As filed with the Securities and Exchange Commission on April , 1996
File No. 33-81626
File No. 811-8628
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 2 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 3
CITICORP LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
(Exact Name of Registrant)
CITICORP LIFE INSURANCE COMPANY
(Name of Depositor)
800 Silver Lake Boulevard
Dover, DE 19904
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number: (302) 672-5000
Richard M. Zuckerman, Esq.
Associate General Counsel
Citicorp Life Insurance Company
800 Silver Lake Boulevard
Dover, Delaware 19904
(Name and Address of Agent for Service of Process)
Copy to:
Stephen E. Roth, Esquire
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the registration statement.
<PAGE>
It is proposed that this filling will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[X] on May 1, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[ ] this Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
DECLARATION PURSUANT TO RULE 24f-2
The registrant has previously filed a declaration of indefinite registration of
its shares pursuant to Rule 24f-2 under the Investment Company Act of 1940. The
registrant filed a Rule 24f-2 Notice on February 27, 1996 for its most recent
fiscal year ended December 31, 1995.
<PAGE>
Cross Reference Sheet
Pursuant to Rules 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
Item of Form N-4 Prospectus Caption
1. Cover Page ..................... Cover Page
2. Definitions .................... Definitions
3. Synopsis ....................... Expense Tables; Summary
4. Condensed Financial
Information .................. Condensed Financial Information;
Yields and Total Returns
5. General
(a) Depositor ................ Citicorp Life Insurance Company
(b) Registrant ............... The Separate Account
(c) Portfolio Company ........ The Funds
(d) Fund Prospectus .......... The Funds
(e) Voting Rights ............ Voting Privileges
(f) Administrators ........... N/A
6. Deductions and Expenses
(a) General .................. Charges and Deductions; Summary
(b) Sales Load ............... Charges and Deductions; Summary
(c) Special Purchase Plan .... N/A
(d) Commissions .............. Distribution of the Contracts
(e) Expenses - Registrant .... Charges and Deductions; Summary
(f) Fund Expenses ............ Charges and Deductions
(g) Organizational Expenses .. N/A
<PAGE>
7. Contracts
(a) Persons with Rights ...... Summary; Addition, Deletion or
Substitution of Investments;
Description of the Contract; Annuity
Payment Options; Voting Privileges;
Death Benefit Before the Annuity
Income Date; Modification; Election
of Annuity Payment Options
(b) (i) Allocation of
Purchase Payments ... Summary; Purchase Payments;
Free-Look Period; Allocation of
Purchase Payments
(ii) Transfers ........... Summary; Transfer Privileges
(iii) Exchanges ........... Transfers, Assignments
(c) Changes .................. Additions, Deletions or
Substitutions of Investments;
Description of the Contract;
Modification;
(d) Inquiries ................ Cover page; Inquiries
8. Annuity Period ................. Summary; Annuity Payment Options
9. Death Benefit .................. Death Benefit Before the Annuity
Date
10. Purchases and Contract Value
(a) Purchases ................ Summary; Issuance of a Contract;
Purchase Payments; Free Look Period;
Allocation of Purchase Payments;
Variable Contract Value; Transfer
Privileges
(b) Valuation ................ Definitions; Variable
Contract Value;
(c) Daily Calculation ........ Definitions; Variable
Contract Value;
(d) Underwriter .............. Issuance of a Contract; Distribution
of the Contracts
<PAGE>
11. Redemptions
(a) - By Owners .............. Summary; Transfer Privilege;
Surrenders and Partial Withdrawals;
Annuity Payments on the Annuity
Date; Payments; Annuity Payment
Options; Federal Tax Matters
- By Annuitant ........... Summary; Transfer Privilege;
Surrenders and Partial Withdrawals;
Proceeds on the Annuity Date;
Payments; Annuity Payment Options;
Federal Tax Matters
(b) Texas ORP ................ N/A
(c) Check Delay .............. Purchase Payments
(d) Lapse .................... N/A
(e) Free Look ................ Summary; Free Look Period
12. Taxes .......................... Summary; Federal Tax Matters
13. Legal Proceedings .............. Legal Proceedings
14. Table of Contents for the
Statement of Additional
Information ................... Statement of Additional Information
Table of Contents
<PAGE>
PART B
Item of Form N-4 Part B Caption
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 ................ Charges and Deductions (prospectus)
(b) Management Contracts ...... N/A
(c) Custodian ................. N/A
Independent Public
Accountant ................ Experts
(d) Assets of Registrant ...... The Separate Account
(e) Affiliated Persons ........ Citicorp Life Insurance Company
(prospectus)
(f) Principal Underwriter ..... Distribution of the Contracts
(prospectus)
19. Purchase of Securities
Being Offered .................. Distribution of the Contracts
(prospectus)
Offering Sales Load ............ N/A
20. Underwriters .................... Distribution of the Contracts
(prospectus)
21. Calculation of Performance
Data ............................ Calculation of Yields and Total
Returns; Yields and Total Returns
(prospectus)
22. Annuity Payments ................ Variable Annuity Payments; Annuity
Payment Options (prospectus)
23. Financial Statements ............ Financial Statements
<PAGE>
PART C -- OTHER INFORMATION
Item of Form N - 4 Part C Caption
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 Citicorp
Life Insurance Company
26. Persons Controlled By or
Under Common Control with the
Depositor or Registrant ......... Persons Controlled By or Under
Common Control with the Depositor
or Registrant
27. Number of Contractowners ........ Number of 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
<PAGE>
PART A
PROSPECTUS
<PAGE>
- --------------------------------------------------------------------------------
INDIVIDUAL FLEXIBLE PREMIUM
DEFERRED VARIABLE ANNUITY CONTRACT
CITICORP LIFE INSURANCE COMPANY
800 Silver Lake Blvd.
P.O. Box 7031
Dover, DE 19903
Telephone: (800) 497-4857
PROSPECTUS
May 1, 1996
- --------------------------------------------------------------------------------
<PAGE>
INDIVIDUAL FLEXIBLE PREMIUM
DEFERRED VARIABLE ANNUITY CONTRACT
CITICORP LIFE INSURANCE COMPANY
800 Silver Lake Blvd.
P.O. Box 7031
Dover, DE 19903
Telephone: (800) 497-4857
This Prospectus describes the individual flexible premium deferred variable
annuity contract (the "Contract") being offered by Citicorp Life Insurance
Company. The Contract may be sold to or in connection with retirement plans,
including those that qualify for special federal tax treatment under Sections
403(b) or 408 of the Internal Revenue Code.
Purchase payments and Contract Values are allocated, as designated by you,
to one or more of the subaccounts of Citicorp Life Variable Annuity Separate
Account (the "Separate Account"), or to the Fixed Account, or both. The assets
of each subaccount will be invested in a corresponding portfolio of the Landmark
VIP Funds, the Fidelity Variable Insurance Products Fund, the AIM Variable
Insurance Funds, Inc., or the MFS Variable Insurance Trust (the "Funds"). The
available portfolios of the Landmark VIP Funds include the Landmark VIP U.S.
Government Fund, the Landmark VIP Equity Fund, the Landmark VIP Balanced Fund
and the Landmark VIP International Equity Fund, and are available for investment
under the Contract. The Growth Portfolio of the Fidelity Variable Insurance
Products Fund, the AIM V.I. Capital Appreciation Fund of the AIM Variable
Insurance Funds, Inc. and the MFS World Government Series and the MFS Money
Market Series of the MFS Variable Insurance Trust are also available for
investment under the Contract. The accompanying prospectuses for the Funds
describe the investment objectives of the available portfolio. The Contract
Value prior to the Annuity Income Date, except for amounts in the Fixed Account,
will vary according to the investment performance of the portfolios in which the
selected subaccounts are invested. You bear the entire investment risk on
amounts allocated to the Separate Account.
This Prospectus sets forth basic information about the Contract and the
Separate Account that a prospective investor should know before investing.
Additional information about the Contract and the Separate Account is contained
in the Statement of Additional Information, which has been filed with the
Securities and Exchange Commission. The Statement of Additional Information has
the same date 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. You may obtain a copy of the Statement of Additional
Information free of charge by
2
<PAGE>
writing to or calling the Company at the address or phone number shown above.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. THIS
PROSPECTUS MUST BE ACCOMPANIED BY CURRENT PROSPECTUSES FOR THE LANDMARK VIP
FUNDS, THE FIDELITY VARIABLE INSURANCE PRODUCTS FUND, THE AIM VARIABLE INSURANCE
FUNDS, INC. AND THE MFS VARIABLE INSURANCE TRUST.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CONTRACTS AND SHARES OF THE FUNDS ARE NOT INSURED BY THE FDIC OR ANY OTHER
AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK AND ARE NOT BANK
GUARANTEED. THEY ARE SUBJECT TO MARKET FLUCTUATION, REINVESTMENT RISK AND
POSSIBLE LOSS OF PRINCIPAL INVESTED.
YOUR RIGHT TO LOOK TO A DELAWARE BANK OR TRUST COMPANY FOR PAYMENT ON ANY
INSURANCE POLICY IS LIMITED BY LAW. INSURANCE POLICIES ISSUED BY THE
SUBSIDIARIES OR DIVISIONS OF DELAWARE BANKS OR TRUST COMPANIES ARE NOT DIRECT
LIABILITIES OF SUCH BANKS OR TRUST COMPANIES. ONLY THE ASSETS OF THE INSURANCE
DIVISION OR SUBSIDIARY ISSUING A POLICY ARE APPLICABLE TO THE PAYMENT AND
SATISFACTION OF SUCH POLICY OR CLAIMS MADE THEREUNDER.
INSURANCE POLICIES ISSUED BY A SUBSIDIARY OR DIVISION OF A DELAWARE BANK OR
TRUST COMPANY ARE NOT BANK DEPOSITS AND ARE NOT FDIC INSURED.
May 1, 1996
3
<PAGE>
TABLE OF CONTENTS
DEFINITIONS
EXPENSE TABLES
SUMMARY
The Contract
Charges and Deductions
Annuity Provisions
Federal Tax Status
CONDENSED FINANCIAL INFORMATION
THE COMPANY, THE SEPARATE ACCOUNT AND THE FUNDS
Citicorp Life Insurance Company
Citicorp Life Variable Annuity Separate Account
The Funds
Addition, Deletion or Substitution of Investments
DESCRIPTION OF THE CONTRACT
Issuance of a Contract
Purchase Payments
Free-Look Period
Allocation of Purchase Payments
Variable Contract Value
Transfer Privileges
Surrenders and Partial Withdrawals
Death Benefit Before the Annuity Income Date
Annuity Payments on the Annuity Income Date
Payments
Modification
Owner
Reports to Owners
Inquiries
THE FIXED ACCOUNT
Fixed Account Value
CHARGES AND DEDUCTIONS
Surrender Charge (Contingent Deferred Sales Charge)
Annual Contract Fee
Asset-Based Administration Charge
Transfer Processing Fee
Mortality and Expense Risk Charge
Fund Expenses
Premium Taxes
Other Taxes
4
<PAGE>
ANNUITY PAYMENT OPTIONS
Election of Annuity Payment Options
Fixed Annuity Payments
Legal Developments Regarding Unisex Actuarial Tables
Variable Annuity Payments
Description of Annuity Payment Options
YIELDS AND TOTAL RETURNS
FEDERAL TAX MATTERS
Introduction
Tax Status of the Contract
Taxation of Annuities
Transfers, Assignments or Exchange of a Contract
Withholding
Multiple Contracts
Taxation of Qualified Plans
Possible Charge for the Company's Taxes
Other Tax Consequences
DISTRIBUTION OF THE CONTRACTS
LEGAL PROCEEDINGS
VOTING PRIVILEGES
COMPANY HOLIDAYS
FINANCIAL STATEMENTS
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
5
<PAGE>
DEFINITIONS
Account Any of the subaccounts or the Fixed Account.
Accumulation Unit A unit of measure used to calculate Variable
Contract Value. We use Accumulation Units to
calculate the value of a subaccount before
annuity payments.
Administrative Office Our principal office at 800 Silver Lake
Blvd., P.O. Box 7031, Dover, DE 19903
Age Your age on your last birthday.
Annuitant The Annuitant is the person upon whose life
annuity benefits are based and to whom
payments are made under this contract,
commencing on the Annuity Income Date. The
Annuitant must be a natural person.
Annuity Income Date The date on which annuity payments begin.
Annuity Unit A unit of measure used to calculate variable
annuity payments.
Attained Age Your age on the prior Contract Anniversary.
Beneficiary The person who becomes the Owner of the
Contract upon any Owner's death prior to the
Annuity Income Date and who receives the
Death Benefit. The Contingent Beneficiary is
the person who will become the Beneficiary if
the named Beneficiary is not living. An
Irrevocable Beneficiary is one whose consent
is necessary to change Beneficiaries and
exercise certain other rights under the
Contract.
The Code The Internal Revenue Code of 1986, as
amended.
Contract Anniversary The same date each year after the Contract
Date.
Contract Date The Contract Date is the date the Contract
becomes effective.
Contract Owner The person(s) who owns the Contract and who
is entitled to exercise all rights and
privileges provided in the Contract.
6
<PAGE>
Contract Value The total amount invested under the Contract.
It is the sum of the Variable Contract Value
and the value of the Contract in the Fixed
Account.
Dollar Cost Averaging A series of systematic monthly transfers from
either the Money Market Subaccount or the
Fixed Account to the available subaccounts.
Fixed Account An allocation option under our General
Account. Under the Fixed Account, we credit
any portion of the initial purchase payment
allocated to the Fixed Account with the
Initial Fixed Account Interest Rate shown in
the Contract Schedule. We may declare
different initial interest rates for each
subsequent purchase payment or transfer to
the Fixed Account. After the initial one-year
period, the interest rate earned will be the
Current Fixed Account Interest Rate. The
Current Fixed Account Interest Rate is
determined by us in our discretion and is
guaranteed for one year.
General Account Assets other than those allocated to the
Separate Account or any other separate
account.
"In writing" and
"written request" A written form satisfactory to us and
received by us at our Administrative Office.
We have the right to require a signature
guarantee from an institution qualified to
give such a guarantee before acting on any
written request.
Net Asset Value
per Share The share value of any portfolio as of any
Valuation Day reflecting investment
performance and decreased by any expenses and
fees assessed against the portfolio.
Net Investment Factor An index used to measure the investment
performance of a subaccount from one
Valuation Period to the next.
Non-Qualified Contract A Contract that is not a "qualified
contract."
7
<PAGE>
Premium Taxes Taxes charged by a state or municipality on
purchase payments. We deduct premium taxes
from the Contract Value either: (1) at the
time the Contract is surrendered; (2) on the
Annuity Income Date; or (3) at such other
date as the taxes are assessed.
Qualified Contract A Contract that is issued in connection with
retirement plans that qualify for special
federal income tax treatment under Sections
403(b) or 408 of the Code.
SEC U.S. Securities and Exchange Commission.
Subaccount A subdivision of the Separate Account, the
assets of which are invested in a
corresponding portfolio.
Surrender Value The Contract Value less any applicable
surrender charges payable, premium taxes not
previously deducted and the Annual Contract
Fee for that year.
Valuation Day For each subaccount, each day on which both
we and the New York Stock Exchange are open
for business.
Valuation Period The period that starts following the close of
regular trading on the New York Stock
Exchange on any Valuation Day and ends at the
close of regular trading on the next
succeeding Valuation Day.
Separate Account Citicorp Life Variable Annuity Separate
Account. Assets of the Separate Account equal
to the reserves and other contract
liabilities with respect to the Separate
Account are separate from our other assets
and are not chargeable with liabilities
arising out of any other business we may
conduct.
Variable Contract
Value The value of the Contract in the Separate
Account.
"We", "Our","Us" Citicorp Life Insurance Company.
and the "Company"
8
<PAGE>
"You" and "Your" The Owner of the Contract. In the event of
Joint Ownership, you and your apply equally
to either Joint Owner unless the context
clearly indicates otherwise.
9
<PAGE>
EXPENSE TABLES
The following expense information assumes that the entire Contract Value is
Variable Contract Value.
Owner Transaction Expenses
Sales Charge Imposed on Purchase Payments None
Maximum Surrender Charge (contingent
deferred sales charge) as a percentage
of the premium payment withdrawn 7%
Surrender Fee None*
Transfer Processing Fee None**
Annual Contract Fee $30***
Separate Account Annual Expenses
(as a percentage of net assets)
Mortality and Expense Risk Charge 1.25%
Administration Charge 0.15%
Total Separate Account Expenses 1.40%
Annual Fund Expenses****
(as percentage of average net assets)
Landmark VIP U.S. Government Fund
Management Fees (investment advisory fees) 0.40%
Other Expenses (after fee waivers and reimbursements) 0.20%
Total Annual Fund Expenses (after fee waivers 0.60%
and reimbursements)
- ----------
* We reserve the right to assess a processing charge equal to the lesser of
$25 or 2% of the amount withdrawn for each withdrawal (including the final
surrender) after the first 12 withdrawals in any Contract Year. See "Charges and
Deductions."
** We reserve the right to charge a $25 transfer fee on each transfer after
the first 12 transfers in any Contract Year. See "Charges and Deductions."
*** We will waive the Annual Contract Fee in its entirety if, at the time
this charge would be deducted, the Contract Value is at least $25,000.
**** Certain of the unaffiliated investment advisers reimburse Citicorp
Life for administrative costs incurred in connection with administering the
funds as variable funding options. These reimbursements are paid out of the
10
<PAGE>
advisers' investment advisory fees as a percentage of assets under management.
Landmark VIP Equity Fund
Management Fees (investment advisory fees) 0.50%
Other Expenses (after fee waivers and reimbursements) 0.25%
Total Annual Fund Expenses (after fee waivers 0.75%
and reimbursements)
Landmark VIP Balanced Fund
Management Fees (investment advisory fees) 0.40%
Other Expenses (after fee waivers and reimbursements) 0.30%
Total Annual Fund Expenses (after fee waivers 0.70%
and reimbursements)
Landmark VIP International Equity Fund
Management Fees (investment advisory fees) 1.00%
Other Expenses (after fee waivers and reimbursements) 0.20%
Total Annual Fund Expenses (after fee waivers 1.20%
and reimbursements)
Fidelity Growth Portfolio
Management Fees (investment advisory fees) 0.61%
Other Expenses 0.09%
Total Annual Fund Expenses 0.70%
AIM V.I. Capital Appreciation Fund
Management Fees (investment advisory fees) 0.65%
Other Expenses 0.10%
Total Annual Fund Expenses 0.75%
MFS World Governments Series
Management Fees (investment advisory fees) 0.75%
Other Expenses (after fee reduction) 0.25%
Total Annual Fund Expenses (after fee reduction) 1.00%
11
<PAGE>
MFS Money Market Series
Management Fees (investment advisory fees) 0.50%
Other Expenses (after fee reduction) 0.10%
Total Annual Fund Expenses (after fee reduction) 0.60%
Premium taxes may be applicable, depending on the laws of various
jurisdictions. Various states and other governmental entities levy a premium
tax, currently ranging up to 3.5%, on annuity contracts issued by insurance
companies.
The above tables are intended to assist the Owner in understanding the
costs and expenses that he or she will bear directly or indirectly. The tables
reflect fiscal year 1995 expenses for the Separate Account and fiscal year 1995
expenses for the Landmark VIP U.S. Government Fund, the Landmark VIP Equity
Fund, the Landmark VIP Balanced Fund, the Landmark VIP International Equity
Fund, the Fidelity Growth Portfolio, the AIM V.I. Capital Appreciation Fund, the
MFS World Governments Series and the MFS Money Market Series. Absent fee waivers
and reimbursements, "Other Expenses" and "Total Annual Fund Expenses" incurred
for fiscal year 1995 were: Landmark VIP U.S. Government Fund - 8.67% and 9.07%;
Landmark VIP Equity Fund - 7.33% and 7.83%; Landmark VIP Balanced Fund - 6.92%
and 7.32%; Landmark VIP International Equity Fund - 3.84% and 4.84%, MFS World
Governments Series 1.24% and 1.99% and MFS Money Market Series 21.04% and
21.54%, respectively. There can be no assurance that the fee waivers and
reimbursements reflected in the table will continue at their reflected levels.
However, the MFS Investment Advisor has agreed to bear, subject to
reimbursement, until December 31, 2004, expenses such that the aggregate
expenses of the MFS World Governments Series and the MFS Money Market Series do
not exceed, on an annualized basis 1.00% and 0.60% of the average daily net
assets, respectively. For a more complete description of the various costs and
expenses see "Charges and Deductions" and the prospectuses for the Funds.
12
<PAGE>
Examples
An owner would pay the following expenses on a $1,000 investment, assuming
a 5% annual return on assets:
1. If the Contract is surrendered or annuitized under an annuity option not
providing a life annuity or a life annuity with a period certain of at least
five years at the end of the applicable time period:
Subaccount 1 Year 3 Years 5 Years 10 Years
- ---------- ------ ------- ------- --------
Landmark VIP U.S. Government Fund $ 89 $122 $157 $270
Landmark VIP Equity Fund $ 90 $127 $165 $285
Landmark VIP Balanced Fund $ 90 $125 $162 $280
Landmark VIP International Equity $ 94 $140 $187 $330
Fund
Fidelity Growth Portfolio $ 90 $125 $162 $280
AIM V.I. Capital Appreciation Fund $ 91 $127 $165 $285
MFS World Governments Series $ 92 $134 $177 $311
MFS Money Market Series $ 89 $122 $157 $270
2. If the Contract is annuitized under an annuity option providing either a
life annuity or a life annuity with a period certain of at least five years at
the end of the applicable time period:
Subaccount 1 Year 3 Years 5 Years 10 Years
- ---------- ------ ------- ------- --------
Landmark VIP U.S. Government Fund $ 24 $ 74 $126 $270
Landmark VIP Equity Fund $ 26 $ 79 $134 $285
Landmark VIP Balanced Fund $ 25 $ 77 $132 $280
Landmark VIP International Equity $ 30 $ 92 $157 $330
Fund
Fidelity Growth Portfolio $ 25 $ 77 $132 $280
AIM V.I. Capital Appreciation Fund $ 26 $ 79 $134 $285
MFS World Governments Series $ 28 $ 86 $147 $311
MFS Money Market Series $ 24 $ 74 $126 $270
13
<PAGE>
3. If the Contract is not surrendered or annuitized at the end of the
applicable time period:
Subaccount 1 Year 3 Years 5 Years 10 Years
- ---------- ------ ------- ------- --------
Landmark VIP U.S. Government Fund $ 24 $ 74 $126 $270
Landmark VIP Equity Fund $ 26 $ 79 $134 $285
Landmark VIP Balanced Fund $ 25 $ 77 $132 $280
Landmark VIP International Equity $ 30 $ 92 $157 $330
Fund
Fidelity Growth Portfolio $ 25 $ 77 $132 $280
AIM V.I. Capital Appreciation Fund $ 26 $ 79 $134 $285
MFS World Governments Series $ 28 $ 86 $147 $311
MFS Money Market Series $ 24 $ 74 $126 $270
The examples provided above assume that no transfer charges or premium
taxes have been assessed. The examples also assume that the Annual Contract Fee
is $30 and that the average Contract Value is $10,000, which translates the
Annual Contract Fee into an assumed .30% charge for the purposes of the examples
based on a $1,000 investment.
The examples should not be considered a representation of past or future
expenses. The assumed 5% annual rate of return is hypothetical and should not be
considered a representation of past or future annual returns, which may be
greater or less than this assumed rate.
14
<PAGE>
SUMMARY
UNLIKE BANK ACCOUNTS, CONTRACT VALUE IS NOT INSURED. INVESTMENT OF CONTRACT
VALUE INVOLVES CERTAIN RISKS INCLUDING LOSS OF PURCHASE PAYMENTS (PRINCIPAL).
CONTRACT VALUE IS NOT DEPOSITED IN OR GUARANTEED BY ANY BANK AND IS NOT
GUARANTEED BY ANY GOVERNMENT AGENCY.
The Contract
Issuance of a Contract. Contracts may be issued in connection with
retirement plans that may or may not qualify for special federal tax treatment
under the Code. The maximum age for Owners on the Contract date is 90. (See
"Issuance of a Contract.")
Free-Look Period. You have the right to return the Contract within 10 days
(or longer in certain states) after you receive it. We will consider the
Contract received five days after it is mailed to your last known address. The
returned Contract will become void. We will return to you an amount equal to the
Contract Value on the date the Contract is received either at our administrative
office or by the sales representative who sold it, plus any premium taxes
deducted. Where required, we will instead return the greater of the Contract
Value or purchase payment(s) (See "Free-Look Period.")
Purchase Payments. The minimum amount we will accept as an initial purchase
payment is $5,000 for Non-Qualified Contracts and $2,000 for Qualified
Contracts. Subsequent purchase payments may be paid under the Contract at any
time before the Annuity Income Date; however, we reserve the right not to accept
payments of less than $500 for Non-Qualified Contracts and less than $100 for
Qualified Contracts. Our approval is required for payments that exceed
$1,000,000 per Contract Year. (See "Purchase Payments", page 23.)
Allocation of Purchase Payments. Purchase payments under a Contract will be
allocated, as designated by you, to one or more of the subaccounts of the
Separate Account or to the Fixed Account or to both. In states where we must
refund purchase payments in the event you exercise the free-look right, any
portion of the initial net purchase payment to be allocated to any subaccount
will be allocated to the subaccount investing in the MFS Money Market Series
(the "Money Market Subaccount") during the "free-look" period. At the end of
that period, the value in the Money Market Subaccount will be allocated to the
subaccounts as selected by you. The assets of each subaccount will be invested
solely in a corresponding portfolio. The Contract Value, except for amounts in
the Fixed Account, will vary according to the investment performance of the
portfolio(s) in which the selected subaccount(s)
15
<PAGE>
is invested. Interest will be credited to amounts in the Fixed Account at a
guaranteed minimum rate of 3% per year, or a higher current interest rate
declared by us. (See "Allocation of Purchase Payments.") The Fixed Account may
not be available in all states.
Transfers. On or before the Annuity Income Date, you may transfer all or
part of the value in a subaccount or the Fixed Account to another subaccount or
the Fixed Account subject to certain restrictions.
The maximum amount that may be transferred from the Fixed Account during
any Contract Year equals the greatest of: (1) 25% of the Fixed Account Value as
of the later of the Contract Date or last Contract Anniversary; (2) the Contract
Value in the Fixed Account attributable to interest earnings; or (3) the
greatest transfer from the Fixed Account during the prior Contract Year. We
reserve the right to defer transfers from the Fixed Account for up to 6 months
following the date of request.
Currently, a $25 fee is assessed on the 19th and each subsequent transfer
during a Contract Year. We reserve the right, however, to charge this fee for
the 13th and each subsequent transfer during a Contract Year. (See "Transfer
Privilege.")
Partial Withdrawal. Before the Annuity Income Date, you may, by written
notice, withdraw part of the surrender value subject to certain limitations. Any
withdrawal request must be in writing and must specify from which Account(s) the
withdrawal will be made. (See "Partial Withdrawals.")
Surrender. Upon written notice before the Annuity Income Date, you may
surrender the Contract and receive its surrender value. (See "Surrender.")
Charges and Deductions
The following charges and deductions are assessed under the Contract:
Surrender Charge (Contingent Deferred Sales Charge). No charge for sales
expenses is deducted from purchase payments at the time purchase payments are
made. However, a surrender charge may be deducted from amounts surrendered or
withdrawn. A surrender charge also may be deducted from amounts applied to
annuity payment options not providing a life annuity or a life annuity with a
period certain of at least five years. Surrender charges are not deducted upon
payment of a death benefit.
The surrender charge imposed on partial withdrawals, surrenders and upon
application of proceeds to certain annuity options equals
16
<PAGE>
a specified percentage of the purchase payments withdrawn or applied. The
surrender charge is calculated by multiplying the applicable specified
percentages by the purchase payments withdrawn. For purchase payments withdrawn
or surrendered within one year of having been paid, the charge is 7% of the
amount of purchase payments withdrawn or surrendered. For each purchase payment,
the surrender charge decreases each full year that has elapsed since the payment
was made. Surrenders and withdrawals are considered to come first from earnings
and then from the oldest purchase payment, then the next oldest payment, and so
forth. No surrender charge is assessed upon the withdrawal or surrender of
earnings or purchase payments made more than 5 years prior to the withdrawal or
surrender. (See "Charges for Surrender or Partial Withdrawals.")
During each Contract Year, up to 10% of purchase payments less any prior
withdrawal of purchase payments may be withdrawn without a Surrender Charge.
The surrender charge also may be waived in certain circumstances as
provided in the Contract. (See "Waiver of Surrender Charge.")
We reserve the right to assess a processing charge equal to the lesser of
$25 or 2% of the amount withdrawn for each withdrawal (including the final
surrender) after the first 12 withdrawals in any Contract Year.
Annual Contract Fee. On the 1st day of each Contract Year prior to the
Annuity Income Date, or the surrender of the Contract, if earlier, we will
deduct an Annual Contract Fee of $30 from the Contract Value. A pro-rated
portion of the fee is deducted from all active Accounts. (See "Annual Contract
Fee.")
The Annual Contract Fee will be waived in its entirety if, at the time of
deduction, the Contract Value is $25,000 or more.
Mortality and Expense Risk Charge. We deduct a daily mortality and expense
risk charge to compensate us for assuming certain mortality and expense risks.
The charge is deducted from the assets of the Separate Account at an annual rate
of 1.25% (approximately 0.50% for mortality risk and 0.75% for expense risks).
(See "Mortality and Expense Risk Charge.")
Asset-Based Administration Charge. We deduct a daily administration charge
to compensate us for certain expenses we incur in administration of the Contract
and the Separate Account. The charge is deducted from the assets of the Separate
Account at an annual rate of 0.15%. (See "Asset-Based Administration Charge".)
We do not expect to make a profit from this charge.
17
<PAGE>
Premium Taxes. If state or other premium taxes are applicable to a
Contract, they will be deducted from the Contract Value. Premium taxes will be
deducted from the Contract Value either: (1) at the time the Contract is
surrendered; (2) on the Annuity Income Date; or (3) at such other date as the
taxes are assessed.
Annuity Provisions
The Annuity Income Date may be elected by you at the time of application or
anytime thereafter. The Annuity Income Date may not be after the later of: (1)
the first day of the month following the Annuitant's 85th birthday; or (2) ten
years after the Contract Date. If no Annuity Income Date is elected, it will be
the first day of the calendar month following the Annuitant's 65th birthday or
ten years after the Contract Date, if later
On the Annuity Income Date, the Contract Value (adjusted as described
below) will be applied to an Annuity Income Option, unless you choose to receive
the surrender value in a lump sum. The Contract Value is adjusted by deducting
applicable premium tax not yet deducted, and for annuity options other than a
life annuity or a life annuity with a period certain of at least five years,
less any applicable surrender charge. (See "Annuity Payment Options.")
Federal Tax Status
Generally, a distribution (including a surrender, partial withdrawal or
death benefit payment) may result in taxable income. In certain circumstances, a
10% penalty tax may apply. For a further discussion of the federal income status
of variable annuity contracts, see "Federal Tax Status."
18
<PAGE>
CONDENSED FINANCIAL INFORMATION
The following table sets forth certain information pertaining to the net
assets of the Separate Account, as represented by the accumulation unit values
and accumulation units, as of December 31, 1995. This condensed financial
information is derived from the financial statements of the Separate Account and
should be read in conjunction with the financial statements, related notes and
other financial information contained in the Statement of Additional
Information. The accumulation unit values shown for the beginning of the period
are as of the date of commencement of business, which was February 21, 1995.
Accumulation Unit Accumulation
Value Units
----------------------- ------------
Beginning End of End of
Subaccount of Period Period Period
(2/21/95) (12/31/95) (12/31/95)
- --------------------------------------------------------------------------------
Landmark VIP U.S. Government Fund* 1.00 1.00 0
Landmark VIP Equity Fund* 1.00 1.00 0
Landmark VIP Balanced Fund 1.00 1.11 5,094
Landmark VIP International Equity 1.00 1.00 0
Fund*
Fidelity Growth Portfolio 1.00 1.31 4,565
AIM V.I. Capital Appreciation Fund* 1.00 1.00 0
MFS World Governments Series* 1.00 1.00 0
MFS Money Market Series* 1.00 1.00 0
* As of December 31, 1995, no purchase payments had been allocated to the
subaccounts investing in the Landmark VIP U.S. Government Fund, the Landmark VIP
Equity Fund, the Landmark VIP International Equity Fund, the AIM V.I. Capital
Appreciation Fund, the MFS World Governments Series or the MFS Money Market
Series.
THE COMPANY, THE SEPARATE ACCOUNT AND THE FUNDS
Citicorp Life Insurance Company
Citicorp Life Insurance Company (formerly Family Guardian Life Insurance
Company) is a stock life insurance company organized under the laws of the State
of Arizona in 1971. Citicorp Life Insurance Company is a wholly owned subsidiary
of Citibank Delaware which is a wholly owned subsidiary of Citicorp Holdings
Inc., which in turn, is a wholly owned subsidiary of Citicorp, one of the
world's largest bank holding companies. Citicorp Life and its former parent
corporation, Citicorp Mortgage, Inc., a Delaware holding company, were both
acquired by Citicorp in 1973. During 1990, the ownership of Citicorp Life was
transferred to Citibank Delaware.
19
<PAGE>
Pursuant to the 1973 approval by the Board of Governors of the Federal
Reserve System (FRB), Citicorp Life initially limited its activities to the
reinsurance of credit life and disability insurance sold in connection with
extensions of credit by Citicorp. Additional Federal approvals were received in
1976 and 1980, authorizing Citicorp Life to underwrite group and individual term
life and disability insurance directly related to extensions of credit by the
domestic Citicorp holding company system. Subsequent Delaware and Federal law
changes in 1989 and 1991, respectively, now enable Citicorp Life to underwrite
and issue insurance coverages and annuities which are independent of any
extension of credit.
As of December 31, 1995, Citicorp Life Insurance Company had statutory
assets in excess of $523,847,000. Citicorp Life Insurance Company's financial
statements can be found in the Statement of Additional Information and should
only be considered in the context of its ability to meet any obligations it may
have under the Contract.
Citicorp Life Variable Annuity Separate Account
The Separate Account was established by us as a separate account on July
6, 1994. The Separate Account will receive and invest purchase payments made
under the Contracts. In addition, the Separate Account may receive and invest
purchase payments for other variable annuity contracts we may issue in the
future.
Although the assets in the Separate Account are our property, the assets
in the Separate Account attributable to the Contracts are not chargeable with
liabilities arising out of any other business that we may conduct. The assets of
the Separate Account are available to cover our general liabilities only to the
extent that the Separate Account's assets exceed the liabilities arising under
the Contracts and any other contracts supported by the Separate Account. We have
the right to transfer to the General Account any assets of the Separate Account
which are in excess of reserves and other contract liabilities. All obligations
arising under the Contracts are our general corporate obligations.
The Separate Account currently is divided into eight subaccounts but may,
in the future, include additional subaccounts. Each subaccount invests
exclusively in shares of a single corresponding portfolio. The income, gains and
losses, realized or unrealized, from the assets allocated to each subaccount are
credited to or charged against that subaccount without regard to income, gains
or losses from any other subaccount.
The Separate Account has been registered with the SEC as a unit investment
trust under the Investment Company act of 1940 (the
20
<PAGE>
"1940 Act") and meets the definition of a separate account under the federal
securities laws. Registration with the SEC does not involve supervision of the
management or investment practices or policies of the Separate Account by the
SEC. The Separate Account is also subject to the laws of the State of Arizona
which regulate the operations of insurance companies domiciled in Arizona.
The Funds
The Separate Account invests in shares of the Landmark VIP Funds, the
Fidelity Variable Insurance Products Fund, the AIM Variable Insurance Funds,
Inc. and the MFS Variable Insurance Trust. The Funds are management investment
companies of the series type with one or more investment portfolios. Each Fund
is registered with the SEC as an open-end, management investment company. Such
registration does not involve supervision of the management or investment
practices or policies of the Company or the portfolios by the SEC.
The Funds may, in the future, create additional portfolios that may or may
not be available as investment options under the Contracts. Each portfolio has
its own investment objectives and the income and losses for each portfolio are
determined separately for that portfolio.
The investment objectives and policies of each portfolio are summarized
below. There is no assurance that any portfolio will achieve its stated
objectives. More detailed information, including a description of risks and
expenses, may be found in the prospectuses for the Funds which must accompany or
precede this prospectus and which should be read carefully and retained for
future reference.
Landmark VIP Funds. The Landmark VIP Funds currently include four funds
available as investment options under the Contracts. The Landmark VIP Funds
include the Landmark VIP U.S. Government Fund, the Landmark VIP Equity Fund, the
Landmark VIP Balanced Fund and the Landmark VIP International Equity Fund.
Landmark VIP U.S. Government Fund. This portfolio seeks current income
as well as preservation of capital by investing, under normal
circumstances, at least 65% of its total assets in obligations issued
or guaranteed as to principal and interest by the U.S Government or any
of its agencies and instrumentalities and repurchase agreements
involving U.S. Government securities.
Landmark VIP Equity Fund. This portfolio seeks long-term capital
growth. Dividend income, if any, is incidental to the fund's investment
objective of increasing long-term value.
21
<PAGE>
Under normal circumstances, at least 65% of the fund's total assets are
invested in equity securities. Investments are primarily in common
stocks of domestic companies with medium to large market
capitalizations, i.e. $750 million or more, and seasoned management
teams. Appreciation may be sought in other types of securities such as
fixed income securities, convertible and non-convertible bonds,
preferred stocks and warrants.
Landmark VIP Balanced Fund. This portfolio seeks to earn high current
income by investing in a broad range of securities, to preserve
capital, and to provide growth potential with reduced risk. The fund is
invested in a broadly diversified portfolio of income producing
securities, including common stocks, preferred stocks and bonds. Under
normal circumstances, at least 25% of the portfolio's total assets are
invested in fixed income securities.
Landmark VIP International Equity Fund. This portfolio seeks long-term
capital growth. Dividend income, if any, is incidental to the
portfolio's investment objective of increasing long-term value.
Investments are primarily in common stocks in countries other than the
United States. Under normal circumstances, at least 65% of the fund's
assets are invested in equity securities. Appreciation may be sought in
other types of securities such as fixed income securities, convertible
and non-convertible bonds, preferred stocks and warrants.
Citibank, N.A. serves as investment adviser to these portfolios and manages
their assets in accordance with general policies and guidelines established by
the trustees of the Landmark VIP Funds.
Fidelity Variable Insurance Products Fund. The Fidelity Variable Insurance
Products Fund currently has five portfolios, one of which, the Fidelity Growth
Portfolio, is available as an investment option under the Contracts.
Fidelity Growth Portfolio. This portfolio seeks to achieve capital
appreciation. The portfolio normally purchases common stocks, although
its investments are not restricted to any one type of security. Capital
appreciation may also be found in other types of securities, including
bonds and preferred stocks.
Fidelity Management & Research Company serves as investment adviser to this
portfolio and manages its assets in accordance with general policies and
guidelines established by the trustees of the Fidelity Variable Insurance
Products Fund.
22
<PAGE>
AIM Variable Insurance Funds, Inc. AIM Variable Insurance Funds, Inc.
currently has nine portfolios, one of which, the AIM V.I. Capital Appreciation
Fund, is available as an investment option under the Contracts.
AIM V.I. Capital Appreciation Fund. This portfolio seeks capital
appreciation through investments in common stocks, with emphasis on
medium-sized and smaller emerging growth companies.
AIM Advisors, Inc. serves as investment adviser to this portfolio and
manages its assets in accordance with general policies and guidelines
established by the trustees of the AIM V.I. Capital Appreciation Fund.
MFS Variable Insurance Trust. MFS Variable Insurance Trust currently has
twelve portfolios, two of which, the MFS World Governments Series and the MFS
Money Market Series, are available as investment options under the Contracts.
MFS World Governments Series. This portfolio seeks preservation and
growth of capital, together with moderate current income. Objectives
are achieved through an internationally diversified portfolio
consisting primarily of debt securities (normally at least 80%) and to
a lesser extent equity securities.
MFS Money Market Series. This portfolio seeks as high a level of
current income as is considered consistent with the preservation of
capital and liquidity. Objectives are achieved by investing primarily
(normally at least 80%) in U.S. Government Securities, obligations of
banks, commercial paper and short-term corporate obligations. An
investment in the Money Market Series is neither insured nor guaranteed
by the U.S. Government, and there can be no assurance that the
portfolio will be able to maintain a stable net asset value of $1 per
share.
Massachusetts Financial Services Company serves as investment adviser to
these portfolios and manages their assets in accordance with general policies
and guidelines established by the trustees of the MFS World Governments Series
and the MFS Money Market Series.
Addition, Deletion or Substitution of Investments
We reserve the right, subject to applicable law, to make additions to,
deletions from, or substitutions for the shares of a portfolio that are held in
the Separate Account or that the Separate Account may purchase. If the shares of
a portfolio
23
<PAGE>
are no longer available for investment or if, in our judgment, further
investment in any portfolio should become inappropriate, we may redeem the
shares, if any, of that portfolio and substitute shares of another portfolio. We
will not substitute any shares attributable to a Contract's interest in a
subaccount without notice and prior approval of the SEC and state insurance
authorities, to the extent required by the 1940 Act or other applicable law.
We also reserve the right to establish additional subaccounts of the
Separate Account, each of which would invest in shares of a new corresponding
portfolio having a specified investment objective. We may, in our sole
discretion, establish new subaccounts or eliminate or combine one or more
subaccounts if marketing needs, tax considerations or investment conditions
warrant. Any new subaccounts may be made available to existing Contract Owners
on a basis to be determined by us. Subject to obtaining any approvals or
consents required by applicable law, the assets of one or more subaccounts may
be transferred to any other subaccount if, in our sole discretion, marketing,
tax, or investment conditions warrant.
In the event of any such substitution or change, we may (by appropriate
endorsement, if necessary) change the Contract to reflect the substitution or
change. If we consider it to be in the best interest of Owners and Annuitants,
and subject to any approvals that may be required under applicable law, the
Separate Account may be operated as a management investment company under the
1940 Act, it may be deregistered under that Act if registration is no longer
required, it may be combined with other separate accounts, or its assets may be
transferred to another separate account. In addition, we may, when permitted by
law, restrict or eliminate any voting privileges of Owners or other persons who
have such privileges under the Contracts.
DESCRIPTION OF THE CONTRACT
Issuance of a Contract
In order to purchase a Contract, application must be made to us through our
licensed representative who is also a registered representative of Citicorp
Investment Services, Inc., a registered broker-dealer which has a selling
agreement with The Landmark Funds Broker-Dealer Services, Inc. Contracts may be
sold to or in connection with retirement plans that do not qualify for special
tax treatment as well as retirement plans that qualify for special tax treatment
under the Code. The maximum age for Owners on the Contract Date is 90.
24
<PAGE>
Purchase Payments
The minimum amount that we will accept as an initial purchase payment is
$5,000 for Non-Qualified Contracts, $2,000 for Qualified Contracts. Subsequent
purchase payments may be paid at any time during the Annuitant's lifetime and
before the Annuity Income Date.
We reserve the right not to accept purchase payments in excess of $1
million per Contract Year. We also reserve the right not to accept payments of
less than $500 for Non-Qualified Contracts or less than $100 for Qualified
Contracts.
Under our automatic purchase payment plan, you can select a monthly payment
schedule pursuant to which purchase payment payments will be automatically
deducted from a bank account or other source. We reserve the right not to accept
such monthly payments if less than $500 for Non-Qualified Contracts or less than
$100 for Qualified Contracts.
Free-Look Period
The Contract provides for an initial "free-look" period. You have the right
to return the Contract within 10 days of receiving it. In some jurisdictions,
this period may be longer than 10 days. When we receive the returned Contract at
our administrative office or when the sales representative who sold the Contract
receives it before the end of this period, we will cancel the Contract and
refund to you an amount equal to the Contract Value as of the date the returned
Contract is received plus any premium taxes deducted. This amount may be more or
less than the aggregate amount of purchase payments made up to that time. In
certain jurisdictions, we instead return the greater of the Contract Value plus
any premium tax deducted or aggregate purchase payment(s) less any prior
withdrawals. In those cases, we will allocate initial purchase payments to the
Money Market Subaccount for the free-look period following the Contract Date.
The free-look period begins on the date following your receipt of the Contract.
We will consider the Contract received five days after it is mailed to your last
known address.
Allocation of Purchase Payments
At the time of application, you select the allocation of the initial net
purchase payment among the subaccounts and the Fixed Account. Any allocation
must be for at least the greater of $100 or 10% of a purchase payment and be in
whole percentages.
If the application for a Contract is properly completed and is accompanied
by all the information necessary to process it, including payment of the initial
purchase payment, the initial
25
<PAGE>
purchase payment will be allocated, as designated by you, to one or more of the
subaccounts or to the Fixed Account within two valuation days of receipt of such
purchase payment by us at our administrative office. If the application is not
properly completed, we reserve the right to retain the purchase payment for up
to five valuation days while we attempt to complete the application. If the
application is not complete at the end of the 5-day period, we will inform the
applicant of the reason for the delay and the initial purchase payment will be
returned immediately, unless the applicant specifically consents to our
retaining the purchase payment until the application is complete. Once the
application is complete, the initial purchase payment will be allocated as
designated by you within two valuation days.
