As filed with the Securities and Exchange Commission on January 21, 1999.
Registration No. 333-______________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM S-6
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-----------
COLI VUL-2 SERIES ACCOUNT
(Exact Name of Trust)
GREAT-WEST LIFE INSURANCE & ANNUITY COMPANY
(Name of Depositor)
8515 East Orchard Road
Englewood, Colorado 80111
(Complete Address of Depositor's Principal Executive Offices)
William T. McCallum
President and Chief Executive Officer
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
8515 East Orchard Road
Englewood, Colorado 80111
(Name and Complete Address of Agent for Service)
Copies to:
James F. Jorden, Esq. Beverly A. Byrne, Esq.
Jorden Burt Boros Cicchetti Counsel
Berenson & Johnson Great-West Life & Annuity
1025 Thomas Jefferson Street, N.W. Insurance Company
Washington, D.C. 20007-5201 8515 East Orchard Road
Englewood, Colorado 80111
Securities being offered -- variable portion of individual flexible premium
variable universal life insurance contracts.
-----------
Approximate date of proposed public offering: as soon as practicable after the
effective date of this registration statement.
The registrant is registering an indefinite amount of securities, by reason of
Section 24(f) of the Investment Company Act of 1940.
The registrant hereby amends this registration statement on such 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 Section 8(a), may determine.
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<PAGE>
CROSS REFERENCE SHEET TO PROSPECTUS
Cross reference sheet pursuant to Rule 404(c) showing location in Prospectus of
information required by Items of Form N-8B-2.
<TABLE>
<CAPTION>
Item Number in Form N-8B-2 Caption in Prospectus
- -------------------------- ---------------------
<S> <C>
ORGANIZATION AND GENERAL INFORMATION
1. (a) Name of trust........................................................ Cover, The Series Account,
Appendix A - Glossary of
Terms
(b) Title of each class of securities issued............................. Cover, About the Policy
2. Name & address of each depositor........................................... Cover, Great-West Life &
Annuity Insurance Company
3. Name & address of custodian................................................ The Series Account
4. Name & address of principal underwriter.................................... Distribution of the Policy
5. State in which organized................................................... The Series Account
6. Date of organization....................................................... The Series Account
9. Material litigation........................................................ Other Information - - Legal
Proceedings
GENERAL DESCRIPTION OF THE TRUST AND SECURITIES OF THE TRUST
General Information Concerning Securities and Rights of Holders
- ---------------------------------------------------------------
10. (a), (b)Type of Securities................................................. Cover, About the Policy
(c) Rights of security holders........................................... Cover, About the Policy - -
re: withdrawal or redemption Termination of Policy,
Surrenders, Policy Loans
(d) Rights of security holders........................................... Cover, About the Policy - -
re: conversion, transfer or partial withdrawal Termination of Policy, Partial
Withdrawals, Surrenders,
Premium Payments, Transfers
Between Divisions, Dollar Cost
Averaging, The Rebalancer
Option
ii
<PAGE>
(e) Rights of security holders........................................... About the Policy - -
re: lapses, default, & reinstatement Termination of Policy, Grace
Period, Reinstatement
(f) Provisions re: voting rights......................................... Voting Rights
(g) Notice to security holders........................................... Report to Owners
(h) Consent of security holders.......................................... Addition, Deletion, or
Substitution of Investments,
Allocation of Net Premium
(i) Other principal features............................................. About the Policy
Information Concerning Securities Underlying Trust's Securities
- ---------------------------------------------------------------
11. Unit of specified securities in which security holders have an interest Cover, The Investment Options
12. (a)-(d) Name of company, name & address of its custodian................... Cover, The Investment Options
Information Concerning Loads, Fees, Charges & Expenses
- ------------------------------------------------------
13. (a) With respect to each load, fee, charge & expense..................... About the Policy - - Charges
and Deductions
(b) Deductions for sales charges......................................... About the Policy - - Charges
and Deductions - -Expense
Charges Applied to Premium,
Supplemental Benefits - - Term
Life Insurance Rider
(c) Sales load as percentage of amount invested.......................... About the Policy - - Charges
and Deductions
(d)-(g) Other loads, fees & expenses....................................... About the Policy - - Charges
and Deductions
Information Concerning Operation of Trust
- -----------------------------------------
14. Procedure for applications for & issuance of trust's securities............ About the Policy - - Policy
Application, Issuance and
Initial Premium, About the
Policy - - Premium Payments -
- Allocation of Net Premiums,
Distribution of the Policy
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<PAGE>
15. Procedure for receipt of payments from purchases of trust's securities..... About the Policy - - Policy
Application, Issuance and
Initial Premium, About the
Policy - - Premium Payments,
About the Policy - - Transfers
Between Divisions
16. Acquisition and disposition of underlying securities....................... Cover, The Series Account,
The Investment Options
17. (a) Procedure for withdrawal............................................. Cover, About the Policy - -
Termination of Policy,
Surrenders, Policy Loans,
Partial Withdrawals, Premium
Payments, Transfers Between
Divisions, Dollar Cost
Averaging, The Rebalancer
Option
(b) Redemption or repurchase............................................. Cover, About the Policy - -
Termination of Policy,
Surrenders, Policy Loans,
Partial Withdrawals, Premium
Payments, Transfers Between
Divisions, Dollar Cost
Averaging, The Rebalancer
Option
(c) Cancellation or resale............................................... Not Applicable
18. (a) Income of the Trust.................................................. The Investment Options, About
the Policy - - Premium
Payments - -Allocation of Net
Premiums
19. Procedure for keeping records & furnishing information to security
holders.................................................................... Report to Owner
21. (a) & (b) Loans to security holders........................................ About the Policy - - Policy
Loans
23. Bonding arrangements for depositor......................................... Great-West Life & Annuity
Insurance Company
iv
<PAGE>
24. Other material provisions.................................................. About the Policy - -Death
Benefit, Changes in Death
Benefit Option, Changes in
Total Face Amount, Paid-Up
Life Insurance, Deferral of
Payment, Other Policy
Provisions
ORGANIZATION, PERSONNEL & AFFILIATED PERSONS OF DEPOSITOR
Organization & Operations of Depositor
- --------------------------------------
25. Form, state & date of organization of depositor............................ Great-West Life & Annuity
Insurance Company
27. General character of business of depositor................................. Great-West Life & Annuity
Insurance Company
28. (a) Officials and affiliates of the depositor............................ Great-West Life & Annuity
Insurance Company, Our
Directors and Executive
Officers
(b) Business experience of officers and directors of the depositor....... Our Directors and Executive
Officers
Companies Owning Securities of Depositor
- ----------------------------------------
29. Each company owning 5% of voting securities of depositor................... Great-West Life & Annuity
Insurance Company
Controlling Persons
- -------------------
30. Control of depositor....................................................... Great-West Life & Annuity
Insurance Company
DISTRIBUTION & REDEMPTIONS OF SECURITIES
Distribution of Securities
35. Distribution............................................................... Great-West Life & Annuity
Insurance Company,
Distribution of the Policy
38. (a) General description of method of distribution of securities.......... Distribution of the Policy
(b) Selling agreement between trust or depositor & underwriter........... Distribution of the Policy
(c) Substance of current agreements...................................... Distribution of the Policy
v
<PAGE>
Principal Underwriter
- ---------------------
39. (a) & (b) Principal Underwriter............................................ Distribution of the Policy
41. Character of Underwriter's business........................................ Distribution of the Policy
Offering Price or Acquisition Value of Securities of Trust
- ----------------------------------------------------------
44. Information concerning offering price or acquisition valuation of
securities of trust. (All underlying securities are shares in registered The Investment Options, About
investment companies.)..................................................... the Policy - - Account Value
Redemption Valuation of Securities of Trust
- -------------------------------------------
46. Information concerning redemption valuation of securities of trust. (All
underlying securities are shares in a registered investment company.)...... The Investment Options, About
the Policy - - Account Value
Purchase & Sale of Interests in Underlying Securities
- -----------------------------------------------------
47. Maintenance of Position.................................................... Cover, The Series Account,
The Investment Options, About
the Policy - - Premium
Payments - - Allocation of Net
Premium
INFORMATION CONCERNING TRUSTEE OR CUSTODIAN
48. Custodian of trust......................................................... The Series Account
50. Lien on trust assets....................................................... The Series Account
INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
51. (a) Name & address of insurer............................................ Cover, Great-West Life &
Annuity Insurance Company
(b) Types of Contracts................................................... Cover, About the Policy - -
Policy Application, Issuance
and Initial Premium, Federal
Income Tax Considerations
(c) Risks insured & excluded............................................. About the Policy - - Death
Benefit, Paid-Up Insurance,
Supplemental Benefits, Other
Policy Provisions - -
Misstatement of Age or Sex,
Suicide
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<PAGE>
(d) Coverage............................................................. Cover, About the Policy - -
Death Benefit, Changes in
Death Benefit Option, Changes
in Total Face Amount
(e) Beneficiaries........................................................ About the Policy - - Death
Benefit, Rights of Beneficiary
(f) Terms of cancellations & reinstatement............................... About the Policy - -
Termination of Policy
(g) Method of determining amount of premium paid by holder............... About the Policy - - Policy
Application, Issuance and
Initial Premium, Premium
Payments
POLICY OF REGISTRANT
52. (a) & (c) Selection of Portfolio securities................................ Addition, Deletion, or
Substitution of Investments
Regulated Investment Company
- ----------------------------
53. (a) Taxable status of trust.............................................. Our Taxes
FINANCIAL AND STATISTICAL INFORMATION
59. Financial Statements....................................................... Financial Statements
*Items not listed are not applicable to this Registration Statement.
</TABLE>
vii
<PAGE>
Great-West Life & Annuity Insurance Company
A Stock Company
8515 East Orchard Road
Englewood, Colorado 80111
(303) 689-3000
[logo] PROSPECTUS
A Flexible Premium Variable Universal Life Insurance Policy
offered by Great-West Life & Annuity Insurance Company
in connection with its COLI VUL-2 Series Account
This Prospectus describes a flexible premium variable universal life
insurance policy (the "Policy") offered by Great-West Life & Annuity Insurance
Company ("Great-West," "we" or "us"). The Policy is designed for use by
corporations and employers to provide life insurance coverage in connection
with, among other things, deferred compensation plans. The Policies are designed
to meet the definition of "life insurance contracts" for federal income tax
purposes.
The Policy allows "you," the Policy owner, within certain limits to:
o choose the type and amount of insurance coverage you need and increase or
decrease that coverage as your insurance needs change;
o choose the amount and timing of premium payments, within certain limits;
o allocate premium payments among 33 investment options and transfer Account
Value among available investment options as your investment objectives
change; and
o access your Policy's Account Value through loans and partial withdrawals or
total surrenders.
This Prospectus contains important information you should understand
before purchasing a Policy. We use certain special terms which are defined in
Appendix A. You should read this Prospectus carefully and keep it for future
reference.
Neither the Securities and Exchange Commission nor any state securities
commission has approved these securities or determined that this Prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
The Date of this Prospectus is _____, 1999
<PAGE>
The Policies currently offer 33 investment options, each of which is a
Division of Great-West's COLI VUL-2 Series Account (the "Series Account"). Each
Division uses its assets to purchase, at their net asset value, shares of a
single mutual fund (collectively the "Funds"). The Divisions are referred to as
"variable" because their investment experience depends upon the investment
experience of the Funds in which they invest. Following is a list of the Funds
in which the Divisions currently invest:
American Century Variable Portfolios, Inc.
American Century VP Income & Growth
American Century VP International
American Century VP Value
Dreyfus Stock Index Fund
Dreyfus Variable Investment Fund
Dreyfus Capital Appreciation Portfolio
Dreyfus Growth and Income Portfolio
Federated Insurance Series
Federated American Leaders Fund II
Federated Growth Strategies Fund II
Federated High Income Bond Fund II
Federated International Equity Fund II
INVESCO Variable Investments Fund, Inc.
INVESCO VIF - High Yield Portfolio
INVESCO VIF - Industrial Income Portfolio
INVESCO VIF - Total Return Portfolio
Janus Aspen Series
Balanced Portfolio
Flexible Income Portfolio
Maxim Series Fund, Inc.
Maxim Corporate Bond Portfolio
Maxim INVESCO ADR Portfolio
Maxim INVESCO Balanced Portfolio
Maxim INVESCO Small-Cap Growth
Portfolio
Maxim MidCap Portfolio
Maxim Money Market Portfolio
Maxim U.S. Government Securities Portfolio
Maxim Profile Portfolios:
Maxim Aggressive Profile Portfolio
Maxim Moderately Aggressive Profile
Portfolio
Maxim Moderate Profile Portfolio
Maxim Moderately Conservative Profile
Portfolio
Maxim Conservative Profile Portfolio
Neuberger&Berman Advisers Management Trust
Guardian Portfolio
Mid-Cap Growth Portfolio
Partners Portfolio
Socially Responsive Portfolio
You should contact your representative for further information as to the
availability of the Divisions. We may add or delete investment options in the
future.
The Policy does not have a guaranteed minimum Account Value. Your Policy's
Account Value may rise or fall, depending on the investment performance of the
Funds underlying the Divisions to which you have allocated your premiums. You
bear the entire investment risk on amounts allocated to the Divisions.
ii
<PAGE>
The investment policies and risks of each Fund are described in the accompanying
prospectuses for the Funds. Your Account Value will also reflect net premiums,
amounts withdrawn and cost of insurance or other charges.
The Policy provides for a Total Face Amount as shown on the Policy
Specifications page of your Policy. The death benefit payable under your Policy
may be greater than the Total Face Amount. As long as the Policy remains in
force and you make no withdrawals, the death benefit will never be less than the
Total Face Amount. If the Cash Surrender Value is insufficient to pay the Policy
charges, however, your Policy may lapse without value.
When the Insured dies, we will pay a death benefit to the beneficiary
specified by you. We will reduce the amount of the death benefit by any prior
withdrawals, unpaid Policy Debt, and unpaid Policy charges.
You generally may cancel the Policy by returning it to us within ten days
after you receive it. In some states, however, this right to return period may
be longer, as provided by state law. We will refund the greater of your
premiums, less any withdrawals, or Account Value.
It may not be advantageous for you to purchase a Policy to replace existing
life insurance coverage.
This Prospectus is valid only if accompanied by current prospectuses for
the Funds listed above. If any of these prospectuses are missing or outdated,
please contact us and we will send your the prospectus you need.
We may offer this Policy in group form in certain states, with individual
ownership represented by certificates. The description of Policies in this
Prospectus applies equally to certificates under group Policies unless the
context specifies otherwise.
The Policy may not be available in all states.
iii
<PAGE>
Table of Contents
Topic Page
Summary of Policy...................................................... 2
Great-West Life & Annuity Insurance
Company ............................................................. 8
The Series Account..................................................... 9
The Investment Options.................................................10
Expenses of the Funds..................................................16
About the Policy.......................................................16
Policy Application, Issuance and Initial Premium..................16
Free Look Period..................................................18
Premium Payments..................................................18
Premium. .....................................................18
Net Premiums..................................................19
Allocation of Net Premium.....................................19
Planned Periodic Premiums.....................................19
Death Benefit.....................................................20
Changes in Death Benefit Option...................................22
Changes in Total Face Amount......................................23
Minimum Changes...............................................23
Increases.....................................................23
Decreases.....................................................23
Surrenders........................................................23
Partial Withdrawal................................................23
Policy Loans......................................................24
Transfers Between Divisions.......................................24
Dollar Cost Averaging.............................................26
The Rebalancer Option.............................................26
Account Value.....................................................27
Net Investment Factor.........................................28
Splitting Units...............................................30
Charges and Deductions............................................31
Expense Charges Applied to Premium............................31
Mortality and Expense Risk Charge.............................31
Monthly Deduction.............................................32
Monthly Risk Rates...................................32
Service Charge.......................................33
Transfer Fee..................................................34
Partial Withdrawal Fee........................................34
Change of Death Benefit Option Fee............................34
Fund Expenses.................................................34
iv
<PAGE>
Paid-Up Life Insurance............................................35
Supplemental Benefits.............................................35
Term Life Insurance Rider.....................................35
Change of Insured Rider.......................................37
Continuation of Coverage..........................................37
Grace Period......................................................37
Termination of Policy.............................................38
Reinstatement.....................................................38
Deferral of Payment...............................................39
Rights of Owner...................................................39
Rights of Beneficiary.............................................40
Other Policy Provisions...........................................40
Exchange of Policy............................................40
Addition, Deletion or Substitution of Investments.............40
Entire Contract...............................................41
Alteration....................................................41
Modification..................................................41
Assignments...................................................42
Non-Participating.............................................42
Misstatement of Age or Sex (Non-Unisex Policy)................42
Suicide. .....................................................42
Incontestability..............................................43
Report to Owner...............................................43
Illustrations.................................................43
Notice and Elections..........................................43
Performance Information and Illustrations..............................44
Fund Performance..................................................44
Adjusted Fund Performance.........................................44
Other Information.................................................44
Policy Illustrations..............................................46
Federal Income Tax Considerations......................................46
Tax Status of the Policy..........................................46
Diversification of Investments....................................47
Policy Owner Control..............................................47
Tax Treatment of Policy Benefits..................................47
Life Insurance Death Benefit Proceeds.........................47
Tax Deferred Accumulation.....................................47
Distributions.................................................48
Modified Endowment Contracts..................................48
Distributions Under Modified Endowment Contracts..............49
Distributions Under a Policy That Is Not a MEC................50
Multiple Policies.............................................50
Treatment When Insured Reaches Attained Age 100...............50
Federal Income Tax Withholding................................50
Actions to Ensure Compliance with the Tax Law.................51
v
<PAGE>
Trade or Business Entity Owns or is Directly
or Indirectly a Beneficiary of the
Policy...............................................51
Other Employee Benefit Programs...................................52
Policy Loan Interest..............................................52
Our Taxes.........................................................52
Distribution of the Policy.............................................52
Voting Rights..........................................................53
Our Directors and Executive Officers...................................54
Other Information......................................................58
State Regulation..................................................58
Legal Proceedings.................................................58
Legal Matters.....................................................58
Experts...........................................................58
Registration Statements...........................................59
Year 2000 Compliance..............................................59
Financial Statements...................................................61
Appendix A -- Glossary of Terms........................................A-1
Appendix B -- Fees and Expenses of the
Funds.............................................................B-1
Appendix C -- Table of Death Benefit Percentages.......................C-1
Appendix D -- Sample Hypothetical
Illustrations.....................................................D-1
This Prospectus does not constitute an offering in any jurisdiction
where the offering would not be lawful. You should rely only on the information
contained in this Prospectus or in the prospectus or statement of additional
information of the Funds. We have not authorized anyone to provide you with
information that is different.
vi
<PAGE>
Summary of Policy
This is a summary of some of the most important features of
your Policy. The Policy is more fully described in the remainder
of the Prospectus. Please read this Prospectus carefully. Unless
otherwise indicated, the description of the Policy in this
Prospectus assumes that the Policy is in force, there is no
Policy Debt and current federal tax laws apply.
Corporate-Owned Variable Life Insurance
o The Policy provides for life insurance coverage on the
Insured and for a Cash Surrender Value which is payable if
your Policy is terminated during the Insured's lifetime. You
may also take partial withdrawals from and borrow portions
of your Account Value.
o The Account Value and death benefit of your Policy may
increase or decrease depending on the investment performance
of the Divisions to which you have allocated your premiums
and the death benefit option you have chosen. Your Policy
has no guaranteed minimum Cash Surrender Value. If the Cash
Surrender Value is insufficient to cover Policy charges,
your Policy may lapse without value.
o Under certain circumstances, a Policy may become a "modified
endowment contract" ("MEC") for federal tax purposes. This
may occur if you reduce the Total Face Amount of your Policy
or pay excessive premiums. We will monitor your premium
payments and other Policy transactions and notify you if a
payment or other transaction might cause your Policy to
become a MEC. We will not invest any premium or portion of a
premium that would cause your Policy to become a MEC. We
will promptly refund the money to you and, if you elect to
have a MEC contract, you can return the money to us with a
signed form of acceptance.
o We will issue Policies to corporations and employers to
provide life insurance coverage in connection with, among
other things, deferred compensation plans. We will issue
Policies on the lives of prospective Insureds who meet our
underwriting standards. An Insured's Issue Age must be
between 20 and 85 for Policies issued on a fully
underwritten basis and between 20 and 70 for Policies issued
on a guaranteed underwriting or a simplified underwriting
basis.
2
<PAGE>
Free Look Period
You may return your Policy to us for any reason within 10
days of receiving it, or such longer period as required by
applicable state law, and receive the greater of your premiums,
less any withdrawals, or your Account Value.
Premium Payments
o You must pay us an Initial Premium to put your Policy in
force. The minimum Initial Premium will vary based on
various factors, including the age of the Insured and the
death benefit option you select.
o Thereafter, you choose the amount and timing of premium
payments, within certain limits.
Death Benefit
o You may choose from among three death benefit options --
The Total Face o a fixed benefit equal to the Total Face Amount of your
Amount is the Policy;
minimum amount
of life insu- o a variable benefit equal to the sum of the Total Face
rance coverage Amount and your Policy's Account Value; or
specified in
your Policy o an increasing benefit equal to the sum of the Total
Face Amount and the accumulated value of all premiums
paid under your Policy accumulated at the interest rate
shown on the Policy Specifications page of your Policy.
o For each option, the death benefit may be greater if
necessary to satisfy federal tax law requirements.
o We will deduct any outstanding Policy Debt and unpaid Policy
charges before we pay a death benefit. In addition, prior
partial withdrawals may reduce the death benefit payable
under the first and third options.
o At any time, you may increase or decrease the Total Face
Amount, subject to our approval and other requirements set
forth in the Policy.
o After the first Policy Year, you may change your death
benefit option once each Policy Year.
3
<PAGE>
The Series Account
o We have established a separate account to fund the variable
benefits under the Policy.
o The assets of the separate account are insulated from the
claims of our general creditors.
Investment Options
o You may allocate your net premium payments among the 33
variable Divisions listed on the front cover of this
Prospectus.
o Each Division invests exclusively in shares of a single
mutual fund. Each Fund has distinct investment objectives
and policies, which are described in the accompanying
prospectuses for the Funds.
o You may transfer amounts from one Division to another.
Supplemental Benefits
o The following riders are available --
o term life insurance; and
o change of insured.
o We will deduct the cost, if any, of the rider(s) from your
Policy's Account Value on a monthly basis.
Accessing Your Policy's Account Value
o You may borrow from us using your Account Value as
collateral. Loans may be treated as taxable income if your
Policy is a "modified endowment contract" for federal income
Cash Surrender tax purposes and you have had positive net investment
Value is Account performance.
Value minus
any accrued o You may surrender your Policy for its Cash Surrender Value.
and unpaid There are no surrender charges associated with your Policy.
policy charges
and any o You may withdraw a portion of your Policy's Account Value at
Policy Debt. any time while your Policy is in force.
4
<PAGE>
o A withdrawal may reduce your death benefit, depending on
which death benefit option you have chosen.
o We will charge an administrative fee not greater than $25
per withdrawal on partial withdrawals after the first in a
Policy Year.
Account Value
o Your Policy's Account Value will reflect --
Account Value
is the sum of o the premiums you pay;
and the amount
of the Loan o the investment performance of the Divisions you select;
Account
o any Policy loans or partial withdrawals;
o your Loan Account balance; and
o the charges we deduct under the Policy.
Policy Charges and Deductions
o Expense Charges Against Premiums-- We will deduct a charge
from your premium payments that is guaranteed to be no more
than 10% to cover our sales expenses, premium tax expenses,
and certain federal tax consequences and other obligations
resulting from the receipt of premiums. The premium charge
consists of two portions: (i) a sales charge and (ii) a
"deferred acquisition cost" tax charge ("DAC charge") and
premium tax charge. The current sales charge in Policy Years
1 - 10 consists of 5.5% of premiums up to the target annual
premium plus 3.0% of premiums in excess of target, and 0% of
premiums in years thereafter. The current DAC and premium
tax charge equals 3.5% of premium in all Policy Years. We
may change these rates at any time subject to the overall
guarantee set forth above.
o Monthly Deduction -- At the beginning of each Policy Month,
we will deduct from your Policy's Account Value --
o a Monthly Risk Charge, to cover our anticipated costs
of providing insurance under the Policy;
o the cost of any supplemental benefit riders you choose
to add to your Policy;
5
<PAGE>
o a Service Charge to cover certain administrative
expenses in connection with the Policies. The Service
Charge is guaranteed not to exceed $15.00 each Policy
Month. Currently, this charge is $10.00 each Policy
Month for the first three Policy Years and $7.50 per
Policy Month thereafter; and
o any extra risk charge if the Insured is in a rated
class as specified in your Policy.
o Separate Account Charges -- On each Valuation Day we deduct
a Mortality and Expense Risk Charge from the Divisions to
compensate Great-West for the mortality and expense risks we
assume by issuing your Policy. The Mortality and Expense
Risk Charge will not exceed 0.90% of net asset value
annually of your Account Value. Currently, this charge is
0.45% in Policy Years 1 through 10, 0.30% in Policy Years 11
through 20, and 0.10% thereafter.
o Surrender Charges -- Your Policy has no surrender charges.
o Transfer Fee -- You may transfer Account Value among the
Divisions free of charge up to the first 12 transfers in one
calendar year. Thereafter, subject to certain exceptions, a
maximum administrative charge of $10 per transfer will be
deducted from your Account Value for all transfers in excess
of 12 made in the same calendar year.
o Partial Withdrawal Fee -- You may make one free partial
withdrawal of your Account Value each Policy Year.
Thereafter, a maximum administrative charge of $25 will be
deducted from your Account Value for all partial withdrawals
after the first made in the same Policy Year.
o Change of Death Benefit Option Fee -- A maximum
administrative charge of $100 will be deducted from your
Account Value each time you change your death benefit
option.
The charges assessed under the Policy are described in more
detail in "Charges and Deductions", beginning on page 31.
Fees and Expenses of the Funds
You will indirectly bear the costs of investment management
fees and expenses paid from the assets of the mutual fund
portfolios you select. The prospectuses for the Funds describe
their respective charges and expenses in more detail. We may
6
<PAGE>
receive compensation from the investment advisers or
administrators of the Funds. Such compensation will be consistent
with the services we provide and the cost savings resulting from
the arrangement and therefore may differ between Funds.
What if Charges and Deductions Exceed Account Value?
o Your Policy may terminate if your Account Value at the
beginning of any Policy Month is insufficient to pay all
charges and deductions then due.
o If your Policy would terminate due to insufficient value, we
will send you notice and allow you a 61 day Grace Period.
o If, within the Grace Period, you do not make a premium
payment sufficient to cover all accrued and unpaid charges
and deductions, your Policy will terminate at the end of the
Grace Period without further notice.
Reinstatement
If your Policy terminates due to insufficient value, we will
reinstate it within three years at your request, subject to
certain conditions.
Paid-Up Life Insurance
If the Insured reaches Attained Age 100 and your Policy is
in force, the Policy's Account Value, less Policy Debt, will be
applied as a single premium to purchase "paid-up" insurance. Your
Policy's Account Value will remain in the Series Account
allocated to the Divisions in accordance with your instructions.
The death benefit under this paid-up insurance generally will be
equal to your Account Value. As your Account Value changes based
on the investment experience of the Divisions, the death benefit
will increase or decrease accordingly.
7
<PAGE>
Federal Tax Considerations
Your Policy is structured to meet the definition of a "life
insurance contract" under the Tax Code. We may need to limit the
amount of your premium payments to ensure that your Policy
continues to meet that definition.
Your purchase of, and transactions under, your Policy may
have tax consequences that you should consider before purchasing
a Policy. In general, the death benefit will be excluded from the
gross income of the beneficiary. Increases in Account Value will
not be taxable as earned, although there may be income tax due on
a surrender of your Policy or partial withdrawal of your Policy's
Account Value. For more information on the tax treatment of the
Policy, see "Federal Income Tax Considerations" beginning on page
46 and consult your tax adviser.
Great-West Life & Annuity Insurance Company
Great-West Life & Annuity Insurance Company ("Great-West")
is a stock life insurance company that was originally organized
under the laws of the state of Kansas as the National Interment
Association. Our name was changed to Ranger National Life
Insurance Company in 1963 and to Insuramerica Corporation prior
to changing to our current name in February 1982. In September
1990, we redomesticated under the laws of Colorado.
We are authorized to do business in forty-nine states, the
District of Columbia, Puerto Rico and Guam. We issue individual
and group life insurance policies and annuity contracts and
accident and health insurance policies.
Great-West is a member of the Insurance Marketplace
Standards Association ("IMSA"). Accordingly, we may use the IMSA
logo and membership in IMSA in advertisements. Being a member of
IMSA means that Great-West has chosen to participate in IMSA's
Life Insurance Ethical Market Conduct Program.
Great-West is an indirect wholly-owned subsidiary of The
Great-West Life Assurance Company. The Great-West Life Assurance
Company is a subsidiary of Great-West Lifeco Inc., a holding
company. Great-West Lifeco Inc. is in turn a subsidiary of Power
Financial Corporation of Canada, a financial services company.
Power Corporation of Canada, a holding and management company,
has voting control of Power Financial Corporation of Canada. Mr.
Paul Desmarais, through a group of private holding companies,
which he controls, has voting control of Power Corporation of
Canada.
Great-West also acts as a sponsor for six other of its
separate accounts that are registered with the SEC as investment
companies: FutureFunds Series Account, Maxim Series Account,
Pinnacle Series Account, Retirement Plan Series Account, Variable
Annuity-1 Series Account, and Variable Annuity Account A.
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The officers and employees of Great-West are covered by a
joint fidelity bond. The fidelity bond coverage is $(Canadian)
100,000,000 in the aggregate with a single loss limit of
$(Canadian) 50,000,000. In addition to covering officers and
employees of Great-West, the joint fidelity bond also covers
certain affiliates of Great-West.
The Series Account
We established "COLI VUL-2 Series Account" (the "Series
Account") in accordance with Colorado law on November 25, 1997.
The Series Account may also be used to fund benefits payable
under other life insurance policies issued by us.
We own the assets of the Series Account. The income, gains
or losses, realized or unrealized, from assets allocated to the
Series Account are credited to or charged against the Series
Account without regard to our other income, gains or losses.
The assets of We will at all times maintain assets in the Series Account
the Series with a total market value at least equal to the reserves and
Account are other liabilities relating to the variable benefits under all
insulated policies participating in the Series Account. Those assets may
from our not be charged with our liabilities from our other business. Our
general obligations under those policies are, however, our general
liabilities. corporate obligations.
The Series Account is registered with the Securities and
The Series Exchange Commission (the "SEC") under the Investment Company Act
Account is of 1940 ("1940 Act") as a unit investment trust. Registration
registered under the 1940 Act does not involve any supervision by the SEC of
with the SEC. the management or investment practices or policies of the Series
Account.
The Series Account is divided into 33 Divisions. Each
The Series Division invests exclusively in shares of a corresponding
Account has investment portfolio of a registered investment company (commonly
33 Divisions. known as a mutual fund). We may in the future add new or delete
Each Divi- existing Divisions. The income, gains or losses, realized or
sion invests unrealized, from assets allocated to each Division are credited
exclusively to or charged against that Division without regard to the other
in shares of income, gains or losses of the other Divisions. All amounts
a single allocated to a Division will be used to purchase shares of the
mutual fund corresponding Fund. The Divisions will at all times be fully
portfolio. invested in Fund shares.
We hold the assets of the Series Account. We keep those
assets physically segregated and held separate and apart from our
general account assets. We maintain records of all purchases and
redemptions of shares of the Funds.
The Investment Options
The Fund The Policy offers a number of investment options,
Prospectuses corresponding to the Divisions. Each Division invests in a single
have more Fund. Each Fund is a mutual fund registered under the 1940 Act,
information or a separate series of shares of such a mutual fund. More
about the comprehensive information, including a discussion of potential
Funds, and risks, is found in the current prospectuses for the Funds (the
may be ob- "Fund Prospectuses"). The Fund Prospectuses should be read in
tained from connection with this Prospectus. You may obtain a copy of each
us without Fund Prospectus without charge by Request.
charge.
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Each Fund holds its assets separate from the assets of the
other Funds, and each Fund has its own distinct investment
objective and policies. Each Fund operates as a separate
investment fund, and the income, gains and losses of one Fund
generally have no effect on the investment performance of any
other Fund.
The Funds are NOT available to the general public directly.
The Funds are available as investment options in variable life
insurance policies or variable annuity contracts issued by life
insurance companies or, in some cases, through participation in
certain qualified pension or retirement plans.
Some of the Funds have been established by investment
advisers which manage publicly traded mutual funds having similar
names and investment objectives. While some of the Funds may be
similar to, and may in fact be modeled after publicly traded
mutual funds, the Funds are not otherwise directly related to any
publicly traded mutual fund. Consequently, the investment
performance of publicly traded mutual funds and any similarly
named Fund may differ substantially.
The investment objectives of the current Funds are briefly
described below:
American Century Variable Portfolios, Inc. (advised by American
Century Investment Management, Inc.)
American Century VP Income & Growth seeks dividend growth,
current income and capital appreciation by investing in common
stocks.
American Century VP International seeks capital growth by
investing primarily in an internationally diversified portfolio
of common stocks that are considered by the adviser to have
prospects for appreciation.
American Century VP Value seeks long-term capital growth by
investing in securities that the adviser believes to be
undervalued at the time of purchase. Income is a secondary
objective.
Dreyfus Stock Index Fund (advised by The Dreyfus Corporation and
its affiliate Mellon Equity Associates)
Dreyfus Stock Index Fund seeks 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.
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Dreyfus Variable Investment Fund (advised by The Dreyfus
Corporation)
Dreyfus Capital Appreciation Portfolio seeks to provide
long-term capital growth consistent with the preservation of
capital by investing primarily in the common stocks of domestic
and foreign issuers. Current income is a secondary investment
objective. Fayez Sarofim & Co. is the sub-adviser to this Fund
and, as such, provides day-to-day management.
