As filed with the Securities and Exchange Commission on November 8, 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. 3 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 4
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.
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It is proposed that this filling will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on ____________ pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[X] on January 8, 1997 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.
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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.
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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
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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
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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
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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
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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
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Incorporation By Reference
This Post-Effective Amendment No. 3 on Form N-4 for the Citicorp Life Variable
Annuity Separate Account (the "Account") incorporates by reference the
Prospectus, Statement of Additional Information and Part C (Other Information)
contained in Post-Effective Amendment No. 2 for the Account filed on April 29,
1986 with the Securities and Exchange Commission.
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PART A
PROSPECTUS
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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
January 8, 1997
- --------------------------------------------------------------------------------
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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 Variable Annuity Portfolios, the Fidelity Variable Insurance
Products Fund, the Fidelity Variable Insurance Products Fund II, the AIM
Variable Insurance Funds, Inc. or the MFS Variable Insurance Trust (the
"Funds"). The 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. The subaccounts invested in the
Landmark VIP Funds, however, are no longer available for investment and,
therefore, those subaccounts will not accept new premium payments or transfers
from other subaccounts and the Fixed Account.
The available portfolios of the Variable Annuity Portfolios include
CitiSelectSM VIP Folio 200, CitiSelectSM VIP Folio 300, CitiSelectSM VIP Folio
400, CitiSelectSM VIP Folio 500 and Landmark Small Cap Equity VIP Fund, and are
available for investment under the Contract. The Growth, High Income, Equity
Income and Overseas Portfolios of the Fidelity Variable Insurance Products Fund,
the Contrafund and Index 500 Portfolios of the Fidelity Variable Insurance
Products Fund II, the V.I. Capital Appreciation Fund , V.I. Government
Securities Fund, V.I. Growth Fund, V.I. International Equity Fund, V.I. Value
Fund and V.I. Growth and Income Fund of the AIM Variable Insurance Funds, Inc.
and the MFS World Government Series, the MFS Money Market Series, the MFS Bond
Series, the MFS Total Return Series, the MFS Research Series and the MFS
Emerging Growth Series of the MFS Variable Insurance Trust are also available
for
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investment under the Contract. The accompanying prospectuses for the Funds
describe the investment objectives of the available portfolios. 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 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 VARIABLE ANNUITY
PORTFOLIOS, LANDMARK VIP FUNDS, THE FIDELITY VARIABLE INSURANCE PRODUCTS FUND,
THE FIDELITY VARIABLE INSURANCE PRODUCTS FUND II, 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.
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INSURANCE POLICIES ISSUED BY A SUBSIDIARY OR DIVISION OF A DELAWARE BANK OR
TRUST COMPANY ARE NOT BANK DEPOSITS AND ARE NOT FDIC INSURED.
January 8, 1996
<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
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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
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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.
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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."
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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"
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"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.
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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 (imposed after the 18th $25**
transfer in any Contract Year)
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)
- ----------
* 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. The
Annual Contract Fee will also be waived in its entirety for any Contract Year
during which purchase payments of at least $2,500 ($2,000 for
Qualified Contracts), excluding the initial purchase payment, are paid.
**** 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
advisers' investment advisory fees as a percentage of assets under management.
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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)]
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)
CitiSelect VIP Folio 200
Management Fees (investment management fees) 0.75%
Other Expenses (after fee waivers and reimbursements) 0.20%
Total Annual Fund Expenses (after fee waivers 0.95%
and reimbursements)
CitiSelect VIP Folio 300
Management Fees (investment management fees) 0.75%
Other Expenses (after fee waivers and reimbursements) 0.20%
Total Annual Fund Expenses (after fee waivers 0.95%
and reimbursements)
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CitiSelect VIP Folio 400
Management Fees (investment management fees) 0.75%
Other Expenses (after fee waivers and reimbursements) 0.50%
Total Annual Fund Expenses (after fee waivers 1.25%
and reimbursements)
CitiSelect VIP Folio 500
Management Fees (investment management fees) 0.75%
Other Expenses (after fee waivers and reimbursements) 0.50%
Total Annual Fund Expenses (after fee waivers 1.25%
and reimbursements)
Landmark Small Cap Equity VIP Fund
Management Fees (investment advisory fees) 0.75%
Other Expenses (after fee waivers and reimbursements) 0.15%
Total Annual Fund Expenses (after fee waivers 0.90%
and reimbursements)
Fidelity Growth Portfolio
Management Fees (investment advisory fees) 0.61%
Other Expenses 0.09%
Total Annual Fund Expenses 0.70%
Fidelity High Income Portfolio
Management Fees (investment advisory fees) 0.60%
Other Expenses 0.11%
Total Annual Fund Expenses 0.71%
Fidelity Equity Income Portfolio
Management Fees (investment advisory fees) 0.51%
Other Expenses 0.10%
Total Annual Fund Expenses 0.61%
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Fidelity Overseas Portfolio
Management Fees (investment advisory fees) 0.76%
Other Expenses 0.15%
Total Annual Fund Expenses 0.91%
Fidelity Contrafund Portfolio
Management Fees (investment advisory fees) 0.61%
Other Expenses 0.11%
Total Annual Fund Expenses 0.72%
Fidelity Index 500 Portfolio
Management Fees (investment advisory fees after 0.09%
fee waivers and reimbursement)
Other Expenses 0.19%
Total Annual Fund Expenses (after fee waivers and 0.28%
reimbursements)
AIM V.I. Capital Appreciation Fund
Management Fees (investment advisory fees) 0.65%
Other Expenses 0.10%
Total Annual Fund Expenses 0.75%
AIM V.I. Government Securities Fund
Management Fees (investment advisory fees) 0.50%
Other Expenses 0.69%
Total Annual Fund Expenses 1.19%
AIM V.I. Growth Fund
Management Fees (investment advisory fees) 0.65%
Other Expenses 0.19%
Total Annual Fund Expenses 0.84%
AIM V.I. International Equity Fund
Management Fees (investment advisory fees) 0.75%
Other Expenses 0.40%
Total Annual Fund Expenses 1.15%
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AIM V.I. Value Fund
Management Fees (investment advisory fees) 0.65%
Other Expenses 0.10%
Total Annual Fund Expenses 0.75%
AIM V.I. Growth and Income Fund
Management Fees (investment advisory fees after 0.26%
fee waivers and reimbursements)
Other Expenses 0.52%
Total Annual Fund Expenses (after fee waivers and 0.78%
reimbursements)
MFS World Government Series
Management Fees (investment advisory fees) 0.75%
Other Expenses (after fee reduction) 0.25%
Total Annual Fund Expenses (after fee reduction) 1.00%
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%
MFS Bond Series
Management Fees (investment advisory fees) 0.60%
Other Expenses (after fee reduction) 0.40%
Total Annual Fund Expenses (after fee reduction) 1.00%
MFS Total Return Series
Management Fees (investment advisory fees) 0.75%
Other Expenses (after fee reduction) 0.25%
Total Annual Fund Expenses (after fee reduction) 1.00%
MFS Research Series
Management Fees (investment advisory fees) 0.75%
Other Expenses (after fee reduction) 0.25%
Total Annual Fund Expenses (after fee reduction) 1.00%
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MFS Emerging Growth Series
Management Fees (investment advisory fees) 0.75%
Other Expenses (after fee reduction) 0.25%
Total Annual Fund Expenses (after fee reduction) 1.00%
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, Fidelity High Income, Fidelity Equity Income,
Fidelity Overseas, Fidelity Contrafund and Fidelity Index 500 Portfolios, the
AIM V.I. Capital Appreciation, AIM V.I. Government Securities, AIM V.I. Growth,
AIM V.I. International Equity, AIM V.I. Value and AIM V.I. Growth and Income
Funds and the MFS World Governments, MFS Money Market, MFS Bond, MFS Total
Return, MFS Research and MFS Emerging Growth Series. CitiSelect VIP Folio 200,
CitiSelect VIP Folio 300, CitiSelect VIP Folio 400, CitiSelect VIP Folio 500 and
Landmark Small Cap Equity VIP Fund commenced operations during the current
fiscal year and therefore their other expenses are estimates and not based on
past experience. Absent fee waivers and reimbursements, "Other Expenses" and
"Total Annual Fund Expenses" that are estimated to be incurred in the current
fiscal year would be: CitiSelect VIP Folio 200 - 8.67% and 9.42%; CitiSelect VIP
Folio 300 - 6.92% and 7.67%; CitiSelect VIP Folio 400 - 6.92% and 7.67%;
CitiSelect VIP Folio 500 - 3.84% and 4.59% and Landmark Small Cap Equity VIP
Fund - 1.75% and 2.50%, respectively. 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 Government Series
1.24% and 1.99%; MFS Money Market Series 21.04% and 21.54%; MFS Bond Series
43.25% and 43.85%; MFS Total Return Series 2.02% and 2.77%; MFS Research Series
3.15% and 3.90% and MFS Emerging Growth Series 2.16% and 2.91%, respectively.
The Investment Advisor for the Fidelity Index 500 Portfolio also voluntarily
agreed
17
<PAGE>
to limit the funds operating expenses to 0.28% of average net assets. Absent
this agreement, the "Management Fees" and "Total Annual Fund Expenses" incurred
for fiscal year 1995 were 0.28% and 0.47%, respectively. Similarly, the
Investment Advisor for the AIM V.I. Growth and Income Fund voluntarily agreed to
waive or reduce their advisory fees to 0.26% of average net assets. Absent this
waiver or reduction, the "Management Fees" and "Total Annual Fund Expenses"
incurred for fiscal year 1995 were 0.78% and 1.17%, 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 Government 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. In addition, the MFS investment advisor
has agreed to bear, subject to reimbursement, expenses such that the aggregate
expenses of the MFS Bond Series, the MFS Total Return Series, the MFS Research
Series and the MFS Emerging Growth Series do not exceed, on an annualized basis,
1.00% of the average daily net assets until December 31, 1996, 1.25% of the
average daily net assets from January 1, 1997 through December 31, 1998 and
1.50% of the average daily net assets from January 1, 1999 through December 31,
2004, respectively. For a more complete description of the various costs and
expenses see "Charges and Deductions" and the prospectuses for the Funds.
18
<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
CitiSelect VIP Folio 200* $ 92 $133 -- --
CitiSelect VIP Folio 300* $ 92 $133 -- --
CitiSelect VIP Folio 400* $ 95 $142 -- --
CitiSelect VIP Folio 500* $ 95 $142 -- --
Landmark Small Cap Equity VIP Fund* $ 92 $133 -- --
Fidelity Growth Portfolio $ 90 $125 $162 $280
Fidelity High Income Portfolio* $ 90 $126 -- --
Fidelity Equity Income Portfolio* $ 89 $123 -- --
Fidelity Overseas Portfolio* $ 92 $132 -- --
Fidelity Contrafund Portfolio* $ 90 $126 -- --
Fidelity Index 500 Portfolio* $ 86 $113 -- --
AIM V.I. Capital Appreciation Fund $ 90 $127 $165 $285
AIM V.I. Government Securities Fund* $ 92 $134 -- --
AIM V.I. Growth Fund* $ 89 $122 -- --
AIM V.I. International Equity Fund* $ 92 $134 -- --
AIM V.I. Value Fund* $ 92 $134 -- --
AIM V.I. Growth and Income Fund* $ 92 $134 -- --
MFS World Governments Series $ 92 $134 $177 $311
MFS Money Market Series $ 89 $122 $157 $270
MFS Bond Series* $ 92 $134 -- --
MFS Total Return Series* $ 92 $134 -- --
MFS Research Series* $ 92 $134 -- --
MFS Emerging Growth Series* $ 92 $134 -- --
19
<PAGE>
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
CitiSelect VIP Folio 200* $ 28 $ 85 -- --
CitiSelect VIP Folio 300* $ 28 $ 85 -- --
CitiSelect VIP Folio 400* $ 31 $ 94 -- --
CitiSelect VIP Folio 500* $ 31 $ 94 -- --
Landmark Small Cap Equity VIP Fund* $ 28 $ 85 -- --
Fidelity Growth Portfolio $ 25 $ 77 $132 $280
Fidelity High Income Portfolio* $ 25 $ 77 -- --
Fidelity Equity Income Portfolio* $ 24 $ 74 -- --
Fidelity Overseas Portfolio* $ 27 $ 83 -- --
Fidelity Contrafund Portfolio* $ 25 $ 78 -- --
Fidelity Index 500 Portfolio* $ 21 $ 64 -- --
AIM V.I. Capital Appreciation Fund $ 26 $ 79 $134 $285
AIM V.I. Government Securities Fund* $ 28 $ 86 -- --
AIM V.I. Growth Fund* $ 24 $ 74 -- --
AIM V.I. International Equity Fund* $ 28 $ 86 -- --
AIM V.I. Value Fund* $ 28 $ 86 -- --
AIM V.I. Growth and Income Fund* $ 28 $ 86 -- --
MFS World Governments Series $ 28 $ 86 $147 $311
MFS Money Market Series $ 24 $ 74 $126 $270
MFS Bond Series* $ 28 $ 86 -- --
MFS Total Return Series* $ 28 $ 86 -- --
MFS Research Series* $ 28 $ 86 -- --
MFS Emerging Growth Series* $ 28 $ 86 -- --
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<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
CitiSelect VIP Folio 200* $ 28 $ 85 -- --
CitiSelect VIP Folio 300* $ 28 $ 85 -- --
CitiSelect VIP Folio 400* $ 31 $ 94 -- --
CitiSelect VIP Folio 500* $ 31 $ 94 -- --
Landmark Small Cap Equity VIP Fund* $ 28 $ 85 -- --
Fidelity Growth Portfolio $ 25 $ 77 $132 $280
Fidelity High Income Portfolio* $ 25 $ 77 -- --
Fidelity Equity Income Portfolio* $ 24 $ 74 -- --
Fidelity Overseas Portfolio* $ 27 $ 83 -- --
Fidelity Contrafund Portfolio* $ 25 $ 78 -- --
Fidelity Index 500 Portfolio* $ 21 $ 64 -- --
AIM V.I. Capital Appreciation Fund $ 26 $ 79 $134 $285
AIM V.I. Government Securities Fund* $ 28 $ 86 -- --
AIM V.I. Growth Fund* $ 24 $ 74 -- --
AIM V.I. International Equity Fund* $ 28 $ 86 -- --
AIM V.I. Value Fund* $ 28 $ 86 -- --
AIM V.I. Growth and Income Fund* $ 28 $ 86 -- --
MFS World Governments Series $ 28 $ 86 $147 $311
MFS Money Market Series $ 24 $ 74 $126 $270
MFS Bond Series* $ 28 $ 86 -- --
MFS Total Return Series* $ 28 $ 86 -- --
MFS Research Series* $ 28 $ 86 -- --
MFS Emerging Growth Series* $ 28 $ 86 -- --
* These subaccounts became available for investment as of the date of this
prospectus.
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.
21
<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, except that purchase
payments may not be allocated to any subaccount invested in the Landmark VIP
Funds. 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 a 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
22
<PAGE>
vary according to the investment performance of the portfolio(s) in which the
selected subaccount(s) 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. However, transfers to subaccounts
invested in the Landmark VIP Funds are no longer permitted.
The maximum amount that may be transferred from the Fixed Account during any
Contract Year equals the greatest of: (1) 40% 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.
23
<PAGE>
The surrender charge imposed on partial withdrawals, surrenders and upon
application of proceeds to certain annuity options equals 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 last 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. In addition, the Annual
Contract Fee will be waived in its entirety for any Contract Year in which
purchase payments of at least $2,500 ($2,000 for Qualified Contracts), exclusive
of the initial purchase payment, are paid.
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.")
24
<PAGE>
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.
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."
25
<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.
