INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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As filed with the Securities and Exchange Commission on June 3, 1997
File No. 333-19725
File No. 811-08017
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ( )
Pre-effective Amendment No. 1 ( X )
Post-effective Amendment No. ( )
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 ( )
Pre-effective Amendment No. 1 ( X )
Post-effective Amendment No. ( )
(Check appropriate box or boxes)
------------------------
ANNUITY INVESTORS(REGISTERED) VARIABLE ACCOUNT B
(Exact Name of Registrant)
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED)
(Name of Depositor)
P.O. Box 5423
Cincinnati, Ohio 45201-5423
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code:
(800) 789-6771
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Mark F. Muething, Esq.
Senior Vice President, Secretary and General Counsel
Annuity Investors Life Insurance Company
P.O. Box 5423
Cincinnati, Ohio 45201-5423
(Name and Address of Agent for Service)
Copy to:
Catherine S. Bardsley, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Second Floor
Washington, D.C. 20036-1800
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Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of the Registration Statement.
<PAGE>
DECLARATION REQUIRED BY RULE 24f-2 (a) (1)
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant declares that an indefinite number of its securities is being
registered under the Securities Act of 1933.
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),
may determine.
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CROSS REFERENCE SHEET
Pursuant to Rule 495
Showing Location in Part A (Prospectus),
Part B (Statement of Additional Information) and Part C
of Registration Statement Information Required by Form N-4
PART A
Item of Form N-4 Prospectus Caption
---------------- ------------------
1. Cover Page............................ Cover Page
2. Definitions........................... Definitions
3. Synopsis.............................. Highlights
4. Condensed Financial Information
(a) Accumulation Unit Values........ Not Applicable
(b) Performance Data................ Not Applicable
(c) Financial Statements............ Financial Statements for the
Company
5. General Description of Registrant,
Depositor and Portfolio
Companies
(a) Depositor....................... Annuity Investors Life Insurance
Company(REGISTERED)
(b) Registrant...................... The Separate Account
(c) Portfolio Company............... The Funds
(d) Fund Prospectus................. The Funds
(e) Voting Rights................... Voting Rights
6. Deductions and Expenses
(a) General......................... Charges and Deductions
(b) Sales Load %.................... Contingent Deferred Sales Charge
(c) Special Purchase Plan........... Contingent Deferred Sales Charge
(d) Commissions..................... Distribution of the Contract
(e) Fund Expenses................... The Funds
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(f) Operating Expenses.............. Summary of Expenses
7. Contracts
(a) Persons with Rights............. The Contract; Surrenders;
Contract Loans; Death
Benefit; Voting Rights
(b)(i) Allocation of Premium Payments Purchase Payments
(ii) Transfers .................... Transfers
(iii)Exchanges .................... Additions, Deletions or
Substitutions
(c) Changes......................... Not Applicable
(d) Inquiries....................... Contacting the Company
8. Annuity Period........................ Settlement Options
9. Death Benefit......................... Death Benefit
10. Purchases and Contract Values
(a) Purchases....................... Purchase Payments
(b) Valuation....................... Fixed Account Value; Variable
Account Value
(c) Daily Calculation............... Accumulation Unit Value; Net
Investment Factor
(d) Underwriter..................... Distribution of the Contract
11. Redemptions
(a) By Owner........................ Surrender Value; Systematic
Withdrawal Option
By Annuitant.................... Not Applicable
(b) Texas ORP....................... Texas Optional Retirement Program
(c) Check Delay..................... Suspension or Delay in Payment of
Surrender Value
(d) Free Look....................... Right to Cancel
12. Taxes................................. Federal Tax Matters
13. Legal Proceedings..................... Legal Proceedings
14. Table of Contents for the Statement of
Additional Statement of Additional
Information........................... Information
ii
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PART B
- ------
Statement of Additional
Item of Form N-4 Information Caption
---------------- -------------------
15. Cover Page............................ Cover Page
16. Table of Contents..................... Table of Contents
17. General Information and History....... General Information and History
18. Services
(a) Fees and Expenses of Registrant. (Prospectus) Summary of Expenses
(b) Management Contracts............ Not Applicable
(c) Custodian....................... Not Applicable
Independent Auditors............ Experts
(d) Assets of Registrant............ Not Applicable
(e) Affiliated Person............... Not Applicable
(f) Principal Underwriter........... Not Applicable
19. Purchase of Securities Being Offered.. (Prospectus) Distribution of the
Contract
Offering Sales Load................... (Prospectus) Contingent Deferred
Sales Charge
20. Underwriters.......................... Distribution of the Contract
21. Calculation of Performance Data
(a) Money Market Funded Sub-Accounts Money Market Sub-Account
Standardized Yield
Calculation
(b) Other Sub-Accounts.............. Other Sub-Account Standardized
Yield
Calculations
22. Annuity Payments...................... (Prospectus) Fixed Dollar Annuity
Benefit;
Variable Dollar Annuity Benefit
23. Financial Statements.................. Financial Statements
PART C - Other Information
- --------------------------
Item of Form N-4 Part C Caption
---------------- --------------
24. Financial Statements and Exhibits..... Financial Statements and Exhibits
(a) Financial Statements............ Financial Statements
(b) Exhibits........................ Exhibits
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25. Directors and Officers of the Depositor Directors and Officers of Annuity
Investors Life
Insurance Company(REGISTERED)
26. Persons Controlled By or Under Common Persons Controlled By Or Under
Control With the Common
Registrant............................ Control With the Depositor or
Registrant
27. Number of Owners...................... Number of Owners
28. Indemnification....................... Indemnification
29. Principal Underwriters................ Principal Underwriter
30. Location of Accounts and
Records............................... Location of Accounts and Records
31. Management Services................... Management Services
32. Undertakings.......................... Undertakings
Signature Page........................ Signature Page
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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SUBJECT TO COMPLETION: DATED JUNE 3, 1997
ANNUITY INVESTORS(REGISTERED) VARIABLE ACCOUNT B
OF
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED)
PROSPECTUS
FOR
THE COMMODORE NAVIGATOR(SERVICEMARK)
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES
ISSUED BY
ANNUITY INVESTORS LIFE INSURANCE COMPANY
P.O. BOX 5423, CINCINNATI, OHIO 45201-5423, (800) 789-6771
This Prospectus describes The Commodore Navigator(SERVICEMARK) Individual and
Group Flexible Premium Deferred Annuity Contracts (the "Contracts") issued by
Annuity Investors Life Insurance Company(REGISTERED) (the "Company").
The Commodore Navigator(SERVICEMARK) is available in connection with
arrangements that qualify for favorable tax treatment ("Qualified Contract(s)")
under Sections 401, 403 and 408 of the Code and for non-tax-qualified annuity
purchases ("Non-Qualified Contract(s)"), including Contracts purchased by an
employer in connection with a Code Section 457 or non-qualified deferred
compensation plan.
The Contracts provide for the accumulation of an Account Value on a fixed or
variable basis, or a combination of both. The Contracts also provide for the
payment of periodic annuity payments on a fixed or variable basis, or a
combination of both. If the variable basis is chosen, Annuity Benefit values
will be held in Annuity Investors(REGISTERED) Variable Account B (the "Separate
Account") and will vary according to the investment performance of the mutual
funds in which the Sub-Accounts of the Separate Account invest. If the fixed
basis is chosen, periodic annuity payments from the Company's general account
will be fixed and will not vary.
The Separate Account is divided into Sub-Accounts. Each Sub-Account uses its
assets to purchase, at their net asset value, shares of a designated registered
investment company or portfolio thereof (each, a "Fund"). The Funds available
for investment in the Separate Account under the Contract are as follows: (1)
Janus Aspen Series Aggressive Growth Portfolio; (2) Janus Aspen Series Worldwide
Growth Portfolio; (3) Janus Aspen Series Balanced Portfolio; (4) Janus Aspen
Series Growth Portfolio; (5) Janus Aspen Series International Growth Portfolio;
(6) Dreyfus Variable Investment Fund-Capital Appreciation Portfolio; (7) Dreyfus
Variable Investment Fund-Money Market Portfolio; (8) Dreyfus Variable Investment
Fund-Growth and Income Portfolio; (9) Dreyfus Variable Investment Fund-Small Cap
Portfolio; (10) The Dreyfus Socially Responsible Growth Fund, Inc.; (11) Dreyfus
Stock Index Fund; (12) Strong Special Fund II, Inc.; (13) Strong Variable
Insurance Funds, Inc.-Strong Growth Fund II; (14) INVESCO VIF-Industrial Income
Fund; (15) INVESCO VIF-Total Return Fund; (16) INVESCO VIF-High Yield Fund; (17)
Morgan Stanley Universal Funds Inc.-U.S. Real Estate Portfolio; (18) Morgan
Stanley Universal Funds Inc.-Value Portfolio; (19) Morgan Stanley Universal
Funds Inc.-Emerging Markets Equity Portfolio; (20) Morgan Stanley Universal
Funds Inc.-Fixed Income Portfolio; (21) Morgan Stanley Universal Funds Inc.-Mid
Cap Value Portfolio; (22) PBHG Insurance Series Fund, Inc.-PBHG Growth II
Portfolio; (23) PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth
Portfolio; and (24) PBHG Insurance Series Fund, Inc.-PBHG Technology &
Communications Portfolio.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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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 Contract is available free of charge by
writing to the Company's Administrative Office at P.O. Box 5423, Cincinnati,
Ohio 45201-5423. The Statement of Additional Information, which has the same
date as this Prospectus, as it may be supplemented from time to time, has been
filed with the Securities and Exchange Commission and is incorporated herein by
reference. The table of contents of the Statement of Additional Information is
included at the end of this Prospectus.
* * *
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES REGULATORY AUTHORITIES
NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Please Read this Prospectus Carefully and
Retain It for Future Reference.
The Date of this Prospectus is June 3, 1997.
--------------------------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESPERSON, 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.
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VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY FINANCIAL INSTITUTION, NOR ARE THEY FEDERALLY INSURED OR
OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTMENT.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUS FOR
EACH UNDERLYING FUND. BOTH THIS PROSPECTUS AND THE UNDERLYING FUND PROSPECTUSES
SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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TABLE OF CONTENTS
PAGE
DEFINITIONS....................................................................7
HIGHLIGHTS....................................................................10
THE CONTRACT...............................................................10
THE SEPARATE ACCOUNT.......................................................10
THE FIXED ACCOUNT..........................................................11
TRANSFERS BEFORE THE ANNUITY COMMENCEMENT DATE.............................11
SURRENDERS.................................................................11
CONTINGENT DEFERRED SALES CHARGE ("CDSC")..................................11
OTHER CHARGES AND DEDUCTIONS...............................................11
ANNUITY BENEFITS...........................................................12
DEATH BENEFIT..............................................................12
FEDERAL INCOME TAX CONSEQUENCES............................................12
RIGHT TO CANCEL............................................................12
CONTACTING THE COMPANY.....................................................12
SUMMARY OF EXPENSES...........................................................14
OWNER TRANSACTION EXPENSES.................................................14
ANNUAL EXPENSES...............................................................15
EXAMPLES...................................................................20
FINANCIAL STATEMENTS FOR THE COMPANY..........................................21
THE FUNDS.....................................................................21
JANUS ASPEN SERIES.........................................................22
AGGRESSIVE GROWTH PORTFOLIO..........................................22
WORLDWIDE GROWTH PORTFOLIO...........................................22
BALANCED PORTFOLIO...................................................22
GROWTH PORTFOLIO.....................................................22
INTERNATIONAL GROWTH PORTFOLIO.......................................22
DREYFUS FUNDS..............................................................22
CAPITAL APPRECIATION PORTFOLIO (Dreyfus Variable Investment Fund)....22
MONEY MARKET PORTFOLIO (Dreyfus Variable Investment Fund)............22
GROWTH AND INCOME PORTFOLIO (Dreyfus Variable Investment Fund).......22
SMALL CAP PORTFOLIO (Dreyfus Variable Investment Fund)...............22
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC....................23
DREYFUS STOCK INDEX FUND.............................................23
STRONG SPECIAL FUND II, INC................................................23
STRONG SPECIAL FUND II...............................................23
STRONG VARIABLE INSURANCE FUNDS, INC.......................................23
STRONG GROWTH FUND II................................................23
INVESCO VARIABLE INVESTMENT FUNDS, INC.....................................23
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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INDUSTRIAL INCOME FUND...............................................23
TOTAL RETURN FUND....................................................23
HIGH YIELD FUND......................................................23
MORGAN STANLEY UNIVERSAL FUNDS INC.........................................24
U.S. REAL ESTATE PORTFOLIO...........................................24
VALUE PORTFOLIO......................................................24
EMERGING MARKETS EQUITY PORTFOLIO....................................24
FIXED INCOME PORTFOLIO...............................................24
MID CAP VALUE PORTFOLIO..............................................24
PBHG INSURANCE SERIES FUND, INC............................................24
PBHG GROWTH II PORTFOLIO.............................................24
PBHG LARGE CAP GROWTH PORTFOLIO......................................25
PBHG TECHNOLOGY & COMMUNICATIONS PORTFOLIO...........................25
ADDITIONS, DELETIONS, OR SUBSTITUTIONS.....................................25
PERFORMANCE INFORMATION.......................................................26
YIELD DATA.................................................................26
TOTAL RETURN DATA..........................................................26
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED) AND THE
SEPARATE ACCOUNT..............................................................27
ANNUITY INVESTORS LIFE INSURANCE COMPANY...................................27
PUBLISHED RATINGS..........................................................27
THE SEPARATE ACCOUNT.......................................................27
THE FIXED ACCOUNT.............................................................28
FIXED ACCOUNT OPTIONS......................................................28
RENEWAL OF FIXED ACCOUNT OPTIONS...........................................28
THE CONTRACT..................................................................29
RIGHT TO CANCEL............................................................29
PURCHASE PAYMENTS.............................................................30
PURCHASE PAYMENTS..........................................................30
ALLOCATION OF PURCHASE PAYMENTS............................................30
ACCOUNT VALUE.................................................................30
FIXED ACCOUNT VALUE........................................................30
VARIABLE ACCOUNT VALUE.....................................................31
ACCUMULATION UNIT VALUE....................................................31
NET INVESTMENT FACTOR......................................................31
TRANSFERS.....................................................................32
TELEPHONE TRANSFERS........................................................32
DOLLAR COST AVERAGING......................................................33
PORTFOLIO REBALANCING......................................................33
INTEREST SWEEP.............................................................34
PRINCIPAL GUARANTEE OPTION.................................................34
CHANGES BY THE COMPANY.....................................................34
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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SURRENDERS....................................................................34
SURRENDER VALUE............................................................34
SUSPENSION OR DELAY IN PAYMENT OF SURRENDER VALUE..........................35
FREE WITHDRAWAL PRIVILEGE..................................................36
SYSTEMATIC WITHDRAWAL......................................................36
CONTRACT LOANS................................................................36
DEATH BENEFIT.................................................................37
WHEN A DEATH BENEFIT WILL BE PAID..........................................37
DEATH BENEFIT VALUES.......................................................37
DEATH BENEFIT COMMENCEMENT DATE............................................38
FORM OF DEATH BENEFIT......................................................38
BENEFICIARY................................................................38
CHARGES AND DEDUCTIONS........................................................38
CONTINGENT DEFERRED SALES CHARGE ("CDSC")..................................38
MAINTENANCE AND ADMINISTRATION CHARGES.....................................40
MORTALITY AND EXPENSE RISK CHARGE..........................................40
PREMIUM TAXES..............................................................41
TRANSFER FEE...............................................................41
FUND EXPENSES..............................................................42
REDUCTION OR ELIMINATION OF CONTRACT CHARGES...............................42
SETTLEMENT OPTIONS............................................................42
ANNUITY COMMENCEMENT DATE..................................................42
ELECTION OF SETTLEMENT OPTION..............................................42
BENEFIT PAYMENTS...........................................................42
FIXED DOLLAR BENEFIT.......................................................43
VARIABLE DOLLAR BENEFIT....................................................43
TRANSFERS AFTER THE ANNUITY COMMENCEMENT DATE..............................44
ANNUITY TRANSFER FORMULA...................................................44
SETTLEMENT OPTIONS.........................................................45
MINIMUM AMOUNTS............................................................45
SETTLEMENT OPTION TABLES...................................................46
GENERAL PROVISIONS............................................................46
NON-PARTICIPATING..........................................................46
MISSTATEMENT...............................................................46
PROOF OF EXISTENCE AND AGE.................................................46
DISCHARGE OF LIABILITY.....................................................46
TRANSFER OF OWNERSHIP......................................................46
NON-QUALIFIED CONTRACT...............................................46
QUALIFIED CONTRACT...................................................47
ASSIGNMENT.................................................................47
NON-QUALIFIED CONTRACT...............................................47
QUALIFIED CONTRACT...................................................47
ANNUAL REPORT..............................................................47
INCONTESTABILITY...........................................................47
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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ENTIRE CONTRACT............................................................47
CHANGES -- WAIVERS.........................................................48
NOTICES AND DIRECTIONS.....................................................48
FEDERAL TAX MATTERS...........................................................48
INTRODUCTION...............................................................48
TAXATION OF ANNUITIES IN GENERAL...........................................48
SURRENDERS.................................................................49
QUALIFIED CONTRACTS..................................................49
NON-QUALIFIED CONTRACTS..............................................49
ANNUITY BENEFIT PAYMENTS...................................................49
PENALTY TAX................................................................49
TAXATION OF DEATH BENEFIT PROCEEDS.........................................49
TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF THE CONTRACT.......................50
QUALIFIED CONTRACTS - GENERAL..............................................50
TEXAS OPTIONAL RETIREMENT PROGRAM..........................................50
INDIVIDUAL RETIREMENT ANNUITIES............................................50
TAX-SHELTERED ANNUITIES....................................................50
PENSION AND PROFIT SHARING PLANS...........................................51
CERTAIN DEFERRED COMPENSATION PLANS........................................51
WITHHOLDING................................................................51
POSSIBLE CHANGES IN TAXATION...............................................51
OTHER TAX CONSEQUENCES.....................................................51
GENERAL....................................................................51
DISTRIBUTION OF THE CONTRACT..................................................52
LEGAL PROCEEDINGS.............................................................52
VOTING RIGHTS.................................................................52
AVAILABLE INFORMATION.........................................................53
STATEMENT OF ADDITIONAL INFORMATION...........................................54
APPENDIX A....................................................................55
QUALIFIED CONTRACTS........................................................55
NON-QUALIFIED CONTRACTS....................................................56
GROUP CONTRACT.............................................................60
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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DEFINITIONS
ACCOUNT(S): The Sub-Account(s) and/or the Fixed Account options.
ACCOUNT VALUE: The aggregate value of the Owner's interest in the Sub-Account(s)
and the Fixed Account options as of the end of any Valuation Period. The value
of the Owner's interest in all Sub-Accounts is the "Variable Account Value," and
the value of the Owner's interest in all Fixed Account options is the "Fixed
Account Value."
ACCUMULATED EARNINGS: The Account Value in excess of Purchase Payments received
by the Company and which have not been returned to the Owner.
ACCUMULATION PERIOD: The period prior to the applicable Commencement Date.
ACCUMULATION UNIT: The unit of measure used to calculate the value of the
Sub-Account(s) prior to the applicable Commencement Date.
ADMINISTRATIVE OFFICE: The home office of the Company or any other place of
business the Company may designate for administration.
AGE: Age as of most recent birthday.
ANNUITANT: A natural person whose life is used to determine the duration of
annuity payments involving life contingencies.
ANNUITY BENEFIT: Periodic payments under a settlement option, which commence on
or after the Annuity Commencement Date.
ANNUITY COMMENCEMENT DATE: The first day of the first Payment Interval for which
an Annuity Benefit payment is to be made under a settlement option.
BENEFICIARY: A person entitled to the Death Benefit under the Contract upon the
death of an Owner. If there is a surviving joint Owner, that person will be
deemed the Beneficiary.
BENEFIT PAYMENT: The Annuity Benefit or Death Benefit payable under a settlement
option. Variable Dollar Benefit payments may vary in amount. Fixed Dollar
Benefit payments remain constant except under certain joint and survivor
settlement options.
BENEFIT PAYMENT PERIOD: The period starting with the Commencement Date during
which Benefit Payments are to be made under the Contract.
BENEFIT UNIT: The unit of measure used to determine the dollar value of any
Variable Dollar Benefit payments after the first Benefit Payment is made by the
Company.
CERTIFICATE: The document issued to a Participant evidencing his or her
participation under a group Contract.
CODE: The Internal Revenue Code of 1986, as amended, and the rules and
regulations issued thereunder.
COMMENCEMENT DATE: The Annuity Commencement Date if an Annuity Benefit is
payable under the Contract, or the Death Benefit Commencement Date if a Death
Benefit is payable under the Contract.
CONTRACT ANNIVERSARY: An annual anniversary of the Contract Effective Date.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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CONTRACT EFFECTIVE DATE: The date shown on the Contract Specifications page.
CONTRACT YEAR: Any period of twelve months commencing on the Contract Effective
Date and on each Contract Anniversary thereafter.
DEATH BENEFIT: The benefit described in the Benefit on Death of Owner Section of
the Contract.
DEATH BENEFIT COMMENCEMENT DATE: The first day of the first Payment Interval for
which a Death Benefit payment is to be made under a settlement option, or the
date a Death Benefit is to be paid in a lump sum.
DEATH BENEFIT VALUATION DATE: The date that Due Proof of Death has been received
by the Company and the earlier to occur of:
(1) the Company's receipt of a Written Request with instructions as to the
form of Death Benefit; or
(2) the Death Benefit Commencement Date.
DUE PROOF OF DEATH: Any of the following: (1) a certified copy of a death
certificate; (2) a certified copy of a decree of a court of competent
jurisdiction as to the finding of death; or (3) any other proof satisfactory to
the Company.
FUND: A management investment company, or a portfolio thereof, registered under
the Investment Company Act of 1940, as amended, in which a Sub-Account of the
Separate Account invests.
NET ASSET VALUE: The amount computed by an investment company, no less
frequently than each Valuation Period, as the price at which its shares or
units, as the case may be, are redeemed in accordance with the rules of the
Securities and Exchange Commission.
OWNER: The person(s) identified as such on the Contract Specifications page.
PARTICIPANT: A person who participates in the benefits of a group Contract.
PAYMENT INTERVAL: A monthly, quarterly, annual or other regular interval during
the Benefit Payment Period.
PERSON CONTROLLING PAYMENTS:
NON-QUALIFIED CONTRACTS: The "Person Controlling Payments" means the
following, as the case may be:
(1) with respect to Annuity Benefit payments,
(a) the Owner, if the Owner has the right to change the payee; or
(b) in all other cases, the payee; and
(2) with respect to Death Benefit payments,
(a) the Beneficiary; or
(b) if the Beneficiary is deceased, the payee.
QUALIFIED CONTRACTS: The "Person Controlling Payments" means the following,
as the case may be:
(1) with respect to Annuity Benefit payments, the Owner; and
(2) with respect to Death Benefit payments,
(a) the Beneficiary; or
(b) if the Beneficiary is deceased, the payee.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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PURCHASE PAYMENT: A contribution amount paid to the Company in consideration for
the Contract, after the deduction of any and all of the following that may
apply:
(1) any fee charged by the person remitting payments for the Owner;
(2) premium taxes; and/or
(3) other taxes.
SEPARATE ACCOUNT: An account, which may be an investment company, which is
established and maintained by the Company pursuant to the laws of the State of
Ohio.
SUB-ACCOUNT: The Separate Account is divided into Sub-Accounts, each of which
invests in the shares of a designated Fund.
SURRENDER VALUE: The amount payable under a Contract if the Contract is
surrendered.
VALUATION PERIOD: The period commencing at the close of regular trading on the
New York Stock Exchange on any Valuation Date and ending at the close of trading
on the next succeeding Valuation Date. "Valuation Date" means each day on which
the New York Stock Exchange is open for business.
WRITTEN REQUEST: Information provided, or a request made, that is complete and
satisfactory to the Company, that is sent to the Company on the Company's form
or in a manner satisfactory to the Company, which may, at the Company's
discretion, be telephonic, and that is received by the Company at the
Administrative Office. A Written Request is subject to any payment made or any
action the Company takes before the Written Request is acknowledged by the
Company. The Company will deem a Written Request a standing order which may be
modified or revoked only by a subsequent Written Request, when permitted by the
terms of the Contract. An Owner may be required to return his or her Contract to
the Company in connection with a Written Request.
- --------------------------------------------------------------------------------
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
HIGHLIGHTS
THE CONTRACT
The Commodore Navigator(SERVICEMARK) Contracts described in this
Prospectus are available for use in connection with certain
non-tax-qualified annuity purchases, including Contracts purchased by an
employer in connection with a Code Section 457 or non-qualified deferred
compensation plan, and are also available for arrangements that qualify
for favorable tax treatment under Section 401, 403 or 408 of the Code.
Participation in a group Contract will be evidenced by the issuance of a
participant Certificate describing the Participant's interest under the
group Contract. Participation in an individual Contract will be evidenced
by the issuance of an individual Contract. References to "Contract"
throughout this Prospectus shall also mean Certificates under group
Contracts except where noted. For such group Contracts, references to
"Owner" shall also mean the Participant unless the Contract and
Certificate otherwise require the Owner to exercise Contractual rights.
Unless changed by endorsement, or otherwise noted herein, group Contract
provisions are identical to Qualified Contract provisions described in
this Prospectus.
The Owner is the person or persons designated as such on the Contract
Specifications page. Subject to the terms of the Contract and unless the
Owner dies before the Annuity Commencement Date, the Account Value, after
certain adjustments, will be applied to the payment of an Annuity Benefit
under the Settlement Option elected by the Owner.
The Account Value will depend on the investment experience of the amounts
allocated to each Sub-Account of the Separate Account elected by the Owner
and/or interest credited on amounts allocated to the Fixed Account
option(s) elected. All Annuity Benefits and other values provided under
the Contract when based on the investment experience of the Separate
Account are variable and are not guaranteed as to dollar amount.
Therefore, the Owner bears the entire investment risk with respect to
amounts allocated to the Separate Account under the Contract.
THERE IS NO GUARANTEED OR MINIMUM SURRENDER VALUE WITH RESPECT TO AMOUNTS
ALLOCATED TO THE SEPARATE ACCOUNT, SO THE PROCEEDS OF A SURRENDER COULD BE
LESS THAN THE TOTAL PURCHASE PAYMENTS.
THE SEPARATE ACCOUNT
Annuity Investors(REGISTERED) Variable Account B is a Separate Account of
the Company that is divided into Sub-Accounts. (See "The Separate
Account," page 27.) Each Sub-Account uses its assets to purchase, at their
Net Asset Value, shares of a Fund. The Funds available for investment in
the Separate Account under the Contract are as follows: (1) Janus Aspen
Series Aggressive Growth Portfolio; (2) Janus Aspen Series Worldwide
Growth Portfolio; (3) Janus Aspen Series Balanced Portfolio; (4) Janus
Aspen Series Growth Portfolio; (5) Janus Aspen Series International Growth
Portfolio; (6) Dreyfus Variable Investment Fund-Capital Appreciation
Portfolio; (7) Dreyfus Variable Investment Fund-Money Market Portfolio;
(8) Dreyfus Variable Investment Fund-Growth and Income Portfolio; (9)
Dreyfus Variable Investment Fund-Small Cap Portfolio; (10) The Dreyfus
Socially Responsible Growth Fund, Inc.; (11) Dreyfus Stock Index Fund;
(12) Strong Special Fund II, Inc.; (13) Strong Variable Insurance Funds,
Inc.-Strong Growth Fund II; (14) INVESCO VIF-Industrial Income Fund; (15)
INVESCO VIF-Total Return Fund; (16) INVESCO VIF-High Yield Fund; (17)
Morgan Stanley Universal Funds Inc.-U.S. Real Estate Portfolio; (18)
Morgan Stanley Universal Funds Inc.-Value Portfolio; (19) Morgan Stanley
Universal Funds Inc.-Emerging Markets Equity Portfolio; (20) Morgan
Stanley Universal Funds Inc.-Fixed Income Portfolio; (21) Morgan Stanley
Universal Funds Inc.-Mid Cap Value Portfolio; (22) PBHG Insurance Series
Fund, Inc.-PBHG Growth II Portfolio; (23) PBHG Insurance Series Fund,
Inc.-PBHG Large Cap Growth Portfolio; and (24) PBHG Insurance Series Fund,
Inc.-PBHG Technology & Communications Portfolio.
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
Each Fund pays its investment adviser and other service providers certain
fees charged against the assets of the Fund. The Account Value of a
Contract and the amount of any Annuity Benefits will vary to reflect the
investment performance of all the Sub-Accounts elected by the Owner and
the deduction of the charges described under "CHARGES AND DEDUCTIONS,"
page 38. For more information about the Funds, see "THE FUNDS," page 21
and the accompanying Funds' prospectuses.
THE FIXED ACCOUNT
The Fixed Account is an account within the Company's general account.
There are currently five Fixed Account options available under the Fixed
Account: a Fixed Accumulation Account option and four fixed term options.
Purchase Payments allocated or amounts transferred to the Fixed Account
options are credited with interest at a rate declared by the Company's
Board of Directors, but in any event at a minimum guaranteed annual rate
of 3.0% corresponding to a daily rate of 0.0081%. (See "THE FIXED
ACCOUNT," page 28.)
TRANSFERS BEFORE THE ANNUITY COMMENCEMENT DATE
Prior to the Annuity Commencement Date, the Owner may transfer values
between the Separate Account and the Fixed Account, within the Fixed
Account and between the Sub-Accounts, by Written Request to the Company or
by telephone in accordance with the Company's telephone transfer rules.
(See "TRANSFERS," page 32.)
The Company currently charges a fee of $25 for each transfer ("Transfer
Fee") in excess of twelve made during the same Contract Year. (See
"TRANSFERS," page 32.)
SURRENDERS
All or part of the Surrender Value of a Contract may be surrendered by the
Owner on or before the Annuity Commencement Date by Written Request to the
Company. Purchase Payments surrendered may be subject to a Contingent
Deferred Sales Charge ("CDSC") depending upon how long the Purchase
Payments to be withdrawn have been held under the Contract. Amounts
withdrawn also may be subject to a premium tax or similar tax, depending
upon the jurisdiction in which the Owner lives. Surrenders may be subject
to a 10% premature distribution penalty tax if made before the Owner
reaches age 59 1/2. Surrenders may further be subject to federal, state or
local income taxes or significant tax law restrictions. (See "FEDERAL TAX
MATTERS," page 48.)
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
A CDSC may be imposed on amounts surrendered. The maximum CDSC is 7% for
each Purchase Payment. That percentage decreases by 1% annually to 0%
after year seven.
The CDSC may be reduced or waived under certain circumstances. (See
"CHARGES AND DEDUCTIONS," page 38.)
OTHER CHARGES AND DEDUCTIONS
The Company deducts a daily charge ("Mortality and Expense Risk Charge")
at an effective annual rate of 1.25% of the daily Net Asset Value of each
Sub-Account. In connection with certain Contracts where the Company incurs
reduced sales and servicing expenses, such as Contracts offered to active
employees of the Company or any of its subsidiaries and/or affiliates, the
Company may offer a Contract with a Mortality and Expense Risk Charge at
an effective annual rate of 0.95% of the daily Net Asset Value of each
- --------------------------------------------------------------------------------
Page 11
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
Sub-Account. The Mortality and Expense Risk Charge is not assessed against
Fixed Account options. (See "CHARGES AND DEDUCTIONS," page 38.)
The Company also deducts a Contract maintenance charge each year
("Contract Maintenance Fee"). This Fee is currently $30 and is deducted
from an Owner's Variable Account Value on each Contract Anniversary. The
Contract Maintenance Fee may be waived under certain circumstances. This
Contract Maintenance Fee is not assessed against Fixed Account options.
(See "CHARGES AND DEDUCTIONS," page 38.)
Additionally, the Company deducts a charge to help cover the costs of
administering the Contracts and the Separate Account ("Administration
Charge"). The Administration Charge is computed at an effective annual
rate of 0.15% of the daily Net Asset Value of each Sub-Account. This
Administration Charge is not assessed against Fixed Account options.
Charges for premium taxes may be imposed in some jurisdictions. Depending
on the applicability of such taxes, the charges may be deducted from
Purchase Payments, from surrenders, and from other payments made under the
Contract. (See "CHARGES AND DEDUCTIONS," page 38.)
ANNUITY BENEFITS
Annuity Benefits are paid on a fixed or variable basis, or a combination
of both. (See "Benefit Payments," page 42.)
DEATH BENEFIT
The Contract provides for the payment of a Death Benefit if the Owner dies
prior to the Annuity Commencement Date. The Death Benefit may be paid in
one lump sum or pursuant to any available settlement option offered under
the Contract. (See "DEATH BENEFIT," page 37.)
FEDERAL INCOME TAX CONSEQUENCES
An Owner generally should not be taxed on increases in the Account Value
until a distribution under the Contract occurs (e.g., a surrender or
Annuity Benefit) or is deemed to occur (e.g., a loan in default).
Generally, a portion (up to 100%) of any distribution or deemed
distribution is taxable as ordinary income. The taxable portion of
distributions is generally subject to income tax withholding unless the
recipient elects otherwise. In addition, a 10% federal penalty tax may
apply to certain distributions. (See "FEDERAL TAX MATTERS," page 48.)
RIGHT TO CANCEL (INDIVIDUAL CONTRACTS ONLY, UNLESS OTHERWISE REQUIRED BY STATE
LAW)
An Owner may cancel the Contract by giving the Company written notice of
cancellation and returning the Contract before midnight of the twentieth
day (or longer if required by state law) after receipt. (See "Right to
Cancel," page 29.)
CONTACTING THE COMPANY
All Written Requests and any questions or inquiries should be directed to
the Company's Administrative Office, P.O. Box 5423, Cincinnati, Ohio
45201-5423, (800) 789-6771. All inquiries should include the Contract
Number and the Owner's name.
- --------------------------------------------------------------------------------
Page 12
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
NOTE: THE FOREGOING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION IN THE REMAINDER OF THIS PROSPECTUS AND IN THE ACCOMPANYING
PROSPECTUSES FOR THE FUNDS WHICH SHOULD BE REFERRED TO FOR MORE DETAILED
INFORMATION. THE REQUIREMENTS OF AN ENDORSEMENT TO THE CONTRACT OR
LIMITATIONS OR PENALTIES IMPOSED BY THE CODE MAY IMPOSE ADDITIONAL LIMITS
OR RESTRICTIONS ON PURCHASE PAYMENTS, SURRENDERS, DISTRIBUTIONS, BENEFITS,
OR OTHER PROVISIONS OF THE CONTRACT. THIS PROSPECTUS DOES NOT DESCRIBE
SUCH LIMITATIONS OR RESTRICTIONS.
(SEE "FEDERAL TAX MATTERS," PAGE 48.)
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
SUMMARY OF EXPENSES
OWNER TRANSACTION EXPENSES
Sales Load Imposed on Purchase Payments NONE
Contingent Deferred Sales Charge (as a percentage of Purchase
Payments surrendered)
Contract Years elapsed since receipt of Purchase Payment
less than 1 year 7%
1 year but less than 2 years 6%
2 years but less than 3 years 5%
3 years but less than 4 years 4%
4 years but less than 5 years 3%
5 years but less than 6 years 2%
6 years but less than 7 years 1%
7 years or more 0%
Surrender Fees NONE
Transfer Fee(1) $25
Annual Contract Maintenance Fee(2) $30
- --------------------
1/ The first twelve transfers in a Contract Year are free. Thereafter, a $25 fee
will be charged on each subsequent transfer.
2/ The Company will waive the Contract Maintenance Fee if the Account Value is
equal to or greater than $40,000 on the date the Contract Maintenance Fee would
otherwise be assessed.
- --------------------------------------------------------------------------------
Page 14
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL EXPENSES
SEPARATE ACCOUNT JANUS A.S. JANUS A.S. JANUS A.S. JANUS JANUS A.S.
ANNUAL EXPENSES(3) AGGRESSIVE WORLDWIDE BALANCED A.S. INTERNATIONAL
(as a percentage of GROWTH GROWTH PORTFOLIO(5) GROWTH GROWTH
average Separate PORTFOLIO(5) PORTFOLIO(5) PORTFOLIO(5) PORTFOLIO(5)
Account assets)
<S> <C> <C> <C> <C> <C>
Mortality and
Expense Risk Charge 1.25% 1.25% 1.25% 1.25% 1.25%
Administration Charge 0.15% 0.15% 0.15% 0.15% 0.15%
Other Fees and
Expenses of the 0.00% 0.00% 0.00% 0.00% 0.00%
Separate Account
Total Separate
Account Annual 1.40% 1.40% 1.40% 1.40% 1.40%
Expenses
FUND ANNUAL EXPENSES(4)
(as a percentage of Fund average net assets after fee waiver and/or expense
reimbursement, if any)
Management Fees 0.72% 0.66% 0.79% 0.65% 0.05%
Other Expenses 0.04% 0.14% 0.15% 0.04% 1.21%
Total Fund Annual
Expenses 0.76% 0.80% 0.94% 0.69% 1.26%
</TABLE>
<TABLE>
<CAPTION>
SEPARATE ACCOUNT DREYFUS DREYFUS DREYFUS DREYFUS THE DREYFUS DREYFUS
ANNUAL EXPENSES(3)(as a V.I.F. V.I.F. V.I.F. V.I.F. SOCIALLY STOCK
percentage of average CAPITAL MONEY GROWTH & SMALL CAP RESPONSIBLE INDEX
Separate Account APPRECIATION MARKET INCOME PORTFOLIO GROWTH FUND
assets) PORTFOLIO PORTFOLIO PORTFOLIO FUND, INC.(6)
<S> <C> <C> <C> <C> <C> <C>
Mortality and Expense
Risk Charge 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
Administration Charge 0.15% 0.15% 0.15% 0.15% 0.15% 0.15%
Other Fees and
Expenses of the 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Separate Account
Total Separate Account
Annual Expenses 1.40% 1.40% 1.40% 1.40% 1.40% 1.40%
FUND ANNUAL EXPENSES(4)
(as a percentage of Fund average net assets after fee waiver and/or expense
reimbursement, if any)
Management Fees 0.75% 0.50% 0.75% 0.75% 0.72% 0.245%
Other Expenses 0.09% 0.12% 0.08% 0.04% 0.24% 0.055%
Total Fund Annual
Expenses 0.84% 0.62% 0.83% 0.79% 0.96% 0.30%
</TABLE>
- --------------------------------------------------------------------------------
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT STRONG SPECIAL STRONG V.I.F.-
ANNUAL EXPENSES(3) FUND II, INC. STRONG GROWTH
(as a percentage FUND II
of average
Separate Account
assets)
---------------------------------------------------------------
Mortality and
Expense Risk Charge 1.25% 1.25%
Administration 0.15% 0.15%
Charge
Other Fees and
Expenses of the
Separate Account 0.00% 0.00%
Total Separate
Account Annual
Expenses 1.40% 1.40%
FUND ANNUAL EXPENSES(7)
(as a percentage of Fund average net assets after fee waiver
and/or expense reimbursement, if any)
Management Fees 1.00% 1.00%
Other Expenses 0.17% 1.00%
Total Fund Annual
Expenses 1.17% 2.00%
SEPARATE ACCOUNT INVESCO VIF- INVESCO VIF- INVESCO VIF-
ANNUAL EXPENSES(3) INDUSTRIAL TOTAL HIGH YIELD
(as a percentage INCOME FUND(8)(9) RETURN Fund(8)(11)
of average Fund(8)(10)
Separate Account
assets)
--------------------------------------------------------------
Mortality and
Expense Risk
Charge 1.25% 1.25% 1.25%
Administration
Charge 0.15% 0.15% 0.15%
Other Fees and
Expenses of the
Separate Account 0.00% 0.00% 0.00%
Total Separate
Account Annual
Expenses 1.40% 1.40% 1.40%
FUND ANNUAL EXPENSES(4)
(as a percentage of Fund average net assets after fee waiver
and/or expense reimbursement, if any)
Management Fees 0.75% 0.75% 0.60%
Other Expenses 0.20% 0.19% 0.27%
Total Fund
Annual Expenses 0.95% 0.94% 0.87%
- --------------------------------------------------------------------------------
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT MORGAN STANLEY MORGAN STANLEY
ANNUAL EXPENSES(3) UNIVERSAL FUNDS UNIVERSAL
as a percentage INC.-MID CAP VALUE FUNDS
of average PORTFOLIO INC.-U.S. REAL
Separate Account ESTATE
assets) PORTFOLIO
--------------------------------------------------------
Mortality and
Expense Risk 1.25% 1.25%
Charge
Administration 0.15% 0.15%
Charge
Other Fees and
Expenses of the
Separate Account 0.00% 0.00%
Total Separate
Account Annual
Expenses 1.40% 1.40%
FUND ANNUAL EXPENSES(12)
(as a percentage of Fund average net assets after fee
waiver and/or expense reimbursement, if any)
Management Fees 0.75% 0.80%
Other Expenses 0.30% 0.30%
Total Fund
Annual Expenses 1.05% 1.10%
SEPARATE ACCOUNT ANNUAL MORGAN STANLEY MORGAN STANLEY MORGAN STANLEY
EXPENSES(3) (as a UNIVERSAL UNIVERSAL UNIVERSAL
percentage of average FUNDS INC.- FUNDS FUNDS INC.-
Separate Account assets) VALUE PORTFOLIO INC.-EMERGING FIXED INCOME
MARKETS EQUITY PORTFOLIO
PORTFOLIO
- ------------------------------------------------------------------------------
Mortality and Expense
Risk Charge 1.25% 1.25% 1.25%
Administration Charge 0.15% 0.15% 0.15%
Other Fees and Expenses
of the Separate Account 0.00% 0.00% 0.00%
Total Separate Account
Annual Expenses 1.40% 1.40% 1.40%
FUND ANNUAL EXPENSES12
(as a percentage of Fund average net assets after fee waiver and/or expense
reimbursement, if any)
Management Fees 0.55% 1.25% 0.40%
Other Expenses 0.30% 0.50% 0.30%
Total Fund Annual
Expenses 0.85% 1.75% 0.70%
- --------------------------------------------------------------------------------
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<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT ANNUAL PBHG INSURANCE PBHG INSURANCE PBHG INSURANCE
EXPENSES(3) (as a SERIES FUND, SERIES FUND, SERIES FUND,
percentage of average INC.-PBHG GROWTH INC.-PBHG LARGE INC.-PBHG
Separate Account assets) II PORTFOLIO(13) CAP GROWTH TECHNOLOGY &
PORTFOLIO(13) COMMUNICATIONS
PORTFOLIO(13)
- ------------------------------------------------------------------------------
Mortality and Expense
Risk Charge 1.25% 1.25% 1.25%
Administration Charge 0.15% 0.15% 0.15%
Other Fees and Expenses
of the Separate Account 0.00% 0.00% 0.00%
Total Separate Account
Annual Expenses 1.40% 1.40% 1.40%
FUND ANNUAL EXPENSES
(as a percentage of Fund average net assets after fee waiver and/or expense
reimbursement, if any)
Management Fees 0.85% 0.72% 0.61%
Other Expenses 0.30% 0.38% 0.59%
Total Fund Annual
Expenses 1.15% 1.10% 1.20%
The purpose of this table is to assist an Owner in understanding the various
costs and expenses that the Owner will bear directly and indirectly with respect
to investment in the Separate Account. The table reflects expenses of each
Sub-Account as well as of the Fund in which the Sub-Account invests. See
"CHARGES AND DEDUCTIONS," page 38 of this Prospectus and the accompanying
prospectus for the applicable Fund for a more complete description of the
various costs and expenses. Information regarding each underlying Fund has been
provided to the Company by each Fund, and the Company has not independently
verified such information. In addition to the expenses listed above, premium
taxes may be applicable. The dollar figures should not be considered a
representation of past or future expenses. Actual expenses may be greater or
less than those shown. The $30 Contract Maintenance Charge is included in the
Examples as $1.
__________________
3/ Annual expenses are anticipated to be the same for each Sub-Account. These
expenses are based on estimated amounts for the current fiscal year.
4/ Data for each Fund are for its fiscal year ended December 31, 1996. Actual
expenses in future years may be higher or lower.
5/ The fees and expenses in the table above are based on gross expenses before
expense offset arrangements for the fiscal year ended December 31, 1996. The
information for each Portfolio is net of fee waivers or reduction from Janus
Corporation. Fee reductions for the Aggressive Growth, Worldwide Growth and
Balanced Portfolios reduce the management fee to the level of the corresponding
Janus retail fund. Other waivers, if applicable, are first applied against the
management fee and then against other expenses. Without such waivers or
reductions, the Management Fee, Other Expenses and Total Operating Expenses
would have been 1.00%, 1.21% and 2.21%, respectively for the International
Growth Portfolio; 0.79%, 0.04% and 0.83%, respectively for the Growth Portfolio;
0.79%, 0.04%, and 0.83%, respectively for Aggressive Growth Portfolio; 0.77%,
0.14% and 0.91%, respectively for Worldwide Growth Portfolio and 0.92%, 0.15%
and 1.07%, respectively for the Balanced Portfolio. Janus Corporation may modify
or terminate the waivers or reductions at any time upon at least 90 days' notice
to the Trustees.
6/ Fund expenses are net of management fees and other expenses waived and/or
reimbursed. In the absence of such fee waivers and/or expense reimbursements,
Management Fees, Other Expenses and Total Portfolio Expenses would have been as
follows for the fiscal year ended December 31, 1996: 0.75%, 0.24% and 0.99%,
respectively, for The Dreyfus Socially Responsible Growth Fund, Inc.
7/ There were no expense reimbursements applicable for any of these funds, nor
are there currently any expense reimbursement arrangements. With respect to the
Strong Growth Fund II, "Other Expenses" have been estimated because the Fund did
not commence operations until December 31, 1996. This estimate is based on the
projected growth of the Fund during its first year of operations. Please refer
to the Fund's unaudited financial highlights in its prospectus for the Fund's
- --------------------------------------------------------------------------------
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
ratio of expenses to average net assets, which is annualized, based on the
Fund's first three months of operations.
8/ In accordance with a Sub-Advisory Agreement between INVESCO Funds Group, Inc.
("IFG") and INVESCO Trust Company ("ITC"), a wholly owned subsidiary of IFG,
investment decisions of High Yield and Industrial Income Funds are made by ITC.
A separate Sub-Advisory Agreement between IFG and INVESCO Capital Management,
Inc. ("ICM"), an affiliate of IFG, provides that investment decisions of Total
Return Fund are made by ICM. Fees for such sub-advisory services are paid by
IFG.
9/ Various expenses of the Portfolio were voluntarily absorbed by IFG for the
year ended December 31, 1996. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 1.19%, and
ratio of net investment income to average net assets would have been 2.63%.
Expense ratio of 0.95% is based on Total Expenses of the Portfolio, less
Expenses Absorbed by Investment Adviser, which is before any expense offset
arrangements.
10/ Various expenses of the Portfolio were voluntarily absorbed by IFG for the
year ended December 31, 1996. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 1.30% and
ratio of net investment income to average net assets would have been 3.08%.
Expense ratio of 0.94% is based on Total Expenses of the Portfolio, less
Expenses Absorbed by Investment Adviser, which is before any expense offset
arrangement.
11/ Various expenses of the Portfolio were voluntarily absorbed by IFG for the
year ended December 31, 1996. If such expenses had not been voluntarily
absorbed, ratio of expenses to average net assets would have been 1.32% and
ratio of net investment income to average net assets would have been 8.74%.
Expense ratio of 0.87% is based on Total Expenses of the Portfolio, less
Expenses Absorbed by Investment Adviser, which is before any expense offset
arrangements.
12/ Morgan Stanley Asset Management Inc. and Miller Anderson & Sherrerd, LLP
have agreed to a reduction in their management fees and to reimburse the
Portfolios for which they act as investment adviser if such fees would cause
"Total Fund Annual Expenses" to exceed the amounts set forth in the tables
above. The only Portfolio of Morgan Stanley Universal Funds that was operational
on December 31, 1996 is the Emerging Markets Portfolio, with respect to which
Morgan Stanley Asset Management Inc. has agreed to a reduction in its management
fee and to reimburse the Portfolio if such fees would cause "Total Fund Annual
Expenses" to exceed 1.75% of average daily net assets. Absent such reductions,
it is estimated that annualized "Management Fees" and "Total Fund Annual
Expenses" for the Emerging Markets Equity Portfolio would have been 1.25% and
6.17%, respectively for the period October 1, 1996 (commencement of the
Portfolio's operations) through December 31, 1996.
13/ The Adviser has voluntarily agreed to waive or limit advisory fees or assume
Other Expenses of the Portfolios in order to limit total expenses to not more
than 1.20% of the average daily net assets of the PBHG Insurance Series Fund,
Inc.-PBHG Technology & Communications Fund Portfolio through December 31, 1997.
Such waiver of advisory fees is subject to a possible reimbursement by the
Portfolio in future years if such reimbursement can be achieved within the
foregoing annual expense limits. Absent such fee waiver/expense reimbursements,
the advisory fees and estimated Total Operating Expenses for the PBHG Insurance
Series Fund, Inc.-PBHG Technology & Communications Portfolio would be 0.85% and
1.44%; for the PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth Portfolio
would be 0.75% and 1.13%. Given the projected asset size of the Growth II
Portfolio, it is not anticipated that a fee waiver or expense reimbursement will
be necessary with respect to that Portfolio.
- --------------------------------------------------------------------------------
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
EXAMPLES(14)
If the Owner surrenders his or her Contract at the end of the applicable time
period, the following expenses will be charged on a $1,000 investment, assuming
a 5% annual return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS
- -------------------------------------------------------------------------------
Janus A.S. Aggressive Growth Portfolio $ 93 $125
Janus A.S. Worldwide Growth Portfolio $ 94 $127
Janus A.S. Balanced Portfolio $ 95 $131
Janus A.S. Growth Portfolio $ 93 $123
Janus A.S. International Growth Portfolio $ 98 $141
Dreyfus V.I.F. Capital Appreciation Portfolio $ 94 $128
Dreyfus V.I.F. Money Market Portfolio $ 92 $121
Dreyfus V.I.F. Growth and Income Portfolio $ 94 $128
Dreyfus V.I.F. Small Cap Portfolio $ 94 $126
The Dreyfus Socially Responsible Growth Fund, Inc. $ 95 $132
Dreyfus Stock Index Fund $ 89 $110
Strong Special Fund II, Inc. $ 97 $138
Strong Variable Insurance Funds, Inc.-Strong Growth Fund II $106 $164
INVESCO VIF-Industrial Income Fund $ 95 $129
INVESCO VIF-Total Return Fund $ 95 $129
INVESCO VIF-High Yield Fund $ 94 $127
Morgan Stanley Universal Funds Inc.-Mid-Cap Value Portfolio $ 96 $135
Morgan Stanley Universal Funds Inc.-U.S. Real Estate $ 97 $136
Portfolio
Morgan Stanley Universal Funds Inc.-Value Portfolio $ 94 $128
Morgan Stanley Universal Funds Inc.-Emerging Markets $103 $157
Equity Portfolio
Morgan Stanley Universal Funds Inc.-Fixed Income Portfolio $ 93 $123
PBHG Insurance Series Fund, Inc.-PBHG Growth II Portfolio $ 97 $138
PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth $ 97 $136
Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Technology & $ 98 $139
Communications Portfolio
- ------------------------
14/ The examples assume the reinvestment of all dividends and distributions, no
transfers among Sub-Accounts or between Accounts and a 5% annual rate of return
as mandated by Securities and Exchange Commission regulations. Annual Contract
Maintenance Fees are based on an estimated average Account Value for the current
fiscal year.
- --------------------------------------------------------------------------------
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If the Owner does not surrender his or her Contract, or if it is annuitized, the
following expenses would be charged on a $1,000 investment at the end of the
applicable time period, assuming a 5% annual return on assets:
SUB-ACCOUNT 1 YEAR 3 YEARS
Janus A.S. Aggressive Growth Portfolio $ 23 $ 75
Janus Worldwide Growth Portfolio $ 24 $ 77
Janus A.S. Balanced Portfolio $ 25 $ 81
Janus A.S. Growth Portfolio $ 23 $ 73
Janus A.S. International Growth Portfolio $ 28 $ 91
Dreyfus V.I.F. Capital Appreciation Portfolio $ 24 $ 78
Dreyfus V.I.F. Money Market Portfolio $ 22 $ 71
Dreyfus V.I.F. Growth and Income Portfolio $ 24 $ 78
Dreyfus V.I.F. Small Cap Portfolio $ 24 $ 76
The Dreyfus Socially Responsible Growth Fund, Inc. $ 25 $ 82
Dreyfus Stock Index Fund $ 19 $ 60
Strong Special Fund II, Inc. $ 27 $ 88
Strong Variable Insurance Funds, Inc.-Strong Growth $ 36 $114
Fund II
INVESCO VIF-Industrial Income Fund $ 25 $ 79
INVESCO VIF-Total Return Fund $ 25 $ 79
INVESCO VIF-High Yield Fund $ 24 $ 77
Morgan Stanley Universal Funds Inc.-Mid-Cap Value $ 26 $ 85
Portfolio
Morgan Stanley Universal Funds Inc.-U.S. Real Estate $ 27 $ 86
Portfolio
Morgan Stanley Universal Funds Inc.-Value Portfolio $ 24 $ 78
Morgan Stanley Universal Funds Inc.-Emerging Markets $ 33 $107
Equity Portfolio
Morgan Stanley Universal Funds Inc.-Fixed Income $ 23 $ 73
Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Growth II $ 27 $ 88
Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Large Cap Growth $ 27 $ 86
Portfolio
PBHG Insurance Series Fund, Inc.-PBHG Technology & $ 28 $ 89
Communications Portfolio
The examples should not be considered a representation of past or future
expenses or annual rates of return of any Fund. Actual expenses and annual rates
of return may be more or less than those assumed for the purpose of the
examples.
The fee table and examples do not include charges to the Owner for premium
taxes.
FINANCIAL STATEMENTS FOR THE COMPANY
The financial statements and report of independent public accountants for the
Company are contained in the Statement of Additional Information. Because the
Contracts registered by this Prospectus had not yet been issued as of the date
of this Prospectus, no financial information for the Separate Account is
provided.
THE FUNDS
The Separate Account currently has twenty-four Funds that are available for
investment under the Contract. Each Fund has separate investment objectives and
policies. As a result, each Fund operates as a separate investment portfolio and
the investment performance of one Fund has no effect on the investment
performance of any other Fund. There is no assurance that any of these Funds
will achieve their stated objectives. The Securities and Exchange Commission
does not supervise the management or the investment practices and/or policies of
any of the Funds.
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The Separate Account invests exclusively in shares of the Funds listed below
(followed by a brief overview of each Fund's investment objective(s) and
policies):
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH PORTFOLIO. A nondiversified portfolio that seeks
long-term growth of capital by investing primarily in common stocks with
an emphasis on securities issued by medium-sized companies.
WORLDWIDE GROWTH PORTFOLIO. A diversified portfolio that seeks long-term
growth of capital by investing primarily in common stocks of foreign and
domestic issuers.
BALANCED PORTFOLIO. A diversified portfolio that seeks long-term growth of
capital balanced by current income. The Fund normally invests 40-60% of
its assets in securities selected primarily for their growth potential and
40-60% of its assets in securities selected primarily for their income
potential.
GROWTH PORTFOLIO. A diversified portfolio that seeks long-term growth of
capital by investing primarily in common stocks, with an emphasis on
companies with larger market capitalizations.
INTERNATIONAL GROWTH PORTFOLIO. A diversified portfolio that seeks
long-term growth of capital by investing primarily in common stocks of
foreign issuers.
Janus Corporation serves as the investment adviser to each of these
Portfolios.
DREYFUS FUNDS:
CAPITAL APPRECIATION PORTFOLIO (Dreyfus Variable Investment Fund). The
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 goal. It seeks to achieve its goals
by investing principally in common stocks of domestic and foreign issuers,
common stocks with warrants attached and debt securities of foreign
governments.
The Dreyfus Corporation serves as the investment adviser and Fayez Sarofim
& Co. serves as the sub-investment adviser to this Portfolio.
MONEY MARKET PORTFOLIO (Dreyfus Variable Investment Fund). The Money
Market Portfolio's goal is to provide as high a level of current income as
is consistent with the preservation of capital and the maintenance of
liquidity. This Portfolio invests in short-term money market instruments.
An investment in the Money Market Portfolio is neither insured nor
guaranteed by the U.S. Government. There can be no assurance that the
Money Market Portfolio will be able to maintain a stable net asset value
of $1.00 per share.
GROWTH AND INCOME PORTFOLIO (Dreyfus Variable Investment Fund). The Growth
and Income Portfolio's goal is to provide long-term capital growth,
current income and growth of income, consistent with reasonable investment
risk. This Portfolio invests primarily in equity securities, debt
securities and money market instruments of domestic and foreign issuers.
SMALL CAP PORTFOLIO (Dreyfus Variable Investment Fund). The Small Cap
Portfolio's goal is to maximize capital appreciation. This Portfolio
invests primarily in common stocks of domestic and foreign issuers. This
Portfolio will be particularly alert to companies that The Dreyfus
Corporation considers to be 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.
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The Dreyfus Corporation serves as investment adviser to the Money Market,
Growth and Income, and Small Cap Portfolios.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. The Dreyfus Socially
Responsible Growth Fund, Inc.'s primary goal is to provide capital growth.
It seeks to achieve this goal by investing principally in common stocks,
or securities convertible into common stock, of companies which, in the
opinion of the Fund's management, not only meet traditional investment
standards, but also show evidence that they conduct their business in a
manner that contributes to the enhancement of the quality of life in
America. Current income is a secondary goal.
The Dreyfus Corporation serves as the investment adviser and NCM Capital
Management Group, Inc. serves as the sub-investment adviser to this Fund.
DREYFUS STOCK INDEX FUND. The Dreyfus Stock Index Fund's investment
objective is to provide investment results that correspond to the price
and yield performance of publicly traded common stocks in the aggregate,
as represented by the Standard & Poor's 500 Composite Stock Price Index.
The Stock Index Fund is neither sponsored by nor affiliated with Standard
& Poor's Corporation.
The Dreyfus Corporation acts as the Fund manager and Mellon Equity
Associates, an affiliate of Dreyfus, is the index manager.
STRONG SPECIAL FUND II, INC.
STRONG SPECIAL FUND II. The investment objective of the Strong Special
Fund II is to seek capital growth. It currently emphasizes medium-sized
companies that the Fund's adviser believes are under-researched and
attractively valued.
Strong Capital Management, Inc. serves as the investment adviser to this
Fund.
STRONG VARIABLE INSURANCE FUNDS, INC.
STRONG GROWTH FUND II. The investment objective of the Strong Growth Fund
II is to seek capital growth. It invests primarily in equity securities
that the Fund's adviser believes have above-average growth prospects.
Strong Capital Management, Inc. serves as the investment adviser to this
Fund.
INVESCO VARIABLE INVESTMENT FUNDS, INC.:
INDUSTRIAL INCOME FUND. The investment objective of the Industrial Income
Fund is to seek the best possible current income while following sound
investment practices. Capital growth potential is an additional, but
secondary, consideration in the selection of portfolio securities.
TOTAL RETURN FUND. The investment objective of the Total Return Fund is to
seek a high total return on investment through capital appreciation and
current income. The Total Return Fund seeks to accomplish its objective by
investing in a combination of equity securities (consisting of common
stocks and, to a lesser degree, securities convertible into common stock)
and fixed income securities.
HIGH YIELD FUND. The investment objective of the High Yield Fund is to
seek a high level of current income by investing substantially all of its
assets in lower rated bonds and other debt securities and in preferred
stock. The Fund pursues its investment objective through investment in a
variety of long-term, intermediate-term, and short-term bonds. Potential
capital appreciation is a factor in the selection of investments, but is
secondary to the Fund's primary objective. For further discussion of the
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risks associated with investment in lower rated bonds, please see the
attached INVESCO Variable Investment Funds, Inc. prospectus.
INVESCO Funds Group, Inc. serves as the investment adviser to each of
these Funds.
MORGAN STANLEY UNIVERSAL FUNDS INC.:
U.S. REAL ESTATE PORTFOLIO. The investment objective of the U.S. Real
Estate Portfolio is above-average current income and long-term capital
appreciation by investing primarily in equity securities of U.S. and
non-U.S. companies principally engaged in the U.S. real estate industry,
including Real Estate Investment Trusts (REITs).
Morgan Stanley Asset Management Inc. serves as the investment adviser to
this Portfolio.
VALUE PORTFOLIO. The investment objective of the Value Portfolio is to
seek above-average total return over a market cycle of three to five years
by investing primarily in a diversified portfolio of common stocks and
other equity securities deemed by the adviser to be undervalued based on
various measures such as price-earnings ratios and price/book ratios.
Miller Anderson & Sherrerd, LLP (an indirect wholly owned subsidiary of
Morgan Stanley Group Inc.) serves as the investment adviser to this
Portfolio.
EMERGING MARKETS EQUITY PORTFOLIO. The investment objective of the
Emerging Markets Equity Portfolio is long-term capital appreciation by
investing primarily in equity securities of emerging market country
issuers with a focus on those in which the adviser believes the economies
are developing strongly and in which the markets are becoming more
sophisticated.
Morgan Stanley Asset Management Inc. serves as the investment adviser to
this Portfolio.
FIXED INCOME PORTFOLIO. The investment objective of the Fixed Income
Portfolio is to seek above-average total return over a market cycle of
three to five years by investing primarily in a diversified portfolio of
securities issued by the U.S. Government and its Agencies, Corporate
Bonds, Mortgage-Backed Securities, Foreign Bonds, and other Fixed Income
Securities.
Miller Anderson & Sherrerd, LLP (an indirect wholly owned subsidiary of
Morgan Stanley Group Inc.) serves as the investment adviser to this
Portfolio.
MID CAP VALUE PORTFOLIO. The Mid Cap Value Portfolio seeks above-average
total return over a market cycle of three to five years by investing in
common stocks and other equity securities of issuers with equity
capitalizations in the range of the companies represented in the S&P
MidCap 400 Index. Such range is currently $100 million to $8 billion but
the range fluctuates over time with changes in the equity market.
Miller Anderson & Sherrerd, LLP (an indirect wholly owned subsidiary of
Morgan Stanley Group Inc.) serves as the investment adviser to this
Portfolio.
PBHG INSURANCE SERIES FUND, INC.
PBHG GROWTH II PORTFOLIO. The investment objective of the PBHG Insurance
Series Growth II Portfolio is to seek capital appreciation by investing
primarily in common stocks and convertible securities of small and medium
sized growth companies (market capitalization or annual revenues up to $4
billion) that are considered to have an outlook for strong earnings
growth.
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PBHG LARGE CAP GROWTH PORTFOLIO. The investment objective of the PBHG
Insurance Series Large Cap Growth Portfolio is to seek long-term growth of
capital by investing primarily in common stocks of large capitalization
companies (market capitalization in excess of $1 billion) that are
considered to have an outlook for strong growth in earnings and potential
for capital appreciation.
PBHG TECHNOLOGY & COMMUNICATIONS PORTFOLIO. The investment objective of
the PBHG Insurance Series Technology & Communications Portfolio is to seek
long-term growth of capital by investing primarily in common stocks of
companies which rely extensively on technology or communications in their
product development or operations, or which are expected to benefit from
technological advances and improvements, and that may be experiencing
exceptional growth in sales and earnings driven by technology or
communications-related products and services.
Pilgrim Baxter & Associates, Ltd. serves as the investment advisor to each
of these Portfolios.
THERE IS NO ASSURANCE THAT ANY OF THESE FUNDS WILL ACHIEVE THEIR STATED
OBJECTIVES.
INVESTMENTS IN THESE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT OR ANY OTHER ENTITY OR PERSON.
Since each of the Funds is available to separate accounts of other
insurance companies offering variable annuity and variable life products,
and certain Funds may be available to qualified pension and retirement
plans, there is a possibility that a material conflict may arise between
the interests of the Separate Account and one or more other separate
accounts or plans investing in the Fund. In the event of a material
conflict, the affected insurance companies and plans will take any
necessary steps to resolve the matter, including stopping their separate
accounts from investing in the particular Fund. See the Funds'
prospectuses for greater detail.
Additional information concerning the investment objectives and policies
of each Fund, the investment advisory services and administrative services
of each Fund and charges of each Fund can be found in the current
prospectus for each Fund which accompanies this Prospectus. THE
APPROPRIATE FUNDS' PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE ANY
DECISION IS MADE CONCERNING THE ALLOCATION OF PURCHASE PAYMENTS TO, OR
TRANSFERS AMONG, THE SUB-ACCOUNTS.
ADDITIONS, DELETIONS, OR SUBSTITUTIONS
The Company does not control the Funds and cannot guarantee that any of
the Sub-Accounts or any of the Funds will always be available for
allocation of Purchase Payments or transfers. The Company retains the
right to make changes in the Separate Account and its investments.
The Company reserves the right to eliminate the shares of any Fund held by
a Sub-Account and to substitute shares of another investment company for
the shares of any Fund, if the shares of that Fund are no longer available
for investment or if, in the Company's judgment, investment in any Fund
would be inappropriate in view of the purposes of the Separate Account. To
the extent required by the Investment Company Act of 1940, as amended
("1940 Act"), or other applicable law, a substitution of shares
attributable to the Owner's interest in a Sub-Account will not be made
without prior notice to the Owner and the prior approval of the Securities
and Exchange Commission. Nothing contained herein shall prevent the
Separate Account from purchasing other securities for other series or
classes of variable annuity policies, or from effecting an exchange
between series or classes of variable policies on the basis of requests
made by Owners.
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New Sub-Accounts may be established when, in the sole discretion of the
Company, marketing, tax, investment or other conditions so warrant. Any
new Sub-Accounts will be made available to existing Owners on a basis to
be determined by the Company. Each additional Sub-Account will purchase
shares in a Fund or in another mutual fund or investment vehicle. The
Company may also eliminate one or more Sub-Accounts, if in its sole
discretion, marketing, tax, investment or other conditions so warrant. In
the event any Sub-Account is eliminated, the Company will notify Owners
and request a re-allocation of the amounts invested in the eliminated
Sub-Account.
In the event of any substitution or change, the Company may make such
changes in the Contract as may be necessary or appropriate to reflect such
substitution or change. Furthermore, if deemed to be in the best interests
of persons having voting rights under the Contracts, the Separate Account
may be operated as a management company under the 1940 Act or any other
form permitted by law, may be de-registered under the 1940 Act in the
event such registration is no longer required, or may be combined with one
or more separate accounts.
PERFORMANCE INFORMATION
From time to time, the Company may advertise yields and/or total returns
for the Sub-Accounts. THESE FIGURES ARE BASED ON HISTORICAL INFORMATION
AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. For a description of
the methods used to determine yield and total return, see the Statement of
Additional Information.
YIELD DATA
The yield of the Money Market Sub-Account refers to the annualized income
generated by an investment in that Sub-Account over a specified seven-day
period. The Company may also advertise the effective yield of the Money
Market Sub-Account which is calculated similarly but, when annualized, the
income earned by an investment in that Sub-Account is assumed to be
reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
The yield of a Sub-Account other than the Money Market Sub-Account refers
to the annualized income generated by an investment in the Sub-Account
over a specified 30-day period. The yield calculations do not reflect the
effect of any CDSC or premium taxes that may be applicable to a particular
Contract which would reduce the yield of that Contract.
TOTAL RETURN DATA
The average annual total return of a Sub-Account refers to return
quotations assuming an investment has been held in the Sub-Account for
various periods of time including, but not limited to, a period measured
from the date the Sub-Account commenced operations. When a Sub-Account has
been in operation for one, five and ten years, respectively, the average
annual total return presented will be presented for these periods,
although other periods may also be provided. The standardized average
annual total return quotations reflect the deduction of all applicable
charges except for premium taxes. In addition to the standardized average
annual total return for a Sub-Account, the Company may provide cumulative
total return and/or other non-standardized total return for the
Sub-Account. Total return data that does not reflect the CDSC and other
charges will be higher than the total return realized by an investor who
incurs the charges.
Reports and promotional literature may contain the ranking of any
Sub-Account derived from rankings of variable annuity separate accounts or
their investment products tracked by Lipper Analytical Services, Inc.,
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
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VARDS, IBC/Donoghue's Money Fund Report, Financial Planning Magazine,
Money Magazine, Bank Rate Monitor, Standard & Poor's Indices, Dow Jones
Industrial Average, and other rating services, companies, publications, or
other persons who rank separate accounts or other investment products on
overall performance or other criteria. The Company may compare the
performance of a Sub-Account with applicable indices and/or industry
averages. Performance information may present the effects of tax-deferred
compounding on Sub-Account investment returns, or returns in general,
which may be illustrated by graphs, charts, or otherwise, and which may
include comparisons of investment return on a tax-deferred basis with
currently taxable investment return.
The Company may also advertise performance figures for the Sub-Accounts
based on the performance of a Fund prior to the time the Separate Account
commenced operations.
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED) AND THE SEPARATE
ACCOUNT
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED)
Annuity Investors Life Insurance Company(REGISTERED) (the "Company"),
formerly known as Carillon Life Insurance Company, is a stock life
insurance company. It was incorporated under the laws of the State of Ohio
in 1981. The Company is principally engaged in the sale of fixed and
variable annuity policies.
The Company is a wholly owned subsidiary of Great American(REGISTERED)
Life Insurance Company which is a wholly owned subsidiary of American
Annuity Group(SERVICEMARK), Inc., a publicly traded insurance holding
company. That company is in turn indirectly controlled by American
Financial Group, Inc., a publicly traded holding company.
The home office of the Company is located at 250 East Fifth Street,
Cincinnati, Ohio 45202.
PUBLISHED RATINGS
The Company may from time to time publish in advertisements, sales
literature and reports to Owners, the ratings and other information
assigned to it by one or more independent rating organizations such as
A.M. Best Company, Standard & Poor's, and Duff & Phelps. The purpose of
the ratings is to reflect the financial strength and/or claims-paying
ability of the Company and should not be considered as reflecting on the
investment performance of assets held in the Separate Account. Each year
the A.M. Best Company reviews the financial status of thousands of
insurers, culminating in the assignment of Best's Ratings. These ratings
reflect their current opinion of the relative financial strength and
operating performance of an insurance company in comparison to the norms
of the life/health insurance industry. In addition, the claims-paying
ability of the Company as measured by Standard & Poor's or Duff & Phelps
may be referred to in advertisements or sales literature or in reports to
Owners. These ratings are opinions of those agencies as to an operating
insurance company's financial capacity to meet the obligations of its
insurance and annuity policies in accordance with their terms. Such
ratings do not reflect the investment performance of the Separate Account
or the degree of risk associated with an investment in the Separate
Account.
THE SEPARATE ACCOUNT
Annuity Investors(REGISTERED) Variable Account B was established by the
Company as an insurance company separate account under the laws of the
State of Ohio on December 19, 1996, pursuant to resolutions of the
Company's Board of Directors. The Separate Account is registered with the
Securities and Exchange Commission under the 1940 Act as a unit investment
trust. However, the Securities and Exchange Commission does not supervise
the management or the investment practices or policies of the Separate
Account.
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The assets of the Separate Account are owned by the Company but they are
held separately from the other assets of the Company. The Ohio Revised
Code provides that the assets of a separate account are not chargeable
with liabilities incurred in any other business operation of the Company.
Income, gains and losses incurred on the assets in the Separate Account,
whether or not realized, are credited to or charged against the Separate
Account, without regard to other income, gains or losses of the Company.
Therefore, the investment performance of the Separate Account is entirely
independent of the investment performance of the Company's general account
assets or any other separate account maintained by the Company.
Under Ohio law, the assets of the Separate Account will be held for the
exclusive benefit of Owners of, and the persons entitled to payment under,
the Contracts offered by this Prospectus and under all other contracts
which provide for accumulated values or dollar amount payments to reflect
investment results of the Separate Account. The obligations arising under
the Contracts are obligations of the Company.
The Separate Account is divided into Sub-Accounts, each of which invests
solely in a specific corresponding Fund. (See "THE FUNDS," page 21.)
Changes to the Sub-Accounts may be made at the discretion of the Company.
(See "Additions, Deletions, or Substitutions," page 25.)
THE FIXED ACCOUNT
The Fixed Account is a part of the Company's general account. Because of
exemptive and exclusionary provisions, interests in the general account
have not been registered under the Securities Act of 1933, nor is the
general account registered as an investment company under the 1940 Act.
Accordingly, neither the general account nor any interest therein is
generally subject to the provisions of these Acts, and the staff of the
Securities and Exchange Commission does not generally review the
disclosures in the prospectus relating to the Fixed Account. Disclosures
regarding the Fixed Account and the general account may, however, be
subject to certain generally applicable provisions of the federal
securities laws relating to the accuracy and completeness of statements
made in the Prospectus.
The Company has sole discretion to invest the assets of the Fixed Account,
subject to applicable law. The Company delegates the investment of the
assets of the Fixed Account to American Money Management Corporation.
Allocation of any amounts to the Fixed Account does not entitle Owners to
share directly in the investment experience of these assets. The Company
assumes the risk of investment gain or loss on the portion of the Account
Value allocated to the Fixed Account. All assets held in the general
account are subject to the Company's general liabilities from business
operations.
FIXED ACCOUNT OPTIONS
There are currently five options under the Fixed Account: the Fixed
Accumulation Account Option; and the guarantee period options referred to
in the Contract as the Fixed Account options One-Year, Three-Year,
Five-Year, and Seven-Year Guarantee Period, respectively. Different Fixed
Account options may be offered by the Company at any time. Purchase
Payments allocated and amounts transferred to the Fixed Account options
accumulate interest at the applicable current interest rate declared by
the Company's Board of Directors, and if applicable, for the duration of
the guarantee period selected.
The Company guarantees a minimum rate of interest for the Fixed Account
options. The guaranteed rate is 3% per year, compounded annually.
RENEWAL OF FIXED ACCOUNT OPTIONS
The following provisions apply to all Fixed Account options except the
Fixed Accumulation Account Option.
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At the end of a guarantee period, and for the thirty days immediately
preceding the end of such guarantee period, the Owner may elect a new
option to replace the Fixed Account option that is then expiring. The
entire amount maturing may be reallocated to any of the then-current
options under the Contract (including the various Sub-Accounts within the
Separate Account), except that a Fixed Account option with a guarantee
period that would extend past the Annuity Commencement Date may not be
selected. In particular, in the case of renewals occurring within one year
of such Commencement Date, the only Fixed Account option available is the
Fixed Accumulation Account Option.
If the Owner does not specify a new Fixed Account option in accordance
with the preceding paragraph, the Owner will be deemed to have elected the
same Fixed Account option as is expiring, so long as the guarantee period
of such option does not extend beyond the Annuity Commencement Date. In
the event that such a period would extend beyond the Annuity Commencement
Date, the Owner will be deemed to have selected the Fixed Account option
with the longest available guarantee period that expires prior to the
Annuity Commencement Date, or, failing that, the Fixed Accumulation
Account Option.
THE CONTRACT
The Contracts described herein are individual and group flexible premium
deferred annuities. The rights and benefits are described below and in the
Contract. References to "Contract" throughout this Prospectus shall also
mean Certificates issued under group Contracts, except where noted. The
Company reserves the right to make any modification to conform the
Contracts to, or give the Owner the benefit of, any applicable law. The
obligations under the Contracts are obligations of the Company.
The Company is subject to the insurance laws and regulations of all the
jurisdictions where it is licensed to operate. The availability of certain
Contract rights and provisions depends on state approval and/or filing and
review processes in each such jurisdiction. Where required by law or
regulation, the Contracts will be modified accordingly.
Fixed Account Values, Variable Account Values, benefits and charges will
be calculated separately for each Contract. The various administrative
rules described below will apply separately to each Contract, unless
otherwise noted. The Company reserves the right to terminate any Contract
at any time the Surrender Value is less than $500. A surrender will be
deemed to have been made and the Company will pay the Owner the Surrender
Value. A group Contract may be terminated on 60 days advance notice, in
which case Participants will be entitled to continue their interests on a
deferred, paid-up basis, subject to the Company's right to terminate as
described above.
RIGHT TO CANCEL (INDIVIDUAL CONTRACTS ONLY UNLESS OTHERWISE REQUIRED BY STATE
LAW)
The Owner may cancel the Contract by giving the Company written notice of
cancellation and returning the Contract before midnight of the twentieth
day (or longer if required by state law) following the date the Owner
receives the Contract. The Contract must be returned to the Company, and
the required notice must be given in person, or to the agent who sold it
to the Owner, or by mail. If by mail, the return of the Contract or the
notice is effective on the date it is postmarked, with the proper address
and with postage paid. If the Owner cancels the Contract as set forth
above, the Contract will be void and the Company will refund the Purchase
Payment(s) plus or minus any investment gains or losses under the Contract
as of the end of the Valuation Period during which the returned Contract
is received by the Company, or as otherwise required by law. Where
required by state or federal law, the Right to Cancel provision of a
Contract will provide that the Company will refund Purchase Payment(s)
during the minimum refund period required. Where required by state law,
the right to cancel provision of a Contract may provide for refund of a
different amount or a right to cancel for a different time period than
described above.
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PURCHASE PAYMENTS
PURCHASE PAYMENTS
The minimum initial Purchase Payment for Qualified Contracts purchased
under a periodic payment program is $50; for other Qualified Contracts,
$2,000; for Non-Qualified Contracts purchased under a periodic payment
program, $100; and for other Non-Qualified Contracts, $5,000. Under any
Contract, the Company requires each subsequent Purchase Payment to be at
least $50. Purchase Payments and tax-free transfers or rollovers may be
sent to the Company at its Administrative Office at any time before the
Annuity Commencement Date so long as the Contract has not been fully
surrendered and the Owner is still living.
Each Purchase Payment will be applied by the Company to the credit of the
Owner's Account. If the application form is in good order, the Company
will apply the initial Purchase Payment to an account for the Owner within
two business days of receipt of the Purchase Payment at the Administrative
Office. If the application form is not in good order, the Company will
attempt to get the application form in good order within five business
days. If the application form is not in good order at the end of this
period, the Company will inform the Owner of the reason for the delay and
that the Purchase Payment will be returned immediately unless he or she
specifically consents to the Company keeping the Purchase Payment until
the application form is in good order. Once the application form is in
good order, the Purchase Payment will be applied to the Owner's Account
within two business days.
Each additional Purchase Payment is credited to a Contract as of the next
Valuation Date following the receipt of such additional Purchase Payment.
No Purchase Payment for any Contract may exceed $500,000 without prior
approval of the Company.
ALLOCATION OF PURCHASE PAYMENTS
The Company will allocate Purchase Payments to the Fixed Account options
and/or to the Sub-Accounts according to instructions received by Written
Request. Allocations must be made in whole percentages. The minimum
Purchase Payment amount that can be allocated to a Fixed Account option
other than the Fixed Accumulation Account is $2,000.
ACCOUNT VALUE
The Account Value is equal to the aggregate value of the Owner's interest
in the Sub-Account(s) and the Fixed Account options as of the end of any
Valuation Period. The value of the Owner's interest in all Sub-Accounts is
the "Variable Account Value," and the value of the Owner's interest in all
Fixed Account options is the "Fixed Account Value."
FIXED ACCOUNT VALUE
The Fixed Account Value for the Contract at any time is equal to: (a) the
Purchase Payment(s) allocated to the Fixed Account; plus (b) amounts
transferred to the Fixed Account; plus (c) interest credited to the Fixed
Account; less (d) any charges, surrenders, deductions, amounts transferred
from the Fixed Account or other adjustments made in accordance with the
provisions of the Contract.
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VARIABLE ACCOUNT VALUE
Purchase Payments may be allocated among, and Account values may be
transferred to, the various Sub-Accounts within the Separate Account,
subject to the provisions of the Contract governing transfers. For each
Sub-Account, the Purchase Payment(s) or amounts transferred are converted
into Accumulation Units. The number of Accumulation Units credited is
determined by dividing the dollar amount directed to each Sub-Account by
the value of the Accumulation Unit for that Sub-Account at the end of the
Valuation Period on which the Purchase Payment(s) or transferred amount is
received.
The following events will result in the cancellation of an appropriate
number of Accumulation Units of a Sub-Account:
(1) transfer from a Sub-Account;
(2) full or partial surrender of the Variable Account Value;
(3) payment of a Death Benefit;
(4) application of the Variable Account Value to a Settlement
Option;
(5) deduction of the Contract Maintenance Fee; or
(6) deduction of any Transfer Fee.
Accumulation Units will be canceled as of the end of the Valuation Period
during which the Company receives a Written Request regarding the event
giving rise to such cancellation, or an applicable Commencement Date, or
the end of the Valuation Period on which the Contract Maintenance Fee or
Transfer Fee is due, as the case may be.
The Variable Account Value for a Contract at any time is equal to the sum
of the number of Accumulation Units for each Sub-Account attributable to
that Contract multiplied by the Accumulation Unit value ("Accumulation
Unit Value") for each Sub-Account at the end of the preceding Valuation
Period.
ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Sub-Account, with the
exception of the Money Market Sub-Account, was set at $10. The initial
Accumulation Unit Value for the Money Market Sub-Account was set at $1.00.
Thereafter, the Accumulation Unit Value at the end of each Valuation
Period is the Accumulation Unit Value at the end of the previous Valuation
Period multiplied by the Net Investment Factor, as described below.
NET INVESTMENT FACTOR
The Net Investment Factor is a factor applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. Each
Sub-Account has a Net Investment Factor for each Valuation Period which
may be greater or less than one. Therefore, the value of an Accumulation
Unit for each Sub-Account may increase or decrease. The Net Investment
Factor for any Sub-Account for any Valuation Period is determined by
dividing (1) by (2) and subtracting (3) from the result, where:
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(1) is equal to:
(a) the Net Asset Value per share of the Fund held in the
Sub-Account, determined at the end of the applicable
Valuation Period; plus
(b) the per share amount of any dividend or net capital gain
distributions made by the Fund held in the Sub-Account,
if the "ex-dividend" date occurs during the applicable
Valuation Period; plus or minus
(c) a per share charge or credit for any taxes reserved for,
which is determined by the Company to have resulted from
the investment operations of the Sub-Account;
(2) is the Net Asset Value per share of the Fund held in the
Sub-Account, determined at the end of the immediately preceding
Valuation Period; and
(3) is the factor representing the Mortality and Expense Risk
Charge and the Administration Charge deducted from the
Sub-Account for the number of days in the applicable Valuation
Period.
TRANSFERS
Prior to the applicable Commencement Date, the Owner may transfer amounts
in a Sub-Account to a different Sub-Account and/or one or more of the
Fixed Account options. After the first Contract Anniversary, and prior to
the applicable Commencement Date, the Owner may transfer amounts from any
Fixed Account option and/or one or more of the Sub-Accounts. If a transfer
is being made from a Fixed Account option pursuant to the "Renewal"
provision of the Contract, then the entire amount of that Fixed Account
option subject to renewal at that time may be transferred. In any other
case, transfers from a Fixed Account option are subject to a cumulative
limit during each Contract Year of twenty percent (20%) of the Fixed
Account option's value as of the most recent Contract Anniversary. Amounts
previously transferred from Fixed Account options to the Sub-Accounts may
not be transferred back to the Fixed Account options for a period of six
(6) months from the date of transfer. The minimum transfer amount for any
transfer is $500.
The Company currently charges a Transfer Fee of $25 for each transfer in
excess of twelve during the same Contract Year.
TELEPHONE TRANSFERS
An Owner may place a request for all or part of the Account Value to be
transferred by telephone. All transfers must be in accordance with the
terms of the Contract. Transfer instructions are currently accepted on
each Valuation Date between 9:30 a.m. and 4:00 p.m. Eastern Time at (800)
789-6771. Once instructions have been accepted, they may not be rescinded;
however, new telephone instructions may be given the following day.
The Company will not be liable for complying with telephone instructions
which the Company reasonably believes to be genuine, or for any loss,
damage, cost or expense in acting on such telephone instructions. The
Owner or person controlling payments will bear the risk of such loss. The
Company will employ reasonable procedures to determine that telephone
instructions are genuine. If the Company does not employ such procedures,
the Company may be liable for losses due to unauthorized or fraudulent
instructions. These procedures may include, among others, tape recording
telephone instructions.
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DOLLAR COST AVERAGING
Prior to the applicable Commencement Date, the Owner may establish
automatic transfers from the Money Market Sub-Account to any other
Sub-Account(s), or from the Fixed Accumulation Account to any
Sub-Account(s), on a monthly or quarterly basis, by submitting to the
Administrative Office a Dollar Cost Averaging Authorization Form. No
Dollar Cost Averaging transfers may be made to any of the Fixed Account
options. The Dollar Cost Averaging transfers will take place on the last
Valuation Date of each calendar month or quarter as requested by the
Owner.
In order to be eligible for Dollar Cost Averaging, the value of the source
of funds (the Money Market Sub-Account or the Fixed Accumulation Account)
must be at least $10,000, and the minimum amount that may be transferred
is $500.
Dollar Cost Averaging will automatically terminate if any Dollar Cost
Averaging transfer would cause the account balance of the source of the
funds (the Money Market Sub-Account or the Fixed Accumulation Account) to
fall below $500. At that time, the Company will then transfer the account
balance of the source of the funds to the designated Sub-Account(s) in the
same percentage distribution as directed in the Dollar Cost Averaging
Authorization Form.
Dollar Cost Averaging transfers will not count toward the twelve transfers
permitted under the Contract without a Transfer Fee charge.
Before electing Dollar Cost Averaging, an Owner should consider the risks
involved in switching between investments available under the Contract.
Dollar Cost Averaging requires regular investments regardless of
fluctuating price levels and does not guarantee profits nor prevent losses
in a declining market. An Owner should consider his or her financial
ability to continue Dollar Cost Averaging transfers through periods of
changing price levels.
The Owner may terminate Dollar Cost Averaging services at any time, but
must give the Company at least 30 days notice to change any automatic
transfer instructions that are currently in place. Termination and change
instructions will be accepted by telephone at (800) 789-6771. Currently,
the Company does not charge a fee for Dollar Cost Averaging services.
PORTFOLIO REBALANCING
In connection with the allocation of Purchase Payments to the
Sub-Accounts, and/or the Fixed Accumulation Account, the Owner may elect
to have the Company perform Portfolio Rebalancing services. The election
of Portfolio Rebalancing instructs the Company to automatically transfer
amounts between the Sub-Accounts and the Fixed Accumulation Account to
maintain the percentage allocations selected by the Owner.
Prior to the applicable Commencement Date, the Owner may elect Portfolio
Rebalancing, by submitting to the Administrative Office a Portfolio
Rebalancing Authorization Form. In order to be eligible for the Portfolio
Rebalancing program, the Owner must have a minimum Account Value of
$10,000. Portfolio Rebalancing transfers will take place on the last
Valuation Date of each calendar quarter.
Portfolio Rebalancing transfers will not count toward the twelve transfers
permitted under the Contract without a Transfer Fee charge.
The Owner may terminate Portfolio Rebalancing services at any time, but
must give the Company at least 30 days notice to change any automatic
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transfer instructions that are already in place. Termination and change
instructions will be accepted by telephone at (800) 789-6771. Currently,
the Company does not charge a fee for Portfolio Rebalancing services.
INTEREST SWEEP
Prior to the applicable Commencement Date, the Owner may elect automatic
transfers of the income from each Fixed Account option to the
Sub-Account(s), by submitting to the Administrative Office an Interest
Sweep Authorization Form. Interest Sweep transfers will take place on the
last Valuation Date of each calendar quarter.
In order to be eligible for the Interest Sweep program, the value of each
Fixed Account option selected must be at least $5,000. The maximum amount
that may be transferred from each Fixed Account option selected is 20% of
such Fixed Account option's value per year. Any amounts transferred under
the Interest Sweep program reduce the 20% maximum otherwise allowed.
Interest Sweep transfers will not count toward the twelve transfers
permitted under the Contract without a Transfer Fee charge.
The Owner may terminate the Interest Sweep program, at any time, but must
give the Company at least 30 days notice to change any automatic transfer
instructions that are already in place. Termination and change
instructions will be accepted by telephone at (800) 789-6771. Currently,
the Company does not charge a fee for Interest Sweep services.
PRINCIPAL GUARANTEE OPTION
The Owner may elect to have the Company allocate a portion of a Purchase
Payment to the Fixed Account Seven-Year Guarantee Period such that, at the
end of the Seven-Year Guarantee Period, that account will grow to an
amount equal to the total Purchase Payment. The Company determines the
portion of the Purchase Payment which must be allocated to the Fixed
Account Seven-Year Guarantee Period such that, based on the interest rate
then in effect, the Seven-Year Guarantee account will grow to equal the
full amount of the Purchase Payment after seven years. The remainder of
the Purchase Payment will be allocated according to the Owner's
instructions. The minimum Purchase Payment eligible for the Principal
Guarantee program is $5,000.
CHANGES BY THE COMPANY
The Company reserves the right, in the Company's sole discretion and at
any time, to terminate, suspend or modify any aspect of the privileges
described above without prior notice to Owners, as permitted by applicable
law. The Company may also impose an annual fee or increase the current
annual fee, as applicable, for any of the foregoing services in amount(s)
as the Company may then determine to be reasonable for participation in
the service.
SURRENDERS
SURRENDER VALUE
The Owner may surrender a Contract in full for the Surrender Value, or
partial surrenders may be made for a lesser amount, by Written Request at
any time prior to the Annuity Commencement Date. The amount of any partial
surrender must be at least $500. A partial surrender cannot reduce the
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Surrender Value to less than $500. Surrenders will be deemed to be
withdrawn first from the portion of the Account Value that represents
accumulated earnings and then from Purchase Payments. For purposes of the
Contract, Purchase Payments are deemed to be withdrawn on a "first-in,
first-out" basis.
The amount available for surrender will be the Surrender Value at the end
of the Valuation Period in which the Written Request is received.
The Surrender Value at any time is an amount equal to:
(1) the Account Value as of the end of the applicable Valuation
Period; less
(2) any applicable CDSC; less
(3) any outstanding loans; and less
(4) any applicable premium tax or other taxes not previously
deducted.
On full surrender, a full Contract Maintenance Fee will also be deducted
as part of the calculation of the Surrender Value. The Contract
Maintenance Fee will be deducted before the application of any CDSC.
A full or partial surrender may be subject to a CDSC as set forth in this
prospectus. (See "Contingent Deferred Sales Charge ("CDSC")," page 38.)
Surrenders will result in the cancellation of Accumulation Units from each
applicable Sub-Account(s) and/or a reduction of the Fixed Account Value.
In the case of a full surrender, the Contract will be terminated.
Surrenders may be subject to a 10% premature distribution penalty tax if
made before the Owner reaches age 59 1/2, and may further be subject to
federal, state or local income tax, as well as significant tax law
restrictions in the case of Qualified Contracts. (See "FEDERAL TAX
MATTERS," page 48.)
SUSPENSION OR DELAY IN PAYMENT OF SURRENDER VALUE
The Company has the right to suspend or delay the date of payment of a
partial or full surrender of the Variable Account Value for any period:
(1) when the New York Stock Exchange ("NYSE") is closed or trading
on the NYSE is restricted;
(2) when an emergency exists (as determined by the Securities and
Exchange Commission) as a result of which (a) the disposal of
securities in the Separate Account is not reasonably
practicable or (b) it is not reasonably practicable to
determine fairly the value of the net assets in the Separate
Account; or
(3) when the Securities and Exchange Commission so permits for the
protection of security holders.
The Company further reserves the right to delay payment of any partial or
full surrender of the Fixed Account Value for up to six months after the
receipt of a Written Request.
A surrender request will be effective when all appropriate surrender
request forms are received. Payments of any amounts derived from a
Purchase Payment paid by check may be delayed until the check has cleared.
SINCE THE OWNER ASSUMES THE INVESTMENT RISK AND BECAUSE CERTAIN SURRENDERS
ARE SUBJECT TO A CDSC, THE TOTAL AMOUNT PAID UPON SURRENDER OF THE
CONTRACT (TAKING INTO ACCOUNT ANY PRIOR SURRENDERS) MAY BE MORE OR LESS
THAN THE TOTAL PURCHASE PAYMENTS.
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When Contracts offered by this Prospectus are issued in connection with
retirement plans which meet the requirements of Sections 401, 403, 408 or
457 of the Code, as applicable, reference should be made to the terms of
the particular plans for any additional limitations or restrictions on
surrenders.
FREE WITHDRAWAL PRIVILEGE
Subject to the provisions of the Contract, the Company will waive the
CDSC, to the extent applicable, on full or partial surrenders as follows:
(1) during the first Contract Year, on an amount equal to not more
than 10% of all Purchase Payments received; and
(2) during the second and succeeding Contract Years, on an amount
equal to not more than the greater of: (a) Accumulated Earnings
(Account Value in excess of Purchase Payments); or (b) 10% of
the Account Value as of the last Contract Anniversary.
If the Free Withdrawal Privilege is not exercised during a Contract Year,
it does not carry over to the next Contract Year. The Free Withdrawal
Privilege may not be available under some group Contracts.
SYSTEMATIC WITHDRAWAL
Prior to the applicable Commencement Date, the Owner, by Written Request
to the Administrative Office, may elect to automatically withdraw money
from the Fixed Account and/or the Sub-Accounts. To be eligible for the
Systematic Withdrawal program, the Account Value must be at least $10,000
at the time of election. The minimum monthly amount that can be withdrawn
is $100. Systematic withdrawals will be subject to the CDSC to the extent
the amount withdrawn exceeds the Free Withdrawal Privilege (See "CHARGES
AND DEDUCTIONS," page 38.) The Owner may begin or discontinue systematic
withdrawals at any time by Written Request to the Company, but at least 30
days notice must be given to change any systematic withdrawal instructions
that are currently in place. The Company reserves the right to discontinue
offering systematic withdrawals at any time. Currently, the Company does
not charge a fee for Systematic Withdrawal services. However, the Company
reserves the right to impose an annual fee in such amount as the Company
may then determine to be reasonable for participation in the Systematic
Withdrawal program.
Systematic withdrawals may have tax consequences or may be limited by tax
law restrictions. (See "FEDERAL TAX MATTERS," page 48.)
CONTRACT LOANS
If permitted under the Contract, an Owner may obtain a loan using his or
her interest under such Contract as the only security for the loan. Loans
are subject to provisions of the Code. A tax adviser should be consulted
prior to exercising loan privileges. Loan provisions are described in the
loan endorsement to the Contract.
The amount of any loan will be deducted from any Death Benefit. In
addition, a loan, whether or not repaid, will have a permanent effect on
the Account Value because the investment results of the investment options
will only apply to the unborrowed portion of the Account Value. The longer
the loan is outstanding, the greater the effect is likely to be. The
effect could be favorable or unfavorable. If the investment results are
greater than the rate being credited on amounts held in the loan account
while the loan is outstanding, the Account Value will not increase as
rapidly as it would if no loan were outstanding. If investment results are
below that rate, the Account Value will be higher than it would have been
if no loan had been outstanding.
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DEATH BENEFIT
WHEN A DEATH BENEFIT WILL BE PAID
A Death Benefit will be paid under the Contract if:
(1) the Owner or the joint owner, if any, dies before the Annuity
Commencement Date and before the Contract is fully surrendered;
(2) the Death Benefit Valuation Date has occurred; and
(3) a spouse does not become the Successor Owner.
If a Death Benefit becomes payable:
(1) it will be in lieu of all other benefits under the Contract;
and
(2) all other rights under the Contract will be terminated except
for rights related to the Death Benefit.
Only one Death Benefit will be paid under the Contract.
DEATH BENEFIT VALUES
If the Owner dies before attaining Age 80 and before the Annuity
Commencement Date, the Death Benefit is an amount equal to the greatest
of:
(1) the Account Value on the Death Benefit Valuation Date;
(2) the total Purchase Payment(s), with interest at three percent
(3%) per year, compounded annually, less any partial surrenders
and any CDSC that applied to those amounts; or
(3) the largest Account Value on any Contract Anniversary after the
fourth Contract Anniversary and prior to the Death Benefit
Valuation Date, less any partial surrenders and any CDSC that
applied to those amounts.
If the Owner dies after attaining Age 80 and before the Annuity
Commencement Date, the Death Benefit is an amount equal to the greatest
of:
(1) the Account Value on the Death Benefit Valuation Date;
(2) the total Purchase Payment(s), with interest at 3% per year,
compounded annually, through the Contract Anniversary prior to
the Owner's 80th birthday, less any partial surrenders, and any
CDSC that applied to those amounts; or
(3) the largest Account Value on any Contract Anniversary after the
fourth Contract Anniversary and prior to the date on which the
Owner attained Age 80, less any partial surrenders and any CDSC
that applied to those amounts.
In any event, if the Contract is issued after any Owner has attained Age
80, and any Owner dies before the Annuity Commencement Date, the amount of
the Death Benefit will be the greater of:
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(1) the Account Value on the Death Benefit Valuation Date; or
(2) the total Purchase Payment(s), less any partial surrenders and
any CDSC that applied to those amounts.
Any applicable premium tax or other taxes not previously deducted, and any
outstanding loans, will be deducted from the Death Benefit amount
described above.
DEATH BENEFIT COMMENCEMENT DATE
The Beneficiary may designate the Death Benefit Commencement Date by
Written Request within one year of the Owner's death. If no designation is
made, then the Death Benefit Commencement Date will be one year after the
Owner's death.
FORM OF DEATH BENEFIT
Death Benefit payments will be Fixed Dollar Benefit payments made monthly
in accordance with the terms of Option A with a period certain of 48
months under the "SETTLEMENT OPTIONS" section of this prospectus. (See
page 42.)
In lieu of that, the Owner may elect at any time before his or her death
to have Death Benefit payments made in one lump sum or pursuant to any
available settlement option under the "SETTLEMENT OPTIONS" section of this
prospectus. If the Owner does not make any such election, the Beneficiary
may make that election at any time after the Owner's death and before the
Death Benefit Commencement Date.
BENEFICIARY
Non-Qualified Contracts may be jointly owned by two people. If there is a
joint owner and that joint owner survives the Owner, the joint owner is
the Beneficiary, regardless of any designation made by the Owner. If there
is no surviving joint owner, and in the case of Qualified Contracts, the
Beneficiary is the person or persons so designated in the application, if
any, or under the Change of Beneficiary provision of the Contract. If the
Owner has not designated a Beneficiary, or if no Beneficiary designated by
the Owner survives the Owner, then the Beneficiary will be the Owner's
estate.
CHARGES AND DEDUCTIONS
There are two types of charges and deductions. First, there are charges
assessed under the Contract. These charges include the CDSC, the
Administration Charge, the Mortality and Expense Risk Charge, Premium
Taxes and Transfer Fees. All of these charges are described below, and
some may not be applicable to every Contract. Second, there are Fund
expenses for fund management fees and administration expenses. These fees
are described in the prospectus and statement of additional information
for each Fund.
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
No deduction for front-end sales charges is made from Purchase Payments.
However, the Company may deduct a CDSC of up to 7% of Purchase Payments on
certain surrenders to partially cover certain expenses incurred by the
Company relating to the sale of the Contract, including commissions paid,
the costs of preparation of sales literature and other promotional costs
and acquisition expenses.
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The CDSC applies to and is calculated separately for each Purchase
Payment. The CDSC percentage varies according to the number of full years
elapsed between the date of receipt of a Purchase Payment and the date a
Written Request for surrender is made. The amount of the CDSC is
determined by multiplying the amount withdrawn subject to the CDSC by the
CDSC percentage in accordance with the following table. Surrenders will be
deemed withdrawn first from Accumulated Earnings (which may be surrendered
without charge) and then to Purchase Payments on a first-in, first-out
basis.
Number of Full Years Elapsed Between Date Contingent Deferred Sales Charge
of Receipt of Purchase Payment and Date as a Percentage of Associated
Written Request for Surrender Received Purchase Payment Surrendered
------------------------------------------ --------------------------------
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 or more 0%
In no event shall the CDSC assessed against the Contract exceed 7% of the
aggregate Purchase Payment(s).
Any Purchase Payments that have been held by the Company for at least
seven years may be surrendered free of any CDSC. The CDSC will not be
imposed on amounts surrendered under the Free Withdrawal Privilege. (See
"Free Withdrawal Privilege," page 36.)
No CDSC is assessed upon payment of the Death Benefit.
The CDSC will be waived upon surrender if the Contract is modified by the
Long-Term Care Waiver Rider and the Owner is confined in a licensed
Hospital or Long-Term Care Facility, as those terms are defined in the
Rider, for at least 90 days beginning on or after the first Contract
Anniversary. This Rider may not be available in all jurisdictions. Also,
the CDSC will be waived if the Owner has been determined by the Social
Security Administration to be "disabled" as that term is defined in the
Social Security Act of 1935, as amended.
The CDSC may be reduced or waived in connection with certain Contracts
where the Company incurs reduced sales and servicing expenses, such as
Contracts offered to active employees of the Company or any of its
subsidiaries and/or affiliates.
The CDSC arising from a surrender of a Contract will be waived for
Contracts which are issued with an Employer Plan Endorsement or a Deferred
Compensation Endorsement if the Owner of an individual Contract or
Participant under a group Contract incurs a separation from service.
The CDSC arising from a surrender of a Contract will be waived for
Contracts which are issued with a Tax Sheltered Annuity Endorsement (and
without an Employer Plan Endorsement) if the Owner of an individual
Contract or Participant under a group Contract: (i) incurs a separation
from service, has attained age 55 and has held the Contract for at least
seven years; or (ii) has held the Contract for fifteen years or more.
The Company reserves the right to terminate, suspend or modify waivers of
the CDSC, without prior notice to Owners, as permitted by applicable law.
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The CDSC may be reduced or waived on partial or full surrenders from a
Fixed Account option to the extent required to satisfy state law.
MAINTENANCE AND ADMINISTRATION CHARGES
On each Contract Anniversary, the Company deducts an annual Contract
Maintenance Fee as partial compensation for expenses relating to the issue
and maintenance of the Contract, and the Separate Account. The annual
Contract Maintenance Fee is $30. This Contract Maintenance Fee is not
assessed against Fixed Account options. If the Contract is surrendered in
full on any day other than on the Contract Anniversary, the Contract
Maintenance Fee will be deducted in full at the time of such surrender. If
a Variable Annuity Benefit is elected, a portion of the $30 annual
Contract Maintenance Fee will be deducted from each Benefit Payment.
The Company will waive the Contract Maintenance Fee if the Account Value
is equal to or greater than $40,000 on the date of the assessment of the
charge. The Company will waive the Contract Maintenance Fee after the
applicable Commencement Date if the Annuity Benefit or Death Benefit
amount applied to a Variable Dollar Benefit exceeds $40,000. The Company
may waive the Contract Maintenance Fee in connection with Contracts
offered to active employees of the Company, or any of its subsidiaries
and/or affiliates. The Company may waive the Contract Maintenance Fee in
certain situations where the Company expects to realize significant
economies of scale with respect to sales of Contracts and Certificates.
This is possible because sales costs do not increase in proportion to the
Purchase Payments under the Contracts and Certificates sold; for example,
the per dollar transaction cost for a sale of a Contract and Certificates
with $500,000 of Purchase Payments is generally much higher than the per
dollar cost for a sale of a Contract and Certificates with $1,000,000 of
Purchase Payments. Thus, the applicable sales costs decline as a
percentage of the Purchase Payments as the amount of Purchase Payments
increases. In such a situation, the Company may be designated as a
preferred variable annuity contract provider by an employer or trustee of
an employee benefit plan.
The Company imposes an Administration Charge to reimburse the Company for
those administrative expenses attributable to the Contract and the
Separate Account which exceed the revenues received from the Contract
Maintenance Fee and any Transfer Fee. For this Administration Charge, the
Company makes a daily charge equal to .000411% corresponding to an
effective annual rate of 0.15% of the daily Net Asset Value of each
Sub-Account in the Separate Account. This Administration Charge is not
assessed against Fixed Account options.
The Company has set the Administration Charge and the Contract Maintenance
Fee at levels such that the Company will recover no more than the
anticipated and estimated costs associated with administering the Contract
and Separate Account. The Company does not expect to make a profit from
either the Administration Charge or the Contract Maintenance Fee. The
Company guarantees that it will not increase the Administration Charge or
the Contract Maintenance Fee for a Contract.
MORTALITY AND EXPENSE RISK CHARGE
The Company imposes a Mortality and Expense Risk Charge as compensation
for bearing certain mortality and expense risks under the Contract. For
assuming these risks, the Company makes a daily charge equal to .003403%
corresponding to an effective annual rate of 1.25% of the daily Net Asset
Value of each Sub-Account in the Separate Account. The Company estimates
that the mortality risk component of this charge is 0.75% of the daily Net
Asset Value of each Sub-Account and the expense risk component is 0.50%.
In connection with certain Contracts that allow the Company to reduce
administrative expenses, the Company will issue an Enhanced Contract with
a Morality and Expense Risk Charge equal to an effective annual rate of
0.95%. This is equal to a daily charge of 0.002590%. The Company estimates
that 0.20% is for expense risks and 0.75% is for mortality risks. The
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Company's decision to offer an Enhanced Contract will be based primarily
on whether the Company is designated as a preferred variable annuity
contract provider by an employer or by the trustee of an employee benefit
plan or on whether the initial purchase payment is large enough to
significantly reduce administrative expenses as a percentage of assets.
Where the Company is so designated, the Company anticipates that it will
recognize administrative expense savings from various economies of scale
and routine operations. In addition, the Company may offer an Enhanced
Contract to a group of employees of the Company, its subsidiaries and/or
affiliates. The Mortality and Expense Risk Charge is imposed before the
Annuity Commencement Date and after the Annuity Commencement Date if a
Variable Annuity Benefit is selected. The Company guarantees that the
Mortality and Expense Risk Charge will never increase for a Contract. The
Mortality and Expense Risk Charge is reflected in the Accumulation Unit
values for each Sub-Account. The Mortality and Expense Risk Charge is not
assessed against Fixed Account options.
The mortality risks assumed by the Company arise from its contractual
obligations to make annuity payments (determined in accordance with the
annuity tables and other provisions contained in the Contract) and to pay
Death Benefits prior to the Annuity Commencement Date.
The Company also bears substantial risk in connection with the Death
Benefit before the Annuity Commencement Date, since in certain
circumstances the Company may be obligated to pay a larger Death Benefit
amount than the then-existing Account Value of the Contract.
The expense risk assumed by the Company is the risk that the Company's
actual expenses in administering the Contracts and the Separate Account
will exceed the amount recovered through the Contract Maintenance Fees and
Transfer Fees.
If the Mortality and Expense Risk Charge is insufficient to cover actual
costs and risks assumed, the loss will fall on the Company. Conversely, if
this charge is more than sufficient, any excess will be profit to the
Company. Currently, the Company expects a profit from this charge.
