 Act or the 1933 Act.
ARTICLE V FEES AND EXPENSES
5.1. The Trust and Underwriter shall pay no fee or other compensation to
the Company under this Agreement, except subject a Rule 12b-1 Plan to
finance distribution expenses, then, subject to obtaining any required
exemptive orders or other regulatory approvals, the Underwriter may
make payments to the Company or to the underwriter for the Contracts
if and in amounts agreed to by the Underwriter in writing. Each
party, however, shall, in accordance with the allocation of expenses
specified in this Agreement, reimburse other parties for expenses
initially paid by one party but allocated to another party. In
addition, nothing herein shall prevent the parties hereto from
otherwise agreeing to perform, and arranging for appropriate
compensation for, other services relating to the Trust and/or to the
Separate Accounts.
5.2. All expenses incident to performance by the Trust of this Agreement
shall be paid by the Trust to the extent permitted by law. All Trust
shares will be duly authorized for issuance and registered in
accordance with applicable federal law and to the extent deemed
advisable by the Trust, in accordance with applicable state law, prior
to sale. The Trust shall bear the expenses for the cost of
registration and qualification of the Trust's shares, preparation and
filing of the Trust's prospectus and registration statement, Trust
proxy materials and reports, setting in type the Trust's prospectuses,
and printing the Trust prospectuses, proxy materials and reports for
existing shareholders and Contract owners, the preparation of all
statements and notices required by any federal or state law,
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all taxes on the issuance or transfer of the Trust's shares, and any
expenses permitted to be paid or assumed by the Trust pursuant to any
Rule 12b-1 Plan under the 1940 Act duly adopted by the Trust.
5.3. The Company shall bear the expenses of printing and distributing the
Trust prospectuses for prospective shareholders and Contract owners,
and distributing the Trust prospectuses and of distributing the
Trust's proxy statements and shareholder reports to existing Contract
owners. The Company shall bear all expenses associated with the
registration, qualification, and filing of the Contracts under
applicable federal securities and state insurance laws; the cost of
preparing, printing, and distributing the Contracts' prospectuses and
statements of additional information; and the cost of printing and
distributing annual individual account statements for Contract owners
as required by state insurance laws.
ARTICLE VI DIVERSIFICATION
6.1. The Trust will at all times invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable
contracts under the Internal Revenue Code and the regulations issued
thereunder. Without limiting the scope of the foregoing, the Trust
will comply with Section 817(h) of the Internal Revenue Code and
Treasury Regulation 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations or successors thereto. In the event of a breach of this
Article VI by the Trust, it will take all reasonable steps (a) to
notify the Company of such breach,
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and (b) to adequately diversify the Trust so as to achieve compliance
within the grace period afforded by Treasury Regulation 1.817-5.
ARTICLE VII POTENTIAL CONFLICTS
7.1. The Board of Trustees of the Trust (the "Trust Board") will monitor
the Trust for the existence of any material irreconcilable conflict
among the interests of the Contract owners of all separate accounts
investing in the Trust. A material irreconcilable conflict may arise
for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax, or securities laws or regulations, or a public
ruling, private letter ruling, no-action or interpretative letter, or
any similar action by insurance, tax, or securities regulatory
authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any
Fund are being managed; (e) a difference in voting instructions given
by variable annuity contract owners, variable life insurance contract
owners, and trustees of qualified pension or retirement plans; (f) a
decision by a Participating Insurance Company to disregard the voting
instructions of Contract owners; or (g) if applicable, a decision by a
qualified pension or retirement plan to disregard the voting
instructions of plan participants. The Trust Board shall promptly
inform the Company if it determines that a material irreconcilable
conflict exists and the implications thereof. A majority of the Trust
Board shall consist of Trustees who are not "interested" persons of
the Trust.
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7.2. The Company has reviewed a copy of the Mixed and Shared Funding Order,
and in particular, has reviewed the conditions to the requested relief
set forth therein. The Company agrees to assist the Trust Board in
carrying out its responsibilities under the Mixed and Shared Funding
Order, by providing the Trust Board with all information reasonably
necessary for the Trust Board to consider any issues raised. This
includes, but is not limited to, an obligation by the Company to
inform the Trust Board whenever Contract owner voting instructions are
disregarded. The Trust Board shall record in its minutes or other
appropriate records, all reports received by it and all action with
regard to a conflict.