Dreyfus Growth and Income Portfolio seeks to provide
long-term capital growth, current income and growth of income,
consistent with reasonable investment risk by investing primarily
in equity securities, debt securities and money market
instruments of domestic and foreign issuers.
Federated Insurance Series (advised by Federated Advisers)
Federated American Leaders Fund II seeks to achieve
long-term growth of capital by investing, under normal
circumstances, at least 65% of its total assets in common stock
of "blue-chip" companies. The Fund's secondary objective is to
provide income.
Federated Growth Strategies Fund II seeks capital
appreciation by investing at least 65% of its assets in equity
securities of companies with prospects for above-average growth
in earnings and dividends or companies where significant
fundamental changes are taking place.
Federated High Income Bond Fund II seeks high current income
by investing primarily in a professionally managed, diversified
portfolio of fixed-income securities, including lower-rated
corporate debt obligations commonly referred to as "junk bonds."
Federated International Equity Fund II seeks to obtain a
total return on its assets by investing at least 65% of its
assets in equity securities of issuers located in at least three
different countries outside the United States.
INVESCO Variable Investments Fund, Inc. (advised by INVESCO Funds
Group, Inc.)
INVESCO VIF - High Yield Portfolio seeks 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.
INVESCO VIF - Industrial Income Portfolio seeks the best
possible current income while following sound investment
practices by investing at least 65% of its total assets in
dividend-paying common stocks, with up to 10% of its total assets
invested in equity securities that do not pay regular dividends
and the remainder invested in other income-producing securities
such as corporate bonds. Capital growth potential is an
additional consideration in the selection of portfolio
securities.
INVESCO VIF - Total Return Portfolio seeks a high total
return on investment through capital appreciation and current
income by investing in a combination of equity and fixed-income
securities.
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INVESCO Capital Management, Inc. serves as the sub-adviser to
this Fund and, as such, provides day-to- day management.
Janus Aspen Series (advised by Janus Capital Corporation)
Balanced Portfolio seeks long-term growth of capital,
balanced by current income by investing up to 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.
Flexible Income Portfolio seeks to maximize total return
from a combination of income and capital appreciation by
investing primarily in income-producing securities.
High-Yield Portfolio seeks high current income as its
primary objective by investing primarily in high yield/high risk
fixed-income securities, commonly referred to as "junk bonds."
Capital appreciation is a secondary objective when consistent
with the primary objective.
Worldwide Growth Portfolio seeks long-term growth of capital
by investing primarily in common stocks of foreign and domestic
issuers.
Maxim Series Fund, Inc. (advised by GW Capital Management, LLC, a
wholly-owned subsidiary of Great-West)
Maxim Corporate Bond Portfolio seeks high total investment
return by investing primarily in debt securities (including
convertibles), although up to 20% of its total assets may be
invested in preferred stocks. Loomis, Sayles & Company, L.P.
serves as sub-adviser to this Fund and, as such, provides
day-to-day management.
Maxim INVESCO ADR Portfolio seeks to achieve a high total
return on investment through capital appreciation and current
income, while reducing risk through diversification, by investing
in foreign securities that are issued in the form of American
Depository Receipts or foreign stocks that are registered with
the SEC and traded in the United States. Institutional Trust
Company serves as the sub-adviser to this Fund and, as such,
provides day-to-day management.
Maxim INVESCO Balanced Portfolio seeks to achieve a high
total return on investment through capital appreciation and
current income by investing in a combination of common stocks and
fixed-income securities. Institutional Trust Company serves as
the sub-adviser to this Fund and, as such, provides day-to-day
management.
Maxim INVESCO Small-Cap Growth Portfolio seeks long-term
capital growth by investing its assets principally in a
diversified group of equity securities of emerging growth
companies with market capitalization of $1 billion or less at the
time of initial purchase. Institutional Trust Company serves as
the sub-adviser to this Fund and, as such, provides day-to-day
management.
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Maxim MidCap Portfolio seeks long-term growth of capital by
normally investing at least 65% of its assets in securities
issued by medium-sized companies. Janus Capital Corporation
serves as the sub-adviser to this Fund and, as such, provides
day-to-day management.
Maxim Money Market Portfolio seeks preservation of capital,
liquidity and the highest possible current income through
investments in short-term money market securities. An investment
in this Fund is not insured by the Federal Deposit Insurance
Corporation or any other government agency. Although the Fund
seeks to preserve the value of an investment at $1.00 per share,
it is possible to lose money.
Maxim U.S. Government Securities Portfolio seeks the highest
level of return consistent with preservation of capital and
substantial credit protection by investing primarily in
mortgage-related securities issued or guaranteed by an agency or
instrumentality of the U.S. Government, other U.S. agency and
instrumentality obligations and in U.S. Treasury obligations.
Maxim Profile Portfolios
Maxim Aggressive Profile Portfolio seeks to achieve a high
total return on investment through long-term capital appreciation
by investing in other Maxim Funds with an emphasis on equity
investments.
Maxim Moderately Aggressive Profile Portfolio seeks to
achieve a high total return on investment through long-term
capital appreciation by investing in other Maxim Funds with an
emphasis on equity investments, though income is a secondary
consideration.
Maxim Moderate Profile Portfolio seeks to achieve a high
total return on investment through long-term capital appreciation
by investing in other Maxim Funds with a relatively equal
emphasis on equity and fixed-income investments.
Maxim Moderately Conservative Profile Portfolio seeks to
achieve the highest possible total return consistent with
reasonable risk through a combination of income and capital
appreciation by investing in other Maxim Funds with primary
emphasis on fixed-income investments, and, to a lesser degree, in
other Maxim Funds with an emphasis on equity investments.
Maxim Conservative Profile Portfolio seeks to achieve total
return consistent with preservation of capital primarily through
fixed-income investments by investing in other Maxim Funds with
an emphasis on fixed-income investments.
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Neuberger&Berman Advisers Management Trust
The portfolios listed below invest their assets in a
corresponding portfolio of Neuberger&Berman Advisers Managers
Trust, an open-end investment company registered under the 1940
Act. This type of arrangement is commonly referred to as a
"master/feeder" structure and is different from that of many
other investment companies which directly acquire and manage
their own assets. The investment objectives of the portfolios
listed below are identical to the corresponding portfolios in
which they invest and their investment performance will directly
correspond with the investment performance of those corresponding
portfolios. Neuberger&Berman Management Incorporated serves as
the investment adviser to Advisers Managers Trust and
Neuberger&Berman, LLC acts as sub-adviser.
Guardian Portfolio seeks capital appreciation, and,
secondarily, current income by investing primarily in common
stocks of long-established, high- quality companies. A
value-oriented investment approach is used in selecting
securities.
Mid-Cap Growth Portfolio seeks capital appreciation by
investing, under normal market conditions, in equity securities
of medium-sized companies. A growth-oriented investment approach
is used in selecting securities.
Partners Portfolio seeks capital growth by investing in
common stocks and other equity securities of medium to large
capitalization established companies. A value-oriented investment
approach is used in selecting securities.
Socially Responsive Portfolio seeks long-term capital
appreciation by investing in stocks of medium to large
capitalization companies that meet both financial and social
criteria. A value-oriented investment approach is used in
selecting securities.
You should contact your representative for further
information on the availability of the Divisions.
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<PAGE>
Each Fund is subject to certain investment restrictions and
policies which may not be changed without the approval of a
majority of the shareholders of the Fund. See the accompanying
Fund Prospectuses for further information.
We automatically reinvest all dividends and capital gains
distributions from the Funds in shares of the distributing Fund
at their net asset value. The income and realized and unrealized
gains or losses on the assets of each Division are separate and
are credited to or charged against the particular Division
without regard to income, gains or losses from any other Division
or from any other part of our business. We will use amounts you
allocate to a Division to purchase shares in the corresponding
Fund and will redeem shares in the Funds to meet Policy
obligations or make adjustments in reserves. The Funds are
required to redeem their shares at net asset value and to make
payment within seven days.
The Funds may also be available to separate accounts
offering variable annuity and variable life products of other
affiliated and unaffiliated insurance companies, as well as our
other separate accounts. Although we do not anticipate any
disadvantages to this, there is a possibility that a material
conflict may arise between the interests of the Series Account
and one or more of the other separate accounts participating in
the Funds. A conflict may occur due to a change in law affecting
the operations of variable life and variable annuity separate
accounts, differences in the voting instructions of policyowners
and those of other companies, or some other reason. In the event
of conflict, we will take any steps necessary to protect
policyowners, including withdrawal of the Series Account from
participation in the Funds which are involved in the conflict or
substitution of shares of other Funds.
Expenses of the Funds
Fund shares are purchased at net asset value, which reflects
the deduction of investment management fees and certain other
expenses. These expenses, therefore, are not direct charges
against Series Account assets or reductions from your Policy's
Account Value. You do, however, indirectly bear the expenses of
the Funds because those expenses are taken into consideration in
computing each Fund's net asset value, which is the share price
used to calculate the Unit Values of the Series Account. Fund
expenses are shown in Appendix B.
The management fees and other expenses of the Funds are more
fully described in the Fund Prospectuses. The information
relating to the Fund expenses was provided by each Fund and was
not independently verified by us. See "Charges and Deductions --
Fund Expenses" beginning on page 34 of this Prospectus.
About the Policy
Policy Application, Issuance and Initial Premium
To purchase a Policy, you must submit an application to our
Principal Office. We will then follow our underwriting procedures
designed to determine the insurability of the proposed Insured.
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<PAGE>
We may require a full underwriting, which includes a medical
examination and further information, before your application is
approved. We also may offer the Policy on a simplified
underwriting or guaranteed issue basis. Proposed Insureds must be
acceptable risks based on our applicable underwriting limits and
standards. We will not issue a Policy until the underwriting
process has been completed to our satisfaction. We reserve the
right to reject an application for any lawful reason or to "rate"
an Insured as a substandard risk, which will result in increased
Monthly Risk Charges. The Monthly Risk Charge also may vary
depending on the type of underwriting we use.
You must specify certain information in the application,
including the Total Face Amount, the death benefit option and
supplemental benefits, if any. The Total Face Amount generally
may not be decreased below $100,000.
Upon approval of the application, we will issue to you a
Policy on the life of the Insured. A specified Initial Premium
must be paid before we issue the Policy. The effective date of
coverage for your Policy (which we call the "Policy Date") will
be the date we receive a premium equal to or in excess of the
specified Initial Premium after we have approved your
application. If your premium payment is received on the 29th,
30th or 31st of a month, the Policy will be dated the 28th of
that month.
We generally do not accept premium payments before approval
of an application. However, at our discretion, we may elect to do
so. While your application is in underwriting, if we accept your
premium payment before approval of your application, we will
provide you with temporary insurance coverage in accordance with
the terms of our temporary insurance agreement. In our
discretion, we may limit the amount of premium we accept and the
amount of temporary coverage we provide. If we approve your
application, we will allocate your premium to the Series Account
on the Policy Date, as described below. Otherwise, we will
promptly return your payment to you. We will not credit interest
to your premium payment for the period while your application is
in underwriting.
We reserve the right to change the terms or conditions of
your Policy to comply with differences in applicable state law.
Variations from the information appearing in this Prospectus due
to individual state requirements are described in supplements
which are attached to this Prospectus or in endorsements to the
Policy, as appropriate.
Free Look Period
If you are not satisfied with your Policy, it may be
returned by delivering or mailing it to our Principal Office or
to the representative from whom the Policy was purchased within
10 days from the date you receive it (unless a longer period is
required under applicable state insurance law) (the "Free Look
Period").
A Policy returned under this provision will be deemed void.
You will receive a refund equal to the greater of --
o the sum of all premium payments made (less any withdrawals);
or
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o the Policy's Account Value.
During the Free Look Period, we will allocate your net
premium payments to the Division of the Series Account that
invests in the Maxim Money Market Portfolio. We will transfer the
Account Value in that Division to the other Divisions of the
Series Account in accordance with your allocation instructions
five days after the end of the Free Look Period.
Premium Payments
Premium. All premium payments must be made payable to "Great-West
Life & Annuity Insurance Company" and mailed to our Principal
Office. The Initial Premium will be due and payable on or before
your Policy's Issue Date. You may pay additional premium payments
to us in the amounts and at the times you choose, subject to the
limitations described below.
We reserve the right to limit the number of premium payments
we accept on an annual basis. No premium payment may be less than
$100 without our consent, although we will accept a smaller
premium payment if necessary to keep your Policy in force. We
reserve the right to restrict or refuse any premium payments that
exceed the Initial Premium amount shown on your Policy. We also
reserve the right not to accept a premium payment that causes the
death benefit to increase by an amount that exceeds the premium
received. Evidence of insurability satisfactory to us may be
required before we accept any such premium.
We will not accept premium payments that would, in our
opinion, cause your Policy to fail to qualify as life insurance
under applicable federal tax law. If a premium payment is made in
excess of these limits, we will accept only that portion of the
premium within those limits, and will refund the remainder to
you.
Net Premiums. The net premium is the amount you pay as the
premium less any Expense Charges Applied to Premium. See "Charges
and Deductions - - Expense Charges Applied to Premium," beginning
on page 31 of this Prospectus.
Allocation of Net Premium. Except as otherwise described herein,
your net premium will be allocated in accordance with the
allocation percentages you select. Percentages must be in whole
numbers.
Premiums received prior to the end of the Free Look Period
will initially be credited to the Maxim Money Market Portfolio
Division. Your initial allocation percentages will take effect
five days after the end of your state's Free Look Period.
You may change your allocation percentages at any time by
Request. Telephone Requests will be honored only if we have a
properly completed telephone authorization form for you on file.
An allocation change will be effective as of the date we receive
the Request for that change. We, our affiliates and the
representative from whom you purchased your Policy will not be
responsible for losses resulting from acting upon telephone
Requests reasonably believed to be genuine. We will use
17
<PAGE>
reasonable procedures to confirm that instructions communicated
by telephone are genuine. You will be required to identify
yourself by name and a personal identification number for
transactions initiated by telephone. However, if we do not take
reasonable steps to ensure that a telephone authorization is
valid, we may be liable for such losses. We may suspend, modify
or terminate this telephone privilege at any time without notice.
Planned Periodic Premiums. While you are not required to make
additional premium payments according to a fixed schedule, you
may select a planned periodic premium schedule and corresponding
billing period, subject to our limits. We will send you reminder
notices for the planned periodic premium, unless you request to
have reminder notices suspended. You are not required, however,
to pay the planned periodic premium; you may increase or decrease
the planned periodic premium subject to our limits, and you may
skip a planned payment or make unscheduled payments. Depending on
the investment performance of the Divisions you select, the
planned periodic premium may not be sufficient to keep your
Policy in force, and you may need to change your planned payment
schedule or make additional payments in order to prevent
termination of your Policy.
Death Benefit
You may If your Policy is in force at the time of the Insured's
choose from death, we will pay the beneficiary an amount based on the death
three death benefit option you select once we have received Due Proof of the
benefit op- Insured's death. The amount payable will be:
tions. Your
choice will o the amount of the selected death benefit option, plus
affect the
insurance o any amounts payable under any supplemental benefit riders
charges we added to your Policy, less
deduct from
your Account o the value of any Policy Debt on the date of the Insured's
Value and the death, less
amount of the
death benefit. o any accrued and unpaid Policy charges.
We will pay this amount to the beneficiary in one lump sum,
unless we and the beneficiary agree on another form of
settlement. We will pay interest, at a rate not less than that
required by law, on the amount of Policy Proceeds, if payable in
one lump sum, from the date of the Insured's death to the date of
payment.
In order to meet the definition of life insurance under the
Internal Revenue Code of 1986, as amended (the "Code"), Section
7702 of the Code defines alternative testing procedures for the
minimum death benefit under a Policy: the guideline premium test
("GPT") and the cash value accumulation test ("CVAT"). See
"Federal Income Tax Considerations - Tax Status of the Policy,"
at page 46. The Policy must qualify under either the GPT or the
CVAT. When you purchase a Policy, you must choose the procedure
under which your Policy will qualify. You may not change your
choice while the Policy is in force.
Under both testing procedures, there is a minimum death
benefit required at all times equal to your Policy's Account
Value multiplied by some pre-determined factor. The factors used
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<PAGE>
to determined the minimum death benefit depend on the testing
procedure chosen and vary by age. The factors used for GPT are
shown in Appendix C and those used for CVAT are set forth in your
Policy.
Under the GPT, there is also a maximum amount of premium
which may be paid with respect to your Policy.
Use of the CVAT can be advantageous if you intend to
maximize the total amount of premiums paid. An offsetting
consideration, however, is that the factors used to determine the
You may minimum death benefit are higher under the CVAT, which can result
select from in a higher death benefit over time and, thus, a higher total
among three cost of insurance.
death bene-
fit options The Policy has three death benefit options.
Option 1. The "Level Death" Option. Under this option, the death
benefit is --
o the Policy's Total Face Amount on the date of the Insured's
death less any partial withdrawals; or, if greater,
o the Policy's Account Value on the date of death multiplied
by the applicable factor shown in the table set forth in
Appendix C or in your Policy.
This death benefit option should be selected if you want to
minimize your cost of insurance.
Option 2. The "Coverage Plus" Option. Under this option, the
death benefit is --
o the sum of the Total Face Amount and Account Value of the
Policy on the date of the Insured's death; or, if greater,
o the Policy's Account Value on the date of death multiplied
by the applicable factor shown in the table set forth in
Appendix C or in your Policy.
This death benefit option should be selected if you want
your death benefit to increase with your Policy's Account Value.
Option 3. The "Premium Accumulation" Option. Under this option,
the death benefit is --
o the sum of the Total Face Amount and premiums paid under the
Policy plus interest at the rate specified in your Policy
less any partial withdrawals; or, if greater,
o the Policy's Account Value on the date of death multiplied
by the applicable factor shown in the table set forth in
Appendix C or in your Policy.
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This death benefit option should be selected if you want a
specified amount of death benefit plus a return of the premiums
you paid with guaranteed interest.
Changes in Death Benefit Option
After the first Policy Year, but not more than once each
Policy Year, you may change the death benefit option by Request.
Any change will be effective on the first day of the Policy Month
following the date we approve your Request. A maximum
administrative fee of $100 will be deducted from your Account
Value each time you change your death benefit option.
A change in the death benefit option will not change the
amount payable upon the death of the Insured. Any change is
subject to the following conditions:
o If the change is from Option 1 to Option 2, the new Total
Face Amount, at the time of the change, will equal the prior
Total Face Amount less the Policy's Account Value. Evidence
of insurability may be required.
o If the change is from Option 1 to Option 3, the new Total
Face Amount, at the time of the change, will equal the prior
Total Face Amount less the accumulated value of all premiums
at the interest rate shown in your Policy. Evidence of
insurability may be required.
o If the change is from Option 2 to Option 1, the new Total
Face Amount, at the time of the change, will equal the prior
Total Face Amount plus the Policy's Account Value.
o If the change is from Option 2 to Option 3, the new Total
Face Amount, at the time of the change, will equal the prior
Total Face Amount plus the Policy's Account Value less the
accumulated value of all premiums at the interest rate shown
in your Policy.
o If the change is from Option 3 to Option 1, the new Total
Face Amount, at the time of the change, will equal the prior
Total Face Amount plus the accumulated value of all premiums
at the interest rate shown in your Policy.
o If the change is from Option 3 to Option 2, the new Total
Face Amount, at the time of the change, will equal the prior
Total Face Amount less the Policy's Account Value plus the
accumulated value of all premiums at the interest rate shown
in your Policy.
Changes in Total Face Amount
You may in- You may increase or decrease the Total Face Amount of your
crease or Policy at any time within certain limits.
decrease the
Total Face
Amount within
certain limits.
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Minimum Changes. Each increase or decrease in the Total Face
Amount must be at least $25,000. We reserve the right to change
the minimum amount by which you may change the Total Face Amount.
Increases. To Request an increase, you must provide satisfactory
evidence of the Insured's insurability. Once approved by us, an
increase will become effective on the Policy Anniversary
following our approval of your Request, subject to the deduction
of the first Policy Month's Monthly Risk Charge, Service Charge,
any extra risk charge if the Insured is in a rated class and the
cost of any riders.
Decreases. A decrease will become effective at the beginning of
the next Policy Month following our approval of your request. The
Total Face Amount after the decrease must be at least $100,000.
For purposes of the Incontestability Provision of your
Policy, any decrease in Total Face Amount will be applied in the
following order:
o first, to the most recent increase;
o second, to the next most recent increases, in reverse
chronological order; and
o finally, to the initial Total Face Amount.
Surrenders
If you sur- You may surrender your Policy for its Cash Surrender Value
render your at any time while the Insured is living. If you do, the insurance
Policy and coverage and all other benefits under the Policy will terminate.
receive its
Cash Sur- Cash Surrender Value is your Policy's Account Value less the sum
render Value, of:
you may
incur taxes o the outstanding balance of any Policy Debt; and
and tax
penalties. o any other accrued and unpaid Policy charges.
We will determine your Cash Surrender Value as of the end of
the first Valuation Date after we receive your Request for
surrender.
Partial Withdrawal
If you with- You may Request a partial withdrawal of Account Value at any
draw part of time while the Policy is in force. The amount of any partial
the Cash withdrawal must be at least $500 and may not exceed 90% of your
Surrender Policy's Account Value less the value of the Loan Account. An
Value, your administrative fee will be deducted from your Account Value for
Policy's all partial withdrawals after the first made during the same
death benefit Policy Year. This administrative fee is guaranteed to be no
will be re- greater than $25.
duced and
you may incur If you have chosen either Death Benefit Option 1 or Death
taxes and Benefit Option 3, then the death benefit payable will be reduced
tax penal- by the amount of any partial withdrawals.
ties.
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Your Policy's Account Value will be reduced by the amount of
a partial withdrawal. The amount of a partial withdrawal will be
withdrawn from the Divisions in the proportion the amounts in the
Divisions bear to your Policy's Account Value. You cannot repay
amounts taken as a partial withdrawal. Any subsequent payments
received by us will be treated as additional premium payments and
will be subject to our limitations on premiums.
A partial withdrawal may have tax consequences. See "Federal
Income Tax Considerations - - Tax Treatment of Policy Benefits,"
beginning on page 47 of this Prospectus.
Policy Loans
You may You may request a Policy loan of up to 90% of your Policy's
borrow from Account Value, decreased by the amount of any outstanding Policy
us using Debt on the date the Policy loan is made. When a Policy loan is
your Account made, a portion of your Account Value equal to the amount of the
Value as Policy loan will be allocated to the Loan Account as collateral
collateral. for the loan. This amount will not be affected by the investment
experience of the Series Account while the loan is outstanding
and will be subtracted from the Divisions in the proportion the
amounts in the Divisions bear to your Account Value. The minimum
Policy loan amount is $500.
The interest rate on the Policy loan will be determined
annually at the beginning of each Policy Year. That interest rate
will be guaranteed for that Policy Year and will apply to all
Policy loans outstanding during that Policy Year. Interest is due
and payable on each Policy Anniversary. Interest not paid when
due will be added to the principal amount of the loan and will
bear interest at the loan interest rate.
Presently, the maximum interest rate for Policy loans is The
Moody's Corporate Bond Yield Average - Monthly Average
Corporates, which is published by Moody's Investor Service, Inc.
If that Average ceases to be published, the maximum interest rate
for Policy loans will be derived from a substantially similar
average adopted by your state's Insurance Commissioner.
We must reduce our Policy loan interest rate if the maximum
loan interest rate is lower than the loan interest rate for the
previous Policy Year by one-half of one percent or more.
We may increase the Policy loan interest rate but such
increase must be at least one-half of one percent. No increase
may be made if the Policy loan interest rate would exceed the
maximum loan interest rate. We will send you advance notice of
any increase in the Policy loan rate.
Interest will be credited to amounts held in the Loan
Account. The rate will be no less than the Policy loan interest
rate then in effect less 0.9%.
All payments we receive from you will be treated as premium
payments unless we have received notice, in form satisfactory to
us, that the funds are for loan repayment. If you have a Policy
loan, it is generally advantageous to repay the loan rather than
make a premium payment because premium payments incur expense
charges whereas loan repayments do not. Loan repayments will
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<PAGE>
first reduce the outstanding balance of the Policy loan and then
accrued but unpaid interest on such loans. We will accept
repayment of any Policy loan at any time while the Policy is in
force. Amounts paid to repay a Policy loan will be allocated to
the Divisions in the proportion the amounts in the Divisions bear
to your Account Value.
A Policy loan, whether or not repaid, will affect the Policy
Proceeds payable upon the Insured's death and the Account Value
because the investment results of the Divisions do not apply to
amounts held in the Loan Account. The longer a loan is
outstanding, the greater the effect is likely to be, depending on
the investment results of the Divisions while the loan is
outstanding. The effect could be favorable or unfavorable.
Transfers Between Divisions
Subject to our rules as they may exist from time to time,
you may at any time transfer to another Division all or a portion
of the Account Value allocated to a Division. We will make
transfers pursuant to a Request. Telephone Requests will be
honored only if we have a properly completed telephone
authorization form for you on file. We, our affiliates and the
representative from whom you purchased your Policy will not be
responsible for losses resulting from acting upon telephone
Requests reasonably believed to be genuine. We will use
reasonable procedures to confirm that instructions communicated
by telephone are genuine. For transactions initiated by
telephone, you will be required to identify yourself by name and
a personal identification number. However, if we do not take
reasonable steps to help ensure that a telephone authorization is
valid, we may be liable for such losses. We may suspend, modify
or terminate the telephone transfer privilege at any time without
notice.
Transfers may be Requested by indicating the transfer of
either a specified dollar amount or a specified percentage of the
Division's value from which the transfer will be made.
Transfer privileges are subject to our consent. We reserve
the right to impose limitations on transfers, including, but not
limited to: (1) the minimum amount that may be transferred; and
(2) the minimum amount that may remain in a Division following a
transfer from that Division.
An administrative charge of $10 per transfer will apply for
all transfers in excess of 12 made in a calendar year. We may
increase or decrease the transfer charge; however, it is
guaranteed to never exceed $10 per transfer. All transfers made
in a single day will count as only one transfer toward the 12
free transfers. The transfer of your Initial Premium from the
Maxim Money Market Portfolio Division to your selected Divisions
does not count toward the twelve free transfers. Likewise, any
transfers under Dollar Cost Averaging or periodic rebalancing of
your Account Value under the Rebalancer Option do not count
toward the twelve free transfers (a one time rebalancing,
however, will be counted as one transfer).
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<PAGE>
Dollar Cost Averaging
By Request, you may elect Dollar Cost Averaging in order to
purchase Units of the Divisions over a period of time.
Dollar Cost Averaging permits you to automatically transfer
a predetermined dollar amount, subject to our minimum, at regular
Dollar Cost intervals from any one or more designated Divisions to one or
Averaging more of the remaining, then available Divisions. The Unit Value
permits you will be determined on the dates of the transfers. You must
to transfer specify the percentage to be transferred into each designated
your Account Division. Transfers may be set up on any one of the following
Value at frequency periods: monthly, quarterly, semiannually, or annually.
regular The transfer will be initiated one frequency period following the
intervals date of your request. We will provide a list of Divisions
from one or eligible for Dollar Cost Averaging which may be modified from
more Divi- time to time. Amounts transferred through Dollar Cost Averaging
sions to are not counted against the twelve free transfers allowed in a
other calendar year. You may not participate in Dollar Cost Averaging
Divisions. and the Rebalancer Option (described below) at the same time.
Participation in Dollar Cost Averaging does not assure a greater
profit, or any profit, nor will it prevent or necessarily
alleviate losses in a declining market. We reserve the right to
modify, suspend, or terminate Dollar Cost Averaging at any time.
The Rebalancer Option
The Reba- By Request, you may elect the Rebalancer Option in order to
lancer Option automatically transfer Account Value among the Divisions on a
permits you periodic basis. This type of transfer program automatically
to reba- reallocates your Account Value so as to maintain a particular
lance your percentage allocation among Divisions chosen by you. The amount
Account Value allocated to each Division will grow or decline at different
so that you rates depending on the investment experience of the Divisions.
may main-
tain your You may Request that rebalancing occur one time only, in
chosen which case the transfer will take place on the date of the
percentage Request. This transfer will count as one transfer towards the
allocation twelve free transfers allowed in a calendar year.
among
Divisions. You may also choose to rebalance your Account Value on a
quarterly, semiannual, or annual basis, in which case the first
transfer will be initiated one frequency period following the
date of your request. On that date, your Account Value will be
automatically reallocated to the selected Divisions. Thereafter,
your Account Value will be rebalanced once each frequency period.
In order to participate in the Rebalancer Option, your entire
Account Value must be included. Transfers made with these
frequencies will not count against the twelve free transfers
allowed in a calendar year.
You must specify the percentage of Account Value to be
allocated to each Division and the frequency of rebalancing. You
may terminate the Rebalancer Option at any time by Request.
You may not participate in the Rebalancer Option and Dollar
Cost Averaging at the same time. Participation in the Rebalancer
Option does not assure a greater profit, or any profit, nor will
24
<PAGE>
it prevent or necessarily alleviate losses in a declining market.
The Company reserves the right to modify, suspend, or terminate
the Rebalancer Option at any time.
Account Value
Your Account Value is the sum of your interests in each
Division you have chosen plus the amount in your Loan Account.
The Account Value varies depending upon the premiums paid,
Expense Charges Applied to Premium, Mortality and Expense Risk
Charge, Service Charges, Monthly Risk Charges, partial
withdrawals, fees, Policy loans and the net investment factor
(described below) for the Divisions to which your Account Value
is allocated.
A Valuation We measure the amounts in the Divisions in terms of Units
Date is any and Unit Values. On any given date, your interest in a Division
day on which is equal to the Unit Value multiplied by the number of Units
we, the appli- credited to you in that Division. Amounts allocated to a Division
cable Fund, will be used to purchase Units of that Division. Units are
and the NYSE redeemed when you make partial withdrawals, undertake Policy
are open for loans or transfer amounts from a Division, and for the payment of
business. Service Charges, Monthly Risk Charges and other fees. The number
of Units of each Division purchased or redeemed is determined by
The Valuation dividing the dollar amount of the transaction by the Unit Value
Period is the for the Division. The Unit Value for each Division was
period of established at $10.00 for the first Valuation Date of the
time from one Division. The Unit Value for any subsequent Valuation Date is
determination equal to the Unit Value for the preceding Valuation Date
of Unit multiplied by the net investment factor (determined as provided
Values to below). The Unit Value of a Division for any Valuation Date is
the next. determined as of the close of the Valuation Period ending on that
Valuation Date.
Transactions are processed on the date we receive a premium
at our Principal Office or upon approval of a Request. If your
premium or Request is received on a date that is not a Valuation
Date, or after the close of the New York Stock Exchange on a
Valuation Date, the transaction will be processed on the next
Valuation Date.
We apply your The Account Value attributable to each Division of the
Initial Pre- Series Account on the Policy Date equals:
mium on the
Policy Date, o that portion of net premium received and allocated to the
which will Division, less
be the Issue
Date (if we o the Service Charges due on the Policy Date, less
have already
received o the Monthly Risk Charge due on the Policy Date, less
your Initial
Premium) or o the Monthly Risk Charge for any riders due on the Policy
the Business Date.
Day we receive
a premium The Account Value attributable to each Division of the
equal to or Series Account on subsequent Valuation Dates is equal to:
in excess of
the Initial o the Account Value attributable to the Division on the
Premium after preceding Valuation Date multiplied by that Division's net
we have investment factor, plus
approved your
Policy
application.
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<PAGE>
o that portion of net premium received and allocated to the
Division during the current Valuation Period, plus
o that portion of the value of the Loan Account transferred to
the Division upon repayment of a Policy loan during the
current Valuation Period; plus
o any amounts transferred by you to the Division from another
Division during the current Valuation Period, less
o any amounts transferred by you from the Division to another
Division during the current Valuation Period, less
o that portion of any partial withdrawals deducted from the
Division during the current Valuation Period, less
o that portion of any Account Value transferred from the
Division to the Loan Account during the current Valuation
Period, less
o that portion of fees due in connection with a partial
surrender charged to the Division, less
o if the first day of a Policy Month occurs during the current
Valuation Period, that portion of the Service Charge for the
Policy Month just beginning charged to the Division, less
o if the first day of a Policy Month occurs during the current
Valuation Period, that portion of the Monthly Risk Charge
for the Policy Month just beginning charged to the Division,
less
o if the first day of a Policy Month occurs during the current
Valuation Period, that Division's portion of the cost for
any riders and any extra risk charge if the Insured is in a
rated class as specified in your Policy, for the Policy
Month just beginning.
Net Investment Factor. The net investment factor for each
Division for any Valuation Period is determined by deducting the
Mortality and Expense Risk Charge for each day in the Valuation
Period from the quotient of (1) and (2) where: (1) is the net
result of:
o the net asset value of a Fund share held in the Division
determined as of the end of the current Valuation Period,
plus
o the per share amount of any dividend or other distribution
declared on Fund shares held in the Division if the
"ex-dividend" date occurs during the current Valuation
Period, plus or minus
26
<PAGE>
o a per share credit or charge with respect to any taxes
incurred by or reserved for, or paid by us if not previously
reserved for, during the current Valuation Period which are
determined by us to be attributable to the operation of the
Division; and
(2) is the net result of:
o the net asset value of a Fund share held in the Division
determined as of the end of the preceding Valuation Period;
plus or minus
o a per share credit or charge with respect to any taxes
incurred by or reserved for, or paid by us if not previously
reserved for, during the preceding Valuation Period which
are determined by us to be attributable to the operation of
the Division.
The Mortality and Expense Risk Charge for the Valuation Period is
the annual Mortality and Expense Risk Charge divided by 365
multiplied by the number of days in the Valuation Period.
The net investment factor may be greater or less than or equal to
one.