The Company recognizes that the CDSC may not generate sufficient funds to
pay the cost of distributing the Contracts. To the extent that the CDSC is
insufficient to cover the actual cost of Contract distribution, the
deficiency will be met from the Company's general corporate assets which
may include amounts, if any, derived from the Mortality and Expense Risk
Charge.
PREMIUM TAXES
Certain state and local governments impose premium taxes. These taxes
currently range up to 5.0% depending upon the jurisdiction. The Company,
in its sole discretion and in compliance with any applicable state law,
will determine the method used to recover premium tax expenses incurred.
The Company will deduct any applicable premium taxes from the Account
Value either upon death, surrender, annuitization, or at the time Purchase
Payments are made to the Contract, but no earlier than when the Company
has a tax liability under state law.
TRANSFER FEE
The Company currently imposes a $25 fee for each transfer in excess of
twelve in a single Contract Year. The Company will deduct the charge from
the amount transferred. Transfers associated with Dollar Cost Averaging,
Interest Sweep and Automatic Rebalancing programs do not currently incur a
Transfer Fee and do not count toward the twelve annual transfers currently
permitted under the Contract without a Transfer Fee.
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FUND EXPENSES
The value of the assets in the Separate Account reflects the value of Fund
shares and therefore the fees and expenses paid by each Fund. The annual
expenses of each Fund are set out in the "Summary of Expenses" tables at
the front of this Prospectus. A complete description of the fees,
expenses, and deductions from the Funds are found in the respective
prospectuses for the Funds. (See "THE FUNDS," page 21.)
REDUCTION OR ELIMINATION OF CONTRACT CHARGES (GROUP CONTRACTS ONLY)
The CDSC and administrative charges under the Contract may be reduced or
eliminated when certain sales of the Contract result in savings or
reduction of sales expenses. The entitlement to such a reduction in the
CDSC or the administrative charges will be based on the following: (1) the
size and type of the group to which sales are to be made; (2) the total
amount of Purchase Payments to be received; and (3) any prior or existing
relationship with the Company. The CDSC and administrative charges may be
reduced or waived in connection with a Contract offered to a group of
employees of the Company, its subsidiaries and/or affiliates. There may be
other circumstances, of which the Company is not presently aware, which
could result in fewer sales expenses. In no event will reduction or
elimination of the CDSC or the administrative charge be permitted where
such reduction or elimination will be unfairly discriminatory to any
person.
SETTLEMENT OPTIONS
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is shown on the Contract Specifications
page. The Owner may change the Annuity Commencement Date by Written
Request made at least 30 days prior to the date that Annuity Benefit
payments are scheduled to begin. Unless the Company agrees otherwise, the
Annuity Commencement Date cannot be later than the Contract Anniversary
following the 85th birthday of the eldest Owner, or five years after the
Contract Effective Date, whichever is later.
ELECTION OF SETTLEMENT OPTION
If the Owner is alive on the Annuity Commencement Date and unless
otherwise directed, the Company will apply the Account Value, less premium
taxes, if any, according to the Settlement Option elected.
If no election has been made on the Annuity Commencement Date, the Company
will begin payments based on Settlement Option B (Life Annuity with
Payments for at Least a Fixed Period), described below, with a fixed
period of 120 monthly payments assured.
BENEFIT PAYMENTS
Benefit Payments may be calculated and paid: (1) as a Fixed Dollar
Benefit; (2) as a Variable Dollar Benefit; or (3) as a combination of
both.
If only a Fixed Dollar Benefit is to be paid, the Company will transfer
all of the Account Value to the Company's general account on the
applicable Commencement Date, or on the Death Benefit Valuation Date (if
applicable). Similarly, if only a Variable Dollar Benefit is elected, the
Company will transfer all of the Account Value to the Sub-Accounts as of
the end of the Valuation Period immediately prior to the applicable
Commencement Date; the Company will allocate the amount transferred among
the Sub-Accounts in accordance with a Written Request. No transfers
between the Fixed Dollar Benefit and the Variable Dollar Benefit will be
allowed after the Commencement Date. However, after the Variable Dollar
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Benefit has been paid for at least twelve months, the Person Controlling
Payments may, no more than once each twelve months thereafter, transfer
all or part of the Benefit Units upon which the Variable Dollar Benefit is
based from the Sub-Account(s) then held, to Benefit Units in different
Sub-Account(s).
If a Variable Dollar Benefit is elected, the amount to be applied under
that benefit is the Variable Account Value as of the end of the Valuation
Period immediately preceding the applicable Commencement Date. If a Fixed
Dollar Benefit is to be paid, the amount to be applied under that benefit
is the Fixed Account Value as of the applicable Commencement Date, or as
of the Death Benefit Valuation Date (if applicable).
FIXED DOLLAR BENEFIT
Fixed Dollar Benefit payments are determined by multiplying the Fixed
Account Value (expressed in thousands of dollars and after deduction of
any fees and charges, loans, or applicable premium tax not previously
deducted) by the amount of the monthly payment per $1,000 of value
obtained from the Settlement Option Table for the settlement option
elected. Fixed Dollar Benefit payments will remain level for the duration
of the payment period.
If at the time a Fixed Dollar Benefit is elected, the Company has
available options or rates on a more favorable basis than those
guaranteed, the higher benefits shall be applied and shall not change for
as long as that election remains in force.
VARIABLE DOLLAR BENEFIT
The first monthly Variable Dollar Benefit payment is equal to the Owner's
Variable Account Value (expressed in thousands of dollars and after
deduction of any fees and charges, loans, or applicable premium tax not
previously deducted) as of the end of the Valuation Period immediately
preceding the applicable Commencement Date multiplied by the amount of the
monthly payment per $1,000 of value obtained from the Settlement Option
Table for the Benefit Payment option elected less the pro rata portion of
the Contract Maintenance Fee.
The number of Benefit Units in each Sub-Account held by the Owner is
determined by dividing the dollar amount of the first monthly Variable
Dollar Benefit payment from each Sub-Account by the Benefit Unit Value for
that Sub-Account as of the applicable Commencement Date. The number of
Benefit Units remains fixed during the Benefit Payment Period, except as a
result of any transfers among Sub-Accounts after the applicable
Commencement Date.
The dollar amount of the second and any subsequent Variable Dollar Benefit
payment will reflect the investment performance of the Sub-Account(s)
selected and may vary from month to month. The total amount of the second
and any subsequent Variable Dollar Benefit payment will be equal to the
sum of the payments from each Sub-Account less a pro rata portion of the
Contract Maintenance Fee. Where an Owner elects a Variable Dollar Benefit,
there is a risk that only one Benefit Payment will be made under any
settlement option, if: (i) at the end of the applicable Valuation Period,
the Owner's Variable Account Value has declined to zero; or (ii) the
person on whose life Benefit Payments are based dies prior to the second
Benefit Payment.
The payment from each Sub-Account is found by multiplying the number of
Benefit Units held in each Sub-Account by the Benefit Unit Value for that
Sub-Account as of the end of the fifth Valuation Period preceding the due
date of the payment.
The Benefit Unit Value for each Sub-Account is originally established in
the same manner as Accumulation Unit values. Thereafter, the Benefit Unit
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Value for a Sub-Account is determined by multiplying the Benefit Unit
Value as of the end of the preceding Valuation Period by the Net
Investment Factor, determined as set forth above under "Accumulation Unit
Value", for the Valuation Period just ended. The product is then
multiplied by the assumed daily investment factor (0.99991781), for the
number of days in the Valuation Period. The factor is based on the assumed
net investment rate of 3% per year, compounded annually, that is reflected
in the Settlement Option Tables.
TRANSFERS AFTER THE ANNUITY COMMENCEMENT DATE
After the Annuity Commencement Date, no transfers between the Fixed
Account and the Separate Account are permitted. However, after a Variable
Dollar Annuity Benefit has been paid for at least twelve months, the
Participant may, by Written Request to the Administrative Office, transfer
Annuity Units between Sub-Accounts no more than once during a twelve-month
period.
ANNUITY TRANSFER FORMULA
Transfers after the Annuity Commencement Date are implemented according to
the following formulas:
(1) Determine the number of units to be transferred from the Sub-Account
as follows:
=AT/AUV1
(2) Determine the number of Annuity Units remaining in such Sub-Account
(after the transfer):
= UNIT1 - AT/AUV1
(3) Determine the number of Annuity Units in the Transferee Sub-Account
(after the transfer):
= UNIT2 + AT/AUV2
(4) Subsequent Variable Dollar Annuity Benefit payments will reflect the
changes in Annuity Units in each Sub-Account as of the next Variable
Dollar Annuity Benefit payment's due date.
Where:
(AUV1) is the Annuity Unit Value of the Sub-Account that the transfer
is being made from as of the end of the Valuation Period in which the
transfer request was received.
(AUV2) is the Annuity Unit Value of the Sub-Account that the transfer
is being made to as of the end of the Valuation Period in which the
transfer request was received.
(UNIT1) is the number of Annuity Units in the Sub-Account that the
transfer is being made from, before the transfer.
(UNIT2) is the number of Annuity Units in the Sub-Account that the
transfer is being made to, before the transfer.
(AT) is the dollar amount being transferred from the Sub-Account.
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SETTLEMENT OPTIONS
OPTION A: Income for a Fixed Period
The Company will make periodic payments for a fixed period.
The first payment will be paid as of the last day of the
initial Payment Interval. The maximum time over which
payments will be made by the Company or money will be held
by the Company is 30 years. The Option A Table applies to
this Option.
OPTION B: Life Annuity with Payments for at Least a Fixed Period
The Company will make periodic payments for at least a
fixed period. If the person on whose life Benefit Payments
are based lives longer than the fixed period, then the
Company will make payments until his or her death. The
first payment will be paid as of the first day of the
initial Payment Interval. The Option B Table(s) apply to
this Option.
OPTION C: Joint and One-Half Survivor Annuity
The Company will make periodic payments until the death of
the primary person on whose life Benefit Payments are
based; thereafter, the Company will make one-half of the
periodic payment until the death of the secondary person on
whose life Benefit Payments are based. The Company will
require Due Proof of Death of the primary person on whose
life Benefit Payments are based. The first payment will be
paid as of the first day of the initial Payment Interval.
The Option C Table(s) apply to this Option.
OPTION D: Life Annuity
We will make periodic payments until the death of the
person on whose life Benefit Payments are based. The first
payment will be paid as of the first day of the initial
Payment Interval. The Option D Table(s) apply to this
option.
OPTION E: Any Other Form
The Company will make periodic payments in any other form
of settlement option which is acceptable to us at the time
of an election.
MINIMUM AMOUNTS
Presently, the minimum amount of a Benefit Payment under any settlement
option is $50. If an Owner selects a Payment Interval under which a
Benefit Payment would be less than $50, the Company will advise the Owner
that a new Payment Interval must be selected so that the Benefit Payment
will be at least $50. Generally, monthly, quarterly, semi-annual and
annual Payment Intervals are available. From time to time, the Company may
require Benefit Payments to be made by direct deposit or wire transfer to
the account of a designated payee.
Minimum amounts, Payment Intervals and other terms and conditions may be
modified by the Company at any time without prior notice to Owners, as
permitted by applicable law. If the Company changes the minimum amounts,
the Company may change any current or future payment amounts and/or
Payment Intervals to conform with the change. More than one settlement
option may be elected if the requirements for each settlement option
elected are satisfied. Once payment begins under a settlement option, the
settlement option may not be changed.
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All factors, values, benefits and reserves under the Contract will not be
less than those required by the law of the state in which the Contract is
delivered.
SETTLEMENT OPTION TABLES
The Settlement Option Tables in Appendix A show the payments that the
Company will make at sample Payment Intervals for each $1,000 applied at
the guaranteed interest rate.
Rates for monthly payments for ages or fixed periods not shown in the
Settlement Option Tables will be calculated on the same basis as those
shown and may be obtained from the Company. Fixed periods shorter than
five years are not available, except as a Death Benefit Settlement Option.
GENERAL PROVISIONS
NON-PARTICIPATING
The Contract does not pay dividends or share in the Company's divisible
surplus.
MISSTATEMENT
If the age and/or sex of a person on whose life Benefit Payments are based
is misstated, the payments or other benefits under the Contract shall be
adjusted to the amount which would have been payable based on the correct
age and/or sex. If the Company made any underpayments based on any
misstatement, the amount of any underpayment with interest shall be
immediately paid in one sum. In addition to any other remedies that may be
available at law or at equity, the Company may deduct any overpayments
made, with interest, from any succeeding payment(s) due under the
Contract.
PROOF OF EXISTENCE AND AGE
The Company may require proof of age and/or sex of any person on whose
life Benefit Payments are based. If payment under a settlement option
depends on whether a specified person is still alive, the Company may at
any time require proof that such person is still living.
DISCHARGE OF LIABILITY
Upon payment of any partial or full surrender, or any Benefit Payment, the
Company shall be discharged from all liability to the extent of each such
payment.
TRANSFER OF OWNERSHIP
NON-QUALIFIED CONTRACT
The Owner of a Non-Qualified Contract may transfer ownership at any time
during his or her lifetime. Any such transfer is subject to the following:
(1) it must be made by Written Request; and
(2) unless otherwise elected or required by law, it will not
cancel a designation of an Annuitant or Beneficiary or any
settlement option election previously made.
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QUALIFIED CONTRACT
The Owner of a Qualified Contract may not transfer ownership.
ASSIGNMENT
NON-QUALIFIED CONTRACT
The Owner of a Non-Qualified Contract may assign all or any part of his or
her rights under the Contract except rights to:
(1) designate or change a Beneficiary;
(2) designate or change an Annuitant;
(3) transfer ownership; and
(4) elect a settlement option.
The person to whom an assignment is made is called an assignee.
The Company is not responsible for the validity of any assignment. An
assignment must be in writing and must be received at the Administrative
Office of the Company. The Company will not be bound by an assignment
until the Company acknowledges it. An assignment is subject to any payment
made or any action the Company takes before the Company acknowledges it.
An assignment may be ended only by the assignee or as provided by law.
QUALIFIED CONTRACT
The Owner of a Qualified Contract may not assign or in any way alienate
his or her interest under the Contract.
ANNUAL REPORT
At least once each Contract Year, the Company will provide a report of the
Contract's current values and any other information required by law, until
the first to occur of the following:
(1) the date the Contract is fully surrendered;
(2) the Annuity Commencement Date; or
(3) the Death Benefit Commencement Date.
INCONTESTABILITY
No Contract shall be contestable by the Company.
ENTIRE CONTRACT
The Company issues the Contract in consideration and acceptance of the
payment of the initial Purchase Payment. In those states that require a
written application, a copy of the application will be attached to and
become part of the Contract. Only statements in the application, if any,
or made elsewhere by the Owner in consideration for the Contract will be
used to void the Owner's interest under the Contract, or to defend a claim
based on it. Such statements are representations and not warranties.
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CHANGES -- WAIVERS
No changes or waivers of the terms of the Contract are valid unless made
in writing by the Company's President, Vice President, or Secretary. The
Company reserves the right both to administer and to change the provisions
of the Contract to conform to any applicable laws, regulations or rulings
issued by a governmental agency.
NOTICES AND DIRECTIONS
The Company will not be bound by any authorization, election or notice
which is not made by Written Request.
Any written notice requirement by the Company to the Owner will be
satisfied by the mailing of any such required written notice, by
first-class mail, to the Owner's last known address as shown on the
Company's records.
FEDERAL TAX MATTERS
INTRODUCTION
The following discussion is a general description of federal tax
considerations relating to the Contract and is not intended as tax advice.
This discussion is not intended to address the tax consequences resulting
from all of the situations in which a person may be entitled to or may
receive a distribution under the Contract. Any person concerned about tax
implications should consult a competent tax advisor before initiating any
transaction. This discussion is based upon the Company's 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 Contract may be purchased on a tax-qualified or non-tax-qualified
basis. Qualified Contracts are designed for use in connection with plans
entitled to special income tax treatment under Section 401, 403, or 408 of
the Code. The ultimate effect of federal income taxes on the amounts held
under a Contract, on Benefit Payments, and on the economic benefit to the
Owner or the Beneficiary may depend on the type of Contract and the tax
status of the individual concerned. Certain requirements must be satisfied
in purchasing a Qualified Contract and receiving distributions from such a
Contract in order to continue to receive favorable tax treatment. The
Company makes no attempt to provide more than general information about
use of Contracts with the various types of tax-qualified arrangements.
Owners and Beneficiaries are cautioned that the rights of any person to
any benefits may be subject to the terms and conditions of the
tax-qualified arrangement, regardless of the terms and conditions of the
Contract. Some tax-qualified arrangements are subject to distribution and
other requirements that are not incorporated in the administration of the
Contract. Owners are responsible for determining that contributions,
distributions and other transactions with respect to Qualified Contracts
satisfy applicable law. Therefore, purchasers of Qualified Contracts
should seek competent legal and tax advice regarding the suitability of
the Contract for their situation, the applicable requirements, and the tax
treatment of the rights and benefits of the Contract. The Statement of
Additional Information discusses the requirements for qualifying as an
annuity.
TAXATION OF ANNUITIES IN GENERAL
Section 72 of the Code governs taxation of annuities in general. The
Company believes that the Owner who is a natural person generally is not
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taxed on increases in the value of an Account until distribution occurs by
withdrawing all or part of the Account Value (e.g., surrenders or annuity
payments under the Settlement Option elected.) The taxable portion of a
distribution (in the form of a single sum payment or an annuity) is
generally taxable as ordinary income.
The following discussion generally applies to a Contract owned by a
natural person.
SURRENDERS
QUALIFIED CONTRACTS
In the case of a surrender under a Contract, other than Systematic
Withdrawal Option payments treated as Annuity Benefit payments for tax
purposes, a pro rata portion of the amount received is taxable, generally
based on the ratio of the "investment in the contract" to the individual's
total accrued benefit under the annuity. The "investment in the contract"
generally equals the amount of any non-deductible and/or non-excludable
Purchase Payments paid by or on behalf of any individual. Special tax
rules may be available for certain distributions from a Qualified
Contract.
NON-QUALIFIED CONTRACTS
In the case of a surrender under a Non-Qualified Contract, the amount
recovered is taxable to the extent that the Account Value immediately
before the surrender, reduced by any applicable charges, exceeds the
"investment in the contract" at such time.
ANNUITY BENEFIT PAYMENTS
Although the tax consequences may vary depending on the Settlement Option
elected under the Contract, in general, only the portion of a Benefit
Payment that represents the amount by which the Account Value exceeds the
"investment in the contract" will be taxed; after the "investment in the
contract" is recovered, the full amount of any additional Benefit Payments
is taxable. For Variable Dollar Benefit Payments, the taxable portion is
generally determined by an equation that establishes a specific dollar
amount of each payment that is not taxed. The dollar amount is determined
by dividing the "investment in the contract" by the total number of
expected periodic payments. For Fixed Dollar Benefit Payments, in general
there is no tax on the portion of each payment which represents the same
ratio that the "investment in the contract" bears to the total expected
value of the Benefit Payments for the term of the payments; however, the
remainder of each Benefit Payment is taxable. In either case, once the
"investment in the contract" has been fully recovered, the full amount of
any additional Benefit Payments is taxable. If Benefit Payments cease as a
result of an Owner's death before full recovery of the "investment in the
contract," consult a competent tax adviser regarding deductibility of the
unrecovered amount.
PENALTY TAX
In general, a 10% premature distribution penalty tax applies to the
taxable portion of a distribution from a Contract prior to Age 59 1/2.
Exceptions to this penalty tax are available to distributions made on
account of disability, death, and certain payments for life and life
expectancy. Certain other exceptions may apply depending on the
tax-qualification of the Contract involved. A 25% premature distribution
penalty tax applies to certain distributions from a Savings Incentive
Match Plan for Employees (SIMPLE) IRA described in Section 408(p) of the
Code.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed under a Contract because of the death of an
Owner. Generally such amounts are includable 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 as described above, or (2) if
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distributed under a Settlement Option, they are taxed in the same manner
as Annuity Benefit payments, as described above.
TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF THE CONTRACT
A transfer of ownership or an assignment of a Contract, the designation of
an Annuitant who is not also the Owner, or the exchange of a Contract may
result in certain tax consequences to the Owner that are not discussed
herein.
QUALIFIED CONTRACTS - GENERAL
Qualified Contracts are designed for use with several types of retirement
plans. The tax rules applicable to Owner and Beneficiaries in retirement
plans vary according to the type of plan and the terms and conditions of
the plan.
TEXAS OPTIONAL RETIREMENT PROGRAM
Section 830.105 of the Texas Government Code permits participants in the
Texas Optional Retirement Program ("ORP") to withdraw their interests in a
variable annuity policy issued under the ORP only upon: (1) termination of
employment in the Texas public institutions of higher education; (2)
retirement; (3) attainment of Age 70 1/2; or (4) death. Section 830.205 of
the Texas Government Code provides that benefits under the optional
retirement program vest after one year of participation. Accordingly, an
Account Value cannot be withdrawn or distributed without written
certification from the employer of the ORP participant's vesting status
and, if the participant is living and under age 70 1/2, the participant's
retirement or other termination from employment.
INDIVIDUAL RETIREMENT ANNUITIES
Code Sections 219 and 408 permit individuals or their employers to
contribute to an individual retirement program known as an "Individual
Retirement Annuity" or "IRA". Under applicable limitations, certain
amounts may be contributed to an IRA that are deductible from an
individual's gross income. Employers also may establish a Simplified
Employee Pension (SEP) Plan or Savings Incentive Match Plan for Employees
(SIMPLE) to provide IRA contributions on behalf of their employees.
TAX-SHELTERED ANNUITIES
Section 403(b) of the Code permits the purchase of "tax-sheltered
annuities" by public schools and certain charitable, educational and
scientific organizations described in Section 501(c)(3) of the Code. These
qualifying employers may make contributions to the Contracts for the
benefit of their employees. Subject to certain limits, such contributions
are not includable in the gross income of the employee until the employee
receives distributions under the Contract. Amounts attributable to
contributions made under a salary reduction agreement cannot be
distributed until the employee attains Age 59 1/2, separates from service,
becomes disabled, incurs a hardship, or dies.
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PENSION AND PROFIT SHARING PLANS
Code section 401 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 Contracts to accumulate
retirement savings under the plans.
Purchasers of a Contract for use with such plans should seek competent
advice regarding the suitability of the proposed plan documents and the
Contract to their specific needs.
CERTAIN DEFERRED COMPENSATION PLANS
Governmental and other tax-exempt employers may invest in annuity
contracts in connection with deferred compensation plans established for
the benefit of their employees under Section 457 of the Code. Other
employers may invest in annuity contracts in connection with non-qualified
deferred compensation plans established for the benefit of their
employees. Under these plans, contributions made for the benefit of the
employees generally will not be includable in the employees' gross income
until distributed from the plan.
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. Federal
withholding at a flat 20% of the taxable part of the distribution is
required if the distribution is eligible for rollover and the distribution
is not paid as a direct rollover. In other cases, recipients generally are
provided the opportunity to elect not to have tax withheld from
distributions.
POSSIBLE CHANGES IN TAXATION
There is always the possibility that the tax treatment of annuities could
change by legislation or other means (such as IRS regulations, revenue
rulings, judicial decisions, etc.). Moreover, it is also possible that any
change could be retroactive (that is, effective prior to the date of the
change).
OTHER TAX CONSEQUENCES
As noted above, the foregoing discussion of the federal income tax
consequences is not exhaustive and special rules are provided with respect
to other tax situations not discussed in this Prospectus. Further, the
federal income tax consequences discussed herein reflect the Company's
understanding of current law and the law may change. Federal estate and
gift tax consequences and state and local estate, inheritance, and other
tax consequences of ownership or receipt of distributions under the
Contract depend on the circumstances of each Owner or recipient of the
distribution. A competent tax adviser should be consulted for further
information.
GENERAL
At the time the initial Purchase Payment is paid, a prospective purchaser
must specify whether the purchase is a Qualified Contract or a
Non-Qualified Contract. If the initial Purchase Payment is derived from an
exchange or surrender of another annuity contract, the Company may require
that the prospective purchaser provide information with regard to the
federal income tax status of the previous annuity contract. The Company
will require that persons purchase separate Contracts if they desire to
invest monies qualifying for different annuity tax treatment under the
Code. Each such separate Contract will require the minimum initial
Purchase Payment stated above. Additional Purchase Payments under a
Contract must qualify for the same federal income tax treatment as the
initial Purchase Payment under the Contract; the Company will not accept
an additional Purchase Payment under a Contract if the federal income tax
- --------------------------------------------------------------------------------
Page 51
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
treatment of such Purchase Payment would be different from that of the
initial Purchase Payment.
DISTRIBUTION OF THE CONTRACT
AAG Securities, Inc. ("AAG Securities"), an affiliate of the Company, is
the principal underwriter and distributor of the Contracts. AAG Securities
may also serve as an underwriter and distributor of other contracts issued
through the Separate Account and certain other Separate Accounts of the
Company and any affiliates of the Company. AAG Securities is a wholly
owned subsidiary of American Annuity Group(SERVICEMARK), Inc., a publicly
traded company which is an indirect subsidiary of American Financial
Group, Inc. AAG Securities is registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the National Association
of Securities Dealers, Inc. ("NASD"). Its principal offices are located at
250 East Fifth Street, Cincinnati, Ohio 45202. The Company pays AAG
Securities for acting as underwriter under a distribution agreement.
AAG Securities sells Contracts through its registered representatives. In
addition, AAG Securities may enter into sales agreements with other
broker-dealers to solicit applications for the Contracts through
registered representatives who are licensed to sell securities and
variable insurance products. These agreements provide that applications
for the Contracts may be solicited by registered representatives of the
broker-dealers appointed by the Company to sell its variable life
insurance and variable annuities. These broker-dealers are registered with
the Securities and Exchange Commission and are members of the NASD. The
registered representatives are authorized under applicable state
regulations to sell variable annuities.
The Company or AAG Securities may pay commissions to registered
representatives of AAG Securities and other broker-dealers of up to 8.5%
of Purchase Payments made under the Contracts ("Commissions"). These
Commissions are reduced by one-half for Contracts issued to Owners over
age 75. When permitted by state law and in exchange for lower initial
Commissions, AAG Securities and/or the Company may pay trail commissions
to registered representatives of AAG Securities and to other
broker-dealers. Trail commissions are not expected to exceed 1% of the
Account Value of a Contract on an annual basis. To the extent permissible
under current law, the Company and/or AAG Securities may pay production,
persistency and managerial bonuses as well as other promotional
incentives, in cash or other compensation, to registered representatives
of AAG Securities and/or other broker-dealers.
LEGAL PROCEEDINGS
There are no pending legal proceedings affecting the Separate Account or
AAG Securities. The Company is involved in various kinds of routine
litigation which, in management's judgment, are not of material importance
to the Company's assets or the Separate Account.
VOTING RIGHTS
To the extent required by applicable law, all Fund shares held in the
Separate Account will be voted by the Company at regular and special
shareholder meetings of the respective Funds in accordance with
instructions received from persons having voting interests in the
corresponding Sub-Account. If, however, the 1940 Act or any regulation
thereunder should be amended, or if the present interpretation thereof
should change, or if the Company determines that it is allowed to vote all
shares in its own right, the Company may elect to do so.
- --------------------------------------------------------------------------------
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
The person with the voting interest is the Owner, or the Person
Controlling Payments, if different from the Owner. The number of votes
which are available will be calculated separately for each Sub-Account.
Before the Annuity Commencement Date, that number will be determined by
applying the Owner's percentage interest, if any, in a particular
Sub-Account to the total number of votes attributable to that Sub-Account.
The Owner, or the Person Controlling Payments, if different from the
Owner, holds a voting interest in each Sub-Account to which the Account
Value is allocated. After the Annuity Commencement Date, the number of
votes decreases as Annuity Benefit payments are made and as the number of
Accumulation Units for a Contract decreases.
The number of votes of a Fund will be determined as of the date coincident
with the date established by that Fund for 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 respective Funds.
Shares as to which no timely instructions are received and shares held by
the Company as to which Owners have no beneficial interest will be voted
in proportion to the voting instructions which are received with respect
to all Contracts participating in the Sub-Account. Voting instructions to
abstain on any item will be applied on a pro rata basis to reduce the
votes eligible to be cast.
Each person or entity having a voting interest in a Sub-Account will
receive proxy material, reports and other material relating to the
appropriate Fund.
It should be noted that the Funds are not required to hold annual or other
regular meetings of shareholders.
AVAILABLE INFORMATION
The Company has filed a registration statement (the Registration
Statement) with the Securities and Exchange Commission under the
Securities Act of 1933 relating to the Contracts offered by this
Prospectus. This Prospectus has been filed as a part of the Registration
Statement and does not contain all of the information set forth in the
Registration Statement and exhibits thereto, and reference is hereby made
to such Registration Statement and exhibits for further information
relating to the Company or the Contracts. Statements contained in this
Prospectus, as to the content of the Contracts and other legal
instruments, are summaries. For a complete statement of the terms thereof,
reference is made to the instruments filed as exhibits to the Registration
Statement. The Registration Statement and the exhibits thereto may be
inspected and copied at the office of the Commission, located at 450 Fifth
Street, N.W., Washington, D.C.
- --------------------------------------------------------------------------------
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
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
--------------------------------------------
Page
ANNUITY INVESTORS LIFE INSURANCE COMPANY(REGISTERED)..........................3
General Information and History...............................................3
State Regulation........................................................3
SERVICES......................................................................4
Safekeeping of Separate Account Assets..................................4
Records and Reports.....................................................4
Experts.................................................................4
DISTRIBUTION OF THE CONTRACTS.................................................4
CALCULATION OF PERFORMANCE INFORMATION........................................5
Money Market Sub-Account Standardized Yield Calculation.................5
Other Sub-Account Standardized Yield Calculation........................6
Standardized Total Return Calculation...................................7
Hypothetical Performance Data...........................................7
Other Performance Data..................................................8
FEDERAL TAX MATTERS...........................................................10
Taxation of the Company.................................................10
Tax Status of the Contract..............................................11
FINANCIAL STATEMENTS..........................................................12
- --------------------------------------------------------------------------------
Copies of the Statement of Additional Information dated June 3, 1997 are
available without charge. To request a copy, please clip this coupon on the
dotted line above, enter your name and address in the spaces provided below, and
mail to: Annuity Investors Life Insurance Company(REGISTERED), P.O. Box 5423,
Cincinnati, Ohio 45201-5423.
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
City:
---------------------------------------------------------------------------
State:
--------------------------------------------------------------------------
Zip:
----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 54
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
APPENDIX A
QUALIFIED CONTRACTS
<TABLE>
<CAPTION>
OPTION A TABLE -- INCOME FOR A FIXED PERIOD Payments for
fixed number of years for each $1,000 applied.
- ------------------------------------------------------------------------------------------------------------------------------------
Terms of Annual Semi- Quarterly Monthly Terms of Annual Semi- Quarterly Monthly Terms of Annual Semi- Quarterly Monthly
Payments Annual Payments Annual Payments Annual
- ------------------------------------------------------------------------------------------------------------------------------------
Years Years Years
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 184.60 91.62 45.64 15.18 11 108.08 53.64 26.72 8.88 16 79.61 39.51 19.68 6.54
7 160.51 79.66 39.68 13.20 12 100.46 49.86 24.84 8.26 17 75.95 37.70 18.78 6.24
8 142.46 70.70 35.22 11.71 13 94.03 46.67 23.25 7.73 18 72.71 36.09 17.98 5.98
9 128.43 63.74 31.75 10.56 14 88.53 43.94 21.89 7.28 19 69.81 34.65 17.26 5.74
10 117.23 58.18 28.98 9.64 15 83.77 41.57 20.71 6.89 20 67.22 33.36 16.62 5.53
</TABLE>
OPTION B TABLE - LIFE ANNUITY
With Payments For At Least A Fixed Period
----------------------------------------------
60 120 180 240
MONTHS MONTHS MONTHS MONTHS
----------------------------------------------
Age
----------------------------------------------
55 $4.42 $4.39 $4.32 $4.22
56 4.51 4.47 4.40 4.29
57 4.61 4.56 4.48 4.35
58 4.71 4.65 4.56 4.42
59 4.81 4.75 4.64 4.49
60 4.92 4.86 4.73 4.55
61 5.04 4.97 4.83 4.62
62 5.17 5.08 4.92 4.69
63 5.31 5.20 5.02 4.76
64 5.45 5.33 5.12 4.83
65 5.61 5.46 5.22 4.89
66 5.77 5.60 5.33 4.96
67 5.94 5.75 5.43 5.02
68 6.13 5.91 5.54 5.08
69 6.33 6.07 5.65 5.14
70 6.54 6.23 5.76 5.19
71 6.76 6.41 5.86 5.24
72 7.00 6.58 5.96 5.28
73 7.26 6.77 6.06 5.32
74 7.53 6.95 6.16 5.35
----------------------------------------------
- --------------------------------------------------------------------------------
Page 55
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
OPTION C TABLE - JOINT AND ONE-HALF SURVIVOR ANNUITY Monthly
payments for each $1,000 of proceeds by ages of persons named*.
- --------------------------------------------------------------------------------
PRIMARY SECONDARY AGE
AGE
------------------------------------------------------------------------
60 61 62 63 64 65 66 67 68 69 70
60 $4.56 $4.58 $4.61 $4.63 $4.65 $4.67 $4.69 $4.71 $4.73 $4.75 $4.76
61 4.63 4.66 4.69 4.71 4.73 4.76 4.78 4.80 4.82 4.84 4.86
62 4.71 4.74 4.77 4.80 4.82 4.85 4.87 4.90 4.92 4.94 4.96
63 4.79 4.82 4.85 4.88 4.91 4.94 4.97 5.00 5.02 5.05 5.07
64 4.88 4.91 4.94 4.98 5.01 5.04 5.07 5.10 5.13 5.15 5.18
65 4.96 5.00 5.03 5.07 5.11 5.14 5.17 5.20 5.24 5.27 5.30
66 5.05 5.09 5.13 5.17 5.21 5.24 5.28 5.32 5.35 5.38 5.42
67 5.14 5.18 5.23 5.27 5.31 5.35 5.39 5.43 5.47 5.51 5.54
68 5.23 5.28 5.33 5.37 5.42 5.46 5.50 5.55 5.59 5.63 5.67
69 5.33 5.38 5.43 5.48 5.53 5.57 5.62 5.67 5.72 5.76 5.81
70 5.43 5.48 5.53 5.59 5.64 5.69 5.74 5.80 5.85 5.90 5.95
- --------------------------------------------------------------------------------
*Payments after the death of the Primary Payee will be one-half of the amount
shown.
OPTION D TABLE - LIFE ANNUITY
Monthly payments for each $1,000 applied.
- --------------------------------------------------------------------------------
AGE AGE AGE AGE
- --------------------------------------------------------------------------------
55 $4.43 60 $4.94 65 $5.65 70 $6.64
56 4.52 61 5.07 66 5.82 71 6.89
57 4.62 62 5.20 67 6.00 72 7.15
58 4.72 63 5.34 68 6.20 73 7.43
59 4.83 64 5.49 69 6.41 74 7.74
- --------------------------------------------------------------------------------
NON-QUALIFIED CONTRACTS
<TABLE>
<CAPTION>
OPTION A TABLE - INCOME FOR A FIXED PERIOD
Payments for fixed number of years for each $1,000 applied.
- ------------------------------------------------------------------------------------------------------------------------------------
Terms of Annual Semi- Quarterly Monthly Terms of Annual Semi- Quarterly Monthly Terms of Annual Semi- Quarterly Monthly
Payments Annual Payments Annual Payments Annual
- ------------------------------------------------------------------------------------------------------------------------------------
Years Years Years
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 184.60 91.62 45.64 15.18 11 108.08 53.64 26.72 8.88 16 79.61 39.51 19.68 6.54
7 160.51 79.66 39.68 13.20 12 100.46 49.86 24.84 8.26 17 75.95 37.70 18.78 6.24
8 142.46 70.70 35.22 11.71 13 94.03 46.67 23.25 7.73 18 72.71 36.09 17.98 5.98
9 128.43 63.74 31.75 10.56 14 88.53 43.94 21.89 7.28 19 69.81 34.65 17.26 5.74
10 117.23 58.18 28.98 9.64 15 83.77 41.57 20.71 6.89 20 67.22 33.36 16.62 5.53
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Page 56
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
OPTION B TABLES - LIFE ANNUITY
With Payments For At Least A Fixed Period
-----------------------------------------
MALE 60 120 180 240
MONTHS MONTHS MONTHS MONTHS
-----------------------------------------
Age
-----------------------------------------
55 $4.68 $4.62 $4.53 $4.39
56 4.78 4.72 4.61 4.45
57 4.89 4.82 4.69 4.51
58 5.00 4.92 4.78 4.58
59 5.12 5.03 4.87 4.64
60 5.25 5.14 4.96 4.71
61 5.39 5.26 5.06 4.78
62 5.53 5.39 5.16 4.84
63 5.69 5.52 5.26 4.90
64 5.85 5.66 5.36 4.96
65 6.03 5.81 5.46 5.02
66 6.21 5.96 5.56 5.08
67 6.41 6.11 5.66 5.13
68 6.62 6.28 5.76 5.18
69 6.84 6.44 5.86 5.23
70 7.07 6.61 5.96 5.27
71 7.32 6.78 6.05 5.31
72 7.58 6.96 6.14 5.34
73 7.85 7.14 6.23 5.37
74 8.14 7.32 6.31 5.40
------------------------------------------
FEMALE 60 120 180 240
MONTHS MONTHS MONTHS MONTHS
------------------------------------------
Age
------------------------------------------
55 $4.25 $4.22 $4.18 $4.10
56 4.33 4.30 4.25 4.17
57 4.41 4.38 4.32 4.23
58 4.50 4.47 4.40 4.30
59 4.60 4.56 4.48 4.37
60 4.70 4.66 4.57 4.44
61 4.81 4.76 4.66 4.51
62 4.93 4.86 4.75 4.58
63 5.05 4.98 4.85 4.65
64 5.18 5.10 4.95 4.72
65 5.32 5.22 5.05 4.79
66 5.47 5.36 5.16 4.86
67 5.63 5.50 5.26 4.93
68 5.80 5.65 5.37 5.00
69 5.98 5.80 5.49 5.06
70 6.18 5.96 5.60 5.12
71 6.39 6.14 5.71 5.18
72 6.62 6.31 5.83 5.23
73 6.86 6.50 5.94 5.28
74 7.12 6.69 6.04 5.32
- --------------------------------------------------------------------------------
Page 57
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
OPTION C TABLES - JOINT AND ONE-HALF SURVIVOR ANNUITY
Monthly payments for each $1,000 of proceeds by ages of persons named*.
- --------------------------------------------------------------------------------
MALE FEMALE SECONDARY AGE
PRIMARY
AGE
-------------------------------------------------------------------------
60 61 62 63 64 65 66 67 68 69 70
- --------------------------------------------------------------------------------
60 $4.70 $4.73 $4.76 $4.79 $4.82 $4.85 $4.88 $4.91 $4.94 $4.96 $4.99
61 4.78 4.81 4.84 4.88 4.91 4.94 4.97 5.00 5.03 5.06 5.09
62 4.86 4.89 4.93 4.96 5.00 5.03 5.07 5.10 5.13 5.16 5.19
63 4.94 4.97 5.01 5.05 5.09 5.13 5.16 5.20 5.24 5.27 5.31
64 5.02 5.06 5.10 5.14 5.18 5.23 5.27 5.31 5.34 5.38 5.42
65 5.10 5.15 5.19 5.24 5.28 5.33 5.37 5.41 5.46 5.50 5.54
66 5.19 5.24 5.28 5.33 5.38 5.43 5.48 5.52 5.57 5.62 5.66
67 5.28 5.33 5.38 5.43 5.48 5.53 5.59 5.64 5.69 5.74 5.79
68 5.37 5.42 5.48 5.53 5.59 5.64 5.70 5.75 5.81 5.86 5.92
69 5.46 5.52 5.57 5.63 5.69 5.75 5.81 5.87 5.93 5.99 6.05
70 5.55 5.61 5.67 5.74 5.80 5.86 5.93 5.99 6.06 6.12 6.19
- --------------------------------------------------------------------------------
*Payments after the death of the Primary Payee will be one-half of the amount
shown.
Monthly payments for each $1,000 of proceeds by ages of persons named*.
- --------------------------------------------------------------------------------
MALE FEMALE PRIMARY AGE
SCONDARY
AGE
------------------------------------------------------------------------
60 61 62 63 64 65 66 67 68 69 70
- --------------------------------------------------------------------------------
60 $4.46 $4.54 $4.62 $4.71 $4.79 $4.88 $4.98 $5.07 $5.17 $5.27 $5.38
61 4.48 4.56 4.65 4.73 4.82 4.91 5.01 5.11 5.21 5.31 5.42
62 4.50 4.58 4.67 4.75 4.85 4.94 5.04 5.14 5.25 5.36 5.47
63 4.52 4.60 4.69 4.78 4.87 4.97 5.07 5.17 5.28 5.40 5.51
64 4.53 4.62 4.71 4.80 4.90 5.00 5.10 5.21 5.32 5.44 5.56
65 4.55 4.63 4.72 4.82 4.92 5.02 5.13 5.24 5.35 5.48 5.60
66 4.56 4.65 4.74 4.84 4.94 5.05 5.16 5.27 5.39 5.51 5.64
67 4.57 4.66 4.76 4.86 4.96 5.07 5.18 5.30 5.42 5.55 5.68
68 4.59 4.68 4.78 4.88 4.98 5.09 5.21 5.33 5.45 5.59 5.72
69 4.60 4.69 4.79 4.89 5.00 5.11 5.23 5.36 5.48 5.62 5.76
70 4.61 4.70 4.80 4.91 5.02 5.13 5.25 5.38 5.51 5.65 5.80
- --------------------------------------------------------------------------------
*Payments after the death of the Primary Payee will be one-half of the amount
shown.
- --------------------------------------------------------------------------------
Page 58
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INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
OPTION D TABLES - LIFE ANNUITY
Monthly payments for each $1,000 applied.
Male
- --------------------------------------------------------------------------------
Age Age Age Age
- --------------------------------------------------------------------------------
55 $4.70 60 $5.28 65 $6.10 70 $7.23
56 4.80 61 5.42 66 6.29 71 7.51
57 4.91 62 5.57 67 6.50 72 7.80
58 5.03 63 5.74 68 6.73 73 8.12
59 5.15 64 5.91 69 6.97 74 8.45
- --------------------------------------------------------------------------------
Female
- --------------------------------------------------------------------------------
Age Age Age Age
- --------------------------------------------------------------------------------
55 $4.25 60 $4.72 65 $5.35 70 $6.25
56 4.34 61 4.83 66 5.51 71 6.47
57 4.42 62 4.95 67 5.67 72 6.71
58 4.52 63 5.07 68 5.85 73 6.97
59 4.61 64 5.21 69 6.04 74 7.26
- --------------------------------------------------------------------------------
Upon request, we will provide information on the payments that we will make for
other Payment Intervals, gender combinations, and ages.
- --------------------------------------------------------------------------------
Page 59
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
GROUP CONTRACT
<TABLE>
<CAPTION>
OPTION A TABLE - INCOME FOR A FIXED PERIOD
Payments for fixed number of years for each $1,000 applied.
- ------------------------------------------------------------------------------------------------------------------------------------
Terms of Annual Semi- Quarterly Monthly Terms of Annual Semi- Quarterly Monthly Terms of Annual Semi- Quarterly Monthly
Payments Annual Payments Annual Payments Annual
- ------------------------------------------------------------------------------------------------------------------------------------
Years Years Years
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 184.60 91.62 45.64 15.18 11 108.08 53.64 26.72 8.88 16 79.61 39.51 19.68 6.54
7 160.51 79.66 39.68 13.20 12 100.46 49.86 24.84 8.26 17 75.95 37.70 18.78 6.24
8 142.46 70.70 35.22 11.71 13 94.03 46.67 23.25 7.73 18 72.71 36.09 17.98 5.98
9 128.43 63.74 31.75 10.56 14 88.53 43.94 21.89 7.28 19 69.81 34.65 17.26 5.74
10 117.23 58.18 28.98 9.64 15 83.77 41.57 20.71 6.89 20 67.22 33.36 16.62 5.53
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
OPTION B TABLE - LIFE ANNUITY
With Payments For At Least A Fixed Period
--------------------------------------------
60 120 180 240
Months Months Months Months
--------------------------------------------
Age
--------------------------------------------
55 $4.55 $4.51 $4.44 $4.33
56 4.65 4.61 4.52 4.39
57 4.76 4.71 4.61 4.46
58 4.87 4.81 4.70 4.53
59 4.99 4.92 4.79 4.60
60 5.12 5.04 4.89 4.67
61 5.25 5.16 4.99 4.74
62 5.40 5.29 5.09 4.81
63 5.55 5.42 5.19 4.87
64 5.72 5.56 5.30 4.94
65 5.89 5.71 5.40 5.00
66 6.08 5.86 5.51 5.06
67 6.27 6.02 5.62 5.11
68 6.48 6.19 5.72 5.17
69 6.71 6.36 5.83 5.22
70 6.95 6.54 5.93 5.26
71 7.20 6.72 6.03 5.30
72 7.46 6.90 6.12 5.34
73 7.75 7.08 6.21 5.37
74 8.04 7.27 6.30 5.40
--------------------------------------------
- --------------------------------------------------------------------------------
Page 60
<PAGE>
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------
OPTION C TABLE - JOINT AND ONE-HALF SURVIVOR ANNUITY
Monthly payments for each $1,000 of proceeds by ages of persons named*.
- --------------------------------------------------------------------------------
Secondary Age
- --------------------------------------------------------------------------------
Primary
Age 60 61 62 63 64 65 66 67 68 69 70
- --------------------------------------------------------------------------------
60 $4.73 $4.75 $4.78 $4.80 $4.83 $4.85 $4.87 $4.89 $4.92 $4.93 $4.95
61 4.81 4.84 4.87 4.90 4.92 4.95 4.97 5.00 5.02 5.04 5.06
62 4.90 4.93 4.96 4.99 5.02 5.05 5.08 5.11 5.13 5.16 5.18
63 4.99 5.03 5.06 5.09 5.13 5.16 5.19 5.22 5.25 5.28 5.30
64 5.09 5.12 5.16 5.20 5.23 5.27 5.30 5.34 5.37 5.40 5.43
65 5.18 5.22 5.26 5.31 5.35 5.38 5.42 5.46 5.49 5.53 5.56
66 5.28 5.33 5.37 5.42 5.46 5.50 5.54 5.58 5.62 5.66 5.70
67 5.38 5.43 5.48 5.53 5.58 5.62 5.67 5.72 5.76 5.80 5.84
68 5.49 5.54 5.59 5.65 5.70 5.75 5.80 5.85 5.90 5.95 5.99
69 5.60 5.65 5.71 5.77 5.82 5.88 5.93 5.99 6.04 6.10 6.15
70 5.71 5.77 5.83 5.89 5.95 6.01 6.07 6.13 6.19 6.25 6.31
- --------------------------------------------------------------------------------
*Payments after the death of the Primary Payee will be one-half (1/2) of the
amount shown.
OPTION D TABLE - LIFE ANNUITY
Monthly payments for each $1,000 applied.
------------------------------------------------------------------
Age Age Age Age
------------------------------------------------------------------
55 $4.56 60 $5.14 65 $5.95 70 $7.08
56 4.67 61 5.28 66 6.14 71 7.36
57 4.77 62 5.43 67 6.35 72 7.66
58 4.89 63 5.59 68 6.58 73 7.98
59 5.01 64 5.76 69 6.82 74 8.33
------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 61
<PAGE>
SUBJECT TO COMPLETION: DATED JUNE 3, 1997
ANNUITY INVESTORS[REGISTERED TRADEMARK] VARIABLE ACCOUNT B
OF
ANNUITY INVESTORS LIFE INSURANCE COMPANY[REGISTERED TRADEMARK]
STATEMENT OF ADDITIONAL INFORMATION
FOR
THE COMMODORE NAVIGATOR[SERVICEMARK]
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED ANNUITIES ISSUED BY
ANNUITY INVESTORS LIFE INSURANCE COMPANY[REGISTERED TRADEMARK]
P.O. BOX 5423, CINCINNATI, OHIO 45201-5423, (800) 789-6771
THIS STATEMENT OF ADDITIONAL INFORMATION EXPANDS UPON SUBJECTS DISCUSSED IN THE
CURRENT PROSPECTUS FOR THE COMMODORE NAVIGATORSM, INDIVIDUAL AND GROUP FLEXIBLE
PREMIUM DEFERRED ANNUITY CONTRACTS (THE "CONTRACTS") OFFERED BY ANNUITY
INVESTORS LIFE INSURANCE COMPANY[REGISTERED TRADEMARK]. A COPY OF THE PROSPECTUS
DATED JUNE 3, 1997, AS SUPPLEMENTED FROM TIME TO TIME, MAY BE OBTAINED FREE OF
CHARGE BY WRITING TO ANNUITY INVESTORS LIFE INSURANCE COMPANY[REGISTERED
TRADEMARK], ADMINISTRATIVE OFFICE, P.O. BOX 5423, CINCINNATI, OHIO 45201-5423.
TERMS USED IN THE CURRENT PROSPECTUS FOR THE CONTRACTS ARE INCORPORATED IN THIS
STATEMENT OF ADDITIONAL INFORMATION.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACTS.
DATED JUNE 3, 1997
- --------------------------------------------------------------------------------
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS STATEMENT OF ADDITIONAL
INFORMATION SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN
WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ANNUITY INVESTORS LIFE INSURANCE COMPANY[REGISTERED TRADEMARK]...............3
GENERAL INFORMATION AND HISTORY............................................3
STATE REGULATION..........................................................3
SERVICES.....................................................................4
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS.....................................4
RECORDS AND REPORTS........................................................4
EXPERTS....................................................................4
DISTRIBUTION OF THE CONTRACTS................................................4
CALCULATION OF PERFORMANCE INFORMATION.......................................5
MONEY MARKET SUB-ACCOUNT STANDARDIZED YIELD CALCULATION....................5
OTHER SUB-ACCOUNT STANDARDIZED YIELD CALCULATIONS..........................6
STANDARDIZED TOTAL RETURN CALCULATION......................................7
HYPOTHETICAL PERFORMANCE DATA..............................................7
OTHER PERFORMANCE DATA.....................................................8
FEDERAL TAX MATTERS.........................................................10
TAXATION OF THE COMPANY...................................................10
TAX STATUS OF THE CONTRACT................................................11
FINANCIAL STATEMENTS........................................................12
2
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The following information supplements the information in the Prospectus about
the Contracts. Terms used in this Statement of Additional Information have the
same meaning as in the Prospectus.
ANNUITY INVESTORS LIFE INSURANCE COMPANY[REGISTERED TRADEMARK]
GENERAL INFORMATION AND HISTORY
Annuity Investors Life Insurance Company[REGISTERED TRADEMARK] (the "Company"),
formerly known as Carillon Life Insurance Company, is a stock life insurance
company incorporated under the laws of the State of Ohio in 1981. The name
change occurred in the state of domicile on April 12, 1995. The Company is
principally engaged in the sale of fixed and variable annuity policies.
The Company was acquired in November, 1994, by American Annuity
Group[SERVICEMARK], Inc. ("AAG") a Delaware corporation that is a publicly
traded insurance holding company. Great American[REGISTERED TRADEMARK] Insurance
Company ("GAIC"), an Ohio corporation, owns 80% of the common stock of AAG. GAIC
is a multi-line insurance carrier and a wholly owned subsidiary of Great
American[REGISTERED TRADEMARK] Holding Company ("GAHC"), an Ohio corporation.
GAHC is a wholly owned subsidiary of American Financial Corporation ("AFC"), an
Ohio corporation. AFC is a wholly owned subsidiary of American Financial Group,
Inc. ("AFG"), an Ohio corporation that owns 1% of the common stock of AAG. AFG
is a publicly traded holding company which is engaged, through its subsidiaries,
in financial businesses that include annuities, insurance and portfolio
investing, and non-financial businesses.
STATE REGULATION
The Company is subject to the insurance laws and regulations of all the
jurisdictions where it is licensed to operate. The availability of certain
Contract rights and provisions depends on state approval and/or filing and
review processes in each such jurisdiction. Where required by law or regulation,
the Contracts will be modified accordingly.
SERVICES
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS
Title to assets of the Separate Account is held by the Company. The Separate
Account assets are segregated from the Company's general account assets. Records
are maintained of all purchases and redemptions of Fund shares held by each of
the Sub-Accounts.
Title to assets of the Fixed Account is held by the Company together with the
Company's general account assets.
3
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RECORDS AND REPORTS
All records and accounts relating to the Fixed Account and the Separate Account
will be maintained by the Company. As presently required by the provisions of
the Investment Company Act of 1940, as amended ("1940 Act"), and rules and
regulations promulgated thereunder which pertain to the Separate Account,
reports containing such information as may be required under the 1940 Act or by
other applicable law or regulation will be sent to each Owner semi-annually at
the Owner's last known address.
EXPERTS
The statutory-basis financial statements of the Company included in this
Statement of Additional Information have been audited by Ernst & Young LLP,
independent auditors, to the extent indicated in their report thereon also
appearing elsewhere herein. Such statutory-basis financial statements have been
included herein in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
DISTRIBUTION OF THE CONTRACTS
The offering of the Contracts is expected to be continuous, and the Company does
not anticipate discontinuing the offering of the Contracts. However, the Company
reserves the right to discontinue the offering of the Contracts.
CALCULATION OF PERFORMANCE INFORMATION
MONEY MARKET SUB-ACCOUNT STANDARDIZED YIELD CALCULATION
In accordance with rules and regulations adopted by the Securities and Exchange
Commission, the Company computes the Money Market Sub-Account's current
annualized yield for a seven-day period in a manner which does not take into
consideration any realized or unrealized gains or losses on shares of the Money
Market Fund or on its portfolio securities. This current annualized yield is
computed by determining the net change (exclusive of realized gains and losses
on the sale of securities and unrealized appreciation and depreciation) in the
value of a hypothetical account having a balance of one unit of the Money Market
Sub-Account at the beginning of such seven-day period, dividing such net change
in the value of the hypothetical account by the value of the hypothetical
account at the beginning of the period to determine the base period return and
annualizing this quotient on a 365-day basis. The net change in the value of the
hypothetical account reflects the deductions for the Mortality and Expense Risk
and Administration Charges and income and expenses accrued during the period.
Because of these deductions, the yield for the Money Market Sub-Account of the
Separate Account will be lower than the yield for the Money Market Fund or any
comparable substitute funding vehicle.
4
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The Securities and Exchange Commission also permits the Company to disclose the
effective yield of the Money Market Sub-Account for the same seven-day period,
determined on a compounded basis. The effective yield is calculated according to
the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)[SUPERSCRIPT]365/7] - 1
The yield on amounts held in the Money Market Sub-Account normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields. The Money Market
Sub-Account's actual yield is affected by changes in interest rates on money
market securities, average portfolio maturity of the Money Market Fund or
substitute funding vehicle, the types and quality of portfolio securities held
by the Money Market Fund or substitute funding vehicle, and operating expenses.
IN ADDITION, THE YIELD FIGURES DO NOT REFLECT THE EFFECT OF ANY CONTINGENT
DEFERRED SALES CHARGE ("CDSC") (OF UP TO 7% OF PURCHASE PAYMENTS) THAT MAY BE
APPLICABLE ON SURRENDER.
OTHER SUB-ACCOUNT STANDARDIZED YIELD CALCULATIONS
The Company may from time to time disclose the current annualized yield of one
or more of the Sub-Accounts (other than the Money Market Sub-Account) for 30-day
periods. The annualized yield of a Sub-Account refers to the income generated by
the Sub-Account over a specified 30-day period. Because this yield is
annualized, the yield generated by a Sub-Account during the 30-day period is
assumed to be generated each 30-day period. The yield is computed by dividing
the net investment income per Accumulation Unit earned during the period by the
price per unit on the last day of the period, according to the following
formula:
YIELD = 2[(a-b[OVER] cd + 1)[SUPERSCRIPT]6 - 1]
Where
a= net investment income earned during the period by the Portfolio
attributable to the shares owned by the Sub-Account.
b= expenses for the Sub-Account accrued for the period (net of
reimbursements).
c= the average daily number of Accumulation Units outstanding during
the period.
d= the maximum offering price per Accumulation Unit on the last day of
the period.
5
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Net investment income will be determined in accordance with rules and
regulations established by the Securities and Exchange Commission. Accrued
expenses will include all recurring fees that are charged to all Contracts. The
yield calculations do not reflect the effect of any CDSC that may be applicable
to a particular Contract. CDSCs range from 7% to 0% of the Purchase Payments
withdrawn depending on the elapsed time since the receipt of such Purchase
Payments.
Because of the charges and deductions imposed by the Separate Account, the yield
for a Sub-Account will be lower than the yield for the corresponding Fund. The
yield on amounts held in a Sub-Account normally will fluctuate over time.
Therefore, the disclosed yield for any given period is not an indication or
representation of future yields or rates of return. The Sub-Account's actual
yield will be affected by the types and quality of portfolio securities held by
the Fund and its operating expenses.
STANDARDIZED TOTAL RETURN CALCULATION
The Company may from time to time also disclose average annual total returns for
one or more of the Sub-Accounts for various periods of time. Average annual
total return quotations are computed by finding the average annual compounded
rates of return over one-, five- and ten-year periods that would equal the
initial amount invested to the ending redeemable value, according to the
following formula:
P(1 + T)[SUPERSCRIPT]n = ERV
Where
P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = "ending redeemable value" of a hypothetical $1,000 payment
made at the beginning of the one-, five- or ten-year period at
the end of the one-, five- or ten-year period (or fractional
portion thereof).
All recurring fees, such as the Contract Maintenance Fee and the Mortality and
Expense Risk Charge, which are charged to all Contracts are recognized in the
ending redeemable value. The average annual total return calculations will
reflect the effect of any CDSCs that may be applicable to a particular period.
6
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HYPOTHETICAL PERFORMANCE DATA
The Company may also disclose "hypothetical" performance data for a Sub-Account,
for periods BEFORE the Sub-Account commenced operations. Such performance
information for the Sub-Account will be calculated based on the performance of
the corresponding Fund and the assumption that the Sub-Account was in existence
for the same periods as those indicated for the Fund, with the level of Contract
charges currently in effect. The Fund used for these calculations will be the
actual Fund in which the Sub-Account invests.
This type of hypothetical performance data may be disclosed on both an average
annual total return and a cumulative total return basis. Moreover, it may be
disclosed assuming that the Contract is not surrendered (I.E., with no deduction
for a CDSC) or assuming that the Contract is surrendered at the end of the
applicable period (I.E., reflecting a deduction for any applicable CDSC).
OTHER PERFORMANCE DATA
The Company may from time to time disclose other non-standardized total return
in conjunction with the standardized performance data described above.
Non-standardized data may reflect no CDSC or present performance data for a
period other than that required by the standardized format. The Company may from
time to time also disclose cumulative total return calculated using the
following formula assuming that the CDSC percentage is 0%:
CTR = (ERV/P) - 1
Where:
CTR = the cumulative total return net of Sub-Account recurring
charges, other than the Contract Maintenance Fee, for the
period.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the beginning of the one-, five- or ten-year period at the end
of the one-, five- or ten-year period (or fractional portion
thereof).
P = a hypothetical initial payment of $1,000.
All non-standardized performance data will be advertised only if the requisite
standardized performance data is also disclosed.
7
<PAGE>
The Contracts may be compared in advertising materials to Certificates of
Deposit ("CDs") or other investments issued by banks or other depository
institutions. Variable annuities differ from bank investments in several
respects. For example, variable annuities may offer higher potential returns
than CDs. However, unless you have elected to invest in only the Fixed Account
Options, the Company does not guarantee your return. Also, none of your
investments under the Contract, whether allocated to the Fixed Account or a
Sub-Account, are FDIC-insured.
Advertising materials for the Contracts may, from time to time, address
retirement needs and investing for retirement, the usefulness of a tax-qualified
retirement plan, saving for college, or other investment goals. Advertising
materials for the Contracts may discuss, generally, the advantages of investing
in a variable annuity and the Contract's particular features and their
desirability and may compare Contract features with those of other variable
annuities and investment products of other issuers. Advertising materials may
also include a discussion of the balancing of risk and return in connection with
the selection of investment options under the Contracts and investment
alternatives generally, as well as a discussion of the risks and attributes
associated with the investment options under the Contracts. A description of the
tax advantages associated with the Contracts, including the effects of
tax-deferral under a variable annuity or retirement plan generally, may be
included as well. Advertising materials for the Contracts may quote or reprint
financial or business publications and periodicals, including model portfolios
or allocations, as they relate to current economic and political conditions,
management and composition of the underlying Funds, investment philosophy,
investment techniques, the desirability of owning the Contract and other
products and services offered by the Company or AAG Securities, Inc. ("AAG
Securities").
The Company or AAG Securities may provide information designed to help
individuals understand their investment goals and explore various financial
strategies. Such information may include: information about current economic,
market and political conditions; materials that describe general principles of
investing, such as asset allocation, diversification, risk tolerance and goal
setting; questionnaires designed to help create a personal financial profile;
worksheets used to project savings needs based on assumed rates of inflation and
hypothetical rates of return; and alternative investment strategies and plans.
Ibbotson Associates of Chicago, Illinois ("Ibbotson"), provides historical
returns of the capital markets in the United States, including common stocks,
small capitalization stocks, long-term corporate bonds, intermediate-term
government bonds, long-term government bonds, Treasury bills, the U.S. rate of
inflation (based on the Consumer Price Index), and combinations of various
capital markets. The performance of these capital markets is based on the
returns of different indices.
8
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Advertising materials for the Contracts may use the performance of these capital
markets in order to demonstrate general risk-versus-reward investment scenarios.
Performance comparisons may also include the value of a hypothetical investment
in any of these capital markets. The risk associated with the security types in
any capital market may or may not correspond directly to those of the
Sub-Accounts and the Funds. Advertising materials may also compare performance
to that of other compilations or indices that may be developed and made
available in the future.
In addition, advertising materials may quote various measures of volatility and
benchmark correlations for the Sub-Accounts and the respective Funds and compare
these volatility measures and correlations with those of other separate accounts
and their underlying funds. Measures of volatility seek to compare a
sub-account's, or its underlying fund's, historical share price fluctuations or
total returns to those of a benchmark. Measures of benchmark correlation
indicate how valid a comparative benchmark may be. All measures of volatility
and correlation are calculated using averages of historical data.
FEDERAL TAX MATTERS
The Contracts and any Certificates thereunder are designed for use by
individuals as a non-tax-qualified annuity (including Contracts purchased by an
employer in connection with a Code Section 457 or non-qualified deferred
compensation plan), and with arrangements which qualify for special tax
treatment under Section 401, 403 or 408 of the Code. The ultimate effect of
federal taxes on the Account Value, on Annuity Benefits or on the Death Benefit,
and on the economic benefit to the Owner Participant, Annuitant and/or the
Beneficiary may depend on the type of retirement plan for which the Contract is
purchased, on the tax and employment status of the individual concerned and on
the Company's tax status. THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT
INTENDED AS TAX ADVICE. Any person concerned about tax implications should
consult a competent tax adviser. This discussion is based upon the Company's
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 continuation of present federal income tax laws or of the current
interpretations by the Internal Revenue Service. Moreover, no attempt has been
made to consider any applicable state or other tax laws.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under Part I of Subchapter L of
the Code. Since the Separate Account is not an entity separate from the Company,
and its operations form a part of the Company, it will not be taxed separately
as a "regulated investment company" under Subchapter M of the Code. Investment
income and realized capital gains are automatically applied to increase reserves
under the Contracts. Under existing federal income tax law, the Company believes
that it will not be taxed on the Separate Account investment income and realized
net capital gains to the extent that such income and gains are applied to
increase the reserves under the Contracts.
9
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Accordingly, the Company does not anticipate that it will incur any federal
income tax liability attributable to the Separate Account and, therefore, the
Company does not intend to make provisions for any such taxes. However, if
changes in the federal tax laws or interpretations thereof result in the Company
being taxed on income or gains attributable to the Separate Account, then the
Company may impose a charge against the Separate Account (with respect to some
or all Contracts) in order to set aside provisions to pay such taxes.
TAX STATUS OF THE CONTRACT
Section 817(h) of the Code requires that with respect to Non-Qualified
Contracts, the investments of the Funds be "adequately diversified" in
accordance with Treasury regulations in order for the Contracts to qualify as
annuity contracts under federal tax law. The Separate Account, through the
Funds, intends to comply with the diversification requirements prescribed by the
Treasury in Reg. Sec. 1.817-5, which affect how the Funds' assets may be
invested.
In certain circumstances, Owners of individual variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support their contracts. In those circumstances,
income and gains from the separate account assets would be included in the
variable contract owner's gross income. The Internal Revenue Service 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 has also announced, in connection with
the issuance of regulations concerning diversification, that those regulations
"do not provide guidance concerning the circumstances in which investor control
of the investments of a segregated asset account may cause the investor [I.E.,
the Owner or Participant], 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." As of the date of
this Statement of Additional Information, no guidance has been issued.
The ownership rights under the Contracts are similar to, but different in
certain respects from, those described by the Internal Revenue Service in
rulings in which it was determined that contract owners were not owners of
10
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separate account assets. For example, the Owner or Participant has additional
flexibility in allocating Purchase Payments and Account Value. These differences
could result in an Owner's or Participant's being treated as the owner of a PRO
RATA portion of the assets of the Separate Account and/or Fixed Account. In
addition, the Company 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. The Company therefore reserves the right to modify the Contracts as
necessary to attempt to prevent an Owner or Participant from being considered
the owner of a PRO RATA share of the assets of the Separate Account.
FINANCIAL STATEMENTS
The Company's audited statutory-basis financial statements for the years ended
December 31, 1996 and 1995 are included herein.
The financial statements of the Company included in this Statement of Additional
Information should be considered only as bearing on the ability of the Company
to meet its obligations under the Contracts. They should not be considered as
bearing on the investment performance of the assets held in the Separate
Account.
11
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ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATUTORY-BASIS FINANCIAL STATEMENTS
AND OTHER FINANCIAL INFORMATION
YEARS ENDED DECEMBER 31, 1996 AND 1995
CONTENTS
Report of Independent Auditors
Audited Statutory-Basis Financial Statements
Balance Sheets - Statutory-Basis
Statements of Operations - Statutory-Basis
Statements of Changes in Capital and Surplus - Statutory-Basis
Statements of Cash Flows - Statutory-Basis
Notes to Statutory-Basis Financial Statements
Other Financial Information
Supplemental Schedule of Selected Statutory-Basis Financial Data
Note to Supplemental Schedule of Selected Statutory-Basis Financial Data
12
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ERNST & YOUNG LLP 1300 Chiquita Center Phone: 513-621-6450
250 East Fifth Street
Cincinnati, Ohio 45202
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Annuity Investors Life Insurance Company
We have audited the accompanying statutory-basis balance sheets of Annuity
Investors Life Insurance Company ("the Company") as of December 31, 1996 and
1995, and the related statutory-basis statements of operations, changes in
capital and surplus, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Notes B and J to the financial statements, the Company presents
its financial statements in conformity with the accounting practices prescribed
or permitted by the Ohio Insurance Department, which practices differ from
generally accepted accounting principles. The variances between such practices
and generally accepted accounting principles and the effects on the accompanying
financial statements are described in Notes B and J.
In our opinion, because of the effects of the matter described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Annuity Investors Life Insurance Company at December 31, 1996 and 1995, or
the results of its operations or its cash flows for the years then ended.
Also, in our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Annuity Investors Life
Insurance Company at December 31, 1996 and 1995, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting practices prescribed or permitted by the Ohio Insurance Department.
Our audits were conducted for the purpose of forming an opinion on the
statutory-basis financial statements taken as a whole. The accompanying
supplemental schedule of selected statutory-basis financial data is presented to
comply with the National Association of Insurance Commissioners' Annual
Statement Instructions and is not a required part of the statutory-basis
financial statements. Such information has been subjected to the auditing
procedures applied in our audit of the statutory-basis financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
statutory-basis financial statements taken as a whole.
Cincinnati, Ohio ERNST & YOUNG LLP
February 28, 1997
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ANNUITY INVESTORS LIFE INSURANCE COMPANY
BALANCE SHEETS
STATUTORY-BASIS
DECEMBER 31
--------------------------
1996 1995
----------- -----------
ADMITTED ASSETS
Cash and investments:
Fixed maturities - at amortized cost
(market value - $22,445,536 and $8,648,412) $22,996,685 $ 8,554,641
Policy loans 41,190 --
Short-term investments 841,000 15,169,930
Cash 475,770 93,584
Other invested assets 75,000 --
----------- -----------
Total cash and investments 24,429,645 23,818,155
Investment income due and accrued 437,051 220,028
Federal income tax recoverable 392,995 --
Separate Account assets 3,389,109 --
----------- -----------
TOTAL ADMITTED ASSETS $28,648,800 $24,038,183
=========== ===========
LIABILITIES, CAPITAL AND SURPLUS
Annuity reserves $ 3,676,377 $ 2,842,013
Commissions due and accrued 53,746 966
General expenses due and accrued 26,759 7,000
Transfers to Separate Accounts due
and accrued (net) (206,980) --
Taxes, licenses and fees due and accrued 1,900 3,000
Federal income tax payable -- 8,952
Asset valuation reserve 58,437 2,848
Payable to parent and affiliates 303,718 58,423
Other liabilities 9,402 --
Separate Account liabilities 3,389,109 --
----------- -----------
TOTAL LIABILITIES 7,312,468 2,923,202
----------- -----------
Common stock, par value- $125 and $100:
- 25,000 shares authorized
- 20,000 shares issued and outstanding 2,500,000 2,000,000
Gross paid-in and contributed surplus 17,550,000 18,050,000
Unassigned surplus 1,286,332 1,064,981
----------- -----------
TOTAL CAPITAL AND SURPLUS 21,336,332 21,114,981
------------ ------------
TOTAL LIABILITIES, CAPITAL AND SURPLUS $ 28,648,800 $ 24,038,183
============ ============
See notes to statutory financial statements
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ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
STATUTORY-BASIS
YEAR ENDED DECEMBER 31
--------------------------
1996 1995
----------- -----------
REVENUES
Premiums and annuity considerations $ 38,838 $ 58,695
Deposit-type funds 4,355,900 16,107
Net investment income 1,500,424 552,141
Other income (expense) (639) --
----------- -----------
Total revenue 5,894,523 626,943
BENEFITS AND EXPENSES
Increase in aggregate reserves 834,364 157,637
Policyholders' benefits 408,089 109,607
Commissions on premiums, annuity
considerations and deposit-type funds 257,666 966
Commissions and expense allowances on
reinsurance assumed 48,353 48,689
General insurance expenses 1,138,281 34,588
Taxes, licenses and fees 103,174 53,577
Net transfers to Separate Accounts 3,090,948 --
----------- -----------
Total benefits and expenses 5,880,875 405,064
----------- -----------
Gain from operations before federal income taxes 13,648 221,879
Provision for federal income taxes 2,280 74,941
----------- -----------
Gain from operations after federal income
taxes before net realized capital gains 11,368 146,938
Net realized capital gains (losses)
Gross realized capital gains (losses) (26,813) 15
Capital gains tax expense -- (5)
Interest maintenance reserve transfer
(net of tax) 17,428 (8)
----------- -----------
Net realized capital gains (losses)
after transfer to IMR (9,385) 2
----------- -----------
NET INCOME $ 1,983 $ 146,940
=========== ===========
See notes to statutory financial statements
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ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS
STATUTORY-BASIS
YEAR ENDED DECEMBER 31
-----------------------------
1996 1995
------------ -------------
COMMON STOCK
Balance at beginning of year $ 2,000,000 $ 2,000,000
Transfer from gross paid in and
contributed surplus 500,000 --
------------ ------------
Balance at end of year $ 2,500,000 $ 2,000,000
============ ============
GROSS PAID-IN AND CONTRIBUTED SURPLUS
Balance at beginning of year $ 18,050,000 $ 3,350,000
Capital contribution -- 14,700,000
Transfer to common stock (500,000) --
------------ ------------
Balance at end of year $ 17,550,000 $ 18,050,000
============ ============
UNASSIGNED FUNDS
Balance at beginning of year $ 1,064,981 $ 920,890
Net income 1,983 146,940
Increase in non-admitted assets (85,271) --
Increase in asset valuation reserve (55,589) --
Adjustment for prior year taxes 360,228 (2,849)
------------ ------------
Balance at end of year $ 1,286,332 $ 1,064,981
============ ============
TOTAL CAPITAL AND SURPLUS $ 21,336,332 $ 21,114,981
============ ============
See notes to statutory financial statements
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ANNUITY INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
STATUTORY-BASIS
YEAR ENDED DECEMBER 31
1996 1995
------------- -------------
OPERATIONS:
Premiums and annuity considerations $ 38,838 $ 58,695
Deposit-type funds 4,355,900 16,107
Net investment income 1,365,858 512,777
Net increase in policy loans (41,190) --
Policyholder benefits paid (408,089) (109,607)
Commissions, expenses and premium and
other taxes paid (1,479,640) (128,854)
Net transfers to Separate Accounts (3,297,928) --
Federal income taxes paid (44,000) (42,813)
Other cash provided 186,214 47,151
------------ ------------
Net cash provided by operations 675,963 353,456
INVESTING ACTIVITIES:
Sale, maturity or repayment of bonds 2,383,321 1,167,103
Purchase of bonds (16,931,028) (1,462,567)
Other cash applied (75,000) --
------------ ------------
Net cash used in investment activities (14,622,707) (295,464)
FINANCING AND MISCELLANEOUS ACTIVITIES:
Capital contribution -- 14,700,000
----------- ------------
Net cash provided by financing and
miscellaneous activities -- 14,700,000
------------- -----------
Net (decrease) increase in cash and
short-term investments $ (13,946,744) $ 14,757,992
============= ============
RECONCILIATION BETWEEN YEARS
Cash and short-term investments
at beginning of year $ 15,263,514 $ 505,522
Net (decrease) increase in cash
and short-term investments (13,946,744) 14,757,992
------------- ------------
Cash and short-term investments
at end of year $ 1,316,770 $ 15,263,514
============= ============
See notes to statutory financial statements
17
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
A. GENERAL
Annuity Investors Life Insurance Company ("AILIC"), a life insurance company
domiciled in the State of Ohio, is an indirectly owned subsidiary of American
Annuity Group, Inc., ("AAG"), a publicly traded financial services holding
company of which American Financial Group, Inc. ("AFG") owns 81%. On November
29, 1994, AILIC, formerly Carillon Life Insurance Company, was purchased from
Great American Insurance Company, a wholly-owned subsidiary of AFG.
AILIC's primary product is the variable annuity sold to both the individual and
group markets. This product is marketed to hospitals, 501(c)(3) organizations,
public education institutions and other qualified and non-qualified markets.
B. ACCOUNTING POLICIES
BASIS OF PRESENTATION The accompanying financial statements have been prepared
in conformity with accounting practices prescribed or permitted by the National
Association of Insurance Commissioners ("NAIC") and the Ohio Insurance
Department, which vary in some respects from generally accepted accounting
principles ("GAAP"). The more significant of these differences are as follows:
(a) annuity receipts and deposit-type funds are accounted for as revenues versus
liabilities;
(b) an Interest Maintenance Reserve ("IMR") is provided whereby interest related
realized gains and losses are deferred and amortized into investment income over
the expected remaining life of the security sold;
(c) Asset Valuation Reserves
("AVR") are provided which reclassify a portion of surplus to liabilities;
(d) investments in bonds considered "available for sale" (as defined by GAAP)
are generally recorded at amortized cost versus market;
(e) certain general expenses and commissions relating to the acquisition of new
business are capitalized to Deferred Acquisition Costs ("DAC") and amortized for
GAAP; and
(f) the cost of certain assets designated as "non-admitted assets" (principally
advance commissions paid to agents), is charged against surplus.
Preparation of the financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
accompanying notes. Such estimates and assumptions could change in the future as
more information becomes known which could impact the amounts reported and
disclosed herein.
Certain reclassifications have been made to the prior year financial statements
to conform to the current year's presentation.
INVESTMENTS Asset values are generally stated as follows: Bonds not backed by
other loans, where permitted, at amortized cost using the interest method;
loan-backed bonds and structured securities, where permitted, at amortized cost
using the interest method; short-term investments at cost; and policy loans at
unpaid balances.
18
<PAGE>
Prepayment assumptions for loan-backed bonds and structured securities were
obtained from broker dealer survey values or internal estimates. These
assumptions are consistent with the current interest rate and economic
environment. Significant changes in estimated cash flows from the original
purchase assumptions are accounted for on a prospective basis.
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
As prescribed by the NAIC, the market value for investments in bonds is
determined by the values included in the Valuations of Securities manual
published by the NAIC's Securities Valuation Office. Those values generally
represent quoted market value prices for securities traded in the public
marketplace or analytically determined values by the Securities Valuation
Office.
Short-term investments having original maturities of three months or less when
purchased are considered to be cash equivalents for purposes of the financial
statements.
The carrying values of cash and short-term investments approximate their fair
values.
Gains or losses on sales of securities are recognized at the time of disposition
with the amount of gain or loss determined on the specific identification basis.
The IMR applies to interest-related realized capital gains and losses (net of
tax) and is intended to defer realized gains and losses resulting from changes
in the general level of interest rates. The IMR is amortized into investment
income over the approximate remaining life of the investments sold.
The AVR provides for possible credit-related losses on securities and is
calculated according to a specified formula as prescribed by the NAIC for the
purpose of stabilizing surplus against fluctuations in the market value of
investment securities. Changes in the required reserve balances are made by
direct credits or charges to surplus.
PREMIUMS Annuity premiums and deposit-type funds are recognized as revenue when
due.
SEPARATE ACCOUNTS Separate account assets and liabilities reported in the
accompanying balance sheets represent funds that are separately administered,
principally for annuity contracts, and for which the contractholder, rather than
AILIC, bears the investment risk. Separate account contractholders have no claim
against the assets of the general account of AILIC. Separate account assets are
reported at market value. The operations of the separate accounts are not
included in the accompanying financial statements. Fees charged on separate
account policyholder deposits are included in other income.
ANNUITY RESERVES Annuity reserves are developed by actuarial methods and are
determined based on published tables using statutory specified interest rates
and valuation methods that will provide, in the aggregate, reserves that are
greater than or equal to the minimum amounts required by law. The fair market
value of the reserves approximates the statement value.
REINSURANCE Reinsurance premiums, benefits and expenses are accounted for on a
basis consistent with those used in accounting for the original policies issued
and the terms of the reinsurance contracts.
19
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996 AND 1995
C. INVESTMENTS
At December 31, 1996, fixed maturity investments in U.S. Government and
government agencies and authorities had a carrying value of $9.0 million and a
market value of $8.7 million, gross unrealized gains of $42,370 and gross
unrealized losses of ($361,158). All other corporate fixed maturity investments
at December 31, 1996, had a carrying value of $13.9 million, market value of
$13.7 million, gross unrealized gains of $111,747 and gross unrealized losses of
($344,107). At December 31, 1995, fixed maturity investments in U.S. Government
and government agencies and authorities had a carrying value and market value of
$7.3 million, gross unrealized gains of $74,700 and gross unrealized losses of
($45,100). All other corporate fixed maturity investments at December 31, 1995,
had a carrying value of $1.3 million, market value of $1.4 million, gross
unrealized gains of $64,700 and gross unrealized losses of ($600).
Proceeds from sales of fixed maturity investments were $2.4 million in 1996 and
$1.2 million in 1995. Gross realized gains of $3,525 and $18 and gross realized
losses of $30,338 and $3 were realized on those sales during 1996 and 1995,
respectively.
U.S. Treasury Notes with a carrying value of $6.1 million at December 31, 1996,
were on deposit as required by the insurance departments of various states.
The table below sets forth the scheduled maturities of AILIC's fixed maturity
investments as of December 31, 1996:
Carrying Market
Value Value
Bonds by maturity:
Due within 1 year or less $ 100,629 $ 102,406
Over 1 year through 5 years 5,968,341 5,886,647
Over 5 years through 10 years 12,735,872 12,421,027
Over 10 years through 20 years 3,655,618 3,500,404
Over 20 years 536,225 535,052
----------- -----------
Total bonds by maturity $22,996,685 $22,445,536
=========== ===========
Net investment income consisted
of the following:
1996 1995
---- ----
Bonds $ 1,369,442 $ 447,488
Short-term investments 159,533 72,980
Cash on hand and on deposit 1,250 41,582
Policy loans 1,153 -
Aggregate write-ins for investment
income 54 -
---------- -------------
Gross investment income 1,531,432 562,050
Investment expenses (31,008) (9,909)
---------- -------------
Net investment income $1,500,424 $ 552,141
========== =============
20
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996 AND 1995
D. FEDERAL INCOME TAXES
AILIC's amount of federal income taxes incurred for recoupement in the event of
future losses is approximately $2,000 in 1996.
E. RELATED PARTY TRANSACTIONS
On December 30, 1993, AILIC entered into a reinsurance agreement with Great
American Life Insurance Company ("GALIC"), an affiliated Ohio domiciled
insurance company, which became AILIC's immediate parent in 1995. As a result of
the transaction, AILIC assumed $2.6 million in deferred annuity reserves and
received an equivalent amount of assets. Premiums of $38,838 in 1996 and $58,695
in 1995 consisted of assumed reinsurance from GALIC in accordance with the
agreement. The reinsurance agreement will be terminated as of January 1, 1997
and an equal amount of assets and annuity reserves will be transferred to GALIC.
AILIC has an agreement with American Money Management, Inc. (an affiliate),
subject to the direction of the Finance Committee of AILIC, whereby American
Money Management, Inc., provides investment management services. In 1996 and
1995, AILIC paid $15,095 and $11,666, respectively, in management fees.
AILIC has an agreement with AAG Securities, Inc., a wholly-owned subsidiary of
AAG, whereby AAG Securities is the principal underwriter and distributor of
AILIC's variable contracts. AILIC pays AAG Securities for acting as underwriter
under a distribution agreement. In 1996 and 1995, AILIC paid $257,666 and $966,
respectively, in commissions.
Certain administrative, management, accounting, data processing, underwriting,
claim, collection and investment services are provided under agreements between
AILIC and affiliates at charges not unfavorable to AILIC or insurance
affiliates. In 1996 and 1995, AILIC paid $277,505 and $0, respectively, in fees
to affiliates.
F. DIVIDEND RESTRICTIONS
The amount of dividends which can be paid by AILIC without prior approval of
regulatory authorities is subject to restrictions relating to capital and
surplus and net income. AILIC may pay approximately $1.3 million in dividends in
1997 based on capital and surplus, without prior approval.
G. ANNUITY RESERVES, EXCLUDING SEPARATE ACCOUNTS
At December 31, 1996, $2.7 million or 72.2% of AILIC's annuity reserves,
excluding Separate Accounts, were subject to discretionary withdrawal without
adjustment, and $1.0 million or 27.8% were subject to discretionary withdrawal
at book value less surrender charges of 5% or more. As of 1995, there were no
purchase payments allocated or investments held in the Separate Account.
21
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996 AND 1995
H. SEPARATE ACCOUNT
The Company writes individual and group non-guaranteed variable annuities. In
1996, the General Account had net transfers to the Separate Account of
$3,090,948, consisting of transfers to the Separate Account of $3,337,987 and
transfers from the Separate Account of $247,039, including contingent deferred
sales charges of $198,353. In 1995, there were no transfers to or from the
Separate Account.
All Separate Account reserves are non-guaranteed and subject to discretionary
withdrawal at market value. In 1995, there were no reserves in the Separate
Account. In 1996, funds in the Separate Account had a total market value of
$3,389,109 and amortized cost of $3,335,765, resulting in net unrealized gains
of $53,344, consisting of gross unrealized gains of $57,307 and gross unrealized
losses of ($3,963).
I. OTHER ITEMS
The increase in the number of insurance companies that are under regulatory
supervision has resulted, and is expected to continue to result, in increased
assessments by state guaranty funds to cover losses to policyholders of
insolvent or rehabilitated insurance companies. Those mandatory assessments may
be partially recovered through deduction in future premium taxes in certain
states. GALIC is responsible for payment of all assessments relating to premiums
earned in accordance with the reinsurance agreement discussed in Note E.
The Company increased the par value on the authorized shares of common stock
from $100 a share to $125 a share during 1996. This resulted in a
reclassification between gross paid in and contributed surplus and common stock.
J. VARIANCES FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The accompanying financial statements have been prepared in conformity with
accounting practices prescribed or permitted by the National Association of
Insurance Commissioners ("NAIC") and the Ohio Insurance Department, which vary
in some respects from generally accepted accounting principles ("GAAP"). The
following table summarizes the differences between net income and surplus as
determined in accordance with statutory accounting practices and GAAP for the
years ended December 31, 1996 and 1995:
22
<PAGE>
<TABLE>
<CAPTION>
NET INCOME CAPITAL AND SURPLUS
---------------------------- ---------------------------
1996 1995 1996 1995
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
As reported on a statutory basis $ 1,983 $ 146,940 $ 21,336,332 $ 21,114,981
Commissions capitalized to DAC 257,666 954 257,666 954
General expenses capitalized to DAC 569,139 -- 569,139 --
Taxes, licenses and fees capitalized to DAC 51,587 -- 51,587 --
Amortization of DAC (51,969) -- (51,969) --
Capital gains transferred to IMR, net of tax (17,428) 8 (17,428) 8
Amortization of IMR, net of tax 814 -- 814 --
Contingent deferred sales charge (262,297) -- (262,297) --
Federal income taxes (190,841) (3,051) (190,841) (3,051)
Unrealized gain (loss) adjustment -- -- (352,697) 38,109
AVR adjustment -- -- 55,589 2,848
Non-admitted assets adjustment -- -- 85,271 --
Prior year tax adjustment -- -- (360,228) --
Prior year stat to GAAP cumulative adjustments -- -- 38,868 --
------------ ------------ ------------
Total GAAP adjustments 356,671 (2,089) (176,526) 38,868
------------ ------------ ------------ ------------
GAAP basis $ 358,654 $ 144,851 $ 21,159,806 $ 21,153,849
============ ============ ============ ============
</TABLE>
23
<PAGE>
OTHER FINANCIAL INFORMATION
24
<PAGE>
ANNUITY INVESTORS LIFE INSURANCE COMPANY
SUPPLEMENTAL SCHEDULE OF SELECTED STATUTORY-BASIS FINANCIAL DATA
DECEMBER 31, 1996
Investment income earned:
Bonds $ 1,369,442
Short-term investments 159,533
Cash on hand and on deposit 1,250
Policy loans 1,153
Aggregate write-ins for investment income 54
-------------
Gross investment income $ 1,531,432
============
Bonds and short-term investments by class (statement value):
Class "1" $19,566,716
Class "2" 2,334,053
Class "3" 1,126,918
Class "4" 809,998
-------------
Total bonds and short-term investments by class $23,837,685
===========
Bonds traded:
Publicly $22,665,384
Privately 331,301
Total bonds traded $22,996,685
Short-term investments (book value) $ 841,000
=============
Cash on deposit $ 475,770
=============
Group annuities not fully paid--account balance $ 3,676,377
============
Bonds and short-term investments by maturity (statement value):
Due within 1 year or less $ 941,629
Over 1 year through 5 years 5,968,341
Over 5 years through 10 years 12,735,872
Over 10 years through 20 years 3,655,618
Over 20 years 536,225
-------------
Total by maturity $23,837,685
NOTE--BASIS OF PRESENTATION
The accompanying schedule presents selected statutory-basis financial data as of
December 31, 1996 and for the year then ended for purposes of complying with
paragraph 9 of the Annual Audited Financial Reports in the General section of
the National Association of Insurance Commissioners' Annual Statement
Instructions and agrees to or is included in the amounts reported in AILIC's
1996 Statutory Annual Statement as filed with the Ohio Insurance Department.
25
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
All required financial statements are included in Parts A or B of this
Registration Statement.
(b) Exhibits
(1) Resolution of the Board of Directors of Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] authorizing establishment of
Annuity Investors[REGISTERED TRADEMARK] Variable Account B.1/
(2) Not Applicable.
(3) (a) Distribution Agreement between Annuity Investors Life
Insurance Company [REGISTERED TRADEMARK] and AAG Securities,
Inc. [filed herewith].
(b) Form of Selling Agreement between Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK], AAG Securities, Inc.
and another Broker-Dealer. 1/
(4) Individual and Group Contract Forms and Endorsements.
(a) Form of Qualified Individual Flexible Premium Deferred
Variable Annuity Contract [filed herewith].
(b) Form of Non-Qualified Individual Flexible Deferred Variable
Annuity Contract [filed herewith].
(c) Form of Loan Endorsement to Individual Contract [filed
herewith].
(d) Form of Tax Sheltered Annuity Endorsement to Individual
Contract [filed herewith].
(e) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Individual Contract [filed herewith].
(f) Form of Employer Plan Endorsement to Individual Contract
[filed herewith].
(g) Form of Individual Retirement Annuity Endorsement to
Individual Contract [filed herewith].
(h) Form of Texas Optional Retirement Program Endorsement to
Individual Contract [filed herewith].
C-1
<PAGE>
(i) Form of Long-Term Care Waiver Rider to Individual Contract
[filed herewith].
(j) Form of Simple IRA Endorsement to Individual Contract [filed
herewith].
(k) Form of Group Flexible Premium Deferred Variable Annuity
Contract [filed herewith].
(l) Form of Certificate of Participation under a Group Flexible
Premium Deferred Variable Annuity Contract [filed herewith].
(m) Form of Loan Endorsement to Group Contract [filed herewith].
(n) Form of Loan Endorsement to Certificate of Participation
under a Group Contract [filed herewith].
(o) Form of Tax Sheltered Annuity Endorsement to Group Contract
[filed herewith].
(p) Form of Tax Sheltered Annuity Endorsement to Certificate
of Participation under a Group Contract [filed herewith].
(q) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Group Contract [filed herewith].
(r) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Certificate of Participation under a Group
Contract [filed herewith].
(s) Form of Employer Plan Endorsement to Group Contract
[filed herewith].
(t) Form of Employer Plan Endorsement to Certificate of
Participation under a Group Contract [filed herewith].
(u) Form of Deferred Compensation Endorsement to Group Contract
[filed herewith].
(v) Form of Deferred Compensation Endorsement to Certificate of
Participation under a Group Contract [filed herewith].
(w) Form of Texas Optional Retirement Program Endorsement to
Group Contract [filed herewith].
C-2
<PAGE>
(x) Form of Texas Optional Retirement Program Endorsement to
Certificate of Participation under a Group Contract [filed
herewith].
(y) Form of Long-Term Care Waiver Rider to Group Contract
[filed herewith].
(z) Form of Long-Term Care Waiver Rider to Certificate of
Participation under a Group Contract [filed herewith].
(5) (a) Form of Application for Individual Flexible Premium Deferred
Annuity Contract and Certificate of Participation under a
Group Contract [filed herewith].
(b) Form of Application for Group Flexible Premium Deferred
Annuity Contract [filed herewith].
(6) (a) Articles of Incorporation of Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK].1/
(i) Amendment to Articles of Incorporation, adopted April
9, 1996, and approved by the Secretary of State, State
of Ohio, on July 11, 1996 [filed herewith].
(ii) Amendment to Articles of Incorporation, adopted August
9, 1996, and approved by the Secretary of State, State
of Ohio, on December 3, 1996 [filed herewith].
(b) Code of Regulations of Annuity Investors Life Insurance
Company.[REGISTERED TRADEMARK]1/
(7) Not Applicable
(8) (a) Participation Agreement between Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] and Dreyfus Variable
Investment Fund [filed herewith].
(i) Letter Agreement dated April 14, 1997 between Annuity
Investors Life Insurance Company [REGISTERED TRADEMARK]
and Dreyfus Variable Investment Fund [filed herewith].
(b) Participation Agreement between Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] and Dreyfus Life and
Annuity Index Fund, Inc. (d/b/a Dreyfus Stock Index Fund)
[filed herewith].
(i) Letter Agreement dated April 14, 1997 between Annuity
Investors Life Insurance Company[REGISTERED TRADEMARK]
and Dreyfus Life and Annuity Index Fund, Inc. (d/b/a
Dreyfus Stock Index Fund) [filed herewith].
C-3
<PAGE>
(c) Participation Agreement between Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] and The Dreyfus
Socially Responsible Growth Fund, Inc. [filed herewith].
(i) Letter Agreement dated April 14, 1997 between Annuity
Investors Life Insurance Company[REGISTERED TRADEMARK]
and The Dreyfus Socially Responsible Growth Fund, Inc.
[filed herewith].
(d) Participation Agreement between Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] and Janus Aspen
Series [filed herewith].
(e) Participation Agreement between Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] and Strong Variable
Insurance Funds, Inc. and Strong Special Fund II, Inc. [filed
herewith].
(f) Participation Agreement between Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] and INVESCO Variable
Investment Funds, Inc.[filed herewith]
(g) Participation Agreement between Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] and Morgan Stanley
Universal Funds, Inc. [filed herewith].
(h) Participation Agreement between Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] and PBHG Insurance
Series Fund, Inc. [filed herewith].
(i) Service Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and American Annuity
Group[SERVICEMARK], Inc.1/
(j) Agreement between AAG Securities, Inc. and AAG Insurance
Agency, Inc.1/
(k) Investment Service Agreement between Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] and American Annuity
Group[SERVICEMARK], Inc. 1/
(l) Service Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and Strong Capital Management,
Inc. [filed herewith].
(m) Service Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and Pilgrim Baxter &
Associates, Ltd. [filed herewith].
(n) Service Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and Morgan Stanley Asset
Management, Inc. [filed herewith].
(o) Amended and Restated Agreement between The Dreyfus
Corporation and Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK]. [filed herewith].
C-4
<PAGE>
(p) Service Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and Janus Capital Corporation
[filed herewith].
(9) Opinion and Consent of Counsel1/.
(10) Consent of Independent Auditors [filed herewith].
(11) No financial statements are omitted from Item 23.
(12) Not Applicable.
(13) Not Applicable.
(14) Financial Data Schedules [filed herewith].
- ------------------------
1/ Filed on Form N-4 on December 23, 1996
C-5
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
PRINCIPAL POSITIONS AND OFFICES
NAME BUSINESS ADDRESS WITH THE COMPANY
---- ---------------- ---------------------
Robert Allen Adams (1) President, Director
Stephen Craig Lindner (1) Director
William Jack Maney, II (1) Assistant Treasurer and
Director
James Michael Mortensen (1) Executive Vice President,
Assistant Secretary and
Director
Mark Francis Muething (1) Senior Vice President,
Secretary, General Counsel
and Director
Jeffrey Scott Tate (1) Director
Thomas Kevin Liguzinski (1) Senior Vice President
Charles Kent McManus (1) Senior Vice President
Robert Eugene Allen (1) Vice President and Treasurer
Arthur Ronald Greene, III (1) Vice President
Betty Marie Kasprowicz (1) Vice President and Assistant
Secretary
Michael Joseph O'Connor (1) Senior Vice President and
Chief Actuary
Lynn Edward Laswell (1) Assistant Vice President
___________________________
(1) P.O. Box 5423, Cincinnati, Ohio 45201-5423.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT
The Depositor, Annuity Investors Life Insurance Company[REGISTERED TRADEMARK] is
a wholly owned subsidiary of Great American[REGISTERED TRADEMARK] Life Insurance
Company, which is a wholly owned subsidiary of American Annuity
Group,[SERVICEMARK] Inc. The Registrant, Annuity Investors[REGISTERED TRADEMARK]
Variable Account B, is a segregated asset account of Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK].
The following chart shows the affiliations among Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] and its parent, subsidiary and affilited
entitites.
C-6
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC. % OF STOCK OWNED(1)
| STATE OF DATE OF BY IMMEDIATE
| DOMICILE INCORP. PARENT COMPANY NATURE OF BUSINESS
<S> <C> <C> <C> <C>
|_AHH Holdings, Inc. Florida 12/27/95 49 Holding Company
| |_Columbia Financial Company Florida 10/26/93 100 Real Estate Holding Company
| |_American Heritage Holding Delaware 11/02/94 100 Home Builder
| Corporation
| | |_Heritage Homes Realty, Inc. Florida 07/20/93 100 Home Sales
| | |_Southeast Title, Inc. Florida 05/16/95 100 Title Company
| |_Heritage Home Finance Corporation Florida 02/10/94 100 Finance Company
|_American Financial Capital Trust I Delaware 09/14/96 100 Statutory Business Trust
|_American Financial Corporation Ohio 11/15/55 100 Holding Company
| |_AFC Coal Properties, Inc. Ohio 12/18/96 100 Real Estate Holding Company
| |_American Barge & Towing Company Ohio 03/25/82 100 Inactive
| | |_Spartan Transportation
Corporation Ohio 07/19/83 100 Mgmt-River Transportation Equipment
| |_American Financial Corporation Ohio 08/27/63 100 Inactive
| |_American Money Management Ohio 03/01/73 100 Investment Management
Corporation
| |_American Money Management Netherland 05/10/85 100 Securities Management
International, N.V
| | Antilles
| |_American Premier Underwriters, Inc. Pennsylvania 1846 100(2) Diversified
| | |_The Ann Arbor Railroad Company Michigan 09/21/1895 99 Inactive
| | |_The Associates of the Jersey New Jersey 11/10/1804 100 Inactive
Company
| | |_Cal Coal, Inc. Illinois 05/30/79 100 Inactive
| | |_The Indianapolis Union Railway Indiana 11/19/1872 100 Inactive
Company
| | |_Lehigh Valley Railroad Company Pennsylvania 04/21/1846 100 Inactive
| | |_Millennium Dynamics, Inc. Ohio 07/31/95 100 Design, Marketing & Servicing of
Comp. Software
| | |_The New York and Harlem Railroad New York 04/25/1831 97 Inactive
Company
| | |_The Owasco River Railway, Inc. New York 06/02/1881 100 Inactive
| | |_PCC Real Estate, Inc. New York 12/15/86 100 Holding Company
| | | |_PCC Chicago Realty Corp. New York 12/23/86 100 Real Estate Developer
| | | |_PCC Gun Hill Realty Corp. New York 12/18/85 100 Real Estate Developer
| | | |_PCC Michigan Realty, Inc. Michigan 11/09/87 100 Real Estate Developer
| | | |_PCC Scarsdale Realty Corp. New York 06/01/86 100 Real Estate Developer
| | | | |_Scarsdale Depot Associates, Delaware 05/05/89 80 Real Estate Developer
L.P.
| | |_Penn Central Energy Management Delaware 05/11/87 100 Energy Operations Manager
Company
| | |_Pennsylvania Company Delaware 12/05/58 100 Holding Company
| | | |_Atlanta Casualty Company Illinois 06/13/72 100 (2) Property/Casualty Insurance
| | | | |_American Premier Insurance Indiana 11/30/89 100 Property/Casualty Insurance
Company
| | | | |_Atlanta Specialty Insurance Iowa 02/06/74 100 Property/Casualty Insurance
Company
| | | | |_Mr. Agency of Georgia, Inc. Georgia 04/01/77 100 Insurance Agency
| | | | | |_Atlanta Casualty General Texas 03/15/61 100 Managing General Agency
Agency, Inc.
| | | | | |_Atlanta Insurance Brokers, Georgia 02/06/71 100 Insurance Agency
Inc.
| | | | | |_Treaty House, Ltd. (d/b/a Nevada 11/02/71 100 Insurance Premium Finance
Mr. Budget)
| | | | |_Penn Central U.K. Limited United Kingdom 10/28/92 100 Insurance Holding Company
| | | | | |_Insurance (GB) Limited United Kingdom 05/13/92 100 Property/Casualty Insurance
| | | |_Delbay Corporation Delaware 12/27/62 100 Inactive
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC.
|_American Financial Corporation % OF STOCK OWNED(1)
| |_American Premier Underwriters, Inc. STATE OF DATE OF BY IMMEDIATE
| | |_Pennsylvania Company DOMICILE INCORP. PARENT COMPANY NATURE OF BUSINESS
|
<S> <C> <C> <C> <S>
| | | |_Great Southwest Corporation Delaware 10/25/78 100 Real Estate Developer
| | | | |_World Houston, Inc. Delaware 05/30/74 100 Real Estate Developer
| | | |_Hangar Acquisition Corp. Ohio 10/06/95 100 Aircraft Investment
| | | |_Infinity Insurance Company Florida 07/09/55 100 Property/Casualty Insurance
| | | | |_Infinity Agency of Texas, Inc. Texas 07/15/92 100 Managing General Agency
| | | | |_The Infinity Group, Inc. Indiana 07/22/92 100 Insurance Holding Company
| | | | |_Infinity Select Insurance Indiana 06/11/91 100 Property/Casualty Insurance
Company
| | | | |_Infinity Southern Insurance Alabama 08/05/92 100 Property/Casualty Insurance
Corporation
| | | | |_Leader National Insurance Ohio 03/20/63 100 Property/Casualty Insurance
Company
| | | | | |_Budget Insurance Premiums, Ohio 02/14/64 100 Premium Finance Company
Inc.
| | | | | |_Leader National Agency, Inc. Ohio 04/05-63 100 Brokering Agent
| | | | | |_Leader National Agency of Texas 01/25/94 100 Managing General Agency
Texas, Inc.
| | | | | |_Leader National Insurance Arizona 12/05/73 100 Brokering Agent
Agency of Arizona
| | | | | |_Leader Preferred Insurance Ohio 11/07/94 100 Property/Casualty Insurance
Company
| | | | | |_Leader Specialty Insurance Indiana 03/10/94 100 Property/Casualty Insurance
Company
| | | |_PCC Technical Industries, Inc. California 03/07/55 100 Holding Company
| | | | |_ESC, Inc. California 11/02/62 100 Connector Accessories
| | | | |_Marathon Manufacturing Delaware 11/18/83 100 Holding Company
Companies, Inc.
| | | | | |_Marathon Manufacturing Delaware 12/07/79 100 Inactive
Company
| | | | |_PCC Maryland Realty Corp. Maryland 08/18/93 100 Real Estate Holding Company
| | | | |_Penn Camarillo Realty Corp. California 11/24/92 100 Real Estate Holding Company
| | | |_Penn Towers, Inc. Pennsylvania 08/01/58 100 Inactive
| | | |_Republic Indemnity Company of California 12/05/72 100 Workers' Compensation Insurance
America
| | | | |_Republic Indemnity Company of California 10/13/82 100 Workers' Compensation Insurance
California
| | | | |_Republic Indemnity Medical California 03/25/96 100 Medical Bill Review
Management, Inc.
| | | | |_Timberglen Limited United Kingdom 10/28/92 100 Investments
| | | |_Risico Management Corporation Delaware 01/10/89 100 Risk Management
| | | |_Windsor Insurance Company Indiana 11/05/87 100(2) Property/Casualty Insurance
| | | | |_American Deposit Insurance Oklahoma 12/28/66 100 Property/Casualty Insurance
Company
| | | | | |_Granite Finance Co., Inc. Texas 11/09/65 100 Premium Financing
| | | | |_Coventry Insurance Company Ohio 09/05/89 100 Property/Casualty Insurance
| | | | |_El Aguila Compania de Mexico 11/24/94 100(2) Property/Casualty Insurance
Seguros, S.A. de C.V.
| | | | |_Moore Group Inc. Georgia 12/19/62 100 Insurance Holding Company/Agency
| | | | | |_Casualty Underwriters, Inc. Georgia 10/01/54 51 Insurance Agency
| | | | | |_Dudley L. Moore Insurance, Louisiana 03/30/78 beneficial Insurance Agency
Inc. interest
| | | | | |_Hallmark General Insurance Oklahoma 06/16/72 beneficial Insurance Agency
Agency, Inc. interest
| | | | | |_Middle Tennessee Tennessee 11/14/69 100 Insurance Agency
Underwriters, Inc.
| | | | | | |_Insurance Finance Company Tennessee 01/03/62 100 Premium Financing
| | | | | |_Windsor Group, Inc. Georgia 05/23/91 100 Insurance Holding Company
| | | | |_Regal Insurance Company Indiana 11/05/87 100 Property/Casualty Insurance
| | | | |_Texas Windsor Group, Inc. Texas 06/23/88 100 Insurance Agency
| | |_Pennsylvania-Reading Seashore New Jersey 06/14/01 66.67 Inactive
Lines
| | |_Pittsburgh and Cross Creek Pennsylvania 08/14/70 83 Inactive
Railroad Company
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC.
| |_American Financial Corporation
| | |_American Premier Underwriters, Inc. % OF STOCK OWNED(1)
| STATE OF DATE OF BY IMMEDIATE
| DOMICILE INCORP. PARENT COMPANY NATURE OF BUSINESS
|- -------- ------- ------------------- ------------------
<S> <C> <C> <C> <C>
| | |_Terminal Realty Penn Co. District of 09/23/68 100 Inactive
| | |_United Railroad Corp. Delaware 11/25/81 100 Inactive
| | | |_Detroit Manufacturers Railroad Michigan 01/30/02 82 Inactive
Company
| | |_Waynesburg Southern Railroad Pennsylvania 09/01/66 100 Inactive
Company
| |_Chiquita Brands International, Inc. New Jersey 03/30/99 43.09(2) Production/Processing/Distribution
(and subsidiaries) | | of Food Products
| |_Dixie Terminal Corporation Ohio 04/23/70 100 Commercial Leasing
| |_Fairmont Holdings, Inc. Ohio 12/15/83 100 Holding Company
| |_FWC Corporation Ohio 03/16/83 100 Financial Services
| |_Great American Holding Corporation Ohio 11/30/77 100 Holding Company
| | |_Great American Insurance Company Ohio 3/7/1872 100 Property/Casualty Insurance
| | | |_A B I Group, Inc. Minnesota 07/27/78 100 Inactive
| | | | |_American Business Risk Minnesota 04/19/78 100 Inactive
Services, Inc.
| | | | |_American Insurance Management Minnesota 11/16/82 100 Inactive
Agency, Inc.
| | | | |_Consolidated Underwriters, Texas 10/14/80 100 Inactive
Inc.
| | | |_Agricultural Excess and Surplus Delaware 02/28/79 100 Excess & Surplus Lines Insurance
Insurance Company
| | | |_Agricultural Insurance Company Ohio 03/23/05 100 Property/Casualty Insurance
| | | |_American Alliance Insurance Arizona 09/11/45 100 Property/Casualty Insurance
Company
| | | |_American Annuity Group, Inc. Delaware 05/15/87 81.38(2) Holding Company
| | | | |_AAG Holding Company, Inc. Ohio 09/11/96 100 Holding Company
| | | | | |_American Annuity Group Delaware 09/13/96 100 Financing Vehicle
Capital Trust I
| | | | | |_American Annuity Group Delaware 03/11/97 100 Financing Vehicle
Capital Trust II
| | | | | |_Great American Life Ohio 12/15/59 100 Life Insurance Company
Insurance Company
| | | | | | |_Annuity Investors Life Ohio 11/31/81 100 Life Insurance Company
Insurance Company
| | | | | | |_Assured Security Life South Dakota 05/12/78 100 Life Insurance Company
Insurance Company, Inc.
| | | | | | |_CHATBAR, Inc. Massachusetts 11/02/93 100 Hotel Operator
| | | | | | |_Driskill Holding, Inc. Texas 06/07/95 beneficial Hotel Management
interest
| | | | | | |_GALIC Brothers, Inc. Ohio 11/12/93 80 Real Estate Management
| | | | | | |_GALIC Life Insurance Ohio 06/21/94 100 Life Ins. Co. (License Pending)
Company
| | | | | | |_Great American Life Ohio 08/10/67 100 Life Insurance Company
Assurance Company
| | | | | | |_Loyal American Life Alabama 05/18/55 100 Life Insurance Company
Insurance Company
| | | | | | | |_ADL Financial North Carolina 09/10/70 100 Marketing Services
Services, Inc.
| | | | | | | |_Purity Financial Florida 12/21/91 100 Marketing Services
Corporation
| | | | | | |_Prairie National Life South Dakota 02/11/76 100 Life Insurance Company
Insurance Company
| | | | | | | |_American Memorial Life South Dakota 03/18/59 100 Life Insurance Company
Insurance Company
| | | | | | | | |_Great Western Life Montana 05/01/80 100 Life Insurance Company
Insurance Company
| | | | | | | | |_Rushmore National South Dakota 04/16/37 100 Life Insurance Company
Life Insurance
Company
| | | | |_AAG Insurance Agency, Inc. Kentucky 12/06/94 100 Life Insurance Agency
| | | | | |_AAG Insurance Agency of Massachusetts 05/25/95 100 Insurance Agency
Massachusetts, Inc.
| | | | |_AAG Securities, Inc. Ohio 12/10/93 100 Broker-Dealer
| | | | |_American DataSource, Inc. Delaware 06/15/90 100 Pre-need Trust Services
| | | | |_American Memorial Marketing Washington 06/19/80 100 Marketing Services
Services, Inc.