<TABLE>
<CAPTION>
Accumulation Unit Accumulation
Value Units
---------------------------------- -------------------------
Beginning End of End of
Subaccount of Period Period Period
(2/21/95) (12/31/95) (12/31/95)
- ---------------------------------------------- ----------------- ----------------- ----------------------
<S> <C> <C> <C>
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*
CitiSelect VIP Folio 200** - - -
CitiSelect VIP Folio 300** - - -
CitiSelect VIP Folio 400** - - -
CitiSelect VIP Folio 500** - - -
Loandmark Small Cap Equity VIP - - -
Fund**
Fidelity Growth Portfolio 1.00 1.31 4,565
Fidelity High Income Portfolio** - - -
Fidelity Equity Income Portfolio** - - -
Fidelity Overseas Portfolio** - - -
Fidelity Contrafund Portfolio** - - -
Fidelity Index 500 Portfolio** - - -
AIM V.I. Capital Appreciation Fund* 1.00 1.00 0
AIM V.I. Government Securities - - -
Fund**
AIM V.I. Growth Fund** - - -
AIM V.I. International Equity - - -
Fund**
AIM V.I. Value Fund** - - -
AIM V.I. Growth and Income Fund** - - -
MFS World Government Series* 1.00 1.00 0
MFS Money Market Series* 1.00 1.00 0
MFS Bond Series** - - -
MFS Total Return Series** - - -
MFS Research Series** - - -
MFS Emerging Growth Series** - - -
</TABLE>
*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
26
<PAGE>
International Equity Fund, the AIM V.I. Capital Appreciation Fund, the MFS World
Government Series or the MFS Money Market Series.
**As of the date of this Prospectus, the CitiSelect VIP Folio 200, the
CitiSelect VIP Folio 300, the CitiSelect VIP Folio 400, the CitiSelect VIP Folio
500, the Landmark Small Cap Equity VIP Fund, the Fidelity High Income Portfolio,
the Fidelity Equity Income Portfolio, the Fidelity Overseas Portfolio, the
Fidelity Contrafund Portfolio, the Fidelity Index 500 Portfolio, the AIM V.I.
Government Securities Fund, the AIM V.I. Growth Fund, the AIM V.I. International
Equity Fund, the AIM V.I. Value Fund, the AIM V.I. Growth and Income Fund, the
MFS Bond Series, the MFS Total Return Series, the MFS Research Series and the
MFS Emerging Growth Series subaccounts had not yet commenced operations, had no
assets or liabilities and had received no income and incurred no expenses.
Accordingly, no condensed financial information is included for these 19
subaccounts and these subaccounts are not included in the financial statement.
The Landmark VIP U.S. Government Fund, the Landmark VIP Equity Fund, the
Landmark VIP Balanced Fund and the Landmark VIP International Equity Fund
subaccounts were offered prior to the date of this prospectus as part of the
Separate Account and included in the condensed financial information and
financial statements. However, such subaccounts are no longer available for
investment.
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.
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,
27
<PAGE>
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 twenty-seven (27)
subaccounts but may, in the future, include additional subaccounts. Each
subaccount invests exclusively in shares of a single corresponding portfolio,
however, the Landmark VIP U.S. Government Fund, the Landmark VIP Equity Fund,
the Landmark VIP Balanced Fund and the Landmark VIP International Equity Fund
subaccounts are closed to new investment. 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 "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
28
<PAGE>
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, Variable
Annuity Portfolios, the Fidelity Variable Insurance Products Fund, the Fidelity
Variable Insurance Products Fund II, 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. However, as of the date of
this prospectus, the Landmark VIP Funds are no longer available for investment.
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. Under normal circumstances, at
least 65% of the fund's total
29
<PAGE>
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.
Variable Annuity Portfolios. The Variable Annuity Portfolios currently
include five funds available as investment options under the Contracts. The
Variable Annuity Portfolios include the CitiSelect VIP Folio 200, the CitiSelect
VIP Folio 300, the CitiSelect VIP Folio 400, the CitiSelect VIP Folio 500 and
the Landmark Small Cap Equity VIP Fund.
CitiSelect VIP Folio 200. This portfolio seeks high total return over
time, consistent with a primary emphasis on income and a secondary
emphasis on capital appreciation by allocating portfolio assets among a
diversified, professionally managed mix of equity, fixed income and
money market securities. Under normal circumstances, 25%-45% of the
portfolio's assets will be invested in equity securities, 35%-55% of
the portfolio's assets will be invested in fixed income securities, and
10%-30% of the portfolio's assets will be invested in Money Market
securities.
30
<PAGE>
CitiSelect VIP Folio 300. This portfolio seeks high total return over
time, consistent with a balanced emphasis on income and capital
appreciation by allocating portfolio assets among a diversified,
professionally managed mix of equity, fixed income and money market
securities. Under normal circumstances, 40%-60% of the portfolio's
assets will be invested in equity securities, 35%-55% of the
portfolio's assets will be invested in fixed income securities, and
1%-10% of the portfolio's assets will be invested in Money Market
securities.
CitiSelect VIP Folio 400. This portfolio seeks high total return over
time, consistent with a primary emphasis on capital appreciation and a
secondary emphasis on income for risk reduction purposes by allocating
portfolio assets among a diversified, professionally managed mix of
equity, fixed income and money market securities. Under normal
circumstances, 55%-85% of the portfolio's assets will be invested in
equity securities, 15%-35% of the portfolio's assets will be invested
in fixed income securities, and 1%-10% of the portfolio's assets will
be invested in Money Market securities.
CitiSelect VIP Folio 500. This portfolio seeks the highest total return
over time, consistent with a primary emphasis on capital appreciation
and a secondary emphasis on income for risk reduction purposes by
allocating portfolio assets among a diversified, professionally managed
mix of equity, fixed income and money market securities. Under normal
circumstances, 70%-95% of the portfolio's assets will be invested in
equity securities, 5%-20% of the portfolio's assets will be invested in
fixed income securities, and 1%-10% of the portfolio's assets will be
invested in Money Market securities.
Landmark Small Cap Equity VIP Fund. This fund seeks long-term capital
growth by investing in a diversified portfolio of equity securities of
U.S. companies. Under normal circumstances, at least 65% of the fund's
total assets will be invested in such companies with market
capitalization of $750 million or less. Dividend income, if any, is
incidental to this investment objective.
Citibank, N.A. serves as Investment Manager to these portfolios and manages
their assets in accordance with general policies and guidelines established by
the Trustees of the Variable Annuity Portfolios.
With respect to the CitiSelect Folios, Citibank, N.A. expects that, in
general, each Fund's assets will be allocated among the
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equity, fixed income and money market class as provided above. However, cash
flows of a Fund or changes in market valuations could produce different results.
Citibank, N.A. will review each Fund's asset allocation quarterly and expects,
in general, to rebalance the Fund's investments, if necessary, at that time.
Rebalancing may be accomplished over a period of time and may be limited by tax
and regulatory requirements.
Fidelity Variable Insurance Products Fund. The Fidelity Variable Insurance
Products Fund currently has five portfolios, four of which, the Fidelity Growth
Portfolio, the Fidelity High Income Portfolio, the Fidelity Equity Income
Portfolio, and the Fidelity Overseas Portfolio are available as investment
options 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 High Income Portfolio*. This portfolio seeks to achieve high
current income by investing, under normal circumstances, at least 65%
of its assets in income producing debt securities, preferred stocks and
convertible securities. The Fidelity High Income Portfolio typically
invests in longer term, lower quality fixed income securities but may
invest in common stocks, other equity securities and debt securities
not currently paying interest but which are expected to do so in the
future. In choosing investments, the Fidelity High Income Portfolio
also considers growth of capital.
Fidelity Equity Income Portfolio. This portfolio seeks reasonable
income by investing, under normal circumstances, at least 65% of its
assets in income producing equity securities. The remainder of the
Fidelity Equity Income Portfolio's assets will tend to be invested in
debt obligations, many of which are expected to be convertible into
common stock. In choosing investments, the portfolio also considers the
potential for capital appreciation.
Fidelity Overseas Portfolio. This portfolio seeks long term growth of
capital by investing, under normal circumstances, at least 65% of its
assets in securities of issuers from at least three different
countries, whose principal activities are outside of North America (the
U.S., Canada, Mexico and Central America). The majority of the
portfolio's assets will be invested in equity securities. However, the
portfolio may also invest in debt securities of any quality.
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Fidelity Management & Research 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 Fidelity Variable Insurance
Products Fund.
Fidelity Variable Insurance Products Fund II. The Fidelity Variable Insurance
Products Fund II currently has five portfolios, two of which, the Fidelity
Contrafund Portfolio and the Fidelity Index 500 Portfolio are available as
investment options under the Contracts.
Fidelity Contrafund Portfolio. Under normal circumstances, this
portfolio seeks capital appreciation by investing mainly in common
stocks and securities convertible into common stock believed to be
undervalued by an overly pessimistic public appraisal but has the
flexibility to invest in any type of security that may produce capital
appreciation. The portfolio's investment strategy may lead to
investment in small and mid-size companies.
Fidelity Index 500 Portfolio. This portfolio seeks to match the total
return of the S&P 500 by investing, under normal circumstances, at
least 80% of its assets (65% if portfolio assets are below $20 million)
in equity securities of companies that compose the S&P 500, while
keeping expenses low.
Fidelity Management & Research 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 Fidelity Variable Insurance
Products Fund II.
AIM Variable Insurance Funds, Inc. AIM Variable Insurance Funds, Inc.
currently has nine portfolios, six of which, the AIM V.I. Capital Appreciation
Fund, the AIM V.I. Government Securities Fund, the AIM V.I. Growth Fund, the AIM
V.I. International Equity Fund, the AIM V.I. Value Fund and the AIM V.I. Growth
and Income Fund are available as investment options 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 V.I. Government Securities Fund. This portfolio seeks to achieve a
high level of current income consistent with reasonable concern for
safety of principal by investing in debt securities issued, guaranteed
or otherwise backed by the United States Government.
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AIM V.I. Growth Fund. This portfolio seeks growth of capital
principally through investment in common stocks of seasoned and
bettered capitalized companies considered by AIM to have strong
earnings momentum
AIM V.I. International Equity Fund. This portfolio seeks to provide
long-term growth of capital by investing in a diversified portfolio of
international equity securities, the issuers of which are considered by
AIM to have strong earnings momentum.
AIM V.I. Value Fund. This portfolio seeks to achieve long-term growth
of capital by investing primarily in equity securities judged by AIM to
be undervalued relative to the current or projected earnings of the
companies issuing the securities, or relative to current market value
of assets owned by the companies issuing the securities or relative to
the equity market generally. Income is a secondary objective.
AIM V.I. Growth and Income Fund. This portfolio seeks growth of
capital, with current income as a secondary objective. The fund invests
primarily in stocks believed by AIM to have the potential for above
average prospects for both growth of capital and dividend income.
AIM Advisors, Inc. serves as investment adviser to these portfolios and
manages their 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, six of which, the MFS World Governments Series, the MFS Money
Market Series, the MFS Bond Series, the MFS Total Return Series, the MFS
Research Series and the MFS Emerging Growth 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
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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.
MFS Bond Series*. This portfolio seeks primarily to provide as high a
level of current income as is believed consistent with prudent
investment risk and secondarily to protect capital. Under normal
conditions, at least 65% of the portfolio's total assets will be
invested in convertible and non-convertible debt securities and
preferred stocks, U.S. Government securities, commercial paper,
repurchase agreements and cash or cash equivalents (such as
certificates of deposit and banker's acceptances).
MFS Total Return Series*. This portfolio's primary investment objective
is to provide above average income (compared to a portfolio invested
entirely in equity securities) consistent with the prudent employment
of capital, and secondarily, to provide a reasonable opportunity for
growth of capital and income. Under normal market conditions, at least
25% of the portfolio's assets will be invested in fixed income
securities and at least 40% and no more than 75% of its assets will be
invested in equity securities.
MFS Research Series*. This portfolio seeks to provide long term growth
of capital and future income by investing a substantial portion of its
total assets in the common stocks or securities convertible into common
stocks of companies believed to possess better than average prospects
for long term growth. A smaller proportion of the MFS Research Series'
assets may be invested in bonds, short term obligations, preferred
stocks or common stocks whose principal characteristic is income
production rather than growth.
MFS Emerging Growth Series. This portfolio seeks primarily to provide
long term growth of capital. Dividend and interest income from
portfolio securities, if any, is incidental to the primary investment
objective of long term growth of capital. Under normal circumstances,
at least 80% of the portfolio's total assets will be invested in common
stocks of companies that MFS believes are early in their life cycle but
which have the potential to become major enterprises.
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 Variable Insurance Trust.
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*The portfolios' investment strategy may provide the opportunity of higher than
average yields by investing in securities with higher than average risk, such as
lower and unrated debt and comparable equity instruments. Please consult each
portfolio's Fund prospectus accompanying this Prospectus for more information
about the risk associated with such investments.
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 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.
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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.
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
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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 $100 and be a whole percentage of a purchase payment.
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 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. However, allocations to
the Landmark VIP Funds are no longer permitted.
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
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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 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
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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.
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) 40% 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.
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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 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.
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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 1/30 of the Fixed Account value at the time 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
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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).
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.
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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 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;
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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.
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.
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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.
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.
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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
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
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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 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
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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
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) 40% 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.
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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 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,
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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 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. In addition, we do
not deduct the Annual Contract Fee under Contracts for which purchase payments
of at least $2,500 ($2,000 for Qualified Contracts), exclusive of the initial
purchase payment, are received during the Contract Year.
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.
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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 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 Variable Annuity Portfolios, the Fidelity Variable Insurance Products
Fund, the Fidelity Variable Insurance Products Fund II, 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
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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
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
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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.
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
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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
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. In addition,
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transfers to the subaccounts investing in the Landmark VIP Funds are no longer
permitted.
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.
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
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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 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
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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.
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.
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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.
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.
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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 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
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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
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
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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.
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
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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 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
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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
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
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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 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
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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 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.
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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
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
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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.
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
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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 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 appear in the Statement of Additional
Information to Post-Effective Amendment No. 2 to the Separate Account's
registration statement filed on April 29, 1996 with the SEC and are incorporated
by reference in the Statement of Additional Information to this registration
statement. The financial statements for the Separate Account as of December 31,
1995 as well as the Auditor's Report also appear in the Statement of Additional
Information to Post-Effective Amendment No. 2 to the Separate Account's
registration statement filed on April 29, 1996 with the SEC and are
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incorporated by reference in the Statement of Additional Information to this
registration statement.
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.
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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: _______________________________________________________
_______________________________________________________
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PART B
STATEMENT OF ADDITIONAL INFORMATION
1
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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
January 8, 1997
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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 Variable Annuity
Portfolios, the Fidelity Variable Insurance Products Fund, the Fidelity Variable
Insurance Products Fund II, 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.
January 8, 1997
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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
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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.
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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. Because of the fees and
charges assessed under the Contract, the yield for each subaccount will be lower
than the yield for the investment portfolio supporting that subaccount. The
calculation of yields, total returns and other performance data do not reflect
the effect of any premium tax that may be applicable. Most states and political
subdivisions do not assess premium taxes, however, where state premium taxes are
assessed, we will deduct the amount of the tax due from each payment at rates
ranging from a minimum of 0.5% to a maximum of 3.5% of such payment at the time
annuity payments begin. Premium taxes levied by political subdivisions,
generally at rates of less than 1.00%, will be deducted in the same manner.
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:
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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.
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.
The seven-day Effective Yield is calculated by compounding the
unannualized base period return according to the following formula:
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.
Based on the method of calculation described above, the Current Yield
and Effective Yield on amounts held in the MFS Money Market Subaccount for the
seven-day period ending September 30, 1996 were:
Current Yield - 3.29%
Effective Yield - 3.34%
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The current and effective yields on amounts held in this 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 the Bond Subaccount for a Contract for 30-day or one-month
periods. The annualized yield generated by the Bond Subaccount refers to income
generated by the subaccount during a 30-day or one-month period and is assumed
to be generated each 30-day or one month 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 Contracts with less than $25,000
of Contract Value. 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:
6
Yield = 2 X (((NI - ES)/(U X UV)) + 1) - 1)
8
<PAGE>
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.
Based on the method of calculation described above, for the thirty-day
period ending September 30, 1996, the yield for the Bond Subaccount was:
Yield = N/A
The yield on the amounts held in the Bond Subaccount 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. The Bond
Subaccount's actual yield is affected by the types and quality of securities
held by the MFS Bond Series and that portfolio's operating expenses.
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
9
<PAGE>
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
Contracts with less than $25,000 of Contract Value. 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:
1/N
TR = ((ERV/P) ) - 1
Where:
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.