Notwithstanding the foregoing, in jurisdictions where we must refund the
greater of aggregate purchase payments or Contract Value in the event you
exercise the free-look right, any portion of the initial purchase payment to be
allocated to a subaccount will be allocated to the Money Market Subaccount for
the free-look period following the Contract Date. At the end of that period, the
amount in the Money Market Subaccount will be allocated to the subaccounts as
designated by you based on the proportion that the allocation percentage for
each such subaccount bears to the sum of the allocation percentages set forth in
the purchase payment allocation schedule then in effect.
Any subsequent purchase payments will be allocated as of the end of the
valuation period in which the subsequent purchase payment is received by us and
will be allocated in accordance with the purchase payment allocation schedule in
effect at the time the purchase payment is received. However, you may direct
individual payments to a specific subaccount or to the Fixed Account (or any
combination thereof) without changing the existing allocation schedule. The
allocation schedule may be changed by you at any time by written notice.
Changing the purchase payment allocation schedule will not change the allocation
of existing Contract Value among the subaccounts or the Fixed Account.
The Contract Values allocated to a subaccount will vary with that
subaccount's investment experience, and you bear the entire investment risk. You
should periodically review your purchase payment allocation schedule in light of
market conditions and your overall financial objectives.
Variable Contract Value
The Variable Contract Value will reflect the investment experience of the
selected subaccounts, any purchase payments paid, any surrenders or partial
withdrawals, any transfers, and any charges assessed in connection with the
Contract. There is no
26
<PAGE>
guaranteed minimum Variable Contract Value, and, because a Contract's Variable
Contract Value on any future date depends upon a number of variables, it cannot
be predetermined.
Calculation of Variable Contract Value. The Variable Contract Value is
determined at the end of each valuation period prior to the Annuity Income Date.
The value will be the aggregate of the values attributable to the Contract in
each of the subaccounts, determined for each subaccount by multiplying that
subaccount's accumulation unit value for the relevant valuation period by the
number of accumulation units of that subaccount allocated to the Contract.
Determination of Number of Accumulation Units. Prior to the Annuity Income
Date, any amounts allocated or transferred to the subaccounts will be converted
into subaccount accumulation units. The number of accumulation units to be
credited to a Contract is determined by dividing the dollar amount being
allocated or transferred to a subaccount by the accumulation unit value for that
subaccount at the end of the valuation period during which the amount is
allocated or transferred. The number of accumulation units in any subaccount
will be increased at the end of the valuation period by any purchase payments
allocated to the subaccount during the current valuation period and by any
amounts transferred to the subaccount from another subaccount or from the Fixed
Account during the current valuation period.
Any amounts transferred, surrendered or deducted from a subaccount will be
processed by cancelling or liquidating accumulation units. The number of
accumulation units to be cancelled is determined by dividing the dollar amount
being removed from a subaccount by the accumulation unit value for that
subaccount at the end of the valuation period during which the amount was
removed. The number of accumulation units in any subaccount will be decreased at
the end of the valuation period by: (a) any amounts transferred (and any
applicable transfer fee) from that subaccount to another subaccount or to the
Fixed Account; (b) any amounts withdrawn or surrendered during that valuation
period; (c) any surrender charge, Annual Contract Fee or premium tax assessed
upon a partial withdrawal or surrender; and (d) the Annual Contract Fee, if
assessed during that valuation period.
Determination of Accumulation Unit Value. The accumulation unit value for
each subaccount's first Valuation Period was set at $1.00. The accumulation unit
value for a subaccount is calculated for each subsequent Valuation Period by
multiplying that subaccount's accumulation unit value on the preceding Valuation
Day by the net investment factor for that sub-account for the Valuation Period
then ended.
27
<PAGE>
The net investment factor for each subaccount for any Valuation Period is
calculated by dividing (1) by (2) and subtracting (3) from the result, where:
(1) Is the net asset value per share of the corresponding portfolio at the
end of the Valuation Period plus the per share amount of any declared
and unpaid dividends or capital gains accruing to that portfolio plus
(or minus) a per share credit (or charge) for any taxes resulting from
the investment operations of the subaccount.
(2) Is the portfolio's net asset value per share at the beginning of the
Valuation Period; and
(3) Is a factor representing the daily mortality and expense risk charge
and the administration charge deducted from the subaccount.
Transfer Privileges
General. Before the Annuity Income Date and subject to the restrictions
described below, you may transfer all or part of the amount in a subaccount or
the Fixed Account to another subaccount or the Fixed Account.
The maximum amount transferable from the Fixed Account during any Contract
Year is limited to the greater of: (1) 25% of the Fixed Account Value as of the
later of the Contract Date or last Contract Anniversary; (2) the Contract Value
in the Fixed Account attributable to interest earnings; and (3) the greatest
transfer from the Fixed Account during the prior Contract Year. We also reserve
the right to defer transfers from the Fixed Account for up to 6 months following
the date of the request.
If the value remaining in any Account after a transfer is less than $100,
we have the right to transfer the entire amount instead of the requested amount.
In the absence of any other directions, such transfer will be allocated in the
same proportion as the transfer request resulting in this action.
Subject to the foregoing restrictions, there currently is no limit on the
number of transfers that can be made among or between subaccounts or to or from
the Fixed Account.
Transfers may be made based upon instructions given by written request or
by telephone. We will only honor telephone transfer requests if we have a
currently valid telephone transfer authorization form on file signed by you. A
telephone transfer authorization form received by us at our administrative
office is valid until it is rescinded or revoked in writing by you or until a
28
<PAGE>
subsequently dated form signed by you is received at our administrative office.
You may provide a telephone transfer authorization with the application or
pursuant to a written request after the Contract Date.
We employ reasonable procedures to confirm that instructions communicated
by telephone are genuine and if we follow such procedures we will not be liable
for any losses due to unauthorized or fraudulent instructions. We, however, may
be liable for such losses if we do not follow those reasonable procedures. The
procedures we follow for telephone transfers include confirming the correct
name, contract number and social security number code for each telephone
transfer.
We reserve the right to modify, restrict, suspend or eliminate the transfer
privileges (including the telephone transfer facility) at any time, for any
class of Contracts, for any reason. In particular, we reserve the right to not
honor transfers requested by a third party holding a power of attorney from an
Owner where that third party requests simultaneous transfers on behalf of the
Owners of two or more Contracts.
Transfer Fee. Currently, a $25 fee is assessed on the 19th and each
subsequent transfer during a Contract Year. We reserve the right, however, to
charge $25 for the 13th and each subsequent transfer during a Contract Year.
(See "Charges and Deductions".)
Dollar-Cost Averaging. If elected at the time of the application and at any
time thereafter by written request, you may systematically or automatically
transfer (on a monthly basis) specified dollar amounts from the Money Market
Subaccount or the Fixed Account, but not from both Accounts at the same time, to
other subaccounts for any period of time greater than six months. This is known
as the dollar-cost averaging method of investment. The fixed dollar amount will
purchase more accumulation units of a subaccount when their value is lower and
fewer units when their value is higher. Over time, the cost per unit averages
out to be less than if all purchases of units had been made at the highest value
and greater than if all purchases had been made at the lowest value. The
dollar-cost averaging method of investment reduces the risk of making purchases
only when the price of accumulation units is high. It does not assure a profit
or protect against a loss in declining markets.
The minimum transfer amount to a subaccount for dollar-cost averaging is
$100 per month (or the equivalent). Each transfer from the Money Market
Subaccount must be equal to or less than 1/6 of the Money Market Subaccount
value at the time the automatic transfers begin. The maximum per transfer amount
for transfer from the Fixed Account is 1/48 of the Fixed Account value at the
time
29
<PAGE>
the automatic transfers begin. Once elected, dollar-cost averaging remains in
effect for a Contract until the Contract Value in the Money Market Subaccount or
the Fixed Account is inadequate to execute the requested transfers or until you
cancel the election by providing us with at least 6 days prior written notice.
You may exercise your right to cancel the election at any time. There is no
additional charge for using dollar-cost averaging. However, automatic transfers
will be treated as any other transfer in determining the number of transfers in
any Contract Year. We reserve the right to discontinue offering the dollar-cost
averaging facility at any time and for any reason.
Surrenders and Partial Withdrawals
Surrender. At any time before the Annuity Income Date, you may surrender
the Contract for its surrender value. The surrender value will be determined as
of the end of the Valuation Period during which written notice requesting
surrender is received at our administrative office. The surrender value will be
paid in a lump sum. A surrender may have adverse federal income tax
consequences, including a penalty tax. (See "Taxation of Annuities.")
Partial Withdrawals. At any time before the Annuity Income Date, you may
make partial withdrawals of the surrender value. Partial withdrawal requests
must be in writing and specify from which Account(s) the withdrawal is to be
made. The amount withdrawn must equal at least $500 except for systematic
withdrawals. When a withdrawal is made, you will receive the amount requested to
be withdrawn less any applicable surrender charge. If a partial withdrawal
request would reduce the Contract Value to less than $2,000, we may pay the full
surrender value and terminate the Contract. We will withdraw the amount
requested from the Contract Value as of the end of the Valuation Period during
which written notice requesting the partial withdrawal is received. (See
"Surrender Charge.")
A partial withdrawal may have adverse federal income tax consequences,
including a penalty tax. (See "Taxation of Annuities.")
We currently do not impose a processing charge for withdrawals, however, we
reserve the right to assess a processing charge equal to the lesser of $25 or 2%
of the amount withdrawn for the 13th and each subsequent withdrawal during a
Contract Year. The processing charge will be in addition to any applicable
surrender charge. This charge will be deducted from the Account from which the
withdrawal is made and will reduce the Account value available for withdrawal
accordingly. If a withdrawal is made from more than one Account at the same
time, the processing charge would be deducted pro-rata from the remaining
Contract Value in such Account(s).
30
<PAGE>
Surrender and Partial Withdrawal Restrictions. Your right to make
surrenders and partial withdrawals is subject to any restrictions imposed by
applicable law or employee benefit plan. We may defer payments from the Fixed
Account for up to six months.
Restrictions on Distributions from Certain Types of Contracts. There are
certain restrictions on surrenders of and partial withdrawals from Contracts
used as funding vehicles for Code Section 403(b) retirement programs. Section
403(b)(11) of the Code restricts the distribution under Section 403(b) annuity
contracts of: (i) elective contributions made in years beginning after December
31, 1988; (ii) earnings on those contributions; and (iii) earnings in such years
on amounts held as of the last year beginning before January 1, 1989.
Distributions of those amounts may only occur upon the death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, income attributable to elective contributions may not be
distributed in the case of hardship.
Systematic Withdrawals. You may elect in writing at the time of the
application or any time after the first Contract Anniversary to receive periodic
partial withdrawals under our systematic withdrawal plan. Under the systematic
withdrawal plan, we will make partial withdrawals on a monthly, quarterly,
semi-annual or annual basis from designated Accounts as specified by you.
Withdrawals from an Account must be at least $50 each.
The withdrawals may be requested on the following basis: (1) as a specified
dollar amount; and (2) as a specified whole percent of Contract Value.
Participation in the systematic withdrawal plan will terminate on the
earliest of the following events: (1) the value in an Account from which partial
withdrawals are being made becomes zero; (2) a termination date specified by you
is reached; or (3) you request that your participation in the plan cease.
Withdrawals under the systematic withdrawal plan are subject to a surrender
charge. (See "Surrender Charge").
Systematic withdrawals may have adverse federal income tax consequences and
you should, therefore, consult with your tax adviser before electing to
participate in the plan. We reserve the right to discontinue offering the
systematic withdrawal plan at any time
Death Benefit Before the Annuity Income Date
Death of the Owner. Upon receipt of due proof of your death (or in the case
of Joint Owners, the death of the first Joint Owner to
31
<PAGE>
die) while the Contract is in force and before the Annuity Income Date, we will
pay the Beneficiary the Death Benefit. In the case of Joint Owners, the
surviving Joint Owner will be the primary beneficiary. You may specify the
manner in which the Death Benefit is to be paid. If you do not specify how the
Death Benefit is to be paid, the Beneficiary may elect the manner in which the
Death Benefit is to be distributed.
In either case, the Death Benefit under a Non-Qualified Contract must be
distributed in full within 5 years after the deceased Owner's death unless:
1. The benefit is paid as a life annuity or an annuity with a period
certain not exceeding the Beneficiary's life expectancy with payments
beginning within one year of the deceased Owner's death; or
2. The Beneficiary is the surviving spouse of the deceased Owner, in
which case he or she may continue this Contract as the Owner.
If the Beneficiary is not a natural person, the benefit must be distributed
within 5 years of your death. Similar rules apply to Qualified Contracts. Death
Benefit. If you die prior to age 75, the Death Benefit will be the greatest of:
1. The Contract Value on the date we receive due proof of your death;
2. The Contract Value on the most recent 5th Contract Anniversary
immediately preceding the date of death, increased by the dollar
amount of any purchase payments and reduced by the dollar amount of
any withdrawals made since that Contract Anniversary; or
3. 100% of all purchase payments made less the dollar amount of any
purchase payment withdrawals since the date this Contract was issued.
If you die on or after your 75th birthday, the Death Benefit will equal the
greater of:
1. The Contract Value on the date we receive due proof of your death; or
2. The Death Benefit on your 75th birthday, less the dollar amount of any
subsequent withdrawals.
32
<PAGE>
3. 100% of all purchase payments made less the dollar amount of any
purchase payment withdrawals since the date this Contract was issued.
If the Death Benefit is paid immediately in one lump sum, the Contract will
end on the date of payment. If the Death Benefit is not taken immediately in one
lump sum, the Death Benefit will become the new Contract Value. Any resulting
increase in the Contract Value will be allocated to each Account in proportion
to the distribution of the Contract Value on the date we receive due proof of
your death.
If you die (or in the case of Joint Owners, the first Owner to die) prior
to the Annuity Income Date and there are two or more Beneficiaries, each
Beneficiary will receive an equal share of the Death Benefit unless you specify
otherwise in writing. If a named Beneficiary dies before you, the interest of
that Beneficiary will end on his or her death. If no Beneficiary is named or no
Beneficiary survives you, the commuted value of the Death Benefit will be paid
to your estate.
Death of the Annuitant Prior to the Annuity Income Date: If the Annuitant
dies prior to the Annuity Income Date, you may designate a new Annuitant. If no
new Annuitant is named within 30 days after the death of the Annuitant, you will
become the Annuitant under the Contract. If you are the Annuitant, upon receipt
of due proof of your death, we will pay the Beneficiary the Death Benefit, as
described above.
Annuity Payments on the Annuity Income Date
The Annuity Income Date may be elected by you at the time of the
application or any time thereafter. The Annuity Income Date may not be after the
later of the first day of the month following the Annuitant's 85th birthday or
10 years after the Contract Date. You may change the Annuity Income Date at any
time provided you give us 30 days prior written notice. If no Annuity Income
Date is elected, it will be the first day of the calendar month following the
Annuitant's 65th birthday or ten years after the Contract Date, if later.
On the Annuity Income Date, the Contract Value, less any applicable prior
undeducted premium taxes, will be applied under the life income annuity payment
option with ten years guaranteed, unless you elect to have the proceeds paid
under another payment option or to receive the surrender value in a lump sum.
(See "Annuity Payment Options.") Unless you instruct us otherwise, amounts in
the Fixed Account will be used to provide a fixed-annuity payment option and
amounts in the Separate Account will be used to provide a variable annuity
payment option.
33
<PAGE>
Any time prior to the Annuity Income Date, you may designate or change the
payee (Annuitant) to receive payments under the applicable annuity payment
option.
Payments
Any surrender, partial withdrawal, or death benefit will usually be paid
within seven days of receipt of a written request, any information or
documentation reasonably necessary to process the request, and (in the case of a
Death Benefit) receipt and filing of due proof of death. However, payments may
be postponed if:
1. the New York Stock Exchange is closed, other than customary weekend
and holiday closings, or trading on the exchange is restricted as
determined by the SEC; or
2. the SEC permits by an order the postponement for the protection of
Contract Owners; or
3. the SEC determines that an emergency exists that would make the
disposal of securities held in the subaccount or the determination of
the value of the subaccount's net assets not reasonably practicable.
If a recent check or draft has been submitted, we have the right to delay
payment until we have assured ourselves that the check or draft has been
honored.
We have the right to defer payment of any surrender or partial withdrawal
or transfer from the Fixed Account for up to six months from the date of receipt
of written notice for such a surrender or transfer. If payment is not made
within 10 days after receipt of documentation necessary to complete the
transaction, interest will be added to the amount paid from the date of receipt
of documentation at the minimum rate required by law or the Current Fixed
Account Interest Rate, if greater.
Modification
Upon notice to you, or the Annuitant, we may modify the Contract if:
1. necessary to permit the Contract or the Separate Account to comply
with any applicable law or regulation issued by a government agency;
or
2. necessary to reflect a change in the operation of the Separate Account
or a subaccount; or
34
<PAGE>
3. necessary to add, delete or modify an Account; or
4. necessary to add, modify or delete subaccounts or portfolios.
In the event of most such modifications, we will make appropriate
endorsement to the Contract.
Owner
You are the Owner of the Contract. You are also the Annuitant unless a
different Annuitant is named. Any Joint Owner must be your spouse unless we
agree otherwise. For Qualified Contracts, the Owner must be the Annuitant and
Joint Owners are not permitted. Before the Annuity Income Date you have all the
rights under the Contract, subject to the rights of any assignee of record. This
includes the right to:
1. Transfer values between Accounts and designate or change the
allocation of purchase payments to each Account;
2. Name and/or change the Beneficiaries, Owner or Annuitant;
3. Surrender the Contract in whole or in part for cash;
4. Assign the Contract Value, in whole or in part;
5. Designate and change the Annuity Income Date; and
6. Elect or change the Annuity Payment Option.
All elections, authorizations and change requests must be made to us in
writing. Upon receipt by us, any change will be effective as of the date it was
signed by you, except that any values or amounts payable under the Contract will
be determined as of the Valuation Day on or next following the date of receipt.
Payment made or action taken by us prior to the time written notice is received
will discharge our liability under this Contract to the extent of such action or
payment. The consent of any irrevocable Beneficiary is required to exercise any
right. If Joint Owners are named, both must consent to any change.
Reports to Owners
At least annually, we will mail to each Owner, at such Owner's last known
address of record, a report setting forth the Contract Value, subaccount values,
and Fixed Account Value, as well as your current purchase payment allocation
directions. We will also
35
<PAGE>
provide you with shareholder reports of the Funds as well as other notices,
reports or documents as required by law.
Inquiries
Inquiries regarding a Contract may be made by writing to us at our
administrative office.
THE FIXED ACCOUNT
You may allocate some or all of the purchase payments and transfer some or
all of the Contract Value to the Fixed Account, which is part of our General
Account and pays interest at declared rates guaranteed for one year. Our General
Account supports our insurance and annuity obligations. Since the Fixed Account
is part of the General Account, we assume the risk of investment gain or loss on
this amount. All assets in the General Account are subject to our general
liabilities from business operations. The Fixed Account may not be available in
all states.
The Fixed Account has not been, and is not required to be, registered with
the SEC under the Securities Act of 1933, and neither the Fixed Account nor our
General Account has been registered as an investment company under the 1940 Act.
Therefore, neither our General Account, the Fixed Account, nor any interests
therein are generally subject to regulation under the 1933 Act or the 1940 Act.
The disclosures relating to the Fixed Account which are included in this
prospectus are for your information and have not been reviewed by the SEC.
However, such disclosures may be subject to certain generally applicable
provisions of federal securities laws relating to the accuracy and completeness
of statements made in prospectuses.
Fixed Account Value
The Fixed Account Value is credited with interest, as described below. The
Fixed Account Value reflects interest credited, the allocation of purchase
payments, transfers of Contract Value from the Fixed Account, surrenders and
partial withdrawals from the Fixed Account and charges assessed in connection
with the Contract. The Fixed Account Value is guaranteed to accumulate at a
minimum effective annual interest rate of 3%.
Beginning on the date we issue the Contract, we will credit any portion of
the initial purchase payment allocated to the Fixed Account with a specified
interest rate, known as the Initial Fixed Account Interest Rate. We may declare
different initial interest rates for each subsequent purchase payment or
transfer into the Fixed Account. We will guarantee the initial rate credited for
one year from the date the purchase payment is received or transfer is
36
<PAGE>
effective. Thereafter, the interest rate earned will be the applicable Current
Fixed Account Interest Rate as we may declare.
The Current Fixed Account Interest Rate is a rate we establish from time to
time for all amounts under the Contract that have been allocated to the Fixed
Account for more than one year. We may change the Current Fixed Account Interest
Rate from time to time to reflect prevailing market conditions but not more
often than once every twelve months. The Initial Fixed Account Interest Rate and
the Current Fixed Account Interest Rate will vary but will always be equal to or
greater than an effective annual rate of 3%.
The maximum amount transferable from the Fixed Account during any Contract
Year is limited to the greatest of: (1) 25% of the Fixed Account Value as of the
later of the Contract Date or last Contract Anniversary; (2) the Contract Value
in the Fixed Account attributable to interest earnings; and (3) the greatest
transfer from the Fixed Account during the prior Contract Year. If the value
remaining in the Fixed Account after a transfer is less than $100, we have the
right to transfer the entire amount instead of the requested amount. We also
reserve the right to defer transfers from the Fixed Account for up to 6 months
following the date of the request.
CHARGES AND DEDUCTIONS
Surrender Charge (Contingent Deferred Sales Charge)
General. No charge for sales expenses is deducted from purchase payments at
the time purchase payments are paid. However, a surrender charge may be deducted
upon surrender or partial withdrawal of purchase payments. A surrender charge
also may be deducted from amounts applied to annuity options not providing a
life annuity or a life annuity with a period certain of at least five years.
Surrender charges are not deducted upon payment of a death benefit or from
withdrawals or surrender of earnings under the Contract. (See "Annuity Payments
on the Annuity Income Date".)
In the event surrender charges are not sufficient to cover sales expenses,
the loss will be borne by us; conversely, if the amount of such charges proves
more than enough to cover such expenses, the excess will be retained by us. We
do not currently believe that the surrender charges imposed will cover the
expected costs of distributing the Contracts. Any shortfall will be made up from
our general assets which may include amounts derived from the mortality and
expense risk charge.
Charge for Partial Withdrawal or Surrender. A charge is imposed on partial
withdrawals and surrenders equal to a specified
37
<PAGE>
percentage of the purchase payments withdrawn. The surrender charge is
calculated by multiplying the applicable percentages specified in the table
below by the purchase payments withdrawn. The number of years since the date of
a purchase payment being withdrawn will determine the surrender charge
percentage that will apply to that purchase payment. The surrender charge is
calculated using the assumption that all earnings are withdrawn first and then
all purchase payments are withdrawn on a first-in-first-out basis.
Number of Years Since Charge as Percentage
Date of Purchase Payment of Purchase Payment Withdrawn
- ------------------------ -----------------------------
0-1 7%
1-2 6%
2-3 5%
3-4 4%
4-5 3%
5+ 0%
Any applicable surrender charge is deducted from the amount withdrawn.
Amounts Not Subject to Surrender Charge. During each Contract Year, up to
10% of all purchase payments not previously withdrawn, less any prior withdrawal
of purchase payments, may be withdrawn without the imposition of a surrender
charge. Purchase payments surrendered or withdrawn in excess of this 10% will be
assessed a surrender charge. This right is not cumulative from Contract Year to
Contract Year.
Waiver of Surrender Charge. Where allowed by state law, upon written notice
from you prior to your 80th birthday, the surrender charge will be waived on any
partial withdrawal or surrender after you are: (1) diagnosed as having a
terminal illness; or (2) confined to a hospital, nursing home or long term care
facility for at least 30 consecutive days, provided (a) confinement is for
medically necessary reasons at the recommendation of a physician; (b) the
hospital, nursing home or long term care facility is licensed or otherwise
recognized and operating as such by the proper authority in the state where it
is located, the Joint Commission on Accreditation of Hospitals or Medicare; and
(c) the withdrawal or surrender request is received by us no later than 91 days
after the last day of your confinement.
Annual Contract Fee
On the last day of each Contract Year prior to the Annuity Income Date, we
deduct from the Contract Value an Annual Contract Fee of $30 to reimburse us for
administrative expenses relating to the
38
<PAGE>
Contract. The fee will be charged by reducing the value of all active Accounts
on a pro-rata basis. With respect to each subaccount, we deduct this fee by
cancelling accumulation units. The number of accumulation units deducted from
each subaccount will be determined by dividing the pro-rata portion of the fee
applicable to that subaccount by the accumulation unit value of that subaccount
on the date the fee is assessed. We do not expect to make a profit on this fee.
The Annual Contract Fee also is deducted upon surrender of a Contract if other
than on the last day of each Contract Year. We do not deduct the Annual Contract
Fee under Contracts with a Contract Value of $25,000 or more on the date of
deduction.
Asset-Based Administration Charge
We deduct a daily administration charge to compensate us for certain
expenses we incur in administration of the Contract and the Separate Account.
The charge is deducted from the assets of the Separate Account at an annual rate
of 0.15%. We do not expect to make a profit from this charge.
Transfer Processing Fee
We reserve the right to charge $25 for the 13th and each subsequent
transfer during a Contract Year. Currently, no fee is assessed until the 19th
transfer during the Contract Year. For the purpose of assessing such a transfer
fee, each transfer from any Account, including monthly transfers under the
dollar-cost averaging facility, would be considered to be one transfer,
regardless of the number of subaccounts into which value is transferred. The
transfer fee would be deducted from the Account from which the transfer is made
and will reduce the Account Value available for transfer accordingly. If a
transfer is made from more than one Account at the same time, separate transfer
fees would be deducted from the remaining Contract Value in each Account.
Mortality and Expense Risk Charge
To compensate us for assuming mortality and expense risks, we deduct a
daily mortality and expense risk charge from the assets of the Separate Account.
The charge is at a daily rate of 0.0034462%. If applied on an annual basis this
rate would be 1.25% (approximately 0.50% for mortality risk and 0.75% for
expense risk).
The mortality risk we assume is that Annuitants may live for a longer
period of time than estimated when the guarantees in the Contract were
established. Because of these guarantees, each payee is assured that longevity
will not have an adverse effect on the
39
<PAGE>
annuity payments received. The mortality risk that we assume also includes a
guarantee to pay a Death Benefit if an Owner dies before the Annuity Income
Date. The expense risk that we assume is the risk that the administrative fees
and transfer fees (if imposed) may be insufficient to cover actual future
expenses.
If the mortality and expense risk charge is insufficient to cover the
actual cost of the mortality and expense risks undertaken by us, we will bear
the shortfall. Conversely, if the charge proves more than sufficient, the excess
will be profit to us and will be available for any proper corporate purpose
including, among other things, payment of sales expenses.
Fund Expenses
Because the Separate Account purchases shares or units of the Landmark VIP
Funds, the Fidelity Variable Insurance Products Fund, the AIM Variable Insurance
Funds, Inc. and the MFS Variable Insurance Trust, the net assets of each
subaccount of the Separate Account will reflect the investment advisory fees and
other operating expenses incurred by the corresponding portfolio of the relevant
Fund. See the accompanying current Prospectuses for the Funds.
Premium Taxes
Various states and other governmental entities may levy a premium tax,
currently ranging up to 3.5%, on annuity contracts issued by insurance
companies. Premium tax rates are subject to change from time to time by
legislative and other governmental action. In addition, other government units
within a state may levy such taxes.
The timing of tax levies varies from one taxing authority to another. If
premium taxes are applicable to a Contract, we will deduct such premium taxes
against Contract Value in a manner determined by us in compliance with
applicable state law. Premium taxes deducted from Contract Value currently are
assessed either: (1) at the time the Contract is surrendered; (2) on the Annuity
Income Date; or (3) at such other date as the taxes are assessed.
Other Taxes
Currently, no charge is made against the Separate Account for any federal,
state or local taxes (other than premium taxes) that we incur or that may be
attributable to the Separate Account or the Contracts. We may, however, make
such a charge in the future from surrender value, death benefits or annuity
payments, as appropriate. Such taxes may include taxes (levied by any government
40
<PAGE>
entity) which we determine to have resulted from: (1) the establishment or
maintenance of the Separate Account; (2) receipt by us of purchase payments; (3)
issuance of the Contracts; or (4) the payment of annuity payments.
ANNUITY PAYMENT OPTIONS
Election of Annuity Payment Options
On the Annuity Income Date, the Contract Value less any premium tax
previously unpaid and less any applicable surrender charge will be applied under
an annuity payment option. (See "Annuity Payments on the Annuity Income Date.")
If an election of an annuity payment option is not on file at our administrative
office on the Annuity Income Date, the proceeds will be paid as a life income
annuity with payments for ten years guaranteed. The value of each subaccount
will be applied to provide a variable annuity and the value of the Fixed Account
will be applied to provide a fixed dollar annuity. An annuity payment option may
be elected, revoked, or changed by you at any time before the Annuity Income
Date upon 30 days prior written notice. You may elect to apply any portion of
the Contract Value less any premium tax previously unpaid to provide either
variable annuity payments or fixed annuity payments or a combination of both.
The annuity payment options available are described below. In addition, you may
elect any other method of payment that is mutually agreeable to you and us.
We reserve the right to refuse the election of an annuity payment option
other than paying the Contract Value, less any applicable surrender charge and
premium tax previously unpaid, in a lump sum if the total amount applied to an
annuity payment option would be less than $2,000. If the amount of any annuity
payment for each affected Account would be or becomes less than $50.00, we may
reduce the frequency of payments to an interval that would result in payments of
at least $50.00
Fixed Annuity Payments
Fixed annuity payments are periodic payments from us to the designated
payee, the amount of which is fixed and guaranteed by us. The amount of each
payment depends only on the form and duration of the annuity payment option
chosen, the age of the Annuitant, the sex of the Annuitant (if applicable), the
amount applied to purchase the annuity payments and the applicable annuity
purchase rates in the Contract. The annuity purchase rates in the Contract are
based on a minimum guaranteed interest rate of 3.0%. We may, in our sole
discretion, make annuity payments in an amount based on a higher interest rate.
41
<PAGE>
Legal Developments Regarding Unisex Actuarial Tables
In 1983, the United States Supreme Court held in Arizona Governing
Committee v. Norris that optional annuity benefits provided under an employee's
deferred compensation plan could not, under Title VII of the Civil Rights Act of
1964, vary between men and women on the basis of sex. In addition, legislative,
regulatory, or decisional authority of some states may prohibit use of
sex-distinct mortality tables under certain circumstances. Accordingly,
employers and employee organizations should consider, in consultation with legal
counsel, the impact of these authorities on any employment-related insurance or
benefits program before purchasing the Contract.
Variable Annuity Payments
The dollar amount of the first monthly variable annuity payment is
determined by dividing the Value of the Accounts to be applied to a variable
annuity on the Annuity Income Date by 1,000 and multiplying the result by the
appropriate factor in the annuity tables provided in the Contract. The
appropriate factor is based on annual net investment return of 3.0%. The amount
of each payment will depend on the age of the Annuitant(s) at the time the first
payment is due, and the sex of the Annuitant(s), if applicable, unless otherwise
required by law.
The net investment performance of a subaccount is translated into a
variation in the amount of variable annuity payments through the use of annuity
units. The amount of the first variable annuity payment associated with each
subaccount is applied to purchase subaccount annuity units at the annuity unit
value for the subaccount on the Annuity Income Date. The number of annuity units
of each subaccount attributable to a Contract then remains fixed. Each
subaccount has a separate subaccount annuity unit value that changes with each
valuation period in substantially the same manner as do accumulation units of
the subaccount.
The dollar value of each variable annuity payment after the first is equal
to the sum of the amounts determined by multiplying the number of subaccount
annuity units under a Contract for a particular subaccount by the annuity unit
value for the subaccount for the valuation period which ends no earlier than the
fifth Valuation Day preceding the date of each such payment. If the net
investment return of the subaccount for a payment period is equal to the
pro-rated portion of the 3.0% annual assumed investment rate, the variable
annuity payment attributable to that subaccount for that period will equal the
payment for the prior period. To the extent that such net investment return
exceeds an annualized rate of 3.0% for a payment period, the payment for that
period will be greater than the payment for the prior period and to the extent
42
<PAGE>
that such return for a period falls short of an annualized rate of 3.0%, the
payment for that period will be less than the payment for the prior period.
Once every three months, after the Annuity Income Date, the Annuitant may
elect, in writing, to transfer among the selected subaccount(s) on which
variable annuity payments are based. If such a transfer is elected, the number
of annuity units will change and be determined by "a" times "b," less any
applicable fees, divided by "c" where:
"a" is the number of annuity units being transferred;
"b" is the subaccount annuity unit value from which the transfer is made;
and
"c" is the annuity unit value of the subaccount to which the transfer is
made.
Thereafter, the number of annuity units will remain fixed until transferred.
After the Annuity Income Date, no transfers may be made between the subaccounts
and the Fixed Account.
Description of Annuity Payment Options
Option 1: Income for a Fixed Period. We will make annuity payments to a payee
each month for a fixed number of years. The number of years must be at least
5 and no more than 30. If the Annuitant dies before the end of the designated
period, payments will continue to be made to the person(s) named by the
Annuitant to receive such guaranteed payments for the remainder of the fixed
period. If no such person is named or none survive the Annuitant, the
remainder of the guaranteed payments will be paid to the Annuitant's estate.
This option is available only as a fixed dollar annuity and if the Contract
has been in force for 5 years, unless we agree otherwise.
Option 2: Life Annuity. We will make annuity payments to a payee each month
as long as the Annuitant is alive. When the Annuitant dies, all payments will
cease.
Option 3: Life Annuity with Period Certain. We will make annuity payments to
a payee each month as long as the Annuitant is alive. If the Annuitant dies
prior to the end of the guaranteed period, payments will continue to be made
to the person(s) named by the Annuitant to receive such guaranteed payments
for the remainder of the fixed period. If no such person is named or none
survive the Annuitant, the remainder of the guaranteed payments will be paid
to the Annuitant's estate.
43
<PAGE>
Option 4: Joint and Survivor Annuity. We will make annuity payments to a
payee each month for the joint lifetime of the Annuitant and another person.
At the death of either, payments will continue to be made to the payee. When
the survivor dies, all payments will cease.
The amount of each payment will be determined from the tables in the
Contract that apply to the particular option using the Annuitant's age and sex
(if applicable). Age will be determined from the last birthday at the due date
of the first payment.
Note Carefully: Under annuity payment options 2 and 4 it would be possible
for only one annuity payment to be made if the Annuitant(s) were to die
before the due date of the second annuity payment; only two annuity payments
if the Annuitant(s) were to die before the due date of the third annuity
payment; and so forth.
Alternate Payment Option. In lieu of one of the above options, the Contract
Value, less any applicable surrender charge and premium taxes previously unpaid,
or Death Benefit, as applicable, may be applied to any other payment option made
available by us or requested and agreed to by us
YIELDS AND TOTAL RETURNS
From time to time, we may advertise or include in sales literature yields,
effective yields and total returns for the subaccounts of the Separate Account.
These figures are based on historical earnings and do not indicate or project
future performance. We also may, from time to time, advertise or include in
sales literature subaccount performance relative to certain performance rankings
and indices compiled by independent organizations. More detailed information as
to the calculation of performance appears in the Statement of Additional
Information.
Effective yields and total returns for the subaccounts are based on the
investment performance of the corresponding portfolio. The performance of a
portfolio in part reflects its expenses. See the prospectuses for the
portfolios.
The yield of the Money Market Subaccount refers to the annualized income
generated by an investment in the subaccount 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 and is shown as
a percentage of the investment. The effective yield is calculated similarly but,
when annualized, the income earned by an investment in the subaccount is assumed
to be reinvested. The effective yield
44
<PAGE>
will be slightly higher than the yield because of the compounding effect of this
assumed reinvestment.
The yield of a subaccount (except the Money Market Subaccount) refers to
the annualized income generated by an investment in the subaccount 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 and is shown as a percentage of the
investment.
The total return of a subaccount refers to return quotations assuming an
investment under a Contract has been held in the subaccount for various periods
of time. For periods prior to the date the Separate Account commenced
operations, performance information will be calculated based on the performance
of the corresponding portfolios and the assumption that the subaccounts were in
existence for the same periods as those indicated for the portfolios, with the
level of Contract charges that were in effect at the inception of the
subaccounts. When a subaccount or portfolio has been in operation for one, five,
and ten years, respectively, the total return for these periods will be
provided.
The average annual total return quotations represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Contract to the redemption value of that investment as of the last day
of each of the periods for which total return quotations are provided. Average
annual total return information shows the average annual percentage change in
the value of an investment in the subaccount from the beginning date of the
measuring period to the end of that period. This standardized version of average
annual total return reflects all historical investment results, less all charges
and deductions applied against the subaccount (including any surrender charge
that would apply if an Owner terminated the Contract at the end of each period
indicated, but excluding any deductions for premium taxes).
In addition to the standard version described above, total return
performance information computed on two different non-standard bases may be used
in advertisements or sales literature. Average annual total return information
may be presented, computed on the same basis as described above, except
deductions will not include the surrender charge. In addition, we may from time
to time disclose cumulative total return for Contracts funded by subaccounts.
From time to time, yields, standard average annual total returns, and
non-standard total returns for the portfolios may be disclosed, including such
disclosures for periods prior to the date the Separate Account commenced
operations.
45
<PAGE>
Non-standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed. For additional
information regarding the calculation of other performance data, please refer to
the Statement of Additional Information.
In advertising and sales literature, the performance of each subaccount may
be compared with 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 portfolios of mutual funds with investment objectives
similar to the subaccount. Lipper Analytical Services, Inc. ("Lipper"), Variable
Annuity Research Data Service ("VARDS") and Morningstar, Inc. ("Morningstar")
are independent services which monitor and rank the performance of variable
annuity issuers in each of the major categories of investment objectives on an
industry-wide basis.
Lipper's and Morningstar's rankings include variable life insurance issuers
as well as variable annuity issuers. VARDS rankings compare only variable
annuity issuers. The performance analyses prepared by Lipper, VARDS and
Morningstar each rank such issuers on the basis of total return, assuming
reinvestment of distributions, but do not take sales charges, redemption fees,
or certain expense deductions at the separate account level into consideration.
In addition, VARDS prepares risk rankings, which consider the effects of market
risk on total return performance. This type of ranking provides data as to which
funds provide the highest total return within various categories of funds
defined by the degree of risk inherent in their investment objectives.
Advertising and sales literature may also compare the performance of each
subaccount to the Standard & Poor's Index of 500 Common Stocks, 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 indices
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 subaccount's investment returns, or returns in general, which
may be illustrated by tables, graphs, or charts. All income and capital gains
derived from subaccount investments are reinvested and can lead to substantial
long-term accumulation of assets, provided that the subaccount investment
experience is positive.
46
<PAGE>
FEDERAL TAX MATTERS
The Following Discussion is General and
Is Not Intended as Tax Advice
Introduction
This discussion is not intended to address the tax consequences resulting
from all of the situations in which a person may be entitled to or may receive a
distribution under the annuity contract issued by us. Any person concerned about
these tax implications should consult a competent tax advisor before initiating
any transaction. This discussion is based upon our understanding of the present
federal income tax laws, as they are currently interpreted by the Internal
Revenue Service ("IRS"). No representation is made as to the likelihood of the
continuation of the present federal income tax laws or of the current
interpretation by the IRS. Moreover, no attempt has been made to consider any
applicable state or other tax laws.
The Contract may be purchased on a non-qualified basis or purchased and
used in connection with plans qualifying for favorable tax treatment. The
Qualified Contract is designed for use by individuals whose purchase payments
are comprised solely of proceeds from and/or contributions under retirement
plans which are intended to qualify as plans entitled to special income tax
treatment under Sections 403(b), or 408 of the Code. The ultimate effect of
federal income taxes on the amounts held under a Contract, or annuity payments,
and on the economic benefit to you, the Annuitant, or the Beneficiary depends on
the type of retirement plan, on the tax and employment status of the individual
concerned, and on the Company's 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. Therefore, purchasers of
Qualified Contracts should seek competent legal and tax advice regarding the
suitability of a Contract for their situation, the applicable requirements, and
the tax treatment of the rights and benefits of a Contract. The following
discussion assumes that Qualified Contracts are purchased with proceeds from
and/or contributions under retirement plans that qualify for the intended
special federal income tax treatment.
Tax Status of the Contract
Diversification Requirements. Section 817(h) of the Code provides that
separate account investment underlying a contract must be "adequately
diversified" in accordance with Treasury regulations in order for the contract
to qualify as an annuity
47
<PAGE>
contract under Section 72 of the Code. The Separate Account, through each
underlying portfolio, intends to comply with the diversification requirements
prescribed in regulations under Section 817(h) of the Code, which affect how the
assets in the various subaccounts may be invested. Although we do not have
direct control over the portfolios in which the Separate Account invests, we
believe that each portfolio in which the Separate Account owns shares will meet
the diversification requirements, and therefore, the Contract will be treated as
an annuity contract under the Code.
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their contracts. In those circumstances, income
and gains from the separate account assets would be includible in the variable
annuity contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incident of ownership in those assets,
such as the ability to exercise investment control over the assets. The Treasury
Department has also announced, in connection with the issuance of regulations
concerning investment diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor (i.e., the
contract owner), rather than the insurance company, to be treated as the owner
of the assets in the account." This announcement also states that guidance will
be issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular subaccounts without being treated as
owners of the underlying assets."
The ownership rights under the Contracts are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of separate account assets.
These differences could result in an owner being treated as the owner of the
assets of the Separate Account. In addition, we do not know what standards will
be set forth, if any, in the regulations or rulings which the Treasury
Department has stated it expects to issue. We therefore reserve the right to
modify the Contract as necessary to attempt to prevent the contract owner from
being considered the owner of any portion of the assets of the Separate Account.
Required Distributions. In order to be treated as an annuity contract for
federal income tax purposes, Section 72(s) of the Code requires any
Non-Qualified Contract to provide that: (a) if any owner dies on or after the
Annuity Income Date but prior to the time the entire interest in the contract
has been distributed, the remaining portion of such interest will be distributed
48
<PAGE>
at least as rapidly as under the method of distribution being used as of the
date of that owner's death; and (b) if any owner dies prior to the Annuity
Income Date, the entire interest in the Contract will be distributed within five
years after the date of the owner's death. These requirements will be considered
satisfied as to any portion of the owner's interest which is payable to or for
the benefit of a "designated beneficiary" and which is distributed over the life
of such beneficiary or over a period not extending beyond the life expectancy of
that beneficiary, provided that such distributions begin within one year of that
owner's death. The owner's "designated beneficiary" is the individual designated
by the owner as a beneficiary and to whom ownership of the contract passes by
reason of death of the owner. However, if the owner's "designated beneficiary"
is the surviving spouse of the deceased owner, the Contract may be continued
with the surviving spouse as the new owner.
The Non-Qualified Contracts contain provisions which are intended to comply
with the requirements of Section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. The Company intends to
review such provisions and modify them if necessary to assure that they comply
with the requirements of Code Section 72(s) when clarified by regulation or
otherwise.
Other rules may apply to Qualified Contracts.
The following discussion assumes that the Contracts will qualify as annuity
contracts for federal income tax purposes.
Taxation of Annuities
In General. Section 72 of the Code governs taxation of annuities in
general. We believe that an owner who is a natural person is not taxed on
increases in the value of a Contract until distribution occurs by withdrawing
all or part of the Contract Value (e.g., partial withdrawals and surrenders) or
as annuity payments under the payment option elected. For this purpose, the
assignment, pledge, or agreement to assign or pledge any portion of the Contract
Value (and in the case of a Qualified Contract, any portion of an interest in
the qualified plan) generally will be treated as a distribution. The taxable
portion of a distribution (in the form of a single sum payment or payment
option) is taxable as ordinary income.
The owner of any annuity contract who is not a natural person generally
must include in income any increase in the excess of the contract value over the
"investment in 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 competent tax advisor.
49
<PAGE>
The following discussion generally applies to Contracts owned by natural
persons.
Partial Withdrawals. In the case of a partial withdrawal from a Qualified
Contract, under Section 72(e) of the Code, a ratable portion of the amount
received is taxable, generally based on the ratio of the "investment in the
contract" to the participant's total accrued benefit or balance under the
retirement plan. The "investment in the contract" generally equals the portion,
if any, of any purchase payments paid by or on behalf of the individual under a
Contract which was not excluded from the individual's gross income. For
Contracts issued in connection with qualified plans, the "investment in the
contract" can be zero. Special tax rules may be available for certain
distributions from Qualified Contracts.
In the case of a partial withdrawal (including systematic withdrawals) from
a Non-Qualified Contract, under Section 72(e), any amounts received are
generally first treated as taxable income to the extent that the contract value
immediately before the partial withdrawal exceeds the "investment in the
contract" at that time. Any additional amount withdrawn is not taxable.
In the case of a full surrender under a Qualified or Non-Qualified
Contract, the amount received generally will be taxable only to the extent it
exceeds the "investment in the contract."
Exchanges. Section 1035 of the Code generally provides that no gain or loss
shall be recognized on the exchange of one annuity contract for another. If the
surrendered contract was issued prior to August 14, 1982, the tax rules formerly
provided that the surrender was taxable only to the extent the amount received
exceeds the owner's investment in the contract will continue to apply to amounts
allocable to investments in that contract prior to August 14, 1982. In contrast,
contracts issued after January 19, 1985 in a Code Section 1035 exchange are
treated as new contracts for purposes of the penalty and distribution-at-death
rules. Special rules and procedures apply to Section 1035 transactions.
Prospective owners wishing to take advantage of Section 1035 should consult
their tax adviser.