</TABLE>
C-9
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC.
| |_American Financial Corporation % OF STOCK OWNED(1)
| | |_Great American Holding Corporation STATE OF DATE OF BY IMMEDIATE
| | | |_Great American Insurance Company DOMICILE INCORP. PARENT COMPANY NATURE OF BUSINESS
| | | |_American Annuity Group, Inc. -------- ------- ------------------- ------------------
<S> <C> <C> <C> <C>
|-
| | |_CSW Management Services, Inc.
| | |_GALIC Disbursing Company Texas 06/27/85 100 Pre-need Trust Admin. Services
| | | |_Keyes-Graham Insurance Ohio 05/31/94 100 Payroll Servicer
Agency, Inc. Massachusetts 12/23/87 100 Insurance Agency
| | | |_International Funeral
Associates, Inc. Delaware 05/07/86 100 Coop. Buying Funeral Dirs.
| | | |_Laurentian Credit Services
Corporation Delaware 10/07/94 100 Inactive
| | | |_Laurentian Marketing
Services, Inc. Delaware 12/23/87 100 Marketing Services
| | | |_Laurentian Securities
Corporation Delaware 01/30/90 100 Inactive
| | | |_Lifestyle Financial
Investments, Inc. Ohio 12/29/93 100 Marketing Services
| | | | |_Lifestyle Financial
Investments Agency of Ohio 03/07/94 beneficial Life Insurance Agency
Ohio, Inc. interest
| | | | |_Lifestyle Financial
Investments of Indiana 02/24/94 100 Life Insurance Agency
Indiana, Inc.
| | | | |_Lifestyle Financial
Investments of Kentucky 10/03/94 100 Insurance Agency
Kentucky, Inc.
| | | | |_Lifestyle Financial
Investments of the Minnesota 06/10/85 100 Insurance Agency
Northwest, Inc.
| | | | |_Lifestyle Financial
Investments of the North Carolina 07/13/94 100 Insurance Agency
Southeast, Inc.
| | | |_Loyal Marketing Services,
Inc. Alabama 07/20/90 100 Marketing Services
| | | |_Purple Cross Insurance
Agency, Inc. Delaware 11/07/89 100 Insurance Agency
| | | |_Retirement Resource Group,
Inc. Indiana 02/07/95 100 Insurance Agency
| | | | |_RRG of Alabama, Inc.
| | | | |_RRG of Ohio, Inc. Alabama 09/22/95 100 Life Insurance Agency
Ohio 02/20/96 beneficial Insurance Agency
| | | | |_RRG of Texas, Inc. interest
| | | |_SPELCO (UK) Ltd. Texas 06/02/95 100 Life Insurance Agency
| | | |_SWTC, Inc. United Kingdom 00/00/00 99 Inactive
| | | |_SWTC Hong Kong Ltd. Delaware 00/00/00 100 Inactive
| | | |_Technomil Ltd. Hong Kong 00/00/00 100 Inactive
| | |_American Custom Insurance Delaware 00/00/00 100 Inactive
Services, Inc. Ohio 07/27/83 100 Management Holding Company
| | | |_American Custom Insurance
Services California, Inc. California 05/18/92 100 Insurance Agency & Brokerage
| | | |_Eden Park Insurance Brokers,
Inc. California 02/13/90 100 Wholesale Brokerage for Surplus
| | | |_Professional Risk Brokers, Lines
Inc. Illinois 03/01/90 100 Insurance Agency
| | | |_Professional Risk Brokers
Insurance, Inc. Massachusetts 04/19/94 100 Surplus Lines Brokerage
| | | |_Professional Risk Brokers of
Connecticut, Inc. Connecticut 07/09/92 100 Insurance Agency & Brokerage
| | | |_Professional Risk Brokers of
Ohio, Inc. Ohio 12/17/86 100 Insurance Agency and Brokerage
| | | |_Utility Insurance Services,
Inc. Texas 04/06/95 100(2) Texas Local Recording Agency
| | | |_Utility Management Services,
Inc. Texas 09/07/65 100 Texas Managing General Agency
| | |_American Custom Insurance
Services Illinois, Inc. Illinois 07/08/92 100 Underwriting Office
| | |_American Dynasty Surplus Lines
Insurance Company Delaware 01/12/82 100 Excess & Surplus Lines Insurance
| | |_American Eagle Group, Inc.
| | | |_AE Insurance Agency, Inc. Delaware 10/03/86 48.6(3) Holding Company
| | | |_AOA Corporation California 12/17/91 100 Inactive
| | | |_American Eagle Insurance Texas 11/12/91 100 Inactive
Company Texas 12/07/84 100 Property/Casualty Insurer
| | | | |_American Eagle Reinsurance
Organization, Inc. Texas 08/31/70 100 Inactive
| | | | |_American Meridian Insurance
Company Limited Bermuda 01/01/81 100 Inactive
</TABLE>
C-10
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC. % of STOCK
| |_American Financial Corporation OWNED (1) BY
| | |_Great American Holding Corporation STATE OF DATE OF IMMEDIATE PARENT
| | | |_Great American Insurance Company DOMICILE INCORP. COMPANY NATURE OF BUSINESS
| | | | |_American Eagle Group, Inc. -------- -------- ---------------- ------------------
<S> <C> <C> <C> <C>
|-
| | | | |_Aviation Adjustment Bureau, Texas 05/08/79 100 Claims Servicing
Inc.
| | | | |_Aviation Elite Reinsurance Texas 11/22/72 100 Inactive
Organization, Inc.
| | | | |_Aviation Office of America, Texas 02/15/77 100 Insurance Agency
Inc.
| | | |_American Empire Surplus Lines Delaware 07/15/77 100 Excess & Surplus Lines Insurance
Insurance Company
| | | | |_American Empire Insurance Ohio 11/26/79 100 Property/Casualty Insurance
Company
| | | | | |_American Signature Ohio 04/08/96 100 Insurance Agency
Underwriters, Inc.
| | | | | |_Specialty Underwriters, Texas 05/19/76 100 Insurance Agency
Inc.
| | | | |_Fidelity Excess and Surplus Ohio 06/30/87 100 Property/Casualty Insurance
Insurance Company
| | | |_American Financial Connecticut 1871 82.62(2) Closed End Investment Company
Enterprises, Inc.
| | | |_American Insurance Agency, Inc. Kentucky 07/27/67 100 Insurance Agency
| | | |_American National Fire New York 08/22/47 100 Property/Casualty Insurance
Insurance Company
| | | |_American Special Risk, Inc. Illinois 12/29/81 100 Insurance Broker/Managing General Agency
| | | | |_American Special Risk I of Arizona 02/06/90 100 Inactive
Arizona, Inc.
| | | |_American Spirit Insurance Indiana 04/05/88 100 Property/Casualty Insurance
Company
| | | |_Brothers Property Corporation Ohio 09/08/87 80 Real Estate Investment
| | | | |_Brothers Barrington Oklahoma 03/18/94 100 Real Estate Holding Corporation
Corporation
| | | | |_Brothers Cincinnatian Ohio 01/25/94 100 Hotel Manager
Corporation
| | | | |_Brothers Columbine Oklahoma 03/18/94 100 Real Estate Holding Corporation
Corporation
| | | | |_Brothers Landing Corporation Louisiana 02/24/94 100 Real Estate Holding Corporation
| | | | |_Brothers Pennsylvanian Pennsylvania 12/23/94 100 Real Estate Holding Corporation
Corporation
| | | | |_Brothers Port Richey Florida 12/06/93 100 Apartment Manager
Corporation
| | | | |_Brothers Property Management Ohio 09/25/87 100 Real Estate Management
Corporation
| | | | |_Brothers Railyard Corporation Texas 12/14/93 100 Apartment Manager
| | | |_Contemporary American Illinois 04/16/96 100 Property/Casualty Insurance
Insurance Company
| | | |_Crop Managers Insurance Kansas 08/09/89 100 Insurance Agency
Agency, Inc.
| | | |_Dempsey & Siders Agency, Inc. Ohio 05/09/56 100 Insurance Agency
| | | |_Eagle American Insurance Ohio 07/01/87 100 Property/Casualty Insurance
Company
| | | |_Eden Park Insurance Company Indiana 01/08/90 100 Special Risk Surplus Lines
| | | |_FCIA Management Company, Inc. New York 09/17/91 79 Servicing Agent
| | | |_The Gains Group, Inc. Ohio 01/26/82 100 Marketing of Advertising
| | | |_Great American Lloyd's, Inc. Texas 08/02/83 100 Attorney-in-Fact - Texas Lloyd's Company
| | | |_Great American Lloyd's Texas 10/09/79 beneficial Lloyd's Plan Insurer
Insurance Company interest
| | | |_Great American Management Ohio 12/05/74 100 Data Processing and Equipment Leasing
Services, Inc.
| | | | |_American Payroll Services, Ohio 02/20/87 100 Payroll Services
Inc.
| | | |_Great American Re Inc. Delaware 05/14/71 100 Reinsurance Intermediary
| | | |_Great American Risk Ohio 04/21/80 100 Insurance Risk Management
Management, Inc.
| | | |_Great Texas County Mutual Texas 04/29/54 beneficial Property/Casualty Insurance
Insurance Company interest
| | | |_Grizzly Golf Center, Inc. Ohio 11/08/93 100 Operate Golf Courses
| | | |_Homestead Snacks Inc. California 03/02/79 100(2) Meat Snack Distribution
| | | | |_Giant Snacks, Inc. Delaware 07/06/89 100 Meat Snack Distribution
</TABLE>
C-11
<PAGE>
<TABLE>
<CAPTION>
AMERICAN FINANCIAL GROUP, INC. % OF STOCK
| |_American Financial Corporation OWNED (1) BY
| | |_Great American Holding Corporation STATE OF DATE OF IMMEDIATE PARENT
| | | |_Great American Insurance Company DOMICILE INCORP. COMPANY NATURE OF BUSINESS
-------- ------- ---------------- ------------------
<S> <C> <C> <C> <C>
|-
| | | |_Key Largo Group, Inc. Florida 07/28/81 100 Land Developer & Resort Operator
| | | | |_Key Largo Group Utility Florida 11/26/84 100 Water & Sewer Utility
Company
| | | |_Mid-Continent Casualty Company Oklahoma 02/26/47 100 Property/Casualty Insurance
| | | | |_Mid-Continent Insurance Oklahoma 08/13/92 100 Property/Casualty Insurance
Company
| | | | |_Oklahoma Surety Company Oklahoma 08/05/68 100 Property/Casualty Insurance
| | | |_National Interstate Corporation Ohio 01/26/89 52.15 Holding Company
| | | | |_American Highways Insurance California 05/05/94 100 Insurance Agency
Agency
| | | | |_National Interstate Texas 06/07/89 beneficial Insurance Agency
Insurance Agency of Texas, Inc. interest
| | | | |_National Interstate Ohio 02/13/89 100 Insurance Agency
Insurance Agency, Inc.
| | | | |_National Interstate Ohio 02/10/89 100 Property/Casualty Insurance
Insurance Company
| | | | |_Safety, Claims & Litigation Pennsylvania 06/23/95 90 Claims Third Party Administrator
Services, Inc.
| | | |_North America Livestock, Inc. Florida 12/03/82 100 Managing General Agency
| | | |_OBGC Corporation Florida 11/23/77 80 Real Estate Development
| | | |_Pointe Apartments, Inc. Minnesota 06/24/93 100 Real Estate Holding Corporation
| | | |_Seven Hills Insurance Company New York 06/30/32 100 Property/Casualty Reinsurance
| | | |_Stonewall Insurance Company Alabama 02/1866 100 Property/Casualty Insurance
| | | |_Stone Mountain Professional Georgia 08/07/95 100 Insurance Agency
Liability Agency, Inc.
| | | |_Tamarack American, Inc. Delaware 06/10/86 100 Management Holding Company
| | | |_Transport Insurance Company Ohio 05/25/76 100 Property/Casualty Insurance
| | | | |_American Commonwealth Texas 07/23/63 100 Real Estate Development
Development Company
| | | | | |_ACDC Holdings Corporation Texas 05/04/81 100 Real Estate Development
| | | | |_Instech Corporation Texas 09/02/75 100 Claim & Claim Adjustment Services
| | | | |_TICO Insurance Company Ohio 06/03/80 100 Property/Casualty Insurance
| | | | |_Transport Managing General Texas 05/19/89 100 Managing General Agency
Agency, Inc.
| | | | |_Transport Insurance Agency, Texas 08/21/89 beneficial Insurance Agency
Inc. interest
| | | |_Transport Underwriters California 05/11/45 100 Holding Company/Agency
Association
|_One East Fourth, Inc. Ohio 02/03/64 100 Commercial Leasing
|_PCC 38 Corp. Illinois 12/23/96 100 Real Estate Holding Company
|_Pioneer Carpet Mills, Inc. Ohio 04/29/76 100 Carpet Manufacturing
|_TEJ Holdings, Inc. Ohio 12/04/84 100 Real Estate Holdings
|_Three East Fourth, Inc. Ohio 08/10/66 100 Commercial Leasing
(1) Except Director's Qualifying Shares.
(2) Total percentage owned by parent shown and by other
affiliated company(ies).
(3) Convertible Preferred Stock.
</TABLE>
C-12
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
Not Applicable.
ITEM 28. INDEMNIFICATION
(a) The Code of Regulations of Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] provides in Article V as follows:
The Corporation shall, to the full extent permitted by the General
Corporation Law of Ohio, indemnify any person who is or was a director or
officer of the Corporation and whom it may indemnify pursuant thereto. The
Corporation may, within the sole discretion of the Board of Directors,
indemnify in whole or in part any other persons whom it may indemnify
pursuant thereto.
Insofar as indemnification for liability arising under the Securities Act of
1933 ("1933 Act") may be permitted to directors, officers and controlling
persons of the Depositor pursuant to the foregoing provisions, or otherwise, the
Depositor has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Depositor of expenses incurred or paid by the 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 Depositor 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 1933 Act and
will be governed by the final adjudication of such issue.
(b) The directors and officers of Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] are covered under a Directors and Officers
Reimbursement Policy. Under the Reimbursement Policy, directors and officers are
indemnified for loss arising from any covered claim by reason of any Wrongful
Act in their capacities as directors or officers, except to the extent the
Company has indemnified them. In general, the term "loss" means any amount which
the directors or officers are legally obligated to pay for a claim for Wrongful
Acts. In general, the term "Wrongful Acts" means any breach of duty, neglect,
error, misstatement, misleading statement, omission or act by a director or
officer while acting individually or collectively in their capacity as such
claimed against them solely by reason of their being directors and officers. The
limit of liability under the program is $20,000,000 for the policy year ending
September 1, 1997. The primary policy under the program is with National Union
Fire Insurance Company of Pittsburgh, PA. in the name of American Premier
Underwriters, Inc.
ITEM 29. PRINCIPAL UNDERWRITER
AAG Securities, Inc. is the underwriter and distributor of the Contracts as
defined in the Investment Company Act of 1940 ("1940 Act").
(a) AAG Securities, Inc. does not act as a principal underwriter, depositor,
sponsor or investment adviser for any investment company other than Annuity
Investors[REGISTERED TRADEMARK] Variable Account A and Annuity
Investors[REGISTERED TRADEMARK] Variable Account B.
C-13
<PAGE>
(b) Directors and Officers of AAG Securities, Inc.
NAME AND PRINCIPAL POSITION WITH
BUSINESS ADDRESS AAG SECURITIES, INC.
- ------------------ ---------------------
Thomas Kevin Liguzinski (1) Chief Executive Officer and Director
Charles Kent McManus Senior Vice President
Mark Francis Muething (1) Vice President, Secretary and
Director
William Jack Maney, II (1) Director
Jeffrey Scott Tate (1) Director
James Lee Henderson (1) President
Andrew Conrad Bambeck, III (1) Vice President
William Claire Bair, Jr. (1) Treasurer
______________________________
(1) 250 East Fifth Street, Cincinnati, Ohio 45202
(c) Not applicable.
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 Lynn E. Laswell, Assistant Vice
President of the Company, at the Administrative Office.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
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 Prospectus and Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request to the Company at the address or
phone number listed in the Prospectus.
(d) Registrant represents that the fees and charges deducted under the Contract,
in the aggregate, are reasonable in relation to the services rendered, the
expenses expected to be incurred and the risks assumed by the Company.
C-14
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant certifies that it has caused this Pre-Effective
Amendment No. 1 to its Registration Statement to be signed on its behalf by the
undersigned in the City of Cincinnati, State of Ohio on the 14th day of May,
1997.
ANNUITY INVESTORS[REGISTERED TRADEMARK] VARIABLE
ACCOUNT B
(REGISTRANT)
By: /s/ Robert Allen Adams
-------------------------------------
Robert Allen Adams
Chairman of the Board, President
and Director, Annuity Investors
Life Insurance Company[REGISTERED TRADEMARK]
ANNUITY INVESTORS LIFE INSURANCE
COMPANY[REGISTERED TRADEMARK]
(DEPOSITOR)
By: /s/ Robert Allen Adams
--------------------------------------
Robert Allen Adams
Chairman of the Board, President
and Director
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.
/s/ Robert Allen Adams Principal Executive May 14, 1997
- ------------------------------ Officer, Director
Robert Allen Adams
/s/ Robert Eugene Allen Principal Financial May 14, 1997
- ------------------------------ Officer
Robert Eugene Allen
/s/ Lynn Edward Laswell Principal Accounting May 14, 1997
- ----------------------------- Officer
Lynn Edward Laswell
C-15
<PAGE>
/s/ Stephen Craig Lindner Director May 14, 1997
- --------------------------------
Stephen Craig Lindner
/s/ William Jack Maney, Ii Director May 14, 1997
- --------------------------------
William Jack Maney, II
/s/ James Michael Mortensen Director May 14, 1997
- ---------------------------
James Michael Mortensen
/s/ Mark Francis Muething Director May 14, 1997
- -----------------------------
Mark Francis Muething
/s/ Jeffrey Scott Tate Director May 14, 1997
- ---------------------------------
Jeffrey Scott Tate
C-16
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
(1) Resolution of the Board of Directors of Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] authorizing establishment
of Annuity Investors[REGISTERED TRADEMARK] Variable Account B.1/
(2) Not Applicable.
(3)(a) Distribution Agreement between Annuity Investors Life Insurance
Company [REGISTERED TRADEMARK] and AAG Securities, Inc. [filed
herewith].
(3)(b) Form of Selling Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK], AAG Securities, Inc. and another
Broker-Dealer. 1/
(4)(a) Form of Qualified Individual Flexible Premium Deferred Variable
Annuity Contract [filed herewith].
(4)(b) Form of Non-Qualified Individual Flexible Deferred Variable
Annuity Contract [filed herewith].
(4)(c) Form of Loan Endorsement to Individual Contract [filed herewith].
(4)(d) Form of Tax Sheltered Annuity Endorsement to Individual Contract
[filed herewith].
(4)(e) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Individual Contract [filed herewith].
(4)(f) Form of Employer Plan Endorsement to Individual Contract [filed
herewith].
(4)(g) Form of Individual Retirement Annuity Endorsement to Individual
Contract [filed herewith].
(4)(h) Form of Texas Optional Retirement Program Endorsement to
Individual Contract [filed herewith].
(4)(i) Form of Long-Term Care Waiver Rider to Individual Contract [filed
herewith].
(4)(j) Form of Simple IRA Endorsement to Individual Contract [filed
herewith].
(4)(k) Form of Group Flexible Premium Deferred Variable Annuity Contract
[filed herewith].
<PAGE>
(4)(l) Form of Certificate of Participation under a Group Flexible
Premium Deferred Variable Annuity Contract [filed herewith].
(4)(m) Form of Loan Endorsement to Group Contract [filed herewith].
(4)(n) Form of Loan Endorsement to Certificate of Participation under a
Group Contract [filed herewith].
(4)(o) Form of Tax Sheltered Annuity Endorsement to Group Contract [filed
herewith].
(4)(p) Form of Tax Sheltered Annuity Endorsement to Certificate of
Participation under a Group Contract [filed herewith].
(4)(q) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Group Contract [filed herewith].
(4)(r) Form of Qualified Pension, Profit Sharing and Annuity Plan
Endorsement to Certificate of Participation under a Group Contract
[filed herewith].
(4)(s) Form of Employer Plan Endorsement to Group Contract [filed
herewith].
(4)(t) Form of Employer Plan Endorsement to Certificate of Participation
under a Group Contract [filed herewith].
(4)(u) Form of Deferred Compensation Endorsement to Group Contract [filed
herewith].
(4)(v) Form of Deferred Compensation Endorsement to Certificate of
Participation under a Group Contract [filed herewith].
(4)(w) Form of Texas Optional Retirement Program Endorsement to Group
Contract [filed herewith].
(4)(x) Form of Texas Optional Retirement Program Endorsement to
Certificate of Participation under a Group Contract [filed
herewith].
(4)(y) Form of Long-Term Care Waiver Rider to Group Contract [filed
herewith].
(4)(z) Form of Long-Term Care Waiver Rider to Certificate of
Participation under a Group Contract [filed herewith].
(5)(a) Form of Application for Individual Flexible Premium Deferred
Annuity Contract and Certificate of Participation under a Group
Contract [filed herewith].
(5)(b) Form of Application for Group Flexible Premium Deferred Annuity
Contract [filed herewith].
(6)(a) Articles of Incorporation of Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK].1/ --
<PAGE>
(6)(a)(i) Amendment to Articles of Incorporation, adopted April 9, 1996, and
approved by the Secretary of State, State of Ohio, on July 11,
1996 [filed herewith].
(6)(a)(ii) Amendment to Articles of Incorporation, adopted August 9, 1996,
and approved by the Secretary of State, State of Ohio, on December
3, 1996 [filed herewith].
(6)(b) Code of Regulations of Annuity Investors Life Insurance
Company.[REGISTERED TRADEMARK]1/
(7) Not Applicable
(8)(a) Participation Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and Dreyfus Variable Investment Fund
[filed herewith].
(8)(a)(i) Letter Agreement dated April 14, 1997 between Annuity Investors
Life Insurance Company [REGISTERED TRADEMARK] and Dreyfus Variable
Investment Fund [filed herewith].
(8)(b) Participation Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and Dreyfus Life and Annuity Index
Fund, Inc. (d/b/a Dreyfus Stock Index Fund) [filed herewith].
(8)(b)(i) Letter Agreement dated April 14, 1997 between Annuity Investors
Life Insurance Company[REGISTERED TRADEMARK] and Dreyfus Life and
Annuity Index Fund, Inc. (d/b/a Dreyfus Stock Index Fund) [filed
herewith].
(8)(c) Participation Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and The Dreyfus Socially Responsible
Growth Fund, Inc. [filed herewith].
(8)(c)(i) Letter Agreement dated April 14, 1997 between Annuity Investors
Life Insurance Company[REGISTERED TRADEMARK] and The Dreyfus
Socially Responsible Growth Fund, Inc. [filed herewith].
(8)(d) Participation Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and Janus Aspen Series [filed
herewith].
(8)(e) Participation Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and Strong Variable Insurance Funds,
Inc. and Strong Special Fund II, Inc. [filed herewith].
(8)(f) Participation Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and INVESCO Variable Investment
Funds, Inc.[filed herewith]
<PAGE>
(8)(g) Participation Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and Morgan Stanley Universal Funds,
Inc. [filed herewith].
(8)(h) Participation Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and PBHG Insurance Series Fund, Inc.
[filed herewith].
(8)(i) Service Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and American Annuity
Group[SERVICEMARK], Inc.1/
(8)(j) Agreement between AAG Securities, Inc. and AAG Insurance Agency,
Inc.1/ --
(8)(k) Investment Service Agreement between Annuity Investors Life
Insurance Company[REGISTERED TRADEMARK] and American Annuity
Group[SERVICEMARK], Inc. 1/
(8)(l) Service Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and Strong Capital Management, Inc.
[filed herewith].
(8)(m) Service Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and Pilgrim Baxter & Associates,
Ltd. [filed herewith].
(8)(n) Service Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and Morgan Stanley Asset Management,
Inc. [filed herewith].
(8)(o) Amended and Restated Agreement between The Dreyfus Corporation and
Annuity Investors Life Insurance Company[REGISTERED TRADEMARK].
[filed herewith].
(8)(p) Service Agreement between Annuity Investors Life Insurance
Company[REGISTERED TRADEMARK] and Janus Capital Corporation [filed
herewith].
(9) Opinion and Consent of Counsel1/.
(10) Consent of Independent Auditors [filed herewith].
(11) No financial statements are omitted from Item 23.
(12) Not Applicable.
(13) Not Applicable.
(14) Financial Data Schedules [filed herewith].
- ------------------------
1/ Filed on Form N-4 on December 23, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<INVESTMENTS-AT-COST> 3,335,765
<INVESTMENTS-AT-VALUE> 3,389,109
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,389,109
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 8,687
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 581,599
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,380,422
<DIVIDEND-INCOME> 33,183
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 8,687
<NET-INVESTMENT-INCOME> 24,496
<REALIZED-GAINS-CURRENT> 4,654
<APPREC-INCREASE-CURRENT> 53,343
<NET-CHANGE-FROM-OPS> 82,493
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 651,877
<NUMBER-OF-SHARES-REDEEMED> 70,279
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 581,598
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Exhibit (3)(a)
DISTRIBUTION AGREEMENT
AGREEMENT dated as of December 1, 1995, by and between ANNUITY
INVESTORS LIFE INSURANCE COMPANY ("AILIC"), an Ohio insurance company, and AAG
SECURITIES, INC. ("AAGS"), an Ohio corporation.
WITNESSETH:
WHEREAS, AAGS is a broker-dealer that engages in the distribution of
investment products; and
WHEREAS, AAGS, together with AAG INSURANCE AGENCY, INC. and certain
affiliated insurance agencies ("AAGI"), an insurance agency that is affiliated
with AAGS, desires to distribute variable annuity contracts and variable life
insurance contracts (collectively, "variable insurance products") offered by
AILIC; and
WHEREAS, AILIC desires to issue certain variable insurance products
described more fully below to the public through AAGS acting as the principal
underwriter and AAGI acting as the principal insurance agent for such products;
NOW, THEREFORE, in consideration of their mutual promises, AILIC and
AAGS hereby agree as follows:
1. ADDITIONAL DEFINITIONS.
a. Contracts - The class or classes of variable annuity contracts set
forth on Schedule 1 to this Agreement as in effect at the time
this Agreement is executed, and such other classes of variable
insurance products that may be added to Schedule 1 from time to
time in accordance with Section 14.b of this Agreement, and
including any riders to such contracts and any other contracts
offered in connection therewith. For this purpose and under this
Agreement generally, a "class of Contracts" shall mean those
Contracts issued by AILIC on the same policy form or forms and
covered by the same Registration Statement.
b. Registration Statement - At any time that this Agreement is in
effect, each currently effective registration statement, or
currently effective post-effective amendment thereto, relating to
a class of Contracts, including financial statements included in,
and all exhibits to, such registration statement or
post-effective amendment. For purposes of Section 12 of this
Agreement, the term "Registration Statement" means any document
which is or at any time was a Registration Statement within the
meaning of this Section 1.b.
<PAGE>
c. Prospectus - The prospectus and statement of additional
information, if any, included within a Registration Statement,
except that, if the most recently filed prospectus and statement
of additional information filed pursuant to Rule 497 under the
1933 Act subsequent to the date on which a Registration Statement
became effective differs from the prospectus and statement of
additional information included within such Registration Statement
at the time it became effective, the term "Prospectus" shall refer
to the most recently filed prospectus and statement of additional
information filed under Rule 497 under the 1933 Act, from and
after the date on which they each shall have been filed. For
purposes of Section 12 of this Agreement, the term "any
Prospectus" means any document which is or at any time was a
Prospectus within the meaning of this Section 1.c.
d. Fund - An investment company which is included in the Variable
Account and is an investment alternative under a Contract.
e. Variable Account - A separate account supporting a class or
classes of Contracts and specified on Schedule 2 as in effect at
the time this Agreement is executed, or as it may be amended from
time to time in accordance with Section 14.b of this Agreement.
f. 1933 Act - The Securities Act of 1933, as amended.
g. 1934 Act - The Securities Exchange Act of 1934, as amended.
h. 1940 Act - The Investment Company Act of 1940, as amended.
i. SEC - The Securities and Exchange Commission.
j. NASD - The National Association of Securities Dealers, Inc.
k. Regulations - The rules and regulations promulgated by the SEC
under the 1933 Act, the 1934 Act and the 1940 Act as in effect at
the time this Agreement is executed or thereafter promulgated.
l. Distributor - A person registered as a broker-dealer and licensed
as a life insurance agent or affiliated with a person so licensed,
and authorized to distribute the Contracts pursuant to a sales
agreement as provided for in Section 2 of this Agreement.
m. Intermediary Distributor - A Distributor authorized to recruit
other persons to become Distributors pursuant to a sales agreement
as provided for in Section 2 of this Agreement.
n. Affiliate - With respect to a person, any other person
controlling, controlled by, or under common control with, such
person.
2
<PAGE>
o. Representative - When used with reference to AAGS, AAGI, a
Distributor or AILIC, an individual who is an associated person,
as that term is defined in the 1934 Act, thereof.
p. Application - An application for a Contract.
q. Premium - A payment made under a Contract by an applicant or
purchaser to purchase benefits under the Contract.
r. Customer Service Center - AILIC Annuity Service Center, 250 East
Fifth Street, Cincinnati, Ohio 45202, or such other location as
may be designated in writing from time to time by AILIC.
s. Agent's Manual - The Agent's Manual attached hereto as Exhibit B.
2. DISTRIBUTION ACTIVITIES
-----------------------
a. AUTHORITY
---------
AILIC authorizes AAGS on an exclusive basis, and AAGS accepts such
authority, subject to the registration requirements of the 1933 Act and
the 1940 Act and the provisions of the 1934 Act, to be the distributor
and principal underwriter of the Contracts.
AILIC hereby authorizes AAGS to solicit Applications and Premiums
directly from customers and prospective customers and to select all
persons who will be authorized to engage in solicitation activities
with respect to the Contracts, such selection activity to include the
recruitment and appointment of third parties as Distributors which in
turn may be authorized as Intermediary Distributors to engage in
solicitation activities involving the solicitation of Applications and
Premiums directly from customers and prospective customers and/or as
Intermediary Distributors to recruit other third parties to act as
Distributors, in each case as AAGS and AAGI may in their sole
discretion so provide or limit. AAGS shall enter into separate written
sales agreements with such Distributors. Such sales agreements shall be
substantially in the form attached to this Agreement as Exhibit A, but
may include such additional or alternative terms and conditions that
are not otherwise inconsistent with this Agreement, subject to AILIC's
review and prior written consent, which consent shall not be
unreasonably withheld.
3
<PAGE>
AAGS is hereby vested with power and authority to select and
recommend AAGS Representatives, and to authorize a Distributor to
select and recommend Distributor Representatives, for appointment as
agents of AILIC, and only Representatives so recommended by AAGS or a
Distributor shall become agents of AILIC with authority to engage in
solicitation activities with respect to the Contracts. AAGS shall be
solely responsible for background investigations of the AAGS
Representatives to determine their qualifications, good character, and
moral fitness to sell the Contracts. AILIC shall appoint in the
appropriate states or jurisdictions such selected and recommended
agents, provided that AILIC reserves the right, which right shall not
be exercised unreasonably, to refuse to appoint as agent any AAGS
Representative or Distributor Representative, or, once appointed, to
terminate the same at any time with or without cause. No other
individuals, persons or entities shall have authority to engage in
solicitation activities with respect to the Contracts, unless expressly
approved in writing by AAGS, in its sole discretion, except to the
extent permitted by the following paragraph.
AAGS shall use its best efforts to market the Contracts actively,
directly or through Distributors, subject to applicable material market
and regulatory conditions.
AAGS and AAGS Representatives shall not have authority, and shall
not grant authority to Distributors or Distributor Representatives, on
behalf of AILIC: to make, alter or discharge any Contract or other
contract entered into pursuant to a Contract; to waive any Contract
forfeiture provision; to extend the time of paying any Premium; or to
receive any monies or Premiums (except for the sole purpose of
forwarding monies or Premiums to AILIC). AAGS shall not expend, nor
contract for the expenditure of, the funds of AILIC. AAGS shall not
possess or exercise any authority on behalf of AILIC other than that
expressly conferred on AAGS by this Agreement.
b. SOLICITATION ACTIVITIES, APPLICATIONS AND PREMIUMS
--------------------------------------------------
Solicitation activities shall be subject to applicable laws and
regulations, the Agent's Manual, and the rules set forth herein.
(1) AILIC shall forward to AAGS Applications and other materials
for use by AAGS and the Distributors in their solicitation
activities with respect to the Contracts. AILIC shall notify
AAGS in writing of those states or jurisdictions which
require delivery of a statement of additional information
with a prospectus to a prospective purchaser.
4
<PAGE>
(2) AAGS shall require that AAGS Representatives appointed by
AILIC as agents not make recommendations to an applicant to
purchase a Contract in the absence of reasonable grounds to
believe that the purchase of the Contract is suitable for the
applicant. While not limited to the following, a
determination of suitability shall be based on information
supplied to an AAGS Representative after a reasonable inquiry
concerning the applicant's insurance and investment
objectives and financial situation and needs.
(3) All Premiums paid by check or money order that are collected
by AAGS or any AAGS Representative shall be remitted promptly
in full, together with any Applications, forms and any other
required documentation, to the Customer Service Center.
Checks or money orders in payment of Premiums shall be drawn
to the order of "Annuity Investors Life Insurance Company."
Premiums may be transmitted by wire order from AAGS to the
Customer Service Center in accordance with the procedures set
forth in the Agent's Manual. If any Premium is held at any
time by AAGS, AAGS shall hold such Premium in a fiduciary
capacity and such Premium shall be remitted promptly to
AILIC. All such Premiums, whether by check, money order or
wire, shall be the property of AILIC.
(4) AAGS acknowledges that AILIC shall have the unconditional
right to reject, in whole or in part, any Application. In the
event an Application is rejected, any Premium submitted
therewith shall be returned by AILIC to the applicant. AILIC
shall notify AAGS and, if applicable, the Distributor who
submitted the Application, of such action. In the event that
a purchaser exercises his right to cancel under his Contract,
any amount to be refunded as provided in such Contract shall
be so refunded to the purchaser by AILIC. AILIC shall notify
AAGS and, if applicable, the Distributor who solicited the
Contract, of such action.
(5) AAGS shall not encourage a prospective applicant to surrender
or exchange an insurance contract in order to purchase a
Contract, nor shall AAGS encourage any Contractholder to
surrender or exchange a Contract in order to purchase another
insurance contract. AAGS shall require, through all sales
agreements entered into pursuant to Section 2.a of this
Agreement, that each Distributor likewise agree not to
encourage a prospective applicant to surrender or exchange
any insurance contract in order to purchase a Contract, nor
to encourage a Contractholder to surrender or exchange a
Contract in order to purchase another insurance contract.
5
<PAGE>
c. INDEPENDENT CONTRACTOR
----------------------
AAGS shall act as an independent contractor in the performance of
its duties and obligations under this Agreement and nothing herein
contained shall constitute AAGS or AAGS Representatives or employees or
the Distributors or their respective Representatives or employees as
employees of AILIC in connection with the distribution of the
Contracts.
d. SUPERVISION AND 1934 ACT COMPLIANCE
-----------------------------------
AAGS shall train, supervise and be solely responsible for the
conduct of AAGS Representatives in their solicitation of Applications
and Premiums, and shall supervise their compliance with applicable
rules and regulations of any securities regulatory agencies that have
jurisdiction over variable insurance product activities. AAGS
understands and acknowledges that neither it nor its Representatives is
authorized by AILIC to give any information or make any representation
in regard to a class of Contracts in connection with the offer or sale
of such class of Contracts that is not in accordance with the
then-currently effective Prospectus or for such class of Contracts or
in the then-currently effective prospectus or statement of additional
information for the Funds, or in current advertising materials for such
class of Contracts authorized by AILIC.
AILIC, as agent for AAGS, shall confirm to each applicant for and
purchaser of a Contract in accordance with Rule 10b-10 under the 1934
Act acceptance of Premiums and such other transactions as are required
by Rule 10b-10 or administrative interpretations thereunder. AILIC
shall maintain and preserve such books and records with respect to such
confirmations in conformity with the requirements of Rules 17a-3 and
17a-4 under the 1934 Act to the extent such requirements apply. AILIC
shall maintain all such books and records and hold such books and
records on behalf of and as agent for AAGS whose property they are and
shall remain, and acknowledges that such books and records are at all
times subject to inspection by the SEC in accordance with Section 17(a)
of the 1934 Act, the NASD and any state agency which has jurisdiction.
3. MARKETING MATERIALS
-------------------
AILIC shall be primarily responsible for the design and
preparation of all promotional, sales and advertising material relating
to the Contracts. It is understood that as a general matter AILIC shall
initiate and design all forms of promotional, sales and advertising
material for the Contracts. Prior to any use with members of the
public, the following procedures shall be observed:
6
<PAGE>
a. AILIC shall provide to AAGS copies of all promotional, sales and
advertising material developed by AILIC for AAGS' review and
written approval, and AAGS shall be given a reasonable amount of
time to complete its review.
b. If any such promotional, sales or advertising material names a
Fund or a Fund's investment adviser, AILIC shall then furnish such
material to such Fund or such Fund's distributor, and approval
shall be obtained from such Fund or such Fund's distributor before
use.
c. The parties shall respond on a prompt and timely basis in
approving any such material and shall act reasonably in connection
therewith.
d. AAGS shall be responsible for filing such material it develops, as
required, with the NASD and any state securities regulatory
authorities.
e. AILIC shall be responsible for filing all promotional, sales or
advertising material, as required, with any state insurance
regulatory authorities.
f. The parties shall notify each other expeditiously of any comments
provided by the NASD or any securities or insurance regulatory
authority on such material, and will cooperate expeditiously in
resolving and implementing any comments, as applicable.
4. COMPENSATION AND EXPENSES
a. AILIC shall pay commissions to AAGS on Premiums paid under
Contracts sold pursuant to this Agreement and any sales agreements
entered into pursuant to Section 2 of this Agreement in the
amounts set forth on Schedule 2. AAGS shall be responsible for all
tax reporting information which AAGS is required to provide under
applicable tax law to its agents, Representatives or employees
with respect to the Contracts.
b. With respect to this Agreement, AILIC shall be obligated to pay
all expenses in connection with:
(1) the preparation and filing of each Registration Statement
(including each pre-effective and post-effective amendment
thereto) and the preparation and filing of each Prospectus
(including any preliminary and each definitive Prospectus);
(2) the preparation, underwriting, issuance and administration of
the Contracts;
7
<PAGE>
(3) any registration, qualification or approval of the Contracts
for offer and sale required under the securities, blue-sky
laws or insurance laws of the states and other jurisdictions
in the Territory;
(4) the expenses of printing the Prospectuses and the Contracts
and the Funds (any supplements thereto) for distribution to
prospective customers;
(5) all registration fees for the Contracts payable to the SEC
and the NASD;
(6) the printing of definitive Prospectuses for the Contracts and
any supplements thereto for distribution to existing
Contractowners;
c. AAGS shall be obligated to pay the following expenses related to
its distribution of the Contracts:
(1) the compensation of AAGS Representatives and employees and
any Distributors;
(2) expenses associated with the initial licensing and training
of AAGS Representatives and other employees involved in the
distribution of the Contracts;
(3) the costs of any promotional, sales and advertising material
that AAGS develops for its use in connection with the sale of
the Contracts; and
(4) any other expenses incurred by AAGS or its Representatives or
employees for the purpose of carrying out the obligations of
AAGS hereunder.
d. Other than as specifically provided in this Agreement, AILIC shall
pay all expenses that it incurs in connection with this Agreement
and AAGS shall pay all expenses that it incurs in connection with
this Agreement; it being understood that neither AAGS nor AAGI
shall be responsible for any expenses relating to the Contracts or
the processing of Contracts, Premiums or Applications, including
without limitation any expenses incurred in connection with the
return of Premiums solicited by Distributors for Applications
rejected or not timely received by AILIC, or relating to any of
the matters or acts contemplated by this Agreement, except to the
extent expressly set forth herein.
8
<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF AILIC
---------------------------------------
AILIC represents and warrants to AAGS, on the effective date of
each Registration Statement for the Contracts (or for each class of
Contracts) and at each time that AAGS sells a Contract and, with
respect to Sections 5.g., 5.i., and 5.j. below, also on the date of
this Agreement, as follows:
a. Such Registration Statement has been declared effective by the SEC
or has become effective in accordance with the Regulations.
b. Such Registration Statement and the related Prospectus comply in
all material respects with the provisions of the 1933 Act and the
1940 Act and the Regulations, and neither the Registration
Statement nor the Prospectus contains an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, in light of the circumstances in which they were made;
provided, however, that none of the representations and warranties
in this Section 5.b. shall apply to statements or omissions from a
Registration Statement or Prospectus made in reliance upon and in
conformity with information furnished to AILIC in writing by AAGS
expressly for use in such Registration Statement.
c. AILIC has not received any notice from the SEC with respect to
such Registration Statement pursuant to Section 8(e) of the 1940
Act and no stop order under the 1933 Act has been issued and no
proceeding therefor has been instituted or threatened by the SEC.
d. The auditors who certified the financial statements included in
such Registration Statement and the related Prospectus are
independent public auditors as required by the 1933 Act and the
Regulations.
e. The financial statements included in such Registration Statement
present fairly the respective financial positions of AILIC and the
Variable Account (as applicable) at the dates indicated; and such
financial statements have been prepared in conformity with
generally accepted accounting principles in the United States
applied on a consistent basis.
9
<PAGE>
f. Subsequent to the respective dates as of which information is
given in such Registration Statement or the related Prospectus,
there has not been any material adverse change in the condition,
financial or otherwise, of AILIC or the Variable Account (as
applicable) which would cause such information to be materially
misleading.
g. AILIC has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Ohio
with full power and authority to own, lease and operate its
properties and conduct its business in the manner described in
such Registration Statement, is duly qualified to transact the
business of a life insurance company, and is in good standing, in
each state or other jurisdiction in which the Contracts will be
offered for sale.
h. The form of the Contracts has been approved to the extent required
by the Ohio Insurance Commissioner and by the governmental agency
responsible for regulating insurance companies in each other state
or jurisdiction in which the Contracts will be offered for sale.
i. The execution and delivery of this Agreement and the consummation
of the transactions contemplated herein have been duly authorized
by all necessary corporate action by AILIC, and when so executed
and delivered this Agreement shall be the valid and binding
obligation of AILIC enforceable in accordance with its terms.
j. The consummation of the transactions contemplated by this
Agreement, and the fulfillment of the terms of this Agreement,
shall not conflict with, result in any breach of any of the terms
and provisions of, or constitute (with or without notice or lapse
of time) a default under, the articles of incorporation or code of
regulations of AILIC, or any indenture, agreement, mortgage, deed
of trust, or other instrument to which AILIC is a party or by
which it is bound, or violate any law, or, to the best of AILIC's
knowledge, any order, rule or regulation applicable to AILIC of
any court or of any federal or state regulatory body,
administrative agency or any other governmental instrumentality
having jurisdiction over AILIC or any of its properties.
k. No consent, approval, authorization or order of any court or
governmental authority or agency is required for the issuance or
sale of the Contracts or for the consummation of the transactions
contemplated by this Agreement, that has not been obtained.
10
<PAGE>
l. AILIC has filed with the SEC all statements and other documents
required for registration under the provisions of the 1940 Act and
the Regulations thereunder, of the Variable Account supporting the
Contracts, and such registration has been effected; further, there
are no contracts or documents of AILIC which are required to be
filed as exhibits to such Registration Statement by the 1933 Act,
the 1940 Act or the Regulations which have not been so filed.
m. AILIC has obtained all exemptive or other orders of the SEC
necessary to make the public offering and consummate the sale of
such Contracts pursuant to this Agreement and to permit the
operation of the Variable Account supporting such Contracts as
contemplated in the related Prospectus.
n. Such class of Contracts has been duly authorized by AILIC and
conforms to the descriptions thereof in the Registration Statement
for such class of Contracts and the related Prospectus and, when
issued as contemplated by such Registration Statement, shall
constitute legal, validly issued and binding obligations of AILIC
in accordance with their terms.
6. UNDERTAKINGS OF AILIC
----------------------
a. AILIC shall use its best efforts
(1) to maintain the registration of the Contracts with the SEC
and any state securities commissions of any state or other
jurisdiction in which the Contracts will be offered for sale
where the securities or blue-sky laws of such state or other
jurisdiction require registration of the Contracts, including
without limitation using its best efforts to prevent a stop
order from being issued or if a stop order has been issued to
cause such stop order to be withdrawn;
(2) to gain approval of the Contract forms where required under
the insurance laws and regulations of each state or other
jurisdiction in which the Contracts will be offered for sale;
and
(3) to keep such registrations and approvals in effect thereafter
so long as the Contracts are outstanding.
b. AILIC shall take all action required to cause the Contracts to
comply, and to continue to comply, as annuity contracts and as
registered securities under applicable laws and regulations, and
to cause each Registration Statement and each related Prospectus
to comply, and to continue to comply, with:
11
<PAGE>
(1) all applicable federal laws and regulations; and
(2) all applicable laws and regulations of each state and other
jurisdiction in which the Contracts will be offered for sale.
c. AILIC shall notify AAGS immediately or in any event as soon as
possible under the circumstances:
(1) When a Registration Statement has become effective or any
post-effective amendment with respect to a Registration
Statement becomes effective thereafter;
(2) Of any request by the SEC for any amendments to a
Registration Statement, for any supplement to a Prospectus,
or for additional information;
(3) Of any event which makes any material statement made in a
Registration Statement or a Prospectus untrue in any material
respect or results in a material omission in a Registration
Statement or a Prospectus;
(4) Of the issuance by the SEC of any stop order with respect to
a Registration Statement or any amendment thereto, or the
initiation of any proceedings for that purpose or for any
other purpose relating to the registration and/or offering of
the Contracts;
(5) In which states or jurisdictions registration of the
Contracts is required under the securities or blue-sky laws,
and when such registration(s) have become effective;
(6) In which states or jurisdictions approval of the Contract
forms is required under the applicable insurance laws and
regulations, and when such approvals have been obtained; and
(7) In what states or jurisdictions the Contracts may not be
lawfully sold.
d. AILIC shall furnish to AAGS without charge promptly after filing
five (5) complete copies of each Registration Statement and any
pre-effective or post-effective amendment thereto, including
financial statements and all exhibits not incorporated therein by
reference.
12
<PAGE>
e. Schedule 3 attached to this Agreement is a list provided by AILIC
of all states and jurisdictions in which the Contracts can
lawfully be offered as of the date of this Agreement. AILIC shall
promptly notify AAGS of any change on Schedule 3.
f. AILIC shall provide AAGS, without charge, with as many copies of
each Prospectus (and any amendments or supplements to such
Prospectus) as AAGS may reasonably request.
g. AILIC shall timely file all required reports, statements and
amendments required to be filed by or for AILIC and each Variable
Account under the 1933 Act, the 1934 Act, and/or the 1940 Act or
the Regulations and under applicable state insurance statutes and
regulations.
h. AILIC shall deliver to AAGS, as soon as practicable after it
becomes available, the Quarterly Statements, Annual Statement for
AILIC and for each Variable Account in the form filed with the
State of Ohio.
i. AILIC shall provide AAGS access to such records, officers and
employees of AILIC at reasonable times as is necessary to enable
AAGS to fulfill its obligation, as the underwriter under the 1933
Act for the Contracts, to perform due diligence and to use
reasonable care.
j. AILIC shall have the responsibility for maintaining the
appointment records of all agents appointed by AILIC to distribute
the Contracts.
7. CONDITIONS TO OBLIGATIONS OF AAGS
The obligations of AAGS hereunder are subject to the accuracy of
the representations and warranties of AILIC contained in this
Agreement, to the performance by AILIC of its obligations hereunder,
and to the condition that prior to the time that AAGS begins offering
the Contracts and each time, during the period in which AAGS is
offering the Contracts, that an amendment to a Registration Statement
becomes effective, AAGS shall have received an officer's certificate
executed by a senior executive officer of AILIC to the effect that the
representations and warranties set forth in Section 5 of this Agreement
are true and correct.
8. REPRESENTATIONS AND WARRANTIES OF AAGS
AAGS represents and warrants to AILIC, on the date hereof and at
each time that AAGS sells a Contract, as follows:
13
<PAGE>
a. AAGS has taken all actions including, without limitation, those
necessary under its articles of incorporation, code of regulations
and applicable state corporate law, necessary to authorize the
execution, delivery and performance of this Agreement and all
transactions contemplated hereunder.
b. AAGS is and shall remain registered during the term of this
Agreement as a broker-dealer under the 1934 Act, is a member with
the NASD, and is duly registered under applicable state securities
laws.
c. AAGS shall solicit, and shall instruct Distributors to solicit,
sales of the Contracts only in those states or jurisdictions
listed on Schedule 3 as in effect at the time of solicitation.
d. AAGS is and shall remain during the term of this Agreement in
compliance with Section 9(a) of the 1940 Act.
9. UNDERTAKINGS OF AAGS
a. All solicitation and sales activities engaged in by AAGS and the
AAGS Representatives in regard to the Contracts shall be in
compliance with all applicable federal and state securities laws
and regulations, as well as all applicable insurance laws and
regulations. No AAGS Representative shall solicit the sale of a
Contract unless at the time of such solicitation such individual
is:
(1) Properly licensed by the NASD and all other applicable state
insurance and securities regulatory authorities; and
(2) Appointed as an insurance agent of AILIC except as may be
otherwise agreed to by AILIC.
b. Neither AAGS nor any AAGS Representative shall give any
information or make any representation in regard to a class of
Contracts in connection with the offer or sale of such class of
Contracts that is not in accordance with the then-currently
effective Prospectus for such class of Contracts, or in the
then-currently effective prospectus or statement of additional
information for a Fund, or in current advertising materials for
such class of Contracts authorized by AILIC.
c. Neither AAGS nor any AAGS Representative shall offer, attempt to
offer, or solicit Applications for the Contracts or deliver the
Contracts, in any state or other jurisdiction as to which AILIC
has notified AAGS in accordance with Section 6.c.(7) of this
Agreement that such Contracts may not legally be sold or offered
for sale.
14
<PAGE>
10. RECORDS
-------
AILIC and AAGS each shall maintain such accounts, books and other
documents as are required to be maintained by each of them by
applicable laws and regulations and shall preserve such accounts, books
and other documents for the periods prescribed by such laws and
regulations. The accounts, books and records of AILIC, the Variable
Account(s) and AAGS as to all transactions hereunder shall be
maintained so as to clearly and accurately disclose the nature and
details of the transactions, including such accounting information as
necessary to support the reasonableness of the amounts paid by AILIC
hereunder. Each party or designee thereof shall have the right to
inspect and audit such accounts, books and records of the other party
during normal business hours upon reasonable written notice to the
other party. Each party shall keep confidential all information
obtained pursuant to such an inspection or audit, and shall disclose
such information to third parties only upon receipt of written
authorization from the other party, except as required by law.
11. EXAMINATIONS, INVESTIGATIONS AND PROCEEDINGS
--------------------------------------------
a. COOPERATION
-----------
AILIC and AAGS shall cooperate fully in any insurance regulatory
examination or investigation or proceeding or judicial proceeding
arising in connection with the offering, sale or distribution of the
Contracts distributed under this Agreement. Further, AILIC and AAGS
shall cooperate fully in any securities regulatory investigation or
proceeding or judicial proceeding with respect to AILIC, AAGS, their
Affiliates and their agents, Representatives or employees to the extent
that such investigation or proceeding is in connection with the
offering, sale or distribution of the Contracts distributed under this
Agreement. Without limiting the foregoing, AILIC and AAGS shall notify
each other promptly of any customer complaint or notice of any
regulatory investigation or proceeding or judicial proceeding received
by either party with respect to AILIC, AAGS or any of their Affiliates,
agents, Representatives or employees or which may affect AILIC's
issuance of any Contract marketed under this Agreement.
b. CUSTOMER COMPLAINT
In the case of a customer complaint, AAGS and AILIC shall
cooperate in investigating such complaint and any response by either
party to such complaint shall be sent to the other party for written
15
<PAGE>
approval not less than five business days prior to its being sent to
the customer or any regulatory authority, except that if a more prompt
response is required, the proposed response shall be communicated by
telephone or facsimile. In any event, neither party shall release any
such response without the other party's prior written approval. AILIC
shall maintain all complaint records by applicable regulations and
applicable insurance laws and regulations. AAGS shall maintain all
records required by the rules and regulations of the NASD.
12. INDEMNIFICATION
---------------
a. BY AILIC
--------
AILIC shall indemnify and hold harmless AAGS and each person who
controls or is associated with AAGS within the meaning of such terms
under the federal securities laws, and any officer, director, employee
or agent of the foregoing, against any and all losses, claims damages
or liabilities, joint or several (including any investigative, legal
and other expenses reasonably incurred in connection with, and any
amounts paid in settlement of, any action, suit or proceeding or any
claim asserted), to which AAGS and/or any such person may become
subject, under any statute or regulation, any NASD rule or
interpretation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities:
(1) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact or omission or
alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein
not misleading, in light of the circumstances in which they
were made, contained in any (i) Registration Statement or in
any Prospectus; or (ii) blue-sky application or other
document executed by AILIC specifically for the purpose of
qualifying any or all of the Contracts for sale under the
securities laws of any jurisdiction; provided that AILIC
shall not be liable in any such case to the extent that such
loss, claim, damage or liability arises out of, or is based
upon, an untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon
information furnished in writing to AILIC by AAGS
specifically for use in the preparation of any such
Registration Statement or any such blue-sky application or
any amendment thereof or supplement thereto.
(2) result because of the terms of any Contract or because of any
breach by AILIC of any provision of this Agreement or of any
Contract or which proximately result from any activities of
AILIC's officers, directors, employees or agents or their
failure to take any action in connection with the sale,
processing or administration of the Contracts; or
16
<PAGE>
(3) result from any breach of any representation or warranty made
by AILIC in this Agreement.
This indemnification agreement shall be in addition to any liability
that AILIC may otherwise have; provided, however, that no person shall
be entitled to indemnification pursuant to this provision if such loss,
claim, damage or liability is due to the willful misfeasance, bad
faith, gross negligence or reckless disregard of duty by the person
seeking indemnification.
b. BY AAGS
AAGS shall indemnify and hold harmless AILIC and each person who
controls or is associated with AILIC within the meaning of such terms
under the federal securities laws, and any officer, director, employee
or agent of the foregoing, against any and all losses, claims, damages
or liabilities, joint or several (including any investigative, legal
and other expenses reasonably incurred in connection with, and any
amounts paid in settlement of, any action, suit or proceeding or any
claim asserted), to which AILIC and/or any such person may become
subject under any statute or regulation, and NASD rule or
interpretation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities:
(1) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact or omission or
alleged omission to state a material fact required to be
stated therein or necessary in order to make the statements
therein not misleading, in light of the circumstances in
which they were made, contained in any (i) Registration
Statement or in any Prospectus (ii) blue-sky application or
other document executed by AILIC specifically for the purpose
of qualifying any or all of the Contracts for sale under the
securities laws of any jurisdiction; in each case to the
extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission made
in reliance upon information furnished in writing to AILIC by
AAGS specifically for use in the preparation of any such
Registration Statement or any such blue-sky application or
any amendment thereof or supplement thereto.
(2) result because of any use by AAGS or any AAGS Representative
of promotional, sales or advertising material not authorized
by AILIC or any verbal or written misrepresentation by AAGS
or any AAGS Representative or any unlawful sales practices
concerning the Contracts by AAGS or any AAGS Representative
under federal securities laws or NASD regulations, but not
including state insurance laws compliance with which is a
responsibility of AILIC under this Agreement or otherwise; or
17
<PAGE>
(3) result from any claims by agents or Representatives or
employees of AAGS for commissions or other compensation or
remuneration of any type; or
(4) result from any breach by AAGS or any AAGS Representative of
any provision of this Agreement or any breach of any
representation or warranty made by AAGS in this Agreement.
This indemnification shall be in addition to any liability that AAGS
may otherwise have; provided, however, that no person shall be entitled
to indemnification pursuant to this provision if such loss, claim,
damage or liability is due to the willful misfeasance, bad faith, gross
negligence or reckless disregard of duty by the person seeking
indemnification.
c. GENERAL
-------
After receipt by a party entitled to indemnification ("indemnified
party") under this Section 12 of notice of the commencement of any
action, if a claim in respect thereof is to be made against any person
obligated to provide indemnification under this Section 12
("indemnifying party"), such indemnified party shall notify the
indemnifying party in writing of the commencement thereof as soon as
practicable thereafter, provided that that the omission to so notify
the indemnifying party shall not relieve the indemnifying party from
the liability under this Section 12, 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 this
failure to give such notice. The indemnifying party, upon the request
of the indemnified party, shall retain counsel reasonably satisfactory
to the indemnified party to represent the indemnified party and any
others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such
proceeding. 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 (1)
the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (2) the named parties to any
such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The indemnifying party
shall not be liable for any settlement of any proceeding effected
without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party
shall indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment.
18
<PAGE>
The indemnification provisions contained in this Section 12 shall
remain operative in full force and effect, regardless of (1) any
investigation made by or on behalf of AILIC or by or on behalf of any
controlling person thereof, (2) delivery of any Contracts and Premiums
therefor, and (3) any termination of this Agreement. A successor by law
of AILIC or AAGS, as the case may be, shall be entitled to the benefits
of the indemnification provisions contained in this Section 11.
13. TERMINATION
-----------
a. This agreement shall be effective upon execution by the parties
hereto and will remain in effect unless terminated, as provided in
this Section 13.
b. This Agreement shall terminate automatically if it is assigned by
a party without the prior written consent of the other party.
c. This Agreement may be terminated at the option of either party to
this Agreement upon the other party's material breach of any
provision of this Agreement or of any representation made in this
Agreement, unless such breach has been cured within 10 days after
receipt of notice of breach from the non-breaching party.
d. Upon termination of this Agreement all authorizations, rights and
obligations shall cease except: (1) the obligation to settle
accounts hereunder, including commissions on Premiums subsequently
received for Contracts in effect at the time of termination or
issued pursuant to Applications received by AILIC prior to
termination; and (2) the obligations contained in Sections 4, 6,
10, 11 and 12 hereof.
14. MISCELLANEOUS
-------------
a. BINDING EFFECT
--------------
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 action by such
party and when so executed and delivered this Agreement shall be the
valid and binding obligation of such party enforceable in accordance
with its terms. This Agreement shall be binding on and shall inure to
the benefit of the respective successors and assigns of the parties
19
<PAGE>
hereto of the respective successors and assigns of the parties hereto
provided that neither party shall assign this Agreement or any rights
or obligations hereunder without the prior written consent of the other
party.
b. AMENDMENT OF SCHEDULES
----------------------
The parties to this Agreement may amend Schedules 1, 2, and 3 to
this Agreement from time to time to reflect additions of or changes in
any class of Contracts, Commissions or jurisdictions in which Contracts
may be offered and sold. The provisions of this Agreement shall be
equally applicable to each such class of Contracts that may be added to
the Schedules, unless the context otherwise requires. Any other change
in the terms or provisions of this Agreement shall be by written
agreement between AILIC and AAGS.
c. RIGHTS, REMEDIES, ETC. ARE CUMULATIVE
-------------------------------------
The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws. Failure of either party to insist upon
strict compliance with any of the conditions of this Agreement shall
not be construed as a waiver of any of the conditions, but the same
shall remain in full force and effect. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a
waiver of any other provisions, whether or not similar, nor shall any
waiver constitute a continuing waiver.
d. NOTICES
-------
All notices hereunder are to be made in writing and shall be
given:
If to AILIC, to:
Annuity Investors Life Insurance Company
250 East Fifth Street, 10th Floor
Cincinnati, Ohio 45202
Attention: General Counsel
If to AAGS, to:
AAG Securities, Inc.
250 East Fifth Street, 10th Floor
Cincinnati, Ohio 45202
Attention: General Counsel
or such other address as such party may hereafter specify in writing.
Each such notice to a party shall be either hand delivered or
transmitted by registered or certified United States mail with return
receipt requested, and shall be effective upon delivery.
20
<PAGE>
e. ARBITRATION
-----------
Any controversy or claim arising out of relating to this
Agreement, or the breach hereof, shall be settled by arbitration in the
forum jointly selected by AILIC and AAGS (but if applicable law requires
some other forum, than such other forum) in accordance with the
Commercial Arbitration Rules of the American Arbitration Association,
and judgment upon the award rendered by the arbitrator(s) may be entered
in any court having jurisdiction thereof.
f. INTERPRETATION; JURISDICTION
----------------------------
This Agreement constitutes the whole agreement between the
parties thereto with respect to the subject matter hereof, and
supersedes all prior oral or written understandings, agreements or
negotiations between the parties with respect to such subject matter. No
prior writings by or between the parties with respect to the subject
matter hereof shall be used by either party in connection with the
interpretation of any provision of this Agreement. This Agreement shall
be construed and its provisions interpreted under and in accordance with
the internal laws of the State of Ohio without giving effect to
principles of conflict of laws.
g. SEVERABILITY
------------
This is a severable Agreement. In the event that any provision of
this Agreement would require a party to take action prohibited by
applicable federal or state law or profit a party from taking action
required by applicable federal or state law, then it is the intention
of the parties hereto that such provision shall be enforced to the
extent permitted under the law, and, in any event, that all other
provisions of this Agreement shall remain valid and duly enforceable as
if the provision at issue had never been a part hereof.
h. SECTION AND OTHER HEADINGS
--------------------------
The headings in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
i. COUNTERPARTS
------------
This Agreement may be executed in two or more counterparts, each
of which taken together shall constitute one and the same instrument.
21
<PAGE>
j. REGULATION
----------
This Agreement shall be subject to the provisions of the 1933 Act,
1934 Act and 1940 Act and the Regulations and the rules and regulations
of the NASD, from time to time in effect, including such exemptions
from the 1940 Act as the SEC may grant, and the terms hereof shall be
interpreted and construed in accordance therewith.
IN WITNESS WHEREOF, each party hereto represents that the officer
signing this Agreement on the party's behalf is duly authorized to execute this
Agreement; and the parties hereto have caused this Agreement to be duly executed
by such authorized officers on the date specified below.
ANNUITY INVESTORS LIFE INSURANCE
COMPANY
By: /s/ Mark F. Muething
Name: Mark F. Muething
Title: Senior Vice President
AAG SECURITIES, INC.
By: /s/ Mark F. Muething
Name: Mark F. Muething
Title: Vice President
22
<PAGE>
SCHEDULE 1
CONTRACTS SUBJECT TO DISTRIBUTION AGREEMENT
- --------------------------------------------------------------------------------
CONTRACT MARKETING NAME POLICY FORM NOS. SEC REGISTRATION NO.
================================================================================
Commodore Nauticus G800(95)-3; C800(95)-3 811-07299/33-59861
- --------------------------------------------------------------------------------
Commodore Americus A800(Q96)-3 811-07299/33-65409
- --------------------------------------------------------------------------------
Commodore Americus, f/k/a A800(NQ96)-3 811-07299/33-65409
Commodore Mariner
- --------------------------------------------------------------------------------
Commodore Navigator A801-BD(NQ97)-3 811-08017/333-19725
- --------------------------------------------------------------------------------
Commodore Navigator A801-BD(Q97)-3 811-08017/333-19725
- --------------------------------------------------------------------------------
Commodore Navigator G801-BD(97)-3; 811-08017/333-19725
C801-BD(97)-3
- --------------------------------------------------------------------------------
EFFECTIVE DATE: MAY 1, 1997
<PAGE>
SCHEDULE 2
Commissions
23
<PAGE>
Schedule 3
List of Jurisdictions in which the
Contracts may be Offered for Sale
24
Exhibit (4)(a)
ANNUITY INVESTORS(SERVICEMARK)
Life Insurance Company
A Stock Insurance Company
Domicile Address: 580 Walnut Street, Cincinnati, Ohio 45202
Administrative Office:
P. O. Box 5423, Cincinnati, Ohio 45201-5423
Individual Flexible Premium Deferred Variable Annuity Contract
TWENTY DAY EXAMINATION-RIGHT TO CANCEL
You may cancel this contract ("Contract") by returning it and giving us written
notice of cancellation. You have until midnight of the twentieth day following
the date you receive this Contract. This Contract must be returned to us and the
required notice must be given in person, or to the agent who sold it to you, or
by mail. If by mail, the return of the Contract or the notice is effective on
the date it is postmarked, with the proper address and with postage paid. If you
cancel this Contract as set forth above, the Contract will be void and we will
refund the Purchase Payments plus or minus any investment gains or losses under
the Contract as of the end of the Valuation Period during which the returned
Contract is received by the Company, or as otherwise required by law.
As you read through this Contract, please note that the words "we", "us",
"our", and "Company" refer to Annuity Investors Life Insurance Company. The
words "you" and "your" refer to the Owner.
This is a deferred variable annuity contract. It is a legally binding
agreement between you and us.
PLEASE READ YOUR CONTRACT WITH CARE.
/s/ Betty Kasprowicz /s/ James M. Mortensen
Assistant Secretary Executive Vice President
Nonparticipating - No Dividends
Tax-Qualified
BENEFIT PAYMENTS AND OTHER VALUES DESCRIBED IN THIS CONTRACT, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, MAY INCREASE OR DECREASE AND ARE
NOT GUARANTEED AS TO FIXED DOLLAR AMOUNTS. NO MINIMUM CONTRACT VALUE IS
GUARANTEED, EXCEPT FOR AMOUNTS IN THE FIXED ACCOUNT.
<PAGE>
CONTRACT SPECIFICATIONS
OWNER: JOHN DOE
AGE OF OWNER AS OF CONTRACT EFFECTIVE DATE: 35
CONTRACT NUMBER: 000000000
CONTRACT EFFECTIVE DATE: APRIL 01, 1996
ANNUITY COMMENCEMENT DATE: APRIL 01, 2031
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT: Annuity Investors Variable Account B
- ----------------
Following is a list of the Funds in which the currently available Sub-Accounts
invest:
[Janus Aspen Series Aggressive Growth Portfolio]
[Janus Aspen Series Worldwide Growth Portfolio]
[Janus Aspen Series Balanced Portfolio]
[Janus Aspen Series Growth Portfolio]
[Janus Aspen Series International Growth Portfolio]
[Dreyfus Variable Investment Fund-Capital Appreciation Portfolio]
[Dreyfus Variable Investment Fund-Money Market Portfolio]
[Dreyfus Variable Investment Fund-Growth and Income Portfolio]
[Dreyfus Variable Investment Fund-Small Cap Portfolio]
[The Dreyfus Socially Responsible Growth Fund, Inc.]
[Dreyfus Stock Index Fund]
[Strong Special Fund II]
[Strong Growth Fund II]
[INVESCO VIF-Industrial Income Fund]
[INVESCO VIF-Total Return Fund]
[INVESCO VIF-High Yield Fund]
[Morgan Stanley Universal Funds, Inc. U.S. Real Estate Portfolio]
[Morgan Stanley Universal Funds, Inc. Value Portfolio]
[Morgan Stanley Universal Funds, Inc. Emerging Markets Equity Portfolio]
[Morgan Stanley Universal Funds, Inc. Fixed Income Portfolio]
[Morgan Stanley Universal Funds, Inc. Mid-Cap Value Portfolio]
[PBHG Insurance Series Fund, Inc.-Growth II Portfolio]
[PBHG Insurance Series Fund, Inc.-Large-Cap Growth Portfolio]
[PBHG Insurance Series Fund, Inc.-Technology & Communications Portfolio]
2
<PAGE>
FIXED ACCOUNT:
- -------------
Following is a list of the currently available Fixed Account options, with
guarantee periods as may be applicable:
Fixed Accumulation Account Option
[Fixed Account Option One-Year Guarantee Period]
[Fixed Account Option Three-Year Guarantee Period]
[Fixed Account Option Five-Year Guarantee Period]
[Fixed Account Option Seven-Year Guarantee Period]
The guaranteed rate of interest for the Fixed Account options is three percent
(3%) per year, compounded annually.
TRANSFER FEE: [$25] per transfer in excess of twelve (12) in any Contract Year.
CONTINGENT DEFERRED SALES CHARGE: An amount deducted on each partial or full
surrender of a Purchase Payment, as follows:
Number of full years elapsed Contingent Deferred Sales Charge as
between the date of receipt of a a percentage of the associated
Purchase Payment and date Written Purchase Payment Surrendered
Request for surrender is received
- -------------------------------- ---------------------------------
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7+ 0%
Please see the SURRENDERS section of this Contract for additional information.
FREE WITHDRAWAL PRIVILEGE:
Contract Year Applicable Percentage
1 10% of all Purchase Payments received
2 and thereafter Greater of: (a) Accumulated Earnings; or (b)
10% of Account Value as of last Contract
Anniversary
Please see the SURRENDERS section of this Contract for additional information.
CONTRACT MAINTENANCE FEE: [ $30] Annually
MORTALITY AND EXPENSE RISK CHARGE: A charge equal to an effective annual rate of
[1.25%] of the daily Net Asset Value of the Sub-Accounts.
ADMINISTRATION CHARGE: A charge equal to an effective annual rate of [0.15%] of
the daily Net Asset Value of the Sub-Accounts.
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TERMINATION: We reserve the right to terminate this Contract at any time the
Surrender Value is less than $500. A surrender will be deemed to have been made
and we will pay you the Surrender Value of this Contract.
INQUIRIES: For information, or to make a complaint, call or write:
Variable Annuity Service Center
Annuity Investors Life Insurance Company
Post Office Box 5423
Cincinnati, Ohio 45201-5423
1-800-789-6771
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TABLE OF CONTENTS Page
- ---------------------------------------------------------------
Definitions...................................................7
General Provisions............................................9
Entire Contract............................................9
Changes -- Waivers.........................................9
Nonparticipating...........................................9
Misstatement...............................................9
Required Reports...........................................9
Exclusive Benefit..........................................9
State Law.................................................10
Claims of Creditors.......................................10
Company Liability.........................................10
Voting Rights.............................................10
Incontestability..........................................10
Discharge of Liability....................................10
Transfer By the Company...................................10
Purchase Payments............................................10
Purchase Payments.........................................10
Allocation of Purchase Payments...........................10
No Termination............................................10
Fixed Account................................................11
Fixed Account.............................................11
Fixed Account Options...................................11
Interest Credited.......................................11
Renewal.................................................11
Fixed Account Value.......................................11
Separate Account.............................................12
General Description.......................................12
Sub-Accounts of the Separate Account......................12
Valuation of Assets.......................................12
Variable Account Value....................................12
Accumulation Unit Value...................................13
Transfers....................................................13
Fees and Charges.............................................14
Mortality and Expense Risk Charge.........................14
Administration Charge.....................................14
Contract Maintenance Fee..................................14
Surrenders...................................................14
Surrenders................................................14
Surrender Value...........................................14
Contingent Deferred Sales Charge..........................14
Free Withdrawal Privilege.................................15
Deferral of Payment.......................................15
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Ownership Provisions.........................................15
Ownership of Separate Account.............................15
Owner.....................................................15
Transfer and Assignment...................................15
Successor Owner...........................................16
Community Property........................................16
Beneficiary Provisions.......................................16
Beneficiary...............................................16
Change of Beneficiary.....................................16
Benefit on Annuity Commencement Date.........................16
Annuity Commencement Date.................................16
Annuity Benefit Payments..................................16
Form of Annuity Benefit...................................17
Benefit on Death of Owner....................................17
Death Benefit.............................................17
Death Benefit Amount......................................18
Transfers After Death.....................................18
Death Benefit Commencement Date...........................18
Form of Death Benefit.....................................18
Settlement Options...........................................19
Conditions................................................19
Benefit Payments..........................................19
Fixed Dollar Benefit......................................20
Variable Dollar Benefit...................................20
Limitation on Election of Settlement Option...............20
Settlement Option Computations............................20
Available Settlement Options..............................21
Settlement Option Tables..................................21
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DEFINITIONS
Account(s): The Sub-Account(s) and/or the Fixed Account options.
Account Value: The aggregate value of your interest in the Sub-Account(s) and
the Fixed Account options as of the end of any Valuation Period. The value of
your interest in all Sub-Accounts is the "Variable Account Value," and the value
of your interest in all Fixed Account options is the "Fixed Account Value."
Accumulated Earnings: The Account Value in excess of Purchase Payments received
by us and which have not been returned to you.
Accumulation Period: The period prior to the applicable Commencement Date.
Accumulation Unit: A unit of measure used to calculate the value(s) of the
Sub-Account(s) prior to the applicable Commencement Date.
Administrative Office: The home office of the Company or any other place of
business which we may designate for administration.
Age: Age as of most recent birthday.
Annuitant: A natural person whose life is used to determine the duration of
annuity payments involving life contingencies.
Annuity Benefit: Periodic payments under a settlement option, which commence on
or after the Annuity Commencement Date.
Annuity Commencement Date: The first day of the first Payment Interval for which
an Annuity Benefit payment is to be made under a settlement option.
Beneficiary: A person entitled to the Death Benefit under the Contract upon the
death of an Owner.
Benefit Payment: The Annuity Benefit or Death Benefit payable under a settlement
option. Variable Dollar Benefit payments may vary in amount. Fixed Dollar
Benefit payments remain constant except under certain joint and survivor
settlement options.
Benefit Payment Period: The period starting with the Commencement Date during
which Benefit Payments are to be made under this Contract.
Benefit Unit: A unit of measure used to determine the dollar value of any
Variable Dollar Benefit payments after the first Benefit Payment is made by us.
Code: The Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
Commencement Date: The Annuity Commencement Date if an Annuity Benefit is
payable under this Contract, or the Death Benefit Commencement Date if a Death
Benefit is payable under this Contract.
Contract Anniversary: An annual anniversary of the Contract Effective Date.
Contract Effective Date: The date shown on the Contract Specifications page.
Contract Year: Any period of twelve (12) months, commencing on the Contract
Effective Date and on each Contract Anniversary thereafter.
Death Benefit: The benefit described in the Benefit on Death of Owner section of
this Contract.
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Death Benefit Commencement Date: The first day of the first Payment Interval for
which a Death Benefit payment is to be made under a settlement option, or the
date a Death Benefit is to be paid in a lump sum.
Death Benefit Valuation Date: The date that Due Proof of Death has been received
by us and the earlier to occur of: 1) our receipt of a Written Request with
instructions as to the form of Death Benefit; or 2) the Death Benefit
Commencement Date.
Due Proof of Death: Any of the following:
1) certified copy of a death certificate;
2) certified copy of a decree of a court of competent
jurisdiction as to the finding of death; or
3) any other proof satisfactory to us.
Fund: A management investment company or portfolio thereof, registered under the
Investment Company Act of 1940, in which a Sub-Account of the Separate
Account invests.
Net Asset Value: The amount computed by an investment company, no less
frequently than each Valuation Period, as the price at which its shares or
units, as the case may be, are redeemed in accordance with the rules of the
Securities and Exchange Commission.
Owner: The person identified as such on the Contract Specifications page.
Payment Interval: A monthly, quarterly, annual or other regular interval during
the Benefit Payment Period.
Person Controlling Payments: The "Person Controlling Payments" means the
following, as the case may be:
1) with respect to Annuity Benefit payments, you as Owner; and
2) with respect to Death Benefit payments,
a) the Beneficiary; or
b) if the Beneficiary is deceased, the payee.
Purchase Payment: A contribution amount paid to us in consideration for this
Contract, after the deduction of any and all of the following which may apply:
1) any fee charged by the person remitting payments for you;
2) premium taxes; and/or
3) other taxes.
Separate Account: An account, which may be an investment company, which is
established and maintained by the Company pursuant to the laws of the State of
Ohio.
Sub-Account: The Separate Account is divided into Sub-Accounts, each of which
invests in the shares of a designated Fund.
Valuation Period: The period commencing at the close of regular trading on the
New York Stock Exchange on any Valuation Date, and ending at the close of
trading on the next succeeding Valuation Date. "Valuation Date" means each day
on which the New York Stock Exchange is open for business.
Written Request: Information provided, or a request made, that is complete and
satisfactory to us, that is sent to us on our form or in a manner satisfactory
to us, which may, at our discretion, be telephonic, and that is received by us
at our Administrative Office. A Written Request is subject to any payment made
or any action we take before we acknowledge it. The Company will deem a Written
Request a standing order which may be modified or revoked only by a subsequent
Written Request, when permitted by the terms of this Contract. You may be
required to return this Contract to us in connection with a Written Request.
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GENERAL PROVISIONS
ENTIRE CONTRACT
We have issued this Contract to the Owner identified on the Contract
Specifications page. This Contract is an individual flexible premium deferred
variable annuity contract. This Contract is restricted by endorsement as
required to obtain favorable tax treatment under the Code, and is not valid
without the requisite endorsement(s) being attached. This Contract, its
endorsements, and the application, if any, form the entire Contract between you
and us.
Only statements in the application, if any, or statements made elsewhere by you
in consideration for this Contract will be used to void your interest under this
Contract, or to defend a claim based on it. Such statements are representations
and not warranties.
CHANGES - WAIVERS
No changes or waivers of the terms of this Contract are valid unless made in
writing by our President, Vice President, or Secretary. No agent or other person
not named above has authority to change or waive any provision of this Contract.
We reserve the right both to administer and to change the provisions of this
Contract to conform to any applicable laws, regulations or rulings issued by a
governmental agency.
In any event, the Company reserves the right to add or delete Fixed Account
options and Sub-Accounts, to substitute shares of a different Fund or different
class or series of a Fund for shares held in a Sub-Account, to merge or combine
Sub-Accounts, to merge or combine the Separate Account with any other separate
account of the Company, to transfer the assets of the Separate Account to
another life insurance company by means of a merger or reinsurance, to convert
the Separate Account into a managed separate account, and to de-register the
Separate Account under the Investment Company Act of 1940. Any such change will
be made in accordance with applicable insurance and securities laws and after
obtaining any necessary approvals, including those of the Ohio Department of
Insurance and the Securities and Exchange Commission.
NONPARTICIPATING
This Contract does not pay dividends or share in the Company's divisible
surplus.
MISSTATEMENT
If the age or sex of a person on whose life Benefit Payments are based is
misstated, the payments or other benefits under this Contract shall be adjusted
to the amount which would have been payable based on the correct age or sex. If
we made any underpayments based on any misstatement, the amount of any
underpayment with interest shall be immediately paid in one sum. In addition to
any other remedies that may be available at law or at equity, we may deduct any
overpayments made, with interest, from any succeeding payment(s) due under this
Contract.
REQUIRED REPORTS
At least once each Contract Year, we will send you a report of your current
values and any other information required by law, until the first to occur of
the following:
1) the date this Contract is fully surrendered;
2) the Annuity Commencement Date; or
3) the Death Benefit Commencement Date.
The report will be mailed to your last known address. The reported values will
be based on the information in our possession at the time the report is prepared
by us. We may adjust the reported values at a later date if that information
proves to be incorrect or has changed.
EXCLUSIVE BENEFIT
This Contract is for the exclusive benefit of you and your Beneficiaries. Your
interest under this Contract is nonforfeitable by us.
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STATE LAW
All factors, values, benefits and reserves under this Contract will not be less
than those required by the law of the state in which this Contract is delivered.
CLAIMS OF CREDITORS
To the extent allowed by law, your Contract and all values and benefits under it
are not subject to the claims of creditors or to legal process.
COMPANY LIABILITY
We will not incur any liability or be responsible for any failure, in whole or
in part, by you or by any person having rights or benefits arising out of or
related to this Contract, to comply with any applicable laws, regulations or
rulings issued by a governmental agency.
VOTING RIGHTS
To the extent required by law, we will vote all shares of the Funds held in the
Separate Account, at regular and special shareholder meetings of the Funds. The
shares will be voted in accordance with instructions received from you, or if
applicable, from the Person Controlling Payments. If there is a change in the
law which permits us to vote the shares of the Funds without such instructions,
then we reserve the right to do so.
INCONTESTABILITY
This Contract shall not be contestable by us.
DISCHARGE OF LIABILITY
Upon payment of any partial or full surrender, or any Benefit Payment, we shall
be discharged from all liability to the extent of each such payment.
TRANSFER BY THE COMPANY
We reserve the right to transfer our obligations under this Contract to another
qualified life insurance company under an assumption reinsurance arrangement,
and without your prior consent.
PURCHASE PAYMENTS
PURCHASE PAYMENTS
One or more Purchase Payments may be paid to us at any time before the Annuity
Commencement Date, so long as:
1) you are still living; and
2) this Contract has not been fully surrendered.
The initial Purchase Payment must be paid to us on or before the
Contract Effective Date. Each Purchase Payment must be paid to us at our
Administrative Office, and is subject to any minimums or maximums that we set
for such from time to time. Upon request, we will provide you with a receipt as
proof of payment.
ALLOCATION OF PURCHASE PAYMENTS
We will allocate Purchase Payments to the Fixed Account options and/or to the
Sub-Accounts according to the instructions we receive by Written Request.
Allocations must be made in whole percentages. The minimum Purchase Payment
amount that can be allocated to a Fixed Account option other than the Fixed
Accumulation Account is $2000.
NO TERMINATION
Except as stated elsewhere in this Contract, this Contract will not be
terminated by us due to failure to make additional Purchase Payments.
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FIXED ACCOUNT
FIXED ACCOUNT
The Fixed Account is part of the Company's general account. The values of the
Fixed Account are not dependent upon the investment performance of the
Sub-Accounts.
FIXED ACCOUNT OPTIONS. The Fixed Account options available as of the Contract
Effective Date are listed on the Contract Specifications page. Different Fixed
Account options may be offered by us at any time.
INTEREST CREDITED. The guaranteed rate of interest for the Fixed Account options
is three percent (3%) per year, compounded annually. We may, at any time, pay a
current interest rate as declared by our Board of Directors for any of the Fixed
Account options that is higher than the guaranteed rate.
The interest rate initially credited to each Purchase Payment allocated to the
Fixed Accumulation Account Option will not be changed any sooner than twelve
(12) months following the date on which that Purchase Payment was received;
thereafter, the interest rate credited will not be changed more frequently than
once per calendar quarter. In the case of transfers from other Fixed Account
options or the Sub-Accounts to the Fixed Accumulation Account option, the
interest rate will not be changed more frequently than once per calendar
quarter.
The interest rate credited to amounts allocated to the Fixed Account options
other than the Fixed Accumulation Account Option will not be changed during the
duration of the applicable guarantee period.
RENEWAL. The following RENEWAL provisions apply to all Fixed Account options
except the Fixed Accumulation Account Option.
At the end of a guarantee period, and for the thirty (30) days immediately
preceding the end of such guarantee period, you may elect a new option to
replace the Fixed Account option that is then expiring. The entire amount
maturing may be re-allocated to any of the then-current options under this
Contract (including the various Sub-Accounts within the Separate Account),
except that a Fixed Account option with a guarantee period that would extend
past the Annuity Commencement Date may not be selected. In particular, in the
case of renewals occurring within one (1) year of such Commencement Date, the
only Fixed Account option available is the Fixed Accumulation Account Option.
If you do not specify a new Fixed Account option in accordance with the
preceding paragraph, you will be deemed to have selected the same Fixed Account
option as is expiring, so long as the guarantee period of such option does not
extend beyond the Annuity Commencement Date. In the event that such a period
would extend beyond the Annuity Commencement Date, you will be deemed to have
selected the Fixed Account option with the longest available guarantee period
that expires prior to the Annuity Commencement Date, or, failing that, the Fixed
Accumulation Account Option.
Any renewal of a Fixed Account option under this Renewal provision will be
effective on the day after the expiration of the guarantee period that is then
expiring.
FIXED ACCOUNT VALUE
The Fixed Account Value for this Contract at any time is equal to:
1) the Purchase Payment(s) allocated to the Fixed Account; plus
2) amounts transferred to the Fixed Account; plus
3) interest credited to the Fixed Account; less
4) any charges, surrenders, deductions, amounts transferred
from the Fixed Account or other adjustments made as described
elsewhere in this Contract.
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SEPARATE ACCOUNT
GENERAL DESCRIPTION
The variable benefits under this Contract are provided through the Separate
Account. The Separate Account is registered with the Securities and Exchange
Commission as a unit investment trust under the Investment Company Act of 1940.
The income, if any, and any gains or losses, realized or unrealized, on the
Separate Account will be credited to or charged against the amounts allocated to
such account without regard to other income, gains, or losses of the Company.
The amounts allocated to the Separate Account and the accumulations thereon
remain the property of the Company, but that portion of the assets of the
Separate Account that is equal to the reserves and other contractual liabilities
under all policies, annuities, and other contracts identified with the Separate
Account is not chargeable with liabilities arising out of any other business of
the Company. The Company is not, and does not hold itself out to be, a trustee
in respect of such amounts.
We have the right to transfer to our general account, in our sole discretion and
at any time without prior written notice, any assets of the Separate Account
which are in excess of the required reserves and other contractual liabilities
under all policies, annuities, and other contracts identified with the Separate
Account.
SUB-ACCOUNTS OF THE SEPARATE ACCOUNT
The assets of the Separate Account are divided into Sub-Accounts. The
Sub-Accounts available as of the Contract Effective Date are listed on the
Contract Specifications page. Each Sub-Account invests exclusively in shares of
an underlying Fund as shown on the Contract Specifications page. Any amounts of
income and any gains on the shares of a Fund will be reinvested in additional
shares of that Fund at its Net Asset Value.
VALUATION OF ASSETS
Shares of Funds held by each Sub-Account will be valued at their Net Asset Value
at the end of each Valuation Period, as reported by each such Fund.
VARIABLE ACCOUNT VALUE
Purchase Payment(s) may be allocated among and, as described elsewhere in this
Contract, Account values may be transferred to the various Sub-Accounts within
the Separate Account. For each Sub-Account, the Purchase Payment(s) or amounts
transferred are converted into Accumulation Units. The number of Accumulation
Units credited is determined by dividing the dollar amount directed to each
Sub-Account by the value of the Accumulation Unit for that Sub-Account at the
end of the Valuation Period during which the Purchase Payment(s) or transferred
amount is received.
The following events will result in the cancellation of an appropriate number of
Accumulation Units of a Sub-Account:
1) transfer from a Sub-Account;
2) full or partial surrender of the Variable Account Value;
3) payment of a Death Benefit;
4) application of the Variable Account Value to a settlement option;
5) deduction of the Contract Maintenance Fee; or
6) deduction of any Transfer Fee.
Accumulation Units will be canceled as of the end of the Valuation Period during
which the Company receives a Written Request regarding the event giving rise to
such cancellation, or an applicable Commencement Date, or the end of the
Valuation Period on which the Contract Maintenance Fee or Transfer Fee is due,
as the case may be.
The Variable Account Value for this Contract at any time is equal to the sum of
the number of Accumulation Units for each Sub-Account attributable to this
Contract multiplied by the Accumulation Unit Value for each Sub-Account at the
end of the preceding Valuation Period.
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ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Sub-Account, with the exception of
the Money Market Sub-Account, was set at $10.00. The initial Accumulation Unit
Value for the Money Market Sub-Account was set at $1.00. Thereafter, the
Accumulation Unit Value at the end of each Valuation Period is the Accumulation
Unit Value at the end of the previous Valuation Period multiplied by the Net
Investment Factor, as described below.
The Net Investment Factor is a factor applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. Each
Sub-Account has a Net Investment Factor for each Valuation Period which may be
greater or less than one. Therefore, the Accumulation Unit Value for each
Sub-Account may increase or decrease. The Net Investment Factor for any
Sub-Account for any Valuation Period is determined by dividing (1) by (2) and
subtracting (3) from the result, where:
1) is equal to:
a) the Net Asset Value per share of the Fund held in the
Sub-Account, determined at the end of the applicable Valuation
Period; plus
b) the per share amount of any dividend or net capital gain
distributions made by the Fund held in the Sub-Account, if the
"ex-dividend" date occurs during the applicable Valuation
Period; plus or minus
c) a per share charge or credit for any taxes reserved for, which
is determined by the Company to have resulted from the
investment operations of the Sub-Account;
2) is the Net Asset Value per share of the Fund held in the
Sub-Account, determined at the end of the immediately
preceding Valuation Period; and
3) is the factor representing the Mortality and Expense Risk
Charge and the Administration Charge deducted from the
Sub-Account for the number of days in the applicable Valuation
Period.
TRANSFERS
Prior to the applicable Commencement Date, you may transfer amounts in a
Sub-Account to a different Sub-Account and/or one or more of the Fixed Account
options.
After the first Contract Anniversary, and prior to the applicable Commencement
Date, you may transfer amounts from any Fixed Account option to any other Fixed
Account option and/or one or more of the Sub-Accounts. If a transfer is being
made from a Fixed Account option pursuant to the Renewal provision of this
Contract, then the entire amount of that Fixed Account option subject to renewal
at that time may be transferred. In any other case, transfers from any Fixed
Account option are subject to a cumulative limit during each Contract Year of
twenty percent (20%) of the Fixed Account option's value as of the most recent
Contract Anniversary.
Amounts previously transferred from Fixed Account options to the Sub-Accounts
may not be transferred back to the Fixed Account options for a period of six (6)
months from the date of transfer.
The minimum transfer amount for any transfer is $500. The number of transfers
per year over which we will charge a Transfer Fee on each additional transfer,
and the amount of the Transfer Fee, are shown on the Contract Specifications
page.
We reserve the right, in our sole discretion and at any time without prior
notice, to terminate, suspend or modify the transfer privileges described above.
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FEES AND CHARGES
MORTALITY AND EXPENSE RISK CHARGE
The Mortality and Expense Risk Charge is shown on the Contract Specifications
page and is deducted daily from each Sub-Account. This deduction is made to
compensate the Company for assuming the mortality and expense risks under this
Contract.
ADMINISTRATION CHARGE
The Administration Charge is shown on the Contract Specifications page and is
deducted daily from each Sub-Account. This deduction is made to reimburse the
Company for expenses incurred in the administration of this Contract and the
Separate Account.
CONTRACT MAINTENANCE FEE
The Contract Maintenance Fee ("Fee") is shown on the Contract Specifications
page and is deducted as of the Valuation Period next following each Contract
Anniversary prior to the applicable Commencement Date. In addition, the full
annual Fee will be deducted at the time of a full surrender. The Fee will be
allocated to each Sub-Account in the same proportion as each Sub-Account's value
is to the total Variable Account Value as of the end of such Valuation Period.
The Fee does not apply to the Fixed Account.
After the applicable Commencement Date, if a Variable Dollar Benefit is elected,
the Fee will be deducted pro-rata from each Benefit Payment and will result in a
reduction in the amount of such payment.
The Fee may be waived in whole or in part in our sole discretion.
SURRENDERS
SURRENDERS
You may surrender this Contract in full for the Surrender Value, or, partial
surrenders may be made for a lesser amount, by Written Request at any time prior
to the Annuity Commencement Date. The amount of any partial surrender must be at
least $500. A partial surrender cannot reduce your Surrender Value to less than
$500. Surrenders will be deemed to be withdrawn first from the portion of the
Account Value that represents your Accumulated Earnings and then from Purchase
Payments. For purposes of this Contract, Purchase Payments are deemed to be
withdrawn on a "first-in, first out" (FIFO) basis.
The amount available for surrender will be the Surrender Value at the end of the
Valuation Period in which the Written Request is received.
SURRENDER VALUE
The Surrender Value at any time is an amount equal to:
1) the Account Value as of the end of the applicable Valuation
Period; less
2) any applicable Contingent Deferred Sales Charge; less
3) any outstanding loans; and less
4) any applicable premium tax or other taxes not previously deducted.
On full surrender, a full Contract Maintenance Fee will also be deducted as part
of the calculation of the Surrender Value.
CONTINGENT DEFERRED SALES CHARGE
A full or partial surrender may be subject to a Contingent Deferred Sales Charge
as set forth on the Contract Specifications page. The Contingent Deferred Sales
Charge applies to and is calculated separately for each Purchase Payment.
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Surrenders will result in the cancellation of Accumulation Units from each
applicable Sub-Account(s) and/or a reduction of your Fixed Account Value. In the
case of a full surrender, this Contract will be terminated. The Contingent
Deferred Sales Charge may be waived in whole or in part in our sole discretion.
FREE WITHDRAWAL PRIVILEGE
Subject to the provisions of this Contract, we will waive the Contingent
Deferred Sales Charge, to the extent applicable, on full or partial surrenders
as follows:
1) during the first Contract Year, on an amount equal to not more
than the applicable percentage (shown on the Contract
Specifications page) of all Purchase Payments received; and
2) during the second and succeeding Contract Years, on an amount
equal to the greater of:
a) Accumulated Earnings; or
b) not more than the applicable percentage (shown on the
Contract Specifications page) of the Account Value as of
the last Contract Anniversary.
The Free Withdrawal Privilege will be applied in each case to monies in the
order in which they are deemed withdrawn, as described in the SURRENDERS
provision of this Contract.
DEFERRAL OF PAYMENT
The Company has the right to suspend or delay the date of payment of a partial
or full surrender of the Variable Account Value for any period:
1) when the New York Stock Exchange is closed, or when trading on
the New York Stock Exchange is restricted; or
2) when an emergency exists (as determined by the Securities and
Exchange Commission) as a result of which:
a) the disposal of securities in the Separate Account is not
reasonably practicable; or
b) it is not reasonably practicable to determine fairly the value
of the net assets in the Separate Account; or
3) when the Securities and Exchange Commission so permits for the
protection of security holders.
The Company further reserves the right to delay payment of a partial or full
surrender of the Fixed Account Value for up to six (6) months after we receive
your Written Request.
OWNERSHIP PROVISIONS
OWNERSHIP OF SEPARATE ACCOUNT
The Company has absolute ownership of the assets in the Separate Account. The
Company is not, and does not hold itself out to be, a trustee in respect of any
amounts under the Separate Account.
OWNER
The Owner of this Contract is the person shown as Owner on the Contract
Specifications page.
Unless otherwise stated, the Owner may exercise all ownership rights under this
Contract.
TRANSFER AND ASSIGNMENT
You may not transfer, sell, assign, pledge, charge, encumber or in any way
alienate your interest under this Contract.
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SUCCESSOR OWNER
By Written Request, your spouse may, in some cases, succeed to the ownership of
this Contract after your death. Specifically, if you die and your spouse is the
sole surviving Beneficiary under this Contract, he or she will become the
Successor Owner of this Contract if:
1) you make that Written Request before your death; or
2) after your death, your spouse makes that Written Request within
one (1) year of your death and before the Death Benefit
Commencement Date.
As Successor Owner, your spouse will then succeed to all rights of ownership
under this Contract except the right to name another Successor Owner.
COMMUNITY PROPERTY
If you live in a community property state and have a spouse at any time while
you own this Contract, the laws of that state may vary your ownership rights.
BENEFICIARY PROVISIONS
BENEFICIARY
The Beneficiary is the person or persons so designated in the application, if
any, or under the Change of Beneficiary provision of this Contract. If you have
not designated a Beneficiary, or if no Beneficiary designated by you survives
you, then the Beneficiary will be your estate.
A Beneficiary will be deemed not to have survived you if he or she dies within
thirty (30) days after your death.
A beneficiary designation may be joint or contingent or both. Unless otherwise
stated, joint Beneficiaries will be entitled to equal shares. A contingent
Beneficiary will be entitled to a benefit only if there is no surviving primary
Beneficiary.
CHANGE OF BENEFICIARY
Unless you have designated an irrevocable Beneficiary, you may change your
designation of a Beneficiary at any time before the Annuity Commencement Date.
Any such change is subject to the following:
1) it must be made by Written Request; and
2) unless otherwise elected or required by law, it will not
cancel any settlement option election previously made.
BENEFIT ON ANNUITY COMMENCEMENT DATE
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is shown on the Contract Specifications page. You
may change the Annuity Commencement Date by Written Request made at least thirty
(30) days prior to the date that Annuity Benefit payments are scheduled to
begin. Unless the Company agrees otherwise, the Annuity Commencement Date cannot
be later than the Contract Anniversary following your 85th birthday or five (5)
years after the Contract Effective Date, whichever is later.
ANNUITY BENEFIT PAYMENTS
An amount equal to the Account Value (after deduction of any fees and charges,
loans, or applicable premium tax or other taxes not previously deducted) will be
used to provide Annuity Benefit payments under this Contract commencing on or
after the Annuity Commencement Date.
16
<PAGE>
Annuity Benefit payments will be made to you as payee. Any Annuity Benefit
amounts remaining payable on your death will be paid to the contingent payee
designated by you by Written Request. You will be the person on whose life any
Annuity Benefit payments are based.
If no contingent payee designated by you is surviving at the time payment is to
be made, then after your death any Annuity Benefit amounts remaining payable
will be paid to the person or persons designated as contingent payee by Written
Request by the last payee who received payments. Failing that, any such amounts
will be paid to the estate of the last payee who received payments.
FORM OF ANNUITY BENEFIT
Annuity Benefit payments will be Fixed Dollar Benefit payments, made monthly in
accordance with the terms of Option B with a fixed period of one hundred twenty
(120) months under the SETTLEMENT OPTIONS section of this Contract.
In lieu of that, you may elect to have Annuity Benefit payments made pursuant to
any other available settlement option under the SETTLEMENT OPTIONS section of
this Contract. Any such election must be made by Written Request before the
Annuity Commencement Date. You may change your election of a settlement option
by Written Request made at least thirty (30) days prior to the date that Annuity
Benefit payments are scheduled to begin.
BENEFIT ON DEATH OF OWNER
DEATH BENEFIT
A Death Benefit will be paid under this Contract if:
1) you die before the Annuity Commencement Date and before this
Contract is fully surrendered;
2) the Death Benefit Valuation Date has occurred; and
3) your spouse does not become the Successor Owner.
If a Death Benefit becomes payable:
1) it will be in lieu of all other benefits under this Contract; and
2) all other rights under this Contract will be terminated except
for rights related to the Death Benefit.
Death Benefit payments shall be made to the Beneficiary as payee.
The Beneficiary will be the person on whose life any Death Benefit payments
under a settlement option are based.
Any Death Benefit amounts remaining payable on the death of the Beneficiary will
be paid:
1) to any contingent payee designated by you as part of any Death
Benefit settlement option election made by you, or if none is
surviving at the time payment is to be made; then
2) to any contingent payee designated by the Beneficiary by Written
Request, or if none is surviving at the time payment is to be
made; then
3) to the estate of the last payee who received payments.
Only one Death Benefit will be paid under this Contract.
17
<PAGE>
DEATH BENEFIT AMOUNT
If you die before attaining Age eighty (80) and before the Annuity Commencement
Date, the Death Benefit is an amount equal to the greatest of:
1) the Account Value on the Death Benefit Valuation Date;
2) the total Purchase Payment(s), with interest at three percent
(3%) per year, compounded annually, less any partial surrenders
and any Contingent Deferred Sales Charge that applied to those
amounts; or
3) the largest Account Value on any Contract Anniversary after the
fourth Contract Anniversary and prior to the Death Benefit
Valuation Date, less any partial surrenders after such Account
Value was determined and any Contingent Deferred Sales Charge
that applied to those amounts.
If you die after attaining Age eighty (80) and before the Annuity Commencement
Date, the Death Benefit is an amount equal to the greatest of:
1) the Account Value on the Death Benefit Valuation Date;
2) the total Purchase Payment(s), with interest at three percent
(3%) per year, compounded annually through the Contract
Anniversary prior to your 80th birthday, less any partial
surrenders and any Contingent Deferred Sales Charge that applied
to those amounts; or
3) the largest Account Value on any Contract Anniversary after the
fourth Contract Anniversary and prior to the date on which you
attained Age eighty (80), less any partial surrenders after such
Account Value was determined and any Contingent Deferred Sales
Charge that applied to those amounts.
In any event, if this Contract was issued to you after Age eighty (80), and you
die before the Annuity Commencement Date, the amount of the Death Benefit will
be the greater of:
1) the Account Value on the Death Benefit Valuation Date; or
2) the total Purchase Payment(s), less any partial surrenders and
any Contingent Deferred Sales Charge that applied to those
amounts.
As of the Death Benefit Valuation Date, the amount of the Death Benefit will be
allocated among the Sub-Accounts and Fixed Account options in the same
proportion as each Account's value is to the total Account Value as of the end
of the Valuation Period immediately preceding the Death Benefit Valuation Date.
Any applicable premium tax or other taxes not previously deducted, and any
outstanding loans, will be deducted from the Death Benefit amount described
above.
TRANSFERS AFTER DEATH
Between the Death Benefit Valuation Date and the Death Benefit Commencement
Date, the Beneficiary may transfer funds among Sub-Accounts and Fixed Account
options as described under the TRANSFERS section of this Contract.
DEATH BENEFIT COMMENCEMENT DATE
The Beneficiary may designate the Death Benefit Commencement Date by Written
Request within one (1) year of your death. If no designation is made, then the
Death Benefit Commencement Date will be one (1) year after your death.
FORM OF DEATH BENEFIT
Payments under the DEATH BENEFIT provision of this Contract will be Fixed Dollar
Benefit payments made monthly in accordance with the terms of Option A with a
period certain of forty-eight (48) months under the SETTLEMENT OPTIONS section
of this Contract.
18
<PAGE>
In lieu of that, you may elect at any time before your death to have payments
under the Death Benefit provision of this Contract made in one lump sum or
pursuant to any available settlement option under the SETTLEMENT OPTIONS section
of this Contract. If you do not make any such election, the Beneficiary may make
that election at any time after your death and before the Death Benefit
Commencement Date.
You may change your election of a settlement option at any time before your
death.
If a Beneficiary elects a settlement option as noted above, he or she may change
his or her own election of a settlement option by Written Request made at least
thirty (30) days prior to the date that Death Benefit payments are scheduled to
begin.
Any election or change of election must be made by Written Request.
SETTLEMENT OPTIONS
CONDITIONS
Benefit Payments under a settlement option are subject to any minimum amounts,
Payment Intervals, and other terms or conditions that we may from time to time
require. If we change our minimums, we may change any current or future payment
amounts and/or Payment Intervals to conform with the change. More than one
settlement option may be elected if the requirements for each settlement option
elected are satisfied. Once payment begins under a settlement option, the
settlement option may not be changed.
All elected settlement options must comply with current applicable laws,
regulations and rulings issued by any governmental agency.
If more than one person is the payee under a settlement option, payments will be
made to the payees jointly. No more than two persons may be initial payees under
any joint and survivor settlement option.
If payment under a settlement option depends on whether a specified person is
still alive, we may at any time require proof that such person is still living.
We will require proof of the age and/or sex of any person on whose life Benefit
Payments are based.
BENEFIT PAYMENTS
Benefit Payments may be calculated and paid:
1) as a Fixed Dollar Benefit;
2) as a Variable Dollar Benefit; or
3) as a combination of both.
If only a Fixed Dollar Benefit is to be paid, we will transfer all of the
Account Value to the Company's general account on the applicable Commencement
Date, or on the Death Benefit Valuation Date (if applicable). Similarly, if only
a Variable Dollar Benefit is elected, we will transfer all of the Account Value
to the Sub-Accounts as of the end of the Valuation Period immediately prior to
the applicable Commencement Date; we will allocate the amount transferred among
the Sub-Accounts in accordance with a Written Request. No transfers between the
Fixed Dollar Benefit and the Variable Dollar Benefit will be allowed after the
Commencement Date. However, after the Variable Dollar Benefit has been paid for
at least twelve (12) months, the Person Controlling Payments may, no more than
once each twelve (12) months thereafter, transfer all or part of the Benefit
Units upon which the Variable Dollar Benefit is based from the Sub-Account(s)
then held, to Benefit Units in different Sub-Account(s).
If a Variable Dollar Benefit is elected, the amount to be applied under that
benefit is the Variable Account Value as of the end of the Valuation Period
immediately preceding the applicable Commencement Date. If a Fixed Dollar
Benefit is to be paid, the amount to be applied under that benefit is the Fixed
Account Value as of the applicable Commencement Date, or as of the Death Benefit
Valuation Date (if applicable).
19
<PAGE>
FIXED DOLLAR BENEFIT
Fixed Dollar Benefit payments are determined by multiplying the Fixed Account
Value (expressed in thousands of dollars and after deduction of any fees and
charges, loans, or applicable premium tax or other taxes not previously
deducted) by the amount of the monthly payment per $1,000 of value obtained from
the Settlement Option Table for the settlement option elected. Fixed Dollar
Benefit payments will remain level for the duration of the Benefit Payment
Period.
If at the time a Fixed Dollar Benefit is elected, we have available options or
rates on a more favorable basis than those guaranteed, the higher benefits shall
be applied and shall not change for as long as that election remains in force.
