<PAGE>
File Nos. 333-12507, 811-7827
As filed with the Securities and Exchange Commission on July 2, 1997
____________________________________________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
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Registration Statement Under the Securities Act of 1933 [ ]
Pre-Effective Amendment No. 2 [X]
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Post-Effective Amendment No. _____ [ ]
and/or
Registration Statement Under the Investment Company Act of 1940 [ ]
Amendment No. 2 [X]
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(Check appropriate box or boxes.)
RetireMAP Variable Account
(Exact Name of Registrant)
United Investors Life Insurance Company
(Name of Depositor)
2001 Third Avenue South
Birmingham, Alabama 35233
(Address of Depositor's Principal Executive Office)
Depositor's Telephone Number: (205) 325-4300
Name and Address of Agent for Service: Copy to:
James L. Sedgwick, Esquire Frederick R. Bellamy, Esquire
United Investors Life Insurance Company Sutherland, Asbill & Brennan, L.L.P.
2001 Third Avenue South 1275 Pennsylvania Avenue, N.W.
Birmingham, Alabama 35233 Washington, D.C. 20004-2404
Approximate Date of Proposed Public Offering:
As soon as practicable after effectiveness of the Registration Statement
____________________________________________
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, an indefinite
amount of securities has been registered under the Securities Act of 1933. The
$500 filing fee was paid with the initial filing.
___________________________________________
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
shall determine.
<PAGE>
Cross Reference Sheet
Pursuant to Rule 481(a) under the Securities Act of 1933
Showing Location of Information Required by Form N-4
in Part A (Prospectus) and Part B (Statement of
Additional Information) of the Registration Statement
___________________________________________________________________________
Part A
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<TABLE>
<CAPTION>
Item of Form N-4 Prospectus Caption
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<S> <C> <C>
1. Cover Page........................ Cover page
2. Definition........................ Definitions
3. Synopsis.......................... Summary
4. Condensed Financial Information... N/A
5. General
(a) Depositor..................... United Investors Life Insurance
Company
(b) Registrant.................... RetireMap Variable Account
(c) Portfolio Company............. Charges and Deductions
(d) Fund Prospectus............... The Funds
(e) Voting Rights................. Voting Rights
(f) Administrators................ Summary
6. Deductions and Expense............ Charges and Deductions
(a) General....................... Charges and Deductions
(b) Sales Load Percentage......... Charges and Deductions
(c) Special Purchase Plan......... Charges and Deductions
(d) Commissions................... Distributor of the Policies
(e) Expenses - Registrant......... Federal Taxes
(f) Fund Expenses................. The Funds
(g) Organizational Expenses....... N/A
7. Contracts
(a) Persons with Rights........... The Policy; Annuity Payments;
Voting Rights
(b) (i) Allocation of Premium
Payments............... Allocation of Purchase Payments
(ii) Transfers.............. Transfers
(iii) Exchanges.............. N/A
(c) Changes....................... Additions, Deletions or
Substitutions of Investments
(d) Inquiries..................... Summary
8. Annuity Period.................... Annuity Payments
9. Death Benefit..................... Death Benefits
10. Purchases and Contract Value
(a) Purchases..................... Purchase Payments and Allocation
of Purchase Payments
(b) Valuation..................... Policy Value
(c) Daily Calculation............. Policy Value
(d) Underwriter................... Distributor of the Policies
11. Redemptions
(a) - By Owners................... Surrender and Partial Withdrawals
- By Annuitant................ N/A
(b) Texas ORP..................... Surrender and Partial Withdrawals
(c) Check Delay................... Surrender and Partial Withdrawals
(d) Lapse......................... N/A
(e) Free Look..................... Free Look Period
12. Taxes............................. Federal Tax Matters
13. Legal Proceedings................. Legal Proceedings
14. Table of Contents of the Statement
of Additional Information......... Statement of Additional
Information
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Part B
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Statement of Additional
Item of Form N-4 Information Caption
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<S> <C> <C>
15. Cover Page........................ Cover Page
16. Table of Contents................. Table of Contents
17. General Information and History... N/A
18. Services
(a) Fees and Expenses of
Registrant.................... N/A
(b) Management Contracts.......... N/A
(c) Custodian..................... N/A
Independent Public Accountant. Experts
(d) Assets of Registrant.......... Safekeeping of Variable
Account Assets
(e) Affiliated Persons............ N/A
(f) Principal Underwriter......... Distribution of the Policy
19. Purchase of Securities Being
Offered........................... Distribution of the Policy
20. Underwriters...................... Distribution of the Policy
21. Calculation of Performance Data... Performance Data Calculations
22. Annuity Payments.................. The Policy; Determination of
Annuity Payments
23. Financial Statements.............. Financial Statements
</TABLE>
<PAGE>
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U N I T E D I N V E S T O R S
R E T I R E M A P (SM) JULY 1, 1997
VARIABLE ANNUITY
PROSPECTUS
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This Prospectus describes the RetireMAP Deferred Variable
Annuity Policy ("Policy") issued by United Investors Life
Insurance Company ("United Investors"). The Policy can be
purchased with a single minimum Purchase Payment of $2,000 (for
tax qualified policies, the minimum Purchase Payment is lower).
Additional Purchase Payments may be made in amounts of $100 or
more. No Policy will be issued if either the Annuitant or the
Owner is over age 85 last birthday.
Over the life of the Policy, the Owner may choose to allocate
Purchase Payments or transfer values to no more than 17 of the
Investment Divisions ("Investment Divisions") of the RetireMAP
Variable Account (the "Variable Account"), to the Fixed Account
which provides guaranteed interest accumulation, or to a
combination of both. (See "Transfers" for additional
restrictions on transfers.) Assets of each Investment Division
are invested in a corresponding mutual fund portfolio. The
following 21 Portfolios of the Funds are currently offered to
Policyowners through the Investment Divisions of the Variable
Account:
<TABLE>
<S> <C>
TMK/UNITED FUNDS, INC. DREYFUS VARIABLE INVESTMENT FUND
MONEY MARKET PORTFOLIO CAPITAL APPRECIATION PORTFOLIO
BOND PORTFOLIO SMALL CAP PORTFOLIO
HIGH INCOME PORTFOLIO GROWTH AND INCOME PORTFOLIO
GROWTH PORTFOLIO QUALITY BOND PORTFOLIO
INCOME PORTFOLIO MFS VARIABLE INSURANCE TRUST
SMALL CAP PORTFOLIO MFS EMERGING GROWTH SERIES
SCIENCE AND TECHNOLOGY PORTFOLIO MFS RESEARCH SERIES
FEDERATED INSURANCE SERIES MFS UTILITIES SERIES
FEDERATED EQUITY INCOME FUND II WARBURG PINCUS TRUST
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II INTERNATIONAL EQUITY PORTFOLIO
SCUDDER VARIABLE LIFE INVESTMENT FUND WARBURG PINCUS TRUST II
GLOBAL DISCOVERY PORTFOLIO FIXED INCOME PORTFOLIO
INTERNATIONAL PORTFOLIO GLOBAL FIXED INCOME PORTFOLIO
</TABLE>
The Policy Value will vary in accordance with the investment
performance of the Investment Divisions selected by the Owner.
Therefore, the Owner bears the entire investment risk under the
Policy for all Purchase Payments allocated to the Variable
Account. United Investors guarantees that Purchase Payments
allocated to the Fixed Account will earn interest at a rate of
not less than the Guaranteed Minimum Interest Rate of 4% per
year.
The Owner can surrender the Policy for cash or make a partial
cash withdrawal (collectively, "Withdrawals"), although
Withdrawals may be taxable and subject to a withdrawal charge
and tax penalty.
This Prospectus sets forth the basic information that a
prospective investor should know before investing. A "Statement
of Additional Information" containing more detailed information
about the Policy and the Variable Account is available free by
writing United Investors at United Investors Life Insurance
Company, Administrative Office, P.O. Box 219065, Dallas, TX
75221-9065, or by calling (800) 453-1271. The Statement of
Additional Information, which has the same date as this
Prospectus, has been filed with the U.S. Securities and
Exchange Commission and is incorporated herein by reference.
The table of contents for the Statement of Additional
Information is included at the end of this Prospectus.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
U.S. SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE U.S. 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.
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THE POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER AGENCY. AN
INVESTMENT IN THE POLICIES INVOLVES CERTAIN RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL.
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PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE
REFERENCE.
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Issued By:
United Investors Life Insurance Company
2001 Third Avenue South
Birmingham, Alabama 35233
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<PAGE>
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
DEFINITIONS................................................................ iii
SUMMARY.................................................................... 1
PUBLISHED RATINGS.......................................................... 8
UNITED INVESTORS LIFE INSURANCE COMPANY AND RETIREMAP VARIABLE ACCOUNT..... 8
United Investors Life Insurance Company.................................. 8
RetireMAP Variable Account............................................... 8
The Funds................................................................ 9
Fund Management and Fees................................................. 11
FIXED ACCOUNT.............................................................. 13
THE POLICY................................................................. 14
Issuance of a Policy..................................................... 14
Purchase Payments........................................................ 14
Allocation of Purchase Payments.......................................... 14
Policy Value............................................................. 15
Surrender and Partial Withdrawals........................................ 16
Transfers................................................................ 17
Dollar Cost Averaging.................................................... 18
Death Benefit............................................................ 18
"Free Look" Period....................................................... 20
CHARGES AND DEDUCTIONS..................................................... 20
Withdrawal Charge........................................................ 20
Waiver of Withdrawal Charges Rider....................................... 21
Annual Contract Maintenance Charge....................................... 21
Administration Fee....................................................... 21
Reduction In Charges For Certain Groups.................................. 21
Mortality and Expense Risk Charge........................................ 22
Optional Death Benefit Rider Charge...................................... 22
Transaction Charge....................................................... 22
Premium Taxes............................................................ 22
Federal Taxes............................................................ 23
Fund Expenses............................................................ 23
ANNUITY PAYMENTS........................................................... 23
Election of Payment Option............................................... 23
Retirement Date.......................................................... 23
Available Options........................................................ 23
DISTRIBUTOR OF THE POLICIES................................................ 25
FEDERAL TAX MATTERS........................................................ 25
Introduction............................................................. 25
Taxation of Annuities in General......................................... 25
VOTING RIGHTS.............................................................. 28
LEGAL PROCEEDINGS.......................................................... 29
FINANCIAL STATEMENTS....................................................... 29
STATEMENT OF ADDITIONAL INFORMATION........................................ 30
</TABLE>
The Policy is not available in all States.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN, OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.
ii
<PAGE>
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DEFINITIONS
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Annuitant................means the person on whose life Annuity Payments de-
pend. If the Policyowner names more than one person
as an "Annuitant," the second person is referred to
as "Co-Annuitant." All provisions based on the date
of death of the "Annuitant" prior to the Retirement
Date are based on the date of death of the last to
survive of the "Annuitant" or "Co-Annuitant." The
"Annuitant" and "Co-Annuitant" are referred to col-
lectively as the "Annuitant."
Annuity Payment..........means an amount paid monthly, starting on the Retire-
ment Date, by United Investors to the Annuitant or
any other payee.
Annuity Payment Option...means any one of the payment options available under
the Policy.
Beneficiary..............means the person, persons or entity entitled to Death
Benefit proceeds under this Policy upon death of the
Owner (or Annuitant if the Owner is not a natural
person) before the Retirement Date. If the Policy has
Joint Owners and one Owner dies, the surviving Joint
Owner will be deemed the Beneficiary.
Death Benefit............means the benefit payable upon death of the Owner (or
Annuitant if the Owner is not a natural person) be-
fore the Retirement Date.
Fixed Account............is a part of the General Account of United Investors
Life Insurance Company. The General Account consists
of all assets of United Investors Life Insurance Com-
pany other than those in any separate account.
Fixed Account Value......means the value of the Fixed Account under the Poli-
cy.
Fixed Annuity............means an annuity with payments which remain fixed in
amount throughout the payment period and, unlike a
Variable Annuity, do not vary with the investment ex-
perience of the variable Investment Divisions.
Funds....................means the mutual funds of which certain portfolios
are available for investment by the Variable Account
on the Policy Date or as later changed by us.
Guaranteed Minimum
Interest Rate...........means the minimum effective annual rate at which in-
terest will be credited to amounts allocated to the
Fixed Account under the Policy. The Guaranteed Mini-
mum Interest Rate is 4% per year.
Joint Owner..............means the persons named as the Joint Owner in the ap-
plication, unless he or she has assigned ownership to
someone else.
Net Purchase Payment.....means a Purchase Payment less any deduction for pre-
mium taxes incurred at the time the Purchase Payment
was accepted.
Nonqualified Policies....means Policies not used in connection with certain
plans that qualify for special Federal income tax
treatment.
Policy Anniversary.......means the same day and month as the Policy Date each
year that the Policy remains in force.
Policy Date..............means the date the Policy becomes effective, and the
date from which Policy Anniversaries and Policy Years
are determined.
Policy Value.............means the Variable Account Value plus the Fixed Ac-
count Value prior to the Retirement Date.
Policy Year..............means a year that starts on the Policy Date or on a
Policy Anniversary.
iii
<PAGE>
Policyowner or Owner.....means the person named as the owner in the applica-
tion, unless he or she has assigned ownership to
someone else.
Purchase Payment.........means any payment made by the Policyowner under the
Policy.
Qualified Policies.......means Policies used in connection with certain plans
that qualify for special Federal income tax treat-
ment.
Retirement Date..........is the date on which the Annuity Payments start.
Surrender Value..........means the Policy Value less any Withdrawal Charge,
the Annual Contract Maintenance Charge, an Optional
Death Benefit Rider Charge (if applicable), and ap-
plicable deductions for premium taxes.
Valuation Date...........means a normal business day, Monday through Friday.
However, we will not value the Policy on any custom-
ary U.S. business holiday when the New York Stock Ex-
change is not open for trading. Those holidays cur-
rently are New Year's Day, Presidents' Day, Good Fri-
day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
Valuation Period.........means the interval of time commencing at the close of
business of the New York Stock Exchange on each Valu-
ation Date and ending at the close of business of the
New York Stock Exchange on the next Valuation Date.
Variable Account Value...means the sum of all values of the Investment Divi-
sions of the Variable Account under the Policy.
Variable Annuity.........means an annuity with payments which vary in amount
with the investment experience of one or more of the
variable Investment Divisions.
We.......................means United Investors Life Insurance Company. "Us"
and "our" also refer to United Investors.
Written Request or
Written Notice..........means a request or notice in writing signed by the
Policyowner.
You......................means the owner of the Policy. "Your" and "yours"
also refer to the Policyowner.
iv
<PAGE>
SUMMARY
The following summary of Prospectus information should be read in
conjunction with the detailed information appearing elsewhere in this
Prospectus.
THE POLICY. The Policy is designed to aid individuals in long-term financial
planning and provides for the accumulation of capital on a tax-deferred basis
for retirement or other long-term purposes. The Policy also provides Annuity
Payments after the Retirement Date. The Owner may select from a number of
Annuity Payment Options, including a life annuity, joint life annuity, and
life annuity for a guaranteed period. Annuity Payments may be on a variable
basis, a fixed basis, or a combination thereof. (See "Annuity Payments.")
The Policy is issued in consideration of the application and payment of the
initial Purchase Payment. The minimum initial Purchase Payment for non-
qualified policies is $2,000. For qualified plans, the initial Purchase
Payment must be at least $1,200, unless Purchase Payments will be made by
means of a bank draft authorization or a group payment method approved in
advance by us. (See "Purchase Payments.") The Policy can be purchased for a
single Purchase Payment. However, additional Purchase Payments may be paid at
the Policyowner's option (within certain limits). (See "Purchase Payments.")
The Policy can be purchased on a non-qualified tax basis or it can be
purchased and used in connection with plans qualifying for favorable Federal
income tax treatment.
THE VARIABLE ACCOUNT. The Variable Account currently has 21 Investment
Divisions. Each Investment Division invests solely in shares of a
corresponding mutual fund portfolio of one of several Funds. Currently the
following 21 separate investment portfolios are available:
<TABLE>
<S> <C>
TMK/UNITED FUNDS, INC. DREYFUS VARIABLE INVESTMENT FUND
MONEY MARKET PORTFOLIO CAPITAL APPRECIATION PORTFOLIO
BOND PORTFOLIO SMALL CAP PORTFOLIO
GROWTH PORTFOLIO GROWTH AND INCOME PORTFOLIO
HIGH INCOME PORTFOLIO QUALITY BOND PORTFOLIO
INCOME PORTFOLIO MFS VARIABLE INSURANCE TRUST
SMALL CAP PORTFOLIO MFS EMERGING GROWTH SERIES
SCIENCE AND TECHNOLOGY PORTFOLIO MFS RESEARCH SERIES
FEDERATED INSURANCE SERIES MFS UTILITIES SERIES
FEDERATED EQUITY INCOME FUND II WARBURG PINCUS TRUST
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II INTERNATIONAL EQUITY PORTFOLIO
SCUDDER VARIABLE LIFE INVESTMENT FUND WARBURG PINCUS TRUST II
GLOBAL DISCOVERY PORTFOLIO FIXED INCOME PORTFOLIO
INTERNATIONAL PORTFOLIO GLOBAL FIXED INCOME PORTFOLIO
</TABLE>
Each of these Portfolios has a different investment objective. (See "The
Funds.")
The Policyowner determines the allocation of Purchase Payments and Policy
Value among the Investment Divisions of the Variable Account. Because the
Policy Value depends on the investment experience of the selected Investment
Divisions, the Owner bears the entire investment risk under the Policy for all
Purchase Payments allocated to, and amounts transferred to, the Variable
Account. (See "Allocation of Purchase Payments.") Prior to the Retirement
Date, the Policyowner may transfer the Policy Value from one Investment
Division to one or more other Investment Divisions up to twelve times per
Policy Year at no cost. After the Retirement Date, the Annuitant may
reallocate the value of the Annuitant's interest in the Investment Divisions
once each Policy Year at no cost. (See "Transfers.")
1
<PAGE>
THE FIXED ACCOUNT. The Fixed Account is a part of the General Account of
United Investors Life Insurance Company. The General Account consists of all
assets of United Investors Life Insurance Company other than those in any
separate account. We guarantee that we will credit interest at a rate of not
less than the Guaranteed Minimum Interest Rate of 4% per year to amounts
allocated to the Fixed Account. We may credit interest at a rate in excess of
the Guaranteed Minimum Interest Rate. ANY EXCESS INTEREST CREDITED WILL BE
DETERMINED IN OUR SOLE DISCRETION. THE OWNER ASSUMES THE RISK THAT INTEREST
CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE GUARANTEED MINIMUM
INTEREST RATE. The Fixed Account may not be available in all states. (See
"Fixed Account.")
The Policyowner determines the allocation of Purchase Payments and Policy
Value to the Fixed Account. Prior to the Retirement Date, the Policyowner may
transfer all or part of the values held in the Fixed Account to one or more of
the Investment Divisions of the Variable Account, subject to certain
restrictions. (See "Transfers.") After the Retirement Date, transfers from the
Fixed Account to the Investment Divisions of the Variable Account are not
allowed. After the Retirement Date values held in the Investment Divisions of
the Variable Account may be transferred to the Fixed Account only once per
policy year. (See "Transfers.")
POLICY VALUE. On the Policy Date, the Policy Value equals the initial
Purchase Payment less any applicable premium taxes plus any accrued interest
from the date of receipt of the initial Purchase Payment to the Policy Date.
Thereafter, the Policy Value will increase or decrease from day to day
depending on the investment experience of the selected Investment Divisions.
The Policy Value is equal to the Variable Account Value plus the Fixed
Account Value prior to the Retirement Date. (See "Fixed Account.") Variable
Account Value is not guaranteed. The Policy Value will reflect the investment
performance of the selected Investment Divisions, the charges imposed in
connection with the Policy, and indirectly the expenses of the Portfolios.
(See "Policy Value.") Accordingly, although the Policy offers the possibility
that the Policy Value will increase, there is no assurance that it will
increase, and it may decrease.
SURRENDER AND PARTIAL WITHDRAWALS. You may surrender the Policy at any time
prior to the Retirement Date for the Surrender Value, which is the Policy
Value less any applicable Withdrawal Charge, the Annual Contract Maintenance
Charge, the Optional Death Benefit Rider Charge (if applicable), and
applicable deductions for premium taxes. You may also make partial withdrawals
of the Policy Value at any time prior to the Retirement Date. However, amounts
withdrawn during the first six Policy Years following receipt of a Purchase
Payment may be subject to a Withdrawal Charge. (See "Surrender and Partial
Withdrawals.") In addition, withdrawals may be taxable and subject to a
penalty tax. For certain Qualified Policies, withdrawals may be severely
restricted and/or penalized. (See "Federal Tax Matters.")
DEATH BENEFIT. The Policy provides a Death Benefit if an Owner dies before
the Retirement Date. Upon the death of any Owner prior to the Retirement Date,
certain distribution requirements under Federal income tax laws will apply.
(See "Death Benefit.") The Death Benefit under the Policy will be paid in a
lump sum or under one of the Annuity Payment Options. (See "Death Benefit,"
and "Annuity Payments.") No Death Benefit will be paid if the Annuitant or
Owner dies after the Retirement Date unless provided for in the Annuity
Payment Option then in effect. (See "Death Benefit.")
If death of the Annuitant occurs prior to the Retirement Date and the
Annuitant is also an Owner or a Joint Owner of the Policy, the rules governing
distribution of death benefit proceeds in the event of the death of the Owner
shall apply. (See "Death Benefit.")
An Optional Death Benefit Rider is available for an extra charge of 0.17%
annually of the average death benefit amount. (See "Death Benefit.")
2
<PAGE>
CHARGES AND DEDUCTIONS. United Investors does not impose any charge or
deduction against a Purchase Payment prior to its allocation to the Variable
Account or Fixed Account (except for a charge for any premium taxes incurred
at the time the Purchase Payment is accepted). Deductions are made from the
values in the Investment Divisions and the Fixed Account to pay for various
expenses and risks that we incur.
A sales charge in the form of a withdrawal charge ("Withdrawal Charge") is
assessed against each Purchase Payment withdrawn or applied under an Annuity
Payment Option within six years after the Purchase Payment is received. The
Withdrawal Charge is 7% of Purchase Payments less than two years old, and
decreases to 3% on Purchase Payments that are 5 years old. Purchase Payments 6
years old or older are not subject to Withdrawal Charges. (See "Withdrawal
Charge.")
A Transaction Charge of up to $20 will apply if more than twelve withdrawals
are made in a Policy Year. (See "Transaction Charge.") Withdrawals may be
taxable and subject to a penalty tax. (See "Federal Tax Matters.")
An Annual Contract Maintenance Charge of $35 is made on each Policy
Anniversary and at the time a Policy is surrendered to partially compensate
United Investors for the cost of administering the Policy. This charge is
waived on any Policy Anniversary on which cumulative Purchase Payments less
withdrawals equals or exceeds $30,000. (See "Annual Contract Maintenance
Charge.") This annual deduction will be made from the variable Investment
Divisions in the same proportion that their values bear to the total Variable
Account Value. There is also a daily charge at an annual rate of 0.15% of the
daily value of the Investment Divisions, for the costs of administering the
Variable Account and the Policies. (See "Administration Fee.")
A daily charge, at an annual rate of 1.25% of the daily value of the
Investment Divisions, will be deducted from the Investment Divisions for
United Investors' assumption of certain mortality and expense risks incurred
in connection with the Policy. (See "Mortality and Expense Risk Charge.")
There is no Mortality and Expense Risk Charge for amounts in the Fixed
Account.
SUMMARY OF FEES AND CHARGES. The following information summarizes the fees
and charges payable by the Owner of a Policy:
<TABLE>
<S> <C>
CONTRACT OWNER TRANSACTION EXPENSES:
Maximum Withdrawal Charge............................................. 7%
Maximum Transaction Charge (for each Withdrawal in excess of 12 per
Policy Year)......................................................... $20
Transfer fee (maximum of 12 transfers in a Policy Year)............... $ 0
MAXIMUM ANNUAL CONTRACT MAINTENANCE CHARGE.............................. $35
VARIABLE ACCOUNT ANNUAL EXPENSES (expressed as a percentage of the aver-
age daily net assets of each Investment Division of the Variable Ac-
count):
Mortality and Expense Risk Charge..................................... 1.25%
Administration Fee.................................................... 0.15%
-----
Total Variable Account Annual Expenses:................................. 1.40%
</TABLE>
Optional Death Benefit Rider Charge:......0.17% (annually) of the average death
benefit amount
3
<PAGE>
PORTFOLIO ANNUAL EXPENSES (1)
(expressed as a percentage of net assets of each Portfolio) (2)
<TABLE>
<CAPTION>
TOTAL PORTFOLIO
MANAGEMENT OTHER ANNUAL
FEE (3) EXPENSES (3) EXPENSES (3)
(after any (after any (after waiver or
PORTFOLIO waiver) reimbursement) reimbursement)
--------- ---------- -------------- ----------------
<S> <C> <C> <C>
TMK/United Funds, Inc.
Money Market Portfolio.......... 0.50 % 0.11 % 0.61 %
Bond Portfolio.................. 0.53 % 0.06 % 0.59 %
High Income Portfolio........... 0.65 % 0.06 % 0.71 %
Growth Portfolio................ 0.70 % 0.03 % 0.73 %
Income Portfolio................ 0.70 % 0.03 % 0.73 %
Small Cap Portfolio............. 0.85 % 0.06 % 0.91 %
Science and Technology Portfolio 0.70 % 0.03 % 0.73 %
Federated Insurance Series
Federated Equity Income Fund II. 0.00 % 0.85 % 0.85 %
Federated Fund for U.S.
Government Securities II....... 0.00 % 0.80 % 0.80 %
Scudder Variable Life Investment
Fund (4)
Global Discovery Portfolio...... 0.16 % 1.59 % 1.75 %
International Portfolio......... 0.86 % 0.44 % 1.30 %
Dreyfus Variable Investment Fund
Capital Appreciation Portfolio.. 0.75 % 0.09 % 0.84 %
Small Cap Portfolio............. 0.75 % 0.04 % 0.79 %
Growth and Income Portfolio..... 0.75 % 0.08 % 0.83 %
Quality Bond Portfolio.......... 0.65 % 0.14 % 0.79 %
MFS Variable Insurance Trust
MFS Emerging Growth Series...... 0.75 % 0.25 % 1.00 %
MFS Research Series............. 0.75 % 0.25 % 1.00 %
MFS Utilities Series............ 0.75 % 0.25 % 1.00 %
Warburg Pincus Trust
International Equity Portfolio.. 0.96 % 0.40 % 1.36 %
Warburg Pincus Trust II
Fixed Income Portfolio.......... 0.48 % 0.51 % 0.99 %
Global Fixed Income Portfolio... 0.52 % 0.47 % 0.99 %
</TABLE>
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(1) The Portfolio Annual Expenses shown above are assessed at the underlying
mutual fund level and are not direct charges against Variable Account
assets or reductions from Policy Value. These underlying Portfolio Annual
Expenses are taken into consideration in computing each underlying
Portfolio's net asset value which is the share price used to calculate the
unit values of the Investment Divisions of the Variable Account. The
Management Fees and Other Expenses, some of which are subject to fee
waivers or expense reimbursements, are more fully described in the
prospectus for each individual underlying mutual fund. The information
relating to the underlying Portfolio Annual Expenses was provided by the
underlying mutual fund and was not independently verified by United
Investors.
(2) The percentages are based on expenses incurred for the year ended December
31, 1996, except for the following new Portfolios, where the figures are
estimates for the year ending December 31, 1997: TMK/United Science and
Technology Portfolio; Federated Equity Income II Portfolio; Scudder Global
Discovery Portfolio; Warburg Pincus Fixed Income Portfolio; and Warburg
Pincus Global Fixed Income Portfolio.
(3) With respect to certain Portfolios, the Portfolio's investment adviser is
waiving part or all of its Management Fee and reimbursing part or all of
the Other Expenses. Absent the waiver or reimbursement, the expenses (1996
actual or 1997 estimated, as the case may be) of these Portfolios would
have been as indicated below:
4
<PAGE>
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL PORTFOLIO
FEE EXPENSES ANNUAL EXPENSES
(before any (before any (before waiver or
PORTFOLIO waiver) reimbursement) reimbursement)
--------- ----------- -------------- -----------------
<S> <C> <C> <C>
Federated Equity Income Fund II 0.75 % 1.07 % 1.82 %
Federated Fund for U.S. Govern-
ment Securities II............ 0.60 % 1.21 % 1.81 %
Scudder Global Discovery Port-
folio......................... 0.975% 1.595% 2.57 %
MFS Emerging Growth Series..... 0.75 % 0.41 % 1.16 %
MFS Research Series............ 0.75 % 0.73 % 1.48 %
MFS Utilities Series........... 0.75 % 2.00 % 2.75 %
Warburg Pincus International
Equity Portfolio.............. 1.00 % 0.40 % 1.40 %
Warburg Pincus Fixed Income
Portfolio..................... 0.50 % 0.65 % 1.15 %
Warburg Pincus Global Fixed In-
come Portfolio................ 1.00 % 0.55 % 1.55 %
</TABLE>
(4) The Variable Account invests in Class B shares of Scudder Variable Life
Investment Fund (the "Scudder Fund"). The Scudder Fund has adopted a plan
pursuant to SEC Rule 12b-1 for its Class B shares (the "Plan") whereby it
will pay Scudder Investor Services, Inc. (the "Distributor"), a subsidiary
of the Scudder Fund's investment adviser, a fee at the annual rate of up
to 0.25% of the average daily net assets of its Global Discovery Portfolio
and International Portfolio attributable to Class B shares ("12b-1 Fees").
Under the terms of the Plan, the Scudder Fund is authorized to make
payments quarterly to the Distributor for remittance to a participating
insurance company (e.g., United Investors) in order to pay or reimburse
such insurance company for distribution and shareholder servicing-related
expenses incurred by that insurance company. Although no 12b-1 Fees were
deducted during 1996, the tables above have been restated to reflect the
current 0.25% fee.
EXPENSE EXAMPLES. The purpose of the following Example Tables is to assist
the Owner in understanding the various costs and expenses that an Owner will
bear directly and indirectly. The Tables reflect charges and expenses of the
Variable Account and charges and expenses of the Portfolios for the year ended
December 31, 1996, where available, or estimates for new Portfolios (after any
fee waiver or expense reimbursement); the Portfolios' charges and expenses for
future years may be higher or lower. For more information on the charges
summarized in these Tables, see "Charges and Deductions," and the Prospectuses
for the Portfolios.
EXAMPLE 1 (assuming basic death benefit)
If you surrender your contract at the end of the applicable time period, you
would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
<TABLE>
<CAPTION>
INVESTMENT DIVISION 1 YEAR 3 YEARS
------------------- ------- -------
<S> <C> <C>
TMK/United Money Market........................................ $ 90.10 $124.75
TMK/United Bond................................................ $ 89.90 $124.15
TMK/United High Income......................................... $ 91.10 $127.77
TMK/United Growth.............................................. $ 91.30 $128.38
TMK/United Income.............................................. $ 91.30 $128.38
TMK/United Small Cap........................................... $ 93.10 $133.79
TMK/United Science and Technology.............................. $ 91.30 $128.38
Federated Equity Income Fund II................................ $ 92.50 $131.99
Federated Fund for U.S. Government Securities II............... $ 92.00 $130.48
Scudder Global Discovery....................................... $101.50 $158.80
Scudder International.......................................... $ 97.00 $145.46
Dreyfus Capital Appreciation................................... $ 92.40 $131.69
Dreyfus Small Cap.............................................. $ 91.90 $130.18
Dreyfus Growth and Income...................................... $ 92.30 $131.39
Dreyfus Quality Bond........................................... $ 91.90 $130.18
MFS Emerging Growth Series..................................... $ 94.00 $136.49
MFS Research Series............................................ $ 94.00 $136.49
MFS Utilities Series........................................... $ 94.00 $136.49
Warburg Pincus International Equity............................ $ 97.60 $147.24
Warburg Pincus Fixed Income.................................... $ 93.90 $136.19
Warburg Pincus Global Fixed Income............................. $ 93.90 $136.19
</TABLE>
5
<PAGE>
If you annuitize or do not surrender your contract, you would pay the
following expenses on a $1,000 investment, assuming 5% annual return on
assets:
<TABLE>
<CAPTION>
INVESTMENT DIVISION 1 YEAR 3 YEARS
------------------- ------- -------
<S> <C> <C>
TMK/United Money Market........................................ $ 20.10 $ 64.75
TMK/United Bond................................................ $ 19.90 $ 64.15
TMK/United High Income......................................... $ 21.10 $ 67.77
TMK/United Growth.............................................. $ 21.30 $ 68.38
TMK/United Income.............................................. $ 21.30 $ 68.38
TMK/United Small Cap........................................... $ 23.10 $ 73.79
TMK/United Science and Technology.............................. $ 21.30 $ 68.38
Federated Equity Income Fund II................................ $ 22.50 $ 71.99
Federated Fund for U.S. Government Securities II............... $ 22.00 $ 70.48
Scudder Global Discovery....................................... $ 31.50 $ 98.80
Scudder International.......................................... $ 27.00 $ 85.46
Dreyfus Capital Appreciation................................... $ 22.40 $ 71.69
Dreyfus Small Cap.............................................. $ 21.90 $ 70.18
Dreyfus Growth and Income...................................... $ 22.30 $ 71.39
Dreyfus Quality Bond........................................... $ 21.90 $ 70.18
MFS Emerging Growth Series..................................... $ 24.00 $ 76.49
MFS Research Series............................................ $ 24.00 $ 76.49
MFS Utilities Series........................................... $ 24.00 $ 76.49
Warburg Pincus International Equity............................ $ 27.60 $ 87.24
Warburg Pincus Fixed Income.................................... $ 23.90 $ 76.19
Warburg Pincus Global Fixed Income............................. $ 23.90 $ 76.19
</TABLE>
EXAMPLE 2 (assuming optional death benefit)
If you surrender your contract at the end of the applicable time period, you
would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
<TABLE>
<CAPTION>
INVESTMENT DIVISION 1 YEAR 3 YEARS
------------------- ------- -------
<S> <C> <C>
TMK/United Money Market........................................ $ 90.10 $128.22
TMK/United Bond................................................ $ 89.90 $127.61
TMK/United High Income......................................... $ 91.10 $131.23
TMK/United Growth.............................................. $ 91.30 $131.83
TMK/United Income.............................................. $ 91.30 $131.83
TMK/United Small Cap........................................... $ 93.10 $137.24
TMK/United Science and Technology.............................. $ 91.30 $131.83
Federated Equity Income Fund II................................ $ 92.50 $135.44
Federated Fund for U.S. Government Securities II............... $ 92.00 $133.94
Scudder Global Discovery....................................... $101.50 $162.20
Scudder International.......................................... $ 97.00 $148.88
Dreyfus Capital Appreciation................................... $ 92.40 $135.14
Dreyfus Small Cap.............................................. $ 91.90 $133.64
Dreyfus Growth and Income...................................... $ 92.30 $134.84
Dreyfus Quality Bond........................................... $ 91.90 $133.64
MFS Emerging Growth Series..................................... $ 94.00 $139.93
MFS Research Series............................................ $ 94.00 $139.93
MFS Utilities Series........................................... $ 94.00 $139.93
Warburg Pincus International Equity............................ $ 97.60 $150.67
Warburg Pincus Fixed Income.................................... $ 93.90 $139.63
Warburg Pincus Global Fixed Income............................. $ 93.90 $139.63
</TABLE>
6
<PAGE>
If you annuitize or do not surrender your contract, you would pay the
following expenses on a $1,000 investment, assuming 5% annual return on
assets:
<TABLE>
<CAPTION>
INVESTMENT DIVISION 1 YEAR 3 YEARS
------------------- ------- -------
<S> <C> <C>
TMK/United Money Market........................................ $ 20.10 $ 68.22
TMK/United Bond................................................ $ 19.90 $ 67.61
TMK/United High Income......................................... $ 21.10 $ 71.23
TMK/United Growth.............................................. $ 21.30 $ 71.83
TMK/United Income.............................................. $ 21.30 $ 71.83
TMK/United Small Cap........................................... $ 23.10 $ 77.24
TMK/United Science and Technology.............................. $ 21.30 $ 71.83
Federated Equity Income Fund II................................ $ 22.50 $ 75.44
Federated Fund for U.S. Government Securities II............... $ 22.00 $ 73.94
Scudder Global Discovery....................................... $ 31.50 $102.20
Scudder International.......................................... $ 27.00 $ 88.88
Dreyfus Capital Appreciation................................... $ 22.40 $ 75.14
Dreyfus Small Cap.............................................. $ 21.90 $ 73.64
Dreyfus Growth and Income...................................... $ 22.30 $ 74.84
Dreyfus Quality Bond........................................... $ 21.90 $ 73.64
MFS Emerging Growth Series..................................... $ 24.00 $ 79.93
MFS Research Series............................................ $ 24.00 $ 79.93
MFS Utilities Series........................................... $ 24.00 $ 79.93
Warburg Pincus International Equity............................ $ 27.60 $ 90.67
Warburg Pincus Fixed Income.................................... $ 23.90 $ 79.63
Warburg Pincus Global Fixed Income............................. $ 23.90 $ 79.63
</TABLE>
In addition, United Investors will deduct a charge for premium taxes when
they are incurred.
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
EXPENSES AND THE ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE SHOWN. The
$35 Annual Contract Maintenance Charge is reflected in these examples as a
charge of 0.13% of the net assets.
"FREE LOOK" PERIOD. You may cancel the Policy by returning it within 10 days
after you receive it. When we receive the Policy we will cancel it and
generally refund the Policy Value plus any charges deducted prior to
allocation to the Investment Divisions or the Fixed Account. In some states,
we will instead refund all Purchase Payments that we have received. (See "`Free
Look' Period.") The "Free Look" period may be extended where required by state
law.
OWNER INQUIRIES. All inquiries regarding the Policy should be addressed or
directed to the sales agent who sold the Policy or to United Investors'
Administrative Office at the following address:
United Investors Life Insurance Company
Administrative Office
P.O. Box 219065
Dallas, TX 75221-9065
Phone: (800) 453-1271
All inquiries should include the Policy number and the Annuitant's name and
Owner's name, if different.
* * *
7
<PAGE>
NOTE: The foregoing summary is qualified in its entirety by the detailed
information in the remainder of this Prospectus and in the Prospectuses
for the Portfolios, all of which should be referred to for more detailed
information. With respect to Qualified Policies, it should be noted that
the requirements of a particular retirement plan, an endorsement to the
Policy, or limitations or penalties imposed by the Internal Revenue Code
may impose limits or restrictions on Purchase Payments, surrenders,
distributions or benefits, or on other provisions of the Policies, and
this Prospectus does not describe any such limitations or restrictions.
(See "Federal Tax Matters.")
PUBLISHED RATINGS
We may publish in advertisements, sales literature, and reports to
Policyowners, the ratings and other information assigned to us by one or more
independent insurance industry analyst or rating organizations such as A.M.
Best Company, Standard & Poor's Corporation, and Weiss Research, Inc. These
ratings reflect the current opinion of an insurance company's financial
strength and operating performance in comparison to the norms for the
insurance industry; they do not reflect the strength, performance, or safety
(or lack thereof) of the Variable Account. The claims-paying ability rating as
measured by Standard & Poor's is an opinion of an operating insurance
company's financial capacity to meet the obligations of its insurance and
annuity policies in accordance with their terms. These ratings should not be
considered as bearing on the investment performance of the assets held in the
Variable Account or the degree of risk associated with an investment in the
Variable Account.
UNITED INVESTORS LIFE INSURANCE COMPANY AND
RETIREMAP VARIABLE ACCOUNT
UNITED INVESTORS LIFE INSURANCE COMPANY
United Investors Life Insurance Company is a stock life insurance company
that was incorporated in the State of Missouri on August 17, 1981, as the
successor to a company of the same name established in Missouri on September
27, 1961. United Investors is a wholly-owned subsidiary of United Investors
Management Company (formerly TMK/United, Inc.), which in turn is indirectly
owned by Torchmark Corporation. United Investors is principally engaged in
offering life insurance and annuity contracts and is admitted to do business
in the District of Columbia and all states except New York.
RETIREMAP VARIABLE ACCOUNT
The RetireMAP Variable Account (the "Variable Account") is currently divided
into 21 Investment Divisions. Each Investment Division invests exclusively in
shares of a single mutual fund portfolio. Income and both realized and
unrealized gains or losses from the assets of each Investment Division are
credited to or charged against that Investment Division without regard to
income, gains or losses from any other Investment Division of the Variable
Account or arising out of any other business United Investors may conduct.
Although the assets in the Variable Account are the property of United
Investors, the assets in the Variable Account attributable to the Policies are
not chargeable with liabilities arising out of any other business which United
Investors may conduct. The Variable Account was established by United
Investors as a segregated asset account on September 20, 1996. The Variable
Account will receive and invest the Purchase Payments allocated to it under
the Policies.
The Variable Account has been registered as a unit investment trust under
the Investment Company Act of 1940 and meets the definition of a separate
account under the Federal securities law. Registration with the Securities and
Exchange Commission does not involve supervision of the
8
<PAGE>
management or investment practices or policies of the Variable Account or
United Investors by the Commission.
THE FUNDS
Each Investment Division invests exclusively in a designated series of
shares, representing an interest in a particular Portfolio of one of several
Funds, which are summarized below. Within each Fund, the assets of each
Portfolio are held separate from the assets of the other Portfolios. Thus,
each Portfolio operates as a separate investment portfolio, and the income or
losses of one Portfolio have no effect on the investment performance of any
other Portfolio.
The investment objectives and policies of each Portfolio are summarized
below. There is no assurance that any of the Portfolios will achieve their
stated objectives. More detailed information, including a description of
risks, is in the Funds' prospectuses, which accompany this Prospectus and
which should be read carefully in conjunction with this Prospectus and
retained.
The Funds are designed as investment vehicles for variable annuity or
variable life insurance contracts of various insurance companies. For more
information about the risks associated with the use of the same funding
vehicle for both variable annuity and variable life insurance contracts of
various insurance companies, see the Funds' prospectuses.
United Investors may receive payments or revenues from some or all of the
Portfolios or their investment advisers.
The following 21 Portfolios of the Funds are currently offered to
Policyowners through the Investment Divisions of the Variable Account:
TMK/United Funds, Inc.
TMK/United Money Market Portfolio seeks to maximize current income
consistent with stability of principal. It may invest in money market
securities such as bank obligations and instruments secured by bank
obligations, commercial paper and corporate debt obligations and obligations
of the U.S. and Canadian Governments or their respective agencies and
instrumentalities. Investments in the Money Market Portfolio are neither
insured nor guaranteed by the U.S. Government and there is no assurance that
the portfolio will be able to maintain a stable per share net asset value.
TMK/United Bond Portfolio seeks current income with an emphasis on
preservation of capital. It will invest primarily in debt securities of
varying yields, qualities, and maturities.
TMK/United High Income Portfolio primarily seeks high current income. As a
secondary goal it will seek capital growth when consistent with the primary
goal. It will invest primarily in high-yield, high risk fixed-income
securities (commonly known as "junk bonds"), but may have up to 20% of its
assets in common stocks. High-yield fixed-income securities may have an
increased risk of default and greater market price volatility than higher
rated securities due to various circumstances. See "Debt Securities" in the
TMK/United Funds, Inc. prospectus for a further description of the risk
factors.
TMK/United Growth Portfolio primarily seeks capital growth. As a secondary
goal it will seek current income. It will invest primarily in common stocks or
securities convertible into common stocks.
TMK/United Income Portfolio seeks to maintain current income, subject to
market conditions. It will invest primarily in common stocks or securities
convertible into common stocks.
TMK/United Small Cap Portfolio seeks capital growth through a diversified
holding of securities, primarily in the common stocks of, or securities
convertible into the common stocks of, relatively new
9
<PAGE>
or unseasoned companies, companies which are in their early stages of
development or smaller companies positioned in new and emerging industries
where the opportunity for rapid growth is above average.
TMK/United Science and Technology Portfolio seeks long-term capital growth
through investments primarily in science and technology securities.
Federated Insurance Series
Federated Equity Income Fund II's investment objective is to provide above
average income and capital appreciation. It attempts to achieve its objectives
by investing at least 65% of its assets in income-producing equity securities.
Federated Fund for U.S. Government Securities II seeks current income by
investing in a professionally managed, diversified portfolio limited to U.S.
government securities (i.e., securities issued or guaranteed as to payment of
principal and interest by the U.S. government, its agencies or
instrumentalities).
Scudder Variable Life Investment Fund
Scudder Global Discovery Portfolio seeks above-average capital appreciation
over the long term by investing primarily in the equity securities of small
companies located throughout the world. It generally invests in small, rapidly
growing companies that offer the potential for above-average returns relative
to larger companies, yet are frequently overlooked and thus undervalued by the
market.
Scudder International Portfolio seeks long-term growth of capital
principally from a diversified portfolio of foreign equity securities. It
invests in companies, wherever organized, which do business primarily outside
the United States. It invests primarily in equity securities of established
companies, which are listed on foreign exchanges.
Dreyfus Variable Investment Fund
Dreyfus Capital Appreciation Portfolio's primary investment objective is to
provide long-term capital growth consistent with the preservation of capital;
current income is a secondary investment objective. This series invests
primarily of common stocks of domestic and foreign issuers.
Dreyfus Small Cap Portfolio's investment objective is to maximize capital
appreciation. This series invests primarily in common stocks of domestic and
foreign issuers. This series will be particularly alert to emerging smaller-
sized companies which are believed to be characterized by new or innovative
products, services or processes which should enhance prospects for growth in
future earnings.
Dreyfus Growth and Income Portfolio's investment objective is to provide
long-term capital growth, current income and growth of income, consistent with
reasonable investment risk. This series invests primarily in equity
securities, debt securities and money market instruments of domestic and
foreign issuers.
Dreyfus Quality Bond Portfolio's investment objective is to provide the
maximum amount of current income to the extent consistent with the
preservation of capital and the maintenance of liquidity. This series
principally in debt obligations of corporations, the U.S. Government and its
agencies and instrumentalities, and U.S. major banking institutions.
MFS Variable Insurance Trust
MFS Emerging Growth Series seeks long-term growth of capital. Dividend and
interest income from portfolio securities, if any, is incidental to the
series' investment objective of long-term growth of
10
<PAGE>
capital. The series' policy is to invest primarily in common stocks of
companies that are early in their life cycles but which are believed to have
the potential to become major enterprises (emerging growth companies). The
series may also invest in more-established companies whose earnings growth are
expected to accelerate due to unique opportunities.
MFS Research Series seeks to provide long-term growth of capital and future
income. The series is an equity portfolio combining U.S. and foreign stocks of
all sizes and many industries. The series is managed by a committee of
investment research analysts, rather than by an individual manager. Each
analyst presents his or her "best idea." Industry and sector weightings are
then reviewed by the committee as a whole. This system of individual expertise
balanced by consensus can open doors to many equity opportunities.
MFS Utilities Series seeks capital growth and current income (income above
that available from a portfolio invested entirely in equity securities). This
series takes a balanced approach to investing. The series, under normal
circumstances, will have at least 65% of its assets (but up to 100% at the
discretion of the manager) allocated between equity and debt securities of
both domestic and foreign companies, primarily in the utilities industry. The
manager has the flexibility to invest up to 35% of the series' net assets in
foreign securities.
Warburg Pincus Trust
Warburg Pincus International Equity Portfolio's investment objective is to
seek long-term capital appreciation. It pursues its investment objective by
investing primarily in a broadly diversified portfolio of equity securities of
companies, wherever organized, that have their principal business activities
and interests outside the United States.