7.3. If it is determined by a majority of the Trust Board, or a majority of
its disinterested Trustees, that a material irreconcilable conflict
exists, the Company shall, at its expense and to the extent reasonably
practicable (as determined by a majority of the disinterested
Trustees), take whatever steps are necessary to remedy or eliminate
the material irreconcilable conflict, up to and including: (a)
withdrawing the assets allocable to some or all of the Separate
Accounts from the relevant Fund and reinvesting such assets in a
different investment medium, including another Fund, or in the case of
insurance company participants submitting the question as to whether
such segregation should be implemented by a vote of all affected
Contract owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity Contract owners or life insurance
Contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected
Contract owners the
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option of making such a change; and (b) establishing a new registered
management investment company or managed separate account.
7.4. If the Company's disregard of voting instructions could conflict with
the majority of Contract owner voting instructions, and the Company's
judgment represents a minority position or would preclude a majority
vote, the Company may be required, at the Trust's election, to
withdraw the Separate Account's investment in the Trust and terminate
this Agreement with respect to such Separate Account, and no charge or
penalty will be imposed as a result of such withdrawal. Any such
withdrawal and termination shall take place within 30 days after
written notice is given that this provision is being implemented,
subject to applicable law but in any event consistent with the terms
of the Mixed and Shared Funding Order. Until such withdrawal and
termination is implemented, the Underwriter and the Trust shall
continue to accept and implement orders by the Company for the
purchase and redemption of shares of the Trust. Such withdrawal and
termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of
disinterested Trustees.
7.5. If a particular state insurance regulator's decision applicable to the
Company conflicts with the majority of other state insurance
regulators, then the Company will withdraw the Separate Account's
investment in the Trust and terminate this Agreement with respect to
such Separate Account within 30 days after the Trust informs the
Company of a material irreconcilable conflict, subject to applicable
law but in any event consistent with the terms of the Mixed and Shared
Funding Order. Until such withdrawal and termination is implemented,
the Underwriter and the Trust shall continue to accept and implement
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orders by this Company for the purchase and redemption of shares of
the Trust. Such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as
determined by a majority of disinterested Trustees.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Trust Board shall determine
whether any proposed action adequately remedies any material
irreconcilable conflict, but in no event will the Trust or the
Underwriter be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to
establish a new funding medium for the Contracts if an offer to do so
has been declined by vote of a majority of Contract owners materially
adversely affected by the material irreconcilable conflict.
7.7. The Trust Board's determination of the existence of a material
irreconcilable conflict and its implication will be made known in
writing to the Company.
7.8. The Company shall at least annually submit to the Trust Board such
reports, materials, or data as the Trust Board may reasonably request
so that the Trustees may fully carry out the duties imposed upon the
Trust Board by the Mixed and Shared Funding Order, and said reports,
materials and data shall be submitted more frequently if deemed
appropriate by the Trust Board.
7.9. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3(T) is adopted, to provide exemptive relief from any
provision of the 1940 Act or the rules promulgated thereunder with
respect to mixed or shared funding (as defined in the Mixed and Shared
Funding Order) on terms and conditions materially different from those
contained in the Mixed and Shared Funding Order, the Trust and/or the
Company, as
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appropriate, shall take such steps as may be necessary to comply with
Rules 6e-2 and 6e- 3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable.