VARIABLE DOLLAR BENEFIT
The first monthly Variable Dollar Benefit payment is equal to your Variable
Account Value (expressed in thousands of dollars and after deduction of any fees
and charges, loans, or applicable premium tax or other taxes not previously
deducted) as of the end of the Valuation Period immediately preceding the
applicable Commencement Date multiplied by the amount of the monthly payment per
$1,000 of value obtained from the Settlement Option Table for the Benefit
Payment option elected less the pro-rata portion of the Contract Maintenance
Fee.
The number of Benefit Units in each Sub-Account held by you is determined by
dividing the dollar amount of the first monthly Variable Dollar Benefit payment
from each Sub-Account by the Benefit Unit Value for that Sub-Account as of the
applicable Commencement Date. The number of Benefit Units remains fixed during
the Benefit Payment Period, except as a result of any transfers among
Sub-Accounts after the applicable Commencement Date.
The dollar amount of the second and any subsequent Variable Dollar Benefit
payment will reflect the investment performance of the Sub-Account(s) selected
and may vary from month to month. The total amount of the second and any
subsequent Variable Dollar Benefit payment will be equal to the sum of the
payments from each Sub-Account less a pro-rata portion of the Contract
Maintenance Fee.
The payment from each Sub-Account is found by multiplying the number of Benefit
Units held in each Sub-Account by the Benefit Unit Value for that Sub-Account as
of the end of the fifth Valuation Period preceding the due date of the payment.
The Benefit Unit Value for each Sub-Account is originally established in the
same manner as Accumulation Unit Values. Thereafter, the value of a Benefit Unit
for a Sub-Account is determined by multiplying the Benefit Unit Value as of the
end of the preceding Valuation Period by the Net Investment Factor, determined
as set forth above under the Accumulation Unit Value provision of this Contract,
for the Valuation Period just ended. The product is then multiplied by the
assumed daily investment factor (0.99991781), for the number of days in the
Valuation Period. The factor is based on the assumed net investment rate of
three percent (3%) per year, compounded annually, that is reflected in the
Settlement Option Tables.
LIMITATION ON ELECTION OF SETTLEMENT OPTION
Fixed periods shorter than five (5) years are not available, except as a Death
Benefit settlement option.
SETTLEMENT OPTION COMPUTATIONS
The 1983 Individual Annuity Mortality Table with interest at three percent (3%)
per year, compounded annually, is used to compute all guaranteed settlement
option factors, values, and benefits under this Contract.
20
<PAGE>
AVAILABLE SETTLEMENT OPTIONS
The available settlement options are set out below.
Option A Income for a Fixed Period
We will make periodic payments for a fixed period. The first payment
will be paid as of the last day of the initial Payment Interval. The
maximum time over which payments will be made by us or money will be
held by us is thirty (30) years. The Option A Table applies to this
Option.
Option B Life Annuity with Payments for at Least a Fixed Period
We will make periodic payments for a least a fixed period. If the
person on whose life Benefit Payments are based lives longer than the
fixed period, then we will make payments until his or her death. The
first payment will be paid as of the first day of the initial Payment
Interval. The Option B Table applies to this Option.
Option C Joint and One-half Survivor Annuity
We will make periodic payments until the death of the primary person on
whose life Benefit Payments are based; thereafter, we will make
one-half (1/2) of the periodic payment until the death of the secondary
person on whose life Benefit Payments are based. The first payment will
be paid as of the first day of the initial Payment Interval. The Option
C Table applies to this Option.
Option D Life Annuity
We will make periodic payments until the death of the person on whose
life Benefit Payments are based. The first payment will be paid as of
the first day of the initial Payment Interval. The Option D Table
applies to this Option.
Option E Any Other Form
We will make periodic payments in any other form of settlement option
which is acceptable to us at the time of an election.
SETTLEMENT OPTION TABLES
The Option Tables show the payments we will make at sample Payment Intervals for
each $1,000 applied at the guaranteed interest rate. Amounts may vary with the
Payment Interval and the age of the person on whose life Benefit Payments are
based.
OPTION A TABLE - INCOME FOR A FIXED PERIOD
Payments for fixed number of years for each $1,000 applied.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Terms Semi- Terms of Semi- Terms of Semi-
of Annual Annual Quarterly Monthly Payments Annual Annual Quarterly Monthly Payments Annual Annual Quarterly Monthly
Payments
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Years Years Years
6 184.60 91.62 45.64 15.18 11 108.08 53.64 26.72 8.88 16 79.61 39.51 19.68 6.54
7 160.51 79.66 39.68 13.20 12 100.46 49.86 24.84 8.26 17 75.95 37.70 18.78 6.24
8 142.46 70.70 35.22 11.71 13 94.03 46.67 23.25 7.73 18 72.71 36.09 17.98 5.98
9 128.43 63.74 31.75 10.56 14 88.53 43.94 21.89 7.28 19 69.81 34.65 17.26 5.74
10 117.23 58.18 28.98 9.64 15 83.77 41.57 20.71 6.89 20 67.22 33.36 16.62 5.53
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
OPTION B TABLE - LIFE ANNUITY
- ----------------------------------------------------------------------------
With Payments For At Least A Fixed Period
------- ---------------- --------------- ---------------- ----------------
60 Months 120 Months 180 Months 240 Months
------- ---------------- --------------- ---------------- ----------------
Age
------- ---------------- --------------- ---------------- ----------------
55 $4.42 $4.39 $4.32 $4.22
56 4.51 4.47 4.40 4.29
57 4.61 4.56 4.48 4.35
58 4.71 4.65 4.56 4.42
59 4.81 4.75 4.64 4.49
60 4.92 4.86 4.73 4.55
61 5.04 4.97 4.83 4.62
62 5.17 5.08 4.92 4.69
63 5.31 5.20 5.02 4.76
64 5.45 5.33 5.12 4.83
65 5.61 5.46 5.22 4.89
66 5.77 5.60 5.33 4.96
67 5.94 5.75 5.43 5.02
68 6.13 5.91 5.54 5.08
69 6.33 6.07 5.65 5.14
70 6.54 6.23 5.76 5.19
71 6.76 6.41 5.86 5.24
72 7.00 6.58 5.96 5.28
73 7.26 6.77 6.06 5.32
74 7.53 6.95 6.16 5.35
------- ---------------- --------------- ---------------- ----------------
OPTION C TABLE - JOINT AND ONE-HALF SURVIVOR ANNUITY
Monthly payments for each $1,000 of proceeds by ages of persons
named*.
<TABLE>
<CAPTION>
- ------------ --------------------------------------------------------------------------------------------------------
Secondary Age
- ------------ --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
Primary
Age 60 61 62 63 64 65 66 67 68 69 70
- ------------ --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
60 $4.56 $4.58 $4.61 $4.63 $4.65 $4.67 $4.69 $4.71 $4.73 $4.75 $4.76
61 4.63 4.66 4.69 4.71 4.73 4.76 4.78 4.80 4.82 4.84 4.86
62 4.71 4.74 4.77 4.80 4.82 4.85 4.87 4.90 4.92 4.94 4.96
63 4.79 4.82 4.85 4.88 4.91 4.94 4.97 5.00 5.02 5.05 5.07
64 4.88 4.91 4.94 4.98 5.01 5.04 5.07 5.10 5.13 5.15 5.18
65 4.96 5.00 5.03 5.07 5.11 5.14 5.17 5.20 5.24 5.27 5.30
66 5.05 5.09 5.13 5.17 5.21 5.24 5.28 5.32 5.35 5.38 5.42
67 5.14 5.18 5.23 5.27 5.31 5.35 5.39 5.43 5.47 5.51 5.54
68 5.23 5.28 5.33 5.37 5.42 5.46 5.50 5.55 5.59 5.63 5.67
69 5.33 5.38 5.43 5.48 5.53 5.57 5.62 5.67 5.72 5.76 5.81
70 5.43 5.48 5.53 5.59 5.64 5.69 5.74 5.80 5.85 5.90 5.95
- ------------ --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
</TABLE>
*Payments after the death of the Primary Payee will be one-half (1/2) of the
amount shown.
22
<PAGE>
OPTION D TABLE - LIFE ANNUITY Monthly payments
for each $1,000 applied.
- ------ -------------- ------------ ---------------- -------------- -------------
0 Months 60 Months 120 Months 180 Months 240 Months
- ------ ------------- ----------------------------- -------------- --------------
Age
- ------ -------------- ------------ ---------------- -------------- -------------
55 4.43 $4.42 $4.39 $4.32 $4.22
56 4.52 4.51 4.47 4.40 4.29
57 4.62 4.61 4.56 4.48 4.35
58 4.72 4.71 4.65 4.56 4.42
59 4.83 4.81 4.75 4.64 4.49
60 4.94 4.92 4.86 4.73 4.55
61 5.07 5.04 4.97 4.83 4.62
62 5.20 5.17 5.08 4.92 4.69
63 5.34 5.31 5.20 5.02 4.76
64 5.49 5.45 5.33 5.12 4.83
65 5.65 5.61 5.46 5.22 4.89
66 5.82 5.77 5.60 5.33 4.96
67 6.00 5.94 5.75 5.43 5.02
68 6.20 6.13 5.91 5.54 5.08
69 6.41 6.33 6.07 5.65 5.14
70 6.64 6.54 6.23 5.76 5.19
71 6.89 6.76 6.41 5.86 5.24
72 7.15 7.00 6.58 5.96 5.28
73 7.43 7.26 6.77 6.06 5.32
74 7.74 7.53 6.95 6.16 5.35
- --------------------- ------------ ---------------- -------------- -------------
23
<PAGE>
ANNUITY INVESTORS(SERVICEMARK)
Life Insurance Company
Individual Flexible Premium Deferred Variable Annuity Contract
Nonparticipating - No Dividends
Tax-Qualified
Exhibit (4)(b)
ANNUITY INVESTORS(SERVICEMARK)
Life Insurance Company
A Stock Insurance Company
Domicile Address: 580 Walnut Street, Cincinnati, Ohio 45202
Administrative Office:
P. O. Box 5423, Cincinnati, Ohio 45201-5423
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
TWENTY DAY EXAMINATION-RIGHT TO CANCEL
You may cancel this contract ("Contract") by returning it and giving us
written notice of cancellation. You have until midnight of the twentieth day
following the date you receive this Contract. This Contract must be returned
to us and the required notice must be given in person, or to the agent who
sold it to you, or by mail. If by mail, the return of the Contract or the
notice is effective on the date it is postmarked, with the proper address
and with postage paid. If you cancel this Contract as set forth above, the
Contract will be void and we will refund the Purchase Payments plus or minus
any investment gains or losses under the Contract as of the end of the
Valuation Period during which the returned Contract is received by the
Company, or as otherwise required by law.
As you read through this Contract, please note that the words "we", "us",
"our", and "Company" refer to Annuity Investors Life Insurance Company. The
words "you" and "your" refer to the Owner, including any joint owner.
This is a deferred variable annuity contract. It is a legally binding
agreement between you and us.
PLEASE READ YOUR CONTRACT WITH CARE.
/s/ Betty Kasprowicz /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
Nonparticipating - No Dividends
NON-TAX-QUALIFIED
BENEFIT PAYMENTS AND OTHER VALUES DESCRIBED IN THIS CONTRACT, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, MAY INCREASE OR DECREASE AND ARE
NOT GUARANTEED AS TO FIXED DOLLAR AMOUNTS. NO MINIMUM CONTRACT VALUE IS
GUARANTEED, EXCEPT FOR AMOUNTS IN THE FIXED ACCOUNT.
<PAGE>
CONTRACT SPECIFICATIONS
OWNER: JOHN DOE
AGE OF OWNER AS OF CONTRACT EFFECTIVE DATE: 35
[JOINT OWNER:]
[AGE OF JOINT OWNER AS OF CONTRACT EFFECTIVE DATE:]
ANNUITANT:
[AGE OF ANNUITANT AS OF CONTRACT EFFECTIVE DATE:]
CONTRACT NUMBER: 000000000
CONTRACT EFFECTIVE DATE: APRIL 01, 1996
ANNUITY COMMENCEMENT DATE: APRIL 01, 2031
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT: Annuity Investors Variable Account B
Following is a list of the Funds in which the currently available Sub-Accounts
invest:
[Janus Aspen Series Aggressive Growth Portfolio]
[Janus Aspen Series Worldwide Growth Portfolio]
[Janus Aspen Series Balanced Portfolio]
[Janus Aspen Series Growth Portfolio]
[Janus Aspen Series International Growth Portfolio]
[Dreyfus Variable Investment Fund-Capital Appreciation Portfolio]
[Dreyfus Variable Investment Fund-Money Market Portfolio]
[Dreyfus Variable Investment Fund-Growth and Income Portfolio]
[Dreyfus Variable Investment Fund-Small Cap Portfolio]
[The Dreyfus Socially Responsible Growth Fund, Inc.]
[Dreyfus Stock Index Fund]
[Strong Special Fund II]
[Strong Growth Fund II]
[INVESCO VIF-Industrial Income Fund]
[INVESCO VIF-Total Return Fund]
[INVESCO VIF- High Yield Fund]
[Morgan Stanley Universal Funds, Inc. U.S. Real Estate Portfolio]
[Morgan Stanley Universal Funds, Inc. Value Portfolio]
[Morgan Stanley Universal Funds, Inc. Emerging Markets Equity Portfolio]
[Morgan Stanley Universal Funds, Inc. Fixed Income Portfolio]
[Morgan Stanley Universal Funds, Inc. Mid-Cap Value Portfolio]
[PBHG Insurance Series Fund, Inc.-Growth II Portfolio]
[PBHG Insurance Series Fund, Inc.-Large-Cap Growth Portfolio]
[PBHG Insurance Series Fund, Inc.-Technology & Communications Portfolio]
2
<PAGE>
FIXED ACCOUNT:
Following is a list of the currently available Fixed Account options, with
guarantee periods as may be applicable:
Fixed Accumulation Account Option
[Fixed Account Option One-Year Guarantee Period]
[Fixed Account Option Three-Year Guarantee Period]
[Fixed Account Option Five-Year Guarantee Period]
[Fixed Account Option Seven-Year Guarantee Period]
The guaranteed rate of interest for the Fixed Account options is three percent
(3%) per year, compounded annually.
TRANSFER FEE: [$25] per transfer in excess of twelve (12) in any Contract Year.
- ------------
CONTINGENT DEFERRED SALES CHARGE: An amount deducted on each partial or full
surrender of a Purchase Payment, as follows:
Number of full years elapsed Contingent Deferred Sales Charge
between the date of receipt of a as a percentage of the associated
Purchase Payment and date Written Purchase Payment Surrendered
Request for surrender is received
---------------------------------- --------------------------------
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7+ 0%
Please see the SURRENDERS section of this Contract for additional information.
FREE WITHDRAWAL PRIVILEGE:
CONTRACT YEAR APPLICABLE PERCENTAGE
1 10% of all Purchase Payments received
2 and thereafter Greater of: (a) Accumulated Earnings; or (b)
10% of Account Value as of last Contract
Anniversary
Please see the SURRENDERS section of this Contract for additional information.
CONTRACT MAINTENANCE FEE: [$30] Annually
MORTALITY AND EXPENSE RISK CHARGE: A charge equal to an effective annual rate of
[1.25%] of the daily Net Asset Value of the Sub-Accounts.
ADMINISTRATION CHARGE: A charge equal to an effective annual rate of [0.15%] of
the daily Net Asset Value of the Sub-Accounts.
TERMINATION: We reserve the right to terminate this Contract at any time the
Surrender Value is less than $500. A surrender will be deemed to have been made
and we will pay you the Surrender Value of this Contract.
3
<PAGE>
INQUIRIES: FOR INFORMATION, OR TO MAKE A COMPLAINT, CALL OR WRITE:
Variable Annuity Service Center
Annuity Investors Life Insurance Company
Post Office Box 5423
Cincinnati, Ohio 45201-5423
1-800-789-6771
4
<PAGE>
DEFINITIONS
ACCOUNT(S): The Sub-Account(s) and/or the Fixed Account options.
ACCOUNT VALUE: The aggregate value of your interest in the Sub-Account(s) and
the Fixed Account options as of the end of any Valuation Period. The value of
your interest in all Sub-Accounts is the "Variable Account Value," and the value
of your interest in all Fixed Account options is the "Fixed Account Value."
ACCUMULATED EARNINGS: The Account Value in excess of Purchase Payments received
by us and which have not been returned to you.
ACCUMULATION PERIOD: The period prior to the applicable Commencement Date.
ACCUMULATION UNIT: A unit of measure used to calculate the value(s) of the
Sub-Account(s) prior to the applicable Commencement Date.
ADMINISTRATIVE OFFICE: The home office of the Company or any other place of
business which we may designate for administration.
AGE: Age as of most recent birthday.
ANNUITANT: A natural person whose life is used to determine the duration of
annuity payments involving life contingencies.
ANNUITY BENEFIT: Periodic payments under a settlement option, which commence on
or after the Annuity Commencement Date.
ANNUITY COMMENCEMENT DATE: The first day of the first Payment Interval for which
an Annuity Benefit payment is to be made under a settlement option.
BENEFICIARY: A person entitled to the Death Benefit under the Contract upon the
death of an Owner. If there is a surviving joint Owner, that person will be
deemed the Beneficiary.
BENEFIT PAYMENT: The Annuity Benefit or Death Benefit payable under a settlement
option. Variable Dollar Benefit payments may vary in amount. Fixed Dollar
Benefit payments remain constant except under certain joint and survivor
settlement options.
BENEFIT PAYMENT PERIOD: The period starting with the Commencement Date during
which Benefit Payments are to be made under this Contract.
BENEFIT UNIT: A unit of measure used to determine the dollar value of any
Variable Dollar Benefit payments after the first Benefit Payment is made by us.
CODE: The Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
COMMENCEMENT DATE: The Annuity Commencement Date if an Annuity Benefit is
payable under this Contract, or the Death Benefit Commencement Date if a Death
Benefit is payable under this Contract.
CONTRACT ANNIVERSARY: An annual anniversary of the Contract Effective Date.
CONTRACT EFFECTIVE DATE: The date shown on the Contract Specifications page.
CONTRACT YEAR: Any period of twelve (12) months, commencing on the Contract
Effective Date and on each Contract Anniversary thereafter.
DEATH BENEFIT: The benefit described in the Benefit on Death of Owner section of
this Contract.
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DEATH BENEFIT COMMENCEMENT DATE: The first day of the first Payment Interval for
which a Death Benefit payment is to be made under a settlement option, or the
date a Death Benefit is to be paid in a lump sum.
DEATH BENEFIT VALUATION DATE: The date that Due Proof of Death has been received
by us and the earlier to occur of:
1) our receipt of a Written Request with instructions as to the form
of Death Benefit; or
2) the Death Benefit Commencement Date.
DUE PROOF OF DEATH: Any of the following:
1) a certified copy of a death certificate;
2) a certified copy of a decree of a court of competent jurisdiction
as to the finding of death; or
3) any other proof satisfactory to us.
FUND: A management investment company or portfolio thereof, registered under the
Investment Company Act of 1940, in which a Sub-Account of the Separate
Account invests.
NET ASSET VALUE: The amount computed by an investment company, no less
frequently than each Valuation Period, as the price at which its shares or
units, as the case may be, are redeemed in accordance with the rules of the
Securities and Exchange Commission.
OWNER: The person(s) identified as such on the Contract Specifications page.
PAYMENT INTERVAL: A monthly, quarterly, annual or other regular interval during
the Benefit Payment Period.
PERSON CONTROLLING PAYMENTS: The "Person Controlling Payments" means the
following, as the case may be:
1) with respect to Annuity Benefit payments,
a) the Owner, if the Owner has the right to change the payee;
or
b) in all other cases, the payee; and
2) with respect to Death Benefit payments,
a) the Beneficiary; or
b) if the Beneficiary is deceased, the payee.
PURCHASE PAYMENT: A contribution amount paid to us in consideration for this
Contract, after the deduction of any and all of the following which may apply:
1) any fee charged by the person remitting payments for you;
2) premium taxes; and/or
3) other taxes.
SEPARATE ACCOUNT: An account, which may be an investment company, which is
established and maintained by the Company pursuant to the laws of the State of
Ohio.
SUB-ACCOUNT: The Separate Account is divided into Sub-Accounts, each of which
invests in the shares of a designated Fund.
VALUATION PERIOD: The period commencing at the close of regular trading on the
New York Stock Exchange on any Valuation Date, and ending at the close of
trading on the next succeeding Valuation Date. "Valuation Date" means each day
on which the New York Stock Exchange is open for business.
WRITTEN REQUEST: Information provided, or a request made, that is complete and
satisfactory to us, that is sent to us on our form or in a manner satisfactory
to us, which may, at our discretion, be telephonic, and that is received by us
at our Administrative Office. A Written Request is subject to any payment made
or any action we take before we acknowledge it. The Company will deem a Written
Request a standing order which may be modified or revoked only by a subsequent
Written Request, when permitted by the terms of this Contract. You may be
required to return this Contract to us in connection with a Written Request.
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GENERAL PROVISIONS
ENTIRE CONTRACT
We have issued this Contract to the Owner identified on the Contract
Specifications page. This Contract is an individual flexible premium deferred
variable annuity contract. This Contract is restricted as required to obtain
favorable tax treatment under the Code. This Contract, any endorsements to it
and the application for it, if any, form the entire Contract between you and us.
Only statements in the application, if any, or statements made elsewhere by you
in consideration for this Contract will be used to void your interest under this
Contract, or to defend a claim based on it. Such statements are representations
and not warranties.
CHANGES - WAIVERS
No changes or waivers of the terms of this Contract are valid unless made in
writing by our President, Vice President, or Secretary. No agent or other person
not named above has authority to change or waive any provision of this Contract.
We reserve the right both to administer and to change the provisions of this
Contract to conform to any applicable laws, regulations or rulings issued by a
governmental agency.
In any event, the Company reserves the right to add or delete Fixed Account
options and Sub-Accounts, to substitute shares of a different Fund or different
class or series of a Fund for shares held in a Sub-Account, to merge or combine
Sub-Accounts, to merge or combine the Separate Account with any other separate
account of the Company, to transfer the assets of the Separate Account to
another life insurance company by means of a merger or reinsurance, to convert
the Separate Account into a managed separate account, and to de-register the
Separate Account under the Investment Company Act of 1940. Any such change will
be made in accordance with applicable insurance and securities laws and after
obtaining any necessary approvals, including those of the Ohio Department of
Insurance and the Securities and Exchange Commission.
NONPARTICIPATING
This Contract does not pay dividends or share in the Company's divisible
surplus.
MISSTATEMENT
If the age or sex of a person on whose life Benefit Payments are based is
misstated, the payments or other benefits under this Contract shall be adjusted
to the amount which would have been payable based on the correct age or sex. If
we made any underpayments based on any misstatement, the amount of any
underpayment with interest shall be immediately paid in one sum. In addition to
any other remedies that may be available at law or at equity, we may deduct any
overpayments made, with interest, from any succeeding payment(s) due under this
Contract.
REQUIRED REPORTS
At least once each Contract Year, we will send you a report of your current
values and any other information required by law, until the first to occur of
the following:
1) the date this Contract is fully surrendered;
2) the Annuity Commencement Date; or
3) the Death Benefit Commencement Date.
The report will be mailed to your last known address. The reported values will
be based on the information in our possession at the time the report is prepared
by us. We may adjust the reported values at a later date if that information
proves to be incorrect or has changed.
EXCLUSIVE BENEFIT
This Contract is for the exclusive benefit of you and your Beneficiaries. Your
interest under this Contract is nonforfeitable by us.
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STATE LAW
All factors, values, benefits and reserves under this Contract will not be less
than those required by the law of the state in which this Contract is delivered.
CLAIMS OF CREDITORS
To the extent allowed by law, your Contract and all values and benefits under it
are not subject to the claims of creditors or to legal process.
COMPANY LIABILITY
We will not incur any liability or be responsible for any failure, in whole or
in part, by you or by any person having rights or benefits arising out of or
related to this Contract, to comply with any applicable laws, regulations or
rulings issued by a governmental agency.
VOTING RIGHTS
To the extent required by law, we will vote all shares of the Funds held in the
Separate Account, at regular and special shareholder meetings of the Funds. The
shares will be voted in accordance with instructions received from you, or if
applicable, from the Person Controlling Payments. If there is a change in the
law which permits us to vote the shares of the Funds without such instructions,
then we reserve the right to do so.
INCONTESTABILITY
This Contract shall not be contestable by us.
DISCHARGE OF LIABILITY
Upon payment of any partial or full surrender, or any Benefit Payment, we shall
be discharged from all liability to the extent of each such payment.
TRANSFER BY THE COMPANY
We reserve the right to transfer our obligations under this Contract to another
qualified life insurance company under an assumption reinsurance arrangement,
and without your prior consent.
PURCHASE PAYMENTS
PURCHASE PAYMENTS
One or more Purchase Payments may be paid to us at any time before the Annuity
Commencement Date, so long as:
1) you are still living; and
2) this Contract has not been fully surrendered.
The initial Purchase Payment must be paid to us on or before the Contract
Effective Date. Each Purchase Payment must be paid to us at our Administrative
Office, and is subject to any minimums or maximums that we set for such from
time to time. Upon request, we will provide you with a receipt as proof of
payment.
ALLOCATION OF PURCHASE PAYMENTS
We will allocate Purchase Payments to the Fixed Account options and/or to the
Sub-Accounts according to the instructions we receive by Written Request.
Allocations must be made in whole percentages. The minimum Purchase Payment
amount that can be allocated to a Fixed Account option other than the Fixed
Accumulation Account is $2000.
NO TERMINATION
Except as stated elsewhere in this Contract, this Contract will not be
terminated by us due to failure to make additional Purchase Payments.
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FIXED ACCOUNT
FIXED ACCOUNT
The Fixed Account is part of the Company's general account. The values of the
Fixed Account are not dependent upon the investment performance of the
Sub-Accounts.
FIXED ACCOUNT OPTIONS. The Fixed Account options available as of the Contract
Effective Date are listed on the Contract Specifications page. Different Fixed
Account options may be offered by us at any time.
INTEREST CREDITED. The guaranteed rate of interest for the Fixed Account options
is three percent (3%) per year, compounded annually. We may, at any time, pay a
current interest rate as declared by our Board of Directors for any of the Fixed
Account options that is higher than the guaranteed rate.
The interest rate initially credited to each Purchase Payment(s) allocated to
the Fixed Accumulation Account Option will not be changed any sooner than twelve
(12) months following the date on which that Purchase Payment was received;
thereafter, the interest rate credited will not be changed more frequently than
once per calendar quarter. In the case of transfers from other Fixed Account
options or the Sub-Accounts to the Fixed Accumulation Account Option, the
interest rate will not be changed more frequently than once per calendar
quarter.
The interest rate credited to amounts allocated to the Fixed Account options
other than the Fixed Accumulation Account Option will not be changed during the
duration of the applicable guarantee period.
RENEWAL. The following RENEWAL provisions apply to all Fixed Account options
except the Fixed Accumulation Account Option.
At the end of a guarantee period, and for the thirty (30) days immediately
preceding the end of such guarantee period, you may elect a new option to
replace the Fixed Account option that is then expiring. The entire amount
maturing may be re-allocated to any of the then-current options under this
Contract (including the various Sub-Accounts within the Separate Account),
except that a Fixed Account option with a guarantee period that would extend
past the Annuity Commencement Date may not be selected. In particular, in the
case of renewals occurring within one (1) year of such Commencement Date, the
only Fixed Account option available is the Fixed Accumulation Account Option.
If you do not specify a new Fixed Account option in accordance with the
preceding paragraph, you will be deemed to have selected the same Fixed Account
option as is expiring, so long as the guarantee period of such option does not
extend beyond the Annuity Commencement Date. In the event that such a period
would extend beyond the Annuity Commencement Date, you will be deemed to have
selected the Fixed Account option with the longest available guarantee period
that expires prior to the Annuity Commencement Date, or, failing that, the Fixed
Accumulation Account Option.
Any renewal of a Fixed Account option under this RENEWAL provision will be
effective on the day after the expiration of the guarantee period that is then
expiring.
FIXED ACCOUNT VALUE
The Fixed Account Value for this Contract at any time is equal to:
1) the Purchase Payment(s) allocated to the Fixed Account; plus
2) amounts transferred to the Fixed Account; plus
3) interest credited to the Fixed Account; less
4) any charges, surrenders, deductions, amounts transferred from the
Fixed Account or other adjustments made as described elsewhere in
this Contract.
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SEPARATE ACCOUNT
GENERAL DESCRIPTION
The variable benefits under this Contract are provided through the Separate
Account. The Separate Account is registered with the Securities and Exchange
Commission as a unit investment trust under the Investment Company Act of 1940.
The income, if any, and any gains or losses, realized or unrealized, on the
Separate Account will be credited to or charged against the amounts allocated to
such account without regard to other income, gains, or losses of the Company.
The amounts allocated to the Separate Account and the accumulations thereon
remain the property of the Company, but that portion of the assets of the
Separate Account that is equal to the reserves and other contractual liabilities
under all policies, annuities, and other contracts identified with the Separate
Account is not chargeable with liabilities arising out of any other business of
the Company. The Company is not, and does not hold itself out to be, a trustee
in respect of such amounts.
We have the right to transfer to our general account, in our sole discretion and
at any time without prior written notice, any assets of the Separate Account
which are in excess of the required reserves and other contractual liabilities
under all policies, annuities, and other contracts identified with the Separate
Account.
SUB-ACCOUNTS OF THE SEPARATE ACCOUNT
The assets of the Separate Account are divided into Sub-Accounts. The
Sub-Accounts available as of the Contract Effective Date are listed on the
Contract Specifications page. Each Sub-Account invests exclusively in shares of
an underlying Fund as shown on the Contract Specifications page. Any amounts of
income and any gains on the shares of a Fund will be reinvested in additional
shares of that Fund at its Net Asset Value.
VALUATION OF ASSETS
Shares of Funds held by each Sub-Account will be valued at their Net Asset Value
at the end of each Valuation Period, as reported by each such Fund.
VARIABLE ACCOUNT VALUE
Purchase Payment(s) may be allocated among and, as described elsewhere in this
Contract, Account values may be transferred to the various Sub-Accounts within
the Separate Account. For each Sub-Account, the Purchase Payment(s) or amounts
transferred are converted into Accumulation Units. The number of Accumulation
Units credited is determined by dividing the dollar amount directed to each
Sub-Account by the value of the Accumulation Unit for that Sub-Account at the
end of the Valuation Period during which the Purchase Payment(s) or transferred
amount is received.
The following events will result in the cancellation of an appropriate number of
Accumulation Units of a Sub-Account:
1) transfer from a Sub-Account;
2) full or partial surrender of the Variable Account Value;
3) payment of a Death Benefit;
4) application of the Variable Account Value to a settlement option;
5) deduction of the Contract Maintenance Fee; or
6) deduction of any Transfer Fee.
Accumulation Units will be canceled as of the end of the Valuation Period during
which the Company receives a Written Request regarding the event giving rise to
such cancellation, or an applicable Commencement Date, or the end of the
Valuation Period on which the Contract Maintenance Fee or Transfer Fee is due,
as the case may be.
The Variable Account Value for this Contract at any time is equal to the sum of
the number of Accumulation Units for each Sub-Account attributable to this
Contract multiplied by the Accumulation Unit Value for each Sub-Account at the
end of the preceding Valuation Period.
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ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Sub-Account, with the exception of
the Money Market Sub-Account, was set at $10.00. The initial Accumulation Unit
Value for the Money Market Sub-Account was set at $1.00. Thereafter, the
Accumulation Unit Value at the end of each Valuation Period is the Accumulation
Unit Value at the end of the previous Valuation Period multiplied by the Net
Investment Factor, as described below.
The Net Investment Factor is a factor applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. Each
Sub-Account has a Net Investment Factor for each Valuation Period which may be
greater or less than one. Therefore, the Accumulation Unit Value for each
Sub-Account may increase or decrease. The Net Investment Factor for any
Sub-Account for any Valuation Period is determined by dividing (1) by (2) and
subtracting (3) from the result, where:
1) is equal to:
a) the Net Asset Value per share of the Fund held in the
Sub-Account, determined at the end of the applicable Valuation
Period; plus
b) the per share amount of any dividend or net capital gain
distributions made by the Fund held in the Sub-Account, if the
"ex-dividend" date occurs during the applicable Valuation Period;
plus or minus
c) a per share charge or credit for any taxes reserved for, which is
determined by the Company to have resulted from the investment
operations of the Sub-Account;
2) is the Net Asset Value per share of the Fund held in the Sub-Account,
determined at the end of the immediately preceding Valuation Period;
and
3) is the factor representing the Mortality and Expense Risk Charge and
the Administration Charge deducted from the Sub-Account for the number
of days in the applicable Valuation Period.
TRANSFERS
Prior to the applicable Commencement Date, you may transfer amounts in a
Sub-Account to a different Sub-Account and/or one or more of the Fixed Account
options.
After the first Contract Anniversary, and prior to the applicable Commencement
Date, you may transfer amounts from any Fixed Account option to any other Fixed
Account option and/or one or more of the Sub-Accounts. If a transfer is being
made from a Fixed Account option pursuant to the RENEWAL provision of this
Contract, then the entire amount of that Fixed Account option subject to renewal
at that time may be transferred. In any other case, transfers from a Fixed
Account option are subject to a cumulative limit during each Contract Year of
twenty percent (20%) of the Fixed Account option's value as of the most recent
Contract Anniversary.
Amounts previously transferred from Fixed Account options to the Sub-Accounts
may not be transferred back to the Fixed Account options for a period of six (6)
months from the date of transfer.
The minimum transfer amount for any transfer is $500. The number of transfers
per year over which we will charge a Transfer Fee on each additional transfer,
and the amount of the Transfer Fee, are shown on the Contract Specifications
page.
We reserve the right, in our sole discretion and at any time without prior
notice, to terminate, suspend or modify the transfer privileges described above.
FEES AND CHARGES
MORTALITY AND EXPENSE RISK CHARGE
The Mortality and Expense Risk Charge is shown on the Contract Specifications
page and is deducted daily from each Sub-Account. This deduction is made to
compensate the Company for assuming the mortality and expense risks under this
Contract.
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ADMINISTRATION CHARGE
The Administration Charge is shown on the Contract Specifications page and is
deducted daily from each Sub-Account. This deduction is made to reimburse the
Company for expenses incurred in the administration of this Contract and the
Separate Account.
CONTRACT MAINTENANCE FEE
The Contract Maintenance Fee (iFeei) is shown on the Contract Specifications
page and is deducted as of the Valuation Period next following each Contract
Anniversary prior to the applicable Commencement Date. In addition, the full
annual Fee will be deducted at the time of a full surrender. The Fee will be
allocated to each Sub-Account in the same proportion as each Sub-Account's value
is to the total Variable Account Value as of the end of such Valuation Period.
The Fee does not apply to the Fixed Account.
After the applicable Commencement Date, if a Variable Dollar Benefit is elected,
the Fee will be deducted pro-rata from each Benefit Payment and will result in a
reduction in the amount of such payment.
The Fee may be waived in whole or in part in our sole discretion.
SURRENDERS
SURRENDERS
You may surrender this Contract in full for the Surrender Value, or, partial
surrenders may be made for a lesser amount, by Written Request at any time prior
to the Annuity Commencement Date. The amount of any partial surrender must be at
least $500. A partial surrender cannot reduce your Surrender Value to less than
$500. Surrenders will be deemed to be withdrawn first from the portion of the
Account Value that represents your Accumulated Earnings and then from Purchase
Payments. For purposes of this Contract, Purchase Payments are deemed to be
withdrawn on a "first-in, first out" (FIFO) basis.
The amount available for surrender will be the Surrender Value at the end of the
Valuation Period in which the Written Request is received.
SURRENDER VALUE
The Surrender Value at any time is an amount equal to:
1) the Account Value as of the end of the applicable Valuation
Period; less
2) any applicable Contingent Deferred Sales Charge; less
3) any outstanding loans; and less
4) any applicable premium tax or other taxes not previously deducted.
On full surrender, a full Contract Maintenance Fee will also be deducted as part
of the calculation of the Surrender Value.
CONTINGENT DEFERRED SALES CHARGE
A full or partial surrender may be subject to a Contingent Deferred Sales Charge
as set forth on the Contract Specifications page. The Contingent Deferred Sales
Charge applies to and is calculated separately for each Purchase Payment.
Surrenders will result in the cancellation of Accumulation Units from each
applicable Sub-Account(s) and/or a reduction of your Fixed Account Value. In the
case of a full surrender, this Contract will be terminated. The Contingent
Deferred Sales Charge may be waived in whole or in part in our sole discretion.
FREE WITHDRAWAL PRIVILEGE
Subject to the provisions of this Contract, we will waive the Contingent
Deferred Sales Charge, to the extent applicable, on full or partial surrenders
as follows:
1) during the first Contract Year, on an amount equal to not more than
the applicable percentage (shown on the Contract Specifications page)
of all Purchase Payments received; and
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2) during the second and succeeding Contract Years, on an amount equal to
the greater of:
a) Accumulated Earnings, or
b) not more than the applicable percentage (shown on the Contract
Specifications page) of the Account Value as of the last Contract
Anniversary.
The Free Withdrawal Privilege will be applied in each case to monies in the
order in which they are deemed withdrawn, as described in the SURRENDERS
provision of this Contract.
DEFERRAL OF PAYMENT
The Company has the right to suspend or delay the date of payment of a partial
or full surrender of the Variable Account Value for any period:
1) when the New York Stock Exchange is closed, or when trading on
the New York Stock Exchange is restricted; or
2) when an emergency exists (as determined by the Securities and
Exchange Commission) as a result of which:
a) the disposal of securities in the Separate Account is not
reasonably practicable; or
b) it is not reasonably practicable to determine fairly the
value of the net assets in the Separate Account; or
3) when the Securities and Exchange Commission so permits for the
protection of security holders.
The Company further reserves the right to delay payment of a partial or full
surrender of the Fixed Account Value for up to six (6) months after we receive
your Written Request.
OWNERSHIP PROVISIONS
OWNERSHIP OF SEPARATE ACCOUNT
The Company has absolute ownership of the assets in the Separate Account. The
Company is not, and does not hold itself out to be, a trustee in respect of any
amounts under the Separate Account.
OWNER
The Owner of this Contract is the person or persons shown as Owner on the
Contract Specifications page, or the person or persons you designate under the
TRANSFER OF OWNERSHIP provision of this Contract.
Unless otherwise stated, the Owner may exercise all ownership rights under this
Contract.
If you or the joint owner is a non-natural person, then the age of the eldest
Annuitant will be treated as the age of such Owner for all purposes under this
Contract.
JOINT OWNERSHIP
Two owners may jointly own this Contract. Joint owners may independently
exercise transfers among the Sub-Accounts and the Fixed Account options. In
addition, joint owners may independently designate Purchase Payment allocations.
All other rights of ownership must be exercised by joint action.
ASSIGNMENT
You may assign all or any part of your rights under this Contract except your
rights to:
1) designate or change a Beneficiary;
2) designate or change an Annuitant;
3) transfer ownership; and
4) elect a settlement option.
The person to whom you make an assignment is called an assignee.
We are not responsible for the validity of any assignment. An assignment must be
in writing and must be received at our Administrative Office. We will not be
bound by an assignment until we acknowledge it.
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An assignment is subject to any payment made or any action we take before we
acknowledge it. An assignment may be ended only by the assignee or as provided
by law.
The rights of an assignee, including the right to any distribution under this
Contract, come before the rights of any Owner, Annuitant, Beneficiary or other
payee.
TRANSFER OF OWNERSHIP
You may transfer ownership at any time during your lifetime. Any such transfer
is subject to the following:
1) it must be made by Written Request; and
2) unless otherwise elected or required by law, it will not
cancel a designation of an Annuitant or Beneficiary or any
settlement option election previously made.
SUCCESSOR OWNER
By Written Request, your spouse may, in some cases, succeed to the ownership of
this Contract after your death. Specifically, if you die and your spouse is the
surviving joint owner or sole surviving Beneficiary under this Contract, he or
she will become the Successor Owner of this Contract if:
1) you make that Written Request before your death; or
2) after your death, your spouse makes that Written Request
within one (1) year of your death and before the Death
Benefit Commencement Date.
As Successor Owner, your spouse will then succeed to all rights of ownership
under this Contract except the right to name another Successor Owner.
COMMUNITY PROPERTY
If you live in a community property state and have a spouse at any time while
you own this Contract, the laws of that state may vary your ownership rights.
ANNUITANT PROVISIONS
ANNUITANT
The Annuitant is the person or persons designated on the Contract Specifications
page, or under the CHANGE OF ANNUITANT provision of this Contract. Two or more
Annuitants maay jointly be the persons on whose lives Annuity Benefit payments
are based.
An Annuitant designation may be joint or contingent or both. A contingent
Annuitant will be the person on whose life Annuity Benefit payments are based
only if there is no surviving primary Annuitant.
DEATH OF ANNUITANT (OTHER THAN OWNER)
If an Annuitant who is not an Owner dies before the Annuity Commencement Date,
then:
1) if there is one or more surviving joint Annuitant(s), such
survivor or survivors will continue as the sole or joint
Annuitant(s) under the Contract, as the case may be; or
2) if there is no surviving joint Annuitant(s), any surviving
contingent Annuitant(s) will become the sole or joint
Annuitant(s) under the Contract, as the case may be; or
3) if there is no surviving joint or contingent Annuitant(s),
the Owner or joint owners will become the sole or joint
Annuitant(s), as the case may be.
If you or the joint owner, if any, is a non-natural person, then the death of an
Annuitant before the Annuity Commencement Date will be treated as the death of
the Owner for all purposes under this Contract.
CHANGE OF ANNUITANT
You may change the Annuitant at any time before the Annuity Commencement Date,
except that no change of Annuitant may be made if you or the joint owner, if
any, is a non-natural person.
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Any such change is subject to the following:
1) it must be made by Written Request; and
2) unless otherwise elected or required by law, it will not
cancel a designation of a Beneficiary or any settlement
option election previously made.
BENEFICIARY PROVISIONS
BENEFICIARY
If there is a joint owner and that joint owner survives you, that joint owner is
the Beneficiary, regardless of any designation made by you. If there is no
surviving joint owner, the Beneficiary is the person or persons so designated in
the application, if any, or under the CHANGE OF BENEFICIARY provision of this
Contract. If you have not designated a Beneficiary, or if no Beneficiary
designated by you survives you, then the Beneficiary will be your estate.
A Beneficiary will be deemed not to have survived you if he or she dies within
thirty (30) days after your death.
A beneficiary designation may be joint or contingent or both. Unless otherwise
stated, joint Beneficiaries will be entitled to equal shares. A contingent
Beneficiary will be entitled to a benefit only if there is no surviving primary
Beneficiary.
CHANGE OF BENEFICIARY
Unless you have designated an irrevocable Beneficiary, you may change your
designation of a Beneficiary at any time before the Annuity Commencement Date.
Any such change is subject to the following:
1) it must be made by Written Request; and
2) unless otherwise elected or required by law, it will not
cancel a designation of an Annuitant or any settlement
option election previously made.
BENEFIT ON ANNUITY COMMENCEMENT DATE
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is shown on the Contract Specifications page. You
may change the Annuity Commencement Date by Written Request made at least thirty
(30) days prior to the date that Annuity Benefit payments are scheduled to
begin. Unless the Company agrees otherwise, the Annuity Commencement Date cannot
be later than the Contract Anniversary following your 85th birthday or five (5)
years after the Contract Effective Date, whichever is later.
ANNUITY BENEFIT PAYMENTS
An amount equal to the Account Value (after deduction of any fees and charges,
loans, or applicable premium tax or other taxes not previously deducted) will be
used to provide Annuity Benefit payments under this Contract commencing on or
after the Annuity Commencement Date.
Annuity Benefit payments will be made to the Annuitant as payee. In lieu of
that, you may elect by Written Request to have Annuity Benefit payments made to
you as payee. Any Annuity Benefit amounts remaining payable on the death of the
payee will be paid to the contingent payee designated by you by Written Request.
You may designate or change the payee or contingent payee after the Annuity
Commencement Date only if:
1) you are the payee, or
2) you reserve that right, by Written Request, on or before the
Annuity Commencement Date; or
3) you reserve that right, by Written Request, when designating
another person as payee or contingent payee.
In any event, the Annuitant will be the person on whose life any Annuity Benefit
payments are based, and no change of payee or contingent payee at any time will
change this.
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If no payee or contingent payee designated by you is surviving at the time
payment is to be made, then any Annuity Benefit amounts remaining payable will
be paid to the person or persons designated as contingent payee by Written
Request by the last payee who received payments. Failing that, any such amounts
will be paid to the estate of the last payee who received payments.
FORM OF ANNUITY BENEFIT
Annuity Benefit payments will be Fixed Dollar Benefit payments, made monthly in
accordance with the terms of Option B with a fixed period of one hundred twenty
(120) months under the SETTLEMENT OPTIONS section of this Contract.
In lieu of that, you may elect to have Annuity Benefit payments made pursuant to
any other available settlement option under the SETTLEMENT OPTIONS section of
this Contract. Any such election must be made by Written Request before the
Annuity Commencement Date, and is subject to the CONTRACT DISTRIBUTION RULES
section of this Contract. You may change your election of a settlement option by
Written Request made at least thirty (30) days prior to the date that Annuity
Benefit payments are scheduled to begin.
BENEFIT ON DEATH OF OWNER
DEATH BENEFIT
A Death Benefit will be paid under this Contract if:
1) you or the joint owner, if any, dies before the Annuity
Commencement Date and before this Contract is fully
surrendered;
2) the Death Benefit Valuation Date has occurred; and
3) a spouse does not become the Successor Owner.
If a Death Benefit becomes payable:
1) it will be in lieu of all other benefits under this
Contract; and
2) all other rights under this Contract will be terminated
except for rights related to the Death Benefit.
Death Benefit payments shall be made to the Beneficiary as payee. In lieu of
that, after the death of the Owner, a Beneficiary which is a non-natural person
may elect to have Death Benefit payments made to a payee to whom the Beneficiary
is obligated to make corresponding payments of a death benefit. Any such
election by a non-natural person as Beneficiary shall be by Written Request, and
may be made or changed at any time.
The Beneficiary will be the person on whose life any Death Benefit payments
under a settlement option are based. However, if the Beneficiary is a
non-natural person, then any payments under a life option will be based on the
life of a person to whom the Beneficiary is obligated, who must be designated by
the Beneficiary by Written Request before the Death Benefit Commencement Date.
Any Death Benefit amounts remaining payable on the death of the Beneficiary will
be paid:
1) to any contingent payee designated by you as part of any Death
Benefit settlement option election made by you, or if none is
surviving at the time payment is to be made; then
2) to any contingent payee designated by the Beneficiary by Written
Request, or if none is surviving at the time payment is to be
made; then
3) to the estate of the last payee who received payments.
In any event, if the Beneficiary is a non-natural person, any Death Benefit
amounts remaining payable on the death of the payee will be paid to any
contingent payee designated by the Beneficiary by Written Request, or if none is
surviving at the time payment is to be made, then to the Beneficiary.
Only one Death Benefit will be paid under this Contract.
16
<PAGE>
DEATH BENEFIT AMOUNT
If you die before attaining Age eighty (80) and before the Annuity Commencement
Date, the Death Benefit is an amount equal to the greatest of:
1) the Account Value on the Death Benefit Valuation Date;
2) the total Purchase Payment(s), with interest at three percent
(3%) per year, compounded annually, less any partial surrenders
and any Contingent Deferred Sales Charge that applied to those
amounts; or
3) the largest Account Value on any Contract Anniversary after the
fourth Contract Anniversary and prior to the Death Benefit
Valuation Date, less any partial surrenders after such Account
Value was determined and any Contingent Deferred Sales Charge
that applied to those amounts.
If you die after attaining Age eighty (80) and before the Annuity Commencement
Date, the Death Benefit is an amount equal to the greatest of:
1) the Account Value on the Death Benefit Valuation Date;
2) the total Purchase Payment(s), with interest at three percent
(3%) per year, compounded annually through the Contract
Anniversary prior to your 80th birthday, less any partial
surrenders and any Contingent Deferred Sales Charge that applied
to those amounts; or
3) the largest Account Value on any Contract Anniversary after the
fourth Contract Anniversary and prior to the date on which you
attained Age eighty (80), less any partial surrenders after such
Account Value was determined and any Contingent Deferred Sales
Charge that applied to those amounts.
In any event, if this Contract was issued to you after Age eighty (80), and you
die before the Annuity Commencement Date, the amount of the Death Benefit will
be the greater of:
1) the Account Value on the Death Benefit Valuation Date; or
2) the total Purchase Payment(s), less any partial surrenders and
any Contingent Deferred Sales Charge that applied to those
amounts.
As of the Death Benefit Valuation Date, the amount of the Death Benefit will be
allocated among the Sub-Accounts and Fixed Account options in the same
proportion as each Account's value is to the total Account Value as of the end
of the Valuation Period immediately preceding the Death Benefit Valuation Date.
Any applicable premium tax or other taxes not previously deducted, and any
outstanding loans, will be deducted from the Death Benefit amount described
above.
TRANSFERS AFTER DEATH
Between the Death Benefit Valuation Date and the Death Benefit Commencement
Date, the Beneficiary may transfer funds among Sub-Accounts and Fixed Account
options as described under the TRANSFERS section of this Contract.
DEATH BENEFIT COMMENCEMENT DATE
The Beneficiary may designate the Death Benefit Commencement Date by Written
Request within one (1) year of your death. If no designation is made, then the
Death Benefit Commencement Date will be one (1) year after your death.
FORM OF DEATH BENEFIT
Payments under the DEATH BENEFIT provision of this Contract will be Fixed Dollar
Benefit payments made monthly in accordance with the terms of Option A with a
period certain of forty-eight (48) months under the SETTLEMENT OPTIONS section
of this Contract.
In lieu of that, you may elect at any time before your death to have payments
under the DEATH BENEFIT provision of this Contract made in one lump sum or
pursuant to any available settlement option under the SETTLEMENT OPTIONS section
of this Contract. If you do not make any such election, the Beneficiary may make
that election at any time after your death and before the Death Benefit
Commencement Date.
You may change your election of a settlement option at any time before your
death.
17
<PAGE>
If a Beneficiary elects a settlement option as noted above, he or she may change
his or her own election of a settlement option by Written Request made at least
thirty (30) days prior to the date that Death Benefit payments are scheduled to
begin.
Any election or change of election must be made by Written Request, and is
subject to the CONTRACT DISTRIBUTION RULES section of this Contract.
CONTRACT DISTRIBUTION RULES
RULES BEFORE ANNUITY COMMENCEMENT DATE
If you or the joint owner, if any, dies before the Annuity Commencement Date,
the Death Benefit under the BENEFIT ON DEATH OF OWNER section of this Contract
must be paid either:
1) in full within five (5) years of such death; or
2) over the life of the Beneficiary or over a period certain not
exceeding his or her life expectancy, with payments at least
annually starting within one (1) year of such death.
However, if your spouse becomes the Successor Owner of this Contract after your
death, then:
1) this rule will not apply at the time of your death; and
2) if your spouse later dies before the Annuity Commencement Date,
this rule will apply upon the death of your spouse, with your
spouse being treated as the Owner for purposes of this rule.
RULES ON OR AFTER ANNUITY COMMENCEMENT DATE
If the Person Controlling Payments under this Contract on or after the Annuity
Commencement Date dies on or after that date, any amount remaining payable under
this Contract at the time of his or her death must be paid at least as rapidly
as payments were being made at the time of such death.
RULES ON OR AFTER DEATH BENEFIT COMMENCEMENT DATE
If the Beneficiary dies on or after the Death Benefit Commencement Date, any
amount remaining payable under this Contract at the time of his or her death
must be paid at least as rapidly as payments were being made at the time of such
death.
SETTLEMENT OPTIONS
CONDITIONS
Benefit Payments under a settlement option are subject to any minimum amounts,
Payment Intervals, and other terms or conditions that we may from time to time
require. If we change our minimums, we may change any current or future payment
amounts and/or Payment Intervals to conform with the change. More than one
settlement option may be elected if the requirements for each settlement option
elected are satisfied. Once payment begins under a settlement option, the
settlement option may not be changed.
All elected settlement options must comply with current applicable laws,
regulations and rulings issued by any governmental agency.
If more than one person is the payee under a settlement option, payments will be
made to the payees jointly. No more than two persons may be initial payees under
any joint and survivor settlement option.
If payment under a settlement option depends on whether a specified person is
still alive, we may at any time require proof that such person is still living.
We will require proof of the age and/or sex of any person on whose life Benefit
Payments are based.
BENEFIT PAYMENTS
Benefit Payments may be calculated and paid:
18
<PAGE>
1) as a Fixed Dollar Benefit;
2) as a Variable Dollar Benefit; or
3) as a combination of both.
If only a Fixed Dollar Benefit is to be paid, we will transfer all of the
Account Value to the Company's general account on the applicable Commencement
Date, or on the Death Benefit Valuation Date (if applicable). Similarly, if only
a Variable Dollar Benefit is elected, we will transfer all of the Account Value
to the Sub-Accounts as of the end of the Valuation Period immediately prior to
the applicable Commencement Date; we will allocate the amount transferred among
the Sub-Accounts in accordance with a Written Request. No transfers between the
Fixed Dollar Benefit and the Variable Dollar Benefit will be allowed after the
Commencement Date. However, after the Variable Dollar Benefit has been paid for
at least twelve (12) months, the Person Controlling Payments may, no more than
once each twelve (12) months thereafter, transfer all or part of the Benefit
Units upon which the Variable Dollar Benefit is based from the Sub-Account(s)
then held, to Benefit Units in different Sub-Account(s).
If a Variable Dollar Benefit is elected, the amount to be applied under that
benefit is the Variable Account Value as of the end of the Valuation Period
immediately preceding the applicable Commencement Date. If a Fixed Dollar
Benefit is to be paid, the amount to be applied under that benefit is the Fixed
Account Value as of the applicable Commencement Date, or as of the Death Benefit
Valuation Date (if applicable).
FIXED DOLLAR BENEFIT
Fixed Dollar Benefit payments are determined by multiplying the Fixed Account
Value (expressed in thousands of dollars and after deduction of any fees and
charges, loans, or applicable premium tax or other taxes not previously
deducted) by the amount of the monthly payment per $1,000 of value obtained from
the Settlement Option Table for the settlement option elected. Fixed Dollar
Benefit payments will remain level for the duration of the Benefit Payment
Period.
If at the time a Fixed Dollar Benefit is elected, we have available options or
rates on a more favorable basis than those guaranteed, the higher benefits shall
be applied and shall not change for as long as that election remains in force.
VARIABLE DOLLAR BENEFIT
The first monthly Variable Dollar Benefit payment is equal to your Variable
Account Value (expressed in thousands of dollars and after deduction of any fees
and charges, loans, or applicable premium tax or other taxes not previously
deducted) as of the end of the Valuation Period immediately preceding the
applicable Commencement Date multiplied by the amount of the monthly payment per
$1,000 of value obtained from the Settlement Option Table for the Benefit
Payment option elected less the pro-rata portion of the Contract Maintenance
Fee.
The number of Benefit Units in each Sub-Account held by you is determined by
dividing the dollar amount of the first monthly Variable Dollar Benefit payment
from each Sub-Account by the Benefit Unit Value for that Sub-Account as of the
applicable Commencement Date. The number of Benefit Units remains fixed during
the Benefit Payment Period, except as a result of any transfers among
Sub-Accounts after the applicable Commencement Date.
The dollar amount of the second and any subsequent Variable Dollar Benefit
payment will reflect the investment performance of the Sub-Account(s) selected
and may vary from month to month. The total amount of the second and any
subsequent Variable Dollar Benefit payment will be equal to the sum of the
payments from each Sub-Account less a pro-rata portion of the Contract
Maintenance Fee.
The payment from each Sub-Account is found by multiplying the number of Benefit
Units held in each Sub-Account by the Benefit Unit Value for that Sub-Account as
of the end of the fifth Valuation Period preceding the due date of the payment.
The Benefit Unit Value for each Sub-Account is originally established in the
same manner as Accumulation Unit Values. Thereafter, the value of a Benefit Unit
for a Sub-Account is determined by multiplying the Benefit Unit Value as of the
end of the preceding Valuation Period by the Net Investment Factor, determined
as set forth above under the ACCUMULATION UNIT VALUE provision of this Contract,
for the Valuation Period just ended. The product is then multiplied by the
assumed daily investment factor (0.99991781), for the number of days in the
19
<PAGE>
Valuation Period. The factor is based on the assumed net investment rate of
three percent (3%) per year, compounded annually, that is reflected in the
Settlement Option Tables.
LIMITATION ON ELECTION OF SETTLEMENT OPTION
Fixed periods shorter than five (5) years are not available, except as a Death
Benefit settlement option.
SETTLEMENT OPTION COMPUTATIONS
The 1983 Individual Annuity Mortality Table with interest at three percent (3%)
per year, compounded annually, is used to compute all guaranteed settlement
option factors, values, and benefits under this Contract.
AVAILABLE SETTLEMENT OPTIONS
The available settlement options are set out below.
OPTION A Income for a Fixed Period
We will make periodic payments for a fixed period. The first payment
will be paid as of the last day of the initial Payment Interval. The
maximum time over which payments will be made by us or money will be
held by us is thirty (30) years. The Option A Table applies to this
Option.
OPTION B Life Annuity with Payments for at Least a Fixed Period
We will make periodic payments for at least a fixed period. If the
person on whose life Benefit Payments are based lives longer than the
fixed period, then we will make payments until his or her death. The
first payment will be paid as of the first day of the initial Payment
Interval. The Option B Tables apply to this Option.
OPTION C Joint and One-half Survivor Annuity
We will make periodic payments until the death of the primary person on
whose life Benefit Payments are based; thereafter, we will make
one-half (1/2) of the periodic payment until the death of the secondary
person on whose life Benefit Payments are based. The first payment will
be paid as of the first day of the initial Payment Interval. The Option
C Tables apply to this Option.
OPTION D Life Annuity
We will make periodic payments until the death of the person on whose
life Benefit Payments are based. The first payment will be paid as of
the first day of the initial Payment Interval. The Option D Tables
apply to this Option.
OPTION E Any Other Form
We will make periodic payments in any other form of settlement option
which is acceptable to us at the time of an election.
SETTLEMENT OPTION TABLES
The Option Tables show the payments we will make at sample Payment Intervals for
each $1,000 applied at the guaranteed interest rate. Amounts may vary with the
Payment Interval and the sex and age of the person on whose life Benefit
Payments are based.
20
<PAGE>
OPTION A TABLE - INCOME FOR A FIXED PERIOD
Payments for fixed number of years for each $1,000
applied.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
TERMS TERMS TERMS
OF SEMI- OF SEMI- OF SEMI-
PAYMENTS ANNUAL ANNUAL QUARTERLY MONTHLY PAYMENTS ANNUAL ANNUAL QUARTERLY MONTHLY PAYMENTS ANNUAL ANNUAL QUARTERLY MONTHLY
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEARS YEARS YEARS
6 184.60 91.62 45.64 15.18 11 108.08 53.64 26.72 8.88 16 79.61 39.51 19.68 6.54
7 160.51 79.66 39.68 13.20 12 100.46 49.86 24.84 8.26 17 75.95 37.70 18.78 6.24
8 142.46 70.70 35.22 11.71 13 94.03 46.67 23.25 7.73 18 72.71 36.09 17.98 5.98
9 128.43 63.74 31.75 10.56 14 88.53 43.94 21.89 7.28 19 69.81 34.65 17.26 5.74
10 117.23 58.18 28.98 9.64 15 83.77 41.57 20.71 6.89 20 67.22 33.36 16.62 5.53
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
OPTION B TABLES - LIFE ANNUITY
With Payments For At Least A Fixed Period
-------- ---------------- --------------- ---------------- ----------------
MALE 60 MONTHS 120 MONTHS 180 MONTHS 240 MONTHS
-------- ---------------- --------------- ---------------- ----------------
AGE
-------- ---------------- --------------- ---------------- ----------------
55 $4.68 $4.62 $4.53 $4.39
56 4.78 4.72 4.61 4.45
57 4.89 4.82 4.69 4.51
58 5.00 4.92 4.78 4.58
59 5.12 5.03 4.87 4.64
60 5.25 5.14 4.96 4.71
61 5.39 5.26 5.06 4.78
62 5.53 5.39 5.16 4.84
63 5.69 5.52 5.26 4.90
64 5.85 5.66 5.36 4.96
65 6.03 5.81 5.46 5.02
66 6.21 5.96 5.56 5.08
67 6.41 6.11 5.66 5.13
68 6.62 6.28 5.76 5.18
69 6.84 6.44 5.86 5.23
70 7.07 6.61 5.96 5.27
71 7.32 6.78 6.05 5.31
72 7.58 6.96 6.14 5.34
73 7.85 7.14 6.23 5.37
74 8.14 7.32 6.31 5.40
-------- ---------------- --------------- ---------------- ----------------
21
<PAGE>
-----------------------------------------------------------------------------
FEMALE 60 MONTHS 120 MONTHS 180 MONTHS 240 MONTHS
-----------------------------------------------------------------------------
AGE
-----------------------------------------------------------------------------
55 $4.25 $4.22 $4.18 $4.10
56 4.33 4.30 4.25 4.17
57 4.41 4.38 4.32 4.23
58 4.50 4.47 4.40 4.30
59 4.60 4.56 4.48 4.37
60 4.70 4.66 4.57 4.44
61 4.81 4.76 4.66 4.51
62 4.93 4.86 4.75 4.58
63 5.05 4.98 4.85 4.65
64 5.18 5.10 4.95 4.72
65 5.32 5.22 5.05 4.79
66 5.47 5.36 5.16 4.86
67 5.63 5.50 5.26 4.93
68 5.80 5.65 5.37 5.00
69 5.98 5.80 5.49 5.06
70 6.18 5.96 5.60 5.12
71 6.39 6.14 5.71 5.18
72 6.62 6.31 5.83 5.23
73 6.86 6.50 5.94 5.28
74 7.12 6.69 6.04 5.32
----------------------------------------------------------------------------
OPTION C TABLES - JOINT AND ONE-HALF SURVIVOR ANNUITY
Monthly payments for each $1,000 of proceeds by
ages of persons named*.
<TABLE>
<CAPTION>
- ---------- -------- ------------------------------------------------------------------------------------------------
Male Female Secondary Age
Primary -------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
Age
60 61 62 63 64 65 66 67 68 69 70
- ---------- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
60 $4.70 $4.73 $4.76 $4.79 $4.82 $4.85 $4.88 $4.91 $4.94 $4.96 $4.99
61 4.78 4.81 4.84 4.88 4.91 4.94 4.97 5.00 5.03 5.06 5.09
62 4.86 4.89 4.93 4.96 5.00 5.03 5.07 5.10 5.13 5.16 5.19
63 4.94 4.97 5.01 5.05 5.09 5.13 5.16 5.20 5.24 5.27 5.31
64 5.02 5.06 5.10 5.14 5.18 5.23 5.27 5.31 5.34 5.38 5.42
65 5.10 5.15 5.19 5.24 5.28 5.33 5.37 5.41 5.46 5.50 5.54
66 5.19 5.24 5.28 5.33 5.38 5.43 5.48 5.52 5.57 5.62 5.66
67 5.28 5.33 5.38 5.43 5.48 5.53 5.59 5.64 5.69 5.74 5.79
68 5.37 5.42 5.48 5.53 5.59 5.64 5.70 5.75 5.81 5.86 5.92
69 5.46 5.52 5.57 5.63 5.69 5.75 5.81 5.87 5.93 5.99 6.05
70 5.55 5.61 5.67 5.74 5.80 5.86 5.93 5.99 6.06 6.12 6.19
- ------------ --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ------
</TABLE>
*Payments after the death of the Primary Payee will be one-half (1/2) of the
amount shown.
22
<PAGE>
Monthly payments for each $1,000 of proceeds by ages of persons named*.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Male Female Primary Age
---------------------------------------------------------------------------------------------------------
Secondary Age
60 61 62 63 64 65 66 67 68 69 70
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
60 $4.46 $4.54 $4.62 $4.71 $4.79 $4.88 $4.98 $5.07 $5.17 $5.27 $5.38
61 4.48 4.56 4.65 4.73 4.82 4.91 5.01 5.11 5.21 5.31 5.42
62 4.50 4.58 4.67 4.75 4.85 4.94 5.04 5.14 5.25 5.36 5.47
63 4.52 4.60 4.69 4.78 4.87 4.97 5.07 5.17 5.28 5.40 5.51
64 4.53 4.62 4.71 4.80 4.90 5.00 5.10 5.21 5.32 5.44 5.56
65 4.55 4.63 4.72 4.82 4.92 5.02 5.13 5.24 5.35 5.48 5.60
66 4.56 4.65 4.74 4.84 4.94 5.05 5.16 5.27 5.39 5.51 5.64
67 4.57 4.66 4.76 4.86 4.96 5.07 5.18 5.30 5.42 5.55 5.68
68 4.59 4.68 4.78 4.88 4.98 5.09 5.21 5.33 5.45 5.59 5.72
69 4.60 4.69 4.79 4.89 5.00 5.11 5.23 5.36 5.48 5.62 5.76
70 4.61 4.70 4.80 4.91 5.02 5.13 5.25 5.38 5.51 5.65 5.80
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
*Payments after the death of the Primary Payee will be one-half (1/2) of the
amount shown.
OPTION D TABLES - LIFE ANNUITY
Monthly payments for each $1,000 applied.
- ------------ ------------ ------------ ------------- ------------- ------------
MALE 0 MONTHS 60 MONTHS 120 MONTHS 180 MONTHS 240 MONTHS
- ------------ ------------ ------------ ------------- ------------- ------------
AGE
- ------------ ------------ ------------ ------------- ------------- ------------
55 $4.70 $4.68 $4.62 $4.53 $4.39
56 4.80 4.78 4.72 4.61 4.45
57 4.91 4.89 4.82 4.69 4.51
58 5.03 5.00 4.92 4.78 4.58
59 5.15 5.12 5.03 4.87 4.64
60 5.28 5.25 5.14 4.96 4.71
61 5.42 5.39 5.26 5.06 4.78
62 5.57 5.53 5.39 5.16 4.84
63 5.74 5.69 5.52 5.26 4.90
64 5.91 5.85 5.66 5.36 4.96
65 6.10 6.03 5.81 5.46 5.02
66 6.29 6.21 5.96 5.56 5.08
67 6.50 6.41 6.11 5.66 5.13
68 6.73 6.62 6.28 5.76 5.18
69 6.97 6.84 6.44 5.86 5.23
70 7.23 7.07 6.61 5.96 5.27
71 7.51 7.32 6.78 6.05 5.31
72 7.80 7.58 6.96 6.14 5.34
73 8.12 7.85 7.14 6.23 5.37
74 8.45 8.14 7.32 6.31 5.40
- ------------ ------------ ------------ ------------- ------------- ------------
23
<PAGE>
- ------------------------------------------------------------------------
FEMALE 0 MONTHS 60 MONTHS 120 MONTHS 180 MONTHS 240 MONTHS
- ------------------------------------------------------------------------
AGE
- ------------------------------------------------------------------------
55 $4.25 $4.25 $4.22 $4.18 $4.10
56 4.34 4.33 4.30 4.25 4.17
57 4.42 4.41 4.38 4.32 4.23
58 4.52 4.50 4.47 4.40 4.30
59 4.61 4.60 4.56 4.48 4.37
60 4.72 4.70 4.66 4.57 4.44
61 4.83 4.81 4.76 4.66 4.51
62 4.95 4.93 4.86 4.75 4.58
63 5.07 5.05 4.98 4.85 4.65
64 5.21 5.18 5.10 4.95 4.72
65 5.35 5.32 5.22 5.05 4.79
66 5.51 5.47 5.36 5.16 4.86
67 5.67 5.63 5.50 5.26 4.93
68 5.85 5.80 5.65 5.37 5.00
69 6.04 5.98 5.80 5.49 5.06
70 6.25 6.18 5.96 5.60 5.12
71 6.47 6.39 6.14 5.71 5.18
72 6.71 6.62 6.31 5.83 5.23
73 6.97 6.86 6.50 5.94 5.28
74 7.26 7.12 6.69 6.04 5.32
- ------------------------------------------------------------------------
Upon request, we will provide information on the payments that we will make for
other Payment Intervals, gender combinations, and ages.
24
<PAGE>
ANNUITY INVESTORS(SERVICEMARK)
Life Insurance Company
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
Nonparticipating - No Dividends
NON-TAX-QUALIFIED
<PAGE>
TABLE OF CONTENTS PAGE
- ---------------------------------------------------------------------------
DEFINITIONS...............................................................7
GENERAL PROVISIONS........................................................9
Entire Contract.......................................................9
Changes -- Waivers....................................................9
Nonparticipating......................................................9
Misstatement..........................................................9
Required Reports......................................................9
Exclusive Benefit.....................................................9
State Law............................................................10
Claims of Creditors..................................................10
Company Liability....................................................10
Voting Rights........................................................10
Incontestability.....................................................10
Discharge of Liability...............................................10
Transfer By the Company..............................................10
PURCHASE PAYMENTS........................................................10
Purchase Payments....................................................10
Allocation of Purchase Payments......................................10
No Termination.......................................................10
FIXED ACCOUNT............................................................11
Fixed Account........................................................11
Fixed Account Options..............................................11
Interest Credited..................................................11
Renewal............................................................11
Fixed Account Value..................................................11
SEPARATE ACCOUNT.........................................................12
General Description..................................................12
Sub-Accounts of the Separate Account.................................12
Valuation of Assets..................................................12
Variable Account Value...............................................12
Accumulation Unit Value..............................................13
TRANSFERS................................................................13
FEES AND CHARGES.........................................................14
Mortality and Expense Risk Charge....................................14
Administration Charge................................................14
Contract Maintenance Fee.............................................14
SURRENDERS...............................................................14
Surrenders...........................................................14
Surrender Value......................................................14
Contingent Deferred Sales Charge.....................................14
Free Withdrawal Privilege............................................15
Deferral of Payment..................................................15
OWNERSHIP PROVISIONS.....................................................15
Ownership of Separate Account........................................15
Owner................................................................15
Joint Ownership......................................................15
Assignment...........................................................16
Transfer of Ownership................................................16
<PAGE>
Successor Owner......................................................16
Community Property...................................................16
ANNUITANT PROVISIONS.....................................................16
Annuitant............................................................16
Death of Annuitant...................................................16
Change of Annuitant..................................................17
BENEFICIARY PROVISIONS...................................................17
Beneficiary..........................................................17
Change of Beneficiary................................................17
BENEFIT ON ANNUITY COMMENCEMENT DATE.....................................17
Annuity Commencement Date............................................17
Annuity Benefit Payments.............................................17
Form of Annuity Benefit..............................................18
BENEFIT ON DEATH OF OWNER................................................18
Death Benefit........................................................18
Death Benefit Amount.................................................19
Transfers After Death................................................19
Death Benefit Commencement Date......................................20
Form of Death Benefit................................................20
CONTRACT DISTRIBUTION RULES..............................................20
Rules Before Annuity Commencement Date...............................20
Rules On or After Annuity Commencement Date..........................20
Rules On or After Death Benefit Commencement Date....................20
SETTLEMENT OPTIONS.......................................................21
Conditions...........................................................21
Benefit Payments.....................................................21
Fixed Dollar Benefit.................................................21
Variable Dollar Benefit..............................................22
Limitation on Election of Settlement Option..........................22
Settlement Option Computations.......................................22
Available Settlement Options.........................................22
Settlement Option Tables.............................................23
Exhibit (4)(c)
LOAN ENDORSEMENT
The policy contract is changed as set out below to permit loans:
LOAN AMOUNT AND CONDITIONS. So long as you have not commenced distributions
under a payment option (or any other systematic payment program), we may
allow you to borrow an amount (the "new policy contract loan") if all of the
following requirements are met:
1) the sum of the new policy contract loan plus the highest balance of each
other policy contract loan, if any, at any time during the one-year
period ending on the date of the new policy contract loan, cannot exceed
$50,000; and
2) the sum of the new policy contract loan plus the current balance of each
other policy contract loan, if any, cannot exceed the greater of (i)
$10,000, or (ii) one-half of the net amount payable to you upon a full
surrender of this policy contract; and
3) the net amount payable to you upon a full surrender of this policy
contract, less the sum of the new policy contract loan and the current
balance of each other policy contract loan, if any, cannot be less than
the minimum amount required to avoid an involuntary surrender under the
other provisions of this policy contract.
An application for a loan must be made on our form. We may delay granting the
loan for up to six months after we receive your request for it. We may also
limit the frequency at which loans may be made, the minimum amount of a loan,
and the minimum amount of loan payments to be made to us.
TERM; REPAYMENT. The principal and interest of each loan must be repaid to us
within five years of the date such loan is made. This five year limit will
not apply to any loan used to acquire a dwelling unit that is to be used as a
principal residence by you. Regular substantially equal periodic payments
must be made at least quarterly over the term of a loan until fully paid.
LIEN -- DEEMED SURRENDER AND DISTRIBUTION. A policy contract loan is a first
lien on this policy contract. Your interest in this policy contract will be
the sole security for a loan. We may pay off the loan (by treating an amount
equal to the balance of a loan as surrendered, and applying it to pay off the
loan) if:
1) this policy contract is fully surrendered; or
2) distributions begin under a payment option (or any other systematic
payment program); or
3) you die and your spouse is not the sole person entitled to your interest
in this policy contract.
If there is a default on repayment, then we may also pay off the loan (as
described above), unless a distribution to you is prohibited by the other
provisions of this policy contract.
<PAGE>
INTEREST. The interest rate on a policy contract loan will not be more than
8% per year, unless otherwise provided under any other provision of this
policy contract covering employee benefit plan loans . Any unpaid interest
will be added to a loan; in effect, then, it will be compounded and will be
part of the loan.
This is part of your policy contract. It is not a separate contract. It changes
the policy contract only as and to the extent stated. In all cases of conflict
with the other terms of the policy contract, the provisions of this Endorsement
shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
Secretary Executive Vice President
-2-
Exhibit (4)(d)
TAX SHELTERED ANNUITY ENDORSEMENT
The policy contract is changed as set out below to add provisions for a Tax
Sheltered Annuity.
APPLICABLE TAX LAW RESTRICTIONS. This policy contract is intended to receive
contributions that qualify for deferred tax treatment under Internal Revenue
Code ("IRC") Section 403(b). It is restricted as required by federal tax
law. We may change the terms of this policy contract or administer this
policy contract at any time as needed to comply with that law. Any such
change may be applied retroactively.
NO ASSIGNMENT OR TRANSFER. You cannot assign, sell, or transfer your
interest in this policy contract. You cannot pledge it to secure a loan or
the performance of an obligation, or for any other purpose. The only
exceptions to these rules are:
1) you may use this policy contract to secure a loan made under any
loan provisions of this policy contract;
2) an interest in this policy contract may be transferred under a
Qualified Domestic Relations Order as defined in IRC Section 414(p);
and
3) you may designate another person to receive payments with you based
on joint lives or joint life expectancies, but any such designation
shall not give that other person any present rights under the policy
contract during your lifetime.
LIMITS ON CONTRIBUTIONS. We may refuse to accept any contribution to this
policy contract that does not qualify for deferred tax treatment under IRC
Section 403(b) and section 415. Contributions made for you to this policy
contract and any other plan, contract, or arrangement under salary reduction
agreement(s) with your employer(s) cannot exceed the limits of IRC Section
402(g). You cannot make more than one new salary reduction agreement with
your current employer for contributions to this policy contract in any
single calendar year. You and your employer shall ensure compliance with
these limits.
DISTRIBUTION RESTRICTIONS ON SALARY REDUCTION CONTRIBUTIONS AND CUSTODIAL
ACCOUNTS TRANSFERS. To comply with federal tax law, distribution
restrictions apply to amounts under this policy contract that represent:
1) contributions made after December 31, 1988 under any salary
reduction agreement with an employer;
2) income earned after December 31, 1988 on salary reduction
contributions whenever made; or
3) transfers from a custodial account described in IRC Section
403(b)(7) and all income attributable to the amount transferred.
<PAGE>
Any such amount cannot be distributed from this policy contract unless you
have:
1) reached age 59-1/2; or
2) separated from service with your employer; or
3) become disabled (as defined in IRC Section 72(m)(7)); or
4) in the case of salary reduction contributions (including salary
reduction contributions to a custodial account), incurred a hardship
as defined under the IRC.
A withdrawal made by reason of a hardship cannot include any income earned
after December 31, 1988 attributable to salary reduction contributions.
IRC Section 72(m)(7) states that: "An individual shall be considered to be
disabled if he is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can
be expected to result in death or to be of long-continued and indefinite
duration. An individual shall not be considered to be disabled unless he
furnishes proof of the existence thereof in such form and manner as the
Secretary [of the Treasury] may require."
DIRECT ROLLOVERS. To the extent required under IRC Section 401(a)(31), you
or your surviving spouse may elect to have any portion of an eligible
rollover distribution (as defined in IRC Section 403(b)(8)) paid directly to
another Individual Retirement Annuity or Individual Retirement Account (as
defined in IRC Section 408) or, if allowed, to another Tax Sheltered Annuity
(as defined in IRC Section 403(b)), specified by you or your surviving
spouse and which accepts such distribution. Any direct rollover election
must be made on our form, and must be received at our office before the date
of payment.
REQUIRED MINIMUM DISTRIBUTIONS. No later than April 1 following the calendar
year in which you reach age 70-1/2:
1) your interest in this policy contract must be paid to you in full;
or
2) distribution of your interest must begin in the form of
substantially equal payments made at least once per year (i) for
your life or as joint and survivor payments to you and one other
person, or (ii) over a period certain not to exceed your life
expectancy or the joint and last survivor life expectancy of you and
one other person named to receive any remaining payments after your
death.
If distributions are to be made under clause 2) of this provision, the
present value of the payments likely to be made to you during your expected
life must be more than half of the present value of all payments expected to
be made. For this purpose, the present value of payments is determined as of
the date payments begin.
DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS. If you die before distributions
commence under the REQUIRED MINIMUM DISTRIBUTIONS provision, any amount
remaining payable under this policy contract must be paid either:
1) in full by December 31 of the fifth calendar year after your death;
or
2) over the life of the person entitled to such amount, or over a
period certain not to exceed his or her life expectancy, with
substantially equal payments made at least once per year starting by
December 31 of the first calendar year after your death.
-2-
<PAGE>
However, if your spouse is the sole person entitled to such amount, then
during your spouse's lifetime the starting date for payments under clause 2)
of this provision may be delayed to a date not later than December 31 of the
calendar year in which you would have reached age 70-1/2. If your spouse
dies before payments commence, then this provision will apply upon the death
of your spouse, with your spouse being treated as the owner of this policy
contract for purposes of this provision.
DEATH AFTER REQUIRED MINIMUM DISTRIBUTIONS. If you die on or after
distributions commence under the REQUIRED MINIMUM DISTRIBUTIONS provision,
any amount remaining payable under this policy contract must be paid as
follows:
1) if you die before April 1 following the year in which you reach or
would have reached age 70-1/2 and you could have slowed or suspended
payments before death, then such amount must be paid under the DEATH
BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision as if you died
before such distributions commenced; or
2) in all other cases, such amount must be paid at least as rapidly as
payments were being made at the time of your death.
LIFE EXPECTANCIES. For the REQUIRED MINIMUM DISTRIBUTIONS provision and the
DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision, life expectancies
will be determined under Section 1.72-9 of the Federal Income Tax
Regulations. The life expectancy of you and your spouse may be recalculated
not more often than once each year. The life expectancy of any other person
cannot be recalculated.
CONTROLLING TAX RULES. The REQUIRED MINIMUM DISTRIBUTIONS provision, DEATH
BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision, and DEATH AFTER REQUIRED
MINIMUM DISTRIBUTIONS provision shall be applied in accordance with IRC
Section 401(a)(9), including the incidental death benefit rules of IRC
Section 401(a)(9)(G), and the related Federal Income Tax Regulations,
including the minimum distribution incidental death benefit rules of Section
1.401(a)(9)-2 of the Proposed Federal Income Tax Regulations.
This is part of your policy contract. It is not a separate contract. It changes
the policy contract only as and to the extent stated. In all cases of conflict
with the other terms of the policy contract, the provisions of this Endorsement
shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
Secretary Executive Vice President
-3-
Exhibit (4)(e)
QUALIFIED PENSION, PROFIT SHARING, AND ANNUITY PLAN
ENDORSEMENT
The policy contract is changed as set out below to add provisions for a
qualified pension, profit sharing, or annuity plan. This endorsement and the
policy contract to which it is attached are not valid without additional
endorsement(s) defining the Plan and Plan Administrator.
APPLICABLE TAX LAW RESTRICTIONS. This policy contract is intended to receive
contributions pursuant to a pension, profit sharing, or annuity plan
qualified under Internal Revenue Code ("IRC") Section 401(a) or 403(a). It is
restricted as required by federal tax law. We may change the terms of this
policy contract or administer this policy contract at any time as needed to
comply with that law. Any such change may be applied retroactively.
EXCLUSIVE BENEFIT. This policy contract is for the exclusive benefit of you
and your beneficiaries. No amounts held under this policy contract may be
used for or diverted to any other purpose (by distribution or otherwise)
except as and to the extent that the Plan Administrator shall determine that
such is allowed both by applicable law and by the Plan.
NO ASSIGNMENT OR TRANSFER. You cannot assign, sell, or transfer your interest
in this policy contract. You cannot pledge it to secure a loan or the
performance of an obligation, or for any other purpose. The only exceptions
to these rules are:
1) you may use this policy contract to secure a loan made under any loan
provisions of this policy contract;
2) an interest in this policy contract may be transferred under a
Qualified Domestic Relations Order as defined in IRC Section 414(p);
and
3) you may designate another person to receive payments with you based on
joint lives or joint life expectancies, but any such designation shall
not give that other person any present rights under this policy
contract during your lifetime.
LIMITS ON CONTRIBUTIONS. Contributions made to this policy contract for you
must not exceed the limits set forth in IRC Section 415. Contributions made
to this policy contract for you under salary reduction agreement(s) with your
employer(s) cannot exceed the limits of IRC Section 402(g). Additional limits
may apply under the terms of the Plan. The Plan Administrator shall ensure
compliance with these IRC limits and any Plan limits.
DISTRIBUTION RESTRICTIONS ON 401(k) EMPLOYEE ELECTIVE CONTRIBUTIONS. Any
amounts under this policy contract which represent employee elective
contributions made pursuant to salary reduction agreement(s) under IRC
Section 401(k) and any income earned on such amounts, cannot be distributed
any earlier than allowed under IRC Section 401(k)(2)(B). Additional limits
may apply under the terms of the Plan. The Plan Administrator shall determine
when a distribution is allowed under this IRC section and the Plan.
<PAGE>
DISTRIBUTION RESTRICTIONS ON PENSION CONTRIBUTIONS. Any amounts under this
policy contract which represent contributions to a money purchase pension
plan or a defined benefit pension plan, and any income earned on such
amounts, cannot be distributed any earlier than allowed under Treasury
Regulations Section 1.401-1(b)(1)(i). Additional limits may apply under the
terms of the Plan. The Plan Administrator shall determine when a distribution
is allowed under this regulation and the Plan.
DIRECT ROLLOVERS. To the extent required under IRC Section 401(a)(31), you or
your surviving spouse may elect to have any portion of an eligible rollover
distribution (as defined in IRC Section 402(c)(4)) paid directly to another
Individual Retirement Annuity or Individual Retirement Account (as defined in
IRC Section 408) or, if allowed, to another qualified pension, profit
sharing, or annuity plan (as defined in IRC Section 401(a) or 403(a)),
specified by you or your surviving spouse and which accepts such
distribution. Any direct rollover election must be made on our form, and must
be received at our office before the date of payment.
DATE BENEFITS TO BEGIN. Unless you elect to delay the payment of your
benefits, a distribution of your interest in this policy contract shall begin
no later than 60 days after the end of the Plan year in which the last of the
following occurs:
1) you have reached the earlier of age 65 or the normal retirement age
stated in the Plan;
2) the 10th anniversary of the date you joined the Plan; or
3) your separation from service with the employer.
The Plan Administrator shall make any determination required under this
provision.
In no event can the payment of your benefits be delayed beyond the date
stated in the REQUIRED MINIMUM DISTRIBUTIONS provision, below.
REQUIRED MINIMUM DISTRIBUTIONS. No later than April 1 following the calendar
year in which you reach age 70-1/2:
1) your interest in this policy contract must be paid to you in full; or
2) distribution of your interest must begin in the form of substantially
equal payments made at least once per year (i) for your life or as
joint and survivor payments to you and one other person, or (ii) over a
period certain not to exceed your life expectancy or the joint and last
survivor life expectancy of you and one other person named to receive
any remaining payments after your death.
If distributions are to be made under clause 2) of this provision, the
present value of the payments likely to be made to you during your expected
life must be more than half of the present value of all payments expected to
be made. For this purpose, the present value of payments is determined as of
the date payments begin.
DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS. If you die before distributions
commence under the REQUIRED MINIMUM DISTRIBUTIONS provision, any amount
remaining payable under this policy contract must be paid either:
1) in full by December 31 of the fifth calendar year after your death; or
2) over the life of the person entitled to such amount, or over a period
certain not to exceed his or her life expectancy, with substantially
equal payments made at least once per year starting by December 31 of
the first calendar year after your death.
-2-
<PAGE>
However, if your spouse is the sole person entitled to such amount, then
during your spouse's lifetime, the starting date for payments under clause 2)
of this provision may be delayed to a date not later than December 31 of the
calendar year in which you would have reached age 70-1/2. If your spouse dies
before payments commence, then this provision will apply upon the death of
your spouse, with your spouse being treated as the owner of this policy
contract for purposes of this provision.
DEATH AFTER REQUIRED MINIMUM DISTRIBUTIONS. If you die on or after
distributions commence under the REQUIRED MINIMUM DISTRIBUTIONS provision,
any amount remaining payable under this policy contract must be paid as
follows:
1) if you die before April 1 following the year in which you reach or
would have reached age 70-1/2 and you could have slowed or suspended
payments before death, then such amount must be paid under the DEATH
BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision as if you died before
such distributions commenced; or
2) in all other cases, such amount must be paid at least as rapidly as
payments were being made at the time of your death.
LIFE EXPECTANCIES. For the REQUIRED MINIMUM DISTRIBUTIONS provision and the
DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision, life expectancies will
be determined under Section 1.72-9 of the Federal Income Tax Regulations. The
life expectancy of you and your spouse may be recalculated not more often
than once each year. The life expectancy of any other person cannot be
recalculated.
CONTROLLING TAX RULES. The REQUIRED MINIMUM DISTRIBUTIONS provision, DEATH
BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision, and DEATH AFTER REQUIRED
MINIMUM DISTRIBUTIONS provision shall be applied in accordance with IRC
Section 401(a)(9), including the incidental death benefit rules of IRC
Section 401(a)(9)(G), and the related Federal Income Tax Regulations,
including the minimum distribution incidental death benefit rules of Section
1.401(a)(9)-2 of the Proposed Federal Income Tax Regulations.
This is part of your policy contract. It is not a separate contract. It changes
the policy contract only as and to the extent stated. In all cases of conflict
with the other terms of the policy contract, the provisions of this Endorsement
shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
Secretary Executive Vice President
-3-
Exhibit (4)(f)
EMPLOYER PLAN
ENDORSEMENT
The policy contract is changed as set out below to adapt it for use with an
employee benefit plan:
PLAN. "Plan" means the employee benefit plan named on your application or
any successor plan.
EMPLOYER. "Employer" means the employer sponsoring the Plan and named on
your application, or any other employer which succeeds to its rights under
the Plan.
PLAN ADMINISTRATOR. "Plan Administrator" means the person designated as such
to us in writing by the Employer. If no person has been designated, "Plan
Administrator" means the Employer.
PLAN INTERPRETATION. For purposes of this policy contract, the Plan
Administrator shall interpret the Plan and decide all questions about what
is allowed or required by the Plan. We have no duty to review or interpret
the Plan, or to review or approve any decision of the Plan Administrator. We
are entitled to rely on the written directions of the Plan Administrator on
such matters.
APPLICABLE RESTRICTIONS. This policy contract may be restricted by federal
and/or state laws related to employee benefit plans. We may change the terms
of this policy contract or administer this policy contract at any time as
needed to comply with such laws.
PLAN DISTRIBUTION PROVISIONS. Distributions allowed under this policy
contract may be made only at a time allowed by the Plan or required by this
policy contract. The form of any distribution shall be determined under the
Plan from among those forms of distribution available under this policy
contract. No distribution may be made without the written direction of the
Plan Administrator unless required by this policy contract. Distributions
may be made without your consent when required by the Plan.
FORFEITURE OF NON-VESTED AMOUNTS. Any amount under this policy contract
attributable to contributions by the Employer (excluding any contributions
made under a salary reduction agreement with your employer) is subject to
the vesting provisions of the Plan. If at any time the Plan provides for a
forfeiture of an amount that is not vested, then such amount may be
withdrawn and paid as directed by the Plan Administrator.
RETURN OF EXCESS CONTRIBUTIONS. Contributions made to this policy contract
for you are subject to any limits on contributions and nondiscrimination
provisions of the Plan. If the Plan Administrator determines that excess or
discriminatory contributions were made, then amounts attributable to such
contributions may be withdrawn and paid as directed by the Plan
Administrator.
INVOLUNTARY CASH OUT. If at any time the Plan provides for an involuntary
cash out of your benefits, then this policy contract may be surrendered as a
whole as directed by the Plan Administrator. No amounts may be withdrawn
under this provision or any other involuntary surrender provision if any
total policy contract value for this policy contract has ever exceeded
$3,500 (not counting any amount paid under the RETURN OF EXCESS
CONTRIBUTIONS provision).
<PAGE>
ENTITLEMENT TO DEATH BENEFITS. The person or persons entitled to any amount
remaining payable under this policy contract after your death shall be
determined under the Plan. No distribution of any such amount shall be made
without the written direction of the Plan Administrator.
INVESTMENT ALLOCATIONS AND TRANSFERS. If this policy contract provides that
amounts held under it are allocated among separate investment funds or fixed
accounts, then any such allocations and/or subsequent transfers shall be
made only as required or allowed by the Plan, or as required by this policy
contract to secure a loan. No such allocation or transfer shall be made
without the written direction of the Plan Administrator unless required by
this policy contract to secure a loan. Allocations or transfers may be made
without your consent when required by the Plan or the policy contract.
PLAN LOAN PROVISIONS. If loans are allowed under this policy contract, no
such loan may be made unless also allowed by the Plan. Any such loan will be
subject to any additional limits and conditions which apply under the Plan.
No loan may be made without the written direction of the Plan Administrator.
The rate of interest to be paid by you on any such loan will be fixed by the
Plan Administrator, but will be at least three percentage points higher than
the minimum guaranteed rate of interest, if any, that applies to your
interest in this policy contract used as security for the loan.
QUALIFIED JOINT AND 50% SURVIVOR ANNUITY OPTION. In addition to the other
payment options available under this policy contract, payments may be made
in the form of a Qualified Joint and 50% Survivor Annuity. Under this
payment option, we will make equal payments to you for life at least once
per year. If the person who is your spouse at the time payments commence
survives you, then after your death we will make payments to such spouse at
the same intervals equal to one-half of the amount of the prior payments,
with such payments continuing to such spouse until his or her death. The
first payment under this payment option will be made on the effective date
of the payment option. The amount of the payments we will make under this
payment option is based on the intervals for payments, which are subject to
our approval. Amounts vary with the ages, as of the first payment date, of
you and your spouse. We will require proof of the ages of you and your
spouse. Monthly payments that we will make under this payment option for
each $1,000 of proceeds applied will be furnished at your request. Once
payments begin under this payment option, the value of future payments may
not be withdrawn as a commutation of benefits.
This is a part of your policy contract. It is not a separate contract. It
changes the policy contract only as and to the extent stated. In all cases of
conflict with the other terms of the policy contract, the provisions of this
endorsement shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
Secretary Executive Vice President
Exhibit (4)(g)
INDIVIDUAL RETIREMENT ANNUITY
ENDORSEMENT
The policy contract is changed as set out below to make it an Individual
Retirement Annuity.
APPLICABLE TAX LAW RESTRICTIONS. This policy contract is intended to receive
premiums that qualify for deferred tax treatment under Internal Revenue Code
("IRC") Section 408(b). It is restricted as required by federal tax law. We
may change the terms of this policy contract or administer this policy
contract at any time as needed to comply with that law. Any such change may
be applied retroactively.
EXCLUSIVE BENEFIT. This policy contract is for the exclusive benefit of you
and your beneficiaries. Your interest in this policy contract is
nonforfeitable.
NON-PARTICIPATING. This policy contract does not pay dividends or share in
our surplus.
NO ASSIGNMENT OR TRANSFER. You cannot assign, sell, or transfer your
interest in this policy contract. You cannot pledge it to secure a loan or
the performance of an obligation, or for any other purpose. The only
exceptions to these rules are:
1) an interest in this policy contract may be transferred to a spouse or
former spouse under a divorce or separation instrument described in
IRC Section 71(b)(2)(A); and
2) you may designate another person to receive payments with you based on
joint lives or joint life expectancies, but any such designation shall
not give that other person any present rights under the policy
contract during your lifetime.
PREMIUM REQUIREMENTS. This policy contract does not require fixed premiums,
but we may decline to accept any premium payment of less than $50. This
policy contract will not lapse if you do not pay premiums. This policy
contract will remain subject to cancellation under any involuntary surrender
or termination provision of this policy contract; provided, however, that in
no event shall any such cancellation occur unless, at a minimum, premiums
have not been paid for at least two full years and the value of this policy
contract (increased by any guaranteed interest) would provide a benefit at
age 70-1/2 of less than $20 a month under the regular settlement option.
All premium payments to us must be made in cash BY CHECK OR MONEY ORDER MADE
PAYABLE TO US.
Total premium payments made to this policy contract with respect to any one
tax year may not exceed $2,000, excluding any payment which is:
1) allowed as a rollover under IRC Section 402(c), 403(a)(4), 403(b)(8),
or 408(d)(3); or
2) made through a Simplified Employee Pension (SEP) program under IRC
Section 408(k).
<PAGE>
ANNUAL REPORT. Following the end of each calendar year, we will send you a
report concerning the status of your policy contract. This report will
include (i) the amount of all premiums received as regular contributions
during or after the calendar year which relate to such calendar year, (ii)
the amount of all premiums received as rollover contributions during such
calendar year, (iii) the policy contract value(s) determined as of the end
of such calendar year, and (iv) such other information as may be required
under federal tax law.
REQUIRED MINIMUM DISTRIBUTIONS. No later than April 1 following the calendar
year in which you reach age 70-1/2:
1) your interest in this policy contract must be paid to you in full; or
2) distribution of your interest must begin in the form of substantially
equal payments made at least once per year (i) for your life or as
joint and survivor payments to you and one other person, or (ii) over a
period certain not to exceed your life expectancy or the joint and last
survivor life expectancy of you and one other person named to receive
any remaining payments after your death.
If distributions are to be made under clause 2) of this provision, the
present value of the payments likely to be made to you during your expected
life must be more than half of the present value of all payments expected to
be made. For this purpose, the present value of payments is determined as of
the date payments begin.
DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS. If you die before distributions
commence under the REQUIRED MINIMUM DISTRIBUTIONS provision, any amount
remaining payable under this policy contract must be paid either:
1) in full by December 31 of the fifth calendar year after your death; or
2) over the life of the person entitled to such amount, or over a period
certain not to exceed his or her life expectancy, with substantially
equal payments made at least once per year starting by December 31 of
the first calendar year after your death.
However, if your spouse is the sole person entitled to such amount, then
during your spouse's lifetime the starting date for payments under clause 2)
of this provision may be delayed to a date not later than December 31 of the
calendar year in which you would have reached age 70-1/2. If your spouse
dies before payments commence, then this provision will apply upon the death
of your spouse, with your spouse being treated as the owner of this policy
contract for purposes of this provision.
DEATH AFTER REQUIRED MINIMUM DISTRIBUTIONS. If you die on or after
distributions commence under the REQUIRED MINIMUM DISTRIBUTIONS provision,
any amount remaining payable under this policy contract must be paid as
follows:
1) if you die before April 1 following the year in which you reach or
would have reached age 70-1/2 and you could have slowed or suspended
payments before death, then such amount must be paid under the DEATH
BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision as if you died before
such distributions commenced; or
2) in all other cases, such amount must be paid at least as rapidly as
payments were being made at the time of your death.
LIFE EXPECTANCIES. For the REQUIRED MINIMUM DISTRIBUTIONS provision and the
DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision, life expectancies
will be determined under Section 1.72-9 of the Federal Income Tax
Regulations. The life expectancy of you and your spouse may be recalculated
not more often than once each year. The life expectancy of any other person
cannot be recalculated.
-2-
<PAGE>
CONTROLLING TAX RULES. The REQUIRED MINIMUM DISTRIBUTIONS provision, DEATH
BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision, and DEATH AFTER REQUIRED
MINIMUM DISTRIBUTIONS provision shall be applied in accordance with IRC
Section 401(a)(9), including the incidental death benefit rules of IRC
Section 401(a)(9)(G), and the related Federal Income Tax Regulations,
including the minimum distribution incidental death benefit rules of Section
1.401(a)(9)-2 of the Proposed Federal Income Tax Regulations.
This is part of your policy contract. It is not a separate contract. It changes
the policy contract only as and to the extent stated. In all cases of conflict
with the other terms of the policy contract, the provisions of this Endorsement
shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
Secretary Executive Vice President
-3-
Exhibit (4)(h)
TEXAS OPTIONAL RETIREMENT PROGRAM ENDORSEMENT
The policy is changed as set out below to adapt it for use with the Texas
Optional Retirement Program:
ORP. "ORP" means the Texas Optional Retirement Program.
EMPLOYER. "Employer" means the employer named on your application or
any other Texas public institution of higher education through which
you have subsequently continued your employment and ORP participation.
ORP INTERPRETATION. The Employer shall interpret the ORP provisions and
decide all questions about what is allowed or required by the ORP,
except for administration of qualified domestic relations orders. We
have no duty to review or interpret the ORP provisions other than for
qualified domestic relations orders, and we have no duty to review or
approve any decision of the Employer. We are entitled to rely on the
written directions of the Employer on such matters.
APPLICABLE STATE LAW RESTRICTIONS. This policy is restricted as
required by Texas law provisions applicable to the ORP. We may change
the terms of this policy or administer this policy at any time as
needed to comply with such state law provisions.
CONTRIBUTIONS LIMITED; NO MINIMUM REQUIRED. Only amounts paid under the
ORP may be contributed to the policy. There is no minimum regular
required contribution that must be paid to us under the policy.
ORP DISTRIBUTION PROVISIONS. Distributions allowed under this policy
may be made to you or your beneficiaries only after the return of any
non-vested amounts and only after (1) you terminate employment with all
Texas public institutions of higher education, (2) you attain age
70-1/2, or (3) you die. No such distribution may be made without the
written certification of the Employer of your vesting status and, if
you are living and under age 70-1/2, the termination date of your
employment.
RETURN OF NON-VESTED AMOUNTS. Contributions by the Employer that were
not based on a reduction in your salary are subject to the vesting
provisions of the ORP. If at any time the ORP provides for a forfeiture
of such Employer contributions, then amounts may be surrendered under
the policy to repay such contributions, as directed by the Employer.
<PAGE>
ORP LOAN PROVISIONS. If loans are allowed, a loan may be made to you
only after the return of any non-vested amounts and only after (1) you
terminate employment with all Texas public institutions of higher
education, or (2) you attain age 70-1/2. No loan may be made without
the written certification of the Employer of your vesting status and,
if you are under age 70-1/2, the termination date of your employment.
This is a part of your policy. It is not a separate contract. It changes the
policy only as and to the extent stated. In all cases of conflict with the other
terms of the policy, the provisions of this endorsement shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
Assistant Secretary Executive Vice President
-2-
Exhibit (4)(i)
LONG-TERM CARE WAIVER RIDER
This rider is part of your Contract. The words "we," "us" and "our" refer to
Annuity Investors Life Insurance Company. The words "you" and "your" refer to
the Owner of the Contract, or the joint owner, if any. If both the Owner and
joint owner, if any, are non-natural person(s) the words "you" and "your" refer
to the Annuitant.
BENEFIT. We will waive the Contingent Deferred Sales Charge under the
Contract if you meet all of the following conditions:
1. You are confined to a Long-Term Care Facility or Hospital for at
least ninety (90) days in a row.
2. A Physician prescribes the confinement and it is Medically
Necessary.
3. The first day of confinement is more than one (1) year after the
Contract Effective Date.
4. We receive a Written Request to surrender or to start distributions
under the Contract and satisfactory proof of your confinement. We
must receive the Written Request and proof of confinement no more
than ninety (90) days after you are discharged from the Long-Term
Care Facility or Hospital, and before this rider terminates.
DEFINITIONS. Capitalized terms have the meanings given to them in the
Contract, except as shown below.
"Long-Term Care Facility" means a Skilled Nursing Facility or an
Intermediate Care Facility. "Long-Term Care Facility" does not mean any of
the following:
1. A place that primarily treats drug addicts or alcoholics.
2. A home for the aged or mentally ill, a community living center, or
a place that primarily provides residential care or retirement
care.
3. A place owned or operated by a member of your Immediate Family.
"Skilled Nursing Facility" means a facility that meets all of the following
conditions:
1. It is in the United States or its territories.
2. It maintains a license and operates as a Skilled Nursing Facility
under the laws of the State or territory in which it is located.
3. It provides skilled nursing care under the supervision of a
licensed Physician.
4. It provides nursing services twenty-four (24) hours a day by, or
under the supervision of, a registered graduate professional nurse
(R.N.).
5. It maintains a daily medical record of each patient.
<PAGE>
"Intermediate Care Facility" means a facility that meets all of the
following conditions:
1. It is in the United States or its territories.
2. It maintains a license and operates as an Intermediate Care
Facility under the laws of the State or territory in which it is
located.
3. It provides nursing services twenty-four (24) hours a day by, or
under the supervision of, a registered graduate professional nurse
(R.N.) or a licensed practical nurse (L.P.N.).
4. It maintains a daily medical record of each patient.
"Hospital" means a facility that meets all of the following conditions:
1. It is in the United States or its territories.
2. It maintains a license as a hospital under the laws of the State or
territory in which it is located.
3. A staff of licensed Physicians supervises it.
4. It provides nursing services twenty-four (24) hours a day by, or
under the supervision of, a registered graduate professional nurse
(R.N.).
5. It operates primarily for the care and treatment of sick and
injured persons as inpatients for a charge.
6. It maintains, or has access to, medical, diagnostic and major
surgical facilities.
"Physician" means a licensed medical doctor (M.D.) or a licensed doctor of
osteopathy (D.O.) practicing within the scope of his or her license. The
term "Physician" does not include you, or a member of your Immediate Family.
In the case of a non-natural person Owner, or joint owner, if any, the term
"Physician" does not include an employee, officer, director, or agent of the
Owner, or joint owner, if any.
"Medically Necessary" means appropriate and consistent with the diagnosis of
a Physician and with accepted standards of practice, and which could not
have been omitted without adversely affecting your condition.
"Immediate Family" means any spouse, children, parents, grandparents,
grandchildren, siblings, or in-laws.
TERMINATION. This rider will terminate and shall have no value when the
Contingent Deferred Sales Charge imposed under the Contract equals 0%, or on
the date distributions start under the Contract, or on the date the Contract
is terminated, whichever comes first. The Company reserves the right to
terminate this rider and the benefits under it at anytime if ownership of
the Contract is changed.
This rider is not a separate contract. This rider changes your Contract only
as and to the extent stated. In the case of conflict with other terms of the
Contract, the terms of this rider shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
Secretary Executive Vice President
Exhibit (4)(j)
Annuity Investors(ServiceMark)
Life Insurance Company
A Stock Insurance Company
Domicile Address: 580 Walnut Street, Cincinnati, Ohio 45202
Administrative Office:
P. O. Box 5423, Cincinnati, Ohio 45201-5423
SIMPLE IRA ENDORSEMENT
The policy is changed as set out below to make it a SIMPLE Individual Retirement
Annuity.
ADDITIONAL TAX LAW RESTRICTIONS. This policy is intended to receive premiums
under a Savings Incentive Match Plan for Employees of Small Employers ("SIMPLE")
that qualifies under Internal Revenue Code ("IRC") Section 408(p). It is
restricted as required by federal tax law. We may change the terms of this
policy or administer this policy at any time as needed to comply with that law.
Any such change may be applied retroactively.
ADDITIONAL PREMIUM REQUIREMENTS. This policy will accept premiums contributed on
behalf of an employee by his or her employer under the terms of a SIMPLE plan
described in IRC Section 408(p). In addition, this policy will accept transfers
or rollovers from other SIMPLE Individual Retirement Annuities or SIMPLE
Individual Retirement Accounts of the employee. No other premiums will be
accepted. The $2,000 limitation on premiums stated in the IRA provisions of this
policy shall not apply.
This is part of your policy. It is not a separate contract. It changes the
policy only as and to the extent stated. In all cases of conflict with the other
terms of the policy, the provisions of this Endorsement shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
Assistant Secretary Executive Vice President
Exhibit (4)(k)
ANNUITY INVESTORS(SERVICEMARK)
Life Insurance Company
A Stock Insurance Company
Domicile Address: 580 Walnut Street, Cincinnati, Ohio 45202
Administrative Office:
P. O. Box 5423, Cincinnati, Ohio 45201-5423
GROUP FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
In consideration of the application, the enrollment forms of participants
hereunder ("Participants"), and the payment of Purchase Payments for the benefit
of Participants, we have issued this Group Flexible Premium Deferred Variable
Annuity Contract ("Contract") to the Contract Owner identified on the Contract
Specifications page, effective as of the Contract Effective Date and subject to
all of the terms and conditions set out on the following pages. As you read
through this Contract, please note that the words "we", "us", "our", and
"Company" refer to Annuity Investors Life Insurance Company. The words "you" and
"your" refer to the Contract Owner.
/s/ Betty Kasprowicz /s/ James M. Mortenson
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
Nonparticipating - No Dividends
ANNUITY BENEFITS AND OTHER VALUES DESCRIBED IN THIS CONTRACT, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, MAY INCREASE OR DECREASE AND ARE
NOT GUARANTEED AS TO FIXED DOLLAR AMOUNTS. NO MINIMUM CONTRACT VALUE IS
GUARANTEED, EXCEPT FOR AMOUNTS IN THE FIXED ACCOUNT.