Warburg Pincus Trust II
Warburg Pincus Fixed Income Portfolio seeks total return consistent with
prudent investment management. It pursues its investment objective by
investing, under normal market conditions, at least 65% of its total assets in
fixed income securities.
Warburg Pincus Global Fixed Income Portfolio seeks total return consistent
with prudent investment management, consisting of combination of interest
income, currency gains and capital appreciation. It pursues its objective by
investing, under normal market conditions, at least 65% of its total assets in
fixed income obligations of governmental and corporate issuers denominated in
various currencies.
FUND MANAGEMENT AND FEES
TMK/United Money Market, Bond, High Income, Growth, Income, Small Cap, and
Science and Technology Portfolios. Waddell & Reed Investment Management
Company ("W&R") is the manager of TMK/United Funds, Inc. and provides
investment advisory services to that Fund. W&R is a wholly-owned subsidiary of
Waddell & Reed, Inc. which is a direct subsidiary of Waddell & Reed Financial
Services, Inc. and an indirect subsidiary of United Investors Management
Company and Torchmark Corporation. Each Portfolio pays W&R a fee for managing
its investments consisting of two elements: (i) a specific fee computed on
each Portfolio's net asset value at the close of business each day at the
following annual rates:
11
<PAGE>
<TABLE>
<CAPTION>
SPECIFIC FEE
ANNUAL RATE
PORTFOLIO (% OF NET ASSETS)
--------- -----------------
<S> <C>
Money Market............................................. none
Bond..................................................... 0.03%
High Income.............................................. 0.15%
Growth................................................... 0.20%
Income................................................... 0.20%
Small Cap................................................ 0.35%
Science and Technology................................... 0.20%
</TABLE>
and (ii) a pro rata participation based on the relative net asset size of each
Portfolio in a "Group" fee computed each day on the combined net asset values
of all of the Portfolios of TMK/United Funds, Inc. at the following annual
rates:
<TABLE>
<CAPTION>
GROUP FEE
GROUP NET ASSET ANNUAL RATE
LEVEL ($ MILLIONS) (% OF NET ASSETS)
------------------ -----------------
<S> <C>
up to $750............................................... 0.51%
$750 - $1,500............................................ 0.49%
$1,500 - $2,250.......................................... 0.47%
over $2,250.............................................. 0.45%
</TABLE>
Federated Equity Income Fund II and Federated Fund for U.S. Government
Securities II. Federated Advisers is the investment adviser of Federated
Insurance Series and provides investment advisory services to the Fund.
Federated Advisers is a subsidiary of Federated Investors, whose voting shares
are owned by a trust whose trustees are the Chairman of Federated Investors,
his wife, and his son. Each Portfolio pays Federated Advisers a fee for
managing its investments at the following annual rates:
<TABLE>
<CAPTION>
ADVISORY FEE
ANNUAL RATE
PORTFOLIO (% OF NET ASSETS)
--------- -----------------
<S> <C>
Federated Equity Income Fund II.......................... 0.75%
Federated Fund for U.S. Government Securities II......... 0.60%
</TABLE>
Scudder Global Discovery and International Portfolios. Scudder, Stevens &
Clark, Inc. ("Scudder"), is the investment adviser of Scudder Variable Life
Investment Fund and provides investment advisory services to that Fund. Each
Portfolio pays Scudder a fee for managing its investments at the following
annual rates:
<TABLE>
<CAPTION>
ADVISORY FEE
ANNUAL RATE
PORTFOLIO (% OF NET ASSETS)
--------- -----------------
<S> <C>
Global Discovery......................................... 0.975%
International
--first $500 million of net assets:...................... 0.875%
--net assets over $500 million:.......................... 0.775%
</TABLE>
Dreyfus Capital Appreciation, Small Cap, Growth and Income, and Quality Bond
Portfolios. The Dreyfus Corporation ("Dreyfus") is the investment adviser of
Dreyfus Variable Investment Fund and provides investment advisory services to
that Fund. Dreyfus is a wholly-owned subsidiary of Mellon Bank, N.A., which is
a wholly-owned subsidiary of Mellon Bank Corporation. Fayez Sarofim & Co. is
the sub-investment adviser of the Capital Appreciation Portfolio, for which it
provides investment
12
<PAGE>
advisory assistance and day-to-day management. Each Portfolio pays investment
management fees at the following annual rates:
<TABLE>
<CAPTION>
ADVISORY FEE
ANNUAL RATE
PORTFOLIO (% OF NET ASSETS)
--------- -----------------
<S> <C>
Capital Appreciation..................................... 0.75%
Small Cap................................................ 0.75%
Growth and Income........................................ 0.75%
Quality Bond............................................. 0.65%
</TABLE>
MFS Emerging Growth, MFS Research, and MFS Utilities Series. Massachusetts
Financial Services Company ("MFS") is the investment adviser of MFS Variable
Insurance Trust and provides investment advisory services to that Fund. MFS is
a subsidiary of Sun Life of Canada (U.S.), which in turn is a wholly-owned
subsidiary of Sun Life Assurance Company of Canada. Each Portfolio pays MFS a
fee for managing its investments at the following annual rates:
<TABLE>
<CAPTION>
ADVISORY FEE
ANNUAL RATE
PORTFOLIO (% OF NET ASSETS)
--------- -----------------
<S> <C>
MFS Emerging Growth Series............................... 0.75%
MFS Research Series...................................... 0.75%
MFS Utilities Series..................................... 0.75%
</TABLE>
Warburg Pincus Fixed Income, Global Fixed Income, and International Equity
Portfolios. Warburg, Pincus Counsellors, Inc. ("Warburg"), is the investment
adviser of Warburg Pincus Trust and Warburg Pincus Trust II and provides
investment advisory services to those Funds. Warburg is a wholly-owned
subsidiary of Warburg, Pincus Counsellors G.P., a New York general partnership
which itself is controlled by Warburg Pincus & Co. ("WP & Co."), also a New
York general partnership. Lionel J. Pincus, the managing partner of WP & Co.,
may be deemed to control both WP & Co. and Warburg. Each Portfolio pays
Warburg a fee for managing its investments at the following annual rates:
<TABLE>
<CAPTION>
ADVISORY FEE
ANNUAL RATE
PORTFOLIO (% OF NET ASSETS)
--------- -----------------
<S> <C>
International Equity Portfolio........................... 1.00%
Fixed Income Portfolio................................... 0.50%
Global Fixed Income Portfolio............................ 1.00%
</TABLE>
FIXED ACCOUNT
THAT PORTION OF THE POLICY RELATING TO THE FIXED ACCOUNT IS NOT REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("1933 ACT") AND THE FIXED ACCOUNT IS NOT
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940
("1940 ACT"). ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS THEREIN
ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT,
AND THE DISCLOSURE REGARDING THE FIXED ACCOUNT HAS NOT BEEN REVIEWED BY THE
STAFF OF THE SECURITIES AND EXCHANGE COMMISSION.
The Fixed Account is a part of the General Account of United Investors Life
Insurance Company. The General Account consists of all assets of United
Investors Life Insurance Company other than those in any separate account. We
guarantee that we will credit interest at a rate of not less than the
Guaranteed Minimum Interest Rate of 4% per year to amounts allocated to the
Fixed Account. We may credit interest at a rate in excess of the Guaranteed
Minimum Interest Rate. ANY EXCESS INTEREST
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CREDITED WILL BE DETERMINED IN OUR SOLE DISCRETION. THE OWNER ASSUMES THE RISK
THAT INTEREST CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE
GUARANTEED MINIMUM INTEREST RATE. The Fixed Account may not be available in
all states. (See "Fixed Account" in the Statement of Additional Information.)
The Policyowner determines the allocation of Purchase Payments and Policy
Value to the Fixed Account. Prior to the Retirement Date, the Policyowner may
transfer all or part of the values held in the Fixed Account to one or more of
the Investment Divisions of the Variable Account, subject to certain
restrictions. (See "Transfers.") After the Retirement Date, transfers from the
Fixed Account to the Investment Divisions of the Variable Account are not
allowed. After the Retirement Date values held in the Investment Divisions of
the Variable Account may be transferred to the Fixed Account not more often
than once per policy year. (See "Transfers.")
THE POLICY
The Policy is a Deferred Variable Annuity. The rights and benefits of the
Policy are described below and in the Policy. The obligations under the
Policies are obligations of United Investors. However, United Investors
reserves the right to make any modification to conform the Policy to, or to
give the Owner the benefit of, any Federal or state statute or rule or
regulation.
The Policy may be purchased on a non-qualified tax basis ("Nonqualified
Policy"). The Policy may also be purchased and used in connection with plans
qualifying for favorable Federal income tax treatment ("Qualified Policy").
ISSUANCE OF A POLICY
Individuals wishing to purchase a Policy must complete an application and
send it to United Investors' Administrative Office. Acceptance is subject to
United Investors' rules, and United Investors reserves the right to reject any
application or Purchase Payment. If the application can be accepted in the
form received, the initial Purchase Payment will be applied within two
Valuation Dates after the latter of receipt of the application or receipt of
the initial Purchase Payment. If the initial Purchase Payment, plus any
accrued interest, cannot be applied because the application is incomplete or
for any other reason, the applicant will be contacted and given an explanation
for the delay and the initial Purchase Payment will be returned within five
Valuation Dates after receipt unless the applicant consents to United
Investors' retaining the initial Purchase Payment and applying it as soon as
the necessary requirements are fulfilled. No Policy will be issued if either
the Annuitant or the Owner are over age 85 last birthday on the date the
application is signed. Coverage will only become effective on the Policy Date.
PURCHASE PAYMENTS
The minimum initial Purchase Payment for Nonqualified Policies is $2,000.
For Qualified Policies, the initial Purchase Payment must be at least $1,200
(as an exception for Qualified Policies, if Purchase Payments will be made by
means of a bank draft authorization or a group payment method approved in
advance by us, we will accept installments of $100 per month totaling at least
$1,200 in the first year). Additional Purchase Payments may be made in amounts
of $100 or more.
ALLOCATION OF PURCHASE PAYMENTS
The Policyowner determines in the application how the initial Net Purchase
Payment will be allocated among the Investment Divisions of the Variable
Account and the Fixed Account. You may allocate any whole percentage of Net
Purchase Payments, from 0% to 100%. Between the date that
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the initial Purchase Payment was received and the Policy Date, interest will
be credited on the Purchase Payment as if it had been invested in the Money
Market Investment Division.
If we receive an additional purchase payment, the Net Purchase Payment will
be allocated to the Investment Divisions and the Fixed Account as of the
Valuation Date it is received by United Investors at its Home Office according
to the allocation percentage specified in your application, unless
subsequently changed.
The Policy Value will vary with the investment performance of the Investment
Divisions you select, and you bear the entire risk for amounts allocated to
the Variable Account. You should periodically review your allocations of
Policy Value in light of all relevant factors, including market conditions and
your overall financial planning requirements.
POLICY VALUE
The Policy Value prior to the Retirement Date is equal to the Variable
Account Value plus the Fixed Account Value. Variable Account Values are not
guaranteed. The Variable Account Value is equal to the sum of the values of
the Investment Divisions of the Variable Account under the Policy. The value
of each Investment Division is calculated first on the Policy Date and
thereafter on each Valuation Date (a normal business day).
Variable Account Value. On the Policy Date, the value of the Investment
Divisions is equal to the amount of the initial Net Purchase Payment allocated
to the Investment Divisions of the Variable Account plus any accrued interest
from the date of the receipt of the initial Purchase Payment to the Policy
Date. On any Valuation Date thereafter, the value of each Investment Division
equals:
(1) the value of the Investment Division on the previous Valuation Date, as
increased or decreased by the investment experience and daily charges for
the Investment Division during the current Valuation Period; plus
(2) the amount of any Net Purchase Payments allocated to the Investment
Division during the current Valuation Period; plus
(3) the amount of any transfers from other Investment Divisions or from the
Fixed Account to the Investment Division during the current Valuation
Period; minus
(4) the amount of any withdrawals (including any Withdrawal Charge or
Transaction Charge) from the Investment Division during the current
Valuation Period; minus
(5) the amount of any transfers from the Investment Division to other
Investment Divisions or to the Fixed Account during the current Valuation
Period; minus
(6) the portion of the Annual Contract Maintenance Charge (and Optional Death
Benefit Rider Charge, if applicable) allocated to the Investment Division
during the current Valuation Period; minus
(7) the portion of any deduction for premium taxes allocated to the Investment
Division during the current Valuation Period.
Fixed Account Value. At the end of any Valuation Period, the Fixed Account
Value is equal to:
(1) the Fixed Account Value at the end of the previous Valuation Period; plus
(2) the sum of all Net Purchase Payments allocated to the Fixed Account during
the current Valuation Period; plus
(3) any amounts transferred from the Variable Account to the Fixed Account
during the current Valuation Period; plus
(4) total interest credited to the Fixed Account during the current Valuation
Period; minus
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(5) any amounts transferred from the Fixed Account to the Variable Account
during the current Valuation Period; minus
(6) the portion of any withdrawals, Withdrawal Charges, and Transaction
Charges allocated to the Fixed Account during the current Valuation
Period; minus
(7) the portion of the Optional Death Benefit Rider Charge (if applicable)
allocated to the Fixed Account during the current Valuation Period; minus
(8) the portion of any deduction for premium taxes which is allocated to the
Fixed Account during the current Valuation Period.
SURRENDER AND PARTIAL WITHDRAWALS
Withdrawals. You may make a partial withdrawal from the Policy Value, prior
to the Retirement Date, by sending a Written Request to United Investors at
its Home Office. A partial withdrawal must be for at least $100, and the
Policy Value must be at least $1,000 after a partial withdrawal. If the Policy
Value would be less than $1,000, we will treat the request for a partial
withdrawal as a request for total surrender. A withdrawal will ordinarily be
paid within seven days of receipt of the Written Request (unless the check for
your Purchase Payment has not yet cleared your bank). United Investors may
defer payment of any amounts from the Fixed Account for up to six months from
the date of the request to surrender. If United Investors defers payment for
more than 30 days, United Investors will pay interest on the amount deferred
at a rate not less than the Guaranteed Minimum Interest Rate.
If you do not specify that the partial withdrawal is to be made from
particular Investment Divisions or the Fixed Account, the partial withdrawal
will be made from the Fixed Account and the Variable Investment Divisions in
the same proportion that their values bear to the total Policy Value.
You may request up to 12 withdrawals per Policy Year without a Transaction
Charge. If more than 12 withdrawals are requested during a Policy Year, there
will be a $20 Transaction Charge (or 2% of the amount withdrawn, if less) for
each withdrawal in addition to the 12 withdrawals. Also, Withdrawal Charges of
up to 7% may apply, but each Policy Year you can withdraw up to 10% of the
Policy Value without charge. (See "Withdrawal Charge" and "Transaction
Charge.") Any Transaction Charge or Withdrawal Charge applicable to a
withdrawal will be deducted from the remaining Policy Value, or from the
amount paid if the remaining value is insufficient. No withdrawals may be made
after the Retirement Date.
Partial withdrawals may be subject to the 10% Federal tax penalty on early
withdrawals and to income tax. (See "Federal Tax Matters.")
Automatic Partial Withdrawals. You may also establish automatic partial
withdrawals prior to the Retirement Date, by submitting a one-time Written
Request. Withdrawals may be in fixed dollar amounts on a monthly, quarterly,
semi-annual or annual basis. The minimum amount of an automatic partial
withdrawal is $100. The maximum amount of automatic partial withdrawals in any
one policy year is 10% of the Policy Value.
Automatic partial withdrawals are subject to all the other contract
provisions and terms. If an additional withdrawal is made from a contract
participating in automatic partial withdrawals, the automatic partial
withdrawals will terminate automatically and may be resumed only on or after
the next policy anniversary.
Automatic partial withdrawals may be subject to the 10% Federal tax penalty
on early withdrawals and to income tax. (See "Federal Tax Matters.")
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Surrender. You may surrender the Policy for its Surrender Value, which is
the Policy Value less any Withdrawal Charge, the Annual Contract Maintenance
Charge, the Optional Death Benefit Rider Charge (if applicable) and applicable
deductions for premium taxes by sending a Written Request to United Investors
at its Home Office. (The Withdrawal Charge, described below, is only
applicable if a surrender occurs in the first six Policy Years following
receipt of a Purchase Payment.) The Annual Contract Maintenance Charge,
described below, is assessed when a surrender occurs. A surrender will
ordinarily be paid within seven days of receipt of the Written Request (unless
the check for your Purchase Payment has not yet cleared your bank). The Policy
will terminate as of the date of receipt of Written Request for surrender.
Surrenders are generally taxable transactions, and may be subject to a 10%
penalty tax. (See "Federal Tax Matters.") No surrender may be made after the
Retirement Date.
Restrictions Under the Texas Optional Retirement Program and Section 403(b)
Plans. The Texas Educational Code permits participants in the Texas Optional
Retirement Program ("ORP") to withdraw or surrender their interest in a
variable annuity contract issued under the ORP only upon (1) termination of
employment in the Texas public institutions of higher education, (2)
retirement, or (3) death. Accordingly, a participant in the ORP (or the
participant's estate if the participant has died) will be required to obtain a
certificate of termination from the employer or a certificate of death before
the account can be redeemed.
Similar restrictions apply to variable annuity contracts used as funding
vehicles for Internal Revenue Code Section 403(b) retirement plans. Section
403(b) of the Internal Revenue Code provides for tax-deferred retirement
savings plans for employees of certain non-profit and educational
organizations. In accordance with the requirements of Section 403(b), any
Policy used for a Section 403(b) plan will prohibit distributions of (i)
elective contributions made in years beginning after December 31, 1988, and
(ii) earnings on those contributions and (iii) earnings on amounts
attributable to elective contributions held as of the end of the last year
beginning before January 1, 1989. However, distributions of such amounts will
be allowed upon death of the employee, attainment of age 59 1/2, separation
from service, disability, or financial hardship, except that income
attributable to elective contributions may not be distributed in the case of
hardship.
Restrictions Under Other Qualified Policies. Other restrictions on
surrenders or with respect to the election, commencement, or distribution of
benefits may apply under Qualified Policies or under the terms of the plans in
respect of which Qualified Policies are issued.
TRANSFERS
You may transfer all or part of the value of an Investment Division to one
or more of the other Investment Divisions or to the Fixed Account at any time
prior to the Retirement Date, except as described below. You may transfer all
or a part of the values held in the Fixed Account to one or more of the
variable Investment Divisions once per Policy Year prior to the Retirement
Date. This restriction will not apply to automatic monthly transfers of a
preselected dollar amount from the Fixed Account to the Investment Divisions
of the Variable Account. The amount transferred from the Fixed Account to a
variable Investment Division may not exceed the greater of: (a) 25% of the
prior Policy Anniversary's Fixed Account Value; or (b) the amount of the prior
Policy Year's transfer. You may transfer all or a part of the values held in
the variable Investment Divisions to one or more variable Investment Divisions
or to the Fixed Account up to twelve times in a Policy Year prior to the
Retirement Date. However, if a transfer is made from the Fixed Account to any
variable Investment Division, no transfer from any variable Investment
Division to the Fixed Account may be made for six months from the transfer
date. The value remaining in the variable Investment Division or the Fixed
Account after a transfer must not be less than $250. If the value remaining
would be less than $250, the transfer request will be treated as a request for
a transfer of the total value.
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Transfers may be made by a Written Request or by calling United Investors if
a written authorization for telephone transfers is on file. United Investors
has the authority to honor any telephone transfer request believed to be
authentic. We employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. A personal identification number is
required in order to initiate a transfer. United Investors will not be liable
for the consequences of a fraudulent telephone transfer request we believe to
be authentic when we have followed those procedures. And as a result, you bear
the risk of loss arising from such a fraudulent request if you authorize
telephone transfers.
Each transfer will be made, without the imposition of any fee or charge, at
the end of the Valuation Period during which United Investors receives a
valid, complete transfer request. United Investors may suspend or modify this
transfer privilege at any time.
Transfers from the Fixed Account to the variable Investment Divisions are
not allowed after the Retirement Date. The Annuitant may transfer values among
the variable Investment Divisions or from the variable Investment Divisions to
the Fixed Account once per Policy Year after the Retirement Date. (See
"Available Options.")
DOLLAR COST AVERAGING
Prior to the Retirement Date you may authorize automatic transfers of a
fixed dollar amount from the Fixed Account or the Money Market Investment
Division to up to 17 of the other Investment Divisions of the Variable
Account. Automatic transfers will be made on a monthly basis on the day of the
month selected in your application. If the day of the month selected does not
fall on a Valuation Date, transfers will be made on the next following
Valuation Date. Transfers will be made at the unit values determined on the
date of each transfer.
The minimum automatic transfer amount is $100. If the transfer is to be made
to more than one Investment Division, a minimum of $25 must be transferred to
each Investment Division selected.
Participation in the automatic transfer program does not guarantee a greater
profit nor does it protect against loss in declining markets. Automatic
transfers will not be counted as a transfer for purposes of the twelve
transfer limit specified in Transfers above. There is no charge for this
service.
DEATH BENEFIT
The Policy pays a Death Benefit to the Beneficiary if an Owner dies prior to
the Retirement Date while the Policy is in force. (If an Owner is not a
natural person, the Death Benefit is payable on the death of the first
Annuitant to die.) The Policy provides a Basic Death Benefit, but an Optional
Death Benefit Rider is available for an extra charge.
BASIC DEATH BENEFIT. The Basic Death Benefit payable on the death of the
Owner (or the Annuitant if the Owner is not a natural person) is the greatest
of:
(a) the Policy Value;
(b) the total Purchase Payments made, adjusted for any amounts withdrawn
and any Withdrawal Charges on the amounts withdrawn; and
(c) the highest of the Policy Values as of the 6th Policy Anniversary, and
every 2nd Policy Anniversary thereafter prior to the Policy Anniversary
following the Owner's 76th birthday (or the Annuitant's 76th birthday
if the Owner is not a natural person). Purchase Payments made after the
Policy Anniversary having the highest Policy Value will be added to the
Death Benefit, and adjustments will be made for any amounts withdrawn
and any Withdrawal Charges since that anniversary.
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Adjustment for a withdrawal and Withdrawal Charges will reduce the Death
Benefit in the same proportion that the amount reduced the Policy Value on the
date of the withdrawal.
The Death Benefit under (c) above will not increase on or after the Policy
Anniversary following the Owner's 76th birthday (or the Annuitant's 76th
birthday if the Owner is not a natural person).
OPTIONAL DEATH BENEFIT RIDER. This Rider is optional and will be available
for an additional annual charge of 0.17% of the average death benefit. This
Rider is not available if the Owner is over age 70 last birthday. If this
Rider is in effect, then the amount of the Death Benefit payable will be the
greatest of:
(a) the Policy Value; or
(b) the total Purchase Payments made, adjusted for any amounts withdrawn
and any withdrawal charges on the amounts withdrawn; or
(c) the highest of the Policy Values as of the 6th Policy Anniversary, and
every 2nd Policy Anniversary thereafter prior to the Policy anniversary
following the Owner's 76th birthday (or the Annuitant's 76th birthday
if the Owner is not a natural person). Purchase Payments made after the
Policy Anniversary having the highest Policy Value will be added to the
Death Benefit, and adjustments will be made for any amounts withdrawn
and any withdrawal charges on amounts withdrawn since that Policy
Anniversary; or
(d) the total Purchase Payments made, less any withdrawals and withdrawal
charges, accumulated daily at a rate equivalent to 5% per year, from
the date such amount is allocated or withdrawn, to the Policy
Anniversary following the Owner's 76th birthday (or the Annuitant's
76th birthday if the Owner is not a natural person), subject to a
maximum of 200% of Purchase Payments.
The Death Benefit under (c) and (d) above will not increase on or after the
Policy Anniversary following the Owner's 76th birthday (or the Annuitant's
76th birthday if the Owner is not a natural person). Adjustment for any
withdrawal and withdrawal charges will reduce the Death Benefit in the same
proportion that the amount reduced the Policy Value on the date of the
withdrawal.
This Rider will terminate on the earlier of:
1.the date the Policy is surrendered, terminated or exchanged;
2.the Retirement Date; or
3.the date We receive Your written request to terminate this Rider.
GENERAL. We will compute the amount of the Death Benefit as of the date the
Death Benefit is paid or applied under one of the Annuity Payment Options. We
will pay the Death Benefit proceeds to the Beneficiary upon receiving due
proof of death. The Death Benefit under the Policy will be paid in a lump sum
or under one of the Annuity Payment Options. (See "Annuity Payments.") If the
Annuitant or Owner dies after the Retirement Date, the amount payable, if any,
will be as provided in the Annuity Payment Option then in effect.
If an Annuitant dies before the Retirement Date and such Annuitant is also
an Owner, or if an Owner is other than a natural person, the death will be
treated as the death of an Owner and the Death Benefit will be payable to the
Beneficiary. If an Annuitant dies before the Retirement Date and all Owners
are natural persons other than the deceased Annuitant, the Owner may name a
new Annuitant, subject to our age limitations, and the Death Benefit will not
be payable. If the Owner does not name a new Annuitant, the Owner will
automatically become the Annuitant and the Death Benefit will not be payable.
In the event of an Owner's death, the entire Death Benefit proceeds must be
distributed within five years after the date of death. If the Beneficiary
chooses to take any portion of his interest in the Policy
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as an Annuity, distributions must commence within one year of the date of
death and must be distributed over his lifetime or over a period not extending
beyond his life expectancy.
If the Beneficiary is the Owner's spouse, then in lieu of receiving the
Death Benefit proceeds, the spouse may elect to continue the Policy in force
and be treated as the original Policy Owner. If the Beneficiary elects to
continue the Policy, the Beneficiary does not have a right to receive the
Death Benefit proceeds and we will increase the Policy Value so that it equals
the Death Benefit, if greater.
As far as permitted by law, the Death Benefit proceeds under the Policy will
not be subject to any claim of the Beneficiary's creditors.
"FREE LOOK" PERIOD
If for any reason you are not satisfied with the Policy, you may return it
to us within 10 days after you receive the Policy. If you cancel the Policy
within this 10-day "Free Look" period, we will generally refund the Policy
Value plus any charges deducted prior to allocation to the Investment
Divisions or the Fixed Account, and the Policy will be void from the Policy
Date. In some states, the full amount of Purchase Payment(s) received will be
refunded instead. To cancel the Policy, you must mail or deliver it to either
United Investors' Home Office or the registered agent who sold it within 10
days after you receive it. (See "Allocation of Purchase Payments.") The "Free
Look" period may be extended where required by state law.
CHARGES AND DEDUCTIONS
United Investors does not impose any charge or deduction against a Purchase
Payment prior to its allocation to the Variable Account or the Fixed Account
(except for a charge for any premium taxes incurred when the Purchase Payment
is accepted). However, certain charges (explained below) will be deducted in
connection with the Policy to compensate United Investors for administering
and distributing the Policy, for providing the insurance benefits set forth in
the Policy, for assuming certain risks in connection with the Policy, and for
any applicable taxes.
WITHDRAWAL CHARGE
If you make partial withdrawals under the Policy or surrender the Policy,
then a Withdrawal Charge may be made, measured as a percent of the Purchase
Payments included in the withdrawal (in the case of a partial withdrawal) or
the amount of the total Purchase Payments (in the case of a surrender) as
specified in the following table of Withdrawal Charges:
<TABLE>
<CAPTION>
NUMBER OF POLICY ANNIVERSARIES 6 OR
SINCE RECEIPT OF PURCHASE PAYMENT: 0 1 2 3 4 5 MORE
- ---------------------------------- --- --- --- --- --- --- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Withdrawal Charge Rate............................ 7% 7% 6% 6% 4% 3% none
</TABLE>
Each Policy Year, you may withdraw up to 10% of Policy Value without
incurring a Withdrawal Charge. This 10% portion is called the Free Withdrawal
Amount. The Free Withdrawal Amount for each Policy Year is calculated at the
time the first withdrawal in a Policy Year is made. Amounts withdrawn in
addition to the Free Withdrawal Amount may be subject to a Withdrawal Charge.
The Withdrawal Charge is determined by multiplying each Purchase Payment
included in the withdrawal by the withdrawal charge rate applicable to the
year in which the Purchase Payment was received.
For purposes of calculating the Withdrawal Charge, (1) the oldest Purchase
Payments will be treated as the first withdrawn, newer Purchase Payments next,
and appreciation last; (2) amounts withdrawn up to the Free Withdrawal Amount
will not be considered a withdrawal of Purchase Payments; and (3) if the
Surrender Value is withdrawn, the Withdrawal Charge will apply to all Purchase
Payments not previously assessed with a Withdrawal Charge.
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As shown above, the Withdrawal Charge percentage varies, depending on the
"age" of the Purchase Payments included in the withdrawal--that is, the Policy
Year in which the Purchase Payment was made. A Withdrawal Charge Rate of 7%
applies to Purchase Payments withdrawn that are less than 2 years old.
Thereafter the Withdrawal Charge Rate decreases each year until the Purchase
Payment withdrawn is 6 years old or older. Amounts representing Purchase
Payments 6 years old or older may be withdrawn without charge.
The Withdrawal Charge will be deducted from the remaining Policy Value, or
from the amount paid if the remaining value is insufficient. The Withdrawal
Charge partially compensates United Investors for sales expenses with regard
to the Policy, including agent sales commissions, the cost of printing
prospectuses and sales literature, advertising, and other marketing and sales
promotional activities.
WAIVER OF WITHDRAWAL CHARGES RIDER
If the Waiver of Withdrawal Charges Rider ("Rider") is attached to your
Policy, we may waive the withdrawal charges described above provided that the
conditions described in the Rider are met, including:
(a) the Owner or the Owner's spouse is continuously confined to a "Nursing
Home," "Hospital," or "Hospice Care Program" (as defined in the Rider)
for a combined stay of at least 30 days within a 35 day period;
(b) such confinement must have totally occurred after the Policy Date; and
(c) written notice and satisfactory proof of confinement are received no
later than 60 days after confinement ends.
Waiver of Withdrawal Charges is subject to all of the conditions and
provisions of the Rider. (See your Policy.) The Rider is not available in all
states. There is no charge for this Rider.
ANNUAL CONTRACT MAINTENANCE CHARGE
United Investors deducts an annual charge of $35 to partially compensate us
for expenses incurred in administering the Policy. These expenses include
costs of maintaining records, processing Death Benefit claims, surrenders,
transfers and Policy changes, providing reports to Policyowners, and overhead
costs. This charge is waived on any Policy Anniversary on which the cumulative
Purchase Payments less withdrawals equals or exceeds $30,000. This charge is
guaranteed not to increase during the life of the Policy. This deduction will
be made from the variable Investment Divisions in the same proportion that
their values bear to the Variable Account Value. Prior to the Retirement Date,
this charge is deducted on each Policy Anniversary and on a full surrender.
After the Retirement Date, this charge is not deducted.
ADMINISTRATION FEE
In addition to the Annual Contract Maintenance Charge, United Investors
deducts a daily charge from the Investment Divisions of the Variable Account
at an annual rate of 0.15% of the average daily net assets of each Investment
Division to partially compensate us for expenses incurred in administering the
Variable Account and the Policy. These expenses include costs of maintaining
records, processing Death Benefit claims, surrenders, transfers and Policy
changes, providing reports to Policyowners, and overhead costs. This charge is
guaranteed not to increase during the life of the Policy.
REDUCTION IN CHARGES FOR CERTAIN GROUPS
United Investors may reduce or eliminate the Administration Fee, Annual
Contract Maintenance Charge, or Withdrawal Charges on Policies that have been
sold to (1) employees and sales
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representatives of United Investors or its affiliates; (2) customers of United
Investors or distributors of the Policies who are transferring existing policy
values to a Policy; (3) individuals or groups of individuals when sales of the
contract result in savings of sales or administrative expenses; or (4)
individuals or groups of individuals where Purchase Payments are to be made
through an approved group payment method and where the size and type of the
group results in savings of administrative expenses.
In no event will reduction or elimination of the Administration Fee, Annual
Contract Maintenance Charge, or Withdrawal Charges be permitted where such
reduction or elimination will be unfairly discriminatory to any person.
MORTALITY AND EXPENSE RISK CHARGE
United Investors deducts a daily charge from the Investment Divisions of the
Variable Account at an annual rate of 1.25% of the average daily net assets of
each Investment Division to compensate us for assuming certain mortality and
expense risks under the Policy. There is no Mortality and Expense Risk Charge
for amounts in the Fixed Account. United Investors may realize a profit from
this charge. However, the level of this charge is guaranteed for the life of
the Policy and may not be increased. United Investors will continue to deduct
this charge after the Retirement Date.
The mortality risk borne by United Investors arises in part from its
obligation to make monthly Annuity Payments (determined in accordance with the
annuity tables and other provisions contained in the Policy) regardless of how
long all Annuitants or any individual may live. This undertaking assures that
neither an Annuitant's own longevity, nor an improvement in general life
expectancy greater than expected, will have any adverse effect on the monthly
Annuity Payments the Annuitant will receive under the Policy. It therefore
relieves the Annuitant from the risk that he will outlive the funds
accumulated for retirement. The mortality risk also arises in part because of
the risk that the Death Benefit may be greater than the Policy Value. United
Investors also assumes the risk that other expense charges may be insufficient
to cover the actual expenses incurred in connection with the Policy.
OPTIONAL DEATH BENEFIT RIDER CHARGE
If you choose the Optional Death Benefit Rider, there will be an annual
charge to compensate United Investors for the additional mortality risk. This
charge is 0.17% of the average death benefit amount, and it is deducted on
each Policy Anniversary (on a surrender of the Policy and voluntary
termination of the rider a pro rata portion is deducted), through the
cancellation of accumulation units. It is not deducted after the Retirement
Date. The average death benefit amount is the mean of the death benefit amount
on the Policy Anniversary (or the date of surrender) and the preceding Policy
Anniversary.
TRANSACTION CHARGE
You may request up to 12 withdrawals per Policy Year without a Transaction
Charge. After the 12th withdrawal in a Policy Year, a Transaction Charge will
apply to each additional withdrawal. The Transaction Charge will be equal to
the lesser of $20 or 2% of the amount withdrawn. This charge will be deducted
from the remaining Policy Value, or from the amount paid if the remaining
value is insufficient.
PREMIUM TAXES
United Investors will deduct a charge for any premium taxes incurred.
Depending on state and local law, premium taxes can be incurred when a
Purchase Payment is accepted, when Policy Value is withdrawn or surrendered,
or when Annuity Payments start. (State premium tax rates incurred by United
Investors currently range from 0 to 3.5%. In some states, localities charge
additional premium taxes.)
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FEDERAL TAXES
Currently no charge is made to the Variable Account for Federal income taxes
that may be attributable to the Variable Account. United Investors may,
however, make such a charge in the future. Charges for other taxes, if any,
attributable to the Variable Account may also be made. (See "Federal Tax
Matters.")
FUND EXPENSES
The value of the assets of the Variable Account will reflect the investment
management fee and other expenses incurred by the Portfolios.
ANNUITY PAYMENTS
ELECTION OF PAYMENT OPTION
The Policyowner has the sole right to elect or change an Annuity Payment
Option during the lifetime of the Owner and prior to the Retirement Date,
either in the application or by Written Request any time at least 30 days
before the Retirement Date. We may require the exchange of the Policy for a
contract covering the option selected.
RETIREMENT DATE
The first Annuity Payment will be made as of the Retirement Date. You may
select the Retirement Date in the application for the Policy. If no selection
is made, the Retirement Date will be the later of the Annuitant's age 85 or 10
years after the Policy Date, or the date required by state law. The Retirement
Date cannot be earlier than the first Policy Anniversary. You may change the
Retirement Date at any time by giving us Written Notice, provided that you
give us Written Notice at least 30 days prior to the new Retirement Date. A
Retirement Date may be the first day of any calendar month commencing 30 days
after the first Policy Anniversary. If the net amount to be applied to an
option is less than $2,000, we have the right to pay such amount in one sum.
Also, if any payment would be less than $50, we have the right to change the
frequency of payment to an interval that will result in payments of at least
$50.
AVAILABLE OPTIONS
On the Retirement Date, the Policy Value as of 14 days prior to the
Retirement Date, less any premium taxes, may be applied to make Fixed Annuity
Payments, Variable Annuity Payments, or a combination thereof. Fixed Annuity
Payments provide guaranteed annuity payments which remain fixed in amount
throughout the payment period. Fixed Annuity Payments do not vary with the
investment experience of the Investment Divisions. The dollar amount of
Variable Annuity Payments after the first is not fixed.
The Annuity Payment Options currently available are:
Option 1:Life Annuity With No Guaranteed Period--This option provides monthly
Annuity Payments during the lifetime of the Annuitant. No payment
will be made after the death of the Annuitant. It is possible that
only one payment will be made under this option if the Annuitant dies
before the second payment is due; only two payments will be made if
the Annuitant dies before the third payment is due, and so forth.
Option 2:Joint Life Annuity Continuing To The Survivor--This option provides
monthly Annuity Payments during the lifetime of the Annuitant and a
joint Annuitant. Payments will continue to the survivor during the
survivor's remaining lifetime. If the joint Annuitant does not
survive the Annuitant, payments will end with the payment due just
before the death
23
<PAGE>
of the Annuitant. It is possible that only one payment or very few
payments will be made under this option if the Annuitant and joint
Annuitant both die before or shortly after payments begin.
Option 3:Life Annuity With 120 or 240 Monthly Payments Guaranteed--This option
provides monthly Annuity Payments during the lifetime of the
Annuitant. A guaranteed period of 120 or 240 months may be chosen. If
the Annuitant dies prior to the end of this guaranteed period monthly
Annuity Payments will be made to the Beneficiary until the end of the
guaranteed period.
United Investors may make other payment options available in the future and
other payment options can be arranged with our written consent. The Withdrawal
Charge may apply to such other Payment Options.
In the event that you have not selected an Annuity Payment Option on the
Retirement Date, we will make monthly annuity payments during the lifetime of
the Annuitant with 120 monthly payments guaranteed.
The amount of each Annuity Payment under the options described above will
depend on the sex and age of the Annuitant (or Annuitants) at the time the
first payment is due. The Annuity Payments may be more or less than the total
Purchase Payments made because (a) Variable Annuity Payments vary with the
investment experience of the underlying Portfolios and the Owner therefore
bears the investment risk under Variable Annuity Payments and (b) Annuitants
may die before the actuarially predicted date of death. As such, the amount of
Annuity Payments cannot be predicted. The method of computing the Annuity
Payments is described in more detail in the Statement of Additional
Information.
The duration of the Annuity Payment Option may affect the dollar amount of
each Annuity Payment. For example, if an Annuity Payment Option guaranteed for
life is chosen, the Annuity Payments may be greater or less than the Annuity
Payments for an annuity for a guaranteed period, depending on the life
expectancy of the Annuitant.
If the actual net investment experience of the Investment Divisions after
the Retirement Date is less than the assumed investment rate, then the dollar
amount of the Variable Annuity Payments will decrease. The dollar amount of
the Variable Annuity Payments will stay level if the net investment experience
equals the assumed investment rate, and the dollar amount of the Variable
Annuity Payments will increase if the net investment experience exceeds the
assumed investment rate. For purposes of the Annuity Payments, the assumed
investment rate is 4.0% Fixed Annuity Payment amounts will be based on our
Fixed Annuity Payment rates in effect on the settlement date. These rates are
guaranteed not to be less than payments based on the 1983 Individual Annuity
Mortality Table (set back one year) with interest at 4.0%. The one year
setback results in lower payments than if no setback is used.
After the Retirement Date, Policy Value may not be withdrawn, nor may the
Policy be surrendered. The Annuitant (if other than the Owner) will be
entitled to exercise any voting rights and to reallocate the value of the
Annuitant's interest in the Investment Divisions. (See "Voting Rights" and
"Transfers.")
The Policies offered by this Prospectus contain life annuity tables that
provide for different benefit payments to men and women of the same age
although they provide for unisex tables where requested and required by law.
Nevertheless, in accordance with the U.S. Supreme Court's decision in Arizona
Governing Committee v. Norris, in certain employment related situations,
annuity tables that do not vary on the basis of sex must be used. Accordingly,
if the Policy is to be used in connection with an employment related
retirement or benefit plan, consideration should be given, in consultation
with your legal counsel, to the impact of Norris on any such plan before
making any contributions under these Policies.
24
<PAGE>
DISTRIBUTOR OF THE POLICIES
MAP Investments Incorporated ("MAP"), 9020 North May Avenue, Suite 290,
Oklahoma City, Oklahoma 73120-4498, is the principal underwriter and the
distributor of the Policies. MAP may enter into written sales agreements with
various broker-dealers to aid in the distribution of the Policies. A
commission plus bonus compensation may be paid to broker-dealers or agents in
connection with sales of the Policies. Bonus compensation will be based on
Purchase Payments received (both initial and additional).
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 a Policy. Any person concerned about these tax
implications should consult a competent tax adviser before initiating any
transaction. This discussion is based upon United Investors' understanding of
the present Federal income tax laws as they are currently interpreted by the
Internal Revenue Service. 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 Internal Revenue Service. Moreover, no attempt has been
made to consider any applicable state or other tax laws.
The Policy may be purchased on a non-qualified tax basis ("Nonqualified
Policy") or purchased and used in connection with plans qualifying for
favorable tax treatment ("Qualified Policy"). The Qualified Policies were
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 401(a), 403(b), 408, or 457 of the Internal Revenue Code of 1986, as
amended (the "Code"). The ultimate effect of Federal income taxes on the
Policy Value, on Annuity Payments and on the economic benefit to an Owner, the
Annuitant or the Beneficiary depends on the type of retirement plan, on the
tax and employment status of the individual concerned and on United Investors'
tax status. In addition, certain requirements must be satisfied in purchasing
a Qualified Policy with proceeds from a tax qualified plan in order to
continue receiving favorable tax treatment. Therefore, purchasers of Qualified
Policies should seek competent legal and tax advice regarding the suitability
of the Policy for their situation, the applicable requirements and the tax
treatment of the rights and benefits of a Policy. The following discussion
assumes that Qualified Policies are purchased with proceeds from and/or
contributions under retirement plans that qualify for the intended special
Federal income tax treatment.
TAXATION OF ANNUITIES IN GENERAL
The following discussion assumes that the Policy will qualify as an annuity
contract for Federal income tax purposes. The Statement of Additional
Information describes such qualifications.
Section 72 of the Code governs taxation of annuities in general. United
Investors believes that an annuity owner who is a natural person generally is
not taxed on increases in the value of a Policy until distribution occurs
either in the form of a lump sum received by withdrawing all or part of the
cash value (i.e., withdrawals) or as Annuity Payments under the Annuity
Payment Option elected. For this purpose, the assignment, pledge, or agreement
to assign or pledge any portion of the Policy Value generally will be treated
as a distribution. The taxed portion of a distribution (in the form of a lump
sum payment or an annuity) is taxed as ordinary income.
An owner of any deferred annuity contract who is not a natural person
generally must include in income any increase in the excess of the owner's
Policy Value over the owner's investment in the
25
<PAGE>
contract during the taxable year. However, there are some exceptions to this
rule and you may wish to discuss these with your tax adviser.
POSSIBLE CHANGES IN TAXATION. In recent 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
nonqualified annuities that did not have "substantial life contingencies" by
taxing income as it is credited to the annuity. Although as of the date of
this Prospectus Congress is not considering any legislation regarding 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, and judicial decisions). Moreover, it is also
possible that any legislative change could be retroactive (that is, effective
prior to the date of such change).
The following discussion applies to Policies owned by natural persons.
WITHDRAWALS. In the case of a withdrawal under a Qualified Policy, a ratable
portion of the amount received is taxable, generally based on the ratio of the
"investment in the contract" to the total Policy Value. The "investment in the
contract" generally equals the portion, if any, of any Purchase Payments paid
by or on behalf of an individual under a Policy which was not excluded from
the individual's gross income. For Policies issued in connection with
qualified plans, the "investment in the contract" can be zero. Special rules
may apply to a withdrawal from a Qualified Policy with respect to "investment
in the contract" as of December 31, 1986, and in other circumstances.
Generally, in the case of a withdrawal under a Nonqualified Policy before
the annuity starting date, amounts received are first treated as taxable
income to the extent that the Policy Value immediately before the 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 Nonqualified Policy,
the amount received generally will be taxable only to the extent it exceeds
the "investment in the contract."
ANNUITY PAYMENTS. Although the tax consequences may vary depending on the
Annuity Payment Option elected under the Policy, generally only the portion of
the Annuity Payment that represents the amount by which the Policy Value
exceeds the "investment in the contract" will be taxed. For Variable Annuity
Payments, in general the taxable portion of each Annuity Payment (prior to
recovery of the investment in the contract) is determined by a formula which
establishes a specific dollar amount of each Annuity Payment that is not
taxed. This dollar amount is determined by dividing the "investment in the
contract" by the total number of expected Annuity Payments. For Fixed Annuity
Payments, in general there is no tax on the amount of each payment which
represents the same ratio that the "investment in the contract" bears to the
total expected value of annuity payments for the term of the payments;
however, the remainder of each payment is taxable. In all cases, after the
"investment in the contract" is recovered, the full amount of any additional
Annuity Payments is taxable.
PENALTY TAX. In the case of a distribution pursuant to a Nonqualified
Policy, 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 tax on
distributions: (1) made on or after the taxpayer attains age 59 1/2, (2) made
as a result of the owner's death or is attributable to the taxpayer's
disability, or (3) received in substantially equal periodic payments as a life
annuity.
QUALIFIED POLICIES. The tax rules applicable to a Qualified Policy vary
according to the type of plan and the terms and conditions of the plan.
Special favorable tax treatment may be available for certain types of
contributions and distributions. Adverse tax consequences may result from
contributions in excess of specified limits; distributions prior to age 59 1/2
(subject to certain exceptions);
26
<PAGE>
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.
We make no attempt to provide more than general information about the use of
the Policy with the various types of retirement plans. Owners and participants
under retirement plans as well as Annuitants and Beneficiaries are cautioned
that the rights of any person to any benefits under a Qualified Policy may be
subject to the terms and conditions of the plans themselves, regardless of the
terms and conditions of the Policy issued in connection with such a plan. Some
retirement plans are subject to distribution and other requirements that are
not incorporated into our Policy administration procedures. Owners,
participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the
Qualified Policy comply with applicable law. Purchasers of annuity contracts
for use with any qualified retirement plan should consult their legal counsel
and tax adviser regarding the suitability of the annuity contract.
Code Section 401(a) permits employers to establish various types of
retirement plans for employees, and permits self-employed individuals to
establish retirement plans for themselves and their employees. These
retirement plans may permit the purchase of the Policies to accumulate
retirement savings under the plans. Adverse tax or other legal consequences to
the plan, to the participant or to both may result if this Policy is assigned
or transferred to any individual as a means to provide benefit payments,
unless the plan complies with all legal requirements applicable to such
benefits prior to transfer of the Policy.
Tax Sheltered Annuity (TSA) Section 403(b) payments made by public school
systems and certain tax exempt organizations are excludable from the gross
income of the employee, subject to certain limitations. However, these
payments may be subject to FICA (Social Security) taxes. Code Section
403(b)(11) restricts the distribution under Code Section 403(b) annuity
contracts of: (1) elective contributions made in years beginning after
December 31, 1988; (2) earnings on those contributions; and (3) earnings in
such years on amounts held as of the last year beginning before January 1,
1989. Distribution of those amounts may only occur upon 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.
Individual Retirement Annuities are subject to limitations on the amount
which may be contributed and deducted and the time when distributions may
commence. In addition, distributions from certain other types of retirement
plans may be placed into an Individual Retirement Annuity on a tax deferred
basis. The Internal Revenue Service has not addressed in a ruling of general
applicability whether a death benefit provision such as the provision in the
Policy comports with IRA qualification requirements.