Annuity Payments. Although tax consequences may vary depending on the
payment option elected under an annuity contract, under Code Section 72(b),
generally (prior to recovery of the investment in the contract) gross income
does not include that part of any amount received as an annuity under an annuity
contract that bears the same ratio to such amount as the investment in the
contract bears to the expected return at the annuity starting date. For variable
annuity payments, the taxable portion is generally determined by
50
<PAGE>
an equation that establishes a specific dollar amount of each payment that is
not taxed. The dollar amount is determined by dividing the "investment in the
contract" by the total number of expected periodic payments. However, the entire
distribution will be taxable once the recipient has recovered the dollar amount
of his or her "investment in the contract." For fixed annuity payments, in
general, there is no tax on the portion of each payment which represents the
same ratio that the "investment in the contract" bears to the total expected
value of the annuity payments for the term of the payments; however, the
remainder of each annuity payment is taxable until the recovery of the
investment in the contract, and thereafter the full amount of each annuity
payment is taxable. If death occurs before full recovery of the investment in
the contract, the unrecovered amount may be deducted on the Annuitant's final
tax return.
Taxation of Death Benefit Proceeds. Amounts may be distributed from a
Contract because of the death an owner. Generally, 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 full surrender of the contract or (ii) if
distributed under a payment option, they are taxed in the same way as annuity
payments. For these purposes, the investment in the Contract is not affected by
the owner's death. That is, the investment in the Contract remains the amount of
any purchase payments paid which were not excluded from gross income.
Penalty Tax on Certain Withdrawals. In the case of a distribution pursuant
to a Non-Qualified Contract, there may be imposed a federal penalty tax equal to
10% of the amount treated as taxable income. In general, however, there is no
penalty on distributions:
1. made on or after the taxpayer reaches age 59 1/2;
2. made on or after the death of the holder (or if the holder is not an
individual, the death of the primary annuitant);
3. attributable to the taxpayer's becoming disabled;
4. a part of a series of substantially equal periodic payments (not less
frequently than annually) for the life (or life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of the
taxpayer and his or her designated beneficiary;
5. made under certain annuities issued in connection with structured
settlement agreements; and
51
<PAGE>
6. made under an annuity contract that is purchased with a single
purchase payment when the Annuity Income Date is no later than a year
from purchase of the annuity and substantially equal periodic payments
are made, not less frequently than annually, during the annuity
payment period.
Other tax penalties may apply to certain distributions under a Qualified
Contract.
Possible Changes in Taxation. In past years, legislation has been proposed
that would have adversely modified the federal taxation of certain annuities.
For example, one such proposal would have changed the tax treatment of
non-qualified annuities that did not have "substantial life contingencies" by
taxing income as it is credited to the annuity. As of the date of this
prospectus, Congress is not entertaining legislation that would change the
taxation of annuities; there is always the possibility that the tax treatment of
annuities could change by legislation or other means (such as IRS regulations,
revenue rulings, judicial decisions, etc.). Moreover, it is also possible that
any change could be effective prior to the date of the change.
Transfers, Assignments or Exchanges of a Contract
A transfer of ownership of a Contract, the designation of an annuitant,
payee or other beneficiary who is not also the owner, the selection of certain
Annuity Income Dates or the exchange of a Contract may result in certain tax
consequences to the owner that are not discussed herein. An owner contemplating
any such transfer, assignment, or exchange of a Contract should contact a
competent tax advisor with respect to the potential tax effects of such a
transaction.
Withholding
Pension and annuity distributions generally are subject to withholding for
the recipient's federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not to have tax withheld from
distributions. Effective January 1, 1993, distributions from certain qualified
plans are generally subject to mandatory withholding. Certain states also
require withholding of state income tax whenever federal income tax is withheld.
Multiple Contracts
All non-qualified deferred annuity contracts entered into after October 21,
1988 that are issued by us (or our affiliates) to the
52
<PAGE>
same owner during any calendar year are treated as one annuity Contract for
purposes of determining the amount includible in gross income under Section
72(e). The effects of this rule are not yet completely clear; however, it could
affect the time when income is taxable and the amount that might be subject to
the 10% penalty tax described above. In addition, the Treasury Department has
specific authority to issue regulations that prevent the avoidance of Section
72(e) through the serial purchase of annuity contracts or otherwise. There may
also be other situations in which the Treasury may conclude that it would be
appropriate to aggregate two or more annuity contracts purchased by the same
owner. Accordingly, you should consult a competent tax advisor before purchasing
more than one annuity contract in any calendar year.
Taxation of Qualified Plans
The Contracts are 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; aggregate distributions in excess of a specified
annual amount; and in other specified circumstances. Therefore, no attempt is
made to provide more than general information about the use of the Contracts
with the various types of qualified retirement plans. Contract Owners, the
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. 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 that contributions,
distributions and other transactions with respect to the Contracts comply with
applicable law. Brief descriptions follow of the various types of qualified
retirement plans in connection with a Contract. We will amend the Contract as
necessary to conform it to the requirements of the Code.
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
53
<PAGE>
distributions may commence. Also, distributions from certain other types of
qualified retirement plans may be "rolled over" on a tax-deferred basis into an
IRA. Sales of the Contract for use with IRAs may be subject to special
requirements of the Internal Revenue Service. Employers may establish Simplified
Employee Pension (SEP) Plans to provide IRA contributions on behalf of their
employees.
Tax Sheltered Annuities. Section 403(b) of the Code allows employees of
certain Section 501(c)(3) organizations and public schools to exclude from their
gross income the purchase payments paid, within certain limits, on a Contract
that will provide an annuity for the employee's retirement. These purchase
payments may be subject to FICA (social security) tax.
Restrictions Under Qualified Plans. Other restrictions with respect to the
election, commencement or distribution of benefits may apply under Qualified
Contracts or under the terms of the plan in respect of which Qualified Contracts
are issued.
Possible Charge for the Company's Taxes
At the present time, we make no charge to the subaccounts for any Federal,
state, or local taxes that we incur which may be attributable to such
subaccounts or the Contracts. We, however, reserve the right in the future to
make a charge for any such tax or other economic burden resulting from the
application of the tax laws that we determine to be properly attributable to the
subaccounts or to the Contracts.
Other Tax Consequences
As noted above, the foregoing comments about the Federal tax consequences
under these Contracts are not exhaustive, and special rules are provided with
respect to other tax situations not discussed in the Prospectus. Further, the
Federal income tax consequences discussed herein reflect our understanding of
current law and the law may change. 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 advisor should be consulted for
further information.
DISTRIBUTION OF THE CONTRACTS
The Contracts will be offered to the public on a continuous basis. We do
not anticipate discontinuing the offering of the Contracts, but reserve the
right to do so. Applications for Contracts are solicited by agents who are
licensed by applicable state insurance authorities to sell our variable annuity
contracts
54
<PAGE>
and who are also registered representatives of Citicorp Investment Services,
Inc. which entered into a selling agreement with The Landmark Funds
Broker-Dealer Services, Inc. Citicorp Investment Services, Inc. is registered
with the SEC under the Securities Exchange Act of 1934 as a broker-dealer and is
a member of the National Association of Securities Dealers, Inc.
The Landmark Funds Broker-Dealer Services, Inc. acts as the principal
underwriter, as defined in the 1940 Act, of the Contracts for the Separate
Account pursuant to an Underwriting Agreement with us. The Landmark Funds
Broker-Dealer Services, Inc. is not obligated to sell any specific number of
Contracts. The Landmark Funds Broker-Dealer Services, Inc.'s principal business
address is 6 St. James Avenue, Suite 900, Boston, Massachusetts 02116.
We may pay sales commissions to broker-dealers up to an amount equal to 6%
of the purchase payments paid under a Contract. These broker-dealers are
expected to compensate sales representatives in varying amounts from these
commissions. We also may pay other distribution expenses such as production
incentive bonuses, agent's insurance and pension benefits, and agency expense
allowances. These distribution expenses do not result in any additional charges
under the Contracts that are not described under "Charges and Deductions."
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or
the assets of the Separate Account are subject. The Company is not involved in
any litigation that is of material importance in relation to its total assets or
that relates to the Separate Account.
VOTING PRIVILEGES
In accordance with our view of current applicable law, we will vote
portfolio shares held in the Separate Account at regular and special shareholder
meetings of the portfolios in accordance with instructions received from persons
having voting interests in the corresponding subaccounts. If, however, the 1940
Act or any regulation thereunder should be amended, or if the present
interpretation thereof should change, or we otherwise determine that we are
allowed to vote the shares in our right, we may elect to do so.
55
<PAGE>
The number of votes that an Owner or Annuitant has the right to instruct
will be calculated separately for each subaccount of the Separate Account, and
may include fractional votes. Prior to the Annuity Income Date, an Owner holds a
voting interest in each subaccount to which the Contract Value is allocated.
After the Annuity Income Date, the Annuitant has a voting interest in each
subaccount from which variable annuity payments are made.
For each Owner, the number of votes attributable to a subaccount will be
determined by dividing the Contract Value attributable to that Owner's Contract
in that subaccount by the net asset value per share of the portfolio in which
that subaccount invests. For each Annuitant, the number of votes attributable to
a subaccount will be determined by dividing the liability for future variable
annuity payments to be paid from that subaccount by the net asset value per
share of the portfolio in which that subaccount invests. This liability for
future payments is calculated on the basis of the mortality assumptions, the
3.0% assumed investment rate used in determining the number of annuity units of
that subaccount credited to the Annuitant's Contract and annuity unit value of
that subaccount on the date that the number of votes is determined. As variable
annuity payments are made to the Annuitant, the liability for future payments
decreases as does the number of votes.
The number of votes available to an Owner or Annuitant will be determined
as of the date coincident with the date established by the portfolio for
determining shareholders eligible to vote at the relevant meeting of the
portfolio's shareholders. Voting instructions will be solicited by written
communication prior to such meeting in accordance with procedures established
for the portfolio. Each Owner or Annuitant having a voting interest in a
subaccount will receive proxy materials and reports relating to any meeting of
shareholders of the portfolio in which that subaccount invests.
Portfolio shares as to which no timely instructions are received and shares
held by us in a subaccount as to which no Owner or Annuitant has a beneficial
interest will be voted in proportion to the voting instructions which are
received with respect to all Contracts participating in that subaccount. Voting
instructions to abstain on any item to be voted upon will be applied to reduce
the total number of votes eligible to be cast on a matter.
COMPANY HOLIDAYS
We are closed on the following holidays: New Years Day, Civil Rights Day
(Martin Luther King Day), President's Day, Memorial Day, Independence Day, Labor
Day, Columbus Day, Thanksgiving Day, Day
56
<PAGE>
After Thanksgiving and Christmas Day. Holidays which fall on a Saturday will be
recognized on the previous Friday. Holidays which fall on a Sunday will be
recognized on the following Monday.
FINANCIAL STATEMENTS
The audited Statutory Financial Statements of the Company as of December
31, 1995 and 1994 and for the years ended December 31, 1995, 1994, and 1993 as
well as the Independent Auditors' Report are contained in the Statement of
Additional Information. The Statement of Additional Information also contains
financial statements for the Separate Account as of December 31, 1995.
YOUR RIGHT TO LOOK TO A DELAWARE BANK OR TRUST COMPANY FOR PAYMENT ON ANY
INSURANCE POLICY IS LIMITED BY LAW. INSURANCE POLICIES ISSUED BY THE
SUBSIDIARIES OR DIVISIONS OF DELAWARE BANKS OR TRUST COMPANIES ARE NOT DIRECT
LIABILITIES OF SUCH BANKS OR TRUST COMPANIES. ONLY THE ASSETS OF THE INSURANCE
DIVISION OR SUBSIDIARY ISSUING A POLICY ARE APPLICABLE TO THE PAYMENT AND
SATISFACTION OF SUCH POLICY OR CLAIMS MADE THEREUNDER.
INSURANCE POLICIES ISSUED BY A SUBSIDIARY OR DIVISION OF A DELAWARE BANK
OR TRUST COMPANY ARE NOT BANK DEPOSITS AND ARE NOT FDIC INSURED.
57
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Page
----
ADDITIONAL CONTRACT PROVISIONS
The Contract
Incontestability
Misstatement of Age or Sex
Participation
Assignment
DISTRIBUTION OF THE CONTRACTS
CALCULATION OF YIELDS AND TOTAL RETURNS
Money Market Subaccount Yields
Other Subaccount Yields
Average Annual Total Returns
Effect of the Annual Contract Fee on Performance Data
VARIABLE ANNUITY PAYMENTS
Assumed Investment Rate
Amount of Variable Annuity Payments
Annuity Unit Value
LEGAL MATTERS
EXPERTS
OTHER INFORMATION
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
If you would like a free copy of the Statement of Additional Information for
this prospectus, please fill out this form and mail it to Citicorp Life
Insurance Company, 800 Silver Lake Boulevard, P.O. Box 7031, Dover, Delaware
19903.
Please send a copy of the Statement of Additional Information pertaining
to the Citicorp Life Insurance Company Variable Annuity and the Citicorp
Life Variable Annuity Separate Account to:
Name: _________________________________________________
Mailing Address: _________________________________________________
_________________________________________________
_________________________________________________
58
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF
ADDITIONAL INFORMATION
Citicorp Life Insurance Company
800 Silver Lake Boulevard
P.O. Box 7031
Dover, DE 19903
(800) 497-4857
CITICORP LIFE VARIABLE
ANNUITY SEPARATE ACCOUNT
INDIVIDUAL FLEXIBLE PREMIUM
DEFERRED VARIABLE ANNUITY CONTRACT
May 1, 1996
- --------------------------------------------------------------------------------
1
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Citicorp Life Insurance Company
800 Silver Lake Boulevard
P.O. Box 7031
Dover, DE 19903
(800) 497-4857
CITICORP LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
This Statement of Additional Information contains information in addition
to the information described in the Prospectus for the flexible premium deferred
variable annuity contract (the "Contract") offered by Citicorp Life Insurance
Company ("we", "our" and "us"). This Statement of Additional Information is not
a prospectus, and it should be read only in conjunction with the prospectuses
for the Contract, the Landmark VIP Funds the Fidelity Variable Insurance
Products Fund, the AIM Variable Insurance Funds, Inc. and the MFS Variable
Insurance Trust. The Prospectus for the Contract is dated the same as this
Statement of Additional Information. You may obtain a copy of the prospectuses
by writing or calling us at our address or phone number shown above.
May 1, 1996
2
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Page
ADDITIONAL CONTRACT PROVISIONS
The Contract
Incontestability
Misstatement of Age or Sex
Participation
Assignment
DISTRIBUTION OF THE CONTRACTS
CALCULATION OF YIELDS AND TOTAL RETURNS
Money Market Subaccount Yields
Other Subaccount Yields
Average Annual Total Returns
Effect of the Annual Contract Fee on Performance Data
VARIABLE ANNUITY PAYMENTS
Assumed Investment Rate
Amount of Variable Annuity Payments
Annuity Unit Value
LEGAL MATTERS
EXPERTS
OTHER INFORMATION
FINANCIAL STATEMENTS
3
<PAGE>
ADDITIONAL CONTRACT PROVISIONS
The Contract
The application, endorsements and all other attached papers are part of the
Contract. The statements made in the application are deemed representations and
not warranties. We will not use any statement in defense of a claim or to void
the Contract unless it is contained in the application.
Incontestability
We will not contest the Contract.
Misstatement of Age or Sex
If the age or sex (if applicable) of the payee has been misstated, the
amount which will be paid is that which the proceeds would have purchased at the
correct age and sex (if applicable
Participation
The Contract does not participate in our divisible surplus.
Assignment
Upon written notice to us, you may assign your rights under this Contract.
We assume no responsibility for the validity of any such assignment. Assignments
will not apply to any payments or actions taken prior to the time it is recorded
by us.
DISTRIBUTION OF THE CONTRACTS
The Landmark Funds Broker-Dealer Services, Inc. acts as the principal
underwriter and distributor of the Contract, pursuant to an Underwriting
Agreement with us. Applications for the Contracts are solicited by agents who
are licensed by applicable state insurance authorities to sell our variable
annuity contracts and who are also licensed representatives of Citicorp
Insurance Services, Inc. which entered into a selling agreement with the
Landmark Funds Broker-Dealer Services, Inc.
The Landmark Funds Broker-Dealer Services, Inc. is an indirect wholly owned
subsidiary of Citicorp and an affiliate of Citicorp Life Insurance Company. For
fiscal year 1995, no underwriting commissions were paid to, or retained by, The
Landmark Funds Broker-Dealer Services, Inc.
4
<PAGE>
CALCULATION OF YIELDS AND TOTAL RETURNS
From time to time, we may disclose yields, total returns, and other
performance data pertaining to the Contracts for a subaccount. Such performance
data will be computed, or accompanied by performance data computed, in
accordance with the standards defined by the SEC.
Money Market Subaccount Yields
From time to time, advertisements and sales literature may quote the
current annualized yield of the Money Market Subaccount for a seven-day period
in a manner which does not take into consideration any realized or unrealized
gains or losses on shares of the MFS Money Market Series or on that portfolio's
securities.
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 1 unit of the
Money Market Subaccount at the beginning of the period, dividing such net change
in subaccount 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 subaccount value reflects: 1) net income from
the portfolio attributable to the hypothetical account; and 2) charges and
deductions imposed under the Contract which are attributable to the hypothetical
account. The charges and deductions include the per unit charges for the
hypothetical account for: 1) the annual contract fee; 2) the mortality and
expense risk charge; and (3) the asset-based administration charge. For purposes
of calculating current yields for a Contract, an average per unit contract fee
is used based on the $30 annual contract fee deducted at the end of each
Contract Year. Current Yield is calculated according to the following formula:
Current Yield = ((NCS - ES)/UV) X (365/7)
Where:
NCS = the net change in the value of the MFS Money
Market Series (exclusive of realized gains or
losses on the sale of securities and
unrealized appreciation and depreciation) for
the seven-day period attributable to a
hypothetical account having a balance of 1
subaccount unit.
5
<PAGE>
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.
Effective Yield = (1 + ((NCS-ES)/UV)) 365/7 - 1
Where:
NCS = the net change in the value of the MFS Money
Market Series (exclusive of realized gains or
losses on the sale of securities and
unrealized appreciation and depreciation) for
the seven-day period attributable to a
hypothetical account having a balance of 1
subaccount 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.
Because of the charges and deductions imposed under the Contract, the yield
for the Money Market Subaccount is lower than the yield for the MFS Money Market
Series.
The current and effective yields on amounts held in the Money Market
Subaccount 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 Subaccount's actual yield is
affected by changes in interest rates on money market securities, average
portfolio maturity of the MFS Money Market Series, the types and quality of
portfolio securities held by the MFS Money Market Series and the MFS Money
Market Series' operating expenses. Yields on amounts held in the Money Market
Subaccount may also be presented for periods other than a seven-day period.
Yield calculations do not take into account the surrender charge under the
Contract equal to a maximum of 7% of the amount of purchase payments withdrawn
for certain withdrawals. During each Contract Year, up to 10% of all purchase
payments, less any prior withdrawal of purchase payments, may be withdrawn
without the imposition of a surrender charge.
Other Subaccount Yields
From time to time, sales literature or advertisements may quote the current
annualized yield of one or more of the subaccounts (except the Money Market
6
<PAGE>
Subaccount) for a Contract for 30-day or one-month periods. The annualized yield
of a subaccount refers to income generated by the subaccount during a 30-day or
one-month period and is assumed to be generated each period over a 12-month
period.
The yield is computed by: 1) dividing the net investment income of the
portfolio attributable to the subaccount units less subaccount expenses for the
period; by 2) the maximum offering price per unit on the last day of the period
times the daily average number of units outstanding for the period; by 3)
compounding that yield for a six-month period; and by 4) multiplying that result
by 2. Expenses attributable to the subaccount include the annual contract fee,
the asset-based administration charge and the mortality and expense risk charge.
The yield calculation assumes a contract fee of $30 per year per Contract
deducted at the end of each Contract Year. For purposes of calculating the
30-day or one-month yield, an average contract fee based on the average Contract
Value in the Separate Account is used to determine the amount of the charge
attributable to the subaccount for the 30-day or one-month period. The 30-day or
one-month yield is calculated according to the following formula:
Yield = 2 X (((NI - ES)/(U X UV)) + 1)6 - 1)
Where:
NI = net income of the portfolio for the 30-day or
one-month period attributable to the
subaccount's units.
ES = expenses of the subaccount 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 subaccount is lower than the yield for the corresponding
portfolio.
The yield on the amounts held in the subaccounts 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 subaccount's
actual yield is affected by the types and quality of portfolio securities held
by the corresponding portfolio and that portfolio's operating expenses.
7
<PAGE>
Yield calculations do not take into account the surrender charge under the
Contract equal to a maximum of 7% of the amount of purchase payments withdrawn
for certain withdrawals. During each Contract Year, up to 10% of all purchase
payments, less any prior withdrawal of purchase payments, may be withdrawn
without the imposition of a surrender charge.
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 subaccounts for various
periods of time.
When a subaccount or portfolio has been in operation for 1, 5, and 10
years, respectively, the average annual total return for these periods will be
provided. 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 redemption 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 subaccount unit
values which we calculate on each Valuation Day based on the performance of the
subaccount's underlying portfolio, the deductions for the mortality and expense
risk charge, the deductions for the asset-based administration charge and the
annual contract fee. The calculation assumes that the contract fee is $30 per
year per Contract deducted at the end of each Contract Year. For purposes of
calculating average annual total return, an average per-dollar per-day contract
fee attributable to the hypothetical account for the period is used. The
calculation also assumes surrender of the Contract at the end of the period for
the return quotation. Total returns will therefore reflect a deduction of the
surrender charge for any period less than five years since the date of the
purchase payment being withdrawn. The total return is calculated according to
the following formula:
TR = ((ERV/P)1/N) - 1
Where:
8
<PAGE>
TR = the average annual total return net of
subaccount recurring charges.
ERV = the ending redeemable value (net of any
applicable surrender charge) 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.
From time to time, sales literature or advertisements may also quote
average annual total returns that do not reflect the surrender charge. These are
calculated in exactly the same way as average annual total returns described
above, except that the ending redeemable 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.
We 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 = (ERV/P) - 1
Where:
CTR = The cumulative total return net of subaccount
recurring charges for the period.
ERV = The ending redeemable value of the
hypothetical investment at the end of the
period.
P = A hypothetical single payment of $1,000.
Effect of the Annual Contract Fee on Performance Data
The Contract provides for a $30 annual contract fee to be deducted annually
at the end of each Contract Year from the Accounts based on the proportion of
the Contract Value invested in each such Account. For purposes of reflecting the
contract fee in yield and total return quotations, the annual charge is
converted into a per-dollar per-day charge based on the average Contract Value
of all Contracts on the last day of the period for which quotations are
provided. The per-dollar per-day average charge will then be adjusted to reflect
the basis upon which the particular quotation is calculated.
9
<PAGE>
VARIABLE ANNUITY PAYMENTS
Assumed Investment Rate
The discussion concerning the amount of variable annuity payments which
follows is based on an assumed investment rate of 3.0% per year. The assumed net
investment rate is used merely in order to determine the first monthly payment
per thousand dollars of applied value. This rate does not bear any relationship
to the actual net investment experience of the Separate Account or of any
subaccount.
Amount of Variable Annuity Payments
The amount of the first variable annuity payment is determined by dividing
the Contract Value on the Annuity Income Date by 1,000 and multiplying the
result by the appropriate factor in the annuity tables provided in the Contract.
These tables are based upon the 1983 IAM Tables (promulgated by the Society of
Actuaries). The appropriate factor is based on the annual net investment return
of 3.0%. The amount of each payment will depend on the age of the Annuitant(s)
at the time the first payment is due, and the sex of the Annuitant(s), unless
otherwise required by law.
The dollar amount of the second and subsequent variable annuity payments
will vary and is determined by multiplying the number of subaccount annuity
units by the subaccount annuity unit value as of a date no earlier than the
fifth Valuation Day preceding the date the payment is due. The number of such
units will remain fixed during the annuity period, assuming you or the
Annuitant, if you are deceased, make no exchanges of annuity units for annuity
units of another subaccount or to provide a fixed annuity payment. Once every 3
months after annuity payments have commenced, the Annuitant may elect in
writing, to transfer among any subaccounts. After the Annuity Income Date, no
transfers may be made between the subaccounts and the Fixed Account.
The annuity unit value will increase or decrease from one payment to the
next in proportion to the net investment return of the subaccount or subaccounts
supporting the variable annuity payments, less an adjustment to neutralize the
3.0% assumed net investment rate referred to above. Therefore, the dollar amount
of annuity payments after the first will vary with the amount by which the net
investment return of the appropriate subaccounts is greater or less than 3.0%
per year. For example, for a Contract using only one subaccount to generate
variable annuity payments, if that subaccount has a cumulative net investment
return of 5% over a one year period, the first annuity payment in the next year
10
<PAGE>
will be approximately 2% greater than the payment on the same date in the
preceding year. If such net investment return is 1% over a one year period, the
first annuity payment in the next year will be approximately 2 percentage points
less than the payment on the same date in the preceding year. (See also
"Variable Annuity Payments" in the Prospectus.)
Fixed annuity payments are determined at annuitization by multiplying the
values allocated to the Fixed Account by a rate to be determined by Citicorp
Life which is no less than the rate specified in the annuity tables in the
Contract. The annuity payment will remain level for the duration of the annuity.
The annuity payments will be made on the fifteenth day of each month. The
annuity unit value used in calculating the amount of the variable annuity
payments will be based on an annuity unit value determined as of the close of
business on a day no earlier than the fifth Valuation Day preceding the date of
the annuity payment.
Annuity Unit Value
The annuity unit value is calculated at the same time that the value of an
accumulation unit is calculated and is based on the same values for portfolio
shares and other assets and liabilities. (See "Variable Contract Value" in the
Prospectus.) The annuity unit value for each subaccount's first valuation period
was set at $1.00. The annuity unit value for a subaccount is calculated for each
subsequent Valuation Period by multiplying the subaccount annuity unit value on
the preceding day by the product of 1 times 2 where:
(1) is the subaccount's net investment factor on the Valuation Day the
Annuity Unit Value is being calculated; and
(2) is 0.999919 (which is the daily factor that will produce the 3.0%
annual investment rate assumed in the annuity tables), adjusted by the
number of days since the previous Valuation Day.
The following illustration shows, by use of hypothetical example, the
method of determining the annuity unit value.
Illustration of Calculation of Annuity Unit Value
1. Net Investment Factor for period......................... 1.003662336
2. Adjustment for 3% Assumed Investment
Rate..................................................... 0.999919016
11
<PAGE>
3. 2x1...................................................... 1.003581055
4. annuity unit value, beginning of
valuation period......................................... 10.743769
5. annuity unit value, end of valuation
period (3x4)............................................. 10.782243
12
<PAGE>
LEGAL MATTERS
All matters relating to Arizona law pertaining to the Contracts, including
the validity of the Contracts and our authority to issue the Contracts, have
been passed upon by Alan Liebowitz, General Counsel of the Company. Sutherland,
Asbill & Brennan of Washington, D.C. has provided advice on certain matters
relating to the federal securities laws.
EXPERTS
The statutory financial statements of Citicorp Life Insurance Company as
of December 31, 1995 and 1994, and for each of the years in the three-year
period ended December 31, 1995, and the financial statements for the Separate
Account as of December 31, 1995, have been included herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, and upon the authority of said firm as
experts in accounting and auditing.
The report of KPMG Peat Marwick LLP covering the financial statements of
Citicorp Life Insurance Company contains an explanatory paragraph which states
that the financial statements are presented in conformity with accounting
practices prescribed or permitted by the Department of Insurance of the State of
Arizona. These practices differ in some respects from generally accepted
accounting principles. The financial statements do not include any adjustments
that might result from the differences.
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.
13
<PAGE>
FINANCIAL STATEMENTS
The Statutory Financial Statements of the Company as of December 31, 1995
and 1994 and for the years ended December 31, 1995, 1994, and 1993, which are
included in this Statement of Additional Information, should be considered only
as bearing on our ability to meet our obligations under the Contracts. They
should not be considered as bearing on the investment performance of the assets
held in the Separate Account. This Statement of Additional Information also
contains financial statements for the Separate Account as of December 31, 1995.
14
<PAGE>
[LOGO - KPMG Peat Marwick LLP]
Independent Auditors' Report
The Board of Directors
Citicorp Life Insurance Company and Policyholders
of Citicorp Life Insurance Company Variable
Annuity Separate Account:
We have audited the accompanying statements of net assets, including the
schedule of investments, of the Landmark Equity Fund, Landmark U.S. Government
Securities Fund, Landmark International Equity Fund, Landmark Balanced Fund,
and Fidelity Growth Portfolios of Citicorp Life Insurance Company Variable
Annuity Separate Account as of December 31, 1995, and related statements of
operations and changes in net assets for the period June 5, 1995 (Inception) to
December 31, 1995. These financial statements are the responsibility of
Citicorp Life Insurance Company Variable Annuity Separate Account's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of investments owned at December 31, 1995 by
correspondence with the Landmark Variable Insurance Products Fund and Fidelity
Variable Insurance Products Fund. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Landmark Equity Fund,
Landmark U.S. Government Securities Fund, Landmark International Equity Fund,
Landmark Balanced Fund, and Fidelity Growth Portfolios of Citicorp Life
Insurance Company Variable Annuity Separate Account as of December 31, 1995,
and the results of their operations and changes in their net assets for the
period June 5, 1995 (Inception) to December 31, 1995, in conformity with
generally accepted accounting principles.
s/KPMG Peat Marwick LLP
Chicago, Illinois
February 16, 1996
124
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF NET ASSETS
December 31, 1995
<TABLE>
<CAPTION>
Landmark U.S. Landmark Landmark Fidelity
Landmark Government International Balanced Growth
Equity Fund Securities Fund Equity Fund Fund Portfolio
----------- --------------- ------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net Assets:
Investments at Market Value
(See Schedule of Investments) $1,147,521 $1,069,479 $4,122,919 $1,114,304 $5,974
Payable to Citicorp Life
Insurance Company -- -- -- 4 4
---------- ---------- ---------- ---------- ------
Total Net Assets $1,147,521 $1,069,479 $4,122,919 $1,114,300 $5,970
========== ========== ========== ========== ======
Total Net Assets Represented By:
Variable Annuity Cash Value
Invested in Separate Account -- -- -- $ 5,660 $5,970
Citicorp Life Insurance Co. Equity $1,147,521 $1,069,479 $4,122,919 1,108,640
---------- ---------- ---------- ---------- ------
Total Net Assets $1,147,521 $1,069,479 $4,122,919 $1,114,300 $5,970
========== ========== ========== ========== ======
Total Units Held -- -- -- 5,094 4,565
Net Unit Value -- -- -- $1.11 $ 1.31
Cost of Investments $1,012,229 $1,035,503 $4,050,938 $1,026,812 $5,103
========== ========== ========== ========== =======
</TABLE>
See Notes to Financial Statements.
118
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS
For the Period from June 5, 1995 (Inception) to December 31, 1995
<TABLE>
<CAPTION>
Landmark U.S. Landmark Landmark Fidelity
Landmark Government International Balanced Growth
Equity Fund Securities Fund Equity Fund Fund Portfolio
----------- --------------- ------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Investment Income:
Dividends $ 12,229 $35,503 $ 50,938 $ 21,708 --
Expenses:
Mortality & Expense Risk Fees -- -- -- 39 $ 45
Daily Administrative Charges -- -- -- 4 5
-------- ------- -------- -------- ----
Total Expenses -- -- -- 43 50
-------- ------- -------- -------- ----
Net Investment Income (Loss) 12,229 35,503 50,938 21,665 (50)
-------- ------- -------- -------- ----
Realized and Unrealized Gain
on Investments:
Realized Gain on Sale of Investments -- -- -- 2 8
Net Unrealized Gain on Investments 135,292 33,976 71,981 87,492 871
-------- ------- -------- -------- ----
Net Gain on Investments 135,292 33,976 71,981 87,494 879
-------- ------- -------- -------- ----
Increase in Net Assets Resulting
from Operations $147,521 $69,479 $122,919 $109,159 $829
======== ======= ======== ======== ====
</TABLE>
See Notes to Financial Statements.
119
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
For the Period from June 5, 1995 (Inception) to December 31, 1995
<TABLE>
<CAPTION>
Landmark U.S. Landmark Landmark Fidelity
Landmark Government International Balanced Growth
Equity Fund Securities Fund Equity Fund Fund Portfolio
----------- --------------- ------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net Investment Income (Loss) $ 12,229 $ 35,503 $ 50,938 $ 21,665 $ (50)
Realized Gain on Sale of Investments -- -- -- 2 8
Change in Unrealized Appreciation
of Investments 135,292 33,976 71,981 87,492 871
---------- ---------- ---------- ---------- ------
Increase in Net Assets Resulting
from Operations 147,521 69,479 122,919 109,159 829
---------- ---------- ---------- ---------- ------
Capital Transactions:
Contract Deposits -- -- -- 5,141 5,141
Seed Money from Citicorp
Life Insurance Company 1,000,000 1,000,000 4,000,000 1,000,000 --
---------- ---------- ---------- ---------- ------
Increase in Net Assets Resulting
from Capital Transactions 1,000,000 1,000,000 4,000,000 1,005,141 5,141
---------- ---------- ---------- ---------- ------
Increase in Net Assets 1,147,521 1,069,479 4,122,919 1,114,300 5,970
Net Assets, at Beginning of Period -- -- -- -- --
---------- ---------- ---------- ---------- ------
Net Assets, at End of Period $1,147,521 $1,069,479 $4,122,919 $1,114,300 $5,970
========== ========== ========== ========== ======
</TABLE>
See Notes to Financial Statements.
120
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
1. History
The Citicorp Life Insurance Company Variable Annuity Separate Account (the
Account) is a separate investment account maintained under the provisions of
Arizona Insurance Law by Citicorp Life Insurance Company (the Company), a
subsidiary of Citibank Delaware. The Account operates as a unit investment trust
registered under the Investment Company Act of 1940, as amended, and supports
the operations of the Companys individual flexible premium deferred variable
annuity contracts (the contracts). The Account invests in Portfolios of the
Landmark Variable Insurance Products Funds, the A.I.M. Variable Insurance Funds,
Inc., the Fidelity Investments Variable Insurance Products Fund and the M.F.S.
Variable Insurance Trust (the Funds). The available Portfolios of the Landmark
Variable Insurance Products Funds include the Landmark Equity Fund, the Landmark
U.S. Government Fund, the Landmark International Equity Fund and the Landmark
Balanced Fund. The A.I.M. V.I. Capital Appreciation Fund of the A.I.M. Variable
Insurance Funds, Inc., the Growth Portfolio of the Fidelity Investments Variable
Insurance Products Fund, the MFS Money Market Series and the MFS World
Governments Series of the M.F.S. Variable Insurance Trust are also available for
investment.
The Account had no assets or operations until June 5, 1995, when the initial
investment was made. On June 12, 1995, the Company transferred $7,000,000 from
its general funds to provide initial capital in the Landmark Variable Insurance
Products Funds.
The assets of the Account are the property of the Company. The portion of the
Accounts assets applicable to the contracts are not chargeable with liabilities
arising out of any other business conducted by the Company.
In addition to the Account, a contract owner may also allocate funds to the
General Account, which is part of the Companys general account. Amounts
allocated to the General Account are credited with a guaranteed rate for one
year. Because of exemptive and exclusionary provisions, interests in the
General Account have not been registered under the Securities Act of 1933 and
the General Account has not been registered as an investment company under the
Investment Company Act of 1940.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the
Account in preparation of the financial statements in conformity with generally
accepted accounting principles.
A. Investment Valuation The investments of the Portfolios within the Account
are stated at market value, which is the net asset value of each of the
respective series as determined at the close of business on the last working
day of the period.
B. Accounting for Investments Investment transactions are accounted for on the
trade date. Dividend income is recorded on the ex-dividend date.
C. Federal Income Taxes The Company is taxed under federal law as a life
insurance company. The Account is part of the Companys total operations and
is not taxed separately. Under current Federal income tax law, no taxes are
payable on investment income or realized capital gains of the Account
Contractholders.
D. Use of Estimates The preparation of financial statements in conformity with
Generally Accepted Accounting Principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of increase and
decrease in net assets from operations during the period. Actual results
could differ from those estimates.
121
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
3. Contract Charges
Daily charges for mortality and expense risks assumed by the Company are
assessed through the daily unit value calculation and are equivalent on an
annual basis to 1.25% of the value of the contracts.
An annual contract fee of $30 is assessed against each contract on its
anniversary date by surrendering units. Daily charges for administrative
expenses are assessed through the daily unit value calculation and are
equivalent on an annual basis to 0.15% of the value of the contracts.
The contracts provide that in the event that a contract owner withdraws all or
a portion of the contract value within five contract years there will be
assessed a deferred sales charge. The deferred sales charge is based on a table
of charges of which the maximum charge is currently 7% of the contract value.
During each contract year, up to 10% of purchase payments less any prior
withdrawal of purchase payments may be withdrawn without a deferred sales
charge.
Premium taxes may be applicable, depending on the laws of various
jurisdictions. Various states and other government entities levy a premium tax
on annuity contracts issued by insurance companies.
Through the period ended December 31, 1995, the Landmark Equity Fund, Landmark
U.S. Government Securities Fund, and Landmark International Equity Fund
consisted of general funds contributed by the Company. As a result of the
nature of these deposits, there have been no contract charges assessed against
these deposits.
4. Purchases and Sales of Investments
For the period ended December 31, 1995, investment activity in the Account was
as follows:
<TABLE>
<CAPTION>
Cost of Proceeds
Shares of Purchases from Sales
- --------- --------- ----------
<S> <C> <C>
Landmark Variable Insurance Products Funds:
Landmark Equity Fund $1,012,229 --
Landmark U.S. Government Fund 1,035,503 --
Landmark International Equity Fund 4,050,938 --
Landmark Balanced Fund 1,026,849 $39
Fidelity Investments Variable Insurance Products Fund:
Growth Portfolio 5,141 46
</TABLE>
5. Net Increase in Accumulation Units
For the period ended December 31, 1995, transactions in accumulation units of
the Account were as follows:
<TABLE>
<CAPTION>
Landmark Fidelity
Balanced Growth
Fund Portfolio
-------- ---------
<S> <C> <C>
Units Purchased 5,094 4,565
Units Withdrawn -- --
Units Transferred Between Funds -- --
----- -----
Net Increase 5,094 4,565
Units, at Beginning of Period -- --
----- -----
Units, at End of Period 5,094 4,565
===== =====
</TABLE>
122
<PAGE>
CITICORP LIFE INSURANCE COMPANY
VARIABLE ANNUITY SEPARATE ACCOUNT
SCHEDULE of investments
December 31, 1995
<TABLE>
<CAPTION>
Number Market
of Shares Value Cost
--------- --------- ---------
<S> <C> <C> <C>
Landmark Variable Insurance Products Funds:
Landmark Equity Fund 99,698 $1,147,521 $1,012,229
Landmark U.S. Government Fund 102,050 1,069,479 1,035,503
Landmark International Equity Fund 399,895 4,122,919 4,050,938
Landmark Balanced Fund 101,116 1,114,304 1,026,812
Fidelity Variable Insurance Products Fund:
Growth Portfolio 205 5,974 5,103
</TABLE>
123
<PAGE>
CITICORP LIFE INSURANCE COMPANY
(A Wholly Owned Subsidiary of Citibank Delaware)
Statutory Financial Statements
December 31, 1995, 1994, and 1993
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
The Board of Directors
Citicorp Life Insurance Company:
We have audited the accompanying statutory statements of admitted assets,
liabilities, and capital and surplus of Citicorp Life Insurance Company (a
wholly owned subsidiary of Citibank Delaware) as of December 31, 1995 and 1994,
and the related statutory statements of operations, capital and surplus, and
cash flow for each of the years in the three-year period ended December 31,
1995. These statutory financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
statutory financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in note 1, the statutory financial statements have been prepared in
conformity with accounting practices prescribed or permitted by the Department
of Insurance of the State of Arizona. These practices differ in some respects
from generally accepted accounting principles (note 12). Accordingly, the
financial statements referred to above are not intended to present, and in our
opinion do not present, fairly the financial position, results of operations,
and cash flow in conformity with generally accepted accounting principles.
Also, in our opinion, the statutory financial statements referred to above
present fairly, in all material respects, the admitted assets, liabilities, and
capital and surplus of Citicorp Life Insurance Company as of December 31, 1995
and 1994, and the results of its operations and its cash flow for each of the
years in the three-year period ended December 31, 1995 on the basis of
accounting as described in note 1.
s/KPMG Peat Marwick LLP
April 19, 1996
1
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Statutory Statements of Admitted Assets,
Liabilities, and Capital and Surplus
December 31, 1995 and 1994
- -------------------------------------------------------------------------------
Admitted Assets 1995 1994
- -------------------------------------------------------------------------------
Cash and investments - other than investments in insurance affiliates:
Bonds $277,368,210 276,222,868
Mutual funds 7,448,559 2,096
Mortgage loans 2,035,095 2,248,224
Cash on hand and on deposit 1,198,000 7,145,466
Short-term investments 69,364,672 59,569,174
Real estate 27,059,121 27,561,494
Investments in insurance affiliates 93,757,664 78,379,407
- -------------------------------------------------------------------------------
Total cash and investments 478,231,321 451,128,729
Net deferred and uncollected premiums 1,979,440 2,315,766
Due from reinsurers 24,789,763 16,921,877
Accrued investment income 6,030,469 11,871,513
Other assets 5,355,915 7,336,343
Separate account assets 7,460,197 --
Total admitted assets $523,847,105 489,574,228
- -------------------------------------------------------------------------------
Liabilities and Capital and Surplus
- -------------------------------------------------------------------------------
Liabilities:
Future policy benefit reserves:
Life insurance 6,950,287 8,196,187
Accident and health insurance 1,288,580 1,296,589
Policyholder account balances
-- annuities 58,390,582 45,229,715
Policy and contract claim reserves:
Life insurance 6,657,389 8,501,863
Accident and health insurance 16,508,481 10,194,402
General expenses due or accrued 718,168 297,839
Federal income taxes due to parent 33,158,718 51,572,923
Asset valuation reserve 23,525,005 16,336,507
Interest maintenance reserve 10,330,687 10,033,117
Stockholder dividends payable 16,000,000 15,000,000
Other liabilities 927,815 3,458,861
Separate account liabilities 11,236 --
- -------------------------------------------------------------------------------
Total liabilities 174,466,948 170,118,003
- -------------------------------------------------------------------------------
Commitments and contingencies
Capital and surplus:
Capital stock - $1 par value per share;
5,000,000 shares authorized;
2,500,000 shares issued and
outstanding 2,500,000 2,500,000
Surplus:
Paid-in 1,899,878 1,899,878
Assigned - separate account 7,448,961 --
Unassigned 337,531,318 315,056,347
- -------------------------------------------------------------------------------
Total capital and surplus 349,380,157 319,456,225
- -------------------------------------------------------------------------------
Total liabilities and capital and surplus $523,847,105 489,574,228
- -------------------------------------------------------------------------------
See accompanying notes to statutory financial statements.
2
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Statutory Statements of Operations
Years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Premiums and annuity considerations:
Annuities $17,404,560 41,271,181 4,813,339
Life insurance 35,711,063 41,648,452 38,549,536
Accident and health insurance 51,595,154 48,487,209 29,067,432
- ---------------------------------------------------------------------------------------------------------
Total premium and annuity considerations 104,710,777 131,406,842 72,430,307
Net investment income (including
dividends from subsidiaries
of $5.7 million in 1994) 23,484,474 26,200,378 14,209,824
Amortization of interest maintenance reserve 1,493,637 1,606,337 1,136,744
Commissions and expense allowances on reinsurance
ceded 308,635 365,414 501,296
Other 4,085 14,428 63,628
- ---------------------------------------------------------------------------------------------------------
Total revenues 130,001,608 159,593,399 88,341,799
- ---------------------------------------------------------------------------------------------------------
Benefits and expenses:
Death and other policy benefits:
Annuities 1,327,395 441,851 --
Life insurance 17,389,922 21,544,399 22,039,555
Accident and health insurance 18,609,868 9,871,951 12,921,135
Surrenders 4,902,176 1,013,546 34,429
Change in future policy benefits:
Annuities 13,160,867 40,220,967 4,733,927
Life insurance (1,245,900) (1,046,509) (2,462,756)
Accident and health insurance (8,009) 512,640 (481,151)
Other operating costs and expenses:
Commissions 11,117,619 8,010,231 5,555,376
General insurance expenses 18,718,836 25,580,133 9,887,598
Net transfers to separate accounts 10,282 -- --
Other (5,905) 7,821 (8,634)
- ---------------------------------------------------------------------------------------------------------
Total benefits and expenses 83,977,151 106,157,030 52,219,479
- ---------------------------------------------------------------------------------------------------------
Income from operations before federal income
tax expense and net realized capital gains (losses) 46,024,457 53,436,369 36,122,320
Federal income tax expense 15,481,637 20,974,659 10,431,863
- ---------------------------------------------------------------------------------------------------------
Income from operations before net
realized capital gains (losses) 30,542,820 32,461,710 25,690,457
Net realized capital gains (losses), net of IMR transfer (626,923) 378,038 2,707,538
- ---------------------------------------------------------------------------------------------------------
Net income $29,915,897 32,839,748 28,397,995
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to statutory financial statements.