Based on the method of calculation described above, the Standardized
Average Annual Total Returns for the Subaccounts for the periods ending
September 30, 1996 were:
10
<PAGE>
- -------------------------------------------------------------------------------
Subaccount Standardized
Average Annual Total Return Table
- -------------------------------------------------------------------------------
For the For the
Subaccount (date of inception one-year 5-year For the
of corresponding portfolio) period period period from
ending ending inception
9/30/96 9/30/96 to 9/30/96
- ------------------------------------------------------------------------------
LANDMARK VIP FUNDS
U.S. Government Fund (3/10/95) -3.31% N/A -0.90%
Balanced Fund (3/10/95) 5.18% N/A 6.65%
Equity Fund (3/10/95) 12.72% N/A 12.74%
International Equity Fund (3/10/95) -3.28% N/A -0.15%
VARIABLE ANNUITY PORTFOLIOS
CitiSelectSM VIP Folio 200 (11/05/96) N/A N/A N/A
CitiSelectSM VIP Folio 300 (11/05/96) N/A N/A N/A
CitiSelectSM VIP Folio 400 (11/05/96) N/A N/A N/A
CitiSelectSM VIP Folio 500 (11/05/96) N/A N/A N/A
Landmark Small Cap Equity VIP 60.96% N/A 66.76%
Fund (11/05/96)a
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) 4.51% N/A 18.37%
Government Securities Fund (5/05/93) -3.21% N/A 1.60%
Growth Fund (5/05/93) 4.25% N/A 12.97%
International Equity Fund (5/05/93) 8.64% N/A 10.98%
Value Fund (5/05/93) -1.50% N/A 14.83%
Growth and Income Fund (5/02/94) 6.29% N/A 14.90%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Growth Portfolio (10/9/86) 0.44% 15.25% 13.35%
High Income Portfolio (9/19/85) 6.88% 13.92% 10.48%
Equity Income Portfolio (10/9/86) 6.08% 15.94% 11.44%
Overseas Fund (1/28/87) 2.94% 6.70% 6.05%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 4.34% N/A 23.19%
Index 500 Portfolio (8/27/92) 12.02% N/A 13.54%
MFS VARIABLE INSURANCE TRUST
World Governments Series (6/14/94) -1.93% N/A 3.53%
Money Market Series (1/03/95) -2.44% N/A -0.25%
Bond Series (10/24/95) N/A N/A -6.66%
Total Return Series (1/03/95) 7.32% N/A 14.70%
Research Series (7/26/95) 15.50% N/A 16.50%
Emerging Growth Series (7/24/95) 19.88% N/A 24.66%
a. For this subaccount, the information is so-called "synthetic" performance
data. As of 9/30/96, the underlying portfolio for this subaccount either had
less than one year of actual performance data, or had not commenced operations,
so no historical performance data exists for the actual portfolio in which this
subaccount will invest. However, the investment advisor for this portfolio
manages another comparable mutual fund portfolio (Landmark Small Cap Equity
Fund); although this comparable portfolio is not the actual portfolio in which
the
11
<PAGE>
Separate Account will invest, it has the same investment objectives, and
uses the same investment strategies and techniques as are contemplated for the
actual portfolio in which the Separate Account will invest. The figures
represent what the investment performance of this subaccount would have been IF
this subaccount had been in existence since the inception of the comparable
portfolio and IF this subaccount had been invested in that portfolio. Since the
subaccount will not invest in this comparable portfolio, these are not actual
performance figures for the applicable subaccount. These are "synthetic" average
annual total return figures which represent the performance of the comparable
portfolio (which is NOT available under the Contract).
The data presented may not necessarily be an indicator of future
performance. The "synthetic" data is based on the actual performance and
expenses of the comparable portfolio, adjusted to reflect the Surrender Charge,
Mortality and Expense Risk Charge, Administrative
Expense Charge and the Annual Contract Fee.
- --------------------------------------------------------------------------------
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.
12
<PAGE>
Based on the method of calculation described above, the Cumulative Total
Returns for the Subaccounts for the periods ending September 30, 1996 were:
- --------------------------------------------------------------------------------
Subaccount Standardized
Cumulative Total Return Table
- --------------------------------------------------------------------------------
For the For the
Subaccount (date of inception of one-year 5-year For the
corresponding portfolio) period period period from
ending ending inception
9/30/96 9/30/96 to 9/30/96
- ------------------------------------------------------------------------------
LANDMARK VIP FUNDS
U.S. Government Fund (3/10/95) -3.31% N/A -1.40%
Balanced Fund (3/10/95) 5.18% N/A 10.60%
Equity Fund (3/10/95) 12.72% N/A 20.64%
International Equity Fund (3/10/95) -3.28% N/A -0.23%
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 200 (11/05/96) N/A N/A N/A
CitiSelect VIP Folio 300 (11/05/96) N/A N/A N/A
CitiSelect VIP Folio 400 (11/05/96) N/A N/A N/A
CitiSelect VIP Folio 500 (11/05/96) N/A N/A N/A
Landmark Small Cap Equity VIP 60.96% N/A 92.39%
Fund (11/05/96)a
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) 4.51% N/A 77.65%
Government Securities Fund (5/05/93) -3.21% N/A 5.56%
Growth Fund (5/05/93) 4.25% N/A 51.54%
International Equity Fund (5/05/93) 8.64 N/A 42.64%
Value Fund (5/05/93) -1.50% N/A 60.23%
Growth and Income Fund (5/02/94) 6.29% N/A 39.89%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND
Growth Portfolio (10/9/86) 0.44% 103.32% 249.28%
High Income Portfolio (9/19/85) 6.88% 91.85% 200.38%
Equity Income Portfolio (10/9/86) 6.08% 109.48% 194.97%
Overseas Fund (1/28/87) 2.94% 38.31% 76.60%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 4.34% N/A 43.82%
Index 500 Portfolio (8/27/92) 12.02% N/A 68.23%
MFS VARIABLE INSURANCE TRUST
World Governments Series (6/14/94) -1.93% N/A 8.31%
Money Market Series (1/03/95) -2.44% N/A -0.44%
Bond Series (10/24/95) N/A N/A -6.26%
Total Return Series (1/03/95) 7.32% N/A 27.00%
Research Series (7/26/95) 15.50% N/A 19.81%
Emerging Growth Series (7/24/95) 19.88% N/A 29.96%
a. This is "synthetic" data. See footnote "a" of the "Subaccount
Standardized Average Annual Total Return Table."
- --------------------------------------------------------------------------------
From time to time, sales literature or advertisements may also quote
average annual total returns and cumulative total
13
<PAGE>
returns that do not reflect the surrender charge or the Annual Contract Fee.
These are calculated in exactly the same way as the standardized average annual
total returns and standardized cumulative 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 or the payment of the annual
contract fee.
14
<PAGE>
Based on this non-standard method of calculation, the Non-Standardized
Average Total Returns and Non-Standardized Cumulative Total Returns for the
Subaccounts for the periods ending September 30, 1996 were:
- --------------------------------------------------------------------------------
Subaccount Non-Standardized
Average Annual Total Return Table
- --------------------------------------------------------------------------------
For the For the
Subaccount (date of inception of one-year 5-year For the
corresponding portfolio) period period period from
ending ending inception
9/30/96 9/30/96 to 9/30/96
- --------------------------------------------------------------------------------
LANDMARK VIP FUNDS
U.S. Government Fund (3/10/95) 2.23% N/A 2.70%
Balanced Fund (3/10/95) 11.21% N/A 10.53%
Equity Fund (3/10/95) 19.18% N/A 16.84%
International Equity Fund (3/10/95) 2.26% N/A 3.48%
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 200 (11/05/96) N/A N/A N/A
CitiSelect VIP Folio 300 (11/05/96) N/A N/A N/A
CitiSelect VIP Folio 400 (11/05/96) N/A N/A N/A
CitiSelect VIP Folio 500 (11/05/96) N/A N/A N/A
Landmark Small Cap Equity VIP 70.18% N/A 74.20%
Fund (11/05/96)a
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) 10.50% N/A 19.67%
Government Securities Fund (5/05/93) 2.34% N/A 2.72%
Growth Fund (5/05/93) 10.22% N/A 14.22%
International Equity Fund (5/05/93) 14.87% N/A 12.21%
Value Fund (5/05/93) 4.14% N/A 16.10%
Growth and Income Fund (5/02/94) 12.38% N/A 17.14%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND
Growth Portfolio (10/9/86) 6.19% 15.27% 13.37%
High Income Portfolio (9/19/85) 13.01% 13.94% 10.50%
Equity Income Portfolio (10/9/86) 12.16% 15.96% 11.47%
Overseas Fund (1/28/87) 8.83% 6.72% 6.07%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 10.32% N/A 27.20%
Index 500 Portfolio (8/27/92) 18.44% N/A 14.33%
MFS VARIABLE INSURANCE TRUST
World Governments Series (6/14/94) 3.69% N/A 5.65%
Money Market Series (1/03/95) 3.16% N/A 3.00%
Bond Series (10/24/95) N/A N/A 0.07%
Total Return Series (1/03/95) 13.47% N/A 18.44%
Research Series (7/26/95) 22.12% N/A 22.12%
Emerging Growth Series (7/24/95) 26.75% N/A 30.65%
a. This is "synthetic" data. See footnote "a" of the "Subaccount
Standardized Average Annual Total Return Table."
- -------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
Subaccount Non-Standardized
Cumulative Total Return Table
- --------------------------------------------------------------------------------
For the For the
Subaccount (date of inception of one-year 5-year For the
corresponding portfolio) period period period from
ending ending inception
9/30/96 9/30/96 to 9/30/96
- --------------------------------------------------------------------------------
LANDMARK VIP FUNDS
U.S. Government Fund (3/10/95) 2.23% N/A 4.26%
Balanced Fund (3/10/95) 11.21% N/A 16.96%
Equity Fund (3/10/95) 19.18% N/A 27.57%
International Equity Fund (3/10/95) 2.26% N/A 5.50%
VARIABLE ANNUITY PORTFOLIOS
CitiSelect VIP Folio 200 (11/05/96) N/A N/A N/A
CitiSelect VIP Folio 300 (11/05/96) N/A N/A N/A
CitiSelect VIP Folio 400 (11/05/96) N/A N/A N/A
CitiSelect VIP Folio 500 (11/05/96) N/A N/A N/A
Landmark Small Cap Equity VIP 70.18% N/A 103.42%
Fund (11/05/96)a
AIM VARIABLE INSURANCE FUNDS, INC.
Capital Appreciation Fund (5/05/93) 10.50% N/A 84.42%
Government Securities Fund (5/05/93) 2.34% N/A 9.58%
Growth Fund (5/05/93) 10.22% N/A 57.32%
International Equity Fund (5/05/93) 14.87% N/A 48.07%
Value Fund (5/05/93) 4.14% N/A 66.33%
Growth and Income Fund (5/02/94) 12.38% N/A 46.55%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND
Growth Portfolio (10/9/86) 6.19% 103.54% 250.02%
High Income Portfolio (9/19/85) 13.01% 92.05% 201.09%
Equity Income Portfolio (10/9/86) 12.16% 109.70% 195.60%
Overseas Fund (1/28/87) 8.83% 38.46% 76.96%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND II
Contrafund Portfolio (1/03/95) 10.32% N/A 52.09%
Index 500 Portfolio (8/27/92) 18.44% N/A 73.05%
MFS VARIABLE INSURANCE TRUST
World Governments Series (6/14/94) 3.69% N/A 13.47%
Money Market Series (1/03/95) 3.16% N/A 5.28%
Bond Series (10/24/95) N/A N/A 0.06%
Total Return Series (1/03/95) 13.47% N/A 34.29%
Research Series (7/26/95) 22.12% N/A 26.68%
Emerging Growth Series (7/24/95) 26.75% N/A 37.42%
a. This is "synthetic" data. See footnote "a" of the "Subaccount Standardized
Average Annual Total Return Table."
- --------------------------------------------------------------------------------
Non-standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed.
16
<PAGE>
In advertising and sales literature, the performance of each subaccount
may be compared to the performance of other variable annuity issuers in general
or to the performance of particular types of variable annuities investing in
mutual funds, or mutual fund portfolios with investment objectives similar to
each of the subaccounts. Lipper Analytical Services, Inc. ("Lipper") and the
Variable Annuity Research Data Services ("VARDS") 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 rankings include variable life issuers as well as variable
annuity issuers. VARDS rankings compare only variable annuity issuers. The
performance analyses prepared by Lipper and VARDS 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 adjusted
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 "deductions" for the expenses of operating
or managing an investment portfolio. Other independent ranking services and
indices may also be used as a source of performance comparison.
Comparison 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 underlying
portfolio's investment experience is positive.
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
17
<PAGE>
will then be adjusted to reflect the basis upon which the particular quotation
is calculated. This fee is waived for Contracts having a Contract Value of at
least $25,000 or if, during the Contract Year, purchase payments of at least
$2,500 ($2,000 for Qualified Contracts), exclusive of the initial purchase
payment, are paid.
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
18
<PAGE>
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 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.
19
<PAGE>
The following illustration shows, by use of hypothetical example, the
method of determining the annuity unit value.
llustration of Calculation of Annuity Unit Value
1. Net Investment Factor for period.................. 1.003662336
2. Adjustment for 3% Assumed Investment
Rate.............................................. 0.999919016
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
20
<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 Richard M. Zuckerman, Associate 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.
21
<PAGE>
- --------------------------------------------------------------------------------
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 Auditor's Report appear in the Statement of Additional
Information to Post-Effective Amendment No. 2 to the Separate Account's
registration statement filed on April 29, 1996 with the SEC and are incorporated
by reference in this Statement of Additional Information. The financial
statements for the Separate Account as of December 31, 1995 as well as the
Auditor's Report also appear in the Statement of Additional Information to
Post-Effective Amendment No. 2 to the Separate Account's registration statement
filed on April 29, 1996 with the SEC and are incorporated by reference in this
Statement of Additional Information.
22
<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) Individual Retirement Annuity Endorsement.*
(c) 403(b) Tax Sheltered Annuity Endorsement.*
(d) Annuity Contract Endorsement: Waiver of Surrender Charges.*
(e) Variable Annuity Endorsement: Amendment of Contract Provisions.
(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*
(b) Participation Agreement Among Variable Insurance Products Fund II,
Fidelity Distributors Corporation and Citicorp Life Insurance
Company.
<PAGE>
(c) Participation Agreement Between MFS Variable Insurance Trust,
Citicorp Life Insurance Company and Massachusetts Financial
Services Company.
(d) Participation Agreement By and Among AIM Variable Insurance Funds,
Inc. and Citicorp Life Insurance Company, on Behalf of Itself and
Citicorp Life Variable Annuity Separate Account.
(e) Participation Agreement Among Landmark VIP Funds and Citicorp Life
Insurance Company.
(f) Participation Agreement Between Variable Annuity Portfolios and
Citicorp Life Insurance Company.
(g) 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 KPMG Peat Marwick LLP.
(11) Not Applicable.
(12) None.
(13) Not Applicable.
(14) Not Applicable.
*Incorporated herein by reference to the registrant's Post-Effective Amendment
No. 2 to the Registration Statement filed with the Securities and Exchange
Commission via EDGARLINK on April 29, 1996 (File 33-81626)
Item 25. Directors and Officers of the Company.
Richard P. Elder Director*
Steven J. Freiberg Director*
Alan F. Liebowitz Director/President and Chief
Executive Officer*
Joseph E. Madalon Director/Senior Vice President*
Charles H. Masland, IV Director/Senior Vice President*
<PAGE>
Larry D. Williams Director/Senior Vice President*
Charles R. Haskins Executive Vice President*
Pasquale S. Alessi Vice President*
Daniel F. Forcade Vice President and Treasurer*
Mark C. Lovejoy Vice President and Chief
Underwriter*
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 Regis-trant 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.
(e) Citicorp Life Insurance Company hereby represents that the fees
and charges deducted under the Contract, in the aggregate, are
reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by Citicorp Life
Insurance Company.
<PAGE>
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the registrant certifies that it 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 22nd day of October, 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 October 22, 1996
/s/Charles H. Masland, IV Director, SVP October 22, 1996
/s/Daniel F. Forcade Treasurer, VP October 22, 1996
<PAGE>
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the registrant certifies that it 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 22nd day of October, 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 October 22, 1996
/s/Joseph E. Madalon Director October 22, 1996
/s/Steven J. Freiberg Director October 22, 1996
/s/Richard P. Elder Director October 22, 1996
<PAGE>
EXHIBIT INDEX
4(e). Variable Annuity Endorsement: Amendment of Contract Provisions.