Splitting Units. We reserve the right to split or combine the
value of Units. In effecting any such change, strict equity will
be preserved and no such change will have a material effect on
the benefits or other provisions of your Policy.
Charges and Deductions
Expense Charges Applied to Premium. We will deduct a maximum
charge of 10% from each premium payment. A maximum of 6.5% of
this charge will be deducted as sales load to compensate us in
part for sales and promotional expenses in connection with
selling the Policies, such as commissions, the cost of preparing
sales literature, other promotional activities and other direct
and indirect expenses. A maximum of 3.5% of this charge will be
used to cover premium taxes and certain federal income tax
obligations resulting from the receipt of premiums. All states
and a few cities and municipalities impose taxes on premiums paid
for life insurance, which generally range from 2% to 4% of
premium but may exceed 4% in some states (for example, Kentucky).
The amount of your state's premium tax may be higher or lower
than the amount attributable to premium taxes that we deduct from
your premium payments.
The current Expense Charge Applied to Premium for sales load
is 5.5% of premium up to target and 3.0% of premium in excess of
target for Policy Years 1 through 10. Your target premium will
depend on the initial Total Face Amount of your Policy, your
Issue Age, your sex (except in unisex states), and rating class
(if any). Thereafter, there is no charge for sales load. The
current Expense Charge Applied to Premium to cover our premium
taxes and the federal tax obligation described above is 3.5% in
all Policy Years.
As described in "Term Life Insurance Rider", we may offer a
Term Life Insurance Rider that may have the effect of reducing
the sales charge you pay on purchasing an equivalent amount of
insurance.
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<PAGE>
We offer this rider in circumstances which result in the savings
of sales and distribution expenses and administrative costs. To
qualify, a corporation, employer, or other purchaser must satisfy
certain criteria such as, for example, the number of Policies it
expects to purchase, and the expected Total Face Amount under all
such Policies. Generally, the sales contacts and effort and
administrative costs per Policy depend on factors such as the
number of Policies purchased by a single owner, the purpose for
which the Policies are purchased, and the characteristics of the
proposed Insureds. The amount of reduction and the criteria for
qualification are related to the sales effort and administrative
costs resulting from sales to a qualifying owner. Great-West from
time to time may modify on a uniform basis both the amounts of
reductions and the criteria for qualification. Reductions in
these charges will not be unfairly discriminatory against any
person, including the affected owners funded by the Series
Account.
Mortality and Expense Risk Charge. This charge is for the
mortality and expense risks we assume with respect to the Policy.
It is based on an annual rate that we apply against each Division
of the Series Account on a daily basis. We convert the Mortality
and Expense Risk Charge into a daily rate by dividing the annual
rate by 365. The Mortality and Expense Risk Charge will be
determined by us from time to time based on our expectations of
future interest, mortality experience, persistency, expenses and
taxes, but will not exceed 0.90% annually. Currently, the charge
is 0.45% for Policy Years 1 through 10, 0.30% for Policy Years 11
through 20 and 0.10% thereafter.
The mortality risk we assume is that the group of lives
insured under the Policies may, on average, live for shorter
periods of time than we estimated. The expense risk we assume is
that the costs of issuing and administering Policies may be more
than we estimated.
Monthly Deduction. We make a monthly deduction from your Account
Value on the Policy Date and the first day of each Policy Month.
This monthly deduction will be charged proportionally to the
amounts in the Divisions.
The monthly deduction equals the sum of (1), (2), (3) and (4)
where:
(1) is the cost of insurance charge (the Monthly Risk Charge)
equal to the current Monthly Risk Rate (described below)
multiplied by the net amount at risk divided by 1,000;
(2) is the Service Charge;
(3) is the monthly cost of any additional benefits provided by
riders which are a part of your Policy; and
(4) is any extra risk charge if the Insured is in a rated class
as specified in your Policy.
The net amount at risk equals:
o the death benefit divided by 1.00327374; less
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<PAGE>
o your Policy's Account Value on the first day of a Policy
Month prior to assessing the monthly deduction.
If there are increases in the Total Face Amount other than
increases caused by changes in the death benefit option, the
monthly deduction described above is determined separately for
the initial Total Face Amount and each increase in the Total Face
Amount. In calculating the net amount at risk, your Account Value
will first be allocated to the most recent increase in the death
benefit and then to each increase in the Total Face Amount in the
reverse order in which the increases were made.
Monthly Risk Rates. The Monthly Risk Rate is used to
determine the cost of insurance charge for providing insurance
coverage under the Policy. The Monthly Risk Rates (except for any
such rate applicable to an increase in the Total Face Amount) are
based on the length of time your Policy has been in force and the
Insured's sex (in the case of non-unisex Policies) and Issue Age.
If the Insured is in a rated class as specified in your Policy,
we will deduct an extra risk charge that reflects that class
rating. The Monthly Risk Rates applicable to each increase in the
Total Face Amount are based on the length of time the increase
has been in force and the Insured's sex (in the case of
non-unisex Policies), Issue Age, and class rating, if any. The
Monthly Risk Rates will be determined by us from time to time
based on our expectations of future experience with respect to
mortality, persistency, interest rates, expenses and taxes, but
will not exceed the Guaranteed Maximum Monthly Risk Rates based
on the 1980 Commissioner's Standard Ordinary, Age Nearest
Birthday, Male/Female, Unismoke Ultimate Mortality Table ("1980
CSO"). Our Monthly Risk Rates for unisex Policies will never
exceed a maximum based on the 1980 CSO using male lives.
The Guaranteed Maximum Monthly Risk Rates reflect any class
rating applicable to the Policy. We have filed a detailed
statement of our methods for computing Account Values with the
insurance department in each jurisdiction where the Policy was
delivered. These values are equal to or exceed the minimum
required by law.
Service Charge. We will deduct a maximum of $15.00 from your
Policy's Account Value on the first day of each Policy Month to
cover our administrative costs, such as salaries, postage,
telephone, office equipment and periodic reports. This charge may
be increased or decreased by us from time to time based on our
expectations of future expenses, but will never exceed $15.00 per
Policy Month. The Service Charge will be deducted proportionally
from the Divisions. The current Service Charge is $10.00 per
Policy Month for Policy Years 1 through 3 and $7.50 per Policy
Month thereafter.
Transfer Fee. A maximum administrative charge of $10 per transfer
of Account Value from one Division to other Divisions will be
deducted from your Policy's Account Value for all transfers in
excess of 12 made in the same calendar year. The allocation of
your Initial Premium from the Maxim Money Market Portfolio
Division to your selected Divisions will not count toward the 12
free transfers. Similarly, transfers made under Dollar Cost
Averaging and periodic rebalancing under the Rebalancer Option do
not count as transfers for this purpose (although, a one-time
rebalancing under the Rebalancer Option will count as one
transfer). All transfers requested on the same Business Day will
be aggregated and counted as one transfer. The current charge is
$10 per transfer.
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<PAGE>
Partial Withdrawal Fee. A maximum administrative fee of $25 will
be deducted from your Policy's Account Value for all partial
withdrawals after the first made in the same Policy Year.
Change of Death Benefit Option Fee. A maximum administrative fee
of $100 will be deducted from your Policy's Account Value each
time you change your death benefit option.
Fund Expenses. You indirectly bear the charges and expenses of
the Funds whose shares are held by the Divisions to which you
allocate your Account Value. The Series Account purchases shares
of the Funds at net asset value. Each Fund's net asset value
reflects investment advisory fees and administrative expenses
already deducted from the Fund's assets. For a summary of current
estimates of these charges and expenses, see Appendix B to this
Prospectus. For more information concerning the investment
advisory fees and other charges against the Funds, see the Fund
Prospectuses and the statements of additional information for the
Funds, which are available upon Request.
We may receive compensation from the investment advisers or
administrators of the Funds. Such compensation will be consistent
with the services we provide or the cost savings resulting from
the arrangement and, therefore, may differ between Funds.
Paid-Up Life Insurance
When the Insured reaches Attained Age 100 (if your Policy is
in force at that time), the entire Account Value of your Policy
(less outstanding Policy Debt) will be applied as a single
premium to purchase "paid-up" insurance. Outstanding Policy Debt
will be repaid at this time. This repayment may be treated as a
taxable distribution to you if your Policy is not a MEC. The net
single premium for this insurance will be based on the 1980
Commissioner's Standard Ordinary, Sex Distinct, Non-Smoker
Mortality Table. The cash value of your paid-up insurance, which
initially is equal to the net single premium, will remain in the
Divisions of the Series Account in accordance with your then
current allocation. While the paid-up life insurance is in effect
your assets will remain in the Series Account. You may change
your Division allocation instructions and you may transfer your
cash value among the Divisions. All charges under your Policy, to
the extent applicable, will continue to be assessed, except we
will no longer make a deduction each Policy Month for the Monthly
Risk Charge. Your death benefit will be equal to the cash value
of the paid-up policy and, thus, as your cash value changes based
on the investment experience of the Divisions, the death benefit
will increase or decrease accordingly. You may surrender the
paid-up insurance policy at any time and, if surrendered within
30 days of a Policy Anniversary, its cash value will not be less
than it was on that Policy Anniversary. See "Federal Income Tax
Considerations -- Treatment When Insured Reached Attained Age
100."
Supplemental Benefits
The following supplemental benefit riders are available,
subject to certain limitations. An additional Monthly Risk Charge
will be assessed for each rider which is in force as part of the
monthly deduction from your Account Value.
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<PAGE>
Term Life Insurance Rider
This Rider provides term life insurance on the Insured.
Coverage is renewable annually to the Insured's Attained Age 100.
The amount of coverage provided under this Rider varies from
month to month as described below. We will pay the Rider's death
benefit to the beneficiary when we receive Due Proof of death of
the Insured while this Rider is in force.
This Rider provides the same three death benefit options as
your Policy. The option you choose under the Rider must at all
times be the same as the option you have chosen for your Policy.
The Rider's death benefit will be determined at the beginning of
each Policy Month in accordance with one of those options. For
each of the options, your death benefit will be reduced by any
outstanding Policy Debt.
If you purchase this Rider, the Total Face Amount shown on
your Policy's Specifications Page will be equal to the minimum
amount of coverage provided by this Rider plus the Base Face
Amount (which is the minimum death benefit under your Policy
without the Rider's death benefit). The minimum allocation of
Total Face Amount between your Policy and the Rider is 10% and
90% at inception, respectively. The total death benefit payable
under the Rider and the Policy will be determined as described in
"Death Benefit" above, using the Total Face Amount shown on your
Policy's Specifications page.
Coverage under this Rider will take effect on the later of:
o the Policy Date of the Policy to which this Rider is
attached; or
o the Policy Anniversary following our approval of your
Request to add this Rider to your Policy, subject to the
deduction of the first Monthly Risk Charge for the Rider.
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<PAGE>
The Monthly Risk Rate for this Rider will be the same as
that used for the Policy and the Monthly Risk Charge for the
Rider will be determined by multiplying the Monthly Risk Rate by
the Rider's death benefit. This charge will be calculated on the
first day of each Policy Month and added to the Policy's Monthly
Risk Charge.
If you purchase this Rider, the target premium amount, to
which the sales charge applies, will be proportionately lower. As
a result, the sales charge deducted from your premium payments
will be less than you would pay on a single Policy providing the
same Total Face Amount of coverage as your Policy and Rider.
We will offer this Rider only in circumstances which result
in the savings of sales and distribution expenses. As a result,
in our discretion, we may decline to offer the Term Rider or
refuse to consent to a proposed allocation of coverage between a
Base Policy and Term Rider. In exercising this discretion, we
will not discriminate unfairly against any person, including the
affected owners funded by the Series Account. For more
information see "Expense Charges Applied to Premium" at page
31 above.
You may terminate this Rider by Request. This Rider also
will terminate on the earliest of the following dates:
o the date the Policy is surrendered or terminated;
o the expiration of the Grace Period of the Policy; or
o the death of the Insured.
Change of Insured Rider
This Rider permits you to change the Insured under your
Policy or any Insured that has been named by virtue of this
Rider. Before we change the Insured you must provide us with (1)
a Request for the change signed by you and approved by us; (2)
evidence of insurability for the new Insured; (3) evidence that
there is an insurable interest between you and the new Insured;
(4) evidence that the new Insured's age, nearest birthday, is
under 70 years; and (5) evidence that the new Insured was born
prior to the Policy Date. We may charge a maximum fee of $25 for
administrative expenses when you changed the Insured. When a
change of Insured takes effect, Policy premiums will be based on
the new Insured's age, sex, mortality class and the premium rate
in effect on the Policy Date.
Continuation of Coverage
If you cease making premium payments, coverage under your
Policy and any Riders to the Policy will continue until your
Policy's Account Value, less any Policy Debt, is insufficient to
cover the monthly deduction. When that occurs, the Grace Period
will go into effect.
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<PAGE>
Grace Period
If the first day of a Policy Month occurs during the
Valuation Period and your Policy's Account Value, less any Policy
Debt, is not sufficient to cover the monthly deduction for that
Policy month, then your Policy will enter the Grace Period
described below. If you do not pay sufficient additional premiums
during the Grace Period, your Policy will terminate without
value.
The Grace Period will allow 61 days for the payment of
premium sufficient to keep the Policy in force. Any such premium
must be in an amount sufficient to cover deductions for the
Monthly Risk Charge, the Service Charge, the cost for any riders
and any extra risk charge if the Insured is in a rated class for
the next two Policy Months. Notice of premium due will be mailed
to your last known address or the last known address of any
assignee of record at least 31 days before the date coverage
under your Policy will cease. If the premium due is not paid
within the Grace Period, then the Policy and all rights to
benefits will terminate without value at the end of the 61 day
period. The Policy will continue to remain in force during this
Grace Period. If the Policy Proceeds become payable by us during
the Grace Period, then any due and unpaid Policy charges will be
deducted from the amount payable by us.
Termination of Policy
Your Policy will terminate on the earlier of the date we
receive your Request to surrender, the expiration date of the
Grace Period due to insufficient value or the date of death of
the Insured.
Reinstatement
Before the Insured's death, we will reinstate your Policy,
provided that the Policy has not been surrendered, and provided
further that:
o you make your reinstatement Request within three years from
the date of termination;
o you submit satisfactory evidence of insurability to us;
o you pay an amount equal to the Policy charges which were due
and unpaid at the end of the Grace Period;
o you pay a premium equal to four times the monthly deduction
applicable on the date of reinstatement; and
o you repay or reinstate any Policy loan that was outstanding
on the date coverage ceased, including interest at 6.00% per
year compounded annually to the date of reinstatement of
your Policy.
A reinstated Policy's Total Face Amount may not exceed the
Total Face Amount at the time of termination. Your Account Value
on the reinstatement date will reflect:
o the Account Value at the time of termination; plus
o net premiums attributable to premiums paid to reinstate the
Policy; less
o the Monthly Expense Charge; less
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o the Monthly Cost of Insurance charge applicable on the date
of reinstatement.
The effective date of reinstatement will be the date the
application for reinstatement is approved by us.
Deferral of Payment
We will usually pay any amount due from the Series Account
within seven days after the Valuation Date following your Request
giving rise to such payment or, in the case of death of the
Insured, Due Proof of such death. Payment of any amount payable
from the Series Account on death, surrender, partial surrender,
or Policy loan may be postponed whenever:
o the New York Stock Exchange is closed other than customary
weekend and holiday closing, or trading on the NYSE is
otherwise restricted;
o the Securities and Exchange Commission, by order, permits
postponement for the protection of policyowners; or
o an emergency exists as determined by the Securities and
Exchange Commission, as a result of which disposal of
securities is not reasonably practicable, or it is not
reasonably practicable to determine the value of the assets
of the Series Account.
Rights of Owner
While the Insured is alive, unless you have assigned any of
these rights, you may:
o transfer ownership to a new owner;
o name a contingent owner who will automatically become the
owner of the Policy if you die before the Insured;
o change or revoke a contingent owner;
o change or revoke a beneficiary (unless a previous
beneficiary designation was irrevocable); o exercise all
other rights in the Policy;
o increase or decrease the Total Face Amount, subject to the
other provisions of the Policy; and o change the death
benefit option, subject to the other provisions of the
Policy.
When you transfer your rights to a new owner, you
automatically revoke any prior contingent owner designation. When
you want to change or revoke a prior beneficiary designation, you
have to specify that action. You do not affect a prior
beneficiary when you merely transfer ownership, or change or
revoke a contingent owner designation.
You do not need the consent of a beneficiary or a contingent
owner in order to exercise any of your rights. However, you must
give us written notice satisfactory to us of the Requested
action. Your
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Request will then, except as otherwise specified herein, be
effective as of the date you signed the form, subject to any
action taken before it was received by us.
Rights of Beneficiary
The beneficiary has no rights in the Policy until the death
of the Insured, except an irrevocable beneficiary cannot be
changed without the consent of that beneficiary. If a beneficiary
is alive at that time, the beneficiary will be entitled to
payment of the Policy Proceeds as they become due.
Other Policy Provisions
Exchange of Policy. You may exchange your Policy for a new policy
issued by Great-West that does not provide for variable benefits.
The new policy will have the same Policy Date, Issue Age, and
Insured as your Policy on the date of the exchange. The exchange
must be made within 24 Policy Months after the Issue Date of your
Policy and all Policy Debt must be repaid.
Addition, Deletion or Substitution of Investments. Shares of any
or all of the Funds may not always be available for purchase by
the Divisions of the Series Account, or we may decide that
further investment in any such shares is no longer appropriate.
In either event, shares of other registered open-end investment
companies or unit investment trusts may be substituted both for
Fund shares already purchased by the Series Account and/or as the
security to be purchased in the future, provided that these
substitutions have been approved by the Securities and Exchange
Commission, to the extent necessary. We also may close a Division
to future premium allocations and transfers of Account Value. If
we do so, we will notify you and ask you to change your premium
allocation instructions. If you do not change those instructions
by the Division's closing date, premiums allocated to that
Division automatically will be allocated to the Maxim Money
Market Portfolio Division until you instruct us otherwise. A
Division closing may affect Dollar Cost Averaging and the
Rebalancer Option. We reserve the right to operate the Series
Account in any form permitted by law, to take any action
necessary to comply with applicable law or obtain and continue
any exemption from applicable laws, to assess a charge for taxes
attributable to the operation of the Series Account or for other
taxes, as described in "Charges and Deductions" beginning on page
31 of this Prospectus, and to change the way in which we assess
other charges, as long as the total other charges do not exceed
the maximum guaranteed changes under the Policies. We also
reserve the right to add Divisions, or to eliminate or combine
existing Divisions or to transfer assets between Divisions, or
from any Division to our general account. In the event of any
substitution or other act described in this paragraph, we may
make appropriate amendment to the Policy to reflect the change.
Entire Contract. Your entire contract with us consists of the
Policy, including the attached copy of your Policy application
and any attached copies of supplemental applications for
increases in the Total Face Amount, any endorsements and any
riders. Any illustrations prepared in connection with the Policy
do not form a part of our contract with you and are intended
solely to provide information about how values under the Policy,
such as Cash Surrender Value, death benefit and Account Value,
will change with the investment experience of the Divisions, and
such information is based solely upon data available at the time
such illustrations are prepared.
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Alteration. Sales representatives do not have any authority to
either alter or modify your Policy or to waive any of its
provisions. The only persons with this authority are our
president, secretary, or one of our vice presidents.
Modification. Upon notice to you, we may modify the Policy if
such a modification --
o is necessary to make the Policy or the Series Account comply
with any law or regulation issued by a governmental agency
to which we are or the Series Account is subject;
o is necessary to assure continued qualification of the Policy
under the Internal Revenue Code or other federal or state
laws as a life insurance policy;
o is necessary to reflect a change in the operation of the
Series Account or the Divisions; or
o adds, deletes or otherwise changes Division options.
We also reserve the right to modify certain provisions of the
Policy as stated in those provisions. In the event of any such
modification, we may make appropriate amendment to the Policy to
reflect such modification.
Assignments. During the lifetime of the Insured, you may assign
all or some of your rights under the Policy. All assignments must
be filed at our Principal Office and must be in written form
satisfactory to us. The assignment will then be effective as of
the date you signed the form, subject to any action taken before
it was received by us. We are not responsible for the validity or
legal effect of any assignment.
Non-Participating. The Policy does not pay dividends.
Misstatement of Age or Sex (Non-Unisex Policy). If the age or (in
the case of a non-unisex Policy) sex of the Insured is stated
incorrectly in your Policy application or rider application, we
will adjust the amount payable appropriately as described in the
Policy.
If we determine that the Insured was not eligible for coverage
under the Policy after we discover a misstatement of the
Insured's age, our liability will be limited to a return of
premiums paid, less any partial withdrawals, any Policy Debt, and
the cost for riders.
Suicide. If the Insured, whether sane or insane, commits suicide
within two years after your Policy's Issue Date (one year if your
Policy is issued in Colorado or North Dakota), we will not pay
any part of the Policy Proceeds. We will pay the beneficiary
premiums paid, less the amount of any Policy Debt, any partial
withdrawals and the cost for riders.
If the Insured, whether sane or insane, commits suicide
within two years after the effective date of an increase in the
Total Face Amount (one year if your Policy is issued in Colorado
or North Dakota), then our liability as to that increase will be
the cost of insurance for that increase and that portion of the
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Account Value attributable to that increase. The Total Face
Amount of the Policy will be reduced to the Total Face Amount
that was in effect prior to the increase.
Incontestability. All statements made in the application or in a
supplemental application are representations and not warranties.
We relied and will rely on those statements when approving the
issuance, increase in face amount, increase in death benefit over
premium paid, or change in death benefit option of the Policy. In
the absence of fraud, no statement can be used by us in defense
of a claim or to cancel the Policy for misrepresentation unless
the statement was made in the application or in a supplemental
application. In the absence of fraud, after the Policy has been
in force during the lifetime of the Insured for a period of two
years from its Issue Date, we cannot contest it except for
non-payment of premiums. However, any increase in the Total Face
Amount which is effective after the Issue Date will be
incontestable only after such increase has been in force during
the lifetime of the Insured for two years from the effective date
of coverage of such increase.
Report to Owner. We will maintain all records relating to the
Series Account and the Divisions. We will send you a report at
least once each Policy Year within 30 days after a Policy
Anniversary. The report will show current Account Value, current
allocation in each Division, death benefit, premiums paid,
investment experience since your last report, deductions made
since the last report, and any further information that may be
required by laws of the state in which your Policy was issued. It
will also show the balance of any outstanding Policy loans and
accrued interest on such loans. There is no charge for this
report.
In addition, we will send you the financial statements of the
Funds and other reports as specified in the Investment Company
Act of 1940, as amended. We also will mail you confirmation
notices or other appropriate notices of Policy transactions
quarterly or more frequently within the time periods specified by
law. Please give us prompt written notice of any address change.
Please read your statements and confirmations carefully and
verify their accuracy and contact us promptly with any question.
Illustrations. Upon request, we will provide you with an
illustration of how Cash Surrender Value, Account Value and death
benefits change with the investment experience of your Policy.
This illustration will be furnished to you for a nominal fee not
to exceed $50.
Notice and Elections. To be effective, all notices and elections
under the Policy must be in writing, signed by you, and received
by us at our Principal Office. Certain exceptions may apply.
Unless otherwise provided in the Policy, all notices, requests
and elections will be effective when received at our Principal
Office complete with all necessary information.
Performance Information and Illustrations
We may pre- We may sometimes publish performance information related to
sent mutual the Fund, the Series Account or the Policy in advertising, sales
fund port- literature and other promotional materials. This information is
folio per- based on past investment results and is not an indication of
formance in future performance.
sales
literature.
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<PAGE>
Fund Performance. We may publish a mutual fund portfolio's total
return or average annual total return. Total return is the change
in value of an investment over a given period, assuming
reinvestment of any dividends and capital gains. Average annual
total return is a hypothetical rate of return that, if achieved
annually, would have produced the same total return over a stated
period if performance had been constant over the entire period.
Average annual total returns smooth variations in performance,
and are not the same as actual year-by-year results.
We may also publish a mutual fund portfolio's yield. Yield
refers to the income generated by an investment in a portfolio
over a given period of time, expressed as an annual percentage
rate. When a yield assumes that income earned is reinvested, it
is called an effective yield. Seven-day yield illustrates the
income earned by an investment in a money market fund over a
recent seven-day period.
Total returns and yields quoted for a mutual fund portfolio
include the investment management fees and other expenses of the
portfolio, but do not include charges and deductions attributable
to your Policy. These expenses would reduce the performance
quoted.
Adjusted Fund Performance. We may publish a mutual fund
portfolio's total return and yields adjusted for charges against
the assets of the Series Account.
We may publish total return and yield quotations based on
the period of time that a mutual fund portfolio has been in
existence. The results for any period prior to any Policy being
offered will be calculated as if the Policy had been offered
during that period of time, with all charges assumed to be those
applicable to the Policy.
Other Information. Performance information may be compared, in
reports and promotional literature, to:
o the S&P 500, Dow Jones Industrial Average, Lehman Brothers
Aggregate Bond Index or other unmanaged indices so that
investors may compare the Division results with those of a
group of unmanaged securities widely regarded by investors
as representative of the securities markets in general;
o other groups of variable life variable accounts or other
investment products tracked by Lipper Analytical Services, a
widely used independent research firm which ranks mutual
funds and other investment products by overall performance,
investment objectives, and assets, or tracked by other
services, companies, publications, or persons, such as
Morningstar, Inc., who rank such investment products on
overall performance or other criteria; or
o the Consumer Price Index (a measure for inflation) to assess
the real rate of return from an investment in the Division.
Unmanaged indices may assume the reinvestment of dividends
but generally do not reflect deductions for administrative
and management expenses.
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We may provide policy information on various topics of
interest to you and other prospective policyowners. These topics
may include:
o the relationship between sectors of the economy and the
economy as a whole and its effect on various securities
markets;
o investment strategies and techniques (such as value
investing, market timing, dollar cost averaging, asset
allocation, constant ratio transfer and account
rebalancing);
o the advantages and disadvantages of investing in
tax-deferred and taxable investments;
o customer profiles and hypothetical purchase and investment
scenarios;
o financial management and tax and retirement planning; and
o investment alternatives to certificates of deposit and other
financial instruments, including comparisons between a
Policy and the characteristics of, and market for, such
financial instruments.
Policy Illustrations. Upon request we will provide you with an
illustration of Cash Surrender Value, Account Value and death
benefits. The first illustration you Request during a Policy Year
will be provided to you free of charge. Thereafter, each
additional illustration Requested during the same Policy Year
will be provided to you for a nominal fee not to exceed $50.
Federal Income Tax Considerations
The following summary provides a general description of the
federal income tax considerations associated with the Policy and
does not purport to be complete or to cover all situations. This
discussion is not intended as tax advice. You should consult
We do not counsel or other competent tax advisers for more complete
make any information. This discussion is based upon our understanding of
guarantees the current federal income tax laws as they are currently
about the interpreted by the Internal Revenue Service (the "IRS"). We make
Policy's no representation as to the likelihood of continuation of the
tax status. current federal income tax laws or of the current interpretations
by the IRS. We do not make any guarantee regarding the tax status
of any policy or any transaction regarding the Policy.
The Policy may be used in various arrangements, including
non-qualified deferred compensation or salary continuance plans,
split dollar insurance plans, executive bonus plans, retiree
medical benefit plans and others. The tax consequences of such
plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if the
use of the Policy in any such arrangement is contemplated, you
should consult a qualified tax adviser for advice on the tax
attributes and consequences of the particular arrangement.
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<PAGE>
Tax Status of the Policy
We believe A Policy has certain tax advantages when treated as a life
the Policy insurance contract within the meaning of Section 7702 of the
will be Internal Revenue Code of 1986, as amended (the "Code"). We
treated as believe that the Policy meets the Section 7702 definition of a
a life in- life insurance contract and will take whatever steps are
surance appropriate and reasonable to attempt to cause the Policy to
contract comply with Section 7702. We reserve the right to amend the
under federal Policies to comply with any future changes in the Code, any
tax laws. regulations or rulings under the Code and any other requirements
imposed by the IRS.
Diversification of Investments
Section 817(h) of the Code requires that the investments of
each Division of the Series Account be "adequately diversified"
in accordance with certain Treasury regulations. We believe that
the Divisions will be adequately diversified.
Policy Owner Control
In certain circumstances, the owner of a variable life
insurance policy may be considered, for federal income tax
purposes, the owner of the assets of the variable account used to
support the policy. In those circumstances, income and gains from
the variable account assets would be includible in the
policyowner's gross income. We do not know what standards will be
established, if any, in the regulations or rulings which the
Treasury has stated it expects to issue on this question. We
therefore reserve the right to modify the Policy as necessary to
attempt to prevent a policyowner from being considered the owner
of a pro-rata share of the assets of the Series Account.
The following discussion assumes that your Policy will
qualify as a life insurance contract for federal income tax
purposes.
Tax Treatment of Policy Benefits
Death bene- Life Insurance Death Benefit Proceeds. In general, the amount of
fits general- the death benefit payable under your Policy is excludible from
ly are not your gross income under the Code.
subject to
federal in- If the death benefit is not received in a lump sum and is,
come tax. instead, applied under a proceeds option agreed to by us and the
beneficiary, payments generally will be prorated between amounts
attributable to the death benefit, which will be excludable from
the beneficiary's income, and amounts attributable to interest
(occurring after the insured's death), which will be includable
in the beneficiary's income.
Investment Tax Deferred Accumulation. Any increase in your Account Value is
gains are generally not taxable to you unless you receive or are deemed to
normally not receive amounts from the Policy before the Insured dies.
taxed unless
distributed
to you be-
fore the
Insured dies.
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<PAGE>
Distributions. If you surrender your Policy, the amount you will
receive as a result will be subject to tax as ordinary income to
the extent that amount exceeds the "investment in the contract,"
which is generally the total of premiums and other consideration
paid for the Policy, less all amounts previously received under
the Policy to the extent those amounts were excludible from gross
income.
Depending on the circumstances, any of the following
transactions may have federal income tax consequences:
o the exchange of a Policy for a life insurance, endowment or
annuity contract;
o a change in the death benefit option;
o a policy loan;
o a partial surrender;
o a surrender;
o a change in the ownership of a Policy;
o a change of the named Insured; or
o an assignment of a Policy.
In addition, federal, state and local transfer and other tax
consequences of ownership or receipt of Policy Proceeds will
depend on your circumstances and those of the named beneficiary.
Whether partial withdrawals (or other amounts deemed to be
distributed) constitute income subject to federal income tax
depends, in part, upon whether your Policy is considered a
"modified endowment contract."
If you pay Modified Endowment Contracts. Section 7702A of the Code treats
more pre- certain life insurance contracts as "modified endowment
miums than contracts" ("MECs"). In general, a Policy will be treated as a
permitted MEC if total premiums paid at any time during the first seven
under the Policy Years exceed the sum of the net level premiums which would
seven-pay have been paid on or before that time if the Policy provided for
test, your paid-up future benefits after the payment of seven level annual
Policy will premiums ("seven-pay test"). In addition, a Policy may be treated
be a MEC. as a MEC if there is a "material change" of the Policy.
We will monitor your premium payments and other Policy
transactions and notify you if a payment or other transaction
might cause your Policy to become a MEC. We will not invest any
premium or portion of a premium that would cause your Policy to
become a MEC. We will promptly refund that money to you and, if
you elect to have a MEC contract, you can return the money to us
with a signed form of acceptance.
Further, if a transaction occurs which decreases the Total
Face Amount of your Policy during the first seven years, we will
retest your Policy, as of the date of its purchase, based on the
lower Total Face Amount to determine compliance with the
seven-pay test. Also, if a decrease in Total Face Amount occurs
within seven years of a "material change," we will retest your
Policy for compliance as of the date of the "material change."
Failure to comply in either case would result in the Policy's
classification as a MEC regardless of our efforts to provide a
payment schedule that would not otherwise violate the seven-pay
test.
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<PAGE>
The rules relating to whether a Policy will be treated as a
MEC are complex and cannot be fully described in the limited
confines of this summary. Therefore, you should consult with a
competent tax adviser to determine whether a particular
transaction will cause your Policy to be treated as a MEC.
Distributions Under Modified Endowment Contracts. If treated as a
MEC, your Policy will be subject to the following tax rules:
o First, partial withdrawals are treated as ordinary income
If your Policy subject to tax up to the amount equal to the excess (if any)
becomes a MEC, of your Account Value immediately before the distribution
Policy loans over the "investment in the contract" at the time of the
and surrenders distribution.
may incur
taxes and tax o Second, policy loans and loans secured by a Policy are
penalties. treated as partial withdrawals and taxed accordingly. Any
past-due loan interest that is added to the amount of the
loan is treated as a loan.
o Third, a 10 percent additional penalty tax is imposed on
that portion of any distribution (including distributions
upon surrender), policy loan, or loan secured by a Policy,
that is included in income, except where the distribution or
loan is:
o made when you are age 59 1/2 or older;
o attributable to your becoming disabled; or
o is part of a series of substantially equal periodic
payments for the duration of your life (or life
expectancy) or for the duration of the longer of your
or the beneficiary's life (or life expectancies).
If your Distributions Under a Policy That Is Not a MEC. If your Policy is
Policy is not a MEC, a distribution is generally treated first as a
not a MEC, tax-free recovery of the "investment in the contract," and then
partial with- as a distribution of taxable income to the extent the
drawals or distribution exceeds the "investment in the contract." An
surrenders exception is made for cash distributions that occur in the first
are taxed 15 Policy Years as a result of a decrease in the death benefit or
only if they other change which reduces benefits under the Policy which are
exceed your made for purposes of maintaining compliance with Section 7702.
investment Such distributions are taxed in whole or part as ordinary income
in your Policy (to the extent of any gain in the Policy) under rules prescribed
and Policy in Section 7702.
loans are
generally If your Policy is not a MEC, policy loans and loans secured
not taxed. by the Policy are generally not treated as distributions. Such
loans are instead generally treated as your indebtedness.