3
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Statutory Statements of Capital and Surplus
Years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital and surplus at beginning of year $319,456,225 306,151,851 262,197,125
Net income 29,915,897 32,839,748 28,397,995
Net unrealized gain (loss) from revaluation of investments 15,824,719 (5,634,043) 16,045,825
Change in asset valuation reserve (7,188,498) 1,091,197 (1,420,850)
Dividends on common stock (16,000,000) (15,000,000) --
Change in nonadmitted assets (77,147) 7,472 931,756
Change in surplus in separate accounts 7,448,961 -- --
- ------------------------------------------------------------------------------------------------------------
Capital and surplus at end of year $349,380,157 319,456,225 306,151,851
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to statutory financial statements.
4
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Statutory Statements of Cash Flow
Years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash provided:
From operations:
Premiums and annuity considerations $105,047,103 131,744,746 72,854,347
Allowances and reserve adjustments received on
reinsurance ceded 308,635 365,414 501,296
Net investment income received 30,896,829 21,535,075 15,631,888
Other income received 4,085 14,428 63,628
Life and accident and health claims, and other
benefits paid (37,762,652) (32,488,486) (32,076,129)
Commissions, other expenses, and taxes paid (29,416,131) (33,700,097) (16,809,398)
Federal income taxes paid (33,773,867) -- (10,357,683)
Net transfer to separate accounts (10,282) -- --
- -----------------------------------------------------------------------------------------------------------
Net cash from operations 35,293,720 87,471,080 29,807,949
- -----------------------------------------------------------------------------------------------------------
Proceeds from investments sold, matured, or repaid:
Bonds 56,095,825 134,432,477 645,481,748
Stocks 10,670 -- 4,475,308
Mortgage loans 213,130 354,743 942,005
Other 18,303 (8,568) 22,903
- -----------------------------------------------------------------------------------------------------------
Total investment proceeds 56,337,928 134,778,652 650,921,964
- -----------------------------------------------------------------------------------------------------------
Tax on capital gains (748,898) -- (286,160)
Other cash provided 2,831,771 2,931,659 3,407,000
- -----------------------------------------------------------------------------------------------------------
Total cash provided 93,714,521 225,181,391 683,850,753
- -----------------------------------------------------------------------------------------------------------
Cash applied:
Separate account capitalization 7,000,000 -- --
Cost of bonds acquired 56,547,871 161,869,207 706,526,986
Cash dividends paid to stockholder 15,000,000 -- --
Change in due from reinsurers 7,867,886 1,957,516 (1,931,291)
Other cash applied 3,450,732 1,887,886 4,917,888
- -----------------------------------------------------------------------------------------------------------
Total cash applied 89,866,489 165,714,609 709,513,583
- -----------------------------------------------------------------------------------------------------------
Net change in cash on hand and on deposit and
short-term investments 3,848,032 59,466,782 (25,662,830)
Cash on hand and on deposit and short-term
investments, beginning of year 66,714,640 7,247,858 32,910,688
- -----------------------------------------------------------------------------------------------------------
Cash on hand and on deposit and short-term
investments, end of year $ 70,562,672 66,714,640 7,247,858
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to statutory financial statements.
5
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
December 31, 1995, 1994, and 1993
- --------------------------------------------------------------------------------
(1) BASIS OF PRESENTATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Citicorp Life Insurance Company (the Company) is a wholly owned subsidiary
of Citibank Delaware (the Parent), which is a second tier wholly owned
subsidiary of Citicorp. The Company issues and assumes term life insurance,
credit life, credit accident and health, single and flexible premium
deferred annuity policies, and variable deferred annuity policies. The
Company also writes and assumes mortgage disability policies. The majority
of the Company's business is generated through customers of Citicorp and
its subsidiaries. The accompanying statutory financial statements have been
prepared in accordance with insurance accounting practices prescribed or
permitted by the Department of Insurance of the State of Arizona. The
preparation of statutory financial statements requires management to make
estimates and assumptions which affect the reported amounts of assets and
liabilities as of the date of the financial statements. Actual results
could differ from these estimates. The Company has two wholly owned
insurance company subsidiaries, First Citicorp Life Insurance Company and
FG Casualty Company, both of which are accounted for on the statutory
equity method. The Company is licensed to issue insurance in 46 states and
the District of Columbia. The accounting practices applied vary in some
respects from generally accepted accounting principles as more fully
discussed in note 12.
The significant statutory accounting policies are as follows:
o Revenue and Expenses - Life premiums are reflected as earned on the policy
anniversary date. Accident and health premiums are reported as revenue when
due and earned on a pro rata basis over the period covered by the policy.
Deferred life premiums represent modal premiums (other than annual) to be
billed in the year subsequent to the commencement of the policy year.
Uncollected premiums represent premiums due less accident and health
premiums over 90 days past due. Expenses, including acquisition costs
related to acquiring new business and interest credited to policyholder
account balances, are charged to operations as incurred. Investment income
is recognized as earned.
o Policy Reserves - The liability for future life policy benefits is based on
statutory mortality and interest requirements without consideration of
withdrawals. The mortality table and interest assumptions currently being
used on the majority of new ordinary and group life policies are the 1980
Commissioners Standard Ordinary (CSO) table, with 4.5% to 5.5% interest on
a Commissioners Reserve Valuation Method (CRVM) basis. With respect to
in-force ordinary life and group policies, the mortality table and interest
assumptions are from the 1980 CSO table with 4.5% to 6% interest. The
Company utilizes the 1980 CSO table with 5.5% to 6% interest for most
credit life policies. Life reserves are generally calculated on either a
net level or CRVM reserve basis.
For deferred annuities, policyholder account balances are computed on the
Commissioners Annuity Reserve Valuation Method (CARVM) using appropriate
issue-year interest rates ranging from 5.5% to 6.5%.
Future policy benefits on accident and health insurance are based on
unearned premiums computed on a pro rata basis. The Company provides a
liability for accident and health claims which represents an estimate of
the ultimate cost of unpaid claims incurred through December 31
6 (Continued)
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
of each year. Management believes this liability will be adequate to cover
such costs; however, the ultimate liability may be more or less than the
estimated liability.
o Investments - Bonds and stocks are valued as prescribed by the National
Association of Insurance Commissioners (NAIC). Bonds and short-term
investments, which consist primarily of U.S. Treasury, corporate, and
mortgage-backed securities, are generally carried at amortized cost,
preferred stocks are generally carried at cost, and common stocks of
unaffiliated companies are generally carried at fair value. Investments in
common stock of insurance affiliates are recorded at their underlying
statutory book value with changes in book value reflected in surplus.
Mortgage loans are stated at the unpaid principal balance and represent
first liens on residential properties located in the United States. Real
estate is carried at cost less accumulated depreciation of $4,699,598 and
$4,197,225 in 1995 and 1994, respectively, which is calculated on a
straight-line basis over the estimated life of the property (50 years).
Life insurance companies are required to establish an Asset Valuation
Reserve (AVR) and an Interest Maintenance Reserve (IMR). The AVR provides
for a standardized statutory investment valuation reserve for bonds,
preferred stocks, short-term investments, mortgage loans, common stocks,
real estate, and other invested assets for the purpose of stabilizing
surplus against the effect of fluctuations in the value of investments and
is recorded as a direct charge to surplus in accordance with statutory
accounting practices. The IMR is designed to defer net realized capital
gains and losses resulting from changes in the level of interest rates in
the market and to amortize them into income over the remaining life of the
bond or mortgage loan sold. The IMR represents the unamortized portion of
such net unrealized capital gains and losses not yet taken into income.
o Capital Gains and Losses - The cost of investments sold is generally
determined on the first-in, first-out method and includes the effects of
any related amortization of premium or accretion of discount. Realized
investment gains and losses are reported net of income taxes of $626,923,
$378,038, and $878,193 in 1995, 1994, and 1993, respectively, and are
included in the determination of net income. Realized investment gains
exclude $1,791,210, $347,398, and $8,954,533, which were transferred to the
IMR in 1995, 1994, and 1993, respectively, net of federal income taxes.
o Separate Account Assets and Liabilities - The assets and liabilities of the
Separate Account represent segregated funds administered and invested by
the Company for purposes of funding variable annuity contracts for the
exclusive benefit of variable annuity contractholders. The Company receives
administrative fees from the Separate Account and retains varying amounts
of withdrawal charges to cover expenses in the event of early withdrawals
by contractholders. The assets and liabilities of the Separate Account are
carried at fair value. During 1995, the Company transferred $7,000,000 from
its general funds to provide initial capital in the Separate Account.
o Nonadmitted Assets - Assets included in the statutory statements of
admitted assets, liabilities, and capital and surplus are at "admitted
asset values." Nonadmitted assets, principally capitalized expenditures for
furniture and equipment, are excluded from the accompanying statutory
financial statements through a charge against unassigned surplus.
o Federal Income Taxes - Federal income taxes are charged to operations based
on income that is currently taxable. No charge to operations is made or
liability established for the tax effects of temporary differences between
the financial reporting and tax basis of assets and liabilities.
o Fair Value Disclosures - Fair value estimates are made at a specific point
in time, based on relevant market information and information about the
financial instrument. These estimates do not reflect any premium or
discount that could result from offering for sale at one time the
7
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
Company's entire holdings of a particular financial instrument. Although
fair value estimates are calculated using assumptions that management
believes are appropriate, changes in assumptions could significantly affect
the estimates and such estimates should be used with care. The following
methods and assumptions were used to estimate the fair market value of each
class of financial instrument for which it was practicable to estimate fair
value:
Investment securities - Fixed maturities are based on market prices
obtained from a pricing service which approximates fair value.
Mortgage loans - First mortgages on real estate are carried at the unpaid
principal balance. As discussed in note 3, the Company bears no credit risk
as all mortgage loans were purchased, with recourse, from an affiliate. The
carrying value of mortgage loans approximates fair value.
Policyholder account balances - The liability for policyholder account
balances is related to investment-type annuity contracts for which
crediting rates are subject to adjustment annually, based on interest rates
currently being offered for similar contracts with maturities consistent
with those remaining for the contracts being valued. The carrying value
approximates fair value at December 31, 1995 and 1994.
Cash and short-term investments - The carrying amount is a reasonable
estimate of fair value.
o Cash and cash equivalents - For purposes of reporting cash flows, cash and
cash equivalents represent demand deposits and highly liquid short-term
investments, which include U.S. Treasury bills, commercial paper, and
repurchase agreements with original or remaining maturities of 90 days or
less when purchased.
o Reclassifications - Certain reclassifications have been made to the 1994
information to conform with the 1995 presentation.
(2) REINSURANCE
Insurance is assumed from other companies in areas where the Company had or
has limited authority to write business. Normally, a commission based on
net written premiums is charged by the ceding company under the terms of
the agreement.
The effect of reinsurance on premiums for the years ended December 31,
1995, 1994, and 1993 is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Direct premiums:
Annuities $ 17,404,560 41,271,181 4,813,339
Life 11,180,195 12,859,822 14,646,756
Accident and health 9,039,109 7,821,980 3,232,594
Premiums assumed - life 25,020,842 30,079,934 23,879,333
Premiums assumed - accident and health 42,608,235 40,739,855 25,918,443
Premiums ceded - life (489,974) (1,291,304) 23,447
Premiums ceded - accident and health (52,190) (74,626) (83,605)
- ------------------------------------------------------------------------------------------
Net premiums earned $104,710,777 131,406,842 72,430,307
- ------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
Reserve credits taken with respect to risks ceded to other companies
amounted to approximately $1,345,978, $1,426,500, and $1,718,180 at
December 31, 1995, 1994, and 1993, respectively. The Company remains
contingently liable with respect to any reinsurance ceded and would become
actually liable if the assuming company was unable to meet its obligations
under the reinsurance treaty.
The Company received approximately 98%, 98%, and 99% of its assumed
premiums from three unrelated insurance companies in 1995, 1994, and 1993,
respectively.
(3) INVESTMENTS
Major categories of net investment income for the years ended December 31,
1995, 1994, and 1993 consist of the following:
- --------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
Bonds 19,038,491 16,143,573 10,521,387
Stocks -- 5,700,000 183,194
Mortgage loans 166,072 151,631 185,593
Real estate 3,126,593 3,087,442 3,126,593
Short-term investments 2,382,964 2,066,640 951,271
Other 2,614 27,157 270,604
- --------------------------------------------------------------------------------
Total investment revenue 24,716,734 27,176,443 15,238,642
Investment expense 1,232,260 976,065 1,028,818
- --------------------------------------------------------------------------------
Net investment income 23,484,474 26,200,378 14,209,824
- --------------------------------------------------------------------------------
Investment expense includes $502,373 in depreciation on investments in real
estate for 1995, 1994, and 1993.
Investments in bonds and short-term investments at December 31, 1995 and
1994 are summarized below. Estimated fair values are based on market prices
obtained from a pricing service and approximates fair value.
<TABLE>
<CAPTION>
1995
- --------------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Carrying unrealized unrealized fair
value gains losses value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bonds:
U.S. Treasury securities $ 19,035,995 163,197 (45,432) 19,153,760
U.S. government agency 75,952,370 847,318 (888,939) 75,910,749
Industrial and miscellaneous bonds 182,379,845 2,573,892 (1,699,699) 183,254,038
- --------------------------------------------------------------------------------------------------------------
Total bonds 277,368,210 3,584,407 (2,634,070) 278,318,547
Short-term investments - U.S. Treasury
bills and agency discount rates 69,364,672 -- (6,643) 69,358,029
- --------------------------------------------------------------------------------------------------------------
Total bonds and short-term investments $346,732,882 3,584,407 (2,640,713) 347,676,576
- --------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994
------------------------------------------------------------
Gross Gross Estimated
Carrying unrealized unrealized fair
value gains losses value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bonds:
U.S. Treasury securities $ 24,796,351 1,600 (2,802,621) 21,995,330
U.S. government agency 72,087,363 -- (6,412,357) 65,675,006
Industrial and miscellaneous bonds 179,339,154 25,450 (21,363,211) 158,001,393
- -------------------------------------------------------------------------------------------------------------
Total bonds 276,222,868 27,050 (30,578,189) 245,671,729
Short-term investments - U.S. Treasury bills 59,569,174 -- (141,467) 59,427,707
- -------------------------------------------------------------------------------------------------------------
Total bonds and short-term investments 335,792,042 27,050 (30,719,656) 305,099,436
- -------------------------------------------------------------------------------------------------------------
</TABLE>
The carrying and estimated fair values of bonds and short-term investments
at December 31, 1995, by contractual maturity, are shown below. Expected
maturities may differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
- ------------------------------------------------------------------
Estimated
Carrying fair
value value
- ------------------------------------------------------------------
Within 1 year $69,839,959 69,836,974
After 1 year through 5 years 22,059,898 22,344,803
After 5 years through 10 years 141,581,215 141,611,971
After 10 years through 20 years 27,277,509 27,147,298
After 20 years 85,974,302 86,735,531
- ------------------------------------------------------------------
$346,732,883 347,676,577
- ------------------------------------------------------------------
Proceeds from sale of bonds during 1995, 1994, and 1993 were $51,565,705,
$117,526,794, and $636,299,841, respectively. Gross gains of $1,857,733,
$355,965, and $11,642,546, and gross losses of $95,496, $-0-, and $945,040
were realized on those sales in 1995, 1994, and 1993, respectively.
Investments in mortgage loans were purchased from Citicorp Mortgage, Inc.
(CMI), an affiliate, pursuant to a Mortgage Loan Purchase and Sale
Agreement. In the event of default by the borrower, CMI has agreed to take
back the related loans at current book value.
(4) INVESTMENTS ON DEPOSIT
At December 31, 1995 and 1994, investments with a carrying value of
$2,695,641 and $2,690,285, respectively, were on deposit with various state
insurance departments as required by law and $2,665,960 and $2,639,403,
respectively, were on deposit in escrow accounts under the terms of certain
of the Company's reinsurance agreements.
10
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
(5) INVESTMENTS IN AFFILIATES
Investments in affiliates is comprised of the following:
Condensed financial information for First Citicorp Life Insurance Company,
on a statutory basis, is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance sheet at December 31:
Admitted assets $200,416,978 110,743,798 42,738,105
Liabilities 182,465,874 92,714,793 26,038,773
- -------------------------------------------------------------------------------------------------
Capital and surplus $ 17,951,104 18,029,005 16,699,332
- -------------------------------------------------------------------------------------------------
Results of operations:
Premiums earned 108,340,895 79,395,337 24,977,664
Benefits and expenses 117,006,106 81,977,659 25,133,678
- -------------------------------------------------------------------------------------------------
Underwriting loss (8,665,211) (2,582,322) (156,014)
Investment income, including realized gains 10,684,469 4,767,146 1,415,728
Other income 83,188 21,437 27,252
- -------------------------------------------------------------------------------------------------
Income before federal income taxes 2,102,446 2,206,261 1,286,966
Federal income tax expense 2,123,528 701,760 379,540
- -------------------------------------------------------------------------------------------------
Net income (loss) $ (21,082) 1,504,501 907,426
- -------------------------------------------------------------------------------------------------
</TABLE>
Condensed financial information for FG Casualty Company, on a statutory
basis, is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance sheet at December 31:
Admitted assets $88,552,358 98,649,579 91,177,352
Liabilities 12,745,798 38,299,177 23,864,524
- -------------------------------------------------------------------------------------------------
Capital and surplus $75,806,560 60,350,402 67,312,828
- -------------------------------------------------------------------------------------------------
Results of operations:
Net premiums earned 17,297,323 17,258,960 17,956,312
Losses and underwriting expenses 9,057,292 5,696,160 8,009,268
- -------------------------------------------------------------------------------------------------
Underwriting gain 8,240,031 11,562,800 9,947,044
Investment income, including realized gains 4,165,601 4,207,553 6,372,958
- -------------------------------------------------------------------------------------------------
Other income -- -- --
Income before federal income taxes 12,405,632 15,770,353 16,320,002
Federal income tax expense 4,554,315 5,282,152 1,664,445
- -------------------------------------------------------------------------------------------------
Net income $7,851,317 10,488,201 14,655,557
- -------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
(6) ACCIDENT AND HEALTH INSURANCE POLICY AND CONTRACT CLAIMS
Activity in the liability for accident and health insurance policy and
contract claims is summarized as follows:
- --------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
Balance at January 1 $10,793,721 11,226,420 8,157,574
- --------------------------------------------------------------------------------
Incurred related to:
Current year 21,893,536 15,951,737 13,289,214
Prior years (3,297,260) (6,084,117) (860,652)
- --------------------------------------------------------------------------------
Total incurred 18,596,276 9,867,620 12,428,562
- --------------------------------------------------------------------------------
Paid related to:
Current year 7,366,024 8,095,080 4,794,737
Prior years 4,929,763 2,205,239 4,564,979
- --------------------------------------------------------------------------------
Total paid 12,295,787 10,300,319 9,359,716
- --------------------------------------------------------------------------------
Balance at December 31 $17,094,210 10,793,721 11,226,420
- --------------------------------------------------------------------------------
The schedule above reflects the due and unpaid, in the course of
settlement, and incurred but not reported components of the unpaid claims
reserves for the Company's health and disability coverages. The schedule
also includes unpaid claims reserves recorded in future policy benefits
which represent the present value of amounts not yet due on claims.
(7) FEDERAL INCOME TAXES
The Company files a consolidated federal income tax return with its
ultimate parent, Citicorp, and its other subsidiaries. The Company
participates in a tax-sharing agreement with the Parent whereby it is
liable to the Parent for federal income taxes on a stand-alone basis.
Under the Life Insurance Company Income Tax Act of 1959, a portion of
income prior to 1984 is not subject to federal income taxes, within certain
limits, until it is distributed to stockholders, at which time the
distribution is taxed at ordinary corporate rates. The untaxed income is
accumulated in a memorandum tax account designated as "Policyholders'
Surplus Account." The accumulated "Policyholders' Surplus Account," as
reported in the federal income tax returns at December 31, 1995, 1994, and
1993, was approximately $10,524,000. Based on the current tax rate, if such
accumulated amounts were distributed to stockholders, the income tax would
be approximately $3,687,000. Since the Company does not intend to make any
significant taxable distributions in the foreseeable future, no provision
for such taxes has been made in the accompanying statutory financial
statements.
At December 31, 1995, the Company had a stockholders' surplus account
balance of approximately $285,567,000 from which it could pay dividends to
the stockholder without incurring additional federal income tax liability.
Federal income tax expense on income from operations varies from amounts
computed by applying the current federal corporate income tax rate to
income from operations before federal income tax expense and net realized
capital gains (losses). The reasons for these differences, and the tax
effects thereof, are as follows:
12
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
---------------------- ---------------------- -----------------------
Amount Percent Amount Percent Amount Percent
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Computed "expected" tax at
U.S. corporate tax rate $16,108,560 35.00% $18,702,729 35.00% $12,642,812 35.00%
Difference between changes
in statutory reserves as
compared to tax reserves 254,169 .55 138,001 .25 (363,469) (1.01)
Policy acquisition expenses
capitalized, net of
amortization 171,520 .37 422,684 .79 205,587 .57
Dividend exclusion -- -- (1,995,000) (3.73) -- --
Amortization of IMR (522,773) (1.14) (440,646) (.82) 2,736,226 7.58
Prior year taxes -- -- 4,226,419 7.90 (6,462,618) (17.89)
Other, net (529,839) (1.15) (79,528) (.14) 1,673,325 4.63
- ------------------------------------------------------------------------------------------------------------------------
$15,481,637 33.63% $20,974,659 39.25% $10,431,863 28.88%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(8) RELATED PARTY TRANSACTIONS
The Company leases two buildings to an affiliate and rental income received
from this affiliate of $3,127,000, $3,087,000, and $3,127,000 in 1995,
1994, and 1993, respectively, is included in net investment income. These
leases expire at various dates and contain options for renewal. The future
minimum rental income under the terms of the leases are summarized as
follows:
Year ending December 31:
1996 $3,127,000
1997 3,127,000
Thereafter --
----------
$6,254,000
The Company has entered into various service contracts with affiliates of
the Company which cover management, investment, and information processing
services. Expenses incurred under such agreements were $2,865,000,
$3,545,000, and $3,311,000 in 1995, 1994, and 1993, respectively.
The Company utilizes the services of Citicorp Insurance Services, Inc. and
CMI. Employees of these companies are eligible to participate in defined
benefit plans provided by Citicorp. Charges for these services are based on
the actual salary and benefit costs of employees providing service to the
Company. Included in these charges are costs associated with Citicorp's
benefit plans.
(9) DIVIDEND RESTRICTIONS
The maximum amount of dividends which can be paid by Arizona insurance
companies without the prior approval of the Arizona Director of Insurance
is not to exceed the lesser of 10% of policyholder
13
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
- --------------------------------------------------------------------------------
surplus as of December 31 of the preceding year or net gain from
operations. The Company has available an additional $14.5 million for the
payment of dividends in 1996 without prior approval. A dividend of $16
million was declared in 1995 will be paid in 1996. A dividend of $15
million was declared in 1994 and paid in 1995.
(10) RISK-BASED CAPITAL
The insurance departments of various states, including the Company's
domiciliary state of Arizona, impose risk-based capital (RBC) requirements
on insurance enterprises. The RBC calculation serves as a benchmark for the
regulation of life insurance companies by state insurance regulators. The
requirements apply various weighted factors to financial balances or
activity levels based on their perceived degree of risk.
The RBC guidelines define specific capital levels where action by the
Company or regulatory intervention is required based on the ratio of a
Company's actual total adjusted capital (sum of capital and surplus and
asset valuation reserve) to control levels determined by the RBC formula.
At December 31, 1995, the Company's actual total adjusted capital exceeded
all regulatory requirements, thus, no action by the Company or its
regulators is required.
(11) COMMITMENTS AND CONTINGENCIES
The Company leases certain of its facilities under a noncancellable lease.
This lease expires on MarchE31, 1997 and contains an option for renewal.
The future minimum rental obligations under the terms of the lease are
summarized as follows:
1996 $585,000
1997 138,700
Thereafter --
--------
$723,700
Certain of the Company's affiliates also occupy the leased premises and are
allocated a portion of the rent expense. Total rent expense was $683,000,
$668,000, and $561,000 in 1995, 1994, and 1993, respectively, of which
$429,000, $305,000, and $119,000, respectively, was allocated to
affiliates.
The Company is involved in various litigation arising in the ordinary
course of operations. Management is of the opinion, after reviewing these
matters with legal counsel, that the ultimate liability, if any, resulting
from any or all of the above matters would not have a material adverse
effect on the Company's financial position.
(12) DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND STATUTORY
ACCOUNTING PRACTICES
Statutory accounting practices differ in some respects from generally
accepted accounting principles. Under generally accepted accounting
principles (GAAP), the following applies:
(a) The liability for future policy benefits is computed using the
rule-of-78s and pro rata methods.
14
<PAGE>
(b) Life premiums are reflected as earned when due. Annuity considerations
and other fund deposits are reflected as deposits rather than revenue.
(c) Acquisition costs are capitalized and amortized generally over the
premium paying period for individual life contracts and in relation to
the estimated present value of gross profits of the underlying business
for interest-sensitive life and investment contracts.
(d) Deferred income taxes are provided on all significant temporary
differences between values of assets and liabilities for book and tax
reporting purposes.
(e) Nonadmitted assets, less applicable allowance accounts, are restored to
the balance sheet.
(f) Asset valuation and interest maintenance reserves are not provided.
(g) Realized investment gains (losses) resulting from changes in interest
rates are recognized when the related security is sold.
(h) Majority-owned subsidiaries are consolidated and the Company's
investment in subsidiaries is eliminated in consolidation.
(i) Debt securities are classified into one of three categories:
held-to-maturity, trading, or available-for-sale. Held-to-maturity
securities are carried at amortized cost. Trading securities are
reported at fair value with unrealized gains and losses included in
earnings. Available-for-sale securities are reported at fair value with
unrealized gains and losses excluded from earnings and reported as a
separate component of equity, net of tax.
(j) Reinsurance premiums, commissions, expense reimbursements, and reserves
would be presented on a gross basis consistent with terms of the
reinsurance contracts.
The statutory financial statements do not include any adjustments that
might result from differences between statutory accounting practices and
GAAP.
(13) SUBSEQUENT EVENT
Subsequent to December 31, 1995, FG Casualty Company and FG Insurance
Corporation, affiliates of the Company, were sold to an unaffiliated party.
Prior to the sale, all underwriting activity of FG Casualty Company and FG
Insurance Corporation was transferred to Citicorp Assurance Company, an
affiliate of the Company. In conjunction with the sale, Citicorp Assurance
Company was dividended to Citicorp Life Insurance Company by Citibank
Delaware.
15
<PAGE>
PART C
OTHER INFORMATION
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
All required financial statements are included in Part B.
(b) Exhibits
(1) Certified resolution of the board of directors of Citicorp
Life Insurance Company (the "Company") establishing Citicorp
Life Variable Annuity Separate Account (the "Separate
Account").
(2) Not Applicable.
(3) Form of underwriting agreement among the Company, the Separate
Account and The Landmark Funds Broker-Dealer Services, Inc.
(4) (a) Contract Form.
(b) Contract Endorsements.
(5) Contract Application.
(6) (a) Certificate of Incorporation of the Company.
(b) By-Laws of the Company.
(7) None.
(8) (a) Participation Agreement Among Variable Insurance
Products Fund, Fidelity Distributors Corporation and
Citicorp Life Insurance Company;
Participation Agreement Among MFS Variable Insurance
Trust, Citicorp Life Insurance Company and
Massachusetts Financial Services Company.
(b) Administrative Services Agreement between Citicorp
Insurance Services, Inc. and Citicorp Life Insurance
Company with Addendums.
(9) Opinion and Consent of Richard M. Zuckerman, Esq.
(10) (a) Consent of Sutherland, Asbill & Brennan.
(b) Consent of Certified Public Accountant.
(11) Not Applicable.
<PAGE>
(12) None.
(13) Not Applicable.
(14) Not Applicable.
Item 25. Directors and Officers of the Company.
Richard P. Elder Director*
Steven J. Freiburg Director*
Charles R. Haskins Director/Executive Vice President*
Alan F. Liebowitz Director/President and Chief
Executive Officer*
Larry D. Williams Director/Senior Vice President*
John V. LaGrasse Senior Vice President*
Pasquale S. Alessi Vice President*
Daniel F. Forcade Vice President and Treasurer*
John T. McCool Vice President*
Eric S. Miller Vice President*
Frederick K. Molen Vice President and Chief Valuation Actuary*
Richard M. Zuckerman Vice President/Associate General
Counsel/Secretary*
- ----------
* 800 Silver Lake Boulevard, Dover, DE 19904
<PAGE>
Item 26. Persons Controlled by or Under Common Control With the Depositor or
Registrant
ORGANIZATION CHART
============================================================
CITICORP
(Delaware Corporation)
============================================================
100%
============================================================
CITICORP HOLDINGS, INC.
(Delaware Corporation)
============================================================
100%
============================================================
CITIBANK DELAWARE
(Delaware Corporation)
============================================================
100%
============================ ==========================
CITICORP LIFE CITICORP ASSURANCE
INSURANCE COMPANY CO
(Arizona Corporation) (Delaware Corporation)
============================ ==========================
100%
=============================
FIRST CITICORP LIFE
INSURANCE
COMPANY
(New York Corporation)
=============================
<PAGE>
Item 27. Number of Contract owners
As of December 31, 1995, there were two (2) contract owners.
Item 28. Indemnification
The Articles of Incorporation of Citicorp Life Insurance Company provide in
Article IX as follows:
(1) The Corporation shall 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 he is or was a director or officer of the
Corporation, against expenses (including attorney's 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 reasonable cause to believe
that his conduct was unlawful.
(2) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of
the fact that he is or was a director or officer of the
Corporation, against expenses (including attorney's fees)
actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit 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
except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the
performance of his duty to the Corporation unless and only to
the extent that the court having jurisdiction in cases of
equity of the State of Arizona or the court in which such
action or suit was brought shall determine upon application
that, despite the adjudication of liability
<PAGE>
but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such
expenses which the court having jurisdiction in cases of
equity of the State of Arizona or such other court shall deem
proper.
(3) The Corporation may indemnify any person who is or was an
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, partnership, joint
venture, trust or other enterprise to the extent and under the
circumstances provided by paragraphs 1 and 2 of this Article
IX with respect to a person who is or was a director or
officer of the Corporation.
(4) Any indemnification under paragraphs 1, 2 and 3 of this
Article IX (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer
is proper in the circumstances because he has met the
applicable standard of conduct set forth therein. Such
determination shall be made (a) by the Board of Directors by a
majority vote of a quorum (as defined in the by-laws of the
Corporation) consisting of directors who were not parties to
such action, suit or proceeding, or (b) if such quorum is not
obtainable, or, even if obtainable a quorum of disinterested
directors so direct, by independent legal counsel in a written
opinion, or (c) by the stockholders.
(5) Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding as
authorized by the Board of Directors of the Corporation in the
manner provided in the next preceding paragraph upon receipt
of an undertaking by or on behalf of the director, officer,
employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified
by the Corporation as authorized in this Article IX.
(6) The indemnification provided by this Article IX shall not be
deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any statute, by-law,
agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as
to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the
<PAGE>
benefit of the heirs, executors and administrators of
such a person.
(7) By action of its Board of Directors, notwithstanding any
interest of the directors in the action, the Corporation may
cause to be purchased and maintained insurance, in such
amounts as the Board of Directors deems appropriate, on behalf
of any person who is or was a director, officer, employee or
agent of the Corporation, or of any corporation a majority of
the voting stock of which is owned by the Corporation, or is
or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether
or not the Corporation would have the power or would be
required to indemnify him against such liability under the
provisions of this Article IX or of the General Corporation
Law of the State of Arizona.
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) The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS"), the
Registrant's Distributor, is also the distributor for Landmark
Cash Reserves, Premium Liquid Reserves, Landmark Tax Free
Reserves, Landmark New York Tax Free Reserves, Landmark
California Tax Free Reserves, Landmark Connecticut Tax Free
Reserves, Landmark New York Tax Free Income Fund, Landmark
Balanced Fund, Landmark Equity Fund, Landmark U.S. Government
Income Fund, Landmark Intermediate Income
<PAGE>
Fund, Landmark U.S. Treasury Reserves, Premium U.S. Treasury
Reserves, Landmark Institutional Liquid Reserves and Landmark
Institutional U.S. Treasury Reserves. LFBDS is also the
placement agent for Balanced Portfolio, Cash Reserves
Portfolio, U.S. Treasury Reserves Portfolio, Tax Free Reserves
Portfolio, International Equity Portfolio, Equity Portfolio
and Government Income Portfolio.
(b) The information required by this item 29 with respect to each
director and officer of LFBDS is incorporated by reference to
Schedule A or Form BD filed by LFBDS pursuant to the
Securities and Exchange Act of 1934 (File No. 8-32417).
(c) Not applicable.
Item 30. Location 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 by the Company at 800 Silver Lake Boulevard,
Dover, Delaware 19904.
Item 31. Management Services
Not applicable.
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 registration 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.
(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 promptly upon written
or oral request to the Company at the address or phone number
listed in the prospectus.
<PAGE>
(d) The Company represents that in connection with its offering of
the contracts as funding vehicles for retirement plans meeting
the requirements of Section 403(b) of the Internal Revenue
Code of 1986, it is relying on a no-action letter dated
November 28, 1988, to the American Council of Life Insurance
(Ref. No. IP-6-88) regarding Sections 22(e), 27(c)(1), and
27(d) of the Investment Company Act of 1940, and that
paragraphs numbered (1) through (4) of that letter will be
complied with.
<PAGE>
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the registrant certifies that this amendment to the Registration
Statement meets the requirements for effectiveness pursuant to paragraph (b) of
Rule 485 and has caused this Amendment to the Registration Statement to be
signed on its behalf, in the City of Dover, and the State of Delaware, on this
19th day of April, 1996.
CITICORP LIFE VARIABLE ANNUITY
SEPARATE ACCOUNT
(Registrant)
Attest:/s/Larry D. Williams By:/s/Richard M. Zuckerman
---------------------- ----------------------------
Vice President, Associate
General Counsel & Secretary of
Citicorp Life Insurance Company
BY: CITICORP LIFE INSURANCE COMPANY
(Depositor)
Attest:/s/Larry D. Williams By:/s/Richard M. Zuckerman
---------------------- ----------------------------
Vice President, Associate
General Counsel & Secretary
As required by the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
/s/Larry D. Williams Director, SVP April 19, 1996
- --------------------------- --------------------------
/s/Daniel F. Forcade Treasurer, VP April 19, 1996
- --------------------------- --------------------------
<PAGE>
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the registrant certifies that this amendment to the Registration Statement
meets the requirements for effectiveness pursuant to paragraph (b) of Rule 485
and has caused this Amendment to the Registration Statement to be signed on its
behalf, in the City of Dover, and the State of Delaware, on this 19th day of
April, 1996.
CITICORP LIFE VARIABLE ANNUITY
SEPARATE ACCOUNT
(Registrant)
Attest:/s/Larry D. Williams By:/s/Richard M. Zuckerman
---------------------- ----------------------------
Vice President, Associate
General Counsel & Secretary of
Citicorp Life Insurance Company
BY: CITICORP LIFE INSURANCE COMPANY
(Depositor)
Attest:/s/Larry D. Williams By:/s/Richard M. Zuckerman
---------------------- ----------------------------
Vice President, Associate
General Counsel & Secretary
As required by the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
/s/Alan F. Liebowitz Director,President,CEO April 19, 1996
- ------------------- ----------------------
/s/Steven J. Freiberg Director April 19, 1996
- ------------------- ----------------------
/s/Richard P. Elder Director April 19, 1996
- ------------------- ----------------------
<PAGE>
EXHIBIT INDEX
1. Certified resolution of the Board of Directors of
Citicorp Life Insurance Company
3. Form of Underwriting Agreement
4(a). Contract Form
4(b). Contract Endorsements
5. Contract Application
6(a). Certificate of Incorporation of Citicorp Life
Insurance Company
6(b). By-laws of Citicorp Life Insurance Company
8(a). Form of Participation Agreement Among Variable
Insurance Products Fund, Fidelity Distributors
Corporation and Citicorp Life Insurance Company with
Amendment; Participation Agreement Among MFS Variable
Insurance Trust, Citicorp Life Insurance Company and
Massachusetts Financial Services Company.
8(b). Administrative Services Agreement between Citicorp
Insurance Services, Inc. and Citicorp Life Insurance
Company with Addendums.
9. Opinion and Consent of Richard M. Zuckerman, Esq.
10(a). Consent of Sutherland, Asbill & Brennan.
10(b). Consent of KPMG Peat Marwick LLP.
EXHIBIT 1
CITICORP LIFE INSURANCE COMPANY
WRITTEN CONSENT OF THE BOARD OF DIRECTORS
IN LIEU OF MEETING
JULY 6, 1994
By unanimous action pursuant to the provisions of the Arizona General
Corporation Law, the Board of Directors of Citicorp Life Insurance Company, an
Arizona corporation, hereby consents to the actions set forth herein and adopts
the following resolutions, all in lieu of a special meeting of the Board of
Directors:
RESOLVED, That the Board of Directors of Citicorp Life Insurance Company
(the "Company"), hereby establishes a separate account, pursuant to the
provisions of Section 20-651 of the Arizona Insurance Laws, designated Citicorp
Life Variable Annuity Separate Account (hereinafter the "Separate Account") for
the following use and purposes, and subject to such conditions as hereinafter
set forth; and
FURTHER RESOLVED, That the Separate Account is established for the purpose
of providing for the issuance by the Company of certain variable annuity
contracts ("Contracts"), and shall constitute a funding medium to support
reserves under such Contracts issued by the Company; and
FURTHER RESOLVED, That the income, gains and losses, whether or not
realized, from assets allocated to the Separate Account shall, in accordance
with the Contracts, be credited to or charged against such Account without
regard to other income, gains or losses of the Company; and
FURTHER RESOLVED, That pursuant to the extent provided under the Contracts,
the portion of the assets of the Separate
<PAGE>
Account equal to the reserves and other contract liabilities with respect to
such account shall not be chargeable with liabilities arising out of any other
business the Company may conduct; and
FURTHER RESOLVED, That the Separate Account shall be divided into
investment subaccounts, each investment subaccount in the Separate Account shall
invest in the shares of a mutual fund portfolio designated on the schedule page
of the Contract and net premiums under the Contracts shall be allocated to the
eligible portfolios in accordance with instructions received from owners of the
Contracts; and
FURTHER RESOLVED, That the Board of Directors expressly reserves the right
to add or remove any investment subaccount of the Separate Account or substitute
one designated mutual fund for another as it may hereafter deem necessary or
appropriate; and
FURTHER RESOLVED, That the income, gains and losses, whether or not
realized, from assets allocated to each investment subaccount of the Separate
Account shall, in accordance with the Contracts, be credited to or charged
against such investment subaccount of the Separate Account without regard to
other income, gains or losses of any other investment subaccount of the Separate
Account; and
FURTHER RESOLVED; That the President, the Senior Vice President & Chief
Financial Officer, the Vice President-Treasurer and each of them, with full
power to act without the others, be, and they hereby are, severally authorized
to invest such amount or amounts of the Company's cash in the Separate Account
or in any investment subaccount thereof as may be deemed necessary or
appropriate to facilitate the commencement of the Account's operations and/or to
meet any minimum capital requirements under the Investment Company Act of 1940
(the "1940 Act"); and
<PAGE>
FURTHER RESOLVED, That the President, the Senior Vice President & Chief
Financial Officer, the Vice President-Treasurer and each of them, with full
power to act without the others, be, and they hereby are, severally authorized
to transfer cash from time to time between the Company's general account and the
Separate Account as deemed necessary or appropriate and consistent with the
terms of the Contracts; and
FURTHER RESOLVED, That the Board of Directors of the Company reserves the
right to change the designation of the Separate Account hereafter to such other
designation as it may deem necessary or appropriate; and
FURTHER RESOLVED, That the President, the Senior Vice President & General
Counsel, the Senior Vice President & Chief Financial Officer, the Vice
President-Treasurer and each of them, with fill power to act without the others,
with such assistance from the Company's independent certified public
accountants, legal counsel and independent consultants or others as they may
require, be, and they hereby are, severally authorized and directed to take all
action necessary to: (a) register the Separate Account as a unit investment
trust under the 1940 Act; (b) register the Contracts in such amounts, which may
be an indefinite amount, as such officers of the Company shall from time to time
deem appropriate under the Securities Act of 1933 (the "1933 Act"); and (c) take
all other actions which are necessary in connection with the offering of the
Contracts for sale and the operation of the Separate Account in order to comply
with the 1940 Act, the Securities Exchange Act of 1934, the 1933 Act, and other
applicable federal laws, including the filing of any amendments to registration
statements, any undertakings, and any applications for exemptions from the 1940
Act or other applicable federal laws as the officers of the Company shall deem
necessary or appropriate; and
<PAGE>
FURTHER RESOLVED, That the President, the Senior Vice President & General
Counsel, the Senior Vice President & Chief Financial Officer, the Vice
President-Treasurer and each of them, with full power to act without the others,
hereby are severally authorized and empowered to prepare, execute and cause to
be filed with the Securities and Exchange Commission on behalf of the Separate
Account, and by the Company as sponsor and depositor, a Notification of
Registration on Form N-8A, a registration statement registering the Account as
an investment company under the 1940 Act and the Contracts under the 1933 Act,
and any and all amendments to the foregoing on behalf of the Separate Account
and the Company and on behalf of and as attorneys-in-fact for the principal
executive officer and/or the principal financial officer and/or the principal
accounting officer and/or any other officer of the Company; and
FURTHER RESOLVED, That Alan F. Liebowitz is duly appointed as agent for
service under any such registration statement, duly authorized to receive
communications and notices from the Securities and Exchange Commission with
respect thereto; and
FURTHER RESOLVED, That the President, the Senior Vice President & General
Counsel, the Senior Vice President & Chief Financial Officer, the Vice
President-Treasurer and each of them, with full power to act without the others,
hereby are severally authorized on behalf of the Separate Account and on behalf
of the Company to take any and all action that each of them may deem necessary
or advisable in order to offer and sell the Contracts, including any
registrations, filings and qualifications both of the Company, its officers,
agents and employees, and of the Contracts, under the insurance and securities
laws of any of the states of the United States of America or other
jurisdictions, and in connection therewith, to prepare, execute, deliver and
file all such applications, reports, covenants, resolutions, applications for
<PAGE>
exemptions, consents to service of process and other papers and
instruments as may be required under such laws, and to take any and all further
action which such officers or legal counsel of the Company may deem necessary or
desirable (including entering into whatever agreements and contracts may be
necessary) in order to maintain such registrations or qualifications for as long
as the officers or legal counsel deem it to be in the best interests of the
Separate Account and the Company; and
FURTHER RESOLVED, That the President, the Senior Vice President & General
Counsel, the Senior Vice President & Chief Financial Officer, the Vice
President-Treasurer and each of them, with full power to act without the others,
be, and they hereby are, severally authorized in the names and on behalf of the
Separate Account and the Company to execute and file irrevocable written
consents on the part of the Separate Account and of the Company to be used in
such states wherein such consents to service of process may be requisite under
the insurance or securities laws therein in connection with the registration or
qualification of the Contracts and to appoint the appropriate state official, or
such other person as may be allowed by insurance or securities laws, agent of
the Separate Account and of the Company for the purpose of receiving and
accepting process; and
FURTHER RESOLVED, That the President, the Senior Vice President & General
Counsel, the Senior Vice President & Chief Financial Officer, the Vice
President-Treasurer and each of them, with full power to act without the others,
be, and hereby are, severally authorized to establish procedures under which the
Company will provide voting rights for owners of the Contracts with respect to
securities owned by the Separate Account; and
FURTHER RESOLVED, That the President, the Senior Vice President & General
Counsel, the Senior Vice President & Chief Financial Officer, the Vice
President-Treasurer and each of them,
<PAGE>
with full power to act without the others, be, and hereby are, severally
authorized to establish procedures under which the Company will provide voting
rights for owners of the Contracts with respect to securities owned by the
Separate Account; and
FURTHER RESOLVED, That the President, the Senior Vice President & General
Counsel, the Senior Vice President & Chief Financial Officer, the Vice
President-Treasurer and each of them, with full power to act without the others,
are hereby severally authorized to execute such agreement or agreements as
deemed necessary and appropriate (i) with a qualified entity under which such
other entity will be appointed principal underwriter and distributor for the
contracts, (ii) with one or more qualified banks or other qualified entities to
provide administrative and/or custody services in connection with the
establishment and maintenance of the Separate Account and the design, issuance,
and administration of the Contracts, and (iii) with the designated mutual funds
and/or the principal underwriter and distributor of those funds for the purchase
and redemption of fund shares; and
FURTHER RESOLVED, That the President, the Senior Vice President & General
Counsel, the Senior Vice President & Chief Financial Officer, the Vice
President-Treasurer and each of them, with full power to act without the others,
are hereby severally authorized to execute and deliver such agreements and other
documents and do such acts and things as each of them may deem necessary or
desirable to carry out the foregoing resolutions and the intent and purposes
thereof.
<PAGE>
The undersigned, being all of the Directors of Citicorp Life Insurance
Company, do hereby consent in writing to the above actions and hereby approve
the same
/s/Arnold E. Amstutz /s/John T. Oates
- ---------------------------------- ------------------------------------
Arnold E. Amstutz John T. Oates
/s/Mary Jane Gillin /s/Larry D. Williams
- ---------------------------------- ------------------------------------
Mary Jane Gillin Larry D. Williams
/s/Alan F. Liebowitz
- ----------------------------------
Alan F. Liebowitz
EXHIBIT 3
DISTRIBUTION AGREEMENT
AGREEMENT dated as of by and between CITICORP LIFE
INSURANCE COMPANY ("Insurer"), a Delaware insurance company, on its behalf and
on behalf of each separate account identified in Schedule 1 hereto, and THE
LANDMARK FUNDS BROKER-DEALER SERVICES, INC. ("Distributor"), a Delaware
corporation.