ARTICLE VIII INDEMNIFICATION
8.1. Indemnification By The Company
(a) The Company agrees to indemnify and hold
harmless the Trust, the Underwriter, and each of the Trust's or the
Underwriter's directors, officers, employees, or agents and each
person, if any, who controls the Trust or the Underwriter within the
meaning of such terms under the federal securities laws (collectively,
the "indemnified parties" for purposes of this Section 8.1) against
any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company), or
litigation (including reasonable legal and other expenses), to which
the indemnified parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the
Trust's shares or the Contracts and:
(i) arise out of or are based upon any untrue
statements or alleged untrue statements of
any material fact contained in the
registration statements, prospectuses or
statements of additional information for
the Contracts or contained in the
Contracts, or sales literature or other
promotional material for the Contracts (or
any amendment or supplement to any of the
foregoing), or arise out of or are based
upon the omission or the alleged omission
to state therein a material fact required
to be stated therein or necessary to make
the statements therein not misleading in
light of the circumstances in which they
were made; provided that this agreement to
indemnify shall not apply as to any
indemnified party if such statement or
omission or such alleged statement or
omission was made in reliance upon and in
conformity with information furnished to
the Company by or on behalf of the Trust
for use in the registration
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statement, prospectus or statement of
information for the Contracts, or in the
Contracts or sales literature (or any
amendment or supplement) or otherwise for
use in connection with the sale of the
Contracts or Trust shares; or
(ii) arise out of or as a result of statements
or representations by or on behalf of the
Company (other than statements or
representations contained in the Trust
registration statement, Trust prospectus or
sales literature or other promotional
material of the Trust not supplied by the
Company or persons under its control) or
wrongful conduct of the Company or persons
under its control, with respect to the sale
or distribution of the Contracts or Trust
shares; or
(iii) arise out of any untrue statement or
alleged untrue statement of a material fact
contained in the Trust's registration
statement, prospectus, statement of
additional information, or sales literature
or other promotional material of the Trust
or any amendment thereof, or supplement
thereto or the omission or alleged omission
to state therein a material fact required
to be stated therein or necessary to make
the statements therein not misleading in
light of the circumstances in which they
were made, if such a statement or omission
was made in reliance upon and in conformity
with information furnished to the Trust by
or on behalf of the Company or persons
under its control; or
(iv) arise as a result of any failure by the
Company to provide the services and furnish
the materials or to make any payments under
the terms of this Agreement; or
(v) arise out of any material breach of any
representation and/or warranty made by the
Company in this Agreement or arise out of
or result from any other material breach by
the Company of this Agreement;
except to the extent provided in Sections 8.1(b) and 8.4 hereof. This
indemnification shall be in addition to any liability which the
Company may otherwise have.
(b) No party shall be entitled to
indemnification by the Company if such loss, claim, damage, liability
or litigation is due to the willful misfeasance, bad
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<PAGE> 25
faith, gross negligence, or reckless disregard of duty by the party
seeking indemnification.
(c) The indemnified parties will promptly
notify the Company of the commencement of any litigation or
proceedings against them in connection with the issuance or sale of
the Trust shares or the Contracts or the operation of the Trust.
8.2. Indemnification By the Underwriter
(a) The Underwriter agrees to indemnify and
hold harmless the Company and each of its directors, officers,
employees, or agents and each person, if any, who controls the Company
within the meaning of such terms under the federal securities laws
(collectively, the "indemnified parties" for purposes of this Section
8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Underwriter), or litigation (including reasonable legal and other
expenses) to which the indemnified parties may become subject under
any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition
of the Trust's shares or the Contracts and:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of
any material fact contained in the
registration statement, prospectus, or
statement of additional information for the
Trust, or sales literature or other
promotional material of the Trust (or any
amendment or supplement to any of the
foregoing), or arise out of or are based
upon the omission or the alleged omission
to state therein a material fact required
to be stated therein or necessary to make
the statements therein not misleading in
light of the circumstances in which they
were made; provided that this agreement to
indemnify shall not apply as to any
indemnified party if such statement or
omission or such alleged statement or
omission was made in reliance upon and in
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<PAGE> 26
conformity with information furnished to
the Underwriter by or on behalf of the
Company for use in the registration
statement, prospectus, or statement of
additional information for the Trust or in
sales literature of the Trust (or any
amendment or supplement thereto) or
otherwise for use in connection with the
sale of the Contracts or Trust shares; or
(ii) arise out of or as a result of statements
or representations (other than statements
or representations contained in the
Contracts or in the Contract or Trust
registration statement, the Contract or
Trust prospectus, statement of additional
information, or sales literature or other
promotional material for the Contracts or
of the Trust not supplied by the
Underwriter or persons under the control of
the Underwriter) or wrongful conduct of the
Underwriter or persons under the control of
the Underwriter, with respect to the sale
or distribution of the Contracts or Trust
shares; or
(iii) arise out of any untrue statement or
alleged untrue statement of a material fact
contained in a registration statement,
prospectus, statement of additional
information, or sales literature or other
promotional material covering the Contracts
(or any amendment thereof or supplement
thereto), or the omission or alleged
omission to state therein a material fact
required to be stated therein or necessary
to make the statement or statements therein
not misleading in light of the
circumstances in which they were made, if
such statement or omission was made in
reliance upon and in conformity with
information furnished to the Company by or
on behalf of the Underwriter or persons
under the control of the Underwriter; or
(iv) arise as a result of any failure by the
Underwriter or the Trust to provide the
services and furnish the materials under
the terms of this Agreement (including a
failure, whether unintentional or in good
faith or otherwise, to comply with the
diversification requirements and procedures
related thereto specified in Article VI of
this Agreement); or
(v) arise out of or result from any material
breach of any representation and/or
warranty made by the Underwriter or the
Trust in this Agreement or arise out of or
result from any other material breach of
this Agreement by the Underwriter;
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<PAGE> 27
except to the extent provided in Sections 8.2(b) and 8.4 hereof. This
indemnification shall be in addition to any liability which the
Underwriter may otherwise have.