Finally, if your Policy is not a MEC, distributions
(including distributions upon surrender), policy loans and loans
secured by the Policy are not subject to the 10 percent
additional tax.
Multiple Policies. All modified endowment contracts issued by us
(or our affiliates) to you during any calendar year will be
treated as a single MEC for purposes of determining the amount of
a policy distribution which is taxable to you.
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<PAGE>
Treatment When Insured Reaches Attained Age 100. As described
above, when the Insured reaches Attained Age 100, we will issue
you a "paid-up" life insurance policy. We believe that the
paid-up life insurance policy will continue to qualify as a "life
insurance contract" under the Code. However, there is some
uncertainty regarding this treatment. It is possible, therefore,
that you would be viewed as constructively receiving the Cash
Surrender Value in the year in which the Insured attains age 100
and would realize taxable income at that time, even if the Policy
Proceeds were not distributed at that time. In addition, any
outstanding Policy Debt will be repaid at that time. This
repayment may be treated as a taxable distribution to you, if
your contract is not a MEC.
We may be Federal Income Tax Withholding. We will withhold and remit to the
required to federal government the amount of any tax due on that portion of a
withhold policy distribution which is taxable, unless you direct us
taxes from otherwise in writing at or before the time of the distribution.
certain dis- As the policyowner, however, you will be responsible for the
tributions payment of any taxes and early distribution penalties that may be
to you. due on policy distributions, regardless of whether those amounts
are subject to withholding.
Actions to Ensure Compliance with the Tax Law. We believe that
the maximum amount of premiums we intend to permit for the
Policies will comply with the Code definition of a "life
insurance contract." We will monitor the amount of your premiums,
and, if you pay a premium during a Policy Year that exceeds those
permitted by the Code, we will promptly refund the premium or a
portion of the premium before any allocation to the Funds. We
reserve the right to increase the death benefit (which may result
in larger charges under a Policy) or to take any other action
deemed necessary to ensure the compliance of the Policy with the
federal tax definition of a life insurance contract.
Trade or Business Entity Owns or Is Directly or Indirectly a
Beneficiary of the Policy
Where a Policy is owned by other than a natural person, the
owner's ability to deduct interest on business borrowing
unrelated to the Policy can be impacted as a result of its
ownership of cash value life insurance. No deduction will be
allowed for a portion of a taxpayer's otherwise deductible
interest expense unless the policy covers only one individual,
and such individual is, at the time first covered by the policy,
a 20 percent owner of the trade or business entity that owns the
policy, or an officer, director, or employee of such trade or
business. Although this limitation generally does not apply to
policies held by natural persons, if a trade or business (other
than one carried on as a sole proprietorship) is directly or
indirectly the beneficiary under a policy (e.g., pursuant to a
split-dollar agreement), the policy shall be treated as held by
such trade or business. The effect will be that a portion of the
trade or business entity's deduction for its interest expenses
will be disallowed unless the above exception for a 20 percent
owner, employee, officer or director applies.
The portion of the entity's interest deduction that is
disallowed will generally be a pro rata amount which bears the
same ratio to such interest expense as the taxpayer's average
unborrowed cash value bears to the sum of the taxpayer's average
unborrowed cash value and average adjusted bases of all other
assets. Any corporate or business use of the life insurance
should be carefully reviewed by your tax adviser with attention
to these rules as well as any other rules and possible tax law
changes that could occur with respect to business-owned life
insurance.
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<PAGE>
Other Employee Benefit Programs
Complex rules may apply when a Policy is held by an employer
or a trust, or acquired by an employee, in connection with the
provision of employee benefits. These Policy owners also must
consider whether the Policy was applied for by or issued to a
person having an insurable interest under applicable state law,
as the lack of insurable interest may, among other things, affect
the qualification of the Policy as life insurance for federal
income tax purposes and the right of the beneficiary to death
benefits. Employers and employer-created trusts may be subject to
reporting, disclosure and fiduciary obligations under the
Employee Retirement Income Security Act of 1974, as amended. You
should consult your legal adviser.
Policy Loan Interest
Generally, no tax deduction is allowed for interest paid or
accrued on any indebtedness under a Policy.
Our Taxes
We are taxed as a life insurance company under Part I of
Subchapter L of the Code. The operations of the Series Account
are taxed as part of our operations. Investment income and
realized capital gains are not taxed to the extent that they are
applied under the Policies. As a result of the Omnibus Budget
Reconciliation Act of 1990, we are currently making, and are
generally required to capitalize and amortize certain policy
acquisition expenses over a 10-year period rather than currently
deducting such expenses. This so-called "deferred acquisition
cost" tax ("DAC tax") applies to the deferred acquisition
expenses of a Policy and results in a significantly higher
corporate income tax liability for Great-West. We reserve the
right to adjust the amount of a charge to premium to compensate
us for these anticipated higher corporate income taxes.
A portion of the Expense Charges Applied to Premium is used
to offset the federal, state or local taxes that we incur which
are attributable to the Series Account or the Policy. We reserve
the right to adjust the amount of this charge.
Distribution of the Policy
The Policy will be sold by licensed insurance agents in
those states where the Policy may be lawfully sold. Such agents
will be registered representatives of broker-dealers registered
under the Securities Exchange Act of 1934 who are members of the
National Association of Securities Dealers, Inc. and who have
entered into selling agreements with our general distributor,
BenefitsCorp Equities, Inc. ("BCE"). BCE is an indirect,
wholly-owned subsidiary of Great-West and is registered with the
Securities and Exchange Commission under the Securities Exchange
Act of 1934 as broker-dealer and is a member of the National
Association of Securities Dealers, Inc. BCE also acts as the
general distributor of certain annuity contracts issued by us.
The maximum sales commissions payable to our agents, independent
registered insurance agents and other registered broker-dealers
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<PAGE>
is 40% of the first year target premium. In addition, asset-based
trail commissions may be paid. A sales representative may be
required to return all the commissions paid if a Policy
terminates prior to the second Policy Anniversary.
The directors and executive officers of BCE are: Charles P.
Nelson, Chairman of the Board and President, Robert K. Shaw,
Director, John A. Brown, Director, Dennis Low, Director, G.E.
Seller, Director and Vice President, Major Accounts, Douglas L.
Wooden, Director, J. Baker, Vice President, Licensing and
Contracts, Glen Ray Derback, Treasurer, Beverly A. Byrne,
Secretary and T. L. Buckley, Compliance Officer. The principal
business address of each director and executive officer, except
G.E. Seller, is 8515 East Orchard Road, Englewood, Colorado
80111. G.E. Seller's principal business address is 18101 Von
Karman Avenue, Suite 1460, Irvine, California 92612.
Voting Rights
We are the legal owner of all shares of the Funds held in
the Divisions of the Series Account, and as such have the right
to vote upon matters that are required by the 1940 Act to be
approved or ratified by the shareholders of the Funds and to vote
upon any other matters that may be voted upon at a shareholders'
meeting. We will, however, vote shares held in the Divisions in
accordance with instructions received from policyowners who have
an interest in the respective Divisions.
We will vote shares held in each Division for which no
timely instructions from policyowners are received, together with
shares not attributable to a Policy, in the same proportion as
those shares in that Division for which instructions are
received.
The number of shares in each Division for which instructions
may be given by a policyowner is determined by dividing the
portion of the Account Value derived from participation in that
Division, if any, by the value of one share of the corresponding
Fund. We will determine the number as of the record date chosen
by the Fund. Fractional votes are counted. Voting instructions
will be solicited in writing at least 14 days prior to the
shareholders' meeting.
We may, if required by state insurance regulators, disregard
voting instructions if those instructions would require shares to
be voted so as to cause a change in the sub-classification or
investment policies of one or more of the Funds, or to approve or
disapprove an investment management contract. In addition, we may
disregard voting instructions that would require changes in the
investment policies or investment adviser, provided that we
reasonably disapprove of those changes in accordance with
applicable federal regulations. If we disregard voting
instructions, we will advise you of that action and our reasons
for it in our next communication to policyowners.
This description reflects our current view of applicable
law. Should the applicable federal securities laws change so as
to permit us to vote shares held in the Series Account in our own
right, we may elect to do so.
45
<PAGE>
Our Directors and Executive Officers
Our directors and executive officers are listed below,
together with information as to their ages, dates of election and
principal business occupations during the last five years (if
other than their present business occupations). The asterisks
below denote the year that the indicated director was elected to
our board of directors.
<TABLE>
<CAPTION>
<S> <C>
Name, Age and Position with Great-West Principal Occupation(s)
- -------------------------------------- -----------------------
Directors
James Balog (70) Company Director since 1993
James W. Burns, O.C. (69) Chairman of the Boards of Great-West Lifeco,
Great-West Life, London Insurance Group Inc.
and London Life Insurance Company; Deputy
Chairman, Power Corporation since 1991
Orest T. Dackow (62) President and Chief Executive Officer, Great-
West Lifeco since 1991
Andre Desmarais (42) President and Co-Chief Executive Officer,
Power Corporation; Deputy Chairman, Power
Financial since 1997
Paul Desmarais, Jr. (44) Chairman and Co-Chief Executive Officer,
Power Corp; Chairman, Power Financial since
1991
Robert G. Graham (67) Company Director since January 1996;
previously Chairman and Chief Executive
Officer, Inter-City Products Corporation since
1991
Robert Gratton (55) Chairman of the Board of the Company;
President and Chief Financial Officer, Power
Financial since 1991
N. Berne Hart (69) Company Director since 1991
Kevin P. Kavanagh (66) Company Director since 1996
William Mackness (60) Company Director since July 1995; previously
Dean, Faculty of Management, University of
Manitoba since 1991
45
<PAGE>
Name, Age and Position with Great-West Principal Occupation(s)
- -------------------------------------- -----------------------
William T. McCallum (56) President and Chief Executive Officer of the
Company; President and Chief Executive
Officer, United States Operations, Great-West
since 1990
Jerry Edgar Alan Nickerson (62) Chairman of the Board, H.B. Nickerson & Sons
Limited since 1994
The Honourable P. Michael Pittfield, P.C., Vice-Chairman, Power Corporation; Member of
Q.C. (61) the Senate of Canada since 1991
Michel Plessis-Belair, F.C.A. (56) Vice-Chairman and Chief Financial Officer,
Power Corporation; Executive Vice-President
and Chief Financial Officer, Power Financial
since 1991
Brian E. Walsh (45) Co-Founder and Managing Partner, Veritas
Capital Management, LLC since September
1997; previously Partner, Trinity L.P. from
January 1996; previously Managing Director and
Co-Head, Global Investment Bank, Bankers
Trust Company since 1995
Executive Officers
John A. Brown (51) Senior Vice President, Sales, Financial Services
of the Company and Great-West Life since 1992
Donna A. Goldin (51) Executive Vice President and Chief Operating
Officer, One Corporation since June 1996;
previously Executive Vice President and Chief
Operating Officer, Harris Methodist Health
Plan since March 1995; previously Executive
Vice President and Chief Operating Officers,
Private Healthcare Systems, Inc. since 1996
Mitchell T. G. Graye (43) Senior Vice President, Chief Financial Officer of
the Company; Senior Vice President, Chief
Financial Officer, United States, Great-West Life
since 1997
46
<PAGE>
Name, Age and Position with Great-West Principal Occupation(s)
- -------------------------------------- -----------------------
John T. Hughes (62) Senior Vice President, Chief Investment Officer
of the Company; Senior Vice President, Chief
Investment Officer; United States, Great-West
Life since 1989
D. Craig Lennox (51) Senior Vice President, General Counsel and
Secretary of the Company; Senior Vice
President and Chief U.S. Legal Officer,
Great-West Life since 1984
William T. McCallum (56) President and Chief Executive Officer of the
Company; President and Chief Executive
Officer, United States Operations, Great-West
Life since 1984
Steve H. Miller (46) Senior Vice President, Employee Benefits Sales
of the Company and Great-West Life since 1997
James D. Motz (49) Executive Vice President, Employee Benefits of
the Company and Great-West Life since 1992
Charles P. Nelson (37) Senior Vice President, Public Non-Profit
Markets of the Company and Great-West life
since 1998
Martin Rosenbaum (46) Senior Vice President, Employee Benefits
Operations of the Company and Great-West
Life since 1997
Robert K. Shaw (43) Senior Vice President, Individual Markets of the
Company and Great-West Life since 1998
Douglas L. Wooden (42) Executive Vice President, Financial Services of
the Company and Great-West Life since 1991
47
</TABLE>
<PAGE>
Other Information
State Regulation
We are subject to the laws of Colorado governing life
insurance companies and to regulation by Colorado's Commissioner
of Insurance, whose agents periodically conduct an examination of
our financial condition and business operations. We are also
subject to the insurance laws and regulations of the all
jurisdictions in which we are authorized to do business.
We are required to file an annual statement with the
insurance regulatory authority of those jurisdictions where we
are authorized to do business relating to our business operations
and financial condition as of December 31st of the preceding
year.
Legal Proceedings
There are no pending legal proceedings which would have an
adverse material effect on the Series Account. Great-West is
engaged in various kinds of routine litigation which, in our
judgment, is not material to its total assets or material with
respect to the Series Account.
Legal Matters
All matters of Colorado law pertaining to the Policy,
including the validity of the Policy and our right to issue the
Policy under Colorado law, have been passed upon by Ruth B.
Lurie, Vice President, Counsel and Associate Secretary of
Great-West. The law firm of Jorden Burt Boros Cicchetti Berenson
& Johnson LLP, 1025 Thomas Jefferson St., Suite 400, East Lobby,
Washington, D.C. 20007-5201, serves as special counsel to
Great-West with regard to the federal securities laws.
Experts
The consolidated financial statements for Great-West Life &
Annuity Insurance Company as of December 31, 1997 and 1996 and
for each of the three years in the period ended December 31, 1997
have been audited by Deloitte & Touch LLP, 555 17th Street, Suite
3600, Denver, Colorado 80202, independent auditors, as stated in
their reports. We have included those financial statements in
reliance upon the reports of Deloitte & Touche LLP, given upon
their authority as experts in accounting and auditing. Actuarial
matters included in this Prospectus and the registration
statement of which it is a part, including the hypothetical
48
<PAGE>
Policy illustrations, have been examined by Ron Laeyendecker,
F.S.A., M.A.A.A., Actuary of the Company, and are included in
reliance upon his opinion as to their reasonableness.
Registration Statements
This Prospectus is part of a registration statement that has
been filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, with respect to the Policy.
It does not contain all of the information set forth in the
registration statement and the exhibits filed as part of the
registration statement. You should refer to the registration
statement for further information concerning the Series Account,
Great-West, the mutual fund investment options, and the Policy.
The descriptions in this Prospectus of the Policies and other
legal instruments are summaries. You should refer to those
instruments as filed for their precise terms.
Year 2000 Compliance
The year 2000 ("Y2K") problem arises when a computer
performing date-based computations or operations produces
erroneous results due to the historical practice of using two
digit years within computer hardware and software. This causes
errors or misinterpretations of the century in date calculations.
Virtually all businesses, including Great-West, are required to
determine the extent of their Y2K problems. Systems that have a
Y2K problem must then be converted or replaced by systems that
will operate correctly with respect to the year 2000 and beyond.
Great-West has a written plan that encompasses all computer
hardware, software, networks, facilities (embedded systems) and
telephone systems. The plan also includes provisions for
identifying and verifying that major vendors and business
partners are Y2K compliant. Great-West is developing contingency
plans to address the possibility of both internal and external
failures as well. The plan calls for full Y2K compliance for core
systems by March 31, 1999 and full Y2K compliance for all
Great-West systems by October 31, 1999.
Great-West's plan establishes five phases for becoming Y2K
compliant. Phase 1 is "impact analysis" which includes initial
inventory and preliminary assessment of Y2K impact. Phase 2 is
"solution planning" which includes system by system planning to
outline the approach and timing for reaching compliance. Phase 3
is "conversion/renovation" which means the actual process of
replacing or repairing non-compliant systems. Phase 4 is
"testing" to ensure that the systems function correctly under a
variety of different date scenarios including current dates, year
49
<PAGE>
2000 and leap year dates. Phase 5 is "implementation" which means
putting Y2K compliant systems back into production.
As of September 1, 1998, Great-West had completed impact
analysis (phase 1) and solution planning (phase 2) for all of its
core systems and was more than 93% complete for phase 1 and 2
with respect to its systems as a whole. In addition, Great-West
was approximately 58% complete with respect to conversion and
renovation (phase 3), 42% complete with respect to testing (phase
4) and 38% complete with respect to implementation (phase 5).
In addition to ensuring that Great-West's own systems are
Y2K compliant, Great-West has identified third parties with which
Great-West has significant business relationships in order to
assess the potential impact on Great-West of the third parties'
Y2K issues and plans. Great-West expects to complete this process
during the first quarter of 1999 and will conduct system testing
with third parties throughout 1999. Great-West does not have
control over these third parties and cannot make any
representations as to what extent Great-West's future operating
results may be adversely affected by the failure of any third
party to address successfully its own Y2K issues.
On the basis of currently available information, the expense
incurred by Great-West, including anticipated future expenses,
related to the Y2K issue has not and is not expected to be
material to Great-West's financial condition or results of
operations. Great-West has spent approximately $7.5 million on
its Y2K project through the end of August 1998 and expects to
spend up to approximately $15.3 million on its Y2K project by the
end of 2000. All of these funds will come from Great-West's cash
flow from operations. Great-West has continued other scheduled
non-Y2K information systems changes and upgrades. Although work
on Y2K issues may have resulted in minor delays on the other
projects, the delays are not expected to have a material adverse
effect on Great-West's consolidated financial condition or
results of operations.
The most reasonably likely worst case Y2K scenario is that
Great-West will experience isolated internal or third party
computer failures and will be temporarily unable to process
insurance and annuity benefit transactions. All of Great-West's
Y2K efforts have been designed to prevent such an occurrence.
However, if Great-West identifies internal or third party Y2K
issues which cannot be timely corrected, there can be no
assurance that Great-West can avoid Y2K problems or that the cost
of curing the problem will not be material.
50
<PAGE>
In an effort to mitigate risks associated with Y2K failures,
Great-West is in the process of developing contingency plans to
address its core functions, including relations with third
parties. It is Great-West's expectation that contingency plans
will address possible failures generated internally, by vendors
or business partners and by customers. Possible general
approaches include manual processing, payments on an estimated
basis and use of disaster recovery facilities.
Financial Statements
Great-West's financial statements, which are included in
this prospectus, should be considered only as bearing on our
ability to meet our obligations with respect to the death benefit
and our assumption of the mortality and expense risks. They
should not be considered as bearing on the investment performance
of the Fund shares held in the Series Account.
There are no financial statements for the Series Account
because it had not commenced operations as of the date of this
Prospectus, has no assets or liabilities, and has received no
income or incurred any expense.
51
<PAGE>
Appendix A -- Glossary of Terms
Account Value -- The sum of the value of your interests in the Divisions and the
Loan Account.
Attained Age -- The Insured's Issue Age plus the number of completed Policy
Years.
Business Day -- Any day that we are open for business. We are open for business
every day that the New York Stock Exchange is open for trading.
Cash Surrender Value -- The Account Value minus any outstanding Policy Debt.
Divisions -- Divisions into which the assets of the Series Account are divided,
each of which corresponds to an investment choice available to you.
DueProof -- Such evidence as we may reasonably require in order to establish
that Policy Proceeds are due and payable.
Fund -- An underlying mutual fund in which a Division invests. Each Fund is an
investment company registered with the SEC or a separate investment series of
a registered investment company.
Initial Premium -- The initial premium amount specified in a Policy.
Insured -- The person whose life is insured under the Policy.
Issue Age -- The Insured's age as of the Insured's birthday nearest the Policy
Date.
Issue Date -- The date on which we issue a Policy.
Loan Account -- An account established for amounts transferred from the
Divisions as security for outstanding Policy Debt.
Policy Anniversary -- The same day in each succeeding year as the day of the
year corresponding to the Policy Date.
Policy Date -- The date coverage commences under your Policy and the date from
which Policy Months, Policy Years and Policy Anniversaries are measured.
Policy Debt -- The principal amount of any outstanding loan against the Policy,
plus accrued but unpaid interest on such loan.
Policy Month -- The one-month period commencing on the same day of the month as
the Policy Date.
A-1
<PAGE>
Policy Proceeds -- The amount determined in accordance with the terms of the
Policy which is payable at the death of the Insured. This amount is the death
benefit, decreased by the amount of any outstanding Policy Debt, and
increased by the amounts payable under any supplemental benefits.
Policy Year -- The one-year period commencing on the Policy Date or any Policy
Anniversary and ending on the next Policy Anniversary.
Principal Office -- Great-West Life & Annuity Insurance Company, 8515 East
Orchard Road, Englewood, Colorado 80111, or such other address as we may
hereafter specify to you by written notice.
Request -- Any instruction in a form, written, telephoned or computerized,
satisfactory to us and received at our Principal Office from you as required
by any provision of your Policy or as required by us. The Request is subject
to any action taken or payment made by us before it is processed.
SEC -- The United States Securities and Exchange Commission.
Series Account -- COLI VUL-2 Series Account of Great-West Life & Annuity
Insurance Company.
Total Face Amount -- The amount of life insurance coverage you request as
specified in your Policy.
Unit -- An accounting unit of measurement that we use to calculate the value of
each Division.
Unit Value -- The value of each Unit in a Division.
Valuation Date -- Any day that benefits vary and on which the New York Stock
Exchange is open for regular business, except as may otherwise be required or
permitted by the applicable rules and regulations of the SEC.
Valuation Period -- The period of time from one determination of Unit Values to
the next following determination of Unit Values. We will determine Unit
Values for each Valuation Date as of the close of the New York Stock Exchange
on that Valuation Date.
A-2
<PAGE>
<TABLE>
<CAPTION>
Appendix B -- Fees and Expenses of the Funds
Management Other Total Operating
Fund Fees Expenses 12b-1 Fees Expenses
- --------------------------------------------- ------------ -------- ---------- ---------------
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc.
o American Century VP Income & --- --- --- ---
Growth
o American Century VP International --- --- --- ---
o American Century VP Value --- --- --- ---
Dreyfus Stock Index Fund
Dreyfus Variable Investment Fund
o Dreyfus Capital Appreciation Portfolio --- --- --- ---
o Dreyfus Growth and Income Portfolio --- --- --- ---
Federated Insurance Series
o Federated American Leaders Fund II --- --- --- ---
o Federated Growth Strategies Fund II --- --- --- ---
o Federated High Income Bond Fund II --- --- --- ---
o Federated International Equity Fund II --- --- --- ---
INVESCO Variable Investments Fund, Inc.
o INVESCO VIF - High Yield Portfolio --- --- --- ---
o INVESCO VIF - Industrial Income --- --- --- ---
Portfolio
o INVESCO VIF - Total Return Portfolio --- --- --- ---
B-1
<PAGE>
Management Other Total Operating
Fund Fees Expenses 12b-1 Fees Expenses
- --------------------------------------------- ------------ -------- ---------- ---------------
Janus Aspen Series
o Balanced Portfolio --- --- --- ---
o Flexible Income Portfolio --- --- --- ---
o High-Yield Portfolio --- --- --- ---
o Worldwide Growth Portfolio --- --- --- ---
Maxim Series Fund, Inc.
o Maxim Corporate Bond Portfolio --- --- --- ---
o Maxim INVESCO ADR Portfolio --- --- --- ---
o Maxim INVESCO Balanced Portfolio --- --- --- ---
o Maxim INVESCO Small-Cap Growth --- --- --- ---
Portfolio
o Maxim MidCap Portfolio --- --- --- ---
o Maxim Money Market Portfolio --- --- --- ---
o Maxim U.S. Government Securities --- --- --- ---
Portfolio
Maxim Profile Portfolios:
o Maxim Aggressive Profile Portfolio --- --- --- ---
o Maxim Moderately Aggressive Portfolio --- --- --- ---
o Maxim Moderate Profile Portfolio --- --- --- ---
o Maxim Moderately Conservative Profile --- --- --- ---
Portfolio
o Maxim Conservative Profile Portfolio --- --- --- ---
B-2
<PAGE>
Management Other Total Operating
Fund Fees Expenses 12b-1 Fees Expenses
- --------------------------------------------- ------------ -------- ---------- ---------------
Neuberger&Berman Advisers Management
Trust
o Guardian Portfolio --- --- --- ---
o Mid-Cap Growth Portfolio --- --- --- ---
o Partners Portfolio --- --- --- ---
o Socially Responsive Portfolio --- --- --- ---
</TABLE>
The Fund expenses shown above are assessed at the Fund level and are
not direct charges against Series Account assets or reductions from Account
Values. These expenses are taken into consideration in computing each Fund's net
asset value, which is the share price used to calculate the Unit Values of the
Series Account. The following Funds are subject to the following fee waiver
and/or expense reimbursement arrangements.
[INSERT WAIVER & REIMBURSEMENT INFORMATION IN PRE-EFFECTIVE AMENDMENT]
The management fees and other expenses are more fully described in the
prospectuses for each Fund. The information relating to the Fund expenses was
provided by the Fund and was not independently verified by us.
B-3
<PAGE>
Appendix C -- Table of Death Benefit Percentages
<TABLE>
<CAPTION>
Applicable Applicable
Age Percentage Age Percentage
<S> <C> <C> <C>
20 250% 60 130%
21 250% 61 128%
22 250% 62 126%
23 250% 63 124%
24 250% 64 122%
25 250% 65 120%
26 250% 66 119%
27 250% 67 118%
28 250% 68 117%
29 250% 69 116%
30 250% 70 115%
31 250% 71 113%
32 250% 72 111%
33 250% 73 109%
34 250% 74 107%
35 250% 75 105%
36 250% 76 105%
37 250% 77 105%
38 250% 78 105%
39 250% 79 105%
40 250% 80 105%
41 243% 81 105%
42 236% 82 105%
43 229% 83 105%
44 222% 84 105%
45 215% 85 105%
46 209% 86 105%
47 203% 87 105%
48 197% 88 105%
49 191% 89 105%
50 185% 90 105%
51 178% 91 104%
52 171% 92 103%
53 164% 93 102%
54 157% 94 101%
55 150% 95 100%
56 146% 96 100%
57 142% 97 100%
58 138% 98 100%
59 134% 99 100%
</TABLE>
C-1
<PAGE>
Appendix D -- Sample Hypothetical Illustrations
Illustrations of Death Benefits, Surrender Values And Accumulated Premiums
The illustrations in this prospectus have been prepared to help show how values
under the Policy change with investment performance. The illustrations on the
following pages illustrate the way in which a Policy Year's death benefit,
Account Value and Cash Surrender Value could vary over an extended period of
time. They assume that all premiums are allocated to and remain in the Series
Account for the entire period shown and are based on hypothetical gross annual
investment returns for the Funds (i.e., investment income and capital gains and
losses, realized or unrealized) equivalent to constant gross annual rates of 0%,
6%, and 12% over the periods indicated.
The Account Values and death benefits would be different from those shown if the
gross annual investment rates of return averaged 0%, 6%, and 12% over a period
of years, but fluctuated above or below such averages for individual Policy
Years. The values would also be different depending on the allocation of a
Policy's total Account Value among the Divisions of the Series Account, if the
actual rates of return averaged 0%, 6% or 12%, but the rates of each Fund varied
above and below such averages.
The amounts shown for the death benefits and Account Values take into account
all charges and deductions imposed under the Policy based on the assumptions set
forth in the tables below. These include the Expense Charges Applied to Premium,
the Daily Risk Percentage charged against the Series Account for mortality and
expense risks, the Monthly Expense Charge and the Monthly Cost of Insurance. The
Expense Charges Applied to Premium is equal to a % charge for sales load and our
federal tax obligations and the applicable local and state premium tax assumed
to be %. The Daily Risk Percentage charged against the Series Account for
mortality and expense risks is an annual effective rate of 0.45% for the first
10 Policy Years, 0.30% for Policy Years 11 through 20, and 0.10% thereafter and
is guaranteed not to exceed an annual effective rate of .90%. The Monthly
Expense Charge is $10.00 per month for first three Policy Years and $7.50 per
Policy Month for all Policy Years thereafter. This Charge is guaranteed not to
exceed $15 per Policy Month.
The amounts shown in the tables also take into account the Funds' advisory fees
and operating expenses, which are assumed to be at an annual rate of % of the
average daily net assets of each Fund. This is based upon a simple average of
the advisory fees and expenses of all the Funds for the most recent fiscal year
taking into account any applicable expense caps or expense reimbursement
arrangements. Actual fees and expenses that you will incur may be more or less
than %, and will vary from year to year. See the prospectuses for the Fund for
more information on Fund expenses. The gross annual rates of investment return
of 0%, 6% and 12% correspond to net annual rates of %, %, and %, respectively,
during the first three policy years, ___%, ___%, and ___%, respectively, for
Policy Years 4 through 10, and _____%, ______% and _____%, respectively,
thereafter.
The hypothetical returns shown in the tables do not reflect any charges for
income taxes against the Series Account since no charges are currently made. If,
in the future, such charges are made, in order
D-1
<PAGE>
to produce the illustrated death benefits, Account Values and Cash Surrender
Values, the gross annual investment rate of return would have to exceed 0%, 6%,
or 12% by a sufficient amount to cover the tax charges.
The second column of each table shows the amount which would accumulate if an
amount equal to each premium were invested and earned interest, after taxes, at
% per year, compounded annually.
We will furnish upon request a comparable table using any specific set of
circumstances. In addition to a table assuming Policy charges at their maximum,
we will furnish a table assuming current Policy charges.
D-2
<PAGE>
TABLE 1
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
COLI VUL-2 SERIES ACCOUNT
Male, Preferred, Age 45
$ TOTAL FACE AMOUNT
ANNUAL PREMIUM $
DEATH BENEFIT OPTION ___
CURRENT POLICY CHARGES
<TABLE>
<CAPTION>
Hypothetical 0% Hypothetical 6% Hypothetical 12%
Premiums Gross Investment Return Gross Investment Return Gross Investment Return
Paid Plus Net_____% Net_____% Net_____%
--------------------------------- ---------------------------------- ---------------------------------
Interest Cash Cash Cash
Policy At % Surrender Account Death Surrender Account Death Surrender Account Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ---------- -------- ---------- ---------- ---------- ----------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
D-3
<PAGE>
Age 60
Age 65
Age 70
Age 75
</TABLE>
(1) Assumes a $ premium is paid at the beginning of each Policy Year. Values
will be different if premiums are paid with a different frequently or in
different amounts.
(2) Assumes that no policy loans have been made. Excessive loans or partial
withdrawals may cause this your Policy to lapse due to insufficient Account
Value.
The hypothetical investment rates of return are illustrative only, and should
not be deemed a representation of past or future investment rates of return.
Actual investment results may be more or less than those shown, and will depend
on a number of factors, including the investment allocations by a policy owner,
and the different investment rates of return for the Funds. The Cash Surrender
Value and death benefit for a Policy would be different from those shown if the
actual rates of investment return averaged 0%, 6%, and 12% over a period of
years, but fluctuated above and below those averages for individual Policy
Years. They would also be different if any policy loans or partial withdrawals
were made. No representations can be made that these hypothetical investment
rates of return can be achieved for any one year or sustained over any period of
time.
D-4
<PAGE>
TABLE 2
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
COLI VUL-2 SERIES ACCOUNT
Male, Preferred, Age 45
$ TOTAL FACE AMOUNT
ANNUAL PREMIUM $
DEATH BENEFIT OPTION
GUARANTEED POLICY CHARGES
<TABLE>
<CAPTION>
Hypothetical 0% Hypothetical 6% Hypothetical 12%
Premiums Gross Investment Return Gross Investment Return Gross Investment Return
Paid Plus Net______% Net_____% Net_____%
--------------------------------- ---------------------------------- ---------------------------------
Interest Cash Cash Cash
Policy At % Surrender Account Death Surrender Account Death Surrender Account Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
D-5
<PAGE>
Age 60
Age 65
Age 70
Age 75
</TABLE>
(1) Assumes a $ premium is paid at the beginning of each Policy Year. Values
will be different if premiums are paid with a different frequently or in
different amounts.
(2) Assumes that no policy loans have been made. Excessive loans or partial
withdrawals may cause this your Policy to lapse due to insufficient Account
Value.
The hypothetical investment rates of return are illustrative only, and should
not be deemed a representation of past or future investment rates of return.
Actual investment results may be more or less than those shown, and will depend
on a number of factors, including the investment allocations by a policy owner,
and the different investment rates of return for the Funds. The Cash Surrender
Value and death benefit for a Policy would be different from those shown if the
actual rates of investment return averaged 0%, 6%, and 12% over a period of
years, but fluctuated above and below those averages for individual Policy
Years. They would also be different if any policy loans or partial withdrawals
were made. No representations can be made that these hypothetical investment
rates of return can be achieved for any one year or sustained over any period of
time.
D-6
<PAGE>
[ Back Cover ]
The Securities and Exchange Commission maintains an Internet Web site
(http//www.sec.gov) that contains additional information about Great-West Life &
Annuity Insurance Company, the Policy and the Series Account which may be of
interest to you. The Web site also contains additional information about the
Policy Year's mutual fund investment options.
<PAGE>
PART II - OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, as amended, the undersigned Registrant hereby undertakes
to file with the Securities and Exchange Commission such supplementary and
periodic information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
REPRESENTATION AS TO FEES AND CHARGES
Great-West Life & Annuity Insurance Company hereby represents that the
fees and charges deducted under the Corporate Flexible Premium Variable
Universal Life Insurance Policies hereby registered by this Registration
Statement in the aggregate are reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks assumed by Great-West Life &
Annuity Insurance Company.
REPRESENTATION PURSUANT TO RULE 6e-3(T)
This filing is made pursuant to Rule 6e-3(T) under the Investment
Company Act of 1940, as amended (the "1940 Act").