5. Contract Application
8(b). Participation Agreement Among Variable Insurance Products Fund II,
Fidelity Distributors Corporation and Citicorp Life Insurance Company
with Amendment.
8(c). Participation Agreement Among MFS Variable Insurance Trust, Citicorp Life
Insurance Company and Massachusetts Financial Services Company.
8(d). Participation Agreement By and Among AIM Variable Insurance Funds, Inc.
and Citicorp Life Insurance Company on Behalf of Itself and Citicorp Life
Variable Annuity Separate Account.
8(e). Participation Agreement Among Landmark VIP Funds and Citicorp Life
Insurance Company.
8(f). Participation Agreement Among Variable Annuity Portfolios and Citicorp
Life Insurance Company.
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 4(e)
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Home Office: Phoenix, AZ
Administrative Office: 800 Silver Lake Boulevard
P.O. Box 7031
Dover, DE 19903
VARIABLE ANNUITY ENDORSEMENT
AMENDMENT OF CONTRACT PROVISIONS
The contract to which this endorsement is attached is amended as follows:
The second paragraph of the "Allocation of Premium" provision is deleted in
its entirety and replaced by the following:
You may change the premium allocation at any time by notifying us in
writing. We may require allocations to any Account to be expressed in
whole percent and be at least $100 of any premium payment.
Sub-paragraph 2. A. of the "Transfer" provision is deleted in its entirety
and replaced by the following:
2. A. 40% of the Fixed Account value as of the later of the Contract
Date or last Contract Anniversary;
Sub-paragraph 3. of the provision entitled "Dollar Cost Averaging (Automatic
Transfers)" is deleted in its entirety and replaced by the following:
3. The amount of such transfers from the Fixed Account must be equal
to or less than 1/30 of the Account value when this option is
elected.
The following is added to the third paragraph of the provision entitled
"Annual Contract Fee""
In addition, the Annual Contract Fee will be waived in its entirety for
any Contract Year in which additional premium payments of at least
$2,500 ($2,000 for Qualified Plans as defined under the I.R.S. Code),
exclusive of the initial premium, are paid.
In all other respects, the contract is unchanged.
/s/Richard M. Zuckerman
Secretary
63-1712(06-96)
EXHIBIT 5
<PAGE>
CITICORP LIFE INSURANCE COMPANY
Administrative Offices: 800 Silver Lake Blvd., P.O. Box 7031, Dover, DE 19903
Variable Annuity Application
(Make all checks payable to Citicorp Life Insurance Company)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Contract Name (First) (Middle) (Last) Sex [ ] 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) Sex [ ] 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) Sex [ ] 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) Sex [ ] 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 Total Premium Received with Application $
Indicate in whole % VARIABLE ANNUITY PORTFOLIOS FIDELITY VARIABLE INSURANCE AIM VARIABLE INSURANCE FUNDS,
the allocation of 1.___% CitiSelect(SM) VIP Folio 200 PRODUCTS FUND II INC.
the initial premium. 2.___% CitiSelect(SM) VIP Folio 300 10.___% Contrafund Portfolio 18.___% Capital Appreciation Fund
Subsequent payments 3.___% CitiSelect(SM) VIP Folio 400 11.___% Index 500 Portfolio 19.___% Government Securities Fund
will be allocated in 4.___% CitiSelect(SM) VIP Folio 500 MFS VARIABLE INSURANCE TRUST 20.___% Growth Fund
the same manner 5.___% Landmark Small Cap Equity 12.___% World Governments Series 21.___% International Equity Fund
until changed. VIP Fund 13.___% Money Market Series 22.___% Value Fund
Premiums paid must FIDELITY VARIABLE INSURANCE 14.___% Bond Series 23.___% Growth and Income Fund
result in allocation PRODUCTS FUND 15.___% Total Return Series FIXED ACCOUNT
of a least $100 to 6.___% Growth Portfolio 16.___% Research Series 24.___%
each fund elected. 7.___% High Income Portfolio 17.___% Emerging Growth Series __________________________________
8.___% Equity Income Portfolio
9.___% Overseas Portfolio _______Total (Must equal 100%)
- ------------------------------------------------------------------------------------------------------------------------------------
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: ___________________________________
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
63-1804(08-96)
EXHIBIT 8(b)
<PAGE>
AMENDMENT NO. 1 TO PARTICIPATION AGREEMENT AMONG
VARIABLE INSURANCE PRODUCTS FUND II
FIDELITY DISTRIBUTORS CORPORATION
and
CITICORP LIFE INSURANCE COMPANY
WHEREAS, CITICORP LIFE INSURANCE COMPANY (the "Company"), VARIABLE
INSURANCE PRODUCTS FUND II (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 II 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
LG943260.022
<PAGE>
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND II,
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 II, an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts (hereinafter the
"Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the "Underwriter"), a
Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as
"Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 17, 1986 (File No. 812-6422), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15)
thereunder, to the extent necessary to permit
<PAGE>
shares of the Fund to be sold to and held by variable annuity and variable life
insurance separate accounts of both affiliated and unaffiliated life insurance
companies (hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life insurance 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
<PAGE>
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.
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
<PAGE>
investment objectives or policies that are substantially different from
the investment objectives and policies of all the Portfolios of the Fund; or (b)
the Company gives the Fund and the Underwriter 45 days written notice of its
intention to make such other investment company available as a funding vehicle
for the Contracts; or (c) such other investment company was available as a
funding vehicle for the Contracts prior to the date of this Agreement and the
Company so informs the Fund and Underwriter prior to their signing this
Agreement (a list of such funds appearing on Schedule C to this Agreement); or
(d) the Fund or Underwriter consents to the use of such other investment
company.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10 The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. 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
<PAGE>
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 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 that
it will notify the Fund and the Underwriter immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.5. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. The Fund has adopted a "no
fee" or "defensive" Rule 12b-1 Plan under which it makes no payments for
distribution expenses. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have a board of
trustees, a majority of whom are not interested persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distribution expenses.
2.6 The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Arizona and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in
<PAGE>
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.
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
<PAGE>
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;
(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
<PAGE>
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.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the Contracts or
each Account, contemporaneously with the filing of such document with the SEC or
other regulatory authorities.
<PAGE>
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
5.1. The fund and Underwriter shall pay no fee or other compensation to
the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund.
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
<PAGE>
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 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),
<PAGE>
establishing a new registered management investment company or managed separate
account.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those
<PAGE>
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 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
<PAGE>
(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 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.
<PAGE>
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, 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
<PAGE>
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 subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
<PAGE>
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.
<PAGE>
In case any such action is brought against the Indemnified Parties, the
Fund will be entitled to participate, at its own expense, in the defense
thereof. The Fund also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Fund to such party of the Fund's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Fund will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
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
<PAGE>
applicable state and/or federal law or such law precludes the use
of such shares as the underlying investment media of the Contracts
issued or to be issued by the Company; or
(d) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Fund may
fail to so qualify; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio 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
<PAGE>
invest in the Fund upon the making of additional purchase payments
under the Existing Contracts. The parties agree that this Section 10.2 shall not
apply to any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Fund and the Underwriter the
opinion of counsel 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,
<PAGE>
agents or shareholders assume any personal liability for obligations entered
into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, 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.
<PAGE>
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;
(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.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
CITICORP LIFE INSURANCE COMPANY
By: /s/Charles R. Haskins 10-26-94
Name: Charles R. Haskins
Title: E. V. P.
VARIABLE INSURANCE PRODUCTS FUND II
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
<PAGE>
Schedule A
Separate Accounts and Associated Contracts
Name of Separate Account and Policy Form Numbers of Contracts Funded
Funded
Date Established by Board of Directors By Separate Account
Citicorp Life Variable Annuity 63-1103(05-94)
Separate Account
(July 6, 1994)
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter
as early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At
this time the Underwriter will inform the Company of the Record, Mailing
and Meeting dates. This will be done verbally approximately two months
before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in
the number of Customers to Fidelity, as soon as possible, but no later
than two weeks after the Record Date.
3. The Fund's Annual Report 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.)
<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.
<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.
<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
EXHIBIT 8(c)
<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
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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
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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
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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,
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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
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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.
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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
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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
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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.
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<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.
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<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.
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<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.
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<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
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<PAGE>
As of November 30, 1994
AMENDED: As of August 1, 1996
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
Name of Separate
Account and Date
Established by Policies Funded Portfolios
Board of Directors by Separate Account Applicable to Policies
- ------------------ ------------------- ----------------------
Citicorp Life 63-1103(05-94) MFS World Governments Series
Variable Annuity MFS Money Market Series
Separate Account MFS Bond Series
(July 6, 1994) MFS Research Series
MFS Total Return Series
MFS Emerging Growth Series
CITICORP LIFE INSURANCE COMPANY
By its authorized officer:
By: /s/ Elizabeth C. Craig
Title: Vice President
MFS VARIABLE INSURANCE TRUST, on behalf of
the Portfolios
By its authorized officer and
not individually:
By: /s/ A Keith Brodkin
A. Keith Brodkin
Chairman
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer:
By: /s/ Arnold D. Scott
Arnold D. Scott
Senior Executive Vice President
-17-
EXHIBIT 8(d)
<PAGE>
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.
AND
CITICORP LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
CITICORP LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
<PAGE>
THIS AGREEMENT, made and entered into this 10th day of February, 1995,
by and among AIM VARIABLE INSURANCE FUNDS, INC., an open-end, series, management
investment company ("AVIF"), and CITICORP LIFE INSURANCE COMPANY, an Arizona
corporation (the "Company"), on its own behalf and on behalf of the CITICORP
LIFE VARIABLE ANNUITY SEPARATE ACCOUNT and other segregated asset accounts of
the Company as set forth on Schedule A attached hereto, as the parties hereto
may amend from time to time (each, an "Account," and collectively, the
"Accounts").
WHEREAS, AVIF is a Maryland corporation 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 under the Securities Act
of 1933, as amended (the "1933 Act");
WHEREAS, AVIF is comprised of nine investment portfolios (the "Funds"),
shares of which are currently sold only to insurance company separate accounts
to fund benefits under variable annuity contracts;
WHEREAS, the Funds to be offered by AVIF to the Company and the Accounts
are set forth on Schedule A attached hereto, as the parties hereto may amend
from time to time (each, a "Portfolio," and collectively, the "Portfolios");
WHEREAS, A I M Advisors, Inc. ("AIM Advisors") is duly registered as an
investment adviser under the Investment Advisors Act of 1940, as amended, and
any applicable state securities law, and is AVIF's investment adviser;
WHEREAS, the Company will issue certain variable annuity contracts
("Contracts") and/or variable life insurance policies ("Policies") as set forth
on Schedule A attached hereto, as the parties hereto may amend from time to
time, which Contracts and Policies, if required by applicable law, will be
registered under the 1933 Act;
WHEREAS, each Account is or will be a segregated asset account, duly
organized and validly existing under the laws of the State of Arizona, and
established by resolution of the Board of Directors of the Company to set aside
and invest assets attributable to the Policies that are allocated to the
Accounts;
WHEREAS, the Company has registered or will register the Accounts as
unit investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, A I M Distributors, Inc. (the "Underwriter") is registered as a
broker-dealer with the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"), and is
a member in good standing of the National Association of Securities Dealers,
Inc., (the "NASD"),
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<PAGE>
WHEREAS, Landmark Funds Broker-Dealer Services, Inc. ("Landmark"), the
underwriter for the Policies, is registered as a broker-dealer with the SEC
under the 1934 Act and is a member in good standing of the NASD;
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios (the "Shares") on behalf of the Accounts to fund the Contracts and
Policies (hereinafter collectively, the "Policies,"); provided, however, that
Shares will be sold to Accounts funding variable life insurance policies only
following receipt by AVIF of an exemptive order from the SEC permitting AVIF to
be available for investment by separate accounts funding variable life insurance
policies ("Mixed Funding") and by separate accounts of insurance companies
unaffiliated with the Company ("Shared Funding"); and
WHEREAS, AVIF intends to sell such Shares to the Accounts at net asset
value;
NOW, THEREFORE, in consideration of their mutual promises, AVIF, and the
Company, on behalf of itself and the Accounts, agree as follows:
ARTICLE I. SALE OF TRUST SHARES
1.1. AVIF agrees to sell to the Company those shares that the Accounts order
(based on orders placed by owners of Policies (collectively, "Policy owners") on
each Business Day before the time as of which AVIF computes the net asset value
of its Shares on that Business Day, as defined below) and that are available for
purchase by such Accounts, executing such orders on a daily basis at the net
asset value next computed after receipt by AVIF or its designee of the order for
the Shares. For purposes of this Section 1.1 Landmark shall be the designee of
AVIF for receipt of such orders from Policy owners and receipt by such designee
shall constitute receipt by AVIF; provided that AVIF 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 (the "NYSE") is
open for trading and on which AVIF calculates its net asset value pursuant to
the rules of the SEC.
1.2. AVIF 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 AVIF calculates its net asset value pursuant to rules of the SEC,
and AVIF shall calculate such net asset value on each day on which the NYSE is
open for trading. Notwithstanding the foregoing, the Board of Directors of AVIF
(the "Board") may refuse to sell Shares of any Portfolio 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 AVIF's
2
<PAGE>
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. AVIF agrees that it will sell Shares only to insurance companies that have
entered into participation agreements with AVIF (the "Participating Insurance
Companies"), the separate accounts of Participating Insurance Companies,
qualified pension and retirement plans, and AVIF or its affiliates. In the event
AVIF implements Mixed and Shared Funding, AVIF will not sell Shares to any
Participating Insurance Company or separate account thereof unless an agreement
containing provisions substantially the same as Section 2.7 of Article II,
Sections 3.5 and 3.6 of Article III, and Article VII of this Agreement is in
effect to govern such sales. The Company will not resell the Shares except to
AVIF or its agents.
1.4. AVIF agrees to redeem for cash, on the Company's request, any full or
fractional Shares held by the Accounts (based on orders placed by Policy owners
on each Business Day before the time as of which AVIF calculates the net asset
value of its Shares on that Business Day), executing such request at the net
asset value per Share next computed after receipt by AVIF or its designee of the
request for redemption. For purposes of this Section 1.4, the Company shall be
the designee of AVIF for receipt of requests for redemption from Policy owners
and receipt by such designee shall constitute receipt by AVIF, provided that
AVIF 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 AVIF, the Company and AVIF shall net purchase and 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, AVIF shall pay the redemption proceeds by 2:00 p.m.
New York time on the next Business Fay after an order to redeem the Shares is
made in accordance with the provisions of Section 1.4. hereof, or as soon
thereafter as is reasonably practicable, and in any event within five calendar
days after the date the order is placed in order to enable the Company to pay
redemption proceeds within the time specified in Section 22(e) of the 1940 Act.
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 any Account. The Shares
ordered from AVIF will be recorded in an appropriate title for the Accounts or
the appropriate subaccounts of the Accounts.
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<PAGE>
1.8. AVIF shall furnish same day notice (by wire or telephone followed by
written conformation) 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. AVIF shall notify the Company of the number
of Shares so issued as payment of such dividends and distributions.
1.9. AVIF shall make the net asset value per share for each Portfolio available
to the Company on each Business Day as soon as reasonably practicable 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 AVIF 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
that AVIF takes to make the net asset value available to the Company. If AVIF
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 gain
information shall be reported promptly upon discovery to the Company.
ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. The Company represents and warrants that the Policies are or will be
registered under the 1933 Act or are exempt from or not subject to registration
thereunder, and that the Policies will be issued, sold, and distributed in
compliance in all material respects with all applicable federal and state laws,
including without limitation the 1933 Act, the 1934 Act, and the 1940 Act. The
Company further represents and warrants that it is an insurance company duly
organized and in good standing under Arizona law and that it has legally and
validly established the Accounts as segregated asset accounts under Arizona 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 sale in accordance with the securities laws of the various
states only if and to the extent deemed necessary by the Company.
2.2. Subject to Article VI, 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 contracts
4
<PAGE>
under applicable provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), that it will make every effort to maintain such treatment and that
it will notify AVIF immediately upon having a reasonable basis for believe 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, the underwriter for the
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, will sell and distribute such policies in accordance in all
material respects with all applicable federal and state securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.4 AVIF represents and warrants that the Shares sold pursuant to this Agreement
shall be registered under the 1933 Act, that the Shares shall be duly authorized
for issuance and sold in compliance with the laws of the state of Maryland and
all applicable federal and state securities laws and that AVIF is and shall
remain registered as a management investment company under the 1940 Act. AVIF
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. AVIF shall register and qualify the Shares for sale in
accordance with the laws of the various states only if and to the extent it
deems necessary.