Internal Revenue Code Section 457 provides for certain deferred compensation
plans. These plans may be offered with respect to service for state
governments, local governments, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities, and tax exempt
organizations. These plans are subject to various restrictions on
contributions and distributions. These plans may permit participants to
specify the form of investments for their deferred compensation account. All
investments under such Plans are owned by the sponsoring employer and are
subject to the claims of general creditors of the employer. Depending on the
terms of the particular plan, the employer may be entitled to draw on deferred
amounts for purposes unrelated to its Section 457 plan obligations. In
general, all amounts received under a Section 457 plan are taxable and are
subject to Federal income tax withholding as wages.
MULTIPLE NONQUALIFIED POLICIES. All nonqualified deferred annuities entered
into after October 21, 1988 that are issued by United Investors (or its
affiliates) to the same owner during any calendar year are treated as one
annuity contract for purposes of determining the amount includible in gross
27
<PAGE>
income under Section 72(e) of the Code. In addition, there may be other
situations in which the Treasury Department may (under its authority to issue
regulations or otherwise) conclude that it would be appropriate to aggregate
two or more annuity contracts purchased by the same owner. Accordingly, a
Policy Owner should consult a competent tax advisor before purchasing more
than one annuity contract.
TRANSFERS. A TRANSFER OR ASSIGNMENT OF OWNERSHIP OF A POLICY, OR DESIGNATION
OF AN ANNUITANT OR OTHER BENEFICIARY WHO IS NOT ALSO THE OWNER, MAY RESULT IN
CERTAIN TAX CONSEQUENCES TO THE OWNER THAT ARE NOT DISCUSSED HEREIN. An Owner
contemplating any such transfer, assignment or designation should contact a
competent tax adviser with respect to the potential tax effects of such
transaction.
DEATH BENEFITS. Amounts may be distributed from a Policy because of the
death of an Owner or an Annuitant. Generally, such amounts are includible in
the income of the recipient as follows: (1) if distributed in a lump sum, they
are taxed in the same manner as a full surrender of the Policy, as described
above, or (2) if distributed under an annuity option, they are taxed in the
same manner as annuity payments, as described above. For these purposes, the
investment in the contract is not affected by an Owner's or Annuitant's death.
That is, the investment of the contract remains the amount of any Purchase
Payments paid which were not excluded from gross income.
GENERAL. As noted above, the foregoing comments about the Federal tax
consequences under these Policies are not exhaustive and special rules are
provided with respect to other tax situations not discussed in this
Prospectus. Further, the Federal tax consequences discussed herein reflect
United Investors' 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 Policy depend on the individual
circumstances of each owner of the Policy or recipient of the distribution. A
competent tax adviser should be consulted for further information.
VOTING RIGHTS
To the extent deemed to be required by law, United Investors will vote the
Funds' shares held in the Variable Account at shareholder meetings of the
Funds in accordance with instructions received from persons having voting
interests in the corresponding Investment Divisions of the Variable Account.
If, however, the 1940 Act or any regulation thereunder should be amended or if
the present interpretation thereof should change, or if United Investors
determines that it is allowed to vote the Fund shares in its own right, United
Investors may elect to do so. The Funds do not hold regular annual shareholder
meetings.
The number of votes which are available to an Owner will be calculated
separately for each Investment Division of the Variable Account. That number
will be determined by applying his or her percentage interest, if any, in a
particular Investment Division to the total number of votes attributable to
that Investment Division. Prior to the Retirement Date, the Owner holds a
voting interest in each Investment Division to which the Policy Value is
allocated. After the Retirement Date, the person receiving Variable Annuity
Payments has the voting interest. The number of votes prior to the Retirement
Date will be determined by dividing the value of the Policy allocated to the
Investment Division by the net asset value per share of the corresponding
Portfolio. After the Retirement Date, the votes attributable to a Policy
decrease as the value of the Investment Divisions decrease with Variable
Annuity Payments. In determining the number of votes, fractional shares will
be recognized.
The number of votes of a Portfolio which are available will be determined as
of the date coincident with the date established by that Portfolio for
determining shareholders eligible to vote at the meeting of the Fund. Voting
instructions will be solicited by written communication prior to such meeting
in accordance with procedures established by the Fund.
28
<PAGE>
Portfolio shares attributable to the Policies as to which no timely
instructions are received will be voted in proportion to the voting
instructions which are received with respect to all Policies participating in
the Investment Division. Voting instructions to abstain on any item to be
voted upon will be applied on a pro rata basis to reduce the votes eligible to
be cast.
Each person having a voting interest in an Investment Division will receive
proxy material, reports and other materials relating to the appropriate
Portfolio.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a party to
or to which the assets of the Variable Account are subject. United Investors
is not involved in any litigation that is of material importance in relation
to its total assets or that relates to the Variable Account.
FINANCIAL STATEMENTS
The financial statements for United Investors (as well as the Auditors'
Report thereon) are in the Statement of Additional Information. Neither this
Prospectus nor the Statement of Additional Information contains financial
statements for the Variable Account because it has not yet commenced
operations, has no assets or liabilities, and has received no income and
incurred no expenses as of the date of this Prospectus.
29
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more
details concerning the subjects discussed in this Prospectus. The following is
the Table of Contents for that Statement:
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE POLICY................................................................. 3
Accumulation Units....................................................... 3
Annuity Units............................................................ 3
Net Investment Factor.................................................... 4
Determination of Annuity Payments........................................ 5
Fixed Annuity Payments................................................. 5
Variable Annuity Payments.............................................. 5
The Contract............................................................. 6
Misstatement of Age or Sex............................................... 6
Annual Report............................................................ 6
Non-Participation........................................................ 6
Delay or Suspension of Payments.......................................... 7
Ownership................................................................ 7
Beneficiary.............................................................. 7
Change of Owner or Beneficiary........................................... 8
Assignment............................................................... 8
Incontestability......................................................... 8
Evidence of Survival..................................................... 8
FIXED ACCOUNT.............................................................. 8
FEDERAL TAX MATTERS........................................................ 9
Taxation of United Investors............................................. 9
Tax Status of the Policies............................................... 9
Required Distributions................................................... 10
Withholding.............................................................. 11
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS.......................... 11
DISTRIBUTION OF THE POLICY................................................. 12
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS..................................... 13
STATE REGULATION........................................................... 13
RECORDS AND REPORTS........................................................ 14
LEGAL MATTERS.............................................................. 14
EXPERTS.................................................................... 14
OTHER INFORMATION.......................................................... 15
FINANCIAL STATEMENTS....................................................... 15
</TABLE>
30
<PAGE>
This Prospectus sets forth information about the RetireMAP Variable Annuity
Policy that a prospective investor should know before investing. The Statement
of Additional Information contains more detailed information about the Policy
and the Variable Account. This Statement of Additional Information is
available upon request at no charge. To obtain such information, return this
request form to the address shown below.
- --------------------------------------------------------------------------------
TO: United Investors Life Insurance Company
Administrative Office
P. O. Box 219065
Dallas, TX 75221-9065
Please send me a Statement of Additional Information for the RetireMAP
Variable Annuity.
Name ________________________________
Address _____________________________
_______________________________
_______________________________
_______________________________
_______________________________
Telephone ( ) -
<PAGE>
RetireMAP Variable Account
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
for the
DEFERRED VARIABLE ANNUITY POLICY
Offered by
United Investors Life Insurance Company
This Statement of Additional Information expands upon subjects discussed in the
current Prospectus for the Deferred Variable Annuity Policy ("Policy") offered
by United Investors Life Insurance Company. You may obtain a copy of the
Prospectus dated July 1, 1997, by writing to United Investors Life Insurance
Company, Administrative Office, P.O. Box 219065, Dallas, TX 75221-9065. Terms
used in the current Prospectus for the Policy are incorporated in this
Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE POLICY.
Dated: July 1, 1997
- 1 -
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Corresponding
Page in
Page Prospectus
---- ----------
<S> <C> <C>
THE POLICY......................................... 3 14
Accumulation Units............................... 3
Annuity Units.................................... 3
Net Investment Factor............................ 4
Determination of Annuity Payments................ 5
Fixed Annuity Payments........................ 5
Variable Annuity Payments..................... 5
The Contract..................................... 6
Misstatement of Age or Sex....................... 6
Annual Report.................................... 6
Non-Participation................................ 6
Delay or Suspension of Payments.................. 7
Ownership........................................ 7
Beneficiary...................................... 7
Change of Ownership or Beneficiary............... 8
Assignment....................................... 8
Incontestability................................. 8
Evidence of Survival............................. 8
FIXED ACCOUNT...................................... 8 13
FEDERAL TAX MATTERS................................ 9 25
Taxation of United Investors..................... 9
Tax Status of the Policies....................... 9
Required Distributions........................... 10
Withholding...................................... 11
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS.. 11
DISTRIBUTION OF THE POLICY......................... 12 25
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS............. 13
STATE REGULATION................................... 13
RECORDS AND REPORTS................................ 14
LEGAL MATTERS...................................... 14 29
EXPERTS............................................ 14
OTHER INFORMATION.................................. 15
FINANCIAL STATEMENTS............................... 15 29
</TABLE>
- 2 -
<PAGE>
THE POLICY
----------
As a supplement to the description in the Prospectus, the following
provides additional information about the Policy.
Accumulation Units
- ------------------
An Accumulation Unit is an accounting unit used prior to the Retirement Date
to calculate the Variable Account Value. The portion of a Net Purchase Payment
that you allocate to an Investment Division of the Variable Account is credited
as Accumulation Units in that Investment Division. Similarly, the value that
you transfer to an Investment Division of the Variable Account is credited as
Accumulation Units in that Investment Division. The number of Accumulation
Units to credit is determined by dividing (1) the dollar amount allocated to the
Investment Division by (2) the Investment Division's appropriate Accumulation
Unit Value for the Valuation Period in which we received the Purchase Payment or
transfer request (in the case of the initial Purchase Payment, we will credit
Accumulation Units for that Purchase Payment based on the Accumulation Unit
value for the Policy Date).
The value of an Accumulation Unit for each Investment Division was
initially arbitrarily set at $1. The value for any later Valuation Period is
found by multiplying the Accumulation Unit Value for an Investment Division for
the last prior Valuation Period by such Investment Division's Net Investment
Factor (described below) for the following Valuation Period. Like the Policy
Value, the value of an Accumulation Unit may increase or decrease from one
Valuation Period to the next.
Annuity Units
- -------------
An Annuity Unit is an accounting unit used after the Retirement Date to
calculate the value of Variable Annuity Payments. The value of an Annuity Unit
in each Investment Division was initially set at $1. The value for any later
Valuation Period is determined by (a) multiplying the Annuity Unit Value for an
Investment Division for the last prior Valuation Period for such Investment
Division's Net Investment Factor for the following Valuation Period, and then
(b) adjusting the result to compensate for the interest rate assumed in the
annuity
- 3 -
<PAGE>
tables used to determine the amount of the first Variable Annuity Payment. The
value of an Annuity Unit for each Investment Division changes to reflect the
investment performance of the Portfolio underlying that Investment Division.
Net Investment Factor
- ---------------------
The Net Investment Factor is an index applied to measure the investment
performance of an Investment Division of the Variable Account from one Valuation
Period to the next. The Net Investment Factor may be greater or less than one,
so the value of an Investment Division may increase or decrease.
The Net Investment Factor of an Investment Division for any Valuation
Period is determined by dividing (1) by (2) and subtracting (3) from the result,
where:
(1) is the result of:
(a) the net asset value per share of the Portfolio shares held in the
Investment Division determined at the end of the current Valuation
Period; plus
(b) the per share amount of any dividend or capital gain distributions
on the Portfolio shares held in the Investment Division, if the
"ex-dividend" date occurs during the current Valuation Period;
plus or minus
(c) A charge or credit for any taxes reserved for the current
Valuation Period which we determine to have resulted from the
investment operations of the Investment Division;
(2) is the result of:
(a) the net asset value per share of the Portfolio shares held in the
Investment Division, determined at the end of the previous
Valuation Period; plus or minus
(b) the charge or credit for any taxes reserved for the previous
Valuation Period; and
(3) is a deduction for the 1.25% Mortality and Expense Risk Charge and the
0.15% Administration Fee.
- 4 -
<PAGE>
Determination of Annuity Payments
- ---------------------------------
At the Retirement Date, the Policy Value as of 14 days prior to the
Retirement Date, less any applicable premium taxes, may be applied to make Fixed
Annuity Payments, Variable Annuity Payments, or a combination thereof.
Fixed Annuity Payments. Fixed Annuity Payments provide guaranteed annuity
----------------------
payments which remain fixed in amount throughout the payment period. Fixed
Annuity Payments do not vary with the investment experience of the Investment
Divisions. The payment amount will be based on our Fixed Annuity Payment rates
in effect on the settlement date. These rates are guaranteed not to be less
than payments based on the 1983 Individual Annuity Mortality Table (set back one
year) with interest at 4.0%. The one year setback results in lower rates than
if no setback is used. Where requested and required by law unisex tables will
be used.
Variable Annuity Payments. The dollar amount of the first Variable Annuity
-------------------------
Payment is determined by multiplying the net value applied by purchase rates
based on the 1983 Individual Annuity Mortality Table (set back one year) with
interest at 4.0%. The one year setback results in lower rates than if no
setback is used. Where requested and required by law unisex tables will be
used.
The portion of the first Variable Annuity Payment attributed to each
Investment Division is divided by the Annuity Unit Value for the Investment
Division (as of the same date that the amount of the first Variable Annuity
Payment is determined) to determine the number of Annuity Units upon which later
Variable Annuity Payments will be made. This number of Annuity Units will not
change unless subsequently changed by reallocation. The dollar amount of each
monthly Variable Annuity Payment after the first Annuity Payment will equal the
sum of the number of Annuity Units credited to each Investment Division
multiplied by the Annuity Unit Value for each respective Investment Division for
the Valuation Period as of 14 days prior to the Variable Annuity Payment.
After the Retirement Date, the Annuitant may reallocate the value of the
Annuitant's interest in the Investment Divisions, no more than once each Policy
Year, by sending a Written Request to United Investors. A reallocation will be
effected during the Valuation Period as of 14 days prior to the next Variable
- 5 -
<PAGE>
Annuity Payment, by converting Annuity Units for the value transferred from an
Investment Division into Annuity Units in the Investment Division to which the
value is transferred. Reallocations may cause the number of Annuity Units to
change, but will not change the dollar amount of the Variable Annuity Payment as
of the date of reallocation.
United Investors guarantees that the dollar amount of monthly Variable
Annuity Payments after the first payment will not be affected by variations in
expenses or mortality experience.
The Contract
- ------------
The entire contract is made up of the Policy, any riders, and the written
application. All statements made in the application, in the absence of fraud,
are considered representations and not warranties. Only the statements made in
the written application can be used by us to defend a claim or void the Policy.
Changes to the Policy are not valid unless we make them in writing. They
must be signed by one of our executive officers. No agent has authority to
change the Policy or to waive any of its provisions.
Misstatement of Age or Sex
- --------------------------
If the Annuitant's age or sex is misstated, we will adjust each benefit and
any amount to be paid to reflect the correct age and sex.
Annual Report
- -------------
At least once each Policy Year prior to the Retirement Date we will send
you a report on your Policy. It will show the current Policy Value, the current
Fixed Account Value, the current value of the Investment Divisions of the
Variable Account, the Purchase Payments paid, all charges and partial
withdrawals since the last report, the current Surrender Value and the current
Death Benefit. We will also include in the report any other information
required by state law or regulation. Further, we will send you the reports
required by the Investment Company Act of 1940. You may request additional
reports during the year but we may charge a fee for any additional reports.
Non-Participation
- -----------------
The Policy is non-participating. This means that no dividends will be paid
- 6 -
<PAGE>
on your Policy. It will not share in our profits or surplus earnings.
Delay or Suspension of Payments
- -------------------------------
We will normally pay a surrender or any withdrawal within seven days after
we receive your Written Request in our Home Office. However, payment of any
amount from the Investment Divisions of the Variable Account may be delayed or
suspended whenever:
a) the New York Stock Exchange is closed other than customary weekend and
holiday closing, or trading on the New York Exchange is restricted as
determined by the Securities and Exchange Commission;
b) the Securities and Exchange Commission by order permits postponement for
the protection of Policyowners; or
c) an emergency exists, as determined by the Commission, as a result of
which disposal of the securities held in the Investment Divisions is not
reasonably practicable or it is not reasonably practicable to determine
the value of the Variable Account's net assets.
Payment of any amounts from the Fixed Account may be deferred for up to six
months from the date of the request to surrender. If payment is deferred for
more than 30 days, we will pay interest on the amount deferred at a rate not
less the Guaranteed Minimum Interest Rate.
Payments under the Policy of any amounts derived from Purchase Payments
paid by check may be delayed until such time as the check has cleared your bank.
Ownership
- ---------
The Policy belongs to you, the Policyowner. Unless you provide otherwise,
you may receive all benefits and exercise all rights of the Policy prior to the
Retirement Date. These rights and the rights of any Beneficiary are subject to
the rights of any assignee. If there is more than one Owner at a given time,
all must exercise the rights of ownership by joint action.
Beneficiary
- -----------
The Beneficiary means the person, persons or entity entitled to Death
Benefit proceeds under this Policy upon death of the Owner (or Annuitant if the
Owner is not a natural person) before the Retirement Date. If the Policy has
- 7 -
<PAGE>
joint Owners and one Owner dies, the surviving Joint Owner will be deemed the
Beneficiary. The rights of any Beneficiary who dies before the Owner (or
Annuitant if the Owner is not a natural person) will pass to the surviving
Beneficiary or Beneficiaries unless you provide otherwise. If no Beneficiary is
living at the Owner's (or Annuitant's if the Owner is not a natural person)
death, we will pay the Death Benefit, if any, to the Owner, if living;
otherwise, it will be paid to the deceased's estate.
Change of Ownership or Beneficiary
- ----------------------------------
Unless you provide otherwise in writing to us, you may change the Owner or
the Beneficiary during your lifetime. Any changes must be made by Written
Request filed with us. The change takes effect on the date the request was
signed, but it will not apply to payments made by us before we accept your
Written Request. We may require you to submit the Policy to us before making a
change. A change of ownership may be a taxable event.
Assignment
- ----------
You may assign the Policy, but we will not be responsible for the validity
of any assignment and no assignment will bind us until it is filed in writing at
our home office. When it is filed, your rights and the rights of any
Beneficiary will be subject to it. An assignment of the Policy may be a taxable
event.
Incontestability
- ----------------
United Investors will not contest the Policy.
Evidence of Survival
- --------------------
Where any payments under the Policy depend on the payee being alive, we may
require proof of survival prior to making the payments.
FIXED ACCOUNT
-------------
We guarantee that we will credit interest at a rate of not less than the
Guaranteed Minimum Interest Rate of 4.0% per year to amounts allocated to the
Fixed Account. We may credit interest at a rate in excess of the Guaranteed
Minimum Interest Rate.
Any excess interest credited will be determined at our sole discretion.
- 8 -
<PAGE>
The Owner assumes the risk that interest credited to Fixed Account allocations
may not exceed the Guaranteed Minimum Interest Rate.
FEDERAL TAX MATTERS
-------------------
Taxation of United Investors
- ----------------------------
United Investors is taxed as a life insurance company under Part 1 of
Subchapter L of the Internal Revenue Code of 1986 (the "Code"). Since the
Variable Account is not an entity separate from United Investors and its
operations form a part of United Investors, it will not be taxed separately as a
"regulated investment company" under Subchapter M of the Code. Investment
income and realized net capital gains on the assets of the Variable Account are
reinvested and taken into account in determining the Policy Value. As a result,
such investment income and realized net capital gains are automatically retained
as part of the reserves under the Policy. Under existing federal income tax
law, United Investors believes that Variable Account investment income and
realized net capital gains should not be taxed to the extent that such income
and gains are retained as part of the reserves under the Policy.
Tax Status of the Policies
- --------------------------
Section 817(h) of the Code provides that the investments of the Variable
Account must be "adequately diversified" in accordance with Treasury regulations
in order for the Policies to qualify as annuity contracts under Section 72 of
the Code. The Variable Account, through each Portfolio of the Funds, intends to
comply with the diversification requirements prescribed by the Treasury in
Treas. Reg. Section 1.817-5, which affect how the Portfolios' assets may be
invested. United Investors does not control any of the Funds or their
Portfolios' investments. However, it has entered into an agreement regarding
participation in each Fund, which requires each participating Portfolio of the
Funds to be operated in compliance with the diversification requirements
prescribed by the Treasury.
In certain circumstances, owners of variable annuity contracts may be
- 9 -
<PAGE>
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 contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. The
Treasury Department also announced, in connection with the issuance of
regulations concerning diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor (i.e., the
Policyowner), rather than the insurance company, to be treated as the owner of
the assets in the account." This announcement also stated that guidance would
be issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular subaccounts without being treated as
owners of the underlying assets."
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policy owners were not owners of separate account assets. For
example, the Policyowner has additional flexibility in allocating premium
payments and Policy Values. These differences could result in a Policyowner
being treated as the owner of a pro rata portion of the assets of the Variable
Account. In addition, United Investors does 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. United Investors therefore reserves the right to
modify the Policy as necessary to attempt to prevent a Policyowner from being
considered the owner of a pro rata share of the assets of the Variable 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 nonqualified Policy to provide
that (a) if any Owner dies on or after the annuity starting date but prior to
the
- 10 -
<PAGE>
time the entire interest in the Policy 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 starting date, the entire interest in the
Policy will be distributed within five years after the date of that Owner's
death.
These requirements will be considered satisfied as to any portion of the
Owner's interest that is payable as annuity payments which will begin within one
year of that Owner's death and which will be made over the life of the Owner's
designated Beneficiary or over a period not extending beyond his life
expectancy.
If the Owner's designated Beneficiary is the surviving spouse of the Owner,
the Policy may be continued with the surviving spouse as the new Owner and no
distributions will be required.
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. Generally, the recipient
is given the opportunity to elect not to have tax withheld from distributions.
However, certain distributions from Section 401(a) and 403(b) plans are subject
to mandatory withholding.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
-------------------------------------------------
United Investors reserves the right, subject to compliance with applicable
law, to make additions to, deletions from, or substitutions for, the shares of
the Funds that are held by the Variable Account (or any Investment Division) or
that the Variable Account (or any Investment Division) may purchase. United
Investors reserves the right to eliminate the shares of any of the Portfolios of
the Funds and to substitute shares of another Portfolio of the Funds or any
other investment vehicle or of another open-end, registered investment company
if laws or regulations are changed, if the shares of any of the Funds or a
Portfolio are no longer available for investment, or if in our judgment further
investment in
- 11 -
<PAGE>
any Portfolio should become inappropriate in view of the purposes
of the Investment Division. United Investors will not substitute any shares
attributable to a Policyowner's interest in an Investment Division of the
Variable Account without notice and prior approval of the Securities and
Exchange Commission and the insurance regulator of the state where the Policy
was delivered, where required. Nothing contained herein shall prevent the
Variable Account from purchasing other securities for other series or classes of
policies, or from permitting a conversion between series or classes of policies
on the basis of requests made by Policyowners.
United Investors also reserves the right to establish additional Investment
Divisions of the Variable Account, each of which would invest in a new Portfolio
of one of the Funds, or in shares of another investment company or suitable
investment, with a specified investment objective. New Investment Divisions may
be established when, in the sole discretion of United Investors, marketing needs
or investment conditions warrant, and any new Investment Divisions will be made
available to existing Policyowners on a basis to be determined by United
Investors. United Investors may also eliminate one or more Investment Divisions
if, in its sole discretion, marketing, tax, or investment conditions warrant.
In the event of any such substitution or change, United Investors may, by
appropriate endorsement, make such changes in the Policies as may be necessary
or appropriate to reflect such substitution or change. If deemed by United
Investors to be in the best interests of persons having voting rights under the
Policies, the Variable Account may be operated as a management company under the
Investment Company Act of 1940, it may be deregistered under that Act in the
event such registration is no longer required, or it may be combined with other
United Investors separate accounts.
DISTRIBUTION OF THE POLICY
--------------------------
The Policies will be sold by individuals who, in addition to being licensed
as life insurance agents for United Investors, are also registered
representatives of MAP Investments Incorporated ("MAP"), the principal
- 12 -
<PAGE>
underwriter of the Policies, or of broker-dealers or banks who have entered into
written sales agreements with MAP. MAP is registered with the Securities and
Exchange Commission under the Securities Exchange Act of 1933 as a broker-dealer
and is a member of the National Association of Securities Dealers, Inc. The
Policies are offered to the public through brokers licensed under the federal
securities laws and state insurance laws that have entered into agreements with
MAP. The offering of the Policies is continuous, and MAP does not anticipate
discontinuing the offering of the Policies. However, MAP reserves the right to
discontinue the offering of the Policies.
United Investors may reduce or eliminate the Administrative Fee, Annual
Contract Maintenance Charge, or Withdrawal Charges on Policies that have been
sold to: (1) employees and sales representatives of United Investors or its
affiliates; (2) customers of United Investors or distributors of the Policies
who are transferring existing policy values to a Policy; or (3) individuals or
groups of individuals when sales of the Policy result in savings of sales
expenses.
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS
--------------------------------------
United Investors holds the assets of the Variable Account. The assets are
kept physically segregated and held separate and apart from United Investors'
general account. United Investors maintains records of all purchases and
redemptions of Fund shares by each of the Investment Divisions.
STATE REGULATION
----------------
United Investors is subject to regulation by the Missouri Department of
Insurance. An annual statement is filed with the Missouri Department of
Insurance on or before March 1 of each year covering the operations and
reporting on the financial condition of United Investors as of December 31 of
the preceding year. Periodically, the Missouri Department of Insurance or other
authorities examine the liabilities and reserves of United Investors and the
Variable Account, and a full examination of United Investors' operations is
conducted periodically by the National Association of Insurance Commissioners.
- 13 -
<PAGE>
In addition, United Investors is subject to the insurance laws and
regulations of other states within which it is licensed or may become licensed
to operate. Generally, the insurance department of any other state applies the
laws of the state of domicile in determining permissible investments. A Policy
is governed by the law of the state in which it is delivered. The values and
benefits of each Policy are at least equal to those required by such state.
RECORDS AND REPORTS
-------------------
All records and accounts relating to the Variable Account will be
maintained by United Investors. As presently required by the Investment Company
Act of 1940 and regulations promulgated thereunder, reports containing such
information as may be required under that Act or by any other applicable law or
regulation will be sent to Owners at their last known address of record.
LEGAL MATTERS
-------------
Legal advice regarding certain matters relating to federal securities laws
applicable to the issuance of the Policy described in the Prospectus have been
provided by Sutherland, Asbill & Brennan, L.L.P., of Washington, D.C. All
matters of Missouri law pertaining to the Policy, including the validity of the
Policy and United Investors' right to issue the Policy under Missouri Insurance
Law and any other applicable state insurance or securities laws, have been
passed upon by James L. Sedgwick, Esq., President of United Investors.
EXPERTS
-------
The balance sheets of United Investors Life Insurance Company as of
December 31, 1996 and 1995, and the related statements of operations,
shareholder's equity, and cash flows for each of the years in the three-year
period ended December 31, 1996 have been included herein in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
- 14 -
<PAGE>
OTHER INFORMATION
-----------------
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with respect to the
Policies discussed in this Statement of Additional Information. Not all of 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 Policies 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 Securities and Exchange
Commission.
FINANCIAL STATEMENTS
--------------------
The financial statements of United Investors, which are included in this
Statement of Additional Information, should be considered only as bearing on the
ability of United Investors to meet its obligations under the Policies. They
should not be considered as bearing on the investment performance of the assets
held in the Variable Account.
There are no financial statements for the Variable Account because as of
the date of this Statement of Additional Information it had not commenced
operations and had no assets or liabilities.
- 15 -
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
United Investors Life Insurance Company
Birmingham, Alabama
We have audited the accompanying balance sheets of United Investors Life
Insurance Company as of December 31, 1996 and 1995 and the related statements
of operations, shareholder's equity and cash flow for each of the years in the
three-year period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United Investors Life
Insurance Company at December 31, 1996 and 1995 and the results of its
operations and its cash flow for each of the years in the three-year period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Birmingham, Alabama
January 31, 1997
F-1
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities--available for sale, at fair value
(cost: 1996--$621,177; 1995--$612,375)................. $ 624,880 637,844
Policy loans............................................ 14,332 12,299
Other long-term invested assets......................... 21,411 19,848
Short-term investments.................................. 1,834 4,223
---------- ----------
Total investments..................................... 662,457 674,214
Cash..................................................... 2,404 6,042
Accrued investment income (includes amounts from
affiliates:
1996--$473; 1995--$473)................................. 10,781 9,963
Receivables (includes amounts from affiliates:
1996--$35,423; 1995--$35,322)........................... 38,058 37,858
Deferred acquisition costs............................... 169,986 144,716
Value of insurance purchased............................. 16,160 18,679
Goodwill................................................. 7,055 7,340
Property and equipment................................... 156 125
Other assets............................................. 1,534 2,242
Separate account assets.................................. 1,420,025 1,085,844
---------- ----------
Total assets.......................................... $2,328,616 $1,987,023
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Future policy benefits.................................. $ 531,297 $ 517,177
Unearned and advance premiums........................... 2,804 2,521
Other policy liabilities................................ 8,135 6,264
---------- ----------
Total policy liabilities............................... 542,236 525,962
Accrued income taxes.................................... 43,063 50,313
Other liabilities....................................... 2,265 2,132
Due to affiliates....................................... 8,965 9,644
Separate account liabilities............................ 1,420,025 1,085,844
---------- ----------
Total liabilities..................................... 2,016,554 1,673,895
Shareholder's equity:
Common stock, par value $6 per share-authorized,
issued and outstanding:
500,000 shares......................................... 3,000 3,000
Additional paid-in capital.............................. 137,950 137,950
Unrealized investment gains, net of applicable taxes.... 4,460 12,292
Retained earnings....................................... 166,652 159,886
---------- ----------
Total shareholder's equity............................ 312,062 313,128
---------- ----------
Total liabilities and shareholder's equity............ $2,328,616 $1,987,023
========== ==========
</TABLE>
See accompanying Notes to Financial Statements.
F-2
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Premium income.................................... $ 65,114 $ 61,792 $ 57,753
Policy charges and fees........................... 29,403 23,109 18,259
Net investment income (includes amounts from af-
filiates: 1996-- $2,847; 1995--$3,058; 1994--
$628)............................................ 51,128 49,356 46,258
Realized investment gains (losses)................ 925 1,441 (2,047)
Other income...................................... 0 4 2
-------- -------- --------
Total revenue................................... 146,570 135,702 120,225
Benefits and expenses:
Policy benefits:
Individual life.................................. 47,355 42,943 39,578
Annuity.......................................... 15,807 16,540 15,326
-------- -------- --------
Total policy benefits........................... 63,162 59,483 54,904
Amortization of deferred acquisition costs........ 19,850 16,602 15,790
Commissions and premium taxes (includes amounts to
affiliates: 1996--$4,723; 1995--$4,000; 1994--
$4,008).......................................... 5,248 4,691 4,205
Other operating expense (includes amounts to af-
filiates: 1996--$2,181; 1995--$1,862; 1994--
$1,774).......................................... 3,966 3,679 3,954
-------- -------- --------
Total benefits and expenses..................... 92,226 84,455 78,853
-------- -------- --------
Net operating income before income taxes........... 54,344 51,247 41,372
Income taxes....................................... 19,078 18,037 14,337
-------- -------- --------
Net income...................................... $ 35,266 $ 33,210 $ 27,035
======== ======== ========
</TABLE>
See accompanying Notes to Financial Statements.
F-3
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
ADDITIONAL INVESTMENT TOTAL
COMMON PAID-IN GAINS RETAINED SHAREHOLDER'S
STOCK CAPITAL (LOSSES) EARNINGS EQUITY
------ ---------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1994
Balance at January 1,
1994................... $3,000 $137,915 $11,885 $117,141 $269,941
Net income.............. 27,035 27,035
Dividends............... (10,000) (10,000)
Net change in unrealized
investment gains (loss-
es).................... (24,263) (24,263)
------ -------- ------- -------- --------
Balance at December 31,
1994................... 3,000 137,915 (12,378) 134,176 262,713
YEAR ENDED DECEMBER 31,
1995
Net income.............. 33,210 33,210
Dividends............... (7,500) (7,500)
Exercise of stock op-
tions.................. 35 35
Net change in unrealized
investment gains (loss-
es).................... 24,670 24,670
------ -------- ------- -------- --------
Balance at December 31,
1995................... 3,000 137,950 12,292 159,886 313,128
YEAR ENDED DECEMBER 31,
1996
Net income.............. 35,266 35,266
Dividends............... (28,500) (28,500)
Net change in unrealized
investment gains (loss-
es).................... (7,832) (7,832)
------ -------- ------- -------- --------
Balance at December 31,
1996................... $3,000 $137,950 $ 4,460 $166,652 $312,062
====== ======== ======= ======== ========
</TABLE>
See accompanying Notes to Financial Statements.
F-4
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOW
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1995 1994
-------- --------- ---------
<S> <C> <C> <C>
Net income.................................... $ 35,266 $ 33,210 $ 27,035
Adjustments to reconcile net income to cash
provided from operations:
Increase in future policy benefits........... 20,692 22,011 19,302
Increase (decrease) in other policy benefits. 2,154 (614) (753)
Deferral of policy acquisition costs......... (33,744) (28,870) (28,116)
Amortization of deferred acquisition costs... 19,850 16,602 15,790
Change in accrued income taxes............... (3,033) 2,644 (1,557)
Depreciation................................. 44 52 71
Realized (gains) losses on sale of invest-
ments and properties........................ (925) (1,441) 2,047
Other accruals and adjustments............... (997) (3,525) (1,558)
-------- --------- ---------
Cash provided from operations................. 39,307 40,069 32,261
Cash used for investment activities:
Investments sold or matured:
Fixed maturities available for sale--sold... 15,246 149,076 64,713
Fixed maturities available for sale--
matured, called and repaid................. 44,523 50,659 107,977
Equity securities........................... 0 3,341 0
Other long-term investments................. 482 9,316 1,830
-------- --------- ---------
Total investments sold or matured.......... 60,251 212,392 174,520
Acquisition of investments:
Fixed maturities--available for sale........ (68,214) (244,162) (180,473)
Equity securities........................... 0 0 (102)
Net increase in policy loans................ (2,033) (2,121) (1,524)
Other long-term investments................. (1,183) (1,587) (2,461)
-------- --------- ---------
Total acquisition of investments........... (71,430) (247,870) (184,560)
Net (increase) decrease in short-term invest-
ments....................................... 2,389 (1,901) 12,669
Funds loaned to affiliates................... (3,500) (21,000) (54,000)
Funds repaid from affiliates................. 3,500 21,000 27,000
Disposition of properties.................... 34 6 15
Additions to properties...................... (117) (33) (23)
-------- --------- ---------
Cash used for investment activities........... (8,873) (37,406) (24,379)
Cash used for financing activities:
Cash dividends paid to shareholder........... (27,500) (7,500) (10,000)
Net receipts from deposit product operations. (6,572) 3,343 (450)
-------- --------- ---------
Cash used for financing activities............ (34,072) (4,157) (10,450)
Decrease in cash.............................. (3,638) (1,494) (2,568)
Cash at beginning of year..................... 6,042 7,536 10,104
-------- --------- ---------
Cash at end of year........................... $ 2,404 $ 6,042 $ 7,536
======== ========= =========
</TABLE>
See accompanying Notes to Financial Statements.
F-5
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization: United Investors Life Insurance Company (the "Company") is a
wholly-owned subsidiary of United Investors Management Company ("United
Management"), which is a wholly-owned subsidiary of Torchmark Corporation
("Torchmark"), the ultimate parent.
DESCRIPTION OF BUSINESS
The Company is a life insurer licensed in 49 states. The Company offers a
full range of life, annuity and variable products through its agents and is
subject to competition from other insurers throughout the United States. The
Company is subject to regulation by the insurance department of states in
which it is licensed, and undergoes periodic examinations by those
departments.
The following is a description of certain risks facing life insurers and how
the Company mitigates those risks:
Legal/Regulatory Risk is the risk that, changes in the legal or
regulatory environment in which an insurer operates, will create additional
expenses not anticipated by the insurer in pricing its products. That is,
regulatory initiatives designed to reduce insurer profits or otherwise
affecting the industry in which the insurer operates, new legal theories or
insurance company insolvencies through guaranty fund assessments, may
create costs in the future for the insurer beyond those recorded in the
financial statements. The Company attempts to mitigate this risk by
offering a wide range of products and by operating in 49 states, thus
reducing its exposure to any single product or non-Federal jurisdiction,
and also by employing underwriting practices which identify and minimize
the adverse impact of this risk.
Credit Risk is the risk that issuers of securities owned by the Company
will default or that other parties, including reinsurers that have
obligations to the Company, will not pay or perform. The Company attempts
to minimize the risk by adhering to a conservative investment strategy and
by maintaining sound reinsurance and credit and collection policies.
Interest Rate Risk is the risk that interest rates will change and cause
a decrease in the value of an insurer's investments. This change in rates
may cause certain interest-sensitive products to become uncompetitive or
may cause disintermediation. The Company attempts to match the maturity
schedule of its assets with the expected payouts of its liabilities. To the
extent that liabilities come due more quickly than assets mature, an
insurer would have to sell assets prior to maturity and recognize a gain or
loss.
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements and revenues and expenses for the reporting
period. Actual results could differ significantly from those estimates.
The estimates susceptible to significant change are those used in
determining the liability for policy reserves, losses and claims. Although
some variability is inherent in these estimates, management believes the
amounts provided are adequate.
Basis of Presentation: The accompanying financial statements include the
accounts of United Investors Life Insurance Company ("United Investors") which
is a wholly-owned subsidiary of United Investors Management Company ("United
Management"). The financial statements have been prepared on the basis of
generally accepted accounting principles ("GAAP"). The preparation of
F-6
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Investments: United Investors classifies all of its fixed maturity
investments, which includes bonds and redeemable preferred stocks, as
available for sale. Investments classified as available for sale are carried
at fair value with unrealized gains and losses, net of deferred taxes,
reflected directly in shareholder's equity. Investments in equity securities,
which include common and nonredeemable preferred stocks, are reported at fair
value with unrealized gains and losses, net of deferred taxes, reflected
directly in shareholder's equity. Policy loans are carried at unpaid principal
balances. Short-term investments include investments in certificates of
deposit and other interest-bearing time deposits with original maturities
within three months. Other long-term investments consist of investments in
mutual funds which are carried at fair value. Other long-term investments also
include passive energy limited-partnership investments which are valued at
partnership equity. If an investment becomes permanently impaired, such
impairment is treated as a realized loss and the investment is adjusted to net
realizable value.
Gains and losses realized on the disposition of investments are recognized
as revenues and are determined on a specific identification basis.
Realized investment gains and losses and investment income attributable to
separate accounts are credited to the separate accounts and have no effect on
United Investor's net income. Investment income attributable to policyholders
is included in United Investor's net investment income. Net investment income
for the years ended December 31, 1996, 1995 and 1994 included approximately
$37,600, $38,000, and $35,700, respectively, which was allocable to
policyholder reserves or accounts. Realized investment gains and losses are
not allocable to policyholders.
Determination of Fair Values of Financial Instruments: Fair value for cash,
short-term investments, receivables and payables approximates carrying value.
Fair values for investment securities are based on quoted market prices, where
available. Otherwise, fair values are based on quoted market prices of
comparable instruments. Fair value of future benefits for universal life and
current interest products and annuity products are based on the fund value.
Cash: Cash consists of balances on hand and on deposit in banks and
financial institutions.
Recognition of Revenue and Related Expenses: Premiums for insurance
contracts which are not defined as universal life-type according to the
Financial Accounting Standards Board's Statement of Accounting Standards
(SFAS) 97 are recognized as revenue over the premium-paying period of the
policy. Premiums for limited-payment life insurance contracts as defined by
SFAS 97 are recognized over the contract period. Premiums for universal life-
type and annuity contracts are added to the policy account value, and revenues
from such products are recognized as charges to the policy account value for
mortality, administration, and surrenders (retrospective deposit method). The
related benefits and expenses are matched with revenues by means of the
provision for future policy benefits and the amortization of deferred
acquisition costs in a manner which recognizes profits as they are earned over
the same period.
F-7
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Future Policy Benefits: The liability for future policy benefits for
universal life-type products according to SFAS 97 is represented by policy
account value. Annuity Contracts are accounted for as deposit contracts. The
liability for future policy benefits for other products is provided on the net
level premium method based on estimated investment yields, mortality,
persistency and other assumptions which were appropriate at the time the
policies were issued. Assumptions used are based on United Investor's
experience as adjusted to provide for possible adverse deviation. These
estimates are periodically reviewed and compared with actual experience. If it
is determined that future expected experience differs significantly from that
assumed, the estimates are revised.
Deferred acquisition costs: The costs of acquiring new insurance business
are deferred. Such costs consist of sales commissions, underwriting expenses,
and certain other selling expenses. The costs of acquiring new business
through the purchase of other companies and blocks of insurance business are
also deferred.
Deferred acquisition costs, including the value of insurance purchased, for
policies other than universal life-type policies according to SFAS 97, are
amortized with interest over an estimate of the premium-paying period of the
policies in a manner which charges each year's operations in proportion to the
receipt of premium income. For universal life-type policies, acquisition costs
are amortized with interest in proportion to estimated gross profits. The
assumptions used as to interest, withdrawals and mortality are consistent with
those used in computing the liability for future policy benefits and expenses.
If it is determined that future experience differs significantly from that
previously assumed, the estimates are revised. Deferred acquisition costs are
adjusted to reflect the amounts associated with unrealized investment gains
and losses pertaining to universal life-type products.
Income Taxes: Income taxes are accounted for under the asset and liability
method in accordance with SFAS 109. Under the asset and liability method,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement book
values and tax bases of assets and liabilities. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Interest Expense: Interest expense includes interest on borrowed funds not
used in the production of investment income. Interest expense relating to the
production of investment income is deducted from investment income.
Property and Equipment: Property and equipment is reported at cost less
allowances for depreciation. Depreciation is provided on the straight-line
method over the estimated useful lives of these assets which range from three
to ten years.
Goodwill: Goodwill represents the excess cost over the fair value of the net
assets acquired when United Investors was purchased by Torchmark Corporation
(Torchmark) in 1981 and is being amortized on a straight-line basis over forty
years.
Reclassifications: Certain amounts in the financial statements presented
have been reclassified from amounts previously reported. These
reclassifications have no effect on previously reported shareholder's equity
or net income during the periods involved.
F-8
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 2--STATUTORY ACCOUNTING
United Investors is required to file statutory financial statements with
state insurance regulatory authorities. Accounting principles used to prepare
these statutory financial statements differ from GAAP. Net income and
shareholder's equity on a statutory basis for United Investors were as
follows:
<TABLE>
<CAPTION>
NET INCOME SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, AT DECEMBER 31,
------------------------- ---------------------
1996 1995 1994 1996 1995
-------- -------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Life insurance............... $ 26,640 $ 29,636 $ 7,752 $ 154,222 $ 156,673
</TABLE>
The excess of shareholder's equity on a GAAP basis over that determined on a
statutory basis is not available for distribution to the shareholder without
regulatory approval.
A reconciliation of United Investors' statutory net income to GAAP net
income is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996 1995 1994
------- -------- --------
<S> <C> <C> <C>
Statutory net income............................ $26,640 $ 29,636 $ 7,752
Deferral of acquisition costs................... 33,744 28,870 28,116
Amortization of acquisition costs............... (19,850) (16,602) (15,790)
Differences in policy liabilities............... (4,361) (6,774) 13,515
Deferred income taxes........................... (773) (1,389) (4,271)
Other........................................... (134) (531) (2,287)
------- -------- --------
GAAP net income................................. $35,266 $ 33,210 $ 27,035
======= ======== ========
</TABLE>
A reconciliation of United Investors' statutory shareholder's equity to GAAP
shareholder's equity is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
Statutory shareholder's equity.................... $154,222 $ 156,673
Differences in policy liabilities................. 20,834 21,993
Deferred acquisition costs and value of insurance
purchased........................................ 186,146 163,396
Differences in income tax liability............... (44,679) (47,982)
Asset valuation reserve........................... 10,762 9,388
Nonadmitted assets................................ 1,856 1,778
Fair value adjustment on fixed maturities avail-
able for sale.................................... 3,703 25,469
Goodwill.......................................... 7,055 7,340
Due and deferred premiums......................... (29,324) (26,261)
Other............................................. 1,487 1,334
----------- -----------
GAAP shareholder's equity......................... $ 312,062 $ 313,128
=========== ===========
</TABLE>
The NAIC has adopted a model act that requires a risk based capital formula
to be applied to all life and health insurers. The risk based capital formula
is a threshold formula rather than a target capital formula. It is designed
only to identify companies that require regulatory attention and is not to be
used to rate or rank companies that are adequately capitalized. United
Investors is adequately capitalized under the risk based capital formula.
F-9
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 3--INVESTMENT OPERATIONS
Investment income is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
------- ------- --------
<S> <C> <C> <C>
Fixed maturities.................................. $46,366 $43,482 $ 43,532
Equity securities................................. 0 76 0
Policy loans...................................... 1,001 851 730
Other long-term investments....................... 1,211 1,681 1,314
Short-term investments............................ 287 717 493
Interest and dividends from affiliates............ 2,847 3,058 628
------- ------- --------
51,712 49,865 46,697
Less investment expense........................... (584) (509) (439)
------- ------- --------
Net investment income............................. $51,128 $49,356 $ 46,258
======= ======= ========
Analysis of gains (losses) from investments:
Realized investment gains (losses)
Fixed maturities................................ $ 925 $ 319 $ (2,189)
Equity securities............................... 0 1,276 0
Mutual funds.................................... 0 (154) 142
------- ------- --------
Net realized gains (losses)...................... $ 925 $ 1,441 $ (2,047)
======= ======= ========
Analysis of change in unrealized investment gains
(losses):
Net change in unrealized investment gains (losses)
on equity securities before tax.................. $ 0 $ (438) $ 437
Net change in unrealized investment gains on fixed
maturities available for sale before tax......... (21,767) 58,321 (58,904)
Other............................................. 861 3,602 (1,557)
Adjustment to deferred acquisition costs.......... 8,857 (23,532) 22,697
Applicable tax.................................... 4,217 (13,283) 13,064
------- ------- --------
Net change in unrealized gains (losses) on equity
and fixed maturity securities available for sale. $(7,832) $24,670 $(24,263)
======= ======= ========
</TABLE>
F-10
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 3--INVESTMENT OPERATIONS (CONTINUED)
A summary of fixed maturities available for sale by amortized cost and
estimated market value at December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
GROSS GROSS AMOUNT PER
AMORTIZED UNREALIZED UNREALIZED MARKET THE BALANCE
1996: COST GAINS LOSSES VALUE SHEET
- ----- --------- ---------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C>
Fixed maturities avail-
able for sale:
Bonds:
U.S. Government direct
obligations and agen-
cies................... $ 21,832 $ 79 $ (270) $ 21,641 $ 21,641
GNMA's.................. 150,505 6,297 (812) 155,990 155,990
Mortgage-backed
securities, GNMA
collateral............. 34,904 785 (6) 35,683 35,683
Other mortgage-backed
securities............. 4,060 -0- -0- 4,060 4,060
States, municipalities
and political
subdivisions........... 45,544 383 (894) 45,033 45,033
Foreign governments..... 3,272 158 0 3,430 3,430
Public utilities........ 22,543 483 (345) 22,681 22,681
Industrial and miscella-
neous.................. 338,517 3,737 (5,892) 336,362 336,362
-------- ------ ------- -------- --------
Total fixed maturities.. 621,177 11,922 (8,219) 624,880 624,880
======== ====== ======= ======== ========
<CAPTION>
1995:
- -----
<S> <C> <C> <C> <C> <C>
Fixed maturities avail-
able for sale:
Bonds:
U.S. Government direct
obligations and agen-
cies................... $ 21,790 $ 613 $ -0- $ 22,403 $ 22,403
GNMA's.................. 179,808 8,653 (87) 188,374 188,374
Mortgage-backed
securities, GNMA
collateral............. 42,505 2,195 -0- 44,700 44,700
Other mortgage-backed
securities............. -0- -0- -0- -0- -0-
States, municipalities
and political
subdivisions........... 37,305 946 (375) 37,876 37,876
Foreign governments..... 1,401 92 -0- 1,493 1,493
Public utilities........ 22,390 1,105 (18) 23,477 23,477
Industrial and miscella-
neous.................. 307,176 12,872 (527) 319,521 319,521
-------- ------ ------- -------- --------
Total fixed maturities.. 612,375 26,476 (1,007) 637,844 637,844
======== ====== ======= ======== ========
</TABLE>
F-11
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 3--INVESTMENT OPERATIONS (CONTINUED)
A schedule of fixed maturities by contractual maturity at December 31, 1996
is shown below on an amortized cost basis and on a market value basis. Actual
maturities could differ from contractual maturities due to call or prepayment
provisions.