UNDERTAKING AS TO INDEMNIFICATION
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the Registrant, the Registrant has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-1
<PAGE>
CONTENTS OF THIS REGISTRATION STATEMENT
This Registration Statement consists of the following papers and documents:
Facing Sheet
Cross-Reference Sheet
Prospectus consisting of 78 pages (including appendices)
Undertaking to File Reports
Undertaking As To Indemnification
Representation As To Fees and Charges
Representation Pursuant to Rule 6e-3(T)
Signature Pages
Exhibits
EXHIBIT LIST
1. Exhibits required by paragraph A of the instructions as to Exhibits of Form
N-8B-2
(1) Resolution of the Board of Directors of Great-West Life &
Annuity Insurance Company authorizing establishment of COLI
VUL-2 Series Account (filed herewith)
(2) Custodian Agreement (not applicable)
(3) (a) Form of Distribution Agreement (filed herewith)
(b) Form of Broker-Dealer and General Agent Sales
Agreement (filed herewith)
(c) Schedule of Sales Commissions (filed herewith)
(4) Other Agreements between the depositor, principal underwriter,
and custodian with respect to Registrant or its securities
(not applicable)
(5) (a) Specimen Policy (filed herewith)
(b) Specimen Term Life Insurance Rider (filed herewith)
(6) (a) Articles of Incorporation of Great-West Life &
Annuity Insurance Company, as amended(1)
(b) By-laws of Great-West Life & Annuity Insurance
Company(2)
(7) Not applicable
II-2
<PAGE>
(8) Form of Participation Agreement (filed herewith)
(9) Other Material Contracts (not applicable)
(10) Specimen Application (to be filed by pre-effective amendment)
2. Opinion and Consent of Counsel (to be filed by pre-effective amendment)
3. All financial statements omitted from the Prospectus (not applicable)
4. Not applicable
5. Financial Data Schedule (not applicable)
6. Procedures memorandum pursuant to Rule 6e-3(T)(b)(12)(iii) (to be filed
by pre-effective amendment)
7. Actuarial Opinion and Consent (to be filed by pre-effective amendment)
8. Consent of Independent Accountants (to be filed by pre-effective
amendment)
- -------------------------
(1) Incorporated by reference to Pre-Effective Amendment No. 2 to Form S-1 of
Great-West Life & Annuity Insurance Company (File No. 333-1173, filed on
October 29, 1996).
(2) Incorporated by reference to Amendment No. 1 to Form 10-K of Great-West
Life & Annuity Insurance Company (File No. 333-1173, filed on March 31,
1998).
II-3
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the registrant has duly caused this Registration Statement to be
signed on its behalf in the City of Englewood, State of Colorado, on the 21st
day of January, 1999.
COLI VUL-2 SERIES ACCOUNT
(Registrant)
BY: GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
(Depositor)
By: /s/ William T. McCallum
--------------------------------------
William T. McCallum
President and Chief Executive Officer
As required by the Securities Act of 1933, this Registration Statement
has been signed below by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Robert Gratton*
- -----------------------------
Robert Gratton Chairman of the Board January 21, 1999
/s/ William T. McCallum
- -----------------------------
William T. McCallum President, Chief Executive Officer January 21, 1999
and Director
/s/ Mitchell T. G. Graye
- -----------------------------
Mitchell T.G. Graye Chief Financial Officer January 21, 1999
/s/ January __, 1999
- -----------------------------
James Balog Director
/s/ James W. Burns, O.C.*
- -----------------------------
James W. Burns, O.C. Director January 21, 1999
/s/ Orest T. Dackow*
- -----------------------------
Orest T. Dackow Director January 21, 1999
/s/ Andre Desmarais*
- -----------------------------
Andre Desmarais Director January 21, 1999
<PAGE>
/s/ Paul Desmarais, Jr.*
- -----------------------------
Paul Desmarais, Jr. Director January 21, 1999
/s/
- -----------------------------
Robert G. Graham Director January __, 1999
/s/ N. Berne Hart*
- -----------------------------
N. Berne Hart Director January 21, 1999
/s/
- -----------------------------
Kevin P. Kavanagh Director January __, 1999
/s/
- -----------------------------
William Mackness Director January __, 1999
/s/
- -----------------------------
Jerry Edgar Allan Nickerson Director January __, 1999
/s/P. Michael Pittfield, P.C., Q.C.*
- -----------------------------
The Honourable P. Michael Director January 21, 1999
Pittfield, P.C., Q.C.
/s/ Michel Plessis-Belair, F.C.A.*
- -----------------------------
Michel Plessis-Belair, F.C.A. Director January 21, 1999
/s/
- -----------------------------
Brian E. Walsh Director January __, 1999
*By: /s/ D.C. Lennox
------------------------
D.C. Lennox
Attorney-in-fact pursuant to Powers of Attorney filed with this
Registration Statement.
</TABLE>
<PAGE>
POWER OF ATTORNEY PRIVATE
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, J.W. Burns, a Member of the Board of
Directors of Great-West Life & Annuity Insurance Company, a Colorado
corporation, do hereby constitute and appoint each of D.C. Lennox and G.R.
Derback as my true and lawful attorney and agent for me and in my name and on my
behalf to do, individually and without the concurrence of the other attorney and
agent, any and all acts and things and to execute any and all instruments which
either said attorney and agent may deem necessary or desirable to enable
Great-West Life & Annuity Insurance Company and COLI VUL-2 Series Account, a
separate and distinct account of Great-West Life & Annuity Insurance Company
governed under the provisions of the Colorado Insurance Code, to comply with the
Securities Act of 1933 and the Investment Company Act of 1940 and any rules,
regulations, and requirements of the Securities and Exchange Commission
thereunder, in connection with the registration under said Acts of variable life
contracts, including specifically, but without limiting the generality of the
foregoing, power and authority to sign my name, in my capacity as a Member of
the Board of Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-6) of Great-West Life & Annuity Insurance Company
and COLI VUL-2 Series Account (Registration No. _________), and to any and all
amendments thereto, and I hereby ratify and confirm all that either said
attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of January, 1999.
/s/J.W. Burns
------------------------------------------
Member, Board of Directors
Great-West Life & Annuity Insurance Company
Witness:
/s/Michelle Thompson
- ---------------------------
Name: Michelle Thompson
(Type or print name of witness)
<PAGE>
POWER OF ATTORNEY PRIVATE
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, O.T. Dackow, a Member of the Board of
Directors of Great-West Life & Annuity Insurance Company, a Colorado
corporation, do hereby constitute and appoint each of D.C. Lennox and G.R.
Derback as my true and lawful attorney and agent for me and in my name and on my
behalf to do, individually and without the concurrence of the other attorney and
agent, any and all acts and things and to execute any and all instruments which
either said attorney and agent may deem necessary or desirable to enable
Great-West Life & Annuity Insurance Company and COLI VUL-2 Series Account, a
separate and distinct account of Great-West Life & Annuity Insurance Company
governed under the provisions of the Colorado Insurance Code, to comply with the
Securities Act of 1933 and the Investment Company Act of 1940 and any rules,
regulations, and requirements of the Securities and Exchange Commission
thereunder, in connection with the registration under said Acts of variable life
contracts, including specifically, but without limiting the generality of the
foregoing, power and authority to sign my name, in my capacity as a Member of
the Board of Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-6) of Great-West Life & Annuity Insurance Company
and COLI VUL-2 Series Account (Registration No. _________), and to any and all
amendments thereto, and I hereby ratify and confirm all that either said
attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 12th day of January, 1999.
/s/O.T. Dackow
------------------------------------------
Member, Board of Directors
Great-West Life & Annuity Insurance Company
Witness:
/s/Beverly A. Byrne
- ---------------------------
Name: Beverly A. Byrne
(Type or print name of witness)
<PAGE>
POWER OF ATTORNEY PRIVATE
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, A. Desmarais, a Member of the Board of
Directors of Great-West Life & Annuity Insurance Company, a Colorado
corporation, do hereby constitute and appoint each of D.C. Lennox and G.R.
Derback as my true and lawful attorney and agent for me and in my name and on my
behalf to do, individually and without the concurrence of the other attorney and
agent, any and all acts and things and to execute any and all instruments which
either said attorney and agent may deem necessary or desirable to enable
Great-West Life & Annuity Insurance Company and COLI VUL-2 Series Account, a
separate and distinct account of Great-West Life & Annuity Insurance Company
governed under the provisions of the Colorado Insurance Code, to comply with the
Securities Act of 1933 and the Investment Company Act of 1940 and any rules,
regulations, and requirements of the Securities and Exchange Commission
thereunder, in connection with the registration under said Acts of variable life
contracts, including specifically, but without limiting the generality of the
foregoing, power and authority to sign my name, in my capacity as a Member of
the Board of Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-6) of Great-West Life & Annuity Insurance Company
and COLI VUL-2 Series Account (Registration No. _________), and to any and all
amendments thereto, and I hereby ratify and confirm all that either said
attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 13th day of January, 1999.
/s/A. Desmarais
------------------------------------------
Member, Board of Directors
Great-West Life & Annuity Insurance Company
Witness:
/s/Lise Gagnon
- ---------------------------
Name: Lise Gagnon
(Type or print name of witness)
<PAGE>
POWER OF ATTORNEY PRIVATE
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, P. Desmarais, Jr., a Member of the Board
of Directors of Great-West Life & Annuity Insurance Company, a Colorado
corporation, do hereby constitute and appoint each of D.C. Lennox and G.R.
Derback as my true and lawful attorney and agent for me and in my name and on my
behalf to do, individually and without the concurrence of the other attorney and
agent, any and all acts and things and to execute any and all instruments which
either said attorney and agent may deem necessary or desirable to enable
Great-West Life & Annuity Insurance Company and COLI VUL-2 Series Account, a
separate and distinct account of Great-West Life & Annuity Insurance Company
governed under the provisions of the Colorado Insurance Code, to comply with the
Securities Act of 1933 and the Investment Company Act of 1940 and any rules,
regulations, and requirements of the Securities and Exchange Commission
thereunder, in connection with the registration under said Acts of variable life
contracts, including specifically, but without limiting the generality of the
foregoing, power and authority to sign my name, in my capacity as a Member of
the Board of Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-6) of Great-West Life & Annuity Insurance Company
and COLI VUL-2 Series Account (Registration No. _________), and to any and all
amendments thereto, and I hereby ratify and confirm all that either said
attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of January, 1999.
/s/P. Desmarais, Jr.
------------------------------------------
Member, Board of Directors
Great-West Life & Annuity Insurance Company
Witness:
/s/Lucie Filteau
- ---------------------------
Name: Lucie Filteau
(Type or print name of witness)
<PAGE>
POWER OF ATTORNEY PRIVATE
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, R. Gratton, a Member of the Board of
Directors of Great-West Life & Annuity Insurance Company, a Colorado
corporation, do hereby constitute and appoint each of D.C. Lennox and G.R.
Derback as my true and lawful attorney and agent for me and in my name and on my
behalf to do, individually and without the concurrence of the other attorney and
agent, any and all acts and things and to execute any and all instruments which
either said attorney and agent may deem necessary or desirable to enable
Great-West Life & Annuity Insurance Company and COLI VUL-2 Series Account, a
separate and distinct account of Great-West Life & Annuity Insurance Company
governed under the provisions of the Colorado Insurance Code, to comply with the
Securities Act of 1933 and the Investment Company Act of 1940 and any rules,
regulations, and requirements of the Securities and Exchange Commission
thereunder, in connection with the registration under said Acts of variable life
contracts, including specifically, but without limiting the generality of the
foregoing, power and authority to sign my name, in my capacity as a Member of
the Board of Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-6) of Great-West Life & Annuity Insurance Company
and COLI VUL-2 Series Account (Registration No. _________), and to any and all
amendments thereto, and I hereby ratify and confirm all that either said
attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of January, 1999.
/s/R. Gratton
------------------------------------------
Member, Board of Directors
Great-West Life & Annuity Insurance Company
Witness:
/s/Nicole Barolet
- ---------------------------
Name: Nicole Barolet
(Type or print name of witness)
<PAGE>
POWER OF ATTORNEY PRIVATE
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, N.B. Hart, a Member of the Board of
Directors of Great-West Life & Annuity Insurance Company, a Colorado
corporation, do hereby constitute and appoint each of D.C. Lennox and G.R.
Derback as my true and lawful attorney and agent for me and in my name and on my
behalf to do, individually and without the concurrence of the other attorney and
agent, any and all acts and things and to execute any and all instruments which
either said attorney and agent may deem necessary or desirable to enable
Great-West Life & Annuity Insurance Company and COLI VUL-2 Series Account, a
separate and distinct account of Great-West Life & Annuity Insurance Company
governed under the provisions of the Colorado Insurance Code, to comply with the
Securities Act of 1933 and the Investment Company Act of 1940 and any rules,
regulations, and requirements of the Securities and Exchange Commission
thereunder, in connection with the registration under said Acts of variable life
contracts, including specifically, but without limiting the generality of the
foregoing, power and authority to sign my name, in my capacity as a Member of
the Board of Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-6) of Great-West Life & Annuity Insurance Company
and COLI VUL-2 Series Account (Registration No. _________), and to any and all
amendments thereto, and I hereby ratify and confirm all that either said
attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 15th day of January, 1999.
/s/N.B. Hart
------------------------------------------
Member, Board of Directors
Great-West Life & Annuity Insurance Company
Witness:
/s/Wilma J. Hart
- ---------------------------
Name: Wilma J. Hart
(Type or print name of witness)
<PAGE>
POWER OF ATTORNEY PRIVATE
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, M. Plessis-Belair, a Member of the Board
of Directors of Great-West Life & Annuity Insurance Company, a Colorado
corporation, do hereby constitute and appoint each of D.C. Lennox and G.R.
Derback as my true and lawful attorney and agent for me and in my name and on my
behalf to do, individually and without the concurrence of the other attorney and
agent, any and all acts and things and to execute any and all instruments which
either said attorney and agent may deem necessary or desirable to enable
Great-West Life & Annuity Insurance Company and COLI VUL-2 Series Account, a
separate and distinct account of Great-West Life & Annuity Insurance Company
governed under the provisions of the Colorado Insurance Code, to comply with the
Securities Act of 1933 and the Investment Company Act of 1940 and any rules,
regulations, and requirements of the Securities and Exchange Commission
thereunder, in connection with the registration under said Acts of variable life
contracts, including specifically, but without limiting the generality of the
foregoing, power and authority to sign my name, in my capacity as a Member of
the Board of Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-6) of Great-West Life & Annuity Insurance Company
and COLI VUL-2 Series Account (Registration No. _________), and to any and all
amendments thereto, and I hereby ratify and confirm all that either said
attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 14th day of January, 1999.
/s/M. Plessis-Belair
------------------------------------------
Member, Board of Directors
Great-West Life & Annuity Insurance Company
Witness:
/s/Danielle Durocher
- ---------------------------
Name: Danielle Durocher
(Type or print name of witness)
<PAGE>
POWER OF ATTORNEY PRIVATE
RE
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
Know all men by these presents, that I, P. Michael Pittfield, P.C., Q.C., a
Member of the Board of Directors of Great-West Life & Annuity Insurance Company,
a Colorado corporation, do hereby constitute and appoint each of D.C. Lennox and
G.R. Derback as my true and lawful attorney and agent for me and in my name and
on my behalf to do, individually and without the concurrence of the other
attorney and agent, any and all acts and things and to execute any and all
instruments which either said attorney and agent may deem necessary or desirable
to enable Great-West Life & Annuity Insurance Company and COLI VUL-2 Series
Account, a separate and distinct account of Great-West Life & Annuity Insurance
Company governed under the provisions of the Colorado Insurance Code, to comply
with the Securities Act of 1933 and the Investment Company Act of 1940 and any
rules, regulations, and requirements of the Securities and Exchange Commission
thereunder, in connection with the registration under said Acts of variable life
contracts, including specifically, but without limiting the generality of the
foregoing, power and authority to sign my name, in my capacity as a Member of
the Board of Directors of Great-West Life & Annuity Insurance Company, to the
Registration Statement (Form S-6) of Great-West Life & Annuity Insurance Company
and COLI VUL-2 Series Account (Registration No. _________), and to any and all
amendments thereto, and I hereby ratify and confirm all that either said
attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 15th day of January, 1999.
/s/P. Michael Pittfield, P.C., Q.C.
------------------------------------------
Member, Board of Directors
Great-West Life & Annuity Insurance Company
Witness:
/s/Diane Meilleur
- ---------------------------
Name: Diane Meilleur
(Type or print name of witness)
<PAGE>
EXHIBIT INDEX
1.(1) Resolution of the Board of Directors of Great-West Life &
Annuity Insurance Company authorizing establishment of COLI
VUL-2 Series Account
1.(3)(a) Form of Distribution Agreement
1.(3)(b) Form of Broker-Dealer and General Agent Sales Agreement
1.(3)(c) Schedule of Sales Commissions
1.(5)(a) Specimen Policy
1.(5)(b) Specimen Term Life Insurance Rider
1.(8) Form of Participation Agreement
Exhibit 1.(1)
<PAGE>
GREAT-WEST
Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, CO 80111
This will certify that the following is a true and correct copy of a resolution
passed at a meeting of the Board of Directors of Great-West Life & Annuity
Insurance Company duly called and held on the twenty-fifth day of November,
1997, at which meeting a quorum was present and acting throughout, and that said
resolution is still in full force and effect:
That the Company hereby authorizes the establishment of separate
accounts designated GWL&A VUL Series Accounts 1 - 5 (hereinafter "the
Accounts"), subject to such conditions as hereafter set forth, said
use, purposes, and conditions to be in full compliance with C.R.S.
?10-7-402 and all rules and regulations of the Colorado Division of
Insurance;
Further, that the appropriate officers are hereby authorized to
determine the terms of the offering of the Accounts; to designate from
time to time the number of separate investment divisions as may be
necessary or appropriate for each Account to which net payments under
the Contracts will be allocated in accordance with instructions
received from contractholders; and, to establish all procedures,
standards, and arrangements necessary or appropriate for the operation
of the Accounts; and
Further, that the Accounts shall be established for the purpose of
allowing the Company to issue corporate-owned or bank-owned variable
universal life insurance contracts ("Contracts") as the President or a
Vice-President may designate and shall constitute separate accounts
into which will be allocated amounts paid to the Company which are to
be applied under the terms of such Contracts; and
Further, that the income, gains and losses, realized or unrealized,
from assets allocated to the Accounts shall be credited to or charged
against such Accounts without regard to other income, gains, or losses
of the Company to the extent provided in the Contracts; and
Further, that the fundamental investment policy of the Accounts shall
be to invest or reinvest the assets of the Accounts in securities
issued by investment companies registered under the Investment Company
Act of 1940 or invest or reinvest the assets of the Accounts directly
in other separate accounts and other investments according to the
investment objective and policy established for such Contract or
Contracts; and
Further, that the President or a Vice-President each be, and hereby is,
authorized to deposit such amounts in the Accounts or in each
investment division as may be necessary or appropriate to facilitate
the commencement of the Accounts? operations; and
Further, that the President or a Vice-President each be, and hereby is,
authorized to transfer funds from time to time into the Accounts in
order to establish the Accounts or to support the operation of the
Contracts with respect to the Accounts or to transfer funds from time
to time out of the Accounts if transfer is made by cash or securities
having a readily determined market value, if such transfer is approved
by the Commissioner of the Division of Insurance; and
<PAGE>
Further, that the President or a Vice-President each be, and is hereby
authorized to change the designation of the Accounts to such other
designation as he may deem necessary or appropriate; and
Further, that the appropriate officers of the Company, with such
assistance from the Company's auditors, legal counsel and independent
consultants or others as they may require, be, and they hereby are,
authorized and directed to take all action necessary to take all
actions which are necessary in connection with the offering of said
Contracts for sale and the operation of the Account in order to comply
with the Investment Company Act of 1940, the Securities Exchange Act of
1934, the Securities Act of 1933 and other applicable federal laws,
including the filing of registration statements and amendments thereto,
any undertakings, and any applications for exemptions from the
Investment Company Act of 1940 or other applicable federal laws as the
officers of the Company shall deem necessary or appropriate; and
Further, that the appropriate officers of the Company be, and they
hereby are, authorized on behalf of the Accounts and on behalf of the
Company to take any and all action they may deem necessary or advisable
in order to sell the Contracts, including any registrations, filings
and qualifications of the Company, its officers, agents and employees,
and the Contracts under the insurance and securities laws of any of the
states of the United States of America or other jurisdictions, and in
connection therewith to prepare, execute, deliver and file all such
applications, reports, covenants, resolutions, applications for
exemptions, consents to service of process and other papers and
instruments as may be required under such laws, and to take any and all
further action which said officers or counsel of the Company may deem
necessary or desirable (including entering into whatever agreements may
be necessary) in order to maintain such registrations or qualifications
for as long as said officers or counsel deem it to be in the best
interests of the Accounts and the Company; and
Further, that the President, the Vice-Presidents and the Secretary of
the Company be, and they hereby are, each authorized in the names and
on behalf of the Accounts and the Company to execute and file
irrevocable written consents on the part of the Accounts and of the
Company to be used in such states wherein such consents to service of
process may be required under the insurance or securities laws therein
in connection with said registration or qualification of the Contracts
and to appoint the appropriate state official or such other person as
may be allowed by said insurance or securities laws, agent of the
Accounts and of the Company for the purpose of receiving and accepting
process; and
Further, that the President or a Vice-President each be, and hereby is,
authorized to cause the Company to institute procedures for providing
voting rights for owners of such Contracts with respect to securities
owned by the Accounts; and
Further, that the President or a Vice-President each be, and is hereby
authorized to execute such agreement or agreements as deemed necessary
and appropriate with underwriters and distributors for the Contracts in
connection with the establishment and maintenance of the Accounts or
the design, administration and offer and sale of the Contracts;
provided, however, that the Company is directed to finalize such
agreements before effecting any registrations or filings of the
Contracts or the Accounts; and
Further, that the appropriate officers of the Company are hereby
authorized to execute whatever agreement or agreements may be necessary
or appropriate to enable the Accounts to invest in securities issued by
one or more investment companies registered under the Investment
Company Act of 1940 as may be specified in the respective Contracts;
and
<PAGE>
Further, that the appropriate officers of the Company, and each of
them, are hereby authorized to execute and deliver all such documents
and papers and to do or cause to be done all such acts and things as
they may deem necessary or desirable to carry out the foregoing
resolutions and the intent and purposes thereof; and
Further, that the term "appropriate officers" as used herein, shall
include all of the elected and appointed officers of the Company,
either severally or individually, subject to any applicable resolutions
of the Board of Directors dealing with signing authority for the
Company.
Dated at Englewood, /s/ B.A. Byrne
Colorado this 30th day -----------------------------------
of December, 1998. B.A. Byrne
Assistant Vice President, Associate
Counsel and Assistant Secretary
Exhibit 1.(3)(a)
<PAGE>
UNDERWRITING AGREEMENT
THIS UNDERWRITING AGREEMENT made this ______ day of ____________ 199__,
by and between BenefitsCorp Equities, Inc. (the "Underwriter") and Great-West
Life & Annuity Insurance Company (the "Insurance Company"), on its own behalf
and on behalf of GWL&A VUL Series Account 2 (the "Series Account"), as follows:
WHEREAS, the Insurance Company has or will register the Series Account
as a unit investment trust under the Investment Company Act of 1940, as amended
(the "1940 Act") and has or will register the Contracts under the Securities Act
of 1933;
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission (the "SEC") under the Securities Exchange Act
of 1934, as amended (the "1934 Act"), and is a member of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Insurance Company and the Series Account desire to have
the Contracts sold and distributed through the Underwriter, and the Underwriter
is willing to sell and distribute such Contracts under the terms stated herein;
NOW THEREFORE, the parties hereto agree as follows:
1. Representations, Responsibilities and Warranties of Insurance Company
1.01 The Insurance Company represents that it has the authority, and
hereby agrees to, grant the Underwriter the right to serve as the distributor
and principal underwriter of the Contracts during the term of this Agreement.
1.02 The Insurance Company represents and warrants that it is duly
licensed as an insurance company under the laws of the State of Colorado and
that it has taken all appropriate actions to establish the Series Account in
accordance with state and federal laws.
1.03 The Insurance Company agrees to update and maintain a current
prospectus for the Contracts as required by law.
1.04 The Insurance Company represents that it reserves the right to
appoint or refuse to appoint, any proposed associated person of the Underwriter
as an agent or broker of the Insurance Company. The Insurance Company also
retains the right to terminate such agents or brokers once appointed.
1.05 On behalf of the Series Account, the Insurance Company shall
furnish the Underwriter with copies of all financial statements and other
documents which the Underwriter reasonably requests for use in connection with
the distribution of the contracts.
1
<PAGE>
2. Representations, Responsibilities and Warranties of Underwriter
2.01 Underwriter represents that it has the authority and hereby agrees
to serve as distributor and principal underwriter of the Contracts during the
term of this Agreement.
2.02 The Underwriter represents that it is duly registered as a
broker-dealer under the 1934 Act and is a member in good standing of the NASD
and to the extent necessary to offer the Contracts, shall be duly registered or
otherwise qualified under the securities laws of any state or other
jurisdiction.
2.03 The Underwriter agrees to use its best efforts to solicit
applications for the Contracts, and to undertake, at its own expense, to provide
all sales services relative to the Contracts and otherwise to perform all duties
and functions which are necessary and proper for the distribution of the
Contracts.
2.04 The Underwriter agrees to offer the Contracts for sale in
accordance with the prospectus therefor, then in effect. The Underwriter
represents and agrees that it is not authorized to give any information or make
any representations concerning the Contracts other than those contained in the
current prospectus as filed with the SEC or in such sales literature as may be
authorized by the Insurance Company.
2.05. The Underwriter shall be fully responsible for carrying out its
sales, underwriting and compliance supervisory obligations hereunder in
compliance with the NASD Conduct Rules and all other relevant federal and state
securities laws and regulations. Without limiting the generality of the
foregoing, the Underwriter agrees that it shall have full responsibility for:
(a) ensuring that no person shall offer or sell the Contracts
on its behalf until such person is duly registered as a representative
of the Underwriter, and duly licensed and appointed by the Insurance
Company;
(b) ensuring that no person shall offer or sell the Contracts
on its behalf until the Underwriter has confirmed that the Insurance
Company is appropriately licensed, or otherwise qualified to offer and
sell such Contracts under the federal securities laws and any
applicable state or jurisdictional securities and/or insurance laws in
each state or jurisdiction in which such Contracts may be lawfully
sold;
(c) continually training, supervising, and controlling all
registered representatives and other agents of the Underwriter for
purposes of complying with the NASD Conduct Rules and with federal and
state securities laws which may be applicable to the offering and sale
of the Contracts. In this respect, the Underwriter shall:
(1) conduct training programs (including the
preparation and utilization of training materials) as is
necessary, in the Underwriter's opinion, to comply with
applicable laws and regulations;
2
<PAGE>
(2) establish and implement reasonable written
procedures for the supervision of the sales practices of
agents, representatives or brokers who sell the Contracts; and
(3) take reasonable steps to ensure that its
associated persons shall 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 such applicants; and
(d) supervising and ensuring compliance with NASD rules of all
administrative functions performed by the Underwriter with respect to
the offering and sale of the Contracts and representations with respect
to the Series Account.
2.06 The Underwriter, or its affiliates, on behalf of the Insurance
Company, shall apply for the proper insurance licenses in the appropriate states
or jurisdictions for the designated persons associated with the Underwriter or
with independent broker-dealers which have entered into agreements with the
Underwriter for the sale of the Contracts. The Underwriter agrees to pay all
licensing or other fees necessary to properly authorize such persons for the
sale of the Contracts.
2.07 The Underwriter shall have the responsibility for paying (i) all
commissions or other fees to its associated persons which are due for the sale
of the Contracts and (ii) any compensation to independent broker-dealers and
their associated persons due under the terms of any sales agreements between the
Underwriter and such broker-dealers. Provided, however, the Insurance Company
retains the ultimate right to reject any commission rate allowed by the
Underwriter. Furthermore, no associated person or independent broker-dealer
shall have an interest in the surrender charges, deductions or other fees
payable to Underwriter as set forth herein. The Underwriter shall have the
responsibility for calculating and furnishing periodic reports to the Insurance
Company as to the sale of the Contracts, and as to the commissions and service
fees payable to persons selling the Contracts.
3. Records and Confidentiality
3.01 The Insurance Company and the Underwriter shall cause to be
maintained and preserved for the periods prescribed, such accounts, books,
records, files and other documents and materials ("Records") as are required of
it by the 1940 Act and any other applicable laws and regulations. The Records of
the Insurance Company, the Series Account and the Underwriter as to all
transactions hereunder shall be maintained so as to disclose clearly and
accurately the nature and details of the transactions.
3.02 The Underwriter shall cause the Insurance Company to be furnished
with such Records, or copies thereof, as the Insurance Company may reasonably
request for the purpose of meeting its reporting and recordkeeping requirements
under the insurance laws of the State of Colorado and any other applicable
states or jurisdictions.
3
<PAGE>
3.03 The Insurance Company shall cause the Underwriter to be furnished
with any Records, or copies thereof, as the Underwriter may reasonably request
for the purpose of meeting its reporting and recordkeeping requirements under
the federal securities laws or the securities laws of any inquiring
jurisdiction.
3.04 The Underwriter agrees and understands that all Records shall be
the sole property of the Insurance Company and that such property shall be held
by the Underwriter, or its agents during the term of this agreement. Upon
termination, all Records shall be returned to the Insurance Company.
3.05 Insurance Company agrees and understands that the Underwriter may
maintain copies of the Records as is required by any relevant securities law,
the SEC, the NASD or any other self regulatory agency.
3.06 Underwriter shall establish and maintain facilities and procedures
for the safekeeping of all Records relative to this Agreement.
3.07 The parties hereto agree that all Records pertaining to the
business of the other party which are exchanged or received pursuant to this
Agreement, shall remain confidential and shall not be voluntarily disclosed to
any other person, except to the extent disclosure thereof may be required by
law. All such confidential information in the possession of each of the parties
hereto shall be returned to the party from whom it was obtained upon the
termination or expiration of this Agreement.
4. Relationship of the Parties
4.01 Notwithstanding anything in this Agreement to the contrary, the
Underwriter or the Insurance Company may enter into sales agreements with
independent broker-dealers for the sale of the Contracts.
4.02 All such sales agreements as described in 4.01, above, which are
entered into by the Insurance Company or the Underwriter shall provide that each
independent broker-dealer will assume full responsibility for continued
compliance by itself and its associated persons with NASD Conduct Rules and
applicable federal and state securities laws. All associated persons of such
independent broker-dealers soliciting applications for the Contracts shall be
duly and appropriately licensed and/or appointed for the sale of the Contracts
under the insurance laws of the applicable state or jurisdiction in which the
Contracts may be lawfully sold.
4.03 The services of the Underwriter to the Series Account hereunder
are not to be deemed exclusive and the Underwriter shall be free to render
similar services to others so long as the services rendered hereunder are not
interfered with or impaired.
4
<PAGE>
5. Term and Termination
5.01 Subject to termination, the Agreement shall remain in full force
and effect for one year, and shall continue in full force and effect from year
to year until terminated as provided below. Each additional year shall be an
additional term of this Agreement.
5.02 This Agreement may be terminated:
(a) by either party upon sixty (60) days written notice to the
other party;
(b) immediately, upon written notice in the event of
bankruptcy or insolvency of one party;
(c) at any time upon mutual written consent of the parties;
(d) immediately in the event of its assignment; provided
however, "assigned" shall not include any transaction exempted
from section 15(b)(2) of the 1940 Act;
(e) immediately in the event that the Underwriter no longer
qualifies as a broker-dealer under applicable federal law; and
(f) immediately in the event of fraud, misrepresentation,
conversion or unlawful withholding of funds by a party.
5.03 Upon termination of this Agreement, all authorization, rights, and
obligations shall cease except the obligations to settle accounts hereunder,
including payments or premiums or contributions subsequently received for
Contracts in effect at the time of termination or issued pursuant to
applications received by the Insurance Company prior to termination.
5.04 After notice of termination, the parties agree to cooperate to
effectuate an orderly transition of all accounts, payments and Records.
6. Miscellaneous
6.01 This Agreement shall be subject to the provisions of the 1940 Act,
the 1934 Act and the rules, regulations and rulings thereunder. In addition it
shall be subject to the rulings of the NASD, as issued from time to time, and
any exemptions from the 1940 Act the SEC may grant. All terms of this Agreement
will be interpreted and construed in accordance with compliance of this section
6.01.
6.02 Except as otherwise provided, Underwriter acknowledges that
Insurance Company retains the overall right and responsibility to direct and
control the activities of the Underwriter.
5
<PAGE>
6.03 If any provisions of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall remain in full force and effect.
6.04 This Agreement constitutes the entire Agreement between the
parties hereto and may not be modified except in a written instrument executed
by all the parties hereto.
6.05 This Agreement shall be governed by the internal laws of the State
of Colorado.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective duly authorized officers and have caused their respective
seals to be affixed hereto, as of the day and year first written above.
Great-West Life & Annuity Insurance Company
______________________ By: _______________________________________
Witness: William T. McCallum
President and Chief Executive Officer
BenefitsCorp Equities, Inc.
______________________ By: _______________________________________
Witness: Charles P. Nelson
President
6
<PAGE>
Exhibit 1.(3)(b)
<PAGE>
CORPORATE OWNED VARIABLE UNIVERSAL
LIFE INSURANCE CONTRACT
BROKER-DEALER SELLING AGREEMENT
This Agreement, dated ____________________, 19____, is by and among
_______________________________________________________ (individually
"Broker/Dealer") and ___________________________________________________
(individually "Insurance Agency"), (or collectively "Broker/Dealer,") Great-West
Life & Annuity Insurance Company ("Insurer") and BenefitsCorp Equities, Inc., a
registered Broker/Dealer ("Distributor").