2.5. AVIF 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. AVIF
represents that AVIF 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. AVIF represents that it is lawfully organized and validly existing under
the laws of the State of Maryland and that it does and will comply in all
material respects with the 1940 Act and any applicable regulations thereunder.
2.7. No less frequently than annually, the Company shall submit to the Board
such reports, material or data as the Board may reasonably request from time to
time so that it may carry out fully the obligations imposed upon it by the
conditions contained in any exemptive application filed in the future by AVIF
pursuant to which the SEC may grant exemptive relief to permit Mixed and Shared
Funding (the "Mixed and Shared Funding Exemptive Order").
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1 AVIF or its designee shall provide the Company such documentation (including
a "camera ready" copy of the current prospectus (describing only the Portfolios
listed in Schedule A hereto)
5
<PAGE>
for the Shares 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 Company once each year (or more frequently if the
prospectus for the Shares is supplemented or amended) to have the prospectus for
the Policies and the prospectus for the Shares printed together in one document;
the expense of such printing to be borne by the Company. AVIF shall be
responsible for providing the prospectus in the format in which it or AVIF 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 AVIF or its designee. AVIF or its
designee, at its expense, shall provide a master of such statement of additional
information suitable for duplication by the Company, at its expense, for
distribution to any owner of a Policy funded by the Shares, to a prospective
purchaser who requests such statement or to an owner of a Policy not funded by
the Shares.
3.3 AVIF or its designee shall provide the Company camera ready copies, if and
to the extent applicable to the Shares, of AVIF's proxy materials, reports to
Shareholders and other communications to Shareholders as the Company shall
reasonably require for distribution to Policy owners. The Company shall, at its
expense, print and distribute such materials to Policy owners.
3.4 Notwithstanding the provisions of Section 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 AVIF hereby notifies the Company that, in the event that AVIF implements
Mixed and Shared Funding, it may be appropriate to include in the prospectus
pursuant to which a 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 timely instructions received
from Policy owners; and
6
<PAGE>
(c) vote the Shares for which no timely instructions have been
received, as well as Shares it owns, 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 Policy 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 Account in its own right, to the extent permitted by law.
The Company shall be responsible for assuring that each of their
separate accounts holding Shares calculates voting privileges in
a manner consistent with that of other Participating Insurance
Companies or in the manner required by any Mixed and Shared
Funding Exemptive Order that AVIF may obtain in the future. AVIF
will notify the Company of any changes of interpretations or
amendments to any Mixed and Shared Funding Exemptive Order it
obtains in the future.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to AVIF or its
designee, each piece of sales literature or other promotional material in which
AVIF, AIM Advisors, any other investment advisor to AVIF, or any affiliate of
AVIF are named, at least five (5) Business Days prior to its use. No such
material shall be used if AVIF, AIM Advisors or their respective designees
reasonably objects to such use within five (5) 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 AVIF, AIM Advisors, any other investment adviser to AVIF,
or any affiliate of AVIF 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 of proxy statements
prepared by or for AVIF, or in sales literature or other promotional material
approved by AVIF, AIM Advisors, or their respective designees, except with the
permission of AVIF, AIM Advisors, or their respective designees. AVIF agrees,
and shall cause AIM Advisors and their respective designees, 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
AVIF, AIM Advisors, or any of their affiliates which is intended for use only by
brokers or agents selling the Policies (i.e., information that is not intended
for distribution to Policy owners or prospective Policy owners) is so used, and
neither AVIF, AIM Advisors nor any of their affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials.
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<PAGE>
4.3. AVIF 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
materials in which the Company and/or the Accounts is named, at least five (5)
Business Days prior to its use. No such material shall be used if the Company or
its designee reasonably objects to such use within five (5) Business Days after
receipt of such material.
4.4. AVIF 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 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 AVIF is an underwriter or distributor of the Policies.
4.5. The Company and AVIF (or their designees) will each provide to the other at
least one complete copy of all registration statements, prospectuses, statements
of additional information, reports, proxy statements, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Accounts or
the Policies, or to AVIF or its Shares, prior to or contemporaneously with the
filing of such document with the SEC or other regulatory authorities. The
Company and AVIF shall also each promptly inform the other of the results of any
examination by the SEC (or other regulatory authorities) that relates to the
Accounts or the Policies, AVIF 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 examination.
4.6. AVIF will provide the Company with as much notice as is reasonably
practicable of any proxy solicitations for any Portfolio, and of any material
change in AVIF's registration statement. AVIF will cooperate with the Company so
as to enable the Company to solicit proxies from Policy owners to make
corresponding changes to the Policy prospectus, statement of additional
information or registration statement, in an orderly manner. AVIF 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 purposes 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),
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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. AVIF shall pay no fee or other compensation to the Company under this
Agreement, and the Company shall pay no fee or other compensation to AVIF,
except that if AVIF or any Portfolio adopts and implements a plan pursuant to
Rile 12b-1 under the 1940 Act to finance distribution and shareholder servicing
expenses, then, subject to obtaining any required exemptive orders or regulatory
approvals, AVIF may make payments to the Company or to the underwriter for the
Policies if and in amounts agreed to by AVIF in writing. The Company, however,
shall, in accordance with the allocation of expenses specified in Articles III
and V hereof, reimburse AVIF for expenses initially paid by AVIF or its designee
but allocated to the Company. 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 Portfolios and/or to the
Accounts.
5.2. AVIF 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 AVIF's registration statement, and payment
of filing fees and registration fees; preparation and filing of AVIF's proxy
materials and reports to Shareholders; setting in type its prospectus and
statement of additional information, including any amendments or supplements
thereto (to the extent provided by and as determined in accordance with Article
III above); setting in type the proxy materials, reports and other
communications 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 AVIF by any federal or state law with respect to its Shares;
any taxes on the issuance or transfer of the Shares; and any expenses permitted
to be paid or assumed by AVIF pursuant to a plan, if any, under Rule 12b-1 under
the 1940 Act. AVIF shall not bear any expenses of marketing the Policies.
5.3. The Company shall bear the expenses of printing and distributing the
prospectus and statement of additional information, including any amendments or
supplements thereto, relating to Portfolio Shares in connection with existing
Policy owners and new sales of the Policies and of printing and distributing
AVIF's Shareholder proxy materials, reports and other communications to existing
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
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and statement of additional information; and the cost of preparing, printing and
distributing annual individual account statements for Policy owners as required
by state insurance laws.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1. AVIF, on behalf of each Portfolio, represents and warrants that it will use
every effort to comply with the diversification requirements of Section
817(h)(1) of the Code and Treas. Reg. 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts, as
they may be amended from time to time (and any revenue rulings, revenue
procedures, notices, and other published announcements of the Internal Revenue
Service interpreting these sections) as if those requirements applied directly
to each such Portfolio. In the event that any Portfolio is not so diversified at
the end of any applicable quarter, AVIF will notify the Company and will use
every effort to adequately diversify the Portfolio so as to achieve compliance
within the grace period afforded by Treas. Reg. 1.817-5.
6.2. AVIF represents that each Portfolio will elect to be qualified as a
regulated investment company under Subchapter M or of the Code and that best
efforts will be made to maintain such qualification (under Subchapter M or any
successor or similar provision) and that AVIF or its designee will notify the
Company promptly upon having a reasonable basis for believing that any Portfolio
has ceased to so qualify or that any Portfolio might not so qualify in the
future.
6.3 The Company agrees that if the Internal Revenue Service ("IRS") asserts in
writing in connection with any governmental audit or review of the Company or,
to the Company's knowledge, of any Policy owner, that any Portfolio has failed
to comply with the diversification requirements of section 817(h) of the Code or
the Company otherwise becomes aware of any facts that could give rise to any
claim against AVIF or its affiliates as a result of such a failure or alleged
failure, (i) the Company shall promptly notify AVIF of such assertion or
potential claim; (ii) the Company shall consult with AVIF as to how to minimize
any liability that may arise as a result of such failure or alleged failure;
(iii) the Company shall use its best efforts to minimize any liability of AVIF
or its affiliates resulting from such failure, including, without limitation,
demonstrating, pursuant to Treasury Regulations Section 1.817-5(a)(2), to the
Commissioner of the IRS that such failure was inadvertent; (iv) the Company
shall permit AVIF, its affiliates and their legal and accounting advisors to
participate in any conferences, settlement discussions or other administrative
or judicial proceeding or contests (including judicial appeals thereof) with the
IRS, any Policy owner or any other claimant regarding any claims that could give
rise to liability to AVIF or its affiliates as a result of such a failure or
alleged failure; (v) any written materials to be submitted by the Company to the
IRS, any Policy owner or any other claimant in connection with any of the
foregoing proceedings or contests (including, without limitation, any such
materials to be submitted to the IRS pursuant to Treasury Regulations Section
1.817-5(a)(2)), (a) shall be provided by the Company to AVIF (together with any
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supporting information or analysis) at least ten (10) business days prior to the
day on which such proposed materials are to be submitted and (b) shall not be
submitted by the Company to any such person without the express written consent
of AVIF which shall not be unreasonably withheld; (vi) the Company shall provide
AVIF or its affiliates and their accounting and legal advisors with such
cooperation as AVIF shall reasonably request (including, without limitation, by
permitting AVIF and its accounting and legal advisors to review the relevant
books and records of the Company) in order to facilitate review by AVIF or its
advisors of any written submissions provided to it pursuant to the preceding
clause or its assessment of the validity or amount of any claim against its
arising from such a failure or alleged failure; (vii) the Company shall not with
respect to any claim of the IRS or any Policy owner that would give rise to a
claim against AVIF or its affiliates (a) compromise or settle any claim, (b)
accept any adjustment on audit, or (c) forego any allowable judicial appeals,
without the express written consent of AVIF or its affiliates, which shall not
be unreasonably withheld, provided that the Company shall not be required to
appeal any adverse judicial decision unless AVIF or its affiliates shall have
provided an opinion of independent counsel to the effect that a reasonable basis
exists for taking such appeal; and (viii) AVIF and its affiliates shall have no
liability as a result of such failure or alleged failure if the Company fails to
comply with any of the foregoing clauses (i) through (vii), and such failure
could be shown to have materially contributed to the liability. Should AVIF or
any of its affiliates refuse to give its written consent to any compromise or
settlement of any claim or liability hereunder, the Company may, in its
discretion, authorize AVIF or its affiliates to act in the name of the Company
in, and to control the conduct of, such conferences, discussions, proceedings,
contests or appeals and all administrative or judicial appeals thereof, and in
that event AVIF or its affiliates shall bear the fees and expenses associated
with the conduct of the proceedings that it is so authorized to control;
provided further that in no event shall any liability to the Company exceed the
amount which would have otherwise attached had the proposed settlement or
compromise been accepted by AVIF.
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The parties hereto agree that the provisions of this Article VII shall
apply if and only if AVIF implements Mixed and Shared Funding pursuant to an
exemptive order from the SEC or otherwise. AVIF agrees that the Board,
constituted with a majority of disinterested Directors, will monitor each
Portfolio for the existence of any material irreconcilable conflict between the
interests of the variable annuity contract owners and the variable life
insurance policy owners (collectively, "Participants") of the Participating
Insurance Companies investing in AVIF. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
or other regulatory authority; (b) a change in applicable federal or state
insurance, tax or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
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investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
policy Participants or by Participants of different Participating Insurance
Companies; or (f) a decision by a Participating Insurance Company to disregard
the voting instructions of Participants. 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
Directors 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 any
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 Participant voting
instructions are disregarded. The Company agrees to carry out these
responsibilities with a view only to the interests of the Participants. The
Company also agrees that, if a material irreconcilable conflict arises, it will
at its own cost remedy or eliminate such conflict up to and including (a)
withdrawing the assets allocable to some or all of the Accounts from AVIF or any
Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of AVIF, or submitting to a
vote of all affected Participants whether to withdraw assets from AVIF or any
Portfolio and reinvesting such assets in a different investment medium and, as
appropriate, segregating the assets attributable to any appropriate group of
Participants that votes in favor of such segregation, or offering to any of the
affected Participants the option of segregating the assets attributable to their
contracts or policies, and (b) establishing a new registered management
investment company and segregating the assets underlying the Policies, unless a
majority of Policy owners materially adversely affected by the conflict have
voted to decline the offer to establish a new registered management investment
company.
7.3. A majority of the disinterested Directors 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 AVIF each of the Accounts
designated by the disinterested Directors 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 Directors of the
Board.
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7.4 If a material irreconcilable conflict arises because of the Company's
decision to disregard contractowner voting instructions, and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the election of AVIF, to withdraw its Account(s) investments
herein, and no charge or penalty will be imposed as a result of such withdrawal.
Any such withdrawal must take place within six (6) months after AVIF's Board
informs the Company that it has determined that such decision has created a
material irreconcilable conflict, and until such withdrawal AVIF shall continue
to accept and implement orders by the Company for the purchase and redemption of
shares of AVIF.
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 Account's
investment in AVIF within six (6) months after AVIF's Board informs the Company
that it has determined that such decision has created a material irreconcilable
conflict, and until such withdrawal AVIF shall continue to accept and implement
orders by the Company for the purchase and redemption of shares of AVIF.
7.6 The Company agrees that any remedial action taken by it in resolving any
material irreconcilable conflict will be carried out at its expense and with a
view only to the interests of Policy owners.
7.7 For purposes hereof, a majority of the disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will AVIF or AIM Advisors be
required to establish a new funding medium for any Policies.
7.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule
6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act
or the rules promulgated thereunder with respect to Mixed or Shared Funding (as
defined in the Mixed and Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Mixed Shared Funding Exemptive
Order, then (a) AVIF 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 2.7, 3.5, 3.6 and 7.1 through 7.8 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.
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ARTICLE VIII. INDEMNIFICATION
8.1. Indemnification by the Company
The Company agrees to indemnify and hold harmless AVIF, AIM Advisors, any
affiliates of AVIF, and each of their respective directors/trustees, officers
and each person, if any, who controls AVIF or AIM Advisors 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 loses, 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 or acquisition of the
Shares or the Policies and;
(a) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement,
prospectus or statement of additional information for the Policies or contained
in 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 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 Company or its designee by or on behalf of
AVIF or any affiliate of AVIF 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 AVIF not supplied by the Company or its designee, or
persons under its control and on which the Company has reasonably relied) or
wrongful conduct of the Company or persons under its control, with respect to
the sale or distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue statement of a material
fact contained in the registration statement, prospectus, statement of
additional information, or sales literature or other promotional literature of
AVIF, 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
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omission was made in reliance upon information furnished to AVIF by or on behalf
of the Company; or
(d) arise out of or result from any material breach of any representation and/or
warranty made by the Company in this Agreement or arise out of or result from
any other material breach of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to provide the services and
furnish the materials under the terms of this Agreement, as limited by and in
accordance with the provisions of this Article VIII.
8.2. Indemnification by AVIF
AVIF 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 AVIF) 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 AVIF (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission of such alleged statement or omission was made in
reasonable reliance upon and in conformity with information furnished to AVIF,
AIM Advisors, 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 AVIF or in sales literature or other promotional
material for AVIF (or any amendment or supplement) or otherwise for use in
connection with the sale of the Policies or Shares; or
(b) arise out of or as a result of statements or representations (other than
statements or representations contained in the registration statement,
prospectus, statement of additional information or sales literature or other
promotional material for the Policies not supplied by AVIF, AIM Advisors, the
Underwriter or any of their respective designees or persons under their
respective control and on which any such entity has reasonably relied) or
wrongful conduct of
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AVIF 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 AVIF in this Agreement or arise out of or result from any other
material breach of this Agreement by AVIF; 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 AVIF 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 AVIF 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
owner, 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 AVIF 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 ("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 if from
liability which it may have to any Indemnified Party otherwise than under this
Article
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VIII. 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.
8.6. Each party agrees promptly to notify the other party 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
this 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 State of Maryland.
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
AVIF and the Company agree that each shall promptly notify the other, 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.