WITNESSETH:
WHEREAS, Distributor is a broker-dealer that engages in the distribution of
investment products;
WHEREAS, Insurer proposes to issue variable insurance products to the
public; and
WHEREAS, Insurer desires to authorize Distributor, and Distributor desires,
to serve as principal underwriter for certain variable insurance products
described more fully below;
NOW THEREFORE, in consideration of their mutual promises, Insurer and
Distributor hereby agree as follows:
1. Definitions
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 12.b of this Agreement, including any riders
or endorsements to such contracts. 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.
a. Registration Statement -- At any time that this Agreement is in
effect, the 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
1
<PAGE>
is or at any time was a Registration Statement within the meaning
of this Section 1.b.
b. 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 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.
c. (omitted)
d. Separate Account -- A separate account supporting a class or classes
of Contracts are 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 12.b of this Agreement.
e. 1933 Act -- The Securities Act of 1933, as amended.
f. 1934 Act -- The Securities Exchange Act of 1934, as amended.
g. 1940 Act -- The Investment Company Act of 1940, as amended.
h. SEC -- The Securities and Exchange Commission.
i. NASD -- The National Association of Securities Dealers, Inc.
j. State Insurance Department -- A department, commission, agency or
other governmental body charged by the legislature of a state or
commonwealth of the United States or the District of Columbia with the
regulation of insurance.
k. State Securities Commission -- A commission, agency or other
governmental body charged by the legislature of a state or
commonwealth of the United States or the District of Columbia with the
regulation of securities.
l. 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
this Agreement is executed or thereafter promulgated.
2
<PAGE>
m. Selling Agreement -- An agreement among Insurer, Distributor and
Selling Broker-Dealer pursuant to which Selling Broker-Dealer is
authorized to engage in insurance solicitation activities with respect
to the Contracts.
n. Selling Broker-Dealer -- A person registered as a broker-dealer and
licensed as a life insurance agent or associated with a person so
licensed,
and authorized to distribute the Contracts pursuant to a
Selling Agreement as provided for in Section 2 of this Agreement.
o. Representative -- When used with reference to Distributor or a Selling
Broker-Dealer, an individual who is an associated person, as that term
is defined in the 1934 Act, thereof.
p. Customer Service Center -- the service center identified in the
Prospectus as the location at which premiums and applications for the
Contracts are accepted.
2. Authorization and Appointment
a. Scope of Authority. Insurer hereby authorizes Distributor to serve as
principal underwriter on an agency basis for the Contracts, and
Distributor hereby agrees to act as such. Distributor shall actively
engage in its duties under this Agreement on a continuous basis while
the Registration Statement for the Contracts is effective, consistent
with its business and subject to applicable market and regulatory
conditions and any other restrictions that may become applicable to
its activities. Insurer reserves the right at any time to suspend or
limit the public offering of the Contracts, upon written notice to
Distributor. It is understood that Distributor has no present
intention of engaging in solicitation activities for the Contracts on
a retail basis, and intends to restrict its distribution activities to
wholesaling efforts consisting of authorizing broker-dealers to engage
in retail sales of the Contracts. Insurer shall provide support for
Distributor's wholesaling efforts appropriate for the Contracts,
including wholesaler training, marketing support, sales ideas,
competitive information and other market research, and illustrative
software.
b. Authorization of Selling Broker-Dealers. Distributor will authorize
Selling Broker-Dealers to solicit applications and premiums for the
Contracts on a retail basis directly from purchasers, subject to the
provisions of this Agreement. Such authority shall be granted pursuant
to Selling Agreements in the form attached hereto, with such
modifications as Insurer and Distributor may agree upon from time to
time. Distributor shall provide information and marketing assistance
to Selling Broker-Dealers. Insurer alone shall be responsible for
appointing Selling Broker-Dealers
3
<PAGE>
and all persons selling the Contracts on their behalf as agents of
Insurer in accordance with applicable state insurance law and for
communicating to all Selling Broker-Dealers and their personnel, all
policies and procedures applicable to them as such appointed agents of
Insurer.
c. Limits on Authority. Distributor shall act as an independent
contractor and nothing herein contained shall constitute Distributor
or its agents, officers or employees as agents, officers or employees
of Insurer by virtue of their activities in connection with the sale
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 contract entered
into pursuant to a Contract; to waive any Contract forfeiture
provision; to extend the time of paying any premium; or to receive any
monies or premiums (except for the sole purpose of forwarding monies
or premiums 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. Neither
Distributor nor any Distributor Representative shall give any
information or make any representation in regard to the Contracts in
connection with the offer or sale of such Contracts that is not in
accordance with the Prospectus or statement of additional information
for such Contracts, or in the then-currently effective prospectus or
statement of additional information for an investment vehicle for the
Contracts, or in current advertising materials for such class of
Contracts authorized by Insurer.
d. Collection of premiums. Given the scope of Distributor's activities
hereunder, it is not anticipated that Distributor would collect or
receive premiums for the Contracts, and shall not be required to do
so. However, to the extent that Distributor or a Distributor
Representative receives a premium, such premium shall be remitted
promptly, and in any event not later than two business days, in full,
together with any applications, forms and any other required
documentation, to the Customer Service Center. Checks or money orders
in payment of premiums shall be drawn to the order of "Citicorp Life
Insurance Company." If any premium is held at any time by Distributor,
Distributor shall hold such premium in a fiduciary capacity until
remitted. Distributor acknowledges that all such premiums, whether by
check, money order or wire, shall be the property of Insurer.
Distributor acknowledges that Insurer shall have the unconditional
right to reject, in whole or in part, any application or premium.
3. Distributor's Representations, Warranties and Undertakings. Distributor
represents and warrants to Insurer that Distributor is registered as a
broker-dealer under the 1934 Act, is a member of the NASD, and is duly
registered under
4
<PAGE>
applicable state securities laws, and that Distributor is in compliance in
all material respects with the requirements of the 1934 Act, application
requirements of the 1940 Act, the NASD Rules of Fair Practice and state
securities laws applicable to Distributor as a registered broker-dealer.
Distributor further represents and warrants that any Distributor
Representatives required to be registered with the NASD and any state
securities commission as representatives or principals of Distributor are
so registered. Distributor shall continue to comply and shall undertake to
cause its Representatives to comply, in all material respects, during the
term of this Agreement, with applicable requirements of the 1934 Act, the
1940 Act (including, without limitation, Section 9(a) of the 1940 Act and
Rule 17j-1 thereunder), the NASD Rules of Fair Practice and any state
securities laws.
4. Insurer's Representations and Warranties. Insurer represents and warrants
to Distributor that:
a. Insurer has filed with the SEC all statements, notices, and other
documents required for registration of the Contracts and the Separate
Account under the provisions of the 1933 Act and the 1940 Act and
Regulations thereunder, and has obtained all necessary or customary
orders of exemption or approval from the SEC to permit the
distribution of the Contracts pursuant to this Agreement and to permit
the establishment and operation of the Separate Account as
contemplated in the Registration Statement and in conformity with the
1940 Act and Regulations thereunder, and, to the extent required, all
such orders apply to Distributor, as principal underwriter for the
Contracts and for the Separate Account.
b. The Registration Statement has been declared effective by the SEC or
has become effective in accordance with applicable Regulations.
Insurer has not received any notice from the SEC with respect to the
Registration Statement pursuant to Section 8(e) of the 1940 Act, and
no stop order under the 1933 Act has been issued, and no proceeding
therefor has been instituted or threatened by the SEC.
c. The Registration Statement and related Prospectus complies in all
material respects with applicable provisions of the 1933 Act and the
1940 Act and Regulations thereunder, and neither the Registration
Statement nor the Prospectus contains an untrue statement of a
material fact or omits 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; provided, however,
that none of the representations and warranties in this Section 4
shall apply to statements or omissions from a Registration Statement
or Prospectus made in reliance upon and in
5
<PAGE>
conformity with information furnished to Insurer in writing by
Distributor expressly for use therein.
d. The Contracts have been duly authorized by Insurer and conform to the
descriptions thereof in the Registration Statement and the related
Prospectus and, when issued as contemplated by the Registration
Statement and related Prospectus, shall constitute legal, validly
issued and binding obligations of Insurer in accordance with their
terms.
e. The Separate Account has been duly established by Insurer and conforms
to the description thereof in the Registration Statement and related
Prospectus.
f. The form of the Contracts and the Separate Account each have been duly
approved to the extent required by the Delaware Insurance Department
and by the state insurance departments in every state listed in
Schedule 2.
g. The Contacts qualify as annuity contracts under applicable federal tax
laws.
5. Insurer's Compliance with Applicable Law
a. Securities Law Compliance. Insurer shall be responsible for preparing
the Prospectuses and Registration Statements and filing them with the
SEC and State Securities Commissions, to the extent required. Insurer
shall use its best efforts to maintain the registration of the
Contracts and the Separate Account with the SEC and any applicable
state securities commission, such efforts to include, without
limitation, best efforts to prevent a stop order from being issued by
the SEC or any such state securities commission or, if a stop order
has been issued, to cause such stop order to be withdrawn. Insurer
shall take all action required to cause the Separate Account to
continue to comply, in all material respects, with the provisions of
the 1940 Act and regulations and exceptions thereunder applicable to
the Separate Account as a registered investment company under the 1940
Act. Insurer shall not deduct any amounts from the assets of the
Separate Account or enter into a transaction or arrangement involving
the Contracts or the Separate Account or cause the Separate Account to
enter into any such transaction or arrangement without obtaining any
necessary or customary approvals or exemptions from the SEC or
no-action assurance from the SEC staff, and without ensuring that such
approval, exemption or assurance applies to the Distributor as the
principal underwriter for the Separate Account and the Contracts.
Insurer shall timely file each post-effective amendment to a
Registration Statement, Prospectus, statement of additional
information, Rule 24f-2
6
<PAGE>
notice, annual report on Form N-SAR, and all other reports, notices,
statements, and amendments required to be filed by or for Insurer
and/or the Separate Account with the SEC under the 1933 Act, the 1934
Act and/or the 1940 Act or any applicable regulations, and shall pay
all filing or registration fees payable in connection therewith. To
the extent there occurs an event or development (including, without
limitation, a change of applicable law, regulation or administrative
interpretation) warranting an amendment to either the Registration
Statement or supplement to the Prospectus, Insurer shall endeavor to
prepare, subject to the Distributor's right to review such material
provided in Section 6(b), and file such amendment or supplement with
the SEC with all deliberate speed.
b. State Insurance Law Compliance. Insurer shall be responsible for
preparing the Contract forms and filing them with applicable state
insurance departments and shall obtain and maintain approvals of the
Contacts and the Separate Account from state insurance departments, to
the extent required. Insurer shall take all action required to cause
the Contracts to continue to comply, in all material respects under
applicable state insurance laws. Insurer shall file promotional, sales
and advertising material for the Contracts and Separate Account, to
the extent required, with state insurance departments. Attached hereto
as Schedule 2 is a list of all states in which approvals of the
Contracts have been obtained and/or in which the Contracts are cleared
for sale as of the date of this Agreement. Insurer shall update this
list from time to time to reflect changes therein, and shall inform
Selling Broker-Dealers of such changes, as appropriate.
c. Federal Tax Law Compliance. Insurer shall take all action required to
cause the Contracts to continue to comply, in all material respects,
as annuity contracts or life insurance contracts, as applicable, under
applicable federal tax laws.
6.h Additional Obligations of Insurer
a. Issuance and Administration of Contracts. Insurer shall be responsible
for issuing the Contracts and administering the Contracts and the
Separate Account, provided, however, that Citicorp Investments
Services, Inc. shall have full responsibility for the securities
activities of all persons employed by the Insurer, engaged directly or
indirectly in the Contract operations, and for the training,
supervision and control of such persons to the extent of such
activities.
b. Provision of Copies. If so requested by Distributor, Insurer shall
provide Distributor with a preliminary draft of any amendment to a
Registration
7
<PAGE>
Statement, supplement to the Prospectus, exemptive application or
no-action request to be filed with the SEC in connection with the
Contracts and/or the Separate Account. Insurer shall furnish
Distributor with copies of any such material or amendment thereto, as
filed with the SEC, promptly after the filing thereof, and any SEC
communication or order with respect thereto, promptly after receipt
thereof. Insurer shall maintain and keep on file in its principal
executive office any file memoranda or any supplemental materials
referred to in any such Registration Statement, Prospectus, exemptive
application and no-action request and shall, as necessary, amend such
memoranda or materials and shall provide or otherwise make available
copies of such memoranda and materials to the Distributor.
c. Solicitation Materials. Insurer shall be responsible for furnishing
Distributor and Selling Broker-Dealer with such applications,
Prospectuses and other materials for use by Distributor and any
Selling Broker-Dealers in their activities with respect to the
Contracts. Insurer shall notify Distributor and any Selling
Broker-Dealers of those states or jurisdictions which require delivery
of a statement of additional information with a prospectus to a
prospective purchaser.
d. Due Diligence. Insurer shall provide the Distributor access to such
records, officers and employees of Insurer at reasonable time as is
necessary to enable the Distributor to fulfill its obligation, as the
underwriter under the 1933 Act of the Contracts and as principal
underwriter for the Separate Account under the 1940 Act, to perform
due diligence and to use reasonable care.
e. Confirmations and 1934 Act Compliance. Insurer shall be responsible
for producing and sending confirmations to each applicant for and
purchaser of a Contract, in accordance with Rule 10b-10 under the 1934
Act, that confirm acceptance of premiums and such other transactions
as are required to be confirmed by Rule 10b-10 or administrative
interpretations thereunder. Insurer shall maintain and preserve books
and records with respect to the Contracts (including, without
limitation, the confirmations referred to in the preceding sentence)
required by Rules 17a-3 and 17a-4 under the 1934 Act to the extent
applicable to Distributor. Insurer shall maintain and hold all 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.
8
<PAGE>
7. Notification of Developments and Customer Complaints
a. Insurer and Distributor shall notify the other in writing upon being
apprised of the institution of any proceeding, investigation or
hearing involving the offer or sale of the Contracts. 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.
b. Insurer and Distributor shall notify the other upon the happening of
any material event, if known by such notifying party, which makes
untrue any material statement made in the Registration Statement or
Prospectus or which requires the making of a change therein in order
to make any statement made therein not materially misleading. In
addition, Insurer shall notify the Distributor immediately or in any
event as soon as possible under the circumstances of the following:
(1) If Insurer becomes aware that any Prospectus, sales literature or
other printed matter or material used in marketing and
distributing any Contract contains an untrue statement of a
material fact or omits to state a material fact necessary in
order to make the statements made therein, in light of the
circumstances in which they were made, not misleading.
(2) Of any request by the SEC for any amendment to a Registration
Statement, for any supplement to the Prospectus, or for
additional information;
(3) Of the issuance by the SEC of any stop order with respect to a
Registration Statement or any amendment thereto, or the
initiation of any proceedings for that purpose or for any other
purpose relating to the registration and/or offering of the
Contracts;
(4) Of any event of the Contracts' or the Separate Account's
noncompliance with the applicable requirements of federal tax law
or regulations, rulings, or interpretations thereunder that could
jeopardize the Contracts' status as an annuity.
(5) Of any change in applicable insurance laws or regulations of any
state materially adversely affecting the insurance status of the
Contracts or Distributor's obligations with respect to the
distribution of the Contracts.
9
<PAGE>
(6) Of any loss or suspension of the approval of the Contracts or
distribution thereof by a State Securities Commission or State
Insurance Department, any loss or suspension of Insurer's
certificate of authority to do business or to issue variable
insurance products in any state, or of the lapse or termination
of the Contracts' or the Separate Account's registration,
approval or clearance in any state.
c. Customer Complaints. Insurer and Distributor shall notify each other
promptly of any substantive customer complaint received by either
party with respect to Insurer, Distributor, any Distributor
Representative or employee or with respect to any Contract. The
parties hereto shall cooperate in investigating such complaint and any
response by either party to such complaint shall be sent to the other
party for written approval not less than five business days prior to
its being sent to the customer or any regulatory authority, except
that if a more prompt response is required, the proposed response
shall be communicated by telephone or facsimile. In any event, neither
party shall release any such response without the other party's prior
written approval.
8. Compensation and Expenses
a. Insurer shall pay Distributor for its services in accordance with
Schedule 3 hereto. Insurer shall pay compensation payable under the
Selling Agreements directly to Selling Broker-Dealers or their
designees. Distributor shall not be entitled to any compensation based
on sales of the Contracts pursuant to Selling Agreements.
b. Insurer shall be responsible for all expenses in connection with:
(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, underwriting, issuance and administration of the
Contracts;
(3) 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.
(4) all registration fees for the Contracts payable to the SEC; and
10
<PAGE>
(5) the printing of all promotional materials, definitive
Prospectuses for the Contracts and any supplements thereto for
distribution to existing Contractowners.
c. Distributor shall be responsible for any expenses incurred by
Distributor or its Representatives or employees in carrying out the
obligations of Distributor hereunder.
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 in order to make the statements therein not
misleading, in light of the circumstances in which they were
made, contained in any (i) Registration Statement or in any
Prospectus or (ii) blue-sky application or other document
executed by Insurer specifically for the purpose of qualifying
any or all of the Contracts for sale under the securities laws of
any jurisdiction; 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 such blue-sky application or any
amendment thereof or supplement thereto;
(2) result from any material breach by Insurer of any provision of
this Agreement.
This indemnification shall be in addition to any liability that
Insurer may otherwise have; provided, however, that no person
shall be entitled to
11
<PAGE>
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
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 (i) Registration Statement or in any
Prospectus or (ii) blue-sky application or other document
executed by Insurer specifically for the purpose of qualifying
any or all of the Contracts for sale under the securities laws of
any jurisdiction; in each case 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 such blue-sky application 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 concerning the Contracts by Distributor or any
Distributor Representative 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
12
<PAGE>
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
and other expenses incurred by such indemnified person in defending
himself or itself.
The indemnification provisions contained in this Section 9 shall
remain operative 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. Term and Termination. This Agreement shall remain in effect until it is
terminated. 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
six months' prior written notice to the other party, without payment of any
penalty. (The term "assigned" shall not include any transaction not
involving an actual change in management or control.) 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 by the breaching party of notice of
breach from the non-breaching party. Upon termination of this Agreement all
authorizations, rights and obligations shall cease except the obligation to
settle accounts hereunder.
13
<PAGE>
11. Notices. All notices hereunder are to be made in writing and shll be given:
if to Insurer, to:
Alan F. Liebowitz, Esquire
Citicorp Life Insurance Company
One Court Square - 25th Floor
Long Island City, New York 11120
if to Distributor, to:
James B. Craver, Esq.
The Landmark Funds Broker-Dealer Services, Inc.
St. James Avenue, Suite 900
Boston, Massachusetts 02116
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.
12. General
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 herunder without the prior written consent of
the other party in accordance with Section 10 of this Agreement.
b. Amendments. The parties to this Agreement may amend Schedule 1 to this
Agreement from time to time to reflect additions of any class of
Contracts and Separate Accounts. 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 Schedule and the related
Registration Statement and Prospectus, unless the context otherwise
requires. Insurer may amend Schedule 2 unilaterally, with prompt
notice to Distributor, from time to time. 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 compliance
with any of the conditions of
14
<PAGE>
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. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach hereof, shall be settled by arbitration
in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.
e. Interpretation; Jurisdiction. This Agreement constitutes the whole
agreement between the parties hereto with respect tot he 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 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
15
<PAGE>
exemptions from the 1940 Act as the SEC may grant, and the terms
hereof shall be interpreted and construed in accordance therewith.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by such authorized officers on the date specified
below.
CITICORP LIFE INSURANCE COMPANY
By:
Name:
Title:
THE LANDMARK FUNDS BROKER-DEALER SERVICES, INC.
By:
Name:
Title:
16
<PAGE>
SCHEDULE 1
CONTRACT FORMS AND SEPARATE ACCOUNTS
======================================= ==================================
CONTRACT FORM SEPARATE ACCOUNT
======================================= ==================================
17
<PAGE>
SCHEDULE 2
======================================================================
STATE APPROVALS
======================================================================
18
<PAGE>
SCHEDULE 3
======================================================================
COMPENSATION
======================================================================
19
EXHIBIT 4(a)
CITICORP LIFE INSURANCE COMPANY
================================================================================
Administrative Offices: 800 Silver Lake Blvd.
P.O. Box 7031
Dover, DE 19903
If this contract is in force and the Annuitant is living, we will begin payment
of the annuity benefit on the Annuity Income Date, subject to the terms and
conditions on the following pages. We will pay the Death Benefit upon receipt of
proof of your death prior to the Annuity Income Date.
This contract is issued in consideration of the application and payment of the
initial premium.
RIGHT TO EXAMINE CONTRACT. You may cancel this contract by delivering or mailing
a written notice or sending a telegram to us at 800 Silver Lake Boulevard, P.O.
Box 7031, Dover, Delaware 19903 and returning the contract before midnight of
the tenth day after the date you receive it. Notice and return of the contract
by mail are effective on being postmarked, properly addressed and postage
prepaid. If you exercise this right, we will promptly return to you the Contract
Value. You bear the investment risk prior to the date of cancellation. No
Surrender Charges or Annual Contract Fees will be assessed if you exercise this
right but the daily Administrative and Mortality and Expense Risk Charges will
be deducted.
At any time, we will also provide information regarding contract benefits and
provisions within a reasonable time after receiving your written request.
s/Alan F. Liebowitz s/Steven J. Frieberg
Secretary President
This is a legal contract between you and us. PLEASE READ YOUR CONTRACT
CAREFULLY.
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY CONTRACT
NON-PARTICIPATING
ALL VALUES AND PAYMENTS PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF A SUB-ACCOUNT, ARE VARIABLE, MAY INCREASE OR DECREASE IN
ACCORDANCE WITH FLUCTUATIONS IN THE NET INVESTMENT FACTOR, AND ARE NOT
GUARANTEED AS TO FIXED DOLLAR AMOUNT. THERE IS NO MINIMUM GUARANTEED CONTRACT
VALUE EXCEPT FOR AMOUNTS IN THE FIXED ACCOUNT. VARIABLE PROVISIONS ARE DETAILED
IN THE CONTRACT.
<PAGE>
TABLE OF CONTENTS
PAGE
DEFINITIONS 4
PREMIUM PROVISIONS
Premium Payment 5
Allocation of Premium 5
Transfers 5
Dollar Cost Averaging (Automatic Transfers) 6
CONTRACT VALUE
Account Valuation 6
Interest 7
Accumulation Unit Value 7
Net Investment Factor 7
Mortality and Expense Risk Charge 7
Annuity Unit Value 7
Annual Contract Fee 7
Administration Charge 8
Annual Report 8
SURRENDER AND WITHDRAWALS
Surrender 8
Surrender Value 8
Surrender Charges 8
Withdrawals 8
Systematic Withdrawals 9
Deferral of Surrenders and Withdrawals 9
DEATH BENEFIT
If You Die Prior to the Annuity Income Date 9
Death Benefit Amount 9
Beneficiary 10
Annuitant Death Prior to the Annuity Income Date 10
GENERAL PROVISIONS
Entire Contract 10
Modifications 10
Incontestability 11
Owner 11
Misstatement of Age or Sex 11
Evidence of Survival 11
Claims of Creditors 11
Assignment 11
Minimum Values 11
Non Participating 11
ANNUITY BENEFIT
Annuity Income Date 11
Annuity Payment Amount 12
Variable Annuity 12
Fixed Dollar Annuity 12
Annuity Income Options 12
Table 1 13
Table 2 14
Table 3 14
Page 2
<PAGE>
CITICORP LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
Administrative Offices: 800 Silver Lake Blvd.
P.O. Box 7031 Dover, DE 19903
Contract Schedule
TABLE OF SURRENDER CHARGES
YEARS SINCE PERCENTAGE OF
PREMIUM PAID PREMIUM WITHDRAWN
-----------------------------------------------
0-1 7%
1-2 6%
2-3 5%
3-4 4%
4-5 3%
5+ 0
(ATTACH COPY OF APPLICATION HERE)
CONTRACT DATE: CONTRACT NUMBER:
GUARANTEED MINIMUM FIXED INITIAL FIXED ACCOUNT
ACCOUNT INTEREST RATE: 3.00% ANNUALLY INTEREST RATE: % ANNUALLY
ANNUITY INCOME DATE: ANNUAL CONTRACT FEE: $30.00
SEPARATE ACCOUNT: CITICORP LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
Page 3
<PAGE>
DEFINITIONS
In this contract:
"Account" means any of the Sub-Accounts or the Fixed Account.
An "Accumulation Unit" is an accounting device used to calculate the value of a
Sub-Account before annuity payments begin.
"Age" means age last birthday.
The "Annuitant" is the person upon whose life annuity benefits are based and to
whom payments are made under this contract, commencing on the Annuity Income
Date. The Annuitant is named by you. The Annuitant must be a natural person.
"Annuity Income Date" means the date on which annuity payments are to begin. The
first annuity payment will be calculated and paid as of this date.
An "Annuity Unit" is an accounting device used to calculate the value of
variable annuity payments.
"Attained age" means age on the prior Contract Anniversary.
"Beneficiary" means the person who becomes the Owner of this contract upon any
Owner's death prior to the Annuity Income Date and who may receive the Death
Benefit. The Contingent Beneficiary is the person who will become the
Beneficiary if the named Beneficiary is not living. An Irrevocable Beneficiary
is one whose consent is necessary to change Beneficiaries and exercise certain
other rights under this contract.
"Contract Anniversary" means the same date each year after the Contract Date.
"Contract Date" means the date shown in the Contract Schedule. Contract Years
and Contract Months are measured from the Contract Date. The Contract Date is
the date the first Account is established under this contract.
"Contract Value" means the sum of all Sub-Account values plus the value of the
Fixed Account.
"Dollar Cost Averaging" is a series of systematic transfers from the Fixed
Account or the Money Market Sub-Account to any available Account(s).
The "Fixed Account" is a part of our General Account. Any or all of the Contract
Value may be allocated to the Fixed Account.
"Fund(s)" means any of the Funds specified in the Application attached to this
contract at issue or as may be later offered under this contract.
"General Account" means assets other than those allocated to a Separate Account.
"In writing" and "written request" means in a written form satisfactory to us
and received by us at our Administrative Offices. We have the right to require a
signature guarantee from an institution qualified to give such a guarantee
before acting on any written request.
The "Net Asset Value per Share" is the share value of any Fund as of any
Valuation Day allowing for investment performance and decreased by any expenses
and fees assessed against that Fund.
The "Net Investment Factor" is an index used to measure the investment
performance of a Sub-Account from one Valuation Period to the next.
"Premium Tax(es)" means taxes charged by a state or municipality against premium
payments received by us. We may deduct the amount of such tax from the Contract
Value on: 1) the date the contract is surrendered; 2) on the Annuity Income
Date; or 3) at such earlier date as they become due and payable.
Page 4
<PAGE>
"Separate Account" means the account established by us to hold assets funding
the variable benefits for this and other contracts of the same type. The
Separate Account for this contract is identified in the Contract Schedule.
Assets of the Separate Account equal to the reserves and other contract
liabilities with respect to such Account are separate from our other assets and
are not chargeable with liabilities arising out of any other business we may
conduct.
A "Sub-Account" is a subdivision of the Separate Account. Sub-Accounts are used
to determine the allocation of the Contract Value between the Funds.
The "Surrender Value" is the value received if the contract is surrendered, as
described in the "Surrender and Withdrawal" provisions.
A "Valuation Day" is any day both we and the New York Stock Exchange are open
for business. Valuation Periods are measured from the close of regular trading
on the New York Stock Exchange on any Valuation Day and ending at the close of
regular trading on the next succeeding Valuation Day.
"We," "Our" and "Us" mean Citicorp Life Insurance Company.
"You" and "Your" mean the Owner named in the Contract Schedule. In the event of
joint ownership, you and your apply equally to either Joint Owner unless the
context clearly indicates otherwise.
PREMIUM PROVISIONS
PREMIUM PAYMENT: The initial premium for this contract is due on the date this
contract is issued. The initial premium is shown in the Contract Schedule.
Subsequent premium payments may be made at such time and in such amounts as you
determine. However, we reserve the right to refuse premium payments of less than
$500 ($100 for "Qualified Plans" as defined under the I.R.S. Code). In addition,
our approval is required for any subsequent premium payment(s) that exceeds
$1,000,000 per contract year. All premium payments are payable to us in U.S.
Funds. This contract will not be in default if no subsequent premium payments
are made.
ALLOCATION OF PREMIUM: You must specify the portion of each premium payment to
be allocated to each Account. Your initial specifications are shown in the
application.
You may change the premium allocation at any time by notifying us in writing. We
may require allocations to any Account to be at least the greater of $100 or 10%
of any premium payment.
TRANSFERS: Prior to the Annuity Income Date and upon written notice to us, you
may transfer the value (or any portion thereof) held in any Account(s) into any
other Account(s) subject to the following limitations:
1. We reserve the right to charge a $25 Transfer Fee for each transfer in
excess of 12 in any Contract Year. Any Transfer Fees will be deducted from
the Account from which the transfer is made. The transfer of value from an
Account is deemed to be one transfer, regardless of the number of Accounts
into which the value is transferred;
2. The maximum amount transferable from the Fixed Account during any Contract
Year is the greater of:
A. 25% of the Fixed Account value as of the later of the Contract Date or
last Contract Anniversary;
B. The Fixed Account value attributable to interest; or
C. The greatest of any transfer from the Fixed Account during the prior
Contract Year; and
3. We reserve the right to defer transfers from the Fixed Account for up to 6
months following the date of request.
Page 5
<PAGE>
If the value remaining in any Account after a transfer is made is less than
$100, we have the right to transfer the entire amount instead of the requested
amount. In the absence of any other directions, such transfer will be allocated
in the same proportion as the transfer request resulting in this action.
DOLLAR COST AVERAGING (AUTOMATIC TRANSFERS): If you elect in writing, we will
automatically transfer values from the Fixed Account or Money Market Sub-Account
(but not both at any one time) as specified by you, to any of the Sub-Accounts
on a monthly basis, subject to the following conditions:
1. The amount of each transfer to a Sub-Account must be at least $100;
2. The amount of such transfers from the Money Market Sub-Account must be
equal to or less than 1/6 of the Account value when this option is
elected; and
3. The amount of such transfers from the Fixed Account must be equal to
or less than 1/48 of the Account value when this option is elected.
Automatic Transfers are not subject to any Transfer Fee. However, they will be
treated as any other transfer for purposes of determining the number of
transfers in any Contract Year. You may discontinue or modify the option at any
time upon at least 6 days written notice to us. We may discontinue the Automatic
Transfer privilege upon at least 30 days notice to you. However, we will
immediately discontinue the Automatic Transfer process if the balances of the
Account(s) from which the transfers are being made are inadequate to execute the
requested transfers.
CONTRACT VALUE
ACCOUNT VALUATION: Net premium payments are applied to increase the value of the
Fixed Account and acquire Accumulation Units of each Sub-Account. On any date,
the value of the Fixed Account shall be equal to:
1. The dollar value of each net premium payment or transfer allocated to
the Fixed Account; plus
2. Any interest earned; minus
3. The dollar value of any transfers, withdrawals, charges and Premium
Taxes deducted from the Fixed Account.
On any date, the value of the Separate Account shall be equal to the sum of the
values of each Sub-Account. The value of each Sub-Account on any date is equal
to:
1. The number of Accumulation Units in the Sub-Account; multiplied by
2. The applicable Sub Account's Accumulation Unit value as of that date.
The number of Accumulation Units in each Sub-Account is increased by net premium
payments and transfers to that Sub-Account and decreased by withdrawals and
transfers from that Sub-Account as well as any applicable charges.
The number of Accumulation Units credited or subtracted is determined by
dividing the dollar value of each transaction applicable to each Sub-Account by
the dollar value of one Accumulation Unit in that Sub-Account. For premium
payments, Accumulation Unit values will be determined as of the end of the
Valuation Day on or first following our receipt of the premium payment. For all
other transactions, the Accumulation Unit value will be determined as of the
date of the transaction.
The Accumulation Unit value in any Sub-Account may increase or decrease from day
to day as described below. The number of Accumulation Units will not be affected
by a subsequent change in the Accumulation Unit value.
Page 6
<PAGE>
INTEREST: Beginning on the date this contract was issued, the initial net
premium allocated to the Fixed Account will earn interest for a period of one
year at the Initial Fixed Account Interest Rate shown in the Contract Schedule.
We may declare different initial interest rates for each subsequent premium
payment or transfer into the Fixed Account. Any such rate applicable to any
specific premium payment or transfer is guaranteed for one year. Thereafter, the
interest rate earned will be the applicable Current Fixed Account Interest Rate.
The Current Fixed Account Interest Rate is applied to the Fixed Account Value as
well as premium payments or transfers into the Fixed Account after the initial
one year period. We may change the Current Fixed Account Interest Rate from time
to time but not more often than once every 12 months. The Initial Fixed Account
Interest Rate and the Current Fixed Account Interest Rate will never be less
than the Guaranteed Minimum Fixed Account Interest Rate shown in the Contract
Schedule. All interest rates are annual rates. Interest is credited daily.
ACCUMULATION UNIT VALUE: The value of an Accumulation Unit in each Sub-Account
reflects the investment experience of the Fund underlying that Sub-Account. At
the end of each Valuation Day, Accumulation Unit values for each Sub-Account are
determined by multiplying that Sub-Account's Accumulation Unit value on the
preceding Valuation Day by the Net Investment Factor for that Sub-Account for
the Valuation Day then ended. The value of each Sub-Account is then determined
by multiplying the number of Accumulation Units in that Sub-Account by the
Accumulation Unit value.
NET INVESTMENT FACTOR: The Net Investment Factor for each Sub-Account for any
Valuation Period is equal to "a" divided by "b" minus "c" where:
"a" is the net asset value per share of the corresponding Fund at the end
of the Valuation Period plus the per share amount of any declared and
unpaid dividends or capital gains accruing to that Fund plus (or minus) a
per share credit (or charge) for any taxes resulting from the investment
operations of the Sub-Account;
"b" is the Fund's net asset value per share at the beginning of the
Valuation Period; and
"c" is a factor representing the daily Mortality and Expense Risk Charge
and the Administration Charge deducted from the Sub-Account. Such factor is
equal to 1.40% per annum of the average daily net asset value of the
Sub-Account.
MORTALITY AND EXPENSE RISK CHARGE: The Mortality and Expense Risk Charge is a
daily charge made to compensate us for assuming the mortality and expense risks
under this contract. It is equivalent to 1.25% per annum of the average daily
net asset value held in each Sub-Account.
ANNUITY UNIT VALUE: The value of an Annuity Unit in each Sub-Account was
arbitrarily fixed at $1.00 on the date Fund shares were originally purchased. On
any Valuation Day thereafter, that Sub-Account's Annuity Unit value is equal to
the Annuity Unit value on the preceding Valuation Day multiplied by the product
of "a" times "b" where:
"a" is the Sub-Account's Net Investment Factor on the Valuation Day the
Annuity Unit value is being calculated; and
"b" is 0.999919 (which is the daily factor that will produce the 3.0%
annual investment rate assumed in the Annuity Tables), adjusted for the
number of days since the previous Valuation Day.
ANNUAL CONTRACT FEE: On the last day of each Contract Year prior to the Annuity
Income Date, or the date this contract is surrendered, if earlier, an Annual
Contract Fee will be deducted from the Contract Value. The fee will be charged
by reducing the value of all active Accounts on a pro-rata basis. The Annual
Contract Fee is shown in the Contract Schedule.
Page 7
<PAGE>
With respect to each Sub Account, the fee will be charged in the form of
Accumulation Units. The number of Accumulation Units deducted from each
Sub-Account will be determined by dividing the pro-rata portion of the fee
applicable to that Sub-Account by the Accumulation Unit value of that
Sub-Account on the date the fee is assessed.
The Annual Contract Fee will be waived in its entirety if, on the date it would
otherwise be due, the Contract Value is at least $25,000.
ADMINISTRATION CHARGE: Our charge for administering this contract is equivalent
to 0.15% per annum of the average daily net asset value held in each
Sub-Account. This charge is calculated and deducted on a daily basis.
ANNUAL REPORT: We will send you a report at least once each year stating the
Contract Value, Sub-Account values and Fixed Account value, as well as your
current premium allocation directions. We will also provide you with shareholder
reports of each Fund as well as any other notices, reports or documents as
required by law.
SURRENDER AND WITHDRAWALS
SURRENDER: You may surrender this contract while it is in force for its
Surrender Value at any time during your lifetime before the Annuity Income Date.
Any surrender request must be in writing. When the Surrender Value is paid, this
contract terminates.
SURRENDER VALUE: The Surrender Value equals the Contract Value less:
1. Any Surrender Charges payable;
2. Any applicable Premium Taxes not previously deducted; and
3. The Annual Contract Fee for that year.
The Surrender Value will not be less than the minimum values required by the
insurance laws of the state where this contract was issued.
SURRENDER CHARGES: Premiums withdrawn or surrendered are subject to Surrender
Charges. No Surrender Charges are applied to earnings surrendered or withdrawn.
Surrender Charges are calculated by multiplying the Surrender Charge Percentage
shown in the Contract Schedule by the premium amount surrendered or withdrawn.
All surrenders and withdrawals are considered to come first from earnings and
then from the oldest premium payment, then from the next oldest, etc.
WITHDRAWALS: You may withdraw a portion of the Contract Value at any time during
your lifetime before the Annuity Income Date. Any withdrawal request must be in
writing and must specify from which Account(s) the withdrawal is to be made. The
amount withdrawn must be at least $500, subject to the "Systematic Withdrawals"
provision. If a withdrawal reduces the Contract Value below $2,000, we have the
right to pay the full Surrender Value and terminate the contract.
When a withdrawal is made, you will receive the amount withdrawn less any
applicable Surrender Charge.
During each Contract Year, up to 10% of all premium payments, less any prior
withdrawals of premium , may be surrendered or withdrawn without a Surrender
Charge. Amounts not subject to a Surrender Charge under this provision are not
cumulative. That is, such amounts not withdrawn during any Contract Year cannot
be taken in later Contract Years without incurring the applicable Surrender
Charge.
We reserve the right to assess a processing charge for each withdrawal (to
include final surrender) in excess of 12 in any Contract Year. This processing
charge is equal to the lesser of $25.00 or 2% of the amount withdrawn. The
processing charge will be in addition to any applicable Surrender Charge.
Page 8
<PAGE>
On the Annuity Income Date, applicable Surrender Charges are assessed against
amounts applied as an Annuity Income Option. However, Surrender Charges are not
assessed against amounts paid under an Annuity Income Option providing a life
annuity or a life annuity with a period certain of at least five years.
Surrender Charges are not applied to earnings or amounts paid as a Death
Benefit.
SYSTEMATIC WITHDRAWALS: You may arrange to make systematic (recurring) monthly,
quarterly, semi-annual or annual withdrawals under the contract, provided:
1. Written request for such systematic withdrawals is made after the
first Contract Anniversary
or received with the contract application, specifying the Account(s) from
which the withdrawals are to be made; and
2. The amount to be withdrawn from each Account is at least $50.00.
If the amount to be withdrawn from an Account is or becomes less than $50.00, we
have the right to reduce the frequency of payments to an interval that would
result in withdrawals of at least $50.00. We may discontinue this Systematic
Withdrawal privilege upon at least 30 days written notice to you.
DEFERRAL OF SURRENDERS AND WITHDRAWALS: Payments made as a result of a request
for surrender or withdrawal will be made not later than 7 days after we receive
the written request. However, with respect to the values in any Sub-Account,
payment may be postponed:
1. For any period during which the New York Stock Exchange is closed or
trading is restricted;
2. For any period during which an emergency exists as a result of which:
A. Disposal of the securities held in the Sub-Account is not
reasonably practicable; or
B. It is not reasonably practicable for the value of the net assets
of the Sub-Account to be fairly determined;
3. For such other periods as the Securities and Exchange Commission may,
by order and according to its rules and regulations, permit for the
protection of the Contract Owners.
We may defer payment of any amount representing premium payments until the check
for that premium payment has cleared. We may also defer payment of any amounts
from the Fixed Account for up to 6 months. However, if payment is deferred for
more than 10 working days, we will pay interest on the amount deferred at the
minimum rate required by law or the Current Fixed Account Interest Rate, if
greater.
DEATH BENEFIT
IF YOU DIE PRIOR TO THE ANNUITY INCOME DATE: Upon receipt of due proof of your
death (or in the case of Joint Owners, the death of the first Joint Owner to
die) while this contract is in force and before the Annuity Income Date, we will
pay the Beneficiary the Death Benefit. You may specify the manner in which this
Death Benefit is to be paid. In the absence of such direction, the Beneficiary
may elect the manner in which the Death Benefit is to be distributed.
In either case, this benefit must be distributed in full within 5 years after
your death unless:
1. The benefit is to be paid as a life annuity or an annuity with a
period certain not exceeding the Beneficiary's life expectancy with
payments beginning within one year of your death; or
2. The Beneficiary is your surviving spouse, in which case he or she may
continue this contract as the Owner.
If the Beneficiary is not a natural person, the benefit must be distributed
within 5 years of your death.
DEATH BENEFIT AMOUNT: If you die prior to the date you attain age 75, the Death
Benefit will be the greater of:
1. The Contract Value on the date we receive due proof of your death;
Page 9
<PAGE>
2. The Contract Value on the most recent 5th Contract Anniversary
immediately preceding the date of death, increased by the dollar
amount of any premium payments and reduced by the dollar amount of any
withdrawals made since that Contract Anniversary; or
3. 100% of all premium payments made less the dollar amount of any
withdrawals of premium since the date this contract was issued.
If you die after the date you attain age 75, the Death Benefit will equal the
greater of:
1. The Contract Value on the date we receive due proof of your death;
2. The Death Benefit on the date you attained age 75, less the dollar
amount of any subsequent withdrawals; or
3. 100% of all premium payments made less the dollar amount of any
withdrawals of premium since the date this contract was issued.
If the Death Benefit is paid immediately in one lump sum, this contract will end
on the date of payment. If the Death Benefit is not taken immediately in one
lump sum, the amount of the Death Benefit will become the new Contract Value.
Any increase in the Contract Value will be allocated to each Account in
proportion to the distribution of the Contract Value on the date we receive
proof of your death.
BENEFICIARY: The Beneficiary is named in the application unless changed at a
later date. However, in the event of joint ownership, the surviving Joint Owner
will be considered to be the Beneficiary; any other Beneficiary named in the
application or later designated will be deemed to be the Contingent Beneficiary
unless specifically directed otherwise in writing.
If you die while this contract is in force and prior to the Annuity Income Date,
benefits will be paid to the Beneficiary as stated above. If there are two or
more Beneficiaries, they will receive equal shares unless you have directed
otherwise in writing. The interest of any Beneficiary who dies before you will
end at his or her death. If no Beneficiary is named or none survive you, the
Death Benefit will be paid to your estate in one lump sum.
ANNUITANT DEATH PRIOR TO THE ANNUITY INCOME DATE: If the Annuitant dies prior to
the Annuity Income Date, you may designate a new Annuitant. If no new Annuitant
is named within 30 days, you will become the Annuitant. If you are the
Annuitant, the "If You Die Prior To The Annuity Income Date" provisions apply.
GENERAL PROVISIONS
ENTIRE CONTRACT: This contract, including the attached application and any
riders or endorsements attached at issue, constitute the entire contract between
you and us. All statements in the application are representations and not
warranties. No statement shall be used to void this contract or in defense of a
claim unless it is contained in the application.
MODIFICATIONS: Only our President or Secretary may amend this contract or waive
any of its provisions. Any such change or waiver must be in writing. No agent
has the right to amend, alter, waive or change this contract in any way.
We reserve the right to modify this contract, to the extent allowed by law, in
order to:
1. Comply with any law or regulation issued by a governmental agency to
which we or this contract is subject;
2. Reflect a change in the operation of the Separate Account or a
Sub-Account;
3. Add, delete or modify an Account option; or
4. Add, modify or delete Sub-Accounts or Funds.
Page 10
<PAGE>
In the event of any such modification, we will notify you, or the payee if the
modification is made while annuity payments are being made. As necessary, we
will also provide an endorsement for attachment to the contract to reflect such
changes.
INCONTESTABILITY: This contract is incontestable.
OWNER: You are the Owner of this contract. You are also the Annuitant unless a
different Annuitant is named. Any Joint Owner must be your spouse unless we
agree otherwise. Before the Annuity Income Date, you have all the rights under
this contract, subject to the rights of any assignee of record. This includes
the right to:
1. Transfer values between Accounts and designate or change the
allocation of net premium payments to each Account;
2. Name and/or change the Beneficiaries, Owner or Annuitant;
3. Surrender the contract in whole or in part for cash;
4. Assign the Contract Value, in whole or in part;
5. Designate and change the Annuity Income Date; and
6. Elect or change the Annuity Income Option.
All elections, authorizations and change requests must be made to us in writing.
Upon receipt by us, any change will be effective as of the date it was signed by
you, except that any values or amounts payable under the contract will be
determined as of the Valuation Day on or next following the date of receipt.