WHEREAS, This Agreement is entered to arrange for the distribution of
certain corporate owned variable universal life insurance ("COLI VUL") contracts
(the "Contracts"), issued by Insurer and underwritten by Distributor, through
sales people who are licensed agents of the Insurance Agency and Registered
Representatives of the Broker/Dealer (collectively referred to as "Registered
Representatives").
WHEREAS, Broker/Dealer hereby represents that it is, or is affiliated
with an entity which is, registered as a Broker/Dealer with the Securities and
Exchange Commission ("SEC") and which is a member in good standing of the
National Association of Securities Dealers, Inc. ("NASD");
WHEREAS, Broker/Dealer is affiliated with Insurance Agency which is
licensed as a life insurance agency under the insurance laws of the various
states in which it operates.
NOW THEREFORE, In consideration of the mutual promises and covenants
contained in this Agreement, Insurer and Distributor appoint those persons who
are Registered Representatives of Broker/Dealer and licensed agents of Insurance
Agency to solicit and procure applications for the COLI VUL Contracts, which are
or will be properly registered under the Securities Act of 1933, as amended and
are offered in connection with a unit investment trust which is registered under
the Investment Company Act of 1940, as amended. Broker/Dealer is authorized to
offer and sell the Contracts subject to the following conditions:
A. Scope of Appointment
1. This appointment is not deemed to be exclusive in any manner
and only extends to those jurisdictions in which the Contracts
have been approved for sale and in which Broker/Dealer,
Insurance Agency and their Registered Representatives are
properly licensed and appointed.
<PAGE>
2. Applications shall be taken only on the application forms
supplied by Insurer. All completed applications, supporting
documents and initial and subsequent payments are the sole
property of Insurer and must be remitted immediately upon
execution or payment to Insurer at such address as it may
designate from time to time. All applications are subject to
acceptance by Insurer in its sole discretion.
3. Broker/Dealer agrees that it will not act as the collector of
deposits, transfers, or rollovers from other insurance
carriers, banks, trusts, savings institutions, or other
financial institutions, or of other amounts to be deposited to
the Contracts.
4. Broker/Dealer further agrees that if, on occasion, it receives
such deposits under the Contract, the full amount of such
deposits shall be immediately remitted to Insurer without
reduction.
B. Registered Representatives
1. Broker/Dealer is authorized to recommend Registered
Representatives for appointment with Insurer to solicit sales
of the Contracts. Further, Broker/Dealer warrants that each
such person recommended for appointment is fully licensed
under the applicable state insurance and securities laws and
is a duly Registered Representative of Broker/Dealer.
2. Broker/Dealer is responsible for such supervision of its
Registered Representatives which will enable Broker/Dealer to
ensure that its Registered Representatives are in compliance
with applicable federal and state securities and insurance
laws, rules, regulations and statements of policy promulgated
thereunder as may apply to the Contracts. Broker/Dealer is
responsible for conducting all background investigations which
may be required by law or regulation and represents that its
Registered Representatives have all the necessary licenses to
transact business.
C. Sales Materials
1. Broker/Dealer shall cause its officers, employees and
Registered Representatives not to use any sales material or
information, including but not limited to written, audio, or
video sales material, or offering documents, unless such
material has been provided or approved in writing by Insurer
or Distributor.
<PAGE>
2. Broker/Dealer shall cause its officers, employees and
Registered Representatives not to use any sales material or
information, including but not limited to written, audio, or
video sales material, or offering documents, unless such
material has been approved in writing by the NASD, as
required, if such materials were not provided by Insurer or
Distributor and copies of such materials will be submitted to
the Insurer and Distributor pursuant to Section C.1. above for
their approval.
3. In accordance with the requirements of law and regulations,
Broker/Dealer shall maintain complete records indicating the
manner, date and extent of distribution of any such
solicitation material. Such records and material shall be made
available to appropriate regulatory agencies as required by
law or regulation. Broker/Dealer shall hold Insurer,
Distributor and their affiliates and agents harmless from any
liability arising from the use of any material which has not
been specifically approved by Insurer, Distributor and/or
NASD, as applicable, in writing, or which is used in a manner
inconsistent with Insurer's or Distributor's approval.
4. Broker/Dealer, its officers, employees, and Registered
Representatives are not authorized to make any other
representations concerning the Contracts except those
contained in the then-current offering materials and/or sales
materials issued and/or approved by Insurer or Distributor.
5. Insurer and Distributor will use reasonable effort to provide
to Broker/Dealer and its Registered Representatives
information and marketing assistance, including reasonable
quantities of advertising materials, sales literature,
reports, and current offering documents for the Contracts. All
material provided by Insurer or Distributor to Broker/Dealer
under this Agreement shall remain property of Insurer or
Distributor and upon termination, any materials in the
possession of Broker/Dealer or its Registered Representatives
shall be returned promptly to Insurer or Distributor or at
Insurer's or Distributor's request, shall be properly
disposed.
D. Broker/Dealer and Insurance Agency Compliance
1. Broker/Dealer is a Broker/Dealer registered with the SEC and a
member in good standing of the NASD and shall comply fully
with the rules of conduct of the NASD and all other applicable
laws, rules and regulation, including insurance laws,
applicable to the transactions hereunder.
2. Insurance Agency is properly registered and licensed in all
jurisdictions in which the Contracts will be sold and shall
comply fully with all laws, rules and regulations applicable
to the transactions hereunder.
<PAGE>
3. Broker/Dealer and/or Insurance Agency shall establish forms,
procedures, supervisory and inspection techniques necessary to
supervise the activities of their Registered Representatives.
Upon request by Distributor or Insurer, Broker/Dealer and/or
Insurance Agency shall furnish appropriate records as are
necessary to establish diligent supervision.
4. In the event that Broker/Dealer uses an affiliated entity to
satisfy the Broker/Dealer requirements pursuant to permission
granted by a no-action letter issued by the SEC, such
affiliated Broker/Dealer shall countersign this Agreement and
shall be bound hereby and a copy of such no action letter
shall be attached to this Agreement as an Exhibit.
E. Recordkeeping
1. Broker/Dealer is responsible for preparation and maintenance
of full and accurate records of the business transacted by its
Registered Representatives under this Agreement. Insurer and
Distributor shall have the right to examine Broker/Dealer's
records at reasonable times.
F. Commissions
1. Insurer shall pay commissions to Distributor for the sales of
the Contracts as defined therein. Distributor will pay a
commission to Broker/Dealer for those sales of the Contract
procured by Broker/Dealer as described in Exhibit A.
2. Broker/Dealer shall not be entitled to an agrees to return to
Distributor any commissions paid in connection with the
Contracts if a Contract owner elects to terminate the Contract
in accordance with any Free-Look Provision, if any or under
any other applicable state or federal law or regulation or
NASD rule or policy.
G. Indemnification
1. Broker/Dealer agrees to hold harmless and indemnify
Distributor and Insurer and their respective officers,
directors, agents and affiliates from any and all claims,
direct or indirect liabilities, losses and expenses which any
such party may incur (including attorney's fees) resulting
from:
(a) requests, directions, actions or initiations of
Broker/Dealer and/or its officers, employees, or
Registered Representatives, or
<PAGE>
(b) Any alleged true or untrue statement made by
Broker/Dealer, its officers, employees, or Registered
Representatives, unless such statement is contained
in the offering or sales materials provided by
Distributor or Issuer for the Contract, or
(c) The failure of Broker/Dealer, its officers,
employees, or Registered Representatives to comply
with any provision of this Agreement, or
(d) Any negligent, intentional or fraudulent act,
omission or error of Broker/Dealer, its officers,
employees or Registered Representatives relating to
the solicitation, sale or servicing of the Contract,
or
(e) Any violation of any federal or state law,
regulation, or ruling, or of any violation of any
other applicable rules or regulation arising from an
act or error of Broker/Dealer, its officers,
employees or Registered Representatives.
2. Insurer and Distributor agree to hold harmless and indemnify
Broker/Dealer and its Registered Representatives from any and
all claims, direct or indirect liabilities, losses and
expenses which any such party may incur (including attorney's
fees) resulting from:
(a) Any negligent, intentional or fraudulent act,
omission, or error of Insurer or Distributor, their
officers, employees or affiliates in the solicitation
or servicing of the Contract, or
(b) Any act or error of Insurer or Distributor, their
officers, employees or affiliates which is in
violation of any federal or state law, regulation, or
ruling or of any violation of any other applicable
rules or regulation.
(c) Any false or materially misleading statement or
omission in any Contract prospectus or registration
statement, if Broker/Dealer relied upon such
statement or omission and such statement or omission
is the basis of the Broker/Dealer's liability.
<PAGE>
H. Fidelity Bond
1. Broker/Dealer represents that all its directors, officers,
employees and Registered Representatives who are licensed or
appointed pursuant to this Agreement are and will continue to
be covered by a blanket fidelity bond including coverage for
larceny, embezzlement and other defalcations, issued by a
reputable bonding company. This bond shall be maintained at
Broker/Dealer's expense. Such bond shall be at least
equivalent to the minimum coverage required under the NASD
Rules, and will be endorsed, as necessary, to extend coverage
to variable contract transactions. Broker/Dealer acknowledges
that, from time to time, Insurer may require evidence that
such coverage is in force and Broker/Dealer shall promptly
give notice to Insurer of any notice of cancellation or change
of coverage.
2. Broker/Dealer assigns any proceeds received from the fidelity
bond company to Insurer or Distributor, as applicable, to the
extent of Insurer's or Distributor's loss caused by activities
covered by the bond. If there is any deficiency, Broker/Dealer
shall pay Insurer or Distributor, as applicable, that amount
promptly on demand and Broker/Dealer indemnifies and holds
harmless Insurer and/or Distributor from any deficiency and
from the costs of collection.
I. Limitation of Authority
1. The Contract forms are the sole property of Insurer. No person
other than Insurer has the authority to make, alter or
discharge any policy, contract, certificate, supplemental
contract or form issued by Insurer. Insurer may make such
changes as it deems advisable in the conduct of its business
or discontinue at any time issuing any of its forms or
contracts and no liability to the Broker/Dealer will attach to
Insurer or Distributor by reason of Insurer so doing.
2. No person other than Insurer has the right to waive any
provision with respect to the Contract.
3. No person other than Insurer or Distributor, as applicable,
has the authority to enter any proceeding in a court of law or
before a regulatory agency in the name of or on behalf of
Insurer or Distributor.
<PAGE>
J. Cooperation
1. Broker/Dealer agrees to notify Insurer and Distributor
promptly of any change of address or of any written complaint
by any Contract owner, state insurance department, or other
regulatory or oversight agency, litigation or other legal
proceeding, whether criminal or civil, with respect to the
Contract(s), brought against it, its officers, employees or
Registered Representatives, by any person, including
regulatory agencies of any state or the federal government.
2. Insurer and Distributor will notify Broker/Dealer promptly of
any written complaint by any Contract owner, state insurance
department, or other regulatory or oversight agency,
litigation or other legal proceeding, whether criminal or
civil, with respect to the Contract(s), brought against them,
their officers, employees or affiliates, by any person,
including regulatory agencies of any state or the federal
government.
3. Broker/Dealer, its directors, officers, employees and
Registered Representatives shall cooperate with Insurer and
Distributor in the investigation and settlement of any or all
claims against Broker/Dealer, its officers, directors,
employees and Registered Representatives relating to the
solicitation or sale of Contracts under this Agreement.
Broker/Dealer shall promptly forward to Insurer and
Distributor any notice or other relevant information which may
come into Broker/Dealer's possession.
K. General Provisions
1. Failure of any of the parties to insist upon strict compliance
with any of the obligations of another party under this
Agreement shall not be deemed to constitute a waiver of the
right to enforce strict compliance.
2. Broker/Dealer and its Registered Representatives are
independent contractors and not employees of or subsidiaries
of or affiliated with Distributor or Insurer.
3. No assignment of this Agreement or of any commissions or any
other payments under this Agreement shall be valid without the
prior written consent of Insurer and/or Distributor.
4. Any notice pursuant to this Agreement shall be mailed, postage
paid, to the address listed on the last page of this Agreement
unless changed in writing by the applicable party.
<PAGE>
5. To the extent this Agreement may be in conflict with any
applicable law or regulation, this Agreement shall be
construed in a manner not inconsistent with such law or
regulation. The invalidity or illegality of any provision of
this Agreement shall not be deemed to affect the validity or
legality of any other provision of this Agreement.
6. This agreement may be amended in writing signed by all parties
to this Agreement, except that this Agreement may be amended
by notification from Insurer or Distributor and applications
submitted by Broker/Dealer or its Registered Representatives
following such notification shall be deemed to be an
acceptance of such amendments.
7. This Agreement may be terminated immediately by any party upon
written notice.
8. This Agreement shall be construed in accordance with the laws
of the State of Colorado.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date set forth above.
BROKER/DEALER
- ----------------------------- --------------------------------
Address: Address:
- ----------------------------- --------------------------------
- ----------------------------- --------------------------------
By: _________________________ By: ____________________________
Name: _______________________ Name: __________________________
Title: ______________________ Title: _________________________
Date: _______________________ Date: __________________________
<PAGE>
Great-West Life & Annuity BenefitsCorp Equities, Inc.
Insurance Company 8515 E. Orchard Road
8515 E. Orchard Road Englewood, CO 80111
Englewood, CO 80111
By: __________________________ By: __________________________
Name: ________________________ Name: ________________________
Title: _______________________ Title: _______________________
Date: ________________________ Date: ________________________
<PAGE>
Exhibit 1.(3)(c)
<PAGE>
Exhibit 1.(3)(c)
Schedule of Sales Commissions
I. Introduction
This Schedule of Sales Commission relates to Flexible Premium Variable Universal
Life Insurance Policies issued by Great-West Life & Annuity Insurance Company on
Form J355 (and any variation of that form as may be required by insurance
regulatory authorities) through its separate account, COLI VUL-2 Series Account.
Capitalized terms used herein have the meaning given to them in the Prospectus.
II. Commissions as a Percentage of Premium
The first year commissions on a 7-pay premium are equal to 15% of the premium.
The target premium is equal to .10/.35 of the 7-pay premium. The targets will
change if there is an increase or decrease in the Total Face Amount.
Commissions will be calculated as a percentage of premium and will be paid based
on the following schedule:
1. Policy Year 1: 40% of the amount of the target premium plus 5%
of the amount of premium paid in excess of the
target premium.
2. Policy Years 2-4: 25% of the amount of the target premium plus 5%
of the amount of premium paid in excess of the
target premium.
3. Policy Years 5-10: 2.5% of the amount of the target premium plus
2.5% of the amount of premium paid in excess
of the target premium.
III. Asset-Based Compensation
Asset-based compensation will be calculated as a percentage of Account Value,
less the value of the Loan Account, and will be paid based on the following
schedule:
1. Policy Years 1-4: None
2. Policy Years 5-15: 0.20% of Account Value less the value of the
Loan Account.
3. Policy Years 16+: 0.10% of Account Value less the value of the
Loan Account.
IV. Chargebacks
If a Policy is surrendered at any time before the end of the second
Policy Year, there shall be a chargeback of 100% of commissions paid.
Thereafter, there shall be no chargebacks.
Exhibit 1.(5)(a)
<PAGE>
Great-West Life & Annuity Insurance Company
A Stock Company
8515 East Orchard Road Englewood, CO 80111
Insured: John Doe
Policy Number: 1234567
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE
Great-West Life & Annuity Insurance Company, herein referred to as the Company,
will pay the Death Benefit Proceeds to the Beneficiary subject to the policy
provisions, when the Company receives due proof of the Insured's death. (Payment
of such proceeds will completely discharge the Company's liability with respect
to the amount payable.)
The Owner and Beneficiary are as shown in the application unless changed as
provided for in this policy.
The provisions on the following pages are a part of this policy.
Signed for the Company on the Issue Date.
/s/D.C. Lennox /s/W.T. McCullum
- ------------------------- -------------------------
D.C. Lennox, W.T. McCallum,
Secretary President and Chief
Executive Officer
This policy is a legal contract between the Owner and the Company. PLEASE READ
THIS POLICY CAREFULLY.
FREE LOOK PERIOD
10 DAY RIGHT TO EXAMINE POLICY: IF NOT SATISFIED WITH THE POLICY, RETURN IT TO
THE COMPANY OR AN AUTHORIZED REPRESENTATIVE WITHIN 10 DAYS OF RECEIVING IT. THE
POLICY WILL THEN BE DEEMED VOID FROM THE START, AND THE COMPANY WILL REFUND THE
GREATER OF: 1) PREMIUMS RECEIVED LESS SURRENDERS AND/OR WITHDRAWALS; OR 2) THE
POLICY VALUE ACCOUNT LESS SURRENDERS. DURING THE 10 DAY RIGHT TO EXAMINE PERIOD,
THE CASH VALUE WILL BE ALLOCATED TO THE MONEY MARKET INVESTMENT DIVISION. AT THE
END OF THE 10 DAY PERIOD, THE CASH VALUE WILL BE ALLOCATED IN THE INVESTMENT
DIVISIONS AS SPECIFIED IN THE APPLICATION.
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE
ADJUSTABLE DEATH BENEFIT. Proceeds payable at death are subject to policy
provisions. See Death Benefit Provisions. Flexible Premiums payable while the
Insured is alive. If no Premiums are paid after the first Premium, or if
subsequent Premiums prove to be too low, this coverage may cease prior to age
100. ALL PAYMENTS AND VALUES BASED ON THE INVESTMENT EXPERIENCE OF THE
INVESTMENT DIVISIONS ARE VARIABLE, MAY INCREASE OR DECREASE ACCORDINGLY, AND ARE
NOT GUARANTEED AS TO AMOUNT. Non-Participating.
J355 (98)
<PAGE>
POLICY SPECIFICATIONS
This Policy Specifications Page, together with the Premium
Allocation Information, reflects the information with
which your policy has been established as of the
Policy Date.
- --------------------------------------------------------------------------------
OWNER/POLICY INFORMATION
- --------------------------------------------------------------------------------
Owner: XYZ Corporation
Insured: JOHN DOE
Policy Number: 1234567
Policy Date: January 1, 1998
Total Face Amount: $250,000
Issue Date: January 1, 1998
Issue Age/Sex: 35/ Male
Plan: Individual Flexible Premium Variable
Universal Life Insurance:
Non-Participating
Employer Number: 54321
- --------------------------------------------------------------------------------
PREMIUM AND EXPENSE INFORMATION
- --------------------------------------------------------------------------------
Premium Class: Standard
Initial Periodic Premium Amount: $1,593.36 Per Year
If no Premiums are paid after the first Premium or if subsequent Premiums
prove to be too low, this coverage may cease prior to age 100. The Owner
may have to pay more than the Premiums shown above to keep this policy and
coverage in force.
Summary of Charges:
Service Charge: $15.00 per month maximum
Expense Charge: 10.00% of premium maximum
Mortality & Expense Charge: .90% maximum
Risk Charges: Shown on Page 1a
- --------------------------------------------------------------------------------
SCHEDULE OF BENEFITS AND PREMIUMS
- --------------------------------------------------------------------------------
BENEFITS FACE AMOUNT MONTHLY COSTS PREMIUM PERIOD
Total Face To Insured's Age 100
Amount $250,000 See Page 1a
Base Face $200,000 See Page 1a
Rider Face Amount $50,000 See Page 1a
The Owner has elected Death Benefit Option 1, Level Death: the Total Face
Amount, less any partial withdrawals, less any outstanding loans, and loan
interest accrued, will be payable upon the insured's death. Each partial
withdrawal will cause a decrease in the death benefit. In some cases, growth
of the Policy Value Account may require the Company to adjust the Death
Benefit in order to comply with Internal Revenue Code Regulations. The Owner
has elected Cash Value Accumulation Test, for this calculation. The Table is
shown on Policy Page 1b.
J355LD Page 1
<PAGE>
Table A
FACTORS
ATTAINED ATTAINED
AGE MALE FEMALE AGE MALE FEMALE
20 6.52076 7.78152 60 1.91115 2.20053
21 6.33350 7.53356 61 1.86315 2.13871
22 6.14981 7.29258 62 1.81717 2.07893
23 5.96381 7.05840 63 1.77320 2.02134
24 5.79038 6.83085 64 1.73126 1.96617
25 5.61443 6.61014 65 1.69130 1.91343
26 5.44092 6.39568 66 1.65326 1.86300
27 5.27031 6.18766 67 1.61699 1.81470
28 5.10316 5.98586 68 1.58236 1.76827
29 4.93975 5.79038 69 1.54923 1.72343
30 4.78046 5.60097 70 1.51753 1.68009
31 4.62543 5.41767 71 1.48726 1.63827
32 4.47504 5.24022 72 1.45844 1.59809
33 4.32914 5.06840 73 1.43116 1.55974
34 4.18798 4.90198 74 1.40548 1.52338
35 4.05148 4.74131 75 1.38142 1.48910
36 3.91965 4.58592 76 1.35889 1.45684
37 3.79247 4.43621 77 1.33775 1.42648
38 3.66997 4.29213 78 1.31783 1.39782
39 3.55206 4.15360 79 1.29892 1.37069
40 3.43868 4.02063 80 1.28090 1.34496
41 3.32968 3.89305 81 1.26375 1.32058
42 3.22506 3.77070 82 1.24746 1.29761
43 3.12447 3.65328 83 1.23212 1.27608
44 3.02787 3.54035 84 1.21783 1.25607
45 2.93502 3.43166 85 1.20460 1.23755
46 2.84584 3.32701 86 1.19234 1.22040
47 2.76008 3.22611 87 1.18093 1.20448
48 2.67761 3.12877 88 1.17021 1.18963
49 2.59824 3.03494 89 1.16000 1.17566
50 2.52192 2.94449 90 1.15008 1.16236
51 2.44849 2.85732 91 1.14024 1.14954
52 2.37800 2.77329 92 1.13021 1.13694
53 2.31039 2.69235 93 1.11971 1.12430
54 2.24563 2.61451 94 1.10841 1.11132
55 2.18370 2.53953 95 1.09607 1.10301
56 2.12443 2.46726 96 1.08265 1.08350
57 2.06772 2.39746 97 1.06839 1.06873
58 2.01335 2.32987 98 1.05387 1.05396
59 1.96120 2.26425 99 1.04000 1.04000
J355LD Page 1b
<PAGE>
GUARANTEED MAXIMUM MONTHLY RISK CHARGES FOR POLICY 1234567
(Based on the Attained Age of the Insured)
Monthly Monthly
Policy Risk Rate Policy Risk Rate
Age Year Per $1,000 Age Year Per $1,000
35 1 0.17 70 36 3.29
36 2 0.18 71 37 3.60
37 3 0.20 72 38 3.97
38 4 0.21 73 39 4.38
39 5 0.23 74 40 4.84
40 6 0.25 75 41 5.34
41 7 0.27 76 42 5.87
42 8 0.29 77 43 6.42
43 9 0.32 78 44 6.99
44 10 0.34 79 45 7.58
45 11 0.37 80 46 8.23
46 12 0.41 81 47 8.95
47 13 0.44 82 48 9.77
48 14 0.47 83 49 10.68
49 15 0.51 84 50 11.68
50 16 0.55 85 51 12.74
51 17 0.60 86 52 13.84
52 18 0.66 87 53 14.96
53 19 0.72 88 54 16.10
54 20 0.79 89 55 17.27
55 21 0.87 90 56 18.48
56 22 0.95 91 57 19.74
57 23 1.04 92 58 21.12
58 24 1.13 93 59 22.67
59 25 1.23 94 60 24.65
60 26 1.34 95 61 27.49
61 27 1.46 96 62 32.04
62 28 1.59 97 63 40.01
63 29 1.75 98 64 54.83
64 30 1.92 99 65 83.33
65 31 2.11
66 32 2.32
67 33 2.53
68 34 2.76
69 35 3.01
Guaranteed net single premium at Attained Age 100: $1,000 per $1,000
J355 Page 2
<PAGE>
Table of Contents
DEFINITIONS....................................................................5
Definitions continued..........................................................6
OWNERSHIP PROVISIONS
Rights of Owner............................................................6
Assignments/Transfers......................................................6
Beneficiary................................................................7
Ownership of Series Account................................................7
GENERAL PROVISIONS
Entire Contract............................................................7
Policy Modification........................................................7
Incontestability Provision.................................................7
Suicide Exclusion..........................................................8
Voting Rights..............................................................8
Currency...................................................................8
Non-Participating..........................................................8
Misstatement of Age and/or Sex.............................................8
Policy Years and Anniversaries.............................................8
Payment of Premiums........................................................8
Allocation of Premiums.....................................................8
Grace Period Provision.....................................................9
Periodic Premium Amount....................................................9
Additional Premium Payments Provision......................................9
Reinstatement..............................................................9
Annual Statement...........................................................9
Illustration of Benefits and Values.......................................10
Exchange of Policy........................................................10
Change of Total Face Amount...............................................10
DEATH BENEFIT PROVISIONS
Death Benefit Provision...................................................10
Change of Death Benefit Option............................................11
Death Benefit Payment.....................................................11
POLICY VALUES, LOAN AND NONFORFEITURE PROVISIONS
Cost of Insurance.........................................................11
Risk Rate.................................................................12
Expense Charge............................................................12
Service Charge............................................................12
Policy Value Account......................................................12
Sub-Account Value.........................................................12
Net Investment Factor.....................................................12
Continuation of Insurance.................................................13
Policy Loan...............................................................13
Effect of a Loan..........................................................13
J355 Page 3
<PAGE>
Table of Contents (continued)
POLICY VALUES, LOAN AND NONFORFEITURE PROVISIONS (continued)
Loan Interest.............................................................13
Loan Value................................................................13
Loan Interest Rate........................................................14
Surrender Benefit.........................................................14
Paid-Up Life Insurance Provision..........................................14
Tax Considerations........................................................14
Partial Withdrawal Provision..............................................15
Postponement..............................................................15
Emergency Procedure.......................................................15
How Values Are Computed...................................................15
TRANSFER PROVISIONS
Transfers.................................................................15
Dollar Cost Averaging.....................................................16
The Rebalancer Option.....................................................16
J355 Page 4
<PAGE>
Definitions
Attained Age - the age of the Insured, nearest birthday, as of the Policy Date
and each policy anniversary thereafter.
Beneficiary - the person(s) named by the Owner to receive the Death Benefit
Proceeds upon the death of the Insured.
Cash Surrender Value - is equal to:
(a) Policy Value Account on the effective date of the surrender; less
(b) outstanding policy loans and accrued loan interest, if any; less
(c) any monthly cost of insurance charges.
Corporate Headquarters - Great-West Life & Annuity Insurance Company ("the
Company"), 8515 East Orchard Road, Englewood, Colorado 80111.
Death Benefit Proceeds - the amount payable upon the Insured's death. A full
description of the Death Benefit is described in the Death Benefit Provision.
Effective Date - the date on which the first Premium payment is credited to the
policy.
Evidence of Insurability - information about an Insured which is used to approve
or reinstate this policy or any additional benefit.
Insured - the person named on Page 1 as the Insured.
Investment Divisions - the divisions of the Series Account that purchase shares
in specific securities. The Company may, at times: o make additional Series
Accounts or additional Series Account Investment Divisions available; o
eliminate Investment Divisions; o combine two or more Investment Divisions; or o
substitute a new portfolio for the portfolio in which an Investment Division
invests.
Subject to any required regulatory approvals, the Company has the right to
transfer assets of a Series Account or of an Investment Division to another
Series Account or Investment Division. When permitted by law, the Company may
modify the policy to comply with applicable federal and state laws and combine
the Series Account with other Series Accounts.
Issue Date - the date from which the incontestability and suicide exclusions are
measured and is shown on Page 1.
Loan Account - all outstanding loans plus credited loan interest held in the
general account of the Company. The Loan Account is not part of the Series
Account.
J355 Page 5
<PAGE>
Definitions (continued)
Loan Account Value - the sum of all outstanding loans plus credited loan
interest for this policy.
Policy Date - the effective date of coverage under this policy. The Policy
Months, policy years and anniversaries are measured from the Policy Date shown
on Page 1.
Policy Value Account - the Sub-Account Value plus the Loan Account Value.
Premiums - amounts received and allocated to the Sub-Account(s) prior to any
deductions.
Request - any instruction in a form, written, telephoned or computerized,
satisfactory to the Company and received at the Corporate Headquarters from the
Owner or the Owner's assignee (as specified in a form acceptable to the Company)
or the Beneficiary, (as applicable) as required by any provision of this policy
or as required by the Company. The Request is subject to any action taken or
payment made by the Company before it was processed.
Series Account - the segregated investment account established by the Company as
a separate account under Colorado law named the COLI VUL-2 Series Account. It is
registered as a unit investment trust under the Investment Company Act of 1940,
as amended.
The Company owns the assets in the Series Account. The investments held in the
Series Account provide variable life insurance benefits under this policy and
the Series Account is used for other purposes permitted by applicable laws and
regulations. This account is kept separate from the general account and other
series accounts the Company may have.
Sub-Account - sub-division(s) of the Owner's Policy Value Account containing the
value credited to the Owner from the Series Account.
Sub-Account Value - the sum of the values of the Sub-Accounts credited to the
Owner under the Policy Value Account. The Sub-Account Value is credited with a
return based upon the investment experience of the Investment Division(s)
selected by the Owner and will increase or decrease accordingly.
Transaction Date - the date on which any Premium payment or Request from the
Owner will be processed by the Company. Premium payments and Requests received
after 4:00 p.m. EST/EDT will be deemed to have been received on the next
business day. Requests will be processed and the Sub-Account Value will be
valued on each date that the New York Stock Exchange ("NYSE") is open for
trading.
Transfer - the moving of money from one Sub-Account to one or more
Sub-Account(s).
J355 Page 6
<PAGE>
Definitions (continued)
Underlying Fund - a portfolio of securities managed in accordance with a
specified investment objective, or a registered management investment company in
which the assets of the Series Account may be invested.
Valuation Date - the date on which the net asset value of each Underlying Fund
is determined. A Valuation Date is each day that the New York Stock Exchange is
open for regular business. The value of an Investment Division's assets is
determined at the end of each Valuation Date. To determine the value of an asset
on a day that is not a Valuation Date, the value of that asset as of the end of
the previous Valuation Date will be used.
Valuation Period - the period between two successive Valuation Dates, starting
at the close of the NYSE on one Valuation Date and ending at the close of the
NYSE on the next succeeding Valuation Date.
Ownership Provisions
RIGHTS OF OWNER
While the Insured is living, all benefits and rights under this policy belong to
the Owner. However, the Owner's rights are subject to the rights of any assignee
or irrevocably named Beneficiary.
ASSIGNMENTS/TRANSFERS
The Owner may assign this policy while the Insured is living. The Company will
not recognize an assignment until the original or a certified copy is recorded
at the Corporate Headquarters. When filed, the Owner's rights and those of the
Beneficiary are subject to the assignment. The Company is not responsible for
the validity of any assignment.
When recorded by the Company, a transfer of ownership will revoke any
designation of a Secondary Owner. It will not change a Beneficiary. All benefits
and rights under this policy will belong to the new Owner, subject to the terms
and conditions of the policy and the interest of any recorded assignee.
BENEFICIARY
While the Insured is living, the Owner may change the Beneficiary by Request
unless a previous designation was made irrevocable. Any change is subject to any
existing assignment of this policy. A recorded change of Beneficiary will take
effect as of the date the notice was signed. However, the change will not affect
any payment made by the Company before it received a Request for a change of
Beneficiary.
J355 Page 7
<PAGE>
Ownership Provisions (continued)
The Company may rely on an affidavit by any responsible person to identify a
Beneficiary or verify the non-existence of a Beneficiary not identified by name.
OWNERSHIP OF SERIES ACCOUNT
The Company has absolute ownership of the assets of the Series Account. The
portion of the assets of the Series Account equal to the reserves and other
Contract liabilities with respect to the Series Account are not chargeable with
liabilities arising out of any other business the Company may conduct.
Income and realized and unrealized gains or losses from the assets in the Series
Account are credited to or charged against the account without regard to other
income, gains or losses arising out of any other business the Company may
conduct.
Assets of the Series Account held in or represented by any other separate
account of the Company used in connection with this policy, in an amount equal
to such other account's reserves and other contract liabilities shall not be
chargeable with the liabilities arising out of any other business the Company
may conduct.
General Provisions
ENTIRE CONTRACT
This policy, any endorsements, any riders, and the application form the entire
contract. A copy of the application is attached. After issue, amendments or
changes in writing and agreed to by the Company are part of the contract.
All statements in the application, in the absence of fraud, are considered
representations and not warranties. Only statements in the application will be
used to defend a claim or to cancel the policy for misrepresentation.
Only the President, a Vice-President, or the Secretary of the Company have the
authority to change or waive any provisions of the policy. No agent or broker
has the authority to change any term of this policy or to make any agreements
binding to the Company.
J355 Page 8
<PAGE>
General Provisions (continued)
POLICY MODIFICATION
The Company may terminate an Investment Division or Underlying Fund. In that
event, the Owner, by Request, may change the allocation of the Premium. If no
Request is made by the date of termination, future Premium allocations to the
terminated Investment Division or Underlying Fund will be allocated to the Money
Market Investment Division. Any modification will not affect the terms,
provisions or conditions which are, or may be, applicable to Premium payments
previously made to any such Investment Division.
incontestability provision
This policy will not be contested on the basis of misrepresentation after it has
been in force during the Insured's lifetime for 2 years from the Issue Date.
However, this 2 year limit does not apply to any rider attached to this policy
which provides:
(a) benefits in the event of disability; or
(b) additional insurance in the event of accidental death.
If the Total Face Amount is increased, the amount of the increase will in like
manner be incontestable after it has been in force during the Insured's lifetime
for 2 years from the effective date of the increase.
SUICIDE EXCLUSION
If the Insured commits suicide, while sane or insane, within 2 years from the
Issue Date (1 year if issued in Colorado or North Dakota), the proceeds payable
under this policy will be limited to an amount equal to all Premiums paid on
this policy less outstanding policy loans, accrued loan interest, partial
withdrawals and the cost for riders. Payment will be made to the Beneficiary.