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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 the Company to the extent that the Shares of Portfolios 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. Prompt notice of the election to terminate for such cause and
an explanation of such cause shall be furnished to AVIF by the Company; or
(b) at the option of AVIF if the Policies issued by the Company cease to qualify
as annuity contracts or life insurance contracts under the Code (other than by
reason of a Portfolio's noncompliance with Section 817(h) or Subchapter M of the
Code) or if interests in the Accounts under the Policies are not registered,
where required, and, in all material respects, are not issued or sold in
accordance with applicable federal or state law. Prompt notice of the election
to terminate for such cause and an explanation of such cause shall be furnished
to the Company by AVIF; or
(c) at the option of AVIF upon institution of formal proceedings against the
Company by the NASD, the SEC, or any insurance department or any other
regulatory body regarding the Company's duties under this Agreement or related
to the sale of the Policies, the operation of the Accounts, or the purchase of
the Shares; or
(d) at the option of the Company upon institution of formal proceedings against
AVIF by the NASD, the SEC, or any state securities or insurance department or
any other regulatory body regarding AVIF's duties under this Agreement or
related to the sale of the Shares; or
(e) at the option of the Company or AVIF 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 AVIF of the date of any proposed vote or other action taken to
replace the Shares; or
(f) at the option of AVIF, upon 30 days' written notice, if the Board of AVIF
determines, in its 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
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(g) at the option of the Company, upon 30 days' written notice, if the Company
determines, in its sole judgment exercised in good faith, that AVIF 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) 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. Unless otherwise specified in Section 11.1, the party terminating the
Agreement shall provide the other at least 30 days notice to the other party.
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. 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 six (6) months after the Company shall have
notified AVIF of its intention to do so and until 24 full calendar months shall
have expired from the date on which an Account first invested in any Portfolio.
11.4. Notwithstanding any termination of this Agreement, AVIF 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 AVIF upon the making of
additional purchase payments under the Existing Policies.
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
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may from time to time specify in writing to the other party.
If to AVIF:
AIM Variable Insurance Funds, Inc.
11 Greenway Plaza, Suite 1919
` Houston, TX 77046
Attn: Nancy L. Martin, Esq.
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
ARTICLE XIII. MISCELLANEOUS
13.1. Subject to the requirements of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of the
Policy owners and all information reasonably identified as confidential in
writing by any other party hereto and, except as permitted by this Agreement or
as otherwise required by applicable law or regulation, shall not disclose,
disseminate or utilize such names and addresses and other confidential
information without the express written consent of the affected party until such
time as it may come into the public domain.
13.2. The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.
13.3. This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
13.4. If any provisions of this Agreement shall be held or made invalid by court
decision, statute, rule or otherwise, the remainder of the Agreement shall not
be affected thereby,
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13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in connection with
inquiries by appropriate governmental authorities (including without limitation
the SEC, the NASD, and state insurance regulators) relating to this Agreement or
the transactions contemplated hereby.
13.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under federal and
state laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified above.
AIM VARIABLE INSURANCE FUNDS, INC.
By:
Title: President
CITICORP LIFE INSURANCE COMPANY,
on behalf of itself and
CITICORP LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
By: /s/Charles R. Haskins
Title: E.V.P.
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SCHEDULE A
Accounts, Policies and Portfolios Subject To the Participation Agreement
Name of Separate Account and Date
Established by Board of Directors:
Citicorp Life Variable Annuity Separate Account (July 6, 1994)
Policies Funded by Separate Account:
Portfolios Applicable to Policies:
AIM V.I. Capital Appreciation Fund
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EXPENSE ALLOCATION AGREEMENT
This Agreement is made as of the 10th day of February, 1995 by and
between Citicorp Life Insurance Company, an Arizona corporation ("Citicorp
Life"), First Citicorp Life Insurance Company, a New York Corporation ("First
Citicorp"), A I M Advisors, Inc., a Delaware corporation ("AIM Advisors"), and A
I M Distributors, Inc., a Delaware corporation ("AIM Distributors")
(collectively, the "Parties").
WITNESSETH:
WHEREAS, AIM Advisors and AIM Distributors serve as the investment
adviser and principal underwriter, respectively, of the AIM Variable Insurance
Funds, Inc., a Maryland corporation ("Fund"), which currently consists of nine
separate series (each, a "Portfolio"); and
WHEREAS, Citicorp Life and First Citicorp have each entered into an
agreement, dated February 10, 1995, with the Fund (each, a "Participation
Agreement") pursuant to which the Fund will make shares of each Portfolio listed
from time to time on Schedule A of each Agreement available to Citicorp Life and
First Citicorp at net asset value and with no sales charges, subject to the
terms of the Participation Agreement, to fund benefits under variable annuity
contracts and/or variable life insurance policies (collectively, "Policies") to
be issued by Citicorp Life and First Citicorp; and
WHEREAS, each Participation Agreement provides that the Fund will bear
the costs of preparing, filing with the Securities and Exchange Commission and
setting for printing the Fund's prospectus, statement of additional information,
including any amendments or supplements thereto, periodic reports to
shareholders, Fund proxy material and other shareholder communications
(collectively, the "Fund Materials"), and that the Fund will provide Citicorp
Life and First Citicorp with camera ready or diskette copies of all Fund
Materials; and
WHEREAS, each Participation Agreement provides that Citicorp Life and
First Citicorp shall print in quantity and deliver to existing owners of
Policies ("Policy owners") the Fund Materials, and that the costs of printing in
quantity and delivering to existing Policy owners such Fund Materials will be
borne by Citicorp Life and First Citicorp; and
WHEREAS, each Participation Agreement provides that the expenses of
distributing a Portfolio's shares and the Policies will be borne by Citicorp
Life and First Citicorp; and
WHEREAS, Citicorp Life and First Citicorp will incur various
administrative expenses in connection with the servicing of Policy owners who
have allocated Policy value to a Portfolio, including, but not limited to,
responding to various Policy owner inquiries regarding a Portfolio; and
<PAGE>
WHEREAS, the Parties wish to allocate expenses in a manner that is fair
and equitable, and consistent with the best interests of Policy owners; and
WHEREAS, the Parties hereto wish to establish a means for allocating the
expenses that does not entail the expense and inconvenience of separately
identifying and accounting for each item of expense;
NOW THEREFORE in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
1. Expense Allocations.
1.1. Fund Materials.
(a) Subject to Section 2 hereof, Citicorp Life and First Citicorp or
their respective affiliates shall initially bear the costs of printing in
quantity and distributing all Fund Materials required by law to be distributed
to existing Policy owners who have allocated Policy value to a Portfolio.
(b) Subject to Section 2 hereof, Citicorp Life and First Citicorp or
their respective affiliates shall initially bear the costs of printing in
quantity and mailing all Fund Materials to prospective Policy owners.
1.2. Sales Materials.
(a) AIM Advisors and AIM Distributors, as they may allocate between
themselves, shall bear the costs of preparing all sales literature or other
promotional material relating to each Portfolio (collectively, "Fund Sales
Materials").
(b) Subject to Section 2 hereof, Citicorp Life and First Citicorp or
their respective affiliates shall initially bear the costs of printing in
quantity all Fund Sales Materials, and preparing and printing in quantity all
sales literature or other promotional material relating to the Policies
(collectively, "Citicorp Sales Materials").
(c) Subject to Section 2 hereof, Citicorp Life and First Citicorp or
their respective affiliates shall initially bear the costs of mailing all Fund
Sales Materials and Citicorp Sales Materials to prospective Policy owners.
1.3. Policy Owner Servicing.
Subject to Section 2 hereof, Citicorp Life and First Citicorp or their
respective affiliates shall initially bear all costs of servicing Policy owners
who have allocated Policy value to a Portfolio, which servicing shall include,
but is not limited to, responding to various Policy owner inquiries regarding a
Portfolio and recordkeeping relating thereto.
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2. Reimbursement of Expenses.
(a) AIM Advisors and AIM Distributors, as they may allocate between
themselves, shall pay to Citicorp Life and First Citicorp, on a pro rata basis,
a monthly payment ("Monthly Payment") equal to a percentage of a Portfolio's
average monthly net assets attributable to Policies issued by Citicorp Life and
First Citicorp at the following annual rates:
Annual Rate Average Monthly Net Assets
0.00% Less than $25 million
0.05% $25 million but less than $100 million
0.10% $100 million but less than $250 million
0.15% $250 million or more
(b) For purposes of calculating the amount of the expense reimbursement,
described in (a) above:
(1) the "average monthly net assets" of any Portfolio for any
calendar month shall be equal to the quotient produced by
dividing (i) the sum of the net assets of such Portfolio
determined in accordance with procedures established from time to
time by or under the direction of the Funds' Board of Directors,
for each [business] day of such month, by (ii) the number of such
[business] days; and
(2) the amount of average monthly net assets attributable to
Policies issued Citicorp Life and First Citicorp shall be
aggregated.
(c) Notwithstanding any other provisions to the contrary, AIM Advisors
or AIM Distributors' obligations to make such payments to Citicorp Life or First
Citicorp shall not arise until the month in which assets of the Portfolio
attributable to the Policies issued by Citicorp Life and First Citicorp equal
$25 million, and such payment obligations, once commenced, shall be suspended
with respect to any month during which assets of the Portfolio attributable to
the Policies shall fall below $25 million.
(d) AIM Advisors or AIM Distributors will calculate the payment
contemplated by this Section 2 at the end of each calendar month and will make
such payment to Citicorp Life or First Citicorp within 30 days thereafter. Each
payment will be accompanied by a statement showing the calculation of the
monthly amounts payable by AIM Advisors or AIM Distributors and such other
supporting data as may be reasonably requested by Citicorp Life or First
Citicorp.
(e) The form of payment made by AIM Advisors or AIM Distributors
pursuant to this Section 2 will be cash; provided, however, that AIM Advisors or
AIM Distributors and Citicorp Life and First Citicorp may from time to time
mutually agree in writing to payments by
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AIM Advisors or AIM Distributors of a portion of the payments made pursuant
to this Section 2 in the form of research services or other forms of payment.
(f) From time to time, the Parties hereto shall review the Monthly
Payment to determine whether it exceeds or is reasonably expected to exceed the
incurred and anticipated costs, over time, of Citicorp Life and First Citicorp
specified in Section 1 hereof. The Parties agree to negotiate in good faith a
reduction to the Monthly Payment as necessary to eliminate any such excess.
3. Term of Agreement.
This Agreement shall continue in effect for so long as the AIM Advisors
or its successor(s) in interest, or any affiliate thereof, continues to perform
in a similar capacity for the Fund, and for so long as any Policy value or any
monies attributable to Citicorp Life and First Citicorp is allocated to a
Portfolio.
4. Termination.
This Agreement may be terminated upon mutual agreement of the Parties
hereto in writing.
5. Amendment.
This Agreement may be amended only upon mutual agreement of the Parties
hereto in writing.
6. Notices.
Notices and communications required to permitted hereby will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
Citicorp Life Insurance Company
800 Silver Lake Boulevard
Dover, Delaware 19901
Facsimile: (718) 248-6964
Attention: Alan F. Liebowitz, Esq.
First Citicorp Life Insurance Company
One Court Square
Twenty-Fifth Floor
Long Island City, New York 11120
Facsimile: (718) 248-6964
Attention: Alan F. Liebowitz, Esq.
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AIM Advisors, Inc. or AIM Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046
Facsimile: (713) 993-9185
Attention: Nancy L. Martin, Esquire
7. Applicable Law.
Except insofar as the 1940 Act or other federal laws and regulations may
be controlling, this Agreement will be construed and the provisions hereof
interpreted under and in accordance with Texas law, without regard for that
state's principles of conflict of laws.
8. Execution in Counterparts.
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
9. Severability.
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
10. Rights Cumulative.
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
11. Headings.
The headings used in this Agreement are for purposes of reference only
and shall not limit or define the meaning of the provisions of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in their names and on behalf by and through their duly authorized
officers signing below.
CITICORP LIFE INSURANCE COMPANY
By: /s/ Charles R. Haskins
Title: E.V.P.
FIRST CITICORP LIFE INSURANCE COMPANY
By: /s/ Charles R. Haskins
Title: E.V.P.
A I M ADVISORS, INC.
By: /s/
Title: President
A I M DISTRIBUTORS, INC.
By: /s/ Michael J. Cenio
Title: President
6
EXHIBIT 8(e)
<PAGE>
PARTICIPATION AGREEMENT
AMONG
LANDMARK VIP FUNDS
AND
CITICORP LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into this 1st day of
February, 1995, by and between LANDMARK VIP FUNDS, an open-end management
investment company organized as a Massachusetts business trust (the "Trust") and
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").
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, 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);
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WHEREAS, the Company has registered or will register the Accounts as
unit investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, the Landmark Funds Broker-Dealer Services, Inc. (the
"Underwriter" or "LFBDS") 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");
WHEREAS, the Underwriter also serves as the underwriter for the
individual variable annuity and the variable life policies;
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust
and the Company agree as follows:
ARTICLE I. Sale of Trust Shares
1.1. The Trust agrees to sell to the Company (through the Underwriter as agent
for the Trust) 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 9:00 a.m. New York time on the next following
Business Day. "Business Day" shall mean any day on which the New York Sock
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
2
<PAGE>
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 agrees that the Shares will be sold only to insurance companies
which have entered into participation agreements with the Trust (the
"Participating Insurance Companies") and their separate accounts, qualified
pension and retirement plans and Citibank or its affiliates. The Company agrees
that the Trust shall be permitted (subject to the other terms of this Agreement)
to make its Shares available to any other insurance company which offers
variable annuity and/or variable life products to the public and which has
entered into an agreement with the Trust for the purpose of making Trust Shares
available to serve as the underlying investment medium for such policies and any
individual or entity who owns such a policy. 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 9:00 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
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 transmit payment for the
Shares by 2:30 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 2:30 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, unless doing so would require the Trust to dispose of portfolio
securities or otherwise incur additional costs, within seven days upon notice by
the Trust. All such payments shall be in federal funds transmitted by wire and
shall be deemed made when such funds are received by the appropriate party.
Notwithstanding the foregoing, in the event
3
<PAGE>
that the Federal Reserve System is closed for wire transfers on any day on which
a payment is otherwise required to be made hereunder, such payment shall be made
on the next succeeding day on which the Federal Reserve System is open for such
wire transfers.
1.7. The Company shall use its best efforts to notify the Trust in advance of
any unusually large purchase or redemption order.
1.8. 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.
1.9. The Trust shall furnish same day notice (by fax, or by 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.
1.10. The Trust or its custodian shall use their best efforts to 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 Covenants
2.1. The Company represents and warrants that the Policies are or will be
registered under the 1933 Act or are exempt from or not subject to registration
thereunder, and that the Policies will be issued, sold, and distributed in
compliance in all material respects with all applicable state and 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
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<PAGE>
duly organized and in good standing under applicable law and that it has legally
and validly established the Account as a segregated asset account under
applicable law and has registered or, prior to any issuance or sale of the
Policies, will register the Accounts as unit investment trusts in accordance
with the provisions of the 1940 Act (unless exempt therefrom) to serve as
segregated investment accounts for the Policies, and that it will maintain such
registration for so long as any Policies are outstanding. The Company shall
amend the registration statements under the 1933 Act for the Policies and the
registration statements under the 1940 Act for the Accounts from time to time as
required in order to effect the continuous offering of the Policies or as may
otherwise be required by applicable law. The Company shall register and qualify
the Policies for sales 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 such treatment and that it will notify the Trust 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 The 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 The Landmark Funds Broker-Dealer Services, Inc. will sell and
distribute such policies in accordance in all material respects will all
applicable state and federal laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.4. The Trust represents and warrants 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. The Trust represents that it is lawfully organized and validly existing
under the laws of The Commonwealth of Massachusetts and
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<PAGE>
that it does and will comply in all material respects with the 1940 Act and any
applicable regulations thereunder.
2.6. 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 or may grant
exemptive relief to permit mixed and shared funding (the "Mixed and Shared
Funding Exemptive Order").
2.7. The Company will promptly notify the Trust of the applicable requirements
(and any changes to the requirements) as to diversification and other matters
under applicable state insurance and other laws and regulations to which the
Company, the Trust and the Policies are subject. The Trust will use reasonable
efforts to comply in all material respects with such requirements of which it
has been so advised by the Company.