Payment made or action taken by us prior to the time written notice is received
will discharge our liability under this contract to the extent of such action or
payment. If the Owner is not a natural person, the primary Annuitant will be
deemed to be the Owner for any Contract Values distributed prior to the Annuity
Income Date. Further, the death of, or change of the primary Annuitant will be
deemed to be the death of the Owner for purposes of administering this contract.
The consent of any irrevocable Beneficiary is required to exercise any right. If
Joint Owners are named, both must consent to any change.
MISSTATEMENT OF AGE OR SEX: We may require proof of the age or sex of any payee
before beginning any payments under this contract. If the age or sex has been
misstated, we will adjust the amount payable when we discover the misstatement.
The adjusted payments will be based on the payee's correct age or sex. Any
underpayments will be included with the next benefit payment. Any overpayments,
will be deducted from future benefit payments until the overpayment is repaid in
full.
EVIDENCE OF SURVIVAL: If a contract provision requires that a person be alive,
we have the right to require proof that the person is alive before taking any
action under that provision.
CLAIMS OF CREDITORS: To the extent permitted by law, no payment made by us under
the terms of this contract will be subject to the claims of any creditor.
ASSIGNMENT: Upon notice in writing to us, you may assign your rights under this
contract. We assume no responsibility for the validity of any such assignment.
An assignment will not apply to any payment made or action taken prior to the
time it is recorded by us.
MINIMUM VALUES: The minimum Surrender Values, death benefits or Annuity Benefits
provided by this contract are at least equal to those required by the state in
which the contract is issued.
NON PARTICIPATING: This contract does not share in our divisible surplus.
ANNUITY BENEFIT
ANNUITY INCOME DATE: The Annuity Income Date may be elected by you at the time
of application or anytime thereafter. You may change the Annuity Income Date
upon 30 days prior written notice.
Page 11
<PAGE>
If no Annuity Income Date is elected, it will be the first day of the calendar
month following the Annuitant's 65th birthday or ten years after the Contract
Date, if later.
In any circumstance, however, the Annuity Income Date can be no later than the
later of:
1. The first day of the month following the Annuitant's 85th birthday; or
2. Ten years after the Contract Date.
ANNUITY PAYMENT AMOUNT: On the Annuity Income Date, the Contract Value, less any
applicable Surrender Charges and premium tax previously unpaid, will be applied
to the Annuity Income Option then in effect. The Contract Value will be
determined on the basis of the Accumulation Unit value of each Sub-Account and
the value of the Fixed Account no later than the fifth Valuation Day preceding
the date annuity payments are to begin. The amount of the annuity payments will
depend on the amount thus applied, based as applicable on the sex of the
Annuitant unless otherwise required by law. The amount to be applied to any
Annuity Income Option must be at least $2,000. If less, we reserve the right to
pay it in one lump sum in lieu of paying it under the Annuity Income Option. If
the amount of any annuity payment for each affected Account would be or becomes
less than $50.00 we have the right to reduce the frequency of payments to an
interval that would result in payments of at least $50.00.
VARIABLE ANNUITY: A variable annuity is an annuity with payments increasing or
decreasing in amount according to the net investment results of the
Sub-Account(s) used to provide the annuity as described in the Contract Value
provisions. After the first annuity payment has been determined according to the
terms of this contract, the number of Sub-Account Annuity Units is calculated by
dividing the first payment by the appropriate Sub-Account Annuity Unit value on
the date the Contract Value is established for purposes of applying it to an
Annuity Income Option as set forth under the "Annuity Payment Amount" provision
above. Thereafter, the number of Annuity Units remains fixed with respect to
that particular Sub-Account.
However, the actual dollar amount of the second and subsequent variable annuity
payments may vary and is determined by multiplying the number of Sub-Account
Annuity Units by the Sub-Account Annuity Unit value as of a date no earlier than
the fifth Valuation Day preceding the date the annuity payment is due.
Once every 3 months after annuity payments have commenced, the Annuitant may
elect, in writing, to transfer among any Sub-Account(s) on which variable
annuity payments are based. If such a transfer is elected, the number of Annuity
Units will change and be determined by "a" times "b," less any applicable fees,
divided by "c" where:
"a" is the number of Annuity Units being transferred;
"b" is the Sub-Account Annuity Unit value from which the transfer is
made; and
"c" is the Annuity Unit value of the Sub-Account to which the transfer
is made.
Thereafter, the number of Annuity Units will remain fixed until transferred.
After the Annuity Income Date, no transfers may be made between the Sub-Accounts
and the Fixed Account.
The dollar amount of variable annuity payments will not be adversely affected by
changes in expenses or actual mortality experience of the payees, including age
adjustments, from the assumptions used in determining the first annuity payment.
FIXED DOLLAR ANNUITY: A fixed dollar annuity is one in which payments do not
depend on the investment experience of any Sub-Account.
ANNUITY INCOME OPTIONS: The Annuity Income Option is elected by you at the time
of application or thereafter. You may further elect to have annuity payments
paid as a variable annuity, a fixed dollar annuity or a combination of both.
You may change the option prior to the Annuity Income Date upon 30 days prior
written notice. Available Annuity Income Options are described below. In
addition, you may elect any other method of payment that is mutually acceptable
to both you and us.
Page 12
<PAGE>
If no election is made to the contrary, the value of each Sub-Account will be
applied to provide a variable annuity and the value of the Fixed Account shall
be applied to provide a fixed dollar annuity. In either case, the annuity option
used will be a Life Annuity with 10 years certain.
OPTION 1: Income for a Fixed Period. We will make annuity payments to the
Annuitant each month for a fixed number of years as shown in Table 1. The number
of years must be at least 5 and no more than 30. If the Annuitant dies before
the end of the designated period, payments will continue to be made to the
person(s) named by the Annuitant to receive such guaranteed payments for the
remainder of the fixed period. If no such person is named or none survive the
Annuitant, the remainder of the guaranteed payments will be paid to the
Annuitant's estate. This option is available only as a Fixed Annuity and if the
contract has been in force for 5 years, unless we agree otherwise.
Option 2: Life Annuity. We will make annuity payments to the Annuitant each
month as shown in Table 2 as long as he or she is alive. When the Annuitant
dies, all payments will cease.
Option 3: Life Annuity with Period Certain. We will make annuity payments to the
Annuitant each month as shown in Table 2 as long as he or she is alive. If the
Annuitant dies prior to the end of the guaranteed period, payments will continue
to be made to the person(s) named by the Annuitant to receive such guaranteed
payments for the remainder of the fixed period. If no such person is named or
none survive the Annuitant, the remainder of the guaranteed payments will be
paid to the Annuitant's estate.
Option 4: Joint and Survivor Annuity. We will make annuity payments to the
Annuitant each month as shown in Table 3 for the joint lifetime of the Annuitant
and another person. At the death of either, payments will continue to be made to
the survivor. When the survivor dies, all payments will cease.
ANNUITY INCOME OPTION TABLES: The following tables show the monthly payments for
each $1,000 applied under the option, assuming a net investment return of 3.0%,
using the 1983 IAM Tables. In Tables 2 and 3, the amount of each payment will
depend on the age of the Annuitant(s) at the time the first payment is due, and
the Annuitant(s) sex, unless otherwise required by law. Payments other than
monthly for ages or durations not shown will be calculated on the same basis as
those shown and may be obtained from us.
These are the guaranteed minimum payment amounts for values applied as a fixed
annuity. Actual fixed annuity payments will not be less than those that would be
provided under similar contracts offered by us on the Annuity Income Date to the
same class of Annuitants. These are also the amounts used to determine the first
variable annuity payment. However, when applied as a variable annuity, second
and subsequent payments are based on the investment experience of a Separate
Account, are variable and are not guaranteed as to dollar amount.
Table 1: Income for a Fixed Period
<TABLE>
<CAPTION>
Fixed Period (Years) Monthly Payment Fixed Period (Years) Monthly Payment
------------------- --------------- -------------------- ---------------
<S> <C> <C> <C>
5 $17.91 18 $5.96
6 15.14 19 5.73
7 13.61 20 5.51
8 11.68 21 5.32
9 10.53 22 5.15
10 9.61 23 4.99
11 8.86 24 4.84
12 8.24 25 4.71
13 7.71 26 4.59
14 7.26 27 4.47
15 6.87 28 4.37
16 6.53 29 4.27
17 6.23 30 4.18
</TABLE>
Page 13
<PAGE>
Table 2: Life Annuity/Life Annuity with Period Certain.
<TABLE>
<CAPTION>
Age Life Annuity 10 Years 20 Years
- --------- --------------------------------- --------------------------------- ---------------------------------
Male Female Unisex Male Female Unisex Male Female Unisex
---- ------ ------ ---- ------ ------ ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
40 3.43 3.24 3.34 3.42 3.24 3.33 3.40 3.23 3.32
41 3.47 3.27 3.37 3.46 3.27 3.37 3.44 3.26 3.35
42 3.51 3.31 3.41 3.50 3.30 3.40 3.47 3.29 3.38
43 3.55 3.34 3.44 3.54 3.34 3.44 3.51 3.32 3.42
44 3.60 3.37 3.48 3.59 3.37 3.48 3.55 3.36 3.45
45 3.64 3.41 3.52 3.63 3.41 3.52 3.59 3.39 3.49
46 3.69 3.45 3.57 3.68 3.44 3.56 3.63 3.42 3.53
47 3.74 3.49 3.61 3.73 3.48 3.60 3.68 3.46 3.57
48 3.80 3.53 3.66 3.78 3.52 3.65 3.72 3.50 3.61
49 3.85 3.57 3.71 3.83 3.57 3.70 3.77 3.54 3.65
50 3.91 3.62 3.76 3.89 3.61 3.75 3.82 3.58 3.70
51 3.97 3.67 3.82 3.95 3.66 3.80 3.87 3.63 3.75
52 4.04 3.72 3.87 4.01 3.71 3.86 3.92 3.67 3.80
53 4.10 3.77 3.93 4.07 3.76 3.91 3.98 3.72 3.85
54 4.18 3.83 4.00 4.14 3.82 3.98 4.03 3.77 3.90
55 4.25 3.89 4.06 4.21 3.87 4.04 4.09 3.82 3.95
56 4.33 3.95 4.14 4.29 3.94 4.11 4.15 3.87 4.01
57 4.42 4.02 4.21 4.37 4.00 4.18 4.21 3.93 4.07
58 4.50 4.09 4.29 4.45 4.07 4.25 4.27 3.99 4.13
59 4.60 4.16 4.37 4.54 4.14 4.33 4.33 4.05 4.19
60 4.70 4.24 4.46 4.63 4.21 4.42 4.40 4.11 4.25
61 4.81 4.33 4.56 4.73 4.29 4.51 4.46 4.17 4.32
62 4.92 4.41 4.66 4.84 4.38 4.60 4.53 4.24 4.39
63 5.05 4.51 4.77 4.94 4.47 4.70 4.59 4.31 4.45
64 5.18 4.61 4.88 5.06 4.56 4.80 4.66 4.38 4.52
65 5.32 4.72 5.00 5.18 4.66 4.91 4.73 4.45 4.59
66 5.46 4.83 5.13 5.30 4.76 5.03 4.79 4.52 4.66
67 5.62 4.95 5.27 5.43 4.88 5.15 4.86 4.59 4.73
68 5.79 5.08 5.42 5.57 4.99 5.27 4.92 4.66 4.79
69 5.97 5.22 5.58 5.71 5.12 5.41 4.98 4.73 4.86
70 6.17 5.37 5.75 5.86 5.25 5.54 5.04 4.80 4.93
71 6.37 5.53 5.93 6.01 5.39 5.69 5.09 4.87 4.99
72 6.58 5.70 6.12 6.16 5.53 5.84 5.14 4.94 5.05
73 6.81 5.89 6.33 6.32 5.68 6.00 5.19 5.01 5.10
74 7.05 6.09 6.55 6.49 5.84 6.16 5.23 5.07 5.16
75 7.31 6.31 6.78 6.65 6.01 6.33 5.27 5.12 5.20
</TABLE>
Table 3: Joint and Survivor Annuity
<TABLE>
<CAPTION>
SEX DISTINCT UNISEX
Age Of Female Annuitant Age Of Joint Annuitant
Age Of Male ---------------------------------------- Age Of ----------------------------------------
Annuitant 45 55 65 75 85 Annuitant 45 55 65 75 85
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 3.23 3.40 3.52 3.59 3.62 45 3.24 3.37 3.45 3.49 3.51
55 3.32 3.61 3.88 4.08 4.19 55 3.37 3.62 3.83 3.97 4.03
65 3.37 3.76 4.25 4.74 5.09 65 3.45 3.83 4.27 4.64 4.87
75 3.39 3.84 4.51 5.44 6.38 75 3.49 3.97 4.64 5.47 6.18
85 3.40 3.87 4.64 5.95 7.80 85 3.51 4.03 4.87 6.18 7.83
</TABLE>
Page 14
<PAGE>
CITICORP LIFE INSURANCE COMPANY
================================================================================
Administrative Offices: 800 Silver Lake Blvd.
P.O. Box 7031
Dover, DE 19903
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY CONTRACT
NON-PARTICIPATING
EXHIBIT 4(b)
CITICORP LIFE INSURANCE COMPANY
================================================================================
PHOENIX, ARIZONA
INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
The contract to which this endorsement is attached has been issued as an
Individual Retirement Annuity. It is amended as follows:
1. This contract is established for the exclusive benefit of the Annuitant and
his or her Beneficiaries. It may not be assigned, pledged, or otherwise
transferred by the Annuitant. It may not be used as security for a loan.
Only the Annuitant may be the Owner of this contract
2. None of the Annuitant's rights in this contract may be forfeited. Benefits
will be distributed to the Annuitant under the Annuity Income Option
selected, provided, distribution of all benefits must be made during:
A. The life of the Annuitant or the lives of the Annuitant and his or her
Beneficiary; or
B. A period not extending beyond the life expectancy of the Annuitant or
the life expectancy of the Annuitant and his or her Beneficiary.
In any case, all distributions under the contract shall be made in
accordance with the requirements of Section 401(a)(9) of the Internal
Revenue Code (the Code), including the Incidental Death Benefit
Requirements of Section 401(a)(9)G of the Code and the Regulations
thereunder, including the Minimum Distribution Incidental Benefit
requirement of Section 1.401(a)(9)-2 of the proposed Income Tax
Regulations.
3. The distribution of benefits under the contract must begin not later than
the first day of April following the calendar year in which the Annuitant
attains age 70 1/2 (required beginning date). The amount to be distributed
each year (commencing with the required beginning date and each year
thereafter) must be at least equal to the value obtained by dividing "a" by
"b" or "c" (as applicable) where:
"a" is the entire value of the contract as of December 31 of the
preceding year;
"b" is the Annuitant's life expectancy; and
"c" is the joint and last survivor expectancy of the Annuitant and the
Beneficiary.
Annual distributions, including that made during the year in which the
required beginning date occurs, shall be made by December 31 of that year.
In addition, payments must be non-increasing or they may increase only as
provided in Q&A F-3 of Section 1.401(a)(9)-1 of the proposed Income Tax
Regulations.
Life expectancy and joint and last survivor expectancy are computed by the
use of the Expectancy Return Multiples in Tables V and VI in Section 1.72-9
of the Income Tax Regulations. For purposes of this computation, the
Annuitant's life expectancy (or the life expectancy of the Annuitant and
his or her spouse Beneficiary) shall be recalculated annually unless the
Annuitant elects prior to the required beginning date not to recalculate
life expectancy. Such election shall be irrevocable by the Annuitant and
shall apply to all subsequent years. However, the life expectancy of a
non-spouse Beneficiary may not be recalculated. If the Annuitant's
Beneficiary is other than his or her spouse, the recalculated joint life
expectancy will use the Annuitant's recalculated life expectancy and the
life expectancy of the Beneficiary as of the date of the first payment
minus the number of whole years elapsed since distribution first commenced.
Page 1
<PAGE>
If the Annuitant's Beneficiary is other than his or her spouse, the
distribution must not be less than the amount obtained by dividing the
contract value by the divisor determined by the table set forth in Q&A-4 of
Section 1.401(a)(9)-2 of the Income Tax Regulations.
4. If the Annuitant dies before all contract values have been distributed, the
following rules apply:
A. If the Annuitant dies after distribution of benefits has started, any
remaining benefits will continue to be distributed at least as rapidly
as under the method of distribution being used at his or her death.
B. If the Annuitant dies before distribution of benefits begins, all
contract values will be distributed:
(1) By December 31 of the year containing the fifth anniversary of
the Annuitant's death; or
(2) If the remaining value is payable to an individual Beneficiary,
in substantially equal installments over a period not to exceed
the life or life expectancy of the Beneficiary commencing no
later than one year after the date of the Annuitant's death.
However, if the Beneficiary is the Annuitant's surviving spouse, the spouse
may elect either to treat the contract as his or her own Individual
Retirement Annuity or receive equal or substantially equal payments over a
period not exceeding his or her life or life expectancy starting on any
date prior to December 31 of the year in which the Annuitant would have
attained age 70 1/2. Such election must be made not later than five years
after the date of the Annuitant's death. An election to treat the contract
as his or her own will be assumed if the surviving spouse fails to elect to
begin distributions.
If distribution is to be made over the Beneficiary's life or life
expectancy, the amount to be distributed each year must be at least equal
to the value obtained by dividing the contract value as of the December 31
preceding distribution by the life expectancy of the Beneficiary.
Life expectancy is calculated using the Expectancy Return Multiples in
Tables V and VI in Section 1.72-9 of the Income Tax Regulations. For
purposes of this computation, the life expectancy of a surviving spouse
Beneficiary shall be recalculated annually unless the spouse elects not to
recalculate life expectancy by the time distributions are required to
begin. Such election shall be irrevocable by the surviving spouse and shall
apply to all subsequent years. However, the life expectancy of any
non-spouse Beneficiary may not be recalculated. The life expectancy of such
non-spouse Beneficiary is calculated at the time of the first payment and
thereafter his or her life expectancy will be his or her life expectancy as
of the date of the first payment minus the number of whole years elapsed
since distribution first commenced.
C. Any amount paid to a child of the Annuitant will be considered to have
been paid to the surviving spouse if the remainder of the contract
values become payable to the surviving spouse when the child reaches
the age of majority.
D. Distributions under this provision are considered to have begun if
distributions are made on account of the Annuitant reaching his or her
required beginning date or if, prior to the required beginning date,
distributions irrevocably commence to an individual Annuitant over a
period permitted and in an annuity form acceptable under Section
1.401(a)(9) of the Income Tax Regulations.
Page 2
<PAGE>
5. Annual contributions (premium) paid under this contract are not fixed but
cannot exceed the lesser of 100 % of the Annuitant's earned income for the
tax year or $2,000.00. This limitation does not apply to premiums which
represent:
A. Any portion of a transfer or qualifying rollover as defined in
Sections 402(c), 403(a)(4), 403(b)(8) or 408(d)(3) of the Internal
Revenue Code; or
B. Contributions made under a Simplified Employee Pension (SEP-IRA) as
described in Section 408(k) of the Internal Revenue Code.
All contributions must be in cash.
6. We will provide the Annuitant with a statement at least once each calendar
year, stating the values held under the contract, interest earned and any
withdrawals during the period covered.
7. Both we and the Annuitant agree to amend this contract to comply with
changes in the Internal Revenue Code and any Department of Labor and
Internal Revenue Regulations. Any other changes to this contract will be
made only with the mutual agreement of us and the Annuitant and will be
subject to the conditions stated in the contract. A copy of each amendment
will be furnished to the Annuitant for attachment to the contract.
Refer to the contract to which this endorsement is attached for the definition
of terms and additional contract provisions not otherwise amended hereby.
s/Alan F. Liebowitz
Secretary
Page 3
<PAGE>
CITICORP LIFE INSURANCE COMPANY
================================================================================
PHOENIX, ARIZONA
403(b) TAX SHELTERED ANNUITY ENDORSEMENT
The contract to which this endorsement is attached has been issued as a Tax
Sheltered Annuity under a plan established by an employer for the benefit of the
Annuitant/employee as provided under Section 403(b) of the Internal Revenue
Code. It is amended as follows:
1. This contract is established for the exclusive benefit of the Annuitant. It
may not be assigned, pledged as collateral for a loan or as security for
the performance of an obligation. It may not be transferred to any person
for any reason except to us upon surrender. Only the Annuitant may be the
Owner of this contract unless the employer's plan contains a vesting
schedule. In such a case, the Annuitant is the Owner of the contract at the
time of full vesting.
2. None of the Owner's rights in this contract may be forfeited.
3. The distribution of benefits attributable to contributions made pursuant to
a salary reduction agreement shall be paid pursuant to the terms of the
plan, but no earlier than when the Annuitant attains age 59 1/2 unless he
or she separates from service, dies or becomes disabled or in the case of
hardship. However, distributions made on account of hardship may not
include any earnings on amounts contributed. The definition of disability
and hardship are governed by the Internal Revenue Code and regulations
promulgated thereunder. We are not responsible for determining whether
hardship or disability exists.
4. Contributions made pursuant to a salary reduction agreement may not exceed
the amount of the limitation in effect under Section 402(g) for each
calendar year.
5. Except as allowed otherwise under Regulation 1.403(b)-2, the distribution
of benefits under the contract must begin not later than the first day of
April following the calendar year in which the Annuitant attains age 70 1/2
(required beginning date). The amount to be distributed each year
(commencing with the required beginning date and each year thereafter) must
be at least equal to the value obtained by dividing "a" by "b" or "c" (as
applicable) where:
"a" is the entire value of the contract as of December 31 of the
preceding year;
"b" is the Annuitant's life expectancy; and
"c" is the joint and last survivor life expectancy of the Annuitant
and his or her Beneficiary.
Annual distributions, including that made during the year in which the
required beginning date occurs, shall be made by December 31 of that year.
Life expectancy and joint and last survivor expectancy are computed by the
use of the tables contained in Section 1.72-9 of the Income Tax
Regulations. For purposes of this computation, the Annuitant's life
expectancy (or the life expectancy of the Annuitant and his or her spouse
Beneficiary) shall be recalculated annually unless the Annuitant elects
prior to the required begdate not to recalculate life expectancy. However,
the life expectancy of a non-spouse Beneficiary may not be recalculated. If
the Annuitant's Beneficiary is other than his or her spouse, the
recalculated joint life expectancy will use the Annuitant's recalculated
life expectancy and the life expectancy of the Beneficiary as of the date
of the first payment minus the number of whole years elapsed since
distribution first commenced.
Page 1
<PAGE>
If the Annuitant's Beneficiary is other than his or her spouse, the
distribution must not be less than the amount obtained by dividing the
contract value by the divisor determined by the tables set forth in Q & A 4
of Section 1.401(a)(9)-2 of the Income Tax Regulations.
After the Annuity Income Date, distributions under an Annuity Income Option
shall be made in accordance with the requirements of Section 403(b)(10) of
the Code and the Regulations thereunder.
6. If the Annuitant dies before all contract values have been distributed, the
following rules apply:
A. If the Annuitant dies after distribution of benefits has started, any
remaining benefits will continue to be distributed at least as rapidly
as under the method of distribution being used at his or her death.
B. If the Annuitant dies before distribution of benefits begins, all
contract values will be distributed:
(1) By December 31 of the year containing the fifth anniversary of
the Annuitant's death; or
(2) If the remaining value is payable to an individual Beneficiary,
in substantially equal installments over a period not to exceed
the life or life expectancy of the Beneficiary commencing no
later than one year after the date of the Annuitant's death.
However, if the Beneficiary is the Annuitant's spouse, the spouse may
elect to receive equal or substantially equal payments over a period
not exceeding his or her life expectancy starting on any date prior to
December 31 of the year in which the Annuitant would have attained age
70 1/2. Such election must be made not later than five years after the
date of the Annuitant's death.
If distribution is to be made over the Beneficiary's life or life
expectancy, the amount to be distributed each year must be at least
equal to the value obtained by dividing the contract value as of the
December 31 preceding distribution by the life expectancy of the
Beneficiary. Life expectancy is calculated using the tables contained
in Section 1.72-9 of the Income Tax Regulations. Life expectancy of a
surviving spouse shall be recalculated annually unless the spouse
elects not to recalculate. The life expectancy of any non-spouse
Beneficiary is calculated at the time of the first payment and
payments for later years will be based on such life expectancy minus
the number of whole years elapsed since distribution first commenced.
C. Any amount paid to a child of the Annuitant will be considered to have
been paid to the surviving spouse if the remainder of the contract
values become payable to the surviving spouse when the child reaches
the age of majority.
7. The availability of and payments pursuant to the various Annuity Income
Options under the contract shall be restricted and altered to the extent
necessary to comply with Code Section 401(a)(11) and 417 and the
regulations thereunder, if applicable.
8. For distributions made on or after January 1, 1993, the Annuitant may elect
to have any portion of an eligible rollover distribution paid directly to
an eligible retirement plan specified by the Annuitant in a direct
rollover. An eligible rollover distribution is any distribution of all or
any portion of the balance to the credit of the Annuitant, except that an
eligible rollover distribution does not include:
A. Any distribution that is one of a series of substantially equal
periodic payments (not less
Page 2
<PAGE>
frequent than annually) made for:
(1) The life (or life expectancy) of the Annuitant or the joint lives
(or joint life expectancies) of the Annuitant and the Annuitant's
designated Beneficiary; or
(2) A specified period of ten years or more;
B. Any distribution to the extent that such distribution is required
under Section 401(a)(9) of the Code; or
C. The portion of any distribution that is not includible in gross
income.
An eligible retirement plan is:
A. An individual retirement account described in Section 408(a) of the
Code;
B. An individual retirement annuity described in Section 408(b) of the
Code; or
C. Another contract pursuant to Section 403(b) of the Code that accepts
the Annuitant's eligible rollover distribution.
However, in the case of an eligible rollover distribution to a surviving
spouse, only an individual retirement account or individual retirement
annuity is an eligible retirement plan.
In addition, the Annuitant's surviving spouse and the Annuitant's spouse or
former spouse who is the alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of the Code, are distributees
with regard to the values payable to the surviving spouse, spouse or former
spouse. A direct rollover is a payment by the plan to the eligible
retirement plan specified by the Annuitant (or spouse).
9. Both we and the Annuitant agree to amend this contract to comply with
changes in the Internal Revenue Code and any Department of Labor and
Internal Revenue Regulations. Any other changes to this contract will be
made only with the mutual agreement of us and the Annuitant and will be
subject to the conditions stated in the contract. A copy of each Amendment
will be furnished to the Annuitant for attachment to the contract.
Refer to the contract to which this endorsement is attached for the definition
of terms and additional contract provisions not otherwise amended hereby.
s/Alan F. Liebowitz
Secretary
Page 3
<PAGE>
CITICORP LIFE INSURANCE COMPANY
================================================================================
Administrative Offices: 800 Silver Lake Blvd.
P.O. Box 7031
Dover, DE 19903
ANNUITY CONTRACT ENDORSEMENT
WAIVER OF SURRENDER CHARGES
The Annuity Contract to which this endorsement is attached is amended as
follows:
All Surrender Charges will be waived if, prior to the date you attain age 80,
you surrender this contract or withdraw any portion of the Contract Value after
you are:
1. Diagnosed as having a terminal illness by a physician; or
2. Confined in a hospital, nursing home or other long term care facility
for at least 30 consecutive days, provided:
A. Confinement is for medically necessary reasons at the
recommendation of a physician;
B. The hospital, nursing home or long term care facility is licensed
or otherwise recognized and operating as such by the proper
authority in the state where it is located, the Joint Commission
on the Accreditation of Hospitals or Medicare; and
C. The withdrawal or surrender request is received by us no later
than 91 days after the last day of your confinement.
"Terminal illness" means an illness which, with a reasonable degree of medical
certainty, is expected to result in death within 12 months.
"Physician" means a licensed practitioner of the healing arts, other than
yourself, a family member or the Annuitant, acting within the scope of such
license.
You must provide written proof of diagnosis or confinement satisfactory to us.
We also have the right to require a medical examination by a physician of our
choice.
In all other respects, the contract is unchanged.
s/Alan F. Liebowitz
Secretary
EXHIBIT 5
CITICORP LIFE INSURANCE COMPANY
Administrative Offices: 800 Silver Lake Blvd.
P.O. Box 7031
Dover, DE 19903
<TABLE>
<CAPTION>
Variable Annuity Application
(Make all checks payable to Citicorp Life Insurance Company)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Contract Name (First) (Middle) (Last) [ ] Male Tax ID/Social Security No.
Owner [ ] Female
----------------------------------------------------------------------------- ----------------------------
Street Address Date of Birth Telephone Number
----------------------------------------------------------------------------- ----------------------------
City State Zip Code
----------------------------------------------------------------------------- ----------------------------
2. Joint Contract Name (First) (Middle) (Last) [ ] Male Tax ID/Social Security No.
Owner [ ] Female
----------------------------------------------------------------------------- ----------------------------
(If any) Relation to Contract Owner Date of Birth Telephone Number
- ------------------------------------------------------------------------------------------------------- ----------------------------
3. Annuitant Name (First) (Middle) (Last) [ ] Male Tax ID/Social Security No.
(If other than Owner) [ ] Female
----------------------------------------------------------------------------- ----------------------------
Street Address Date of Birth Telephone Number
----------------------------------------------------------------------------- ----------------------------
City State Zip Code
- ------------------------------------------------------------------------------------------------------- ----------------------------
4. Joint Annuitant Name (First) (Middle) (Last) [ ] Male Tax ID/Social Security No.
(If any) [ ] Female
- ------------------------------------------------------------------------------------------------------- ----------------------------
5. Beneficiaries Name (First) (Middle) (Last) Percentage Relation to Contract Owner
Primary
----------------------------------------------------------------------------- ----------------------------
Name (First) (Middle) (Last) Percentage Relation to Contract Owner
Contingent
- ------------------------------------------------------------------------------------------------------- ----------------------------
6. Plan Type [ ] Non-Qualified [ ] Contributory IRA [ ] IRA Rollover [ ] IRA Transfer [ ] SEP [ ] 403(b)
[ ] Other ______________
[ ] 1035 Exchange (Complete 1035 Exchange Form) If IRA, indicate year for which payment is to be applied:
- ------------------------------------------------------------------------------------------------------------------------------------
7. Other Options Dollar Cost Averaging: [ ] Yes [ ] No Systematic Withdrawal: [ ] Yes [ ] No
Automatic Purchase: [ ] Yes [ ] No
If any of these options is elected, complete and submit appropriate election form with this application
- ------------------------------------------------------------------------------------------------------------------------------------
8. Premium Paid
Indicate in whole % the
allocation of the initial Total Premium Received with Application $____________
premium. Subsequent 1. ______% Fixed Account 6. ______% Fidelity VIP Products Fund Growth Portfolio
payments will be
allocated in the same 2. ______% Landmark VIP U.S. Government Fund 7. ______% AIM VI Capital Appreciation Fund
manner until changed.
3. ______% Landmark VIP Equity Fund 8. ______% MFS World Governments Series
4. ______% Landmark VIP Balanced Fund 9. ______% MFS Money Market Series
5. ______% Landmark VIP International 100 % Total (Allocation to each fund elected must
Equity Fund equal 10% or more)
- --------------------------- --------------------------------------------------------------------------------------------------------
9. Remarks
- --------------------------- --------------------------------------------------------------------------------------------------------
Have you purchased any other Citicorp Life annuity during the prior 12 months? [ ] Yes [ ] No
Will this annuity change or replace any existing annuity or life insurance policy? [ ] Yes [ ] No (If yes, give Co. name and
policy no. in "remarks)"
I (We) declare to the best of my (our) knowledge and belief that all of the answers herein are complete and true. I (We) agree that
this Application shall be part of the Contract issued by Citicorp Life Insurance Company. I (We) understand that annuity payments,
when based upon the investment experience of a separate account, are variable and are not guaranteed as to fixed dollar amount. I
(We) also acknowledge receipt of a current prospectus.
Signed At:________________________________________ Date ________________ Signature of Owner: ___________________________
Signature of Annuitant: ___________________________________________________ Signature of Joint Owner: _____________________
(If other than Owner)
- ------------------------------------------------------------------------------------------------------------------------------------
AGENT REPORT
To the best of my knowledge and belief, the annuity being applied for [ ] does, [ ] does not change or replace any other annuity or
life insurance policy.
Agent's Signature: ___________________________________ Print Agent's Name: _________________________________
Broker/Dealer Name: __________________________________ Agent Number: _______________________________________
Branch: ______________________________________________ Agent License No. (if applicable): __________________
Client Account No: ___________________________________ Agent's Phone No: ___________________________________
- ------------------------------------------------------------------------------------------------------------------------------------
63-1803(08-95)
</TABLE>
EXHIBIT 6(a)
State of Arizona
[Great Seal of the State of Arizona]
OFFICE OF THE
CORPORATION COMMISSION
I, JAMES MATTHEWS, EXECUTIVE SECRETARY OF THE ARIZONA CORPORATION
COMMISSION, DO HEREBY CERTIFY that FAMILY GUARDIAN LIFE INSURANCE COMPANY filed
an Amendment to their Articles of Incorporation on the 31st Day of August, 1993,
changing the name of the corporation to CITICORP LIFE INSURANCE COMPANY.
IN WITNESS WHEREOF, I have hereunto set
my hand and affixed the official seal of
the Arizona Corporation Commission. Done
at Phoenix, the Capitol, this
15th day of November, 1993, A.D.
[Arizona Corporation
Commission Seal] s/James Matthews
---------------------------------------
EXECUTIVE SECRETARY
By s/LuAnn Gilmore
---------------------------------------
<PAGE>
Articles of Amendment
to the
Articles of Incorporation
of
Family Guardian Life Insurance Company
RESOLVED, that Article IX of the Articles of Incorporation of the Corporation,
originally filed in the office of the Arizona Corporation Commission on March 1,
1971, and subsequently amended on January 29, 1975, February 24, 1975, and April
6. 1978, be amended so that Article IX reads as follows:
(1) The Corporation shall 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 or officer of the
Corporation, against expenses (including attorney's 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 reasonable cause to believe that
his conduct was unlawful.
(2) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgement
in its favor by reason of the fact that he is or was a director or officer
of the Corporation, against expenses (including attorney's fees) actually
and reasonably incurred by him in connection with the defense or settlement
of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
Corporation and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged
to be liable for negligence or misconduct in the performance of his duty to
the Corporation unless and only to the extent that the court having
jurisdiction in cases of equity of the State of Arizona or the court in
which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court having jurisdiction in cases of
equity of the State of Arizona or such other court shall deem proper.
<PAGE>
(3) The Corporation may indemnify any person who is or was an 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,
partnership, joint venture, trust or other enterprise to the extent and
under the circumstances provided by paragraphs 1 and 2 of this Article IX
with respect to a person who is or was a director or officer of the
Corporation.
(4) Any indemnification under paragraphs 1, 2 and 3 of this Article IX (unless
ordered by a court) shall be made by the Corporation only as authorized in
the specific case upon a determination that indemnification of the
director or officer is proper in the circumstances because he has met the
applicable standard of conduct set forth therein. Such determination shall
be made (a) by the Board of Directors by a majority vote of a quorum (as
defined in the by-laws of the Corporation) consisting of directors who were
not parties to such action, suit or proceeding, or (b) if such quorum is
not obtainable, or, even if obtainable a quorum of disinterested directors
so direct, by independent legal counsel in a written option, or (c) by the
stockholders.
(5) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the Board
of Directors of the Corporation in the manner provided in the next
preceding paragraph upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this Article IX.
(6) The indemnification provided by this Article IX shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any statute, by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office,
and shall continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(7) By action of its Board of Directors, notwithstanding any interest of the
directors in the action, the Corporation may cause to be purchased and
maintained insurance, in such amounts as the Board of Directors deems
appropriate, on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or of any corporation a majority of
the voting stock of which is owned by the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise, against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not
the Corporation would have the power or would be required to indemnify him
against such liability under the provisions of this Article IX or of the
General Corporation Law of the State of Arizona.
<PAGE>
[Arizona Corporation Commission
stamp of receipt dated July 27,1979]
[Arizona Corporation Commission stamp of
filing dated August 10, 1979]
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
GATEWAY LIFE INSURANCE COMPANY
Pursuant to the Provisions of Section 10-061 of the Arizona Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation:
FIRST: The name of the corporation is _____________________________
Gateway Life Insurance Company
SECOND: The following amendments of the Articles of Incorporation were
adopted by the shareholders of the corporation on February 24, 1978, in the
manner prescribed by the Arizona Business Corporation Act:
RESOLVED, that Article I of the Articles of Incorporation which now reads:
The name of the corporation shall be: GATEWAY LIFE INSURANCE COMPANY, be amended
to read as follows: The name of the corporation shall be: FAMILY GUARDIAN LIFE
INSURANCE COMPANY
THIRD: The number of shares of the corporation outstanding at the time of
such adoption was 1,100,000; and the number of shares entitled to vote thereon
was 1,100,000.
FOURTH: The designation and number of outstanding shares of each class or
series entitled to vote thereon as a class or series were as follows:
Class or Series Number of Shares
--------------- ----------------
Common, $1 par 1,100,000
FIFTH: The number of shares voted for such amendment was 1,100,000 ; and
the number of shares voted against such amendment was 0 .
[Arizona Department of Insurance [Arizona Department of Insurance
stamp indicating no conflict of stamp indicating receipt dated
title dated 3/26/77] 3/20/77]
<PAGE>
SIXTH: The number of shares of each class entitled to vote thereon as a
class or series voted for and against such amendment respectively, was:
Class or Series Number of Shares Voted
--------------- ----------------------
For Against
--- -------
Common, $1 par 1,100,000 0
SEVENTH: The manner in which any exchange, reclassification,
or cancellation of issued shares provided for in the amendment shall be effected
is as follows:
Share ownership will not be effected; existing certificates will
be cancelled and new certificates bearing the new name issued in
identical numbers of shares
EIGHTH: The manner in which such amendment effects a change in the amount
of stated capital, and the amount of stated capital as changed by such
amendment, are as follows:
None
Dated March 2, 1978.
GATEWAY LIFE INSURANCE COMPANY
By s/Peter A. Lefferts
------------------------------------
Its ______ President
and s/Gary R. Peterson
------------------------------------
Its Assistant Secretary
<PAGE>
State of Missouri
County of St. Louis
The foregoing instrument was acknowledged before me this 2nd day of March ,
1978 by Peter A. Lefferts and Gary R. Peterson of Gateway Life Insurance Company
a(n) Arizona corporation, on behalf of the corporation.
s/Naoma Cepisky
------------------------------------
Title Notary
<PAGE>
[Arizona Corporation Commission
stamp of Receipt dated
April 5, 1978]
[Arizona Corporation Commission
Incorporating Division
stamp of filing dated
April 6, 1978]
<PAGE>
AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
GATEWAY LIFE INSURANCE COMPANY
THIS IS TO CERTIFY that at a Special Meeting of the shareholders of the
GATEWAY LIFE INSURANCE COMPANY, a corporation organized and existing under and
by virtue of the laws of the State of Arizona, held at the office of CT
CORPORATION SYSTEM, at 1- North 18th Avenue, Phoenix, Arizona on the 22nd day of
January, 1975, pursuant to a written waiver of notice, of the time, place and
the purpose of such meeting having been sent to all shareholders by the
unanimous vote of all issued and outstanding stock, represented in person or by
proxy, a resolution was passed authorizing the amendment of Article VI of the
Articles of Incorporation of GATEWAY LIFE INSURANCE COMPANY, so that, Sentence
Three of Paragraph One of the Article VI reads as follows: The number of
Directors, not fewer than three (3), nor more than fifteen (15) shall be
designated and elected by the stockholders at their annual meeting to be held
the third Wednesday in April each year.
IN WITNESS WHEREOF, the said GATEWAY LIFE INSURANCE COMPANY, has caused
this certificate to be executed by its Vice President, and its corporate seal to
be affixed and attested by its Secretary, this 22nd day of January, A.D. 1975.
(CORPORATE SEAL) s/William J. Heron, Jr.
------------------------------
Vice President
William J. Heron, Jr.
ATTEST
s/Raymond S. Kozlowski
- ---------------------------------
Secretary
Raymond S. Kozlowski
<PAGE>
STATE OF MISSOURI
COUNTY OF ST. LOUIS
This instrument was acknowledged before me this 22nd day of January,
1975, by William J. Heron, Jr., as Vice President of GATEWAY LIFE INSURANCE
COMPANY, who stated that he executed such instrument on behalf of said company
for the purpose and consideration therein expressed.
My commission expires August 27, 1977
s/Mary Suttle Howard
------------------------------------
Notary Public
(NOTARIAL SEAL)
<PAGE>
AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
GATEWAY LIFE INSURANCE COMPANY
THIS IS TO CERTIFY that at a Special Meeting of the shareholders of the
GATEWAY LIFE INSURANCE COMPANY, a corporation organized and existing under and
by virtue of the laws of the State of Arizona, held at the office of CT
CORPORATION SYSTEM, at 1- North 18th Avenue, Phoenix, Arizona on the 10th day of
February, 1975, pursuant to a written waiver of notice of the time, place and
the purpose of such meeting having been sent to all shareholders by the
unanimous vote of all issued and outstanding stock, represented in person or by
proxy, a resolution was passed authorizing the amendment of Article VI of the
Articles of Incorporation of GATEWAY LIFE INSURANCE COMPANY, so that, Sentence
Three of Paragraph One of the Article VI reads as follows: The number of
directors, not fewer than five (5), nor more than fifteen (15) shall be
designated and elected by the stockholders at their annual meeting to be held
the third Wednesday in April each year.
IN WITNESS WHEREOF, the said GATEWAY LIFE INSURANCE COMPANY, has caused
this Certificate to be executed by its President and its Corporate Seal to be
affixed and attested by its Secretary, this 10th day of February, 1975.
(CORPORATE SEAL) s/Charles W. Morgan
------------------------------------
President
ATTEST
s/Raymond S. Kozlowski
- -----------------------------------------
Secretary
<PAGE>
STATE OF MISSOURI
COUNTY OF ST. LOUIS
This instrument was acknowledged before me this 10th day
of February, 1975, by Charles W. Morgan as President of
GATEWAY LIFE INSURANCE COMPANY, who stated that he executed such instrument on
behalf of said company for the purpose and consideration therein expressed.
My commission expires:
s/Mary Suttle Howard
------------------------------------
Notary Public
(NOTARIAL SEAL)
<PAGE>
ARTICLES OF INCORPORATION
OF
GATEWAY LIFE INSURANCE COMPANY
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, having associated ourselves together for the
purpose of forming a corporation under and by virtue of the laws of the State of
Arizona, hereby adopt the following Articles of Incorporation:
ARTICLE I
The name of the corporation shall be:
GATEWAY LIFE INSURANCE COMPANY
and its principal place of business in Arizona shall be Phoenix, Maricopa
County, but other places of business may be established and maintained within or
without the State of Arizona as the Board of Directors may designate, where
business of the corporation, including meetings of stockholders and directors,
may be conducted and held.
ARTICLE II
The names, residences and addresses of the incorporators (each of whom is
over the age of twenty-one (21) years) are as follows:
A. Russell M. M. Peot
2040 E. Willetta 74 West Moreland
Phoenix, Arizona Phoenix, Arizona
J. H. Gordon L. F. Anderson
325 West Holly 8560 No. 26th Avenue
Phoenix, Arizona Phoenix, Arizona
Douglas D. Morgan Acceptance Finance Company
2534 North 22nd Dr. 8012 Bonhomme
Phoenix, Arizona St. Louis, Missouri 63105
<PAGE>
ARTICLE III
The general nature of the business to be transacted by the corporation and
its powers are as follows:
To engage as a domestic limited stock insurance company in the life and
disability insurance business, insuring risks direct or as a reinsurer, or both,
but not exceeding the limits as provided by the laws of the State of Arizona,
and in particular Section 20-708, Arizona Revised Statutes. At such time as its
paid-in capital and surplus funds permit, and when it may legally do so, to
engage as a stock insurance company in the general life and disability insurance
business, free from the limitations imposed upon a domestic limited stock
insurance company. To enter into and perform life and disability insurance
contracts of all kinds, individual and group; to reinsure or accept reinsurance
of all of any part of any risk; to make investments of any kind and as permitted
by Title 20, Chapter 3, Article 2, Arizona Revised Statutes; to purchase or
otherwise acquire stock and securities of other corporations and to dispose of
the same, to buy, lease and otherwise acquire real estate, personalty,
appliances and equipment and to operate or use the same on a commission, lease
or other basis, and to sell, encumber and otherwise deal in and dispose thereof;
to enter into and perform contracts of every kind; to borrow or otherwise raise
money for any corporate purpose and to give corporate evidence of indebtedness
therefor and to encumber corporate property for the repayment thereof; to lend
any of its surplus funds with or without security; to purchase, acquire, hold
and sell its own stock and to exchange the same for stock in other corporations;
to engage in reorganizations and mergers; and without limiting the generality of
the foregoing powers and purposes, to do every other thing or act necessary or
expedient in carrying on the business of the corporation and which may be
permitted by Law.
- 2 -
<PAGE>
ARTICLE IV
The Authorized capital stock of the corporation shall be Five Million
Dollars ($5,000,000) and shall consist of five million (5,000,000) shares of
common stock of One Dollar ($1.00) par value each, any part of which shall be
issued at such times and in such manner as the Board of Directors may designate
and as may be permitted by Law. Each share of the capital stock shall be fully
paid for before being issued, and thereafter each share shall be nonassessable,
except to the extent which may be required by the Constitution and laws of the
State of Arizona.