<PAGE>
CONTRACT SPECIFICATIONS
CONTRACT OWNER:
CONTRACT NUMBER:
CONTRACT EFFECTIVE DATE:
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT: Annuity Investors Variable Account B
Following is a list of the Funds in which the currently available Sub-Accounts
invest:
[Janus Aspen Series Aggressive Growth Portfolio]
[Janus Aspen Series Worldwide Growth Portfolio]
[Janus Aspen Series Balanced Portfolio]
[Janus Aspen Series Growth Portfolio]
[Janus Aspen Series International Growth Portfolio]
[Dreyfus Variable Investment Fund-Capital Appreciation Portfolio]
[Dreyfus Variable Investment Fund-Money Market Portfolio]
[Dreyfus Variable Investment Fund-Growth and Income Portfolio]
[Dreyfus Variable Investment Fund-Small Cap Portfolio]
[The Dreyfus Socially Responsible Growth Fund, Inc.]
[Dreyfus Stock Index Fund]
[Strong Special Fund II]
[Strong Growth Fund II]
[INVESCO VIF-Industrial Income Fund]
INVESCO VIF-Total Return Fund]
[INVESCO VIF-High Yield Fund]
[Morgan Stanley Universal Funds, Inc. U.S. Real Estate Portfolio]
[Morgan Stanley Universal Funds, Inc. Value Portfolio]
[Morgan Stanley Universal Funds, Inc. Emerging Markets Equity Portfolio]
[Morgan Stanley Universal Funds, Inc. Fixed Income Portfolio]
[Morgan Stanley Universal Funds, Inc. Mid-Cap Value Portfolio]
[PBHG Insurance Series Fund, Inc.-Growth II Portfolio]
[PBHG Insurance Series Fund, Inc.-Large-Cap Growth Portfolio]
[PBHG Insurance Series Fund, Inc.-Technology & Communications Portfolio]
2
<PAGE>
FIXED ACCOUNT:
Following is a list of the currently available Fixed Account options, with
guarantee periods as may be applicable:
Fixed Accumulation Account Option
[Fixed Account Option One-Year Guarantee Period]
[Fixed Account Option Three-Year Guarantee Period]
[Fixed Account Option Five-Year Guarantee Period]
[Fixed Account Option Seven-Year Guarantee Period]
Minimum guaranteed interest rate credited to the Fixed Account: Three percent
(3%) effective annual rate.
TRANSFER FEE: [$25] per transfer in excess of twelve (12) in any Certificate
Year.
CONTINGENT DEFERRED SALES CHARGE: An amount deducted on each partial or full
surrender of a Purchase Payment, as follows:
NUMBER OF FULL YEARS ELAPSED BETWEEN CONTINGENT DEFERRED SALES CHARGE AS
THE DATE OF RECEIPT OF A PURCHASE PAYMENT A PERCENTAGE OF THE ASSOCIATED
AND DATE WRITTEN REQUEST FOR PURCHASE PAYMENT
SURRENDER IS RECEIVED SURRENDERED
- ------------------------------------------ -------------------------------------
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7+ 0%
CERTIFICATE MAINTENANCE FEE: [$30] Annually
MORTALITY AND EXPENSE RISK CHARGE: A charge equal to an effective annual rate of
[1.25%] of the daily Net Asset Value of the Sub-Accounts.
ADMINISTRATION CHARGE: A charge equal to an effective annual rate of [0.15%] of
the daily Net Asset Value of the Sub-Accounts.
TERMINATION: We reserve the right to terminate any Participant's participation
interest under this Contract, if at any time the Surrender Value of his/her
Certificate is less than $500. A surrender will be deemed to have been made and
we will pay the Participant the Surrender Value of his or her participation
interest.
[We reserve the right to terminate this Contract, if ]
INQUIRIES: FOR INFORMATION, OR TO MAKE A COMPLAINT, CALL OR WRITE:
Variable Annuity Service Center
Annuity Investors Life Insurance Company
Post Office Box 5423
Cincinnati, Ohio 45201-5423
1-800-789-6771
3
<PAGE>
DEFINITIONS
ACCOUNT(S): The Sub-Account(s) and/or the Fixed Account options.
ACCOUNT VALUE: The aggregate value of a Participant's interest in the
Sub-Account(s) and the Fixed Account options as of the end of any Valuation
Period. The value of a Participant's interest in all Sub-Accounts is his or her
"Variable Account Value," and the value of a Participant's interest in all Fixed
Account options is his or her "Fixed Account Value."
ACCUMULATED EARNINGS: A Participant's Account Value in excess of Purchase
Payments received by us and which have not been returned to the Participant.
ACCUMULATION PERIOD: The period prior to the applicable Commencement Date under
a Certificate.
ACCUMULATION UNIT: A unit of measurement used to calculate the value(s) of the
Sub-Account(s) prior to the applicable Commencement Date.
ADMINISTRATIVE OFFICE: The home office of the Company or any other place of
business which we may designate for administration.
AGE: Age as of most recent birthday.
ANNUITANT: For each participation interest under this Contract, the Annuitant is
the Participant, and is the person on whose life Annuity Benefit payments are
based.
ANNUITY BENEFIT: Periodic payments made under a settlement option, which
commence on or after the Annuity Commencement Date.
ANNUITY COMMENCEMENT DATE: For each Participant, the first day of the first
Payment Interval for which an Annuity Benefit payment is to be made under a
settlement option.
BENEFICIARY: A person entitled to the Death Benefit under a Certificate.
BENEFIT PAYMENT: The Annuity Benefit or Death Benefit payable under a settlement
option. Variable Dollar Benefit payments may vary in amount. Fixed Dollar
Benefit payments remain constant except under certain joint and survivor
settlement options.
BENEFIT PAYMENT PERIOD: The period starting with the Commencement Date during
which Benefit Payments are to be made under a Certificate.
BENEFIT UNIT: A unit of measure used to determine the dollar value of any
Variable Dollar Benefit payments after the first Benefit Payment is made by us.
CERTIFICATE ANNIVERSARY: An annual anniversary of a Participant's Certificate
Effective Date.
CERTIFICATE EFFECTIVE DATE: The date shown on a Participant's Certificate
Specifications page.
CERTIFICATE YEAR: For a Participant's Certificate, any period of twelve (12)
months commencing on the Certificate Effective Date and on each Certificate
Anniversary thereafter.
CODE: The Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
4
<PAGE>
COMMENCEMENT DATE: The Annuity Commencement Date if an Annuity Benefit is
payable under a Certificate, or the Death Benefit Commencement Date if a Death
Benefit is payable under a Certificate.
DEATH BENEFIT: The benefit described in the Benefit on Death of Participant
section of this Contract.
DEATH BENEFIT COMMENCEMENT DATE: For each Participant, the first day of the
first Payment Interval for which a Death Benefit payment is to be made under a
settlement option, or the date a Death Benefit is to be paid in a lump sum.
DEATH BENEFIT VALUATION DATE: The date that Due Proof of Death has been received
by us and the earlier to occur of:
1) our receipt of a Written Request with instructions as to the form
of Death Benefit; or
2) the Death Benefit Commencement Date.
DUE PROOF OF DEATH: Any of the following:
1) a certified copy of a death certificate;
2) a certified copy of a decree of a court of competent jurisdiction
as to the finding of death; or
3) any other proof of death satisfactory to us.
FUND: A management investment company or portfolio thereof, registered under the
Investment Company Act of 1940, in which a Sub-Account of the Separate Account
invests.
NET ASSET VALUE: The amount computed by an investment company, no less
frequently than each Valuation Period, as the price at which its shares or
units, as the case may be, are redeemed in accordance with the rules of the
Securities and Exchange Commission.
OWNER: The person identified as such on the Contract Specifications page.
PARTICIPANT: A person who participates in the benefits of this Contract pursuant
to the enrollment form for such person, as evidenced by a Certificate.
PAYMENT INTERVAL: A monthly, quarterly, annual or other regular interval during
a Benefit Payment Period.
PERSON CONTROLLING PAYMENTS: The "Person Controlling Payments" means the
following, as the case may be:
1) with respect to Annuity Benefit payments, the Participant; and
2) with respect to Death Benefit payments,
a) the Beneficiary; or
b) if the Beneficiary is deceased, the payee.
PURCHASE PAYMENT: A contribution amount paid to us in consideration for a
Participant's participation under this Contract, after the deduction of any and
all of the following which may apply:
1) any fee charged by the person remitting payments for you;
2) premium taxes; and/or
3) other taxes.
SEPARATE ACCOUNT: An account, which may be an investment company, which is
established and maintained by the Company pursuant to the laws of the State of
Ohio.
5
<PAGE>
SUB-ACCOUNT: The Separate Account is divided into Sub-Accounts, each of which
invests in the shares of a designated Fund.
VALUATION PERIOD: The period commencing at the close of regular trading on the
New York Stock Exchange on any Valuation Date, and ending at the close of
trading on the next succeeding Valuation Date. "Valuation Date" means each day
on which the New York Stock Exchange is open for business.
WRITTEN REQUEST: Information provided, or a request made, that is complete and
satisfactory to us and in writing, that is sent to us on our form or in a manner
satisfactory to us, which may, at our discretion, be telephonic, and that is
received by us at our Administrative Office. A Written Request is subject to any
payment made or any action we take before we acknowledge it. The Company will
deem a Written Request a standing order which may be modified or revoked only by
a subsequent Written Request, when permitted by the terms of this Contract. A
Participant may be required to return his or her Certificate to us in connection
with a Written Request.
6
<PAGE>
GENERAL PROVISIONS
ENTIRE CONTRACT
We have issued this Contract to the Contract Owner identified on the Contract
Specifications page. This Contract is a group flexible premium deferred variable
annuity contract. This Contract is restricted by endorsement as required to
obtain favorable tax treatment under the Code, and is not valid without the
requisite endorsement(s) being attached. This Contract, its endorsements, the
application, if any, and the enrollment forms of all Participants under it, form
the entire Contract between you and us. Certificates are not contracts and are
not a part of this Contract.
Only statements in the application, if any, or in a Participant's enrollment
form will be used to void a Participant's participation interest hereunder, or
to defend a claim based on it. Such statements are representations and not
warranties.
PARTICIPANT CERTIFICATE
A Certificate is evidence of a Participant's participation interest under this
Contract.
CHANGES -- WAIVERS
No changes or waivers of the terms of this Contract are valid unless made in
writing by our President, Vice President, or Secretary. No agent or other person
not named above has authority to change or waive any provision of this Contract.
We reserve the right both to administer and to change the provisions of this
Contract to conform to any applicable laws, regulations or rulings issued by a
governmental agency.
In any event, the Company reserves the right to add or delete Fixed Account
options and Sub-Accounts, to substitute shares of a different Fund or different
class or series of a Fund for shares held in a Sub-Account, to merge or combine
Sub-Accounts, to merge or combine the Separate Account with any other separate
account of the Company, to transfer the assets of the Separate Account to
another life insurance company by means of a merger or reinsurance, to convert
the Separate Account into a managed separate account, and to de-register the
Separate Account under the Investment Company Act of 1940. Any such change will
be made in accordance with applicable insurance and securities laws and after
obtaining any necessary approvals, including those of the Ohio Department of
Insurance and the Securities and Exchange Commission.
NONPARTICIPATING
This Contract does not pay dividends or share in the Company's divisible
surplus.
MISSTATEMENT
If the age or sex of a person on whose life Benefit Payments are based is
misstated, the payments or other benefits under this Contract shall be adjusted
to the amount which would have been payable based on the correct age or sex. If
we made any underpayments based on any misstatement, the amount of any
underpayment with interest shall be immediately paid in one sum. In addition to
any other remedies that may be available at law or at equity, we may deduct any
overpayments made, with interest, from any succeeding payments due.
REQUIRED REPORTS
At least once each Certificate Year, we will send a report of a Participant's
current values and any other information required by law, until the first to
occur of the following:
1) the date the Participant's participation interest under this
Contract is fully surrendered;
2) the Participant's Annuity Commencement Date; or
3) the Participant's Death Benefit Commencement Date.
7
<PAGE>
The report will be mailed to the last known address of the Participant. The
reported values will be based on the information in our possession at the time
the report is prepared by us. We may adjust the reported values at a later date
if that information proves to be incorrect or has changed.
EXCLUSIVE BENEFIT
This Contract is for the exclusive benefit of Participants and their
Beneficiaries. Their interests under this Contract are nonforfeitable by us.
STATE LAW
All factors, values, benefits and reserves under this Contract will not be less
than those required by the law of the state in which this Contract is delivered.
CLAIMS OF CREDITORS
To the extent allowed by law, this Contract and all values and benefits under it
are not subject to the claims of creditors or to legal process.
COMPANY LIABILITY
We will not incur any liability or be responsible for any failure, in whole or
in part, by you or by any person having rights or benefits arising out of or
related to this Contract, to comply with any applicable laws, regulations or
rulings issued by a governmental agency.
VOTING RIGHTS
To the extent required by law, we will vote all shares of the Funds held in the
Separate Account, at regular and special shareholder meetings of the Funds, in
accordance with instructions received from the Participant, or, if applicable,
from the Person Controlling Payments. If there is a change in the law which
permits us to vote the shares of the Funds without such instructions, then we
reserve the right to do so.
INCONTESTABILITY
This Contract, and the participation interests of Participants under it, shall
not be contestable by us.
DISCHARGE OF LIABILITY
Upon payment of any partial or full surrender, or any Benefit Payment, we shall
be discharged from all liability to the extent of each such payment.
TRANSFER BY THE COMPANY
We reserve the right to transfer our obligations under this Contract to another
qualified life insurance company under an assumption reinsurance arrangement
without your prior consent.
TERMINATION
Either we or you may terminate this Contract by giving sixty (60) days advance
notice in writing. Refer to the Contract Specifications page for information
regarding the benefits and charges, if any, in the event of termination of this
Contract. If this Contract is terminated, a Participant may continue his or her
participation under it on a deferred paid-up basis, subject to all of the terms
and conditions of this Contract, unless he or she surrenders his or her
participation as a whole. Termination of this Contract will not affect Benefit
Payments being made by us.
8
<PAGE>
PURCHASE PAYMENTS
PURCHASE PAYMENTS
One or more Purchase Payments may be paid to us for a Participant at any time
before the Participant's Annuity Commencement Date, so long as:
1) the Participant is still living; and
2) the Participant's participation interest has not been fully
surrendered.
The initial Purchase Payment for a Participant must be paid to us on or before
the Participant's Certificate Effective Date. Each Purchase Payment must be paid
to us at our Administrative Office, and is subject to any minimums or maximums
that we set for such from time to time. Upon request, we will provide you with a
receipt as proof of payment.
ALLOCATION OF PURCHASE PAYMENT(S)
We will allocate Purchase Payments to the Fixed Account options and/or to the
Sub-Accounts according to the instructions we receive in the Participant's
enrollment form or subsequent Written Request. Allocations must be made in whole
percentages. The minimum Purchase Payment amount that can be allocated to a
Fixed Account option other than the Fixed Accumulation Account is $2000.
You shall be responsible to collect Purchase Payment(s) by payroll deduction or
otherwise and to remit Purchase Payment(s) to us in the proper amount, together
with all information necessary to apply such amounts properly under the terms of
this Contract and with respect to the participation interests of Participants
hereunder.
NO TERMINATION
Except as stated elsewhere in this Contract, neither this Contract nor the
participation of a Participant under it will be terminated by us due to failure
to make additional Purchase Payments.
FIXED ACCOUNT
FIXED ACCOUNT
The Fixed Account is part of the Company's general account. The values of the
Fixed Account are not dependent upon the investment performance of the
Sub-Accounts.
FIXED ACCOUNT OPTIONS. The Fixed Account options available as of the Contract
Effective Date are listed on the Contract Specifications page. Different Fixed
Account options may be offered by us at any time.
INTEREST CREDITED. The guaranteed rate of interest for the Fixed Account options
is three percent (3%) per year, compounded annually. We may, at any time, pay a
current interest rate as declared by our Board of Directors for any of the Fixed
Account options that is higher than the guaranteed rate.
The interest rate initially credited to each Purchase Payment allocated to the
Fixed Accumulation Account Option will not be changed any sooner than twelve
(12) months following the date on which that Purchase Payment was received;
thereafter, the interest rate credited will not be changed more frequently than
once per calendar quarter. In the case of transfers from other Fixed Account
options or the Sub-Accounts to the Fixed Accumulation Account Option, the
interest rate will not be changed more frequently than once per calendar
quarter.
9
<PAGE>
The interest rate credited to amounts allocated to the Fixed Account options
other than the Fixed Accumulation Account Option will not be changed during the
duration of the applicable guarantee period.
RENEWAL. The following RENEWAL provisions apply to all Fixed Account options
except the Fixed Accumulation Account Option.
At the end of a guarantee period, and for the thirty (30) days immediately
preceding the end of such guarantee period, a Participant may elect a new option
to replace the Fixed Account option that is then expiring. The entire amount
maturing may be re-allocated to any of the then-current options under the
Contract (including the various Sub-Accounts within the Separate Account),
except that a Fixed Account option with a guarantee period that would extend
past the Participant's Annuity Commencement Date may not be selected. In
particular, in the case of renewals occurring within one (1) year of such
Commencement Date, the only Fixed Account option available to the Participant is
the Fixed Accumulation Account Option.
If a new Fixed Account option is not specified in accordance with the preceding
paragraph, the Participant will be deemed to have selected the same Fixed
Account option as is expiring, so long as the guarantee period of such option
does not extend beyond the Participant's Annuity Commencement Date. In the event
that such a period would extend beyond that date, the Participant will be deemed
to have selected the Fixed Account option with the longest available guarantee
period that expires prior to that date, or, failing that, the Fixed Accumulation
Account Option.
Any renewal of a Fixed Account option under this RENEWAL provision will be
effective on the day after the expiration of the guarantee period that is then
expiring.
FIXED ACCOUNT VALUE
A Participant's Fixed Account Value at any time is equal to:
1) Purchase Payment(s) received by us for him or her which are
allocated to the Fixed Account; plus
2) amounts transferred to the Fixed Account for him or her; plus
3) interest credited to the Participant's interest in the Fixed
Account; less
4) any charges, surrenders, deductions, amounts transferred from the
Fixed Account or other adjustments made as described elsewhere in
this Contract, which relate to his or her participation.
SEPARATE ACCOUNT
GENERAL DESCRIPTION
The variable benefits under this Contract are provided through the Separate
Account. The Separate Account is registered with the Securities and Exchange
Commission as a unit investment trust under the Investment Company Act of 1940.
The income, if any, and any gains or losses, realized or unrealized, on the
Separate Account will be credited to or charged against the amounts allocated to
such account without regard to other income, gains, or losses of the Company.
The amounts allocated to the Separate Account and the accumulations thereon
remain the property of the Company, but that portion of the assets of the
Separate Account that is equal to the reserves and other contractual liabilities
under all policies, annuities, and other contracts identified with the Separate
Account, is not chargeable with liabilities arising out of any other business of
the Company. The Company is not, and does not hold itself out to be, a trustee
in respect of such amounts.
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We have the right to transfer to our general account, in our sole discretion and
at any time without prior written notice, any assets of the Separate Account
which are in excess of the required reserves and other contractual liabilities
under all policies, annuities, and other contracts identified with the Separate
Account.
SUB-ACCOUNTS OF THE SEPARATE ACCOUNT
The assets of the Separate Account are divided into Sub-Accounts. The
Sub-Accounts available as of the Contract Effective Date are listed on the
Contract Specifications page. Each Sub-Account invests exclusively in shares of
an underlying Fund as shown on the Contract Specifications page. Any amounts of
income and any gains on the shares of a Fund will be reinvested in additional
shares of that Fund at its Net Asset Value.
VALUATION OF ASSETS
Shares of Funds held by each Sub-Account will be valued at their Net Asset Value
at the end of each Valuation Period, as reported by each such Fund.
VARIABLE ACCOUNT VALUE
Purchase Payment(s) may be allocated among and, as described elsewhere in this
Contract, Account Values may be transferred to the various Sub-Accounts within
the Separate Account. For each Sub-Account, the Purchase Payment(s) or amounts
transferred are converted into Accumulation Units. The number of Accumulation
Units credited is determined by dividing the dollar amount directed to each
Sub-Account by the value of the Accumulation Unit for that Sub-Account at the
end of the Valuation Period on which the Purchase Payment(s) or transferred
amount is received.
The following events will result in the cancellation of an appropriate number of
Accumulation Units of a Sub-Account:
1) transfer from a Sub-Account;
2) full or partial surrender of a Participant's Variable Account Value;
3) payment of a Death Benefit;
4) application of a Participant's Variable Account Value to a
settlement option;
5) deduction of a Certificate Maintenance Fee; or
6) deduction of any Transfer Fee.
Accumulation Units will be canceled as of the end of the Valuation Period during
which the Company receives a Written Request regarding the event giving rise to
such cancellation, or an applicable Commencement Date, or the end of the
Valuation Period on which a Certificate Maintenance Fee or Transfer Fee is due,
as the case may be.
A Participant's Variable Account Value at any time is equal to the sum of the
number of Accumulation Units for each Sub-Account attributable to his or her
participation multiplied by the Accumulation Unit Value for each Sub-Account at
the end of the preceding Valuation Period.
ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Sub-Account, with the exception of
the Money Market Sub-Account, was set at $10.00. The initial Accumulation Unit
Value for the Money Market Sub-Account was set at $1.00. Thereafter, the
Accumulation Unit Value at the end of each Valuation Period is the Accumulation
Unit Value at the end of the previous Valuation Period multiplied by the Net
Investment Factor, as described below.
The Net Investment Factor is a factor applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. Each
Sub-Account has a Net Investment Factor for each Valuation Period which may be
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greater or less than one. Therefore, the Accumulation Unit Value for each
Sub-Account may increase or decrease. The Net Investment Factor for any
Sub-Account for any Valuation Period is determined by dividing (1) by (2) and
subtracting (3) from the result, where:
1) is equal to:
a) the Net Asset Value per share of the Fund held in the
Sub-Account, determined at the end of the applicable
Valuation Period; plus
b) the per share amount of any dividend or net capital gain
distributions made by the Fund held in the Sub-Account, if
the "ex-dividend" date occurs during the applicable Valuation
Period; plus or minus
c) a per share charge or credit for any taxes reserved for,
which is determined by the Company to have resulted from the
investment operations of the Sub-Account;
2) is the Net Asset Value per share of the Fund held in the
Sub-Account, determined at the end of the immediately preceding
Valuation Period; and
3) is the factor representing the Mortality and Expense Risk Charge
and the Administration Charge deducted from the Sub-Account for
the number of days in the applicable Valuation Period.
TRANSFERS
Prior to his or her applicable Commencement Date, a Participant may transfer
amounts in a Sub-Account to a different Sub-Account and/or one or more of the
Fixed Account options.
After the first Certificate Anniversary, and prior to the applicable
Commencement Date, a Participant may transfer amounts from any Fixed Account
option to any other Fixed Account option and/or one or more of the Sub-Accounts.
If a transfer is being made from a Fixed Account option pursuant to the RENEWAL
provision of this Contract, then the entire amount of that Fixed Account option
subject to renewal at that time may be transferred. In any other case, transfers
from any Fixed Account option are subject to a cumulative limit for each
Participant during each Certificate Year of twenty percent (20%) of the Fixed
Account option's value for that Participant as of the most recent Certificate
Anniversary.
Amounts previously transferred from Fixed Account options to the Sub-Accounts
may not be transferred back to the Fixed Account options for a period of six (6)
months from the date of transfer.
The minimum transfer amount for any transfer is $500. The number of transfers
per year for each Participant, over which we will charge a Transfer Fee on each
additional transfer, and the amount of the Transfer Fee, are shown on the
Contract Specifications page.
We reserve the right, in our sole discretion and at any time without prior
notice, to terminate, suspend or modify the transfer privileges described above.
FEES AND CHARGES
MORTALITY AND EXPENSE RISK CHARGE
The Mortality and Expense Risk Charge is shown on the Contract Specifications
page and is deducted daily from each Sub-Account. This deduction is made to
compensate the Company for assuming the mortality and expense risks under this
Contract.
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ADMINISTRATION CHARGE
The Administration Charge is shown on the Contract Specifications page and is
deducted daily from each Sub-Account. This deduction is made to reimburse the
Company for expenses incurred in the administration of this Contract, the
Certificates thereunder, and the Separate Account.
CERTIFICATE MAINTENANCE FEE
The Certificate Maintenance Fee ("Fee") is shown on the Contract Specifications
page and is deducted for each Participant as of the Valuation Period next
following each Certificate Anniversary prior to the applicable Commencement
Date. In addition, the full annual Fee will be charged at the time of a full
surrender of a Participant's participation interest. The Fee will be allocated
to each Sub-Account in the same proportion as each Sub-Account's value is to the
Participant's total Variable Account Value as of the end of such Valuation
Period. The Fee does not apply to the Fixed Account.
After his or her applicable Commencement Date, if a Variable Dollar Benefit is
elected by a Participant, the Fee will be deducted pro-rata from each Benefit
Payment and will result in a reduction in the amount of such payment.
The Fee may be waived in whole or in part in our sole discretion.
SURRENDERS
SURRENDERS
A surrender in full may be made for a Participant's Surrender Value, or partial
surrenders may be made for a lesser amount, by Written Request at any time prior
to the Participant's Annuity Commencement Date. The amount of any partial
surrender must be at least $500. A partial surrender cannot reduce a
Participant's Surrender Value to less than $500. Surrenders will be deemed to be
withdrawn first from the portion of the Account Value that represents a
Participant's Accumulated Earnings and then from Purchase Payments. For purposes
of this Contract, Purchase Payments are deemed to be withdrawn on a "first-in,
first-out" (FIFO) basis.
The amount available for surrender will be the Surrender Value at the end of the
Valuation Period in which the Written Request is received by us.
SURRENDER VALUE
A Participant's Surrender Value at any time is an amount equal to:
1) his or her Account Value as of the end of the applicable Valuation
Period; less
2) any applicable Contingent Deferred Sales Charge; less
3) any outstanding loans; and less
4) any applicable premium tax or other taxes not previously deducted.
On full surrender, a full Contract Maintenance Fee will also be deducted as part
of the calculation of the Surrender Value.
CONTINGENT DEFERRED SALES CHARGE
A full or partial surrender of a Participant's participation interest may be
subject to a Contingent Deferred Sales Charge as set forth on the Contract
Specifications page. The Contingent Deferred Sales Charge applies to and is
calculated separately for each Purchase Payment.
Surrenders will result in the cancellation of Accumulation Units from each
applicable Sub-Account(s) and/or a reduction of the Participant's Fixed Account
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Value. In the case of a full surrender, a Participant's participation interest
under this Contract will be terminated. The Contingent Deferred Sales Charge may
be waived in whole or in part in our sole discretion.
DEFERRAL OF PAYMENT
The Company has the right to suspend or delay the date of payment of a partial
or full surrender of the Variable Account Value for any period:
1) when the New York Stock Exchange is closed, or when trading on
the New York Stock Exchange is restricted; or
2) when an emergency exists (as determined by the Securities and
Exchange Commission) as a result of which:
a) the disposal of securities in the Separate Account is not
reasonably practicable; or
b) it is not reasonably practicable to determine fairly the
value of the net assets in the Separate Account; or
3) when the Securities and Exchange Commission so permits for the
protection of security holders.
The Company further reserves the right to delay payment of a partial or full
surrender of the Fixed Account Value for up to six (6) months after we receive a
Written Request.
OWNERSHIP PROVISIONS
OWNERSHIP OF SEPARATE ACCOUNT
The Company has absolute ownership of the assets in the Separate Account.
However, the Company is not, and does not hold itself out to be, a trustee in
respect of any amounts under the Separate Account.
OWNERSHIP OF CONTRACT AND PARTICIPANT ACCOUNT
The Contract Owner must be an employer or the trustee for an employer's
retirement plan. The Contract Owner is shown on the Contract Specifications
page. This Contract is held by the Contract Owner for the benefit of the
Participants and Beneficiaries.
Each participant for whom Purchase Payment(s) are made will participate in this
Contract as a Participant. A participant account will be established for each
Participant.
TRANSFER AND ASSIGNMENT
Neither you nor a Participant may transfer, sell, assign, pledge, charge,
encumber or in any way alienate an interest under this Contract.
SUCCESSOR OWNER
By Written Request, a Participant's spouse may, in some cases, succeed to the
ownership of a Participant's participation interest under this Contract after
the Participant's death. Specifically, if a Participant dies and his or her
spouse is the sole surviving Beneficiary of the Participant's participation
interest, he or she will become the Successor Owner of the Participant's
participation interest if:
1) the Participant makes that Written Request before his or her
death; or
2) after the Participant's death, his or her spouse makes that
Written Request within one (1) year of the Participant's death
and before the Death Benefit Commencement Date.
As Successor Owner, the Participant's spouse will then succeed to all the
Participant's rights of ownership under this Contract except the right to name
another Successor Owner.
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COMMUNITY PROPERTY
If a Participant lives in a community property state and has a spouse at any
time while he or she participates under this Contract, the laws of that state
may vary his or her ownership rights.
BENEFICIARY PROVISIONS
BENEFICIARY
A Participant's Beneficiary is the person or persons so designated on his or her
enrollment form, if any, or under the CHANGE OF BENEFICIARY provision of this
Contract. If a Participant has not designated a Beneficiary, or if no
Beneficiary designated survives the Participant, then the Beneficiary will be
the Participant's estate.
A Beneficiary will be deemed not to have survived a Participant if he or she
dies within thirty (30) days after the Participant's death.
A Beneficiary designation may be joint or contingent or both. Unless otherwise
stated, joint Beneficiaries will be entitled to equal shares. A contingent
Beneficiary will be entitled to a benefit only if there is no surviving primary
Beneficiary.
CHANGE OF BENEFICIARY
Unless a Participant has designated an irrevocable Beneficiary, he or she may
change his or her designation of a Beneficiary at any time before the Annuity
Commencement Date.
Any such change is subject to the following:
1) it must be made by Written Request; and
2) unless otherwise elected or required by law, it will not cancel
any settlement option election previously made.
BENEFIT ON ANNUITY COMMENCEMENT DATE
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date for a Participant is shown on the Participant's
Certificate Specifications page. A Participant may change his or her Annuity
Commencement Date by Written Request made at least thirty (30) days prior to the
date that Annuity Benefit payments are scheduled to begin. Unless the Company
agrees otherwise, a Participant's Annuity Commencement Date cannot be later than
the Certificate Anniversary following his or her 85th birthday, or five (5)
years after his or her Certificate Effective Date, whichever is later.
ANNUITY BENEFIT PAYMENTS
An amount equal to the Participant's Account Value (after deduction of any fees
and charges, loans, or applicable premium tax or other taxes not previously
deducted) will be used to provide Annuity Benefit payments to Participants under
this Contract commencing on or after a Participant's Annuity Commencement Date.
Annuity Benefit payments will be made to the Participant as payee. Any Annuity
Benefit amounts remaining payable on his or her death will be paid to the
contingent payee designated by the Participant by Written Request. The
Participant will be the person on whose life any Annuity Benefit payments are
based.
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If no contingent payee designated by the Participant is surviving at the time
payment is to be made, then after the Participant's death any Annuity Benefit
amounts remaining payable will be paid to the person or persons designated as
contingent payee by Written Request by the last payee who received payments.
Failing that, any such amounts will be paid to the estate of the last payee who
received payments.
FORM OF ANNUITY BENEFIT
Annuity Benefit payments will be Fixed Dollar Benefit payments, made monthly in
accordance with the terms of Option B with a fixed period of one hundred twenty
(120) months under the SETTLEMENT OPTIONS section of this Contract.
In lieu of that, a Participant may elect to have Annuity Benefit payments made
pursuant to any other available settlement option under the SETTLEMENT OPTIONS
section of this Contract. Any such election must be made by Written Request
before the Annuity Commencement Date. A Participant may change his or her
election of a settlement option by Written Request made at least thirty (30)
days prior to the date that Annuity Benefit payments are scheduled to begin.
BENEFIT ON DEATH OF PARTICIPANT
DEATH BENEFIT
A Death Benefit will be paid under this Contract if:
1) a Participant dies before his or her Annuity Commencement Date
and before his or her participation interest is fully
surrendered;
2) the Participant's Death Benefit Valuation Date has occurred; and
3) the Participant's spouse does not become the Successor Owner of
the Participant's participation interest.
If a Death Benefit becomes payable with respect to a Participant:
1) it will be in lieu of all other benefits with respect to that
Participant under this Contract; and
2) all other rights with respect to that Participant under this
Contract will be terminated except for rights related to the
Death Benefit.
Death Benefit payments shall be made to the Participant's Beneficiary as payee.
The Participant's Beneficiary will be the person on whose life any Death Benefit
payments under a settlement option are based.
Any Death Benefit amounts remaining payable on the death of a Beneficiary will
be paid:
1) to any contingent payee designated by the Participant as part of
any Death Benefit settlement option election made by the
Participant, or if none is surviving at the time payment is to be
made; then
2) to any contingent payee designated by the Beneficiary by Written
Request, or if none is surviving at the time payment is to be
made; then
3) to the estate of the last payee who received payments.
Only one Death Benefit will be paid with respect to a Participant's
participation interest under this Contract.
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DEATH BENEFIT AMOUNT
If the Participant dies before attaining Age eighty (80) and before his or her
Annuity Commencement Date, the Death Benefit is an amount equal to the greatest
of:
1) the Participant's Account Value on the Death Benefit Valuation
Date;
2) the total Purchase Payment(s) received by us for him or her, with
interest at three percent (3%) per year, compounded annually,
less any partial surrenders and any Contingent Deferred Sales
Charge that applied to those amounts; or
3) the largest Account Value for the Participant on any Certificate
Anniversary after the fourth Certificate Anniversary and prior to
the Death Benefit Valuation Date, less any partial surrenders
after such Account Value was determined and any Contingent
Deferred Sales Charge that applied to those amounts.
If the Participant dies after attaining Age eighty (80) and before his or her
Annuity Commencement Date, the Death Benefit is an amount equal to the greatest
of:
1) the Participant's Account Value on the Death Benefit Valuation
Date;
2) the total Purchase Payment(s) received by us for him or her, with
interest at three percent (3%) per year, compounded annually
through the Certificate Anniversary prior to the Participant's
80th birthday, less any partial surrenders and any Contingent
Deferred Sales Charge that applied to those amounts; or
3) the largest Account Value for the Participant on any Certificate
Anniversary after the fourth Certificate Anniversary and prior to
the date on which the Participant attained Age eighty (80), less
any partial surrenders after such Account Value was determined
and any Contingent Deferred Sales Charge that applied to those
amounts.
In any event, if a Certificate was issued to a Participant after Age eighty
(80), and the Participant dies before his or her Annuity Commencement Date, the
amount of the Death Benefit will be the greater of:
1) the Participant's Account Value on the Death Benefit Valuation
Date; or
2) the total Purchase Payment(s) received by us for him or her, less
any partial surrenders and any Contingent Deferred Sales Charge
that applied to those amounts.
As of the Death Benefit Valuation Date for a Participant, the amount of the
Death Benefit will be allocated among the Sub-Accounts and Fixed Account options
in the same proportion as each Account's value is to the total Account Value for
that Participant as of the end of the Valuation Period immediately preceding the
Death Benefit Valuation Date.
Any applicable premium tax or other taxes not previously deducted, and any
outstanding loans, will be deducted from the Death Benefit amount described
above.
TRANSFERS AFTER DEATH
Between the Death Benefit Valuation Date and the Death Benefit Commencement
Date, a Beneficiary may transfer funds among Sub-Accounts and Fixed Account
options as described under the TRANSFERS section of this Contract.
FORM OF DEATH BENEFIT
Payments under the DEATH BENEFIT provision of this Contract will be Fixed Dollar
Benefit payments made monthly in accordance with the terms of Option A with a
period certain of forty-eight (48) months under the SETTLEMENT OPTIONS section
of this Contract.
In lieu of that, a Participant may elect at any time before his or her death to
have payments under the DEATH BENEFIT provision of this Contract made in one
lump sum or pursuant to any available settlement option under the SETTLEMENT
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OPTIONS section of this Contract. If a Participant does not make any such
election, the Beneficiary may make that election at any time after the
Participant's death and before the Death Benefit Commencement Date.
A Participant may change his or her election of a settlement option at any time
before his or her death.
If a Beneficiary elects a settlement option as noted above, he or she may change
his or her own election of a settlement option by Written Request made at least
thirty (30) days prior to the date that Death Benefit payments are scheduled to
begin.
Any election or change of election must be made by Written Request.
SETTLEMENT OPTIONS
CONDITIONS
Benefit Payments under a settlement option are subject to any minimum amounts,
Payment Intervals, and other terms or conditions that we may from time to time
require. If we change our minimums, we may change any current or future payment
amounts and/or Payment Intervals to conform with the change. More than one
settlement option may be elected if the requirements for each settlement option
elected are satisfied. Once payment begins under a settlement option, the
settlement option may not be changed.
All elected settlement options must comply with current applicable laws,
regulations and rulings issued by any governmental agency.
If more than one person is the payee under a settlement option, payments will be
made to the payees jointly. No more than two persons may be initial payees under
any joint and survivor settlement options.
If payment under a settlement option depends on whether a specified person is
still alive, we may at any time require proof that such person is still living.
We will require proof of the age and/or sex of any person on whose life Benefit
Payments are based.
BENEFIT PAYMENTS
Benefit Payments may be calculated and paid:
1) as a Fixed Dollar Benefit;
2) as a Variable Dollar Benefit; or
3) as a combination of both.
If only a Fixed Dollar Benefit is to be paid, we will transfer all of the
Participant's Account Value to the Company's general account on the applicable
Commencement Date, or on the Death Benefit Valuation Date (if applicable).
Similarly, if only a Variable Dollar Benefit is elected, we will transfer all of
the Participant's Account Value to the Sub-Accounts as of the end of the
Valuation Period immediately prior to the applicable Commencement Date; we will
allocate the amount transferred among the Sub-Accounts in accordance with a
Written Request. No transfers between the Fixed Dollar Benefit and the Variable
Dollar Benefit will be allowed after the Commencement Date. However, after the
Variable Dollar Benefit has been paid for at least twelve (12) months, the
Person Controlling Payments may, no more than once each twelve (12) months
thereafter, transfer all or part of the Benefit Units upon which the Variable
Dollar Benefit is based from the Sub-Account(s) then held, to the Benefit Units
in different Sub-Account(s).
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If a Variable Dollar Benefit is elected, the amount to be applied under that
benefit is the Variable Account Value as of the end of the Valuation Period
immediately preceding the applicable Commencement Date. If a Fixed Dollar
Benefit is to be paid, the amount to be applied under that benefit is the Fixed
Account Value as of the applicable Commencement Date, or as of the Death Benefit
Valuation Date (if applicable).
FIXED DOLLAR BENEFIT
Fixed Dollar Benefit payments are determined by multiplying the Participant's
Fixed Account Value (expressed in thousands of dollars and after deduction of
any fees and charges, loans, or applicable premium tax or other taxes not
previously deducted) by the amount of the monthly payment per $1,000 of value
obtained from the Settlement Option Table for the settlement option elected.
Fixed Dollar Benefit payments will remain level for the duration of the Benefit
Payment Period.
If at the time a Fixed Dollar Benefit is elected, we have available options or
rates on a more favorable basis than those guaranteed, the higher benefits shall
be applied and shall not change for as long as that election remains in force.
VARIABLE DOLLAR BENEFIT
The first monthly Variable Dollar Benefit payment is equal to the Participant's
Variable Account Value (expressed in thousands of dollars and after deduction of
any fees and charges, loans, or applicable premium tax or other taxes not
previously deducted) as of the end of the Valuation Period immediately preceding
the applicable Commencement Date multiplied by the amount of the monthly payment
per $1,000 of value obtained from the Settlement Option Table for the Benefit
Payment elected less the pro-rata portion of the Certificate Maintenance Fee.
The number of Benefit Units in each Sub-Account held by a Participant is
determined by dividing the dollar amount of the first monthly Variable Dollar
Benefit payment from each Sub-Account by the Benefit Unit Value for that
Sub-Account as of the applicable Commencement Date. The number of Benefit Units
remains fixed during the Benefit Payment Period, except as a result of any
transfers among Sub-Accounts after the applicable Commencement Date.
The dollar amount of the second and subsequent Variable Dollar Benefit payment
will reflect the investment performance of the Sub-Account(s) selected and may
vary from month to month. The total amount of the second and any subsequent
Variable Dollar Benefit payment will be equal to the sum of the payments from
each Sub-Account less a pro-rata portion of the Contract Maintenance Fee.
The payment from each Sub-Account is found by multiplying the number of Benefit
Units held in each Sub-Account by a Participant by the Benefit Unit Value for
that Sub-Account as of the end of the fifth Valuation Period preceding the due
date of the payment.
The Benefit Unit Value for each Sub-Account is originally established in the
same manner as Accumulation Unit Values. Thereafter, the value of a Benefit Unit
for a Sub-Account is determined by multiplying the Benefit Unit Value as of the
end of the preceding Valuation Period by the Net Investment Factor, determined
as set forth under the ACCUMULATION UNIT VALUE provision of this Contract, for
the Valuation Period just ended. The product is then multiplied by the assumed
daily investment factor (0.99991781), for the number of days in the Valuation
Period. The factor is based on the assumed net investment rate of three percent
(3%) per year, compounded annually, that is reflected in the Settlement Option
Tables.
LIMITATION ON ELECTION OF SETTLEMENT OPTION
Fixed periods shorter than five (5) years are not available, except as a Death
Benefit settlement option.
SETTLEMENT OPTION COMPUTATIONS
The 1983 Group Annuity Mortality Table with interest at three percent (3%) per
year, compounded annually, is used to compute all guaranteed settlement option
factors, values, and benefits under this Contract.
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AVAILABLE SETTLEMENT OPTIONS
The available settlement options are set out below.
OPTION A Income for a Fixed Period
We will make periodic payments for a fixed period. The first payment
will be paid as of the last day of the initial Payment Interval. The
maximum time over which payments will be made by us or money will be
held by us is thirty (30) years. The Option A Table applies to this
Option.
OPTION B Life Annuity with Payments for at Least a Fixed Period
We will make monthly payments for at least a fixed period. If the
person on whose life Benefit Payments are based lives longer than the
fixed period, then we will make payments until his or her death. The
first payment will be paid as of the first day of the initial Payment
Interval. The Option B Table applies to this Option.
OPTION C Joint and One-half Survivor Annuity
We will make a periodic payments until the death of the person on whose
life Benefit Payments are based; thereafter, we will make one-half
(1/2) of the periodic payment until the death of the secondary person
on whose life Benefit Payments are based. The first payment will be
paid as of the first day of the initial Payment Interval. The Option C
Table applies to this Option.
OPTION D Life Annuity
We will make periodic payments until the death of the person on whose
life Benefit Payments are based. The first payment will be paid as of
the first day of the initial Payment Interval. The Option D Table
applies to this Option.
OPTION E Any Other Form
We will make periodic payments in any other form of settlement option
which is acceptable to us at the time of election.
SETTLEMENT OPTION TABLES
The Option Tables show the payments we will make at sample Payment Intervals for
each $1,000 applied at the guaranteed interest rate. Amounts may vary with the
Payment Interval and the age of the person on whose life Benefit Payments are
based.
OPTION A TABLE - INCOME FOR A FIXED PERIOD
Payments for fixed number of years for each $1,000
applied.
<TABLE>
<CAPTION>
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TERMS SEMI- TERMS SEMI- TERMS SEMI
OF ANNUAL ANNUAL QUARTERLY MONTHLY OF ANNUAL ANNUAL QUARTERLY MONTHLY OF ANNUAL ANNUAL QUARTERLY MONTHLY
PAYMENTS PAYMENTS PAYMENTS
- ----------------------------------------------------------------------------------------------------------------------------------
YEARS YEARS YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 184.60 91.62 45.64 15.18 11 108.08 53.64 26.72 8.88 16 79.61 39.51 19.68 6.54
7 160.51 79.66 39.68 13.20 12 100.46 49.86 24.84 8.26 17 75.95 37.70 18.78 6.24
8 142.46 70.70 35.22 11.71 13 94.03 46.67 23.25 7.73 18 72.71 36.09 17.98 5.98
9 128.43 63.74 31.75 10.56 14 88.53 43.94 21.89 7.28 19 69.81 34.65 17.26 5.74
10 117.23 58.18 28.98 9.64 15 83.77 41.57 20.71 6.89 20 67.22 33.36 16.62 5.53
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
OPTION B TABLE - LIFE ANNUITY
With Payments For At Least A Fixed Period
------- ---------------- --------------- ---------------- ----------------
60 MONTHS 120 MONTHS 180 MONTHS 240 MONTHS
------- ---------------- --------------- ---------------- ----------------
AGE
------- ---------------- --------------- ---------------- ----------------
55 $4.55 $4.51 $4.44 $4.33
56 4.65 4.61 4.52 4.39
57 4.76 4.71 4.61 4.46
58 4.87 4.81 4.70 4.53
59 4.99 4.92 4.79 4.60
60 5.12 5.04 4.89 4.67
61 5.25 5.16 4.99 4.74
62 5.40 5.29 5.09 4.81
63 5.55 5.42 5.19 4.87
64 5.72 5.56 5.30 4.94
65 5.89 5.71 5.40 5.00
66 6.08 5.86 5.51 5.06
67 6.27 6.02 5.62 5.11
68 6.48 6.19 5.72 5.17
69 6.71 6.36 5.83 5.22
70 6.95 6.54 5.93 5.26
71 7.20 6.72 6.03 5.30
72 7.46 6.90 6.12 5.34
73 7.75 7.08 6.21 5.37
74 8.04 7.27 6.30 5.40
------- ---------------- --------------- ---------------- ----------------
OPTION C TABLE - JOINT AND ONE-HALF SURVIVOR
ANNUITY Monthly payments for each $1,000 of proceeds by
ages of persons named*.
<TABLE>
<CAPTION>
- -------- --------------------------------------------------------------------------------------------------------
Secondary Age
- -------- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
Primary
Age 60 61 62 63 64 65 66 67 68 69 70
- -------- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
60 $4.73 $4.75 $4.78 $4.80 $4.83 $4.85 $4.87 $4.89 $4.92 $4.93 $4.95
61 4.81 4.84 4.87 4.90 4.92 4.95 4.97 5.00 5.02 5.04 5.06
62 4.90 4.93 4.96 4.99 5.02 5.05 5.08 5.11 5.13 5.16 5.18
63 4.99 5.03 5.06 5.09 5.13 5.16 5.19 5.22 5.25 5.28 5.30
64 5.09 5.12 5.16 5.20 5.23 5.27 5.30 5.34 5.37 5.40 5.43
65 5.18 5.22 5.26 5.31 5.35 5.38 5.42 5.46 5.49 5.53 5.56
66 5.28 5.33 5.37 5.42 5.46 5.50 5.54 5.58 5.62 5.66 5.70
67 5.38 5.43 5.48 5.53 5.58 5.62 5.67 5.72 5.76 5.80 5.84
68 5.49 5.54 5.59 5.65 5.70 5.75 5.80 5.85 5.90 5.95 5.99
69 5.60 5.65 5.71 5.77 5.82 5.88 5.93 5.99 6.04 6.10 6.15
70 5.71 5.77 5.83 5.89 5.95 6.01 6.07 6.13 6.19 6.25 6.31
- -------- --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
</TABLE>
*Payments after the death of the Primary Payee will be one-half (1/2) of the
amount shown.
21
<PAGE>
OPTION D TABLE - LIFE ANNUITY
Monthly payments for each $1,000 applied.
- ------- ------------ ---------- ---------- --------- ---------- ------- --------
AGE AGE AGE AGE
- ------- ------------ ---------- ---------- --------- ---------- ------- --------
55 $4.56 60 $5.14 65 $5.95 70 $7.08
56 4.67 61 5.28 66 6.14 71 7.36
57 4.77 62 5.43 67 6.35 72 7.66
58 4.89 63 5.59 68 6.58 73 7.98
59 5.01 64 5.76 69 6.82 74 8.33
- ------- ------------ ---------- ---------- ---------- ----------- --------------
22
<PAGE>
ANNUITY INVESTORS(SERVICEMARK)
Life Insurance Company
GROUP FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
Nonparticipating - No Dividends
<PAGE>
TABLE OF CONTENTS PAGE
DEFINITIONS...................................................7
GENERAL PROVISIONS............................................8
Entire Contract..........................................8
Participant Certificate..................................8
Changes -- Waivers.......................................8
Nonparticipating.........................................8
Misstatement.............................................8
Required Reports.........................................8
Exclusive Benefit........................................9
State Law................................................9
Claims of Creditors......................................9
Company Liability........................................9
Voting Rights............................................9
Incontestability.........................................9
Discharge of Liability...................................9
Transfer By the Company..................................9
Termination..............................................9
PURCHASE PAYMENTS............................................10
Purchase Payments.......................................10
Allocation of Purchase Payment(s).......................10
No Termination..........................................10
FIXED ACCOUNT................................................10
Fixed Account...........................................10
Fixed Account Options...............................10
Interest Credited...................................10
Renewal.............................................11
Fixed Account Value.....................................11
SEPARATE ACCOUNT.............................................11
General Description.....................................11
Sub-Accounts of the Separate Account....................12
Valuation of Assets.....................................12
Variable Account Value..................................12
Accumulation Unit Value.................................12
TRANSFERS....................................................13
FEES AND CHARGES.............................................13
Mortality and Expense Risk Charge.......................13
Administration Charge...................................14
Certificate Maintenance Fee.............................14
SURRENDERS...................................................14
Surrenders..............................................14
Surrender Value.........................................14
Contingent Deferred Sales Charge........................14
Deferral of Payment.....................................15
OWNERSHIP PROVISIONS.........................................15
Ownership of Separate Account...........................15
Ownership of Group Contract and Participant Account.....15
23
<PAGE>
Transfer and Assignment.................................15
Successor Owner.........................................15
Community Property......................................16
BENEFICIARY PROVISIONS.......................................16
Beneficiary.............................................16
Change of Beneficiary...................................16
BENEFIT ON ANNUITY COMMENCEMENT DATE.........................16
Annuity Commencement Date...............................16
Annuity Benefit Payments................................16
Form of Annuity Benefit.................................17
BENEFIT ON DEATH OF PARTICIPANT DEATH BENEFIT................17
Death Benefit...........................................17
Death Benefit Amount....................................18
Transfers After Death...................................18
Form of Death Benefit...................................19
SETTLEMENT OPTIONS...........................................19
Conditions..............................................19
Benefit Payments........................................19
Fixed Dollar Benefit....................................20
Variable Dollar Benefit.................................20
Limitation on Election of Settlement Option.............20
Settlement Option Computations..........................21
Available Settlement Options............................21
Settlement Option Tables................................21
24
Exhibit (4)(1)
ANNUITY INVESTORS(SERVICEMARK)
Life Insurance Company
A Stock Insurance Company
Domicile Address: 580 Walnut Street, Cincinnati, Ohio 45202
Administrative Office:
P. O. Box 5423, Cincinnati, Ohio 45201-5423
CERTIFICATE OF PARTICIPATION
UNDER A GROUP FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
This is your Certificate of Participation ("Certificate"). It is evidence of
your participation interest in the Group Flexible Premium Deferred Variable
Annuity Contract ("the Contract"), as identified on the Certificate
Specifications page, which has been issued by Annuity Investors Life Insurance
Company to the Contract Owner. As you read through this Certificate, please note
that the words "we", "us", "our", and "Company" refer to Annuity Investors Life
Insurance Company. The words "you" and "your" refer to the Participant.
/s/ Betty Kasprowicz /s/ James M. Mortensen
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
Nonparticipating - No Dividends
ANNUITY BENEFITS AND OTHER VALUES DESCRIBED IN THIS CERTIFICATE, WHEN BASED ON
THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, MAY INCREASE OR DECREASE AND
ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNTS. NO MINIMUM CONTRACT VALUE IS
GUARANTEED, EXCEPT FOR AMOUNTS IN THE FIXED ACCOUNT.
<PAGE>
CERTIFICATE SPECIFICATIONS
PARTICIPANT: JOHN DOE
AGE OF PARTICIPANT AS OF CERTIFICATE EFFECTIVE DATE: 35
GROUP CONTRACT OWNER: ANYTOWN TRUCKING COMPANY
GROUP CONTRACT NUMBER: 000000000
CERTIFICATE NUMBER: 000000000
CERTIFICATE EFFECTIVE DATE: APRIL 01, 1997
ANNUITY COMMENCEMENT DATE: APRIL 01, 2032
SEPARATE ACCOUNT: Annuity Investors Variable Account B
Following is a list of the Funds in which the currently available Sub-Accounts
invest:
[Janus Aspen Series Aggressive Growth Portfolio]
[Janus Aspen Series Worldwide Growth Portfolio]
[Janus Aspen Series Balanced Portfolio]
[Janus Aspen Series Growth Portfolio]
[Janus Aspen Series International Growth Portfolio]
[Dreyfus Variable Investment Fund-Capital Appreciation Portfolio]
[Dreyfus Variable Investment Fund-Money Market Portfolio]
[Dreyfus Variable Investment Fund-Growth and Income Portfolio]
[Dreyfus Variable Investment Fund-Small Cap Portfolio]
[The Dreyfus Socially Responsible Growth Fund, Inc.]
[Dreyfus Stock Index Fund]
[Strong Special Fund II]
[Strong Growth Fund II]
[INVESCO VIF-Industrial Income Fund]
[INVESCO VIF-Total Return Fund]
[INVESCO VIF- High Yield Fund]
[Morgan Stanley Universal Funds, Inc. U.S. Real Estate Portfolio]
[Morgan Stanley Universal Funds, Inc. Value Portfolio]
[Morgan Stanley Universal Funds, Inc. Emerging Markets Equity Portfolio]
[Morgan Stanley Universal Funds, Inc. Fixed Income Portfolio]
[Morgan Stanley Universal Funds, Inc. Mid-Cap Value Portfolio]
[PBHG Insurance Series Fund, Inc.-Growth II Portfolio]
[PBHG Insurance Series Fund, Inc.-Large-Cap Growth Portfolio]
[PBHG Insurance Series Fund, Inc.-Technology & Communications Portfolio]
2
<PAGE>
FIXED ACCOUNT:
Following is a list of the currently available Fixed Account options, with
guarantee periods as may be applicable:
Fixed Accumulation Account Option
[Fixed Account Option One-Year Guarantee Period]
[Fixed Account Option Three-Year Guarantee Period]
[Fixed Account Option Five-Year Guarantee Period]
[Fixed Account Option Seven-Year Guarantee Period]
Minimum guaranteed interest rate credited to the Fixed Account: Three percent
(3%) effective annual rate.
TRANSFER FEE: [$25] per transfer in excess of twelve (12) in any Certificate
Year.
CONTINGENT DEFERRED SALES CHARGE: An amount deducted on each partial or full
surrender of a Purchase Payment, as follows:
NUMBER OF FULL YEARS ELAPSED BETWEEN CONTINGENT DEFERRED SALES CHARGE AS
THE DATE OF RECEIPT OF A PURCHASE PAYMENT A PERCENTAGE OF THE ASSOCIATED
AND DATE WRITTEN REQUEST FOR PURCHASE PAYMENT
SURRENDER IS RECEIVED SURRENDERED
- ------------------------------------------ ------------------------------------
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7+ 0%
CERTIFICATE MAINTENANCE FEE: [$30] Annually
MORTALITY AND EXPENSE RISK CHARGE: A charge equal to an effective annual rate of
[1.25%] of the daily Net Asset Value of the Sub-Accounts.
ADMINISTRATION CHARGE: A charge equal to an effective annual rate of [0.15%] of
the daily Net Asset Value of the Sub-Accounts.
TERMINATION: We reserve the right to terminate your participation interest under
the Contract, and this Certificate, at any time the Surrender Value is less than
$500. A surrender will be deemed to have been made and we will pay you the
Surrender Value of your participation interest under the Contract.
INQUIRIES: FOR INFORMATION, OR TO MAKE A COMPLAINT, CALL OR WRITE:
Variable Annuity Service Center
Annuity Investors Life Insurance Company
Post Office Box 5423
Cincinnati, Ohio 45201-5423
1-800-789-6771
3
<PAGE>
DEFINITIONS
ACCOUNT(S): The Sub-Account(s) and/or the Fixed Account options.
ACCOUNT VALUE: The aggregate value of your interest in the Sub-Account(s) and
the Fixed Account options as of the end of any Valuation Period. The value of
your interest in all Sub-Accounts is the "Variable Account Value," and the value
of your interest in all Fixed Account options is the "Fixed Account Value."
ACCUMULATED EARNINGS: The Account Value in excess of Purchase Payments received
by us and which have not been returned to you.
ACCUMULATION PERIOD: The period prior to the applicable Commencement Date.
ACCUMULATION UNIT: A unit of measurement used to calculate the value(s) of the
Sub-Account(s) prior to the applicable Commencement Date.
ADMINISTRATIVE OFFICE: The home office of the Company or any other place of
business which we may designate for administration.
AGE: Age as of most recent birthday.
ANNUITANT: The Annuitant is the Participant and is the person on whose life
Annuity Benefit payments are based.
ANNUITY BENEFIT: Periodic payments made under a settlement option, which
commence on or after the Annuity Commencement Date.
ANNUITY COMMENCEMENT DATE: The first day of the first Payment Interval for which
an Annuity Benefit payment is to be made under a settlement option.
BENEFICIARY: A person entitled to the Death Benefit.
BENEFIT PAYMENT: The Annuity Benefit or Death Benefit payable under a settlement
option. Variable Dollar Benefit payments may vary in amount. Fixed Dollar
Benefit payments remain constant except under certain joint and survivor
settlement options.
BENEFIT PAYMENT PERIOD: The period starting with the Commencement Date during
which Benefit Payments are to be made.
BENEFIT UNIT: A unit of measure used to determine the dollar value of any
Variable Dollar Benefit payments after the first Benefit Payment is made by us.
CERTIFICATE ANNIVERSARY: An annual anniversary of the Certificate Effective
Date.
CERTIFICATE EFFECTIVE DATE: The date shown on the Certificate Specifications
page.
CERTIFICATE YEAR: Any period of twelve (12) months commencing on the Certificate
Effective Date and on each Certificate Anniversary thereafter.
CODE: The Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
4
<PAGE>
COMMENCEMENT DATE: The Annuity Commencement Date if an Annuity Benefit is
payable under a Certificate, or the Death Benefit Commencement Date if a Death
Benefit is payable under a Certificate.
DEATH BENEFIT: The benefit described in the Benefit on Death of Participant
section of this Contract.
DEATH BENEFIT COMMENCEMENT DATE: The first day of the first Payment Interval for
which a Death Benefit payment is to be made under a settlement option, or the
date a Death Benefit is to be paid in a lump sum.
DEATH BENEFIT VALUATION DATE: The date that Due Proof of Death has been received
by us and the earlier to occur of:
1) our receipt of a Written Request with instructions as to the form
of Death Benefit; or
2) the Death Benefit Commencement Date.
DUE PROOF OF DEATH: Any of the following:
1) a certified copy of a death certificate;
2) a certified copy of a decree of a court of competent jurisdiction
as to the finding of death; or
3) any other proof satisfactory to us.
FUND: A management investment company or portfolio thereof, registered under the
Investment Company Act of 1940, in which a Sub-Account of the Separate Account
invests.
NET ASSET VALUE: The amount computed by an investment company, no less
frequently than each Valuation Period, as the price at which its shares or
units, as the case may be, are redeemed in accordance with the rules of the
Securities and Exchange Commission.
OWNER: The person identified as such on the Contract Specifications page.
PARTICIPANT: The person identified on the Certificate Specifications page who
participates in the benefits of the Contract as evidenced by this Certificate.
PAYMENT INTERVAL: A monthly, quarterly, annual or other regular interval during
the Benefit Payment Period.
PERSON CONTROLLING PAYMENTS: The "Person Controlling Payments" means the
following, as the case may be:
1) with respect to Annuity Benefit payments, you; and
2) with respect to Death Benefit payments,
a) the Beneficiary; or
b) if the Beneficiary is deceased, the payee.
PURCHASE PAYMENT: A contribution amount paid to us in consideration for your
participation under the Contract, after the deduction of any and all of the
following which may apply:
1) any fee charged by the person remitting payments for you;
2) premium taxes; and/or
3) other taxes.
SEPARATE ACCOUNT: An account, which may be an investment company, which is
established and maintained by the Company pursuant to the laws of the State of
Ohio.
5
<PAGE>
SUB-ACCOUNT: The Separate Account is divided into Sub-Accounts, each of which
invests in the shares of a designated Fund.
VALUATION PERIOD: The period commencing at the close of regular trading on the
New York Stock Exchange on any Valuation Date, and ending at the close of
trading on the next succeeding Valuation Date. "Valuation Date" means each day
on which the New York Stock Exchange is open for business.
WRITTEN REQUEST: Information provided, or a request made, that is complete and
satisfactory to us and in writing, that is sent to us on our form or in a manner
satisfactory to us, which may, at our discretion, be telephonic, and that is
received by us at our Administrative Office. A Written Request is subject to any
payment made or any action we take before we acknowledge it. The Company will
deem a Written Request a standing order which may be modified or revoked only by
a subsequent Written Request, when permitted by the terms of the Contract. You
may be required to return this Certificate to us in connection with a Written
Request.
6
<PAGE>
GENERAL PROVISIONS
ENTIRE CONTRACT
We have issued the Contract to the Contract Owner identified on the Certificate
Specifications page. The Contract is a group flexible premium deferred variable
annuity contract. The Contract and this Certificate are restricted by
endorsement as required to obtain favorable tax treatment under the Code, and
neither is valid without the requisite endorsement(s) being attached. The
Contract, its endorsement(s), the application, if any, and the enrollment forms
of all participants under it, form the entire contract between the Contract
Owner and us. This Certificate is not a contract and is not a part of the
Contract.
Only statements in the application for the Contract, if any, or your enrollment
form will be used to void your participation interest under the Contract, or to
defend a claim based on it. Such statements are representations and not
warranties.
PARTICIPANT CERTIFICATE
This Certificate is evidence of your participation interest under the Contract.
CHANGES -- WAIVERS
No changes or waivers of the terms of the Contract or this Certificate, are
valid unless made in writing by our President, Vice President, or Secretary. No
agent or other person not named above has authority to change or waive any
provision of the Contract. We reserve the right both to administer and to change
the provisions of the Contract to conform to any applicable laws, regulations or
rulings issued by a governmental agency.
In any event, the Company reserves the right to add or delete Fixed Account
options and Sub-Accounts, to substitute shares of a different Fund or different
class or series of a Fund for shares held in a Sub-Account, to merge or combine
Sub-Accounts, to merge or combine the Separate Account with any other separate
account of the Company, to transfer the assets of the Separate Account to
another life insurance company by means of a merger or reinsurance, to convert
the Separate Account into a managed separate account, and to de-register the
Separate Account under the Investment Company Act of 1940. Any such change will
be made in accordance with applicable insurance and securities laws and after
obtaining any necessary approvals, including those of the Ohio Department of
Insurance and the Securities and Exchange Commission.
NONPARTICIPATING
The Contract does not pay dividends or share in the Company's divisible surplus.
MISSTATEMENT
If the age or sex of a person on whose life Benefit Payments are based is
misstated, the payments or other benefits under this Certificate shall be
adjusted to the amount which would have been payable based on the correct age or
sex. If we made any underpayments based on any misstatement, the amount of any
underpayment with interest shall be immediately paid in one sum. In addition to
any other remedies that may be available at law or at equity, we may deduct any
overpayments made, with interest, from any succeeding payments due under this
Certificate.
REQUIRED REPORTS
At least once each Certificate Year, we will send a report of your current
values and any other information required by law, until the first to occur of
the following:
1) the date your participation interest under the Contract is fully
surrendered;
2) the Annuity Commencement Date; or
3) the Death Benefit Commencement Date.
7
<PAGE>
The report will be mailed to your last known address. The reported values will
be based on the information in our possession at the time the report is prepared
by us. We may adjust the reported values at a later date if that information
proves to be incorrect or has changed.
EXCLUSIVE BENEFIT
Your participation interest under the Contract is for the exclusive benefit of
you and your Beneficiaries. Your participation interest under the Contract is
nonforfeitable by us.
STATE LAW
All factors, values, benefits and reserves under the Contract will not be less
than those required by the law of the state in which the Contract is delivered.
CLAIMS OF CREDITORS
To the extent allowed by law, the Contract and all values and benefits under it
are not subject to the claims of creditors or to legal process.
COMPANY LIABILITY
We will not incur any liability or be responsible for any failure, in whole or
in part, by you or by any person having rights or benefits arising out of or
related to the Contract, to comply with any applicable laws, regulations or
rulings issued by a governmental agency.
VOTING RIGHTS
To the extent required by law, we will vote all shares of the Funds held in the
Separate Account, at regular and special shareholder meetings of the Funds, in
accordance with instructions received from you, or, if applicable, from the
Person Controlling Payments. If there is a change in the law which permits us to
vote the shares of the Funds without such instructions, then we reserve the
right to do so.
INCONTESTABILITY
This Certificate shall not be contestable by us.
DISCHARGE OF LIABILITY
Upon payment of any partial or full surrender, any Benefit Payment, we shall be
discharged from all liability to the extent of each such payment.
TRANSFER BY THE COMPANY
We reserve the right to transfer our obligations under this Contract to another
qualified life insurance company under an assumption reinsurance arrangement
without your prior consent.
TERMINATION
Either we or the Contract Owner may terminate the Contract by giving advance
notice in writing. The Contract describes the benefits and charges, if any, in
the event of termination of the Contract. Refer to the Contract for information
regarding these benefits and charges. If the Contract is terminated, this
Certificate and your participation interest under the Contract may be continued
on a deferred paid-up basis, subject to all of the terms and conditions of the
Contract, unless you surrender your participation as a whole. Termination of the
Contract will not affect Benefit Payments being made by us.
8
<PAGE>
PURCHASE PAYMENTS
PURCHASE PAYMENTS
One or more Purchase Payments may be paid to us for you at any time before the
Annuity Commencement Date, so long as:
1) you are still living; and
2) your participation interest has not been fully surrendered.
The initial Purchase Payment for you must be paid to us on or before the
Certificate Effective Date. Each Purchase Payment must be paid to us at our
Administrative Office, and is subject to any minimums or maximums that we set
for such from time to time. Upon request, we will provide the Contract Owner
with a receipt as proof of payment.
ALLOCATION OF PURCHASE PAYMENT(S)
We will allocate Purchase Payments to the Fixed Account options and/or to the
Sub-Accounts according to the instructions we receive in your enrollment form or
subsequent Written Request. Allocations must be made in whole percentages. The
minimum Purchase Payment amount that can be allocated to a Fixed Account option
other than the Fixed Accumulation Account is $2000.
NO TERMINATION
Except as stated elsewhere in this Certificate, your participation will not be
terminated by us due to failure to make additional Purchase Payments.
FIXED ACCOUNT
FIXED ACCOUNT
The Fixed Account is part of the Company's general account. The values of the
Fixed Account are not dependent upon the investment performance of the
Sub-Accounts.
FIXED ACCOUNT OPTIONS. The Fixed Account options available as of the Certificate
Effective Date are listed on the Certificate Specifications page. Different
Fixed Account options may be offered by us at any time.
INTEREST CREDITED. The guaranteed rate of interest for the Fixed Account options
is three percent (3%) per year, compounded annually. We may, at any time, pay a
current interest rate as declared by our Board of Directors for any of the Fixed
Account options that is higher than the guaranteed rate.
The interest rate initially credited to each Purchase Payment allocated to the
Fixed Accumulation Account Option will not be changed any sooner than twelve
(12) months following the date on which that Purchase Payment was received;
thereafter, the interest rate credited will not be changed more frequently than
once per calendar quarter. In the case of transfers from other Fixed Account
options or the Sub-Accounts to the Fixed Accumulation Account Option, the
interest rate will not be changed more frequently than once per calendar
quarter.
The interest rate credited to amounts allocated to the Fixed Account options
other than the Fixed Accumulation Account Option will not be changed during the
duration of the applicable guarantee period.
RENEWAL. The following RENEWAL provisions apply to all Fixed Account options
except the Fixed Accumulation Account Option.
9
<PAGE>
At the end of a guarantee period, and for the thirty (30) days immediately
preceding the end of such guarantee period, you may elect a new option to
replace the Fixed Account option that is then expiring. The entire amount
maturing may be re-allocated to any of the then-current options under the
Certificate (including the various Sub-Accounts within the Separate Account),
except that a Fixed Account option with a guarantee period that would extend
past the Annuity Commencement Date may not be selected. In particular, in the
case of renewals occurring within one (1) year of such Commencement Date, the
only Fixed Account option available is the Fixed Accumulation Account Option.
If you do not specify a new Fixed Account option in accordance with the
preceding paragraph, you will be deemed to have selected the same Fixed Account
option as is expiring, so long as the guarantee period of such option does not
extend beyond the Annuity Commencement Date. In the event that such a period
would extend beyond that date, you will be deemed to have selected the Fixed
Account option with the longest available guarantee period that expires prior to
that date, or, failing that, the Fixed Accumulation Account Option.
Any renewal of a Fixed Account option under this RENEWAL provision will be
effective on the day after the expiration of the guarantee period that is then
expiring.
FIXED ACCOUNT VALUE
The Fixed Account Value for this Certificate at any time is equal to:
1) the Purchase Payment(s) allocated to the Fixed Account; plus
2) amounts transferred to the Fixed Account; plus
3) interest credited to the Fixed Account; less
4) any charges, surrenders, deductions, amounts transferred from the
Fixed Account or other adjustments made as described elsewhere in
this Certificate.
SEPARATE ACCOUNT
GENERAL DESCRIPTION
The variable benefits under this Certificate are provided through the Separate
Account. The Separate Account is registered with the Securities and Exchange
Commission as a unit investment trust under the Investment Company Act of 1940.
The income, if any, and any gains or losses, realized or unrealized, on the
Separate Account will be credited to or charged against the amounts allocated to
such account without regard to other income, gains, or losses of the Company.
The amounts allocated to the Separate Account and the accumulations thereon
remain the property of the Company, but that portion of the assets of the
Separate Account that is equal to the reserves and other contractual liabilities
under all policies, annuities, and other contracts identified with the Separate
Account, is not chargeable with liabilities arising out of any other business of
the Company. The Company is not, and does not hold itself out to be, a trustee
in respect of such amounts.
We have the right to transfer to our general account, in our sole discretion and
at any time without prior written notice, any assets of the Separate Account
which are in excess of the required reserves and other contractual liabilities
under all policies, annuities, and other contracts identified with the Separate
Account.
SUB-ACCOUNTS OF THE SEPARATE ACCOUNT
The assets of the Separate Account are divided into Sub-Accounts. The
Sub-Accounts available as of the Certificate Effective Date are listed on the
Certificate Specifications page. Each Sub-Account invests exclusively in shares
10
<PAGE>
of an underlying Fund as shown on the Certificate Specifications page. Any
amounts of income and any gains on the shares of a Fund will be reinvested in
additional shares of that Fund at its Net Asset Value.
VALUATION OF ASSETS
Shares of Funds held by each Sub-Account will be valued at their Net Asset Value
at the end of each Valuation Period, as reported by each such Fund.
VARIABLE ACCOUNT VALUE
Purchase Payment(s) may be allocated among and, as described elsewhere in this
Certificate, Account Values may be transferred to the various Sub-Accounts
within the Separate Account. For each Sub-Account, the Purchase Payment(s) or
amounts transferred are converted into Accumulation Units. The number of
Accumulation Units credited is determined by dividing the dollar amount directed
to each Sub-Account by the value of the Accumulation Unit for that Sub-Account
at the end of the Valuation Period on which the Purchase Payment(s) or
transferred amount is received.
The following events will result in the cancellation of an appropriate number of
Accumulation Units of a Sub-Account:
1) transfer from a Sub-Account;
2) full or partial surrender of your Variable Account Value;
3) payment of a Death Benefit;
4) application of your Variable Account Value to a settlement
option;
5) deduction of the Certificate Maintenance Fee; or
6) deduction of any Transfer Fee.
Accumulation Units will be canceled as of the end of the Valuation Period during
which the Company receives a Written Request regarding the event giving rise to
such cancellation, or an applicable Commencement Date, or the end of the
Valuation Period on which the Certificate Maintenance Fee or Transfer Fee is
due, as the case may be.
The Variable Account Value for this Certificate at any time is equal to the sum
of the number of Accumulation Units for each Sub-Account attributable to this
Certificate multiplied by the Accumulation Unit Value for each Sub-Account at
the end of the preceding Valuation Period.
ACCUMULATION UNIT VALUE
The initial Accumulation Unit Value for each Sub-Account, with the exception of
the Money Market Sub-Account, was set at $10.00. The initial Accumulation Unit
Value for the Money Market Sub-Account was set at $1.00. Thereafter, the
Accumulation Unit Value at the end of each Valuation Period is the Accumulation
Unit Value at the end of the previous Valuation Period multiplied by the Net
Investment Factor, as described below.
The Net Investment Factor is a factor applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. Each
Sub-Account has a Net Investment Factor for each Valuation Period which may be
greater or less than one. Therefore, the Accumulation Unit Value for each
Sub-Account may increase or decrease. The Net Investment Factor for any
Sub-Account for any Valuation Period is determined by dividing (1) by (2) and
subtracting (3) from the result, where:
1) is equal to:
a) the Net Asset Value per share of the Fund held in the
Sub-Account, determined at the end of the applicable
Valuation Period; plus
b) the per share amount of any dividend or net capital gain
distributions made by the Fund held in the Sub-Account, if
the "ex-dividend" date occurs during the applicable
Valuation Period; plus or minus
11
<PAGE>
c) a per share charge or credit for any taxes reserved for,
which is determined by the Company to have resulted from the
investment operations of the Sub-Account;
2) is the Net Asset Value per share of the Fund held in the
Sub-Account, determined at the end of the immediately preceding
Valuation Period; and
3) is the factor representing the Mortality and Expense Risk Charge
and the Administration Charge deducted from the Sub-Account for
the number of days in the applicable Valuation Period.
TRANSFERS
Prior to the applicable Commencement Date, you may transfer amounts in a
Sub-Account to a different Sub-Account and/or one or more of the Fixed Account
options.
After the first Certificate Anniversary, and prior to the applicable
Commencement Date, you may transfer amounts from any Fixed Account option to any
other Fixed Account option and/or one or more of the Sub-Accounts. If a transfer
is being made from a Fixed Account option pursuant to the RENEWAL provision of
this Certificate, then the entire amount of that Fixed Account option subject to
renewal at that time may be transferred. In any other case, transfers from any
Fixed Account option are subject to a cumulative limit during each Certificate
Year of twenty percent (20%) of the Fixed Account option's value as of the most
recent Certificate Anniversary.
Amounts previously transferred from Fixed Account options to the Sub-Accounts
may not be transferred back to the Fixed Account options for a period of six (6)
months from the date of transfer.
The minimum transfer amount for any transfer is $500. The number of transfers
per year over which we will charge a Transfer Fee on each additional transfer,
and the amount of the Transfer Fee, are shown on the Certificate Specifications
page.
We reserve the right, in our sole discretion and at any time without prior
notice, to terminate, suspend or modify the transfer privileges described above.
FEES AND CHARGES
MORTALITY AND EXPENSE RISK CHARGE
The Mortality and Expense Risk Charge is shown on the Certificate Specifications
page and is deducted daily from each Sub-Account. This deduction is made to
compensate the Company for assuming the mortality and expense risks under the
Contract.
ADMINISTRATION CHARGE
The Administration Charge is shown on the Certificate Specifications page and is
deducted daily from each Sub-Account. This deduction is made to reimburse the
Company for expenses incurred in the administration of the Contract, the
Certificates thereunder, and the Separate Account.
CERTIFICATE MAINTENANCE FEE
The Certificate Maintenance Fee ("Fee") is shown on the Certificate
Specifications page and is deducted as of the Valuation Date next following each
Certificate Anniversary prior to the applicable Commencement Date. In addition,
the full annual Fee will be charged at the time of a full surrender. The Fee
12
<PAGE>
will be allocated to each Sub-Account in the same proportion as each
Sub-Account's value is to the total Variable Account Value for this Certificate
on the end of such Valuation Period. The Fee does not apply to the Fixed
Account.
After the applicable Commencement Date, if a Variable Dollar Benefit is elected,
the Fee will be deducted pro-rata from each Benefit Payment and will result in a
reduction in the amount of such payment.
The Fee may be waived in whole or in part in our sole discretion.
SURRENDERS
SURRENDERS
A surrender in full may be made for the Surrender Value, or partial surrenders
may be made for a lesser amount, by Written Request at any time prior to the
Annuity Commencement Date. The amount of any partial surrender must be at least
$500. A partial surrender cannot reduce the Surrender Value to less than $500.
Surrenders will be deemed to be withdrawn first from the portion of the Account
Value that represents the Accumulated Earnings for this Certificate and then
from Purchase Payments. For purposes of this Certificate, Purchase Payments are
deemed to be withdrawn on a "first-in, first-out" (FIFO) basis.
The amount available for surrender will be the Surrender Value at the end of the
Valuation Period in which the Written Request is received by us.
SURRENDER VALUE
The Surrender Value for this Certificate at any time is an amount equal to:
1) the Account Value as of the end of the applicable Valuation
Period; less
2) any applicable Contingent Deferred Sales Charge; less
3) any outstanding loans; and less
4) any applicable premium tax or other taxes not previously
deducted.
On full surrender, a full Contract Maintenance Fee will also be deducted as part
of the calculation of the Surrender Value.
CONTINGENT DEFERRED SALES CHARGE
A full or partial surrender may be subject to a Contingent Deferred Sales Charge
as set forth on the Certificate Specifications page. The Contingent Deferred
Sales Charge applies to and is calculated separately for each Purchase Payment.
Surrenders will result in the cancellation of Accumulation Units from each
applicable Sub-Account(s) and/or a reduction of your Fixed Account Value. In the
case of a full surrender, your participation interest under the Contract and
this Certificate will be terminated. The Contingent Deferred Sales Charge may be
waived in whole or in part in our sole discretion.
DEFERRAL OF PAYMENT
The Company has the right to suspend or delay the date of payment of a partial
or full surrender of the Variable Account Value for any period:
1) when the New York Stock Exchange is closed, or when trading on
the New York Stock Exchange is restricted; or
2) when an emergency exists (as determined by the Securities and
Exchange Commission) as a result of which:
13
<PAGE>
a) the disposal of securities in the Separate Account is not
reasonably practicable; or
b) it is not reasonably practicable to determine fairly the value of
the net assets in the Separate Account; or
3) when the Securities and Exchange Commission so permits for the
protection of security holders.
The Company further reserves the right to delay payment of a partial or full
surrender of the Fixed Account Value for up to six (6) months after we receive
your Written Request.
OWNERSHIP PROVISIONS
OWNERSHIP OF SEPARATE ACCOUNT
The Company has absolute ownership of the assets in the Separate Account.
However, the Company is not, and does not hold itself out to be, a trustee in
respect of any amounts under the Separate Account.
OWNERSHIP OF CONTRACT AND PARTICIPANT ACCOUNT
The owner of the Contract (the "Contract Owner") is your employer or the trustee
for your employer's retirement plan, as shown on your enrollment form and on the
Certificate Specifications page. The Contract is held by the Contract Owner for
the benefit of the participants and Beneficiaries.
Each participant for whom Purchase Payment(s) are made will participate in the
Contract as a Participant. A participant account will be established for each
Participant.
TRANSFER AND ASSIGNMENT
Neither you nor the Contract Owner may transfer, sell, assign, pledge, charge,
encumber or in any way alienate an interest under this Certificate or the
Contract.
SUCCESSOR OWNER
By Written Request, your spouse may, in some cases, succeed to the ownership of
your participation interest under the Contract after your death. Specifically,
if you die and your spouse is the sole surviving Beneficiary of your
participation interest, he or she will become the Successor Owner of your
participation interest if:
1) you make that Written Request before your death; or
2) after your death, your spouse makes that Written Request
within one (1) year of your death and before the Death
Benefit Commencement Date.
As Successor Owner, your spouse will then succeed to all rights of ownership
under this Certificate except the right to name another Successor Owner.
COMMUNITY PROPERTY
If you live in a community property state and have a spouse at any time while
you participate under the Contract, the laws of that state may vary your
ownership rights.
14
<PAGE>
BENEFICIARY PROVISIONS
BENEFICIARY
The Beneficiary is the person or persons so designated on your enrollment form,
if any, or under the CHANGE OF BENEFICIARY provision of this Contract. If you
have not designated a Beneficiary, or if no Beneficiary designated survives you,
then the Beneficiary will be your estate.
A Beneficiary will be deemed not to have survived you if he or she dies within
thirty (30) days after your death.
A Beneficiary designation may be joint or contingent or both. Unless otherwise
stated, joint Beneficiaries will be entitled to equal shares. A contingent
Beneficiary will be entitled to a benefit only if there is no surviving primary
Beneficiary.
CHANGE OF BENEFICIARY
Unless you have designated an irrevocable Beneficiary, you may change your
designation of a Beneficiary at any time before the Annuity Commencement Date.
Any such change is subject to the following:
1) it must be made by Written Request; and
2) unless otherwise elected or required by law, it will not cancel any
settlement option election previously made.
BENEFIT ON ANNUITY COMMENCEMENT DATE
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is shown on the Certificate Specifications page.
You may change the Annuity Commencement Date by Written Request made at least
thirty (30) days prior to the date that Annuity Benefit payments are scheduled
to begin. Unless the Company agrees otherwise, the Annuity Commencement Date
cannot be later than the Certificate Anniversary following your 85th birthday,
or five (5) years after the Certificate Effective Date, whichever is later.
ANNUITY BENEFIT PAYMENTS
An amount equal to the Account Value (after deduction of any fees and charges,
loans, or applicable premium tax or other taxes not previously deducted) will be
used to provide Annuity Benefit payments commencing on or after the Annuity
Commencement Date.
Annuity Benefit payments will be made to you as payee. Any Annuity Benefit
amounts remaining payable on your death will be paid to the contingent payee
designated by you by Written Request. You will be the person on whose life any
Annuity Benefit payments are based.
If no contingent payee designated by you is surviving at the time payment is to
be made, then after your death any Annuity Benefit amounts remaining payable
will be paid to the person or persons designated as contingent payee by Written
Request by the last payee who received payments. Failing that, any such amounts
will be paid to the estate of the last payee who received payments.
15
<PAGE>
FORM OF ANNUITY BENEFIT
Annuity Benefit payments will be Fixed Dollar Benefit payments, made monthly in
accordance with the terms of Option B with a fixed period of one hundred twenty
(120) months under the SETTLEMENT OPTIONS section of this Contract.
In lieu of that, you may elect to have Annuity Benefit payments made pursuant to
any other available settlement option under the SETTLEMENT OPTIONS section of
this Certificate. Any such election must be made by Written Request before the
Annuity Commencement Date. You may change your election of a settlement option
by Written Request made at least thirty (30) days prior to the date that Annuity
Benefit payments are scheduled to begin.
BENEFIT ON DEATH OF PARTICIPANT
DEATH BENEFIT
A Death Benefit will be paid under this Certificate if:
1) you die before the Annuity Commencement Date and before your
participation interest is fully surrendered;
2) the Death Benefit Valuation Date has occurred; and
3) your spouse does not become the Successor Owner of your
participation interest.
If a Death Benefit becomes payable:
1) it will be in lieu of all other benefits evidenced by this
Certificate; and
2) all other rights evidenced by this Certificate will be terminated
except for rights related to the Death Benefit.
Death Benefit payments shall be made to the Beneficiary as payee.
The Beneficiary shall be the person on whose life any Death Benefit payments
under a settlement option election are based.
Any Death Benefit amounts remaining payable on the death of the Beneficiary will
be paid:
1) to any contingent payee designated as part of any Death Benefit
settlement option election made by you, or if none is surviving
at the time payment is to be made; then
2) to any contingent payee designated by the Beneficiary by Written
Request, or if none is surviving at the time payment is to be
made; then
3) to the estate of the last payee who received payments.
Only one Death Benefit will be paid with respect to your participation interest
under the Contract.
DEATH BENEFIT AMOUNT
If you die before attaining Age eighty (80) and before the Annuity Commencement
Date, the Death Benefit is an amount equal to the greatest of:
1) the Account Value on the Death Benefit Valuation Date;
2) the total Purchase Payment(s), with interest at three percent
(3%) per year, compounded annually, less any partial surrenders
and any Contingent Deferred Sales Charge that applied to those
amounts; or
16
<PAGE>
3) the largest Account Value on any Certificate Anniversary after
the fourth Certificate Anniversary and prior to the Death Benefit
Valuation Date, less any partial surrenders after such Account
Value was determined and any Contingent Deferred Sales Charge
that applied to those amounts.
If you die after attaining Age eighty (80) and before the Annuity Commencement
Date, the Death Benefit is an amount equal to the greatest of:
1) the Account Value on the Death Benefit Valuation Date;
2) the total Purchase Payment(s), with interest at three percent
(3%) per year, compounded annually through the Certificate
Anniversary prior to your 80th birthday, less any partial
surrenders and any Contingent Deferred Sales Charge that applied
to those amounts; or 3) the largest Account Value on any
Certificate Anniversary after the fourth Certificate Anniversary
and prior to the date on which you attained Age eighty (80), less
any partial surrenders after such Account Value was determined
and any Contingent Deferred Sales Charge that applied to those
amounts.
In any event, if this Certificate was issued to you after Age eighty (80), and
you die before the Annuity Commencement Date, the amount of the Death Benefit
will be the greater of:
1) the Account Value on the Death Benefit Valuation Date; or\
2) the total Purchase Payment(s), less any partial surrenders and
any Contingent Deferred Sales Charge that applied to those
amounts.
As of the Death Benefit Valuation Date, the amount of the Death Benefit will be
allocated among the Sub-Accounts and Fixed Account options in the same
proportion as each Account's value is to the total Account Value as of the end
of the Valuation Period immediately preceding the Death Benefit Valuation Date.
Any applicable premium tax or other taxes not previously deducted, and any
outstanding loans, will be deducted from the Death Benefit amount described
above.
TRANSFERS AFTER DEATH
Between the Death Benefit Valuation Date and the Death Benefit Commencement
Date, a Beneficiary may transfer funds among Sub-Accounts and Fixed Account
options as described under the TRANSFERS section of this Contract.
FORM OF DEATH BENEFIT
Payments under the DEATH BENEFIT provision of this Contract will be Fixed Dollar
Benefit payments made monthly in accordance with the terms of Option A with a
period certain of forty-eight (48) months under the SETTLEMENT OPTIONS section
of this Contract.
In lieu of that, you may elect at any time before your death to have payments
under the DEATH BENEFIT provision of this Contract made in one lump sum or
pursuant to any available settlement option under the SETTLEMENT OPTIONS section
of this Contract. If you do not make any such election, the Beneficiary may make
that election at any time after your death and before the Death Benefit
Commencement Date.
You may change your election of a settlement option at any time before your
death.
If a Beneficiary elects a settlement option as noted above, he or she may change
his or her own election of a settlement option by Written Request made at least
thirty (30) days prior to the date that Death Benefit payments are scheduled to
begin.
Any election or change of election must be made by Written Request.
17
<PAGE>
SETTLEMENT OPTIONS
CONDITIONS
Benefit Payments under a settlement option are subject to any minimum amounts,
Payment Intervals, and other terms or conditions that we may from time to time
require. If we change our minimums, we may change any current or future payment
amounts and/or Payment Intervals to conform with the change. More than one
settlement option may be elected if the requirements for each settlement option
elected are satisfied. Once payment begins under a settlement option, the
settlement option may not be changed.
All elected settlement options must comply with current applicable laws,
regulations and rulings issued by any governmental agency.
If more than one person is the payee under a settlement option, payments will be
made to the payees jointly. No more than two persons may be initial payees under
any joint and survivor settlement options.
If payment under a settlement option depends on whether a specified person is
still alive, we may at any time require proof that such person is still living.
We will require proof of the age and/or sex of any person on whose life Benefit
Payments are based.
BENEFIT PAYMENTS
Benefit Payments may be calculated and paid:
1) as a Fixed Dollar Benefit:
2) as a Variable Dollar Benefit; or
3) as a combination of both.
If only a Fixed Dollar Benefit is to be paid, we will transfer all of the
Account Value to the Company's general account on the applicable Commencement
Date, or on the Death Benefit Valuation Date (if applicable). Similarly, if only
a Variable dollar Benefit is elected, we will transfer all of the Account Value
to the Sub-Accounts as of the end of the Valuation Period immediately prior to
the applicable Commencement Date; we will allocate the amount transferred among
the Sub-Accounts in accordance with a Written Request. No transfers between the
Fixed Dollar Benefit and the Variable Dollar Benefit will be allowed after the
Commencement Date. However, after the Variable Dollar Benefit has been paid for
at least twelve (12) months, the Person Controlling Payments may, no more than
once each twelve (12) months thereafter, transfer all or part of the Benefit
Units upon which the Variable Dollar Benefit is based form the Sub-Account(s)
then held, to the Benefit Units in different Sub-Account(s).
If a Variable Dollar Benefit is elected, the amount to be applied under that
benefit is the Variable Account Value as of the end of the Valuation Period
immediately preceding the applicable Commencement Date. If a Fixed Dollar
Benefit is to be paid, the amount to be applied under that benefit is the Fixed
Account Value as of the applicable Commencement Date, or as of the Death Benefit
Valuation Date (if applicable).
FIXED DOLLAR BENEFIT
Fixed Dollar Benefits payments are determined by multiplying the Fixed Account
Value (expressed in thousands of dollars and after deduction of any fees and
charges, loans, or applicable premium tax or other taxes not previously
deducted) by the amount of the monthly payment per $1,000 of value obtained from
the Settlement Option Table for the settlement option elected. Fixed Dollar
Benefit payments will remain level for the duration of the Benefit Payment
Period.
18
<PAGE>
If at the time a Fixed Dollar Benefit is elected, we have available options or
rates on a more favorable basis than those guaranteed, the higher benefits shall
be applied and shall not change for as long as that election remains in force.
VARIABLE DOLLAR BENEFIT
The first monthly Variable Dollar Benefit payment is equal to your Variable
Account Value (expressed in thousands of dollars and after deduction of any fees
and charges, loans, or applicable premium tax or other taxes not previously
deducted) as of the end of the Valuation Period immediately preceding the
applicable Commencement Date multiplied by the amount of the monthly payment per
$1,000 of value obtained from the Settlement Option Table for the Benefit
Payment elected less the pro-rata portion of the Certificate Maintenance Fee.
The number of Benefit Units in each Sub-Account held by you is determined by
dividing the dollar amount of the first monthly Variable Dollar Benefit payment
for each Sub-Account by the Benefit Unit Value for that Sub-Account as of the
applicable Commencement Date. The number of Benefit Units remains fixed during
the Benefit Payment Period, except as a result of any transfers among
Sub-Accounts after the applicable Commencement Date.
The dollar amount of the second and subsequent Variable Dollar Benefit payment
will reflect the investment performance of the Sub-Account(s) selected and may
vary from month to month. The total amount of the second and any subsequent
Variable Dollar Benefit payment will be equal to the sum of the payments from
each Sub-Account less a pro-rata portion of the Contract Maintenance Fee.
The payment from each Sub-Account is found by multiplying the number of Benefit
Units held in each Sub-Account by you by the Benefit Unit Value for that
Sub-Account as of the end of the fifth Valuation Period preceding the due date
of the payment.
The Benefit Unit Value for each Sub-Account is originally established in the
same manner as Accumulation Unit Values. Thereafter, the value of a Benefit Unit
for a Sub-Account is determined by multiplying the Benefit Unit Value as of the
end of the preceding Valuation Period by the Net Investment Factor, determined
as set forth under the ACCUMULATION UNIT VALUE provision of this Certificate,
for the Valuation Period just ended. The product is then multiplied by the
assumed daily investment factor (0.99991781), for the number of days in the
Valuation Period. The factor is based on the assumed net investment rate of
three percent (3%) per year, compounded annually, that is reflected in the
Settlement Option Tables.
LIMITATION ON ELECTION OF SETTLEMENT OPTION
Fixed periods shorter than five (5) years are not available, except as a Death
Benefit settlement option.
SETTLEMENT OPTION COMPUTATIONS
The 1983 Group Annuity Mortality Table with interest at three percent (3%) per
year, compounded annually, is used to compute all guaranteed settlement option
factors, values, and benefits under this Contract.
AVAILABLE SETTLEMENT OPTIONS
The available settlement options are set out below.
OPTION A Income for a Fixed Period
We will make periodic payments for a fixed period. The first payment
will be paid as of the last day of the initial Payment Interval. The
maximum time over which payments will be made by us or money will be
held by us is thirty (30) years. The Option A Table applies to this
Option.
OPTION B Life Annuity with Payments for at Least a Fixed Period
19
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We will make monthly payments for at least a fixed period. If the
person on whose life Benefit Payments are based lives longer than the
fixed period, then we will make payments until his or her death. The
first payment will be paid as of the first day of the initial Payment
Interval. The Option B Table applies to this Option.
OPTION C Joint and One-half Survivor Annuity
We will make periodic payments until the death of the person on whose
life Benefit Payments are based; thereafter, we will make one-half
(1/2) of the periodic payment until the death of the secondary person
on whose life Benefit Payments are based. The first payment will be
paid as of the first day of the initial Payment Interval. The Option C
Table applies to this Option.
OPTION D Life Annuity
We will make periodic payments until the death of the person on whose
life Benefit Payments are based. The first payment will be paid as of
the first day of the initial Payment Interval. The Option D Table
applies to this Option.
OPTION E Any Other Form
We will make periodic payments in any other form of settlement option
which is acceptable to us at the time of election.
SETTLEMENT OPTION TABLES
The Option Tables show the payments we will make at sample Payment Intervals for
each $1,000 applied at the guaranteed interest rate. Amounts may vary with the
Payment Interval and the age of the person on whose life Benefit Payments are
based.
OPTION A TABLE - INCOME FOR A FIXED PERIOD
Payments for fixed number of years for each $1,000 pplied.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
TERMS TERMS TERMS
OF SEMI- OF SEMI- OF SEMI-
PAYMENTS ANNUAL ANNUAL QUARTERLY MONTHLY PAYMENTS ANNUAL ANNUAL QUARTERLY MONTHLY PAYMENTS ANNUAL ANNUAL QUARTERLY MONTHLY
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEARS YEARS YEARS
6 184.60 91.62 45.64 15.18 11 108.08 53.64 26.72 8.88 16 79.61 39.51 19.68 6.54
7 160.51 79.66 39.68 13.20 12 100.46 49.86 24.84 8.26 17 75.95 37.70 18.78 6.24
8 142.46 70.70 35.22 11.71 13 94.03 46.67 23.25 7.73 18 72.71 36.09 17.98 5.98
9 128.43 63.74 31.75 10.56 14 88.53 43.94 21.89 7.28 19 69.81 34.65 17.26 5.74
10 117.23 58.18 28.98 9.64 15 83.77 41.57 20.71 6.89 20 67.22 33.36 16.62 5.53
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
OPTION B TABLE - LIFE ANNUITY
With Payments For At Least A Fixed Period
------- ---------------- --------------- ---------------- ----------------
60 MONTHS 120 MONTHS 180 MONTHS 240 MONTHS
------- ---------------- --------------- ---------------- ----------------
AGE
------- ---------------- --------------- ---------------- ----------------
55 $4.55 $4.51 $4.44 $4.33
56 4.65 4.61 4.52 4.39
57 4.76 4.71 4.61 4.46
58 4.87 4.81 4.70 4.53
59 4.99 4.92 4.79 4.60
60 5.12 5.04 4.89 4.67
61 5.25 5.16 4.99 4.74
62 5.40 5.29 5.09 4.81
63 5.55 5.42 5.19 4.87
64 5.72 5.56 5.30 4.94
65 5.89 5.71 5.40 5.00
66 6.08 5.86 5.51 5.06
67 6.27 6.02 5.62 5.11
68 6.48 6.19 5.72 5.17
69 6.71 6.36 5.83 5.22
70 6.95 6.54 5.93 5.26
71 7.20 6.72 6.03 5.30
72 7.46 6.90 6.12 5.34
73 7.75 7.08 6.21 5.37
74 8.04 7.27 6.30 5.40
------- ---------------- --------------- ---------------- ----------------
OPTION C TABLE - JOINT AND ONE-HALF SURVIVOR ANNUITY
Monthly payments for each $1,000 of proceeds by ages of persons named*.
<TABLE>
<CAPTION>
- ------------ --------------------------------------------------------------------------------------------------------
Secondary Age
- ------------ --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
Primary Age
60 61 62 63 64 65 66 67 68 69 70
- ------------ --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
60 $4.73 $4.75 $4.78 $4.80 $4.83 $4.85 $4.87 $4.89 $4.92 $4.93 $4.95
61 4.81 4.84 4.87 4.90 4.92 4.95 4.97 5.00 5.02 5.04 5.06
62 4.90 4.93 4.96 4.99 5.02 5.05 5.08 5.11 5.13 5.16 5.18
63 4.99 5.03 5.06 5.09 5.13 5.16 5.19 5.22 5.25 5.28 5.30
64 5.09 5.12 5.16 5.20 5.23 5.27 5.30 5.34 5.37 5.40 5.43
65 5.18 5.22 5.26 5.31 5.35 5.38 5.42 5.46 5.49 5.53 5.56
66 5.28 5.33 5.37 5.42 5.46 5.50 5.54 5.58 5.62 5.66 5.70
67 5.38 5.43 5.48 5.53 5.58 5.62 5.67 5.72 5.76 5.80 5.84
68 5.49 5.54 5.59 5.65 5.70 5.75 5.80 5.85 5.90 5.95 5.99
69 5.60 5.65 5.71 5.77 5.82 5.88 5.93 5.99 6.04 6.10 6.15
70 5.71 5.77 5.83 5.89 5.95 6.01 6.07 6.13 6.19 6.25 6.31
- ------------ --------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ---------
</TABLE>
*Payments after the death of the Primary Payee will be one-half (1/2) of the
amount shown.
21
<PAGE>
OPTION D TABLE - LIFE ANNUITY
Monthly payments for each $1,000 applied.
- ------- ---------- ---------- --------- ---------- ---------- --------- --------
AGE AGE AGE AGE
- ------- ---------- ---------- --------- ---------- ---------- --------- --------
55 $4.65 60 $5.14 65 $5.95 70 $7.08
56 4.67 61 5.28 66 6.14 71 7.36
57 4.77 62 5.43 67 6.35 72 7.66
58 4.89 63 5.59 68 6.58 73 7.98
59 5.01 64 5.76 69 6.82 74 8.33
- ------- ---------- ---------- --------- ---------- ---------- --------- --------
22
<PAGE>
ANNUITY INVESTORS(SERVICEMARK)
Life Insurance Company
CERTIFICATE OF PARTICIPATION
UNDER A GROUP FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
Nonparticipating - No Dividends
23
<PAGE>
TABLE OF CONTENTS PAGE
- ---------------------------------------------------------------------
DEFINITIONS.........................................................8
GENERAL PROVISIONS..................................................9
Entire Contract................................................9
Participant Certificate........................................9
Changes--Waivers...............................................9
Nonparticipating...............................................9
Misstatement...................................................9
Required Reports...............................................9
Exclusive Benefit.............................................10
State Law.....................................................10
Claims of Creditors...........................................10
Company Liability.............................................10
Voting Rights.................................................10
Incontestability..............................................10
Discharge of Liability........................................10
Transfer By the Company.......................................10
Termination...................................................10
PURCHASE PAYMENTS..................................................11
Purchase Payments.............................................11
Allocation of Purchase Payments...............................11
No Termination................................................11
FIXED ACCOUNT......................................................11
Fixed Account.................................................11
Fixed Account Options.....................................11
Interest Credited.........................................11
Renewal...................................................11
Fixed Account Value...........................................12
SEPARATE ACCOUNT...................................................12
General Description...........................................12
Sub-Accounts of the Separate Account..........................13
Valuation of Assets...........................................13
Variable Account Value........................................13
Accumulation Unit Value.......................................13
TRANSFERS..........................................................14
FEES AND CHARGES...................................................14
Mortality and Expense Risk Charge.............................14
Administration Charge.........................................14
Certificate Maintenance Fee...................................15
SURRENDERS.........................................................15
Surrenders....................................................15
Surrender Value...............................................15
Contingent Deferred Sales Charge..............................15
Deferral of Payment...........................................16
24
<PAGE>
OWNERSHIP PROVISIONS...............................................16
Ownership of Separate Account.................................16
Ownership of Contract and Participant Account.................16
Transfer and Assignment.......................................16
Successor Owner...............................................16
Community Property............................................16
BENEFICIARY PROVISIONS.............................................17
Beneficiary...................................................17
Change of Beneficiary.........................................17
BENEFIT ON ANNUITY COMMENCEMENT DATE...............................17
Annuity Commencement Date.....................................17
Annuity Benefit Payments......................................17
Form of Annuity Benefit.......................................18
BENEFIT ON DEATH OF PARTICIPANT....................................18
Death Benefit.................................................18
Death Benefit Amount..........................................19
Transfers After Death.........................................19
Form of Death Benefit.........................................19
SETTLEMENT OPTIONS.................................................19
Conditions....................................................20
Benefit Payments..............................................20
Fixed Dollar Annuity Benefit..................................20
Variable Dollar Benefit.......................................21
Limitation on Election of Settlement Option...................21
Settlement Option Computations................................21
Available Settlement Options..................................22
Settlement Option Tables......................................22
25
Exhibit 4(m)
Box 5423, Cincinnati, Ohio 45201-5423 (800) 789-6771
LOAN ENDORSEMENT
The policy is changed as set out below to permit loans:
LOAN AMOUNT AND CONDITIONS. So long as a participant has not commenced
distributions of his or her interest under a payment option (or any other
systematic payment program), we may allow the participant to borrow an
amount (the "new policy loan") if all of the following requirements are
met:
1. the sum of the participant's new policy loan plus the highest
balance of each other policy loan, if any, of the participant at any
time during the one-year period ending on the date of the new policy
loan, cannot exceed $50,000; and
2. the sum of the participant's new policy loan plus the current
balance of each other policy loan, if any, of the participant,
cannot exceed the greater of (i) $10,000, or (ii) one-half of the
net amount payable to the participant upon a full surrender of his
or her interest in the policy; and
3. the net amount payable the participant upon a full surrender of his
or her interest in the policy, less the sum of the participant's new
policy loan and the current balance of each other policy loan, if
any, of the participant, cannot be less than the minimum amount
required to avoid an involuntary surrender under the other
provisions of the policy.
An application for a loan must be made on our form. We may delay granting
the loan for up to six months after we receive a participant's request
for it. We may also limit the frequency at which loans may be made, the
minimum amount of a loan, and the minimum amount of loan payments to be
made to us.
TERM; REPAYMENT. The principal and interest of each loan must be repaid
to us within five years of the date such loan is made. This five year
limit will not apply to any loan used to acquire a dwelling unit that is
to be used as a principal residence by the participant. Regular
substantially equal periodic payments must be made at least quarterly
over the term of a loan until fully paid.
LIEN -- DEEMED SURRENDER AND DISTRIBUTION. A policy loan is a first lien
on the participant's interest in the policy. The participant's interest
in the policy will be the sole security for a loan. We may pay off the
loan (by treating a portion of the interest equal to the balance of a
loan as surrendered, and applying it to pay off the loan) if:
1. the participant's interest in the policy is fully surrendered; or
2. distributions of the participant's interest begin under a payment
option (or any other systematic payment program); or
3. the participant dies and his or her spouse is not the sole person
entitled to the participant's interest in the policy.
If there is a default on repayment, then we may also pay off the loan (as
described above), unless a distribution to the participant is prohibited
by the other provisions of the policy.
<PAGE>
INTEREST. The interest rate on a policy loan will not be more than 8% per
year, unless otherwise provided under any other provision of the policy
covering employee benefit plan loans. Any unpaid interest will be added
to a loan; in effect, then, it will be compounded and will be part of the
loan.
This is part of the policy. It is not a separate contract. It changes the policy
only as and to the extent stated. In all cases of conflict with the other terms
of the policy, the provisions of this Endorsement shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Martenson
Betty Kasprowicz James M. Martenson
Assistant Secretary Executive Vice President
2
Exhibit 4(n)
Box 5423, Cincinnati, Ohio 45201-5423 (800) 789-6771
LOAN ENDORSEMENT
Your Certificate of Participation under the policy (your "Certificate") is
changed as set out below to add provisions for policy loans:
LOAN AMOUNT AND CONDITIONS. So long as you have not commenced
distributions of your interest under a payment option (or any other
systematic payment program), we may allow you to borrow an amount (the
"new policy loan") if all of the following requirements are met:
1. the sum of your new policy loan plus the highest balance of each
other policy loan of yours, if any, at any time during the one-year
period ending on the date of the new policy loan, cannot exceed
$50,000; and
2. the sum of your new policy loan plus the current balance of each
other policy loan of yours, if any, cannot exceed the greater of (i)
$10,000, or (ii) one-half of the net amount payable to you upon a
full surrender of your interest in the policy; and
3. the net amount payable to you upon a full surrender of your interest
in the policy, less the sum of your new policy loan and the current
balance of each other policy loan of yours, if any, cannot be less
than the minimum amount required to avoid an involuntary surrender
under the other provisions of the policy.
An application for a loan must be made on our form. We may delay granting
the loan for up to six months after we receive your request for it. We
may also limit the frequency at which loans may be made, the minimum
amount of a loan, and the minimum amount of loan payments to be made to
us.
TERM; REPAYMENT. The principal and interest of each loan must be repaid
to us within five years of the date such loan is made. This five year
limit will not apply to any loan used to acquire a dwelling unit that is
to be used as a principal residence by you. Regular substantially equal
periodic payments must be made at least quarterly over the term of a loan
until fully paid.
LIEN -- DEEMED SURRENDER AND DISTRIBUTION. A policy loan is a first lien
on your interest in the policy. Your interest in the policy will be the
sole security for a loan. We may pay off the loan (by treating a portion
of your interest equal to the balance of a loan as surrendered, and
applying it to pay off the loan) if:
1. your interest in the policy is fully surrendered; or
2. distributions of your interest begin under a payment option (or any
other systematic payment program); or
3. you die and your spouse is not the sole person entitled to your
interest in the policy.
If there is a default on repayment, then we may also pay off the loan (as
described above), unless a distribution to you is prohibited by the other
provisions of the policy.
<PAGE>
INTEREST. The interest rate on a policy loan will not be more than 8% per
year, unless otherwise provided under any other provision of the policy
covering employee benefit plan loans. Any unpaid interest will be added
to a loan; in effect, then, it will be compounded and will be part of the
loan.