(b) No party shall be entitled to
indemnification by the Underwriter if such loss, claim, damage,
liability or litigation is due to the willful misfeasance, bad faith,
gross negligence, or reckless disregard of duty by the party seeking
indemnification.
(c) The indemnified parties will promptly
notify the Underwriter of the commencement of any litigation or
proceedings against them in connection with the issuance or sale of
the Contracts or the operation of each Separate Account.
8.3. Indemnification By the Trust
(a) The Trust agrees to indemnify and hold
harmless the Company and each of its directors, officers, employees,
or agents and each person, if any, who controls the Company within the
meaning of such terms under the federal securities laws (collectively,
the "indemnified parties" for purposes of this Section 8.3) against
any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Trust), or
litigation (including reasonable legal and other expenses) to which
the indemnified parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the operations of the Trust
and:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of
any material fact contained in the
registration statement, prospectus, or
statement of additional information for the
Trust, or sales literature or other
promotional material of the Trust (or any
amendment or supplement to any of the
foregoing), or arise out of or are based
upon the omission or the alleged
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<PAGE> 28
omission to state therein a material fact
required to be stated therein or necessary
to make the statements therein not
misleading in light of the circumstances in
which they were made; provided that this
agreement to indemnify shall not apply as
to any indemnified party if such statement
or omission or such alleged statement or
omission was made in reliance upon and in
conformity with information furnished to
the Trust by or on behalf of the Company
for use in the registration statement,
prospectus, or statement of additional
information for the Trust or in sales
literature of the Trust (or any amendment
or supplement thereto) or otherwise for use
in connection with the sale of the
Contracts or Trust shares; or
(ii) arise out of or as a result of statements
or representations (other than statements
or representations contained in the
Contracts or in the Contract or Trust
registration statement, the Contract or
Trust prospectus, statement of additional
information, or sales literature or other
promotional material for the Contracts or
of the Trust not supplied by the Trust or
persons under the control of the Trust) or
wrongful conduct of the Trust or persons
under the control of the Trust, with
respect to the sale or distribution of the
Contracts or Trust shares; or
(iii) arise out of any untrue statement or
alleged untrue statement of a material fact
contained in a registration statement,
prospectus, statement of additional
information, or sales literature or other
promotional material covering the Contracts
(or any amendment thereof or supplement
thereto), or the omission or alleged
omission to state therein a material fact
required to be stated therein or necessary
to make the statement or statements therein
not misleading in light of the
circumstances in which they were made, if
such statement or omission was made in
reliance upon and in conformity with
information furnished to the Company by or
on behalf of the Trust or persons under the
control of the Trust; or
(iv) arise as a result of any failure by the
Trust to provide the services and furnish
the materials under the terms of this
Agreement (including a failure, whether
unintentional or in good faith or
otherwise, to comply with the
diversification requirements and procedures
related thereto specified in Article VI of
this Agreement); or
(v) arise out of or result from any material
breach of any representation and/or
warranty made by the Trust in this
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<PAGE> 29
Agreement or arise out of or result from
any other material breach of this Agreement
by the Trust;
except to the extent provided in Sections 8.3(b) and 8.4 hereof. This
indemnification shall be in addition to any liability which the Trust
may otherwise have.