<TABLE>
<CAPTION>
AMORTIZED MARKET
COST VALUE
--------- --------
<S> <C> <C>
Fixed maturities available for sale;
Due in one year or less................................. $ 10,361 $ 10,555
Due after one year through five years................... 87,414 89,132
Due after five years through ten years.................. 230,582 227,944
Due after ten years..................................... 103,351 101,516
-------- --------
431,708 429,147
Mortgage- and asset-backed securities.................... 189,469 195,733
-------- --------
$621,177 $624,880
======== ========
</TABLE>
Proceeds from sales of fixed maturities available for sale were $15,246 in
1996, $149,076 in 1995, and $64,713 in 1994. Gross gains realized on these
sales were $749 in 1996, $3,157 in 1995, and $1,058 in 1994. Gross losses on
these sales were $0 in 1996, $2,126 in 1995, and $3,468 in 1994.
F-12
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 4--DEFERRED ACQUISITION COSTS
An analysis of deferred acquisition costs and the value of insurance
purchased is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------- --------------------- ---------------------
DEFERRED VALUE OF DEFERRED VALUE OF DEFERRED VALUE OF
ACQUISITION INSURANCE ACQUISITION INSURANCE ACQUISITION INSURANCE
COSTS PURCHASED COSTS PURCHASED COSTS PURCHASED
----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of
year................... $144,716 $18,679 $153,677 $20,983 $116,406 $ 23,231
Additions:
Deferred during peri-
od:
Commissions.......... 28,492 0 24,258 0 23,533 0
Other expenses....... 5,252 0 4,611 0 4,583 0
-------- ------- -------- ------- -------- --------
Total deferred...... 33,744 0 28,869 0 28,116 0
Adjustment attributable
to unrealized
investment loss (1)... 8,857 0 0 0 22,697 0
-------- ------- -------- ------- -------- --------
Total additions..... 42,601 0 28,869 0 50,813 0
Deductions:
Amortized during peri-
od................... (16,894) (2,519) (14,062) (2,304) (12,109) (2,248)
Adjustment
attributable to
unrealized investment
gains (1)............ 0 0 (23,532) 0 0 0
Adjustment
attributable to
realized investment
gains (1)............ (437) 0 (236) 0 (1,433) 0
-------- ------- -------- ------- -------- --------
Total deductions.... (17,331) (2,519) (37,830) (2,304) (13,542) (2,248)
-------- ------- -------- ------- -------- --------
Balance at end of year.. 169,986 16,160 $144,716 $18,679 $153,677 $ 20,983
======== ======= ======== ======= ======== ========
</TABLE>
- --------
(1) Represents amounts pertaining to investments relating to universal life-
type products.
The amount of interest accrued on the unamortized balance of value of
insurance purchased was approximately $1,100, $1,300, and $1,500 for the years
ended December 31, 1996, 1995 and 1994, respectively. The average interest
accrual rates used were 6.44%, 6.59% and 6.74%, respectively. The estimated
amount of the unamortized value of business purchased balance at December 31,
1996 to be amortized during each of the next five years is: 1997, $1,777;
1998, $1,582; 1999, $1,408; 2000, $1,253; 2001, $1,115.
In the event of lapses or early withdrawals in excess of those assumed,
deferred acquisition costs and the value of insurance purchased may not be
recoverable.
NOTE 5--PROPERTY AND EQUIPMENT
A summary of property and equipment used in the business is as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31,
1996 1995
------------------- -------------------
ACCUMULATED ACCUMULATED
COST DEPRECIATION COST DEPRECIATION
------ ------------ ------ ------------
<S> <C> <C> <C> <C>
Data processing equipment............... $ 192 $ 147 $ 155 $ 137
Transportation equipment................ 132 37 142 73
Furniture and office equipment ......... 919 903 919 881
------ ------ ------ ------
Total................................. $1,243 $1,087 $1,216 $1,091
====== ====== ====== ======
</TABLE>
Depreciation expense on property and equipment used in the business was $44,
$52 and $71 in each of the years 1996, 1995, and 1994, respectively.
F-13
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 6--FUTURE POLICY BENEFIT RESERVES
A summary of the assumptions used in determining the liability for future
policy benefits at December 31, 1996 is as follows:
INDIVIDUAL LIFE INSURANCE
Interest Assumptions:
<TABLE>
<CAPTION>
PERCENT OF
YEARS OF ISSUE INTEREST RATES LIABILITY
-------------- --------------------- ----------
<S> <C> <C>
1962-1996 3% level to 6% level 8%
1986-1992 7.00% graded to 6.00% 20%
1962-1985 8.50% graded to 6.00% 5%
1981-1985 8.50% graded to 7.00% 6%
1984-1996 Interest sensitive 61%
----
100%
====
</TABLE>
Mortality assumptions:
The mortality tables used are various statutory mortality tables and
modifications of:
1965-70 Select and Ultimate Table
1975-80 Select and Ultimate Table
Withdrawal assumptions:
Withdrawal assumptions are based on United Investors' experience.
NOTE 7--INCOME TAXES
United Investors is included in the life-nonlife consolidated federal income
tax return filed by Torchmark. Under the tax allocation agreement with
Torchmark, a company with taxable income pays tax equal to the amount it would
pay if it filed a separate tax return. A company with a loss is paid a tax
benefit currently to the extent that affiliated companies with taxable income
utilize that loss.
Total income taxes were allocated as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Net operating income before income taxes........ $19,078 $18,037 $14,337
Shareholder's equity:
Unrealized gains (losses)...................... (4,217) 13,283 (13,064)
Tax basis compensation expense in excess of
amounts recognized for financial reporting
purposes from the exercise of stock options... 0 (35) 0
Other.......................................... (152) 1 (1)
------- ------- -------
$14,709 $31,286 $ 1,272
======= ======= =======
</TABLE>
F-14
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 7--INCOME TAXES (CONTINUED)
Income tax expense before the adjustments to shareholder's equity is
summarized below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Current income tax expense............................. $18,305 $16,648 $10,066
Deferred income tax expense............................ 773 1,389 4,271
------- ------- -------
$19,078 $18,037 $14,337
======= ======= =======
</TABLE>
In 1996, 1995, and 1994, deferred income tax expense was incurred because of
the difference between net operating income before income taxes as reported on
the statements of operations and taxable income as reported on United
Investor's income tax returns. As explained in Note 1, this difference caused
the financial statement book values of some assets and liabilities to be
different from their respective tax bases.
The effective income tax rate differed from the expected 35% rate in 1996,
1995 and 1994 as shown below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1996 % 1995 % 1994 %
------- --- ------- --- ------- ---
<S> <C> <C> <C> <C> <C> <C>
Expected income taxes.................. $19,020 35% $17,936 35% $14,480 35%
Increase (reduction) in income taxes
resulting from:
Tax-exempt investment income.......... (38) 0 (102) 0 (243) 0
Purchase accounting differences....... 99 0 99 0 99 0
Other................................. (3) 0 104 0 1 0
------- --- ------- --- ------- ---
Income taxes........................... $19,078 35% $18,037 35% $14,337 35%
======= === ======= === ======= ===
</TABLE>
F-15
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 7--INCOME TAXES (CONTINUED)
The tax effects of temporary differences that gave rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Future policy benefits and unearned and advance
premiums.......................................... $ 5,936 $ 9,622
Present value of future surrender charges.......... 9,636 4,083
Other liabilities, principally due to the current
nondeductibilty for tax purposes of certain
accrued expenses.................................. 147 188
----------- -----------
Total gross deferred tax assets.................... 15,719 13,893
----------- -----------
Net deferred tax assets............................ 15,719 13,893
----------- -----------
Deferred tax liabilities:
Deferred acquisition costs......................... 53,625 50,806
Unrealized investment gains........................ 2,402 6,619
Other.............................................. 766 1,138
----------- -----------
Total gross deferred tax liabilities............... 56,793 58,563
----------- -----------
Net deferred tax liability......................... 41,074 44,670
=========== ===========
</TABLE>
In United Investor's opinion, all deferred tax assets will be recoverable.
United Investors has not recognized a deferred tax liability of
approximately $2,200 that arose prior to 1984 on temporary differences related
to its policyholders' surplus account. A current tax expense will be
recognized in the future if and when this tax becomes payable.
NOTE 8--POSTRETIREMENT BENEFITS
Pension Plans: The full-time employees of United Investors are covered under
a defined benefit pension plan and a defined contribution savings plan. These
plans cover primarily employees of other Torchmark and United Management
affiliates. The total costs of these retirement plans charged to operations
were as follows:
<TABLE>
<CAPTION>
DEFINED DEFINED
YEAR ENDED CONTRIBUTION BENEFIT
DECEMBER 31, PLANS PLAN
------------ ------------ -------
<S> <C> <C>
1996.................................................. $41 $115
1995.................................................. 39 75
1994.................................................. 38 66
</TABLE>
Net periodic pension cost for the defined benefit plan which covers United
Investors' employees has been calculated on the projected unit credit
actuarial cost method in accordance with SFAS 87,
F-16
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 8--POSTRETIREMENT BENEFITS (CONTINUED)
which was adopted effective January 1, 1986. Contributions are made to the
plan equal to pension expense subject to minimums required by regulation and
maximums allowed for tax purposes. United Investors records the difference
between the SFAS 87 expense and the actual cash contribution to the plan to a
liability account. The liability recorded was $55 at December 31, 1996, and
$55 at December 31, 1995. The plan is organized as a trust fund whose assets
consist primarily of investments in long-term fixed maturities and equity
securities. Such assets are valued at market.
United Investors accrues expense for the defined contribution plans based on
a percentage of the employees' contributions. The plans are funded by the
employee contributions and a company contribution.
Postretirement Benefit Plans Other Than Pensions: United Investors provides
certain health care benefits ("postretirement benefits") for its retired
employees. Substantially all employees may become eligible for these benefits
if they reach retirement age while working for the Company. Coverage under
this plan of health benefits ceases when the covered retiree and/or covered
spouse are eligible for Medicare benefits.
Postretirement benefit cost for the years ending December 31, 1996, 1995 and
1994 was $5, $3 and $16, respectively; this expense includes the expected cost
of post- retirement benefits for newly eligible or vested employees, the
interest cost, and gains and losses arising from differences between actuarial
assumptions and actual experience.
The unfunded postretirement benefit obligation for retirees and other fully
eligible or vested plan participants was $122 and $133 as of December 31, 1996
and 1995, respectively. The discount rate used in determining the accumulated
postretirement benefit obligation was 7.50% and the health care cost trend
rate was 10%, graded to 4.5% over 10 years.
NOTE 9--RELATED PARTY TRANSACTIONS
The primary distributor of United Investors' Insurance products is Waddell &
Reed, Inc. ("W&R"), a United Management affiliate. W&R receives a commission
for marketing these products which was approximately $30,200, $25,700, and
$25,300 for the years ended December 31, 1996, 1995, and 1994, respectively.
United Investors was charged for space, equipment, and services provided by
an affiliate amounting to $1,797 in 1996, $1,706 in 1995 and $1,618 in 1994.
Torchmark performed certain administrative services for United Investors for
which it charged $384 in 1996, $156 in 1995 and $156 in 1994.
F-17
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 9--RELATED PARTY TRANSACTIONS (CONTINUED)
In January 1994, United Investors loaned United Management $15,000 at an
interest rate of 3.75%. This loan was paid in full in February 1994. Interest
income related to this loan totaling $41 at December 31, 1994 is included in
the accompanying financial statements. In June and July 1994, United Investors
loaned Torchmark $2,000 and $17,000, respectively. The notes bear interest at
5.3% and 5.05% respectively and were paid in full in July 1994. In November
1994, United Investors loaned Torchmark $35,000 at an interest rate of 8.11%.
Interest income related to the Torchmark loans totaling $2,838 and $3,058 at
December 31, 1996 and 1995, respectively, is included in the accompanying
financial statements. In January 1996, United Investors loaned Liberty
National $3,500 at an interest rate of 5.75%. This loan was paid in full in
February 1996. Interest income related to this loan totaling $9 at December
31, 1996 is included in the accompanying financial statements.
United Investors serves as sponsor to two separate accounts and depositor to
the underlying investment fund in connection with its variable product
business. During 1997 United Investors will serve as a sponsor and depositor
of a third separate account in connection with its variable Product business.
At December 31, 1996 and 1995 United Investors had investments of $14,000 and
$12,500, in the separate accounts which were included in other long-term
invested assets and carried at market.
Other long-term invested assets also includes investments, carried at
market, in the United Group of Mutual Funds and certain other funds for which
W&R is the sole advisor. These investments approximated $5,159 and $4,896 at
December 31, 1996 and 1995. Investment income derived from these investments
is included in net investment income.
NOTE 10--COMMITMENTS AND CONTINGENCIES
Reinsurance: United Investors reinsures that portion of insurance risk which
is in excess of its retention limit. The maximum net retention limit for
ordinary life insurance is $525 per life. Life insurance ceded represented 2%
of total life insurance in force at December 31, 1996 and 3% of premium income
for 1996. United Investors would be liable for the reinsured risks ceded to
other companies to the extent that such reinsuring companies are unable to
meet their obligation.
United Investors did not assume insurance risks of other companies for the
year ended December 31, 1996.
Restrictions on the transfer of funds: Regulatory restrictions exist on the
transfer of funds from insurance companies. These restrictions generally limit
the payment of dividends to the statutory net gain from operations of the
prior year in the absence of special approval. Additionally, insurance
companies are not permitted to distribute the excess of shareholder's equity
as determined on a generally accepted accounting basis over that determined on
a statutory basis. Restricted net assets at December 31, 1996 in compliance
with all regulations were $160,840.
Litigation: United Investors is engaged in routine litigation arising from
the normal course of business. In management's opinion, this litigation will
not materially affect United Investors' financial position or results of
operations.
Concentrations of credit risk: United Investors maintains a highly
diversified investment portfolio with limited concentration in any given
region, industry, or economic characteristic. The investment portfolio
consists of securities of the U.S. government or U.S. government-backed
securities (32%); securities of state and municipal governments (7%);
investment-grade corporate bonds (48%); United
F-18
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 10--COMMITMENTS AND CONTINGENCIES (CONTINUED)
Funds (3%); and policy loans (2%) which are secured by the underlying
insurance policy value. The balance of the portfolio is invested in short-term
investments, non investment grade corporate bonds, and various limited
partnerships. Investments in municipal governments and corporations are made
throughout the U.S. with no concentration in any given state. Corporate debt
investments are made in a wide range of industries. At December 31, 1996, 1%
or more of the portfolio was invested in the following industries: financial
services (22%); chemicals (6%); transportation (4%); foods and kindred
products (5%); regulated utilities (3%); manufacturing (3%); media and
communications (3%); electronics (2%); paper and allied products (2%); and
services (1%). At the end of 1996, 7% of the carrying value of securities was
rated below investment grade. Par value of these investments was $47,300,
amortized cost was $48,112, and market value was $49,034. While these
investments could be subject to additional credit risk, such risk should
generally be reflected in market value.
Collateral requirements: United Investors requires collateral for
investments in instruments where collateral is available and typically
required because of the nature of the investment. Since the majority of United
Investor's investments are in government, government-secured, or corporate
securities, the requirement for collateral is rare.
NOTE 11--SUPPLEMENTAL DISCLOSURES FOR CASH FLOW STATEMENT
There were no noncash investing or financing activities for the years 1996,
1995, and 1994.
The following table summarizes certain amounts paid during the period:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Taxes paid....................................... $22,111 $15,393 $14,187
</TABLE>
F-19
<PAGE>
PART C
- ------
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements
--------------------
No financial statements of the Registrant, RetireMAP Variable Account (the
"Variable Account"), are filed as part of the Registration Statement because the
Variable Account had not commenced operations and had no assets and liabilities
as of the date of filing.
The following financial statements of the Depositor, United Investors Life
Insurance Company ("United Investors"), are included in Part B (Statement of
Additional Information) of the Registration Statement:
Independent Auditors' Report
Balance Sheets--at December 31, 1996 and 1995
Statements of Operations--for the years ended December 31, 1996, 1995 and 1994
Statements of Shareholder's Equity--for the years ended December 31, 1996, 1995
and 1994
Statements of Cash Flow--for the years ended December 31, 1996, 1995 and 1994
Notes to Financial Statements
(b) Exhibits
--------
<TABLE>
<C> <S>
(1) Resolution of the Board of Directors of United Investors authorizing
establishment of the Variable Account./2/
(2) Custody agreements: Not applicable.
(3) (A) Principal Underwriting Agreement./3/
(B) Form of Broker-Dealer Sales Agreement./3/
(4) (A) Form of Annuity Policy./2/
(B) Optional Death Benefit Rider./2/
(C) Waiver of Withdrawal Charges Rider./2/
(5) Form of Application./3/
(6) (A) Certificate of Incorporation of United Investors./1/
(B) By-Laws of United Investors./1/
(7) Reinsurance contracts: Not applicable.
(8) (A) Participation Agreement for:
(i) TMK/United Funds, Inc./4/
(ii) Federated Insurance Series./4/
(iii) Scudder Variable Life Investment Fund./4/
(iv) Dreyfus Variable Investment Fund./4/
(v) MFS Variable Insurance Trust./4/
(vi) Warburg Pincus Trust./4/
(vii) Warburg Pincus Trust II./4/
(B) Form of Administration Agreement./3/
(9) Opinion and Consent of James L. Sedgwick, Esq./4/
(10) (A) Consent of Sutherland, Asbill & Brennan, L.L.P./4/
(B) Consent of KPMG Peat Marwick LLP./4/
(11) Certain additional financial statements: Not applicable.
(12) Agreements/understandings for providing initial capital: Not
applicable.
(13) Performance Data Calculations: Not applicable.
(14) Financial Data Schedules: Not applicable.
(15) Power of Attorney./3/
</TABLE>
- ------------------------
1 Incorporated herein by reference from the initial Registration Statement on
Form S-6 (File No. 33-11465), filed on behalf of United Investors Life
Variable Account on January 22, 1987.
C - 1
<PAGE>
2 Incorporated herein by reference from the initial Registration Statement on
Form N-4 (File No. 333-12507) filed on behalf of RetireMAP Variable Account
on September 23, 1996.
3 Incorporated herein by reference from Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-4 (File No. 333-12507) filed on behalf of
RetireMAP Variable Account on March 7, 1997.
4 Filed herewith.
Item 25. Directors and Officers of the Depositor
---------------------------------------
<TABLE>
<CAPTION>
Name and Principal Position and Offices
Business Address* with Depositor
- ----------------- --------------
<S> <C>
Ronald K. Richey Director, Chairman of the Board and Chief
Executive Officer
James L. Sedgwick Director and President
W. Thomas Aycock Vice President and Chief Actuary, and Director
Charles T. Clayton, Jr. Vice President
Michael J. Klyce Vice President and Treasurer
John H. Livingston Secretary and Associate Counsel, and Director
James L. Mayton, Jr. Vice President and Controller
Carol A. McCoy Director and Assistant Secretary
Anthony L. McWhorter Director
Ross W. Stagner Vice President and Director
William L. Surber Vice President and Director
Keith A. Tucker Director and Vice Chairman
</TABLE>
________________________
* The principal business address of each person listed is United Investors
Life Insurance Company, P. O. Box 10207, Birmingham, Alabama 35202-0207.
Item 26. Persons Controlled by or Under Common Control With the Depositor or
-------------------------------------------------------------------
Registrant
----------
The Depositor, United Investors Life Insurance Company, Inc. ("United
Investors"), is wholly owned by United Investors Management Company (formerly
TMK/United, Inc.), which in turn is indirectly owned by Torchmark Corporation.
The following table shows the persons controlled by or under common control with
United Investors, their Parent Company, and the state or jurisdiction of
incorporation. All companies are 100% owned by their Parent Company, unless
otherwise indicated, which is indirectly owned by Torchmark Corporation. The
Registrant is a segregated asset account of United Investors.
<TABLE>
<CAPTION>
Parent State/Jurisdiction
Company Co. Code of Incorporation
- ------- -------- ------------------
<S> <C> <C>
American Income Life Insurance Co. D Indiana
American Life and Accident Insurance Co. B Texas
</TABLE>
C - 2
<PAGE>
<TABLE>
<CAPTION>
Parent State/Jurisdiction
Company Co. Code of Incorporation
- ------- -------- ------------------
<S> <C> <C>
Brown-Service Funeral Homes Co., Inc. C Alabama
(Services burial insurance policies)
Family Service Life Insurance Co. C Texas
Famlico, Inc. A Texas
Fiduciary Trust Company of New Hampshire G* New Hampshire
First United American Life Insurance Co. E New York
Globe Insurance Agency, Inc. B Arkansas
Globe Life And Accident Insurance Co. D Delaware
Globe Marketing Services Inc. B Oklahoma
Liberty National Auto Club, Inc. C Alabama
Liberty National GroupCare, Inc. C Alabama
Liberty National Life Insurance Co. D Alabama
Living Decisions, Inc. E Texas
Maxwell's Energy Company, Inc. D Alabama
Sentinel American Life Insurance Co. A Texas
Stonegate Management Company H Alabama
Stonegate Realty Company H Delaware
Torch Royalty Company F Delaware
Torchmark Corporation Delaware
(Holding company)
Torchmark Development Corporation D Alabama
Torchmark Distributors, Inc. G Missouri
(Distributor for mutual funds)
Unicon Agency, Inc. G New York
United American Insurance Co. D Delaware
United Investors Life Insurance Co. F Missouri
United Investors Management Co. C** Delaware
W & R Insurance Agency, Inc. G Missouri
W & R Insurance Agency of Alabama, Inc. G Alabama
W & R Insurance Agency of Arkansas, Inc. G Arkansas
</TABLE>
- ------------------------
* Parent company owns 99% of the common stock.
** Parent company owns 81%.
C - 3
<PAGE>
<TABLE>
<CAPTION>
Parent State/Jurisdiction
Company Co. Code of Incorporation
- ------- -------- ------------------
<S> <C> <C>
W & R Insurance Agency of Massachusetts, Inc. G Massachusetts
W & R Insurance Agency of Montana, Inc. G Montana
W & R Insurance Agency of Nevada, Inc. G Nevada
W & R Insurance Agency of Utah, Inc. G Utah
W & R Insurance Agency of Wyoming, Inc. G Wyoming
Waddell & Reed, Inc. F Delaware
(Insurance sales; investment manager)
Waddell & Reed Asset Management Co. G Missouri
Waddell & Reed Financial Services, Inc. F Missouri
Waddell & Reed Investment Management Co. G Kansas
Waddell & Reed Leasing, Inc. G Missouri
(Equipment leasing partnerships)
Waddell & Reed Services Co. G Missouri
(Shareholder services)
</TABLE>
Parent Company Codes
- -------------------------------------------
A Family Service Life Insurance Co.
B Globe Life And Accident Insurance Co.
C Liberty National Life Insurance Co.
D Torchmark Corporation
E United American Insurance Co.
F United Investors Management Co.
G Waddell & Reed, Inc.
H Torchmark Development Corporation
Item 27. Number of Policy Owners
-----------------------
(Not Applicable)
Item 28. Indemnification
---------------
Article XII of United Investors' By-Laws provides as follows:
"Each Director or officer, or former Director or officer, of this
Corporation, and his legal representatives, shall be indemnified by the
Corporation against liabilities, expenses, counsel fees and costs, reasonably
incurred by him or his estate in connection with, or arising out of, any
action, suit, proceeding or claim in which he is made a party by reason of
his being, or having been, such Director or officer; and any person who, at
the request of this Corporation, serves as Director or officer of another
corporation in which this Corporation owns corporate stock, and his legal
representatives, shall in like manner be indemnified by this Corporation;
provided that, in either case shall the Corporation indemnify such Director
or officer with respect to any matters as to which he shall be finally
adjudged in any such action, suit or proceeding to have been liable for
misconduct in the performance of his duties as such Director or officer. The
indemnification herein
C - 4
<PAGE>
provided for shall apply also in respect of any amount paid in compromise of
any such action, suit, proceeding or claim asserted against such Director or
officer (including expenses, counsel fees, and costs reasonably incurred in
connection therewith), provided that the Board of Directors shall have first
approved such proposed compromise settlement and determined that the officer
or Director involved is not guilty of misconduct, but in taking such action
any Director involved shall not be qualified to vote thereof, and if for this
reason a quorum of the Board cannot be obtained to vote on such matters, it
shall be determined by a committee of three (3) persons appointed by the
shareholders at a duly called special meeting or at a regular meeting. In
determining whether or not a Director or officer is guilty of misconduct in
relation to any such matter, the Board of Directors or committee appointed by
the shareholders, as the case shall be, may rely conclusively upon an opinion
of independent legal counsel selected by such Board or committee. The rights
to indemnification herein provided shall not be exclusive of any other rights
to which such Director or officer may be lawfully entitled."
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to Directors, officers and controlling provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a Director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such Director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Item 29. Principal Underwriters
----------------------
(a) MAP Investments Incorporated ("MAP") is the principal underwriter of the
Policies as defined in the Investment Company Act of 1940. It is not the
principal underwriter, depositor, sponsor, or investment adviser for any
other investment company.
(b) The following table provides certain information with respect to each
director, officer, or partner of MAP.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address* With Underwriter
- ----------------- ---------------------
<S> <C>
D. Mark Davenport Director, President, Treasurer
Terry L. Johnson Vice President, Secretary
</TABLE>
(c) Commissions Received by Each Principal Underwriter
from the Registrant during the Registrant's Last Fiscal Year
------------------------------------------------------------
<TABLE>
<CAPTION>
Net
Underwriting
Name of Principal Discounts and Compensation Brokerage
Underwriter Commissions on Redemption Commissions Compensation
- ----------------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
MAP Investments (not applicable) (not applicable) (not applicable) (not applicable)
Incorporated
</TABLE>
C - 5
<PAGE>
Item 30. Location of Accounts and Records
--------------------------------
All accounts and records required to be maintained by Section 31(a) of the
1940 Act and the rules under it are maintained by United Investors at its home
office.
Item 31. Management Services
-------------------
All management contracts are discussed in Part A or Part B.
Item 32. Undertakings
------------
(a) Registrant undertakes that it will file a Post-Effective Amendment to this
Registration Statement as frequently as necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old for so long as payments under the variable annuity contracts may be
accepted.
(b) 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 to send for a Statement of Additional
Information.
(c) Registrant undertakes to deliver any Statement of Additional Information
and any financial statements required to be made available under this Form
promptly upon written or oral request to United Investors at the address or
phone number listed in the Prospectus.
(d) United Investors represents that the fees and charges deducted under the
Policy, in the aggregate, are reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks assumed by United Investors.
STATEMENT PURSUANT TO RULE 6c-7
-------------------------------
United Investors and the Variable Account rely on 17 C.F.R. Section
270.6c-7 and represent that the provisions of that Rule have been or will
be complied with. Accordingly, United Investors and the Variable Account
are exempt from the provisions of Sections 22(e), 27(c)(1) and 27(d) of
the Investment Company Act of 1940 with respect to any variable annuity
contract participating in such account to the extent necessary to permit
compliance with the Texas Optional Retirement Program.
SECTION 403(b) REPRESENTATIONS
------------------------------
United Investors represents that 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, in connection with redeemability restrictions on Section 403(b) policies,
and that paragraphs numbered (1) through (4) of that letter will be complied
with.
C - 6
<PAGE>
SIGNATURES
----------
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant, RetireMap Variable Account, has duly caused this
Registration Statement to be signed on its behalf in the City of Birmingham and
the State of Alabama on the 6th day of June , 1997.
----- ----------
RETIREMAP VARIABLE ACCOUNT
(REGISTRANT)
By: UNITED INVESTORS LIFE INSURANCE COMPANY
(DEPOSITOR)
By: /s/ James L. Sedgwick
----------------------------------
James L. Sedgwick, President
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.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Ronald K. Richey Director, Chairman of June 6, 1997
- ------------------------- the Board and Chief
Ronald K. Richey Executive Officer
/s/ James L. Sedgwick Director and President June 6, 1997
- -------------------------
James L. Sedgwick
/s/ W. Thomas Aycock Vice President and Chief June 6, 1997
- ------------------------- Actuary, and Director
W. Thomas Aycock
/s/ Michael J. Klyce Vice President and June 6, 1997
- ------------------------- Treasurer
Michael J. Klyce
/s/ John H. Livingston Secretary and Associate June 6, 1997
- ------------------------- Counsel, and Director
John H. Livingston
/s/ James L. Mayton, Jr. Vice President and June 6, 1997
- ------------------------- Controller
James L. Mayton, Jr.
/s/ Anthony L. McWhorter Director June 6, 1997
- -------------------------
Anthony L. McWhorter
/s/ Carol A. McCoy Director and Assistant June 6, 1997
- ------------------------- Secretary
Carol A. McCoy
/s/ Ross W. Stagner Vice President and June 6, 1997
- ------------------------- Director
Ross W. Stagner
/s/ William L. Surber Vice President and June 6, 1997
- ------------------------- Director
William L. Surber
/s/ Keith A. Tucker Director and Vice June 6, 1997
- ------------------------- Chairman
Keith A. Tucker
</TABLE>
* By:
--------------------------------------
, Attorney-in-Fact and Agent, on , 1997,
--------------
pursuant to the Power of Attorney filed as Exhibit 15 to Pre-Effective
Amendment No. 1 to this Registration Statement on March 7, 1997.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- --------------------------------------
<C> <S>
(8)(A)(i) Participation Agreement for TMK/United Funds, Inc.
(8)(A)(ii) Participation Agreement for Federated Insurance Series
(8)(A)(iii) Participation Agreement for Scudder Variable Life Investment Fund
(8)(A)(iv) Participation Agreement for Dreyfus Variable Investment Fund
(8)(A)(v) Participation Agreement for MFS Variable Insurance Trust
(8)(A)(vi) Participation Agreement for Warburg Pincus Trust
(8)(A)(vii) Participation Agreement for Warburg Pincus Trust II
(9) Opinion and Consent of James L. Sedgwick, Esq.
(10)(A) Consent of Sutherland, Asbill & Brennan, L.L.P.
(10)(B) Consent of KPMG Peat Marwick LLP
</TABLE>
<PAGE>
Exhibit 99.B8(A)(i)
Participation Agreement
TMK/United Funds, Inc.
United Investors Life Insurance Company
2001 Third Avenue South
Birmingham, Alabama 35233
VARIABLE ACCOUNT
TMK/United Funds, Inc. (hereinafter TMK) is a Maryland corporation registered
with the Securities and Exchange Commission under the Investment Company Act of
1940 (the Act) as a management class, open-end, diversified investment company.
It offers its shares exclusively to insurance companies as the investment
vehicles for variable life and variable annuity policies. TMK has authorized
seven classes of shares each of which is a separate fund (Portfolio) being:
Money Market Portfolio, Bond Portfolio, High Income Portfolio, Growth Portfolio,
Income Portfolio, Small Cap Portfolio and Science and Technology Portfolio.
You have advised TMK that you are sponsoring the RetireMAP Variable Account
which is an investment company organized and registered with the Securities and
Exchange Commission as a unit investment trust under the Act (hereinafter the
Trust). You advised that you wish to arrange for the acquisition of TMK's
shares as a funding medium for the Trust. TMK agrees to make the shares of its
seven Portfolios available to you for said purposes subject to the following
terms and conditions:
1. TMK will sell its shares directly to you and on request redeem its
shares at the time and prices specified in its then current prospectus and
Statement of Additional Information (SAI) for the purpose of funding the
investment divisions of the Trust as is more particularly set forth in the
Trust's then current prospectus.
2. (a) Payment for shares in investable funds shall be due on issuance of
shares.
<PAGE>
(b) TMK will make payment on redemption of its shares as stated in its
prospectus and SAI.
(c) Purchases and redemptions of shares of the same Portfolio on the
same day may be netted so as to result in a single purchase or single redemption
for the day.
(d) Shares of one Portfolio may be exchanged for shares of another
Portfolio by redemption of shares of a particular Portfolio and the immediate
purchase of shares of the other Portfolio. On your request, TMK will effect
such exchanges by transfer of monies from one Portfolio to the other as
appropriate.
(e) All dividends and capital gains distributions shall be reinvested
in additional shares.
3. TMK will furnish you with adequate number of copies of its Annual and
Semi-annual Reports to Shareholders and TMK's proxy material for shareholder
meetings as you may request for furnishing to the policyowners and will
reimburse you for your expenses in mailing the reports and proxy materials to
the policyowners including return postage with respect to the voting of proxy
cards. With TMK's prior consent, you may include additional items in the
mailing of TMK's Reports to Shareholders provided any extra costs are paid by
you.
4. You shall vote the shares held by the policyholders as set forth in the
Trust's prospectus and any SAI.
5. TMK will furnish you with a copy of its current prospectus and SAI and
all amendments thereto. You shall print and reproduce at your expense such
copies thereof as you may desire with respect to the distribution of interests
in the Trust. You may use TMK's shareholder Reports in the distribution
process. Copies of the Reports will be furnished for such purposes as you
request at your expense.
6. The foregoing, notwithstanding, TMK shall not engage directly or
indirectly in financing any activity which is primarily
2
<PAGE>
intended to result in the sale of its shares issued by it.
7. Indemnification
A. TMK agrees with you for your benefit and each person, if any, who
controls you within the meaning of Section 15 of the Securities Act of 1933 (the
"Securities Act") and each and all and any of them, to indemnify and hold you
harmless and any such controlling person from and against any and all losses,
claims, damages or liabilities, joint or several, to which you, they or any of
them may become subject under the Securities Act, under any other statute, at
common law or otherwise, and to reimburse you and such controlling persons, if
any, for any legal or other expenses (including the cost of any investigation
and preparation) reasonably incurred by you, them or any of them in connection
with any litigation whether or not resulting in any liability, insofar as such
losses, claims, damages, liabilities or litigation arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or any prospectus or any amendment
thereof or supplement thereto or arise out of or are based upon 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; provided, however,
that this indemnity agreement shall not apply to amounts paid in settlement of
any such litigation if such settlement is effected without the consent of TMK or
to any such losses, claims, damages, liabilities or litigation arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus or any amendment thereof
or supplement thereto, or arising out of or based upon 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, which statement or
omission was made in reliance upon information furnished in writing to TMK by
you for inclusion in any registration statement or any prospectus or any
amendment thereof or supplement thereto. You and each such controlling person
shall
3
<PAGE>
promptly, after the complaint shall have been served upon you or such
controlling person in any litigation against you or such controlling person in
respect of which indemnity may be sought from TMK on account of its agreement
contained in this paragraph, notify TMK in writing of the commencement thereof.
Your omission or such controlling person so to notify TMK of any such litigation
shall relieve TMK from any liability which it may have to you or such
controlling person on account of the indemnity agreement contained in this
paragraph but shall not relieve TMK from any liability which it may have to you
or controlling person otherwise than on account of the indemnity agreement
contained in this paragraph. In case any such litigation shall be brought
against you or any such controlling person and you or such controlling person
shall notify TMK of the commencement thereof, TMK shall be entitled to
participate in (and, to the extent that it shall wish, to direct) the defense
thereof at its own expense but such defense shall be conducted by counsel of
good standing and satisfactory to you or such controlling person or persons,
defendant or defendants in the litigation. The indemnity agreement of TMK
contained in this paragraph shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of you or any such
controlling person and shall survive any delivery of shares of TMK. TMK agrees
to notify you promptly of the commencement of any litigation or proceeding
against it or any of its officers or directors of which it may be advised in
connection with the issue and sale of its shares.
B. Anything herein to the contrary notwithstanding TMK's agreement in the
foregoing, insofar as it constitutes a basis for reimbursement by TMK for
liabilities (other than payment by TMK of expenses incurred or paid in the
successful defense of any action, suit or proceeding) arising under the
Securities Act, shall not extend to the extent of any interest therein of any
person who is deemed to be an underwriter or a partner or controlling person of
an underwriter within the meaning of Section 15 of the Securities Act or who, at
the date of this Agreement, is a director of TMK, except to the extent that an
interest of such character shall have been
4
<PAGE>
determined by a court of appropriate jurisdiction the question of whether or not
such interest is against public policy as expressed in the Securities Act.
C. You agree to indemnify and hold harmless TMK and its directors and such
officers as shall have signed any registration statement from and against any
and all losses, claims, damages or liabilities, joint or several, to which TMK
or such directors or officers may become subject under the Securities Act, under
any other statute, at common law or otherwise, and will reimburse TMK or such
directors or officers for any legal or other expenses (including the cost of any
investigation and preparation) reasonably incurred by it or them or any of them
in connection with any litigation, whether or not resulting in any liability
insofar as such losses, claims, damages, liabilities or litigation arise out of,
or are based upon, any untrue statement or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, which statement or omission was made in reliance upon
information furnished in writing to TMK by you for inclusion in any registration
statement or any prospectus, or any amendment thereof or supplement thereto, or
which statement was made in, or the alleged omission was from, any advertising
or sales literature (including any reports to shareholders used as such) which
relate to TMK.
You shall not be liable for amounts paid in settlement of any such
litigation if such settlement was effected without its consent. TMK and its
directors and such officers, defendant or defendants, in any such litigation
shall, promptly after the complaint shall have been served upon TMK or any such
director or officer in any litigation against TMK or any such director or
officer in respect of which indemnity may be sought from TMK on account of its
agreement contained in this paragraph, notify you in writing of the commencement
thereof. The omission of TMK or such director or officer so to notify you of
any such litigation shall relieve you from any liability which it may have to
TMK or such director or
5
<PAGE>
officer on account of the indemnity agreement contained in this paragraph, but
shall not relieve you from any liability which it may have to TMK or such
director or officer otherwise than on account of the indemnity agreement
contained in this paragraph. In case any such litigation shall be brought
against TMK or any such officer or director and notice of the commencement
thereto shall have been given to you, you shall be entitled to participate in
(and, to the extent that it shall wish, to direct) the defense thereof at its
own expense, but such defense shall be conducted by counsel of good standing and
satisfactory to TMK. The indemnity agreement of TMK contained in this paragraph
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of TMK and shall survive any delivery of
shares of TMK. You agree to notify TMK promptly of the commencement of any
litigation or proceeding against you or any of your officers or directors or
against any such controlling person of which you may be advised, in connection
with the issue and sale of TMK.
D. Notwithstanding any provision contained in this Agreement, no party
hereto and no person or persons in control of any party hereto shall be
protected against any liability to TMK or its security holders, including
beneficial owners or its security to which they would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of their duties or by reason of their reckless disregard of their obligations
and duties under this Agreement.
8. TMK will make shares available and otherwise carry out the terms of
this Agreement until the Trust is terminated; provided, however, it will have no
obligation to issuance of shares other than for purposes of exchange among
Portfolios and reinvestment of dividends and distribution, should the
registration of the Trust securities under the Securities Act of 1933 terminate.
TMK agrees to use its best efforts to keep an adequate number of shares at all
times authorized, but it will not be required to issue its shares if all TMK
shares be issued and outstanding. TMK will be relieved of
6
<PAGE>
responsibility hereunder for issuing shares by reason of any governmental rule,
regulation or order or order of court of any competent jurisdiction or when for
reasons beyond its control, it is unable to issue such shares.
If the foregoing is in accordance with your understanding of our Agreement,
please execute your acceptance hereof on the duplicates hereto enclosed for that
purpose and return one copy to TMK/United Funds, Inc., whereupon this shall
become a binding Agreement between you and TMK/United Funds, Inc.
TMK/United Funds, Inc.
by:
-----------------------------------
Vice President
Accepted this day of 199 .
----- --------------, -
United Investors Life Insurance Company
by:
-------------------------------------
Authorized Signature
7
<PAGE>
FUND PARTICIPATION AGREEMENT
----------------------------
This AGREEMENT is made this day of , 1997, by and between United
Investors Life Insurance Company (the "Insurer"), a life insurance company
domiciled in the State of Missouri, on its behalf and on behalf of the
segregated asset accounts of the Insurer listed on Exhibit A to this Agreement
(the "Separate Accounts"); Federated Insurance Series (the "Fund"), a
Massachusetts business trust; and Federated Securities Corp. (the
"Distributor"), a Pennsylvania corporation.
W I T N E S S E T H
-------------------
WHEREAS, the Fund is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended ("1940 Act") and the Fund is authorized to issue
separate classes of shares of beneficial interest ("shares"), each representing
an interest in a separate portfolio of assets known as a "portfolio" and each
portfolio has its own investment objective, policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its
portfolios to separate accounts of insurance companies that fund variable
annuity contracts and variable life insurance policies ("Variable Contracts")
and to serve as an investment
<PAGE>
medium for Variable Contracts offered by insurance companies that have entered
into participation agreements substantially similar to this agreement
("Participating Insurance Companies"), and
WHEREAS, the Fund is currently comprised of seven separate portfolios, and
other portfolios may be established in the future; and
WHEREAS, the Fund has obtained an order from the SEC dated December 29,
1993 (File No. 812-8620), 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 1940 Act and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of life insurance companies that may
or may not be affiliated with one another (hereinafter the "Mixed and Shared
Funding Exemptive Order"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended ("1934 Act"), and is a
member in good standing of the National Association of Securities Dealers, Inc.
("NASD"); and
<PAGE>
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurer wishes to purchase shares of one or more of the Fund's
portfolios on behalf of its Separate Accounts to serve as an investment medium
for Variable Contracts funded by the Separate Accounts, and the Distributor is
authorized to sell shares of the Fund's portfolios;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants hereinafter set forth, the parties hereby agree as follows:
ARTICLE I. Sale of Fund Shares
-------------------
1.1 The Distributor agrees to sell to the Insurer those shares of the
portfolios offered and made available by the Fund and identified on Exhibit B
("Portfolios") that the Insurer orders on behalf of its Separate Accounts, and
agrees to execute such orders on each day on which the Fund calculates its net
asset value pursuant to rules of the SEC ("business day") at the net asset value
next computed after receipt and acceptance by the Fund or its agent of the order
for the shares of the Fund.
1.2 The Fund agrees to make available on each business day shares of the
Portfolios for purchase at the applicable net asset value per share by the
Insurer on behalf of its Separate Accounts; provided, however, that the Board of
Trustees of the Fund may
<PAGE>
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
Trustees, acting in good faith and in light of the Trustees' fiduciary duties
under applicable law, necessary in the best interests of the shareholders of any
Portfolio.
1.3 The Fund and the Distributor agree that shares of the Portfolios of
the Fund will be sold only to Participating Insurance Companies, their separate
accounts, and other persons consistent with each Portfolio being adequately
diversified pursuant to Section 817(h)(4) of the Internal Revenue Code of 1986,
as amended ("Code"), and the regulations thereunder. No shares of any Portfolio
will be sold directly to the general public to the extent not permitted by
applicable tax law.
1.4 The Fund and the Distributor will not sell shares of the Portfolios to
any insurance company or separate account unless an agreement containing
provisions substantially the same as the provisions in Article IV of this
Agreement is in effect to govern such sales.
1.5 Upon receipt of a request for redemption in proper form from the
Insurer, the Fund agrees to redeem any full or fractional shares of the
Portfolios held by the Insurer, ordinarily executing such requests on each
business day at the net asset value
<PAGE>
next computed after receipt and acceptance by the Fund or its agent of the
request for redemption, except that the Fund reserves the right to suspend the
right of redemption, consistent with Section 22(e) of the 1940 Act and any rules
thereunder. Such redemption shall be paid consistent with applicable rules of
the SEC and procedures and policies of the Fund as described in the current
prospectus.
1.6 For purposes of Sections 1.2 and 1.5, the Insurer shall be the agent
of the Fund for the limited purpose of receiving and accepting purchase and
redemption orders from each Separate Account and receipt of such orders by 4:00
p.m. Eastern time by the Insurer shall be deemed to be receipt by the Fund for
purposes of Rule 22c-1 of the 1940 Act; provided that the Fund receives notice
of such orders on the next following business day prior to 4:00 p.m. Eastern
time on such day, although the Insurer will use its best efforts to provide such
notice by 12:00 noon Eastern time.
1.7 The Insurer agrees to purchase and redeem the shares of each Portfolio
in accordance with the provisions of the current prospectus for the Fund.
1.8 The Insurer shall pay for shares of the Portfolio on the next business
day after it places an order to purchase shares of the Portfolio. Payment shall
be in federal funds transmitted by wire.
<PAGE>
1.9 Issuance and transfer of shares of the Portfolios will be by book
entry only unless otherwise agreed by the Fund. Stock certificates will not be
issued to the Insurer or the Separate Accounts unless otherwise agreed by the
Fund. Shares ordered from the Fund will be recorded in an appropriate title for
the Separate Accounts or the appropriate subaccounts of the Separate Accounts.
1.10 The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Insurer of any income dividends or capital gain
distributions payable on the shares of the Portfolios. The Insurer hereby
elects to reinvest in the Portfolio all such dividends and distributions as are
payable on a Portfolio's shares and to receive such dividends and distributions
in additional shares of that Portfolio. The Insurer reserves the right to
revoke this election in writing and to receive all such dividends and
distributions in cash. The Fund shall notify the Insurer of the number of
shares so issued as payment of such dividends and distributions.
1.11 The Fund shall instruct its recordkeeping agent to advise the Insurer
on each business day of the net asset value per share for each Portfolio 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
7:00 p.m. Eastern time. If the Fund provides materially incorrect share net
asset value information, the Fund shall make an adjustment to the number of
shares purchased or redeemed for the Separate Accounts to
<PAGE>
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 Insurer.
ARTICLE II. Representations and Warranties
------------------------------
2.1 The Insurer represents and warrants that it is an insurance company
duly organized and in good standing under applicable law and that it is taxed as
an insurance company under Subchapter L of the Code.