This is part of your Certificate. It is not a contract. It changes your
Certificate only as and to the extent stated. In all cases of conflict with the
other terms of your Certificate, the provisions of this Endorsement shall
control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
Betty Kasprowicz James M. Mortenson
Assistant Secretary Executive Vice President
2
Exhibit (4)(o)
TAX SHELTERED ANNUITY ENDORSEMENT
The policy is changed as set out below to add provisions for a Tax Sheltered
Annuity.
APPLICABLE TAX LAW RESTRICTIONS. The policy is intended to receive
contributions that qualify for deferred tax treatment under Internal
Revenue Code ("IRC") Section 403(b). It is restricted as required by
federal tax law. We may change the terms of this policy or administer
this policy at any time as needed to comply with that law. Any such
change may be applied retroactively.
NO ASSIGNMENT OR TRANSFER. A participant cannot assign, sell, or
transfer his or her interest in this policy. A participant cannot
pledge it to secure a loan or the performance of an obligation, or for
any other purpose. The only exceptions to these rules are:
1) an interest in this policy may secure a loan made under any
loan provisions of this policy;
2) an interest in this policy may be transferred under a
Qualified Domestic Relations Order as defined in IRC Section
414(p); and
3) a participant may designate another person to receive
payments with the participant based on joint lives or joint
life expectancies, but any such designation shall not give
that other person any present rights under the policy during
the participant's lifetime.
LIMITS ON CONTRIBUTIONS. We may refuse to accept any contribution to
this policy that does not qualify for deferred tax treatment under IRC
Section 403(b) and Section 415. Contributions made for a participant to
the policy and any other plan, contract, or arrangement under salary
reduction agreement(s) with his or her employer(s) cannot exceed the
limits of IRC Section 402(g). A participant cannot make more than one
new salary reduction agreement with his or her current employer for
contributions to this policy in any single calendar year. The
participant and his or her employer shall ensure compliance with these
limits.
DISTRIBUTION RESTRICTIONS ON SALARY REDUCTION CONTRIBUTIONS AND
CUSTODIAL ACCOUNTS TRANSFERS. To comply with federal tax law,
distribution restrictions apply to amounts under the policy that
represent:
1) contributions made after December 31, 1988 under any salary
reduction agreement with an employer;
2) income earned after December 31, 1988 on salary reduction
contributions whenever made; or
3) transfers from a custodial account described in IRC Section
403(b)(7) and all income attributable to the amount
transferred.
<PAGE>
Any such amount cannot be distributed from this policy unless the
participant has:
1) reached age 59-1/2; or
2) separated from service with your employer; or
3) become disabled (as defined in IRC Section 72(m)(7)); or
4) in the case of salary reduction contributions (including
salary reduction contributions to a custodial account),
incurred a hardship as defined under the IRC.
A withdrawal made by reason of a hardship cannot include any income
earned after December 31, 1988 attributable to salary reduction
contributions.
IRC Section 72(m)(7) states that: "An individual shall be considered to
be disabled if he is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or to be of
long-continued and indefinite duration. An individual shall not be
considered to be disabled unless he furnishes proof of the existence
thereof in such form and manner as the Secretary [of the Treasury] may
require."
DIRECT ROLLOVERS. To the extent required under IRC Section 401(a)(31),
a participant or his or her surviving spouse may elect to have any
portion of an eligible rollover distribution (as defined in IRC Section
403(b)(8)) paid directly to another Individual Retirement Annuity or
Individual Retirement Account (as defined in IRC Section 408) or, if
allowed, to another Tax Sheltered Annuity (as defined in IRC Section
403(b)), specified by the participant or surviving spouse and which
accepts such distribution. Any direct rollover election must be made on
our form, and must be received at our office before the date of
payment.
REQUIRED MINIMUM DISTRIBUTIONS. No later than April 1 following the
calendar year in which a participant reaches age 70-1/2:
1) the participant's interest in the policy must be paid in
full; or
2) distribution of the participant's interest in the policy must
begin in the form of substantially equal payments made at
least once per year (i) for the participant's life or as
joint and survivor payments to the participant and one other
person, or (ii) over a period certain not to exceed the
participant's life expectancy or the joint and last survivor
life expectancy of the participant and one other person named
to receive any remaining payments after his or her death.
2
<PAGE>
If distributions are to be made under clause 2) of this provision, the
present value of the payments likely to be made to the participant
during his or her expected life must be more than half of the present
value of all payments expected to be made with respect to his or her
interest. For this purpose, the present value of payments is determined
as of the date payments begin.
DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS. If a participant dies
before distributions commence under the REQUIRED MINIMUM DISTRIBUTIONS
provision, any amount remaining payable with respect to his or her
interest must be paid either:
1) in full by December 31 of the fifth calendar year after the
participant's death; or
2) over the life of the person entitled to such amount, or over
a period certain not to exceed his or her life expectancy,
with substantially equal payments made at least once per year
starting by December 31 of the first calendar year after the
participant's death.
However, if the participant's spouse is the sole person entitled to
such amount, then during such spouse's lifetime the starting date for
payments under clause 2) of this provision may be delayed to a date not
later than December 31 of the calendar year in which you would have
reached age 70-1/2. If such spouse dies before payments commence, then
this provision will apply upon the death of the spouse, with the spouse
being treated as the participant for purposes of this provision.
3
<PAGE>
DEATH AFTER REQUIRED MINIMUM DISTRIBUTIONS. If a participant dies on or
after distributions commence under the REQUIRED MINIMUM DISTRIBUTIONS
provision, any amount remaining payable with respect to his or her
interest must be paid as follows:
1) if the participant dies before April 1 following the year in
which the participant reaches or would have reached age
70-1/2 and the participant could have slowed or suspended
payments before death, then such amount must be paid under
the DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision as
if the participant died before such distributions commenced;
or
2) in all other cases, such amount must be paid at least as
rapidly as payments were being made at the time of the
participant's death.
LIFE EXPECTANCIES. For the REQUIRED MINIMUM DISTRIBUTIONS provision and
the DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision, life
expectancies will be determined under Section 1.72-9 of the Federal
Income Tax Regulations. The life expectancy of a participant and his or
her spouse may be recalculated not more often than once each year. The
life expectancy of any other person cannot be recalculated.
CONTROLLING TAX RULES. The REQUIRED MINIMUM DISTRIBUTIONS provision,
DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision, and DEATH AFTER
REQUIRED MINIMUM DISTRIBUTIONS provision shall be applied in accordance
with IRC Section 401(a)(9), including the incidental death benefit
rules of IRC Section 401(a)(9)(G), and the related Federal Income Tax
Regulations, including the minimum distribution incidental death
benefit rules of Section 1.401(a)(9)-2 of the Proposed Federal Income
Tax Regulations.
This is part of the policy. It is not a separate contract. It changes the policy
only as and to the extent stated. In all cases of conflict with the other terms
of the policy, the provisions of this Endorsement shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
Betty Kasprowicz James M. Mortenson
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
4
Exhibit 4(p)
TAX SHELTERED ANNUITY ENDORSEMENT
Your Certificate of Participation under the policy (your "Certificate") is
changed as set out below to add provisions for a Tax Sheltered Annuity.
APPLICABLE TAX LAW RESTRICTIONS. The policy is intended to receive
contributions that qualify for deferred tax treatment under Internal
Revenue Code ("IRC") Section 403(b). It is restricted as required by
federal tax law. We may change the terms of the policy and your
Certificate, or administer the policy and your interest in it, at any
time as needed to comply with that law. Any such change may be applied
retroactively.
NO ASSIGNMENT OR TRANSFER. You cannot assign, sell, or transfer your
interest in the policy. You cannot pledge it to secure a loan or the
performance of an obligation, or for any other purpose. The only
exceptions to these rules are:
1) you may use your interest in the policy to secure a loan made
under any loan provisions of the policy;
2) all or part of your interest in the policy may be transferred
under a Qualified Domestic Relations Order as defined in IRC
Section 414(p); and
3) you may designate another person to receive payments with you
based on joint lives or joint life expectancies, but any such
designation shall not give that other person any present
rights under the policy during your lifetime.
LIMITS ON CONTRIBUTIONS. We may refuse to accept any contribution to
the policy that does not qualify for deferred tax treatment under IRC
Section 403(b) and Section 415. Contributions made for you to the
policy and any other plan, contract, or arrangement under salary
reduction agreement(s) with your employer(s) cannot exceed the limits
of IRC Section 402(g). You cannot make more than one new salary
reduction agreement with your current employer for contributions to the
policy in any single calendar year. You and your employer shall ensure
compliance with these limits.
DISTRIBUTION RESTRICTIONS ON SALARY REDUCTION CONTRIBUTIONS AND
CUSTODIAL ACCOUNTS TRANSFERS. To comply with federal tax law,
distribution restrictions apply to amounts under the policy that
represent:
1) contributions made after December 31, 1988 under any salary
reduction agreement with an employer;
2) income earned after December 31, 1988 on salary reduction
contributions whenever made; or
3) transfers from a custodial account described in IRC Section
403(b)(7) and all income attributable to the amount
transferred.
<PAGE>
Any such amount cannot be distributed with respect to your interest in
the policy unless you have:
1) reached age 59-1/2; or
2) separated from service with your employer; or
3) become disabled (as defined in IRC Section 72(m)(7)); or
4) in the case of salary reduction contributions (including
salary reduction contributions to a custodial account),
incurred a hardship as defined under the IRC.
A withdrawal made by reason of a hardship cannot include any income
earned after December 31, 1988 attributable to salary reduction
contributions.
IRC Section 72(m)(7) states that: "An individual shall be considered to
be disabled if he is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or to be of
long-continued and indefinite duration. An individual shall not be
considered to be disabled unless he furnishes proof of the existence
thereof in such form and manner as the Secretary [of the Treasury] may
require."
DIRECT ROLLOVERS. To the extent required under IRC Section 401(a)(31),
you or your surviving spouse may elect to have any portion of an
eligible rollover distribution (as defined in IRC Section 403(b)(8))
made with respect to your interest in the policy paid directly to
another Individual Retirement Annuity or Individual Retirement Account
(as defined in IRC Section 408) or, if allowed, to another Tax
Sheltered Annuity (as defined in IRC Section 403(b)), specified by you
or your surviving spouse and which accepts such distribution. Any
direct rollover election must be made on our form, and must be received
at our office before the date of payment.
REQUIRED MINIMUM DISTRIBUTIONS. No later than April 1 following the
calendar year in which you reach age 70-1/2:
1) your interest in the policy must be paid to you in full; or
2) distribution of your interest in the policy must begin in the
form of substantially equal payments made at least once per
year (i) for your life or as joint and survivor payments to
you and one other person, or (ii) over a period certain not
to exceed your life expectancy or the joint and last survivor
life expectancy of you and one other person named to receive
any remaining payments after your death.
2
<PAGE>
If distributions are to be made under clause 2) of this provision, the
present value of the payments likely to be made to you during your
expected life must be more than half of the present value of all
payments expected to be made with respect to your interest. For this
purpose, the present value of payments is determined as of the date
payments begin.
DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS. If you die before
distributions commence with respect to your interest under the REQUIRED
MINIMUM DISTRIBUTIONS provision, any amount remaining payable with
respect to your interest must be paid either:
1) in full by December 31 of the fifth calendar year after your
death; or
2) over the life of the person entitled to such amount, or over
a period certain not to exceed his or her life expectancy,
with substantially equal payments made at least once per year
starting by December 31 of the first calendar year after your
death.
However, if your spouse is the sole person entitled to such amount,
then during your spouse's lifetime the starting date for payments under
clause 2) of this provision may be delayed to a date not later than
December 31 of the calendar year in which you would have reached age
70-1/2. If your spouse dies before payments commence, then this
provision will apply upon the death of your spouse, with your spouse
being treated as the owner of your interest in the policy for purposes
of this provision.
DEATH AFTER REQUIRED MINIMUM DISTRIBUTIONS. If you die on or after
distributions with respect to your interest commence under the REQUIRED
MINIMUM DISTRIBUTIONS provision, any amount remaining payable with
respect to your interest must be paid as follows:
1) if you die before April 1 following the year in which you
reach or would have reached age 70-1/2 and you could have
slowed or suspended payments before death, then such amount
must be paid under the DEATH BEFORE REQUIRED MINIMUM
DISTRIBUTIONS provision as if you died before such
distributions commenced; or
2) in all other cases, such amount must be paid at least as
rapidly as payments were being made at the time of your
death.
3
<PAGE>
LIFE EXPECTANCIES. For the REQUIRED MINIMUM DISTRIBUTIONS provision and
the DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision, life
expectancies will be determined under Section 1.72-9 of the Federal
Income Tax Regulations. The life expectancy of you and your spouse may
be recalculated not more often than once each year. The life expectancy
of any other person cannot be recalculated.
CONTROLLING TAX RULES. The REQUIRED MINIMUM DISTRIBUTIONS provision,
DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision, and DEATH AFTER
REQUIRED MINIMUM DISTRIBUTIONS provision shall be applied in accordance
with IRC Section 401(a)(9), including the incidental death benefit
rules of IRC Section 401(a)(9)(G), and the related Federal Income Tax
Regulations, including the minimum distribution incidental death
benefit rules of Section 1.401(a)(9)-2 of the Proposed Federal Income
Tax Regulations.
This is part of your Certificate. It is not a contract. It changes your
Certificate only as and to the extent stated. In all cases of conflict with the
other terms of your Certificate, the provisions of this Endorsement shall
control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
Betty Kasprowicz James M. Mortenson
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
4
Exhibit (4)(q)
QUALIFIED PENSION, PROFIT SHARING, AND ANNUITY PLAN
ENDORSEMENT
The policy is changed as set out below to add provisions for a qualified
pension, profit sharing, or annuity plan. This endorsement and the policy to
which it is attached are not valid without additional endorsement(s) defining
the Plan and Plan Administrator.
APPLICABLE TAX LAW RESTRICTIONS. This policy is intended to receive
contributions pursuant to a pension, profit sharing, or annuity plan
qualified under Internal Revenue Code ("IRC") Section 401(a) or 403(a).
It is restricted as required by federal tax law. We may change the
terms of this policy or administer this policy at any time as needed to
comply with that law. Any such change may be applied retroactively.
EXCLUSIVE BENEFIT. This policy is for the exclusive benefit of the
participants and their beneficiaries. No amounts held under this policy
may be used for or diverted to any other purpose (by distribution or
otherwise) except as and to the extent that the Plan Administrator
shall determine that such is allowed both by applicable law and by the
Plan.
NO ASSIGNMENT OR TRANSFER. A participant cannot assign, sell, or
transfer his or her interest in this policy. A participant cannot
pledge his or her interest to secure a loan or the performance of an
obligation, or for any other purpose. The only exceptions to these
rules are:
1) an interest in this policy may secure a loan made under any
loan provisions of this policy;
2) an interest in this policy may be transferred under a
Qualified Domestic Relations Order as defined in IRC Section
414(p); and
3) a participant may designate another person to receive
payments with the participant based on joint lives or joint
life expectancies, but any such designation shall not give
that other person any present rights under this policy during
the participant's lifetime.
LIMITS ON CONTRIBUTIONS. Contributions made to this policy must not
exceed the limits set forth in IRC Section 415. Contributions made to
this policy for a participant under salary reduction agreement(s) with
his or her employer(s) cannot exceed the limits of IRC Section 402(g).
Additional limits may apply under the terms of the Plan. The Plan
Administrator shall ensure compliance with these IRC limits and any
Plan limits.
DISTRIBUTION RESTRICTIONS ON 401(K) EMPLOYEE ELECTIVE CONTRIBUTIONS.
Any amounts under this policy which represent employee elective
contributions made pursuant to salary reduction agreement(s) under IRC
Section 401(k) and any income earned on such amounts, cannot be
distributed any earlier than allowed under IRC Section 401(k)(2)(B).
Additional limits may apply under the terms of the Plan. The Plan
Administrator shall determine when a distribution is allowed under this
IRC section and the Plan.
DISTRIBUTION RESTRICTIONS ON PENSION CONTRIBUTIONS. Any amounts under
this policy which represent contributions to a money purchase pension
plan or a defined benefit pension plan, and any income earned on such
amounts, cannot be distributed any earlier than allowed under Treasury
Regulations Section 1.401-1(b)(1)(i). Additional limits may apply under
the terms of the Plan. The Plan Administrator shall determine when a
distribution is allowed under this regulation and the Plan.
<PAGE>
DIRECT ROLLOVERS. To the extent required under IRC Section 401(a)(31),
a participant or his or her surviving spouse may elect to have any
portion of an eligible rollover distribution (as defined in IRC Section
402(c)(4)) paid directly to another Individual Retirement Annuity or
Individual Retirement Account (as defined in IRC Section 408) or, if
allowed, to another qualified pension, profit sharing, or annuity plan
(as defined in IRC Section 401(a) or 403(a)), specified by the
participant or surviving spouse and which accepts such distribution.
Any direct rollover election must be made on our form, and must be
received at our office before the date of payment.
DATE BENEFITS TO BEGIN. Unless a participant elects to delay the
payment of his or her benefits, a distribution of the participant's
interest in this policy shall begin no later than 60 days after the end
of the Plan year in which the last of the following occurs:
1) the participant has reached the earlier of age 65 or the
normal retirement age stated in the Plan;
2) the 10th anniversary of the date the participant joined the
Plan; or
3) the participant's separation from service with the employer.
The Plan Administrator shall make any determination required under this
provision.
In no event can the payment of a participant's benefits be delayed
beyond the date stated in the REQUIRED MINIMUM DISTRIBUTIONS provision,
below.
REQUIRED MINIMUM DISTRIBUTIONS. No later than April 1 following the
calendar year in which a participant reaches age 70-1/2:
1) the participant's interest in this policy must be paid in
full; or
2) distribution of the participant's interest must begin in the
form of substantially equal payments made at least once per
year (i) for the participant's life or as joint and survivor
payments to the participant and one other person, or (ii)
over a period certain not to exceed the participant's life
expectancy or the joint and last survivor life expectancy of
the participant and one other person named to receive any
remaining payments after his or her death.
If distributions are to be made under clause 2) of this provision, the
present value of the payments likely to be made to the participant
during his or her expected life must be more than half of the present
value of all payments expected to be made with respect to his or her
interest. For this purpose, the present value of payments is determined
as of the date payments begin.
DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS. If a participant dies
before distributions commence under the REQUIRED MINIMUM DISTRIBUTIONS
provision, any amount remaining payable with respect to his or her
interest must be paid either:
2
<PAGE>
1) in full by December 31 of the fifth calendar year after the
participant's death; or
2) over the life of the person entitled to such amount, or over
a period certain not to exceed his or her life expectancy,
with substantially equal payments made at least once per year
starting by December 31 of the first calendar year after the
participant's death.
However, if the participant's spouse is the sole person entitled to
such amount, then during such spouse's lifetime, the starting date for
payments under clause 2) of this provision may be delayed to a date not
later than December 31 of the calendar year in which the participant
would have reached age 70-1/2. If such spouse dies before payments
commence, then this provision will apply upon the death of the spouse,
with the spouse being treated as the participant for purposes of this
provision.
DEATH AFTER REQUIRED MINIMUM DISTRIBUTIONS. If a participant dies on or
after distributions commence under the REQUIRED MINIMUM DISTRIBUTIONS
provision, any amount remaining payable with respect to his or her
interest must be paid as follows:
1) if the participant dies before April 1 following the year in
which the participant reaches or would have reached age
70-1/2 and the participant could have slowed or suspended
payments before death, then such amount must be paid under
the DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision as
if the participant died before such distributions commenced;
or
2) in all other cases, such amount must be paid at least as
rapidly as payments were being made at the time of the
participant's death.
LIFE EXPECTANCIES. For the REQUIRED MINIMUM DISTRIBUTIONS provision and
the DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision, life
expectancies will be determined under Section 1.72-9 of the Federal
Income Tax Regulations. The life expectancy of a participant and his or
her spouse may be recalculated not more often than once each year. The
life expectancy of any other person cannot be recalculated.
CONTROLLING TAX RULES. The REQUIRED MINIMUM DISTRIBUTIONS provision,
DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision, and DEATH AFTER
REQUIRED MINIMUM DISTRIBUTIONS provision shall be applied in accordance
with IRC Section 401(a)(9), including the incidental death benefit
rules of IRC Section 401(a)(9)(G), and the related Federal Income Tax
Regulations, including the minimum distribution incidental death
benefit rules of Section 1.401(a)(9)-2 of the Proposed Federal Income
Tax Regulations.
3
<PAGE>
This is part of the policy. It is not a separate contract. It changes the policy
only as and to the extent stated. In all cases of conflict with the other terms
of the policy, the provisions of this Endorsement shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
Betty Kasprowicz James M. Mortenson
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
4
Exhibit (4)(r)
QUALIFIED PENSION, PROFIT SHARING, AND ANNUITY PLAN
ENDORSEMENT
Your Certificate of Participation under the policy (your "Certificate") is
changed as set out below to add provisions for a qualified pension, profit
sharing, or annuity plan. This endorsement and the Certificate to which it is
attached are not valid without additional endorsement(s) defining the Plan and
Plan Administrator.
APPLICABLE TAX LAW RESTRICTIONS. The policy is intended to receive
contributions pursuant to a pension, profit sharing, or annuity plan
qualified under Internal Revenue Code ("IRC") Section 401(a) or 403(a).
It is restricted as required by federal tax law. We may change the
terms of the policy and your Certificate, or administer the policy and
your interest in it, at any time as needed to comply with that law. Any
such change may be applied retroactively.
EXCLUSIVE BENEFIT. Your interest in the policy is for the exclusive
benefit of you and your beneficiaries. No portion of your interest may
be used for or diverted to any other purpose (by distribution or
otherwise) except as and to the extent that the Plan Administrator
shall determine that such is allowed both by applicable law and by the
Plan.
NO ASSIGNMENT OR TRANSFER. You cannot assign, sell, or transfer your
interest in the policy. You cannot pledge it to secure a loan or the
performance of an obligation, or for any other purpose. The only
exceptions to these rules are:
1) you may use your interest in the policy to secure a loan made
under any loan provisions of the policy;
2) all or part of your interest in the policy may be transferred
under a Qualified Domestic Relations Order as defined in IRC
Section 414(p); and
3) you may designate another person to receive payments with you
based on joint lives or joint life expectancies, but any such
designation shall not give that other person any present
rights under the policy during your lifetime.
LIMITS ON CONTRIBUTIONS. Contributions made to this policy for you must
not exceed the limits set forth in IRC Section 415. Contributions made
to this policy for you under salary reduction agreement(s) with your
employer(s) cannot exceed the limits of IRC Section 402(g). Additional
limits may apply under the terms of the Plan. The Plan Administrator
shall ensure compliance with these IRC limits and any Plan limits.
DISTRIBUTION RESTRICTIONS ON 401(K) EMPLOYEE ELECTIVE CONTRIBUTIONS.
Any amounts under the policy which represent employee elective
contributions made pursuant to salary reduction agreement(s) under IRC
Section 401(k) and any income earned on such amounts, cannot be
distributed any earlier than allowed under IRC Section 401(k)(2)(B).
Additional limits may apply under the terms of the Plan. The Plan
Administrator shall determine when a distribution is allowed under this
IRC section and the Plan.
<PAGE>
DISTRIBUTION RESTRICTIONS ON PENSION CONTRIBUTIONS. Any amounts under
the policy which represent contributions to a money purchase pension
plan or a defined benefit pension plan, and any income earned on such
amounts, cannot be distributed any earlier than allowed under Treasury
Regulations Section 1.401-1(b)(1)(i). Additional limits may apply under
the terms of the Plan. The Plan Administrator shall determine when a
distribution is allowed under this regulation and the Plan.
DIRECT ROLLOVERS. To the extent required under IRC Section 401(a)(31),
you or your surviving spouse may elect to have any portion of an
eligible rollover distribution (as defined in IRC Section 402(c)(4))
made with respect to your interest in the policy paid directly to
another Individual Retirement Annuity or Individual Retirement Account
(as defined in IRC Section 408) or, if allowed, to another qualified
pension, profit sharing, or annuity plan (as defined in IRC Section
401(a) or 403(a)), specified by you or your surviving spouse and which
accepts such distribution. Any direct rollover election must be made on
our form, and must be received at our office before the date of
payment.
DATE BENEFITS TO BEGIN. Unless you elect to delay the payment of your
benefits, a distribution of your interest in this policy shall begin no
later than 60 days after the end of the Plan year in which the last of
the following occurs:
1) you have reached the earlier of age 65 or the normal
retirement age stated in the Plan;
2) the 10th anniversary of the date you joined the Plan; or
3) your separation from service with the employer.
The Plan Administrator shall make any determination required under this
provision.
In no event can the payment of your benefits be delayed beyond the date
stated in the REQUIRED MINIMUM DISTRIBUTIONS provision, below.
REQUIRED MINIMUM DISTRIBUTIONS. No later than April 1 following the
calendar year in which you reach age 70-1/2:
1) your interest in the policy must be paid to you in full; or
2) distribution of your interest in the policy must begin in the
form of substantially equal payments made at least once per
year (i) for your life or as joint and survivor payments to
you and one other person, or (ii) over a period certain not
to exceed your life expectancy or the joint and last survivor
life expectancy of you and one other person named to receive
any remaining payments after your death.
2
<PAGE>
If distributions are to be made under clause 2) of this provision, the
present value of the payments likely to be made to you during your
expected life must be more than half of the present value of all
payments expected to be made with respect to your interest. For this
purpose, the present value of payments is determined as of the date
payments begin.
DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS. If you die before
distributions commence with respect to your interest under the REQUIRED
MINIMUM DISTRIBUTIONS provision, any amount remaining payable with
respect to your interest must be paid either:
1) in full by December 31 of the fifth calendar year after your
death; or
2) over the life of the person entitled to such amount, or over
a period certain not to exceed his or her life expectancy,
with substantially equal payments made at least once per year
starting by December 31 of the first calendar year after your
death.
However, if your spouse is the sole person entitled to such amount,
then during your spouse's lifetime, the starting date for payments
under clause 2) of this provision may be delayed to a date not later
than December 31 of the calendar year in which you would have reached
age 70-1/2. If your spouse dies before payments commence, then this
provision will apply upon the death of your spouse, with your spouse
being treated as the owner of your interest in the policy for purposes
of this provision.
DEATH AFTER REQUIRED MINIMUM DISTRIBUTIONS. If you die on or after
distributions commence with respect to your interest under the REQUIRED
MINIMUM DISTRIBUTIONS provision, any amount remaining payable with
respect to your interest must be paid as follows:
1) if you die before April 1 following the year in which you
reach or would have reached age 70-1/2 and you could have
slowed or suspended payments before death, then such amount
must be paid under the DEATH BEFORE REQUIRED MINIMUM
DISTRIBUTIONS provision as if you died before such
distributions commenced; or
2) in all other cases, such amount must be paid at least as
rapidly as payments were being made at the time of your
death.
LIFE EXPECTANCIES. For the REQUIRED MINIMUM DISTRIBUTIONS provision and
the DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision, life
expectancies will be determined under Section 1.72-9 of the Federal
Income Tax Regulations. The life expectancy of you and your spouse may
be recalculated not more often than once each year. The life expectancy
of any other person cannot be recalculated.
CONTROLLING TAX RULES. The REQUIRED MINIMUM DISTRIBUTIONS provision,
DEATH BEFORE REQUIRED MINIMUM DISTRIBUTIONS provision, and DEATH AFTER
REQUIRED MINIMUM DISTRIBUTIONS provision shall be applied in accordance
with IRC Section 401(a)(9), including the incidental death benefit
rules of IRC Section 401(a)(9)(G), and the related Federal Income Tax
Regulations, including the minimum distribution incidental death
benefit rules of Section 1.401(a)(9)-2 of the Proposed Federal Income
Tax Regulations.
3
<PAGE>
This is part of your Certificate. It is not a contract. It changes your
Certificate only as and to the extent stated. In all cases of conflict
with the other terms of your Certificate, the provisions of this
Endorsement shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
Betty Kasprowicz James M. Mortenson
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
4
Exhibit (4)(s)
EMPLOYER PLAN ENDORSEMENT
The policy is changed as set out below to adapt it for use with an employee
benefit plan:
PLAN. "Plan" means the employee benefit plan named on the group policy
application or any successor plan.
EMPLOYER. "Employer" means the employer sponsoring the Plan and named
on the group policy application, or any other employer which succeeds
to its rights under the Plan.
PLAN ADMINISTRATOR. "Plan Administrator" means the person designated as
such to us in writing by the Employer. If no person has been
designated, "Plan Administrator" means the Employer.
PLAN INTERPRETATION. For purposes of this policy, the Plan
Administrator shall interpret the Plan and decide all questions about
what is allowed or required by the Plan. We have no duty to review or
interpret the Plan, or to review or approve any decision of the Plan
Administrator. We are entitled to rely on the written directions of the
Plan Administrator on such matters.
APPLICABLE RESTRICTIONS. This policy may be restricted by federal
and/or state laws related to employee benefit plans. We may change the
terms of this policy or administer this policy at any time as needed to
comply with such laws.
PLAN DISTRIBUTION PROVISIONS. Distributions of a participant's interest
allowed under this policy may be made only at a time allowed by the
Plan or required by this policy. The form of any distribution shall be
determined under the Plan from among those forms of distribution
available under this policy. No distribution may be made without the
written direction of the Plan Administrator unless required by this
policy. Distributions of a participant's interest in the policy may be
made without the participant's consent when required by the Plan.
FORFEITURE OF NON-VESTED AMOUNTS. Any amount under this policy
attributable to contributions by the Employer (excluding any
contributions made under a salary reduction agreement with an employer)
is subject to the vesting provisions of the Plan. If at any time the
Plan provides for a forfeiture of an amount that is not vested, then
such amount may be withdrawn and paid as directed by the Plan
Administrator.
RETURN OF EXCESS CONTRIBUTIONS. Contributions made to this policy are
subject to any limits on contributions and nondiscrimination provisions
of the Plan. If the Plan Administrator determines that excess or
discriminatory contributions were made, then amounts attributable to
such contributions may be withdrawn and paid as directed by the Plan
Administrator.
<PAGE>
INVOLUNTARY CASH OUT. If at any time the Plan provides for an
involuntary cash out of a participant's benefits, then the
participant's interest in this policy may be surrendered as a whole as
directed by the Plan Administrator. No amounts be withdrawn under this
provision or any other involuntary surrender provision if any total
policy value of the participant's interest has ever exceeded $3,500
(not counting any amount paid under the RETURN OF EXCESS CONTRIBUTIONS
provision).
ENTITLEMENT TO DEATH BENEFITS. The person or persons entitled to any
portion of a participant's interest in this policy remaining payable
after the participant's death shall be determined under the Plan. No
distribution of any such amount shall be made without the written
direction of the Plan Administrator.
INVESTMENT ALLOCATIONS AND TRANSFERS. If this policy provides that
amounts held under it are allocated among separate investment funds or
fixed accounts, then any such allocations and/or subsequent transfers
shall be made only as required or allowed by the Plan, or as required
by this policy to secure a loan. No such allocation or transfer shall
be made without the written direction of the Plan Administrator unless
required by this policy to secure a loan. Allocations or transfers with
respect to a participant's interest in the policy may be made without
the participant's consent when required by the Plan or the policy.
PLAN LOAN PROVISIONS. If loans are allowed under this policy, no such
loan may be made unless also allowed by the Plan. Any such loan will be
subject to any additional limits and conditions which apply under the
Plan. No loan may be made without the written direction of the Plan
Administrator. The rate of interest to be paid by a participant on any
such loan will be fixed by the Plan Administrator, but will be at least
three percentage points higher than the minimum guaranteed rate of
interest, if any, that applies to that portion of a participant's
interest in this policy used as security for the loan.
QUALIFIED JOINT AND 50% SURVIVOR ANNUITY OPTION. In addition to the
other payment options available under the policy, payments of a
participant's interest may be made in the form of a Qualified Joint and
50% Survivor Annuity. Under this payment option, we will make equal
payments to the participant for life at least once per year. If the
person who is the participant's spouse at the time payments commence
survives the participant, then after the participant's death we will
make payments to such spouse at the same intervals equal to one-half of
the amount of the prior payments, with such payments continuing to such
spouse until his or her death. The first payment under this payment
option will be made on the effective date of the payment option. The
amount of the payments we will make under this payment option is based
on the intervals for payments, which are subject to our approval.
Amounts vary with the ages, as of the first payment date, of the
participant and his or her spouse. We will require proof of the ages of
the participant and spouse. Monthly payments that we will make under
this payment option for each $1,000 of proceeds applied will be
furnished upon request. Once payments begin under this payment option,
the value of future payments may not be withdrawn as a commutation of
benefits.
2
<PAGE>
This is a part of the policy. It is not a separate contract. It changes the
policy only as and to the extent stated. In all cases of conflict with the other
terms of the policy, the provisions of this endorsement shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
Betty Kasprowicz James M. Mortenson
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
3
Exhibit (4)(t)
EMPLOYER PLAN ENDORSEMENT
Your Certificate of Participation under the policy (your "Certificate") is
changed as set out below to adapt it for use with an employee benefit plan:
PLAN. "Plan" means the employee benefit plan named on your application
or any successor plan.
EMPLOYER. "Employer" means the employer sponsoring the Plan and named
on your application, or any other employer which succeeds to its rights
under the Plan.
PLAN ADMINISTRATOR. "Plan Administrator" means the person designated as
such to us in writing by the Employer. If no person has been
designated, "Plan Administrator" means the Employer.
PLAN INTERPRETATION. For purposes of the policy, the Plan Administrator
shall interpret the Plan and decide all questions about what is allowed
or required by the Plan. We have no duty to review or interpret the
Plan, or to review or approve any decision of the Plan Administrator.
We are entitled to rely on the written directions of the Plan
Administrator on such matters.
APPLICABLE RESTRICTIONS. The policy may be restricted by federal and/or
state laws related to employee benefit plans. We may change the terms
of the policy and your Certificate, or administer the policy and your
Certificate, at any time as needed to comply with such laws.
PLAN DISTRIBUTION PROVISIONS. Distributions of your interest allowed
under the policy and your Certificate may be made only at a time
allowed by the Plan or required by the policy. The form of any
distribution of shall be determined under the Plan from among those
forms of distribution available under the policy. No distribution of
your interest may be made without the written direction of the Plan
Administrator unless required by the policy. Distributions of your
interest may be made without your consent when required by the Plan.
FORFEITURE OF NON-VESTED AMOUNTS. Any portion of your interest in the
policy attributable to contributions by the Employer (excluding any
contributions made under a salary reduction agreement with your
employer) is subject to the vesting provisions of the Plan. If at any
time the Plan provides for a forfeiture of an amount that is not
vested, then such amount may be withdrawn and paid as directed by the
Plan Administrator.
RETURN OF EXCESS CONTRIBUTIONS. Contributions made to the policy for
you are subject to any limits on contributions and nondiscrimination
provisions of the Plan. If the Plan Administrator determines that
excess or discriminatory contributions were made, then amounts
attributable to such contributions may be withdrawn and paid as
directed by the Plan Administrator.
<PAGE>
INVOLUNTARY CASH OUT. If at any time the Plan provides for an
involuntary cash out of your benefits, then your interest in the policy
may be surrendered as a whole as directed by the Plan Administrator. No
amounts be withdrawn under this provision or any other involuntary
surrender provision if any total policy value for your interest in the
policy has ever exceeded $3,500 (not counting any amount paid under the
RETURN OF EXCESS CONTRIBUTIONS provision).
ENTITLEMENT TO DEATH BENEFITS. The person or persons entitled to any
portion of your interest in the policy remaining payable after your
death shall be determined under the Plan. No distribution of any such
amount shall be made without the written direction of the Plan
Administrator.
INVESTMENT ALLOCATIONS AND TRANSFERS. If the policy provides that
amounts held under it are allocated among separate investment funds or
fixed accounts, then any such allocations and/or subsequent transfers
shall be made only as required or allowed by the Plan, or as required
by the policy to secure a loan. No such allocation or transfer shall be
made without the written direction of the Plan Administrator unless
required by the policy to secure a loan. Allocations or transfers with
respect to your interest in the policy may be made without your consent
when required by the Plan or the policy.
PLAN LOAN PROVISIONS. If loans are allowed under the policy, no such
loan may be made unless also allowed by the Plan. Any such loan will be
subject to any additional limits and conditions which apply under the
Plan. No loan may be made without the written direction of the Plan
Administrator. The rate of interest to be paid by you on any such loan
will be fixed by the Plan Administrator, but will be at least three
percentage points higher than the minimum guaranteed rate of interest,
if any, that applies to that portion of your interest in the policy
used as security for the loan.
QUALIFIED JOINT AND 50% SURVIVOR ANNUITY OPTION. In addition to the
other payment options available under the policy, payments of your
interest may be made in the form of a Qualified Joint and 50% Survivor
Annuity. Under this payment option, we will make equal payments to you
for life at least once per year. If the person who is your spouse at
the time payments commence survives you, then after your death we will
make payments to such spouse at the same intervals equal to one-half of
the amount of the prior payments, with such payments continuing to such
spouse until his or her death. The first payment under this payment
option will be made on the effective date of the payment option. The
amount of the payments we will make under this payment option is based
on the intervals for payments, which are subject to our approval.
Amounts vary with the ages, as of the first payment date, of you and
your spouse. We will require proof of the ages of you and your spouse.
Monthly payments that we will make under this payment option for each
$1,000 of proceeds applied will be furnished at your request. Once
payments begin under this payment option, the value of future payments
may not be withdrawn as a commutation of benefits.
2
<PAGE>
This is a part of your Certificate. It is not a contract. It changes your
Certificate only as and to the extent stated. In all cases of conflict with the
other terms of your Certificate, the provisions of this endorsement shall
control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
Betty Kasprowicz James M. Mortenson
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
3
Exhibit (4)(u)
DEFERRED COMPENSATION
ENDORSEMENT
The Contract is changed as set out below for use with a non-qualified deferred
compensation plan or Internal Revenue Code Section 457 plan:
RIGHTS IN CONTRACT AND PARTICIPATION INTEREST.
The Contract Owner as employer shall possess all rights under this
Contract and in any participation interest under this Contract. Any
request, designation, election, power, or right otherwise permitted or
given to a Participant, Annuitant, Beneficiary, or other payee under
this Contract shall be owned, controlled, and exercised only by the
Contract Owner. No Participant, Annuitant, Beneficiary, or payee (other
than the Contract Owner) shall have any legal or equitable rights under
this Contract or in any participation interest under this Contract.
The entire rights of the Contract Owner under this Contract shall at
all times be subject to the claims of the Contract Owner's general
creditors and to legal process.
BENEFICIARY DESIGNATIONS.
The Beneficiary for each participation interest may be designated by
the Contract Owner at any time before a Death Benefit payment is made
by us, and regardless of any designation of Beneficiary previously
received or acknowledged by us.
PAYEE DESIGNATIONS.
Any Annuity Benefit shall be paid to the Contract Owner or to the
applicable Annuitant and/or any joint or survivor or contingent payee.
Any Death Benefit shall be paid to the Contract Owner or to the
applicable Beneficiary and/or any joint or survivor or contingent
payee. Any other payment or proceeds shall be paid to the Contract
Owner or the applicable Annuitant. Subject to these limits, the
Contract Owner shall designate the person to whom payments shall be
made, and may make or change any such designation at any time subject
to any prior action taken by us.
This is a part of the Contract. It is not a separate contract. In all cases of
conflict with the other terms of the Contract, the restrictions of this
endorsement shall control. It changes the Contract only as and to the extent
stated.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
Betty Kasprowicz James M. Mortenson
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
Exhibit (4)(v)
DEFERRED COMPENSATION
ENDORSEMENT
Your Certificate of Participation under the Group Contract (your "Certificate")
is changed as set out below for use with a non-qualified deferred compensation
plan or Internal Revenue Code Section 457 plan:
RIGHTS IN GROUP CONTRACT AND CERTIFICATE.
The Group Contract Owner as employer shall possess all rights under this
Certificate and the Group Contract. Any request, designation, election,
power, or right otherwise permitted or given to a Participant,
Annuitant, Beneficiary, or other payee under this Certificate shall be
owned, controlled, and exercised only by the Group Contract Owner. No
Participant, Annuitant, Beneficiary, or payee (other than the Group
Contract Owner) shall have any legal or equitable rights under this
Certificate or the Group Contract.
The entire rights of the Group Contract Owner under this Certificate and
the Group Contract shall at all times be subject to the claims of the
Group Contract Owner's general creditors and to legal process.
BENEFICIARY DESIGNATIONS.
The Beneficiary may be designated by the Group Contract Owner at any
time before a Death Benefit payment is made by us, and regardless of any
designation of Beneficiary previously received or acknowledged by us.
PAYEE DESIGNATIONS.
Any Annuity Benefit shall be paid to the Group Contract Owner or to the
Annuitant and/or any joint or survivor or contingent payee. Any Death
Benefit shall be paid to the Group Contract Owner or to the Beneficiary
and/or any joint or survivor or contingent payee. Any other payment or
proceeds shall be paid to the Group Contract Owner or the Annuitant.
Subject to these limits, the Group Contract Owner shall designate the
person to whom payments shall be made, and may make or change any such
designation at any time subject to any prior action taken by us.
This is a part of your Certificate. It is not a contract. In all cases of
conflict with the other terms of your Certificate, the provisions of this
endorsement shall control. It changes your Certificate only as and to the extent
stated.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
Betty Kasprowicz James M. Mortenson
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
Exhibit (4)(w)
TEXAS OPTIONAL RETIREMENT PROGRAM ENDORSEMENT
The policy is changed as set out below to adapt it for use with the Texas
Optional Retirement Program:
ORP. "ORP" means the Texas Optional Retirement Program.
EMPLOYER. "Employer" means the employer named on the group policy
application or any other Texas public institution of higher education
through which a participant has subsequently continued employment and
ORP participation.
ORP INTERPRETATION. The Employer shall interpret the ORP provisions and
decide all questions about what is allowed or required by the ORP,
except for administration of qualified domestic relations orders. We
have no duty to review or interpret the ORP provisions other than for
qualified domestic relations orders, and we have no duty to review or
approve any decision of the Employer. We are entitled to rely on the
written directions of the Employer on such matters.
APPLICABLE STATE LAW RESTRICTIONS. This policy is restricted as
required by Texas law provisions applicable to the ORP. We may change
the terms of this policy or administer this policy at any time as
needed to comply with such state law provisions.
CONTRIBUTIONS LIMITED; NO MINIMUM REQUIRED. Only amounts paid under the
ORP may be contributed to the policy. There is no minimum regular
required contribution that must be paid to us under the policy.
ORP DISTRIBUTION PROVISIONS. Distributions of a participant's interest
allowed under this policy may be made to the participant or the
participant's beneficiaries only after the return of any non-vested
amounts, and only after (1) the participant terminates employment with
all Texas public institutions of higher education, (2) the participant
attains age 70-1/2, or (3) the participant dies. No such distribution
may be made without the written certification of the Employer of the
participant's vesting status and, if the participant is living and
under age 70-1/2, the termination date of the participant's employment.
RETURN OF NON-VESTED AMOUNTS. Contributions by the Employer that were
not based on a reduction in the participant's salary are subject to the
vesting provisions of the ORP. If at any time the ORP provides for a
forfeiture of such Employer contributions, then amounts may be
surrendered from the participant's interest under the policy to repay
such contributions, as directed by the Employer.
ORP LOAN PROVISIONS. If loans are allowed under this policy, a loan may
be made to a participant only after the return of any non-vested
amounts held with respect to such participant and only after (1) the
participant terminates employment with all Texas public institutions of
higher education, or (2) the participant attains age 70-1/2. No loan
may be made without the written certification of the Employer of the
participant's vesting status and, if the participant is under age
70-1/2, the termination date of the participant's employment.
<PAGE>
This is a part of the policy. It is not a separate contract. It changes the
policy only as and to the extent stated. In all cases of conflict with the other
terms of the policy, the provisions of this endorsement shall control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
Betty Kasprowicz James M. Mortenson
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
2
Exhibit (4)(x)
TEXAS OPTIONAL RETIREMENT PROGRAM ENDORSEMENT
Your Certificate of Participation under the policy (your "Certificate") is
changed as set out below to adapt it for use with the Texas Optional Retirement
Program:
ORP. "ORP" means the Texas Optional Retirement Program.
EMPLOYER. "Employer" means the employer named on your application or
any other Texas public institution of higher education through which
you have subsequently continued your employment and ORP participation.
ORP INTERPRETATION. The Employer shall interpret the ORP provisions and
decide all questions about what is allowed or required by the ORP,
except for administration of qualified domestic relations orders. We
have no duty to review or interpret the ORP provisions other than for
qualified domestic relations orders, and we have no duty to review or
approve any decision of the Employer. We are entitled to rely on the
written directions of the Employer on such matters.
APPLICABLE STATE LAW RESTRICTIONS. The policy is restricted as required
by Texas law provisions applicable to the ORP. We may change the terms
of the policy and your Certificate, or administer the policy and your
Certificate, at any time as needed to comply with such state law
provisions.
CONTRIBUTIONS LIMITED; NO MINIMUM REQUIRED. Only amounts paid under the
ORP may be contributed to the policy. There is no minimum regular
required contribution that must be paid to us under the policy.
ORP DISTRIBUTION PROVISIONS. Distributions of your interest allowed
under the policy may be made to you or your beneficiaries only after
the return of any non-vested amounts, and only after (1) you terminate
employment with all Texas public institutions of higher education, (2)
you attain age 70-1/2, or (3) you die. No such distribution may be made
without the written certification of the Employer of your vesting
status and, if you are living and under age 70-1/2, the termination
date of your employment.
RETURN OF NON-VESTED AMOUNTS. Contributions by the Employer that were
not based on a reduction in your salary are subject to the vesting
provisions of the ORP. If at any time the ORP provides for a forfeiture
of such Employer contributions, then amounts may be surrendered from
your interest under the policy to repay such contributions, as directed
by the Employer.
ORP LOAN PROVISIONS. If loans are allowed, a loan may be made to you
only after the return of any non-vested amounts held with respect to
you and only after (1) you terminate employment with all Texas public
institutions of higher education, or (2) you attain age 70-1/2. No loan
may be made without the written certification of the Employer of your
vesting status and, if you are under age 70-1/2, the termination date
of your employment.
<PAGE>
This is a part of your Certificate. It is not a contract. It changes your
Certificate only as and to the extent stated. In all cases of conflict with the
other terms of your Certificate, the provisions of this endorsement shall
control.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
Betty Kasprowicz James M. Mortenson
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
2
Exhibit (4)(y)
LONG-TERM CARE WAIVER RIDER
This rider is made part of the policy to which it is attached.
THE BENEFIT. Prior to the date distributions commence under a payment
option (or any other systematic payment program) under a Participant's
participation, we will waive any charge imposed on surrenders in part
or as a whole or on the commencement of distributions under a payment
option (or any other systematic payment program) according to the
policy provisions, if:
1. The Annuitant becomes confined to a Long-Term Care Facility
or Hospital for at least 90 consecutive days;
2. The initial date of confinement is one or more years after
the date of issue of the Participant's participation;
3. A surrender request and adequate proof of confinement are
received by us either while the Annuitant is confined or
within 90 days of the Annuitant's discharge from the
Long-Term Care Facility or Hospital; and
4. Confinement in a Long-Term Care Facility is prescribed by a
Physician and is Medically Necessary.
DEFINITIONS
"Long-Term Care Facility" means a Skilled Nursing Facility or an
Intermediate Care Facility. Long-Term Care Facility does not
mean:
1. A place that primarily treats drug addicts or alcoholics;
2. A home for the aged or mentally ill, a community living
center, or a place that primarily provides domiciliary,
residency or retirement care; or
3. A place owned or operated by a member of the Annuitant's
immediate family (including any spouse, children, parents,
grandparents, grandchildren, siblings, or in-laws of the
Annuitant).
"Skilled Nursing Facility" is a facility which:
1. Is located in the United States or its territories;
2. Is operated as a Skilled Nursing Facility according to the
laws of the jurisdiction in which it is located;
3. Provides skilled nursing care under the supervision of a
licensed physician;
<PAGE>
4. Provides continuous 24 hours a day nursing services by, or
under the supervision of, a registered graduate professional
nurse (R.N.); and
5. Maintains a daily medical record of each patient.
"Intermediate Care Facility" is a facility which:
1. Is located in the United States or its territories;
2. Is licensed and operated as an Intermediate Care Facility
according to the laws of the jurisdiction in which it is
located;
3. Provides continuous 24 hours a day nursing service by, or
under the supervision of, a registered graduate professional
nurse (R.N.) or licensed practical nurse (L.P.N); and
4. Maintains a daily medical record of each patient.
"Hospital" is a facility which:
1. Is located in the United States or its territories;
2. Is licensed as a hospital by the jurisdiction in which it is
located;
3. Is supervised by a staff of licensed physicians;
4. Provides nursing services 24 hours a day by, or under the
supervision of, a registered nurse (R.N.);
5. Operates primarily for the care and treatment of sick and
injured persons as inpatients for a charge; and
6. Has access to medical, diagnostic and major surgical
facilities.
"Physician" is a licensed medical doctor (M.D.) or a licensed doctor of
osteopathy (D.O.) practicing within the scope of his or her
license. The term "physician" does not include the Annuitant, or
a member of the Annuitant's immediate family (including any
spouse, children, parents, grandparents, grandchildren, siblings
or in-laws of the Annuitant).
2
<PAGE>
"Medically Necessary" means appropriate and consistent with the
diagnosis in accord with accepted standards of practice, and
which could not have been omitted without adversely affecting the
individual's condition.
TERMINATION. This rider will terminate without value when the charge
imposed under a Participant's participation on surrenders in part or as
a whole or on the commencement of distributions under a payment option
(or any other systematic payment program) according to the policy
provisions, equals 0%, or upon the date distributions commence under a
payment option (or any other systematic payment program), or upon
termination of the policy, or upon termination of his or her
participation, whichever comes first.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
Betty Kasprowicz James M. Mortenson
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
3
Exhibit (4)(z)
LONG-TERM CARE WAIVER RIDER
This rider is made part of the Certificate of Participation to which it is
attached.
THE BENEFIT. Prior to the date distributions commence under a payment
option (or any other systematic payment program) under your annuity, we
will waive any charge imposed on surrenders in part or as a whole or on the
commencement of distributions under a payment option (or any other
systematic payment program) according to the provisions of the Policy, if:
1. The Annuitant becomes confined to a Long-Term Care Facility or
Hospital for at least 90 consecutive days;
2. The initial date of confinement is one or more years after the
date of issue of your participation;
3. A surrender request and adequate proof of confinement are
received by us either while the Annuitant is confined or within
90 days of the Annuitant's discharge from the Long-Term Facility
or Hospital; and
4. Confinement in a Long-Term Facility is prescribed by a Physician
and is Medically Necessary.
DEFINITIONS
"LONG-TERM CARE FACILITY" means a Skilled Nursing Facility or an
Intermediate Care Facility.
Long-Term Care Facility does not mean:
1. A place that primarily treats drug addicts or alcoholics;
2. A home for the aged or mentally ill, a community living center,
or a place that primarily provides domiciliary, residency or
retirement care; or
3. A place owned or operated by a member of the Annuitant's
immediate family (including any spouse, children, parents,
grandparents, grandchildren, siblings, or in-laws of the
Annuitant).
"SKILLED NURSING FACILITY" is a facility which:
1. Is located in the United States or its territories;
2. Is operated as a Skilled Nursing Facility according to the laws
of the jurisdiction in which it is located;
3. Provides skilled nursing care under the supervision of a licensed
physician;
4. Provides continuous 24 hours a day nursing services by, or under
the supervision of, a registered graduate professional nurse
(R.N.); and
5. Maintains a daily medical record of each patient.
<PAGE>
"INTERMEDIATE CARE FACILITY" is a facility which:
1. Is located in the United States or its territories;
2. Is licensed and operated as an Intermediate Care Facility
according to the laws of the jurisdiction in which it is located;
3. Provides continuous 24 hours a day nursing service by, or under
the supervision of, a registered graduate professional nurse
(R.N.) or licensed practical nurse (L.P.N); and
4. Maintains a daily medical record of each patient.
"HOSPITAL" is a facility which:
1. Is located in the United States or its territories;
2. Is licensed as a hospital by the jurisdiction in which it is
located;
3. Is supervised by a staff of licensed physicians;
4. Provides nursing services 24 hours a day by, or under the
supervision of, a registered nurse (R.N.);
5. Operates primarily for the care and treatment of sick and injured
persons as inpatients for a charge; and
6. Has access to medical, diagnostic and major surgical facilities.
"PHYSICIAN" is a licensed medical doctor (M.D.) or a licensed doctor of
osteopathy (D.O.) practicing within the scope of his or her license.
The term "physician" does not include the Annuitant, or a member of
the Annuitant's immediate family (including any spouse, children,
parents, grandparents, grandchildren, siblings or in-laws of the
Annuitant).
"MEDICALLY NECESSARY" means appropriate and consistent with the diagnosis
in accord with accepted standards of practice, and which could not
have been omitted without adversely affecting the individual's
condition.
TERMINATION. This rider will terminate without value when the charge
imposed under your annuity on surrenders in part or as a whole or on the
commencement of distributions under payment option (or any other systematic
payment program) according to the provisions of the Policy, equals 0%, or
upon the date distributions commence under a payment option (or any other
systematic payment program), or upon termination of the Policy, or upon
termination of your annuity, whichever comes first.
Signed for us at our office as of the date of issue.
/s/ Betty Kasprowicz /s/ James M. Mortenson
ASSISTANT SECRETARY EXECUTIVE VICE PRESIDENT
2
<TABLE>
<CAPTION>
Exhibit (5)(a)
- -----------------------------------------------------------------------------------------------------------------
Annuity Investors[SERVICEMARK]
Life Insurance Company
Application for a Tax Qualified or Nonqualified variable annuity. Initial payment or the original of our
Transfer/Rollover/Exchange Request form must accompany this application, if applicable. Please make check
payable to ANNUITY INVESTORS LIFE INSURANCE COMPANY[REGISTERED TRADEMARK] and mail to P.O. BOX 5423, CINCINNATI,
OH 45201-5423
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
1) ACCOUNT INFORMTION (please print) 3) ALLOCATION ELECTIONS
- --------------------------------------------- ------------------------------------------------------------
OWNER/PARTICIPANT Allocate my Purchase Payment(s) as indicated below.
Allocations must be in whole percentages and must total 100%
Name: John Doe
--------------------------------------- Rollover/
Address: 123 Any Street Single Flexible PORTFOLIOS
------------------------------------- Premium Premium
City,State, Zip: Anytown, USA 99999 (%) (%)
----------------------------- [DREYFUS CORPORATION]
Daytime Phone #: (513)555-1212 -------- -------- [Small Cap Portfolio-VIF]
----------------------------- 25 [Capital Appreciation Portfolio-VIF]
Evening Phone #: (513)555-2121 -------- -------- [The Socially Responsible Growth Fund]
----------------------------- -------- -------- [Dreyfus Stock Index Fund}
Date of Birth: 7/13/43 __ Male __ Female -------- -------- [Growth and Income Portfolio-VIF]
-------
-------- -------- [Money Market Portfolio-VIF]
Social Security #: 111-11-1111 [INVESCO]
--------------------------- -------- -------- [Industrial Income Fund-VIF]
25 [Total Return Fund-VIF]
JOINT OWNER (If Applicable) -------- -------- [High Yield Fund-VIF]
Name: Jane Doe [JANUS CORPORATION (ASPEN SERIES)]
---------------------------------------- -------- -------- [International Growth Portfolio]
Date of Birth: 4/29/45 __ Male __ Female 25 [Worldwide Growth Portfolio]
-------- -------- [Aggressive Growth Portfolio]
Social Security#: ###-##-#### -------- -------- [Growth Portfolio]
---------------------------- -------- -------- [Balanced Portfolio]
Relationship to Owner: wife [MORGAN STANLEY UNIVERSAL FUNDS, INC.]
----------------------- -------- -------- [Emerging Markets Equity Portfolio]
-------- -------- [Mid-Cap ValuePortfolio]
ANNUITANT (If Other than Owner) -------- -------- [Value Portfolio]
Name: N/A -------- -------- [U.S. Real Estate Portfolio]
---------------------------------------- -------- -------- [Fixed Income Portfolio]
Date of Birth: __ Male __ Female -------- -------- [PBHG INSURANCE SERIES FUND, INC.]
----------- 25 [Technology & Communications Portfolio]
Social Security#: -------- -------- [Growth II Portfolio]
---------------------------- -------- -------- [Large-Cap Growth Portfolio]
- ----------------------------------------------- -------- -------- [STRONG CAPITAL MANAGEMENT, INC.]
2) BENEFICIARIES [Strong Growth Fund II]
- ----------------------------------------------- -------- -------- [Strong Special Fund II]
[FIXED ACCOUNT OPTIONS]
PRIMARY -------- -------- [Fixed Accumulation Account]
Name: Jim Doe N/A [Fixed Option 1-Year Guarantee]
-------------------------------------- -------- --------
N/A [Fixed Option 3-Year Guarantee]
Relationship to Owner: Child -------- --------
----------------------- N/A [Fixed Option 5-Year Guarantee]
-------- --------
Name: Sally Doe N/A [Fixed Option 7-Year Guarantee]
---------------------------------------- -------- --------
Relationship to Owner: Child
-----------------------
CONTINGENT
Name: N/A
--------------------------------------
Relationship to Owner: 100% 100% TOTAL
----------------------- -------- --------
Enclose a signed letter of instruction if
further designations are needed.
_______________________________________________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
____________________________________________________________________________________________________________________
4) PLAN INFORMATION
- --------------------------------------------------------------------------------------------------------------------
Tax Qualification
___ IRA Tax Year _________________ ___ TSA ___ 457
___ IRA ___ Transfer ___ Rollover ___ 401
__ Nonqualified OR ___ SEP IRA Tax Year _______________ ___ Other ____________________
- ------------------------------------------------------------------------------------------------------------------
5) PURCHASE PAYMENTS
- ------------------------------------------------------------------------------------------------------------------
Single Premium: $ 50,000
- ----------------- -------------------------
Amount
Salary Reduction/Flexible Premiums: ___ Check here and enclose a voided check, if you would like to have
payments electronically transferred from your checking account.
$ $
- ------------------ -------------------------------------- ------------------ -----------------------------
First Payment Date Periodic Payment Amount Frequency Projected Annual Premium
Name of Employer (Salary Reduction Plan Only)
---------------------------------------------------------------------
Replacement: Will the proposed contract replace any existing annuity or life insurance contract
- -------------- or certificate? ___ Yes ___ No
Please include all state specific Replacement forms with this application
- ------------------------------------------------------------------------------------------------------------------
6) REMARKS
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
7) SIGNATURES
- ------------------------------------------------------------------------------------------------------------------
Owner's Statement:
- -----------------
I agree that the information provided is true and complete to the best of my knowledge. I have read and
understand each of the statements and answers on this form. The contract I have applied for is suitable to my
investment objectives and financial situation. I also understand that the Annuity Commencement Date will be the
Contract (or Certificate) Anniversary following the 85th birthday of the oldest owner or five years after the
Contract (or Certificate) Effective Date, whichever is later, unless otherwise requested in the Remarks section
and accepted by the Company. I HAVE RECEIVED A CURRENT COPY OF THE PROSPECTUS FOR ANNUITY INVESTORS[REGISTERED
TRADEMARK] VARIABLE ACCOUNT B. I UNDERSTAND THAT ANNUITY PAYMENTS OR SURRENDER VALUES, WHEN BASED UPON THE
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND NOT GUARANTEED AS TO DOLLAR AMOUNT.
SIGNED AT: Anytown, USA this 17 day of March in the year 1997
-------------------------------- ---------- ------------------- ------------
City State Day Month Year
John Doe Jane Doe
- ------------------------------------------------- ------------------------------------------
Signature of Owner/Participant Signature of Joint Owner/Participant
Agent's Statement:
- ------------------
To the best of my knowledge and belief, the annuity applied for ___ IS ___ IS NOT intended to replace insurance
or an annutiy on the proposed Owner/Participant with this or any other company. I also certify that an
appropriate exclusion allowance was calculated (if applicable) for the named Owner/Participant, in accordance
with current tax laws and regulations.
Dummy Agent 3/17/97
- ----------------------------------------------------------------------------------------------------------------
Agent Signature Agent Name Printed Date
XYZ Brokerage
- ----------------------------------------------------------------------------------------------------------------
Name of Broker/Dealer Firm Brokerage Account Number
00000 000-000-0000
- ----------------------------------------------------------------------------------------------------------------
Agent Number Agent Phone Number Agent State License ID
For Agent Use Only
- ----------------------
____________________________________________________________________________________________________________________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
____________________________________________________________________________________________________________________
ACCOUNT SERVICE OPTIONS (Please initial all desired options.)
____________________________________________________________________________________________________________________
- ------------------------------------------------------------------------------------------------------------------
THIRD PARTY AUTHORIZATION
______________INITIAL HERE TO AUTHORIZE A THIRD PARTY TO CONDUCT TRANSFER TRANSACTIONS ON YOUR BEHALF. I hereby
authorize the person listed below to change the allocation of purchase payments, and the transfer of funds, among
the sub-account options and fixed account options of the contract, in writing or by telephone. I understand that
all telephone transactions are recorded. I understand that this authorization will remain in effect until new
written instructions are received by Annuity Investors Life Insurance Company.[REGISTERED TRADEMARK].
Name of Authorized Third Party: Dummy Agent Relationship Agent
------------------------------------------ ------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
PRINCIPAL GUARANTEE PROGRAM
(Minimum payment of $5,000)
__________INITIAL HERE TO ENROLL IN THE PRINCIPAL GUARANTEE PROGRAM. This authorizes the Company to allocate a
portion of the Purchase Payment to the Fixed 7-Year Guarantee option such that, at the end of the 7-Year
Guarantee period, the account will grow to an amount equal to at least the total Purchase Payment. The remaining
balance will be allocated per your instructions on your application, which should total 100%.
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
INTEREST SWEEP
(Minimum account value required for each Fixed Account selected for Interest Sweep is $5,000.)
__________INITIAL HERE TO ACTIVATE INTEREST SWEEP. Interest Sweep transfers will take place on the last valuation
date of each calendar quarter, from the following fixed accounts:
___ [Fixed Accumulation Account] ___ [1-Year Guarantee Account] ___ [3-Year Gurantee Account]
___ [5-Year Guarantee Account] ___ [7-Year Guarantee Account]
Interest Sweep transfers are to be allocated among portfolio sub-accounts, as indicated in the Allocation
Instructions on page 4 of this application. NOTE: Interest Sweep is not permitted into a sub-Account from which
Dollar Cost Averaging transfers are currently taking place, nor from a Fexed Accumulation Account from which
Dollar Cost Averaging transfers are currently taking place.
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
DOLLAR COST AVERAGING
(Minimum account value required to activate Dollar Cost Averaging is $10,000.)
________INITIAL HERE TO ACTIVATE DOLLAR COST AVERAGING. Please transfer $__________ (minimum $500) on the last
valuation date of each calendar ___ month ___ quarter, as indicated in the Allocation Instructions on page 4 of
this application. If no selection is made, transfers will occur on a quarterly basis. Dollar Cost Averaging will
remain in effect until the selected source sub-account is depleted, or until canceled. Automatic transfers are
only available from either the Money Market or Fixed Accumulation Account, but not from both concurrently.
Source Account:
___ [Fixed Accumulation Account] ___ [Dreyfus Money Market Portfolio-VIF]
Destination Sub-Accounts:
Please allocate the transfer to the sub-accounts as listed on page 4. Allocations must be in whole percentages
and must equal 100%.
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
PORTFOLIO REBALANCING
(Minimum account value required to activate Portfolio Rebalancing is $10,000.)
__________ INITIAL HERE TO ACTIVATE PORTFOLIO REBALANCING. If this service option is selected, the
Owner/Particpiant's Account Value (excluding amounts in all the Fixed Accounts) will be automatically rebalanced
to maintain the allocation percentage levels in the variable portfolios, as indicated in the Allocation
Instructions on page 4 of this application. Portfolio Rebalancing will occur on the last valuation date of each
calendar quarter. If Portfolio Rebalancing is selected, the total value of all variable sub-account portfolios
will be included in the rebalancing process. Portfolio Rebalancing cannot include a sub-account from which Dollar
Cost Averaging transfers are currently taking place.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
____________________________________________________________________________________________________________________
ACCOUNT SERVICE OPTIONS (Continued)
____________________________________________________________________________________________________________________
PORTFOLIOS PORTFOLIO REBALANCING DOLLAR COST AVERAGING INTEREST SWEEP
ALLOCATION (%) ALLOCATION (%) ALLOCATION (%)
- --------------------------------------------------------------------------------------------------------------------
[DREYFUS CORPORATION]
[Small Cap Portfolio-VIF]
- --------------------------------------------------------------------------------------------------------------------
[Capital Appreciation Portfolio-VIF]
- --------------------------------------------------------------------------------------------------------------------
[The Socially Responsible Growth Fund, Inc.]
- --------------------------------------------------------------------------------------------------------------------
[Dreyfus Stock Index Fund]
- --------------------------------------------------------------------------------------------------------------------
[Growth and Income Portfolio-VIF]
- --------------------------------------------------------------------------------------------------------------------
[Money Market Portfolio-VIF]
- --------------------------------------------------------------------------------------------------------------------
[INVESCO]
[Industrial Income Fund-VIF]
- --------------------------------------------------------------------------------------------------------------------
[Total Return Fund-VIF]
- --------------------------------------------------------------------------------------------------------------------
[High Yield Fund-VIF]
- --------------------------------------------------------------------------------------------------------------------
[JANUS CORPORATION (ASPEN SERIES)]
[International Growth Portfolio]
- --------------------------------------------------------------------------------------------------------------------
[Worldwide Growth Portfolio]
- --------------------------------------------------------------------------------------------------------------------
[Aggressive Growth Portfolio]
- --------------------------------------------------------------------------------------------------------------------
[Growth Portfolio]
- --------------------------------------------------------------------------------------------------------------------
[Balanced Portfolio]
- --------------------------------------------------------------------------------------------------------------------
[MORGAN STANLEY UNIVERSAL FUNDS, INC.]
[Emerging Markets Equity Portfolio]
- --------------------------------------------------------------------------------------------------------------------
[Mid-Cap Value Portfolio]
- --------------------------------------------------------------------------------------------------------------------
[Value Portfolio]
- --------------------------------------------------------------------------------------------------------------------
[Fixed Income Portfolio]
- --------------------------------------------------------------------------------------------------------------------
[PBHG INSURANCE SERIES FUND, INC.]
[Technology & Communications Fund]
- --------------------------------------------------------------------------------------------------------------------
[Growth II Fund]
- --------------------------------------------------------------------------------------------------------------------
[Large-Cap Growth Fund]
- --------------------------------------------------------------------------------------------------------------------
[STRONG CAPITAL MANAGEMENT, INC.]
[Strong Growth Fund II]
- --------------------------------------------------------------------------------------------------------------------
[Strong Special Fund II]
- --------------------------------------------------------------------------------------------------------------------
TOTAL 100% 100% 100%
- --------------------------------------------------------------------------------------------------------------------
<PAGE>
____________________________________________________________________________________________________________________
SIGNATURE AUTHORIZATION
____________________________________________________________________________________________________________________
By signing my name to this form I hereby authorize Annuity Investors Life Insurance Company[REGISTERED TRADEMARK]
to make the elections as indicated on this form. I have read this entire form and agree to hold hamrless and
indemnify Annuity Investors Life Insurance Company as to any and all claims or demand which may be made by reason
of the election so made. You may change your current instructions or elect to discontinue your participation in
these programs by calling the Annuity Investors Life Insurance Company Variable Annuity Service Center at
1-800-789-6771.
John Doe 3/17/97 Jane Doe 3/17/97
- ---------------------------------- ---------------- -------------------------------------- ----------
Signature of Owner/Participant Date Signature of Joint Owner/Participant Date
____________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Exhibit (5)(b)
Annuity Investors[SERVICEMARK]
Life Insurance Company
PO Box 5423, Cincinnati, Ohio 45201-5423 . (800) 789-6771
APPLICATION FOR GROUP FLEXIBLE PREMIUM DEFERRED ANNUITY CONTRACT
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------
1) OWNER INFORMATION
- -------------------------------------------------------------------------------------------------------
PROPOSED CONTRACT OWNER:_____________________________________________________________________________
MAILING ADDRESS:_____________________________________________________________________________________
________________________________________________________________________________
BILLING CONTACT: ________________________________________________________________________________
Telephone Number: (___)____________________________ Fax Number: (___)_____________________________
Mail Billing Statement to (If other than above): Third Party Administrator (If Applicable):
Name:__________________________________________ Firm:_________________________________________
Address:_______________________________________ Address:______________________________________
City, State Zip:_______________________________ City, State Zip:______________________________
Contact:______________________________________
Telephone Number: (___)_______________________
- -------------------------------------------------------------------------------------------------------
2) PRODUCT INFORMATION
- -------------------------------------------------------------------------------------------------------
Please check the product chosen for your plan: ___The Commodore Nauticus ___The Commodore Navigator
- -------------------------------------------------------------------------------------------------------
3) PLAN INFORMATION
Plan Name:_____________________________________ Plan Number: ___ ___ ___
Tax ID Number:_________________________________ Plan Year End: Month _____________ Day _______
Plan Type:___ 401(a) ___ 401(k) ___ ERISA 403(b) ___ Non-ERISA 403(b) ___ 457 ___ Other Specify
Plan Administration/Trustee: Telephone Number: ( )
- -------------------------------------------------------------------------------------------------------
4) AGREEMENT
- -------------------------------------------------------------------------------------------------------
Application is hereby made for a Group Flexible Premium Deferred Annuity Contract. The Owner
acknowledges that Annuity Investors Life Insurance Company[REGISTERED TRADEMARK] will provide the
investment vehicle for, but will not be responsible for the administration of the plan. The Owner
hereby agrees that the Contract shall not take effect and be in force unless and until the first
premium is received by the COMPANY. The Owner has read and understands this entire application. The
Owner has also received current copies of the prospectuses for the Annuity Investors Variable Account
and Funds which correspond to the product selected in section 2 of this application.
IT IS FURTHER UNDERSTOOD THAT PAYMENTS AND VALUES PROVIDED UNDER EACH CERTIFICATE, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEE AS TO DOLLAR AMOUNT.
The information provided herein is true, correct, and complete to the best of my knowledge and belief.
Signed at: _________________________, this________ day of ________________, in the year ___________.
City, State Day Month Year
Signature for Owner:____________________________________ Title:___________________________________
Signature of COMPANY Representative:_______________________________________________________________
- -------------------------------------------------------------------------------------------------------
FOR HOME OFFICE USE ONLY:
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit 6(a)(i)
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
ANNUITY INVESTORS LIFE INSURANCE COMPANY
The undersigned President and Senior Vice President and Secretary of
Annuity Investors Life Insurance Company, an Ohio corporation for profit (the
"Corporation"), do hereby certify that in a writing dated as of April 9, 1996
signed by the sole shareholder of the Corporation, the following resolution to
amend the Articles of Incorporation of the Corporation was adopted:
"RESOLVED: That the Articles of Incorporation, as amended, of the
Corporation be amended by deleting Article FOURTH in its entirety
and replacing therefor the following:
Fourth. The number of shares which the Corporation is authorized
to have outstanding is Fifteen Thousand (15,000), all of which
shall be Common Shares, par value One Hundred Twenty Five
Dollars ($125)."
IN WITNESS WHEREOF, the undersigned have hereunto subscribed their
names as of the 19th day of April, 1996.
/s/ Robert A. Adams
------------------------------------------
Robert A. Adams
President
/s/ Mark F. Muething
-----------------------------------------
Mark F. Muething
Senior Vice President and Secretary
Exhibit 6(a)(ii)
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
ANNUITY INVESTORS LIFE INSURANCE COMPANY
The undersigned President and Senior Vice President and Secretary of
Annuity Investors Life Insurance Company, an Ohio corporation for profit (the
"Corporation), do hereby certify that in a writing dated as of August 9, 1996
signed by the sole shareholder of the Corporation, the following resolution to
amend the Articles of Incorporation of the Corporation was adopted:
"RESOLVED: That the Articles of Incorporation, as amended, of the
Corporation be amended by deleting Article FOURTH in its entirety
and replacing therefor the following:
Fourth. The number of shares which the Corporation is authorized
to have outstanding is Twenty Five Thousand (25,000), all of
which shall be Common Shares, par value One Hundred Twenty Five
Dollars ($125)."
IN WITNESS WHEREOF, the undersigned have hereunto subscribed their
names as of the 14th day of August, 1996.
/s/ Robert A. Adams
-----------------------------------
Robert A. Adams
President
/s/ Mark F. Muething
-----------------------------------
Senior Vice President and Secretary
Exhibit (8)(a)
FUND PARTICIPATION AGREEMENT
----------------------------
This Agreement is entered into as of the 21st day of November, 1995, between
Annuity Investors Life Insurance Company ("Insurance Company"), a life insurance
company organized under the laws of the State of Ohio, and DREYFUS VARIABLE
INVESTMENT FUND ("Fund"), an unincorporated business trust organized
under the laws of the Commonwealth of Massachusetts.
ARTICLE I
DEFINITIONS
1.1 "Act" shall mean the Investment Company Act of 1940, as amended.
1.2 "Board" shall mean the Board of Trustees of the Fund having the
responsibility for management and control of the Fund.
1.3 "Business Day" shall mean any day for which the 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 contract that uses the Fund 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.
1.7 "Disinterested Board Members" shall mean those members of the Board 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.
1.9 "Participating Companies" shall mean any insurance company (including
Insurance Company), which offers variable annuity and/or variable life
insurance contracts to the public and which has entered into an agreement
with the Fund for the purpose of making Fund shares available to serve as
an underlying investment medium for the aforesaid Contracts.
1.10 "Prospectus" shall mean the Fund's current prospectus and statement of
additional information, as most recently filed with the Commission.
1.11 "Separate Account" shall mean Annuity Investors Variable Account A, a
separate account established by Insurance Company in accordance with the
laws of the State of Ohio.
1.12 "Software Program" shall mean the software program used by the 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 the Fund is not
available, such information may be provided by telephone and confirmed by
facsimiles. The Lion System shall be provided to Insurance Company at no
charge.
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ARTICLE II
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
laws of the State of Ohio for the purpose of offering to the public
certain individual and group variable annuity contracts; (c) it has
registered or will register the Separate Account as a unit investment
trust under the Act to serve as the segregated investment account for the
Contracts; and (d) each Separate Account is eligible to invest in shares
of the Fund without such investment disqualifying the 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 inform the Fund promptly of any investment restrictions imposed by
state insurance law and applicable to the 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 Fund represents that the Fund is registered with the Commission under the
Act as an open-end, diversified management investment company and
possesses, and shall maintain, all legal and regulatory licenses,
approvals, consents and/or exemptions required for Fund to operate and
offer its shares as an underlying investment medium for Participating
Companies. The Fund has established eight series of shares (each, a
"Series") and may in the future establish other series of shares.
2.5 Fund represents that it is currently qualified as a Regulated Investment
Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision)
and that it will notify 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.
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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 the 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 Fund agrees that the Fund's assets shall be managed and invested in a
manner that complies with the requirements of Section 817(h) of the Code.
2.8 Insurance Company agrees that the Fund shall be permitted (subject to the
other terms of this Agreement) to make Series' shares available to other
Participating Companies and contractholders.
2.9 Fund 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 Fund are and shall continue to be
at all times covered by a blanket fidelity bond or similar coverage for
the benefit of the Fund in an amount not less than 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.
2.10 Insurance Company represents and warrants that all of its employees and
agents who deal with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage in an amount not less than the coverage required to be maintained
by the Fund. 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
FUND SHARES
3.1 The Contracts funded through the Separate Account will provide for the
investment of certain amounts in the Series' shares.
3.2 Fund agrees to make the shares of its Series available for purchase at the
then applicable net asset value per share by the Separate Account on each
Business Day pursuant to rules of the Commission. Notwithstanding the
foregoing, the Fund may refuse to sell the shares of any Series to any
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person, or suspend or terminate the offering of the shares of any Series
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 and in the best interests of the
shareholders of such Series.
3.3 Fund agrees that shares of the Fund will be sold only to Participating
Companies and their separate accounts and to the general accounts of those
Participating Companies and their affiliates. No shares of any Series will
be sold to the general public.
3.4 Fund shall use its best efforts to provide closing net asset value,
dividend and capital gain (loss) information for each Series available on
a per-share and Series 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 (loss) 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 for the Series in question.
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 Separate
Account unit values 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 Series
shares which will be purchased or redeemed at that day's closing net asset
value per share for such Series. The net purchase or redemption orders
will be transmitted to the Fund by Insurance Company by 11:00 a.m. Eastern
Time on the Business Day next following Insurance Company's receipt of
that information.
3.6 Fund appoints Insurance Company as its agent for the limited purpose of
accepting orders for the purchase and redemption of shares of each Series
for the Separate Account. Fund will execute orders for any Series 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 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 Series shares, the
conditions specified in Section 3.8, as applicable, are satisfied. A
redemption or purchase request for any Series that does not satisfy the
conditions specified in this Section and in Section 3.8, as applicable,
will be effected at the net asset value computed for such Series on the
Business Day immediately preceding the Business Day upon which such
conditions have been satisfied in accordance with the requirements of this
Section and Section 3.8.
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3.7 Insurance Company will use its best efforts to notify Fund in advance of
any unusually large purchase or redemption orders.
3.8 If Insurance Company's order requests the purchase of Series shares,
Insurance Company will pay for such purchases by wiring Federal Funds to
Fund or its designated custodial account on the day the order is
transmitted. Insurance Company shall make all reasonable efforts to
transmit to the Fund payment in Federal Funds by 12:00 noon Eastern Time
on the Business Day the Fund receives the notice of the order pursuant to
Section 3.5. 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 Fund receives payment in Federal Funds by 12:00 midnight
Eastern Time on the Business Day the Fund receives the notice of the order
pursuant to Section 3.5. If payment in Federal Funds for any purchase is
not received or is received by the Fund after 12:00 noon Eastern Time on
such Business Day, Insurance Company shall promptly upon the Fund's
request, reimburse the Fund for any charges, costs, fees, interest or
other expenses incurred by the Fund in connection with any advances to, or
borrowings or overdrafts by, the Fund, or any similar expenses incurred by
the Fund, as a result of portfolio transactions effected by the Fund based
upon such purchase request. Payment for Series shares redeemed by the
Separate Account or the Insurance Company shall be made in Federal Funds
transmitted by wire to the Insurance Company or any other designated
person on the next Business Day after the Fund is properly notified of the
redemption order of Series shares (unless redemption proceeds are to be
applied to the purchase of Fund shares of other Series), except that the
Fund reserves the right to delay payment of redemption proceeds to the
extent permitted under Section 22(e) of the 1940 Act. The Fund shall not
bear any responsibility whatsoever for the proper disbursement or
crediting of redemption proceeds by the Insurance Company; the Insurance
Company alone shall be responsible for such action.
3.9 Fund has the obligation to ensure that Series shares are registered with
applicable federal agencies at all times.
3.10 Fund will confirm each purchase or redemption order made by Insurance
Company. Transfer of Series shares will be by book entry only. No share
certificates will be issued to Insurance Company. Insurance Company will
record shares ordered from Fund in an appropriate title for the
corresponding account.
3.11 Fund shall credit Insurance Company with the appropriate number of shares.
3.12 On each ex-dividend date of the Fund or, if not a Business Day, on the
first Business Day thereafter, Fund shall communicate to Insurance Company
the amount of dividend and capital gain, if any, per share of each Series.
All dividends and capital gains of any Series shall be automatically
reinvested in additional shares of the relevant Series at the applicable
net asset value per share of such Series on the payable date. Fund shall,
on the day after the payable 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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3.13 This Agreement does not cover the sale of any Fund shares to the Insurance
Company general account.
ARTICLE IV
STATEMENTS AND REPORTS
4.1 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 Fund shall distribute to Insurance Company copies of the Fund's
Prospectuses, proxy materials, notices, periodic reports and other printed
materials (which the Fund customarily provides to its shareholders) in
quantities as Insurance Company may reasonably request for distribution to
each Contractholder and Participant.
4.3 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 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 the Fund at least one 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 Contracts or the Separate Account, contemporaneously
with the filing of such document with the Commission.
ARTICLE V
EXPENSES
5.1 The charge to the Fund for all expenses and costs of the Series, including
but not limited to management fees, administrative expenses and legal and
regulatory costs, will be made in the determination of the relevant
Series' daily net asset value per share so as to accumulate to an annual
charge at the rate set forth in the 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 the Fund or expenses relating to the distribution of its
shares. Insurance Company shall pay the following expenses or costs:
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a. Such amount of the production expenses of any Fund materials,
including the cost of printing the 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 Fund materials or marketing
materials for prospective Insurance Company Contractholders and
Participants.
c. Distribution expenses of Fund materials or marketing materials
for Insurance Company Contractholders and Participants.
Except as provided herein, all other Fund expenses shall not be borne by
Insurance Company.
ARTICLE VI
EXEMPTIVE RELIEF
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
and, in particular, has reviewed the conditions to the relief set forth in
the related Notice. As set forth therein, Insurance Company agrees to
report any potential or existing conflicts promptly to the Board, and in
particular whenever contract voting instructions are disregarded, and
recognizes that it will be responsible for assisting the 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.
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 the Fund, the Board shall give prompt notice
to all Participating Companies. 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
Series and reinvesting such assets in a different investment medium,
or submitting the question of whether such segregation should be
implemented to a vote or all affected Contractholders; and/or
b. Establishing a new registered management investment company.
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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 the Fund, Insurance Company
may be required, at the Board's election, to withdraw the Separate
Account's investment in the 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 the
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 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 the 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
VOTING OF FUND SHARES
7.1 Fund shall provide Insurance Company with copies at no cost to Insurance
Company, of the Fund's proxy material, annual and semi-annual 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 Series shares in accordance with instructions received
from Contractholders or Participants; and
c. vote Series shares for which no instructions have been received
in the same proportion as Series shares for which instructions
have been received.
Insurance Company agrees to be responsible for assuring that voting Fund
shares for the Separate Account is conducted in a manner consistent with
other Participating Companies.
7.2 Insurance Company agrees that it shall not, without the prior written
consent of the Fund and Dreyfus, solicit, induce or encourage
Contractholders to (a) change or supplement the Fund's current investment
adviser or (b) change, modify, substitute, add to or delete the Fund from
the current investment media for the Contracts.
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ARTICLE VIII
MARKETING AND REPRESENTATIONS
8.1 The 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;
b. other marketing materials.
Expenses for the production of such documents shall be borne by Insurance
Company in accordance with Section 5.2 of this Agreement.
8.2 Insurance Company shall designate certain persons or entities which 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 the
Fund, each piece of sales literature or other promotional material in
which the 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 Fund 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. The Fund 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 the Fund or concerning the Fund
or any Series in connection with the sale of the Contracts other than the
information or representations contained in the registration statement or
Prospectus, as 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.
8.5 Fund shall furnish, or shall cause to be furnished, to Insurance Company,
each piece of the 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 Fund shall not, in connection with the sale of Series 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 which 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.
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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, 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
INDEMNIFICATION
9.1 Insurance Company agrees to indemnify and hold harmless the Fund, Dreyfus,
any sub-investment adviser of a Series, and their 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 Fund or with respect to the Separate Account or
Contracts, 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 rnisleading; (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 Fund) of Insurance Company or its
agents, with respect to the sale and distribution of Contracts for which
Series' 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 Series' 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
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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 Fund specifically for use therein. This indemnity
agreement will be in addition to any liability which Insurance Company may
otherwise have.
9.2 The Fund 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 to which Insurance Company or any
such director, officer, employee, agent or controlling person may 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 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 Fund any material
fact required to be stated therein or necessary to make the statements
therein not misleading; or (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 Fund; and the 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 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 Fund by Insurance
Company specifically for use therein. This indemnity agreement will be in
addition to any liability which the Fund may otherwise have.
9.3 The Fund shall indemnify and hold Insurance Company harmless against any
and all liability, loss, damages, costs or expenses which Insurance
Company may incur, suffer or be required to pay due to the Fund's (1)
incorrect calculation of the daily net asset value, dividend rate or
capital gain (loss) distribution rate of a Series; (2) incorrect reporting
of the daily net asset value, dividend rate or capital gain (loss)
distribution rate; and (3) untimely reporting of the net asset value,
dividend rate or capital gain (loss) distribution rate; provided that the
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.
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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 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.
9.5 Insurance Company shall indemnify and hold the Fund, Dreyfus and any
sub-investment adviser of a Series harmless against any tax liability
incurred by the Fund under Section 851 of the Code arising from purchases
or redemptions by Insurance Company's General Accounts or the account) of
its affiliates.
ARTICLE X
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 as to one or more Series at
the option of the terminating party:
a. At the option of Insurance Company or the Fund at any time from the
date hereof upon 180 days' notice, unless a shorter time is agreed
to by the parties;
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b. At the option of Insurance Company, if shares of any Series 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 Fund
makes available a sufficient number of shares to meet the
requirements of the Contracts within said ten-day period;
c. At the option of Insurance Company, upon the institution of formal
proceedings against the Fund 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 Insurance
Company's reasonable judgment, materially impair the Fund's ability
to meet and perform the 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. At the option of the 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 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 the Fund with said termination to be
effective upon receipt of notice;
e. At the option of the Fund, if the 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
the Fund or Dreyfus, the 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 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. Upon termination of the Investment Advisory Agreement between the
Fund and Dreyfus or its successors unless Insurance Company
specifically approves the selection of a new Fund investment
adviser. The Fund shall promptly furnish notice of such termination
to Insurance Company;
g. In the event the 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 upon such occurrence without notice;
-13-
<PAGE>
h. At the option of the Fund upon a determination by the Board in good
faith that it is no longer advisable and in the best interests of
shareholders for the Fund to continue to operate pursuant to this
Agreement. Termination pursuant to this Subsection (h) shall be
effective upon notice by the Fund to Insurance Company of such
termination;
i. At the option of the Fund if the Contracts cease to qualify as
annuity contracts or life insurance policies, as applicable, under
the Code, or if the Fund reasonably believes that the Contracts may
fail to so qualify;
j. At the option of either party to this Agreement, upon the breach by
a party of any material provision of this Agreement, which breach
has not been cured to the reasonable satisfaction of the other party
within 10 days after written notice of such breach is delivered to
such other party;
k. At the option of the Fund, if the Contracts are not registered,
issued or sold in accordance with applicable federal and/or state
law; or
l. Upon assignment of this Agreement, unless made with the written
consent of the non-assigning party.
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, the Fund and Dreyfus may, at the option of the Fund, continue to
make available additional Series shares for so long as the Fund desires
pursuant to the terms and conditions of this Agreement as provided below,
for all Contracts in effect on the effective date of termination of this
Agreement (hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, if the Fund or Dreyfus so elects to make additional
Series shares available, the owners of the Existing Contracts or Insurance
Company, whichever shall have legal authority to do so, shall be permitted
to reallocate investments in the Series, redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments
under the Existing Contracts, if permitted by the terms of the Existing
Contracts. In the event of a termination of this Agreement pursuant to
Section 10.2 hereof, the Fund and Dreyfus, as promptly as is practicable
under the circumstances, shall notify Insurance Company whether Dreyfus
and the Fund will continue to make Series shares available after such
termination. If Series shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect and
thereafter either the Fund or Insurance Company may terminate the
Agreement, 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 Fund, need not be
for more than six months.
-14-
<PAGE>
ARTICLE XI
AMENDMENTS
11.1 Any other changes in the terms of this Agreement shall be made by
agreement in writing between Insurance Company and 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: Annuity Investors Life Insurance Company
10th Floor, Chiquita Center
250 East Fifth Street
Cincinnati, Ohio 45202
Attn: Mark F. Muething
Fund: Dreyfus Variable Investment Fund
200 Park Avenue
New York, New York 10166
Attn: Daniel C. Maclean
with copies to: 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
MISCELLANEOUS
13.1 This Agreement has been executed on behalf of the 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 Trustee, off1cer or
shareholder of the Fund individually.
ARTICLE IV
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.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be duly
executed and attested as of the date first above written.
ANNUITY INVESTORS LIFE INSURANCE COMPANY
By: /s/ Mark F. Muething
Its: Senior Vice President
Attest: /s/ Charles K. McManus
Senior Vice President
DREYFUS VARIABLE INVESTMENT FUND
By: /s/
Its: Assistant Treasurer
Attest: /s/
-16-
Exhibit (8)(a)(i)
DREYFUS LIFE AND ANNUITY INDEX FUND, INC.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
DREYFUS VARIABLE INVESTMENT FUND
200 Park Avenue
New York, New York
April 14, 1997
Annuity Investors Life Insurance Company
10th Floor, Chiquita Center
250 East Fifth Street
Cincinnati, OH 45201
Attention: Mark Muething
Gentlemen:
This letter sets forth the agreement between Annuity Investors
Life Insurance Company (the "Insurance Company") and each of Dreyfus Life and
Annuity Index Fund, Inc. (d/b/a Dreyfus Stock Index Fund), The Dreyfus Socially
Responsible Growth Fund, Inc. and Dreyfus Variable Investment Fund (each a
"Fund" and collectively the "Funds") concerning investment in the Funds by the
Insurance Company, on its own behalf and on behalf of the separate account
identified below (the "Agreement").
1. The terms of the agreement entered into between the Insurance
Company and Dreyfus Life and Annuity Index Fund, Inc. on November 21, 1995; the
agreement entered into between the Insurance Company and Dreyfus Variable
Investment Fund on November 21, 1995; and the agreement entered into between the
Insurance Company and The Dreyfus Socially Responsible Growth Fund, Inc. on
November 21, 1995 (each an "Original Agreement" and collectively the "Original
Agreements") are incorporated herein by reference and shall govern investment in
the Funds, respectively, except that all references in the original Agreements
to "Separate Account" shall be deemed to be references to Annuity Investors
Variable Account B, a separate account established by the Insurance Company in
accordance with the laws of the State of Ohio.
2. This Agreement may be terminated for any of the causes set
forth in Section 10.2 of each Original Agreement at the option of the relevant
party in accordance with the provision relevant to that party. In no event,
however, will the termination of any respective Original Agreement automatically
result in the termination of this Agreement, or will the termination of this
Agreement automatically result in the termination of any respective Original
Agreement.
3. This Agreement shall be effective as of the date hereof and
shall continue in force as to each Fund for as long as that Fund serves as an
investment medium for variable insurance contracts issued by the Insurance
Company.
<PAGE>
4. Any amendments to an Original Agreement entered into after the
date hereof shall be deemed, with respect to the relevant Fund, amendments to
this Agreement unless otherwise provided in such amendment. Any other changes in
the terms of this Agreement with respect to any Fund shall be effective and
binding only if made in writing between the Insurance Company and that Fund.
5. Notice. Each notice required by this Agreement shall be given
by certified mail, return receipt requested, to the appropriate parties as
identified in the respective original Agreement. Notice shall be deemed to be
given on the date of receipt by the addressees as evidenced by the return
receipt.
6. Miscellaneous. This Agreement has been executed on behalf of
each Fund by the undersigned officer of the Fund in his/her 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.
If this Agreement is consistent with your understanding of the
matters we discussed concerning the Insurance Company's investment in the Funds,
kindly sign below and return a signed copy to us.
Very truly yours,
Dreyfus Life and Annuity Index
Fund, Inc. (d/b/a Dreyfus Stock
Index Fund)
The Dreyfus Socially Responsible
Growth Fund, Inc.
Dreyfus Variable Investment Fund
By: /s/ Elizabeth Keeley
Name: Elizabeth Keeley
Title: Vice President
Acknowledged and Agreed:
Annuity Investor Life Insurance Company
By: /s/ Mark F. Muething
Name: Mark F. Muething
Title: Senior Vice President
Exhibit (8)(b)
FUND PARTICIPATION AGREEMENT
This Agreement is entered into as of the 21st day of November, 1995, between
Annuity Investors Life Insurance Company ("Insurance Company"), a life insurance
company organized under the laws of the State of Ohio, and DREYFUS LIFE AND
ANNUITY INDEX FUND, INC. (d/b/a DREYFUS STOCK INDEX FUND), a corporation
organized under the laws of the State of Maryland (the "Fund").
ARTICLE I
DEFINITIONS
1.1 "Act" shall mean the Investment Company Act of 1940, as amended.
1.2 "Board" shall mean the Board of Directors of the Fund having the
responsibility for management and control of the Fund.
1.3 "Business Day" shall mean any day for which the 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 contract that uses the Fund 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.
1.7 "Disinterested Board Members" shall mean those members of the Board 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.
1.9 "Participating Companies" shall mean any insurance company (including
Insurance Company), which offers variable annuity and/or variable life
insurance contracts to the public and which has entered into an agreement
with the Fund for the purpose of making Fund shares available to serve as
an underlying investment medium for the aforesaid Contracts.
1.10 "Prospectus" shall mean the Fund's current prospectus and statement of
additional information, as most recently filed with the Commission.
<PAGE>
1.11 "Separate Account" shall mean Annuity Investors Variable Account A, a
separate account established by Insurance Company in accordance with the
laws of the State of Ohio.
1.12 "Software Program" shall mean the software program used by the 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 the Fund is not
available, such information may be provided by telephone and confirmed by
facsimiles. The Lion System shall be provided to Insurance Company at no
charge.
ARTICLE II
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
laws of the State of Ohio for the purpose of offering to the public
certain individual and group variable annuity contracts; (c) it has
registered or will register the Separate Account as a unit investment
trust under the Act to serve as the segregated investment account for the
Contracts; and (d) each Separate Account is eligible to invest in shares
of the Fund without such investment disqualifying the 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 inform the Fund promptly of any investment restrictions imposed by
state insurance law and applicable to the 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
<PAGE>
2.4 Fund represents that it is registered with the Commission under the Act as
an open-end, non-diversified management investment company and possesses,
and shall maintain, all legal and regulatory licenses, approvals, consents
and/or exemptions required for Fund to operate and offer its shares as an
underlying investment medium for Participating Companies.
2.5 Fund represents that it is currently qualified as a Regulated Investment
Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision)
and that it will notify 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 the 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 Fund agrees that the Fund's assets shall be managed and invested in a
manner that complies with the requirements of Section 817(h) of the Code.
2.8 Insurance Company agrees that the Fund shall be permitted (subject to the
other terms of this Agreement) to make Fund shares available to other
Participating Companies and contractholders.
2.9 Fund represents and warrants that any of its directors, officers,
employees, investment advisers, and other individuals/entities who deal
with the money and/or securities of the Fund are and shall continue to be
at all times covered by a blanket fidelity bond or similar coverage for
the benefit of the Fund in an amount not less than 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.
2.10 Insurance Company represents and warrants that all of its employees and
agents who deal with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage in an amount not less than the coverage required to be maintained
by the Fund. 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.
3
<PAGE>
ARTICLE III
FUND SHARES
3.1 The Contracts funded through the Separate Account will provide for the
investment of certain amounts in shares of the Fund.
3.2 Fund agrees to make its shares available for purchase at the then
applicable net asset value per share by the Separate Account on each
Business Day pursuant to rules of the Commission. Notwithstanding the
foregoing, the 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 the 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 Fund's shareholders.
3.3 Fund agrees that shares of the Fund will be sold only to Participating
Companies and their separate accounts and to the general accounts of those
Participating Companies and their affiliates. No shares will be sold to
the general public.
3.4 Fund shall use its best efforts to provide closing net asset value,
dividend and capital gain (loss) information on a per-share and Fund 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 (loss) 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.
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 Separate
Account unit values 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 Fund shares
which 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
the Fund by Insurance Company by 11:00 a.m. Eastern Time on the Business
Day next following Insurance Company's receipt of that information.
3.6 Fund appoints Insurance Company as its agent for the limited purpose of
accepting orders for the purchase and redemption of Fund shares for the
Separate Account. 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 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 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 in this Section 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 Business Day
upon which such conditions have been satisfied in accordance with the
requirements of this Section and Section 3.8.
4
<PAGE>
3.7 Insurance Company will use its best efforts to notify Fund in advance of
any unusually large purchase or redemption orders.
3.8 If Insurance Company's order requests the purchase of Fund shares,
Insurance Company will pay for such purchases by wiring Federal Funds to
Fund or its designated custodial account on the day the order is
transmitted. Insurance Company shall make all reasonable efforts to
transmit to the Fund payment in Federal Funds by 12:00 noon Eastern Time
on the Business Day the Fund receives the notice of the order pursuant to
Section 3.5. 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 Fund receives payment in Federal Funds by 12:00 midnight
Eastern Time on the Business Day the Fund receives the notice of the order
pursuant to Section 3.5. If payment in Federal Funds for any purchase is
not received or is received by the Fund after 12:00 noon Eastern Time on
such Business Day, Insurance Company shall promptly upon the Fund's
request, reimburse the Fund for any charges, costs, fees, interest or
other expenses incurred by the Fund in connection with any advances to, or
borrowings or overdrafts by, the Fund, or any similar expenses incurred by
the Fund, as a result of portfolio transactions effected by the Fund based
upon such purchase request. Payment for shares redeemed by the Separate
Account or the Insurance Company shall be made in Federal Funds
transmitted by wire to the Insurance Company or any other designated
person on the next Business Day after the Fund is properly notified of the
redemption order of shares, except that the Fund reserves the right to
delay payment of redemption proceeds to the extent permitted under Section
22(e) of the 1940 Act. The Fund shall not bear any responsibility
whatsoever for the proper disbursement or crediting of redemption proceeds
by the Insurance Company; the Insurance Company alone shall be responsible
for such action
3.9 Fund has the obligation to ensure that Fund shares are registered with
applicable federal agencies at all times.
3.10 Fund will confirm each purchase or redemption order made by Insurance
Company. Transfer of Fund shares will be by book entry only. No share
certificates will be issued to Insurance Company. Insurance Company will
record shares ordered from Fund in an appropriate title for the
corresponding account.
3.11 Fund shall credit Insurance Company with the appropriate number of shares.
3.12 On each ex-dividend date of the Fund or, if not a Business Day, on the
first Business Day thereafter, 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 Fund at the net asset value per share on the ex-dividend date. 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.
5
<PAGE>
3.13 This Agreement does not cover the sale of any Fund shares to the Insurance
Company general account.
ARTICLE IV
STATEMENTS AND REPORTS
4.1 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 Fund shall distribute to Insurance Company copies of the Fund's
Prospectuses, proxy materials, notices, periodic reports and other printed
materials (which the Fund customarily provides to its shareholders) in
quantities as Insurance Company may reasonably request for distribution to
each Contractholder and Participant.
4.3 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 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 the Fund at least one 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 Contracts or the Separate Account, contemporaneously
with the filing of such document with the Commission.
ARTICLE V
EXPENSES
5.1 The charge to the Fund for all expenses and costs of the Fund, including
but not limited to management fees, administrative expenses and legal and
regulatory costs, will be made in the determination of the Fund's daily
net asset value per share so as to accumulate to an annual charge at the
rate set forth in the 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 the Fund or expenses relating to the distribution of its
shares. Insurance Company shall pay the following expenses or costs:
6
<PAGE>
a. Such amount of the production expenses of any Fund materials,
including the cost of printing the 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 Fund materials or marketing materials
for prospective Insurance Company Contractholders and Participants.
c. Distribution expenses of Fund materials or marketing materials for
Insurance Company Contractholders and Participants.
Except as provided herein, all other Fund expenses shall not be borne by
Insurance Company.
ARTICLE VI
EXEMPTIVE RELIEF
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
and, in particular, has reviewed the conditions to the relief set forth in
the related Notice. As set forth therein, Insurance Company agrees to
report any potential or existing conflicts promptly to the Board, and in
particular whenever contract voting instructions are disregarded, and
recognizes that it will be responsible for assisting the 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.
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 the Fund, the Board shall give prompt notice
to all Participating Companies. 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
Fund and reinvesting such assets in a different investment medium,
or submitting the question of whether such segregation should be
implemented to a vote or all affected Contractholders; and/or
b. Establishing a new registered management investment company.
7
<PAGE>
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 the Fund, Insurance Company
may be required, at the Board's election, to withdraw the Separate
Account's investment in the 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 the
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 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 the 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
VOTING OF FUND SHARES
7.1 Fund shall provide Insurance Company with copies at no cost to Insurance
Company, of the Fund's proxy material, annual and semi-annual 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 Fund shares in accordance with instructions received from
Contractholders or Participants; and
c. vote Fund shares for which no instructions have been received in the
same proportion as Fund shares for which instructions have been
received.
Insurance Company agrees to be responsible for assuring that voting Fund
shares for the Separate Account is conducted in a manner consistent with
other Participating Companies.
7.2 Insurance Company agrees that it shall not, without the prior written
consent of the Fund and Dreyfus, solicit, induce or encourage
Contractholders to (a) change or supplement the Fund's current investment
adviser or (b) change, modify, substitute, add to or delete the Fund from
the current investment media for the Contracts.
8
<PAGE>
ARTICLE VIII
MARKETING AND REPRESENTATIONS
8.1 The 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 by Insurance
Company in accordance with Section 5.2 of this Agreement.
8.2 Insurance Company shall designate certain persons or entities which 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 the
Fund, each piece of sales literature or other promotional material in
which the 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 Fund 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. The Fund 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 the Fund or concerning the Fund
in connection with the sale of the Contracts other than the information or
representations contained in the registration statement or Prospectus, as
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.
8.5 Fund shall furnish, or shall cause to be furnished, to Insurance Company,
each piece of the 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.
9
<PAGE>
8.6 Fund shall not, in connection with the sale of 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 which 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, 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
INDEMNIFICATION
9.1 Insurance Company agrees to indemnify and hold harmless the Fund, Dreyfus,
the sub-investment adviser of the Fund, and their 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 Fund or with respect to the Separate Account or
10
<PAGE>
Contracts, 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; (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 Fund) of Insurance Company or its
agents, with respect to the said and distribution of Contracts for which
Fund 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 Fund 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
Fund specifically for use therein. This indemnity agreement will be in
addition to any liability which Insurance Company may otherwise have.
9.2 The Fund 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 to which Insurance Company or any
such director, officer, employee, agent or controlling person may 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 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 Fund any material
fact required to be stated therein or necessary to make the statements
therein not misleading or (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 Fund; and the 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 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 Fund by Insurance
Company specifically for use therein. This indemnity agreement will be in
addition to any liability which the Fund may otherwise have.
11
<PAGE>
9.3 The Fund shall indemnify and hold Insurance Company harmless against any
and all liability, loss, damages, costs or expenses which Insurance
Company may incur, suffer or be required to pay due to the Fund's (1)
incorrect calculation of the daily net asset value, dividend rate or
capital gain (loss) distribution rate; (2) incorrect reporting of the
daily net asset value, dividend rate or capital gain (loss) distribution
rate; and (3) untimely reporting of the net asset value, dividend rate or
capital gain (loss) distribution rate; provided that the 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.
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 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 the Fund, Dreyfus and any
sub-investment adviser harmless against any tax liability incurred by the
Fund under Section 851 of the Code arising from purchases or redemptions
by Insurance Company's General Accounts or the account of its affiliate.
12
<PAGE>
ARTICLE X
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. At the option of Insurance Company or the Fund at any time from the
date hereof upon 180 days' notice, unless a shorter time is agreed
to by the parties;
b. At the option of Insurance Company, if shares of the 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 Fund
makes available a sufficient number of shares to meet the
requirements of the Contracts within said ten-day period;
c. At the option of Insurance Company, upon the institution of formal
proceedings against the Fund 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 Insurance
Company's reasonable judgment, materially impair the Fund's ability
to meet and perform the 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. At the option of the 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 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 the Fund with said termination to be
effective upon receipt of notice;
e. At the option of the Fund, if the 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
the Fund or Dreyfus, the Fund shall notify Insurance Company in
writing of such determination and its intent to terminate this
13
<PAGE>
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 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. Upon termination of the Investment Advisory Agreement between the
Fund and Dreyfus or its successors unless Insurance Company
specifically approves the selection of a new Fund investment
adviser. The Fund shall promptly furnish notice of such termination
to Insurance Company;
g. In the event the 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 upon such occurrence without notice;
h. At the option of the Fund upon a determination by the Board in good
faith that it is no longer advisable and in the best interests of
shareholders for the Fund to continue to operate pursuant to this
Agreement. Termination pursuant to this Subsection (h) shall be
effective upon notice by the Fund to Insurance Company of such
termination;
i. At the option of the Fund if the Contracts cease to qualify as
annuity contracts or life insurance policies, as applicable, under
the Code, or if the Fund reasonably believes that the Contracts may
fail to so qualify;
j. At the option of either party to this Agreement, upon the breach by
a party of any material provision of this Agreement, which breach
has not been cured to the reasonable satisfaction of the other party
within 10 days after written notice of such breach is delivered to
such other party;
k. At the option of the Fund, if the Contracts are not registered,
issued or sold in accordance with applicable federal and/or state
law; or
l. Upon assignment of this Agreement, unless made with the written
consent of the non-assigning party.
Any such termination pursuant to Section 10.2a, 10.2d, l0.2e, 10.2f or
l0.2k 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.
14
<PAGE>
10.3 Notwithstanding any termination of this Agreement pursuant to Section 10.2
hereof, the Fund and Dreyfus may, at the option of the Fund, continue to
make available additional Series shares for so long as the Fund desires
pursuant to the terms and conditions of this Agreement as provided below,
for all Contracts in effect on the effective date of termination of this
Agreement (hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, if the Fund or Dreyfus so elects to make additional
Series shares available, the owners of the Existing Contracts or Insurance
Company, whichever shall have legal authority to do so, shall be permitted
to reallocate investments in the Series, redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments
under the Existing Contracts, if permitted by the terms of the Existing
Contracts. In the event of a termination of this Agreement pursuant to
Section 10.2 hereof, the Fund and Dreyfus, as promptly as is practicable
under the circumstances, shall notify Insurance Company whether Dreyfus
and the Fund will continue to make Series shares available after such
termination. If Series shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect and
thereafter either the Fund or Insurance Company may terminate the
Agreement, 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 Fund, need not be
for more than six months.
ARTICLE XI
AMENDMENTS
11.1 Any other changes in the terms of this Agreement shall be made by
agreement in writing between Insurance Company and 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: Annuity Investors Life Insurance Company
10th Floor, Chiquita Center
250 East Fifth Street
Cincinnati, OH 45202
Attn.: Mark F. Muething
Fund: Dreyfus Stock Index Fund
200 Park Avenue
New York New York 10166
Attn.: Daniel Maclean
with copies to: Stroock & Stroock & Lavan
7 Hanover Square
New York New York 10004-2696
Attn.: Lewis G. Cole, Esq.
Stuart H. Coleman, Esq.