(b) No party shall be entitled to
indemnification by the Trust if such loss, claim, damage, liability or
litigation is due to the willful misfeasance, bad faith, gross
negligence, or reckless disregard of duty by the party seeking
indemnification.
(c) The indemnified parties will promptly
notify the Trust of the commencement of any litigation or proceedings
against it in connection with the issuance or sale of the Contracts or
the operation of each Separate Account.
8.4. Indemnification Procedure
Any person obligated to provide indemnification under this Article
VIII ("indemnifying party" for the purpose of this Section 8.4) shall
not be liable under the indemnification provisions of this Article
VIII with respect to any claim made against a party entitled to
indemnification under this Article VIII ("indemnified party" for the
purpose of this Section 8.4) unless such indemnified party shall have
notified the indemnifying party in writing within a reasonable time
after the summons or other first legal process giving information of
the nature of the claim shall have been served upon such indemnified
party (or after such party shall have received notice of such service
on any designated agent), but failure to notify the indemnifying party
of any such claim shall not relieve the indemnifying party from any
liability which it may have to the indemnified party against whom such
action is brought under the indemnification provision of this Article
VIII, except to the extent that the failure to notify results in the
failure of actual notice to the
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<PAGE> 30
indemnifying party and such indemnifying party is damaged solely as a
result of failure to give such notice. In case any such action is
brought against the indemnified party, the indemnifying party will be
entitled to participate, at its own expense, in the defense thereof.
The indemnifying party also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action.
After notice from the indemnifying party to the indemnified party of
the indemnifying party's election to assume the defense thereof, the
indemnified party shall bear the fees and expenses of any additional
counsel retained by it, and the indemnifying party will not be liable
to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation,
unless (i) the indemnifying party and the indemnified party shall have
mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them. The indemnifying party shall not be liable for any settlement
of any proceeding effected without its written consent but if settled
with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from
and against any loss or liability by reason of such settlement or
judgment.
A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this
Article VIII. The indemnification provisions contained in this
Article VIII shall survive any termination of this Agreement.
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<PAGE> 31
ARTICLE IX APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of
Delaware without giving effect to conflicts of laws provisions
thereof.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934,
and 1940 Acts, and the rules, regulations, and rulings thereunder,
including such exemptions from those statutes, rules and regulations
as the SEC may grant (including, but not limited to, the Mixed and
Shared Funding Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon six months
advance written notice to the other parties; or
(b) at the option of the Company if shares of
the Funds delineated in Exhibit B are not reasonably available to meet
the requirements of the Contracts as determined by the Company; or
(c) at the option of the Trust upon institution
of formal proceedings against the Company by the NASD, the SEC, the
insurance commission of any state or any other regulatory body
regarding the Company's duties under this Agreement or related to the
sale of the Contracts, the administration of the Contracts, the
operation of each Separate Account, or the purchase of the Trust
shares, which would have a material
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<PAGE> 32
adverse effect on the Company's ability to perform its obligations
under this Agreement; or
(d) at the option of the Company upon
institution of formal proceedings against the Trust or the Underwriter
by the NASD, the SEC, or any state securities or insurance department
or any other regulatory body, which would have a material adverse
effect on the Underwriter's or the Trust's ability to perform its
obligations under this Agreement; or
(e) at the option of the Company or the Trust
upon receipt of any necessary regulatory approvals or the vote of the
Contract owners having an interest in each Separate Account (or any
subaccount) to substitute the shares of another investment company for
the corresponding Fund shares of the Trust in accordance with the
terms of the Contracts for which those Fund shares had been selected
to serve as the underlying investment media. The Company will give 30
days prior written notice to the Trust of the date of any proposed
vote or other action taken to replace the Trust's shares; or
(f) at the option of the Company or the Trust
upon a determination by a majority of the Trust Board, or a majority
of the disinterested Trustees, that a material irreconcilable conflict
exists among the interests of (i) all contract owners of variable
insurance products of all separate accounts, or (ii) the interests of
the Participating Insurance Companies investing in the Trust as
delineated in Article VII of this Agreement; or
(g) at the option of the Company if the Trust
ceases to qualify as a Regulated Investment Company under Subchapter M
of the Internal Revenue Code, or
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<PAGE> 33
under any successor or similar provision, or if the Company reasonably
believes that the Trust may fail to so qualify; or
(h) at the option of the Company if the Trust
fails to meet the diversification requirements specified in Article VI
hereof or if the Company reasonably believes that the Trust will fail
to meet such requirements; or
(i) at the option of any party to this
Agreement, upon another party's material breach of any provision of
this Agreement; or
(j) at the option of the Company, if the
Company determines in its sole judgment exercised in good faith, that
either the Trust or the Underwriter has suffered a material adverse
change in its business, operations, or financial condition since the
date of this Agreement or is the subject of material adverse publicity
which is likely to have a material adverse impact upon the business
and operations of the Company or the Contracts (including the sale
thereof); or
(k) at the option of the Trust or Underwriter,
if the Trust or Underwriter respectively, shall determine in its sole
judgment exercised in good faith, that the Company has suffered a
material adverse change in its business, operations, or financial
condition since the date of this Agreement or is the subject of
material adverse publicity which is likely to have a material adverse
impact upon the business and operations of the Trust or Underwriter;
or
(l) subject to the Trust's compliance with
Article VI hereof, at the option of the Trust in the event any of the
Contracts are not issued or sold in accordance
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<PAGE> 34
with applicable requirements of federal and/or state law. Termination
shall be effective immediately upon such occurrence without notice.