2.2 The Insurer represents and warrants that it has legally and validly
established each of the Separate Accounts as a segregated asset account under
the Missouri Insurance Code, and that each of the Separate Accounts is a validly
existing segregated asset account under applicable federal and state law.
2.3 The Insurer represents and warrants that the Variable Contracts issued
by the Insurer or interests in the Separate Accounts under such Variable
Contracts (1) are or, prior to issuance, will be registered as securities under
the Securities Act of 1933 ("1933 Act") or, alternatively, (2) are not
registered because they are properly exempt from registration under the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under the 1933 Act.
<PAGE>
2.4 The Insurer represents and warrants that each of the Separate Accounts
(1) has been registered as a unit investment trust in accordance with the
provisions of the 1940 Act or, alternatively, (2) has not been registered in
proper reliance upon an exclusion from registration under the 1940 Act.
2.5 The Insurer represents that it believes, in good faith, that the
Variable Contracts issued by the Insurer are currently treated as annuity
contracts or life insurance policies (which may include modified endowment
contracts), whichever is appropriate, under applicable provisions of the Code.
2.6 The Fund represents and warrants that it is duly organized as a
business trust under the laws of the Commonwealth of Massachusetts, and is in
good standing under applicable law.
2.7 The Fund represents and warrants that the shares of the Portfolios are
duly authorized for issuance in accordance with applicable law and that the Fund
is registered as an open-end management investment company under the 1940 Act.
2.8 The Fund represents and warrants that each Portfolio currently
complies with the diversification provisions of Section 817(h) of the Code and
the regulations issued thereunder relating to the diversification requirements
for variable life insurance
<PAGE>
policies and variable annuity contracts, and that each Portfolio is currently
qualified as a regulated investment company under Subchapter M of the Code.
2.9 The Distributor represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.
2.10 The Fund represents and warrants that any of its trustees, officers,
employees, and investment advisers 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 that required by Rule 17g-1 under the Act. The
aforesaid bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
ARTICLE III. General Duties
--------------
3.1 The Fund shall take all such actions as are necessary to permit the
sale of the shares of each Portfolio to the Separate Accounts, including
maintaining its registration as an investment company under the 1940 Act, and
registering the shares of the Portfolios sold to the Separate Accounts under the
1933 Act for so long as required by applicable law. The Fund shall amend its
Registration Statement filed with the SEC under the 1933 Act and the 1940 Act
from time to time as required in order to effect the
<PAGE>
continuous offering of the shares of the Portfolios. The Fund shall register and
qualify the shares for sale in accordance with the laws of the various states to
the extent deemed necessary in the reasonable discretion of the Fund or the
Distributor.
3.2 The Fund shall make every effort to maintain qualification of each
Portfolio as a Regulated Investment Company under Subchapter M of the Code (or
any successor or similar provision) and shall notify the Insurer immediately
upon having a reasonable basis for believing that a Portfolio has ceased to so
qualify or that it might not so qualify in the future.
3.3 The Fund shall be managed and invested in such a manner as to comply
with the diversification provisions of Section 817(h) of the Code and the
regulations issued thereunder relating to the diversification requirements for
variable life insurance policies and variable annuity contracts and any
prospective amendments or other modifications to Section 817 or regulations
thereunder, and shall notify the Insurer immediately upon having a reasonable
basis for believing that any Portfolio has ceased to comply, and in such event
shall take all reasonable steps to adequately diversify so as to achieve
compliance.
3.4 The Insurer shall take all such actions as are necessary under
applicable federal and state law to permit the sale of the Variable Contracts
issued by the Insurer,
<PAGE>
including registering each Separate Account as an investment company to the
extent required under the 1940 Act, and registering the Variable Contracts or
interests in the Separate Accounts under the Variable Contracts to the extent
required under the 1933 Act, and obtaining all necessary approvals to offer the
Variable Contracts from state insurance commissioners.
3.5 The Insurer shall make every effort to maintain the treatment of the
Variable Contracts issued by the Insurer as annuity contracts or life insurance
policies, whichever is appropriate, under applicable provisions of the Code, and
shall notify the Fund and the Distributor immediately upon having a reasonable
basis for believing that such Variable Contracts have ceased to be so treated or
that they might not be so treated in the future.
3.6 The Insurer shall offer and sell the Variable Contracts issued by the
Insurer in accordance with applicable provisions of the 1933 Act, the 1934 Act,
the 1940 Act, the NASD Rules of Fair Practice, and state law respecting the
offering of variable life insurance policies and variable annuity contracts.
3.7 The Distributor shall sell and distribute the shares of the Portfolios
of the Fund in accordance with the applicable provisions of the 1933 Act, the
1934 Act, the 1940 Act, the NASD Rules of Fair Practice, and state law.
<PAGE>
3.8 During such time as the Fund engages in Mixed Funding or Shared
Funding, a majority of the Board of Trustees of the Fund shall consist of
persons who are not "interested persons" of the Fund ("disinterested Trustees"),
as defined by Section 2(a)(19) of the 1940 Act and the rules thereunder, and as
modified by any applicable orders of the SEC, except that if this provision of
this Section 3.8 is not met by reason of the death, disqualification, or bona
fide resignation of any Trustee or Trustees, then the operation of this
provision shall be suspended (a) for a period of 45 days if the vacancy or
vacancies may be filled by the Fund's Board; (b) for a period of 60 days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
3.9 The Insurer and its agents will not in any way recommend any proposal
or oppose or interfere with any proposal submitted by the Fund at a meeting of
owners of Variable Contracts or shareholders of the Fund, and will in no way
recommend, oppose, or interfere with the solicitation of proxies for Fund shares
held by Contract Owners, without the prior written consent of the Fund, which
consent may be withheld in the Fund's sole discretion.
3.10 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (including, without
limitation, the SEC, the NASD, and state insurance regulators) and shall permit
such authorities reasonable access
<PAGE>
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
ARTICLE IV. Potential Conflicts
-------------------
4.1 During such time as the Fund engages in Mixed Funding or Shared
Funding, the parties hereto shall comply with the conditions in this Article IV.
4.2 The Fund's Board of Trustees shall monitor the Fund for the existence
of any material irreconcilable conflict (1) between the interests of owners of
variable annuity contracts and variable life insurance policies, and (2) between
the interests of owners of Variable Contracts ("Variable Contract Owners")
issued by different Participating Life Insurance Companies that invest in the
Fund. A material irreconcilable conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretive 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 of
the Fund are being managed; (e) a difference in voting instructions given by
variable annuity and variable life insurance
<PAGE>
contract owners; or (f) a decision by a Participating Insurance Company to
disregard the voting instructions of Variable Contract Owners.
4.3 The Insurer agrees that it shall report any potential or existing
conflicts of which it is aware to the Fund's Board of Trustees. The Insurer
will be responsible for assisting the Board of Trustees of the Fund in carrying
out its responsibilities under the Mixed and Shared Funding Exemptive Order, or,
if the Fund is engaged in Mixed Funding or Shared Funding in reliance on Rule
6e-2, 6e-3(T), or any other regulation under the 1940 Act, the Insurer will be
responsible for assisting the Board of Trustees of the Fund in carrying out its
responsibilities under such regulation, by providing the Board, upon request,
with all information reasonably necessary for the Board to consider any issues
raised. This includes, but is not limited to, an obligation by the Insurer to
inform the Board whenever Variable Contract Owner voting instructions are
disregarded. The Insurer shall carry out its responsibility under this Section
4.3 with a view only to the interests of the Variable Contract Owners.
4.4 The Insurer agrees that in the event that it is determined by a
majority of the Board of Trustees of the Fund or a majority of the Fund's
disinterested Trustees that a material irreconcilable conflict exists, the
Insurer shall, at its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested Trustees of the Board of the
Fund), take whatever steps are necessary to remedy or eliminate the
<PAGE>
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 another portfolio of the Fund, or submitting the question as to
whether such segregation should be implemented to a vote of all affected
Variable Contract Owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners or life insurance contract
owners of contracts issued by one or more Participating Insurance Companies),
that votes in favor of such segregation, or offering to the affected Variable
Contract Owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account. If a
material irreconcilable conflict arises because of the Insurer's decision to
disregard Variable Contract Owners' voting instructions and that decision
represents a minority position or would preclude a majority vote, the Insurer
shall be required, at the Fund's election, to withdraw the Separate Accounts'
investment in the Fund, provided, however, that such withdrawal and termination
shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees, and no
charge or penalty will be imposed as a result of such withdrawal. These
responsibilities shall be carried out with a view only to the interests of the
Variable Contract Owners. A majority of the disinterested Trustees of the Fund
shall determine whether or not any proposed action adequately remedies any
material irreconcilable conflict, but in no event will the Fund or its
investment adviser or the Distributor be required to establish a new funding
<PAGE>
medium for any Variable Contract. The Insurer shall not be required by this
Section 4.4 to establish a new funding medium for any Variable Contract if any
offer to do so has been declined by vote of a majority of Variable Contract
Owners materially adversely affected by the material irreconcilable conflict.
4.5 The Insurer, at least annually, shall submit to the Fund's Board of
Trustees such reports, materials, or data as the Board reasonably may request so
that the Trustees of the Fund may fully carry out the obligations imposed upon
the Board by the conditions contained in the application for the Mixed and
Shared Funding Exemptive Order and said reports, materials, and data shall be
submitted more frequently if deemed appropriate by the Board.
4.6 All reports of potential or existing conflicts received by the Fund's
Board of Trustees, and all Board action with regard to determining the existence
of a conflict, notifying Participating Insurance Companies of a conflict, and
determining whether any proposed action adequately remedies a conflict, shall be
properly recorded in the minutes of the Board of Trustees of the Fund or other
appropriate records, and such minutes or other records shall be made available
to the SEC upon request.
<PAGE>
4.7 The Board of Trustees of the Fund shall promptly notify the Insurer in
writing of its determination of the existence of an irreconcilable material
conflict and its implications.
ARTICLE V. Prospectuses and Proxy Statements; Voting
-----------------------------------------
5.1 The Insurer shall distribute such prospectuses, proxy statements and
periodic reports of the Fund to the owners of Variable Contracts issued by the
Insurer as required to be distributed to such Variable Contract Owners under
applicable federal or state law.
5.2 The Distributor shall provide the Insurer with as many copies of the
current prospectus of the Fund as the Insurer may reasonably request. If
requested by the Insurer in lieu thereof, the Fund shall provide such
documentation (including a final copy of the Fund's prospectus as set in type or
in camera-ready copy) and other assistance as is reasonably necessary in order
for the Insurer to either print a stand-alone document or print together in one
document the current prospectus for the Variable Contracts issued by the
Insurer and the current prospectus for the Fund, or a document combining the
Fund prospectus with prospectuses of the Variable Contract and other funds in
which the Variable Contracts may be invested. The Fund shall bear the expense
of printing copies of its current prospectus that will be distributed to
existing Variable Contract Owners,
<PAGE>
and the Insurer shall bear the expense of printing copies of the Fund's
prospectus that are used in connection with offering the Variable Contracts
issued by the Insurer. The expenses of printing prospectuses combining the Fund
prospectus with the Variable Contract prospectus and/or with prospectuses of
other funds in which the Variable Contracts may be invested shall be apportioned
between (a) the Insurer and (b) the Fund, in proportion to the number of pages
of the combined prospectus, taking account of other relevant factors affecting
the expense of printing, such as covers, columns, graphs and charts. The Fund
will bear the cost of printing the Funds' prospectus portion of such document
for distribution to owners of existing Variable Contracts invested in the Fund,
and the Insurer will bear the expense of printing the portion of such documents
relating to the Separate Accounts; provided, however, that the Insurer will bear
all printing expenses of such combined prospectuses where used for distribution
to prospective purchasers or to owners of existing Variable Contracts not
invested in the Fund.
5.3 The Fund and the Distributor shall provide, at the Fund's expense,
such copies of the Fund's current Statement of Additional Information ("SAI") as
may reasonably be requested, to the Insurer and to any owner of a Variable
Contract issued by the Insurer who requests such SAI.
5.4 The Fund, at its expense, shall provide the Insurer with copies of its
proxy materials, periodic reports to shareholders, and other communications to
shareholders in
<PAGE>
such quantity as the Insurer shall reasonably require for purposes of
distributing to owners of Variable Contracts issued by the Insurer. The Fund, at
the Insurer's expense, shall provide the Insurer with copies of its periodic
reports to shareholders and other communications to shareholders in such
quantity as the Insurer shall reasonably request for use in connection with
offering the Variable Contracts issued by the Insurer. If requested by the
Insurer in lieu thereof, the Fund shall provide such documentation (including a
final copy of the Fund's proxy materials, periodic reports to shareholders, and
other communications to shareholders, as set in type or in camera-ready copy)
and other assistance as reasonably necessary in order for the Insurer to print
such shareholder communications for distribution to owners of Variable Contracts
issued by the Insurer.
5.5 For so long as the SEC interprets the 1940 Act to require pass-through
voting by Participating Insurance Companies whose Separate Accounts are
registered as investment companies under the 1940 Act, the Insurer shall vote
shares of each Portfolio of the Fund held in a Separate Account or a subaccount
thereof, whether or not registered under the 1940 Act, at regular and special
meetings of the Fund in accordance with instructions timely received by the
Insurer (or its designated agent) from owners of Variable Contracts funded by
such Separate Account or subaccount thereof having a voting interest in the
Portfolio. The Insurer shall vote shares of a Portfolio of the Fund held in a
Separate Account or a subaccount thereof that are attributable to the Variable
Contracts as to which no timely instructions are received, as well as shares
held in such
<PAGE>
Separate Account or subaccount thereof that are not attributable to the Variable
Contracts and owned beneficially by the Insurer (resulting from charges against
the Variable Contracts or otherwise), in the same proportion as the votes cast
by owners of the Variable Contracts funded by that Separate Account or
subaccount thereof having a voting interest in the Portfolio from whom
instructions have been timely received. The Insurer shall vote shares of each
Portfolio of the Fund held in its general account, if any, in the same
proportion as the votes cast with respect to shares of the Portfolio held in all
Separate Accounts of the Insurer or subaccounts thereof, in the aggregate.
5.6 During such time as the Fund engages in Mixed Funding or Shared
Funding, the Fund shall disclose in its prospectus that (1) the Fund is intended
to be a funding vehicle for variable annuity and variable life insurance
contracts offered by various insurance companies, (2) material irreconcilable
conflicts possibly may arise, and (3) the Board of Trustees of the Fund will
monitor events in order to identify the existence of any material irreconcilable
conflicts and to determine what action, if any, should be taken in response to
any such conflict. The Fund hereby notifies the Insurer that prospectus
disclosure may be appropriate regarding potential risks of offering shares of
the Fund to separate accounts funding both variable annuity contracts and
variable life insurance policies and to separate accounts funding Variable
Contracts of unaffiliated life insurance companies.
ARTICLE VI. Sales Material and Information
------------------------------
<PAGE>
6.1 The Insurer 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 any Portfolio thereof) or its investment adviser
or the Distributor is named at least 15 days prior to the anticipated use of
such material, and no such sales literature or other promotional material shall
be used unless the Fund and the Distributor or the designee of either approve
the material or do not respond with comments on the material within 10 days from
receipt of the material.
6.2 The Insurer agrees that neither it nor any of its affiliates or agents
shall give any information or make any representations or statements on behalf
of the Fund or concerning the Fund 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
and by the Distributor or its designee, except with the permission of the Fund
or its designee and the Distributor or its designee.
6.3 The Fund or the Distributor or the designee of either shall furnish to
the Insurer or its designee, each piece of sales literature or other promotional
material in which the Insurer or its Separate Accounts are named at least 15
days prior to the anticipated use of such material, and no such material shall
be used unless the Insurer or
<PAGE>
its designee approves the material or does not respond with comments on the
material within 10 days from receipt of the material.
6.4 The Fund and the Distributor agree that each and the affiliates and
agents of each shall not give any information or make any representations on
behalf of the Insurer or concerning the Insurer, the Separate Accounts, or the
Variable Contracts issued by the Insurer, other than the information or
representations contained in a registration statement or prospectus for such
Variable Contracts, as such registration statement and prospectus may be amended
or supplemented from time to time, or in reports for the Separate Accounts or
prepared for distribution to owners of such Variable Contracts, or in sales
literature or other promotional material approved by the Insurer or its
designee, except with the permission of the Insurer.
6.5 The Fund will provide to the Insurer at least one complete copy of the
Mixed and Shared Funding Exemptive Application and any amendments thereto, all
prospectuses, Statements of Additional Information, reports, proxy statements
and other voting solicitation materials, and all amendments and supplements to
any of the above, that relate to the Fund or its shares, promptly after the
filing of such document with the SEC or other regulatory authorities.
<PAGE>
6.6 The Insurer will provide to the Fund all prospectuses (which shall
include an offering memorandum if the Variable Contracts issued by the Insurer
or interests therein are not registered under the 1933 Act), Statements of
Additional Information, reports, solicitations for voting instructions relating
to the Fund, and all amendments or supplements to any of the above that relate
to the Variable Contracts issued by the Insurer or the Separate Accounts which
utilize the Fund as an underlying investment medium, promptly after the filing
of such document with the SEC or other regulatory authority.
6.7 For purposes of this Article VI, 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, computerized media, 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.
ARTICLE VII. Indemnification
---------------
7.1 Indemnification by the Insurer
------------------------------
<PAGE>
7.1(a) The Insurer agrees to indemnify and hold harmless the
Fund, each of its Trustees and officers, any affiliated person of the Fund
within the meaning of Section 2(a)(3) of the 1940 Act, and the Distributor
(collectively, the "Indemnified Parties" for purposes of this Section 7.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Insurer) or litigation expenses
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or litigation expenses are
related to the sale or acquisition of the Fund's shares or the Variable
Contracts issued by the Insurer 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 (which shall include an offering
memorandum) for the Variable Contracts issued by the Insurer or sales
literature for such Variable 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 Insurer by or
on behalf of the Fund for use in the registration statement or
prospectus for the Variable Contracts issued by the Insurer or sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of such Variable Contracts or Fund shares; or
(ii) arise out of or as a result of any statement or
representation (other than statements or representations contained in
the registration statement, prospectus or sales literature of the Fund
not supplied by the Insurer or persons under its control) or wrongful
conduct of the Insurer or any of its affiliates, employees or agents
with respect to
<PAGE>
the sale or distribution of the Variable Contracts issued by the
Insurer or the Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature of the Fund or any amendment thereof
or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to the Fund
by or on behalf of the Insurer; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Insurer in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Insurer;
except to the extent provided in Sections 7.1(b) and 7.1(c) hereof.
7.1(b) The Insurer shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of the
Indemnified Party's duties or by reason of the Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Fund.
7.1(c) The Insurer shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Party shall have notified the Insurer 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
<PAGE>
such Indemnified Party (or after such Party shall have received notice of such
service on any designated agent), but failure to notify the Insurer of any such
claim shall not relieve the Insurer 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 Insurer shall be entitled to participate, at its
own expense, in the defense of such action. The Insurer also shall be entitled
to assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Insurer to such party of the Insurer'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 Insurer 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.
7.1(d) The Indemnified Parties shall promptly notify the Insurer of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund shares or the Variable Contracts issued by
the Insurer or the operation of the Fund.
7.1(e) This indemnification provision is in addition to any liability
which the Insurer may otherwise have.
<PAGE>
7.2 Indemnification By the Distributor
----------------------------------
7.2(a) The Distributor agrees to indemnify and hold harmless the
Insurer, the principal underwriter of the Variable Contracts, and each of their
directors and officers and any affiliated person of the Insurer within the
meaning of Section 2(a)(3) of the 1940 Act (collectively, the "Indemnified
Parties" for purposes of this Section 7.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Distributor) or litigation expenses (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute
or regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or litigation expenses are related to the sale or
acquisition of the Fund's shares or the Variable Contracts issued by the Insurer
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 Distributor or the Fund or the designee of either by or on behalf
of the Insurer 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 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 Variable
Contracts issued by the Insurer or Fund shares; or
<PAGE>
(ii) arise out of or as a result of any statement or
representations (other than statements or representations contained in
the registration statement, prospectus or sales literature for the
Variable Contracts not supplied by the Distributor or any employees or
agents thereof) or wrongful conduct of the Fund or Distributor, or the
affiliates, employees, or agents of the Fund or the Distributor with
respect to the sale or distribution of the Variable Contracts issued
by the Insurer 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 Variable Contracts issued
by the Insurer, 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 Insurer by or on behalf of
the Fund; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Distributor; or
(v) arise out of a failure by the Fund to comply with the
diversification requirements of Section 817(h) of the Code or a
failure by the Fund to qualify as a regulated investment company under
Subchapter M of the Code;
except to the extent provided in Sections 7.2(b) and 7.2(c) hereof.
7.2(b) The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of the
Indemnified Party's duties or by
<PAGE>
reason of the Indemnified Party's reckless disregard of obligations or duties
under this Agreement or to the Insurer or the Separate Accounts.
7.2(c) The Distributor shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Party shall have notified the Distributor in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Party shall have received notice of such service on any designated agent),
but failure to notify the Distributor of any such claim shall not relieve the
Distributor 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 Distributor will be entitled to participate, at is own
expense, in the defense thereof. The Distributor also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Distributor to such party of the Distributor'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 Distributor
will not be liable to such party under this Agreement for any legal or other
expense subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
<PAGE>
7.2(d) The Insurer shall promptly notify the Distributor 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 Variable Contracts
issued by the Insurer or the operation of the Separate Accounts.
7.2(e) This indemnification provision is in addition to any liability
which the Distributor may otherwise have.
7.3 Indemnification by the Fund
---------------------------
7.3(a) The Fund agrees to indemnify and hold harmless the Insurer,
its affiliated principal underwriter of the Variable Contracts, and each of
their directors and officers and any affiliated person of the Insurer within the
meaning of Section 2(a)(3) of the 1940 Act (collectively, the "Indemnified
Parties" for purposes of this Section 7.3) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Fund) or litigation expenses (including legal and other expenses)
to which the Indemnified Parties may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or litigation expenses are related to the sale or acquisition of the
Fund's shares or the Variable Contracts issued by the Insurer and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration
<PAGE>
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
Distributor or the Fund or the designee of either by or on behalf of
the Insurer 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 Variable
Contracts issued by the Insurer or Fund shares; or
(ii) arise out of or as a result of any statement or
representation (other than statements or representations contained in
the registration statement, prospectus or sales literature for the
Variable Contracts not supplied by the Distributor or any employees or
agents thereof) or wrongful conduct of the Fund, or the affiliates,
employees, or agents of the Fund, with respect to the sale or
distribution of the Variable Contracts issued by the Insurer 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 Variable Contracts issued
by the Insurer, 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 Insurer by or on behalf of
the Fund; or
(iv) 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; or
(v) arise as a result of a failure by the Fund to
substantially provide the services and furnish the materials under the
terms of this Agreement.
except to the extent provided in Sections 7.3(b) and 7.3(c) hereof.
<PAGE>
7.3(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of the
Indemnified Party's duties or by reason of the Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Insurer or the
Separate Accounts.
7.3(c) The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such 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
Party shall have received notice of such service on any designated agent), but
failure to notify the Fund of any such claim shall not relieve the Fund from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In case
any such action is brought against the 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
<PAGE>
legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
7.3(d) The Insurer shall promptly notify the Fund of the com-
mencement of any litigation or proceedings against it or any of its officers or
directors in connection with the issuance or sale of the Variable Contracts
issued by the Insurer or the sale of the Fund's shares.
7.3(e) This indemnification provision is in addition to any liability
which the Fund may otherwise have.
ARTICLE VIII. Applicable Law
--------------
8.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Pennsylvania.
8.2 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
(including, but not limited to, the Mixed and Shared Funding Exemptive Order),
and the terms hereof shall be interpreted and construed in accordance therewith.
<PAGE>
ARTICLE IX. Termination
-----------
9.1 This Agreement shall terminate:
(a) at the option of any party upon 180 days advance written notice
to the other parties; or
(b) at the option of the Insurer if shares of the Portfolios are not
reasonably available to meet the requirements of the Variable Contracts issued
by the Insurer, as determined by the Insurer, and upon prompt notice by the
Insurer to the other parties; or
(c) at the option of the Fund or the Distributor by written notice to
the Insurer, upon institution of formal proceedings against the Insurer or its
agent by the NASD, the SEC, or any state securities or insurance department or
any other regulatory body regarding the Insurer's duties under this Agreement or
related to the sale of the Variable Contracts issued by the Insurer, the
operation of the Separate Accounts, or the purchase of the Fund shares; or
(d) at the option of the Insurer by written notice to the Fund and
Distributor, upon institution of formal proceedings against the Fund or the
Distributor by
<PAGE>
the NASD, the SEC, or any state securities or insurance department or any other
regulatory body; or
(e) upon receipt of any necessary regulatory approvals and/or the
requisite vote of the Variable Contract Owners having an interest in the
Separate Accounts (or any subaccounts thereof) to substitute the shares of
another investment company for the corresponding shares of the Fund or a
Portfolio in accordance with the terms of the Variable Contracts for which those
shares had been selected or serve as the underlying investment media; or
(f) in the event any of the shares of a Portfolio are not registered,
issued or sold in accordance with applicable state and/or federal law, or such
law precludes the use of such shares as the underlying investment media of the
Variable Contracts issued or to be issued by the Insurer; or
(g) by any party to the Agreement upon a determination by a majority
of the Trustees of the Fund, or a majority of its disinterested Trustees, that
an irreconcilable conflict, as described in Article IV hereof, exists; or
(h) at the option of the Insurer if the Fund or a Portfolio fails to
meet the requirements under Subchapter M of the Code for qualification as a
Regulated Investment
<PAGE>
Company specified in Section 3.2 hereof or the diversification requirements
specified in Section 3.3 hereof; or
(i) at the option of any party upon any other party's breach of any
material provision of this Agreement, which breach has not been cured to the
satisfaction of the non-breaching party within ten days after written notice of
such breach is delivered to the breaching party; or
(j) at the option of the Insurer, if the Insurer shall determine, in
its sole judgment reasonably exercised in good faith, that the Fund and/or the
Distributor is the subject of material adverse publicity and such material
adverse publicity is likely to have a material adverse impact on the sale of the
variable contracts and/or the operations or business reputation of the Insurer,
and the Insurer shall have notified the Fund and/or the Distributor, as
appropriate, in writing of such determination and its intent to terminate this
Agreement, and, after consideration of the actions taken by the Fund and/or the
Distributor and any other changes in circumstances since the giving of such
notice, the determination of the Insurer shall continue to apply on the sixtieth
day since giving of such notice, which sixtieth day shall be the effective date
of termination; or
(k) at the option of the Fund and/or the Distributor, if the Fund
and/or the Distributor shall determine, in their sole judgment reasonably
exercised in good faith, that
<PAGE>
the Insurer is the subject of material adverse publicity and such material
adverse publicity is likely to have a material adverse impact on the sale of the
Portfolios, the variable contracts and/or the operations or business reputation
of the Fund and/or the Distributor, and the Fund and/or the Distributor shall
have notified the Insurer in writing of such determination and the intent to
terminate this Agreement, and, after consideration of the actions taken by the
Insurer and any other changes in circumstances since the giving of such notice,
the determination of the Fund and/or the Distributor shall continue to apply on
the sixtieth day since giving of such notice, which sixtieth day shall be the
effective date of termination.
9.2 Each party to this Agreement shall promptly notify the other parties
to the Agreement of the institution against such party of any such formal
proceedings as described in Sections 9.1(c) and (d) hereof. The Insurer shall
give 60 days prior written notice to the Fund of the date of any proposed vote
of Variable Contract Owners to replace the Fund's shares as described in Section
9.1(e) hereof.
9.3 Except as necessary to implement Variable Contract Owner initiated
transactions, or as required by state insurance laws or regulations, the Insurer
shall not redeem Fund shares attributable to the Variable Contracts issued by
the Insurer (as opposed to Fund shares attributable to the Insurer's assets held
in the Separate Accounts), and the Insurer shall not prevent Variable Contract
Owners from allocating payments to a
<PAGE>
Portfolio, until 30 days after the Insurer shall have notified the Fund or
Distributor of its intention to do so.
9.4 Notwithstanding any termination of this Agreement, the Fund and the
Distributor shall at the option of the Insurer continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Variable Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, based upon instructions from the owners of the
Existing Contracts, the Separate Accounts shall be permitted to reallocate
investments in the Portfolios of the Fund and redeem investments in the
Portfolios, and shall be permitted to invest in the Portfolios in the event that
owners of the Existing Contracts make additional purchase payments under the
Existing Contracts. If this Agreement terminates, the parties agree that
Sections 3.10, 7.1, 7.2, 7.3, 8.1, and 8.2, and, to the extent that all or a
portion of the assets of the Separate Accounts continue to be invested in the
Fund or any Portfolio of the Fund, Articles I, II, III, and IV and Sections 5.5,
5.6 and 11.4 will remain in effect after termination.
9.5 Unless stated otherwise in this Agreement, termination shall be
effective giving written notice as set forth in Article X.
ARTICLE X. Notices
-------
<PAGE>
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:
Federated Insurance Series
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attn.: John W. McGonigle
If to the Distributor:
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attn.: John W. McGonigle
If to the Insurer:
United Investors Life Insurance Company
2001 Third Avenue South
Birmingham, Alabama 35233
Attn.: James L. Sedgwick, President
Copy to:
Mid America Partners, Inc.
9020 North May Avenue
Suite 290
Oklahoma City, OK 73120
Attn.: Mark Davenport
Fax: 405 840-8770
ARTICLE XI: Miscellaneous
-------------
<PAGE>
11.1 The Fund and the Insurer agree that if and to the extent Rule 6e-2 or
Rule 6e-3(T) under the 1940 Act is amended or if Rule 6e-3 is adopted in final
form, to the extent applicable, the Fund and the Insurer shall each take such
steps as may be necessary to comply with the Rule as amended or adopted in final
form.
11.2 A copy of the Fund's Agreement and Declaration of Trust is on file
with the Secretary of the Commonwealth of Massachusetts and notice is hereby
given that any agreements that are executed on behalf of the Fund by any Trustee
or officer of the Fund are executed in his or her capacity as Trustee or officer
and not individually. The obligations of this Agreement shall only be binding
upon the assets and property of the Fund and shall not be binding upon any
Trustee, officer or shareholder of the Fund individually.
11.3 Nothing in this Agreement shall impede the Fund's Trustees or
shareholders of the shares of the Fund's Portfolios from exercising any of the
rights provided to such Trustees or shareholders in the Fund's Agreement and
Declaration of Trust, as amended, a copy of which will be provided to the
Insurer upon request.
11.4 Administrative services to Variable Contract Owners shall be the
responsibility of Insurer. Insurer, on behalf of its separate accounts will be
the sole shareholder of record of Fund shares. Fund and Distributor recognize
that they will
<PAGE>
derive a substantial savings in administrative expense by virtue of having a
sole shareholder rather than multiple shareholders. In consideration of the
administrative savings resulting from having a sole shareholder rather than
multiple shareholders, Distributor agrees to pay monthly to Insurer, for as long
as its Separate Account(s) is invested in the Fund, an amount computed at an
annual rate of .25 of 1% of the average daily net asset value of shares held in
subaccounts for which Insurer provides administrative services. Distributor's
payments to Insurer are for administrative services only and do not constitute
payment in any manner for investment advisory services.
11.5 It is understood that the name "Federated" or any derivative thereof
or logo associated with that name is the valuable property of the Distributor
and its affiliates, and that the Insurer has the right to use such name (or
derivative or logo) only so long as this Agreement is in effect. Upon
termination of this Agreement the Insurer shall forthwith cease to use such name
(or derivative or logo).
11.6 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.
11.7 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
<PAGE>
11.8 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.
11.9 This Agreement may not be assigned by any party to the Agree-ment
except with the written consent of the other parties to the Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
FEDERATED INSURANCE SERIES
ATTEST: BY:
Name: Name:
__
Title: Title:
FEDERATED SECURITIES CORP.
ATTEST: BY:
Name: Name:
Title: Title:
UNITED INVESTORS LIFE
INSURANCE COMPANY
ATTEST: BY:
Name: Name:
<PAGE>
Title: Title:
Exhibit A
RetireMAP Variable Account
Variable Annuity Contract form number V96
<PAGE>
Exhibit B
<PAGE>
EX-99.B8(A)(iii)
PARTICIPATION AGREEMENT
PARTICIPATION AGREEMENT (the "Agreement") made by and between SCUDDER
VARIABLE LIFE INVESTMENT FUND (the "Fund"), a Massachusetts business trust
created under a Declaration of Trust dated March 15, 1985, as amended, with a
principal place of business in Boston, Massachusetts, and United Investors Life
Insurance Company, a Missouri corporation (the "Company"), with a principal
place of business in Birmingham, Alabama, on behalf of Retire MAP Variable
Account, a separate account of the Company, and any other separate account of
the Company as designated by the Company from time to time, upon written notice
to the Fund in accordance with Section 9 herein (each, an "Account").
WHEREAS, the Fund acts as the investment vehicle for the separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively referred to herein as "Variable Insurance Products") to be offered
by insurance companies which have entered into participation agreements
substantially identical to this Agreement ("Participating Insurance Companies")
and their affiliated insurance companies; and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares of beneficial interest without par value ("Shares"), and additional
series of Shares may be established, each designated a "Portfolio" and
representing the interest in a particular managed portfolio of securities; and
WHEREAS, each Portfolio of the Fund, except the Money Market Portfolio, is
divided into two classes of Shares, and additional classes of Shares may be
established; and
WHEREAS, the Parties desire to evidence their agreement as to certain other
matters,
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter contained, the parties hereto agree as follows:
1. Duty of Fund to Sell.
--------------------
The Fund shall make its Shares available for purchase at the applicable net
asset value per Share by Participating Insurance Companies and their affiliates
and separate accounts on those days on which the Fund calculates its net asset
value pursuant to rules of the Securities and Exchange
<PAGE>
Commission; provided, however, that the Trustees of the Fund 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 Trustees,
necessary in the best interest of the shareholders of any Portfolio.
2. Fund Materials.
---------------
The Fund, at its expense, shall provide the Company or its designee with
camera-ready copy or computer diskette versions of all prospectuses, statements
of additional information, annual and semi-annual reports and proxy materials
(collectively, "Fund Materials") to be printed and distributed by the Company or
its broker/dealer to the Company's existing or prospective contract owners, as
appropriate. The Company agrees to bear the cost of printing and distributing
such Fund Materials.
3. Requirement to Execute Participation Agreement; Requests.
--------------------------------------------------------
Each Participating Insurance Company shall, prior to purchasing Shares in
the Fund, execute and deliver a participation agreement in a form substantially
identical to this Agreement.
The Fund shall make available, upon written request from the Participating
Insurance Company given in accordance with Paragraph 9, to each Participating
Insurance Company which has executed an Agreement and which Agreement has not
been terminated pursuant to Paragraph 7 (i) a list of all other Participating
Insurance Companies, and (ii) a copy of the Agreement as executed by any other
Participating Insurance Company.
The Fund shall also make available upon request to each Participating
Insurance Company which has executed an Agreement and which Agreement has not
been terminated pursuant to Paragraph 7, the net asset value of any Portfolio of
the Fund as of any date upon which the Fund calculates the net asset value of
its Portfolios for the purpose of purchase and redemption of Shares.
4. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless the Fund and each of
its Trustees and officers and each person, if any, who controls the Fund within
the meaning of Section 15 of the Securities Act of 1933 (the "Act") against any
and all losses, claims, damages, liabilities or litigation (including legal and
other expenses), arising out of the acquisition of any Shares by any person, to
which the Fund or such Trustees, officers or controlling person may become
subject under
2
<PAGE>
the Act, under any other statute, at common law or otherwise, which (i) may be
based upon any wrongful act by the Company, any of its employees or
representatives, any affiliate of or any person acting on behalf of the Company
or a principal underwriter of its insurance products, or (ii) may be based upon
any untrue statement or alleged untrue statement of a material fact contained in
a registration statement or prospectus covering Shares 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 the Company, or (iii) may be based on any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement or prospectus covering insurance products sold by the
Company or any insurance company which is an affiliate thereof, or any
amendments 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, unless such statement or
omission was made in reliance upon information furnished to the Company or such
affiliate by or on behalf of the Fund; provided, however, that in no case (i) is
the Company's indemnity in favor of a Trustee or officer or any other person
deemed to protect such Trustee or officer or other person against any liability
to which any such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties or
by reason of his reckless disregard of obligations and duties under this
Agreement or (ii) is the Company to be liable under its indemnity agreement
contained in this Paragraph 4 with respect to any claim made against the Fund or
any person indemnified unless the Fund or such person, as the case may be, shall
have notified the Company in writing pursuant to Paragraph 9 within a reasonable
time after the summons or other first legal process giving information of the
nature of the claims shall have been served upon the Fund or upon such person
(or after the Fund or such person 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 has to the Fund or any
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this Paragraph 4. The Company shall be
entitled to participate, at its own expense, in the defense, or, if it so
elects, to assume the
3
<PAGE>
defense of any suit brought to enforce any such liability, but, if it elects to
assume the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Fund, to its officers and Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Company elects to assume the defense of any such suit and retain such counsel,
the Fund, such officers and Trustees or controlling person or persons, defendant
or defendants in the suit, shall bear the fees and expenses of any additional
counsel retained by them, but, in case the Company does not elect to assume the
defense of any such suit, the Company will reimburse the Fund, such officers and
Trustees or controlling person or persons, defendant or defendants in such suit,
for the reasonable fees and expenses of any counsel retained by them. The
Company agrees promptly to notify the Fund pursuant to Paragraph 9 of the
commencement of any litigation or proceedings against it in connection with the
issue and sale of any Shares.
(b) 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 Act against any and all losses, claims,
damages, liabilities or litigation (including legal and other expenses) to which
it or such directors, officers or controlling person may become subject under
the Act, under any other statute, at common law or otherwise, arising out of the
acquisition of any Shares by any person which (i) may be based upon any wrongful
act by the Fund, any of its employees or representatives or a principal
underwriter of the Fund, or (ii) may be based upon any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement or prospectus covering Shares 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 unless such statement or omission was made in reliance upon
information furnished to the Fund by the Company or (iii) may be based on any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement or prospectus covering insurance products sold by the
Company, or any amendment 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
4
<PAGE>
Fund; provided, however, that in no case (i) is the Fund's indemnity in favor of
a director or officer or any other person deemed to protect such director or
officer or other person against any liability to which any such person would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of his duties or by reason of his reckless
disregard of obligations and duties under this Agreement or (ii) is the Fund to
be liable under its indemnity agreement contained in this Paragraph 4 with
respect to any claims made against the Company or any such director, officer or
controlling person unless it or such director, officer or controlling person, as
the case may be, shall have notified the Fund in writing pursuant to Paragraph 9
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 it or upon
such director, officer or controlling person (or after the Company or such
director, officer or controlling person shall have received notice of such
service on any designated agent), but failure to notify the Fund of any claim
shall not relieve it from any liability which it may have to the person against
whom such action is brought otherwise than on account of its indemnity agreement
contained in this Paragraph. The Fund will be entitled to participate at its
own expense in the defense, or, if it so elects, to assume the defense of any
suit brought to enforce any such liability, but if the Fund elects to assume the
defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Company, its directors, officers or controlling person or
persons, defendant or defendants, in the suit. In the event the Fund elects to
assume the defense of any such suit and retain such counsel, the Company, its
directors, officers or controlling person or persons, defendant or defendants in
the suit, shall bear the fees and expenses of any additional counsel retained by
them, but, in case the Fund does not elect to assume the defense of any such
suit, it will reimburse the Company or such directors, officers or controlling
person or persons, defendant or defendants in the suit, for the reasonable fees
and expenses of any counsel retained by them. The Fund agrees promptly to
notify the Company pursuant to Paragraph 9 of the commencement of any litigation
or proceedings against it or any of its officers or Trustees in connection with
the issuance or sale of any Shares.
5
<PAGE>
The provisions of this Section 4 shall survive the termination of the
Agreement. These indemnification provisions are in addition to any liability
the Fund or the Company may otherwise have.
5. Procedure for Resolving Irreconcilable Conflicts.
------------------------------------------------
(a) The Trustees of the Fund will monitor the operations of the Fund
for the existence of any material irreconcilable conflict among the interests of
all the contract holders and policy owners of Variable Insurance Products (the
"Participants") of all separate accounts investing in the Fund. An
irreconcilable material conflict may arise, among other things, from: (a) an
action by any state insurance regulatory authority; (b) a change in applicable
insurance laws or regulations; (c) a tax ruling or provision of the Internal
Revenue Code or the regulations thereunder; (d) any other development relating
to the tax treatment of insurers, contract holders or policy owners or
beneficiaries of Variable Insurance Products; (e) the manner in which the
investments of any Portfolio are being managed; (f) a difference in voting
instructions given by variable annuity contract holders, on the one hand, and
variable life insurance policy owners, on the other hand, or by the contract
holders or policy owners of different participating insurance companies; or (g)
a decision by an insurer to override the voting instructions of Participants.
(b) The Company will be responsible for reporting any potential or
existing conflicts to the Trustees of the Fund. The Company will be responsible
for assisting the Trustees in carrying out their responsibilities under this
Paragraph 5(b) and Paragraph 5(a), by providing the Trustees with all
information reasonably necessary for the Trustees to consider the issues raised.
The Fund will also request its investment adviser to report to the Trustees any
such conflict which comes to the attention of the adviser.
(c) If it is determined by a majority of the Trustees of the Fund, or
a majority of its disinterested Trustees, that a material irreconcilable
conflict exists involving the Company, the Company shall, at its expense, and to
the extent reasonably practicable (as determined by a majority of the
disinterested Trustees), take whatever steps are necessary to eliminate the
irreconcilable material conflict, including withdrawing the assets allocable to
some or all of the separate accounts from the Fund or any Portfolio or class
thereof and reinvesting such assets in a different investment
6
<PAGE>
medium, including another Portfolio of the Fund or class thereof, offering to
the affected Participants the option of making such a change or establishing a
new funding medium including a registered investment company.
For purposes of this Paragraph 5(c), the Trustees, or the disinterested
Trustees, shall determine whether or not any proposed action adequately remedies
any irreconcilable material conflict. In the event of a determination of the
existence of an irreconcilable material conflict, the Trustees shall cause the
Fund to take such action, such as the establishment of one or more additional
Portfolios or classes, as they in their sole discretion determine to be in the
interest of all shareholders and Participants in view of all applicable factors,
such as cost, feasibility, tax, regulatory and other considerations. In no
event will the Fund be required by this Paragraph 5(c) to establish a new
funding medium for any variable contract or policy.
The Company shall not be required by this Paragraph 5(c) to establish a new
funding medium for any variable contract or policy if an offer to do so has been
declined by a vote of a majority of the Participants materially adversely
affected by the material irreconcilable conflict. The Company will recommend to
its Participants that they decline an offer to establish a new funding medium
only if the Company believes it is in the best interest of the Participants.
(d) The Trustees' determination of the existence of an irreconcilable
material conflict and its implications promptly shall be communicated to all
Participating Insurance Companies by written notice thereof delivered or mailed,
first class postage prepaid.
6. Voting Privileges.
-----------------
The Company shall be responsible for assuring that its separate account or
accounts participating in the Fund shall use a calculation method of voting
procedures substantially the same as the following: those Participants
permitted to give instructions and the number of Shares for which instructions
may be given will be determined as of the record date for the Fund shareholders'
meeting, which shall not be more than 60 days before the date of the meeting.
Whether or not voting instructions are actually given by a particular
Participant, all Fund shares held in any separate account or sub-account thereof
and attributable to policies will be voted for, against, or withheld from voting
on any proposition in the same proportion as (i) the aggregate record date cash
value
7
<PAGE>
held in such sub-account for policies giving instructions, respectively, to vote
for, against, or withhold votes on such proposition, bears to (ii) the aggregate
record date cash value held in the sub-account for all policies for which voting
instructions are received. Participants continued in effect under lapse options
will not be permitted to give voting instructions. Shares held in any other
insurance company general or separate account or sub-account thereof will be
voted in the proportion specified in the second preceding sentence for shares
attributable to policies.
7. Duration and Termination.
------------------------
This Agreement shall continue in effect unless terminated as set forth
below. This Agreement may be terminated at any time, at the option of either of
the Company or the Fund, when neither the Company, any insurance company nor the
separate account or accounts of such insurance company which is an affiliate
thereof which is not a Participating Insurance Company own any Shares of the
Fund or may be terminated by either party to the Agreement upon a determination
by a majority of the Trustees of the Fund, or a majority of its disinterested
Trustees, following certification thereof by a Participating Insurance Company
given in accordance with Paragraph 9 that an irreconcilable conflict exists
among the interests of (i) all contract holders and policy holders of Variable
Insurance Products of all separate accounts or (ii) the interests of the
Participating Insurance Companies investing in the Fund. If this Agreement is
so terminated, the Fund may, at any time thereafter, automatically redeem the
Shares of any Portfolio held by a Participating Shareholder.
8. Compliance.
----------
The Fund will comply with the provisions of Section 4240(a) of the New York
Insurance Law.
Each Portfolio of the Fund will use its best efforts to comply with the
provisions of Section 817(h) of the Internal Revenue Code of 1986, as amended
(the "Code"), relating to diversification requirements for variable annuity,
endowment and life insurance contracts. Specifically, each Portfolio will comply
with either (i) the requirement of Section 817(h)(1) of the Code that its assets
be adequately diversified, or (ii) the "Safe Harbor for Diversification"
specified in Section 817(h)(2) of the Code. The Fund will notify the Company
immediately upon having a reasonable basis for
8
<PAGE>
believing that a Portfolio has ceased to comply with the requirements of Section
817(h) of the Code or that the Portfolio might not so comply in the future.
The provisions of Paragraphs 5 and 6 of this Agreement shall be interpreted
in a manner consistent with any Rule or order of the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, applicable to
the parties hereto.
No Shares of any Portfolio of the Fund may be sold to the general public.
9. 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:
Scudder Variable Life Investment Fund
Two International Place
Boston, Massachusetts 02110
(617) 295-2275
Attn: David B. Watts
If to the Company:
United Investors Life Insurance Company
2001 Third Avenue South
Birmingham, Alabama 35233
Attn: James A. Sedgwick, President
Copy to:
MidAmerica Partners
9020 N. May, Suite 290
Oklahoma City, Oklahoma 73120
Attn: Mark Davenport
10. Massachusetts Law to Apply.
--------------------------
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts.
11. Miscellaneous.
-------------
The name "Scudder Variable Life Investment Fund" is the designation of the
Trustees for the time being under a Declaration of Trust dated March 15, 1985,
as amended, and all persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against
9
<PAGE>
the Fund as neither the Trustees, officers, agents or shareholders assume any
personal liability for obligations entered into on behalf of the Fund. No
Portfolio shall be liable for any obligations properly attributable to any other
Portfolio.
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. This Agreement may be executed
simultaneously in two or more counterparts, each of which taken together shall
constitute one and the same instrument.
12. Entire Agreement.
----------------
This Agreement incorporates the entire understanding and agreement among
the parties hereto, and supersedes any and all prior understandings and
agreements between the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed hereto as of the ____ day of _______________ ,
1997.
SEAL SCUDDER VARIABLE LIFE
INVESTMENT FUND
By:
---------------------------------
David B. Watts
President
SEAL UNITED INVESTORS LIFE
INSURANCE COMPANY
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
10
<PAGE>
Continuation of EX-99.B8(A)(iii)
AMENDMENT
The Participation Agreement, made the ______ day of _____________, 1997 by
______________ and ______________ (the "Agreement"), is hereby amended by the
addition of the provisions set forth in this Amendment to the Agreement.