15
<PAGE>
Notice shall be deemed to be given on the date of receipt by the addresses as
evidenced by the return receipt.
ARTICLE XIII
MISCELLANEOUS
13.1 This Agreement has been executed on behalf of the 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, officer
or shareholder of the Fund individually.
ARTICLE XIV
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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be duly
executed and attested as of the date first above written.
ANNUITY INVESTOR LIFE INSURANCE COMPANY
By: /s/ Mark F. Muething
Its: Senior Vice President
Attest: /s/ Charles K. McManus
Senior Vice President
DREYFUS LIFE AND ANNUITY INDEX FUND, INC.
(d/b/a/ DREYFUS STOCK INDEX FUND)
By: /s/
Its: Vice President
Attest: /s/
16
Exhibit (8)(b)(i)
DREYFUS LIFE AND ANNUITY INDEX FUND, INC.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
DREYFUS VARIABLE INVESTMENT FUND
200 Park Avenue
New York, New York
April 14, 1997
Annuity Investors Life Insurance Company
10th Floor, Chiquita Center
250 East Fifth Street
Cincinnati, OH 452O1
Attention: Mark Muething
Gentlemen:
This letter sets forth the agreement between Annuity Investors Life
Insurance Company (the "Insurance Company") and each of Dreyfus Life and Annuity
Index Fund, Inc. (d/b/a Dreyfus Stock Index Fund), The Dreyfus Socially
Responsible Growth Fund, Inc. and Dreyfus Variable Investment Fund (each a
"Fund" and collectively the "Funds") concerning investment in the Funds by the
Insurance Company, on its own behalf and on behalf of the separate account
identified below (the "Agreement").
1. The terms of the agreement entered into between the Insurance
Company and Dreyfus Life and Annuity Index Fund, Inc. on November 21, 1995; the
agreement entered into between the Insurance Company and Dreyfus Variable
Investment Fund on November 21, 1995; and the agreement entered into between the
Insurance Company and The Dreyfus Socially Responsible Growth Fund, Inc. on
November 21, 1995 (each an "Original Agreement" and collectively the "Original
Agreements") are incorporated herein by reference and shall govern investment in
the Funds, respectively, except that all references in the Original Agreements
to "Separate Account" shall be deemed to be references to Annuity Investors
Variable Account B, a separate account established by the Insurance Company in
accordance with the laws of the State of Ohio.
2. This Agreement may be terminated for any of the causes set forth
in Section 10.2 of each original Agreement at the option of the relevant party
in accordance with the provision relevant to that party. In no event, however,
will the termination of any respective original Agreement automatically result
in the termination of this Agreement, or will the termination of this Agreement
automatically result in the termination of any respective original Agreement.
3. This Agreement shall be effective as of the date hereof and shall
continue in force as to each Fund for as long as that Fund serves as an
investment medium for variable insurance contracts issued by the Insurance
Company.
<PAGE>
4. Any amendments to an original Agreement entered into after the
date hereof shall be deemed, with respect to the relevant Fund, amendments to
this Agreement unless otherwise provided in such amendment. Any other changes in
the terms of this Agreement with respect to any Fund shall be effective and
binding only if made in writing between the Insurance Company and that Fund.
5. Notice. Each notice required by this Agreement shall be given
by certified mail, return receipt requested, to the appropriate parties as
identified in the respective Original Agreement. Notice shall be deemed to be
given on the date of receipt by the addressees as evidenced by the return
receipt.
6. Miscellaneous. This Agreement has been executed on behalf of each
Fund by the undersigned officer of the Fund in his/her 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.
If this Agreement is consistent with your understanding of the
matters we discussed concerning the Insurance Company's investment in the Funds,
kindly sign below and return a signed copy to us.
Very truly yours,
Dreyfus Life and Annuity Index
Fund, Inc. (d/b/a Dreyfus Stock
Index Fund)
The Dreyfus Socially Responsible
Growth Fund, Inc.
Dreyfus Variable Investment Fund
By: /s/ Elizabeth Keeley
Name: Elizabeth Keeley
Title: Vice President
Acknowledged and Agreed:
Annuity Investors Life Insurance Company
By: /s/ Mark F. Muething
Name: Mark F. Muething
Title: Senior Vice President
2
Exhibit (8)(c)
FUND PARTICIPATION AGREEMENT
This Agreement is entered into as of the 21st day of November, 1995, between
Annuity Investors Life Insurance Company ("Insurance Company"), a life insurance
company organized under the laws of the State of Ohio, and THE DREYFUS SOCIALLY
RESPONSIBLE GROWTH FUND, INC., a corporation organized under
the laws of the State of Maryland (the "Fund").
ARTICLE I
DEFINITIONS
1.1 "Act" shall mean the investment Company Act of 1940, as amended.
1.2 "Board" shall mean the Board of Directors of the Fund having the
responsibility for management and control of the Fund.
1.3 "Business Day" shall mean any day for which the 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 contract that uses the Fund 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.
1.7 "Disinterested Board Members" shall mean those members of the Board 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.
1.9 "Participating Companies" shall mean any insurance company (including
Insurance Company), which offers variable annuity and/or variable life
insurance contracts to the public and which has entered into an agreement
with the Fund for the purpose of making Fund shares available to serve as
an underlying investment medium for the aforesaid Contracts.
1.10 "Prospectus" shall mean the Fund's current prospectus and statement of
additional information, as most recently filed with the Commission.
<PAGE>
1.11 "Separate Account" shall mean Annuity Investors Variable Account A, a
separate account established by Insurance Company in accordance with the
laws of the State of Ohio.
1.12 "Software Program" shall mean the software program used by the 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
the Fund is not available, such information may be provided by
telephone and confirmed by facsimiles. The Lion System shall be
provided to Insurance Company at no charge.
ARTICLE II
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
laws of the State of Ohio for the purpose of offering to the public
certain individual and group variable annuity contracts; (c) it has
registered or will register the Separate Account as a unit investment
trust under the Act to serve as the segregated investment account for the
Contracts; and (d) each Separate Account is eligible to invest in shares
of the Fund without such investment disqualifying the 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 underthe 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 inform the Fund promptly of any investment restrictions imposed by
state insurance law and applicable to the 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 Fund represents that it is registered with the Commission under the Act as
an open-end, diversified management investment company and possesses, and
shall maintain, all legal and regulatory licenses, approvals, consents
and/or exemptions required for Fund to operate and offer its shares as an
underlying investment medium for Participating Companies.
2
<PAGE>
2.5 Fund represents that it is currently qualified as a Regulated Investment
Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision)
and that it will notify 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 the 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 Fund agrees that the Fund's assets shall be managed and invested in a
manner that complies with the requirements of Section 817(h) of the Code.
2.8 Insurance Company agrees that the Fund shall be permitted (subject to the
other terms of this Agreement) to make Fund shares available to other
Participating Companies and contractholders
2.9 Fund represents and warrants that any of its directors, officers,
employees, investment advisers, and other individuals/entities who deal
with the money and/or securities of the Fund are and shall continue to be
at all times covered by a blanket fidelity bond or similar coverage for
the benefit of the Fund in an amount not less than that required by Rule
17g-l under the Act. The aforesaid Bond shall include coverage for larceny
and embezzlement and shall be issued by a reputable bonding company.
2.10 Insurance Company represents and warrants that all of its employees and
agents who deal with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage in an amount not less than the coverage required to be maintained
by the Fund. 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
FUND SHARES
3.1 The Contracts funded through the Separate Account will provide for the
investment of certain amounts in shares of the Fund.
3
<PAGE>
3.2 Fund agrees to make its shares available for purchase at the then
applicable net asset value per share by the Separate Account on each
Business Day pursuant to rules of the Commission. Not withstanding the
foregoing, the 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 the 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 Fund's shareholders.
3.3 Fund agrees that shares of the Fund will be sold only to Participating
Companies and their separate accounts and to the general accounts of those
Participating Companies and their affiliates. No shares will be sold to
the general public.
3.4 Fund shall use its best efforts to provide closing net asset value,
dividend and capital gain (loss) information on a per-share and Fund 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 (loss) 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.
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 Separate
Account unit values 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 Fund shares
which 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
the Fund by Insurance Company by 11:00 a.m. Eastern Time on the Business
Day next following Insurance Company's receipt of that information.
3.6 Fund appoints Insurance Company as its agent for the limited purpose of
accepting orders for the purchase and redemption of Fund shares for the
Separate Account. 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 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 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 in this Section 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 Business Day
upon which such conditions have been satisfied in accordance with the
requirements of this Section and Section 3.8.
4
<PAGE>
3.7 Insurance Company will use its best efforts to notify Fund in advance of
any unusually large purchase or redemption orders.
3.8 If Insurance Company's order requests the purchase of Fund shares,
Insurance Company will pay for such purchases by wiring Federal Funds to
Fund or its designated custodial account on the day the order is
transmitted. Insurance Company shall make all reasonable efforts to
transmit to the Fund payment in Federal Funds by 12:00 noon Eastern Time
on the Business Day the Fund receives the notice of the order pursuant to
Section 3.5. 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 Fund receives payment in Federal Funds by 12:00 midnight
Eastern Time on the Business Day the Fund receives the notice of the order
pursuant to Section 3.5. If payment in Federal Funds for any purchase is
not received or is received by the Fund after 12:00 noon Eastern Time on
such Business Day, Insurance Company shall promptly upon the Fund's
request, reimburse the Fund for any charges, costs, fees, interest or
other expenses incurred by the Fund in connection with any advances to, or
borrowings or overdrafts by, the Fund, or any similar expenses incurred by
the Fund, as a result of portfolio transactions effected by the Fund based
upon such purchase request. Payment for shares redeemed by the Separate
Account or the Insurance Company shall be made in Federal Funds
transmitted by wire to the Insurance Company or any other designated
person on the next Business Day after the Fund is properly notified of the
redemption order of shares, except that the Fund reserves the right to
delay payment of redemption proceeds to the extent permitted under Section
22(e) of the 1940 Act. The Fund shall not bear any responsibility
whatsoever for the proper disbursement or crediting of redemption proceeds
by the Insurance Company; the Insurance Company alone shall be responsible
for such action.
3.9 Fund has the obligation to ensure that Fund shares are registered with
applicable federal agencies at all times.
3.10 Fund will confirm each purchase or redemption order made by Insurance
Company. Transfer of Fund shares will be by book entry only. No share
certificates will be issued to Insurance Company. Insurance Company will
record shares ordered from Fund in an appropriate title for the
corresponding account.
3.11 Fund shall credit Insurance Company with the appropriate number of shares.
3.12 On each ex-dividend date of the Fund or, if not a Business Day, on the
first Business Day thereafter, 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 Fund at the net asset value per share on the ex-dividend date. 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.
5
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3.13 This Agreement does not cover the sale of any Fund shares to the Insurance
Company general account.
ARTICLE IV
STATEMENTS AND REPORTS
4.1 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 Fund shall distribute to Insurance Company copies of the Fund's
Prospectuses, proxy materials, notices, periodic reports and other printed
materials (which the Fund customarily provides to its shareholders) in
quantities as Insurance Company may reasonably request for distribution to
each Contractholder and Participant.
4.3 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 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 the Fund at least one 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 Contracts or the Separate Account, contemporaneously
with the filing of such document with the Commission.
ARTICLE V
EXPENSES
5.l The charge to the Fund for all expenses and costs of the Fund, including
but not limited to management fees, administrative expenses and legal and
regulatory costs, will be made in the determination of the Fund's daily
net asset value per share so as to accumulate to an annual charge at the
rate set forth in the 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 the 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 Fund materials
including the cost of printing the Fund's Prospectus, or
marketing materials for prospective Insurance Company
Contractholders and Participants as Dreyfus and Insurance Company
shall agree from time to time.
6
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b. Distribution expenses of any Fund materials or marketing
materials for prospective Insurance Company Contractholders and
Participants.
c. Distribution expenses of Fund materials or marketing materials
for Insurance Company Contractholders and Participants.
Except as provided herein, all other Fund expenses shall not be borne by
Insurance Company.
ARTICLE VI
EXEMPTIVE RELIEF
6.1 The 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 filing
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, and in particular whenever Contractholder voting instructions are
disregarded, to the extent that 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 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.
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 the Fund, the Board shall give prompt notice
to all Participating Companies. If the Board determines that Insurance
Company is responsible for causing or creating said conflict, Insurance
Company shall at no cost and expense to the Fund, 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
Fund and reinvesting such assets in a different investment medium,
or submitting the question of whether such segregation should be
implemented to a vote or 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 the Fund, Insurance Company
may be required, at the Board's election, to withdraw the Separate
Account's investment in the Fund.
7
<PAGE>
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 the
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 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 the 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
VOTING OF FUND SHARES
7.1 Fund shall provide Insurance Company with copies at no cost to Insurance
Company, of the Fund's proxy material, annual and semi-annual 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 Fund shares in accordance with instructions received from
Contractholders or Participants; and
c. vote Fund shares for which no instructions have been received in
the same proportion as Fund shares for which instructions have
been received.
Insurance Company agrees to be responsible for assuring that voting Fund
shares for the Separate Account is conducted in a manner consistent with
other Participating Companies.
7.2 Insurance Company agrees that it shall not, without the prior written
consent of the Fund and Dreyfus, solicit, induce or encourage
Contractholders to (a) change or supplement the Fund's current investment
adviser or (b) change, modify, substitute, add to or delete the Fund from
the current investment media for the Ccontracts.
8
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ARTICLE VIII
MARKETING AND REPRESENTATIONS
8.1 The 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 by Insurance
Company in accordance with Section 5.2 of this Agreement.
8.2 Insurance Company shall designate certain persons or entities which 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 the
Fund each piece of sales literature or other promotional material in which
the 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 Fund 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. The Fund 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 the Fund or concerning the Fund
in connection with the sale of the Contracts other than the information or
representations contained in the registration statement or Prospectus, as
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.
8.5 Fund shall furnish, or shall cause to be furnished, to Insurance Company,
each piece of the 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 unJess
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 Fund shall not, in connection with the sale of 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 which 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.
9
<PAGE>
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, 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
INDEMNIFICATION
9.1 Insurance Company agrees to indemnify and hold harmless the Fund, Dreyfus,
the sub-investment adviser of the Fund, 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 Fund
or with respect to the Separate Account or Contracts, 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; (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 Fund) of Insurance Company or its agents, with
respect to the sale and distribution of Contracts for which Fund 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 Fund 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
10
<PAGE>
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 Fund
specifically for use therein. This indemnity agreement will be in addition
to any liability which Insurance Company may otherwise have.
9.2 The Fund 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 to which Insurance Company or any
such director, officer, employee, agent or controlling person may 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 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 Fund any material
fact required to be stated therein or necessary to make the statements
therein not misleading; or (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 Fund; and the 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 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 Fund by Insurance
Company specifically for use therein. This indemnity agreement will be in
addition to any liability which the Fund may otherwise have.
9.3 The Fund shall indemnify and hold Insurance Company harmless against any
and all liability, loss, damages, costs or expenses which Insurance
Company may incur, suffer or be required to pay due to the Fund's (1)
incorrect calculation of the daily net asset value, dividend rate or
capital gain (loss) distribution rate; (2) incorrect reporting of the
daily net asset value, dividend rate or capital gain (loss) distribution
11
<PAGE>
rate; and (3) untimely reporting of the net asset value, dividend rate or
capital gain (loss) distribution rate; provided that the 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.
9.4 Promptly after receipt by an indemnified party under this Article of
notice of the commencement of any action, such indemnified party wi11, 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 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 the Fund, Dreyfus and
sub-investment adviser harmless against any tax liability incurred by the
Fund under Section 851 of the Code arising from purchases or redemptions
by Insurance Company's General Accounts or the account of its affiliates.
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<PAGE>
ARTICLE X
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. At the option of Insurance Company or the Fund at any time from
the date hereof upon 180 days' notice, unless a shorter time is
agreed to by the parties;
b. At the option of Insurance Company, if shares of the 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 Fund
makes available a sufficient number of shares to meet the
requirements of the Contracts within said ten-day period;
c. At the option of Insurance Company, upon the institution of formal
proceedings against the Fund 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 Insurance
Company's reasonable judgment, materially impair the Fund's ability
to meet and perform the 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. At the option of the 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 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 the Fund with said termination to be
effective upon receipt of notice;
e. At the option of the Fund, if the 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
the Fund or Dreyfus, the 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 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;
13
<PAGE>
f. Upon termination of the Investment Advisory Agreement between the
Fund and Dreyfus or its successors unless Insurance Company
specifically approves the selection of a new Fund investment
adviser. The Fund shall promptly furnish notice of such termination
to Insurance Company;
g. In the event the 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 upon such occurrence without notice;
h. At the option of the Fund upon a determination by the Board in good
faith that it is no longer advisable and in the best interests of
shareholders for the Fund to continue to operate pursuant to this
Agreement. Termination pursuant to this Subsection (h) shall be
effective upon notice by the Fund to Insurance Company of such
termination;
i. At the option of the Fund if the Contracts cease to qualify as
annuity contracts or life insurance policies, as applicable, under
the Code, or if the Fund reasonably believes that the Contracts may
fail to so qualify;
j. At the option of either party to this Agreement, upon the breach by
a party of any material provision of this Agreement, which breach
has not been cured to the reasonable satisfaction of the other party
within 10 days after written notice of such breach is delivered to
such other party;
k. At the option of the Fund, if the Contracts are not registered,
issued or sold in accordance with applicable federal and/or state
law; or
1. Upon assignment of this Agreement, unless made with the written
consent of the non-assigning party.
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, the Fund and Dreyfus may, at the option of the Fund, continue to
make available additional Fund shares for so long as the Fund desires
pursuant to the terms and conditions of this Agreement as provided below,
for all Contracts in effect on the effective date of termination of this
Agreement (hereinafter referred to as "Existing Contracts"). Specifically,
14
<PAGE>
without limitation, if the Fund or Dreyfus so elects to make additional
Fund shares available, the owners of the Existing Contracts or Insurance
Company, whichever shall have legal authority to do so, shall be permitted
to reallocate investments in the Fund, redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments
under the Existing Contracts, if permitted by the terms of the Existing
Contracts. In the event of a termination of this Agreement pursuant to
Section 10.2 hereof, the Fund and Dreyfus, as promptly as is practicable
under the circumstances, shall notify Insurance Company whether Dreyfus
and the Fund will continue to make Fund shares available after such
termination. If Fund shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect and
thereafter either the Fund or Insurance Company may terminate the
Agreement, 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 Fund, need not be
for more than six months.
ARTICLE XI
AMENDMENTS
11.1 Any other changes in the terms of this Agreement shall be made by
agreement in writing between Insurance Company and 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: Annuity Investors Life Insurance Company
10th Floor, Chiquita Center
250 East Fif'th Street
Cincinnati, OH 45202
Attn: Mark F. Muething
Fund: The Dreyfus Socially Responsible Growth Fund, Inc.
c/o Premier Mutual Fund Services, Inc.
200 Park Avenue, 6th Floor West
New York, New York 10166
Attn: Eric B. Fischman, Esq.
15
<PAGE>
with copies to: The Dreyfus Socially Responsible Growth Fund, Inc.
c/o The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Attn: Daniel C. Maclean, 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
MISCELLANEOUS
13.1 This Agreement has been executed on behalf of the 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, officer
or shareholder of the Fund individually.
ARTICLE XIV
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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be duly
executed and attested as of the date first above written.
ANNUITY INVESTORS LIFE INSURANCE COMPANY
By: /S/ MARK F. MUETHING
Its: Senior Vice President
Attest: /s/ Charles K. McManus
Senior Vice President
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC.
By: /s/
Its: Vice President
Attest: /s/
16
Exhibit (8)(c)(i)
DREYFUS LIFE AND ANNUITY INDEX FUND, INC.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
DREYFUS VARIABLE INVESTMENT FUND
200 Park Avenue
New York, New York
April 14, 1997
Annuity Investors Life Insurance Company
10th Floor, Chiquita Center
250 East Fifth Street
Cincinnati, OH 45201
Attention: Mark Muething
Gentlemen:
This letter sets forth the agreement between Annuity Investors Life
Insurance Company (the "Insurance Company") and each of Dreyfus Life and Annuity
Index Fund, Inc. (d/b/a Dreyfus Stock Index Fund), The Dreyfus Socially
Responsible Growth Fund, Inc. and Dreyfus Variable Investment Fund (each a
"Fund" and collectively the "Funds") concerning investment in the Funds by the
Insurance Company, on its own behalf and on behalf of the separate account
identified below (the "Agreement").
1. The terms of the agreement entered into between the Insurance
Company and Dreyfus Life and Annuity Index Fund, Inc. on November 21, 1995; the
agreement entered into between the Insurance Company and Dreyfus Variable
Investment Fund on November 21, 1995; and the agreement entered into between the
Insurance Company and The Dreyfus Socially Responsible Growth Fund, Inc. on
November 21, 1995 (each an "Original Agreement" and collectively the "Original
Agreements") are incorporated herein by reference and shall govern investment in
the Funds, respectively, except that all references in the original Agreements
to "Separate Account" shall be deemed to be references to Annuity Investors
Variable Account B, a separate account established by the Insurance Company in
accordance with the laws of the State of Ohio.
2. This Agreement may be terminated for any of the causes set forth
in Section 10.2 of each Original Agreement at the option of the relevant party
in accordance with the provision relevant to that party. In no event, however,
will the termination of any respective Original Agreement automatically result
in the termination of this Agreement, or will the termination of this Agreement
automatically result in the termination of any respective Original Agreement.
3. This Agreement shall be effective as of the date hereof and shall
continue in force as to each Fund for as long as that Fund serves as an
investment medium for variable insurance contracts issued by the Insurance
Company.
<PAGE>
4. Any amendments to an Original Agreement entered into after the
date hereof shall be deemed, with respect to the relevant Fund, amendments to
this Agreement unless otherwise provided in such amendment. Any other changes in
the terms of this Agreement with respect to any Fund shall be effective and
binding only if made in writing between the Insurance Company and that Fund.
5. Notice. Each notice required by this Agreement shall be given
by certified mail, return receipt requested, to the appropriate parties as
identified in the respective original Agreement. Notice shall be deemed to be
given on the date of receipt by the addressees as evidenced by the return
receipt.
6. Miscellaneous. This Agreement has been executed on behalf of each
Fund by the undersigned officer of the Fund in his/her 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.
If this Agreement is consistent with your understanding of the
matters we discussed concerning the Insurance Company's investment in the Funds,
kindly sign below and return a signed copy to us.
Very truly yours,
Dreyfus Life and Annuity Index Fund, Inc.
(d/b/a Dreyfus Stock Index Fund)
The Dreyfus Socially Responsible Growth
Fund, Inc.
Dreyfus Variable Investment Fund
By: /s/ Elizabeth Keeley
Name: Elizabeth Keeley
Title: Vice President
Acknowledged and Agreed:
Annuity Investors Life Insurance Company
By: /s/ Mark F. Muething
Name: Mark F. Muething
Title: Senior Vice President
2
Exhibit (8)(d)
JANUS ASPEN SERIES
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 1st day of September, 1995, between JANUS
ASPEN SERIES, an open-end management investment company organized as a Delaware
business trust (the "Trust"), and ANNUITY INVESTORS LIFE INSURANCE COMPANY, a
life insurance company organized under the laws of the State of Ohio (the
"Company"), on its own behalf and on behalf of each segregated asset account of
the Company set forth on Schedule A, as may be amended from time to time (the
"Accounts").
WITNESSETH:
WHEREAS, the Trust has registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and has registered the offer
and sale of its shares under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Trust (the "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Trust has received an order from the Securities and Exchange
Commission granting Participating Insurance Companies and their separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a) and 15(b)
of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the
extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Exemptive Order"); and
WHEREAS, the company has registered or will register certain variable life
insurance policies and/or variable annuity contracts under the 1933 Act (the
"Contracts"); and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
<PAGE>
WHEREAS, the Company desires to utilize shares of one or more Portfolios
as an investment vehicle of the Accounts;
NOW THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I.
SALE OF TRUST SHARES
1.1 The Trust shall make shares of its Portfolios available to the
Accounts as the net asset value next computed after receipt of such purchase
order by the Trust (or its agent), as established in accordance with the
provisions of the then current prospectus of the Trust. Shares of a particular
Portfolio of the Trust shall be ordered in such quantities and at such times as
determined by the Company to be necessary to meet the requirements of the
Contracts. The Trustees of the Trust (the "Trustees") may refuse to sell shares
of any Portfolio to any person, or suspend or terminate the offering of shares
of any Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Trustees acting in good
faith and in light of their fiduciary duties under federal and any applicable
state laws, necessary in the best interests of the shareholders of such
Portfolio.
1.2 The Trust will redeem any full or fractional shares of any Portfolio
when requested by the Company on behalf of an Account at the net asset value
next computed after receipt by the Trust (or its agent) of the request for
redemption, as established in accordance with the provisions of the then current
prospectus of the Trust. The Trust shall make payment for such shares in the
manner established from time to time by the Trust, but in no event shall
payments be delayed for a greater period than is permitted by the 1940 Act.
1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby appoints
the Company as its agent for the limited purpose of receiving and accepting
purchase and redemption orders resulting from investment in and payments under
the Contracts. Receipt by the Company shall constitute receipt by the Trust
provided that i) such orders are received by the Company in good order prior to
the time the net asset value of each Portfolio is priced in accordance with its
prospectus and ii) the Trust receives notice of such orders by 11:00 a.m. New
York time on the next following Business Day. "Business Day" shall mean any day
on which the New York Stock Exchange is open for trading and on which the Trust
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
1.4 Purchase orders that are transmitted to the Trust in accordance with
Section 1.3 shall be paid for no later than 12:00 noon New York time on the same
Business Day that the Trust receives notice of the order. Payments shall be made
in federal funds transmitted by wire.
1.5 Issuance and transfer of the Trust's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Trust will be recorded in the appropriate title for each
Account or the appropriate subaccount of each Account.
2
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1.6 The Trust shall furnish prompt notice to the Company of any income
dividends or capital gain distribution payable on the Trust's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional shares of
that Portfolio. The Trust shall notify the Company of the number of shares so
issued as payment of such dividends and distributions by the close of the
following Business Day.
1.7 The Trust shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 6 p.m. New York
time. When available, the net asset value will be communicated to the Company by
telephone and confirmed by facsimile.
1.8 The Trust agrees that its shares will be sold only to Participating
Insurance Companies and their separate account and to certain qualified pension
and retirement plans to the extent permitted by the Exemptive Order. No shares
of any Portfolio will be sold directly to the general public. The Company agrees
that Trust shares will be used only for the purposes of funding the Contracts
and Accounts listed in Schedule A, as amended from time to time.
1.9 The Trust agrees that all participating Insurance Companies shall
have the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding to those contained in Section 2.8 and
Article IV, of this Agreement.
ARTICLE II.
OBLIGATIONS OF THE PARTIES
---------------------------
2.1 The Trust shall prepare and be responsible for filing with the
Securities and Exchange Commission and any state regulators requiring such
filing all shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and statements
of additional information of the Trust. The Trust shall bear the costs of
registration and qualification of its shares, preparation and filing of the
documents listed in this Section 2.1 and all taxes to which an issuer is subject
on the issuance and transfer of its shares.
2.2 At the option of the Company, the Trust shall either (a) provide the
Company (at the Company's expense) with as many copies of the Trust's current
prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments or supplements to any of the foregoing,
as the Company shall reasonably request; or (b) provide the Company with a
camera-ready copy of such documents in a form suitable for printing. The Trust
shall provide the Company with a copy of its statement of additional information
in a form suitable for duplication by the Company. The Trust (at its expense)
shall provide the Company with copies of any Trust-sponsored proxy materials in
such quantity as the Company shall reasonably require for distribution to
Contract owners.
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2.3 The Company shall bear the costs of printing and distributing the
Trust's prospectus, statement of additional information, shareholder reports and
other shareholder communications to owners of and applicants for policies for
which the Trust is serving or is to serve as an investment vehicle. The Company
shall bear the costs of distributing proxy materials (or similar materials such
as voting solicitation instructions) to Contract owners. The Company assumes
sole responsibility for ensuring that such materials are delivered to Contract
owners in accordance with applicable federal and state securities laws.
2.4 The Company agrees and acknowledges that the Trust's adviser, Janus
Capital Corporation ("Janus Capital"), is the sole owner of the name and mark
"Janus" and that all use of any designation comprised in whole or part of Janus
(a "Janus Mark") under this Agreement shall inure to the benefit of Janus
Capital. Except as provided in Section 2.5, the Company shall not use any Janus
Mark on its own behalf or on behalf of the Accounts or Contracts in any
registration statement, advertisement, sale literature or other materials
relating to the Accounts or Contracts without the prior written consent of Janus
Capital. Upon termination of this Agreement for any reason, the Company shall
cease all use of any Janus Mark(s) as soon as reasonably practicable.
2.5 The Company shall furnish, or cause to be furnished, to the Trust or
its designee, a copy of each Contract prospectus or statement of additional
information in which the Trust or its investment adviser is named prior to the
filing of such document with the Securities and Exchange Commission. The Company
shall furnish, or shall cause to be furnished, to the Trust or its designee,
each piece of sales literature or other promotional material in which the Trust
or its investment adviser is named, at least ten Business Days prior to its use.
No such material shall be used if the trust or its designee reasonably objects
to such use within ten Business Days after receipt of such material.
2.6 The Company shall not give any information or make any
representations or statements on behalf of the trust or concerning the Trust or
its investment adviser in connection with the sale of the Contracts other than
information or representations contained in and accurately derived from the
registration statement or prospectus for the Trust shares (as such registration
statement and prospectus may be amended or supplemented from time to time),
reports of the trust, Trust-sponsored proxy statements, or in sales literature
or other promotional material approved by the Trust or its designee, except as
required by legal process or regulatory authorities or with the written
permission of the Trust or its designee.
2.7 The Trust shall not give any information or make any representations
or statements on behalf of the Company or concerning the Company, the Accounts
or the Contracts other than information or representations contained in and
accurately derived from the registration statement or prospectus for the
Contracts (as such registration statements and prospectus may be amended or
supplemented from time to time), or in materials approved by the Company for
distribution including sales literature or other promotional materials, except
as required by legal process or regulatory authorities or with the written
permission of the Company.
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2.8 So long as, and to the exent that the Securities and Exchange
Commission interprets the 1940 Act to require pass-through voting privileges for
variable policyowners, the Company will provide pass-through voting privileges
to owners of policies whose cash values are invested, through the Accounts, in
shares of the Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each Account, the
Company will vote shares of the Trust held by the Account and for which no
timely voting instructions from policyowners are received as well as shares it
owns that are held by that Account, in the same proportion as those shares for
which voting instructions are received. The Company and its agents will in no
way recommend or oppose or interfere with the solicitation of proxies for Trust
shares held by Contract owners without the prior written consent of the Trust,
which consent may be withheld in the Trust's sole discretion.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of Ohio and that
it has legally and validly established each Account as a segregated asset
account under such law on the date set forth in Schedule A.
3.2 The Company represents and warrants that it has registered or, prior
to any issuance or sale of the Contracts, will register each Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts.
3.3 The Company represents and warrants that the Contracts will be
registered under the 1933 Act prior to any issuance or sale of the Contracts;
the Contracts will be issued and sold in compliance in all material respects
with all applicable federal and state laws; and the sale of the Contracts shall
comply in all material respects with state insurance suitability requirements.
3.4 The Trust represents and warrants that it is duly organized and
validly existing under the laws of the State of Delaware.
3.5 The Trust represents and warrants that the Trust shares offered and
sold pursuant to this Agreement will be registered under the 1933 Act and the
Trust shall be registered under the 1940 Act prior to any issuance or sale of
such shares. The Trust shall amend its registration statement under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Trust shall register and qualify its shares for sale
in accordance with the laws of the various states only if and to the extend
deemed advisable by the Trust.
3.6 The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements set forth in Section
817(h) of the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.
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<PAGE>
ARTICLE IV.
PORTFOLIO CONFLICTS
-------------------
4.1 The parties acknowledge that the Trust's shares may be made
available for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. An irreconcilable material conflict may arise
for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance owners; or (f) a
decision by an insurer to disregard the voting instructions of contract owners.
The Trustees shall promptly inform the Company if they determine that an
irreconcilable material conflict exists and the implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Exemptive Order by
providing the Trustees with all information reasonably necessary for the
Trustees to consider any issues raised including, but not limited to,
information as to a decision by the Company to disregard Contract owner voting
instructions.
4.3 If it is determined by a majority of the Trustees, or a majority of
its disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation with
other Participating Insurance Companies whose contract owners are also affected,
at its expense and to the extent reasonably practicable (as determined by the
Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing the
assets allocable to some or all of the Accounts from the Trust or any Portfolio
and reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Trust, or submitting the question of
whether or not such segregation should be implemented to a vote of all affected
Contract owners and, as appropriate, segregating the assets of any appropriate
group (I.E., annuity contract owners, life insurance contract owners, or
variable contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected Contract owners
the option of making such a change; and (b) establishing a new registered
management investment company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
6
<PAGE>
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust gives written
notice that this provision is being implemented. Until the end of such six (6)
month period, the Trust shall continue to accept and implement orders by the
Company for the purchase and redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Trust and terminate this Agreement with
respect to such Account within six (6) months after the Trustees inform the
Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. Until the end of such six (6) month period, the Trust shall continue
to accept and implement orders by the Company for the purchase and redemption of
shares of the Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Company be required to establish a new funding medium for the Contracts
if an offer to do so has been declined by vote of a majority of Contract owners
materially adversely affected by the irreconcilable material conflict. In the
event that the Trustees determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement within six (6)
months after the Trustees inform the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination shall be
limited to the extend required by any such material irreconcilable conflict as
determined by a majority of the disinterested Trustees.
4.7 The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonable request so that the
Trustees may fully carry out the duties imposed upon them by the Exemptive
Order, and said reports, materials and data shall be submitted more frequently
if deemed appropriate by the Trustees.
4.8 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 Exemptive Order) on terms and conditions materially different
from those contained in the Exemptive Order, then the Trust and/or the
Participating Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3,
as adopted to the extent such rules are applicable.
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<PAGE>
ARTICLE V.
INDEMNIFICATION
---------------
5.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Trust and each of its Trustees, officers, employees and agents
and each person, if any, who controls the Trust within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Article V.) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses;
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
registration statement or prospectus for the Contracts or in the
Contracts themselves or in sales literature generated or approved by
the Company on behalf of the Contracts or Accounts (or any amendment
or supplement to any of the foregoing) (collectively, "Company
Documents" for the purposes of this Article V.), or arise out of or
are based upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to make
the statements therein not misleading, provided that this indemnity
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and was accurately derived from written information furnished
to the Company by or on behalf of the Trust for use in Company
Documents or otherwise for use in connection with the sale of the
Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived from Trust Documents as defined in Section
5.2(a)) or wrongful conduct of the Company or persons under its
control, with respect to the sale or acquisition of the Contracts or
Trust shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Trust Documents as
defined in Section 5.2(a) or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon and accurately
derived from written information furnished to the Trust by or on
behalf of the Company; or
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<PAGE>
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under the
terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company.
5.2 INDEMNIFICATION BY THE TRUST. The Trust agrees to indemnify and hold
harmless the Company and each of its directors, officers, employees and agents
and each person, if any, who controls the Company within the meaning of Section
15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Article V.) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Trust) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement or prospectus for the Trust or in sales
literature generated or approved by the Trust or on behalf of the
Trust (or any amendment or supplement thereto), (collectively,
"Trust Documents" for the purposes of this Article V.), or arise out
of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, provided that this
indemnity shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made
in reliance upon and was accurately derived from written information
furnished to the Trust by or on behalf of the Company for use in
Trust Documents or otherwise for use in connection with the sale of
the Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived from Company Documents) or wrongful conduct of
the Trust or persons under its control, with respect to the sale or
acquisition of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Company Documents
or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in
reliance upon and accurately derived from written information
furnished to the Company by or on behalf of the Trust; or
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<PAGE>
(d) arise out of or result from any failure by the Trust to
provide the services or furnish the materials required under the
terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Trust.
5.3 Neither the Company nor the Trust shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any Losses incurred or assessed against an Indemnified Party that arise from
such Indemnified Party's willful misfeasance, bad faith or negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
5.4 Neither the Company nor the Trust shall be liable under the
indemnification provisions of Section 5.1 or 5.2, as applicable, with respect to
any claim made against an Indemnified Party unless such Indemnified Party shall
have notified the other party in writing within a reasonable time after the
summons, or other first written notification, giving information of the nature
of the claim shall have been served upon or otherwise received by such
Indemnified Party (or after such Indemnified Party shall have received notice of
service upon or other notification to any designated agent), but failure to
notify the party against whom indemnification is sought of any such claim shall
not relieve that party from any liability which it may have to the Indemnified
Party in the absence of Sections 5.1 and 5.2.
5.5 In case any such action is brought against the Indemnified Parties,
the indemnifying party shall be entitled to participate, at its own expense, in
the defense of such action. The indemnifying party also shall be entitled to
assume the defense thereof, with counsel reasonably satisfactory to the party
named in the action. After notice from the indemnifying party to the Indemnified
Party of an election to assume such defense, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and the
indemnifying party will not be liable to the Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
ARTICLE VI.
TERMINATION
-----------
6.1 This Agreement may be terminated by either party for any reason by
ninety (90) days advance written notice delivered to the other party.
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6.2 Notwithstanding any termination of this Agreement, the Trust shall,
at the option of the Company, continue to make available additional shares of
the Trust (or any Portfolio) pursuant to the terms and conditions of this
Agreement for all Contracts in effect on the effective date of termination of
this Agreement, provided that the Company continues to pay the costs set forth
in Section 2.3.
6.3 The provisions of Article V. shall survive the termination of this
Agreement, and the provisions of Article IV. And Section 2.8 shall survive the
termination of this Agreement as long as shares of the Trust are held on behalf
of Contract owners in accordance with Section 6.2.
ARTICLE VII.
NOTICES
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Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust:
100 Filmore Street, Suite 300
Denver, Colorado 80206
Attention: David C. Tucker, Esq.
If to the Company:
10th Floor, Chiquita Center
250 East Fifth Street
Cincinnati, Ohio 45202
Attention: Mark F. Meuthing, Esq.
ARTICLE VIII.
MISCELLANEOUS
-------------
8.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
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8.3 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Colorado.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Securities and
Exchange Commission, the National Association of Securities Dealers, Inc., and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
8.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
8.8 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect.
8.9 Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the prior written approval of the other
party.
8.10 No provisions of this Agreement may be amended or modified in any
matter except by a written agreement properly authorized and executed by both
parties.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Participation Agreement as of the date and year first above
written.
ANNUITY INVESTORS
LIFE INSURANCE COMPANY
By: /s/ Mark F. Muething
Name: Mark F. Muething
Title:Senior Vice President
JANUS ASPEN SERIES
By: /s/ Deborah E. Bielieke
Name: Deborah E. Bielieke
Title: Assistant Vice President
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SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
------------------------------------------
Name of Separate Account
Date Established By Board Contracts Funded
Of Directors By Separate Account
- --------------------------
Annuity Investors Variable Account A The Commodore Nauticus[SERVICEMARK]
May 26, 1995 Group Flexible Premium
Deferred Annuity
The Commodore Americus[SERVICEMARK]
Tax-Qualified Individual Flexible
Premium Deferred Annuity
The Commodore Americus[SERVICEMARK]
Non-Tax Qualified Individual Flexible
Premium Deferred Annuity
(Effective May 1, 1997)
Name of Separate Account
Date Established By Board Contracts Funded
Of Directors By Separate Account
- -------------------------- -------------------
Annuity Investors Variable Account B The Commodore Navigator[SERVICEMARK]
December 19, 1996 Individual Flexible Premium
Deferred Annuity
The Commodore Navigator[SERVICEMARK]
Group Flexible Premium
Deferred Annuity
13
EXHIBIT (8)(e)
PARTICIPATION AGREEMENT
THIS AGREEMENT, is made as of April 25, 1997, by and among Annuity
Investors Life Insurance Company ("Company"), on its own behalf and on behalf of
each separate account of the Company set forth on Exhibit A-1 to this Agreement,
as may be amended from time to time (collectively, "Account"), Strong Variable
Insurance Funds, Inc. ("Strong Variable") on behalf of the Portfolios of Strong
Variable listed on the attached Exhibit A as such Exhibit may be amended from
time to time (the "Designated Portfolios"), Strong Special Fund II, Inc.
("Special Fund"), Strong Capital Management, Inc. (the "Adviser"), the
investment adviser and transfer agent for the Special Fund and Strong Variable,
and Strong Funds Distributors, Inc. ("Distributors"), the distributor for Strong
Variable and the Special Fund (each, a "Party" and collectively, the "Parties").
WHEREAS, beneficial interests in Strong Variable are divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets (each, a "Portfolio");
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of Special Fund and the
Designated Portfolios ("Fund" or "Funds" shall be deemed to refer to each
Designated Portfolio and the Special Fund to the extent the context requires),
on behalf of the Account to fund the variable annuity contracts that use the
Funds as an underlying investment medium (the "Contracts");
WHEREAS, the Company, Adviser and Distributors desire to facilitate the
purchase and redemption of shares of the Funds by the Company for the Account
through one account in each Fund (each an "Omnibus Account") to be maintained of
record by the Company, subject to the terms and conditions of this Agreement;
WHEREAS, the Company desires to provide administrative services and
functions (the "Services") for purchasers of Contracts ("Owners") on the terms
and conditions set forth herein;
WHEREAS, the Company has registered or will register certain variable life
insurance policies and/or variable annuity contracts under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Company desires to utilize shares of one or more Portfolios
as an investment vehicle of the Account.
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NOW, THEREFORE, in consideration of the mutual promises set forth
herein, the Company, Funds, Adviser and Distributors agree as follows:
1. PERFORMANCE OF SERVICES. Company agrees to perform the administrative
functions and services specified in Exhibit B attached hereto with respect to
the shares of the Funds included in the Account.
2. THE OMNIBUS ACCOUNTS.
2.1 Each Omnibus Account will be opened based upon the information
contained in Exhibit C hereto. In connection with each Omnibus Account, Company
represents and warrants that it is authorized to act on behalf of each Owner
effecting transactions in the Omnibus Account and that the information specified
on Exhibit C hereto is correct.
2.2 Each Fund shall designate each Omnibus Account with an account number.
These account numbers will be the means of identification when the Parties are
transacting in the Omnibus Accounts. The assets in the Accounts are segregated
from the Company's own assets. The Adviser agrees to cause the Omnibus Accounts
to be kept open on each Fund's books, as applicable, regardless of a lack of
activity or small position size except to the extent the Company takes specific
action to close an Omnibus Account or to the extent a Fund's prospectus reserves
the right to close accounts which are inactive or of a small position size. In
the latter two cases, the Adviser will give prior notice to the Company before
closing an Omnibus Account.
2.3 The Company agrees to provide Adviser such information as Adviser or
Distributors may reasonably request concerning Owners as may be necessary or
advisable to enable Company and Distributors to comply with applicable laws,
including state "Blue Sky" laws relating to the sales of shares of the Funds to
the Accounts.
3. FUND SHARES TRANSACTIONS.
3.1 IN GENERAL. Shares of the Funds shall be sold on behalf of the Funds
by Distributors and purchased by Company for the Account and, indirectly for the
appropriate subaccount thereof at the net asset value next computed after
receipt by Distributors of each order of the Company or its designee, in
accordance with the provisions of this Agreement, the then current prospectuses
of the Funds, and the Contracts. The Board of Directors of each Fund
("Directors") may refuse to sell shares of the applicable Fund to any person, or
suspend or terminate the offering of shares of the Fund if such action is
required by law or by regulatory authorities having jurisdiction. Company agrees
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to purchase and redeem the shares of the Funds in accordance with the provisions
of this Agreement, of the Contracts and of the then current prospectuses for the
Contracts and Funds. Except as necessary to implement transactions as specified
in the Contracts or as initiated by the Owners, or as otherwise permitted by
state or federal laws or regulations, Company shall not redeem shares of Funds
attributable to the Contracts.
3.2 PURCHASE AND REDEMPTION ORDERS. On each day that a Fund is open for
business (a "Business Day"), the Company shall aggregate and calculate the net
purchase or redemption order resulting from investment in and redemptions under
the Contracts for shares of the Fund that it received prior to the close of
trading on the New York Stock Exchange (the "NYSE") (i.e. 3:00 p.m., Central
time, unless the NYSE closes at an earlier time in which case such earlier time
shall apply) and communicate to Distributors, by telephone or facsimile (or by
such other means as the Parties hereto may agree to in writing), the net
aggregate purchase or redemption order (if any) for the Omnibus Account for such
Business Day (such Business Day is sometimes referred to herein as the "Trade
Date"). The Company will communicate such orders to Distributors prior to 8:00
a.m., Central time, on the next Business Day following the Trade Date. All
trades communicated to Distributors by the foregoing deadline shall be treated
by Distributors as if they were received by Distributors prior to the close of
trading on the Trade Date.
3.3 SETTLEMENT OF TRANSACTIONS.
(a) PURCHASES. Company will wire, or arrange for the wire of, the
purchase price of each purchase order to the custodian for the Fund in
accordance with written instructions provided by Distributors to the
Company so that either (1) such funds are received by the custodian for
the Fund prior to 12:00 (noon), Central time, on the next Business Day
following the Trade Date, or (2) Distributors is provided with a Federal
Funds wire system reference number prior to such 12:00 noon deadline
evidencing the entry of the wire transfer of the purchase price to the
applicable custodian into the Federal Funds wire system prior to such
time. Company agrees that if it fails to provide funds to the Fund's
custodian by the close of business on the next Business Day following the
Trade Date, then, at the option of Distributors, (i) the transaction may
be canceled, or (ii) the transaction may be processed at the
next-determined net asset value for the applicable Fund after purchase
order funds are received. In such event, the Company shall indemnify and
hold harmless Distributors, Adviser and the Funds from any liabilities,
costs and damages either may suffer as a result of such failure.
(b) REDEMPTIONS. The Adviser will use its best efforts to cause to
be transmitted to such custodial account as Company shall direct in
writing, the proceeds of all redemption orders placed by Company by 8:00
a.m., Central time, on the Business Day immediately following the Trade
Date, by wire transfer on that Business Day. Should Company need to extend
the settlement on a trade, it will contact Adviser to discuss the
extension. For purposes of determining the length of settlement, Adviser
agrees to treat the Account no less favorably than other shareholders of
the Funds. Each wire transfer of redemption proceeds shall indicate, on
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the Federal Funds wire system, the amount thereof attributable to each
Fund; PROVIDED, HOWEVER, that if the number of entries would be too great
to be transmitted through the Federal Funds wire system, the Adviser
shall, on the day the wire is sent, fax such entries to Company or if
possible, send via direct or indirect systems access until otherwise
directed by the Company in writing.
(c) AUTHORIZED PERSONS. The following persons are each duly
authorized to act on behalf of the Company and the Account under this
Agreement. The Funds, Adviser and Distributors are entitled to
conclusively rely on verbal or written instructions that Adviser or
Distributors reasonably believes were originated by any one of said
persons. The Company shall inform Adviser and Distributors of additions to
or subtractions from this list of authorized persons pursuant to Section
13, hereof:
Lynn Laswell Laura Lally
Brian Sponaugle Chris Accurso
Todd Gayhart John Burress
3.4 BOOK ENTRY ONLY. Issuance and transfer of shares of a Fund will be by
book entry only. Stock certificates will not be issued to the Company or the
Account. Shares of the Funds ordered from Distributors will be recorded in the
appropriate book entry title for the Account.
3.5 DISTRIBUTION INFORMATION. The Adviser or Distributors shall provide
the Company with all distribution announcement information as soon as it is
announced by the Funds. The distribution information shall set forth, as
applicable, ex-dates, record date, payable date, distribution rate per share,
record date share balances, cash and reinvested payment amounts and all other
information reasonably requested by the Company. Where possible, the Adviser or
Distributors shall provide the Company with direct or indirect systems access to
the Adviser's systems for obtaining such distribution information.
3.6 REINVESTMENT. All dividends and capital gains distributions will be
automatically reinvested on the payable date in additional shares of the
applicable Fund at net asset value in accordance with each Fund's then current
prospectus.
3.7 PRICING INFORMATION. Distributors shall use its best efforts to
furnish to the Company prior to 6:00 p.m., Central time, on each Business Day
each Fund's closing net asset value for that day, and for those Funds for which
such information is calculated, the daily accrual for interest rate factor (mil
rate). Such information shall be communicated via fax, or indirect or direct
systems access acceptable to the Company.
3.8 PRICE ERRORS.
(a) In the event adjustments are required to correct any error in
the computation of the net asset value of shares of a Fund, the Fund or
Adviser shall promptly notify Company after discovering the need for those
adjustments which result in a reimbursement to an Account in accordance
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with such Fund's then current policies on reimbursement. Notification may
be made orally or via direct or indirect systems access. Any such
notification shall be promptly followed by a letter written on Fund or
Adviser letterhead and shall state for each day for which an error
occurred the incorrect price, the correct price, and, to the extent
communicated to the Fund's shareholder, the reason for the price change.
Funds and Adviser agree that Company may send this writing, or derivation
thereof (so long as such derivation is approved in advance by Funds or
Adviser, which approval shall not be unreasonably withheld) to Owners that
are affected by the price change.
(b) If the Account received amounts in excess of the amounts to
which it otherwise would have been entitled prior to an adjustment for an
error, Company, when requested by Funds or Adviser, will use its best
efforts to collect such excess amounts from the Account. In no event,
however, shall Company be liable to Funds or Adviser for any such amounts.
(c) If an adjustment is to be made in accordance with subsection (a)
above to correct an error which has caused the Account to receive an
amount less than that to which it is entitled, Funds or Adviser shall make
all necessary adjustments (within the parameters specified in subsection
(a)) to the number of shares owned in the Account and distribute to the
Company the amount of such underpayment for credit to the Account.
3.9 AGENCY. Distributors hereby appoints the Company as its agent for the
limited purpose of accepting purchase and redemption instructions pursuant to
Sections 3.1, 3.2 and 3.3..
3.10 QUARTERLY REPORTS. Adviser agrees to provide Company a statement of
Fund assets as soon as practicable and in any event within 30 days after the end
of each fiscal year quarter, and a statement certifying the compliance by the
Funds during that fiscal quarter with the diversification requirements and
qualification as a regulated investment company. In the event of a breach of
Section 6.4(a), Adviser will take all reasonable steps (a) to notify 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.
4. PROXY SOLICITATIONS AND VOTING. The Company shall, at its expense, distribute
or arrange for the distribution of all proxy materials furnished by the Funds to
the Account and shall: (i) solicit voting instructions from Owners; (ii) vote
the Fund shares in accordance with instructions received from Owners; and (iii)
vote the Fund shares for which no instructions have been received, as well as
shares attributable to it, in the same proportion as Fund shares for which
instructions have been received from Owners, so long as and to the extent that
the Securities and Exchange Commission (the "SEC") continues to interpret the
1940 Act, to require pass-through voting privileges for various contract owners.
The Company and its agents will not recommend action in connection with, or
oppose or interfere with, the solicitation of proxies for the Fund shares held
for Owners.
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5. CUSTOMER COMMUNICATIONS.
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5.1 PROSPECTUSES. The Adviser or Distributors, at its expense, will
provide the Company with as many copies of the current prospectus for the Funds
as the Company may reasonably request for distribution, at the Company's
expense, to existing or prospective Owners.
5.2 SHAREHOLDER MATERIALS. The Adviser and Distributors shall, as
applicable, provide in bulk to the Company or its authorized representative, at
a single address and at no expense to the Company, the following shareholder
communications materials prepared for circulation to Owners in quantities
requested by the Company which are sufficient to allow mailing thereof by the
Company and, to the extent required by applicable law, to all Owners: proxy or
information statements, annual reports, semi-annual reports, and all initial and
updated prospectuses, supplements and amendments thereof. None of the Funds, the
Adviser or Distributors shall be responsible for the cost of distributing such
materials to Owners.
6. REPRESENTATIONS AND WARRANTIES.
6.1 The Company represents and warrants that:
(a) It is an insurance company duly organized and in good standing
under the laws of the State of Ohio and that it has legally and validly
established the Account prior to any issuance or sale thereof as a
segregated asset account and that the Company has and will maintain the
capacity to issue all Contracts that may be sold; and that it is and will
remain duly registered, licensed, qualified and in good standing to sell
the Contracts in all the jurisdictions in which such Contracts are to be
offered or sold;
(b) It is and will remain duly registered and licensed in all
material respects under all applicable federal and state securities and
insurance laws and shall perform its obligations hereunder in compliance
in all material respects with any applicable state and federal laws;
(c) The Contracts are and will be registered under the 1933 Act, and
are and will be registered and qualified for sale in the states where so
required; and the Account is and will be registered as a unit investment
trust in accordance with the 1940 Act and shall be a segregated investment
account for the Contracts;
(d) The Contracts are currently treated as annuity contracts, under
applicable provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), and the Company will maintain such treatment and will notify
Adviser, Distributors and Funds promptly 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;
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(e) It is registered as a transfer agent pursuant to Section 17A of
the Securities Exchange Act of 1934, as amended (the "1934 Act"), or is
not required to be registered as such;
(f) The arrangements provided for in this Agreement will be
disclosed to the Owners; and
(g) It is registered as a broker-dealer under the 1934 Act and any
applicable state securities laws, including as a result of entering into
and performing the Services set forth in this Agreement, or is not
required to be registered as such.
6.2 The Funds each represent and warrant that Fund shares sold
pursuant to this Agreement are and will be registered under the 1933 Act
and the Fund is and will be registered as a registered investment company
under the Investment Company Act of 1940, in each case, except to the
extent the Company is so notified in writing;
6.3 Distributors represents and warrants that:
(a) It is and will be a member in good standing of the NASD and
is and will be registered as a broker-dealer with the SEC; and
(b) It will sell and distribute Fund shares in accordance with all
applicable state and federal laws and regulations.
6.4 Adviser represents and warrants that:
(a) It will cause each Fund to invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
annuity contracts under the Code and the regulations issued thereunder,
and that each Fund will comply with Section 817(h) of the Code as amended
from time to time and with all applicable regulations promulgated
thereunder;
(b) It is and will remain duly registered and licensed in all
material respects under all applicable federal and state securities and
insurance laws and shall perform its obligations hereunder in compliance
in all material respects with any applicable state and federal laws; and
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6.5 Each of the Parties hereto represents and warrants to the others
that:
(a) It has full power and authority under applicable law, and has
taken all action necessary, to enter into and perform this Agreement and
the person executing this Agreement on its behalf is duly authorized and
empowered to execute and deliver this Agreement;
(b) This Agreement constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms and it
shall comply in all material respects with all laws, rules and regulations
applicable to it by virtue of entering into this Agreement;
(c) No consent or authorization of, filing with, or other act by or
in respect of any governmental authority, is required in connection with
the execution, delivery, performance, validity or enforceability of this
Agreement;
(d) The execution, performance and delivery of this Agreement will
not result in it violating any applicable law or breaching or otherwise
impairing any of its contractual obligations;
(e) Each Party hereto is entitled to rely on any written
records or instructions provided to it by another Party; and
(f) Its directors, officers, employees, and investment advisers, and
other individuals/entities dealing with the money or securities of a Fund
are and shall continue to be at all times covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund in an amount not less
than the amount required by the applicable rules of the National
Association of Securities Dealers, Inc. ("NASD") and the federal
securities laws, which bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
7. SALES MATERIAL AND INFORMATION
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7.1 NASD FILINGS. The Company shall promptly inform Distributors as to the
status of all sales literature filings pertaining to the Funds and shall
promptly notify Distributors of all approvals or disapprovals of sales
literature filings with the NASD. For purposes of this Section 7, the phrase
"sales literature or other promotional material" shall be construed in
accordance with all applicable securities laws and regulations.
7.2 COMPANY REPRESENTATIONS. The Company shall not make any material
representations concerning the Adviser, the Distributors, or a Fund other than
the information or representations contained in: (a) a registration statement of
the Fund or prospectus of a Fund, as amended or supplemented from time to time;
(b) published reports or statements of the Funds which are in the public domain
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or are approved by Distributors or the Funds; or (c) sales literature or other
promotional material of the Funds.
7.3 ADVISER, DISTRIBUTORS AND FUND REPRESENTATIONS. None of Adviser,
Distributors or any Fund shall make any material representations concerning the
Company other than the information or representations contained in: (a) a
registration statement or prospectus for the Contracts, as amended or
supplemented from time to time; (b) published reports or statements of the
Contracts or the Account which are in the public domain or are approved by the
Company; or (c) sales literature or other promotional material of the Company.
7.4 TRADEMARKS, ETC. Except to the extent required by applicable law, no
Party shall use any other Party's names, logos, trademarks or service marks,
whether registered or unregistered, without the prior consent of such Party.
7.5 INFORMATION FROM DISTRIBUTORS AND ADVISER. Upon request, Distributors
or Adviser will provide to Company at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, solicitations for voting instructions, applications
for exemptions, requests for no action letters, and all amendments to any of the
above, that relate to the Funds, in final form as filed with the SEC, NASD and
other regulatory authorities.
7.6 INFORMATION FROM COMPANY. Company will provide to Distributors 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 a Fund and the Contracts, in final form as filed with the SEC, NASD
and other regulatory authorities.
7.7 REVIEW OF MARKETING MATERIALS. If so requested by Company, the Adviser
or Distributors will use its best efforts to review sales literature and other
marketing materials prepared by Company which relate to the Funds, the Adviser
or Distributors for factual accuracy as to such entities, provided that the
Adviser or Distributors is provided at least five (5) Business Days to review
such materials. Neither the Adviser nor Distributors will review such materials
for compliance with applicable laws. Company shall provide the Adviser with
copies of all sales literature and other marketing materials which refer to the
Funds, the Company or Distributors within five (5) Business Days after their
first use, regardless of whether the Adviser or Distributors has previously
reviewed such materials. If so requested by the Adviser or Distributors, Company
shall cease to use any sales literature or marketing materials which refer to
the Funds, the Adviser or Distributors that the Adviser or Distributors
determines to be inaccurate, misleading or otherwise unacceptable.
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8. FEES AND EXPENSES.
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8.1 FUND REGISTRATION EXPENSES. Fund or Distributors shall bear the cost
of registration and qualification of Fund shares; preparation and filing of Fund
prospectuses and registration statements, proxy materials and reports;
preparation of all other statements and notices relating to the Fund or
Distributors required by any federal or state law; payment of all applicable
fees, including, without limitation, any fees due under Rule 24f-2 of the 1940
Act, relating to a Fund; and all taxes on the issuance or transfer of Fund
shares on the Fund's records.
8.2 CONTRACT REGISTRATION EXPENSES. The Company shall bear the expenses
for the costs of preparation and filing of the Company's prospectus and
registration statement with respect to the Contracts; preparation of all other
statements and notices relating to the Account or the Contracts required by any
federal or state law; expenses for the solicitation and sale of the Contracts
including all costs of printing and distributing all copies of advertisements,
prospectuses, Statements of Additional Information, proxy materials, and reports
to Owners or potential purchasers of the Contracts as required by applicable
state and federal law; payment of all applicable fees relating to the Contracts;
all costs of drafting, filing and obtaining approvals of the Contracts in the
various states under applicable insurance laws; filing of annual reports on form
N-SAR, and all other costs associated with ongoing compliance with all such laws
and its obligations hereunder.
9. INDEMNIFICATION.
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9.1 INDEMNIFICATION BY COMPANY.
(a) Company agrees to indemnify and hold harmless the Funds, Adviser
and Distributors and each of their directors, officers, employees and
agents, and each person, if any, who controls any of them within the
meaning of Section 15 of the 1933 Act (each, an "Indemnified Party" and
collectively, the "Indemnified Parties" for purposes of this Section 9.1)
from and against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of
Company), and expenses (including reasonable legal fees and expenses), to
which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise (collectively, hereinafter
"Losses"), insofar as such Losses:
(i) 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 sales literature for the
Contracts or contained in the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, PROVIDED that this paragraph
9.1(a) 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 written information furnished
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to Company by or on behalf of a Fund, Distributors or Adviser for
use in the registration statement or prospectus for the Contracts or
in the Contracts (or any amendment or supplement) or otherwise for
use in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of, or as a result of, statements or
representations or wrongful conduct of Company or its agents, with
respect to the sale or distribution of the Contracts or Fund shares;
or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature covering a 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 written information
furnished to a Fund, Adviser or Distributors by or on behalf of
Company; or
(iv) arise out of, or as a result of, any failure by Company
or persons under its control to provide the Services and furnish the
materials contemplated under the terms of this Agreement; or
(v) arise out of, or result from, any material breach of any
representation or warranty made by Company or persons under its
control in this Agreement or arise out of or result from any other
material breach of this Agreement by Company or persons under its
control; as limited by and in accordance with the provisions of
Sections 9.1(b) and 9.1(c) hereof; or
(vi) arise out of, or as a result of, adherence by Adviser or
Distributors to instructions that it reasonably believes were
originated by persons specified in Section 3.2(c), hereof.
This indemnification provision is in addition to any liability which
the Company may otherwise have.
(b) Company shall not be liable under this indemnification provision
with respect to any Losses to which an Indemnified Party would otherwise
be subject by reason of such Indemnified Party's willful misfeasance, bad
faith, or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement.
(c) Company shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
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Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify
Company of any such claim shall not relieve Company from any liability
which it may have to the Indemnified Party otherwise than on account of
this indemnification provision. 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. The
Indemnified Party may not settle any action without the written consent of
the indemnifying Party. The indemnifying Party may not settle any action
without the written consent of the Indemnified Party unless such
settlement completely and finally releases the Indemnified Party from any
and all liability. In either event, consent shall not be unreasonably
withheld.
(d) The Indemnified Parties will promptly notify Company of the
commencement of any litigation or proceedings against the Indemnified
Parties in connection with the issuance or sale of Fund shares or the
Contracts or the operation of a Fund.
9.2 INDEMNIFICATION BY ADVISER AND DISTRIBUTORS.
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(a) Adviser and Distributors agrees to indemnify and hold harmless
Company and each of its directors, officers, employees and agents and each
person, if any, who controls Company within the meaning of Section 15 of
the 1933 Act (each, and "Indemnified Party" and collectively, the
"Indemnified Parties" for purposes of this Section 9.2) against any and
all Losses to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such Losses:
(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 a 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 Section 9.2(a) 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 written information
furnished to a Fund, Adviser or Distributors by or on behalf of
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Company for use in the registration statement or prospectus for a
Fund or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of, or as a result of, statements or
representations or wrongful conduct of Adviser or Distributors or
persons under its control, with respect to the sale or distribution
of Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading,
if such statement or omission was made in reliance upon written
information furnished to Company by or on behalf of Adviser or
Distributors; or
(iv) arise out of, or as a result of, any failure by Adviser
or Distributors or persons under its control to provide the services
and furnish the materials contemplated under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation or warranty made by Adviser or Distributors or
persons under its control in this Agreement or arise out of or
result from any other material breach of this Agreement by Adviser
or Distributors or persons under its control; as limited by and in
accordance with the provisions of Sections 9.2(b) and 9.2(c) hereof.
This indemnification provision is in addition to any liability which
Adviser and Distributors may otherwise have.
(b) Adviser and Distributors shall not be liable under this
indemnification provision with respect to any Losses to which an
Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under
this Agreement or to Company.
(c) Adviser and Distributors shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
Adviser and Distributors in writing within a reasonable time after the
summons or other first legal process giving information of the nature of
the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify Adviser and Distributors of any
such claim shall not relieve Adviser and Distributors from any liability
13
<PAGE>
which it may have to the Indemnified Party otherwise than on account of
this indemnification provision. 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. The
Indemnified Party may not settle any action without the written consent of
the indemnifying Party. The indemnifying Party may not settle any action
without the written consent of the Indemnified Party unless such
settlement completely and finally releases the Indemnified Party from any
and all liability. In either event, consent shall not be unreasonably
withheld.
(d) The Indemnified Parties will promptly notify Adviser and
Distributors of the commencement of any litigation or proceedings against
the Indemnified Parties in connection with the issuance or sale of the
Contracts or the operation of the Account.
10. POTENTIAL CONFLICTS.
-------------------
10.1 MONITORING BY DIRECTORS FOR CONFLICTS OF INTEREST. The Directors of
each Fund will monitor the Fund for any potential or existing material
irreconcilable conflict of interest between the interests of the contract owners
of all separate accounts investing in the Fund, including such conflict of
interest with any other separate account of any other insurance company
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 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 the Fund are
being managed; (e) a difference in voting instructions given by variable annuity
contract owners and variable life insurance contract owners or by contract
owners of different life insurance companies utilizing the Fund; or (f) a
decision by Company to disregard the voting instructions of Owners. The
Directors shall promptly inform the Company, in writing, if they determine that
an irreconcilable material conflict exists and the implications thereof.
10.2 MONITORING BY THE COMPANY FOR CONFLICTS OF INTEREST. The Company will
promptly notify the Directors, in writing, of any potential or existing material
irreconcilable conflicts of interest, as described in Section 10.1 above, of
which it is aware. The Company will assist the Directors in carrying out their
responsibilities under any applicable provisions of the federal securities laws
and any exemptive orders granted by the SEC ("Exemptive Order"), by providing
14
<PAGE>
the Directors, in a timely manner, with all information reasonably necessary for
the Directors to consider any issues raised. This includes, but is not limited
to, an obligation by the Company to inform the Directors whenever Owner voting
instructions are disregarded.
10.3 REMEDIES. If it is determined by a majority of the Directors, or a
majority of disinterested Directors, that a material irreconcilable conflict
exists, as described in Section 10.1 above, the Company shall, at its own
expense take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including, but not limited to: (a),
withdrawing the assets allocable to some or all of the separate accounts from
the applicable Fund and reinvesting such assets in a different investment
medium, including (but not limited to) another fund managed by the Adviser, or
submitting the question whether such segregation should be implemented to a vote
of all affected Owners and, as appropriate, segregating the assets of any
particular group that votes in favor of such segregation, or offering to the
affected owners the option of making such a change; and (b), establishing a new
registered management investment company or managed separate account.
10.4 CAUSES OF CONFLICTS OF INTEREST.
(a) STATE INSURANCE REGULATORS. If a material irreconcilable
conflict arises because a particular state insurance regulator's decision
applicable to the Company conflicts with the majority of other state
regulators, then the Company will withdraw the affected Account's
investment in the applicable Fund and terminate this Agreement with
respect to such Account within the period of time permitted by such
decision, but in no event later than six months after the Directors inform
the Company in writing that it has determined that such decision has
created an irreconcilable material conflict; PROVIDED, HOWEVER, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of
the disinterested Directors. Until the end of the foregoing period, the
Distributors and Funds shall continue to accept and implement orders by
the Company for the purchase (and redemption) of shares of the Fund to the
extent such actions do not violate applicable law.
(b) DISREGARD OF OWNER VOTING. If a material irreconcilable conflict
arises because of Company's decision to disregard Owner voting
instructions and that decision represents a minority position or would
preclude a majority vote, Company may be required, at the applicable
Fund's election, to withdraw the Account's investment in said Fund. No
charge or penalty will be imposed against the Account as a result of such
withdrawal.
10.5 LIMITATIONS ON CONSEQUENCES. For purposes of Sections 10.3 through
10.5 of this Agreement, a majority of the disinterested Directors shall
determine whether any proposed action adequately remedies any irreconcilable
material conflict. In no event will a Fund, the Adviser or the Distributors be
required to establish a new funding medium for any of the Contracts. The Company
shall not be required by Section 10.3 to establish a new funding medium for the
Contracts if an offer to do so has been declined by vote of a majority of Owners
affected by the irreconcilable material conflict. In the event that the
15
<PAGE>
Directors determine that any proposed action does not adequately remedy any
irreconcilable material conflict, then the Company will withdraw the Account's
investment in the applicable Fund and terminate this Agreement as quickly as may
be required to comply with applicable law, but in no event later than six (6)
months after the Directors inform the Company in writing of the foregoing
determination, PROVIDED, HOWEVER, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict.
10.6 CHANGES IN LAWS. If and to the extent that Rule 6e-2 and Rule 6e-3(T)
are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the Act or the rules promulgated thereunder with respect to mixed
or shared funding (as defined in the Funds' Exemptive Order) on terms and
conditions materially different from those contained in the Funds' Exemptive
Order, then (a) the Funds and/or the Company, as appropriate, shall take such
steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and
Rule 6e-3, as adopted, to the extent such rules are applicable; and (b) Sections
10.1, 10.2, 10.3 and 10.4 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.
11. MAINTENANCE OF RECORDS.
----------------------
(a) Recordkeeping and other administrative services to Owners shall
be the responsibility of the Company and shall not be the responsibility
of the Funds, Adviser or Distributors. None of the Funds, the Adviser or
Distributors shall maintain separate accounts or records for Owners.
Company shall maintain and preserve all records as required by law to be
maintained and preserved in connection with providing the Services and in
making shares of the Funds available to the Account.
(b) Upon the request of the Adviser or Distributors, the Company
shall provide copies of all the historical records relating to
transactions between the Funds and the Account, written communications
regarding the Funds to or from the Account and other materials, in each
case (1) as are maintained by the Company in the ordinary course of its
business and in compliance with applicable law, and (2) as may reasonably
be requested to enable the Adviser and Distributors, or its
representatives, including without limitation its auditors or legal
counsel, to (A) monitor and review the Services, (B) comply with any
request of a governmental body or self-regulatory organization or the
Owners, (C) verify compliance by the Company with the terms of this
Agreement, (D) make required regulatory reports, or (E) perform general
customer supervision. The Company agrees that it will permit the Adviser
and Distributors or such representatives of either to have reasonable
access to its personnel and records in order to facilitate the monitoring
of the quality of the Services.
(c) Upon the request of the Company, the Adviser and Distributors
shall provide copies of all the historical records relating to
transactions between the Funds and the Account, written communications
16
<PAGE>
regarding the Funds to or from the Account and other materials, in each
case (1) as are maintained by the Adviser and Distributors, as the case
may be, in the ordinary course of its business and in compliance with
applicable law, and (2) as may reasonably be requested to enable the
Company, or its representatives, including without limitation its auditors
or legal counsel, to (A) comply with any request of a governmental body or
self-regulatory organization or the Owners, (B) verify compliance by the
Adviser and Distributors with the terms of this Agreement, (C) make
required regulatory reports, or (D) perform general customer supervision.
(d) The Parties agree to cooperate in good faith in providing
records to one another pursuant to this Section 11.
12. TERM AND TERMINATION.
--------------------
12.1 TERM AND TERMINATION WITHOUT CAUSE. The initial term of this
Agreement shall be for a period of one year from the date hereof. Unless
terminated as to any Fund upon not less than thirty (30) days prior written
notice to the other Parties, this Agreement shall thereafter automatically renew
for the remaining Funds from year to year, subject to termination at the next
applicable renewal date upon not less than 30 days prior written notice. Any
Party may terminate this Agreement as to any Fund following the initial term
upon six (6) months advance written notice to the other Parties.
12.2 TERMINATION BY FUND, DISTRIBUTORS OR ADVISER FOR CAUSE. Adviser, Fund
or Distributors may terminate this Agreement by written notice to the Company,
if any of them shall determine, in its sole judgment exercised in good faith,
that (a) 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 (b) any of the Contracts are
not registered, issued or sold in accordance with applicable state and federal
law or such law precludes the use of Fund shares as the underlying investment
media of the Contracts issued or to be issued by the Company.
12.3 TERMINATION BY COMPANY FOR CAUSE. Company may terminate this
Agreement by written notice to the Adviser, Funds and Distributors in the event
that (a) any of the Fund shares are not registered, issued or sold in accordance
with applicable state or federal law or such law precludes the use of such
shares as the underlying investment media of the Contracts issued or to be
issued by the Company; (b) the Funds cease to qualify as Regulated Investment
Companies under Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Funds may fail to so
qualify; or (c) a Fund fails to meet the diversification requirements specified
in Section 6.4(a).
12.4 TERMINATION BY ANY PARTY. This Agreement may be terminated as to any
Fund by any Party at any time (A) by giving 30 days' written notice to the other
Parties in the event of a material breach of this Agreement by the other Party
17
<PAGE>
or Parties that is not cured during such 30-day period, and (B) (i) upon
institution of formal proceedings relating to the legality of the terms and
conditions of this Agreement against the Account, Company, Funds, Adviser or
Distributors by the NASD, the SEC or any other regulatory body provided that the
terminating Party has a reasonable belief that the institution of formal
proceedings is not without foundation and will have a material adverse impact on
the terminating Party, (ii) by the non-assigning Party upon the assignment of
this Agreement in contravention of the terms hereof, or (iii) as is required by
law, order or instruction by a court of competent jurisdiction or a regulatory
body or self-regulatory organization with jurisdiction over the terminating
Party.
12.5 LIMIT ON TERMINATION. Notwithstanding the termination of this
Agreement with respect to any or all Funds, for so long as any Contracts remain
outstanding and invested in a Fund each Party hereto shall continue to perform
such of its duties hereunder as are necessary to ensure the continued tax
deferred status thereof and the payment of benefits thereunder, except to the
extent proscribed by law, the SEC or other regulatory body. Notwithstanding the
foregoing, nothing in this Section 12.5 obligates a Fund to continue in
existence. In the event that any Fund elects to terminate its operations, the
Company shall, as soon as practicable, obtain an exemptive order or order of
substitution from the SEC to remove all Owners from the applicable Fund.
13. NOTICES.
-------
All notices hereunder shall be given in writing (and shall be deemed to
have been duly given upon receipt) by delivery in person, by facsimile, by
registered or certified mail or by overnight delivery (postage prepaid, return
receipt requested) to the respective Parties as follows:
If to Strong Variable:
Strong Variable Insurance Funds, Inc.
100 Heritage Reserve
Milwaukee, Wisconsin 53051
Attention: General Counsel
Facsimile No.: 414/359-3948
If to Special Fund:
Strong Special Fund II, Inc.
100 Heritage Reserve
Milwaukee, Wisconsin 53051
Attention: General Counsel
Facsimile No.: 414/359-3948
18
<PAGE>
If to Adviser:
Strong Capital Management, Inc.
100 Heritage Reserve
Milwaukee, Wisconsin 53051
Attention: General Counsel
Facsimile No.: 414/359-3948
If to Distributors:
Strong Funds Distributors, Inc.
100 Heritage Reserve
Milwaukee, Wisconsin 53051
Attention: General Counsel
Facsimile No.: 414/359-3948
If to Company:
Annuity Investors Life Insurance Company
250 East Fifth Street
Cincinnati, OH 45202
Attention: Mark F. Muething
Facsimile No.: (513) 357-3397
14. MISCELLANEOUS.
-------------
14.1. CAPTIONS. The captions in this Agreement are included for
convenience of reference only and in no way affect the construction or effect
of any provisions hereof.
14.2. ENFORCEABILITY. If any portion 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.
14.3. COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which taken together shall constitute one
and the same instrument.
14.4. REMEDIES NOT EXCLUSIVE. 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.
14.5. CONFIDENTIALITY. Subject to the requirements of legal process and
regulatory authority, the Funds and Distributors shall treat as confidential the
names and addresses of the owners of the Contracts and all information
reasonably identified as confidential in writing by the Company hereto and,
except as permitted by this Agreement, shall not disclose, disseminate or
utilize such names and addresses and other confidential information without the
express written consent of the Company until such time as it may come into the
public domain.
19
<PAGE>
14.6. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the internal laws of the State of Wisconsin
applicable to agreements fully executed and to be performed therein;
exclusive of conflicts of laws.
14.7. SURVIVABILITY. Sections 6, 7.2, 7.3, 7.4, 9, 11 and 12.5 hereof
shall survive termination of this Agreement. In addition, all provisions of this
Agreement shall survive termination of this Agreement in the event that any
Contracts are invested in a Fund at the time the termination becomes effective
and shall survive for so long as such Contracts remain so invested.
14.8. AMENDMENT AND WAIVER. No modification of any provision of this
Agreement will be binding unless in writing and executed by the Party to be
bound thereby. No waiver of any provision of this Agreement will be binding
unless in writing and executed by the Party granting such waiver.
Notwithstanding anything in this Agreement to the contrary, the Company may
unilaterally amend Exhibit A hereto to add additional series of Strong Variable
Funds ("New Funds") as Funds by sending to the Company a written notice of the
New Funds Any valid waiver of a provision set forth herein shall not constitute
a waiver of any other provision of this Agreement. In addition, any such waiver
shall constitute a present waiver of such provision and shall not constitute a
permanent future waiver of such provision.
14.9. ASSIGNMENT. This Agreement shall be binding upon and shall inure to
the benefit of the Parties and their respective successors and assigns;
PROVIDED, HOWEVER, that neither this Agreement nor any rights, privileges,
duties or obligations of the Parties may be assigned by any Party without the
written consent of the other Parties or as expressly contemplated by this
Agreement.
14.10. ENTIRE AGREEMENT. This Agreement contains the full and complete
understanding between the Parties with respect to the transactions covered and
contemplated hereunder, and supersedes all prior agreements and understandings
between the Parties relating to the subject matter hereof, whether oral or
written, express or implied.
14.11. RELATIONSHIP OF PARTIES; NO JOINT VENTURE, ETC. Except for the
limited purpose provided in Section 3.8, it is understood and agreed that the
Company shall be acting as an independent contractor and not as an employee or
agent of the Adviser, Distributors or the Funds, and none of the Parties shall
hold itself out as an agent of any other Party with the authority to bind such
Party. Neither the execution nor performance of this Agreement shall be deemed
to create a partnership or joint venture by and among any of the Company, Funds,
Adviser, or Distributors.
14.12. EXPENSES. All expenses incident to the performance by each
Party of its respective duties under this Agreement shall be paid by that
Party.
14.13. TIME OF ESSENCE. Time shall be of the essence in this
Agreement.
20
<PAGE>
14.14. NON-EXCLUSIVITY. Each of the Parties acknowledges and
agrees that this Agreement and the arrangements described herein are intended
to be non-exclusive and that each of the Parties is free to enter into
similar agreements and arrangements with other entities.
14.15. OPERATIONS OF FUNDS. In no way shall the provisions of this
Agreement limit the authority of the Funds, the Company or Distributors to take
such action as it may deem appropriate or advisable in connection with all
matters relating to the operation of such Fund and the sale of its shares. In no
way shall the provisions of this Agreement limit the authority of the Company to
take such action as it may deem appropriate or advisable in connection with all
matters relating to the provision of Services or the shares of funds other than
the Funds offered to the Account.
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement
to be duly executed as of the date first above written.
ANNUITY INVESTORS LIFE INSURANCE COMPANY
By:
-----------------------------------
Name:
Title:
STRONG CAPITAL MANAGEMENT, INC.
By: -----------------------------------
Name: Stephen J. Shenkenberg
Title: Vice President
STRONG FUNDS DISTRIBUTORS, INC.
By:
----------------------------------
Name: Stephen J. Shenkenberg
Title: Vice President
STRONG VARIABLE INSURANCE FUNDS, INC.
on behalf of the Designated Portfolios
By: ----------------------------------
Name: Stephen J. Shenkenberg
Title: Vice President
STRONG SPECIAL FUND II, INC.
By:
-----------------------------------
Name: Stephen J. Shenkenberg
Title: Vice President
21
<PAGE>
EXHIBIT A-1
SEPARATE ACCOUNTS
Annuity Investors Variable Account A
Annuity Investors Variable Account B
22
<PAGE>
EXHIBIT A
The following is a list of Designated Portfolios under this Agreement:
Strong Growth Fund II
23
<PAGE>
EXHIBIT B
THE SERVICES
Company shall perform the following services. Such services shall be
the responsibility of the Company and shall not be the responsibility of the
Funds, Adviser or Distributors.
1. Maintain separate records for each Account, which records shall reflect
Fund shares ("Shares") purchased and redeemed, including the date and price for
all transactions, Share balances, and the name and address of each Owner,
including zip codes and tax identification numbers.
2. Credit contributions to individual Owner accounts and invest such
contributions in shares of the Funds to the extent so designated by the Owner.
3. Disburse or credit to the Owners, and maintain records of, all proceeds
of redemptions of Fund shares and all other distributions not reinvested in
shares.
4. Prepare and transmit to the Owners, periodic account statements
showing, among other things, the total number of Fund shares owned as of the
statement closing date, purchases and redemptions of shares during the period
covered by the statement, the net asset value of the Funds as of a recent date,
and the dividends and other distributions paid during the statement period
(whether paid in cash or reinvested in shares).
5. Transmit to the Owners, as required by applicable law, prospectuses,
proxy materials, shareholder reports, and other information provided by the
Adviser, Distributors or Funds and required to be sent to shareholders under the
Federal securities laws.
6. Transmit to Distributors purchase orders and redemption requests placed
by the Account and arrange for the transmission of funds to and from the Funds.
7. Transmit to Distributors such periodic reports as Distributors shall
reasonably conclude is necessary to enable the Funds to comply with applicable
Federal securities and state Blue Sky requirements.
8. Transmit to the each Account confirmations of purchase orders and
redemption requests placed by each Account.
24
<PAGE>
9. Maintain all account balance information for the Account and daily and
monthly purchase summaries expressed in shares and dollar amounts.
10. Prepare, transmit and file any Federal, state and local government
reports and returns as required by law with respect to each account maintained
on behalf of the Account.
11. Respond to Owners' inquiries regarding, among other things, share
prices, account balances, dividend options, dividend amounts, and dividend
payment dates.
25
<PAGE>
EXHIBIT C
ACCOUNT INFORMATION
1. Entity in whose name each Account will be opened:
Annuity Investors Life Insurance Company
Mailing address: P.O. Box 5423
Cincinnati, OH 45201-5423t
2. Employer ID number (For internal use only): 31-1021738
3. Authorized contact persons: The following persons are authorized on behalf of
the Company to effect transactions in each Account:
Lynn Laswell 513-333-6281
Brian Sponaugle 513-357-3396
Todd Gayhart 513-333-6005
Laura Lally 513-333-6217
Chris Accurso 513-357-3261
John Burress 513-357-3194
4. Will the Accounts have telephone exchange? ___ Yes __X__ No
(THIS OPTION LETS COMPANY REDEEM SHARES BY TELEPHONE AND APPLY THE PROCEEDS
FOR PURCHASE IN ANOTHER IDENTICALLY REGISTERED STRONG FUNDS ACCOUNT.)
5. Will the Accounts have telephone redemption? ___ Yes __X__ No
(THIS OPTION LETS COMPANY SELL SHARES BY TELEPHONE. THE PROCEEDS WILL BE
WIRED TO THE BANK ACCOUNT SPECIFIED BELOW.)
6. All dividends and capital gains will be reinvested automatically.
26
<PAGE>
7. Instructions for all outgoing wire transfers: The Provident Bank
Cincinnati, OH 45202
ABA # 042000424
For the Account of Annuity
Investors Life Insurance
Company Depository Account
Account # 0697-394
Amount:
Attn.: Wire Transfer Department
8. If this Account Information Form contains changed information, the
undersigned authorized officer has executed this amended Account Information
Form as of the date set forth below and acknowledges the agreements and
representations set forth in the Participation Agreement between the Company,
the Funds, Adviser and Distributors:
-------------------------------------- ---------------------
(SIGNATURE OF AUTHORIZED OFFICER) (DATE)
9. Company represents under penalty of perjury that:
(i) The employer ID number on this form is correct; and
(ii) Company is not subject to backup withholding because (a) Company is
exempt from backup withholding, (b) Company has not been notified by the IRS
that it is subject to backup withholding as a result of failure to report all
interest or dividends, or (c) the IRS has notified the Company that it is no
longer subject to backup withholding. (Cross out (ii) if Company has been
notified by the IRS that it is subject to backup withholding because of
underreporting interest or dividends on its tax return.)
PLEASE NOTE: DISTRIBUTORS EMPLOYS REASONABLE PROCEDURES TO CONFIRM THAT
INSTRUCTIONS COMMUNICATED BY TELEPHONE ARE GENUINE AND MAY NOT BE LIABLE FOR
LOSSES DUE TO UNAUTHORIZED OR FRAUDULENT INSTRUCTIONS. PLEASE SEE THE PROSPECTUS
FOR THE APPLICABLE FUND FOR MORE INFORMATION ON THE TELEPHONE EXCHANGE AND
REDEMPTION PRIVILEGES.
FOR STRONG INTERNAL USE: THIS ACCOUNT INFORMATION FORM MAY BE A COPY. THE
ORIGINAL ACCOUNT INFORMATION FORM IS ATTACHED TO THE PARTICIPATION AGREEMENT
WITH THE ADVISER AND RETAINED IN THE LEGAL DEPARTMENT.
27
<PAGE>
April 25, 1997
Annuity Investors Life Insurance Company
250 East Fifth Street
Cincinnati, OH 45202
Attention: Mark F. Muething
Dear Mark: Re: Fee Letter Relating to the Annuity Investors Life
Insurance Company Participation Agreement.
Pursuant to the Participation Agreement by and among Strong Capital
Management, Inc. ("Strong"), Annuity Investors Life Insurance Company (the
"Company"), Strong Variable Insurance Funds, Inc., Strong Special Fund II, Inc.
and Strong Funds Distributors, Inc. ("Distributors") dated as April 25, 1997
(the "Participation Agreement"), the Company will provide certain administrative
services on behalf of the registered investment companies or series thereof
specified in Exhibit A (each a "Fund" and collectively the "Funds").
In recognition of the reduction in administrative expenses that derives
from the performance of said administrative services, Strong agrees to pay the
Company the fee specified below for each Fund specified in Exhibit A hereto.
(a) For average aggregate amounts (as calculated in paragraph (b),
below) invested through variable insurance products issued by the Company
with the Funds, the monthly fee shall equal the percentage (calculated in
paragraph (b), below) of the applicable annual fee for each Fund specified
in Exhibit A.
(b) For purposes of computing the fee contemplated in paragraph (a)
above, Strong shall calculate and pay to the Company an amount with
respect to each Fund equal to the product of: (a) the product of (i) the
number of calendar days in the applicable month divided by the number of
calendar days in that year (365 or 366 as applicable) and (ii) the
applicable percentage specified in Exhibit A, hereto, multiplied by (b)
the average daily market value of the investments held in such Fund
pursuant to the Participation Agreement computed by totaling the aggregate
investment (share net asset value multiplied by the total number of shares
held) on each day during the calendar month and dividing by the total
number of days during such month.
(c) Strong shall calculate the amount of the payment to be made
pursuant to this Letter Agreement at the end of each calendar month and
will make such payment to the Company within 30 days after receiving the
report referenced in paragraph (e), below. Fees will be paid, at Strong's
election, by wire transfer or by check. All payments hereunder shall be
considered final unless disputed by the Company in writing within 60 days
of receipt.
(d) The parties agree that the fees contemplated herein are solely
for shareholder servicing and other administrative services provided by
the Company and do not constitute payment in any manner for investment
advisory, distribution, trustee, or custodial services.
28
<PAGE>
(e) The Company agrees to provide Strong by the 15th day of each
month with a report which indicates the number of Owners that hold through
a Contract interests in each Account as of the last day of the prior
month.
(f) If requested in writing by Strong, and at Strong's expense, the
Company shall provide to Strong, by February 14th of each year, a "Special
Report" from a nationally recognized accounting firm reasonably acceptable
to Strong which substantiates for each month of the prior calendar year:
(a) the number of Owners that hold, through an Account, interests in each
Account maintained by the Company on the last day of each month which held
shares for which the fee provided for in this Letter Agreement was
received by the Company, (b) that any fees billed to Strong for such month
were accurately determined in accordance with this Letter Agreement, and
(c) such other information in connection with this Agreement and the
Participation Agreement as may be reasonably requested by Strong.
(g) The parties hereto agree that Strong may unilaterally amend
Schedule A hereto to add additional investment companies or series thereof
("New Funds") as Funds subject to the provisions of this Letter Agreement
by sending to the Company a written notice of the New Funds and indicating
therein the fees to be paid to the Company with respect to the
administrative services provided pursuant to the Participation Agreement
in connection with such New Funds.
(h) This Letter Agreement shall terminate upon termination of the
Participation Agreement. Accordingly, all payments pursuant to this Letter
Agreement shall cease upon termination of the Participation Agreement.
(i) Capitalized terms not otherwise defined herein shall have the
meaning assigned to them in the Participation Agreement.
If you are in agreement with the foregoing, please sign and date below
where indicated and return one copy of this signed letter agreement to me.
Very truly yours,
Stephen J. Shenkenberg
Vice President
Accepted and agreed as of April 25, 1997 by
Annuity Investors Life Insurance Company
- ---------------------------------------
By:
Name and Title:
29
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EXHIBIT A TO LETTER DATED APRIL 25, 1997
The Funds subject to this Agreement and applicable annual fees are as follows:
FUND ANNUAL FEE
Strong Special Fund II, Inc. .20%
Strong Variable Insurance Funds, Inc.
Strong Growth Fund II .20%
30
Exhibit (8)(f)
PARTICIPATION AGREEMENT
-----------------------
Among
INVESCO VARIABLE INVESTMENT FUNDS, INC.
---------------------------------------
INVESCO FUNDS GROUP, INC.
-------------------------
and
ANNUITY INVESTORS LIFE INSURANCE COMPANY
----------------------------------------
THIS AGREEMENT, made and entered into this 30th day of May, 1997 by and
among ANNUITY INVESTORS LIFE INSURANCE COMPANY, (hereinafter the "Insurance
Company"), an Ohio corporation, on its own behalf and on behalf of each
segregated asset account of the Insurance Company set forth on Schedule A hereto
as may be amended from time to time (each such account hereinafter referred to
as the "Account"), INVESCO VARIABLE INVESTMENT FUNDS, INC., a Maryland
corporation (the "Company") and INVESCO FUNDS GROUP, INC.
("INVESCO"), a Delaware corporation.
WHEREAS, the Company engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable annuity and life insurance contracts
to be offered by insurance companies which have entered into participation
agreements substantially identical to this Agreement ("Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Company is divided into several
series of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Company has obtained an order from the Securities and
Exchange Commission (the "Commission"), dated December 29, 1993 (File No.
812-8590), granting Participating Insurance Companies and their separate
accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and
15(b) of the 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 Company 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 (the "Mixed and Shared Funding
Exemptive Order"); and
WHEREAS, the Company is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
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WHEREAS, INVESCO is duly registered as an investment adviser under the
Investment Advisers Act of 1940 and any applicable state securities law and as a
broker dealer under the Securities Exchange Act of 1934, as amended, (the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Insurance Company has registered under the 1933 Act, or will
register under the 1933 Act, certain variable annuity contracts identified by
the form number(s) listed on Schedule B to this Agreement, as amended from time
to time hereafter by mutual written agreement of all the parties hereto (the
"Contracts"); and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the board of directors of the
Insurance Company on the date shown for that Account on Schedule A hereto, to
set aside and invest assets attributable to the Contracts; and
WHEREAS, the Insurance Company has registered or will register each
Account as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurance Company intends to purchase shares in the Funds on
behalf of the Accounts to fund the Contracts and INVESCO 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 Insurance
Company, the Company and INVESCO agree as follows:
ARTICLE I. SALE OF COMPANY SHARES
1.1. INVESCO agrees to sell to the Insurance Company those shares of the
Company which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Company or its designee of
the order for the shares of the Company. For purposes of this Section 1.1, the
Insurance Company shall be the designee of the Company for receipt of such
orders from the Accounts and receipt by such designee shall constitute receipt
by the Company; provided that the Company receives notice of such order by 9:00
a.m., Mountain Time, on the next following Business Day. "Business Day" shall
mean any day on which the New York Stock Exchange is open for trading and on
which the Company calculates its net asset value pursuant to the rules of the
Commission.
1.2. The Company agrees to make its shares available for purchase at the
applicable net asset value per share by the Insurance Company and its Accounts
on those days on which the Company calculates its Funds' net asset values
2
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pursuant to rules of the Commission and the Company shall use reasonable efforts
to calculate its Funds' net asset values on each day on which the New York Stock
Exchange is open for trading. Notwithstanding the foregoing, the board of
directors of the Company (hereinafter the "Board") may refuse to sell shares of
any Fund to any person, or suspend or terminate the offering of shares of any
Fund if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board acting in good faith and
in light of their fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of that Fund.
1.3. The Company and INVESCO agree that shares of the Company will be sold
only to Participating Insurance Companies and their separate accounts. No shares
of any Fund will be sold to the general public.
1.4. The Company and INVESCO will not sell Company shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Sections 2.1, 3.4, 3.5 and Article VII of this
Agreement is in effect to govern such sales.
1.5. The Company agrees to redeem, on the Insurance Company's request, any
full or fractional shares of the Company held by the Insurance Company,
executing such requests on a daily basis at the net asset value next computed
after receipt by the Company or its designee of the request for redemption. For
purposes of this Section 1.5, the Insurance Company shall be the designee of the
Company for receipt of requests for redemption from each Account and receipt by
that designee shall constitute receipt by the Company; provided that the Company
receives notice of the request for redemption by 9:00 a.m., Mountain Time, on
the next following Business Day.
1.6. The Insurance Company agrees to purchase and redeem the shares of
each Fund offered by the then-current prospectus of the Company in accordance
with the provisions of that prospectus.
1.7. The Insurance Company shall pay for Company shares by 9:00 a.m.,
Mountain Time, on the next Business Day after an order to purchase Company
shares is made in accordance with the provisions of Section 1.1 hereof. Payment
shall be in federal funds transmitted by wire. For the purpose of Sections 2.10
and 2.11, upon receipt by the Company of the federal funds so wired, such funds
shall cease to be the responsibility of the Insurance Company and shall become
the responsibility of the Company. Payment of aggregate redemption proceeds
(aggregate redemptions of a Fund's shares by an Account) ordinarily will be made
by wiring federal funds to the Insurance Company on the next Business Day after
receipt of the redemption request, but in any event within seven days after
receipt of the redemption request. Notwithstanding the foregoing, in the event
3
<PAGE>
that one or more Funds has insufficient cash on hand to pay aggregate
redemptions on the next Business Day, and if such Fund has determined to settle
redemption transactions for all of its shareholders on a delayed basis (more
than one Business Day, but in no event more than seven calendar days, after the
date on which the redemption order is received, unless otherwise permitted by an
order of the Commission under Section 22(e) of the 1940 Act), the Company shall
be permitted to delay sending redemption proceeds to the Insurance Company by
the same number of days that the Company is delaying sending redemption proceeds
to the other shareholders of the Fund.
Redemptions of up to the lesser of $250,000 or 1% of the net asset value
of the Fund whose shares are to be redeemed in any 90-day period will be made in
cash. Redemptions in excess of that amount in any 90-day period may, in the sole
discretion of the Company, be in-kind redemptions, with the securities to be
delivered in payment of redemptions selected by the Company and valued at the
value assigned to them in computing the Fund's net asset value per share,
provided that (i) such in-kind redemptions are permitted under applicable
provisions of the 1940 Act and (ii) the Company at such time utilizes in-kind
redemptions under this Section 1.7 with respect to other Participating Insurance
Companies with redemptions in excess of $250,000 within any 90-day period.
1.8. Issuance and transfer of the Company's shares will be by book entry
only. Stock certificates will not be issued to the Insurance Company or any
Account. Shares ordered from the Company will be recorded in an appropriate
title for each Account or the appropriate subaccount of each Account.
1.9. The Company shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Insurance Company of any income,
dividends or capital gain distributions payable on the Funds' shares. The
Insurance Company hereby elects to receive all income dividends and capital gain
distributions payable on a Fund's shares in additional shares of that Fund. The
Insurance Company reserves the right to revoke this election and to receive all
such income dividends and capital gain distributions in cash. The Company shall
notify the Insurance Company of the number of shares issued as payment of
dividends and distributions.
1.10. The Company shall make the net asset value per share for each Fund
available to the Insurance Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make those per-share net asset values available via facsimile by
5:00 p.m., Mountain Time.
4
<PAGE>
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Insurance Company represents and warrants that the Contracts are,
or will be, registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable federal and
state laws and that the sale of the Contracts shall comply in all material
respects with applicable state insurance suitability requirements. The Insurance
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 prior to any issuance or sale thereof as a
segregated asset account under Section 3907.15 of the Ohio Revised Code and has
registered, or prior to any issuance or sale of the Contracts will register, 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.
2.2. The Company represents and warrants that Company shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sale in compliance with the laws of the State of Maryland and all
applicable federal securities laws and that the Company is and shall remain
registered under the 1940 Act. The Company 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
Company shall register and qualify the shares for sale in accordance with the
laws of the various states only if and to the extent deemed advisable by the
Company or INVESCO.
2.3. The Company represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain that
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the 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.
2.4. The Insurance Company represents and warrants that the Contracts are
currently treated as annuity contracts, under applicable provisions of the Code
and that it will make every effort to maintain such treatment and that it will
notify the Company and INVESCO immediately upon having a reasonable basis for
believing that the Contracts have ceased to be so treated or that they might not
be so treated in the future.
2.5. The Company currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1, the Company undertakes
to have a board of directors, a majority of whom are not interested persons of
the Company, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
5
<PAGE>
2.6. The Company makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.7. INVESCO represents and warrants that it is a member in good standing
of the NASD and is registered as a broker-dealer with the Commission. INVESCO
further represents that it will sell and distribute the Company shares in
accordance with the laws of the State of Ohio and all applicable state and
federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Company represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and that it does and will
comply in all material respects with the 1940 Act.
2.9. INVESCO represents and warrants that it is and shall remain duly
registered in all material respects under all applicable federal and state
securities laws and that it shall perform its obligations for the Company in
compliance in all material respects with the laws of the State of Colorado and
any applicable state and federal securities laws.
2.10. The Company and INVESCO represent and warrant that all of their
officers, employees, investment advisers, investment sub-advisers, and other
individuals or entities dealing with the money and/or securities of the Company
are, and shall continue to be at all times, covered by a blanket fidelity bond
or similar coverage for the benefit of the Company in an amount not less than
the minimum coverage required currently by Section 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. That fidelity bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Insurance Company represents and warrants that all of its
officers, employees, investment advisers, and other individuals or entities
dealing with the money and/or securities of the Company are and shall continue
to be at all times covered by a blanket fidelity bond or similar coverage for
the benefit of the Company, in an amount not less than the minimum coverage
required currently for entities subject to the requirements of Rule 17g-1 of the
1940 Act or related provisions or may be promulgated from time to time. The
aforesaid Bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company. The Insurance Company further represents
and warrants that the employees of Insurance Company, or such other persons
designated by Insurance Company, listed on Schedule C have been authorized by
all necessary action of Insurance Company to give directions, instructions and
certifications to the Company and INVESCO on behalf of Insurance Company. The
Company and INVESCO are authorized to act and rely upon any directions,
instructions and certifications received from such persons unless and until they
have been notified in writing by the Insurance Company of a change in such
persons, and the Company and INVESCO shall incur no liability in doing so.
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<PAGE>
2.12. The Insurance Company represents and warrants that it will not
purchase Company shares with Account assets derived from tax-qualified
retirement plans except indirectly, through Contracts purchased in connection
with such plans.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. INVESCO shall provide the Insurance Company (at the Insurance
Company's expense) with as many copies of the Company's current prospectus as
the Insurance Company may reasonably request. If requested by the Insurance
Company in lieu thereof, the Company shall provide such documentation (including
a final copy of the new prospectus as set in type at the Company's expense) and
other assistance as is reasonably necessary in order for the Insurance Company
once each year (or more frequently if the prospectus for the Company is amended)
to have the prospectus for the Contracts and the Company's prospectus printed
together in one document (at the Insurance Company's expense).
3.2. The Company's prospectus shall state that the Statement of Additional
Information for the Company (the "SAI") is available from INVESCO (or in the
Company's discretion, the Prospectus shall state that the SAI is available from
the Company), and INVESCO (or the Company), at its expense, shall print and
provide the SAI free of charge to the Insurance Company and to any owner of a
Contract or prospective owner who requests the SAI.
3.3. The Company, at its expense, shall provide the Insurance Company with
copies of its proxy material, reports to stockholders and other communications
to stockholders in such quantity as the Insurance Company shall reasonably
require for distributing to Contract owners.
3.4. If and to the extent required by law, the Insurance Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Company shares in accordance with instructions
received from Contract owners; and
(iii) vote Company shares for which no instructions have been
received in the same proportion as Company shares of such
portfolio for which instructions have been received:
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<PAGE>
so long as and to the extent that the Commission continues to interpret the 1940
Act to require pass-through voting privileges for variable contract owners. The
Insurance Company reserves the right to vote Company shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that each of
their separate accounts participating in the Company calculates voting
privileges in a manner consistent with the standards set forth on Schedule D
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies. The Insurance
Company shall fulfill its obligations under, and abide by the terms and
conditions of, the Mixed and Shared Funding Exemptive Order.
3.5. The Company will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Company will either provide for
annual meetings (except insofar as the Commission may interpret Section 16 of
the 1940 Act not to require such meetings) or, as the Company currently intends,
comply with Section 16(c) of the 1940 Act (although the Company 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 Company will act in
accordance with the Commission's interpretation of the requirements of Section
16(a) with respect to periodic elections of directors and with whatever rules
the Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Insurance Company 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, a sub-adviser of one of the Funds, or
INVESCO is named, at least fifteen calendar days prior to its use. No such
material shall be used if the Company or its designee objects to such use within
ten calendar days after receipt of such material.
4.2. The Insurance Company shall not give any information or make any
representations or statements on behalf of the Company or concerning the Company
in connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Company's shares, as such registration statement and prospectus may be amended
or supplemented from time to time, or in reports or proxy statements for the
Company, or in sales literature or other promotional material approved by the
Company or its designee or by INVESCO, except with the permission of the Company
or INVESCO.
8
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4.3. The Company, INVESCO, or its designee shall furnish, or shall cause
to be furnished, to the Insurance Company or its designee, each piece of sales
literature or other promotional material in which the Insurance Company and/or
its separate account(s), is named at least fifteen calendar days prior to its
use. No such material shall be used if the Insurance Company or its designee
object to such use within ten calendar days after receipt of that material.
4.4. The Company and INVESCO shall not give any information or make any
representations on behalf of the Insurance Company or concerning the Insurance
Company, the Account, or the Contracts other than the information or
representations contained in a registration statement or prospectus for the
Contracts, as that registration statement and prospectus may be amended or
supplemented from time to time, or in published reports for the Account which
are in the public domain or approved by the Insurance Company for distribution
to Contract owners, or in sales literature or other promotional material
approved by the Insurance Company or its designee, except with the permission of
the Insurance Company.
4.5. The Company will provide to the Insurance Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, proxy statement, piece of sales literature or
other promotional material, application for exemption, request for no-action
letter, and any amendment to any of the above, that relate to the Company or its
shares, contemporaneously with the filing of the document with the Commission,
the NASD, or other regulatory authorities.
4.6. The Insurance Company will provide to the Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, solicitation for voting instructions, piece of
sales literature and other promotional material, application for exemption,
request for no action letter, and any amendment to any of the above, that
relates to the Contracts or the Account, contemporaneously with the filing of
the document with the Commission, the NASD, or other regulatory authorities.
4.7. For purposes of this Agreement, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements,
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media, sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees, and registration
statements, prospectuses, statements of additional information, shareholder
reports, and proxy materials.
9
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4.8. At the request of any party to this Agreement, each other party will
make available to the other party's independent auditors and/or representative
of the appropriate regulatory agencies, all records, data and access to
operating procedures that may be reasonably requested. Company agrees that
Insurance Company shall have the right to inspect, audit and copy all records
pertaining to the performance of services under this Agreement pursuant to the
requirements of the Ohio Department of Insurance. However, Company and INVESCO
shall own and control all of their respective records pertaining to their
performance of the services under this Agreement.
ARTICLE V. FEES AND EXPENSES
5.1. The Company and INVESCO shall pay no fee or other compensation to the
Insurance Company under this agreement, except that if the Company or any Fund
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then INVESCO may make payments to the Insurance Company if and in
amounts agreed to by INVESCO in writing, subject to review by the board of
directors of the Company. No such payments shall be made directly by the
Company.
5.2. All expenses incident to performance by the Company under this
Agreement shall be paid by the Company. The Company shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Company or
INVESCO, in accordance with applicable state laws prior to their sale. The
Company shall bear the expenses for the cost of registration and qualification
of the Company's shares, preparation and filing of the Company's prospectus and
registration statement, proxy materials and reports, setting the prospectus in
type, setting in type and printing the proxy materials and reports to
shareholders (including the costs of printing a prospectus that constitutes an
annual report), the preparation of all statements and notices required by any
federal or state law, and all taxes on the issuance or transfer of the Company's
shares.
5.3. The Insurance Company shall bear the expenses of printing and
distributing to Contract owners the Contract prospectuses and of distributing to
Contract owners the Company's prospectus, proxy materials and reports.
ARTICLE VI. DIVERSIFICATION
6.1. The Company will, at the end of each calendar quarter, comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5 relating to the
diversification requirements for variable annuity, endowment, modified endowment
or life insurance contracts and any amendments or other modifications to that
Section or Regulation.
10
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ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Company for the existence of any material
irreconcilable conflict between the interests of the variable contract owners of
all separate accounts investing in the Company. 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 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 Fund are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by a Participating Insurance Company to
disregard the voting instructions of variable contract owners. The Board shall
promptly inform the Insurance Company if it determines that an irreconcilable
material conflict exists and the implications thereof. The Board shall have sole
authority to determine whether an irreconcilable material conflict exists and
such determination shall be binding upon the Insurance Company.
7.2 The Insurance Company will report promptly any potential or existing
conflicts of which it is aware to the Board. The Insurance Company will assist
the Board in carrying out its responsibilities under the Mixed and Shared
Funding Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Insurance Company to inform the Board whenever
Contract owner voting instructions are to be disregarded. Such responsibilities
shall be carried out by Insurance Company with a view only to the interests of
the Contract owners.
7.3. If it is determined by a majority of the Board, or a majority of its
directors who are not interested persons of the Company, INVESCO, or any
sub-adviser to any of the Funds (the "Independent Directors"), that a material
irreconcilable conflict exists, the Insurance Company and/or other Participating
Insurance Companies shall, at their expense and to the extent reasonably
practicable (as determined by a majority of the Independent Directors), take
whatever steps are necessary to remedy or eliminate the irreconcilable material
conflict, up to and including: (1), withdrawing the assets allocable to some or
all of the separate accounts from the Company or any Fund and reinvesting those
assets in a different investment medium, including (but not limited to) another
Fund of the Company, or submitting the question 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 (e.g., annuity
11
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contract owners, life insurance contract owners, or variable contract owners of
one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected variable contract owners the option of
making such a change; and (2), establishing a new registered management
investment company or managed separate account and obtaining approval thereof by
the Commission.