ARTICLE III. Prospectus and Proxy Statements; Voting
3.1. At least annually, the Trust or its designee shall provide the Company,
free of charge, with as many copies of the current prospectus (describing only
the Portfolios listed in Schedule A hereto) for the Shares as the Company may
reasonably request for distribution to existing Policy owners whose Policies are
funded by such Shares. The Trust or its designee shall provide the Company, at
the Company's expense, with as many copies of the current prospectus for the
Shares as the Company may reasonably request for distribution to prospective
purchasers of Policies. If requested by the Company in lieu thereof, the Trust
or its designee shall provide such documentation (including a "camera ready"
copy of the new prospectus as set in type or, at the request of the Company, as
a diskette in the form sent to the financial printer) and other assistance as is
reasonably necessary in order for the parties hereto once each year (or more
frequently if the prospectus for the Shares is supplemented or amended) to have
the prospectus for the Policies and the prospectus for the Shares printed
together in one document; the expenses of such printing to be apportioned
between (a) the Company and (b) the Trust or its designee in proportion to the
number of pages of the Policy and Shares' prospectuses, taking account of other
relevant factors affecting the expense of printing, such as covers, columns,
graphs and charts; the Trust or its designee to bear the cost of printing the
Shares' prospectus portion of such document for distribution to owners of
existing Policies funded by the Shares and the Company to bear the expenses of
printing the portion of such document relating to the Accounts; provided,
however, that the Company shall bear all printing expenses of such combined
documents where used for distribution to prospective purchasers or to owners of
existing Policies not funded by the Shares. In the event that the Company
requests that the
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<PAGE>
Trust or it 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 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 of its designee. The
Trust or its designee, at its expense, shall print (or otherwise reproduce) 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 (or otherwise reproduce) and provide such
statement to the Company (or a master of such statement suitable for duplication
by the Company) for distribution to a prospective purchaser who requests such
statement or to an owner of a Policy not funded by the Shares.
3.3. The Trust or its designee shall provide the Company free of charge copies,
if and to the extent applicable to the Shares, of the Trust's proxy materials,
reports to Shareholders and other communications to Shareholders in such
quantity as the Company shall reasonably require for distribution to Policy
owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3 above, or of
Article V below, the Company shall pay the expense of printing or providing
documents to the extent such cost is considered a distribution expense.
Distribution expenses would include by way of illustration, but are not limited
to, the printing of the Shares' prospectus or prospectuses for distribution to
prospective purchasers or to owners of existing Policies not funded by such
Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate to include
in the prospectus pursuant to which a Policy is offered disclosure regarding the
potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received from Policy
owners; and
(c) vote the Shares for which no instructions have been received in the
same proportion as the Shares of such Portfolio for which instructions have been
received from Policy owners; so long as and to the extent that the SEC continues
to interpret the 1940
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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
Policyowners. The Company reserves the right to vote shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that each of
their separate accounts holding Shares calculates voting privileges in the
manner required by the Mixed and Shared Funding Exemptive Order (upon receipt of
such Order). The Trust and Citibank will notify the Company of any changes of
interpretations or amendments to the Mixed and Shared Funding Exemptive Order.
3.7. Except to the extent otherwise prohibited or required by applicable federal
or state law, the Company agrees that it shall not, without the prior written
consent of the Trust, solicit, induce or encourage policy owners to (a) change
or supplement the Trust's current investment advisor or (b) change, or modify
the fundamental policies and investment strategies of the Trust, or delete the
Trust as an investment option by way of a vote of policyholders.
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, Citibank, any other investment adviser to the Trust, or any
affiliate of Citibank are named, at least five (5) Business Days prior to its
use. No such material shall be used if the Trust, Citibank, or their respective
designees reasonably objects to such use within five (5) Business Days after
receipt of such material. Notwithstanding any failure to object by the Trust,
the Company shall be solely responsible for compliance with any applicable
Federal or State laws or regulations or rules of the NASD governing the content
of sales literature or other promotional materials, or the use thereof.
4.2. The Company shall not give any information or make any representations or
statement on behalf of the Trust, Citibank, any other investment adviser to the
Trust, or any affiliate of Citibank 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,
Citibank or their respective designees, except with the permission of the Trust,
Citibank or their respective designees. The Trust, Citibank or their respective
designees each agree to respond to any request
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for approval on a prompt and timely basis. The Company shall adopt and implement
procedures reasonably designed to ensure that information concerning the Trust,
Citibank 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 Policyholders) is so used, and
neither the Trust, Citibank 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 five (5)
Business Days prior to its use. No such material shall be used if the Company or
its designee reasonably objects to such use within five (5) Business Days after
receipt of such material.
4.4. The Trust 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 Citibank is an underwriter or distributor of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company or the
Trust, as appropriate) will each provide to the other at least one complete copy
of all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Policies, or to the Trust or
its Shares, prior to or contemporaneously with the filing of such document with
the SEC or other regulatory authorities. The Company and the Trust shall also
each promptly inform the other of the results of any examination by the SEC (or
other regulatory authorities) that relates to the Policies, the Trust or its
Shares, and the party that was the subject of the examination shall provide the
other party with a copy of relevant portions of any "deficiency letter" or other
correspondence or written report regarding any such examination.
4.6. The Trust will provide the Company with as much notice as is
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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 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 will make reasonable
efforts to attempt to have changes affecting Policy prospectuses become
effective simultaneously with the annual updates for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited to
advertisements (such as material published, or designed for use in, a newspaper,
magazine, or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public media),
and sales literature (such as brochures, circulars, reprints or excerpts or any
other advertisement, sales literature, or published articles), distributed or
made generally available to customers or the public, educational or training
materials or communications distributed or made generally available to some or
all agents or employees.
ARTICLE V. Fees and Expenses
5.1. The Trust shall pay no fee or other compensation to the Company under this
Agreement, and the Company shall pay no fee or other compensation to the Trust,
except that if the Trust or any Portfolio adopts and implements a plan pursuant
to Rule 12b-1 under the 1940 Act to finance distribution and Shareholder
servicing expenses, then, subject to obtaining any required exemptive orders or
regulatory approvals, the Trust may make payments to the Company or to the
underwriter for the Policies if and in amounts agreed to by the Trust in
writing. Each party, however, shall, in accordance with the allocation of
expenses specified in Articles III and V hereof, reimburse other parties for
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 to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable federal and
state laws, including preparation and filing of the Trust's registration
statement, and payment of filing fees and registration fees; preparation and
filing of the Trust's proxy materials and reports to Shareholders; setting in
type and printing its prospectus and statement of additional information (to the
extent provided by and as determined in accordance with Article III
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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 (subject to Section 5.3) 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 cost of preparing,
printing and distributing annual individual account statements for Policy owners
as required by state insurance laws.
5.4 In addition to any responsibilities and obligations specified in this
Article V, and without otherwise limiting the responsibilities and obligations
of the Company specified in this Agreement, the Company shall be solely
responsible for the functions of:
a. Receiving and processing Policy applications;
b. Issuing Policies;
c. Delivering Policies to Policyholders;
d. Billing and receiving Policy premiums and considerations;
e. Servicing Policyholders, including changes of ownership, addresses,
coverage, beneficiary designations, premium modes, settlement options
and the like;
f. Receiving, processing and responding to incoming general written and
telephonic correspondence concerning Policy matters from Policyholders
or beneficiaries;
g. Evaluating and paying Policy benefit claims;
h. Preparing and forwarding acknowledgments regarding Policy transactions
and other reports to Policyholders;
i. Administering the Accounts; and
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j. Calculating performance information for the Accounts in accordance with
applicable legal requirements for use by the Trust in preparing
advertisements and sales literature and in responding to questions from
third-party distributors and Policyholders.
ARTICLE VI. Diversification and Related Limitations
6.1. The Trust represents and warrants that it will use every effort to ensure
that each Portfolio of the Trust will meet the diversification requirements of
Section 817(h)(1) of the Code and Treas. Reg. 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts, as they may be amended from time to time (and any revenue rulings,
revenue procedures, notices, and other published announcements of the Internal
Revenue Service interpreting these sections ) as if those requirements applied
directly to each such Portfolio. In the event that any Portfolio is not so
diversified at the end of any applicable quarter, the Trust 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 represents 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 its Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for the
existence of any material irreconcilable conflict between the interests of the
variable annuity contract owners and the variable life insurance policy owners
of the Company and/or affiliated companies ("contract owners") investing in the
Trust. The Board shall have the sole authority to determine if a material
irreconcilable conflict exists, and such determination shall be binding on the
Company only if approved in the form of a resolution by a majority of the Board,
or a majority of the disinterested trustees of the Board. The Board will give
prompt notice of any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the Board in
carrying out its responsibilities under the conditions set forth in the Trust's
exemptive application pursuant to which
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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 of the Trust to consider any issued 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
disregarding. The Company also agrees that, if a material irreconcilable
conflict arises, it will at its 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.
7.3. A majority of the disinterested trustees of the Board of the Trust 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
proposed Rule 6e-3 is adopted, to provide exemptive relief from any provision of
the 1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Mixed and Shared Funding Exemptive Order) on terms
and conditions materially different from those contained in the Mixed 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.
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ARTICLE VIII. Indemnification
8.1. Indemnification by the Company
The Company agrees to indemnify and hold harmless the Trust, Citibank,
any affiliates of Citibank, and each of their respective directors/trustees,
officers and each person, if any, who controls the Trust or Citibank 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
or acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement,
prospectus or statement of additional information for the Policies or contained
in 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 in writing to the Company or its designee by or on
behalf of the Trust 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 Company, LFBDS as
underwriter of the Policies or any of their respective designees, or persons
under their respective control and on which such entity has reasonably relied)
or wrongful conduct of the Company, LFBDS as underwriter of the Policies or
persons under any of their respective control, with respect to the sale or
distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue statement of a material
fact contained in the registration statement,
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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 in writing to the Trust by or on behalf of the Company; or
(d) arise out of or result from any material breach of any representation and/or
warranty made by the Company in this Agreement or arise out of or result from
any other material breach of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to provide the services and
furnish the materials under the terms of this Agreement; as limited by and in
accordance with the provisions of this Article VIII.
(f) arise out of the wrongful conduct of the Company or persons under its
control with respect to the sale or distribution of the Policies or Trust
Shares; or
(g) arise out of the Company's incorrect calculation and/or untimely reporting
of net purchase or redemption orders.
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
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was made in reasonable reliance upon and in conformity with information
furnished to the Trust, Citibank, 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, Citibank, the
Underwriter or any of their respective designees or persons under their
respective control and on which any such entity has reasonably relied) or
wrongful conduct of the Trust or persons under its control, with respect to the
sale or distribution of the 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 capitol 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 and Participating Insurance Company to maintain its
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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 a party claiming indemnification
hereunder ("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
notice of actual or threatened 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 except to the extent that such party shall have been prejudiced by
the failure to give such notice. 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 or
investigation.
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.
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ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts,
without giving effect to principles of conflict of laws.
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 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 180 days advance written notice to the other
parties, unless a shorter time is agreed to by the 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, in writing, and the
Trust shall have ten (10) days to cure any deficiency prior to the effectiveness
of such termination; or
(c) at the option of the Trust upon institution of formal proceedings against
the Company by the NASD, the SEC, or any
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insurance department or any other regulatory body regarding the Company's duties
under this Agreement or related to the sale of the Policies, the operation of
the Accounts, or the purchase of the Shares; or
(d) at the option of the Company upon institution of formal proceedings against
the Trust by the NASD, the SEC, or any state securities or insurance department
or any other regulatory body regarding the Trust's duties under this Agreement
or related to the sale of the shares; or
(e) at the option of the Company or the Trust 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 the Trust by written notice to the Company, if the Trust,
shall determine, in its sole judgment exercised in good faith, that the Company
has suffered a material adverse change in its business, operations, 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 if the Company
shall determine, in its sole judgment exercised in good faith, that the Trust
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) 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
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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 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 Portfolios.
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:
Landmark VIP Funds
6 St. James Avenue
Boston, MA 02116
Attn: Philip W. Coolidge
With a copy to:
Citibank, N.A.
153 East 53rd Street
New York, New York 10043
Attn: Robert I. Frenkel
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
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ARTICLE XIII. Miscellaneous
13.1. Subject to the requirement of applicable laws, agreements, legal process
and regulatory authority, each party hereto shall treat as confidential the
names and addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement or as otherwise required by applicable law or
regulation, shall not disclose, disseminate or utilize such names and addresses
and other confidential information without the express written consent of the
affected party until such time as it may come into the public domain.
13.2. The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more counterparts,
each of which taken together shall constitute one and the same instrument.
13.4. If any provisions 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.
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
21
<PAGE>
this instrument. The Company also agrees that the obligations of each Portfolio
hereunder shall be several and not joint, to the extent (and only to the extent)
that such obligations relate to such portfolio and the Company agrees not to
proceed against any Portfolio for the obligations of another Portfolio.
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.
LANDMARK VIP FUNDS, on behalf of the Portfolios
By its authorized officer,
By: /s/James B. Craver
Title: Secretary & Treasurer
CITICORP LIFE INSURANCE COMPANY
By its authorized officer,
By: /s/Charles R. Haskins
Title: E.V.P.
As of February 1 1995
22
<PAGE>
As of February 1, 1995
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
Name of Separate
Account and Date
Established by Policies Funded Portfolios
Board of Directors by Separate Account Applicable to Policies
- ------------------ ------------------- ----------------------
Citicorp Life Variable 63-1103(05-94) Landmark V.I.P. Funds -
Separate Account Landmark VIP. U.S. Government
(July 6, 1994) Fund
Landmark V.I.P. Funds -
Landmark
VIP Equity Fund
Landmark V.I.P. Funds -
Landmark
VIP Balanced Fund
Landmark V.I.P. Funds -
Landmark
VIP International Equity Fund
23
EXHIBIT 8(f)
<PAGE>
PARTICIPATION AGREEMENT
AMONG
VARIABLE ANNUITY PORTFOLIOS
AND
CITICORP LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into this day of 1996, by and
between VARIABLE ANNUITY PORTFOLIOS, an open-end management investment company
organized as a Massachusetts business trust (the "Trust") and 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").
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, 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);
<PAGE>
WHEREAS, the Landmark Funds Broker-Dealer Services, Inc. (the
"Underwriter" or "LFBDS") 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");
WHEREAS, the Underwriter also serves as the underwriter for the
individual variable annuity and the variable life policies;
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Trust and the Company agree as follows:
ARTICLE I. Sale of Trust Shares
1.1. The Trust agrees to sell to the Company (through the Underwriter as agent
for the Trust) 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 9:00 a.m. New York time on the next following
Business Day. "Business Day" shall mean any day on which the New York Stock
Exchange, 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 agrees that the Shares will be sold only to insurance companies
which have entered into participation agreements with the Trust (the
"Participating Insurance Companies")
<PAGE>
and their separate accounts, qualified pension and retirement plans and Citibank
or its affiliates. The Company agrees that the Trust shall be permitted (subject
to the other terms of this Agreement) to make its Shares available to any other
insurance company which offers variable annuity and/or variable life products to
the public and which has entered into an agreement with the Trust for the
purpose of making Trust Shares available to serve as the underlying investment
medium for such policies and any individual or entity who owns such a policy.
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 9:00
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
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 transmit payment for the
Shares by 2:30 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 2:30 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, unless doing so would require the Trust to dispose of portfolio
securities or otherwise incur additional costs, within seven days upon notice by
the Trust. All such payments shall be in federal funds transmitted by wire and
shall be deemed made when such funds are received by the appropriate party.
Notwithstanding the foregoing, in the event that the Federal Reserve System is
closed for wire transfers on any day on which a payment is otherwise required to
be made hereunder, such payment shall be made on the next succeeding day on
which the Federal Reserve System is open for such wire transfers.
1.7. The Company shall use its best efforts to notify the Trust in advance of
any unusually large purchase or redemption order.
1.8. 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.
<PAGE>
1.9. The Trust shall furnish same day notice (by fax, or by 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 Portfolios 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.
1.10. The Trust or its custodian shall use their best efforts to 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 Covenants
2.1. The Company represents and warrants that the Policies are or will be
registered under the 1933 Act or are exempt from or not subject to registration
thereunder, and that the Policies will be issued, sold, and distributed in
compliance in all material respects with all applicable state and 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 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 such treatment and that it will notify the Trust immediately
upon
<PAGE>
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 The 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 The Landmark Funds Broker-Dealer Services,, Inc. will sell and
distribute such policies in accordance in all material respects with all
applicable state and federal laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.4. The Trust represents and warrants 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. 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.