ARTICLE V
The time of the commencement of this corporation shall be the day the
Certificate of Incorporation is issued by the Arizona Corporation Commission,
and its existence shall be perpetual.
ARTICLE VI
The affairs of the corporation shall be conducted by a Board of Directors,
and by such officers as the said Directors may at any time elect or appoint. No
officer or director need be a stockholder of this corporation. The number of
directors, not fewer than five (5), nor more than fifteen (15) shall be
designated and elected by the stockholders at their annual meeting to be held
the third Wednesday in April each year. Until the first annual meeting of
stockholders, or until their successors shall have been
elected and are qualified, but in any event for a term of not less than two (2)
months or more than one (1) year from the date the Certificate of Incorporation
is issued by the Arizona Corporation Commission, the following persons shall be
the first directors of this corporation and the first
- 3 -
<PAGE>
officers of this corporation, holding the offices set forth after their
respective names:
Meyer Frank President and Director
107 Lake Forest
St. Louis, Missouri 63117
Milton Ferman Vice-President and Director
63 Clermont Lane
St. Louis, Missouri 63124
Dan D. Morgan Secretary and Director
8310 Delcrest Street
St Louis, Missouri 63124
Charles W. Morgan Treasurer and Director
11604 Ladue Road
St. Louis, Missouri 63141
Larry S. Morgan Director
11833 Shallowbrook Dr.
St. Louis, Missouri 62141
The Directors shall have the power to adopt, amend and rescind By-Laws, to
fill vacancies occurring in the Board from any cause, and to appoint from their
own number an Executive Committee and other committees, and vest said committee
or committees with all the powers permitted by the By-Laws.
ARTICLE VII
The limitations on the corporation's indebtedness shall be such
indebtedness as is necessarily incurred in the normal operation of its insurance
business. Any indebtedness in excess of such limitation shall be first
authorized by the Board of Directors. In no event shall the corporation incur
indebtedness in excess of the amount authorized by law.
ARTICLE VIII
The private property of the Stockholders, Directors and Officers of the
corporation shall be forever exempt from its debts and obligations.
- 4 -
<PAGE>
ARTICLE IX
The corporation shall indemnify and hold harmless all of the directors and
officers from any liability of whatsoever kind or nature which may arise from
any acts performed by said Officers or Directors, so long as the same was
performed in good faith by said Officers and Directors. This indemnification
shall include the reimbursement by the Company to said officers of all expenses
incurred in defending or resisting all suits, actions, and charges of whatsoever
nature, whether in a court of law or administrative in nature, and shall
likewise include the reimbursement of said officers and directors of all legal
fees and court costs and court expenses incurred in the resisting of said
claims.
ARTICLE X
The capitol stock of this corporation may be increased or decreased and the
Articles of Incorporation may be amended by a majority of the issued and
outstanding shares of Common Stock. Any amendment may include any provision
which might lawfully be inserted in the articles filed for the first time at the
date of such amendment, except that no amendment shall reduce authorized capital
below the amount required by the laws of Arizona for the kinds of insurance
thereafter to be transacted.
ARTICLE XI
The Director of Insurance of the State of Arizona and his
successors in office, by whatever name called, shall be and he and they are
hereby irrevocably appointed as agent and agents for the service of lawful
process of every kind and character upon the corporation, and service upon such
agent or agents shall be deemed and held to be lawful personal service upon the
corporation.
IN WITNESS WHEREOF, we hereunto affix our signatures this 19th day of
February, 1971.
s/A.F. Russell s/M.M. Peot
- ------------------------------- ---------------------------
A. F. Russell M. M. Peot
s/J.H. Gordon s/L.F. Anderson
- ------------------------------- ---------------------------
J. H. Gordon L. F. Andersen
s/Douglas Morgan s/C.W. Morgan
- ------------------------------- ---------------------------
Douglas F. Morgan Acceptance Finance Company
by its President
- 5 -
<PAGE>
STATE OF ARIZONA
COUNTY OF MARICOPA
On this 19th day of February, 1971, before me personally appeared M. M. Peot, J.
H. Gordon and L. F. Anderson, known to me to be the persons whose names are
subscribed to the within instrument and acknowledged that they executed the same
for the purpose therein contained.
In Witness whereof I hereunto set my hand and official seal.
(Notarial Seal)
My. Comm. Expires s/Alene F. Russell
- --------------- -------------------------
April 14, 1974 Notary Public
STATE OF ARIZONA
COUNTY OF MARICOPA
On this 19th day of February, 1971, before me personally appeared A. F.
Russell, known to me to be the person whose name is subscribed to the within
instrument and acknowledged that she executed the same for the purpose therein
contained
In Witness whereof I hereunto set my hand and official seal.
(Notarial Seal)
My. Comm. Expires s/Margaert M. Peot
June 8, 1973 -------------------------
Notary Public
STATE OF ARIZONA
COUNTY OF MARICOPA
On this 19th day of February , 1971, before me personally appeared Douglas
D. Morgan, known to me to be the person whose name is subscribed to the within
instrument and acknowledged that he executed the same for the purpose therein
contained
IN WITNESS WHEREOF I hereunto set my hand and official seal.
(Notarial Seal)
My. Comm. Expires s/Alene F. Russell
April 14, 1974 -------------------------
Notary Public
STATE OF MISSOURI
COUNTY OF ST LOUIS
On this 8th day of February, 1971, before me personally appeared before me
Charles W. Morgan, President of Acceptance Finance Company, and as such
President, being authorized so to do, executed the foregoing instrument for the
purposes therein contained, by signing the name of the corporation by himself as
President.
IN WITNESS WHEREOF I hereunto set my hand and official seal.
(Notarial Seal)
My. Comm. Expires s/Chas D. Ashlock
- --------------- -------------------------
Aug. 12, 1972 Notary Public
<PAGE>
[Arizona Insurance Department
stamp indicating acceptance of
corporate title dated 3-1-1971]
[State of Arizona, County of Maricopa
County Recorder
stamp of filing dated
March 1, 1971]
[Arizona Corporation Commission
stamp of filing dated
March 1, 1971]
EXHIBIT 6(b)
BY-LAWS
of
CITICORP LIFE INSURANCE COMPANY
ARTICLE I.
Offices
SECTION 1. Registered Office - The registered office of Citicorp Life
Insurance Company (the "Corporation") shall be in the City of Phoenix, County of
Maricopa, State of Arizona.
SECTION 2. Other Offices - The Corporation may establish or discontinue,
from time to time, such other offices and places of business within or without
the State of Arizona as may be deemed proper for the conduct of the
Corporation's business.
ARTICLE II.
Meetings of Stockholders
SECTION 1. Annual Meeting - The annual meeting of stockholders for the
election of directors and the transaction of such other business as may properly
come before the meeting shall be held on such date within thirteen months
subsequent to the last annual meeting of stockholders at such place, either
within or without the State of Arizona, and at such hour as shall be specified
in a notice given as provided in Section 3 of this Article II or in a waiver of
notice thereof.
SECTION 2. Special Meetings - Special meetings of the stockholders may be
called at any time by the Board of Directors and shall be called by the
Secretary upon the written request, stating the purpose or purposes of any such
meeting, of the holders of common stock who hold of record collectively at least
twenty percent of the outstanding shares of common stock. Such meetings shall be
held at such place, wither within or without the State of Arizona, and at such
date and hour as shall be specified in a notice given as provided in Section 3
of this Article II or in a waiver of notice thereof. Unless limited by law, the
Articles of Incorporation, the By-Laws, or by the terms of the notice thereof,
any and all business may be transacted at any special meeting of stockholders.
SECTION 3. Notice of Meetings - Except as otherwise provided or permitted
by law, the Articles of Incorporation, or the By-Laws, notice of each meeting of
stockholders shall be given to each stockholder of record entitled to vote
thereat either by delivering such notice to him personally or by mailing the
same to him. If mailed, the notice shall be directed to the stockholder in a
postage-prepaid envelope at his address it appears on the records of the
Corporation unless, prior to the time of mailing, he shall have filed with the
Secretary a written
<PAGE>
request that notices intended for him be mailed to some other address, in which
case it shall be mailed to the address designated in such request. Notice of
each meeting of stockholders shall be in such form as is approved by the Board
of Directors, or the President, and shall state the place, date and hour of the
meeting, and if for a special meeting, the purpose or purposes for which the
meeting is called, and shall be given not less than five nor more than fifty
days before the date of the meeting. No notice of the time and place of an
adjourned annual or special meeting of stockholders need be given other than by
announcement at the meeting at which such adjournment is taken.
SECTION 4. Organization - The President shall act as chairman at all
meetings of stockholders and as such chairman shall call all meetings of
stockholders to order and preside thereat. The Board of Directors may designate
an alternate chairman for any meeting of stockholders, and if the President is
absent from a meeting and such an alternate chairman has been designated
therefor, he shall act as chairman of the meeting. In the absence of the
President, and such an alternate chairman, or if no such alternate chairman has
been designated for a meeting and the President is absent therefrom, any
stockholder or the proxy of any stockholder entitled to vote at the meeting may
call the meeting to order and a chairman shall be elected, who shall preside
thereat. The Secretary of the Corporation shall act as secretary at all meetings
of the stockholders, but in his absence, the chairman of the meeting may appoint
any person present to act as secretary of the meeting.
SECTION 5. Quorum and Adjournment - Except as otherwise provided by law or
by the Articles of Incorporation, the holders of a majority of the shares of
stock entitled to vote at the meeting shall constitute a quorum and all meetings
of the stockholders. In the absence of a quorum, the holders of a majority of
the shares of stock present in person or by proxy and entitled to vote may
adjourn any meeting, from day to day, until a quorum shall attend, not to exceed
ten days. At any such adjourned meeting at which a quorum may be present, any
business may be transacted which might have been transacted at the meeting as
originally called. No notice of any adjourned meeting need be given other than
by announcement at the meeting that is being adjourned.
SECTION 6. Action Without Meeting - Any action of the stockholders
permitted by law, the Articles of Incorporation or these By-Laws, at any annual
or special meeting of the stockholders may be taken without a meeting if a
consent in writing, setting forth the action so taken, is signed by all of the
stockholders entitled to vote with respect to the subject matter thereof. Such
consent shall have the same effect as a unanimous vote.
SECTION 7. Vote of Stockholders - Except as otherwise required by law or
the Articles of Incorporation, all action by stockholders shall be taken at
stockholders' meetings unless the Board of Directors shall determine that such
action shall be taken by written consent of stockholders. Each stockholder shall
be entitled to cast in person or by written proxy one vote for each share of
stock standing in his name upon the stock books of the Corporation. All proxies
shall be filed with the Secretary of the Corporation as part of his records. The
vote in the election of directors at a meeting of stockholders shall be by
ballot unless the Board of
-2-
<PAGE>
Directors determines otherwise, and the vote upon any question before a meeting
of stockholders shall be by ballot if so directed by the chairman of the
meeting. In a vote by ballot, each ballot shall state the number of shares voted
and the name of the stockholder of proxy voting. Except as otherwise required by
law or by the Articles of Incorporation, directors to be elected at a meeting of
stockholders shall be elected by a plurality of the votes cast at such meeting
by the holders of shares entitled to vote in the election and whenever any
corporate action, other than the election of directors, is to be taken by vote
of the stockholders at a meeting thereof, it shall be authorized by a majority
of the votes cast at such meeting by the holders of stock entitled to vote
thereon.
ARTICLE III.
Board of Directors
SECTION 1. Number - The Board of Directors shall consist of not less than
three directors who need not be stockholders of the Corporation. The directors
shall be elected by the stockholders at their annual meeting of each year and
shall hold their office until the next annual meeting of the stockholders or
until their successors shall have been elected and qualified. Any vacancy in the
Board of Directors may be filled for the unexpired term by the majority vote of
the remaining directors at any regular or special meeting of the Board. The
Board of Directors may at such time as it deems advisable, select from its
members a Chairman of the Board of Directors.
SECTION 2. General Powers - The business, properties and affairs of the
Corporation shall be managed by the Board of Directors, which, without limiting
the generality of the foregoing, shall have power to appoint the officers of the
Corporation, to appoint and direct agents, and to grant general or limited
authority to officers, employees and agents of the Corporation to make, execute
and deliver contracts and other instruments and documents in the name and on
behalf of the Corporation and over its seal, without specific authority in each
case. In addition, the Board of Directors may exercise all the powers of the
Corporation and do all lawful acts and things which are not reserved to the
stockholders by law or the Articles of Incorporation.
SECTION 3. Place of Meeting - Meetings of the Board of Directors, whether
regular or special, shall be held at such place within or without the State of
Arizona as may, from time to time, be fixed by resolution of the Board of
Directors, provided that the place so fixed for any meeting may be changed to
another place, in the case of a regular meeting by order of the President, and,
in the case of a special meeting, by order of the person or persons at whose
request the meeting is called, if in either case such other place is specified
in a notice given as provided in Section 6 of this Article III or in a waiver of
notice thereof.
SECTION 4. Annual Meeting - A newly elected Board of Directors shall meet
and organize, as soon as practicable, after each annual meeting of stockholders,
at the place last fixed by the Board of Directors pursuant to Section 3 of this
Article III, without notice of such
-3-
<PAGE>
meeting, provided a majority of the whole Board of Directors is present. If such
a majority is not present, such organization meeting may be held at any other
time or place which may be specified in a notice given as provided in Section 6
of this Article III or in a waiver of notice thereof. Any business which may
properly be transacted by the Board of Directors may be transacted at any annual
meeting thereof.
SECTION 5. Regular Meetings - The Board of Directors shall meeting, without
notice, on such dates, and at such hours, as may, from time to time, be fixed by
resolution of the Board of Directors and, if any such date shall be a legal
holiday, the meeting, unless the Board of Directors shall otherwise determine,
shall be held at the same place where the meeting was to be held, on the next
succeeding business day not a legal holiday, at the hour fixed as aforesaid. Any
regular meeting may be canceled upon notice to the directors by order of the
Board of Directors at any previous meeting or by order of the Chairman or the
President, and in such event shall not be held. Any business which properly may
be transacted by the Board of Directors may be transacted at any regular meeting
thereof.
SECTION 6. Special Meetings: Notice and Waiver of Notice - Special meetings
of the Board of Directors shall be called by the Secretary on the request of the
Chairman or the President, or on the request in writing of any two directors
stating the purpose or purposes of such meeting. Notice of any special meeting
shall be in form approved by the Chairman or the President, or if the meeting is
called pursuant to the request of some other directors and there shall be a
failure to approve the form of notice as aforesaid, then in form approved by
such directors. Notices of special meeting shall be mailed to each director,
addressed to him at his residence or usual place of business, not later than two
days before the day on which the meeting is to be held, or shall be sent to him
at such place by telegraph, or be delivered personally or by telephone, not
later than the day before such day of meeting. Notice of any meeting of the
Board of Directors need not be given to any director, if waived by him in
writing, before, at, or after such meeting is held, or if he shall be present at
the meeting without pretesting, prior thereto or at its commencement, the lack
of notice to him; and any meeting of the Board of Directors shall be a legal
meeting without any notice thereof having been given, if all the members shall
be present thereat. Unless limited by law, the Articles of Incorporation, the
By-Laws, or by the terms of the notice thereof, any and all business may be
transacted at any special meeting.
SECTION 7. Organization - The Chairman or the President shall preside at
all meetings of the Board of Directors. In the absence of the Chairman and the
President, a temporary chairman may be chosen by the members of the Board of
Directors present. The Secretary of the Corporation shall act as the secretary
at all meetings of the Board of Directors and in his absence, a temporary
secretary shall be appointed by the chairman of the meeting.
SECTION 8. Quorum and Manner of Acting - At every meeting of the Board of
Directors, a majority of the entire Board of Directors shall constitute a
quorum; and, except as otherwise provided by law, or by Section 1 of Article IV,
the vote of a majority of the directors present at any such meeting shall be the
act of the Board of Directors. In the absence of a
-4-
<PAGE>
quorum, a majority of the directors present may adjourn any meeting from time to
time, until a quorum is present. No notice of any adjourned meeting need be
given other than by announcement at the meeting that is being adjourned.
SECTION 9. Voting - On any question on which the Board of Directors or the
Executive Committee of the Board of Directors (which Committee is provided for
in Article IV and is hereinafter referred to as the "Executive Committee") shall
vote, the names of those voting and their votes shall be entered in the minutes
of the meeting when any member of the Board of Directors or the Executive
Committee so requests.
SECTION 10. Resignations - Any director may resign at any time either by
oral tender of resignation at any meeting of the Board of Directors or by such
tender to the Chairman or the President, or by giving written notice thereof to
the corporation. Any resignation shall be effective immediately unless a date
certain is specified for it to take effect.
SECTION 11. Action Without Meeting - Any action of the Board of Directors
or a committee permitted by law, the Articles of Incorporation or these By-Laws,
at any annual, regular or special meeting of the Board of Directors or any
meeting of a committee may be taken without a meeting if a consent in writing,
setting forth the action so taken, is signed by all of the directors or
committee members, as the case may be, entitled to vote with respect to the
subject matter thereof. Such consent shall have the same effect as a unanimous
vote.
ARTICLE IV
Executive Committee; Other Committees
SECTION 1. Executive Committee:
(a) Constitution and Powers - The Board of Directors may, by resolution
adopted by the affirmative vote of a majority of the whole Board of
Directors, appoint an Executive committee consisting of three or more
directors, and of whom the Chairman of the Board, the President, or an
active Vice President shall be a member, which shall have and may exercise,
when the Board of Directors is not in session, all the powers of the Board
of Directors in the management of the business and affairs of the
Corporation including authority to take all action provided in the By-Laws
to be taken by the Board of Directors, may authorize the seal of the
Corporation to be affixed to all papers which may require it. The Board of
Directors may appoint one of the members of the Executive Committee to be
its Chairman.
(b) Meetings - The Executive Committee may make rules for holding and
conducting its meetings and shall keep minutes thereof. Such minutes shall
be submitted at the next regular meeting of the Board of Directors, and any
action
-5-
<PAGE>
taken by the Board of Directors with respect thereto shall be entered in
the minutes of the Board of Directors. All acts done and powers conferred
by the Executive Committee from time to time shall be deemed to be, and may
be certified as being, done or conferred under authority of the Board.
SECTION 2. Investment Committee - The investments of the Corporation shall
be managed and controlled by an Investment Committee. The Investment Committee
shall consist of at least three (3) members who shall be appointed by the Board
of Directors from its own membership at the annual meeting of the Board of
Directors to serve until the next succeeding annual meeting and until their
successors on the Committee have been appointed. The Board shall have the power
at any time to fill vacancies in, to change the membership of, to change the
number of members of, to designate one or more alternate members of, or to
dissolve the Investment Committee.
The Investment Committee shall have and may exercise, when the Board is not
in session, all the rights and powers of the Board of Directors to make,
supervise, and control the investments of the Corporation, inclusive of all real
and personal property acquired by virtue of or incidental to any investment, to
sell, assign, exchange, lease or otherwise dispose of such investments and
property, and to do and perform all things deemed necessary and proper in
relation to such investments and property.
The Committee shall keep a record of its proceedings and shall adopt its
own rules of procedure except that a quorum shall consist of at least three (3)
members not more than two (2) of whom may be officers or salaried employees of
the Corporation. The Committee shall submit copies of its minutes to the Board
of Directors.
SECTION 3. Other Committees - The Board of Directors may from time to time
by resolution create such other committee or committees of Directors, officers,
employees or other persons designated by the Board, to advise with the Board,
the Executive Committee, the Investment Committee and the officers and employees
of the Corporation in all such matters as the Board shall deem advisable, and
with such functions and duties as the Board shall by resolution prescribe. A
majority of all members of any such committee may determine its action and fix
the time and place of its meetings, unless the Board of Directors shall
otherwise provide. The Board of Directors shall have power to change the members
of any such committee at any time, and to discharge any such committee, either
with or without cause at any time.
SECTION 4. Place and Call of Meetings: Notice and Waiver of Notice -
Meetings of committees of the Board of Directors shall be held at such places as
the committee in question may, from time to time, determine and may be called by
the Chairman of such committee or by the Secretary at the request of any other
member thereof. Notice of any meeting of any committee of the Board of Directors
shall be in form approved by the Chairman of such committee, or if the meeting
is called pursuant to the request of some other member of such committee and
there is a failure to approve the form of notice as aforesaid, then in the form
-6-
<PAGE>
approved by such member. The provisions of Section 6 of Article III with respect
to the giving and waiver of notice of special meetings of the Board of Directors
shall also apply to all meetings of such committee.
SECTION 5. Participation in Meetings by Conference Telephone - Members of
the Board of Directors, or of any committee thereof, may participate in a
meeting of such board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and such participation shall constitute presence in
person at such meeting.
ARTICLE V.
The Officers
SECTION 1. Officers - The Corporation shall have a President, may have a
Chairman of the Board, one or more Executive Vice Presidents, one or more Senior
Vice Presidents, one or more Vice Presidents, an Actuary or Consulting Actuary,
and shall have a Secretary and Treasurer; and such officers shall be appointed
by the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, General Counsel, and such other
officers and agents as in their judgment the business of the Corporation may
require, and any such officers other than General Counsel may be appointed,
subject to the authority of the Board of Directors, by the President or Chairman
of the Board.
SECTION 2. Term of Office - All officers shall hold office during the
pleasure of and until removed by the Board of Directors, or until, in the case
of officers who may be appointed by the President or the Chairman of the Board,
removed by the President or the Chairman of the Board.
SECTION 3. Resignations - Any officer may resign at any time either by oral
tender of resignation to the President or the Chairman of the Board or by giving
written notice thereof to the Corporation. Any resignation shall be effective
immediately unless a date certain is specified for it to take effect.
SECTION 4. The President - The President shall be the Chief Executive
Officer of the Corporation, and shall have general executive powers as well as
the specific powers conferred by these By-Laws. He shall preside at meetings of
the Board of Directors and at meetings of the stockholders.
SECTION 5. The Executive Vice Presidents - Each Executive Vice President
shall have general executive powers as well as the specific powers conferred by
these By-Laws and shall have such further powers and duties as may from time to
time be assigned to him by the Board of Directors or the President. In the
absence of the President, the Executive Vice President shall perform any and all
duties of the President.
-7-
<PAGE>
SECTION 6. The Senior Vice Presidents - Each Senior Vice President shall
have general executive powers as well as the specific powers conferred by these
By-Laws and shall have such further powers and duties as may from time to time
be assigned to him by the Board of Directors or the President. In the absence of
the President and Executive Vice President, a Senior Vice President shall
perform any and all duties of the President.
SECTION 7. The Vice Presidents - The several Vice Presidents shall perform
such duties and have such powers as may, from time to time, be assigned to them
by the Board of Directors or the President. In the absence of the President,
Executive Vice President or Senior Vice President, a Vice President shall
perform any and all duties of the President.
SECTION 8. The Secretary - The Secretary shall attend to the giving of
notice of all meetings of stockholders and of the Board of Directors and
committees thereof, and shall keep minutes of all proceedings at meetings of the
stockholders and of the Board of Directors as well as of all proceedings at all
meetings of regular committees of the Board of Directors. He shall have charge
of the corporate seal and shall have authority to attest any and all instruments
or writings to which the same may be affixed. He shall have charge of the stock
ledger and shall keep and account for all books, documents, papers and records
of the Corporation, except those for which some other officer or agent is
properly accountable. He shall generally perform all the duties usually
appertaining to the office of Secretary of a corporation. In the absence of the
Secretary, any Assistant Secretary or such other person as shall be designated
by the President shall perform his duties.
SECTION 9. The Treasurer - The Treasurer shall have the care and custody of
all the funds of the Corporation and shall deposit the same in such banks,
including any banking affiliates of the Corporation, or other depositories as
the Board of Directors, committees appointed by the Board of Directors, or any
officer or officers, or any officer and agent jointly, thereunto duly authorized
by the Board of Directors, shall, from time to time, direct or approve. He shall
keep a full and accurate account of all moneys received and paid on account of
the Corporation, and shall render a statement of his accounts whenever the Board
of Directors shall require. He shall perform all other necessary acts and duties
in connection with the administration of the financial affairs of the
Corporation, and shall generally perform all the duties usually appertaining to
the office of Treasurer of a corporation. When required by the Board of
Directors, he shall give bonds for the faithful discharge of his duties in such
sums and with such sureties as the Board of Directors shall approve. In the
absence of the Treasurer, any Assistant Treasurer or such other person as shall
be designated by the president shall perform his duties.
SECTION 10. The Actuary - The Actuary shall perform the duties customarily
performed by Actuaries of life insurance companies.
SECTION 11. Offices - Any two or more offices may be held by the same
person, except the offices of President and Secretary.
-8-
<PAGE>
SECTION 12. Salaries - The salaries of the officers of the Corporation and
all other salaries shall be fixed by the Board of Directors or in its absence,
by the Executive Committee.
SECTION 13. Authorized Signatures - All vouchers, checks, drafts or any
other orders for the payment of money issued on or against any bank in the
limits of the United States of America, in which this Corporation may have funds
on deposit, or other evidence of indebtedness issued by said bank or banks,
shall be signed by such persons as are duly authorized by resolution of the
Board of Directors. In the event funds of the company are deposited in
depositories outside the limits of the United States of America, all vouchers,
checks, drafts or any other orders for the payment of money issued on or against
any foreign depository in which the Corporation may have funds on deposit, or
any other evidences of indebtedness issued by said bank, or banks, shall be
signed by such persons as may from time to time be authorized by resolution of
the Board of Directors or by the Executive Committee pursuant to authorization
granted by the Board of Directors.
ARTICLE VI.
Stock and Transfers of Stock
SECTION 1. Stock Certificates - The stock of the Corporation shall be
represented by certificates signed by the President or any Executive or Senior
Vice President or Vice President and the Secretary or any assistant Secretary
and the seal of the Company shall be impressed thereon. Where any such
certificate is countersigned by a Transfer Agent, other than the Corporation or
its employee, or by a Registrar, other than the Corporation or its employee, any
other signature on such certificate may be facsimile, engraved, stamped or
printed. In case any such officer, Transfer Agent or Registrar who has signed or
whose facsimile signature has been placed upon any such certificate shall have
ceased to be such officer, Transfer Agent or Registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if such
officer, Transfer Agent or Registrar were such officer, Transfer Agent or
Registrar at the date of its issue. The certificates representing the stock of
the Corporation shall be in such form as shall be approved by the Board of
Directors.
SECTION 2. Transfer Agents and Registrars - The Board of Directors may, in
its discretion, appoint one or more banks or trust companies from time to time
to act as Transfer Agent and Registrars of the stock of the Corporation; and
upon such appointments being made, no stock certificate shall be valid until
countersigned by one of such Transfer Agents and registered by one of such
Registrars.
SECTION 3. Transfer of Stock - Transfers of stock shall be made on the
books of the Corporation only by the person named in the certificate, or by
attorney lawfully constituted in writing, and upon surrender and cancellation of
a certificate or certificates for a like number of shares of the same class of
stock, with a duly executed assignment and power of transfer endorsed thereon or
attached thereto, and with such proof of the authenticity of the signatures
-9-
<PAGE>
as the Corporation or its agents may reasonably require. No transfer of stock
other than on the records of the Corporation shall affect the right of the
Corporation to pay any dividend upon the stock to the holder of record thereof
or to treat the holder of record as the holder in fact thereof for all purpose,
and no transfer shall be valid, except between the parties thereto, until such
transfer shall have been made upon the records of the Corporation.
SECTION 4. Lost Certificates - In case any certificate of stock shall be
lost, stolen or destroyed, the Board of Directors, in its discretion, or any
officer or officers or any agent or agents thereunto duly authorized by the
Board of Directors, may authorize the issue of a substitute certificate in place
of the certificate so lost, stolen or destroyed, and may cause or authorize such
substitute certificate to be countersigned by the appropriate Transfer Agent (or
where such duly authorized agent is the Transfer Agent may itself countersign),
if any, and registered by the appropriate Registrar, if any; provided, however,
that, in each such case, the applicant for a substitute certificate shall
furnish to the Corporation and to such of its Transfer Agents and Registrars as
may require the same, evidence to their satisfaction, in their discretion, of
the loss, theft or destruction of such certificate and of the ownership thereof,
and also such security or indemnity as may by them be required.
ARTICLE VII.
Corporate Seal
SECTION 1. Seal - The seal of the Corporation shall be in such form as may
be approved, from time to time, by the Board of Directors. ----
SECTION 2. Affixing and Attesting - The seal of the Corporation shall be in
the custody of the Secretary, who shall have power to affix it to the proper
corporate instruments and documents, and who shall attest it. In his absence, it
may be affixed and attested by any Assistant Secretary or by the Treasurer or
any Assistant Treasurer or by any other person or persons as may be designated
by the Board of Directors.
ARTICLE VIII.
Dividends
SECTION 1. Dividends - Dividends on the issued and outstanding stock from
the profits made by the Corporation, not including the surplus arising from the
sale of stock, may be declared by the Board of Directors, from time to time. The
Board of Directors shall fix the date of payment of dividends and the record
date of stock entitled thereto.
-10-
<PAGE>
ARTICLE IX.
Miscellaneous
SECTION 1. Execution of Contracts and other Instruments - The President,
any Executive Vice President, any Senior Vice President, any Vice President, the
Secretary and the Treasurer shall each have general authority to execute
contracts, bonds, deeds and powers of attorney in the name and on behalf of the
Corporation. Any contract, bond, deed or power of attorney may also be executed
in the name of and on behalf of the Corporation by such other officer or such
other agent as the Board of Directors may from time to time direct. The
provisions of this Section 1 are supplementary to any other provision by these
By-Laws.
SECTION 2. Shares of Other Corporations - The President, any Executive Vice
President, any Senior Vice President, and any Vice President, is authorized to
vote, represent and exercise on behalf of the Corporation, all rights incident
to any and all shares of any other corporation or corporations standing in the
name of the Corporation. The authority herein granted to said officer to vote or
represent on behalf of the Corporation any and all shares held by the
Corporation in any other corporation or corporations may be exercised either by
said officer in person or by any person authorized to do so by proxy or power of
attorney duly executed by said officer. Notwithstanding the above, however, the
Board of Directors, in its discretion, may designate by resolution the person to
vote or represent said shares of other corporations.
SECTION 3. References to Article and Section Numbers and to the Certificate
of Incorporation - Whenever in the By-Laws reference is made to an Article or
Section number, such reference is to the number of an Article or Section of the
By-Laws. Whenever in the By-Laws reference is made to the Certificate of
Incorporation, such reference is to the Certificate of Incorporation of the
Corporation, as amended.
ARTICLE X.
Amendments
The By-Laws may be altered, amended or repealed, and new By-Laws adopted,
from time to time, at the annual meeting of the stockholders, or at a special
meeting of the stockholders, or by the Board of Directors at any regular or
special meeting.
-11-
EXHIBIT 8(a)
AMENDMENT NO. 1 TO PARTICIPATION AGREEMENT AMONG
VARIABLE INSURANCE PRODUCTS FUND
FIDELITY DISTRIBUTORS CORPORATION
and
CITICORP LIFE INSURANCE COMPANY
WHEREAS, CITICORP LIFE INSURANCE COMPANY (the "Company"), VARIABLE
INSURANCE PRODUCTS FUND (the "Fund") and FIDELITY DISTRIBUTORS CORPORATION have
previously entered into a Participation Agreement (the "Agreement") containing
certain arrangements concerning prospectus costs; and
WHEREAS, the Trustees of the Fund have approved certain changes to the
expense structure of the Fund; and
NOW, THEREFORE, the parties do hereby agree to amend the Agreement by
substituting the following arrangement in place of any inconsistent language in
the Participation Agreement, wherever found:
1. The Fund will provide to the Company each year, at the Fund's cost, such
number of prospectuses and Statements of Additional Information as are actually
distributed to the Company's then-existing variable life and/or variable annuity
contract owners.
2. If the Company takes camera-ready film or computer diskettes containing
the Fund's prospectus and/or Statement of Additional Information in lieu of
receiving hard copies of these documents, the Fund will reimburse the Company in
an amount computed as follows. The number of prospectuses and Statements of
Additional Information actually distributed to existing contract owners by the
Company will be multiplied by the Fund's actual per-unit cost of printing the
documents.
3. The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund in order to verify that
the prospectuses and Statements of Additional Information provided to the
Company, or the reimbursement made to the Company, are or have been used only
for the purposes set forth hereinabove.
IN WITNESS WHEREOF we have set our hand as of the 15th day of December,
1994.
CITICORP LIFE INSURANCE COMPANY
By: s/Charles R. Haskins
---------------------------
Name: Charles R. Haskins
---------------------------
Tittle: E.V.P.
---------------------------
VARIABLE INSURANCE PRODUCT FUND FIDELITY DISTRIBUTORS CORPORATION
By: s/J. Gary Burkhead By: s/Kurt A. Lange
--------------------------- --------------------
Name: J. Gary Burkhead Name: Kurt A. Lange
--------------------------- --------------------
Tittle: Senior Vice President Title: President
--------------------------- --------------------
<PAGE>
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND,
FIDELITY DISTRIBUTORS CORPORATION
and
CITICORP LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the 17th day of October, 1994
by and among CITICORP LIFE INSURANCE COMPANY, (hereinafter the "Company"), an
Arizona corporation, on its own behalf and on behalf of each segregated asset
account of the Company set forth on Schedule A hereto as may be amended from
time to time (each such account hereinafter referred to as the "Account"), and
the VARIABLE INSURANCE PRODUCTS FUND, an unincorporated business trust organized
under the laws of the Commonwealth of Massachusetts (hereinafter the "Fund") and
FIDELITY DISTRIBUTORS CORPORATION (hereinafter the "Underwriter"), a
Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively, the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and the
Underwriter (hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each representing the interest in a particular managed portfolio of
securities and other assets, any one or more of which may be made available
under this Agreement, as may be amended from time to time by mutual agreement of
the parties hereto (each such series hereinafter referred to as "Portfolio");
and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated October 15, 1985 (File No. 812-6102), granting Participating
Insurance Companies and variable annuity and variable life insurance separate
accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940
Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
1
<PAGE>
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable life
insurance or variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable annuity contracts; and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those shares of the Fund
which each Account orders, executing such orders on a daily basis at the net
asset value next computed after receipt by the Fund or its designee of the order
for the shares of the Fund. For purposes of this Section 1.1, the Company shall
be the designee of the Fund for receipt of such orders from each Account and
receipt by such designee shall constitute receipt by the Fund; provided that the
Fund receives notice of such order by 10:00 a.m. 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 Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
2
<PAGE>
1.2 The Fund agrees to make its shares available indefinitely for purchase
at the applicable net asset value per share by the Company and its Accounts on
those days on which the Fund calculates its net asset value pursuant to rules of
the Securities and Exchange Commission and the Fund shall use reasonable efforts
to calculate such net asset value on each day which the New York Stock Exchange
is open for trading. Notwithstanding the foregoing, the Board of Trustees of the
Fund (hereinafter the "Board") may refuse to sell shares of any Portfolio to any
person, or suspend or terminate the offering of shares of any Portfolio if such
action is required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the Board acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5 The Fund agrees to redeem for cash, on the Company's request, any full
or fractional shares of the Fund held by the Company, executing such requests on
a daily basis at the net asset value next computed after receipt by the Fund or
its designee of the request for redemption. For purposes of this Section 1.5,
the Company shall be the designee of the Fund for receipt of requests for
redemption from each Account and receipt by such designee shall constitute
receipt by the Fund; provided that the Fund receives notice of such request for
redemption on the next following Business Day.
1.6 The Company agrees that purchases and redemptions of Portfolio shares
offered by the then current prospectus of the Fund shall be made in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available under the variable annuity contracts with the form number(s) which are
listed on Schedule A attached hereto and incorporated herein by this reference,
as such Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto, (the "Contracts") shall be invested in the
Fund, in such other Funds advised by the Adviser as may be mutually agreed to in
writing by the parties hereto, or in the Company's general account, provided
that such amounts may also be invested in an investment company other than the
Fund if (a) such other investment company, or series thereof, has investment
objectives or policies that are substantially different from the investment
objectives and policies of all the Portfolios of the Fund; or (b) the Company
gives the Fund and the Underwriter 45 days written notice of its intention to
make such other investment company available as a funding vehicle for the
Contracts; or (c) such other investment company was available as a funding
vehicle for the Contracts prior to the date of this Agreement and the Company so
informs the Fund and Underwriter prior to their signing this Agreement (a
3
<PAGE>
list of such funds appearing on Schedule C to this Agreement); or (d) the Fund
or Underwriter consents to the use of such other investment company.
1.7. The Company shall pay for Fund shares on the next Business Day after
an order to purchase Fund shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire. For
purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal funds
so wired, such funds shall cease to be the responsibility of the Company and
shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or any Account. Shares
ordered from the Fund will be recorded in an appropriate title for each Account
or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Company of any income, dividends or capital gain
distributions payable on the Fund's shares. The Company hereby elects to receive
all such income dividends and capital gain distributions as are payable on the
Portfolio shares in additional shares of that Portfolio. The Company reserves
the right to revoke this election and to receive all such income dividends and
capital gain distributions in cash. The fund shall notify the Company of the
number of shares so issued as payment of such dividends and distributions.
1.10 The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated (normally by 6:30 p.m. Eastern time)
and shall use its best efforts to make such net asset value per share available
by 7 p.m. Eastern time.
ARTICLE II. Representations and Warranties
2.1 The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable Federal and State laws
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established each
Account prior to any issuance or sale thereof as a segregated asset account
under Section 20-651 of the Arizona Insurance Code and has registered or, prior
to any issuance or sale of the Contracts, will register each Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts.
2.2 The Fund represents and warrants that Fund shares sold pursuant to this
Agreement shall be registered under the 1933 Act, duly authorized for issuance
and sold in compliance with the laws of the State of Arizona and all applicable
federal and state securities laws and that the Fund is and shall remain
registered under the 1940 Act. The Fund shall amend
4
<PAGE>
the Registration Statement for its shares under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of its
shares. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Fund or the Underwriter.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4 The Company represents that the Contracts are currently treated as
endowment or annuity or life insurance contracts, under applicable provisions of
the Code and that it will make every effort to maintain such treatment and the
it will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. The Fund has adopted a "no
fee" or "defensive" Rule 12b-1 Plan under which it makes no payments for
distribution expenses. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have a board of
trustees, a majority of whom are not interested persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distribution expenses.
2.6 The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Arizona and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Arizona to the extent required to perform this
Agreement.
2.7. The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Arizona and all applicable state and
federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly existing
under the laws of the Commonwealth of Massachusetts and that it does and will
comply in all material respects with the 1940 Act.
5
<PAGE>
2.9 The Underwriter represents and warrants that the Adviser is and shall
remain duly registered in all material respects under all applicable federal and
state securities laws and that the Adviser shall perform its obligations for the
Fund in compliance in all material respects with the laws of the State of
Arizona and any applicable state and federal securities laws.
2.10 The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, in an amount not less $5
million. The aforesaid includes coverage for larceny and embezzlement is issued
by a reputable bonding company. The Company agrees to make all reasonable
efforts to see that this bond or another bond containing these provisions is
always in effect, and agrees to notify the Fund and the Underwriter in the event
that such coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements: Voting
3.1. The Underwriter shall provide the Company (at the Company's expense)
with as many copies of the Fund's current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
for the Fund is amended) to have the prospectus for the Contracts and the Fund's
prospectus printed together in one document (such printing to be at the
Company's expense.)
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter (or in the Fund's
discretion, the Prospectus shall state that such Statement is available from the
Fund), and the Underwriter (or the Fund), at its expense, shall print and
provide such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such Statement.
3.3. The Fund, at its expense, shall provide the Company with copies of its
proxy statements, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
6
<PAGE>
(ii) vote the Fund shares in accordance with instructions received
from Contract owners; and
(iii) vote Fund shares for which no instructions have been received in
the same proportion as Fund shares of such portfolio for which
instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with the standards set forth on Schedule B
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the Fund
or its designee, each piece of sales literature or other promotional material in
which the Fund or its investment adviser or the Underwriter is named, at least
fifteen Business Days prior to its use. No such material shall be used if the
Fund or its designee reasonably objects to such use within fifteen Business Days
after receipt of such material.
4.2. The Company shall not give any information or make any representations
or statement on behalf of the Fund or concerning the Fund in connection with the
sale of the Contracts other than the information or representations contained in
the registration statement or prospectus for the Fund shares, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in reports or proxy statements for the Fund, or in sales literature
or other promotional material approved by the Fund or its designee or by the
Underwriter, except with the permission of the Fund or the Underwriter or the
designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall cause
to be furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company and/or its separate
accounts(s), is named at least fifteen Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably objects to such
use within fifteen Business Days after receipt of such material.
7
<PAGE>
4.4. The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the Contracts or
each Account, contemporaneously with the fling of such document with the SEC or
other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, any of the following that
refer to the Fund or any affiliate of the Fund: advertisements (such as material
published, or designed for use in, a newspaper, magazine, or other periodical,
radio, television, telephone or tape recording, videotape display, signs or
billboards, motion pictures, or other public media), sales literature (i.e., any
written communication distributed or made generally available to customers or
the public, including brochures, circulars, research reports, market letters,
form letters, seminar texts, reprints or excerpts of any other advertisement,
sales literature, or published article), educational or training materials or
other communications distributed or made generally available to some or all
agents or employees, and registration statements, prospectuses, Statements of
Additional Information, shareholder reports, and proxy materials.
ARTICLE V. Fees and Expenses
5.1. The fund and Underwriter shall pay no fee or other compensation to the
Company under this agreement, except that if the Fund or any Portfolio adopts
and implements a plan pursuant to Rule 12b-1 to finance distribution expenses,
the Underwriter may make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Underwriter in writing and such
payments will be made out of existing fees otherwise payable to the Underwriter,
past profits of the Underwriter or other resources available to the
8
<PAGE>
Underwriter. No such payments shall be made directly by the Fund. Currently, no
such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed advisable by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the expenses for
the cost of registration and qualification of the Fund's shares, preparation and
filing of the Fund's prospectus and registration statement, proxy materials and
reports, setting the prospectus in type, setting in type and printing the proxy
materials and reports to shareholders (including the costs of printing a
prospectus that constitutes an annual report), the preparation of all statements
and notices required by any federal or sate law, and all taxes on the issuance
or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of printing and distributing the
Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification
6.1. The Fund will at all times invest money from the contracts in such a
manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the scope
of the foregoing, the Fund will at all times comply with Section 817(h) of the
Code and Treasury Regulation 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts and
any amendments or other modifications to such Section or Regulations. In the
event of a breach of this Article VI by the Fund, it will take all reasonable
steps (a) to notify Company of such breach and (b) to adequately diversify the
Fund so as to achieve compliance with the grace period afforded by Regulation
817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Board shall
9
<PAGE>
promptly inform the Company if it determines that an irreconcilable material
conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of its
disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
10
<PAGE>
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the fund be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 to establish a new funding
medium for the Contracts if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the irreconcilable
material conflict. In the event that the Board determines that any proposed
action does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the Account's investment in the Fund and terminate this
Agreement within six (6) months after the Board informs the Company in writing
of the foregoing determination, provided, however, that such withdrawal and
termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
the (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2- and
6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this
Agreement shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s) as so
amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund and each
trustee of the Board and officers and each person, if any, who controls the Fund
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company) or litigation (including legal and other expenses), to
which the Indemnified Parties may become subject under any statute, regulation,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Registration
Statement or prospectus for the Contracts or contained in the Contracts or
sales literature for the Contracts (or any amendment or supplement to any
of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material
11
<PAGE>
fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in conformity
with information furnished to the Company by or on behalf of the Fund for
use in the Registration Statement or prospectus for the Contracts or in the
Contracts or sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the Registration
Statement, prospectus or sales literature of the Fund not supplied by the
Company, or persons under its control) or wrongful conduct of the Company
or persons under its control, with respect to the sale or distribution of
the Contracts or Fund Shares; or
(iii) Arise out of any untrue statement or alleged untrue statement of
a material fact contained in a Registration Statement, prospectus, or sales
literature of the Fund or any amendment thereof or supplement thereto or
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance upon
information furnished to the Fund by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Company, as limited by and in accordance with the provisions of
Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such may
arise from such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Company in writing
within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon
such Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to
12
<PAGE>
notify the Company of any such claim shall not relieve the Company from any
liability which it may have to the Indemnified party against whom such
action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified
Parties, the Company shall be entitled to participate, at its own expense,
in the defense of such action. The Company also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Company to such party of the Company's
election to assume the defense thereof, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund Shares or the Contracts or
the operation of the Fund.