7.4. If a material irreconcilable conflict arises because of a decision by
the Insurance Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Insurance Company may be required, at the Company's election, to withdraw the
affected Account's investment in the Company and terminate this Agreement with
respect to that Account; provided, however that such withdrawal and termination
shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the Independent Directors. Any such
withdrawal and termination must take place within six (6) months after the
Company gives written notice that this provision is being implemented, and until
the end of that six month period INVESCO and the Company shall continue to
accept and implement orders by the Insurance Company for the purchase (and
redemption) of shares of the Company.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Insurance Company
conflicts with the majority of other state regulators, then the Insurance
Company will withdraw the affected Account's investment in the Company and
terminate this Agreement with respect to that Account within six months after
the Board informs the Insurance Company in writing that it has determined that
the state insurance regulator's decision has created an irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the Independent Directors. Until the end of the
foregoing six month period, INVESCO and the Company shall continue to accept and
implement orders by the Insurance Company for the purchase (and redemption) of
shares of the Company.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the Independent Directors shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Company be required to establish a new funding medium for the
Contracts. The Insurance Company shall not be required by Section 7.3 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely affected
by the irreconcilable material conflict. In the event that the Board determines
that any proposed action does not adequately remedy any irreconcilable material
12
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conflict, then the Insurance Company will withdraw the Account's investment in
the Company and terminate this Agreement within six (6) months after the Board
informs the Insurance Company in writing of the foregoing determination,
provided, however, that the withdrawal and termination shall be limited to the
extent required by the material irreconcilable conflict, as determined by a
majority of the Independent Directors.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the 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 Company and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent those rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3,
7.4, and 7.5 of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to those Sections are contained in
the Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE INSURANCE COMPANY
8.1(a). The Insurance Company agrees to indemnify and hold harmless the
Company and each director of the Board and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for 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 Insurance Company) or litigation
(including reasonable legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Company's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement or prospectus for the Contracts or contained in the
Contracts or sales literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made
in reliance upon and in conformity with information furnished in
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<PAGE>
writing to the Insurance Company by or on behalf of the Company for
use in the registration statement or prospectus for the Contracts or
in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or shares of the Company;
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature of the
Company not supplied by the Insurance Company, or persons under its
control) or wrongful conduct of the Insurance Company or persons
under its control, with respect to the sale or distribution of the
Contracts or Company 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 Company 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 in writing to the Company by or on behalf of the Insurance
Company: or
(iv) arise as a result of any failure by the Insurance Company to
provide the services and furnish the materials under the terms of
this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Insurance Company in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Insurance Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Insurance Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party that
may arise from that Indemnified Party's willful misfeasance, bad faith, or
negligence in the performance of that Indemnified Party's duties or by reason of
that Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Company, whichever is applicable.
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<PAGE>
8.1(c). The Insurance Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless that Indemnified Party shall have notified the Insurance Company in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon that
Indemnified Party (or after the Indemnified Party shall have received notice of
such service on any designated agent). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Insurance Company of its obligations hereunder except to the extent
that the Insurance Company has been prejudiced by such failure to give notice.
In addition, any failure by the Indemnified Party to notify the Insurance
Company of any such claim shall not relieve the Insurance Company from any
liability which it may have to the Indemnified Party against whom the action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Insurance Company
shall be entitled to participate, at its own expense, in the defense of the
action. The Insurance Company also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action; PROVIDED,
however, that if the Indemnified Party shall have reasonably concluded that
there may be defenses available to it which are different from or additional to
those available to the Insurance Company, the Insurance Company shall not have
the right to assume said defense, but shall pay the reasonable costs and
expenses thereof (except that in no event shall the Insurance Company be liable
for the fees and expenses of more than one counsel for Indemnified Parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances).
After notice from the Insurance Company to the Indemnified Party of the
Insurance Company's election to assume the defense thereof, and in the absence
of such a reasonable conclusion that there may be different or additional
defenses available to the Indemnified Party, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and the
Insurance Company will not be liable to that party under this Agreement for any
legal or other expenses subsequently incurred by the party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.1(d). The Indemnified Parties will promptly notify the Insurance Company
of the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Company's shares or the Contracts or the
operation of the Company.
15
<PAGE>
8.2. Indemnification by INVESCO
8.2(a). INVESCO agrees to indemnify and hold harmless the Insurance
Company and each of its directors and officers and each person, if any, who
controls the Insurance Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including reasonable
amounts paid in settlement with the written consent of INVESCO) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Company's shares or
the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or prospectus or sales literature of the Company (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 the
statement or omission or alleged statement or omission was made in
reliance upon and in conformity with information furnished in
writing to INVESCO or the Company by or on behalf of the Insurance
Company for use in the registration statement or prospectus for the
Company or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or
Company shares: or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature for the
Contracts not supplied by INVESCO or persons under its control) or
wrongful conduct of the Company, INVESCO or persons under their
control, with respect to the sale or distribution of the Contracts
or shares of the Company; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance upon
information furnished in writing to the Insurance Company by or on
behalf of the Company; or
16
<PAGE>
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or
otherwise, to comply with the diversification requirements specified
in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by INVESCO in this Agreement or
arise out of or result from any other material breach of this
Agreement by INVESCO; as limited by and in accordance with the
provisions of Sections 8.2(b) and 8.2(c) hereof.
8.2(b) INVESCO shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party that may arise from the Indemnified
Party's willful misfeasance, bad faith, or negligence in the performance of the
Indemnified Party's duties or by reason of the Indemnified Party's reckless
disregard of obligations and duties under this Agreement or to the Insurance
Company or the Account, whichever is applicable.
8.2(c) INVESCO shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless the
Indemnified Party shall have notified INVESCO 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 the Indemnified Party (or after
the Indemnified Party shall have received notice of such service on any
designated agent). Notwithstanding the foregoing, the failure of any Indemnified
Party to give notice as provided herein shall not relieve INVESCO of its
obligations hereunder except to the extent that INVESCO has been prejudiced by
such failure to give notice. In addition, any failure by the Indemnified Party
to notify INVESCO of any such claim shall not relieve INVESCO 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, INVESCO will be entitled to
participate, at its own expense, in the defense thereof. INVESCO also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action; PROVIDED, HOWEVER, that if the Indemnified Party shall have
reasonably concluded that there may be defenses available to it which are
different from or additional to those available to INVESCO, INVESCO shall not
17
<PAGE>
have the right to assume said defense, but shall pay the reasonable costs and
expenses thereof (except that in no event shall INVESCO be liable for the fees
and expenses of more than one counsel for Indemnified Parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances).
After notice from INVESCO to the Indemnified Party of INVESCO's election to
assume the defense thereof, and in the absence of such a reasonable conclusion
that there may be different or additional defenses available to the Indemnified
Party, the Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and INVESCO will not be liable to that party under this
Agreement for any legal or other expenses subsequently incurred by that party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.2(d) The Insurance Company agrees to notify INVESCO promptly of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3 INDEMNIFICATION BY THE COMPANY
8.3(a). The Company agrees to indemnify and hold harmless the Insurance
Company, and each of its directors and officers and each person, if any, who
controls the Insurance Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or litigation (including
reasonable legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as those losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements result from the gross negligence, bad faith, willful misconduct, or
reckless disregard of duty of the Board or any member thereof, are related to
the operations of the Company and:
(i) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements
specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company;
as limited by, and in accordance with the provisions of, Sections 8.3(b) and
8.3(c) hereof.
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<PAGE>
8.3(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party that may arise from the
Indemnified Party's willful misfeasance, bad faith, or negligence in the
performance of the Indemnified Party's duties or by reason of the Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Insurance Company, the Company, INVESCO or the Account, whichever is
applicable.
8.3(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless the
Indemnified Party shall have notified the Company in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Indemnified Party (or after
the Indemnified Party shall have received notice of such service on any
designated agent). Notwithstanding the foregoing, the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Company of its
obligations hereunder except to the extent that the Company has been prejudiced
by such failure to give notice. In addition, any failure by the Indemnified
Party to notify the Company of any such claim shall not relieve the Company from
any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties, the Company
will be entitled to participate, at its own expense, in the defense thereof. The
Company also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action; PROVIDED, HOWEVER, that if the
Indemnified Party shall have reasonably concluded that there may be defenses
available to it which are different from or additional to those available to the
Company, the Company shall not have the right to assume said defense, but shall
pay the costs and expenses thereof (except that in no event shall the Company be
liable for the fees and expenses of more than one counsel for Indemnified
Parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances). After notice from the Company to the Indemnified Party of the
Company's election to assume the defense thereof, and in the absence of such a
reasonable conclusion that there may be different or additional defenses
available to the Indemnified Party, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the Company will not
be liable to that party under this Agreement for any legal or other expenses
subsequently incurred by that party independently in connection with the defense
thereof other than reasonable costs of investigation.
19
<PAGE>
8.3(d). The Insurance Company and INVESCO agree promptly to notify the
Company of the commencement of any litigation or proceedings against it or any
of its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Company.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and provisions hereof interpreted
under and in accordance with the laws of the State of Colorado.
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
any exemptions from those statutes, rules and regulations the Commission 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.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon one year advance written notice
to the other parties; provided, however such notice shall not be
given earlier than one year following the date of this Agreement; or
(b) at the option of the Insurance Company to the extent that shares
of Funds are not reasonably available to meet the requirements of
the Contracts as determined by the Insurance Company, provided
however, that such a termination shall apply only to the Fund(s) not
reasonably available. Prompt written notice of the election to
terminate for such cause shall be furnished by the Insurance
Company; or
(c) at the option of the Company in the event that formal
administrative proceedings are instituted against the Insurance
Company by the NASD, the Commission, an insurance commissioner or
any other regulatory body regarding the Insurance Company's duties
under this Agreement or related to the sale of the Contracts, the
operation of any Account, or the purchase of the Company's shares,
and the Company determines in its sole judgment exercised in good
faith, that any such administrative proceedings will have a material
adverse effect upon the ability of the Insurance Company to perform
its obligations under this Agreement; or
20
<PAGE>
(d) at the option of the Insurance Company in the event that formal
administrative proceedings are instituted against the Company or
INVESCO by the NASD, the Commission, or any state securities or
insurance department or any other regulatory body, and the Insurance
Company determines in its sole judgment exercised in good faith,
that any such administrative proceedings will have a material
adverse effect upon the ability of the Company or INVESCO to perform
its obligations under this Agreement; or
(e) with respect to any Account, upon requisite vote of the Contract
owners having an interest in that Account (or any subaccount) to
substitute the shares of another investment company for the
corresponding Fund shares in accordance with the terms of the
Contracts for which those Fund shares had been selected to serve as
the underlying investment media. The Insurance Company will give at
least 30 days' prior written notice to the Company of the date of
any proposed vote to replace the Company's shares; or
(f) at the option of the Insurance Company, in the event any of the
Company's shares are not registered, issued or sold in accordance
with applicable state and/or federal law or exemptions therefrom, or
such law precludes the use of those shares as the underlying
investment media of the Contracts issued or to be issued by the
Insurance Company; or
(g) at the option of the Insurance Company, if the Company ceases to
qualify as a regulated investment company under Subchapter M of the
Code or under any successor or similar provision, or if the
Insurance Company reasonably believes that the Company may fail to
so qualify; or
(h) at the option of the Insurance Company, if the Company fails
to meet the diversification requirements specified in Article VI
hereof; or
(i) at the option of either the Company or INVESCO, if (1) the
Company or INVESCO, respectively, shall determine, in their sole
judgment reasonably exercised in good faith, that the Insurance
Company has suffered a material adverse change in its business or
financial condition or is the subject of material adverse publicity
and that material adverse change or material adverse publicity will
have a material adverse impact upon the business and operations of
either the Company or INVESCO, (2) the Company or INVESCO shall
notify the Insurance Company in writing of that determination and
its intent to terminate this Agreement, and (3) after considering
21
<PAGE>
the actions taken by the Insurance Company and any other changes in
circumstances since the giving of such a notice, the determination
of the Company or INVESCO shall continue to apply on the sixtieth
(60th) day following the giving of that notice, which sixtieth day
shall be the effective date of termination; or
(j) at the option of the Insurance Company, if (1) the Insurance
Company shall determine, in its sole judgment reasonably exercised
in good faith, that either the Company or INVESCO has suffered a
material adverse change in its business or financial condition or is
the subject of material adverse publicity and that material adverse
change or material adverse publicity will have a material adverse
impact upon the business and operations of the Insurance Company,
(2) the Insurance Company shall notify the Company and INVESCO in
writing of the determination and its intent to terminate the
Agreement, and (3) after considering the actions taken by the
Company and/or INVESCO and any other changes in circumstances since
the giving of such a notice, the determination shall continue to
apply on the sixtieth (60th) day following the giving of the notice,
which sixtieth day shall be the effective date of termination.
10.2. It is understood and agreed that the right of any party hereto
to terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3 NOTICE REQUIREMENT. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to
terminate, which notice shall set forth the basis for the termination.
Furthermore,
(a) in the event that any termination is based upon the provisions
of Article VII, or the provisions of Section 10.1(a), 10.1(i), or
10.1(j) of this Agreement, the prior written notice shall be given
in advance of the effective date of termination as required by those
provisions; and
(b) in the event that any termination is based upon the provisions
of Section 10.1(c) or 10.1(d) of this Agreement, the prior written
notice shall be given at least ninety (90) days before the effective
date of termination.
10.4. EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Company and INVESCO shall at the option of the Insurance Company,
continue to make available additional shares of the Company pursuant to the
terms and conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement ("Existing Contracts").
22
<PAGE>
Specifically, without limitation, the owners of the Existing Contracts shall be
permitted to reallocate investments in the Company, redeem investments in the
Company and/or invest in the Company upon the making of additional purchase
payments under the Existing Contracts. The parties agree that this Section 10.4
shall not apply to any terminations under Article VII and the effect of Article
VII terminations shall be governed by Article VII of this Agreement.
10.5. The Insurance Company shall not redeem Company shares attributable
to the Contracts (as opposed to Company shares attributable to the Insurance
Company's assets held in the Account) except (i) as necessary to implement
Contract-owner-initiated transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (a "Legally Required Redemption"). Upon request, the Insurance
Company will promptly furnish to the Company and INVESCO the opinion of counsel
for the Insurance Company (which counsel shall be reasonably satisfactory to the
Company and INVESCO) to the effect that any redemption pursuant to clause (ii)
above is a Legally Required Redemption.
ARTICLE XI. NOTICES.
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of that other party set forth
below or at such other address as the other party may from time to time specify
in writing.
If to the Company:
P.O. Box 173706
Denver, Colorado 80217-3706
Attention: General Counsel
If to the Insurance Company:
250 East Fifth Street
Cincinnati, Ohio 45202
Attention: General Counsel
If to INVESCO:
P.O. Box 173706
Denver, Colorado 80217-3706
Attention: General Counsel
23
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ARTICLE XII. MISCELLANEOUS
12.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party unless and until that information may come into the public
domain.
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 shall constitute one and the same
instrument.
12.4. 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.
12.5. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Commission, the NASD and state insurance regulators) and shall permit those
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.6. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.7. No party may assign this Agreement without the prior written
consent of the others.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Insurance Company:
ANNUITY INVESTORS LIFE INSURANCE COMPANY
By its authorized officer,
By:
Title:
Date:
Company:
INVESCO VARIABLE INVESTMENT FUNDS, INC.
By its authorized officer,
By:
Title:Treasurer and Chief Financial
and Accounting Officer
Date: May 30, 1997
INVESCO:
INVESCO FUNDS GROUP, INC.
By its authorized officer,
By:
Title:Senior Vice President and
Treasurer
Date:May 30, 1997
25
<PAGE>
SCHEDULE A
----------
ACCOUNTS
--------
Name of Account Date of Resolution of Insurance Company's Board
which Established the Account
Annuity Investors Variable
Account B December 19, 1996
26
<PAGE>
SCHEDULE B
----------
CONTRACTS
---------
1. Contract Form
27
<PAGE>
SCHEDULE C
----------
PERSONS AUTHORIZED TO GIVE INSTRUCTIONS TO THE COMPANY AND INVESCO
------------------------------------------------------------------
NAME ADDRESS AND PHONE NUMBER
(1)_____________________________________
___________________________________
Print or Type Name
_____________________________________
Phone:_________________________________
Signature
(2)_____________________________________
___________________________________
Print or Type Name
_____________________________________
Phone:_________________________________
Signature
(3)_____________________________________
___________________________________
Print or Type Name
_____________________________________
Phone:_________________________________
Signature
(4)_____________________________________
___________________________________
Print or Type Name
_____________________________________
Phone:_________________________________
Signature
28
<PAGE>
Schedule D
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Company by INVESCO, the Company and the
Insurance Company. The defined terms herein shall have the meanings assigned in
the Participation Agreement except that the term "Insurance Company" shall also
include the department or third party assigned by the Insurance Company to
perform the steps delineated below.
1. The number of proxy proposals is given to the Insurance Company by INVESCO
as early as possible before the date set by the Company for the
shareholder meeting to facilitate the establishment of tabulation
procedures. At this time INVESCO will inform the Insurance Company of the
Record, Mailing and Meeting dates. This will be done verbally
approximately two months before meeting.
2. Promptly after the Record Date, the Insurance Company will perform a "tape
run", or other activity, which will generate the names, addresses and
number of units which are attributed to each contractowner/policyholder
(the "Customer") as of the Record Date. Allowance should be made for
account adjustments made after this date that could affect the status of
the Customers' accounts of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Insurance Company will use its best
efforts to call in the number of Customers to INVESCO, as soon
as possible, but no later than one week after the Record Date.
3. The text and format for the Voting Instruction Cards ("Cards" or "Card")
is provided to the Insurance Company by the Company. The Insurance
Company, at its expense, shall produce and personalize the Voting
Instruction cards. The Legal Department of INVESCO ("INVESCO Legal") must
approve the Card before it is printed. Allow approximately 2-4 business
days for printing information on the Cards. Information commonly found on
the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and
verification of votes (already on Cards as printed
by the Company).
(This and related steps may occur later in the chronological process due
to possible uncertainties relating to the proposals.)
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<PAGE>
4. During this time, INVESCO Legal will develop, produce, and the Company
will pay for the Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to Insurance
Company for insertion into envelopes (envelopes and return envelopes are
provided and paid for by the Insurance Company). Contents of envelope sent
to customers by Insurance Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. Return envelope (postage pre-paid by Insurance Company)
addressed to the Insurance Company or its tabulation agent
d. "Urge buckslip" - optional, but recommended. (This is a
small, single sheet of paper that requests Customers to vote
as quickly as possible and that their vote is important. One
copy will be supplied by the Company.)
e. Cover letter - optional, supplied by Insurance Company and
reviewed and approved in advance by INVESCO Legal.
5. The above contents should be received by the Insurance Company
approximately 3-5 business days before mail date. Individual in charge at
Insurance Company reviews and approves the contents of the mailing package
to ensure correctness and completeness. Copy of this approval sent to
INVESCO Legal.
6. Package mailed by the Insurance Company.
* The Company MUST allow at least a 15-day solicitation
time to the Insurance Company as the shareowner. (A 5-week period is
recommended.) Solicitation time is calculated as calendar days from
(but NOT including) the meeting, counting backwards.
7. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal
procedure.
8. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to the Customer with an explanatory letter, a
new Card and return envelope. The mutilated or illegible Card is
disregarded and considered to be NOT RECEIVED for purposes of vote
tabulation. Such mutilated or illegible Cards are "hand verified," i.e.,
examined as to why they did not complete the system. Any questions on
those Cards are usually remedied individually.
30
<PAGE>
9. There are various control procedures used to ensure proper tabulation of
votes and accuracy of the tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
10. The actual tabulation of votes is done in units which are then converted
to shares. (It is very important that the Company receives the tabulations
stated in terms of a percentage and the number of shares.) INVESCO Legal
must review and approve tabulation format.
11. Final tabulation in shares is verbally given by the Insurance Company to
INVESCO Legal on the morning of the meeting not later than 10:00 a.m.
Denver time. INVESCO Legal may request an earlier deadline if required to
calculate the vote in time for the meeting.
12. A Certificate of Mailing and Authorization to Vote Shares will be required
from the Insurance Company as well as an original copy of the final vote.
INVESCO Legal will provided a standard form for each Certification.
13. The Insurance Company will be required to box and archive the Cards
received from the Customers. In the event that any vote is challenged or
if otherwise necessary for legal, regulatory, or accounting purposes,
INVESCO Legal will be permitted reasonable access to such Cards.
14. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
31
Exhibit (8)(g)
PARTICIPATION AGREEMENT
AMONG
MORGAN STANLEY UNIVERSAL FUNDS, INC.,
MORGAN STANLEY ASSET MANAGEMENT INC.
MILLER ANDERSON & SHERRERD, LLP
AND
ANNUITY INVESTORS LIFE INSURANCE COMPANY
DATED AS OF
MAY 1, 1997
<PAGE>
TABLE OF CONTENTS
- -----------------
PAGE
ARTICLE I. Purchase of Fund Shares 2
ARTICLE II Representations and Warranties 5
ARTICLE III. Prospectuses, Reports to Shareholders
and Proxy Statements, Voting 6
ARTICLE IV. Sales Material and Information 8
ARTICLE V Fees and Expenses 10
ARTICLE VI. Diversification 10
ARTICLE VII. Potential Conflicts 11
ARTICLE VIII. Indemnification 13
ARTICLE IX. Applicable Law 19
ARTICLE X. Termination 19
ARTICLE XI. Notices 21
ARTICLE XII. Miscellaneous 22
SCHEDULE A Portfolios of Morgan Stanley Universal Funds A-1
Available for Purchase by Annuity Investors
Life Insurance Company
SCHEDULE B Separate Accounts and Contracts B-1
SCHEDULE C Proxy Voting Procedures
<PAGE>
THIS AGREEMENT, made and entered into as of the 1st day of May 1997 by and
among ANNUITY INVESTORS LIFE INSURANCE COMPANY (hereinafter the "Company"), an
Ohio corporation, on its own behalf and on behalf of each separate account of
the Company set forth on Schedule B hereto as may be amended from time to time
(each such account hereinafter referred to as the "Account"), and MORGAN STANLEY
UNIVERSAL FUNDS, INC. (hereinafter the "Fund"), a Maryland corporation, and
MORGAN STANLEY ASSET MANAGEMENT INC. and MILLER ANDERSON & SHERRERD, LLP
(hereinafter collectively the "Advisers" and individually the "Adviser"), a
Delaware corporation and a Pennsylvania limited liability partnership,
respectively.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as (i) the investment vehicle for separate
accounts established by insurance companies for individual and group life
insurance policies and annuity contracts with variable accumulation and/or
pay-out provisions (hereinafter referred to individually and/or collectively as
"Variable Insurance Products") and (ii) the investment vehicle for certain
qualified pension and retirement plans (hereinafter "Qualified Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an investment
vehicle under their Variable Insurance Contracts enter into participation
agreements with the Fund and the Advisers (the "Participating Insurance
Companies");
WHEREAS, shares of the Fund are divided into several series of shares,
each representing the interest in a particular managed portfolio of securities
and other assets, any one or more of which may be made available under this
Agreement, as may be amended from time to time by mutual agreement of the
parties hereto (each such series hereinafter referred to as a "Portfolio"); and
WHEREAS, the Fund intends to offer shares of the series set forth on
Schedule A (each such series hereinafter referred to as a "Portfolio"), as may
be amended from time to time by mutual agreement of the parties hereto, under
this Agreement to the Accounts of the Company; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated September 19, 1996 (File No. 812-10118), granting
Participating Insurance Companies and Variable Insurance Product separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended (hereinafter the "1940
Act"), and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
<PAGE>
necessary to permit shares of the Fund to be sold to and held by Variable
Annuity Product separate accounts of both affiliated and unaffiliated life
insurance companies and Qualified Plans (hereinafter the "Shared Funding
Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, each Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws; and
WHEREAS, each Adviser manages certain Portfolios of the Fund; and
WHEREAS, Morgan Stanley & Co. Incorporated (the "Underwriter") is
registered as a broker/dealer under the Securities Exchange Act of 1934, as
amended (hereinafter the "1934 Act"), is a member in good standing of the
National Association of Securities Dealers, Inc. (hereinafter "NASD") and serves
as principal underwriter of the shares of the Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule B
hereto, to set aside and invest assets attributable to the aforesaid Variable
Insurance Product; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid Variable Insurance Products and
the Underwriter is authorized to sell such shares to each such Account at net
asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. PURCHASE OF FUND SHARES
1.1. The Fund agrees to make available for purchase by the Company shares
of the Portfolios set forth on Schedule A and shall execute orders placed for
each Account on a daily basis at the net asset value next computed after receipt
2
<PAGE>
by the Fund or its designee of such order. For purposes of this Section 1.1, the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by 10:00 a.m. Eastern time
on the next following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange is open for trading and on which the Fund calculates
its net asset value pursuant to the rules of the Securities and Exchange
Commission.
1.2. The Fund, so long as this Agreement is in effect, agrees to make its
shares available indefinitely for purchase at the applicable net asset value per
share by the Company and its Accounts on those days on which the Fund calculates
its net asset value pursuant to rules of the Securities and Exchange Commission
and the Fund shall use reasonable efforts to calculate such net asset value on
each day which the New York Stock Exchange is open for trading. Notwithstanding
the foregoing, the Board of Directors of the Fund (hereinafter the "Board") may
refuse to permit the Fund to sell shares of any Portfolio to any person, or
suspend or terminate the offering of shares of any Portfolio if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Board acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of such Portfolio.
1.3. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts and to certain
Qualified Plans. No shares of any Portfolio will be sold to the general public.
1.4. The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of Portfolio shares
offered by the then current prospectus of the Fund shall be made in accordance
with the provisions of such prospectus. The Variable Insurance Products issued
by the Company, under which amounts may be invested in the Fund (hereinafter the
"Contracts"), are listed on Schedule B attached hereto and incorporated herein
3
<PAGE>
by reference, as such Schedule B may be amended from time to time by mutual
written agreement of all of the parties hereto. The Company will give the Fund
and the Adviser 45 days written notice of its intention to make available in the
future, as a funding vehicle under the Contracts, any other investment company
with an investment objective substantially similar to that of any of the Funds
Portfolios offered by the Company.
1.7. The Company shall pay for Fund shares on the next Business Day after
an order to purchase Fund shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire. For
purposes of Section 2.10 and 2.11, upon receipt by the Fund of the federal funds
so wired, such funds shall cease to be the responsibility of the Company and
shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated (normally by 6:30 p.m. Eastern time)
and shall use its best efforts to make such net asset value per share available
by 7:00 p.m. Eastern time.
4
<PAGE>
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established each
Account prior to any issuance or sale thereof as a segregated asset account
under Section 3907.15 of the Ohio Revised Code and has registered or, prior to
any issuance or sale of the Contracts, will register each Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Maryland and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the registration
statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund.
2.3 The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated as
life insurance policies or annuity contracts, under applicable provisions of the
Code and that it will make every effort to maintain such treatment and that it
will notify the Fund immediately upon having a reasonable basis for believing
that the Contracts have ceased to be so treated or that they might not be so
treated in the future.
2.5. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have a board of directors, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
5
<PAGE>
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Maryland and the Fund represents that their respective operations are
and shall at all times remain in material compliance with the laws of the State
of Maryland to the extent required to perform this Agreement.
2.7. The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and that it does and will
comply in all material respects with the 1940 Act.
2.8. Each Adviser represents and warrants that it is and shall remain duly
registered in all material respects under all applicable federal and state
securities laws and that it will perform its obligations for the Fund in
compliance in all material respects with the laws of its state of domicile and
any applicable state and federal securities laws.
2.9. The Fund represents and warrants that its directors, officers,
employees, and other individuals/entities dealing with the money and/or
securities of the Fund are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Fund in an
amount not less than the minimal coverage as required currently by Rule 17g-(1)
of the 1940 Act or related provisions as may be promulgated from time to time.
The aforesaid blanket fidelity bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.10. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage, in an amount not less than the minimum coverage
required currently by Rule 17g-(1) of the 1940 Act or related provisions as may
be promulgated from time to time. The aforesaid includes coverage for larceny
and embezzlement is issued by a reputable bonding company. The Company agrees to
make all reasonable efforts to see that this bond or another bond containing
these provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS; VOTING
3.1. The Fund or its designee shall provide the Company with as many
printed copies of the Fund's current prospectus and statement of additional
information as the Company may reasonably request. If requested by the Company,
in lieu of providing printed copies the Fund shall provide camera-ready film or
computer diskettes containing the Fund's prospectus and statement of additional
information, and such other assistance as is reasonably necessary in order for
the Company once each year (or more frequently if the prospectus and/or
6
<PAGE>
statement of additional information for the Fund is amended during the year) to
have the prospectus for the Contracts and the Fund's prospectus printed together
in one document, and to have the statement of additional information for the
Fund and the statement of additional information for the Contracts printed
together in one document. Alternatively, the Company may print the Fund's
prospectus and/or its statement of additional information in combination with
other fund companies' prospectuses and statements of additional information.
3.2. Except as provided in this Section 3.2., all expenses of printing and
distributing Fund prospectuses and statements of additional information shall be
the expense of the Company. For prospectuses and statements of additional
information provided by the Company to its existing owners of Contracts in order
to update disclosure as required by the 1933 Act and/or the 1940 Act, the cost
of printing shall be borne by the Fund. If the Company chooses to receive
camera-ready film or computer diskettes in lieu of receiving printed copies of
the Fund's prospectus, the Fund will reimburse the Company in an amount equal to
the product of x and y where x is the number of such prospectuses distributed to
owners of the Contracts, and y is the Fund's per unit cost of typesetting and
printing the Fund's prospectus. The same procedures shall be followed with
respect to the Fund's statement of additional information. The Company agrees to
provide the Fund or its designee with such information as may be reasonably
requested by the Fund to assure that the Fund's expenses do not include the cost
of printing any prospectuses or statements of additional information other than
those actually distributed to existing owners of the Contracts.
3.3. The Fund's statement of additional information shall be obtainable
from the Fund, the Company or such other person as the Fund may designate, as
agreed upon by the parties.
3.4. The Fund, at its expense, shall provide the Company with copies of
its proxy statements, reports to shareholders, and other communications (except
for prospectuses and statements of additional information, which are covered in
section 3.1) to shareholders in such quantity as the Company shall reasonably
require for distributing to Contract owners.
3.5. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
7
<PAGE>
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
Portfolio for which instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. The Fund and the Company shall follow the procedures, and shall have the
corresponding responsibilities, for the handling of proxy and voting instruction
solicitations, as set forth in Schedule C attached hereto and incorporated
herein by reference. Participating Insurance Companies shall be responsible for
ensuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule C, which standards will also be provided to the other Participating
Insurance Companies.
3.6. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of directors
and with whatever rules the Commission may promulgate with respect thereto.
3.7. The Fund shall use reasonable efforts to provide Fund prospectuses,
reports to shareholders, proxy materials and other Fund communications (or
camera-ready equivalents) to the Company sufficiently in advance of the
Company's mailing dates to enable the Company to complete, at reasonable cost,
the printing, assembling and/or distribution of the communications in accordance
with applicable laws and regulations.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or the Adviser(s) is named, at least ten Business
Days prior to its use. No such material shall be used if the Fund or its
designee reasonably objects to such use within ten Business Days after receipt
of such material.
4.2. The Company shall 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 or prospectus for the
8
<PAGE>
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, except with the permission of the Fund.
4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company and/or its Account(s) is named
at least ten Business Days prior to its use.
No such material shall be used if the Company or its designee
reasonably objects to such use within ten Business Days after receipt of such
material.
4.4. The Fund and the Advisers shall not give any information or make any
representations on behalf of the Company or concerning the Company, each
Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the investment
in the Fund under the Contracts, contemporaneously with the filing of such
document with the Securities and Exchange Commission or other regulatory
authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (I.E., any written communication distributed or made generally
9
<PAGE>
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund shall pay no fee or other compensation to the Company under
this Agreement, except that if the Fund or any Portfolio adopts and implements a
plan pursuant to Rule 12b-1 to finance distribution expenses, then the
Underwriter may make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Underwriter in writing.
5.2. All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed advisable by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the expenses for
the cost of registration and qualification of the Fund's shares, preparation and
filing of the Fund's prospectus and registration statement, proxy materials and
reports, setting the prospectus in type, setting in type and printing the proxy
materials and reports to shareholders (including the costs of printing a
prospectus that constitutes an annual report), the preparation of all statements
and notices required by any federal or state law, and all taxes on the issuance
or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the scope
of the foregoing, the Fund will at all times comply with Section 817(h) of the
Code and Treasury Regulation 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts and
10
<PAGE>
any amendments or other modifications to such Section or Regulations. In the
event of a breach of this Article VI by the Fund, it will take all reasonable
steps (a) to notify Company of such breach and (b) to adequately diversify the
Fund so as to achieve compliance within the grace period afforded by Regulation
817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by Variable Insurance Product owners; or (f) a decision by a Participating
Insurance Company to disregard the voting instructions of contract owners. The
Board shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of its
disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (I.E., annuity contract owners, life insurance policy
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
11
<PAGE>
7.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
(at the Company's expense); provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
12
<PAGE>
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
------------------------------
8.1(a) The Company agrees to indemnify and hold harmless the Fund and each
member of the Board and officers, and each Adviser and each director and officer
of each Adviser, and each person, if any, who controls the Fund or the Adviser
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" and individually, "Indemnified Party," for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including reasonable legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue
statements or alleged untrue statements of any material fact
contained in the registration statement or prospectus for the
Contracts or contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity
with information furnished to the Company by or on behalf of the
Fund for use in the registration statement or prospectus for the
Contracts or in the Contracts or sales literature (or any amendment
or supplement) or otherwise for use in connection with the sale of
the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained
in the registration statement, prospectus or sales literature of the
Fund not supplied by the Company, or persons under its control and
other than statements or representations authorized by the Fund or
an Adviser) or unlawful conduct of the Company or persons under its
control, with respect to the sale or distribution of the Contracts
or Fund shares; or
(iii) arise out of or as a result of any untrue
statement or alleged untrue statement of a material fact contained
in a registration statement, prospectus, or sales literature of the
13
<PAGE>
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
and in conformity with information furnished to the Fund by or on
behalf of the Company; or
(iv) arise as a result of any failure by the
Company to provide the services and furnish the materials under
the terms of this Agreement; or
(v) arise out of or result from any material
breach of any representation and/or warranty made by the Company in
this Agreement or arise out of or result from any other material
breach of this Agreement by the Company.
Each of sub-section (i) through (v) of this
Section 8.1(a) is limited by and in accordance with the provisions
of Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed against an
Indemnified Party as such may arise from such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations or duties
under this Agreement.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
the Company in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify the Company of any such
claim shall not relieve the Company from any liability which it may
have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case
any such action is brought against the Indemnified Parties, the
Company shall be entitled to participate, at its own expense, in the
defense of such action. The Company also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named in
14
<PAGE>
the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company will not be liable to such party
under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the
Company of the commencement of any litigation or proceedings against
them in connection with the issuance or sale of the Fund shares or
the Contracts or the operation of the Fund.
8.2. INDEMNIFICATION BY THE ADVISERS
8.2(a). Each Adviser agrees, with respect to each Portfolio
that it manages, to indemnify and hold harmless the Company and each
of its directors and officers and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" and individually,
"Indemnified Party," 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 Adviser) or litigation
(including reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any statute, at common
law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of shares of the
Portfolio that it manages or the Contracts and:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any material
fact contained in the registration statement or
prospectus or sales literature of the Fund (or any
amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Fund
by or on behalf of the Company for use in the
15
<PAGE>
registration statement or prospectus for the Fund or in
sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Portfolio shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration statement,
prospectus or sales literature for the Contracts not
supplied by the Fund or persons under its control and
other than statements or representations authorized by
the Company) or unlawful conduct of the Fund, Adviser(s)
or Underwriter or persons under their control, with
respect to the sale or distribution of the Contracts or
Portfolio shares; or
(iii) arise out of or as a result of any untrue
statement or alleged untrue statement of a material fact
contained in a registration statement, prospectus, or
sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission
or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statement or statements therein not misleading, if such
statement or omission was made in reliance upon
information furnished to the Company by or on behalf of
the Fund; or
(iv) arise as a result of any failure by the
Fund to provide the services and furnish the
materials under the terms of this Agreement; or
(v) arise out of or result from any material
breach of any representation and/or warranty made by the
Adviser in this Agreement or arise out of or result from
any other material breach of this Agreement by the
Adviser; as limited by and in accordance with the
provisions of Sections 8.2(b) and 8.2(c) hereof.
8.2(b). An Adviser shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed against an
Indemnified Party as such may arise from such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties
under this Agreement.
16
<PAGE>
8.2(c). An Adviser shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
the Adviser in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify the Adviser of any such
claim shall not relieve the Adviser 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
Adviser will be entitled to participate, at its own expense, in the
defense thereof. The Adviser also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Adviser to such party of the Adviser'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 Adviser will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof
other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Adviser of
the commencement of any litigation or proceedings against it or any
of its officers or directors in connection with the issuance or sale
of the Contracts or the operation of each Account.
8.3. INDEMNIFICATION BY THE FUND
---------------------------
8.3(a). The Fund agrees to indemnify and hold harmless the
Company, and each of its directors and officers and each person, if
any, who controls the Company within the meaning of Section 15 of
the 1933 Act (hereinafter collectively, the "Indemnified Parties"
and individually, "Indemnified Party," for purposes of this Section
8.3) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of
the Fund) or litigation (including reasonable legal and other
expenses) to which the Indemnified Parties may become subject under
any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements result from the gross negligence, bad faith
or willful misconduct of the Board or any member thereof, are
related to the operations of the Fund and:
17
<PAGE>
(i) arise as a result of any failure by
the Fund to provide the services and furnish the
materials under the terms of this Agreement; or
(ii) arise out of or result from any
material breach of any representation and/or warranty
made by the Fund in this Agreement or arise out of or
result from any other material breach of this Agreement
by the Fund;
8.3(b). The Fund shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed against an
Indemnified Party as may arise from such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of
such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this
Agreement.
8.3(c). The Fund shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
the Fund in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify the Fund of any such
claim shall not relieve the Fund from any liability which it may
have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case
any such action is brought against the Indemnified Parties, the Fund
will be entitled to participate, at its own expense, in the defense
thereof. The Fund also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the
Fund will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Company agrees promptly to notify the Fund of the
commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this
Agreement, the issuance or sale of the Contracts, with respect to
the operation of either Account, or the sale or acquisition of
shares of the Fund.
18
<PAGE>
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the
State of New York.
9.2. This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the Securities and Exchange Commission may grant
(including, but not limited to, the Shared Funding Exemptive Order)
and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and
effect until the first to occur of:
(a) termination by any party for any reason by sixty (60)
days advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund
and the Adviser with respect to any Portfolio based upon the
Company's determination that shares of such Portfolio is not
reasonably available to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund
and the Adviser with respect to any Portfolio in the event any of
the Portfolio's shares are not registered, issued or sold in
accordance with applicable state and/or federal law or such law
precludes the use of such shares as the underlying investment media
of the Contracts issued or to be issued by the Company; or
(d) termination by the Company by written notice to the Fund
and the Adviser with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company under
Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Fund may
fail to so qualify; or
19
<PAGE>
(e) termination by the Company by written notice to the Fund
and the Adviser with respect to any Portfolio in the event that such
Portfolio falls to meet the diversification requirements specified
in Article VI hereof; or
(f) termination by either the Fund by written notice to the
Company if the Fund shall determine, in its sole judgment exercised
in good faith, that the Company has suffered a material adverse
change in its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity, or
(g) termination by the Company by written notice to the Fund
and the Adviser, if the Company shall determine, in its sole
judgment exercised in good faith, that either the Fund or the
Adviser has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity; or
(h) termination by the Fund or the Adviser by written notice
to the Company, if the Company gives the Fund and the Adviser the
written notice specified in Section 1.6 hereof and at the time such
notice was given there was no notice of termination outstanding
under any other provision of this Agreement; provided, however any
termination under this Section 10.1(h) shall be effective forty five
(45) days after the notice specified in Section 1.6 was given.
10.2. Notwithstanding any termination of this Agreement, the
Fund shall at the option of the Company, continue to make available
additional shares of the Fund pursuant to the terms and conditions
of this Agreement, for all Contracts in effect on the effective date
of termination of this Agreement (hereinafter referred to as
"Existing, Contracts"). Specifically, without limitation, the owners
of the Existing Contracts shall be permitted to direct reallocation
of investments in the Fund, redemption of investments in the Fund
and/or investment in the Fund upon the making of additional purchase
payments under the Existing Contracts. The parties agree that this
Section 10.2 shall not apply to any terminations under Article VII
and the effect of such Article VII terminations shall be governed by
Article VII of this Agreement.
10.3. The Company shall not redeem Fund shares attributable to
the Contracts (as distinct from Fund shares attributable to the
Company's assets held in the Account) except (i) as necessary to
implement Contract Owner initiated or approved transactions, or (ii)
as required by state and/or federal laws or regulations or judicial
or other legal precedent of general application (hereinafter
20
<PAGE>
referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the Securities and Exchange Commission
pursuant to Section 26(b) of the 1940 Act. Upon request, the Company
will promptly furnish to the Fund the opinion of counsel for the
Company (which counsel shall be reasonably satisfactory to the Fund)
to the effect that any redemption pursuant to clause (ii) above is a
Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contracts, the Company shall not
prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the
Fund 90 days prior written notice of its intention to do so.
ARTICLE XI. 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:
Morgan Stanley Universal Funds, Inc.
1221 Avenue of the Americas
New York, New York 10020
Attention: Harold J. Schaaff, Jr., Esq.
If to Adviser:
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Attention: Harold J. Schaaff, Jr., Esq.
If to Adviser:
Miller Anderson & Sherrerd, LLP
One Tower Bridge
West Conshohocken, Pennsylvania 19428
Attention: Lorraine Truten
21
<PAGE>
If to the Company:
Annuity Investors Life Insurance Company
250 East Fifth Street
Cincinnati, Ohio 45202
Attention: Mark F. Muething, Esq.
ARTICLE XII. MISCELLANEOUS
12.1. All persons dealing with the Fund must look solely to
the property of the Fund for the enforcement of any claims against
the Fund as neither the Board, officers, agents or shareholders
assume any personal liability for obligations entered into on behalf
of the Fund.
12.2. Subject to the requirements of legal process and
regulatory authority, each party hereto shall treat as confidential
the names and addresses of the owners of the Contracts and all
information reasonably identified as confidential in writing by any
other party hereto and, except as permitted by this Agreement, shall
not disclose, disseminate or utilize such names and addresses and
other confidential information until such time as it may come into
the public domain without the express written consent of the
affected party.
12.3. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any
of the provisions hereof or otherwise affect their construction or
effect.
12.4. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one
and the same instrument.
12.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party
and all appropriate governmental authorities (including without
limitation the Securities and Exchange Commission, the National
Association of Securities Dealers and state insurance regulators)
and shall permit such authorities reasonable access to its books and
records in connection with any investigation or inquiry relating to
this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto
further agrees to furnish the Ohio Insurance Commissioner with any
22
<PAGE>
information or reports in connection with services provided under
this Agreement which such Commissioner may request in order to
ascertain whether the insurance operations of the Company are being
conducted in a manner consistent with the Ohio Insurance Regulations
and any other applicable law or regulations.
12.7. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights,
remedies and obligations at law or in equity, which the parties
hereto are entitled to under state and federal laws.
12.8. This Agreement or any of the rights and obligations
hereunder may not be assigned by any party without the prior written
consent of all parties hereto; provided, however, that an Adviser
may assign this Agreement or any rights or obligations hereunder to
any affiliate of or company under common control with the Adviser,
if such assignee is duly licensed and registered to perform the
obligations of the Adviser under this Agreement.
12.9 The Company shall furnish, or shall cause to be
furnished, to the Fund or its designee copies of the following
reports:
(a) the Company's annual statement (prepared under
statutory accounting principles) and annual report (prepared
under generally accepted accounting principles ("GAAP"), if
any), as soon as practical and in any event within 90 days
after the end of each fiscal year;
(b) the Company's quarterly statements (statutory) (and
GAAP, if any), as soon as practical and in any event within 45
days after the end of each quarterly period:
(c) any financial statement, proxy statement, notice or
report of the Company sent to stockholders and/or
policyholders, as soon as practical after the delivery thereof
to stockholders;
(d) any registration statement (without exhibits) and
financial reports of the Company filed with the Securities and
Exchange Commission or any state insurance regulator, as soon
as practical after the filing thereof;
(e) any other report submitted to the Company by
independent accountants in connection with any annual, interim
or special audit made by them of the books of the Company, as
soon as practical after the receipt thereof.
23
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly
authorized representative and its seal to be hereunder affixed
hereto as of the date specified above.
ANNUITY INVESTORS LIFE INSURANCE COMPANY
By: ______________________________
NAME:
TITLE:
MORGAN STANLEY UNIVERSAL FUNDS, INC.
By: ______________________________
NAME:
TITLE:
MORGAN STANLEY ASSET MANAGEMENT INC.
By: ______________________________
NAME:
TITLE:
MILLER ANDERSON & SHERRERD, LLP
By: ______________________________
NAME:
TITLE:
<PAGE>
SCHEDULE A
PORTFOLIOS OF MORGAN STANLEY UNIVERSAL FUNDS
AVAILABLE FOR PURCHASE BY ANNUITY INVESTORS
LIFE INSURANCE COMPANY UNDER THIS AGREEMENT
FIXED INCOME
MID CAP VALUE
VALUE
U.S. REAL ESTATE
EMERGING MARKETS EQUITY
A-1
<PAGE>
SCHEDULE B
SEPARATE ACCOUNTS AND CONTRACTS
<TABLE>
<CAPTION>
NAME OF SEPARATE ACCOUNT AND FORM NUMBER AND NAME OF CONTRACT
DATE ESTABLISHED BY BOARD OF DIRECTORS FUNDED BY SEPARATE ACCOUNT
- -------------------------------------- --------------------------------
<S> <C>
ANNUITY INVESTORS VARIABLE ACCOUNT A - A800(NQ96)-3 INDIVIDUAL FLEXIBLE PREMIUM
MAY 26, 1995 DEFERRED ANNUITY CONTRACT
A800(Q96)-3 INDIVIDUAL FLEXIBLE PREMIUM
DEFERRED ANNUITY
G800(95)-3 GROUP FLEXIBLE PREMIUM
DEFERRED ANNUITY
ANNUITY INVESTORS VARIABLE ACCOUNT B - A801-BD INDIVIDUAL FLEXIBLE PREMIUM
DECEMBER 19, 1996 (NQ REV. 3/97)-3 DEFERRED ANNUITY
A801-BD INDIVIDUAL FLEXIBLE PREMIUM
(Q REV. 3/97)-3 DEFERRED ANNUITY
G801-BD(97)-3 GROUP FLEXIBLE PREMIUM
DEFERRED ANNUITY
</TABLE>
B-1
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
-----------------------
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of voting
instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will inform
the Company of the Record, Mailing and Meeting dates. This will be done
verbally approximately two months before meeting.
. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in this Step #2. The Company will use its best efforts to call
in the number of Customers to the Fund , as soon as possible, but no later
than two weeks after the Record Date.
. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting,
instruction solicitation material. The Fund will provide the last Annual
Report to the Company pursuant to the terms of Section 3.3 of the
Agreement to which this Schedule relates.
. The text and format for the Voting Instruction Cards ("Cards" or "Card")
is provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Fund or its
affiliate must approve the Card before it is printed. Allow approximately
2-4 business days for printing information on the Cards. Information
commonly found on the Cards includes:
C-1
<PAGE>
name (legal name as found on account registration)
. address
. fund or account number
. coding to state number of units
. individual Card number for use in tracking and verification of votes
(already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
. During this time, the Fund will develop, produce and pay for the Notice of
Proxy and the Proxy Statement (one document). Printed and folded notices
and statements will be sent to Company for insertion into envelopes
(envelopes and return envelopes are provided and paid for by the Company).
Contents of envelope sent to Customers by the Company will include:
. Voting Instruction Card(s)
. One proxy notice and statement (one document)
. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
. cover letter - optional, supplied by Company and reviewed and
approved in advance by the Fund.
. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to the Fund.
. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including,) the meeting, counting backwards.
. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort Cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
C-2
<PAGE>
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by the Fund in the past.
. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter and a
new Card and return envelope. The mutilated or illegible Card is
disregarded and considered to be NOT RECEIVED for purposes of vote
tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to why
they did not complete the system. Any questions on those Cards are usually
remedied individually.
. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of SHARES.) The Fund must
review and approve tabulation format.
. Final tabulation in shares is verbally given by the Company to the Fund on
the morning of the meeting not later than 10:00 a.m. Eastern time. The
Fund may request an earlier deadline if reasonable and if required to
calculate the vote in time for the meeting.
. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
The Fund will provide a standard form for each Certification.
C-3
<PAGE>
. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will be
permitted reasonable access to such Cards.
. All approvals and "signing-off' may be done orally, but must always be
followed up in writing.
C-4
EXHIBIT 8(h)
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT made as of the 1st day of May, 1997, by and among the PBHG
INSURANCE SERIES FUND, INC. ("FUND"), a Maryland corporation, PILGRIM BAXTER &
ASSOCIATES, LTD. ("Adviser"), a Delaware corporation, ANNUITY INVESTORS LIFE
INSURANCE COMPANY ("LIFE COMPANY"), a life insurance company organized under the
laws of the State of Ohio.
WHEREAS, FUND is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940, as amended (the "`40 Act"), as
an open-end, diversified management investment company; and
WHEREAS, FUND is organized as a series fund comprised of several
Portfolios ("Portfolios"), with those currently available being listed on
Appendix A hereto; and
WHEREAS, FUND was organized to act as the funding vehicle for certain
variable life insurance and/or variable annuity contracts ("Variable Contracts")
offered by life insurance companies through separate accounts ("Separate
Accounts") of such life insurance companies ("Participating Insurance
Companies"); and
WHEREAS, FUND may also offer its shares to certain qualified pension and
retirement plans ("Qualified Plans"); and
WHEREAS, FUND will apply for an order from the SEC, granting Participating
Insurance Companies and their separate accounts exemptions from the provisions
of Sections 9(a), 13(a), 15(a) and 15(b) of the `40 Act, and Rules 6e-2(b)(15)
and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Portfolios of the FUND to be sold to and held by Variable Contract separate
accounts of both affiliated and unaffiliated Participating Insurance Companies
and Qualified Plans ("Exemptive Order"); and
WHEREAS, LIFE COMPANY has established or will establish one or more
separate accounts ("Separate Accounts") to offer Variable Contracts and is
desirous of having FUND as one of the underlying funding vehicles for such
Variable Contracts; and
WHEREAS, ADVISER is registered with the SEC as an investment adviser under
the Investment Advisers Act of 1940 and as a broker-dealer under the Securities
Exchange Act of 1934, as amended and acts as the FUND's investment adviser; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase shares of FUND to fund the
aforementioned Variable Contracts and FUND is authorized to sell such shares to
LIFE COMPANY at net asset value;
<PAGE>
NOW, THEREFORE, in consideration of their mutual promises, LIFE COMPANY,
FUND, and ADVISER agree as follows:
Article I. SALE OF FUND SHARES
1.1 FUND agrees to make available to the Separate Accounts of LIFE COMPANY
shares of the selected Portfolios as listed on Appendix B for investment of
purchase payments of Variable Contracts allocated to the designated Separate
Accounts as provided in FUND's Registration Statement.
1.2 FUND agrees to sell to LIFE COMPANY those shares of the selected
Portfolios of FUND which LIFE COMPANY orders, executing such orders on a daily
basis at the net asset value next computed after receipt by FUND or its designee
of the order for the shares of FUND. For purposes of this Section 1.2, LIFE
COMPANY shall be the designee of FUND for receipt of such orders from the
designated Separate Account and receipt by such designee shall constitute
receipt by FUND; provided that LIFE COMPANY receives the order by 4:00 p.m. New
York time and FUND receives notice from LIFE COMPANY by telephone or facsimile
(or by such other means as FUND and LIFE COMPANY may agree in writing) of such
order by 8:30 a.m. New York time on the next following Business Day. "Business
Day" shall mean any day on which the New York Stock Exchange is open for trading
and on which FUND calculates its net asset value pursuant to the rules of the
SEC.
1.3 FUND agrees to redeem on LIFE COMPANY's request, any full or
fractional shares of FUND held by LIFE COMPANY, executing such requests on a
daily basis at the net asset value next computed after receipt by FUND or its
designee of the request for redemption, in accordance with the provisions of
this agreement and FUND's Registration Statement. For purposes of this Section
1.3, LIFE COMPANY shall be the designee of FUND for receipt of requests for
redemption from the designated Separate Account and receipt by such designee
shall constitute receipt by FUND; provided that LIFE COMPANY receives the
request for redemption by 4:00 p.m. New York time and FUND receives notice from
LIFE COMPANY by telephone or facsimile (or by such other means as FUND and LIFE
COMPANY may agree in writing) of such request for redemption by 8:30 a.m. New
York time on the next following Business Day.
1.4 FUND shall furnish, on or before the ex-dividend date, notice to LIFE
COMPANY of any income dividends or capital gain distributions payable on the
shares of any Portfolio of FUND. LIFE COMPANY hereby elects to receive all such
income dividends and capital gain distributions as are payable on a Portfolio's
shares in additional shares of the Portfolio. FUND shall notify LIFE COMPANY or
its designee of the number of shares so issued as payment of such dividends and
distributions.
1.5 FUND shall make the net asset value per share for the selected
Portfolio(s) available to LIFE COMPANY on a daily basis as soon as reasonably
practicable after the net asset value per share is calculated but shall use its
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<PAGE>
best efforts to make such net asset value available by 7:00 p.m. New York time.
The FUND shall provide such net asset values to LIFE COMPANY by facsimile
transmission or in such other manner as FUND and LIFE COMPANY may agree. If FUND
provides LIFE COMPANY with materially incorrect share net asset value
information through no fault of LIFE COMPANY, LIFE COMPANY on behalf of the
Separate Accounts, shall be entitled to an adjustment to the number of shares
purchased or redeemed to reflect the correct share net asset value. Any material
error in the calculation of net asset value per share, dividend or capital gain
information shall be reported promptly upon discovery to LIFE COMPANY.
1.6 At the end of each Business Day, LIFE COMPANY shall use the
information described in Section 1.5 to calculate Separate Account unit values
for the day. Using these unit values, LIFE COMPANY shall process each such
Business Day's Separate Account transactions based on requests and premiums
received by it by the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m. New York time) to determine the net dollar amount
of FUND shares which shall be purchased or redeemed at that day's closing net
asset value per share. The net purchase or redemption orders so determined shall
be transmitted to FUND by LIFE COMPANY by 8:30 a.m. New York Time on the
Business Day next following LIFE COMPANY's receipt of such requests and premiums
in accordance with the terms of Sections 1.2 and 1.3 hereof.
1.7 If LIFE COMPANY's order requests the purchase of FUND shares, LIFE
COMPANY shall pay for such purchase by wiring federal funds to FUND or its
designated custodial account on the day the order is transmitted by LIFE
COMPANY. If LIFE COMPANY's order requests a net redemption resulting in a
payment of redemption proceeds to LIFE COMPANY, FUND shall use its best efforts
to wire the redemption proceeds to LIFE COMPANY by the next Business Day. In any
event, proceeds shall be wired to LIFE COMPANY within three Business Days or
such longer period permitted by the '40 Act or the rules, orders or regulations
thereunder and FUND shall notify the person designated in writing by LIFE
COMPANY as the recipient for such notice of such delay by 3:00 p.m. New York
Time the same Business Day that LIFE COMPANY transmits the redemption order to
FUND.
1.8 FUND agrees that all shares of the Portfolios of FUND will be sold
only to Participating Insurance Companies which have agreed to participate in
FUND to fund their Separate Accounts and/or to Qualified Plans, all in
accordance with the requirements of Section 817(h) of the Internal Revenue Code
of 1986, as amended ("Code") and Treasury Regulation 1.817-5. Shares of the
Portfolios of FUND will not be sold directly to the general public.
1.9 FUND may refuse to sell shares of any Portfolio to any person, or
suspend or terminate the offering of the shares of or liquidate any Portfolio of
FUND if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board of Directors of the FUND
(the "Board"), acting in good faith and in light of its duties under federal and
any applicable state laws, deemed necessary, desirable or appropriate and in the
best interests of the shareholders of such Portfolios.
3
<PAGE>
1.10 Issuance and transfer of Portfolio shares will be by book entry only.
Stock certificates will not be issued to LIFE COMPANY or the Separate Accounts.
Shares ordered from Portfolio will be recorded in appropriate book entry titles
for the Separate Accounts.
Article II. REPRESENTATIONS AND WARRANTIES
------------------------------
2.1 LIFE COMPANY represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of Ohio and that
it has legally and validly established each Separate Account as a segregated
asset account under such laws, and that AAG Securities, Inc., the principal
underwriter for the Variable Contracts, is registered as a broker-dealer under
the Securities Exchange Act of 1934 (the "'34 Act").
2.2 LIFE COMPANY represents and warrants that it has registered or, prior
to any issuance or sale of the Variable Contracts, will register each Separate
Account as a unit investment trust ("UIT") in accordance with the provisions of
the `40 Act and cause each Separate Account to remain so registered to serve as
a segregated asset account for the Variable Contracts, unless an exemption from
registration is available.
2.3 LIFE COMPANY represents and warrants that the Variable Contracts will
be registered under the Securities Act of 1933 (the "`33 Act") unless an
exemption from registration is available prior to any issuance or sale of the
Variable Contracts and that the Variable Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and further that the sale of the Variable Contracts shall comply in all material
respects with applicable state insurance law suitability requirements.
2.4 LIFE COMPANY represents and warrants that the Variable Contracts are
currently and at the time of issuance will be treated as life insurance,
endowment or annuity contracts under applicable provisions of the Code, that it
will maintain such treatment and that it will notify FUND immediately upon
having a reasonable basis for believing that the Variable Contracts have ceased
to be so treated or that they might not be so treated in the future.
2.5 FUND represents and warrants that the Fund shares offered and sold
pursuant to this Agreement will be registered under the '33 Act and sold in
accordance with all applicable federal and state laws, and FUND shall be
registered under the `40 Act prior to and at the time of any issuance or sale of
such shares. FUND, subject to Section 1.9 above, shall amend its registration
statement under the `33 Act and the `40 Act from time to time as required in
order to effect the continuous offering of its shares. FUND shall register and
qualify its shares for sale in accordance with the laws of the various states
only if and to the extent deemed advisable by FUND.
2.6 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
4
<PAGE>
Regulation 1.817-5, and will notify LIFE COMPANY immediately upon having a
reasonable basis for believing any Portfolio has ceased to comply or might not
so comply and will immediately take all reasonable steps to adequately diversify
the Portfolio to achieve compliance.
2.7 FUND represents and warrants that each Portfolio invested in by the
Separate Account intends to elect to be treated as a "regulated investment
company" under Subchapter M of the Code, and to qualify for such treatment for
each taxable year and will notify LIFE COMPANY immediately upon having a
reasonable basis for believing it has ceased to so qualify or might not so
qualify in the future.
2.8. ADVISER represents and warrants that it is and will remain duly
registered and licensed in all material respects under all applicable federal
and state securities laws and shall perform its obligations hereunder in
compliance in all material respects with any applicable state and federal laws.
Article III. PROSPECTUS AND PROXY STATEMENTS
-------------------------------
3.1 FUND shall prepare and be responsible for filing with the SEC and any
state regulators requiring such filing all shareholder reports, notices, proxy
materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of FUND. FUND
shall bear the costs of registration and qualification of shares of the
Portfolios, preparation and filing of the documents listed in this Section 3.1
and all taxes and filing fees to which an issuer is subject on the issuance and
transfer of its shares.
3.2 At least annually, FUND or its designee shall provide LIFE COMPANY,
free of charge, with as many copies of the current prospectus for the shares of
the Portfolios as LIFE COMPANY may reasonably request for distribution to
existing Variable Contract owners whose Variable Contracts are funded by such
shares. FUND or its designee shall provide LIFE COMPANY, at LIFE COMPANY's
expense, with as many copies of the current prospectus for the shares as LIFE
COMPANY may reasonably request for distribution to prospective purchasers of
Variable Contracts. If requested by LIFE COMPANY in lieu thereof, FUND 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 LIFE 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 a year (or more
frequently if the prospectus for the shares is supplemented or amended) to have
the prospectus for the Variable Contracts and the prospectus for the FUND shares
printed together in one document. The expenses of such printing will be
apportioned between (a) LIFE COMPANY and (b) FUND in proportion to the number of
pages of the Variable Contract and FUND's prospectus, taking account of other
relevant factors affecting the expense of printing, such as covers, columns,
graphs and charts; FUND to bear the cost of printing the FUND's prospectus
portion of such document for distribution only to owners of existing Variable
Contracts funded by the FUND's shares and LIFE COMPANY to bear the expense of
5
<PAGE>
printing the portion of such documents relating to the Separate Account;
provided, however, LIFE COMPANY shall bear all printing expenses of such
combined documents where used for distribution to prospective purchasers or to
owners of existing Variable Contracts not funded by the FUND's shares. In the
event that LIFE COMPANY requests that FUND or its designee provide FUND's
prospectus in a "camera ready" or diskette format, FUND shall be responsible for
providing the prospectus in the format in which it is accustomed to formatting
prospectuses and shall bear the expense of providing the prospectus in such
format (e.g. typesetting expenses), and LIFE COMPANY shall bear the expense of
adjusting or changing the format to conform with any of its prospectuses.
3.3 FUND will provide LIFE COMPANY with at least one complete copy of all
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 SEC or other regulatory authority. FUND, at its expense, will provide
LIFE COMPANY with as many copies of its proxy statement, annual and semi-annual
reports to shareholders as LIFE COMPANY may reasonably require for distribution
to existing Variable Contract owners. LIFE COMPANY will provide 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 a Separate Account promptly after the filing of each such document with the
SEC or other regulatory authority.
Article IV. SALES MATERIALS
---------------
4.1 LIFE COMPANY will furnish, or will cause to be furnished, to FUND and
ADVISER, each piece of sales literature or other promotional material in which
FUND or ADVISER is named, at least fifteen (15) Business Days prior to its
intended use. No such material will be used if FUND or ADVISER reasonably
objects to its use in writing within ten (10) Business Days after receipt of
such material.
4.2 FUND and ADVISER will furnish, or will cause to be furnished, to LIFE
COMPANY, each piece of sales literature or other promotional material in which
LIFE COMPANY or its Separate Accounts are named, at least fifteen (15) Business
Days prior to its intended use. No such material will be used if LIFE COMPANY
reasonably objects to its use in writing within ten (10) Business Days after
receipt of such material.
4.3 FUND and its affiliates and agents shall not give any information or
make any representations on behalf of LIFE COMPANY or concerning LIFE COMPANY,
the Separate Accounts, or the Variable Contracts issued by LIFE COMPANY, 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 of
the Separate Accounts or reports prepared for distribution to owners of such
Variable Contracts, or in sales literature or other promotional material
approved by LIFE COMPANY or its designee, except with the written permission of
LIFE COMPANY.
6
<PAGE>
4.4 LIFE COMPANY and its affiliates and agents shall not give any
information or make any representations on behalf of FUND or concerning FUND
other than the information or representations contained in a registration
statement or prospectus for FUND, as such registration statement and prospectus
may be amended or supplemented from time to time, or in sales literature or
other promotional material approved by FUND or its designee, except with the
written permission of FUND.
4.5 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,
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. ("NASD")
rules, the `40 Act or the '33 Act.
Article V. POTENTIAL CONFLICTS
-------------------
5.1 The parties acknowledge that FUND will be filing an application with
the SEC to request an order granting relief from various provisions of the '40
Act and the rules thereunder to the extent necessary to permit FUND shares to be
sold to and held by Variable Contract separate accounts of both affiliated and
unaffiliated Participating Insurance Companies and Qualified Plans. It is
anticipated that the Exemptive Order, when and if issued, shall require FUND and
each Participating Insurance Company to comply with conditions and undertakings
substantially as provided in this Section 5. If the Exemptive Order imposes
conditions materially different from those provided for in this Section 5, the
conditions and undertakings imposed by the Exemptive Order shall govern this
Agreement and the parties hereto agree to amend this Agreement consistent with
the Exemptive Order. The Fund will not enter into a participation agreement with
any other Participating Insurance Company unless it imposes the same conditions
and undertakings as are imposed on LIFE COMPANY hereby.
5.2 The Board will monitor FUND for the existence of any material
irreconcilable conflict between the interests of Variable Contract owners of all
separate accounts investing in FUND. An irreconcilable material conflict may
arise for a variety of reasons, which may include: (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
7
<PAGE>
letter ruling 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 FUND are being managed;
(e) a difference in voting instructions given by Variable Contract owners; (f) a
decision by a Participating Insurance Company to disregard the voting
instructions of Variable Contract owners and (g) if applicable, a decision by a
Qualified Plan to disregard the voting instructions of plan participants.
5.3 LIFE COMPANY will report any potential or existing conflicts to the
Board. LIFE COMPANY will be responsible for assisting the Board in carrying out
its duties in this regard by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. The responsibility
includes, but is not limited to, an obligation by the LIFE COMPANY to inform the
Board whenever it has determined to disregard Variable Contract owner voting
instructions. These responsibilities of LIFE COMPANY will be carried out with a
view only to the interests of the Variable Contract owners.
5.4 If a majority of the Board or majority of its disinterested Directors,
determines that a material irreconcilable conflict exists affecting LIFE
COMPANY, LIFE COMPANY, at its expense and to the extent reasonably practicable
(as determined by a majority of the Board's disinterested Directors), will take
any steps necessary to remedy or eliminate the irreconcilable material conflict,
including; (a) withdrawing the assets allocable to some or all of the Separate
Accounts from FUND or any Portfolio thereof and reinvesting those assets in a
different investment medium, which may include another Portfolio of FUND, or
another investment company; (b) 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
variable annuity or variable life insurance Contract owners of 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 (c) establishing a new registered management investment company (or
series thereof) or managed separate account. If a material irreconcilable
conflict arises because of LIFE COMPANY's decision to disregard Variable
Contract owner voting instructions, and that decision represents a minority
position or would preclude a majority vote, LIFE COMPANY may be required, at the
election of FUND, to withdraw the Separate Account's investment in FUND, and no
charge or penalty will be imposed as a result of such withdrawal. The
responsibility to take such remedial action shall be carried out with a view
only to the interests of the Variable Contract owners.
For the purposes of this Section 5.4, a majority of the disinterested
members of the Board shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict but in no event will
FUND or ADVISER (or any other investment adviser of FUND) be required to
establish a new funding medium for any Variable Contract. Further, LIFE COMPANY
shall not be required by this Section 5.4 to establish a new funding medium for
any Variable Contracts if any offer to do so has been declined by a vote of a
majority of Variable Contract owners materially and adversely affected by the
irreconcilable material conflict.
8
<PAGE>
5.5 The Board's determination of the existence of an irreconcilable
material conflict and its implications shall be made known promptly and in
writing to LIFE COMPANY.
5.6 No less than annually, LIFE COMPANY shall submit to the Board such
reports, materials or data as the Board may reasonably request so that the Board
may fully carry out its obligations. Such reports, materials, and data shall be
submitted more frequently if deemed appropriate by the Board.
Article VI. VOTING
------
6.1 LIFE COMPANY will provide pass-through voting privileges to all
Variable Contract owners so long as the SEC continues to interpret the `40 Act
as requiring pass-through voting privileges for Variable Contract owners.
Accordingly, LIFE COMPANY, where applicable, will vote shares of the Portfolio
held in its Separate Accounts in a manner consistent with voting instructions
timely received from its Variable Contract owners. LIFE COMPANY will be
responsible for assuring that each of its Separate Accounts that participates in
FUND calculates voting privileges in a manner consistent with other
Participating Insurance Companies. LIFE COMPANY will vote shares for which it
has not received timely voting instructions, as well as shares it owns, in the
same proportion as its votes those shares for which it has received voting
instructions.
6.2 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or if
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the `40
Act or the rules thereunder with respect to mixed and shared funding on terms
and conditions materially different from any exemptions granted in the Exemptive
Order, then FUND, and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rule 6e-2 and Rule
6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such Rules are
applicable.
Article VII. INDEMNIFICATION
---------------
7.1 INDEMNIFICATION BY LIFE COMPANY. LIFE COMPANY agrees to indemnify and
hold harmless FUND, ADVISER and each of their directors, principals, officers,
employees and agents and each person, if any, who controls FUND or ADVISER
within the meaning of Section 15 of the `33 Act (collectively, the "Indemnified
Parties" for purposes of this Article VII) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of LIFE COMPANY, which consent shall not be unreasonably withheld) or
litigation (including reasonable legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of FUND's shares or the Variable Contracts and:
(a) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
Registration Statement or prospectus for the Variable Contracts
or contained in the Variable Contracts (or any amendment or
9
<PAGE>
supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to
any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to LIFE COMPANY by or on
behalf of FUND for use in the registration statement or
prospectus for the Variable Contracts or in the Variable
Contracts or sales literature (or any amendment or supplement)
or otherwise for use in connection with the sale of the
Variable Contracts or FUND 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 or sales literature of FUND
not supplied by LIFE COMPANY, or persons under its control) or
wrongful conduct of LIFE COMPANY or persons under its control,
with respect to the sale or distribution of the Variable
Contracts or FUND shares; or
(c) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, or sales literature of 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 statement or omission or such alleged
statement or omission was made in reliance upon and in
conformity with information furnished to FUND by or on behalf
of LIFE COMPANY; or
(d) arise as a result of any failure by LIFE COMPANY to provide
substantially the services and furnish the materials under the
terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by LIFE COMPANY in this
Agreement or arise out of or result from any other material
breach of this Agreement by LIFE COMPANY.
7.2 LIFE COMPANY shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as such may arise from such Indemnified
Party's willful misfeasance, bad faith, or negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement.
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7.3 LIFE COMPANY shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified LIFE COMPANY in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify LIFE COMPANY of any
such claim shall not relieve LIFE COMPANY from any liability which it may have
to the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, LIFE COMPANY shall be entitled to participate at
its own expense in the defense of such action. LIFE COMPANY also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from LIFE COMPANY to such party of LIFE
COMPANY's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and LIFE
COMPANY will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
7.4 INDEMNIFICATION BY ADVISER. ADVISER agrees to indemnify and hold
harmless LIFE COMPANY and each of its directors, officers, employees, and agents
and each person, if any, who controls LIFE COMPANY within the meaning of Section
15 of the `33 Act (collectively, the "Indemnified Parties" for the purposes of
this Article VII) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of ADVISER which
consent shall not be unreasonably withheld) or litigation (including reasonable
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 expenses (or actions in respect thereof)
or settlements are related to the sale or acquisition of FUND's shares or the
Variable Contracts 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 or prospectus or sales literature of
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 ADVISER or FUND
by or on behalf of LIFE COMPANY for use in the registration
statement or prospectus for FUND or in sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Variable Contracts or FUND shares; or
11
<PAGE>
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature for the
Variable Contracts not supplied by ADVISER or persons under its
control) or wrongful conduct of FUND or ADVISER or persons
under their control, with respect to the sale or distribution
of the Variable Contracts or FUND shares; or
(c) 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, 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 statement or
omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to
LIFE COMPANY for inclusion therein by or on behalf of FUND; or
(d) arise as a result of (i) a failure by FUND to provide
substantially the services and furnish the materials under the
terms of this Agreement; or (ii) a failure by a Portfolio(s)
invested in by the Separate Account to comply with the
diversification requirements of Section 817(h) of the Code; or
(iii) a failure by a Portfolio(s) invested in by the Separate
Account to qualify as a "regulated investment company" under
Subchapter M of the Code; or
(e) arise as a result of any failure by FUND or ADVISER to provide
substantially the services and furnish the materials under the
terms of this Agreement; or
(f) arise out of or result from any material breach of any
representation and/or warranty made by ADVISER in this
Agreement or arise out of or result from any other material
breach of this Agreement by ADVISER.
7.5 ADVISER shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation to which an
Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or 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.
7.6 ADVISER shall not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless such Indemnified
Party shall have notified ADVISER in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
12
<PAGE>
claim shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify ADVISER of any such claim shall not relieve
ADVISER 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,
ADVISER shall be entitled to participate at its own expense in the defense
thereof. ADVISER also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from ADVISER
to such party of ADVISER's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and ADVISER 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.
Article VIII. TERM; TERMINATION
-----------------
8.1 This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions herein.
8.2 This Agreement shall terminate in accordance with the following
provisions:
(a) At the option of LIFE COMPANY or FUND at any time from the date
hereof upon 60 days' notice, unless a shorter time is agreed to
by the parties;
(b) At the option of LIFE COMPANY, if FUND shares are not
reasonably available to meet the requirements of the Variable
Contracts as determined by LIFE COMPANY. Prompt notice of
election to terminate shall be furnished by LIFE COMPANY, said
termination to be effective ten days after receipt of notice
unless FUND makes available a sufficient number of shares to
reasonably meet the requirements of the Variable Contracts
within said ten-day period;
(c) At the option of LIFE COMPANY, upon the institution of formal
proceedings against FUND by the SEC, the NASD, or any other
regulatory body, the expected or anticipated ruling, judgment
or outcome of which would, in LIFE COMPANY's reasonable
judgment, materially impair FUND's ability to meet and perform
FUND's obligations and duties hereunder. Prompt notice of
election to terminate shall be furnished by LIFE COMPANY with
said termination to be effective upon receipt of notice;
(d) At the option of FUND, upon the institution of formal
proceedings against LIFE COMPANY by the SEC, the NASD, or any
other regulatory body, the expected or anticipated ruling,
judgment or outcome of which would, in FUND's reasonable
judgment, materially impair LIFE COMPANY's ability to meet and
perform its obligations and duties hereunder. Prompt notice of
election to terminate shall be furnished by FUND with said
termination to be effective upon receipt of notice;
13
<PAGE>
(e) In the event FUND's shares are not registered, issued or sold
in accordance with applicable state or federal law, or such law
precludes the use of such shares as the underlying investment
medium of Variable Contracts issued or to be issued by LIFE
COMPANY. Termination shall be effective upon such occurrence
without notice;
(f) At the option of FUND if the Variable Contracts cease to
qualify as annuity contracts or life insurance contracts, as
applicable, under the Code, or if FUND reasonably believes that
the Variable Contracts may fail to so qualify. Termination
shall be effective upon receipt of notice by LIFE COMPANY;
(g) At the option of LIFE COMPANY, upon FUND's breach of any
material provision of this Agreement, which breach has not been
cured to the satisfaction of LIFE COMPANY within ten days after
written notice of such breach is delivered to FUND;
(h) At the option of FUND, upon LIFE COMPANY's breach of any
material provision of this Agreement, which breach has not been
cured to the satisfaction of FUND within ten days after written
notice of such breach is delivered to LIFE COMPANY;
(i) At the option of FUND, if the Variable Contracts are not
registered, issued or sold in accordance with applicable
federal and/or state law. Termination shall be effective
immediately upon such occurrence without notice;
(j) In the event this Agreement is assigned without the prior
written consent of LIFE COMPANY, FUND, and ADVISER, termination
shall be effective immediately upon such occurrence without
notice.
8.3 Notwithstanding any termination of this Agreement pursuant to Section
8.2 hereof, FUND shall, at the option of LIFE COMPANY, continue to make
available additional FUND shares, as provided below, 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
14
<PAGE>
"Existing Contracts"). Specifically, without limitation, if LIFE COMPANY so
elects, the owners of the Existing Contracts or LIFE COMPANY, whichever shall
have legal authority to do so, shall be permitted to reallocate investments in
FUND, redeem investments in FUND and/or invest in FUND upon the payment of
additional premiums under the Existing Contracts. In the event of a termination
of this Agreement pursuant to Section 8.2 hereof, LIFE COMPANY, as promptly as
is practicable under the circumstances, shall notify FUND and ADVISER whether
LIFE COMPANY elects to continue to make FUND shares available after such
termination. If FUND shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect and
thereafter either FUND or LIFE COMPANY may terminate the Agreement, as so
continued pursuant to this Section 8.3, upon sixty (60) days prior written
notice to the other party.
8.4 Except as necessary to implement Variable Contract owner initiated
transactions, or as required by state insurance laws or regulations, LIFE
COMPANY shall not redeem the shares attributable to the Variable Contracts (as
opposed to the shares attributable to LIFE COMPANY's assets held in the Separate
Accounts), and LIFE COMPANY shall not prevent Variable Contract owners from
allocating payments to a Portfolio that was otherwise available under the
Variable Contracts until thirty (30) days after the LIFE COMPANY shall have
notified FUND of its intention to do so.
Article IX. NOTICES
-------
Any notice hereunder shall be given by registered or certified mail return
receipt requested to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify in
writing to the other party.
If to FUND:
PBHG Insurance Series Fund, Inc.
1255 Drummers Lane, Suite 300
Wayne, PA 19087
Attention: Mr. Brian F. Bereznak
With a copy to:
PBHG Insurance Series Fund, Inc.
1255 Drummers Lane, Suite 300
Wayne, PA 19087
Attention: John M. Zerrr, Esq.
If to the ADVISER:
PBHG Insurance Series Fund, Inc.
1255 Drummers Lane, Suite 300
Wayne, PA 19087
Attention: Mr. Brian F. Bereznak
With a copy to:
PBHG Insurance Series Fund, Inc.
1255 Drummers Lane, Suite 300
Wayne, PA 19087
Attention: John M. Zerr, Esq.
15
<PAGE>
If to LIFE COMPANY:
Annuity Investors Life Insurance Company
250 East Fifth Street
Cincinnati, OH 45202
Attention: Mark E. Muething
Notice shall be deemed given on the date of receipt by the addressee as
evidenced by the return receipt.
Article X. MISCELLANEOUS
-------------
10.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
10.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
10.3 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
10.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Pennsylvania. It shall also be subject to the provisions of the federal
securities laws and the rules and regulations thereunder and to any orders of
the SEC granting exemptive relief therefrom and the conditions of such orders.
10.5 It is understood and expressly stipulated that neither the
shareholders of shares of any Portfolio nor the Directors or officers of FUND or
any Portfolio shall be personally liable hereunder. No Portfolio shall be liable
for the liabilities of any other Portfolio. All persons dealing with FUND or a
Portfolio must look solely to the property of FUND or that Portfolio,
respectively, for enforcement of any claims against FUND or that Portfolio. It
is also understood that each of the Portfolios shall be deemed to be entering
into a separate Agreement with LIFE COMPANY so that it is as if each of the
Portfolios had signed a separate Agreement with LIFE COMPANY and that a single
document is being signed simply to facilitate the execution and administration
of the Agreement.
10.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
10.7 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.
10.8 No provision of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by FUND,
ADVISER and the LIFE COMPANY.
16
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Fund Participation Agreement as of the date and year first above
written.
PBHG INSURANCE SERIES FUND, INC.
By:
-----------------------------
Name:
Title:
PILGRIM BAXTER & ASSOCIATES, LTD.
By:
-----------------------------
Name:
Title:
ANNUITY INVESTORS
LIFE INSURANCE COMPANY
By:
-----------------------------
Name:
Title:
17
<PAGE>
APPENDIX A
PBHG INSURANCE SERIES FUND, INC. - PORTFOLIOS
- ---------------------------------------------
PBHG Growth II Portfolio
PBHG Large Cap Growth Portfolio
PBHG Technology & Communications Portfolio
<PAGE>
APPENDIX B
SEPARATE ACCOUNTS SELECTED PORTFOLIOS
- ----------------- -------------------
Annuity Investors Variable PBHG Growth II Portfolio
Account A PBHG Technology and Communications Portfolio
Annuity Investors Variable PBHG Growth II Portfolio
Account B PBHG Technology and Communications Portfolio
PBHG Large Cap Growth Portfolio
Exhibit (8)(l)
April 25, 1997
Annuity Investors Life Insurance Company
250 East Fifth Street
Cincinnati, OH 45202
Attention: Mark F. Muething
Dear Mark:
Re: Fee Letter Relating to the Annuity Investors
Life Insurance Company Participation Agreement.
Pursuant to the Participation Agreement by and among Strong Capital
Management, Inc. ("Strong"), Annuity Investors Life Insurance Company (the
"Company"), Strong Variable Insurance Funds, Inc., Strong Special Fund II, Inc.
and Strong Funds Distributors, Inc. ("Distributors") dated as April 25, 1997
(the "Participation Agreement"), the Company will provide certain administrative
services on behalf of the registered investment companies or series thereof
specified in Exhibit A (each a "Fund" and collectively the "Funds").
In recognition of the reduction in administrative expenses that derives
from the performance of said administrative services, Strong agrees to pay the
Company the fee specified below for each Fund specified in Exhibit A hereto.
(a) For average aggregate amounts (as calculated in paragraph
(b), below) invested through variable insurance products issued by the
Company with the Funds, the monthly fee shall equal the percentage
(calculated in paragraph (b), below) of the applicable annual fee for
each Fund specified in Exhibit A.
(b) For purposes of computing the fee contemplated in paragraph
(a) above, Strong shall calculate and pay to the Company an amount with
respect to each Fund equal to the product of: (a) the product of (i) the
number of calendar days in the applicable month divided by the number of
calendar days in that year (365 or 366 as applicable) and (ii) the
applicable percentage specified in Exhibit A, hereto, multiplied by (b)
the average daily market value of the investments held in such Fund
pursuant to the Participation Agreement computed by totaling the
aggregate investment (share net asset value multiplied by the total
number of shares held) on each day during the calendar month and
dividing by the total number of days during such month.
<PAGE>
(c) Strong shall calculate the amount of the payment to be made
pursuant to this Letter Agreement at the end of each calendar month and
will make such payment to the Company within 30 days after receiving the
report referenced in paragraph (e), below. Fees will be paid, at
Strong's election, by wire transfer or by check. All payments hereunder
shall be considered final unless disputed by the Company in writing
within 60 days of receipt.
(d) The parties agree that the fees contemplated herein are
solely for shareholder servicing and other administrative services
provided by the Company and do not constitute payment in any manner for
investment advisory, distribution, trustee, or custodial services.
(e) The Company agrees to provide Strong by the 15th day of each
month with a report which indicates the number of Owners that hold
through a Contract interests in each Account as of the last day of the
prior month.
(f) If requested in writing by Strong, and at Strong's expense,
the Company shall provide to Strong, by February 14th of each year, a
"Special Report" from a nationally recognized accounting firm reasonably
acceptable to Strong which substantiates for each month of the prior
calendar year: (a) the number of owners that hold, through an Account,
interests in each Account maintained by the Company on the last day of
each month which held shares for which the fee provided for in this
Letter Agreement was received by the Company, (b) that any fees billed
to Strong for such month were accurately determined in accordance with
this Letter Agreement, and (c) such other information in connection with
this Agreement and the Participation Agreement as may be reasonably
requested by Strong.
(g) The parties hereto agree that Strong may unilaterally amend
Schedule A hereto to add additional investment companies or series
thereof ("New Funds") as Funds subject to the provisions of this Letter
Agreement by sending to the Company a written notice of the New Funds
and indicating therein the fees to be paid to the Company with respect
to the administrative services provided pursuant to the Participation
Agreement in connection with such New Funds.
(h) This Letter Agreement shall terminate upon termination of the
Participation Agreement. Accordingly, all payments pursuant to this
Letter Agreement shall cease upon termination of the Participation
Agreement.
(i) Capitalized terms not otherwise defined herein shall have the
meaning assigned to them in the Participation Agreement.
2
<PAGE>
If you are in agreement with the foregoing, please sign and date below
where indicated and return one copy of this signed letter agreement to me.
Very truly yours,
/s/ Stephen J. Shenkenberg
Stephen J. Shenkenberg
Vice President
Accepted and agreed as of April 25, 1997 by
Annuity Investors Life Insurance Company
/s/ Mark F. Muething
By: Mark F. Muething
Name and Title: Senior Vice President
<PAGE>
EXHIBIT A TO LETTER DATED APRIL 25, 1997
The Funds subject to this Agreement and applicable annual fees are as follows:
Fund Annual Fee
Strong Special Fund II, Inc. .20%
Strong Variable Insurance Funds, Inc.
Strong Growth Fund II .20%
Exhibit (8)(m)
PILGRIM BAXTER & ASSOCIATES
Investment Counsel
May 1, 1997
Annuity Investors Life Insurance Company
250 East Fifth Street
Cincinnati, OH 452O2
Ladies and Gentlemen:
The purpose of this letter is to confirm certain financial arrangements
between Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter"), the investment
adviser to the PBHG Insurance Series Fund, Inc. (the "Fund") and Annuity
Investors Life Insurance Company ("Annuity Investors") in connection with
Annuity Investors' purchase of shares of certain series of the Fund (the
"Series") on behalf of certain of its separate accounts (the "Separate
Accounts") to fund variable life and annuity contracts issued by Annuity
Investors.
In recognition of Annuity Investors providing to the Fund the services
described in that certain Fund Participation Agreement among Annuity Investors,
the Fund and Pilgrim Baxter, dated May 1, 1997 (the "Agreement"), Pilgrim Baxter
shall pay to Annuity Investors an administrative service fee equal to, on an
annualized basis, 0.15% on the first $25,000,000 of the average daily net assets
of the Separate Accounts invested in shares of the Series of the Fund specified
in Appendix B to the Agreement; 0.20% on the next $25,000,000 of average daily
net assets of the Separate Accounts invested in shares of the Series of the
Fund; and 0.25% on average daily net assets of the Separate Accounts invested in
shares of the Series of the Fund in excess of $50,000,000. Such fee shall be
paid quarterly (on a calendar year basis) in arrears.
In the event that the fees payable to Annuity Investors hereunder, based
upon an opinion of counsel reasonably acceptable to the Fund, Pilgrim Baxter and
Annuity Investors, are or may be in contravention or violation of any law, rule,
regulation, court decision or order, or out-of-court settlement of actual or
threatened litigation or enforcement position of any regulatory body having
jurisdiction over the Fund or Pilgrim Baxter (taken together, "Change in Law"),
the fees shall be adjusted to conform to such Change in Law on terms and
conditions deemed fair and equitable by Pilgrim Baxter and the Fund.
<PAGE>
Either party may terminate this agreement, without penalty, on six
months written notice to the other party, and this agreement shall terminate
automatically upon termination of the Agreement; except that the fees payable
hereunder shall continue as long as any Separate Account is invested in a
Series.
1255 Drummers Lane, Suite 300, Wayne, Pennsylvania 19087-1590
Phone (610) 341-9000 . Facsimile (610) 687-1890
Please confirm your understanding of this arrangement by having the
enclosed duplicate copy of this letter executed by an appropriate authorized
officer of Annuity Investors and returned to Pilgrim Baxter, at 1255 Drummers
Lane, Suite 300, Wayne, PA 19087, Attention:
John M. Zerr, Esquire.
Very truly yours,
PILGRIM BAXTER & ASSOCIATES, LTD.
By: /s/ Eric C. Schneider
Name: Eric C. Schneider
Title: Chief Financial Officer
Accepted and Agreed To:
ANNUITY INVESTORS LIFE
INSURANCE COMPANY
By: /s/ Mark F. Muething
Name: Mark F. Muething
Title: Senior Vice President
Exhibit (8)(n)
MORGAN STANLEY
MORGAN STANLEY
ASSET MANAGEMENT INC.
1221 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020
(212) 703-4000
May 1, 1997
Mark F. Muething, Esq.
Senior Vice President
Annuity Investors Life Insurance Company
250 East Fifth Street
Cincinnati, OH 45202
Gentlemen:
We are please to have entered into an agreement with Annuity Investors Life
Insurance Company (the "Company") dated May 1, 1997 providing for the purchase
by the Company of shares of Morgan Stanley Universal Funds, Inc. (the "Fund")
for its separate accounts to fund variable annuity contract and variable life
policy benefits ("Participation Agreement").
In recognition of the fact that the Company will provide various administrative
services in connection with the issuance of variable annuity contracts and
variable life insurance policies and the fact that we (or our affiliates), as
investments advisers and administrators to the Fund will not incur
administrative expenses that we would otherwise incur in servicing large numbers
of investors in the Fund (such as shareholder communication, record keeping and
postage expenses), we will pay to the Company 0.15% of the Company's separate
account investments in the portfolios of the Fund.
Payment will be made on a quarterly basis during the month following the end of
each quarter.
If you agree to the foregoing, please sign the enclosed copy of this letter and
return it to George Koshy at Morgan Stanley Asset Management Inc., 1221 Avenue
of the Americas, New York, New York 10010.
Sincerely,
Morgan Stanley Asset Management Inc.
By: /s/ Jeffrey R. Margolis
Name: Jeffrey R. Margolis
Title: Principal
Miller Anderson & Sherrerd, LLP
By: /s/ Marna C. Whittington
Name: Marna C. Whittington
Title: Managing Director
AGREED
Annuity Investors Life Insurance Company
By: /s/ Mark F. Muething
Name: Mark F. Muething
Title: Senior Vice President
Exhibit (8)(o)
AMENDED AND RESTATED AGREEMENT
AGREEMENT made as of the 24th day of April, 1997 by and
between (i) The Dreyfus Corporation ("Dreyfus"), a New York corporation; and
(ii) Annuity Investors Life Insurance Company ("Client"), an Ohio corporation.
WITNESSETH:
WHEREAS, each of the investment companies listed on Schedule A hereto as such
Schedule may be amended from time to time (collectively the "Dreyfus Funds,"
each a "Fund") are investment companies registered under the Investment Company
Act of 1940, as amended (the "Act"); and
WHEREAS, Client has entered into a Fund Participation Agreement (the
"Participation Agreement") with each of the Dreyfus Funds listed on Schedule A
hereto; and
WHEREAS, Dreyfus provides investment advisory and/or administrative services to
the Dreyfus Funds; and
WHEREAS, Premier Mutual Fund Services, Inc. ("Premier") is the distributor for
the Dreyfus Funds; and
WHEREAS, the parties hereto have agreed to arrange separately for the
performance of sub-accounting services for owners of shares of the Dreyfus Funds
who maintain their shares in a variable annuity account with Client; and
WHEREAS, Dreyfus desires Client to perform such services and Client is willing
and able to furnish such services on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agrees as follows:
1. Client agrees to perform the administrative services specified in Exhibit A
hereto (the "Administrative Services") for the benefit of the shareholders of
the Dreyfus Funds who maintain their shares of any such Dreyfus Funds in
variable annuity and variable life insurance accounts with Client and whose
shares are included in the master account ("Master Account") referred to in
paragraph 1 of Exhibit A (collectively, the "Client Customers").
2. Client represents and agrees that it will maintain and preserve all records
as required by law to be maintained and preserved in connection with providing
<PAGE>
the Administrative Services, and will otherwise comply with all laws, rules and
regulations applicable to the Administrative Services. Upon the request of
Dreyfus or its representatives, Client shall provide copies of all the
historical records relating to transactions between the Dreyfus Funds and Client
Customers, and written communications regarding the Fund(s) to or from such
Customers and other materials, in each case as may reasonably be requested to
enable Dreyfus or its representatives, including without limitation its
auditors, legal counsel or distributor, to monitor and review the Administrative
Services, or to comply with any request of the board of directors, or trustees
or general partners (collectively, the "Directors") of any Fund or of a
governmental body, self-regulatory organization or a shareholder. Client agrees
that it will permit Dreyfus, the Dreyfus Funds or their representatives to have
reasonable access to its personnel and records in order to facilitate the
monitoring of the quality of services.
3. Client may, with the consent of Dreyfus, contract with or establish
relationships with other parties for the provision of the Administrative
Services or other activities of Client required by the Agreement, provided that
Client shall be fully responsible for the acts and omissions of such other
parties.
4. Client hereby agrees to notify Dreyfus promptly if for any reason it is
unable to perform fully and promptly any of its obligations under this
Agreement.
5. Client hereby represents and covenants that it does not, and will not, own or
hold or control with power to vote any shares of the Dreyfus Funds which are
registered in the name of Client or the name of its nominee and which are
maintained in Client variable annuity accounts. Client represents further that
it is registered as a broker-dealer under the Securities Exchange Act of 1934,
as amended (the "1934 Act"), and any applicable state securities laws, and as a
transfer agent under the 1934 Act, or is not required to be so registered,
including as a result of entering into this Agreement and performing the
Administrative Services.
6. The provisions of the Agreement shall in no way limit the authority of
Dreyfus, or any Dreyfus Fund or Premier to take such action as any of such
parties may deem appropriate or advisable in connection with all matters
relating to the operations of any of such funds and/or sale of its shares.
7. In consideration of the performance of the Administrative Services by Client,
Dreyfus agrees to pay Client a monthly fee at an annual rate which shall equal
.20 of 1% of the value of each Fund's (except Dreyfus Stock Index Fund) average
daily net assets maintained in the Master Account for Client Customers. The
payments by Dreyfus to Client relate solely to administrative services only and
do not constitute payment in any manner for administrative services provided by
Client to Client Customers or any separate account organized by Client, for any
investment advisory services or for costs of distribution of any variable
insurance contracts.
2
<PAGE>
8. Client shall indemnify and hold harmless the Dreyfus Funds, The Dreyfus
Corporation, Dreyfus Service Corporation ("DSC"), Premier, and each of their
respective officers, directors, employees and agents from and against any and
all losses, claims, damages, expenses, or liabilities that any one or more of
them may incur including without limitation reasonable attorneys' fees, expenses
and costs arising out of or related to the performance or non-performance of
Client of its responsibilities under this Agreement.
9. This Agreement may be terminated without penalty at any time by Client or by
Dreyfus as to all of the Dreyfus Funds collectively, upon 180 days written
notice to the other party. The provisions of paragraphs 2, 8, and 10 shall
continue in full force and effect after termination of this Agreement.
Notwithstanding the foregoing, this Agreement shall not require Client to
preserve any records (in any medium or format) relating to this Agreement beyond
the time periods otherwise required by the laws to which Client or the Dreyfus
Funds are subject provided that such records shall be offered to the Dreyfus
Funds in the event Client decides to no longer preserve such records following
such time periods.
10. After the date of any termination of this Agreement in accordance with
paragraph 9, no fee will be due with respect to any amounts first placed in the
Master Account for Client Customers after the date of such termination. However,
notwithstanding any such termination, Dreyfus will remain obligated to pay
Client the fee specified in paragraph 7 with respect to the value of each Fund's
average daily net assets maintained in the Master Account as of the date of such
termination, for so long as such amounts are held in the Master Account and
Client continues to provide the Administrative Services with respect to such
amounts in conformity with this Agreement. This Agreement, or any provision
hereof, shall survive termination to the extent necessary for each party to
perform its obligations with respect to amounts for which a fee continues to be
due subsequent to such termination.
11. Client understands and agrees that the obligations of Dreyfus under this
Agreement are not binding upon any of the Dreyfus Funds, upon any of their Board
members or upon any shareholder of any of the Funds.
12. It is understood and agreed that in performing the services under this
Agreement Client, acting in its capacity described herein, shall at no time be
acting as an agent for Dreyfus, or DSC, or Premier or any of the Dreyfus Funds.
Client agrees, and agrees to cause its agents, not to make any representations
concerning a Fund except those contained in the Fund's then-current prospectus,
in current sales literature furnished by the Fund, Dreyfus or Premier to Client,
or in the then-current prospectus for a variable annuity contract or variable
life insurance policy issued by Client, or then current sales literature with
respect to such variable annuity contract or variable life insurance policy,
approved by Dreyfus.
3
<PAGE>
13. This Agreement, including the provisions set forth herein in Section 7, may
only be amended pursuant to a written instrument signed by the party to be
charged. This Agreement may not be assigned by a party hereto, by operation of
law or otherwise, without the prior, written consent of the other party.
14. This Agreement shall be governed by the laws of the State of New York,
without giving effect to the principles of conflicts of law of such
jurisdiction.
15. This Agreement, including its Exhibit and Schedule, constitutes the entire
agreement between the parties with respect to the matters dealt with herein, and
supersedes any previous agreements and documents with respect to such matters.
IN WITNESS HEREOF, the parties hereto have executed and delivered this Agreement
as of the date first above written.
ANNUITY INVESTORS LIFE INSURANCE COMPANY
Print or Type Name of Client
By: /s/ Mark F. Muething
-------------------------------
Authorized Signatory
Mark F. Muething, Senior Vice President
----------------------------------------
Print or Type Name
THE DREYFUS CORPORATION
By: /s/ Lawrence S. Kash
-------------------------------
Authorized Signatory
Lawrence S. Kash
-------------------------------
Print or Type Name
4
<PAGE>
SCHEDULE A
Annuity Investors Variable Account A (May 26, 1995)
Fund Code Fund Name
112 Dreyfus Variable Investment Fund, Capital Appreciation Portfolio
108 Dreyfus Variable Investment Fund, Growth and Income Portfolio
121 Dreyfus Variable Investment Fund, Small Cap Portfolio
111 The Dreyfus Socially Responsible Growth Fund, Inc.
763 Dreyfus Stock Index Fund
Annuity Investors Variable Account B (December 19, 1996)
Fund Code Fund Name
112 Dreyfus Variable Investment Fund, Capital Appreciation Portfolio
108 Dreyfus Variable Investment Fund, Growth and Income Portfolio
121 Dreyfus Variable Investment Fund, Small Cap Portfolio
117 Dreyfus Variable Investment Fund, Money Market Portfolio
111 The Dreyfus Socially Responsible Growth Fund, Inc.
763 Dreyfus Stock Index Fund
<PAGE>
EXHIBIT A
Pursuant to the Agreement by and among the parties hereto, Client shall perform
the following Administrative Services:
1. Maintain separate records for each Client Customer, which records shall
reflect shares purchased and redeemed and share balances. Client shall maintain
the Master Account with the transfer agent of the Fund on behalf of Client
Customers and such Master Account shall be in the name of Client or its nominee
as the record owner of the shares owned by such Client Customers.
2. For each Fund, disburse or credit to Client Customers all proceeds of
redemptions of shares of the Fund and all dividends and other distributions not
reinvested in shares of the Fund.
3. Prepare and transmit to Client Customers periodic account statements showing
the total number of shares owned by the Customer as of the statement closing
date, purchases and redemptions of Fund shares by the Customer during the period
covered by the statement, and the dividends and other distributions paid to the
Customer during the statement period (whether paid in cash or reinvested in Fund
shares).
4. Transmit to Client Customers proxy materials and reports and other
information received by Client from any of the Funds and required to be sent to
shareholders under the federal securities laws and, upon request of the Fund's
transfer agent, transmit to Client Customers material fund communications deemed
by the Fund, through its Board of Directors or other similar governing body, to
be necessary and proper for receipt by all fund beneficial shareholders.
5. Transmit to the Fund's transfer agent purchase and redemption orders on
behalf of Client Customers.
6. Provide to the Funds, or to the transfer agent for any of the Funds, or any
of the agents designated by any of them, such periodic reports as shall
reasonably be concluded to be necessary to enable each of the Funds and its
distributor to comply with State Blue Sky requirements.
Exhibit (8)(p)
JANUS CAPITAL CORPORATION
December 6, 1996
Mr. Mark F. Muething
Senior Vice President
Annuity Investors Life Insurance Company
10th Floor, Chiquita Center
250 East Fifth Street
Cincinnati, Ohio 45202
Dear Mr. Muething:
This letter sets forth the agreement between Annuity Investors Life
Insurance Company (the "Company"), and Janus Capital Corporation (the
"Adviser"), concerning certain administrative services.
1. ADMINISTRATIVE SERVICES AND EXPENSES. Administrative services for the
separate accounts of the Company (the "Accounts") which invest in one or more
portfolios (collectively, the "Portfolios") of Janus Aspen Series (the
"Trust") pursuant to the Participation Agreement between the Company and the
Trust dated September 1, 1995 (the "Participation Agreement"), and for
purchasers of variable annuity or life insurance contracts (the "Contracts")
issued through the Accounts are the responsibility of the Company.
Administrative services for the Portfolios, in which the Accounts invest, and
for purchasers of shares of the Portfolios, are the responsibility of the
Trust. These administrative services the Company intends to provide to the
Trust and its Portfolios are set forth in Schedule A attached to this letter
agreement, which may be amended from time to time.
2. SERVICE FEE. In consideration of the anticipated administrative expense
savings resulting to the Trust from the Company's services, the Adviser
agrees to pay the Company a fee ("Service Fee"), computed daily and paid
monthly in arrears, at an annual rate equal to fifteen (15) basis points
(0.15%) of the average monthly value of the shares of the Portfolios held in
the Accounts, such payments to commence following the month in which the
average monthly value of investments by the Accounts reaches $50 million. The
Service Fee will be correspondingly suspended if the average monthly value of
such investments drops below $50 million in any month.
For purposes of this Paragraph 2, the average monthly value of the shares of
the Portfolios will be based on the sum of the daily net asset values
calculated by the Portfolios in a month divided by the number of days in the
month.
100 Fillmore Street, Suite 300
Denver, Colorado 80206-4923
303/333-3863
<PAGE>
3. NATURE OF PAYMENTS. The parties to this letter agreement recognize and agree
that the Adviser's payments to the Company relate to administrative services
only and do not constitute payment in any manner for administrative services
provided by the Company to the Account or to the Contracts, for investment
advisory services or for costs of distribution of Contracts or of shares of
the Portfolios, and that these payments are not otherwise related to
investment advisory or distribution services or expenses.
4. REPRESENTATIONS AND WARRANTIES.
a. The Adviser represents and warrants that in the event the Trustees of the
Trust approve the payment of all or any portion of the Service Fee by the
Trust, the Trust will calculate in the same manner the Service Fee to all
insurance companies that have entered into Service Fee arrangements with
the Adviser and/or the Trust (the "Participating Insurance Companies").
b. The Company represents and warrants that: (1) it and its employees and
agents meet the requirements of applicable law, including but not limited
to federal and state securities law and state insurance law, for the
performance of services contemplated herein; and (2) it will not purchase
Trust shares of the Portfolios with Account assets derived from
tax-qualified retirement plans except indirectly, through Contracts
purchased in connection with such plans and that the Service Fee does not
include any payment to the Company that is prohibited under the Employee
Retirement Income Securities Act of 1974 ("ERISA") with respect to any
assets of a Contract owner invested in a Contract using the Portfolios as
investment vehicles.
c. The Company represents, warrants and agrees that: (1) the payment of the
Service Fee by the Adviser is designed to reimburse the Company for
providing administrative services to the Trust that the Trust would
customarily pay and does not represent reimbursement to the Company for
providing administrative services to the Contract or Account as described
in Section 26 of the Investment Company Act of 1940 (the "!940 Act") and
the rules and regulations thereunder; (2) no portion of the Service Fee
will be rebated by the Company to any Contract owner; and (3) if required
by applicable law, the Company will disclose to each Contract owner the
existence of the Service Fee received by the Company pursuant to this
letter agreement in a form consistent with the requirements of applicable
law and will disclose the amount of the Service Fee, if any, that is paid
by the Trust.
5. INDEMNIFICATION
a. The Company agrees to indemnify and hold harmless the Adviser and its
directors, officers, and employees from any and all loss, liability and
expense resulting from any gross negligence or willful wrongful act of the
Company in performing its services under this letter agreement, from the
inaccuracy or breach of any representation made in this letter agreement,
or from a breach of a material provision of this letter agreement, except
to the extent such loss, liability or expense is the result of the
Adviser's willful misfeasance, bad faith or gross negligence in the
performance of its duties.
2
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b. The Adviser agrees to indemnify and hold harmless the Company and its
directors, officers, agents and employees from any and all loss, liability
and expense resulting from any gross negligence or willful wrongful act of
the Adviser in performing its services under this letter agreement, from
the inaccuracy or breach of any representation made in this letter
agreement, or from a breach of a material provision of this letter
agreement, except to the extent such loss, liability or expense is the
result of the Company's willful misfeasance, bad faith or gross negligence
in the performance of its duties.
6. TERMINATION.
a. Either party may terminate this letter agreement, without penalty, on
sixty (60) days' written notice to the other party.
b. This letter agreement will terminate at the option of either party in the
event of the termination of the Participation Agreement.
c. This letter agreement will terminate immediately upon the determination of
either party, with the advice of counsel, that the payment of the Service
Fee is in conflict with applicable law.
7. AMENDMENT. This letter agreement may be amended only upon mutual agreement of
the parties hereto in writing.
8. CONFIDENTIALITY. The terms of this letter agreement will be treated as
confidential and will not be disclosed to the public or any outside party
except with each party's prior written consent, as required by law or
judicial process or as provided in paragraph 4c herein.
9. ASSIGNMENT. This letter agreement may not be assigned (as that term is
defined in the 1940 Act) by either party without the prior written approval
of the other party, which approval will not be unreasonably withheld, except
that the Adviser may assign its obligations under this letter agreement,
including the payment of all or any portion of the Service Fee, to the Trust
upon thirty (30) days' written notice to the Company.
10.GOVERNING LAW. This letter agreement will be construed and the provisions
hereof interpreted under and in accordance with the laws of the State of
Colorado.
11.COUNTERPARTS. This letter agreement may be executed in counterparts, each of
which will be deemed an original but all of which will together constitute
one and the same instrument.
If this letter agreement is consistent with your understanding of the matters we
discussed concerning administrative expense payments, kindly sign below and
return a signed copy to us.
Very truly yours,
JANUS CAPITAL CORPORATION
By: /S/ DAVID W. AGOSTINE
---------------------------
Name: DAVID W. AGOSTINE
Title: VICE PRESIDENT
ANNUITY INVESTORS LIFE INSURANCE COMPANY
By: /S/ MARK F. MUETHING
----------------------------
Name: MARK F. MUETHING
Title: SENIOR VICE PRESIDENT
Attachment: Schedule A
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<PAGE>
Schedule A
Pursuant to the letter agreement to which this Schedule is attached, the Company
will perform administrative services including, but not limited to, the
following:
1. Print and mail to Contract owners copies of the Portfolios'
prospectuses, proxy materials, periodic fund reports to shareholders and other
materials that the Trust is required by law or otherwise to provide to its
shareholders.
2. Provide Contract owner services including, but not limited to,
financial consultants' advice with respect to inquiries related to the
Portfolios (not including information about performance or related to sales) and
communicating with Contract owners about Portfolio (and subaccount) performance.
3. Provide other administrative support for the Trust as mutually
agreed to by the Company and the Adviser and relieve the Trust of other usual or
incidental administrative services provided to individual Contract owners.
Exhibit (10)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 28, 1997, with respect to the financial
statements of Annuity Investors Life Insurance Company included in the
Pre-effective Amendment No. 1 of the Registration Statement (Form N-4 file Nos.
333-19725 and 811-08017) and related Statement of Additional Information of
Annuity Investors Variable Account B.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Cincinnati, Ohio
June 3, 1997