If the face amount is increased, and if the Insured commits suicide, while sane
or insane, within 2 years from the effective date of any increase (1 year if
issued in Colorado or North Dakota), the Company will pay only that portion of
the Policy Value Account and the cost of insurance paid for the amount of
increase. The face amount of the policy will be reduced to the face amount that
was in effect prior to the increase.
VOTING RIGHTS
The Company will exercise any voting rights associated with the Series Account
investments in its sole discretion in accordance with applicable law.
J355 Page 9
<PAGE>
General Provisions (continued)
CURRENCY
All amounts to be paid to or by the Company will be in the currency of the
United States of America.
NON-PARTICIPATING
This policy is non-participating. It is not eligible to share in the Company's
divisible surplus.
MISSTATEMENT OF AGE AND/OR SEX
If the Insured's age and/or sex on the Policy Date has been misstated, the
benefits payable under this policy will be the amount of insurance that the cost
of insurance (deducted from the Policy Value Account at the beginning of the
month in which death occurred) would have purchased for the correct age and/or
sex on the Policy Date.
If the age and/or sex of the Insured or any other person covered under a rider
has been misstated on the Policy Date, the benefits payable under the rider will
be the benefit that the amount charged would have purchased for the correct age
and/or sex on the Policy Date.
If the age is misstated in such a way that the Insured was not eligible for
coverage under the policy, the Company's liability will be limited to a return
of the Premiums paid, less any partial withdrawals and outstanding loans and
accrued loan interest and the cost for riders.
POLICY YEARS AND ANNIVERSARIES
Policy years and anniversaries will be measured from the Policy Date shown on
Page 1.
PAYMENT OF PREMIUMS
The first Premium is due on or before the Policy Date shown on Page 1. The
Company will mail the Owner a billing notice 30 days in advance of the Premium
due date.
All Premiums after the first are to be made payable to the Company at the
Corporate Headquarters and will be due on the first day of any Policy Month in
which the cost of insurance exceeds the Policy Value Account less any
outstanding loans and less any accrued loan interest. Subject to limitations as
provided in this policy, Premiums paid after the first may be paid in any amount
and at any time before the Paid-Up Life Insurance Provision goes into effect.
Receipts will be furnished upon Request.
ALLOCATION OF PREMIUMS
During the Free Look Period, amounts to be allocated to one or more of the
Investment Divisions will first be allocated to the Money Market Investment
Division and will remain there until the next Transaction Date following the end
of the Free Look Period plus 5 calendar days. On that date, the Sub-Account
Value held in the Money Market Investment Division will be allocated to the
Investment Division(s) selected by the Owner.
J355 Page 10
<PAGE>
General Provisions (continued)
If the policy is returned during the Free Look Period, it will be void from the
start, and the Company will refund the amount described on the front cover of
this policy.
After the Free Look Period, subsequent Premium payments will be allocated in the
Policy Value Account as Requested by the Owner. If there are no accompanying
instructions, then allocations will be made in accordance with standing
instructions. Allocations will be effective upon the Transaction Date.
GRACE PERIOD PROVISION
The first day of each Policy Month is the due date for any Premium required to
keep the policy in force for that month. Except for the first Premium, if the
amount in the Policy Value Account, less any outstanding policy loans and less
any accrued loan interest, on the last day of a Policy Month is not sufficient
to cover the monthly deduction for the cost of insurance for the next Policy
Month, a grace period of 61 days from the due date will be allowed for the
payment of an amount sufficient to cover the monthly cost of insurance for the
next 2 months.
Coverage will remain in force during the grace period. If the Premium due is not
paid within the grace period, all coverage under this policy will cease at the
end of the 61 day period.
Notice of such Premium due will be mailed to the last known address of the Owner
and any assignee of record at least 31 days prior to the date coverage will
cease.
If the Insured dies during the grace period, any cost of insurance charges due
and unpaid will be deducted from the Death Benefit Proceeds.
PERIODIC PREMIUM AMOUNT
The Company may suggest a periodic premium amount. The actual amount of Premiums
needed may change, depending on the number of Premium payments made, changes in
coverage, investment experience, monthly risk rate, and partial withdrawals
made.
ADDITIONAL PREMIUM PAYMENTS PROVISION
Besides the periodic premium amount, the Owner may make additional Premium
payments as described below prior to the date the Paid-Up Life Insurance
Provision goes into effect.
J355 Page 11
<PAGE>
General Provisions (continued)
Additional Premium payments may be limited to amounts that will not exceed tax
guidelines and jeopardize the tax status of the policy as life insurance. The
minimum additional Premium that will be accepted at one time is $100. The
Company reserves the right to restrict or refuse additional Premium payments
that exceed the Initial Periodic Premium Amount shown on Page 1.
REINSTATEMENT
This policy may be reinstated within 3 years after the coverage ceased, unless
it has been surrendered.
The Company must receive:
o A Request from the Owner.
o Evidence of Insurability for the Insured and any other person covered
by rider, at the Owner's expense.
o Payment of the cost of insurance for the grace period.
o Payment of an amount equal to 4 months' cost of insurance. Such payment
less the expense charges will be credited to the Policy Value Account
as of the date of reinstatement.
o Payment or reinstatement of any policy loan which was outstanding as of
the date the coverage ceased, including interest thereon. Interest will
be 6.00% per year. Interest will be compounded annually to the date of
the policy reinstatement.
Reinstatement will become effective on the date the application for
reinstatement is approved by the Company.
ANNUAL STATEMENT
Within 30 days after each policy anniversary, the Company will send the Owner a
statement showing:
o The Policy Value Account;
o The Death Benefit
o Premiums paid and investment experience since the last statement;
o Partial withdrawals and charges since the last statement;
o Outstanding policy loans and loan interest paid since the last
statement;
o The current allocation in each of the Investment Divisions; and
o Any further information required by the state in which the policy was
issued.
J355 Page 12
<PAGE>
General Provisions (continued)
ILLUSTRATION OF BENEFITS AND VALUES
The Owner may at any time Request from the Company an illustration of future
Death Benefits and Cash Surrender Values. The first illustration provided during
a policy year will be at no charge. Each additional illustration during that
policy year will be subject to a maximum fee of $50. This illustration will be
based on: o The current Policy Value Account; o Assumed investment experience; o
Coverage amounts and the Death Benefit option elected; o Recommended periodic
premium amounts; and o Current monthly risk rates.
EXCHANGE OF POLICY
Subject to the Company's approval, the Owner may exchange this policy for a new
fixed policy with the Company. The new policy will have the same Policy Date,
Issue Age, and Insured as this policy on the date of exchange.
The Total Face Amount of the new policy may not exceed the Total Face Amount of
this policy on the date of exchange. The premium rate will be the rate used for
the new policy of insurance on the Policy Date for the mortality class in which
this policy has been placed. The Company will determine any other requirements
or costs. Any excess Cash Surrender Value will be payable to the Owner; this
distribution may be a taxable event to the Owner.
Although evidence of insurability will not be required, the following terms
apply:
o the exchange must be made within 24 months after the Issue Date of this
policy; and
o any Loan Account Value must be repaid.
CHANGE OF TOTAL FACE AMOUNT
By Request, the Owner may at any time increase or decrease the Total Face Amount
provided by this policy, subject to the Company's approval. Any change in Total
Face Amount may be limited to amounts that will not exceed tax guidelines and
jeopardize the tax status of the policy as life insurance.
For a decrease in Total Face Amount:
o The Company must receive a Request.
o The decrease will become effective on the first day of the Policy
Month following receipt of the Request.
o The decrease will apply first to the most recent increase or increases
in Total Face Amount for purposes of the Incontestability Provision.
The minimum decrease amount will be $25,000. The Total Face Amount may not be
decreased below $100,000 unless prior approval is obtained from the Company.
J355 Page 13
<PAGE>
General Provisions (continued)
For an increase in Total Face Amount:
o The Company must receive a Request.
o The increase will be subject to Evidence of Insurability satisfactory
to the Company.
o The increase will be effective on the policy anniversary following the
approval of the Request for the increase, subject to the deduction of
the first month's cost of insurance from the Policy Value Account.
The minimum increase amount will be $25,000.
Death Benefit Provisions
DEATH BENEFIT PROVISION
The Death Benefit option for this policy as of the Issue Date is shown on Page
1. The Death Benefit is determined by the option in effect at the Insured's date
of death.
Option 1: Level Death
The Death Benefit will be the greater of:
a) the Total Face Amount shown on Page 1, less any partial withdrawals;
and
b) the Policy Value Account on the Insured's date of death times the
applicable Factor shown in the Table on Page 1b.
The Death Benefit will be reduced by the amount of any outstanding loans and
loan interest accrued.
Option 2: Coverage Plus
The Death Benefit will be the greater of:
a) the Total Face Amount shown on Page 1, plus the Policy Value Account on
the Insured's date of death; and
b) the Policy Value Account on the Insured's date of death times the
applicable Factor shown in the Table on Page 1b.
The Death Benefit will be reduced by the amount of any outstanding loans and
loan interest accrued.
Option 3: Premium Accumulation
The Death Benefit will be the greater of:
a) the Total Face Amount shown on Page 1, plus the accumulated value of
all Premiums paid at interest shown on Page 1, less any partial
withdrawals; and
b) the Policy Value Account on the Insured's date of death times the
applicable Factor shown in the Table on Page 1b.
J355 Page 14
<PAGE>
Death Benefit Provisions (continued)
The Death Benefit will be reduced by the amount of any outstanding loans and
loan interest accrued.
CHANGE OF DEATH BENEFIT OPTION
After the first policy year, but not more than once each policy year, the Owner
may change the Death Benefit option by Request. Any change will be effective on
the first day of the Policy Month following the date the Company approves the
Request. A maximum fee of $100 will be deducted from the Policy Value Account
for each change.
A change in the Death Benefit option is subject to the following conditions:
o If the change is from Option 1 to Option 2, the amount payable upon the
death of the Insured will remain the same and the new Total Face Amount, at
the time of the change, will equal the prior Total Face Amount less the
Policy Value Account. Evidence of Insurability may be required.
o If the change is from Option 1 to Option 3, the amount payable upon the
death of the Insured will remain the same and the new Total Face Amount, at
the time of the change, will equal the prior Total Face Amount less the
accumulated value of all Premiums at the interest rate shown on Page 1.
Evidence of insurability may be required.
o If the change is from Option 2 to Option 1, the amount payable upon the
death of the Insured will remain the same and the new Total Face Amount, at
the time of the change, will equal the prior Total Face Amount plus the
Policy Value Account.
o If the change is from Option 2 to Option 3, the amount payable upon the
death of the Insured will remain the same and the new Total Face Amount, at
the time of the change, will equal the prior Total Face Amount plus the
policy value account less the accumulated value of all Premiums at the
interest rate shown on Page 1.
o If the change is from Option 3 to Option 1, the amount payable upon the
death of the Insured will remain the same and the new Total Face Amount, at
the time of the change, will equal the prior Total Face Amount plus the
accumulated value of all Premiums at the interest rate shown on Page 1.
o If the change is from Option 3 to Option 2, the amount payable upon the
death of the Insured will remain the same and the new Total Face Amount, at
the time of the change, will equal the prior Total Face Amount less the
policy value account plus the accumulated value of all Premiums at the
interest rate shown on Page 1.
J355 Page 15
<PAGE>
Death Benefit Provisions (continued)
DEATH BENEFIT PAYMENT
The Death Benefit payable on the Insured's death will be paid in a lump sum
unless the Owner elects to receive all or a portion of the Death Benefit
Proceeds under a settlement option that the Company is then offering.
The Company will pay interest on the Death Benefit Proceeds from the date of
death to the date of settlement at a rate not less than that required by law.
Policy Values, Loan and Nonforfeiture Provisions
COST OF INSURANCE
An amount will be deducted on the first day of each Policy Month from the Policy
Value Account to pay the cost of insurance for that Policy Month. The cost of
insurance is calculated on the first day of each Policy Month and is equal to:
the Death Benefit divided by 1.00327374 less the Policy Value Account
on the first day of each Policy Month, multiplied by the current
monthly risk rate for the Insured's Attained Age
plus
the extra charge for any rated class
plus
the monthly Service Charge
plus
the cost of any riders.
If there has been an increase or decrease in Death Benefit during the policy
year, the cost of insurance calculation will be adjusted accordingly to reflect
the change.
RISK RATE
The maximum monthly risk rate is shown on Page 1a. The Company may charge a
lower monthly risk rate. The maximum risk rates shown on Page 1a are based on
the Sex-Distinct Commissioners 1980 Standard Ordinary Mortality Table, age
nearest birthday.
Any change in the monthly risk rate will be made uniformly by class.
EXPENSE CHARGE
The maximum expense charge for this policy is shown on Page 1. The charge is a
percentage of all Premiums paid. This charge is guaranteed and may not be
increased.
The expense charge will be deducted from each Premium paid. This would include
any Premium paid to reinstate the policy.
SERVICE CHARGE
The maximum service charge for this policy is shown on Page 1. This charge is
deducted from the Policy Value Account on the first day of each policy month.
This charge is guaranteed and may not be increased.
J355 Page 16
<PAGE>
Policy Values, Loan and Nonforfeiture Provisions (continued)
POLICY VALUE ACCOUNT
The Policy Value Account is equal to the Sub-Account Value plus the Loan Account
Value.
Each Premium less any expense charge will be credited to the Policy Value
Account on the date received at the Corporate Headquarters. On the first day of
each Policy Month a deduction will be made from this account for the cost of
insurance.
SUB-ACCOUNT VALUE
The Sub-Account Value is the total dollar amount of all accumulation units under
each of the Owner's Sub-Accounts. Initially, the value of each Accumulation Unit
was set at $10.00. Each Sub-Account's Value is equal to the sum of:
o the value of the Sub-Account at the last Valuation Date;
o any Premium, less Expense Charges deducted from Premiums received
during the current Valuation Period which is allocated to the
Sub-Account;
o any loan repayment amount;
o all values transferred to the Sub-Account; and
o any net investment return allocated to the Sub-Account.
MINUS the following:
o all values transferred to another Sub-Account and the Loan Account
Value taken from the Sub-Account during the current Valuation Period;
o all partial withdrawals from the Sub-Account during the current
Valuation Period.
In addition, whenever a Valuation Period includes the monthly anniversary day,
value of the Sub-Account at the end of such period is reduced by the portion of
the cost of insurance charges allocated to the Sub-Account and any other
investment charges specified on Page 1.
The Sub-Account Value is expected to change from Valuation Period to Valuation
Period, reflecting the investment experience of the selected Investment
Division(s) as well as the deductions for charges.
Premiums which the Owner allocates to an Investment Division are used to
purchase accumulation units in the Investment Division(s) the Owner selects. The
number of accumulation units to be credited will be determined by dividing the
portion of each Premium allocated to or amount transferred to the Investment
Division by the value of an Accumulation Unit determined at the end of the
Valuation Period during which the Premium was received or the amount was
transferred to the Investment Division. In the case of the initial Premium,
accumulation units for that payment will be credited to the Sub-Account Value
held in the Money Market Investment Division until the end of the Free Look
Period. In the case of any subsequent Premium, accumulation units for that
payment will be credited at the end of the Valuation Period during which we
receive the Premium. The value of an Accumulation Unit for each Investment
Division for a Valuation Period is established at the end of each Valuation
Period and is calculated by multiplying the value of that unit at the end of the
prior Valuation Period by the Investment Division's Net Investment Factor for
the Valuation Period.
J355 Page 17
<PAGE>
Policy Values, Loan and Nonforfeiture Provisions (continued)
NET INVESTMENT FACTOR
The net investment factor for any Investment Division for any Valuation Period
is determined by dividing (a) by (b), and subtracting (c) from the result where:
(a) is the net result of:
(i) the net asset value held in the Investment Division determined as
of the end of the current Valuation Period; plus
(ii) the amount of any dividend (or, if applicable, capital gain
distributions) on assets held in the Investment Division if the
"ex-dividend" date occurs during the current Valuation Period;
minus or plus
(iii) a charge or credit for any taxes incurred by or reserved for in the
Investment Division, which is determined by the Company to have
resulted from the investment operations of the Investment Division.
(b) is the net result of:
(i) the net asset value held in the Investment Division determined as
of the end of the immediately preceding Valuation Period; minus or
plus
(ii) the charge or credit for any taxes incurred by or reserved for in
the Investment Division for the immediately preceding Valuation
Period.
(c) is an amount representing the Mortality and Expense risk charge deducted
from each Investment Division on a daily basis, equal to an annual rate as
a percentage of the daily net asset value of each Investment Division. The
actual mortality and expense charge is determined by the company, but may
not exceed the annual guaranteed maximum Mortality and Expense charge of
.90%
The net investment factor may be greater than, less than, or equal to one.
Therefore, the accumulation unit value may increase, decrease or remain
unchanged.
The net asset value includes a deduction for an investment advisory fee. This
fee compensates the investment adviser for services provided to the Underlying
Fund. The fee may differ between Underlying Funds and may be renegotiated each
year.
CONTINUATION OF INSURANCE
If Premium payments cease, coverage under this policy or any attached riders
will continue until the Policy Value Account, less any outstanding loans, and
less loan interest accrued is insufficient to cover the monthly deduction for
the cost of insurance. When the amount is insufficient, the Grace Period
Provision will go into effect.
POLICY LOAN
While this policy is in force, the Owner, by Request, may obtain a loan from the
Company on the security of the policy. The minimum loan amount is $500. The
total amount of loans cannot be more than the maximum described in the Loan
Value Provision.
J355 Page 18
<PAGE>
Policy Values, Loan and Nonforfeiture Provisions (continued)
EFFECT OF A LOAN
When a policy loan is made, funds are transferred out of the Series Account and
into the Loan Account. When a policy loan is repaid, the amount of repayment is
added according to current allocations to the Series Account.
A loan, whether or not repaid, will have a permanent effect on the Cash
Surrender Value and on the Death Benefit, as described in this policy. If not
repaid, any indebtedness will reduce the amount of Death Benefit Proceeds and
the amount available upon surrender of this policy.
A policy loan will not be treated as a taxable distribution under Section 72
unless:
o this policy is surrendered or lapsed while there is an outstanding
loan; or
o this policy is a modified endowment contract.
If this policy is a modified endowment contract, a 10% penalty will apply to the
amount of the loan included as gross income unless the loan is made after the
date the Owner becomes 59[]or becomes disabled.
LOAN INTEREST
Interest credited on the Loan Account is the loan interest rate less a maximum
of .90%.
A policy loan will be a first lien on the policy in favor of the Company.
The Owner must Request if any part of a Premium is to be applied to repay a
policy loan. The expense charge will not apply to repayments of policy loans.
Loan amounts will be withdrawn from all the Sub-Accounts on a pro rata basis.
The Owner may designate Loan repayments will be added to all the Sub-Accounts on
a pro rata basis.
LOAN VALUE
The maximum loan value is equal to:
90% of the Policy Value Account at the time of the loan
less
the current monthly deductions remaining for the balance of the policy year
less
interest on the loan to the next policy anniversary date.
J355 Page 19
<PAGE>
Policy Values, Loan and Nonforfeiture Provisions (continued)
LOAN INTEREST RATE
The loan interest rate will be determined annually at the beginning of each
policy year. It is guaranteed for that policy year and applies to all loans
outstanding during that policy year. Interest is due and payable on each policy
anniversary. Interest not paid when due will be added to the loan and will bear
interest at the loan interest rate.
The maximum loan interest rate for policy loans is based on a Published Monthly
Average. That average is:
(a) The Moody's Corporate Bond Yield Average - Monthly Average Corporates
as published by Moody's Investors Service, Inc. or any successor
thereto; or
(b) In the event that the Moody's Corporate Bond Yield Average - Monthly
Average Corporates is no longer published, a substantially similar
average, established by regulation issued by the Commissioner.
The Company must reduce the loan interest rate if the maximum loan interest rate
is lower than the loan interest rate for the previous policy year by one-half of
one percent or more.
Any increase to the loan interest rate must be at least one-half of one percent.
No increase may be made if the loan interest rate would exceed the maximum loan
interest rate.
The Company will send to the Owner and any assignee of record with loans advance
notice of any increase in the rate.
SURRENDER BENEFIT
The Owner may surrender this policy for the Surrender Benefit. The Surrender
Benefit is the Policy Value Account less any outstanding policy loans and less
accrued loan interest on the date of surrender.
PAID-UP LIFE INSURANCE PROVISION
If the Insured is living and the policy is in force on the policy anniversary at
Attained Age 100, the entire Policy Value Account less any outstanding loans and
less loan interest accrued will be applied as a single Premium to purchase
paid-up insurance. This net single Premium will be based on the Sex-Distinct
Commissioners 1980 Standard Ordinary Smoker or Non-Smoker Mortality Table and 4%
interest.
J355 Page 20
<PAGE>
Policy Values, Loan and Nonforfeiture Provisions (continued)
The paid-up policy may be surrendered at any time. If it is surrendered within
30 days after a policy anniversary, the Cash Value will not be less than it
would have been on that policy anniversary.
TAX CONSIDERATIONS
This policy is intended to constitute life insurance for tax purposes and is
designed to meet the requirements of Internal Revenue Code (Code) Sections 101
and 7702, as they existed on the Issue Date. If, in the Company's sole
discretion, the Cash Value at any time reaches an amount which could jeopardize
this policy's treatment as life insurance for tax purposes, the Company reserves
the right to refund the portion of the Premium or Cash Value in excess of the
allowable limits.
This policy may be purchased as a modified endowment contract. Distributions
from modified endowment contracts are subject to different taxation rules than
distributions from a life insurance policy that is not a modified endowment
contract.
If the policy is not a modified endowment contract when issued, the payment of
excess Premium or a material change in the benefits or terms of the contract as
provided in Code Section 7702A will cause the policy to be treated as a new
contract and may cause the policy to become a modified endowment contract. It is
entirely the Owner's responsibility to monitor Premium payments and material
changes to ensure that the contract does not become a modified endowment
contract.
Nothing in this policy is to be construed as tax advice, and the Company
recommends that the Owner discuss the tax consequences under the policy with a
competent tax adviser.
PARTIAL WITHDRAWAL PROVISION
The Owner may make a partial withdrawal from the Policy Value Account at any
time while the policy is in force. The minimum amount per withdrawal is $500.
The maximum amount that may be withdrawn is 90% of the Policy Value Account less
the Loan Account Value.
There is no administrative fee charged for the first partial withdrawal in any
policy year. However, a maximum administrative fee of $25 will be deducted from
the Policy Value Account for each additional partial withdrawal made in the same
policy year.
J355 Page 21
<PAGE>
Policy Values, Loan and Nonforfeiture Provisions (continued)
The partial withdrawal will be effective on the Transaction Date. The Policy
Value Account will be reduced by the withdrawal amount, which will be taken from
all the Sub-Accounts on a pro-rata basis.
If the policy is in force under Option 1, Level Death Benefit, or Option 3,
Premium Accumulation, then the Death Benefit also will be reduced by the amount
of each withdrawal.
Withdrawals may not be repaid directly into the Policy Value Account. Any
payments received will be subject to the Additional Premium Payments Provision.
POSTPONEMENT
In accordance with state law, if the Company receives a Request for surrender,
partial withdrawal, or a loan, the Company may postpone any payment for up to 7
days. For Investment Divisions which are not valued on each business day, the
Company may defer until the next Valuation Date:
o determination and payment of any surrenders, partial withdrawals or
loans;
o determination and payment of any death proceeds in excess of the face
amount; and
reallocation of the Sub-Account value.
During the postponement period, the Sub-Account Value will continue to be
subject to the investment experience (gains or losses) of the Underlying Fund(s)
and all applicable charges.
EMERGENCY PROCEDURE
If the Company cannot value the Investment Divisions due to a national stock
exchange closure, with the exception of weekends or holidays, or if trading is
restricted due to an existing emergency as defined by the Securities and
Exchange Commission (SEC), or as otherwise ordered by the SEC, the Company may
postpone all procedures which require valuation of the Investment Divisions
until valuation is possible.
HOW VALUES ARE COMPUTED
All guaranteed calculations are based on the Sex-Distinct Commissioners 1980
Standard Ordinary Mortality Table, age nearest birthday, at an interest rate of
4% per year. These computations assume that Death Benefits are to be paid at the
end of the policy year in which death occurs. Any net single Premium will be
computed on the basis of the Insured's Attained Age and Premium class.
A detailed statement of the method of computing the values of this policy has
been filed with the Insurance Department of the state in which this policy is
delivered. All policy values equal or exceed those required by the law of that
state or jurisdiction.
J355 Page 22
<PAGE>
Policy Values, Loan and Nonforfeiture Provisions (continued)
Transfer Provisions
TRANSFERS
The Owner may make Transfers by Request. The following provisions apply:
o While this policy is in force, the Owner, by request may Transfer all or a
portion of the Sub-Account Value among the Investment Divisions currently
offered by the Company.
o A Transfer will be effective upon the Transaction Date.
o There is no administrative charge for the first twelve Transfers made in a
calendar year. There is a maximum $10 administrative fee for each
subsequent Transfer. All Transfers made on a single Transaction Date will
be aggregated to count as only one Transfer toward the twelve free
Transfers; however, if a one time rebalancing Transfer also occurs on the
Transaction Date, it will be counted as a separate and additional Transfer.
DOLLAR COST AVERAGING
By Request, the Owner may elect Dollar Cost Averaging in order to purchase units
of the Variable Sub-Accounts over a period of time.
The Owner may Request to automatically Transfer a predetermined dollar amount,
subject to the Company's minimum, at regular intervals from any one or more
designated Variable Sub-Accounts to one or more of the remaining, then
available, Variable Sub-Accounts. The unit value will be determined on the dates
of the Transfers. The Owner must specify the percentage to be Transferred into
each designated Variable Sub-Account. Transfers may be set up on any one of the
following frequency periods: monthly, quarterly, semiannually, or annually. The
Transfer will be initiated on the Transaction Date one frequency period
following the date of the Request. The Company will provide a list of Variable
Sub-Accounts eligible for Dollar Cost Averaging which may be modified from time
to time. Amounts Transferred through Dollar Cost Averaging are not counted
against the twelve free Transfers allowed in a calendar year.
The Owner may terminate Dollar Cost Averaging at any time by Request. Dollar
Cost Averaging will terminate automatically upon the annuity commencement date.
J355 Page 23
<PAGE>
Transfer Provisions (continued)
Participation in Dollar Cost Averaging and the Rebalancer Option at the same
time is not allowed. Participation in Dollar Cost Averaging does not assure a
greater profit, or any profit, nor will it prevent or necessarily alleviate
losses in a declining market. The Company reserves the right to modify, suspend,
or terminate Dollar Cost Averaging at any time.
THE REBALANCER OPTION
By Request, the Owner may elect the Rebalancer Option in order to automatically
Transfer among the Variable Sub-Accounts on a periodic basis. This type of
automatic Transfer program automatically reallocates the Variable Account Value
to maintain a particular percentage allocation among Variable Sub-Accounts
selected by the Owner. The amount allocated to each Variable Sub-Account will
grow or decline at different rates depending on the investment experience of the
Variable Sub-Account.
The Owner may Request that rebalancing occur one time only, in which case the
Transfer will take place on the Transaction Date of the Request. This Transfer
will count as one Transfer towards the twelve free Transfers allowed in a
calendar year.
Rebalancing may also be set up on a quarterly, semiannual, or annual basis, in
which case the first Transfer will be initiated on the Transaction Date one
frequency period following the date of the Request. On the Transaction Date for
the specified Request, assets will be automatically reallocated to the selected
funds. Rebalancing will continue on the same Transaction Date for subsequent
periods. In order to participate in the Rebalancer Option, the entire Variable
Account Value must be included. Transfers set up with these frequencies will not
count against the twelve free Transfers allowed in a calendar year.
The Owner must specify the percentage of Variable Account Value to be allocated
to each Variable Sub-Account and the frequency of rebalancing. The Owner may
terminate the Rebalancer Option at any time by Request. The Rebalancer Option
will terminate automatically upon the annuity commencement date.
Participation in the Rebalancer Option and Dollar Cost Averaging at the same
time is not allowed. Participation in the Rebalancer Option does not assure a
greater profit, nor will it prevent or necessarily alleviate losses in a
declining market. The Company reserves the right to modify, suspend, or
terminate the Rebalancer Option at any time.
J355 Page 24
<PAGE>
ADJUSTABLE DEATH BENEFIT. Proceeds payable at death are subject to policy
provisions. See Death Benefit Provisions. Flexible Premiums payable while the
Insured is alive. If no Premiums are paid after the first Premium, or if
subsequent Premiums prove to be too low, this coverage may cease prior to age
100. ALL PAYMENTS AND VALUES BASED ON THE INVESTMENT EXPERIENCE OF THE
INVESTMENT DIVISIONS ARE VARIABLE, MAY INCREASE OR DECREASE ACCORDINGLY, AND ARE
NOT GUARANTEED AS TO AMOUNT. Non-Participating.
J355 Page 25
Exhibit 1.(5)(b)
<PAGE>
TERM LIFE INSURANCE RIDER
- --------------------------------------------------------------------------------
THIS RIDER IS ISSUED BY GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY AS PART OF
THE POLICY TO WHICH IT IS ATTACHED. IT IS ISSUED BASED ON THE INFORMATION GIVEN
IN THE APPLICATION AND PAYMENT OF THE PREMIUMS SHOWN ON THE POLICY
SPECIFICATIONS PAGE. EACH PREMIUM FOR THIS RIDER IS PAYABLE ONLY WITH EACH
CORRESPONDING PREMIUM FOR THE POLICY. THE PROVISIONS OF THE POLICY APPLY TO THIS
RIDER UNLESS OTHERWISE STATED HEREIN.
- --------------------------------------------------------------------------------
BENEFIT
This Rider provides Term Life insurance on the Insured. The Insured is the
person insured under the policy to which this Rider is attached. Coverage is
annually renewable to the Insured's Attained Age 100. The amount of coverage
provided under this Rider varies from month to month as described below. The
Company will pay the Rider's Death Benefit to the Beneficiary when the Company
receives satisfactory proof that the death of the Insured occurred while this
Rider was in force.
RIDER DEATH BENEFIT
The Rider's Death Benefit will be determined at the beginning of each Policy
Month in accordance with one of the following options, whichever is in effect on
the date of the Insured's death.
The Rider's Death Benefit Option at all times must be the same as the policy's
Death Benefit Option. The Death Benefit option for the policy and this Rider as
of the Issue Date is shown on the Policy Specifications Page 1. The Rider's
Death Benefit is determined by the option in effect at the Insured's date of
death. The Rider Death Benefit is included in, and will not be an addition to,
the Death Benefit Provision described on page 10 of the policy to which it is
attached.
For each of the options described below, the Death Benefit will be reduced by
any outstanding loans and loan interest accrued.
Option 1: Level Death
The Rider's Death Benefit will be:
o the greater of:
a) the Total Face Amount shown on the Policy Specifications Page 1, less
any partial withdrawals; and
b) the Policy Value Account on the Insured's date of death times the
applicable Factor shown in the Table on the Policy Specifications Page
1b.
1
<PAGE>
Term Life Insurance Rider (continued)
o less the greater of:
c) the Base Face Amount shown on the Policy Specifications Page 1; and
d) the Policy Value Account of the policy to which this Rider is attached.
Option 2: Coverage Plus
The Rider's Death Benefit will be:
o the greater of:
a) the Total Face Amount shown on the Policy Specifications Page 1, plus
the Policy Value Account on the Insured's date of death; and
b) the Policy Value Account on the Insured's date of death times the
applicable Factor shown in the Table on the Policy Specifications Page
1b.
o less
c) the Base Policy Face Amount shown on the Policy Specifications Page 1;
plus
d) the Policy Value Account of the policy to which this Rider is attached.
Option 3: Premium Accumulation
The Rider's Death Benefit will be:
o the greater of:
a) the Total Face Amount shown on the Policy Specifications Page 1, plus
the accumulated value of all Premiums paid at interest shown on the
Policy Specifications Page 1, less any partial withdrawals; and
b) the Policy Value Account on the Insured's date of death times the
applicable Factor shown in the Table on the Policy Specifications Page
1b.
o less the greater of
c) the Base Policy Face Amount shown on the Policy Specifications Page 1
plus the accumulated value of all premiums paid at the interest shown
on the Policy Specifications Page 1; and
d) the Policy Value Account of the policy to which this Rider is attached.
COVERAGE EFFECTIVE
Coverage under this Rider will take effect on the later of:
o the effective date of the policy to which this Rider is attached; or
o the date this Rider is delivered and the first Rider premium is paid to the
Company.
CHANGE OF FACE AMOUNT
By Request, the Owner may at any time increase or decrease the Rider Face
Amount, subject to the Company's approval. Any change in Rider Face Amount may
be limited to amounts that will not exceed tax guidelines and jeopardize the tax
status of the policy as life insurance.
2
<PAGE>
Term Life Insurance Rider (continued)
For a decrease in Rider Face Amount:
o The Company must receive a Request.
o The decrease will become effective on the first day of the Policy Month
following receipt of the Request.
o The decrease will apply first to the most recent increase or increases in
Total Face Amount for purposes of the Incontestability Provision.
The minimum decrease amount for the Total Face Amount will be $25,000. The Total
Face Amount may not be decreased below $100,000 unless prior approval is
obtained from the Company.
For an increase in Rider Face Amount:
o The Company must receive a Request.
o The increase will be subject to Evidence of Insurability satisfactory to
the Company.
o The increase will be effective on the Rider anniversary following the
approval of the Request for the increase, subject to the deduction of the
first month's cost of insurance for the Rider from the Policy Value
Account.
The minimum increase amount Total Face Amount will be $25,000.