2.6. 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 or may grant
exemptive relief to permit mixed and shared funding (the "Mixed and Shared
Funding Exemptive Order").
2.7. The Company will promptly notify the Trust of the applicable requirements
(and any changes to the requirements) as to diversification and other matters
under applicable state insurance and other laws and regulations to which the
Company, the Trust and the Policies are subject. The Trust will use reasonable
efforts to comply in all material respects with such requirements of which it
has been so advised by the Company.
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
<PAGE>
Shares as the Company may reasonably request for distribution to prospective
purchasers of Policies. If requested by the Company in lieu thereof, the Trust
or its designee shall provide such documentation (including a "camera ready"
copy of the new prospectus as set in type or, at the request of the Company, as
a diskette in the form sent to the financial printer) and other assistance as is
reasonably necessary in order for the parties hereto once each year (or more
frequently if the prospectus for the Shares is supplemented or amended) to have
the prospectus for the Policies and the prospectus for the Shares printed
together in one document; the expenses of such printing to be apportioned
between (a) the Company and (b) the Trust or its designee in proportion to the
number of pages of the Policy and Shares' prospectuses, taking account of other
relevant factors affecting the expense of printing, such as covers, columns,
graphs and charts; the Trust or its designee to bear the cost of printing the
Shares' prospectus portion of such document for distribution to owners of
existing Policies funded by the Shares and the Company to bear the expenses of
printing the portion of such document relating to the Accounts; provided,
however, that the Company shall bear all printing expenses of such combined
documents where used for distribution to prospective purchasers or to owners of
existing Policies not funded by the Shares. In the event that the Company
requests that the Trust or its designee provides the Trust's prospectus in a
"camera ready" or diskette format, the Trust shall be responsible for providing
the prospectus in the format in which it 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 (or otherwise reproduce) 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 (or otherwise reproduce) and provide such
statement to the Company (or a master of such statement suitable for duplication
by the Company) for distribution to a prospective purchaser who requests such
statement or to an owner of a Policy not funded by the Shares.
3.3. The Trust or its designee shall provide the Company free of charge copies,
if and to the extent applicable to the Shares, of the Trust's proxy materials,
reports to Shareholders and other communications to Shareholders in such
quantity as the Company shall reasonably require for distribution to Policy
owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3 above, or of
Article V below, the Company shall pay the expense of printing or providing
documents to the extent such cost is considered a distribution expense.
Distribution expenses would include by way of illustration, but are not limited
to, the printing of the Shares' prospectus or prospectuses for distribution to
prospective purchasers or to owners of existing Policies not funded by such
Shares.
<PAGE>
3.5. The Trust hereby notifies the Company that it may be appropriate to include
in the prospectus pursuant to which a Policy is offered disclosure regarding the
potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received from Policy
owners; and
(c) vote the Shares for which no instructions have been received in the
same proportion as the Shares of such Portfolio for which instructions have
been received from Policy owners; so long as and to the extent that the SEC
continues to interpret the 1940 Act to require pass through voting
privileges for variable contract owners. 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 Policyowners. The
Company reserves the right to vote shares held in any segregated asset
account in its own right, to the extent permitted by law. Participating
Insurance Companies shall be responsible for assuring that each of their
separate accounts holding Shares calculates voting privileges in the manner
required by the Mixed and Shared Funding Exemptive Order (upon receipt of
such Order). The Trust and Citibank will notify the Company of any changes
of interpretations or amendments to the Mixed and Shared Funding Exemptive
Order.
3.7. Except to the extent otherwise prohibited or required by applicable federal
or state law, the Company agrees that it shall not, without the prior written
consent of the Trust, solicit, induce or encourage policy owners to (a) change
or supplement the Trust's current investment adviser or (b) change, or modify
the fundamental policies and investment strategies of the Trust, or delete the
Trust as an investment option by way of a vote of policyholders.
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, Citibank, any other investment adviser to the Trust, or any
affiliate of Citibank are named, at least five (5) Business Days prior to its
use. No such material shall be used if the Trust, Citibank, or their respective
designees reasonably objects to such use within five (5) Business Days after
receipt of such material. Notwithstanding any failure to object by the Trust,
the Company shall be solely responsible for compliance with any applicable
Federal or State laws or regulations or rules of the NASD governing the content
of sales literature or other promotional materials, or the use thereof.
4.2. The Company shall not give any information or make any representations or
statement on behalf of the Trust, Citibank, any other investment adviser to the
Trust, or any affiliate of
<PAGE>
Citibank 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, Citibank or their respective
designees, except with the permission of the Trust, Citibank or their respective
designees. The Trust, Citibank 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, Citibank 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 Policyholders) is so used, and neither the Trust, Citibank 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 five (5)
Business Days prior to its use. No such material shall be used if the Company or
its designee reasonably objects to such use within five (5) Business Days after
receipt of such material.
4.4. The Trust 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 Citibank is an underwriter or distributor of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company or the
Trust, as appropriate) will each provide to the other at least one complete copy
of all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Policies, or to the Trust or
its Shares, prior to or contemporaneously with the filing of such document with
the SEC or other regulatory authorities. The Company and the Trust shall also
each promptly inform the other of the results of any examination by the SEC (or
other regulatory authorities) that relates to the Policies, the Trust or its
Shares, and the party that was the subject of the examination shall provide the
other party with a copy of relevant portions of any "deficiency letter" or other
correspondence or written report regarding any such examination.
<PAGE>
4.6. The Trust 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 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 will make reasonable efforts to attempt to have
changes affecting Policy prospectuses become effective simultaneously with the
annual updates for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited to
advertisements (such as material published, or designed for use in, a newspaper,
magazine, or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public media),
and sales literature (such as brochures, circulars, reprints or excerpts or any
other advertisement, sales literature, or published articles), distributed or
made generally available to customers or the public, educational or training
materials or communications distributed or made generally available to some or
all agents or employees.
ARTICLE V. Fees and Expenses
5.1. The Trust shall pay no fee or other compensation to the Company under this
Agreement, and the Company shall pay no fee or other compensation to the Trust,
except that if the Trust or any Portfolio adopts and implements a plan pursuant
to Rule 12b-1 under the 1940 Act to finance distribution and Shareholder
servicing expenses, then, subject to obtaining any required exemptive orders or
regulatory approvals, the Trust may make payments to the Company or to the
underwriter for the Policies if and in amounts agreed to by the Trust in
writing. Each party, however, shall, in accordance with the allocation of
expenses specified in Articles III and V hereof, reimburse other parties for
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 to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable federal and
state laws, including preparation and filing of the Trust's registration
statement, and payment of filing fees and registration fees; preparation and
filing of the Trust's proxy materials and reports to Shareholders; setting in
type and printing its prospectus and statement of additional information (to the
extent provided by and as determined in accordance with Article III above);
setting in type and printing the proxy materials and reports to Shareholders (to
the extent provided by and as determined in accordance with Article III above);
the preparation of all statements and notices required of the Trust by any
federal or state law with respect to its Shares; all taxes on the issuance or
transfer of the Shares; and (subject to Section 5.3) 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
<PAGE>
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 cost of preparing,
printing and distributing annual individual account statements for Policy owners
as required by state insurance laws.
5.4 In addition to any responsibilities and obligations specified in this
Article V, and without otherwise limiting the responsibilities and obligations
of the Company specified in this Agreement, the Company shall be solely
responsible for the functions of:
a. Receiving and processing Policy applications;
b. Issuing Policies;
c. Delivering Policies to Policyholders;
d. Billing and receiving Policy premiums and considerations;
e. Servicing Policyholders, including changes of ownership, addresses,
coverage, beneficiary designations, premium modes, settlement options
and the like;
f. Receiving, processing and responding to incoming general written and
telephonic correspondence concerning Policy matters from Policyholders
or beneficiaries;
g. Evaluating and paying Policy benefit claims;
h. Preparing and forwarding acknowledgments regarding Policy transactions
and other reports to Policyholders;
i. Administering the Accounts; and
j. Calculating performance information for the Accounts in accordance with
applicable legal requirements for use by the Trust in preparing
advertisements and sales literature and in responding to questions from
third party distributors and Policyholders.
ARTICLE VI. Diversification and Related Limitations
<PAGE>
6.1. The Trust represents and warrants that it will use every effort to ensure
that each Portfolio of the Trust will meet the diversification requirements of
Section 817(h)(1) of the Code and Treas. Reg. 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts, as they may be amended from time to time (and any revenue rulings,
revenue procedures, notices, and other published announcements of the Internal
Revenue Service interpreting these sections) as if those requirements applied
directly to each such Portfolio. In the event that any Portfolio is not so
diversified at the end of any applicable quarter, the Trust 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 represents 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 its Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for the
existence of any material irreconcilable conflict between the interests of the
variable annuity contract owners and the variable life insurance policy owners
of the Company and/or affiliated companies ("contract owners") investing in the
Trust. The Board shall have the sole authority to determine if a material
irreconcilable conflict exists, and such determination shall be binding on the
Company only if approved in the form of a resolution by a majority of the Board,
or a majority of the disinterested trustees of the Board. The Board will give
prompt notice of any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the 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 of the Trust to consider any issues
raised and agrees that it will be responsible for promptly reporting any
potential or existing conflicts of which it is aware to the Board including, but
not limited to, an obligation by the Company to inform the Board whenever
contract owner voting instructions are disregarded. The Company also agrees
that, if a material irreconcilable conflict arises, it will at its own cost
remedy such conflict up to and including (a) withdrawing the assets allocable to
some or all of the Accounts from the Trust or any Portfolio and reinvesting such
assets in a different investment 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
<PAGE>
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.
7.3. A majority of the disinterested trustees of the Board of the Trust 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
proposed Rule 6e-3 is adopted, to provide exemptive relief from any provision of
the 1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Mixed and Shared Funding Exemptive Order) on terms
and conditions materially different from those contained in the Mixed 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, Citibank,
any affiliates of Citibank, and each of their respective directors/trustees,
officers and each person, if any, who controls the Trust or Citibank 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
or acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement,
prospectus or statement of additional information for the Policies or contained
in 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
<PAGE>
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 in writing to the Company or its designee by or on
behalf of the Trust 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 Company, LFBDS as
underwriter of the Policies or any of their respective designees, or persons
under their respective control and on which such entity has reasonably relied)
or wrongful conduct of the Company, LFBDS as underwriter of the Policies or
persons under any of their respective control, with respect to the sale or
distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue statement of a material
fact contained in the registration statement, prospectus, statement of
additional information, or sales literature or other promotional literature of
the Trust, or any amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished in writing
to the Trust by or on behalf of the Company; or
(d) arise out of or result from any material breach of any representation and/or
warranty made by the Company in this Agreement or arise out of or result from
any other material breach of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to provide the services and
furnish the materials under the terms of this Agreement; as limited by and in
accordance with the provisions of this Article VIII.
(f) arise out of the wrongful conduct of the Company or persons under its
control with respect to the sale or distribution of the Policies or Trust
Shares; or
(g) arise out of the Company's incorrect calculation and/or untimely reporting
of net purchase or redemption orders.
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
<PAGE>
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, Citibank, 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, Citibank, the
Underwriter or any of their respective designees or persons under their
respective control and on which any such entity has reasonably relied) or
wrongful conduct of the Trust or persons under its control, with respect to the
sale or distribution of the 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,
<PAGE>
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 a party claiming indemnification
hereunder ("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
notice of actual or threatened 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 except to the extent that such party shall have been prejudiced by
the failure to give such notice. 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.
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.
<PAGE>
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts,
without giving effect to principles of conflict of laws.
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 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 180 days advance written notice to the other
parties, unless a shorter time is agreed to by the 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, in writing, and the
Trust shall have ten (10) days to cure any deficiency prior to the effectiveness
of such termination; or
(c) at the option of the Trust upon institution of formal proceedings against
the Company by the NASD, the SEC, or any insurance department or any other
regulatory body regarding the
<PAGE>
Company's duties under this Agreement or related to the sale of the Policies,
the operation of the Accounts, or the purchase of the Shares; or
(d) at the option of the Company upon institution of formal proceedings against
the Trust by the NASD, the SEC, or any state securities or insurance department
or any other regulatory body regarding the Trust's duties under this Agreement
or related to the sale of the shares; or
(e) at the option of the Company or the Trust 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 the Trust by written notice to the Company, if the Trust,
shall determine, in its sole judgment exercised in good faith, that the Company
has suffered a material adverse change in its business, operations, 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 if the Company
shall determine, in its sole judgment exercised in good faith, that the Trust
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) 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.
<PAGE>
11.5. Notwithstanding any termination of this Agreement, the Trust 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.
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:
Variable Annuity Portfolios
6 St. James Avenue Boston, MA 02116
Attn.: Philip W. Coolidge
With a copy to:
Citibank, N.A.
153 East 53rd Street
New York, NY 10043
Attn.: Robert I. Frenkel
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 and Secretary
ARTICLE XIII. Miscellaneous
13.1. Subject to the requirement of applicable laws, agreements, 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
<PAGE>
confidential information without the express written consent of the affected
party until such time as it may come into the public domain.
13.2. The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more counterparts,
each of which taken together shall constitute one and the same instrument.
13.4. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in connection with
inquiries by appropriate governmental authorities (including without limitation
the SEC, the NASD, and state insurance regulators) relating to this Agreement or
the transactions contemplated hereby.
13.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
13.8. A copy of the Trust's Declaration of Trust is on file with the Secretary
of State of The Commonwealth of Massachusetts. The Company acknowledges that the
obligations of or arising out of this instrument are not binding upon any of the
Trust's trustees, officers, employees, agents or shareholders individually, but
are binding solely upon the assets and property of the Trust in accordance with
its proportionate interest hereunder. The Company further acknowledges that the
assets and liabilities of each Portfolio are separate and distinct and that the
obligations of or arising out of this instrument are binding solely upon the
assets or property of the Portfolio on whose behalf the Trust has executed this
instrument. The Company also agrees that the obligations of each Portfolio
hereunder shall be several and not joint, to the extent (and only to the extent)
that such obligations relate to such portfolio, and the Company agrees not to
proceed against any Portfolio for the obligations of another Portfolio.
<PAGE>
As of November 8, 1996
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.
VARIABLE ANNUITY PORTFOLIOS, on behalf of the Portfolios
By its authorized officer,
By:
Title:
CITICORP LIFE INSURANCE COMPANY
By its authorized officer,
By:
Title:
<PAGE>
As of November 8, 1996
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
Name of Separate
Account and Date
Established by Policies Funded Portfolios
Board of Directors by Separate Account Applicable to policies
- ------------------ ------------------- ----------------------
Citicorp Life Variable 63-1103(05-94) Variable Annuity Portfolios -
Separate Account Small Cap Equity VIP Fund
(July 6, 1994)
Variable Annuity Portfolios -
CitiSelect VIP Folio 200
Variable Annuity Portfolios -
CitiSelect VIP Folio 300
Variable Annuity Portfolios -
CitiSelect VIP Folio 400
Variable Annuity Portfolios -
CitiSelect VIP Folio 500
EXHIBIT 9
<PAGE>
[CITICORP LIFE INSURANCE COMPANY LETTERHEAD]
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. 3 to the Form N-4 Registration Statement.
Citicorp Life Insurance Company
/s/Richard M. Zuckerman
Richard M. Zuckerman
Vice President, Associate General Counsel
October 22, 1996
(Date)
<PAGE>
CITICORP LIFE INSURANCE COMPANY LETTERHEAD
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
October 22, 1996
(Date)
EXHIBIT 10(a)
<PAGE>
Sutherland, Asbill & Brennan, L.L.P.
Atlanta (bullet) Austin (bullet) New York (bullet) Washington
1275 PENNSYLVANIA AVENUE, N.W. TEL: (202) 383-0100
WASHINGTON, D.C. 20004-2404 FAX: (202) 637-3593
STEPHEN E. ROTH
DIRECT LINE: (202) 383-0158
Internet: [email protected]
November 1, 1996
VIA EDGARLINK
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. 3 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 category of persons whose
consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN, L.L.P.
By:/s/ Stephen E. Roth
Stephen E. Roth
EXHIBIT 10(b)
<PAGE>
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
November 8, 1996