As an additional inducement for the Company to enter into the Agreement,
the Fund hereby agrees with the Company as follows:
1. all shares of the Portfolios will be sold only to Participating
Insurance companies which have agreed to participate in the Fund to fund their
separate accounts and/or to certain qualified pension and other retirement
plans, all in accordance with the requirements of Section 817(h) of the Internal
Revenue Code of 1986, as amended ("Code") and Treasury Regulation Sec. 1.817-5;
2. the Fund shall make the net asset value per Share for the selected
Portfolio(s) available to the Company on a daily basis as soon as reasonably
practicable after the net asset value per share is calculated but shall use
commercially reasonable efforts to make such net asset value available by 6:30
p.m. New York time. If the Fund provides materially incorrect share net asset
value information, the Fund shall make an adjustment to the number of shares
purchased or redeemed for the Account to reflect the current 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;
3. the Fund will provide the Company with at least one complete copy of
all prospectuses, statements of additional information, annual and semi-annual
reports, proxy statements, exemptive applications and all amendments or
supplements to any of the above that relate to the Portfolios promptly after the
filing of each such document with the Securities and Exchange Commission ("SEC")
or other regulatory authority. The Company will provide the Fund with at least
one complete copy of all prospectuses, statements of additional information,
annual and semi-annual reports, proxy statements, exemptive applications and all
amendments or supplements to any of the above that relate to an Account promptly
after the filing of each such document with the SEC or other regulatory
authority;
4. the Fund will provide the Company with a "camera ready" copy of all
prospectuses, statements of additional information and annual and semi-annual
reports as set in type or, at the request of the Company, as a diskette in the
form sent to the financial printer, in order to allow for the combined printing
of the prospectuses of the Fund, the Variable Insurance Products and other funds
invested in by the Variable Insurance Products;
5. the Fund and its affiliates and the agents shall not give any
information or make any representations on behalf of the Company or concerning
the Company, the Accounts or the Variable Insurance Products issued by the
Company other than the information or representations contained in a
registration statement or prospectus for such Variable Insurance Products, as
such registration statement and prospectus may be amended or supplemented from
time to time, or in reports of the Accounts or reports prepared for distribution
to owners of such Variable Insurance
<PAGE>
Products, or in sales literature or other promotional material approved by the
company or its designee, except with the written permission of the Company;
6. for purposes of the Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without limitation,
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 (such as any written communication distributed or made
generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, or reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports and
proxy materials, and any other material constituting sales literature or
advertising under the National Association of Securities Dealers, Inc. ("NASD")
rules or federal securities laws;
7. the Agreement shall also terminate in accordance with the following
provisions:
a. At the option of any party hereto, with or without cause upon 90
days advance written notice to the other parties;
b. At the option of the Company, if the number of Fund Shares
available is not reasonably sufficient to meet the requirements of the Variable
Insurance Products as determined by the Company. Prompt notice of election to
terminate shall be furnished by the Company, said termination to be effective
ten days after receipt of notice unless the Fund makes available a sufficient
number of Shares to meet the reasonable requirements of the Variable Insurance
Products within said ten-day period;
c. At the option of the Company, upon the institution of formal
proceedings against the Fund by the SEC, the NASD or any other regulatory body,
the expected or anticipated ruling, judgment or outcome of which would, in the
Company's reasonable judgment, materially impair the Fund's ability to meet and
perform the Fund's obligations and duties hereunder. The Company shall provide
promptly to the Fund a written explanation of how the Fund is materially
impaired so that it cannot meet its obligations and duties hereunder and shall
provide promptly an opinion of counsel stating that it is probable that the
proceedings will lead to a ruling, judgment or outcome which will materially
impair the Fund's ability to meet and perform its obligations and duties
hereunder. Prompt notice of election to terminate shall be furnished by the
Company with said termination to be effective upon receipt of notice,
explanation and opinion of counsel;
d. In the event the Fund's shares are not registered, issued or sold
in accordance with applicable state insurance or federal law and such failure of
the Fund's shares to be so registered, issued, and sold in accordance with
applicable state insurance or federal law has had a material adverse effect on
the status of such contracts under state or federal law, or such law precludes
the use of such shares as the underlying investment medium of Variable Insurance
Products issued or to be issued by the Company. Termination shall be effective
upon such occurrence without notice;
2
<PAGE>
e. At the option of the Company, upon the Fund's breach of any
material provision of the Agreement, which breach has not been cured to the
reasonable satisfaction of the Company within ten days after written notice of
such breach is delivered to the Fund;
f. At the option of the Company, if the Company shall determine, in
its sole judgment reasonably exercised in good faith, that the Fund is the
subject of material adverse publicity which has had a material adverse impact on
the sale of the Variable Insurance Products and/or the operations or business
reputation of the Company, the Company shall have notified the Fund in writing
of such determination and its intent to terminate the Agreement, and after
consideration of the actions taken by the Fund and any other changes in
circumstances since the giving of such notice, the determination of the Company
shall continue to apply on the sixtieth (60th) day since giving of such notice,
which sixtieth (60th) day shall be the effective date of termination;
g. Upon requisite vote of the Participants having an interest in the
Accounts to substitute the shares of another investment company for the
corresponding shares of the Fund in accordance with the terms of the Variable
Insurance Products for which those shares had been selected to serve as the
underlying investment, such termination to be effective sixty days after
notification of the Fund. The Company shall provide to the Fund copies of any
proxy material sent to Participants in connection with such vote at such time
the materials are mailed to the Participants; or
h. In the event the Agreement is assigned without the prior written
consent of the Company and the Fund, termination shall be effective immediately
upon such occurrence without notice.
In the event of any termination of this Agreement, the Fund will, 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 of the Company's
Variable Insurance Products in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, the owners of the Existing Contracts will be permitted to
reallocate investments in the Portfolios (as in effect on such date), redeem
investments in the Portfolios and/or invest in the Portfolios upon the making of
additional purchase payments under the Existing Contracts. However, the
availability of additional shares hereunder will be subject to the restrictions
and limitations set forth in Section 5, as applicable. The Company agrees (i) to
terminate the availability of shares of the Fund to Contracts other than
Existing Contracts and (ii) to request approval from the SEC to replace shares
of the Fund with other investments for Contracts and, if and when granted such
approval, thereafter to so replace the shares of the Fund, in each such case as
soon as reasonably practicable.
8. the Fund represents and warrants that each Portfolio will comply with
the diversification requirements set forth in Section 817(h) of the Code, and
the rules and regulations thereunder, including without limitation Treasury
Regulation 1.817-5, and will notify the Company immediately upon having a
reasonable basis for believing any Portfolio has ceased to so comply and will
immediately take all reasonable steps to adequately diversify the Portfolio to
achieve compliance;
3
<PAGE>
9. the Fund represents and warrants that each Portfolio invested in by
the Accounts will qualify as a "regulated investment company" under Subchapter M
of the Code, that it will maintain such qualification and will notify the
Company immediately upon the reasonable likelihood that it will cease to so
qualify or might not so qualify in the future; and
10. each party shall cooperate with the reasonable requests of 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 the Agreement or the transactions
contemplated thereby.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the _____ day of _____________, 1997.
SEAL SCUDDER VARIABLE LIFE
INVESTMENT FUND
By: _________________________________
David B Watts
President
SEAL UNITED INVESTORS LIFE INSURANCE
COMPANY
By: _________________________________
Name:
Title:
4
<PAGE>
FUND PARTICIPATION AGREEMENT
----------------------------
This Agreement is entered into as of the ____ day of _________, 1997, between
United Investors Life Insurance Company, a life insurance company organized
under the laws of the State of Missouri ("Insurance Company"), and each of
DREYFUS VARIABLE INVESTMENT FUND, THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND,
INC. and DREYFUS LIFE AND ANNUITY INDEX FUND, INC. (d/b/a DREYFUS STOCK INDEX
FUND) (each a "Fund").
ARTICLE I 1.
DEFINITIONS
1.1 "Act" shall mean the Investment Company Act of 1940, as amended.
1.2 "Board" shall mean the Board of Directors or Trustees, as the case may be,
of a Fund, which has the responsibility for management and control of the
Fund.
1.3 "Business Day" shall mean any day for which a Fund calculates net asset
value per share as described in the Fund's Prospectus.
1.4 "Commission" shall mean the Securities and Exchange Commission.
1.5 "Contract" shall mean a variable annuity or life insurance contract that
uses any Participating Fund (as defined below) as an underlying investment
medium. Individuals who participate under a group Contract are
"Participants."
1.6 "Contractholder" shall mean any entity that is a party to a Contract with a
Participating Company (as defined below).
1.7 "Disinterested Board Members" shall mean those members of the Board of a
Fund that are not deemed to be "interested persons" of the Fund, as defined
by the Act.
1.8 "Dreyfus" shall mean The Dreyfus Corporation and its affiliates, including
Dreyfus Service Corporation.
<PAGE>
1.9 "Participating Companies" shall mean any insurance company (including
Insurance Company) that offers variable annuity and/or variable life
insurance contracts to the public and that has entered into an agreement
with one or more of the Funds.
1.10 "Participating Fund" shall mean each Fund, including, as applicable, any
series thereof, specified in Exhibit A, as such Exhibit may be amended from
time to time by agreement of the parties hereto, the shares of which are
available to serve as the underlying investment medium for the aforesaid
Contracts.
1.11 "Prospectus" shall mean the current prospectus and statement of additional
information of a Fund, as most recently filed with the Commission.
1.12 "Separate Account" shall mean RetireMAP Variable Account, a separate
account established by Insurance Company in accordance with the laws of the
State of Missouri.
1.13 "Software Program" shall mean the software program used by a Fund for
providing Fund and account balance information including net asset value
per share. Such Program may include the Lion System. In situations where
the Lion System or any other Software Program used by a Fund is not
available, such information may be provided by telephone. The Lion System
shall be provided to Insurance Company at no charge.
1.14 "Insurance Company's General Account(s)" shall mean the general account(s)
of Insurance Company and its affiliates that invest in a Fund.
ARTICLE II 2.
REPRESENTATIONS
2.1 Insurance Company represents and warrants that (a) it is an insurance
company duly organized and in good standing under applicable law; (b) it
has legally and validly established the Separate Account pursuant to the
Missouri Insurance Code for the purpose of offering to the public certain
individual and group variable annuity and life insurance contracts; (c) it
has registered the Separate Account as a unit investment trust under the
Act to serve as the segregated investment
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account for the Contracts; and (d) the Separate Account is eligible to
invest in shares of each Participating Fund without such investment
disqualifying any Participating Fund as an investment medium for insurance
company separate accounts supporting variable annuity contracts or variable
life insurance contracts.
2.2 Insurance Company represents and warrants that (a) the Contracts will be
described in a registration statement filed under the Securities Act of
1933, as amended ("1933 Act"); (b) the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state
laws; and (c) the sale of the Contracts shall comply in all material
respects with state insurance law requirements. Insurance Company agrees
to notify each Participating Fund promptly of any investment restrictions
imposed by state insurance law and applicable to the Participating Fund.
2.3 Insurance Company represents and warrants that the income, gains and
losses, whether or not realized, from assets allocated to the Separate
Account are, in accordance with the applicable Contracts, to be credited to
or charged against such Separate Account without regard to other income,
gains or losses from assets allocated to any other accounts of Insurance
Company. Insurance Company represents and warrants that the assets of the
Separate Account are and will be kept separate from Insurance Company's
General Account and any other separate accounts Insurance Company may have,
and will not be charged with liabilities from any business that Insurance
Company may conduct or the liabilities of any companies affiliated with
Insurance Company.
2.4 Each Participating Fund represents that it is registered with the
Commission under the Act as an open-end, management investment company and
possesses, and shall maintain, all legal and regulatory licenses,
approvals, consents and/or exemptions required for the Participating Fund
to operate and offer its shares as an underlying investment medium for
Participating Companies.
2.5 Each Participating 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
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"Code"), and that it will maintain such qualification (under Subchapter M
or any successor or similar provision) and that it will notify Insurance
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.
2.6 Insurance Company represents and agrees that the Contracts are currently,
and at the time of issuance will be, treated as life insurance policies or
annuity contracts, whichever is appropriate, under applicable provisions of
the Code, and that it will make every effort to maintain such treatment and
that it will notify each Participating Fund and Dreyfus 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.
Insurance Company agrees that any prospectus offering a Contract that is a
"modified endowment contract," as that term is defined in Section 7702A of
the Code, will identify such Contract as a modified endowment contract (or
policy).
2.7 Each Participating Fund agrees that its assets shall be managed and
invested in a manner that complies with the requirements of Section 817(h)
of the Code and the Regulations thereunder. In the event a Participating
Fund becomes aware that it has failed to so comply, it will take reasonable
steps (a) to notify Insurance Company of such failure and (b) to adequately
diversify the Participating Fund so as to achieve compliance.
2.8 Insurance Company agrees that each Participating Fund shall be permitted
(subject to the other terms of this Agreement) to make its shares available
to other Participating Companies and Contractholders.
2.9 Each Participating Fund represents and warrants that any of its directors,
trustees, officers, employees, investment advisers, and other
individuals/entities who deal with the money and/or securities of the
Participating Fund are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the
Participating Fund in an amount not less than that required by Rule 17g-1
under the Act. The aforesaid Bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
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2.10 Insurance Company represents and warrants that all of its employees and
agents who deal with the money and/or securities of each Participating Fund
are and shall continue to be at all times covered by a blanket fidelity
bond or similar coverage in an amount not less than the coverage required
or appropriate for purposes of its operations under applicable law. The
aforesaid Bond shall include coverage for larceny and embezzlement and
shall be issued by a reputable bonding company.
2.11 Insurance Company agrees that Dreyfus shall be deemed a third party
beneficiary under this Agreement and may enforce any and all rights
conferred by virtue of this Agreement.
ARTICLE III 3.
FUND SHARES
3.1 The Contracts funded through the Separate Account will provide for the
investment of certain amounts in shares of each Participating Fund.
3.2 Each Participating Fund agrees to make its shares available for purchase at
the then applicable net asset value per share by Insurance Company and the
Separate Account on each Business Day pursuant to rules of the Commission.
Notwithstanding the foregoing, each Participating Fund may refuse to sell
its shares to any person, or suspend or terminate the offering of its
shares, if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of its Board, acting in
good faith and in light of its fiduciary duties under federal and any
applicable state laws, necessary and in the best interests of the
Participating Fund's shareholders.
3.3 Each Participating Fund agrees that shares of the Participating Fund will
be sold only to (a) Participating Companies and their separate accounts or
(b) "qualified pension or retirement plans" as determined under Section
817(h)(4) of the Code. Except as otherwise set forth in this Section 3.3,
no shares of any Participating Fund will be sold to the general public.
3.4 Each Participating Fund shall use its best efforts to provide closing net
asset value, dividend and capital gain
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information on a per-share basis to Insurance Company by 6:00 p.m. Eastern
time on each Business Day. Any material errors in the calculation of net
asset value, dividend and capital gain information shall be reported
immediately upon discovery to Insurance Company. Non-material errors will
be corrected in the next Business Day's net asset value per share.
In the event of a material error in the net asset value per share, the
Participating Fund shall take the following steps. Any such error shall be
reported promptly upon discovery to the Insurance Company. Notification
can be made orally or by direct or indirect systems access but must be
confirmed in writing. The letter must state for each day for which an
error occurred the incorrect price, the correct price and the reason for
the price change. If an adjustment is necessary to correct an error that
has caused the Separate Account to receive less than that to which it is
entitled, the Participating Fund shall make all necessary adjustments to
the number of shares owned in the Separate Account and distribute to the
Insurance Company any and all amounts of the underpayment. The Insurance
Company will credit the appropriate amount of such payment to the Separate
Account. When making adjustments for an error, the Participating Fund
shall not net same day transactions in the Separate Account. No adjustment
for an error shall be taken in any Separate Account until such time as the
parties hereto have agreed to a resolution of the error, but the parties
shall use all reasonable efforts to reach such agreement within two
business days after discovery of the error.
3.5 At the end of each Business Day, Insurance Company will use the information
described in Sections 3.2 and 3.4 to calculate the unit values of the
Separate Account for the day. Using this unit value, Insurance Company
will process the day's Separate Account transactions received by it by the
close of trading on the floor of the New York Stock Exchange (currently
4:00 p.m. Eastern time) to determine the net dollar amount of each
Participating Fund's shares that will be purchased or redeemed at that
day's closing net asset value per share. The net purchase or redemption
orders will be transmitted to each Participating Fund by Insurance Company
by 11:00 a.m. Eastern time on the Business Day next following Insurance
Company's receipt of that
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information. Subject to Sections 3.6 and 3.8, all purchase and redemption
orders for Insurance Company's General Accounts shall be effected at the
net asset value per share of each Participating Fund next calculated after
receipt of the order by the Participating Fund or its Transfer Agent.
3.6 Each Participating Fund appoints Insurance Company as its agent for the
limited purpose of accepting orders for the purchase and redemption of
Participating Fund shares for the Separate Account. Each Participating
Fund will execute orders at the applicable net asset value per share
determined as of the close of trading on the day of receipt of such orders
by Insurance Company acting as agent ("effective trade date"), provided
that the Participating Fund receives notice of such orders by 11:00 a.m.
Eastern time on the next following Business Day and, if such orders request
the purchase of Participating Fund shares, the conditions specified in
Section 3.8, as applicable, are satisfied. A redemption or purchase
request that does not satisfy the conditions specified above and in Section
3.8, as applicable, will be effected at the net asset value per share
computed on the Business Day immediately preceding the next following
Business Day upon which such conditions have been satisfied in accordance
with the requirements of this Section and Section 3.8.
3.7 Insurance Company will make its best efforts to notify each applicable
Participating Fund in advance of any unusually large purchase or redemption
orders.
3.8 If Insurance Company's order requests the purchase of a Participating
Fund's shares, Insurance Company will pay for such purchases by wiring
Federal Funds to the Participating Fund or its designated custodial account
on the day the order is transmitted. Insurance Company shall make all
reasonable efforts to transmit to the applicable Participating Fund payment
in Federal Funds by 12:00 noon Eastern time on the Business Day the
Participating Fund receives the notice of the order pursuant to Section
3.5. Each applicable Participating Fund will execute such orders at the
applicable net asset value per share determined as of the close of trading
on the effective trade date if the Participating Fund receives payment in
Federal Funds by 12:00 midnight Eastern time on the Business Day the
Participating Fund receives the notice of the order pursuant
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to Section 3.5. If payment in Federal Funds for any purchase is not
received or is received by a Participating Fund after 12:00 noon Eastern
time on such Business Day, Insurance Company shall promptly, upon each
applicable Participating Fund's request, reimburse the respective
Participating Fund for any charges, costs, fees, interest or other expenses
incurred by the Participating Fund in connection with any advances to, or
borrowings or overdrafts by, the Participating Fund, or any similar
expenses incurred by the Participating Fund, as a result of portfolio
transactions effected by the Participating Fund based upon such purchase
request. If Insurance Company's order requests the redemption of any
Participating Fund's shares valued at or greater than $1 million dollars,
the Participating Fund will wire such amount to Insurance Company within
seven days of the order.
3.9 Each Participating Fund has the obligation to ensure that its shares are
registered with applicable federal agencies at all times. Each
Participating Fund will register and qualify its shares for sale in
accordance with the laws of the various states if required by applicable
law.
3.10 Each Participating Fund will confirm each purchase or redemption order made
by Insurance Company. Transfer of Participating Fund shares will be by
book entry only. No share certificates will be issued to Insurance
Company. Insurance Company will record shares ordered from a Participating
Fund in an appropriate title for the corresponding account.
3.11 Each Participating Fund shall credit Insurance Company with the appropriate
number of shares.
3.12 On each ex-dividend date of a Participating Fund or, if not a Business Day,
on the first Business Day thereafter, each Participating Fund shall
communicate to Insurance Company the amount of dividend and capital gain,
if any, per share. All dividends and capital gains shall be automatically
reinvested in additional shares of the applicable Participating Fund at the
net asset value per share on the ex-dividend date. Each Participating Fund
shall, on the day after the ex-dividend date or, if not a Business Day, on
the first Business Day thereafter, notify Insurance Company of the number
of shares so issued.
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ARTICLE IV 4.
STATEMENTS AND REPORTS
4.1 Each Participating Fund shall provide monthly statements of account as of
the end of each month for all of Insurance Company's accounts by the
fifteenth (15th) Business Day of the following month.
4.2 Each Participating Fund shall distribute to Insurance Company copies of the
Participating Fund's Prospectuses, proxy materials, notices, periodic
reports and other printed materials (which the Participating Fund
customarily provides to its shareholders) in quantities as Insurance
Company may reasonably request for distribution to each Contractholder and
Participant. If requested by Insurance Company, each Participating Fund
will provide documentation (including the Participating Fund's prospectus
as set in type, on diskette or in camera-ready copy) and other reasonable
assistance as is reasonably necessary for Insurance Company to print
together in one document the current prospectus for the variable contracts
issued by Insurance Company, the current prospectus for each Participating
Fund and the current prospectus of each other fund in which the assets of
the variable contracts are invested. In such case, each Participating Fund
will bear that portion of the reasonable expenses allocable to the
Participating Fund portion of the combined printed prospectuses. Insurance
Company shall submit the invoices for such printing and duplicating to each
Participating Fund and shall employ all reasonable efforts to monitor and
control such costs.
4.3 Each Participating Fund will provide to Insurance Company at least one
complete copy of all registration statements, Prospectuses, 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 Participating Fund or its shares,
contemporaneously with the filing of such document with the Commission or
other regulatory authorities.
4.4 Insurance Company will provide to each Participating Fund at least one copy
of all registration statements, Prospectuses, reports, proxy statements,
sales literature and other promotional materials, applications for
exemptions, requests
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for no-action letters, and all amendments to any of the above, that relate
to the Contracts or the Separate Account, contemporaneously with the filing
of such document with the Commission.
ARTICLE V 5.
EXPENSES
5.1 The charge to each Participating Fund for all expenses and costs of the
Participating Fund, including but not limited to management fees,
administrative expenses and legal and regulatory costs, will be made in the
determination of the Participating Fund's daily net asset value per share
so as to accumulate to an annual charge at the rate set forth in the
Participating Fund's Prospectus. Excluded from the expense limitation
described herein shall be brokerage commissions and transaction fees and
extraordinary expenses.
5.2 Except as provided in this Article V and, in particular in the next
sentence, Insurance Company shall not be required to pay directly any
expenses of any Participating Fund or expenses relating to the distribution
of its shares. Insurance Company shall pay the following expenses or
costs:
a. Such amount of the production expenses of any Participating Fund
materials, including the cost of printing a Participating Fund's
Prospectus, or marketing materials for prospective Insurance Company
Contractholders and Participants as Dreyfus and Insurance Company
shall agree from time to time.
b. Distribution expenses of any Participating Fund materials or marketing
materials for prospective Insurance Company Contractholders and
Participants.
c. Distribution expenses of any Participating Fund materials or marketing
materials for Insurance Company Contractholders and Participants.
Except as provided herein, all other expenses of each Participating Fund
shall not be borne by Insurance Company.
ARTICLE VI
6.EXEMPTIVE RELIEF
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6.1 Insurance Company has reviewed a copy of the order dated December 23, 1987
of the Securities and Exchange Commission under Section 6(c) of the Act
with respect to Dreyfus Variable Investment Fund and a copy of the order
dated August 23, 1989 of the Securities and Exchange Commission under
Section 6(c) of the Act with respect to Dreyfus Life and Annuity Index
Fund, Inc. and, in particular, has reviewed the conditions to the relief
set forth in each related Notice. As set forth therein, if Dreyfus
Variable Investment Fund or Dreyfus Life and Annuity Index Fund, Inc. is a
Participating Fund, Insurance Company agrees, as applicable, to report any
potential or existing conflicts promptly to the respective Board of Dreyfus
Variable Investment Fund and/or Dreyfus Life and Annuity Index Fund, Inc.
and, in particular, whenever contract voting instructions are disregarded,
and recognizes that it will be responsible for assisting each applicable
Board in carrying out its responsibilities under such application.
Insurance Company agrees to carry out such responsibilities with a view to
the interests of existing Contractholders.
The Dreyfus Socially Responsible Growth Fund, Inc., if it is a
Participating Fund, shall furnish Insurance Company with a copy of its
application for an order of the Securities and Exchange Commission under
Section 6(c) of the Act for mixed and shared funding relief, and the notice
of such application and order when issued by the SEC. Insurance Company
agrees to comply with the conditions on which such order is issued,
including reporting any potential or existing conflicts promptly to the
Board of The Dreyfus Socially Responsible Growth Fund, Inc., and in
particular whenever Contractholder voting instructions are disregarded, to
the extent such conditions are not materially different from the conditions
of the mixed and shared funding relief obtained by Dreyfus Variable
Investment Fund and Dreyfus Life and Annuity Index Fund, Inc.,
respectively; and recognizes that it shall be responsible for assisting the
Board of The Dreyfus Socially Responsible Growth Fund, Inc. in carrying out
its responsibilities in connection with such order. Insurance Company
agrees to carry out such responsibilities with a view to the interests of
existing Contractholders.
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6.2 If a majority of the Board, or a majority of Disinterested Board Members,
determines that a material irreconcilable conflict exists with regard to
Contractholder investments in a Participating Fund, the Board shall give
prompt notice to all Participating Companies and any other Participating
Fund. If the Board determines that Insurance Company is responsible for
causing or creating said conflict, Insurance Company shall at its sole cost
and expense, and to the extent reasonably practicable (as determined by a
majority of the Disinterested Board Members), take such action as is
necessary to remedy or eliminate the irreconcilable material conflict.
Such necessary action may include, but shall not be limited to:
a. Withdrawing the assets allocable to the Separate Account from the
Participating Fund and reinvesting such assets in another
Participating Fund (if applicable) or a different investment medium,
or submitting the question of whether such segregation should be
implemented to a vote of all affected Contractholders; and/or
b. Establishing a new registered management investment company.
6.3 If a material irreconcilable conflict arises as a result of a decision by
Insurance Company to disregard Contractholder voting instructions and said
decision represents a minority position or would preclude a majority vote
by all Contractholders having an interest in a Participating Fund,
Insurance Company may be required, at the Board's election, to withdraw the
investments of the Separate Account in that Participating Fund.
6.4 For the purpose of this Article, a majority of the Disinterested Board
Members shall determine whether or not any proposed action adequately
remedies any irreconcilable material conflict, but in no event will any
Participating Fund be required to bear the expense of establishing a new
funding medium for any Contract. Insurance Company shall not be required
by this Article to establish a new funding medium for any Contract if an
offer to do so has been declined by vote of a majority of the
Contractholders
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materially adversely affected by the irreconcilable material conflict.
6.5 No action by Insurance Company taken or omitted, and no action by the
Separate Account or any Participating Fund taken or omitted as a result of
any act or failure to act by Insurance Company pursuant to this Article VI,
shall relieve Insurance Company of its obligations under, or otherwise
affect the operation of, Article V.
ARTICLE VII 7.
VOTING OF PARTICIPATING FUND SHARES
7.1 Each Participating Fund shall provide Insurance Company with copies, at no
cost to Insurance Company, of the Participating Fund's proxy material,
reports to shareholders and other communications to shareholders in such
quantity as Insurance Company shall reasonably require for distributing to
Contractholders or Participants.
Insurance Company shall:
(a) solicit voting instructions from Contractholders or Participants on a
timely basis and in accordance with applicable law;
(b) vote the Participating Fund shares in accordance with instructions
received from Contractholders or Participants; and
(c) vote the Participating Fund shares for which no instructions have been
received in the same proportion as Participating Fund shares for which
instructions have been received.
Insurance Company agrees at all times to vote its General Account shares in
the same proportion as the Participating Fund shares for which instructions
have been received from Contractholders or Participants. Insurance Company
further agrees to be responsible for assuring that voting the Participating
Fund shares for the Separate Account is conducted in a manner consistent
with other Participating Companies.
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7.2 Insurance Company agrees that it shall not, without the prior written
consent of each applicable Participating Fund and Dreyfus, solicit, induce
or encourage Contractholders to change or supplement the Participating
Fund's current investment adviser.
ARTICLE VIII 8.
MARKETING AND REPRESENTATIONS
8.1 Each Participating Fund or its underwriter shall periodically furnish
Insurance Company with the following documents, in quantities as Insurance
Company may reasonably request:
a. Current Prospectus and any supplements thereto; and
b. Other marketing materials.
Expenses for the production of such documents shall be borne in accordance
with Sections 4.2 and 5.2 of this Agreement.
8.2 Insurance Company shall designate certain persons or entities that shall
have the requisite licenses to solicit applications for the sale of
Contracts. No representation is made as to the number or amount of
Contracts that are to be sold by Insurance Company. Insurance Company
shall make reasonable efforts to market the Contracts and shall comply with
all applicable federal and state laws in connection therewith.
8.3 Insurance Company shall furnish, or shall cause to be furnished, to each
applicable Participating Fund or its designee, each piece of sales
literature or other promotional material in which the Participating Fund,
its investment adviser or the administrator is named, at least fifteen
Business Days prior to its use. No such material shall be used unless the
Participating Fund or its designee approves such material. Such approval
(if given) must be in writing and shall be presumed not given if not
received within ten Business Days after receipt of such material. Each
applicable Participating Fund or its designee, as the
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case may be, shall use all reasonable efforts to respond within ten days of
receipt.
8.4 Insurance Company shall not give any information or make any
representations or statements on behalf of a Participating Fund or
concerning a Participating Fund in connection with the sale of the
Contracts other than the information or representations contained in the
registration statement or Prospectus of, as may be amended or supplemented
from time to time, or in reports or proxy statements for, the applicable
Participating Fund, or in sales literature or other promotional material
approved by the applicable Participating Fund.
8.5 Each Participating Fund shall furnish, or shall cause to be furnished, to
Insurance Company, each piece of the Participating Fund's sales literature
or other promotional material in which Insurance Company or the Separate
Account is named, at least fifteen Business Days prior to its use. No such
material shall be used unless Insurance Company approves such material.
Such approval (if given) must be in writing and shall be presumed not given
if not received within ten Business Days after receipt of such material.
Insurance Company shall use all reasonable efforts to respond within ten
days of receipt.
8.6 Each Participating Fund shall not, in connection with the sale of
Participating Fund shares, give any information or make any representations
on behalf of Insurance Company or concerning Insurance Company, the
Separate Account, or the Contracts other than the information or
representations contained in a registration statement or prospectus for the
Contracts, as may be amended or supplemented from time to time, or in
published reports for the Separate Account that are in the public domain or
approved by Insurance Company for distribution to Contractholders or
Participants, or in sales literature or other promotional material approved
by Insurance Company.
8.7 For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without
limitation, advertisements (such as material published, or designed for
use, in a newspaper,
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magazine or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures or other
public media), sales literature (such as any written communication
distributed or made generally available to customers or the public,
including brochures, circulars, research reports, market letters, form
letters, seminar texts, or reprints or excerpts of any other advertisement,
sales literature, or published article), educational or training materials
or other communications distributed or made generally available to some or
all agents or employees, registration statements, prospectuses, statements
of additional information, shareholder reports and proxy materials, and any
other material constituting sales literature or advertising under National
Association of Securities Dealers, Inc. rules, the Act or the 1933 Act.
ARTICLE IX 9.
INDEMNIFICATION
9.1 Insurance Company agrees to indemnify and hold harmless each Participating
Fund, Dreyfus, each respective Participating Fund's investment adviser and
sub-investment adviser (if applicable), each respective Participating
Fund's distributor, and their respective affiliates, and each of their
directors, trustees, officers, employees, agents and each person, if any,
who controls or is associated with any of the foregoing entities or persons
within the meaning of the 1933 Act (collectively, the "Indemnified Parties"
for purposes of Section 9.1), against any and all losses, claims, damages
or liabilities joint or several (including any investigative, legal and
other expenses reasonably incurred in connection with, and any amounts paid
in settlement of, any action, suit or proceeding or any claim asserted) for
which the Indemnified Parties may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect to thereof) (i) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained
in information furnished by Insurance Company for use in the registration
statement or Prospectus or sales literature or advertisements of the
respective Participating Fund or with respect to the Separate Account or
Contracts, or arise out of or are based upon the omission or the
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alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; (ii)
arise out of or as a result of conduct, statements or representations
(other than statements or representations contained in the Prospectus and
sales literature or advertisements of the respective Participating Fund) of
Insurance Company or its agents, with respect to the sale and distribution
of Contracts for which the respective Participating Fund's shares are an
underlying investment; (iii) arise out of the wrongful conduct of Insurance
Company or persons under its control with respect to the sale or
distribution of the Contracts or the respective Participating Fund's
shares; (iv) arise out of Insurance Company's incorrect calculation and/or
untimely reporting of net purchase or redemption orders; or (v) arise out
of any breach by Insurance Company of a material term of this Agreement or
as a result of any failure by Insurance Company to provide the services and
furnish the materials or to make any payments provided for in this
Agreement. Insurance Company will reimburse any Indemnified Party in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that with respect to clauses (i)
and (ii) above Insurance Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is
based upon any untrue statement or omission or alleged omission made in
such registration statement, prospectus, sales literature, or advertisement
in conformity with written information furnished to Insurance Company by
the respective Participating Fund specifically for use therein. This
indemnity agreement will be in addition to any liability which Insurance
Company may otherwise have.
9.2 Each Participating Fund severally agrees to indemnify and hold harmless
Insurance Company and each of its directors, officers, employees, agents
and each person, if any, who controls Insurance Company within the meaning
of the 1933 Act against any losses, claims, damages or liabilities,
including any investigative, legal and other expenses reasonably incurred
in connection with, and any amounts paid in settlement of, any action, suit
or proceeding or any claim asserted, to which Insurance Company or any such
director, officer, employee, agent or controlling person may
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become subject, under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) (1) 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 or advertisements of the respective Participating Fund;
(2) arise out of or are based upon the omission to state in the
registration statement or Prospectus or sales literature or advertisements
of the respective Participating Fund any material fact required to be
stated therein or necessary to make the statements therein not misleading;
(3) 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 or advertisements with respect to the
Separate Account or the Contracts and such statements were based on
information provided to Insurance Company by the respective Participating
Fund; or (4) arise out of any breach by a Participating Fund of a material
term of this Agreement or as a result of any failure by a Participating
Fund to provide the services and furnish the materials or to make any
payments in conformity with and as provided for in this Agreement; and the
respective Participating Fund will reimburse any legal or other expenses
reasonably incurred by Insurance Company or any such director, officer,
employee, agent or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the respective Participating Fund will not be liable in any
such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or omission or alleged
omission made in such registration statement, Prospectus, sales literature
or advertisements in conformity with written information furnished to the
respective Participating Fund by Insurance Company specifically for use
therein. This indemnity agreement will be in addition to any liability
which the respective Participating Fund may otherwise have.
9.3 Each Participating Fund severally shall indemnify and hold Insurance
Company and each of its directors, officers, employees, agents, and each
person, if any, who controls Insurance Company within the meaning of the
1933 Act
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harmless against any and all liability, loss, damages, costs or expenses
(including any investigative, legal and other expenses reasonably incurred
in connection with, and any amounts paid in settlement of, any action, suit
or proceeding or any claim asserted) which Insurance Company may incur,
suffer or be required to pay due to the respective Participating Fund's (1)
incorrect calculation of the daily net asset value, dividend rate or
capital gain distribution rate; (2) incorrect reporting of the daily net
asset value, dividend rate or capital gain distribution rate; and (3)
untimely reporting of the net asset value, dividend rate or capital gain
distribution rate; provided that the respective Participating Fund shall
have no obligation to indemnify and hold harmless Insurance Company if the
incorrect calculation or incorrect or untimely reporting was the result of
incorrect information furnished by Insurance Company or information
furnished untimely by Insurance Company or otherwise as a result of or
relating to a breach of this Agreement by Insurance Company. This indemnity
agreement will be in addition to any liability that the Participating Fund
otherwise may have.
9.4 Promptly after receipt by an indemnified party under this Article of notice
of the commencement of any action, such indemnified party will, if a claim
in respect thereof is to be made against the indemnifying party under this
Article, notify the indemnifying party of the commencement thereof. The
omission to so notify the indemnifying party will not relieve the
indemnifying party from any liability under this Article IX, except to the
extent that the omission results in a failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a
result of 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, and
to the extent that the indemnifying party has given notice to such effect
to the indemnified party and is performing its obligations under this
Article, the indemnifying party shall not be liable for any legal or other
expenses subsequently incurred by such indemnified
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<PAGE>
party in connection with the defense thereof, other than reasonable costs
of investigation. Notwithstanding the foregoing, in any such proceeding,
any indemnified party shall have the right to retain its own counsel, but
the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii)
the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent.
A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this Article IX. The
provisions of this Article IX shall survive termination of this Agreement.
9.5 Insurance Company shall indemnify and hold each respective Participating
Fund, Dreyfus and sub-investment adviser of the Participating Fund harmless
against any tax liability incurred by the Participating Fund under Section
851 of the Code arising from purchases or redemptions by Insurance
Company's General Accounts or the general account of its affiliates, but
only if the Participating Fund provides prior notice to Insurance Company
that any such purchase or redemption might cause the Participating Fund to
incur tax liability under Section 851.
ARTICLE X 10.
COMMENCEMENT AND TERMINATION
10.1 This Agreement shall be effective as of the date hereof and shall continue
in force until terminated in accordance with the provisions herein.
10.2 This Agreement shall terminate without penalty:
a. As to any Participating Fund, at the option of Insurance Company or
the Participating Fund at any time from the date hereof upon 180 days'
notice, unless a shorter time is agreed to by the respective
Participating Fund and Insurance Company;
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b. As to any Participating Fund, at the option of Insurance Company, if
shares of that Participating Fund are not reasonably available to meet
the requirements of the Contracts as determined by Insurance Company.
Prompt notice of election to terminate shall be furnished by Insurance
Company, said termination to be effective ten days after receipt of
notice unless the Participating Fund makes available a sufficient
number of shares to meet the requirements of the Contracts within said
ten-day period;
c. As to a Participating Fund, at the option of Insurance Company, upon
the institution of formal proceedings against that Participating Fund
by the Commission, National Association of Securities Dealers or any
other regulatory body, the expected or anticipated ruling,
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judgment or outcome of which would, in Insurance Company's reasonable judgment,
materially impair that Participating Fund's ability to meet and perform the
Participating Fund's obligations and duties hereunder. Prompt notice of election
to terminate shall be furnished by Insurance Company with said termination to be
effective upon receipt of notice;
d. As to a Participating Fund, at the option of each Participating Fund,
upon the institution of formal proceedings against Insurance Company
by the Commission, National Association of Securities Dealers or any
other regulatory body, the expected or anticipated ruling, judgment or
outcome of which would, in the Participating Fund's reasonable
judgment, materially impair Insurance Company's ability to meet and
perform Insurance Company's obligations and duties hereunder. Prompt
notice of election to terminate shall be furnished by such
Participating Fund with said termination to be effective upon receipt
of notice;
e. As to a Participating Fund, at the option of that Participating Fund,
if the Participating Fund shall determine, in its sole judgment
reasonably exercised in good faith, that Insurance Company has
suffered a material adverse change in its business or financial
condition or is the subject of material adverse publicity and such
material adverse change or material adverse publicity is likely to
have a material adverse impact upon the business and operation of that
Participating Fund or Dreyfus; such Participating Fund shall notify
Insurance Company in writing of such determination and its intent to
terminate this Agreement, and after considering the actions taken by
Insurance Company and any other changes in circumstances since the
giving of such notice, such determination of the Participating Fund
shall continue to apply on the sixtieth (60th) day following the
giving of such notice, which sixtieth day shall be the effective date
of termination;
f. As to a Participating Fund, upon termination of the Investment
Advisory Agreement between that Participating Fund and Dreyfus or its
successors unless Insurance Company specifically approves the
selection of a new Participating Fund investment adviser. Such
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<PAGE>
Participating Fund shall promptly furnish notice of such termination
to Insurance Company;
g. As to a Participating Fund, in the event that Participating Fund's
shares are not registered, issued or sold in accordance with
applicable federal law, or such law precludes the use of such shares
as the underlying investment medium of Contracts issued or to be
issued by Insurance Company. Termination shall be effective
immediately as to that Participating Fund only upon such occurrence
without notice;
h. At the option of a Participating Fund upon a determination by its
Board in good faith that it is no longer advisable and in the best
interests of shareholders of that Participating Fund to continue to
operate pursuant to this Agreement. Termination pursuant to this
Subsection (h) shall be effective upon notice by such Participating
Fund to Insurance Company of such termination;
i. At the option of a Participating Fund if the Contracts cease to
qualify as annuity contracts or life insurance policies, as
applicable, under the Code, or if such Participating Fund reasonably
believes that the Contracts may fail to so qualify;
j. At the option of any party to this Agreement, upon another party's
breach of any material provision of this Agreement;
k. At the option of a Participating Fund, if the Contracts are not
registered, issued or sold in accordance with applicable federal
and/or state law;
l. Upon assignment of this Agreement, unless made with the written
consent of every other non-assigning party; or
m. As to a Participating Fund, at the option of Insurance Company, if the
Insurance Company shall determine, in its sole judgment reasonably
exercised in good faith, that the Participating Fund is the subject of
material adverse publicity and such material adverse publicity is
likely to have a material adverse impact upon the sale of the variable
contracts and/or the operations or business reputation of Insurance
Company; Insurance
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<PAGE>
Company shall notify the Participating Fund in writing of such
determination and its intent to terminate this Agreement as to that
Participating Fund, and after considering the actions taken by
Participating Fund and any other changes in circumstances since the
giving of such notice, such determination of Insurance Company shall
continue to apply on the sixtieth (60th) day following the giving of
such notice, which sixtieth day shall be the effective date of
termination.
Any such termination pursuant to Section 10.2a, 10.2d, 10.2e, 10.2f or
10.2k herein shall not affect the operation of Article V of this Agreement.
Any termination of this Agreement shall not affect the operation of Article
IX of this Agreement.
10.3 Notwithstanding any termination of this Agreement pursuant to Section 10.2
hereof, Insurance Company, at its option, may continue to purchase
additional shares of that Participating Fund, as provided below, 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"). Under such circumstances, only the
owners of the Existing Contracts or Insurance Company, whichever shall have
legal authority to do so, shall be permitted to reallocate investments in
that Participating Fund, redeem investments in that Participating Fund
and/or invest in that Participating Fund upon the making of additional
purchase payments under the Existing Contracts. Furthermore, the provisions
of this Agreement shall remain in effect and thereafter either that
Participating Fund or Insurance Company may terminate the Agreement as to
that Participating Fund, as so continued pursuant to this Section 10.3,
upon prior written notice to the other party, such notice to be for a
period that is reasonable under the circumstances but, if given by the
Participating Fund, need not be for longer than the greater of (i) six
months or (ii) the period required by Insurance Company to obtain any
necessary approval from the Commission or any state insurance regulatory
authority provided that Insurance Company makes a reasonable good faith
effort to obtain such approvals in a reasonable period of time.
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<PAGE>
10.4 Termination of this Agreement as to any one Participating Fund shall not be
deemed a termination as to any other Participating Fund unless Insurance
Company or such other Participating Fund, as the case may be, terminates
this Agreement as to such other Participating Fund in accordance with this
Article X.
ARTICLE XI 11.
AMENDMENTS
11.1 Any other changes in the terms of this Agreement, except for the addition
or deletion of any Participating Fund as specified in Exhibit A, shall be
made by agreement in writing between Insurance Company and each respective
Participating Fund.
ARTICLE XII
NOTICE
12.1 Each notice required by this Agreement shall be given by certified mail,
return receipt requested, to the appropriate parties at the following
addresses:
Insurance Company: United Investors Life Insurance Company
2001 Third Avenue South
Birmingham, Alabama 35233
Attn: James L. Sedgwick, President
(FAX: (205) 325-2720)
with copies to: Mid America Partners, Inc.
9020 North May Avenue
Suite 290
Oklahoma City, Oklahoma 73120
Attn: Mark Davenport
(FAX: (405) 840-8770)
Participating Funds: [Name of Fund]
c/o Premier Mutual Fund Services, Inc.
200 Park Avenue, 6th Floor West
New York, New York 10166
Attn: Elizabeth A. Bachman, Esq.
with copies to: [Name of Fund]
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<PAGE>
c/o The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Attn: Mark N. Jacobs, Esq.
Lawrence B. Stoller, Esq.
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004-2696
Attn: Lewis G. Cole, Esq.
Stuart H. Coleman, Esq.
Notice shall be deemed to be given on the date of receipt by the addresses
as evidenced by the return receipt.
ARTICLE XIII 12.
MISCELLANEOUS
13.1 This Agreement has been executed on behalf of each Fund by the undersigned
officer of the Fund in his capacity as an officer of the Fund. The
obligations of this Agreement shall only be binding upon the assets and
property of the Fund and shall not be binding upon any director, trustee,
officer or shareholder of the Fund individually. It is agreed that the
obligations of the Funds are several and not joint, that no Fund shall be
liable for any amount owing by another Fund and that the Funds have
executed one instrument for convenience only.
ARTICLE XIV 13.
LAW
14.1 This Agreement shall be construed in accordance with the internal laws of
the State of New York, without giving effect to principles of conflict of
laws.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be duly
executed and attested as of the date first above written.
UNITED INVESTORS LIFE INSURANCE COMPANY
By:_______________________________
Its:______________________________
Attest:_____________________
DREYFUS LIFE AND ANNUITY INDEX FUND, INC. (d/b/a
DREYFUS STOCK INDEX FUND)
By:_______________________________
Its:______________________________
Attest:_____________________
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
By:_______________________________
Its:______________________________
Attest:_____________________
DREYFUS VARIABLE INVESTMENT FUND
By:_______________________________
Its:______________________________
Attest:_____________________
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<PAGE>
EXHIBIT A
LIST OF PARTICIPATING FUNDS
Dreyfus Variable Investment Fund:
Capital Appreciation Portfolio
Small Cap Portfolio
Growth and Income Portfolio
Quality Bond Portfolio
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<PAGE>
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
UNITED INVESTORS LIFE INSURANCE COMPANY
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this ____ day of March 1997, by and
among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), UNITED INVESTORS LIFE INSURANCE COMPANY, a Missouri corporation (the
"Company") on its own behalf and on behalf of each of the segregated asset
accounts of the Company set forth in Schedule A hereto, as may be amended from
time to time (the "Accounts"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a
Delaware corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or variable
life insurance contracts (individually, the "Policy" or, collectively, the
"Policies") which, if required by applicable law, will be registered under the
1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated asset
accounts, established by resolution of the Board of Directors of the Company, to
set aside and invest assets attributable to the aforesaid variable annuity
and/or variable life insurance contracts that are allocated to the Accounts (the
Policies and the Accounts covered by this Agreement, and each corresponding
Portfolio covered by this Agreement in which the Accounts invest, is specified
in Schedule A attached hereto as may be modified from time to time);
WHEREAS, the Company has registered or will register the Accounts as unit
investment trusts under the 1940 Act (unless exempt therefrom);
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<PAGE>
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered as a
broker-dealer with the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"), and is
a member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD");
WHEREAS, MAP Investments, Inc., the underwriter for the individual variable
annuity and the variable life policies, is registered as a broker-dealer with
the SEC under the 1934 Act and is a member in good standing of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust, MFS,
and the Company agree as follows:
ARTICLE I. SALE OF TRUST SHARES
--------------------
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that Business
Day, as defined below) and which are available for purchase by such
Accounts, executing such orders on a daily basis at the 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 as provided for under Section 817(h)(4) of the Internal Revenue
Code of 1986, as amended (the "Code") and the regulations thereunder. 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
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<PAGE>
the Trust receives notice of such request for redemption by 9:30 a.m. New
York time on the next following Business Day.