10.2. Notice Requirement
(a) In the event that any termination of this
Agreement is based upon the provisions of Article VII, such prior
written notice shall be given in advance of the effective date of
termination as required by such provisions.
(b) In the event that any termination of this
Agreement is based upon the provisions of Sections 10.l(b) - (d) or
10.1(g) - (i), prompt written notice of the election to terminate this
Agreement for cause shall be furnished by the party terminating the
Agreement to the non-terminating parties, with said termination to be
effective upon receipt of such notice by the non-terminating parties.
(c) In the event that any termination of this
Agreement is based upon the provisions of Sections 10.1(j) or 10.
l(k), prior written notice of the election to terminate this Agreement
for cause shall be furnished by the party terminating this Agreement
to the nonterminating parties. Such prior written notice shall be
given by the party terminating this Agreement to the non-terminating
parties at least 30 days before the effective date of termination.
10.3. It is understood and agreed that the right to terminate this Agreement
pursuant to Section 10.1(a) may be exercised for any reason or for no
reason.
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<PAGE> 35
10.4. Effect of Termination
(a) Notwithstanding any termination of this
Agreement pursuant to Section 10.1 of this Agreement and subject to
Section 1.3 of this Agreement, the Company may require the Trust and
the Underwriter to continue to make available additional shares of the
Trust for so long after the termination of this Agreement as the
Company desires pursuant to the terms and conditions of this Agreement
as provided in paragraph (b) below, for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred
to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts shall be permitted to reallocate
investments in the Trust, redeem investments in the Trust and/or
invest in the Trust upon the making of additional purchase payments
under the Existing Contracts. The parties agree that this Section
10.4 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article
VII of this Agreement.
(b) If shares of the Trust continue to be made
available after termination of this Agreement pursuant to this Section
10.4, the provisions of this Agreement shall remain in effect except
for Section 10.l(a) and thereafter the Trust, the Underwriter, or the
Company may terminate the Agreement, as so continued pursuant to this
Section 10.4, upon written notice to the other party, such notice to
be for a period that is reasonable under the circumstances but need
not be for more than 90 days.
10.5. Except as necessary to implement Contract owner initiated or approved
transactions, or as required by state insurance laws or regulations,
the Company shall not redeem Trust
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<PAGE> 36
shares attributable to the Contracts (as opposed to Trust shares
attributable to the Company's assets held in each Separate Account),
and the Company shall not prevent Contract owners from allocating
payments to a Fund that was otherwise available under the Contracts,
until 30 days after the Company shall have notified the Trust or
Underwriter of its intention to do so.
ARTICLE XI NOTICES
Any notice shall be deemed duly given only if sent by hand, evidenced
by written receipt or by certified mail, return receipt requested, to
the other party at the address of such party set forth below or at
such other address as such party may from time to time specify in
writing to the other party. All notices shall be deemed given three
business days after the date received or rejected by the addressee.
If to the Trust: Sage Life Investment Trust
c/o Sage Advisors, Inc.