8.2 Indemnification by the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for the purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter) or litigation (including legal and other
expenses ) to which the Indemnified Parties may become subject under any
statute, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement
or prospectus or sales literature of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Underwriter
or Fund by or on behalf of the Company for use in the Registration
Statement or prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection with the
sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the Registration
Statement,
13
<PAGE>
prospectus or sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful conduct of the
Fund, Adviser or Underwriter or persons under their control, with
respect to the sale or distribution of the Contracts or Fund shares;
or
(iii)arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus, or
sales literature covering the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
to the company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement (including
a failure, whether unintentional or in good faith or otherwise, to
comply with the diversification requirements specified in Article VI
of this Agreement); or
(v) arise out of or result from any material breach of any representation
and/or warranty made by the Underwriter in this Agreement or arise out
of or result from any other material breach of this Agreement by the
Underwriter; as limited by and in accordance with the provisions of
Sections 8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, which ever is applicable.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses
14
<PAGE>
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for the purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement (including
a failure to comply with the diversification requirements specified in
Article VI of this Agreement); or
(ii)arise out of or result from any material breach of any representation
and/or warranty made by the Fund in this Agreement or arise out of or
result from any other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as such may arise from such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Fund in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve the Fund from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
15
<PAGE>
Indemnified Parties, the Fund will be entitled to participate, at its own
expense, in the defense thereof. The Fund also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the Fund
of the commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of either Account, or
the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2 This Agreement shall be subject to the provisions of the 1933, 1934 and
1940 acts, and the rules and regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant (including, but not limited to, the Shared Funding
Exemptive Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by 90 days advance written
notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio based upon the Company's
determination that shares of such Portfolio are not reasonably
available to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in accordance
with applicable state and/or federal law or such law precludes the use
of such shares as the underlying investment media of the Contracts
issued or to be issued by the Company; or
16
<PAGE>
(d) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company under
Subchapter M of the Code or under any successor or similar provision,
or if the Company reasonably believes that the Fund may fail to so
qualify; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio the event that such
Portfolio fails to meet the diversification requirements specified in
Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written notice to
the Company, if either one or both of the Fund or the Underwriter
respectively, shall determine, in their sole judgment exercised in
good faith, that the Company and/or its affiliated companies has
suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement or
is the subject of material adverse publicity; or
(g) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Fund or the Underwriter has
suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement or
is the subject of material adverse publicity; or
(h) termination by the Fund or the Underwriter by written notice to the
Company, if the Company gives the Fund and the Underwriter the written
notice specified in Section 1.6(b) hereof and at the time such notice
was given there was no notice of termination outstanding under any
other provision of this Agreement; provided, however any termination
under this Section 10.1(h) shall be effective 60 days after the notice
specified in Section 1.6(b) was given.
10.2 Effect of Termination. Not withstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.2 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.3 The Company shall not redeem Fund shares attributable to the Contracts
(as opposed to Fund shares attributable to the Company's assets held in the
Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of
17
<PAGE>
the 1940 Act. Upon request, the Company will promptly furnish to the Fund and
the Underwriter the opinion of counsel of the Company (which counsel shall be
reasonably satisfactory to the Fund and the Underwriter) to the effect that any
redemption pursuant to clause (ii) above is a Legally Required Redemption,.
Furthermore, except in cases where permitted under the terms of the Contracts,
the Company shall not prevent Contract Owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first giving
the Fund or the Underwriter 90 days notice of its intention to do so.
ARTICLE IX. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
Citicorp Life Insurance Company
One Court Square, 25th Floor
Long Island City, NY 11120
Attention: Alan F. Liebowitz
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. Miscellaneous
12.1 All persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of the
owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
18
<PAGE>
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid by a
court decision, stature, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.8. This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Underwriter may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Underwriter, if such assignee is duly licensed and registered
to perform the obligations of the Underwriter under this Agreement.
12.9. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory accounting
principles), as soon as practical and in any event within 90 days
after the end of each fiscal year;
(b) the Company's quarterly statements (statutory), as soon as practical
and in any event within 45 days after the end of each quarterly
period;
(c) any financial statement, proxy statement, notice or report of the
Company sent to stockholders and/or policyholders, as soon as
practical after the delivery thereof to stockholders;
19
<PAGE>
(d) any registration statement (without exhibits) and financial reports of
the Company filed with the Securities and Exchange Commission or any
state insurance regulator, as soon as practical after the filing
thereof;
(e) any other report submitted to the Company by independent accountants
in connection with any annual , interim or special audit made by them
of the books of the Company, a soon as practical after the receipt
thereof, but only if such report contains material adverse financial
information concerning the Company.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
CITICORP LIFE INSURANCE COMPANY
By: s/Charles R. Haskins
---------------------------------
Name: Charles R. Haskins
---------------------------------
Title: E. V. P.
---------------------------------
VARIABLE INSURANCE PRODUCTS FUND
By: s/J. Gary Burkhead
---------------------------------
Name: J. Gary Burkhead
---------------------------------
Title: Senior V. P.
---------------------------------
FIDELITY DISTRIBUTORS CORPORATION
By: s/Kurt A. Lange
---------------------------------
Name: Kurt A. Lange
---------------------------------
Title: President
---------------------------------
20
<PAGE>
Schedule A
Separate Accounts and Associated Contracts
Name of Separate Account and Date Policy Form Numbers of Contracts Funded
Established by Board of Directors By Separate Account
Citicorp Life Variable Annuity 63-1103(05-94)
Separate Account
(July 6, 1994)
21
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy statement.
Underwriter will provide the last Annual Report to the Company pursuant to
the terms of Section 3.3 of the Agreement to which this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the
Card before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of votes
(already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
22
<PAGE>
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document). Printed
and folded notices and statements will be sent to Company for insertion
into envelopes (envelopes and return envelopes are provided and paid for by
the Insurance Company). Contents of envelope sent to Customers by Company
will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the Company
or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small, single
sheet of paper that requests Customers to vote as quickly as possible
and that their vote is important. One copy will be supplied by the
Fund.)
e. cover letter - optional, supplied by Company and reviewed and approved
in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company
as the shareowner. (A 5-week period is recommended.) Solicitation time
is calculated as calendar days from (but not including) the meeting,
counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For Example, If the account registration is under "Bertram C. Jones,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
23
<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, a new
Card and return envelope. The mutilated or illegible Card is disregarded
and considered to be not received for purposes of vote tabulation. Any
Cards that have "kicked out" (e.g. mutilated, illegible) of the procedure
are "hand verified," i.e., examined as to why they did not complete the
system. Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, than an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated
in terms of a percentage and the number of shares.) Fidelity Legal must
review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Eastern time.
Fidelity Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
Fidelity Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
24
<PAGE>
SCHEDULE C
Non-Fidelity investment companies currently available under variable annuities
or variable life insurance issued by the Company:
AIM Variable Insurance Funds, Inc.
MFS Variable Insurance Trust
Landmark Variable Insurance Products Fund
25
<PAGE>
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
CITICORP LIFE INSURANCE COMPANY
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this day of November, 1994 by and
among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), CITICORP LIFE INSURANCE COMPANY, an Arizona corporation (the
"Company"), on its own behalf and on behalf of the Citicorp Life Variable
Annuity Separate Account (the "Account") and other segregated asset accounts of
the Company (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 dully 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 Investor Services, 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 amended (hereinafter the "1934 Act"), and is
a member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD");
<PAGE>
WHEREAS, Landmark Funds Broker-Dealer Services, Inc., the underwriter for
the individual variable annuity and the variable life policies, is registered as
a broker-dealer with 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 "Share") 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 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 and 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 holders on that Business Day), executing such requests on a daily
basis at the net asset value next computed after receipt 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. Purchase, redemption and exchange orders placed by the Company shall
be placed separately for each Portfolio and shall not be netted. 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
-2-
<PAGE>
redemption orders with respect to each Portfolio and shall transmit one net
payment per Portfolio in accordance with Section 1.6.
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 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 net asset value per share
for each Portfolio available to the Company on each Business Day 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. 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 net asset value available to the Company. If the Trust provides
materially incorrect share 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 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 CONVENANTS
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 federal laws, including without limitation the 1933 Act, the
Securities Exchange Act of 1934, as amended (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 the 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 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, 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 make
every effort to maintain
-3-
<PAGE>
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 Landmark Funds Broker-Dealer
Services, 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 Landmark Funds Broker-Dealer Services, 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 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 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").
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
-4-
<PAGE>
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 funded by the Shares. The Trust or
its designee, at the Company's expense, shall print and provide such
statement to the Company (or 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 form
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.
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
-5-
<PAGE>
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.
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 holders or prospective Policy
holders) 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.
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. 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 provided 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,
-6-
<PAGE>
the Trust or its 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 examinations.
4.6. The Trust and MFS will provide the Company with as much notice as is
reasonably practicable 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 of 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 expense 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
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 any,
under Rule 12b-1 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 and proxy materials 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
-7-
<PAGE>
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 they will use every
effort to ensure that each Portfolio of the Trust will meet the
diversification requirements of Section ss.17(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 of the Trust will
elect to be qualified as a Regulated Investment Company under Subchapter M
of the Code and that every effort will be made to maintain such
qualification (under Subchapter M or any successor or similar provision)
and that the Trust or its designee will notify the Company promptly upon
having a reasonable basis for believing that any Portfolio of the Trust has
ceased to so qualify or that any Portfolio might not so qualify in the
future.
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The Trust agrees that the 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 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 disregard. The
Company also agrees that, if a material irreconcilable conflict arises, it
will at is own cost remedy such conflict up to an 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 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.
-8-
<PAGE>
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
shares funding (as defined in the Mixed and Shared Funding Exemptive Order)
on terms and conditions materially different from those contained in the
Mixed 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, 7.4 and 7.5 of this Agreement shall continue in
effect only to the extent that terms and conditions substantially identical
to such Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1 Indemnification by the Company
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 an 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 of 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 the Policies or
sales literature or other promotional material for the Policies
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the commission 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 for use in the registration statement, prospectus or
statement of additional information for the Policies or in 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
-9-
<PAGE>
Company or this 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 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 form 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:
(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 statement 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
-10-
<PAGE>
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 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
(d) 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
(e) 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 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) 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 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.
8.5. Promptly after receipt by an Indemnified Party under this Section 8.5.
of commencement of 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.
-11-
<PAGE>
8.6. 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.
8.7. 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.
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
(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
-12-
<PAGE>
(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) day's 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 material breach of any provision of this Agreement; or
(i) upon assignment of this Agreement, unless made with the written
consent of the parties hereto.
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.
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.
-13-
<PAGE>
ARTICLE XII. 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:
MFS Variable Insurance Trust
500 Boylston Street
Boston, Massachusetts 02116
Attn: Stephen E. Cavan, Secretary
If to the Company:
Citicorp Insurance Group
Citibank, N.A.
One Court Square
Long Island City, NY 11120
Attn: Alan F. Liebowitz, Senior Vice President
General Counsel and Secretary
If to MFS:
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
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. The 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.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
-14-
<PAGE>
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.
-15-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified above.
CITICORP LIFE INSURANCE COMPANY
By its authorized officer,
By: s/Charles R. Haskins
---------------------------------
Title: E. V. P.
---------------------------------
MFS VARIABLE INSURANCE TRUST, on behalf of the Portfolios
By its authorized officer and not individually,
By: s/Steven E. Cavan
---------------------------------
Title: Secretary
---------------------------------
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: s/A. Keith Brodkin
---------------------------------
Title: Chairman
---------------------------------
-16-
<PAGE>
As of November , 1994
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
<CAPTION>
Name of Separate
Account and Date Policies Funded Portfolios
Established by Board of Directors by Separate Account Applicable to Policies
--------------------------------- ------------------- ----------------------
<S> <C> <C>
Citicorp Life Variable Annuity Separate 63-1103(05-94) MFS World Governments Series
Account (July 6, 1994) MFS Money Market Series
</TABLE>
-17-
EXHIBIT 8(b)
NINTH ADDENDUM TO LETTER OF INTENT
BETWEEN CITICORP INSURANCE SERVICES, INC. ("CISI")
AND CITICORP LIFE INSURANCE COMPANY ("CLIC")
DATED APRIL 11, 1991 (the "Agreement")
The Agreement is hereby amended as follows:
1. Paragraph 4 is deleted in its entirety and replaced with the following:
4. (a) For the Insurance Products listed in Exhibit 1, CISI shall receive
as compensation for its services a service fee calculated as collected
premiums less:
(a) premium tax defined as 2.5% of collected premium;
(b) 5% of gross premiums for overhead/profit;
(c) all marketing fees paid to the Plan Sponsor: and
(d) claims costs as detailed in Exhibit 4 attached hereto.
(b) For the additional Insurance Products listed in Exhibit 2, CISI
shall receive a servicing fee equal to 10% of gross premiums per
product to be paid on a monthly basis.
(c) For the Insurance Products reinsured by CLIC as listed in Exhibit
3, CISI shall receive a service fee calculated as collected
premium less:
(a) premium tax defined as 2.5% of collected premiums;
(b) 2.5% of gross premiums as a ceding fee;
(c) 5% of gross premiums for overhead/profit;
(d) all marketing fees paid to the Plan Sponsor; and
(e) claims costs as detailed in Exhibit 4 hereto.
All fees due to the ceding company shall be paid by CISI on
behalf of CLIC on or before the 15th day after the end of each
month.
<PAGE>
(d) For all annuity products, CISI shall receive a service fee
calculated as follows:
Fee
---
Variable Annuities
------------------
Per contract issued $33.00
Per year, per contract $40.00
force
Fixed Annuities
---------------
Per contract issued $26.00
Per year, per contract $32.00
in force
2. A new Exhibit 2 is attached hereto.
IN WITNESS WHEREOF, the parties have hereunto signed this Addendum as of
the dates written below.
CITICORP INSURANCE SERVICES, INC.
By: s/Larry D. Williams
------------------------------
Date: 12/14/94
CITICORP LIFE INSURANCE COMPANY
By: s/Alan F. Liebowitz
------------------------------
Date: 12/14/94
FG INSURANCE CORPORATION
By: s/Alan F. Liebowitz
------------------------------
Date: 12/14/94
2
<PAGE>
EXHIBIT 2
Additional Products
1. Level Term Insurance
2. CitiSafeguard (Credit Life Insurance)
3. CitiSafeguard (Credit Accident Insurance)
4. Monthly Outstanding Balance Insurance
5. Universal Life Insurance
6. CreditShield
3
<PAGE>
EIGHTH ADDENDUM TO SERVICING AGREEMENT
DATED APRIL 11, 1991 BETWEEN CITICORP LIFE
INSURANCE COMPANY ("CLIC") AND CITICORP
INSURANCE SERVICES, INC. ("CISI") (the "Agreement")
Reference is made to the Sixth and Seventh Addenda of this Agreement. Due
to an oversight, FG Insurance Corporation, which was subsequently added as a
party to this Agreement,did not execute either Addenda. It is hereby agreed,
that upon execution of this Eighth Addendum, FG Insurance Corporation hereby
approves the Sixth and Seventh Addenda of this Agreement as though herein set
out at length. FG Insurance Corporation shall hereinafter be referred to, along
with CLIC, collectively, as "Insurer".
In addition, the Agreement is hereby amended by adding Section 11 as
follows:
11. Insurer shall provide 30 days' written notice to CISI of
termination or cancellation of the Agreement.
IN WITNESS WHEREOF, the parties have hereunto signed this agreement as of
the date written below.
CITICORP LIFE INSURANCE COMPANY
By: s/Alan F. Liebowitz
Name: ALAN F. LIEBOWITZ
Date: 10/6/94
FG INSURANCE CORPORATION
By: s/Alan F. Liebowitz
Name: ALAN F. LIEBOWITZ
Date: 10/6/94
CITICORP INSURANCE SERVICES, INC.
By: s/Alan F. Liebowitz
Name: ALAN F. LIEBOWITZ
Date: 10/6/94
<PAGE>
SEVENTH ADDENDUM TO LETTER OF INTENT
BETWEEN CITICORP INSURANCE SERVICES, INC. ("CISI")
AND CITICORP LIFE INSURANCE COMPANY ("CLIC")
DATED APRIL 11, 1991 (the "Letter")
The Agreement is hereby amended effective as to all insurance, described in
Exhibits 1, 2 and 3, in force on July 1, 1993 and for all new business written
on or after July 1, 1993 as follows:
1. Paragraph 4 is deleted in its entirety and replaced with the following:
4. (a) For the Insurance Products listed in Exhibit 1, CISI shall receive
as compensation for its services a service fee calculated as collected
premiums less:
(a) premium tax defined as 2.5% of collected premium;
(b) 5% of gross premiums for overhead/profit;
(c) all marketing fees paid to the Plan Sponsor: and
(d) claims costs as detailed in Exhibit 4 attached hereto.
(b) For the additional Insurance Products listed in Exhibit 2, CISI
shall receive a servicing fee equal to 10% of gross premiums per
product to be paid on a monthly basis.
(c) For the Insurance Products reinsured by CLIC as listed in Exhibit
3, CISI shall receive a service fee calculated as collected
premium less:
(a) premium tax defined as 2.5% of collected premiums;
(b) 2.5% of gross premiums as a ceding fee;
(c) 5% of gross premiums for overhead/profit;
(d) all marketing fees paid to the Plan Sponsor; and
(e) claims costs as detailed in Exhibit 4 hereto.
<PAGE>
All fees due to the ceding company shall be paid by CISI on behalf of
CLIC on or before the 15th day after the end of each month.
2. New Exhibits 3 and 4 as attached hereto are added to the Letter.
IN WITNESS WHEREOF, the parties have hereunto signed this Addendum as of
the dates written below.
CITICORP INSURANCE SERVICES, INC.
By: s/Larry D. Williams
Date: 4/26/94
CITICORP LIFE INSURANCE COMPANY
By: s/John T. Oates
Date: 5/2/94
<PAGE>
EXHIBIT 1
INSURANCE PRODUCTS
1. Term Life Insurance
2. Accidental Death & Dismemberment rider
3. Hospital Indemnity Plan ("HIP Insurance") (including
emergency room and child coverage as upfront riders)
4. Intensive Care Unit rider
5. Surgical rider
6. Accidental Death rider
7. Short Term Disability Insurance
<PAGE>
EXHIBIT 2
Additional Products
1. Level Term Insurance
2. CitiSafeguard (Credit Life Insurance)
3. CitiSafeguard (Credit Accident Insurance)
4. Monthly Outstanding Balance Insurance
5. Universal Life Insurance
6. Annuities
7. CreditShield
<PAGE>
EXHIBIT 3
Insurance Products Reinsured by CLIC
1. Hospital Indemnity Plan (#8692) including, but not limited
to, coverages issued under group policies #PCD-300, PCD-301,
and PCD-307
2. High Face Term (#8260)
3. Savings Protector Plan (#8338) (Accidental Death/Term Life)
4. Multi Protector Plan (#8583) (Accidental Death and
Dismemberment/Short Term Disability/Term Life/Daily Hospital
Benefit-Accidents Only)
5. Female Term Insureds Effective 10/01/91 and later (#8540),
excluding insureds who were cancelled and reissued on
10/01/91 as part of the transfer of business.
<PAGE>
EXHIBIT 4
Claims Costs
As of July 1, 1993, the claims cost for each of the following products shall be
calculated as a percentage of gross premium for each policy/certificate in
force.
SAVINGS MULTI
YEAR HIP TERM PROTECTOR PROTECTOR
- ---- --- ---- --------- ---------
1 13% 20% 15% 16%
2 29% 35% 15% 16%
3 45% 50% 15% 16%
4 46% 65% 15% 16%
5 47% 75% 15% 16%
6 48% 85% 15% 16%
7 49% 85% 15% 16%
8 50% 85% 15% 16%
9 52% 85% 15% 16%
10 53% 85% 15% 16%
<PAGE>
SIXTH ADDENDUM TO SERVICING AGREEMENT
DATED APRIL 11, 1991 BETWEEN FAMILY GUARDIAN LIFE
INSURANCE COMPANY ("FGLIC") AND
CITICORP INSURANCE SERVICES, INC. ("CISI")
(the "Agreement")
Due to the corporate name change of FGLIC from Family Guardian Life
Insurance Company to Citicorp Life Insurance Company, it is agreed that all
references in the Agreement to "FGLIC" shall now refer to Citicorp Life
Insurance Company ("CLIC"). In all other respects, the Agreement is unchanged.
This Addendum shall become effective as of August 31, 1993.
IN WITNESS WHEREOF, the parties have hereunto signed this Addendum as of
the date written below.
CITICORP LIFE INSURANCE COMPANY
By: s/Alan F. Liebowitz
Name: ALAN F. LIEBOWITZ
Date: 1/4/94
CITICORP INSURANCE SERVICES, INC.
By: s/Alan F. Liebowitz
Name: ALAN F. LIEBOWITZ
Date: 1/4/94
<PAGE>
FIFTH ADDENDUM TO LETTER OF INTENT
BETWEEN CITICORP INSURANCES SERVICES, INC. ("CISI")
AND FAMILY GUARDIAN LIFE INSURANCE COMPANY
("FGLIC") DATED APRIL 11, 1991 (the "Letter Agreement")
It is agreed that effective April 11, 1991, all references in the Letter
Agreement to FGLIC shall include a reference to Family Guardian Life Insurance
Company's affiliate insurers, First Citicorp Life Insurance Company, (formerly
known as Family Guardian Life Insurance Company of New York) and FG Insurance
Corporation, as applicable.
IN WITNESS WHEREOF, the parties have hereunto signed this Addendum as of
the dates written below.
FAMILY GUARDIAN LIFE FIRST CITICORP LIFE
INSURANCE COMPANY INSURANCE COMPANY
By: s/Alan F. Liebowitz By: s/Alan F. Liebowitz
Name: ALAN F. LIEBOWITZ Name: ALAN F. LIEBOWITZ
Date: May 7, 1993 Date: May 7, 1993
CITICORP INSURANCE FG INSURANCE CORPORATION
SERVICES, INC.
By: s/John T. Oates By: s/John T. Oates
Name: JOHN T. OATES Name: JOHN T. OATES
Date: May 11, 1993 Date: May 11, 1993
<PAGE>
FOURTH ADDENDUM TO LETTER OF INTENT
BETWEEN
CITICORP INSURANCE SERVICES, INC. ("CISI")
AND FAMILY GUARDIAN LIFE INSURANCE COMPANY ("FGLIC")
DATED APRIL 11, 1991 (the "Letter Agreement")
The Letter Agreement is hereby amended by adding section 10 as follows:
10. Insurer shall provide at least fifteen (15) days written notice to the
Director of Insurance of the State of Arizona of termination or
cancellation or any other change in the agreement.
IN WITNESS WHEREOF, the parties have here unto signed this Addendum as of
the date written below.
CITICORP INSURANCE SERVICES, INC.
By: s/John T. Oates
Title: PRESIDENT
Date: 3/3/93
FAMILY GUARDIAN LIFE INSURANCE
COMPANY
By: s/Alan F. Liebowitz
Title: SR. V.P., GENERAL COUNSEL&SECY
Date: 3/2/93
<PAGE>
THIRD ADDENDUM TO LETTER OF INTENT
BETWEEN
CITICORP INSURANCE SERVICES, INC. ("CISI")
AND FAMILY GUARDIAN LIFE INSURANCE COMPANY ("FGLIC")
DATED APRIL 11, 1991 (the "Letter Agreement")
The Letter Agreement is hereby amended by deleting section 3.1(d) in its
entirety and replacing it with the following:
3.1 (d) Receive premiums (either directly, through its parent, Citibank, N.A.
or other automatic billing and collection facilities) and record same and
deposit such premiums in a bank account, which it will maintain in a
fiduciary capacity solely for FGLIC, not later than the final day of each
month. Payments received by CISI shall be deemed to have been received by
FGLIC and the payment of return premiums or claims by FGLIC to CISI is not
considered payment to the insured or claimant until the payments are
received by the insured or claimant. CISI agrees that premium funds will
not be commingled with any other funds, except that prior to the time they
are deposited in CISI's account, they may be commingled by Citibank, N.A.
to the extent permissible by a national bank. FGLIC agrees to maintain on
file with Citibank, N.A. or the other automatic billing and collection
facilities, as the case may be, instructions: i) authorizing such entities
to credit payments directly to CISI, FGLIC, or other person or entity
entitled thereto; and ii) such other instructions as may, from time to
time, be necessary to facilitate the orderly conduct of business.
IN WITNESS WHEREOF, the parties have here unto signed this Addendum as of
the dates written below.
CITICORP INSURANCE SERVICES, INC.
By: s/John T. Oates
Title: PRESIDENT
Date: 11/9/92
FAMILY GUARDIAN LIFE INSURANCE
COMPANY
By: s/Alan F. Liebowitz
Title: SR. V.P. & SECRETARY
Date: 11/5/92
<PAGE>
SECOND ADDENDUM TO LETTER OF INTENT
BETWEEN
CITICORP INSURANCE SERVICES, INC. ("CISI")
AND FAMILY GUARDIAN LIFE INSURANCE COMPANY ("FGLIC")
DATED APRIL 11, 1991 (the "Letter Agreement")
The Letter Agreement is hereby amended by deleting paragraph 3 in its
entirety and replacing it with the following:
3.1 CISI agrees that it will perform or arrange for the performance of the
following services on behalf of FGLIC:
a. Receive applications from prospective insureds and perform all legally
permissible activities necessary to process them for the issuance of
coverage or reject them in accordance with the criteria established by
FGLIC. FGLIC will establish objective criteria upon which CISI
employees may base accept/reject determinations. Any application for
which an accept/reject determination cannot be made based on these
objective criteria must be forwarded to FGLIC for a determination.
b. Issue and mail policies or certificates of FGLIC to Insureds, follow
up on incomplete applications, send general correspondence to
applicants or send letters of rejection, as the situation demands, in
accordance with the procedures established by FGLIC.
c. Maintain true and accurate accounting and statistical records as
mutually agreed upon including premium and coverage records during the
term of this Agreement and for such time thereafter as may be mutually
agreed upon, but in no event for less than six years.
d. Receive premiums (either directly, through its parent, Citibank, N.A.
or other automatic billing and collection facilities) and record same
and deposit such premiums in a bank account, which it will maintain in
a fiduciary capacity solely for FGLIC, not later than the final day of
each month. Payments received by CISI shall be deemed to have been
received by the FGLIC. CISI agrees that premium funds will not be
commingled with any other funds, except that prior to the time they
are deposited in CISI's account, they may be commingled by Citibank,
N.A. to the extent permissible by a national bank. FGLIC agrees to
maintain on file with Citibank, N.A. or the other automatic billing
and collection facilities, as the case may be, instructions: i)
authorizing such entities to credit payments directly to CISI, FGLIC,
or other person or entity entitled thereto; and ii) such other
<PAGE>
nstructions as may, from time to time, be necessary to
facilitate the orderly conduct of business.
e. Arrange for premium collection through credit card or demand deposit
or other automatic billing and collection facilities or prepare and
mail premium notices to Insureds at the then effective premium rates.
f. Transmit additional premium notices, termination notices, lapse
notices, reinstatement offers, and other notices to Insureds on a
timely basis and in the manner and fashion as provided by FGLIC.
g. Implement rate increases upon instruction from FGLIC, including any
pre-notification.
h. Handle policy changes as specified by FGLIC.
i. Receive and process incoming general correspondence and telephone
inquiries of a routine nature in accordance with the procedures set
forth by FGLIC. Inquiries of a non-routine nature shall be forwarded
immediately to FGLIC in accordance with the standards set forth by
FGLIC, which standards are designed to enable FGLIC to comply with
statutory mandates regarding complaints and timeliness standards
applicable to legal actions.
j. CISI shall provide notice to each Insured of the services it will be
performing as Plan Administrator on behalf of FGLIC.
k. Provide claim forms to persons requesting them. Receive completed
claim forms and proof of loss, and perform all legally permissible
activities necessary to process claims in accordance with the criteria
set forth by FGLIC. FGLIC will establish objective criteria upon which
CISI may base a determination to pay a claim. With respect to any
claims for which a favorable decision cannot be made based on these
objective criteria, CISI will forward the claim with all pertinent
support and documentation to FGLIC's representative(s) who will be
located at or near CISI's premises for final adjudication, which shall
be handled by FGLIC representative(s) on an expeditious basis.
3.2 CISI further agrees as follows:
a. It will use forms and procedures approved by FGLIC. No advertising
material pertaining to the business underwritten by FGLIC shall be
used by CISI until such material has been approved in writing by
FGLIC.
<PAGE>
b. During the term of this Agreement, all documents, books and records of
CISI pertaining to the business written hereunder, including all
financial records will be open for inspection by FGLIC at all
reasonable times. Upon the request of FGLIC, CISI will make copies of
such records or any part thereof at a mutually agreeable charge and
furnish such copies to FGLIC. FGLIC's right to inspect shall survive
the termination of this Agreement to the extent necessary to fulfill
all of its contractual obligations to Insureds, as well as its
regulatory requirements.
c. Service fees as herein determined shall be retained by CISI out of
premiums collected by or through Plan Sponsor or other Citibank
affiliate or subsidiary. CISI shall, unless otherwise agreed to in
writing, deposit all other amounts in FGLIC's designated account in
accordance with Section 3.1(d). CISI shall credit amounts in the
following priority: net benefit premium; premium tax; overhead/profit
allowance. The fees set forth in Paragraph 4 shall be payable by CISI
in full every month. Each month CISI shall, in its report to FGLIC,
furnish such data and supporting documentation reasonably required to
account of all premiums collected and the compensation retained by
CISI out of premiums received. If any such fees remain payable on the
date this Agreement terminates, the entire outstanding amount shall
become due and payable on such date.
d. In addition, FGLIC will pay invoices from CISI for charges provided
herein which are acceptable to FGLIC, within 30 days of receipt
thereof or within 30 days of the receipt of the supporting
documentation requested by FGLIC, whichever is later.
e. FGLIC authorizes CISI to issue drafts drawn on FGLIC's account for the
purposes of paying claims. CISI is not authorized to issue drafts on
FGLIC's account for any purpose other than paying insurance benefits
to persons insured under the policies.
f. Certain states have statutes governing the activities of
administrators which require the inclusion of certain matters in
agreements between insurance companies and their administrators. In
those states which have adopted administrator statutes these
provisions to the extent applicable will govern the performance of the
parties hereunder with respect to the matters therein addressed, and
to the extent they conflict with any provisions of this Agreement,
they supersede and replace any such provisions.
<PAGE>
IN WITNESS WHEREOF, the parties have here unto signed this Addendum as of
the dates written below.
CITICORP INSURANCE SERVICES, INC.
By: s/Alan F. Liebowitz
Title: SECRETARY
Date: 9/24/92
FAMILY GUARDIAN LIFE INSURANC
COMPANY
By: s/John T. Oates
Title: SR. VICE PRESIDENT
Date: 9/24/92
<PAGE>
FIRST ADDENDUM TO LETTER OF INTENT
BETWEEN CITICORP INSURANCE SERVICES, INC. ("CISI")
AND FAMILY GUARDIAN LIFE INSURANCE COMPANY ("FGLIC")
DATED APRIL 11, 1991 (the "Letter")
The Agreement is hereby amended as follows:
1. Paragraph 1 is deleted in its entirety and replaced with the following:
1. FGLIC shall issue coverage on eligible customers of Citibank, N.A.
(the "Plan Sponsor") and/or its affiliates ("Customers") the insurance
products listed in Exhibit 1 and Exhibit 3 attached hereto (the
"Insurance") via direct marketing programs.
2. Paragraph 2 is deleted in its entirety and replaced with the following:
2. This Letter shall become effective June 1, 1990 and shall continue
until December 31, 2005.
3. Paragraph 4 is deleted in its entirety and replaced with the following:
4. For the Insurance Products listed in Exhibit 1, CISI shall receive as
compensation for its services a service fee calculated as collected
premiums less:
(a) premium tax defined as 2.5% of collected premium;
(b) 2.5% of gross premiums for overhead/profit;
(c) all marketing fees paid to the Plan Sponsor: and
(d) net benefit premiums as detailed in Exhibit 2 attached hereto.
For the additional Insurance Products listed in Exhibit 3, CISI shall
receive an agreed-to fee based on unit costs which are to be developed
by CISI.
4. A new Exhibit 3 dated April 1, 1992 as attached hereto is added to the
Letter.
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto signed this Addendum as of
the dates written below.
CITICORP INSURANCE SERVICES, INC.
By: s/John T. Oates
Date: 4/9/92
FAMILY GUARDIAN LIFE INSURANCE COMPANY
By: s/John B. Tremmel
Date: April 8, 1992
<PAGE>
EXHIBIT 1
INSURANCE PRODUCTS
1. Term Life Insurance
2. Accidental Death & Dismemberment rider
3. Hospital Indemnity Plan ("HIP Insurance") (including
emergency room and child coverage as upfront riders)
4. Intensive Care Unit rider
5. Surgical rider
6. Accidental Death rider
7. Short Term Disability Insurance
<PAGE>
EXHIBIT 3
Additional Products
1. Level Term Insurance
2. CitiSafeguard (Credit Life Insurance)
3. CitiSafeguard (Credit Accident Insurance)
4. Monthly Outstanding Balance Insurance
5. Universal Life Insurance
6. Annuities
7. CreditShield
<PAGE>
Letter of Intent
The purpose of this Letter is to set forth the principal terms of an
agreement between FAMILY GUARDIAN LIFE INSURANCE COMPANY ("FGLIC") and CITICORP
INSURANCE SERVICES, INC. ("CISI") for the servicing of certain insurance
policies/certificates issued to customers and prospective customers of Citibank
and/or its affiliates.
CISI and FGLIC agree as follows:
1. FGLIC shall issue coverage on eligible customers of Citibank, N.A.
(the "Plan Sponsor") and/or its affiliates ("Customers") the insurance
products listed in Exhibit 1 attached hereto (the "Insurance") via
direct marketing programs. All marketing conducted hereunder shall be
completed by December 31, 1990.
2. This Letter shall go into effect on June 1, 1990 and shall continue
until December 31, 2000 (the "Expiration Date").
3. During the term of this Letter, CISI shall perform certain
administrative services for FGLIC for all policies or certificates of
Insurance sold to Customers hereunder including, but not limited to,
receiving and processing applications from prospective insureds (in
accordance with criteria established by FGLIC); receiving, processing
and maintaining complete originals of beneficiary designations and
changes of insureds promptly after receipt of instructions from FGLIC
to do so; issuing or mailing policies or certificates and delivering
other communications or notices delivered by FGLIC to CISI for
delivery to the insured; following up on incomplete applications;
collecting premiums; receiving premium payments; transmitting premium
notices reasonably in advance of premium due dates, termination
notices, lapse notices, reinstatement offers and other notices on a
timely basis; recording paid premiums and assuming the responsibility
for the collection of delinquent premiums; remitting premiums
collected to FGLIC; implementing rate increases; handling policy
changes; maintaining accounting, administrative and statistical
records acceptable to FGLIC and in accordance with prudent standards
of
<PAGE>
services; and receiving notification of claims, verifying insurance
recordkeeping including premium and coverage records; processing
incoming general correspondence and telephone inquiries; performing
mutually agreeable processing services; and receiving notification of
claims, verifying coverage, processing claims and forwarding claims to
FGLIC in accordance with criteria established by FGLIC.
4. CISI shall receive as compensation for its services a service fee
calculated as collected premiums less:
(a) premium tax defined as 2.5% of collected premium;
(b) 2.5% of gross premiums for overhead/profit;
(c) all marketing fees paid to the Plan Sponsor; and
(d) net benefit premiums as detailed in Exhibit 2 attached hereto.
5. The parties hereto acknowledge that certain information, plans of
operation, material, records and files (including Citibank's customer
lists), which will be furnished to one another or are developed as the
result of the work performed pursuant to this agreement are
confidential (collectively the "Confidential Information").
The parties hereto agree to take necessary precautions to prevent the
disclosure of this agreement or of any Confidential Information,
including the attachments thereto, to persons not authorized to
receive this information.
In the event either party is requested or required in a judicial,
administrative or governmental proceeding to disclose any information,
material, records and files which are obtained as the result of this
agreement, such party will provide the other party with prompt notice
of such request(s) so that such other party may seek an appropriate
protective order or waive compliance with the provisions of this
agreement. The provisions of this Paragraph shall survive the
expiration or termination of this agreement.
6. FGLIC shall indemnify and hold CISI harmless from any and all actions
and claims (including all attorney and legal costs) arising out of any
contractual right
<PAGE>
under a policy issued by FGLIC, solicitation material approved by
FGLIC, or FGLIC's criminal act, fraud, gross negligence or
noncompliance with any insurance or insurance related law, rule or
regulation.
CISI hereby agrees to indemnify and hold FGLIC harmless from and
against any and all losses, costs, damages and expenses (including all
attorney and legal costs) which FGLIC may incur by reason of CISI's
criminal act, fraud or gross negligence.
The party to be indemnified will give prompt notice to the other party
of any action requiring indemnification under this paragraph and shall
thereafter have the right to be indemnified by the other. The
provisions of this Paragraph 7 shall survive expiration or termination
of this agreement.
8. Exhibit 3 details the data necessary for actuarial valuations. The
data elements listed in Exhibit 3 will be provided to FGLIC upon
request.
9. This agreement shall be governed by the laws of the State of
Tennessee.
IN WITNESS WHEREOF, the parties hereof have executed this Letter of Intent.
FAMILY GUARDIAN LIFE CITICORP INSURANCE
INSURANCE COMPANY SERVICES, INC.
By: s/Gordon Schnitzler By: s/Robert A. Gottlieb
Name: Gordon Schnitzler Name: Robert A. Gottlieb
Title: Treasurer Title: President
Date: 4/11/91 Date: 2/15/91
<PAGE>
EXHIBIT 1
INSURANCE PRODUCTS
1. Term Life Insurance
2. Accidental Death & Dismemberment rider
3. Hospital Indemnity Plan ("HIP Insurance")(including
emergency room and child coverage as upfront riders)
4. Intensive Care Unit rider
5. Surgical rider
6. Accidental Death rider
7. Short Term Disability Insurance
<PAGE>
Page 1 of 15
EXHIBIT 2
1. TERM LIFE INSURANCE NET BENEFIT PREMIUMS
Term Life Insurance net benefit premiums are calculated as the number
of units in force (a unit is defined as $1,000) multiplied by the
deaths per 1,000 factor obtained from the attached tables based on
gender, issue age and duration at the due date of the premium, divided
by the modal factor and rounded to the nearest .01 for each policy.
Modal factors are defined as follows:
PREMIUM MODE FACTOR
------------ ------
Monthly 12
Quarterly 4
Semi-annual 2
Annual 1
<PAGE>
Term Life Actuarial Table
(Printed Form)
<PAGE>
Term Life Actuarial Table
(Printed Form)
<PAGE>
Page 4 of 15
EXHIBIT 2
ACCIDENTAL DEATH & DISMEMBERMENT RIDER
Net Benefit Premiums
Net benefit premiums are calculated as $.55 per $1,000 of Accidental
Death and Dismemberment coverage in force.
<PAGE>
Page 5 of 15
EXHIBIT 2
HOSPITAL INCOME PROTECTION ("HIP")
NET BENEFIT PREMIUMS
(CITI-HIP PLANS)
HIP net benefit premiums with respect to all certificates/policies issued are
calculated as the number of units in force (a unit is defined as $1.00 of daily
benefits) multiplied by the medical expense factor obtained from the attached
tables based on gender, issue age and duration at the due date of the premium,
divided by the modal factor and rounded to the nearest .01 for each policy.
Modal factors are defined as follows:
Premium Mode Factor
------------ ------
Monthly 12
Quarterly 4
Semi-Annual 2
Annual 1
Up-Front Riders
CHILDREN'S RIDER
NET BENEFIT PREMIUMS
Children's rider net benefit premiums are calculated as $.80
per dollar of daily HIP net benefits per year.
EMERGENCY ROOM RIDER
NET BENEFIT PREMIUMS
The Emergency Room Rider's net benefit premiums are calculated
as 55% of respective gross premiums.
<PAGE>
HIP Net Benefit Premium Table
(Printed Form)
<PAGE>
HIP Net Benefit Premium Table
(Printed Form)
<PAGE>
Page 8 of 15
EXHIBIT 2 (cont'd.)
INTENSIVE CARE UNIT RIDER
NET BENEFIT PREMIUMS
Intensive Care Unit net benefit premiums are calculated as the
number of units inforce (a unit is defined as $1.00 of daily
benefits) times the medical expense factor obtained from the
attached table based on gender, issue age and duration at the due
date of the premium divided by the modal factor and rounded to
the nearest .01 for each policy. Modal factors are defined as
follows:
Premium Mode Factor
------------ ------
Monthly 12
Quarterly 4
Semi-Annual 2
Annual 1
<PAGE>
HIP Net Benefit Premium Factors
(Printed Form)
<PAGE>
HIP Net Benefit Premium Factors
(Printed Form)
<PAGE>
Page 11 of 15
EXHIBIT 2 (cont'd.)
SURGICAL RIDER
NET BENEFIT PREMIUMS
The Surgical Rider's net benefit premiums are calculated as the number of
inforce units (a unit is defined as $100.00 of daily benefits) times the medical
expense factor obtained from the attached table based on gender, issue age and
duration at the date of the premium divided by the modal factor and rounded to
the nearest .01 for each policy. Modal factors are defined as follows:
Premium Mode Factor
------------ ------
Monthly 12
Quarterly 4
Semi-annual 2
Annual 1
<PAGE>
Surgical Rider Actuarial Factors
(Printed Form)
<PAGE>
Surgical Rider Actuarial Factors
(Printed Form)
<PAGE>
Page 14 of 15
EXHIBIT 2 (cont'd.)
ACCIDENTAL DEATH RIDER
NET BENEFIT PREMIUMS
Accidental Death Rider net benefit premiums are calculated as $.51 per $1,000 of
Accidental Death Coverage in force.
NET BENEFIT PREMIUM
SHORT TERM DISABILITY ("STD") NET BENEFIT PREMIUMS
STD net benefit premiums are calculated as the number of inforce
units (a unit is defined as $1.00 of monthly benefits) multiplied
by the claim cost per $1 coverage factor obtained from the
attached table based on gender and issue age at the date of
premium collection, divided by the modal factor and rounded to
the nearest .01 for each policy. Modal factors are defined as
follows:
PREMIUM MODE FACTOR
------------ ------
Monthly 12
Quarterly 4
Semi-annual 2
Annual 1
<PAGE>
Page 15 of 15
Exhibit 3
ACTUARIAL ATTACHMENT TO LETTER OF INTENT
o PAGE 15 DATA
$ & # NEW ISSUES
$ & # LAPSED
$ & # TERMINATIONS/CANCELS
$ & # DEATHS
$ & # ENDING INFORCE
o DETAIL LISTING OF INFORCE - SORTED BY:
PRODUCT
YEAR OF ISSUE
SEX
ISSUE AGE
o DETAIL LISTING OF CLAIMS DATA BY PRODUCT
RESISTED
IN COURSE OF SETTLEMENT
PAID
DATE INCURRED/DATE OF LOSS
DATE REPORTED
AMOUNT
DATE PAID
AMOUNT CLAIMED
o DATA AS REQUESTED TO COMPLY WITH STATE FILINGS
DUE DATES:
THE DUE DATE FOR ALL ITEMS IS THE 15TH DAY AFTER THE REQUEST.
EXHIBIT 9
[LETTERHEAD OF CITICORP]
With reference to Form N-4 Registration Statement filed on behalf of Citicorp
Life Insurance Company and the Citicorp Life Variable Annuity Separate Account
with the Securities and Exchange Commission covering flexible premium variable
deferred annuity policies, I have examined such documents and such law and have
made due inquiries as I considered necessary and appropriate, and on the basis
of such examination and inquiries, it is my opinion that:
1. The Citicorp Life Insurance Company is duly organized and validly
existing under the laws of the State of Arizona and has been duly
authorized to issue flexible premium variable deferred annuity
policies by the Department of Insurance of the State of Arizona.
2. The Citicorp Life Variable Annuity Separate Account is a duly
authorized and existing separate account established pursuant to the
provisions of the Revised Statutes of the state of Arizona;
3. The flexible premium variable deferred annuity policies, when issued
as contemplated by said Form N-4 Registration Statement, will
constitute legal, validly issued and binding obligations of Citicorp
Life Insurance Company.
I hereby consent to the filing of this opinion as an exhibit to Post-Effective
Amendment No. 2 to the Form N-4 Registration Statement.
Citicorp Life Insurance Company
s/Richard M. Zuckerman
----------------------------
Richard M. Zuckerman
Vice President, Associate General Counsel
April 19, 1996
(Date)
[LETTERHEAD OF CITICORP]
I hereby consent to the use of my name under the caption "Legal Matters" in the
Statement of Additional Information contained in this Post-Effective Amendment
to the Form N-4 Registration Statement, filed on behalf of Citicorp Life
Insurance Company and the Citicorp Life Variable Annuity Separate Account with
the Securities and Exchange Commission
Citicorp Life Insurance Company
s/Richard M. Zuckerman
----------------------------
Richard M. Zuckerman
Vice President, Associate General Counsel
April 19, 1996
(Date)
[TRANSMITTED ON SUTHERLAND, ASBILL & BRENNAN LETTERHEAD]
April 15, 1996
Board of Directors
Citicorp Life Insurance Company
800 Silver Lake Boulevard
Dover, DE 19904
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Statement of Additional Information filed as part of Post-
Effective Amendment No. 2 to the registration statement on Form N-4 for Citicorp
Life Variable Annuity Separate Account (File No. 33-81626). In giving this
consent, we do not admit that we are in the capacity of persons whose comment is
required under Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN
By: /s/Stephen E. Roth
------------------
Stephen E. Roth
Independent Auditors' Consent
-----------------------------
The Board of Directors
Citicorp Life Insurance Company:
We consent to the use of our report included herein and to the reference of our
firm under the heading "Financial Statements" in the Prospectus and under the
heading "Experts" in the Registration Statement for Citicorp Life Variable
Annuity Separate Account.
Our report dated April 19, 1996, covering the financial statements of Citicorp
Life Insurance Company, contains an explanatory paragraph which states that the
financial statements are presented in conformity with accounting practices
prescribed or permitted by the State of Arizona Department of Insurance. These
practices differ in some respects from generally accepted accounting principles.
The financial statements do not include any adjustments that might result from
the differences.
s/KPMG Peat Marwick LLP
Chicago, Illinois
April 24, 1996