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted with
respect to any Portfolio. However, with respect to payment of the purchase
price by the Company and of redemption proceeds by the Trust, the Company
and the Trust shall net purchase and redemption orders with respect to each
Portfolio and shall transmit one net payment for all of the Portfolios in
accordance with Section 1.6.
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 Trust
shall make an adjustment to the number of shares purchased or redeemed for
the Accounts 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
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<PAGE>
segregated investment accounts for the Policies, and that it will maintain
such registration for so long as any Policies are outstanding except for
proper reliance on an exemption from registration under the 1940 Act. 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. 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 Code , that it will
maintain such treatment and that it will notify the Trust or MFS
immediately upon having a reasonable basis for believing that the policies
have ceased to be so treated or that they might not be so treated in the
future.
2.3. The Company represents and warrants that MAP Investments, 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 MAP Investments, 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. The Trust represents and warrants that
any of its trustees, officers, employees, investment advisers, and other
individuals/entities who deal with the money and/or securities of the Trust
are and shall continue to be at all times covered by a blanket fidelity
bond or similar coverage (including larceny and embezzlement) for the
benefit of the Trust in an amount not less than that required by Rule 17g-1
under the 1940 Act issued by a reputable bonding company.
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.
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<PAGE>
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 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. The Company may print the prospectus for the
Shares in combination with other fund prospectuses in accordance with the
expense allocation provisions set forth in the immediately preceding
sentence (provided that the applicable fund will bear expenses with respect
to its prospectus). 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 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.
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<PAGE>
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3 above,
or of Article V below, the Company shall pay the expense of printing or
providing documents to the extent such cost is considered a distribution
expense. Distribution expenses would include by way of illustration, but
are not limited to, the printing of the Shares' prospectus or prospectuses
for distribution to prospective purchasers or to owners of existing
Policies not funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate to
include in the prospectus pursuant to which a Policy is offered disclosure
regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received from
Policy owners; and
(c) vote the Shares for which no instructions have been received in
the same proportion as the Shares of such Portfolio for which
instructions have been received from Policy owners;
so long as and to the extent that the SEC continues to interpret the 1940
Act to require pass through voting privileges for variable contract owners.
The Company will in no way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Shares held for such
Policy owners. The Company reserves the right to vote shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts holding Shares calculates voting privileges
in the manner required by the Mixed and Shared Funding Exemptive Order.
The Trust and MFS will notify the Company of any changes of interpretations
or amendments to the Mixed and Shared Funding Exemptive Order.
ARTICLE IV. SALES MATERIAL AND INFORMATION
-------------------------------
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust, MFS, any other investment adviser to the
Trust, or any affiliate of MFS are named, at least three (3) Business Days
prior to its use. No such material shall be used if the Trust, MFS, or
their respective designees reasonably objects to such use within three (3)
Business Days after receipt of such material.
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, 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
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<PAGE>
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,
, 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 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 or 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 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
-----------------
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<PAGE>
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 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.
-8-
<PAGE>
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
---------------------------------------
6.1 The Trust and MFS represent and warrant 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 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 will 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.
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
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<PAGE>
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 and 7.4 of this Agreement shall continue in effect
only to the extent that terms and conditions substantially identical to
such Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
---------------
8.1. INDEMNIFICATION BY THE COMPANY
------------------------------
The Company agrees to indemnify and hold harmless the Trust, MFS, any
affiliates of MFS, and each of their respective directors/trustees,
officers and each person, if any, who controls the Trust or MFS within the
meaning of Section 15 of the 1933 Act, and any agents or employees of the
foregoing (each an "Indemnified Party," or collectively, the "Indemnified
Parties" for purposes of this Section 8.1) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of the Company) or expenses (including reasonable counsel
fees) to which 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 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 Company or
this designee, or persons under its control and on which the
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<PAGE>
Company has reasonably relied) or wrongful conduct of the
Company or persons under its control, with respect to the sale
or distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the registration
statement, prospectus, statement of additional information, or
sales literature or other promotional literature of the Trust,
or any amendment thereof or supplement thereto, or the omission
or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or omission
was made in reliance upon information furnished to the Trust by
or on behalf of the Company; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of this
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.2. INDEMNIFICATION BY THE TRUST
----------------------------
The Trust agrees to indemnify and hold harmless the Company and each
of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act, and any agents or
employees of the foregoing (each an "Indemnified Party," or collectively,
the "Indemnified Parties" for purposes of this Section 8.2.) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Trust) or expenses (including
reasonable counsel fees) to which any Indemnified Party may become subject
under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Shares or the
Policies and:
(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
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<PAGE>
(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 respective control and on which any such
entity has reasonably relied) or wrongful conduct of the Trust
or persons under its control, with respect to the sale or
distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the registration
statement, prospectus, statement of additional information, or
sales literature or other promotional literature of the Accounts
or relating to the Policies, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance
upon information furnished to the Company by or on behalf of the
Trust, MFS or the Underwriter; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements or a failure to qualify as a regulated investment
company each as specified in Article VI of this Agreement) or
arise out of or result from any other material breach of this
Agreement by the Trust; or
(e) arise out of or result from the materially incorrect or
untimely calculation or reporting of the daily net asset value
per share or dividend or capital gain distribution rate; or
(f) arise as a result of any failure by the Trust to provide
the services and furnish the materials under the terms of the
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any 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
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<PAGE>
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.
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.
These indemnity provisions shall survive termination of this Agreement and
are in addition to any liability which the parties to this Agreement may
otherwise have.
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:
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<PAGE>
(a) at the option of any party upon 180 days 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 by written notice to the
Company 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 by written notice to the Trust
and MFS 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 by written
notice to the other parties, upon another party's material
breach of any provision of this Agreement; or
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<PAGE>
(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.
11.6. If this Agreement terminates, the parties agree that Article VIII,
and to the extent that all or a portion of assets of the Accounts continue
to be invested in the Trust, Articles I, II, III, VI and VII, will remain
in effect after termination.
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.
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<PAGE>
If to the Trust:
MFS VARIABLE INSURANCE TRUST
500 Boylston Street
Boston, Massachusetts 02116
Attn: Stephen E. Cavan, Secretary
If to the Company:
UNITED INVESTORS LIFE INSURANCE COMPANY
2001 Third Avenue South
Birmingham, Alabama 35233
Attention: James L. Sedgwick, President
Fax: (205) 325-2720
Copy to:
MID AMERICA PARTNERS, INC.
9020 North May Avenue, Suite 290
Oklahoma City, Oklahoma 73120
Attention: Mark Davenport
Fax: (405) 840-8770
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. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
-16-
<PAGE>
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, in accordance with
its proportionate interest hereunder, 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.
UNITED INVESTORS LIFE INSURANCE COMPANY
By its authorized officer,
By: _______________________________
Title: ____________________________
MFS VARIABLE INSURANCE TRUST, ON BEHALF OF THE PORTFOLIOS
By its authorized officer and not individually,
By: _______________________________
W. Thomas London
Treasurer
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
-17-
<PAGE>
By: _______________________________
Arnold D. Scott
Senior Executive Vice President
-18-
<PAGE>
As of March ___, 1997
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
--------------------------------------
<TABLE>
<CAPTION>
================================================================================
NAME OF SEPARATE
ACCOUNT AND DATE POLICIES FUNDED PORTFOLIOS
ESTABLISHED BY BOARD OF BY SEPARATE ACCOUNT APPLICABLE TO POLICIES
DIRECTORS
================================================================================
<S> <C> <C>
RetireMap Variable Account Variable Annuity - V96 MFS Emerging Growth Series
MFS Research Series
MFS Utilities Series
- --------------------------------------------------------------------------------
</TABLE>
-19-
<PAGE>
UNITED INVESTORS LIC
EXECUTION COPY
PARTICIPATION AGREEMENT
BY AND AMONG
UNITED INVESTORS LIFE INSURANCE COMPANY
AND
WARBURG, PINCUS TRUST
AND
WARBURG, PINCUS COUNSELLORS, INC.
AND
COUNSELLORS SECURITIES INC.
THIS AGREEMENT, made and entered into this day of _____________,
1997, by and among United Investors Life Insurance Company organized under the
laws of the State of Missouri (the "Company"), on its own behalf and on behalf
of each separate account of the Company named in Schedule 1 to this Agreement as
may be amended from time to time (each account referred to as an "Account"),
Warburg, Pincus Trust, an open-end management investment company and business
trust organized under the laws of the Commonwealth of Massachusetts (the
"Fund"); Warburg, Pincus Counsellors, Inc. a corporation organized under the
laws of the State of Delaware (the "Adviser"); and Counsellors Securities Inc.,
a corporation organized under the laws of the State of New York ("CSI").
WHEREAS, the Fund engages in business as an open-end management
investment company and was established for the purpose of serving as the
investment vehicle for separate accounts established for variable life insurance
contracts and variable annuity contracts to be offered by insurance companies
that have entered into participation agreements similar to this Agreement (the
"Participating Insurance Companies"), and
WHEREAS, beneficial interests in the Fund are divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Fund has received an order from the Securities and
Exchange Commission (the "SEC") granting Participating Insurance Companies and
variable annuity separate accounts and variable life insurance separate accounts
relief from the
<PAGE>
provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended (the "1940 Act"), and Rules 6e-
2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares
of the Fund to be sold to and held by variable annuity separate accounts and
variable life insurance separate accounts of both affiliated and unaffiliated
Participating Insurance Companies and qualified pension and retirement plans
outside of the separate account context (the "Mixed and Shared Funding Exemptive
Order"). The parties to this Agreement agree that the conditions or
undertakings specified in the Mixed and Shared Funding Exemptive Order and that
may be imposed on the Company, the Fund, the Adviser and/or CSI by virtue of the
receipt of such order by the SEC will be incorporated herein by reference, and
such parties agree to comply with such conditions and undertakings to the extent
applicable to each such party; 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 (the "1933 Act"); and
WHEREAS, the Company has registered or will register certain variable
annuity contracts (the "Contracts") under the 1933 Act; and
WHEREAS, the Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company under the insurance laws of the State of Missouri, to set aside and
invest assets attributable to the Contracts; and
WHEREAS, the Company has registered the Account as a unit investment
trust under the 1940 Act; and
WHEREAS, CSI, the Fund's distributor, is registered as a broker-dealer
with the SEC under the Securities Exchange Act of 1934 (the "1934 Act") and is a
member in good standing of the National Association of Securities Dealers, Inc.
(the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of the Portfolios named in
Schedule 2, as such schedule may be amended from time to time (the "Designated
Portfolios"), on behalf of the Account to fund the Contracts, and the Fund is
authorized to sell such shares to unit investment trusts such as the Account at
net asset value;
2
<PAGE>
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund, the Adviser and CSI agree as follows:
ARTICLE I. SALE OF FUND SHARES
-------------------
1.1. The Fund agrees to sell to the Company those shares of the Designated
Portfolios that each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt and acceptance by the Fund or
its designee of the order for the shares of the Fund. For purposes of this
Section 1.1, the Company will be the designee of the Fund for receipt of such
orders from each Account and receipt by such designee will 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 ("T+1"). "Business Day" will
mean any day on which the New York Stock Exchange, Inc. (the "NYSE") is open for
trading and on which the Fund calculates its net asset value pursuant to the
rules of the SEC.
1.2. The Company will pay for Fund shares on T+1 in each case that an order to
purchase Fund shares is made in accordance with Section 1.1 above. Payment will
be in federal funds transmitted by wire. This wire transfer will be initiated
by 12:00 p.m. Eastern Time.
1.3. The Fund agrees to make shares of the Designated Portfolios available
indefinitely for purchase at the applicable net asset value per share by
Participating Insurance Companies and their separate accounts on those days on
which the Fund calculates its Designated Portfolio net asset value pursuant to
rules of the SEC and the Fund shall use reasonable efforts to calculate such net
asset value on each day the NYSE is open for trading; provided, however, that
the Fund, the Adviser or CSI 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 its or their sole discretion acting in good faith, necessary in the best
interests of the shareholders of such Portfolio.
1.4. On each Business Day on which the Fund calculates its net asset value, the
Company will aggregate and calculate the net purchase or redemption orders for
each Account maintained by the Fund in which contract owner assets are invested.
Net orders will only reflect orders that the Company has received prior to the
close of regular trading on the NYSE currently 4:00 p.m., Eastern Time) on that
Business Day. Orders that the Company has received after the close of regular
trading on the NYSE will be treated as though received on the next Business Day.
Each communication of orders by the Company will constitute a representation
that such orders were received
3
<PAGE>
by it prior to the close of regular trading on the NYSE on the Business Day on
which the purchase or redemption order is priced in accordance with Rule 22c-1
under the 1940 Act. Other procedures relating to the handling of orders will be
in accordance with the prospectus and statement of information of the relevant
Designated Portfolio or with oral or written instructions that CSI or the Fund
will forward to the Company from time to time.
1.5. The Fund agrees that shares of the Fund will be sold only to Participating
Insurance Companies and their separate accounts, qualified pension and
retirement plans or such other persons as are permitted under applicable
provisions of Section 817(h)(4) of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code"), and regulations promulgated thereunder, the sale
to which will not impair the tax treatment currently afforded the Contracts. No
shares of any Portfolio will be sold to the general public except as set forth
in this Section 1.5.
1.6. The Fund agrees to redeem for cash, upon 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 and acceptance
by the Fund or its designee of the request for redemption. For purposes of this
Section 1.6, the Company will be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee will
constitute receipt by the Fund, provided the Fund receives notice of request for
redemption by 10:00 a.m. Eastern Time on the next following Business Day.
Payment will be in federal funds transmitted by wire to the Company's account as
designated by the Company in writing from time to time, on the same Business Day
the Fund receives notice of the redemption order from the Company. The Fund
reserves the right to delay payment of redemption proceeds, but in no event may
such payment be delayed longer than the period permitted by the 1940 Act. The
Fund will not bear any responsibility whatsoever for the proper disbursement or
crediting of redemption proceeds; the Company alone will be responsible for such
action. If notification of redemption is received after 10:00 a.m. Eastern
Time, payment for redeemed shares will be made on the next following Business
Day.
1.7. The Company agrees to purchase and redeem the shares of the Designated
Portfolios offered by the then current prospectus of the Fund in accordance with
the provisions of such prospectus.
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. Purchase
and redemption orders for Fund shares will be recorded in an appropriate title
for each Account or the appropriate subaccount of each Account.
4
<PAGE>
1.9. The Fund will furnish same day notice (by telecopier, followed by written
confirmation) to the Company of the declaration of any income, dividends or
capital gain distributions payable on each Designated Portfolio's shares. The
Company hereby elects to receive all such dividends and distributions as are
payable on the Designated Portfolio shares in the form of additional shares of
that Designated Portfolio. The Fund will notify the Company of the number of
shares so issued as payment of such dividends and distributions. The Company
reserves the right to revoke this election upon reasonable prior notice to the
Fund and to receive all such dividends and distributions in cash.
1.10. The Fund will make the net asset value per share for each Designated
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and will use its
best efforts to make such net asset value per share available by 6:00 p.m.,
Eastern Time, but in no event later than 7:00 p.m., Eastern Time, each Business
Day.
1.11. In the event adjustments are required to correct any error in the
computation of the net asset value of the Fund's shares, the Fund or CSI will
notify the Company as soon as practicable after discovering the need for those
adjustments that result in an aggregate reimbursement of $150 or more to any one
Account maintained by a Designated Portfolio unless notified otherwise by the
Company (or, if lesser, results in an adjustment of $10 or more to each
contractowner's account). Any such notice will state for each day for which an
error occurred the incorrect price, the correct price and, to the extent
communicated to the Fund's shareholders, the reason for the price change. The
Company may send this notice or a derivation thereof (so long as such derivation
is approved in advance by CSI or the Adviser) to contractowners whose accounts
are affected by the price change. The parties will negotiate in good faith to
develop a reasonable method for effecting such adjustments.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
-------------------------------
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act or are exempt from and not subject to registration
thereunder, and that the Contracts will be issued and sold in compliance with
all applicable federal and state laws, including 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 as a separate account
under applicable state law and, to the extent required under the 1940 Act, has
registered the Account as a unit investment trust in accordance
5
<PAGE>
with the provisions of the 1940 Act to serve as a segregated investment account
for the Contracts. The Company agrees that it will file and maintain the
effectiveness of any registration statements relating to any Account or Contract
as may be required from time to time. The Company further agrees to amend any
such registration statement under the 1933 Act for the Contracts and any such
registration statement under the 1940 Act for the Accounts from time to time as
required in order to effect the continuous offering of the Contracts or as may
otherwise be required by applicable law. The Company will register and qualify
the Contracts for sale in accordance with the securities laws of the various
states only if and to the extent deemed necessary by the Company.
2.2. The Company represents that the Contracts are currently and at the time of
issuance will be treated as annuity contracts under applicable provisions of the
Internal Revenue Code, and that it will make every effort to maintain such
treatment and that it will notify the Fund and the Adviser immediately upon
having a reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future.
2.3. The Company represents and warrants that it will not purchase shares of
the Designated Portfolios with assets derived from tax-qualified retirement
plans except, indirectly, through Contracts purchased in connection with such
plans.
2.4. The Fund represents and warrants that Fund shares of the Designated
Portfolios sold pursuant to this Agreement will be registered under the 1933 Act
and duly authorized for issuance in accordance with applicable law and that the
Fund is and will remain registered under the 1940 Act for as long as such shares
of the Designated Portfolios are outstanding. The Fund will 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 or as may otherwise be required by applicable law. The Fund will
register and qualify the shares of the Designated Portfolios for sale in
accordance with the laws of the various states only if and to the extent deemed
advisable by the Fund.
2.5. The Fund represents that each Designated Portfolio is currently qualified
as a Regulated Investment Company under Subchapter M of the Internal Revenue
Code and that it will 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 a Designated Portfolio has
ceased to so qualify or that it might not so qualify in the future.
6
<PAGE>
2.6. The Fund represents and warrants that in performing the services described
in this Agreement, the Fund will comply with all applicable laws, rules and
regulations. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies, objectives and restrictions) complies with the insurance laws and
regulations of any state. The Fund and CSI agree that upon request they will
use their best efforts to furnish the information required by state insurance
laws so that the Company can obtain the authority needed to issue the Contracts
in the various states.
2.7. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although it
reserves the right to make such payments in the future. To the extent that it
decides to finance distribution expenses pursuant to Rule 12b-1 the Fund
undertakes to have its Fund Board formulate and approve any plan under Rule 12b-
1 to finance distribution expenses in accordance with 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 applicable provisions of the 1940 Act.
2.9. CSI represents and warrants that it will distribute the Fund shares of the
Designated Portfolios in accordance with all applicable federal and state
securities laws including, without limitation, the 1933 Act, the 1934 Act and
the 1940 Act.
2.10. CSI represents and warrants that it is and will remain duly registered
under all applicable federal and state securities laws and that it will perform
its obligations for the Fund in accordance in all material respects with any
applicable state and federal securities laws.
2.11. The Fund represents and warrants that all of its trustees, officers,
employees, and other individuals/entities having access to the funds and/or
securities of the Fund are and continue to be at all times covered by a blanket
fidelity bond or similar coverage for the benefit of the Fund in an amount not
less than the minimal coverage as required currently by Rule 17g-(1) of the 1940
Act or related provisions as may be promulgated from time to time. The
aforesaid bond includes coverage for larceny and embezzlement and is issued by a
reputable bonding company. CSI and the Fund's investment advisers represent and
warrant that they are and continue to be at all times covered by policies
similar to the aforesaid bond.
7
<PAGE>
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
------------------------------------------
3.1. The Fund or CSI will provide the Company, at the Fund's or its affiliate's
expense, with as many copies of the current Fund prospectus for the Designated
Portfolios as the Company may reasonably request for distribution, at the
Company's expense, to prospective contractowners and applicants. The Fund or
CSI will provide, at the Fund's or its affiliate's expense, as many copies of
said prospectus as necessary for distribution, at the Company's expense, to
existing contractowners. The Fund or CSI will provide the copies of said
prospectus to the Company or to its mailing agent. If requested by the Company,
the Fund or CSI will provide such documentation, including a computer diskette
of the Company's specification or a final copy of a current prospectus set in
type at the Fund's or its affiliate's expense, and such other assistance as is
reasonably necessary in order for the Company at least annually (or more
frequently if the Fund prospectus is amended more frequently) to have the Fund's
prospectus, the prospectus for the Contracts and the prospectuses of other
mutual funds in which assets attributable to the Contracts may be invested
printed together in one document (the "Multifund Prospectus"), in which case the
Fund or its affiliate will bear its reasonable share of expenses as described
above, allocated based on the proportionate number of pages of the Fund's and
other fund's respective portions of the document.
3.2. The Fund or CSI will provide the Company, at the Fund's or its affiliate's
expense, with as many copies of the statement of additional information as the
Company may reasonably request for distribution, at the Company's expense, to
prospective contractowners and applicants. The Fund or CSI will provide, at the
Fund's or its affiliate's expense, as many copies of said statement of
additional information as necessary for distribution, at the Company's expense,
to any existing contractowner who requests such statement or whenever state or
federal law otherwise requires that such statement be provided. The Fund or CSI
will provide the copies of said statement of additional information to the
Company or to its mailing agent.
3.3. To the extent that the Fund or CSI desires to change (whether by revision
or supplement) any of the information contained in any form of Fund prospectus
or statement of additional information provided to the Company for inclusion in
a Multifund Prospectus, the Company agrees to make such changes within a
reasonable period of time after receipt of a request to make such change from
the Fund or CSI, subject to the following limitation. To the extent that the
Fund is legally required to make a change to a Fund prospectus or statement of
additional information provided to the Company for inclusion in a Multifund
Prospectus, the Company agrees to make any such change as soon as possible
following receipt of the form of revised prospectus and/or statement of
additional information or supplement, as applicable, but in no event later than
five days following receipt. To the extent that the Fund is required by law to
8
<PAGE>
cease selling shares of a Designated Portfolio, the Company agrees to cease
offering shares of the Designated Portfolio until the Fund or CSI notifies the
Company otherwise.
3.4. The Fund or CSI, at the Fund's or its affiliate's expense, will provide
the Company or its mailing agent with copies of its proxy material, if any,
reports to shareholders and other communications to shareholders in such
quantity as the Company will reasonably require. The Company will distribute
this proxy material, reports and other communications to existing contract
owners and tabulate the votes.
3.5. If and to the extent required by law the Company will:
(a) solicit voting instructions from
contractowners;
(b) vote the shares of the Designated Portfolios held in the Account
in accordance with instructions received from contractowners; and
(c) vote shares of the Designated Portfolios held in the Account for
which no timely instructions have been received, as well as shares it owns, in
the same proportion as shares of such Designated Portfolio for which
instructions have been received from the Company's contractowners;
so long as and to the extent that the SEC continues to interpret the
1940 Act to require pass-through voting privileges for variable contractowners.
Except as set forth above, 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. The Company will be responsible for assuring that each of its separate
accounts participating in the Fund calculates voting privileges in a manner
consistent with all legal requirements, including the Mixed and Shared Funding
Exemptive Order.
3.6. The Fund will comply with all provisions of the 1940 Act requiring voting
by shareholders, and in particular, the Fund either will provide for annual
meetings (except insofar as the SEC may interpret Section 16 of the 1940 Act not
to require such meetings) or, as the Fund currently intends, will 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
SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of trustees and with whatever rules the SEC may promulgate
with respect thereto.
9
<PAGE>
ARTICLE IV. SALES MATERIAL AND INFORMATION
-------------------------------
4.1. CSI will provide the Company on a timely basis with investment performance
information for each Designated Portfolio in which the Company maintains an
Account, including total return for the preceding calendar month and calendar
quarter, the calendar year to date, and the prior one-year, five-year, and ten
year (or life of the Designated Portfolio) periods. The Company may, based on
the SEC mandated information supplied by CSI, prepare communications for
contractowners ("Contractowner Materials"). The Company will provide copies of
all Contractowner Materials concurrently with their first use for CSI's internal
recordkeeping purposes. It is understood that neither CSI nor any Designated
Portfolio will be responsible for errors or omissions in, or the content of,
Contractowner Materials except to the extent that the error or omission resulted
from information provided by or on behalf of CSI or the Designated Portfolio.
Any printed information that is furnished to the Company pursuant to this
Agreement other than each Designated Portfolio's prospectus or statement of
additional information (or information supplemental thereto), periodic reports
and proxy solicitation materials is CSI's sole responsibility and not the
responsibility of any Designated Portfolio or the Fund. The Company agrees that
the Portfolios, the shareholders of the Portfolios and the officers and
governing Board of the Fund will have no liability or responsibility to the
Company in these respects.
4.2. The Company will not give any information or make any representations or
statements 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, prospectus or statement of additional information
for Fund 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 Fund, or in published reports for the Fund
which are in the public domain or approved by the Fund or CSI for distribution,
or in sales literature or other material provided by the Fund, the Adviser or by
CSI.
Nothing in this Section 4.2 will be construed as preventing the
Company or its employees or agents from giving advice on investment in the Fund.
4.3. The Fund, the Adviser and CSI will not give any information or make any
representations or statements 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, prospectus or statement
of additional information for the Contracts, as such registration statement,
prospectus and statement of additional information may be amended or
supplemented from time to time, or in published reports
10
<PAGE>
for each Account or the Contracts which are in the public domain or approved by
the Company for distribution to contractowners, or in sales literature or other
material provided by the Company, except with permission of the Company. The
Company agrees to respond to any request for approval on a prompt and timely
basis. The Fund, the Adviser or CSI will furnish, or will cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company or its Account is named at least
ten (10) business days prior to its use. No such material will be used if the
Company reasonably objects to such use within five (5) business days after
receipt of such material.
4.4. The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, statements of additions 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 SEC, the NASD or other regulatory
authority.
4.5. 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,
the NASD or other regulatory authority.
4.6. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media (e.g., on-line
networks such as the Internet or other electronic messages)), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisements sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, registration statements, prospectuses,
statements of additional information, shareholder reports, proxy materials and
any other material constituting sales literature or advertising under the NASD
rules, the 1933 Act or the 1940 Act.
4.7. The Fund and CSI hereby consent to the Company's use of the names Warburg,
Pincus Trust Post-Venture Capital Portfolio, or other Designated Portfolio, and
11
<PAGE>
Warburg, Pincus Counsellors, Inc. in connection with the marketing of the
Contracts, subject to the terms of Sections 4.1 and 4.2 of this Agreement. Such
consent will continue only as long as any Contracts are invested in the relevant
Designated Portfolio.
ARTICLE V. FEES AND EXPENSES
------------------
5.1. The Fund, the Adviser and CSI will pay no fee or other compensation to the
Company (other than as set forth in the administrative services letter agreement
between CSI and the Company) except if the Fund or any Designated Portfolio
adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act to
finance distribution expenses, then, subject to obtaining any required exemptive
orders or other regulatory approvals, the Fund may make payments to the Company
or to the underwriter for the Contracts if and in such amounts agreed to by the
Fund in writing.
5.2. All expenses incident to performance by the Fund of this Agreement will be
paid by the Fund to the extent permitted by law. The Fund will bear the
expenses for the cost of registration and qualification of the Fund's shares;
preparation and filing of the Fund's prospectus, statement of additional
information and registration statement, proxy materials and reports; setting in
type and printing the Fund's prospectus; setting in type and printing proxy
materials and reports by it to contractowners (including the costs of printing a
Fund prospectus that contains an annual report); the preparation of all
statements and notices required by any federal or state law; all taxes on the
issuance or transfer of the Fund's shares; any expenses permitted to be paid or
assumed by the Fund pursuant to a plan, if any, under Rule 12b-1 under the 1940
Act; and all other expenses set forth in Article III of this Agreement.
ARTICLE VI. DIVERSIFICATION
---------------
6.1. The Adviser will ensure that 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 annuity contracts under the Internal Revenue Code and the
regulations issued thereunder. Without limiting the scope of the foregoing, the
Fund will comply with Section 817(h) of the Internal Revenue Code and Treasury
Regulation 1.817-5, as amended from time to time, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulation. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps: (a) to notify the Company of such breach; and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Treasury Regulation 1.817-5.
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ARTICLE VII. POTENTIAL CONFLICTS
--------------------
7.1. The Board of Trustees of the Fund (the "Fund Board") will monitor the Fund
for the existence of any irreconcilable material conflict among the interests of
the contractowners 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 Participating Insurance Companies or
by variable annuity and variable life insurance contractowners; or (f) a
decision by an insurer to disregard the voting instructions of contractowners.
The Fund Board will 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 Fund Board. The Company agrees to assist the Fund Board in
carrying out its responsibilities, as delineated in the Mixed and Shared Funding
Exemptive Order, by providing the Fund Board with all information reasonably
necessary for the Fund Board to consider any issues raised. This includes, but
is not limited to, an obligation by the Company to inform the Fund Board
whenever contractowner voting instructions are to be disregarded. The Company's
responsibilities hereunder will be carried out with a view only to the interest
of contractowners.
7.3. If it is determined by a majority of the Fund Board, or a majority of its
disinterested trustees, that an irreconcilable material conflict exists, the
Company will, at its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested trustees), take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict, up to and
including: (a) withdrawing the assets allocable to some or all of the Accounts
from the Fund or any Designated 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 contractowners and, as appropriate,
segregating the assets of any appropriate group (i.e., variable annuity
contractowners or variable life insurance contractowners of one or more
Participating Insurance Companies) that votes in favor of such segregation, or
13
<PAGE>
offering to the affected contractowners the option of making such a change; and
(b) 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 contractowner voting instructions, and the Company's
judgment represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
subaccount of the Account's investment in the Fund and terminate this Agreement
with respect to such subaccount; provided, however, that such withdrawal and
termination will be limited to the extent required by the foregoing
irreconcilable material conflict as determined by a majority of the
disinterested trustees of the Fund Board. No charge or penalty will be imposed
as a result of such withdrawal.
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 insurance regulators, then the Company will withdraw the
affected subaccount of the Account's investment in the Fund and terminate this
Agreement with respect to such subaccount; provided, however, that such
withdrawal and termination will be limited to the extent required by the
foregoing irreconcilable material conflict as determined by a majority of the
disinterested directors of the Fund Board. No charge or penalty will be imposed
as a result of such withdrawal.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority of
the disinterested members of the Fund Board will determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund or the Adviser (or any other investment adviser to the Fund) be
required to establish a new funding medium for the Contracts. The Company will
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
contractowners materially affected by the irreconcilable material conflict.
7.7. The Company will at least annually submit to the Fund Board such reports,
materials or data as the Fund Board may reasonably request so that the Fund
Board may fully carry out the duties imposed upon it as delineated in the Mixed
and Shared Funding Exemptive Order, and said reports, materials and data will be
submitted more frequently if deemed appropriate by the Fund Board.
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
14
<PAGE>
Mixed and Shared Funding Exemptive Order) on terms and conditions materially
different from those contained in the Mixed and Shared Funding Exemptive Order,
then: (a) the Fund and/or the Participating Insurance Companies, as appropriate,
will 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 3.5, 3.6, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement will
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
------------------------------
(a) The Company agrees to indemnify and hold harmless the Fund, the
Adviser, CSI, and each person, if any, who controls or is associated with the
Fund, the Adviser or CSI within the meaning of such terms under the federal
securities laws and any director, trustee, officer, partner, employee or agent
of the foregoing (collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, expenses, damages, liabilities
(including amounts paid in settlement with the written consent of the Company)
or litigation (including reasonable legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements:
(1) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration statement,
prospectus or statement of additional information for the Contracts or contained
in the Contracts or sales literature or other promotional material for the
Contracts (or any amendment or supplement to any of the foregoing), including
any prospectuses or statements of additional information of the Fund to which
the Company has made any changes to the information provided to the Company or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated or necessary to make such
statements not misleading in light of the circumstances in which they were made;
provided that this agreement to indemnify will 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 written information furnished to
the Company by the Fund, the Adviser or CSI for use in the registration
statement, prospectus or statement of additional information for the Contracts
or in the Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Fund shares;
or
15
<PAGE>
(2) arise out of or as a result of statements or representations by
or on behalf of the Company or wrongful conduct of the Company or persons under
its control, with respect to the sale or distribution of the Contracts or Fund
shares (other than statements or representations contained in the Fund
registration statement, Fund prospectus, Fund statement of additional
information, sales literature or other promotional material of the Fund not
supplied by the Company or persons under its control); or
(3) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the Fund registration statement, prospectus,
statement of additional information or sales literature or other promotional
material of the Fund (or amendment or supplement) or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make such statements not misleading in light of the circumstances
in which they were made, if such a statement or omission was made in reliance
upon and in conformity with information furnished to the Fund by or on behalf of
the Company or persons under its control; or
(4) 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
(5) arise out of any material breach of any representation and/or
warranty made by the Company in this Agreement or arise out of or result from
any other material breach by the Company of this Agreement, including, but not
limited to, a failure to comply with the provisions of Section 3.3;
except to the extent provided in Sections 8.1(b) and 8.3 hereof. This
indemnification will be in addition to any liability that the Company otherwise
may have.
(b) No party will be entitled to indemnification under Section 8.1(a)
to the extent such loss, claim, damage, liability or litigation is due to the
willful misfeasance, bad faith, or gross negligence in the performance of such
party's duties under this Agreement, or by reason of such party's reckless
disregard of its obligations or duties under this Agreement by the party seeking
indemnification.
(c) The Indemnified Parties promptly will notify the Company of the
commencement of any litigation, proceedings, complaints or actions by regulatory
authorities against them in connection with the issuance or sale of the Fund
shares or the Contracts or the operation of the Fund.
16
<PAGE>
8.2. Indemnification By The Adviser, the Fund and CSI
------------------------------------------------
(a) The Adviser, the Fund and CSI, in each case solely to the extent
relating to such party's responsibilities hereunder, agree to indemnify and hold
harmless the Company and each person, if any, who controls or is associated with
the Company within the meaning of such terms under the federal securities laws
and any director, trustee, officer, partner, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, expenses, damages, liabilities (including
amounts paid in settlement with the written consent of the Adviser) or
litigation (including reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements:
(1) 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 Fund or sales
literature or other promotional material 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 or necessary to make such statements not misleading in light of the
circumstances in which they were made (in each case substantially as transmitted
to you by the Fund or CSI), provided that this agreement to indemnify will 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 Adviser, CSI or the Fund by or on behalf of the
Company for use in the registration statement, prospectus or statement of
additional information for the Fund or in sales literature of the Fund (or any
amendment or supplement thereto) or otherwise for use in connection with the
sale of the Contracts or Fund shares; or
(2) arise out of or as a result of statements or representations or
wrongful conduct of the Adviser, the Fund or CSI or persons under the control of
the Adviser, the Fund or CSI respectively, with respect to the sale of the Fund
shares (other than statements or representations contained in a registration
statement, prospectus, statement of additional information, sales literature or
other promotional material covering the Contracts not supplied by CSI or persons
under its control); or
(3) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement, prospectus, statement of
additional information or sales literature or other promotional material
covering the Contracts (or
17
<PAGE>
any amendment or supplement thereto), or the omission or alleged omission to
state therein a material fact required to be stated or necessary to make such
statement or statements not misleading in light of the circumstances in which
they were made, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company by the Adviser, the
Fund or CSI or persons under the control of the Adviser, the Fund or CSI; or
(4) arise as a result of any failure by the Fund, the Adviser or CSI
to provide the services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good faith or
otherwise, to comply with the diversification requirements and procedures
related thereto specified in Article VI of this Agreement); or
(5) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser, the Fund or CSI in this
Agreement, or arise out of or result from any other material breach of this
Agreement by the Adviser the Fund or CSI;
except to the extent provided in Sections 8.2(b) and 8.3 hereof.
These indemnifications will be in addition to any liability that the Fund,
Adviser or CSI otherwise may have.
(b) No party will be entitled to indemnification under Section 8.2(a)
to the extent such loss, claim, damage, liability or litigation is due to the
willful misfeasance, bad faith, or gross negligence in the performance of such
party's duties under this Agreement, or by reason of such party's reckless
disregard of its obligations or duties under this Agreement by the party seeking
indemnification.
(c) The Indemnified Parties will promptly notify the Adviser, the Fund
and CSI of the commencement of any litigation, proceedings, complaints or
actions by regulatory authorities against them in connection with the issuance
or sale of the Contracts or the operation of the account.
8.3. Indemnification Procedure
-------------------------
Any person obligated to provide indemnification under this Article
VIII ("Indemnifying Party" for the purpose of this Section 8.3) will not be
liable under the indemnification provisions of this Article VIII with respect to
any claim made against a party entitled to indemnification under this Article
VIII ("Indemnified Party" for the purpose of this Section 8.3) unless such
Indemnified Party will have notified the
18
<PAGE>
Indemnifying Party in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim will
have been served upon such Indemnified Party (or after such party will have
received notice of such service on any designated agent), but failure to notify
the Indemnifying Party of any such claim will not relieve the Indemnifying Party
from any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of the indemnification provision of
this Article VIII, except to the extent that the failure to notify results in
the failure of actual notice to the Indemnifying Party and such Indemnifying
Party is damaged solely as a result of failure to give such notice. In case any
such action is brought against the Indemnified Party, the Indemnifying Party
will be entitled to participate, at its own expense, in the defense thereof. The
Indemnifying Party also will be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Indemnifying Party to the Indemnified Party of the Indemnifying Party's election
to assume the defense thereof, the Indemnified Party will bear the fees and
expenses of any additional counsel retained by it, and the Indemnifying Party
will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation, unless: (a)
the Indemnifying Party and the Indemnified Party will have mutually agreed to
the retention of such counsel; or (b) the named parties to any such proceeding
(including any impleaded parties) include both the Indemnifying Party and the
Indemnified Party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
The Indemnifying Party will not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent or if
there is a final judgment for the plaintiff, the Indemnifying Party agrees to
indemnify the Indemnified Party from and against any loss or liability by reason
of such settlement or judgment. A successor by law of the parties to this
Agreement will be entitled to the benefits of the indemnification contained in
this Article VIII. The indemnification provisions contained in this Article VIII
will survive any termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
---------------
9.1. This Agreement will be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Missouri.
9.2. This Agreement will be subject to the provisions of the 1933 Act, the 1934
Act and the 1940 Act, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including,
19
<PAGE>
but not limited to, the Mixed and Shared Funding Exemptive Order) and the terms
hereof will be interpreted and construed in accordance therewith.
ARTICLE X. TERMINATION
------------
10.1. This Agreement will terminate:
(a) at the option of any party, with or without cause, with respect to
some or all of the Designated Portfolios, upon ninety (90) days' advance written
notice to the other parties; or
(b) at the option of the Company, upon receipt of the Company's
written notice by the other parties, with respect to any Designated Portfolio if
shares of the Designated Portfolio are not reasonably available to meet the
requirements of the Contracts as determined in good faith by the Company; or
(c) at the option of the Company, upon receipt of the Company's
written notice by the other parties, with respect to any Designated Portfolio in
the event any of the Designated Portfolio's shares are not registered, issued or
sold in accordance with applicable state and/or Federal law or such law
precludes the use of such shares as the underlying investment media of the
Contracts issued or to be issued by Company; or
(d) at the option of the Fund, upon receipt of the Fund's written
notice by the other parties, upon institution of formal proceedings against the
Company by the NASD, the SEC, the insurance commission of any state or any other
regulatory body regarding the Company's duties under this Agreement or related
to the sale of the Contracts, the administration of the Contracts, the operation
of the Account, or the purchase of the Fund shares, provided that the Fund
determines in its sole judgment, exercised in good faith, that any such
proceeding would have a material adverse effect on the Company's ability to
perform its obligations under this Agreement; or
(e) at the option of the Company, upon receipt of the Company's
written notice by the other parties, upon institution of formal proceedings
against the Fund, Adviser or CSI by the NASD, the SEC, or any state securities
or insurance department or any other regulatory body, provided that the Company
determines in its sole judgment, exercised in good faith, that any such
proceeding would have a material adverse effect on the Fund's, Adviser's or
CSI's ability to perform its obligations under this Agreement; or
20
<PAGE>
(f) at the option of the Company, upon receipt of the Company's
written notice by the other parties, with respect to any Designated Portfolio if
the Designated Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Internal Revenue Code, or under any successor or
similar provision, or if the Company reasonably and in good faith believes that
the Designated Portfolio may fail to so qualify; or
(g) at the option of the Company, upon receipt of the Company's
written notice by the other parties, with respect to any Designated Portfolio if
the Designated Portfolio fails to meet the diversification requirements
specified in Article VI hereof or if the Company reasonably and in good faith
believes the Designated Portfolio may fail to meet such requirements; or
(h) at the option of any party to this Agreement, upon written notice
to the other parties, upon another party's material breach of any provision of
this Agreement which material breach is not cured within thirty (30) days of
said notice; or
(i) at the option of the Company, if the Company determines in its
sole judgment exercised in good faith, that either the Fund, the Adviser or CSI
has suffered a material adverse change in its business, operations or financial
condition since the date of this Agreement or is the subject of material adverse
publicity which is likely to have a material adverse impact upon the business
and operations of the Company, such termination to be effective sixty (60) days'
after receipt by the other parties of written notice of the election to
terminate; or
(j) at the option of the Fund or CSI, if the Fund or CSI respectively,
determines in its sole judgment exercised in good faith, that the Company has
suffered a material adverse change in its business, operations or financial
condition since the date of this Agreement or is the subject of material adverse
publicity which is likely to have a material adverse impact upon the business
and operations of the Fund or the Adviser, such termination to be effective
sixty (60) days' after receipt by the other parties of written notice of the
election to terminate; or
(k) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the contractowners having an
interest in the Account (or any subaccount) to substitute the shares of another
investment company for the corresponding Designated Portfolio shares of the Fund
in accordance with the terms of the Contracts for which those Designated
Portfolio shares had been selected to serve as the underlying investment media.
21
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The Company will give sixty (60) days' prior written notice to the Fund of the
date of any proposed vote or other action taken to replace the Fund's shares; or
(l) at the option of the Company or the Fund upon a determination by
a majority of the Fund Board, or a majority of the disinterested Fund Board
members, that an irreconcilable material conflict exists among the interests of:
(1) all contractowners of variable insurance products of all separate accounts;
or (2) the interests of the Participating Insurance Companies investing in the
Fund as set forth in Article VII of this Agreement; or
(m) at the option of the Fund in the event any of the Contracts are
not issued or sold in accordance with applicable federal and/or state law.
Termination will be effective immediately upon such occurrence without notice.
10.2. Notice Requirement
-------------------
Except as specified in Section 10.1(m), no termination of this
Agreement will be effective unless and until the party terminating this
Agreement gives prior written notice to all other parties of its intent to
terminate, which notice will set forth the basis for the termination.
10.3. Effect of Termination
----------------------
In the event of any termination of this Agreement, the Fund and CSI
will, 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 will be permitted to reallocate
investments in the Designated Portfolios (as in effect on such date), redeem
investments in the Designated Portfolios and/or invest in the Designated
Portfolios upon the making of additional purchase payments under the Existing
Contracts. However the availability of additional shares hereunder will be
subject to the restrictions and limitations set forth in Article VII, as
applicable. The Company agrees (i) to terminate the availability of shares of
the Fund to Contracts other than Existing Contracts and (ii) to request approval
from the SEC to replace shares of the Fund with other investments for Contracts
and, if and when granted such approval, thereafter to so replace the shares of
the Fund, in each such case as soon as reasonably practicable.
22
<PAGE>
10.4. Surviving Provisions
---------------------
Notwithstanding any termination of this Agreement, each party's
obligations under Article VIII to indemnify other parties will survive and not
be affected by any termination of this Agreement. In addition, each party's
obligations under Section 12.6 will survive and not be affected by any
termination of this Agreement. Finally, with respect to Existing Contracts, all
provisions of this Agreement also will survive and not be affected by any
termination of this Agreement.
ARTICLE XI. NOTICES
--------
11.1. Any notice will be deemed duly 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 parties.
If to the Company: If to the Fund, Adviser and/or CSI:
United Investors Life Insurance 466 Lexington Avenue
Company 10th Floor
2001 Third Avenue South New York, New York 10017
Birmingham, Alabama 35233 Attn: Eugene P. Grace
Attention: James L. Sedgwick, Senior Vice President
President
ARTICLE XII. MISCELLANEOUS
--------------
12.1. The Fund, the Adviser and CSI acknowledge that the identities of the
customers of the Company or any of its affiliates (collectively the "Company
Protected Parties" for purposes of this Section 12.1), information maintained
regarding those customers, and all computer programs and procedures or other
information developed or used by the Company Protected Parties or any of their
employees or agents in connection with the Company's performance of its duties
under this Agreement are the valuable property of the Company Protected Parties.
The Fund, the Adviser and CSI agree that if they come into possession of any
list or compilation of the identities of or other information about the Company
Protected Parties' customers, or any other information or property of the
Company Protected Parties, other than such information as is publicly available
or as may be independently developed or compiled by the Fund, the Adviser or CSI
from information supplied to them by the Company Protected Parties' customers
who also maintain accounts directly with the Fund, the Adviser or CSI, the Fund,
the Adviser and CSI will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with the Company's prior written consent; or (b) as
required by law or judicial process. The
23
<PAGE>
Company acknowledges that the identities of the customers of the Fund, the
Adviser, CSI or any of their affiliates (collectively the "Adviser Protected
Parties" for purposes of this Section 12.1), information maintained regarding
those customers, and all computer programs and procedures or other information
developed or used by the Adviser Protected Parties or any of their employees or
agents in connection with the Fund's, the Adviser's or CSI's performance of
their respective duties under this Agreement are the valuable property of the
Adviser Protected Parties. The Company agrees that if it comes into possession
of any list or compilation of the identities of or other information about the
Adviser Protected Parties' customers, or any other information or property of
the Adviser Protected Parties, other than such information as is publicly
available or as may be independently developed or compiled by the Company from
information supplied to them by the Adviser Protected Parties' customers who
also maintain accounts directly with the Company, the Company will hold such
information or property in confidence and refrain from using, disclosing or
distributing any of such information or other property except: (a) with the
Fund's, the Adviser's or CSI's prior written consent; or (b) as required by law
or judicial process. Each party acknowledges that any breach of the agreements
in this Section 12.1 would result in immediate and irreparable harm to the other
parties for which there would be no adequate remedy at law and agree that in the
event of such a breach, the other parties will be entitled to equitable relief
by way of temporary and permanent injunctions, as well as such other relief as
any court of competent jurisdiction deems appropriate.
12.2. 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.
12.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
12.4. If any provision of this Agreement will be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement will
not be affected thereby.
12.5. This Agreement will not be assigned by any party hereto without the prior
written consent of all the parties.
12.6. Each party to this Agreement will maintain all records required by law,
including records detailing the services it provides. Such records will be
preserved, maintained and made available to the extent required by law and in
accordance with the 1940 Act and the rules thereunder. Each party to this
Agreement will cooperate with each other
24
<PAGE>
party and all appropriate governmental authorities (including without limitation
the SEC, the NASD and state insurance regulators) and will permit each other and
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby. Upon request by the Fund or CSI, the Company agrees to
promptly make copies or, if required, originals of all records pertaining to the
performance of services under this Agreement available to the Fund or CSI, as
the case may be. The Fund agrees that the Company will have the right to
inspect, audit and copy all records pertaining to the performance of services
under this Agreement pursuant to the requirements of any state insurance
department. Each party also agrees to promptly notify the other parties if it
experiences any difficulty in maintaining the records in an accurate and
complete manner. This provision will survive termination of this Agreement.