300 Atlantic Street, Suite 302
Stamford, CT 06901
Attention: Ronald S. Scowby, Chairman
If to the Company: Sage Life Assurance of America, Inc.
300 Atlantic Street, Suite 302
Stamford, CT 06901
Attention: Robin I. Marsden, President
If to the Underwriter: Sage Distributors, Inc.
300 Atlantic Street
Stamford, CT 06901
Attention: James F. Bronsdon, President
ARTICLE XII MISCELLANEOUS
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<PAGE> 37
12.1. All persons dealing with the Trust must look solely to the property of
the Trust for the enforcement of any claims against the Trust as
neither the Trustees, officers, agents or shareholders assume any
personal liability for obligations entered into on behalf of the
Trust.
12.2. Subject to law and regulatory authority, each party hereto shall treat
as confidential all information reasonably identified as such in
writing by any other party hereto (including without limitation the
names and addresses of the owners of the Contracts) and, except as
contemplated by this Agreement, shall not disclose, disseminate, or
utilize such confidential information until such time as it may come
into the public domain without the express prior written consent of
the affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and
the same instrument.
12.5. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
12.6. This Agreement shall not be assigned by any party hereto without the
prior written consent of all the parties.
12.7. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
SEC, the NASD, and state insurance regulators) and shall permit each
other and such authorities reasonable access to its books
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<PAGE> 38
and records in connection with any investigation or inquiry relating
to this Agreement or the transactions contemplated hereby.
12.8. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein
have been duly authorized by all necessary corporate or trust action,
as applicable, by such party and when so executed and delivered this
Agreement will be the valid and binding obligation of such party
enforceable in accordance with its terms.
12.9. The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating to the
Contracts, the Separate Accounts or the Funds of the Trust.
12.10. The Trust has filed a Certificate of Trust with the Secretary of State
of The State of Delaware. The Company acknowledges that the
obligations of or arising out of the Trust's Declaration of Trust are
not binding upon any of the Trust's Trustees, officers, employees,
agents or shareholders individually, but are binding solely upon the
assets and property of the Trust in accordance with its proportionate
interest hereunder. The Company further acknowledges that the assets
and liabilities of each Fund are separate and distinct and that the
obligations of or arising out of this instrument are binding solely
upon the assets or property of the Fund on whose behalf the Trust has
executed this instrument. The Company also agrees that the obligations
of each Fund hereunder shall be several and not joint, in accordance
with its proportionate interest hereunder, and the Company agrees not
to proceed against any Fund for the obligations of another Fund.
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<PAGE> 39
12.11. Except as otherwise expressly provided in this Agreement, neither the
Trust nor the underwriter nor any affiliate thereof shall use any
trademark, trade name, service mark or logo of the Company or any of
its affiliates, or any variation of any such trademark, trade name
service mark or logo, without the Company's prior consent, the
granting of which shall be at the Company's sole option. Except as
otherwise expressly provided in this Agreement, neither the Company
nor any affiliate thereof shall use any trademark, trade name, service
mark or logo of the Trust or of the Underwriter , or any variation of
any such trademark, trade name, service mark or logo, without the
prior consent of either the Trust or of the Underwriter, as
appropriate, the granting of which shall be at the sole option of the
Trust or of the Underwriter, as applicable.
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<PAGE> 40
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
Sage Life Assurance of America, Inc.
By:
--------------------------------
Name: Robin I. Marsden
--------------------------------
Title: President
--------------------------------
Sage Life Investment Trust
By:
-------------------------------
Name: Ronald S. Scowby
--------------------------------
Title: Chairman
--------------------------------
Sage Distributors, Inc.
By:
--------------------------------
Name: James F. Bronsdon
--------------------------------
Title: President
--------------------------------
<PAGE> 41
EXHIBIT A
Separate Accounts and Contracts
Subject to the Participation Agreement
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<PAGE> 42
EXHIBIT B
Funds Subject to the Participation Agreement
EAFE Equity Index Fund
Russell 2000 Equity Index Fund
S&P 500 Equity Index Fund
Money Market Fund
<PAGE> 1
Exhibit 10
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 April 22, 1998, 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 N-4, Nos. 333-
43329 and 811-08581) and related Prospectus for the registration of its variable
annuity contracts.
Ernst & Young LLP
Stamford, Connecticut
December 31, 1998