12.7. Each party represents that the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been duly
authorized by all necessary corporate or board action, as applicable, by such
party and when so executed and delivered this Agreement will be the valid and
binding obligation of such party enforceable in accordance with its terms.
12.8. The parties to this Agreement acknowledge and agree that all liabilities
of the Fund arising, directly or indirectly, under this agreement, will be
satisfied solely out of the assets of the Fund and that no trustee, officer,
agent or holder of shares of beneficial interest of the Fund will be personally
liable for any such liabilities. No Portfolio or series of the Fund will be
liable for the obligations or liabilities of any other Portfolio or series.
12.9. The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect changes in or relating to the Contracts, the
Accounts or the Designated Portfolios of the Fund or other applicable terms of
this Agreement.
12.10. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights.
25
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed hereto as of the date specified below.
UNITED INVESTORS LIFE INSURANCE
COMPANY
SEAL By:
---------------------------------------------
ATTEST By:
--------------------------------------
SEAL WARBURG, PINCUS TRUST
By:
---------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
26
<PAGE>
SEAL WARBURG, PINCUS COUNSELLORS, INC.
By:
---------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
SEAL COUNSELLORS SECURITIES INC.
By:
---------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
ATTEST:
27
<PAGE>
SCHEDULE 1
PARTICIPATION AGREEMENT
BY AND AMONG
UNITED INVESTORS LIFE INSURANCE COMPANY
AND
WARBURG, PINCUS TRUST
AND
WARBURG, PINCUS COUNSELLORS, INC.
AND
COUNSELLORS SECURITIES INC.
The following separate accounts of United Investors Life Insurance Company are
permitted in accordance with the provisions of this Agreement to invest in
Designated Portfolios of the Fund shown in Schedule 2:
RetireMAP Variable Account
established ____________
_______________, 1997
<PAGE>
SCHEDULE 2
PARTICIPATION AGREEMENT
BY AND AMONG
UNITED INVESTORS LIFE INSURANCE COMPANY
AND
WARBURG, PINCUS TRUST
AND
WARBURG, PINCUS COUNSELLORS, INC.
AND
COUNSELLORS SECURITIES INC.
The Separate Account(s) shown on Schedule 1 may invest in the following
Designated Portfolios of the Warburg, Pincus Trust:
Fixed Income Portfolio
Global Fixed Income Portfolio
_______________, 1997
-2-
<PAGE>
PARTICIPATION AGREEMENT
BY AND AMONG
UNITED INVESTORS LIFE INSURANCE COMPANY
AND
WARBURG, PINCUS TRUST II
AND
WARBURG, PINCUS COUNSELLORS, INC.
AND
COUNSELLORS SECURITIES INC.
THIS AGREEMENT, made and entered into this day of _____________,
1997, by and among United Investors Life Insurance Company organized under the
laws of the State of Missouri (the "Company"), on its own behalf and on behalf
of each separate account of the Company named in Schedule 1 to this Agreement as
may be amended from time to time (each account referred to as an "Account"),
Warburg, Pincus Trust II, an open-end management investment company and business
trust organized under the laws of the Commonwealth of Massachusetts (the
"Fund"); Warburg, Pincus Counsellors, Inc. a corporation organized under the
laws of the State of Delaware (the "Adviser"); and Counsellors Securities Inc.,
a corporation organized under the laws of the State of New York ("CSI").
WHEREAS, the Fund engages in business as an open-end management
investment company and was established for the purpose of serving as the
investment vehicle for separate accounts established for variable life insurance
contracts and variable annuity contracts to be offered by insurance companies
that have entered into participation agreements similar to this Agreement (the
"Participating Insurance Companies"), and
WHEREAS, beneficial interests in the Fund are divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Fund has received an order from the Securities and
Exchange Commission (the "SEC") granting Participating Insurance Companies and
variable annuity separate accounts and variable life insurance separate accounts
relief from the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended (the "1940 Act"), and
<PAGE>
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Fund to be sold to and held by variable annuity separate
accounts and variable life insurance separate accounts of both affiliated and
unaffiliated Participating Insurance Companies and qualified pension and
retirement plans outside of the separate account context (the "Mixed and Shared
Funding Exemptive Order"). The parties to this Agreement agree that the
conditions or undertakings specified in the Mixed and Shared Funding Exemptive
Order and that may be imposed on the Company, the Fund, the Adviser and/or CSI
by virtue of the receipt of such order by the SEC will be incorporated herein by
reference, and such parties agree to comply with such conditions and
undertakings to the extent applicable to each such party; 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 (the "1933 Act"); and
WHEREAS, the Company has registered or will register certain variable
annuity contracts (the "Contracts") under the 1933 Act; and
WHEREAS, the Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company under the insurance laws of the State of Missouri, to set aside and
invest assets attributable to the Contracts; and
WHEREAS, the Company has registered the Account as a unit investment
trust under the 1940 Act; and
WHEREAS, CSI, the Fund's distributor, is registered as a broker-dealer
with the SEC under the Securities Exchange Act of 1934 (the "1934 Act") and is a
member in good standing of the National Association of Securities Dealers, Inc.
(the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of the Portfolios named in
Schedule 2, as such schedule may be amended from time to time (the "Designated
Portfolios"), on behalf of the Account to fund the Contracts, and the Fund is
authorized to sell such shares to unit investment trusts such as the Account at
net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund, the Adviser and CSI agree as follows:
2
<PAGE>
ARTICLE I. SALE OF FUND SHARES
-------------------
1.1. The Fund agrees to sell to the Company those shares of the Designated
Portfolios that each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt and acceptance by the Fund or
its designee of the order for the shares of the Fund. For purposes of this
Section 1.1, the Company will be the designee of the Fund for receipt of such
orders from each Account and receipt by such designee will 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 ("T+1"). "Business Day" will
mean any day on which the New York Stock Exchange, Inc. (the "NYSE") is open for
trading and on which the Fund calculates its net asset value pursuant to the
rules of the SEC.
1.2. The Company will pay for Fund shares on T+1 in each case that an order to
purchase Fund shares is made in accordance with Section 1.1 above. Payment will
be in federal funds transmitted by wire. This wire transfer will be initiated
by 12:00 p.m. Eastern Time.
1.3. The Fund agrees to make shares of the Designated Portfolios available
indefinitely for purchase at the applicable net asset value per share by
Participating Insurance Companies and their separate accounts on those days on
which the Fund calculates its Designated Portfolio net asset value pursuant to
rules of the SEC and the Fund shall use reasonable efforts to calculate such net
asset value on each day the NYSE is open for trading; provided, however, that
the Fund, the Adviser or CSI 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 its or their sole discretion acting in good faith, necessary in the best
interests of the shareholders of such Portfolio.
1.4. On each Business Day on which the Fund calculates its net asset value, the
Company will aggregate and calculate the net purchase or redemption orders for
each Account maintained by the Fund in which contract owner assets are invested.
Net orders will only reflect orders that the Company has received prior to the
close of regular trading on the NYSE currently 4:00 p.m., Eastern Time) on that
Business Day. Orders that the Company has received after the close of regular
trading on the NYSE will be treated as though received on the next Business Day.
Each communication of orders by the Company will constitute a representation
that such orders were received by it prior to the close of regular trading on
the NYSE on the Business Day on which the purchase or redemption order is priced
in accordance with Rule 22c-1 under the 1940 Act. Other procedures relating to
the handling of orders will be in accordance
3
<PAGE>
with the prospectus and statement of information of the relevant Designated
Portfolio or with oral or written instructions that CSI or the Fund will forward
to the Company from time to time.
1.5. The Fund agrees that shares of the Fund will be sold only to Participating
Insurance Companies and their separate accounts, qualified pension and
retirement plans or such other persons as are permitted under applicable
provisions of Section 817(h)(4) of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code"), and regulations promulgated thereunder, the sale
to which will not impair the tax treatment currently afforded the Contracts. No
shares of any Portfolio will be sold to the general public except as set forth
in this Section 1.5.
1.6. The Fund agrees to redeem for cash, upon 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 and acceptance
by the Fund or its designee of the request for redemption. For purposes of this
Section 1.6, the Company will be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee will
constitute receipt by the Fund, provided the Fund receives notice of request for
redemption by 10:00 a.m. Eastern Time on the next following Business Day.
Payment will be in federal funds transmitted by wire to the Company's account as
designated by the Company in writing from time to time, on the same Business Day
the Fund receives notice of the redemption order from the Company. The Fund
reserves the right to delay payment of redemption proceeds, but in no event may
such payment be delayed longer than the period permitted by the 1940 Act. The
Fund will not bear any responsibility whatsoever for the proper disbursement or
crediting of redemption proceeds; the Company alone will be responsible for such
action. If notification of redemption is received after 10:00 a.m. Eastern
Time, payment for redeemed shares will be made on the next following Business
Day.
1.7. The Company agrees to purchase and redeem the shares of the Designated
Portfolios offered by the then current prospectus of the Fund in accordance with
the provisions of such prospectus.
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. Purchase
and redemption orders for Fund shares will be recorded in an appropriate title
for each Account or the appropriate subaccount of each Account.
1.9. The Fund will furnish same day notice (by telecopier, followed by written
confirmation) to the Company of the declaration of any income, dividends or
4
<PAGE>
capital gain distributions payable on each Designated Portfolio's shares. The
Company hereby elects to receive all such dividends and distributions as are
payable on the Designated Portfolio shares in the form of additional shares of
that Designated Portfolio. The Fund will notify the Company of the number of
shares so issued as payment of such dividends and distributions. The Company
reserves the right to revoke this election upon reasonable prior notice to the
Fund and to receive all such dividends and distributions in cash.
1.10. The Fund will make the net asset value per share for each Designated
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and will use its
best efforts to make such net asset value per share available by 6:00 p.m.,
Eastern Time, but in no event later than 7:00 p.m., Eastern Time, each Business
Day.
1.11. In the event adjustments are required to correct any error in the
computation of the net asset value of the Fund's shares, the Fund or CSI will
notify the Company as soon as practicable after discovering the need for those
adjustments that result in an aggregate reimbursement of $150 or more to any one
Account maintained by a Designated Portfolio unless notified otherwise by the
Company (or, if lesser, results in an adjustment of $10 or more to each
contractowner's account). Any such notice will state for each day for which an
error occurred the incorrect price, the correct price and, to the extent
communicated to the Fund's shareholders, the reason for the price change. The
Company may send this notice or a derivation thereof (so long as such derivation
is approved in advance by CSI or the Adviser) to contractowners whose accounts
are affected by the price change. The parties will negotiate in good faith to
develop a reasonable method for effecting such adjustments.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
-------------------------------
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act or are exempt from and not subject to registration
thereunder, and that the Contracts will be issued and sold in compliance with
all applicable federal and state laws, including 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 as a separate account
under applicable state law and, to the extent required under the 1940 Act, has
registered the 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. The Company agrees that it will file and maintain the effectiveness
of any registration statements relating to any Account or Contract as may be
5
<PAGE>
required from time to time. The Company further agrees to amend any such
registration statement under the 1933 Act for the Contracts and any such
registration statement under the 1940 Act for the Accounts from time to time as
required in order to effect the continuous offering of the Contracts or as may
otherwise be required by applicable law. The Company will register and qualify
the Contracts for sale in accordance with the securities laws of the various
states only if and to the extent deemed necessary by the Company.
2.2. The Company represents that the Contracts are currently and at the time of
issuance will be treated as annuity contracts under applicable provisions of the
Internal Revenue Code, and that it will make every effort to maintain such
treatment and that it will notify the Fund and the Adviser immediately upon
having a reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future.
2.3. The Company represents and warrants that it will not purchase shares of
the Designated Portfolios with assets derived from tax-qualified retirement
plans except, indirectly, through Contracts purchased in connection with such
plans.
2.4. The Fund represents and warrants that Fund shares of the Designated
Portfolios sold pursuant to this Agreement will be registered under the 1933 Act
and duly authorized for issuance in accordance with applicable law and that the
Fund is and will remain registered under the 1940 Act for as long as such shares
of the Designated Portfolios are outstanding. The Fund will 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 or as may otherwise be required by applicable law. The Fund will
register and qualify the shares of the Designated Portfolios for sale in
accordance with the laws of the various states only if and to the extent deemed
advisable by the Fund.
2.5. The Fund represents that each Designated Portfolio is currently qualified
as a Regulated Investment Company under Subchapter M of the Internal Revenue
Code and that it will 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 a Designated Portfolio has
ceased to so qualify or that it might not so qualify in the future.
2.6. The Fund represents and warrants that in performing the services described
in this Agreement, the Fund will comply with all applicable laws, rules and
regulations. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
6
<PAGE>
policies, objectives and restrictions) complies with the insurance laws and
regulations of any state. The Fund and CSI agree that upon request they will
use their best efforts to furnish the information required by state insurance
laws so that the Company can obtain the authority needed to issue the Contracts
in the various states.
2.7. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although it
reserves the right to make such payments in the future. To the extent that it
decides to finance distribution expenses pursuant to Rule 12b-1 the Fund
undertakes to have its Fund Board formulate and approve any plan under Rule 12b-
1 to finance distribution expenses in accordance with 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 applicable provisions of the 1940 Act.
2.9. CSI represents and warrants that it will distribute the Fund shares of the
Designated Portfolios in accordance with all applicable federal and state
securities laws including, without limitation, the 1933 Act, the 1934 Act and
the 1940 Act.
2.10. CSI represents and warrants that it is and will remain duly registered
under all applicable federal and state securities laws and that it will perform
its obligations for the Fund in accordance in all material respects with any
applicable state and federal securities laws.
2.11. The Fund represents and warrants that all of its trustees, officers,
employees, and other individuals/entities having access to the funds and/or
securities of the Fund are and continue to be at all times covered by a blanket
fidelity bond or similar coverage for the benefit of the Fund in an amount not
less than the minimal coverage as required currently by Rule 17g-(1) of the 1940
Act or related provisions as may be promulgated from time to time. The
aforesaid bond includes coverage for larceny and embezzlement and is issued by a
reputable bonding company. CSI and the Fund's investment advisers represent and
warrant that they are and continue to be at all times covered by policies
similar to the aforesaid bond.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
------------------------------------------
3.1. The Fund or CSI will provide the Company, at the Fund's or its affiliate's
expense, with as many copies of the current Fund prospectus for the Designated
Portfolios as the Company may reasonably request for distribution, at the
7
<PAGE>
Company's expense, to prospective contractowners and applicants. The Fund or
CSI will provide, at the Fund's or its affiliate's expense, as many copies of
said prospectus as necessary for distribution, at the Company's expense, to
existing contractowners. The Fund or CSI will provide the copies of said
prospectus to the Company or to its mailing agent. If requested by the Company,
the Fund or CSI will provide such documentation, including a computer diskette
of the Company's specification or a final copy of a current prospectus set in
type at the Fund's or its affiliate's expense, and such other assistance as is
reasonably necessary in order for the Company at least annually (or more
frequently if the Fund prospectus is amended more frequently) to have the Fund's
prospectus, the prospectus for the Contracts and the prospectuses of other
mutual funds in which assets attributable to the Contracts may be invested
printed together in one document (the "Multifund Prospectus"), in which case the
Fund or its affiliate will bear its reasonable share of expenses as described
above, allocated based on the proportionate number of pages of the Fund's and
other fund's respective portions of the document.
3.2. The Fund or CSI will provide the Company, at the Fund's or its affiliate's
expense, with as many copies of the statement of additional information as the
Company may reasonably request for distribution, at the Company's expense, to
prospective contractowners and applicants. The Fund or CSI will provide, at the
Fund's or its affiliate's expense, as many copies of said statement of
additional information as necessary for distribution, at the Company's expense,
to any existing contractowner who requests such statement or whenever state or
federal law otherwise requires that such statement be provided. The Fund or CSI
will provide the copies of said statement of additional information to the
Company or to its mailing agent.
3.3. To the extent that the Fund or CSI desires to change (whether by revision
or supplement) any of the information contained in any form of Fund prospectus
or statement of additional information provided to the Company for inclusion in
a Multifund Prospectus, the Company agrees to make such changes within a
reasonable period of time after receipt of a request to make such change from
the Fund or CSI, subject to the following limitation. To the extent that the
Fund is legally required to make a change to a Fund prospectus or statement of
additional information provided to the Company for inclusion in a Multifund
Prospectus, the Company agrees to make any such change as soon as possible
following receipt of the form of revised prospectus and/or statement of
additional information or supplement, as applicable, but in no event later than
five days following receipt. To the extent that the Fund is required by law to
cease selling shares of a Designated Portfolio, the Company agrees to cease
offering shares of the Designated Portfolio until the Fund or CSI notifies the
Company otherwise.
8
<PAGE>
3.4. The Fund or CSI, at the Fund's or its affiliate's expense, will provide
the Company or its mailing agent with copies of its proxy material, if any,
reports to shareholders and other communications to shareholders in such
quantity as the Company will reasonably require. The Company will distribute
this proxy material, reports and other communications to existing contract
owners and tabulate the votes.
3.5. If and to the extent required by law the Company will:
(a) solicit voting instructions from
contractowners;
(b) vote the shares of the Designated Portfolios held in the Account
in accordance with instructions received from contractowners; and
(c) vote shares of the Designated Portfolios held in the Account for
which no timely instructions have been received, as well as shares it owns, in
the same proportion as shares of such Designated Portfolio for which
instructions have been received from the Company's contractowners;
so long as and to the extent that the SEC continues to interpret the
1940 Act to require pass-through voting privileges for variable contractowners.
Except as set forth above, 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. The Company will be responsible for assuring that each of its separate
accounts participating in the Fund calculates voting privileges in a manner
consistent with all legal requirements, including the Mixed and Shared Funding
Exemptive Order.
3.6. The Fund will comply with all provisions of the 1940 Act requiring voting
by shareholders, and in particular, the Fund either will provide for annual
meetings (except insofar as the SEC may interpret Section 16 of the 1940 Act not
to require such meetings) or, as the Fund currently intends, will 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
SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of trustees and with whatever rules the SEC may promulgate
with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
-------------------------------
4.1. CSI will provide the Company on a timely basis with investment performance
information for each Designated Portfolio in which the Company maintains an
9
<PAGE>
Account, including total return for the preceding calendar month and calendar
quarter, the calendar year to date, and the prior one-year, five-year, and ten
year (or life of the Designated Portfolio) periods. The Company may, based on
the SEC mandated information supplied by CSI, prepare communications for
contractowners ("Contractowner Materials"). The Company will provide copies of
all Contractowner Materials concurrently with their first use for CSI's internal
recordkeeping purposes. It is understood that neither CSI nor any Designated
Portfolio will be responsible for errors or omissions in, or the content of,
Contractowner Materials except to the extent that the error or omission resulted
from information provided by or on behalf of CSI or the Designated Portfolio.
Any printed information that is furnished to the Company pursuant to this
Agreement other than each Designated Portfolio's prospectus or statement of
additional information (or information supplemental thereto), periodic reports
and proxy solicitation materials is CSI's sole responsibility and not the
responsibility of any Designated Portfolio or the Fund. The Company agrees that
the Portfolios, the shareholders of the Portfolios and the officers and
governing Board of the Fund will have no liability or responsibility to the
Company in these respects.
4.2. The Company will not give any information or make any representations or
statements 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, prospectus or statement of additional information
for Fund 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 Fund, or in published reports for the Fund
which are in the public domain or approved by the Fund or CSI for distribution,
or in sales literature or other material provided by the Fund, the Adviser or by
CSI.
Nothing in this Section 4.2 will be construed as preventing the
Company or its employees or agents from giving advice on investment in the Fund.
4.3. The Fund, the Adviser and CSI will not give any information or make any
representations or statements 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, prospectus or statement
of additional information for the Contracts, as such registration statement,
prospectus and statement of additional information may be amended or
supplemented from time to time, or in published reports for each Account or the
Contracts which are in the public domain or approved by the Company for
distribution to contractowners, or in sales literature or other material
provided by the Company, except with permission of the Company. The Company
agrees to respond to any request for approval on a prompt and timely basis. The
10
<PAGE>
Fund, the Adviser or CSI will furnish, or will cause to be furnished, to the
Company or its designee, each piece of sales literature or other promotional
material in which the Company or its Account is named at least ten (10) business
days prior to its use. No such material will be used if the Company reasonably
objects to such use within five (5) business days after receipt of such
material.
4.4. The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, statements of additions 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 SEC, the NASD or other regulatory
authority.
4.5. 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,
the NASD or other regulatory authority.
4.6. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media (e.g., on-line
networks such as the Internet or other electronic messages)), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisements sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, registration statements, prospectuses,
statements of additional information, shareholder reports, proxy materials and
any other material constituting sales literature or advertising under the NASD
rules, the 1933 Act or the 1940 Act.
4.7. The Fund and CSI hereby consent to the Company's use of the names Warburg,
Pincus Trust II Fixed Income Portfolio, Global Fixed Income Portfolio, or other
Designated Portfolio, and Warburg, Pincus Counsellors, Inc. in connection with
the marketing of the Contracts, subject to the terms of Sections 4.1 and 4.2 of
this Agreement. Such consent will continue only as long as any Contracts are
invested in the relevant Designated Portfolio.
11
<PAGE>
ARTICLE V. FEES AND EXPENSES
------------------
5.1. The Fund, the Adviser and CSI will pay no fee or other compensation to the
Company (other than as set forth in the administrative services letter agreement
between CSI and the Company) except if the Fund or any Designated Portfolio
adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act to
finance distribution expenses, then, subject to obtaining any required exemptive
orders or other regulatory approvals, the Fund may make payments to the Company
or to the underwriter for the Contracts if and in such amounts agreed to by the
Fund in writing.
5.2. All expenses incident to performance by the Fund of this Agreement will be
paid by the Fund to the extent permitted by law. The Fund will bear the
expenses for the cost of registration and qualification of the Fund's shares;
preparation and filing of the Fund's prospectus, statement of additional
information and registration statement, proxy materials and reports; setting in
type and printing the Fund's prospectus; setting in type and printing proxy
materials and reports by it to contractowners (including the costs of printing a
Fund prospectus that contains an annual report); the preparation of all
statements and notices required by any federal or state law; all taxes on the
issuance or transfer of the Fund's shares; any expenses permitted to be paid or
assumed by the Fund pursuant to a plan, if any, under Rule 12b-1 under the 1940
Act; and all other expenses set forth in Article III of this Agreement.
ARTICLE VI. DIVERSIFICATION
---------------
6.1. The Adviser will ensure that 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 annuity contracts under the Internal Revenue Code and the
regulations issued thereunder. Without limiting the scope of the foregoing, the
Fund will comply with Section 817(h) of the Internal Revenue Code and Treasury
Regulation 1.817-5, as amended from time to time, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulation. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps: (a) to notify the Company of such breach; and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Treasury Regulation 1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
--------------------
7.1. The Board of Trustees of the Fund (the "Fund Board") will monitor the Fund
for the existence of any irreconcilable material conflict among the interests of
12
<PAGE>
the contractowners 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 Participating Insurance Companies or
by variable annuity and variable life insurance contractowners; or (f) a
decision by an insurer to disregard the voting instructions of contractowners.
The Fund Board will 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 Fund Board. The Company agrees to assist the Fund Board in
carrying out its responsibilities, as delineated in the Mixed and Shared Funding
Exemptive Order, by providing the Fund Board with all information reasonably
necessary for the Fund Board to consider any issues raised. This includes, but
is not limited to, an obligation by the Company to inform the Fund Board
whenever contractowner voting instructions are to be disregarded. The Company's
responsibilities hereunder will be carried out with a view only to the interest
of contractowners.
7.3. If it is determined by a majority of the Fund Board, or a majority of its
disinterested trustees, that an irreconcilable material conflict exists, the
Company will, at its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested trustees), take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict, up to and
including: (a) withdrawing the assets allocable to some or all of the Accounts
from the Fund or any Designated 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 contractowners and, as appropriate,
segregating the assets of any appropriate group (i.e., variable annuity
contractowners or variable life insurance contractowners of one or more
Participating Insurance Companies) that votes in favor of such segregation, or
offering to the affected contractowners the option of making such a change; and
(b) 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 contractowner voting instructions, and the Company's
judgment represents a minority position or would preclude a majority vote, the
Company may be required, at
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<PAGE>
the Fund's election, to withdraw the affected subaccount of the Account's
investment in the Fund and terminate this Agreement with respect to such
subaccount; provided, however, that such withdrawal and termination will be
limited to the extent required by the foregoing irreconcilable material conflict
as determined by a majority of the disinterested trustees of the Fund Board. No
charge or penalty will be imposed as a result of such withdrawal.
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 insurance regulators, then the Company will withdraw the
affected subaccount of the Account's investment in the Fund and terminate this
Agreement with respect to such subaccount; provided, however, that such
withdrawal and termination will be limited to the extent required by the
foregoing irreconcilable material conflict as determined by a majority of the
disinterested directors of the Fund Board. No charge or penalty will be imposed
as a result of such withdrawal.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority of
the disinterested members of the Fund Board will determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund or the Adviser (or any other investment adviser to the Fund) be
required to establish a new funding medium for the Contracts. The Company will
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
contractowners materially affected by the irreconcilable material conflict.
7.7. The Company will at least annually submit to the Fund Board such reports,
materials or data as the Fund Board may reasonably request so that the Fund
Board may fully carry out the duties imposed upon it as delineated in the Mixed
and Shared Funding Exemptive Order, and said reports, materials and data will be
submitted more frequently if deemed appropriate by the Fund Board.
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 and Shared Funding
Exemptive Order, then: (a) the Fund and/or the Participating Insurance
Companies, as appropriate, will 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 3.5, 3.6, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement will continue in effect only to the extent that terms
14
<PAGE>
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
------------------------------
(a) The Company agrees to indemnify and hold harmless the Fund, the
Adviser, CSI, and each person, if any, who controls or is associated with the
Fund, the Adviser or CSI within the meaning of such terms under the federal
securities laws and any director, trustee, officer, partner, employee or agent
of the foregoing (collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, expenses, damages, liabilities
(including amounts paid in settlement with the written consent of the Company)
or litigation (including reasonable legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements:
(1) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration statement,
prospectus or statement of additional information for the Contracts or contained
in the Contracts or sales literature or other promotional material for the
Contracts (or any amendment or supplement to any of the foregoing), including
any prospectuses or statements of additional information of the Fund to which
the Company has made any changes to the information provided to the Company or
arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated or necessary to make such
statements not misleading in light of the circumstances in which they were made;
provided that this agreement to indemnify will 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 written information furnished to
the Company by the Fund, the Adviser or CSI for use in the registration
statement, prospectus or statement of additional information for the Contracts
or in the Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Fund shares;
or
(2) arise out of or as a result of statements or representations by
or on behalf of the Company or wrongful conduct of the Company or persons under
its control, with respect to the sale or distribution of the Contracts or Fund
shares (other than statements or representations contained in the Fund
registration statement, Fund prospectus, Fund statement of additional
15
<PAGE>
information, sales literature or other promotional material of the Fund not
supplied by the Company or persons under its control); or
(3) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the Fund registration statement, prospectus,
statement of additional information or sales literature or other promotional
material of the Fund (or amendment or supplement) or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make such statements not misleading in light of the circumstances
in which they were made, if such a statement or omission was made in reliance
upon and in conformity with information furnished to the Fund by or on behalf of
the Company or persons under its control; or
(4) 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
(5) arise out of any material breach of any representation and/or
warranty made by the Company in this Agreement or arise out of or result from
any other material breach by the Company of this Agreement, including, but not
limited to, a failure to comply with the provisions of Section 3.3;
except to the extent provided in Sections 8.1(b) and 8.3 hereof. This
indemnification will be in addition to any liability that the Company otherwise
may have.
(b) No party will be entitled to indemnification under Section 8.1(a)
to the extent such loss, claim, damage, liability or litigation is due to the
willful misfeasance, bad faith, or gross negligence in the performance of such
party's duties under this Agreement, or by reason of such party's reckless
disregard of its obligations or duties under this Agreement by the party seeking
indemnification.
(c) The Indemnified Parties promptly will notify the Company of the
commencement of any litigation, proceedings, complaints or actions by regulatory
authorities 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 Adviser, the Fund and CSI
------------------------------------------------
(a) The Adviser, the Fund and CSI, in each case solely to the extent
relating to such party's responsibilities hereunder, agree to indemnify and hold
harmless the Company and each person, if any, who controls or is associated with
16
<PAGE>
the Company within the meaning of such terms under the federal securities laws
and any director, trustee, officer, partner, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, expenses, damages, liabilities (including
amounts paid in settlement with the written consent of the Adviser) or
litigation (including reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements:
(1) 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 Fund or sales
literature or other promotional material 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 or necessary to make such statements not misleading in light of the
circumstances in which they were made (in each case substantially as transmitted
to you by the Fund or CSI), provided that this agreement to indemnify will 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 Adviser, CSI or the Fund by or on behalf of the
Company for use in the registration statement, prospectus or statement of
additional information for the Fund or in sales literature of the Fund (or any
amendment or supplement thereto) or otherwise for use in connection with the
sale of the Contracts or Fund shares; or
(2) arise out of or as a result of statements or representations or
wrongful conduct of the Adviser, the Fund or CSI or persons under the control of
the Adviser, the Fund or CSI respectively, with respect to the sale of the Fund
shares (other than statements or representations contained in a registration
statement, prospectus, statement of additional information, sales literature or
other promotional material covering the Contracts not supplied by CSI or persons
under its control); or
(3) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement, prospectus, statement of
additional information or sales literature or other promotional material
covering the Contracts (or any amendment or supplement thereto), or the omission
or alleged omission to state therein a material fact required to be stated or
necessary to make such statement or statements not misleading in light of the
circumstances in which they were made, if such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company by the Adviser, the Fund or CSI or persons under the control of the
Adviser, the Fund or CSI; or
17
<PAGE>
(4) arise as a result of any failure by the Fund, the Adviser or CSI
to provide the services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good faith or
otherwise, to comply with the diversification requirements and procedures
related thereto specified in Article VI of this Agreement); or
(5) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser, the Fund or CSI in this
Agreement, or arise out of or result from any other material breach of this
Agreement by the Adviser the Fund or CSI;
except to the extent provided in Sections 8.2(b) and 8.3 hereof.
These indemnifications will be in addition to any liability that the Fund,
Adviser or CSI otherwise may have.
(b) No party will be entitled to indemnification under Section 8.2(a)
to the extent such loss, claim, damage, liability or litigation is due to the
willful misfeasance, bad faith, or gross negligence in the performance of such
party's duties under this Agreement, or by reason of such party's reckless
disregard of its obligations or duties under this Agreement by the party seeking
indemnification.
(c) The Indemnified Parties will promptly notify the Adviser, the Fund
and CSI of the commencement of any litigation, proceedings, complaints or
actions by regulatory authorities against them in connection with the issuance
or sale of the Contracts or the operation of the account.
8.3. Indemnification Procedure
-------------------------
Any person obligated to provide indemnification under this Article
VIII ("Indemnifying Party" for the purpose of this Section 8.3) will not be
liable under the indemnification provisions of this Article VIII with respect to
any claim made against a party entitled to indemnification under this Article
VIII ("Indemnified Party" for the purpose of this Section 8.3) unless such
Indemnified Party will have notified the Indemnifying Party in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim will have been served upon such
Indemnified Party (or after such party will have received notice of such service
on any designated agent), but failure to notify the Indemnifying Party of any
such claim will not relieve the Indemnifying Party from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
18
<PAGE>
than on account of the indemnification provision of this Article VIII, except to
the extent that the failure to notify results in the failure of actual notice to
the Indemnifying Party and such Indemnifying Party is damaged solely as a result
of failure to give such notice. In case any such action is brought against the
Indemnified Party, the Indemnifying Party will be entitled to participate, at
its own expense, in the defense thereof. The Indemnifying Party also will be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Indemnifying Party to the
Indemnified Party of the Indemnifying Party's election to assume the defense
thereof, the Indemnified Party will bear the fees and expenses of any additional
counsel retained by it, and the Indemnifying Party will not be liable to such
party under this Agreement for any legal or other expenses subsequently incurred
by such party independently in connection with the defense thereof other than
reasonable costs of investigation, unless: (a) the Indemnifying Party and the
Indemnified Party will have mutually agreed to the retention of such counsel; or
(b) the named parties to any such proceeding (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The Indemnifying Party will not be
liable for any settlement of any proceeding effected without its written consent
but if settled with such consent or if there is a final judgment for the
plaintiff, the Indemnifying Party agrees to indemnify the Indemnified Party from
and against any loss or liability by reason of such settlement or judgment. A
successor by law of the parties to this Agreement will be entitled to the
benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII will survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
---------------
9.1. This Agreement will be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Missouri.
9.2. This Agreement will be subject to the provisions of the 1933 Act, the 1934
Act and the 1940 Act, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to, the Mixed and Shared Funding Exemptive
Order) and the terms hereof will be interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
------------
10.1. This Agreement will terminate:
19
<PAGE>
(a) at the option of any party, with or without cause, with respect to
some or all of the Designated Portfolios, upon ninety (90) days' advance written
notice to the other parties; or
(b) at the option of the Company, upon receipt of the Company's
written notice by the other parties, with respect to any Designated Portfolio if
shares of the Designated Portfolio are not reasonably available to meet the
requirements of the Contracts as determined in good faith by the Company; or
(c) at the option of the Company, upon receipt of the Company's
written notice by the other parties, with respect to any Designated Portfolio in
the event any of the Designated Portfolio's shares are not registered, issued or
sold in accordance with applicable state and/or Federal law or such law
precludes the use of such shares as the underlying investment media of the
Contracts issued or to be issued by Company; or
(d) at the option of the Fund, upon receipt of the Fund's written
notice by the other parties, upon institution of formal proceedings against the
Company by the NASD, the SEC, the insurance commission of any state or any other
regulatory body regarding the Company's duties under this Agreement or related
to the sale of the Contracts, the administration of the Contracts, the operation
of the Account, or the purchase of the Fund shares, provided that the Fund
determines in its sole judgment, exercised in good faith, that any such
proceeding would have a material adverse effect on the Company's ability to
perform its obligations under this Agreement; or
(e) at the option of the Company, upon receipt of the Company's
written notice by the other parties, upon institution of formal proceedings
against the Fund, Adviser or CSI by the NASD, the SEC, or any state securities
or insurance department or any other regulatory body, provided that the Company
determines in its sole judgment, exercised in good faith, that any such
proceeding would have a material adverse effect on the Fund's, Adviser's or
CSI's ability to perform its obligations under this Agreement; or
(f) at the option of the Company, upon receipt of the Company's
written notice by the other parties, with respect to any Designated Portfolio if
the Designated Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Internal Revenue Code, or under any successor or
similar provision, or if the Company reasonably and in good faith believes that
the Designated Portfolio may fail to so qualify; or
20
<PAGE>
(g) at the option of the Company, upon receipt of the Company's
written notice by the other parties, with respect to any Designated Portfolio if
the Designated Portfolio fails to meet the diversification requirements
specified in Article VI hereof or if the Company reasonably and in good faith
believes the Designated Portfolio may fail to meet such requirements; or
(h) at the option of any party to this Agreement, upon written notice
to the other parties, upon another party's material breach of any provision of
this Agreement which material breach is not cured within thirty (30) days of
said notice; or
(i) at the option of the Company, if the Company determines in its
sole judgment exercised in good faith, that either the Fund, the Adviser or CSI
has suffered a material adverse change in its business, operations or financial
condition since the date of this Agreement or is the subject of material adverse
publicity which is likely to have a material adverse impact upon the business
and operations of the Company, such termination to be effective sixty (60) days'
after receipt by the other parties of written notice of the election to
terminate; or
(j) at the option of the Fund or CSI, if the Fund or CSI respectively,
determines in its sole judgment exercised in good faith, that the Company has
suffered a material adverse change in its business, operations or financial
condition since the date of this Agreement or is the subject of material adverse
publicity which is likely to have a material adverse impact upon the business
and operations of the Fund or the Adviser, such termination to be effective
sixty (60) days' after receipt by the other parties of written notice of the
election to terminate; or
(k) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the contractowners having an
interest in the Account (or any subaccount) to substitute the shares of another
investment company for the corresponding Designated Portfolio shares of the Fund
in accordance with the terms of the Contracts for which those Designated
Portfolio shares had been selected to serve as the underlying investment media.
The Company will give sixty (60) days' prior written notice to the Fund of the
date of any proposed vote or other action taken to replace the Fund's shares; or
(l) at the option of the Company or the Fund upon a determination by
a majority of the Fund Board, or a majority of the disinterested Fund Board
members, that an irreconcilable material conflict exists among the interests of:
(1) all contractowners of variable insurance products of all separate accounts;
21
<PAGE>
or (2) the interests of the Participating Insurance Companies investing in the
Fund as set forth in Article VII of this Agreement; or
(m) at the option of the Fund in the event any of the Contracts are
not issued or sold in accordance with applicable federal and/or state law.
Termination will be effective immediately upon such occurrence without notice.
10.2. Notice Requirement
-------------------
Except as specified in Section 10.1(m), no termination of this
Agreement will be effective unless and until the party terminating this
Agreement gives prior written notice to all other parties of its intent to
terminate, which notice will set forth the basis for the termination.
10.3. Effect of Termination
----------------------
In the event of any termination of this Agreement, the Fund and CSI
will, 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 will be permitted to reallocate
investments in the Designated Portfolios (as in effect on such date), redeem
investments in the Designated Portfolios and/or invest in the Designated
Portfolios upon the making of additional purchase payments under the Existing
Contracts. However the availability of additional shares hereunder will be
subject to the restrictions and limitations set forth in Article VII, as
applicable. The Company agrees (i) to terminate the availability of shares of
the Fund to Contracts other than Existing Contracts and (ii) to request approval
from the SEC to replace shares of the Fund with other investments for Contracts
and, if and when granted such approval, thereafter to so replace the shares of
the Fund, in each such case as soon as reasonably practicable.
10.4. Surviving Provisions
---------------------
Notwithstanding any termination of this Agreement, each party's
obligations under Article VIII to indemnify other parties will survive and not
be affected by any termination of this Agreement. In addition, each party's
obligations under Section 12.6 will survive and not be affected by any
termination of this Agreement. Finally, with respect to Existing Contracts, all
provisions of this Agreement also will survive and not be affected by any
termination of this Agreement.
22
<PAGE>
ARTICLE XI. NOTICES
--------
11.1. Any notice will be deemed duly 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 parties.
If to the Company: If to the Fund, Adviser and/or CSI:
United Investors Life Insurance 466 Lexington Avenue
Company 10th Floor
2001 Third Avenue South New York, New York 10017
Birmingham, Alabama 35233 Attn: Eugene P. Grace
Attention: James L. Sedgwick, Senior Vice President
President
ARTICLE XII. MISCELLANEOUS
--------------
12.1. The Fund, the Adviser and CSI acknowledge that the identities of the
customers of the Company or any of its affiliates (collectively the "Company
Protected Parties" for purposes of this Section 12.1), information maintained
regarding those customers, and all computer programs and procedures or other
information developed or used by the Company Protected Parties or any of their
employees or agents in connection with the Company's performance of its duties
under this Agreement are the valuable property of the Company Protected Parties.
The Fund, the Adviser and CSI agree that if they come into possession of any
list or compilation of the identities of or other information about the Company
Protected Parties' customers, or any other information or property of the
Company Protected Parties, other than such information as is publicly available
or as may be independently developed or compiled by the Fund, the Adviser or CSI
from information supplied to them by the Company Protected Parties' customers
who also maintain accounts directly with the Fund, the Adviser or CSI, the Fund,
the Adviser and CSI will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with the Company's prior written consent; or (b) as
required by law or judicial process. The Company acknowledges that the
identities of the customers of the Fund, the Adviser, CSI or any of their
affiliates (collectively the "Adviser Protected Parties" for purposes of this
Section 12.1), information maintained regarding those customers, and all
computer programs and procedures or other information developed or used by the
Adviser Protected Parties or any of their employees or agents in connection with
the Fund's, the Adviser's or CSI's performance of their respective duties under
this Agreement are the valuable property of the Adviser Protected Parties. The
Company agrees that if it comes
23
<PAGE>
into possession of any list or compilation of the identities of or other
information about the Adviser Protected Parties' customers, or any other
information or property of the Adviser Protected Parties, other than such
information as is publicly available or as may be independently developed or
compiled by the Company from information supplied to them by the Adviser
Protected Parties' customers who also maintain accounts directly with the
Company, the Company will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with the Fund's, the Adviser's or CSI's prior written
consent; or (b) as required by law or judicial process. Each party acknowledges
that any breach of the agreements in this Section 12.1 would result in immediate
and irreparable harm to the other parties for which there would be no adequate
remedy at law and agree that in the event of such a breach, the other parties
will be entitled to equitable relief by way of temporary and permanent
injunctions, as well as such other relief as any court of competent jurisdiction
deems appropriate.
12.2. 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.
12.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
12.4. If any provision of this Agreement will be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement will
not be affected thereby.
12.5. This Agreement will not be assigned by any party hereto without the prior
written consent of all the parties.
12.6. Each party to this Agreement will maintain all records required by law,
including records detailing the services it provides. Such records will be
preserved, maintained and made available to the extent required by law and in
accordance with the 1940 Act and the rules thereunder. Each party to this
Agreement will cooperate with each other party and all appropriate governmental
authorities (including without limitation the SEC, the NASD and state insurance
regulators) and will permit each other and such authorities reasonable access to
its books and records in connection with any investigation or inquiry relating
to this Agreement or the transactions contemplated hereby. Upon request by the
Fund or CSI, the Company agrees to promptly make copies or, if required,
originals of all records pertaining to the performance of services under this
Agreement available to the Fund or CSI, as the case may be. The Fund agrees
24
<PAGE>
that the Company will have the right to inspect, audit and copy all records
pertaining to the performance of services under this Agreement pursuant to the
requirements of any state insurance department. Each party also agrees to
promptly notify the other parties if it experiences any difficulty in
maintaining the records in an accurate and complete manner. This provision will
survive termination of this Agreement.
12.7. Each party represents that the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been duly
authorized by all necessary corporate or board action, as applicable, by such
party and when so executed and delivered this Agreement will be the valid and
binding obligation of such party enforceable in accordance with its terms.
12.8. The parties to this Agreement acknowledge and agree that all liabilities
of the Fund arising, directly or indirectly, under this agreement, will be
satisfied solely out of the assets of the Fund and that no trustee, officer,
agent or holder of shares of beneficial interest of the Fund will be personally
liable for any such liabilities. No Portfolio or series of the Fund will be
liable for the obligations or liabilities of any other Portfolio or series.
12.9. The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect changes in or relating to the Contracts, the
Accounts or the Designated Portfolios of the Fund or other applicable terms of
this Agreement.
25
<PAGE>
12.10. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed hereto as of the date specified below.
UNITED INVESTORS LIFE INSURANCE
COMPANY
SEAL By:
------------------------------------
ATTEST By:
------------------------------------
SEAL WARBURG, PINCUS TRUST II
By:
------------------------------------
Name:
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Title:
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26
<PAGE>
SEAL WARBURG, PINCUS COUNSELLORS, INC.
By:
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Name:
----------------------------------
Title:
---------------------------------
SEAL COUNSELLORS SECURITIES INC.
By:
------------------------------------
Name:
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Title:
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ATTEST:
27
<PAGE>
SCHEDULE 1
PARTICIPATION AGREEMENT
BY AND AMONG
UNITED INVESTORS LIFE INSURANCE COMPANY
AND
WARBURG, PINCUS TRUST II
AND
WARBURG, PINCUS COUNSELLORS, INC.
AND
COUNSELLORS SECURITIES INC.
The following separate accounts of United Investors Life Insurance Company are
permitted in accordance with the provisions of this Agreement to invest in
Designated Portfolios of the Fund shown in Schedule 2:
ReitreMAP Variable Account
established ____________
_______________, 1997
<PAGE>
SCHEDULE 2
PARTICIPATION AGREEMENT
BY AND AMONG
UNITED INVESTORS LIFE INSURANCE COMPANY
AND
WARBURG, PINCUS TRUST II
AND
WARBURG, PINCUS COUNSELLORS, INC.
AND
COUNSELLORS SECURITIES INC.
The Separate Account(s) shown on Schedule 1 may invest in the following
Designated Portfolios of the Warburg, Pincus Trust II:
International Equity Portfolio
_______________, 1997
<PAGE>
[LOGO]
JAMES L. SEDGWICK
President
205-325-4305
Fax 205-325-2720
UNITED INVESTORS LIFE 2001 Third Avenue South (35233) Post Office Box 10207,
Birmingham, Alabama 35202-0207
March 31, 1997
The Board of Directors
United Investors Life Insurance Company
2001 Third Avenue, South
Birmingham, Alabama 35233
Gentlemen:
With reference to the Registration Statement on Form N-4 as amended,
filed by United Investors Life Insurance Company and RetireMAP Variable
Account with the Securities and Exchange Commission covering flexible
premium deferred variable annuity policies, I have examined such documents
and such law as I considered necessary and appropriate, and on the basis of
such examination, it is my opinion that:
1. United Investors Life Insurance Company is duly organized and
validly existing under the laws of the State of Missouri and has
been duly authorized to issue individual flexible premium deferred
variable annuity policies by the Division of Insurance of the
State of Missouri.
2. The RetireMAP Variable Account is a duly authorized and existing
separate account established pursuant to the provisions of Section
376.309, of the Revised Statutes of Missouri.
3. The flexible premium deferred variable annuity policies, when
issued as contemplated by said Form N-4 Registration Statement,
will constitute legal, validly issued and binding obligations of
United Investors Life Insurance Company.
I hereby consent to the filing of this opinion as an Exhibit to said
N-4 Registration Statement and to the use of my name under the caption
"Legal Matters" in the Statement of Additional Information.
Very truly yours,
/s/ James L. Sedgwick
James L. Sedgwick
JLS:dk
<PAGE>
Sutherland, Asbill & Brennan, L.L.P.
Atlanta * Austin * New York * Washington
1275 PENNSYLVANIA AVENUE, N.W. TEL: (202) 383-0100
WASHINGTON, D.C. 20004-2404 FAX: (202) 637-3593
FREDERICK R. BELLAMY
DIRECT LINE: (202) 383-3126
Internet: [email protected]
March 12, 1997
United Investors Life Insurance Company
2001 Third Avenue South
Birmingham, Alabama 35233
Re: RetireMAP Variable Account (File No. 333-12507)
-----------------------------------------------
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption
"Legal Matters" in the Statement of Additional Information included in Pre-
Effective Amendment No. 2 to the Registration Statement on Form N-4 for
RetireMAP Variable Account (File No. 333-12507). 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/ Frederick R. Bellamy
--------------------------------------
Frederick R. Bellamy
<PAGE>
Accountants' Consent
--------------------
The Board of Directors of
United Investors Life Insurance Company
We consent to the use of our report dated January 31, 1997, relating to the
balance sheets of United Investors Life Insurance Company as of December 31,
1996 and 1995, and the related statements of operations, shareholder's equity,
and cash flow for each of the years in the three-year period ended December 31,
1996, as contained in Form N-4 for RetireMAP Variable Account. We also consent
to the reference to our firm under the heading "Experts" in the Statement of
Additional Information.
/s/ KPMG Peat Marwick LLP
Birmingham, Alabama
June 27, 1997