COST OF INSURANCE
While this Rider is in force, the cost of insurance for the Rider will be
determined on the first day of each Policy Month and added to the policy's
monthly deduction. The monthly cost of insurance charge for this Rider is
determined by multiplying the monthly cost of insurance rate by the Rider Death
Benefit.
Monthly cost of insurance rates for this Rider will be determined by the Company
from time to time, based on the Company's expectations as to future experience
for factors such as mortality, persistency, expenses and taxes. Any change in
the Company's cost of insurance rates will be made uniformly by class.
These rates will never be greater than the Maximum Monthly Cost of Insurance
Rates shown on the Policy Specifications Page. The Company may charge a lower
monthly rate. The maximum risk rates for this Rider are based on the
Sex-Distinct Commissioners 1980 Standard Ordinary Mortality Table, age nearest
birthday.
3
<PAGE>
Term Life Insurance Rider (continued)
REINSTATEMENT
If the policy to which this Rider is attached is reinstated, the Company will
also reinstate this Rider if the Company receives proof, satisfactory to the
Company, that the Insured is still insurable at the same rates.
INCONTESTABILITY
This Rider will not be contested on the basis of misrepresentation after it has
been in force during the Insured's lifetime for 2 years from its Issue Date.
SUICIDE
If the Insured commits suicide, while sane or insane, within 2 years of the
Issue Date of this Rider, (1 year if issued in Colorado or North Dakota),
payment will be limited to an amount equal to the cost of insurance deducted for
this Rider.
MISSTATEMENT OF AGE AND/OR SEX
If the Insured's age and/or sex has been misstated, the Rider Death Benefit will
be adjusted. The adjusted Rider Death Benefit will be that which the Rider cost
of insurance charge would have purchased, based on the Insured's correct age and
sex on the Effective Date of the Rider. This Rider cost of insurance charge will
be determined on the last Monthly Anniversary Day prior to the death of the
Insured.
NON-PARTICIPATING
This Rider is non-participating; no dividends are payable. It is not eligible to
share in the Company's divisible surplus.
TERMINATION
The Owner may terminate this Rider by Request. In order to terminate this Rider,
the Company has the right to require this policy for endorsement. This Rider
also will also terminate on the earliest of the following dates:
o the date the policy is surrendered or terminated;
o the expiration of the grace period of the policy; or
o the death of the Insured.
Signed for Great-West Life & Annuity Insurance Company on the Issue Date of the
policy (unless a different Issue Date is shown here.)
/s/W.T. McCallum
---------------------------
W.T. McCallum,
President and Chief Executive Officer
4
Exhibit 1.(8)
<PAGE>
FUND PARTICIPATION AGREEMENT
<PAGE>
TABLE OF CONTENTS
ARTICLE I. Sale of Fund Shares.........................................3
ARTICLE II. Representations and Warranties..............................7
ARTICLE III. Prospectuses and Proxy Statements; Voting..................11
ARTICLE IV. Sales Material and Information.............................13
ARTICLE V. Fees and Expenses..........................................15
ARTICLE VI. Diversification and Qualification..........................16
ARTICLE VII. Potential Conflicts and Compliance With
Mixed and Shared Funding Exemptive Order ..................19
ARTICLE VIII. Indemnification ...........................................22
ARTICLE IX. Applicable Law.............................................31
ARTICLE X. Termination................................................32
ARTICLE XI. Notices....................................................35
ARTICLE XII. Miscellaneous..............................................36
SCHEDULE A Contracts..................................................39
SCHEDULE B Designated Portfolios......................................40
SCHEDULE C Reports per Section 6.6....................................41
SCHEDULE D Expenses...................................................43
<PAGE>
PARTICIPATION AGREEMENT
Among
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
XYZ FUNDS,
XYZ INVESTMENT ADVISER,
and
XYZ DISTRIBUTOR
THIS AGREEMENT, made and entered into as of this ____ day of
_______________, 1997 by and among GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
(hereinafter "GWL&A"), a Colorado life insurance company, on its own behalf and
on behalf of its Separate Account Maxim Series Account (the "Account"); XYZ
FUND, a organized under the laws of (hereinafter the "Fund"); XYZ INVESTMENT
ADVISER (hereinafter the "Adviser"), a organized under the laws of ; and XYZ
DISTRIBUTOR, a organized under the laws of (hereinafter the "Distributor").
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and/or
variable annuity contracts (collectively, the "Variable Insurance Products") to
be offered by insurance companies, including GWL&A, which have entered into
participation agreements similar to this Agreement (hereinafter "Participating
Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (hereinafter the "SEC"), dated (File No. ), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended, (here
inafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to
the extent necessary to permit shares of the Fund to be sold to and held by
variable annuity and variable life insurance separate accounts of life insurance
companies that may or may not be affiliated with one another and qualified
pension and retirement plans ("Qualified Plans") (hereinafter the "Mixed and
Shared Funding Exemptive Order"); and
<PAGE>
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolio(s) are registered under
the Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the 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, the Distributor is duly registered 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, GWL&A has registered certain variable annuity contracts
supported wholly or partially by the Account (the "Contracts") under the 1933
Act and said Contracts are listed in Schedule A attached hereto and incorporated
herein by reference, as such Schedule may be amended from time to time by mutual
written agreement; and
WHEREAS, the Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of GWL&A on
June 24, 1981, under the insurance laws of the State of Colorado, to set aside
and invest assets attributable to the Contracts; and
WHEREAS, GWL&A has registered the Account as a unit investment trust
under the 1940 Act and has registered the securities deemed to be issued by the
Account under the 1933 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, GWL&A intends to purchase shares in the Portfolio(s) listed in
Schedule B attached hereto and incorporated herein by reference, as such
Schedule may be amended from time to time by mutual written agreement (the
"Designated Portfolio(s)"), on behalf of the Account to fund the Contracts, and
the Fund is authorized to sell such shares to unit investment trusts such as the
Account at net asset value; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Account also intends to purchase shares in other open-end
investment companies or series thereof not affiliated with the Fund (the
"Unaffiliated Funds") on behalf of the Account to fund the Contracts; and
NOW, THEREFORE, in consideration of their mutual promises, GWL&A, the
Fund, the Distributor and the Adviser agree as follows:
<PAGE>
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to GWL&A those shares of the Designated
Portfolio(s) which the Account orders, executing such orders on each Business
Day at the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the Portfolios. For purposes of this
Section 1.1, GWL&A shall be the designee of the Fund for receipt of such orders
and receipt by such designee shall constitute receipt by the Fund, provided that
the Fund receives notice of any such order by 12:00 noon 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 SEC.
1.2. The Fund agrees to make shares of the Designated Portfolio(s)
available for purchase at the applicable net asset value per share by GWL&A and
the Account on those days on which the Fund calculates its Designated
Portfolio(s)' net asset value pursuant to rules of the SEC, and the Fund shall
calculate such net asset value on each day which the New York Stock Exchange is
open for trading. Notwithstanding the foregoing, the Board of Trustees of the
Fund (hereinafter the "Board") may refuse to sell shares of any Portfolio to any
person, or suspend or terminate the offering of shares of any Portfolio if such
action is required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the Board acting in good faith and in light of its
fiduciary duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of such Portfolio.
1.3. The Fund will not sell shares of the Designated Portfolio(s) to
any other Participating Insurance Company separate account unless an agreement
containing provisions substantially the same as Sections 2.1, 3.5, 3.6, 3.7, and
Article VII of this Agreement is in effect to govern such sales.
1.4. The Fund agrees to redeem for cash, on GWL&A's request, any full
or fractional shares of the Fund held by GWL&A, executing such requests on each
Business Day at the net asset value next computed after receipt by the Fund or
its designee of the request for redemption. Requests for redemption identified
by GWL&A, or its agent, as being in connection with surrenders, annuitizations,
or death benefits under the Contracts, upon prior written notice, may be
executed within seven (7) calendar days after receipt by the Fund or its
designee of the requests for redemption. This Section 1.4 may be amended, in
writing, by the parties consistent with the requirements of the 1940 Act and
interpretations thereof. For purposes of this Section 1.4, GWL&A shall be the
designee of the Fund for receipt of requests for redemption and receipt by such
designee shall constitute receipt by the Fund, provided that the Fund receives
notice of any such request for redemption by 12:00 noon Eastern time on the next
following Business Day.
<PAGE>
1.5. The Parties hereto acknowledge that the arrangement contemplated
by this Agreement is not exclusive; the Fund's shares may be sold to other
Participating Insurance Companies (subject to Section 1.3 and Article VI hereof)
and the cash value of the Contracts may be invested in other investment
companies.
1.6. GWL&A shall pay for Fund shares by 3:00 p.m. Eastern time 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 and/or by a credit for any shares redeemed the same day as
the purchase.
1.7. The Fund shall pay and transmit the proceeds of redemptions of
Fund shares by 12:00 noon Eastern Time on the next Business Day after a
redemption order is received in accordance with Section 1.4 hereof. Payment
shall be in federal funds transmitted by wire and/or a credit for any shares
purchased the same day as the redemption.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to GWL&A or the Account. Shares
ordered from the Fund will be recorded in an appropriate title for the Account
or the appropriate sub-account of the Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to GWL&A of any income, dividends or capital
gain distributions payable on the Designated Portfolio(s)' shares. GWL&A 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.
GWL&A reserves the right to revoke this election and to receive all such income
dividends and capital gain distributions in cash. The Fund shall notify GWL&A by
the end of the next following Business Day 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
Designated Portfolio available to GWL&A on each Business Day as soon as
reasonably practical after the net asset value per share is calculated and shall
use its best efforts to make such net asset value per share available by 6:00
p.m. Eastern time. In the event of an error in the computation of a Designated
Portfolio's net asset value per share ("NAV") or any dividend or capital gain
distribution (each, a "pricing error"), the Adviser or the Fund shall
immediately notify GWL&A as soon as possible after discovery of the error. Such
notification may be verbal, but shall be confirmed promptly in writing in
accordance with Article XI of this Agreement. A pricing error shall be corrected
as follows: (a) if the pricing error results in a difference between the
erroneous NAV and the correct NAV of less than $0.01 per share, then no
corrective action need be taken; (b) if the pricing error results in a
difference between the erroneous NAV and the correct NAV equal to or greater
than $0.01 per share, but less than 1/2 of 1% of the Designated Portfolio's NAV
at the time of the error, then the Adviser shall reimburse the Designated
Portfolio for any loss, after taking into consideration any positive effect of
such error; however, no adjustments to Contractowner accounts need be made; and
(c) if the pricing error results in a difference between the erroneous NAV and
<PAGE>
the correct NAV equal to or greater than 1/2 of 1% of the Designated Portfolio's
NAV at the time of the error, then the Adviser shall reimburse the Designated
Portfolio for any loss (without taking into consideration any positive effect of
such error) and shall reimburse GWL&A for the costs of adjustments made to
correct Contractowner accounts in accordance with the provisions of Schedule D.
If an adjustment is necessary to correct a material error which has caused
Contractowners to receive less than the amount to which they are entitled, the
number of shares of the applicable sub-account of such Contractowners will be
adjusted and the amount of any underpayments shall be credited by the Adviser to
GWL&A for crediting of such amounts to the applicable Contractowners accounts.
Upon notification by the Adviser of any overpayment due to a material error,
GWL&A shall promptly remit to Adviser any overpayment that has not been paid to
Contractowners; however, Adviser acknowledges that GWL&A does not intend to seek
additional payments from any Contractowner who, because of a pricing error, may
have underpaid for units of interest credited to his/her account. In no event
shall GWL&A be liable to Contractowners for any such adjustments or underpayment
amounts. A pricing error within categories (b) or (c) above shall be deemed to
be "materially incorrect" or constitute a "material error" for purposes of this
Agreement.
The standards set forth in this Section 1.10 are based on the Parties'
understanding of the views expressed by the staff of the SEC as of the date of
this Agreement. In the event the views of the SEC staff are later modified or
superseded by SEC or judicial interpretation, the parties shall amend the
foregoing provisions of this Agreement to comport with the appropriate
applicable standards, on terms mutually satisfactory to all Parties.
<PAGE>
ARTICLE II. Representations and Warranties
2.1. GWL&A represents and warrants that the Contracts and the
securities deemed to be issued by the Account under 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. GWL&A 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 of units thereof as a segregated asset account under
Section 10-7-401, et. seq. of the Colorado Insurance Law and has registered the
Account as a unit investment trust in accordance with the provisions of the 1940
Act to serve as a segregated investment account for the Contracts and that it
will maintain such registration for so long as any Contracts are outstanding as
required by applicable law.
2.2. The Fund represents and warrants that Designated Portfolio(s)
shares sold pursuant to this Agreement shall be registered under the 1933 Act,
duly authorized for issuance and sold in compliance with all applicable federal
securities laws including without limitation the 1933 Act, the 1934 Act, and the
1940 Act 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.
2.3. The Fund reserves the right to adopt a plan pursuant to Rule 12b-1
under the 1940 Act and to impose an asset-based or other charge to finance
distribution expenses as permitted by applicable law and regulation. In any
event, the Fund and Adviser agree to comply with applicable provisions and SEC
staff interpretations of the 1940 Act to assure that the investment advisory or
management fees paid to the Adviser by the Fund are in accordance with the
requirements of the 1940 Act. To the extent that the Fund decides to finance
distribution expenses pursuant to Rule 12b- 1, the Fund undertakes to have its
Board, a majority of whom are not interested persons of the Fund, formulate and
approve any plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses.
<PAGE>
2.4. The Fund represents and warrants that it will make every effort to
ensure that the investment policies, fees and expenses of the Designated
Portfolio(s) are and shall at all times remain in compliance with the insurance
and other applicable laws of the State of Colorado and any other applicable
state to the extent required to perform this Agreement. The Fund further
represents and warrants that it will make every effort to ensure that Designated
Portfolio(s) shares will be sold in compliance with the insurance laws of the
State of Colorado and all applicable state insurance and securities laws. The
Fund shall register and qualify the shares for sale in accordance with the laws
of the various states if and to the extent required by applicable law. GWL&A and
the Fund will endeavor to mutually cooperate with respect to the implementation
of any modifications necessitated by any change in state insurance laws,
regulations or interpretations of the foregoing that affect the Designated
Portfolio(s) (a "Law Change"), and to keep each other informed of any Law Change
that becomes known to either party. In the event of a Law Change, the Fund
agrees that, except in those circumstances where the Fund has advised GWL&A that
its Board of Directors has determined that implementation of a particular Law
Change is not in the best interest of all of the Fund's shareholders with an
explanation regarding why such action is lawful, any action required by a Law
Change will be taken.
2.5. The Fund represents and warrants that it is lawfully organized and
validly existing under the laws of the State of and that it does and will comply
in all material respects with the 1940 Act.
2.6. The Adviser represents and warrants that it is and shall remain
duly registered under all applicable federal and state securities laws and that
it shall perform its obligations for the Fund in compliance in all material
respects with the laws of the State of and any applicable state and federal
securities laws.
2.7. The Distributor represents and warrants that it is and shall
remain duly registered under all applicable federal and state securities laws
and that it shall perform its obligations for the Fund in compliance in all
material respects with the laws of the State of and any applicable state and
federal securities laws.
2.8. The Fund and the Adviser represent and warrant that all of their
respective officers, employees, investment advisers, and other individuals or
entities dealing with the money and/or securities of the Fund are, and shall
continue to be at all times, covered by one or more blanket fidelity bonds or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage required by Rule 17g-1 under the 1940 Act or related provisions
as may be promulgated from time to time. The aforesaid bonds shall include
coverage for larceny and embezzlement and shall be issued by a reputable bonding
company.
<PAGE>
2.9. The Fund will provide GWL&A with as much advance notice as is
reasonably practicable of any material change affecting the Designated
Portfolio(s) (including, but not limited to, any material change in the
registration statement or prospectus affecting the Designated Portfolio(s)) and
any proxy solicitation affecting the Designated Portfolio(s) and consult with
GWL&A in order to implement any such change in an orderly manner, recognizing
the expenses of changes and attempting to minimize such expenses by implementing
them in conjunction with regular annual updates of the prospectus for the
Contracts. The Fund agrees to share equitably in expenses incurred by GWL&A as a
result of actions taken by the Fund, consistent with the allocation of expenses
contained in Schedule D attached hereto and incorporated herein by reference.
2.10. GWL&A represents and warrants, for purposes other than
diversification under Section 817 of the Internal Revenue Code of 1986 as
amended ("the Code"), that the Contracts are currently and at the time of
issuance will be 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 Fund, the Distributor and the Adviser immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so treated
or that they might not be so treated in the future. In addition, GWL&A
represents and warrants that the Account is a "segregated asset account" and
that interests in the Account are offered exclusively through the purchase of or
transfer into a "variable contract" within the meaning of such terms under
Section 817 of the Code and the regulations thereunder. GWL&A will use every
effort to continue to meet such definitional requirements, and it will notify
the Fund, the Distributor and the Adviser immediately upon having a reasonable
basis for believing that such requirements have ceased to be met or that they
might not be met in the future. GWL&A represents and warrants that it will not
purchase Fund shares with assets derived from tax-qualified retirement plans
except, indirectly, through Contracts purchased in connection with such plans.
<PAGE>
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. At least annually, the Adviser or Distributor shall provide GWL&A
with as many copies of the Fund's current prospectus for the Designated
Portfolio(s) as GWL&A may reasonably request for marketing purposes (including
distribution to Contractowners with respect to new sales of a Contract), with
expenses to be borne in accordance with Schedule D hereof. If requested by GWL&A
in lieu thereof, the Adviser, Distributor or Fund shall provide such
documentation (including a camera-ready copy and computer diskette of the
current prospectus for the Designated Portfolio(s)) and other assistance as is
reasonably necessary in order for GWL&A once each year (or more frequently if
the prospectuses for the Designated Portfolio(s) are amended) to have the
prospectus for the Contracts and the Fund's prospectus for the Designated
Portfolio(s) printed together in one document. The Fund and Adviser agree that
the prospectus (and semi-annual and annual reports) for the Designated
Portfolio(s) will describe only the Designated Portfolio(s) and will not name or
describe any other portfolios or series that may be in the Fund unless required
by law.
3.2. If applicable state or federal laws or regulations require that
the Statement of Additional Information ("SAI") for the Fund be distributed to
all Contractowners, then the Fund, Distributor and/or the Adviser shall provide
GWL&A with copies of the Fund's SAI or documenta tion thereof for the Designated
Portfolio(s) in such quantities, with expenses to be borne in accordance with
Schedule D hereof, as GWL&A may reasonably require to permit timely distribution
thereof to Contractowners. The Adviser, Distributor and/or the Fund shall also
provide SAIs to any Contractowner or prospective owner who requests such SAI
from the Fund (although it is anticipated that such requests will be made to
GWL&A).
3.3. The Fund, Distributor and/or Adviser shall provide GWL&A with
copies of the Fund's proxy material, reports to stockholders and other
communications to stockholders for the Designated Portfolio(s) in such quantity,
with expenses to be borne in accordance with Schedule D hereof, as GWL&A may
reasonably require to permit timely distribution thereof to Contractowners.
3.4. It is understood and agreed that, except with respect to
information regarding GWL&A provided in writing by that party, GWL&A is not
responsible for the content of the prospectus or SAI for the Designated
Portfolio(s). It is also understood and agreed that, except with respect to
information regarding the Fund, the Distributor, the Adviser or the Designated
Portfolio(s) provided in writing by the Fund, the Distributor or the Adviser,
neither the Fund, the Distributor nor Adviser are responsible for the content of
the prospectus or SAI for the Contracts.
<PAGE>
3.5. If and to the extent required by law GWL&A shall:
(i) solicit voting instructions from Contractowners;
(ii) vote the Designated Portfolio(s) shares held in the
Account in accordance with instructions received from
Contractowners: and
(iii) vote Designated Portfolio shares held in the Account
for which no instructions have been received in the
same proportion as Designated Portfolio(s) shares for
which instructions have been received from
Contractowners, so long as and to the extent that the
SEC continues to interpret the 1940 Act to require
pass-through voting privileges for variable contract
owners. GWL&A reserves the right to vote Fund shares
held in any segregated asset account in its own
right, to the extent permitted by law.
3.6. GWL&A shall be responsible for assuring that each of its separate
accounts holding shares of a Designated Portfolio calculates voting privileges
as directed by the Fund and agreed to by GWL&A and the Fund. The Fund agrees to
promptly notify GWL&A of any changes of interpretations or amendments of the
Mixed and Shared Funding Exemptive Order.
3.7. 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 (except insofar as the SEC may interpret Section 16 of the 1940
Act not to require such meetings) or, as the Fund currently intends, comply with
Section 16(c) of the 1940 Act (although the Fund is not one of the trusts
described in Section 16(c) of that Act) as well as with Sections 16(a) and, if
and when applicable, 16(b). Further, the Fund will act in accordance with the
SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of directors or trustees and with whatever rules the
Commission may promulgate with respect thereto.
<PAGE>
ARTICLE IV. Sales Material and Information
4.1. GWL&A shall furnish, or shall cause to be furnished, to the Fund
or its designee, a copy of each piece of sales literature or other promotional
material that GWL&A, respectively, develops or proposes to use and in which the
Fund (or a Portfolio thereof), its Adviser or one of its sub-advisers or the
Distributor is named in connection with the Contracts, at least ten (10)
Business Days prior to its use. No such material shall be used if the Fund
objects to such use within five (5) Business Days after receipt of such
material.
4.2. GWL&A shall not give any information or make any representations
or statements on behalf of the Fund in connection with the sale of the Contracts
other than the information or representations contained in the registration
statement, prospectus or SAI for the Fund shares, as the same may be amended or
supplemented from time to time, or in sales literature or other promotional
material approved by the Fund, Distributor or Adviser, except with the
permission of the Fund, Distributor or Adviser.
4.3. The Fund or the Adviser shall furnish, or shall cause to be
furnished, to GWL&A, a copy of each piece of sales literature or other
promotional material in which GWL&A and/or its separate account(s), is named at
least ten (10) Business Days prior to its use. No such material shall be used if
GWL&A objects to such use within five (5) Business Days after receipt of such
material.
4.4. The Fund, the Distributor and the Adviser shall not give any
information or make any representations on behalf of GWL&A or concerning GWL&A,
the Account, or the Contracts other than the information or representations
contained in a registration statement, prospectus or SAI for the Contracts, as
the same may be amended or supplemented from time to time, or in sales
literature or other promotional material approved by GWL&A or its designee,
except with the permission of GWL&A.
4.5. The Fund will provide to GWL&A at least one complete copy of all
registration statements, prospectuses, SAIs, sales literature and other
promotional materials, applications for ex emptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Designated
Portfolio(s), contemporaneously with the filing of such document(s) with the SEC
or NASD or other regulatory authorities.
4.7. GWL&A will provide to the Fund at least one complete copy of all
registration statements, prospectuses, SAIs, reports, solicitations for voting
instructions, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Contracts or the Account, contemporaneously with the
filing of such document(s) with the SEC, NASD, or other regulatory authority.
<PAGE>
4.8. For purposes of Articles IV and VIII, the phrase "sales literature
and other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media; e.g.,
on-line networks such as the Internet or other electronic 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 shareholder reports, and proxy
materials (including solicitations for voting instructions) and any other
material constituting sales literature or advertising under the NASD rules, the
1933 Act or the 1940 Act.
4.9. 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 in connection
with compliance and regulatory requirements related to this Agreement or any
party's obligations under this Agreement.
<PAGE>
ARTICLE V. Fees and Expenses
5.1. The Fund and the Adviser shall pay no fee or other compensation to
GWL&A under this Agreement, and GWL&A shall pay no fee or other compensation to
the Fund or Adviser under this Agreement, although the parties hereto will bear
certain expenses in accordance with Schedule D, Articles III, V, and other
provisions of this Agreement.
5.2. All expenses incident to performance by the Fund, the Distributor
and the Adviser under this Agreement shall be paid by the appropriate party, as
further provided in Schedule D. The Fund shall see to it that all shares of the
Designated Portfolio(s) are registered and authorized for issuance in accordance
with applicable federal law and, if and to the extent required, in accordance
with applicable state laws prior to their sale.
5.3. The parties shall bear the expenses of routine annual distribution
(mailing costs) of the Fund's prospectus and distribution (mailing costs) of the
Fund's proxy materials and reports to owners of Contracts offered by GWL&A, in
accordance with Schedule D.
5.4. The Fund, the Distributor and the Adviser acknowledge that a
principal feature of the Contracts is the Contractowner's ability to choose from
a number of unaffiliated mutual funds (and portfolios or series thereof),
including the Designated Portfolio(s) and the Unaffiliated Funds, and to
transfer the Contract's cash value between funds and portfolios. The Fund, the
Distributor and the Adviser agree to cooperate with GWL&A in facilitating the
operation of the Account and the Contracts as described in the prospectus for
the Contracts, including but not limited to cooperation in facilitating
transfers between Unaffiliated Funds.
<PAGE>
ARTICLE VI. Diversification and Qualification
6.1. The Fund, the Distributor and the Adviser represent and warrant
that the Fund will at all times sell its shares and invest its assets in such a
manner as to ensure that the Contracts will be treated as annuity contracts
under the Code, and the regulations issued thereunder. Without limiting the
scope of the foregoing, the Fund, Distributor and Adviser represent and warrant
that the Fund and each Designated Portfolio thereof will at all times comply
with Section 817(h) of the Code and Treasury Regulation ss.1.817-5, as amended
from time to time, and any Treasury interpretations thereof, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications or successor provisions to
such Section or Regulations. The Fund, the Distributor and the Adviser agree
that shares of the Desig nated Portfolio(s) will be sold only to Participating
Insurance Companies and their separate accounts and to Qualified Plans.
6.2. No shares of any Designated Portfolio of the Fund will be sold to
the general public.
6.3. The Fund, the Distributor and the Adviser represent and warrant
that the Fund and each Designated Portfolio is currently qualified as a
Regulated Investment Company under Subchapter M of the Code, and that each
Designated Portfolio will maintain such qualification (under Subchapter M or any
successor or similar provisions) as long as this Agreement is in effect.
6.4. The Fund, Distributor or Adviser will notify GWL&A immediately
upon having a reasonable basis for believing that the Fund or any Designated
Portfolio has ceased to comply with the aforesaid Section 817(h) diversification
or Subchapter M qualification requirements or might not so comply in the future.
6.5. Without in any way limiting the effect of Sections 8.2, 8.3 and
8.4 hereof and without in any way limiting or restricting any other remedies
available to GWL&A, the Adviser or Distributor will pay all costs associated
with or arising out of any failure, or any anticipated or reasonably foreseeable
failure, of the Fund or any Designated Portfolio to comply with Sections 6.1,
6.2, or 6.3 hereof, including all costs associated with reasonable and
appropriate corrections or responses to any such failure; such costs may
include, but are not limited to, the costs involved in creating, organizing, and
registering a new investment company as a funding medium for the Contracts
and/or the costs of obtaining whatever regulatory authorizations are required to
substitute shares of another investment company for those of the failed
Portfolio (including but not limited to an order pursuant to Section 26(b) of
the 1940 Act); such costs are to include, but are not limited to, fees and
expenses of legal counsel and other advisors to GWL&A and any federal income
taxes or tax penalties and interest thereon (or "toll charges" or exactments or
amounts paid in settlement) incurred by GWL&A with respect to itself or owners
of its Contracts in connection with any such failure or anticipated or
reasonably foreseeable failure.
<PAGE>
6.6. The Fund at the Fund's expense shall provide GWL&A or its designee
with reports certifying compliance with the aforesaid Section 817(h)
diversification and Subchapter M qualification requirements, at the times
provided for and substantially in the form attached hereto as Schedule C and
incorporated herein by reference; provided, however, that providing such reports
does not relieve the Fund of its responsibility for such compliance or of its
liability for any non-compliance.
6.7. GWL&A agrees that if the Internal Revenue Service ("IRS") asserts
in writing in connection with any governmental audit or review of GWL&A or, to
GWL&A's knowledge, or any Contractowner that any Designated Portfolio has failed
to comply with the diversification requirements of Section 817(h) of the Code or
GWL&A otherwise becomes aware of any facts that could give rise to any claim
against the Fund, Distributor or Adviser as a result of such a failure or
alleged failure:
(a) GWL&A shall promptly notify the Fund, the Distributor and the
Adviser of such assertion or potential claim;
(b) GWL&A shall consult with the Fund, the Distributor and the Adviser
as to how to minimize any liability that may arise as a result of such
failure or alleged failure;
(c) GWL&A shall use its best efforts to minimize any liability of the
Fund, the Distributor and the Adviser resulting from such failure,
including, without limitation, demonstrating, pursuant to Treasury
Regulations, Section 1.817-5(a)(2), to the commissioner of the IRS that
such failure was inadvertent;
(d) any written materials to be submitted by GWL&A to the IRS, any
Contractowner or any other claimant in connection with any of the
foregoing proceedings or contests (including, without limitation, any
such materials to be submitted to the IRS pursuant to Treasury
Regulations, Section 1.817-5(a)(2)) shall be provided by GWL&A to the
Fund, the Distributor and the Adviser (together with any supporting
information or analysis) within at least two (2) business days prior to
submission;
<PAGE>
(e) GWL&A shall provide the Fund, the Distributor and the Adviser with
such cooperation as the Fund, the Distributor and the Adviser shall
reasonably request (including, without limitation, by permitting the
Fund, the Distributor and the Adviser to review the relevant books and
records of GWL&A) in order to facilitate review by the Fund, the
Distributor and the Adviser of any written submissions provided to it
or its assessment of the validity or amount of any claim against it
arising from such failure or alleged failure;
(f) GWL&A shall not with respect to any claim of the IRS or any
Contractowner that would give rise to a claim against the Fund, the
Distributor and the Adviser (i) compromise or settle any claim, (ii)
accept any adjustment on audit, or (iii) forego any allowable
administrative or judicial appeals, without the express written consent
of the Fund, the Distributor and the Adviser, which shall not be
unreasonably withheld; provided that, GWL&A shall not be required to
appeal any adverse judicial decision unless the Fund and the Adviser
shall have provided an opinion of independent counsel to the effect
that a reasonable basis exists for taking such appeal; and further
provided that the Fund, the Distributor and the Adviser shall bear the
costs and expenses, including reasonable attorney's fees, incurred by
GWL&A in complying with this clause (f).
<PAGE>
ARTICLE VII. Potential Conflicts and Compliance With
Mixed and Shared Funding Exemptive Order
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners or by
contract owners of different Participating Insurance Companies; or (f) a
decision by a Participating Insurance Company to disregard the voting
instructions of contract owners. The Board shall promptly inform GWL&A if it
determines that an irreconcilable material conflict exists and the implications
thereof.
7.2. GWL&A will report any potential or existing conflicts of which it
is aware to the Board. GWL&A 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 GWL&A to inform the Board whenever contract owner voting instructions are to
be disregarded. Such responsibilities shall be carried out by GWL&A with a view
only to the interests of its Contractowners.
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 Fund, the Distributor, the
Adviser or any sub-adviser to any of the Designated Portfolios (the "Independent
Directors"), that a material irreconcilable conflict exists, GWL&A and 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 Fund or any
Designated Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or var iable 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.
<PAGE>
7.4. If a material irreconcilable conflict arises because of a decision
by GWL&A to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, GWL&A may be
required, at the Fund's election, to withdraw the Account's investment in the
Fund and terminate this Agreement; 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 with drawal and termination must take place within six (6)
months after the Fund gives written notice that this provision is being
implemented, and until the end of that six month period the Adviser, the
Distributor and the Fund shall continue to accept and implement orders by GWL&A
for the purchase (and redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to GWL&A conflicts with the
majority of other state regulators, then GWL&A will withdraw the Account's
investment in the Fund and terminate this Agreement within six months after the
Board informs GWL&A 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 Fund shall continue to accept and implement orders by GWL&A 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. GWL&A 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 Contractowners affected by the irreconcilable material conflict. In
the event that the Board determines that any proposed action does not adequately
remedy any irreconcilable material conflict, then GWL&A will withdraw the
Account's investment in the Fund and terminate this Agreement within six (6)
months after the Board informs GWL&A in writing of the foregoing determination;
provided, however, that such withdrawal and termination shall be limited to the
extent required by any such material irreconcilable conflict as determined by a
majority of the Independent Directors.
<PAGE>
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 Mixed and Shared Funding Exemptive Order) on terms
and conditions materially different from those contained in the Mixed and Shared
Funding Exemptive Order, then (a) the Fund and/or the Participating Insurance
Compa nies, 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 3.5, 3.6, 3.7, 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.
<PAGE>
ARTICLE VIII. Indemnification
8.1. Indemnification By GWL&A
8.1(a). GWL&A agrees to indemnify and hold harmless the Fund, the
Distributor and the Adviser and each of their respective officers and directors
or trustees and each person, if any, who controls the Fund, Distributor or
Adviser 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, expenses, damages and liabilities (including amounts paid in
settlement with the written consent of GWL&A) 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, expenses, damages or liabilities (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 or SAI covering the
Contracts or contained in the Contracts or sales literature or
other promotional material for the Contracts (or any amendment
or supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
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 writing to GWL&A by
or on behalf of the Adviser, Distributor or Fund for use in
the registration statement or prospectus for the Contracts or
in the Contracts or sales literature or other promotional
material (or any amendment or supplement to any of the
foregoing) 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 or
other promotional material of the Fund not supplied by GWL&A
or persons under its control) or wrongful conduct of GWL&A or
persons under its control, with respect to the sale or
distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, SAI, or sales literature or other promotional
material of the Fund, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein not misleading, if such a
statement or omission was made in reliance upon information
furnished in writing to the Fund by or on behalf of GWL&A; or
<PAGE>
(iv) arise as a result of any failure by GWL&A 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 GWL&A in this Agreement
or arise out of or result from any other material breach of
this Agreement by GWL&A, including without limitation Section
2.11 and Section 6.7 hereof,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). GWL&A shall not be liable under this indemnification provision
with respect to any losses, claims, expenses, 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 or duties under this Agreement or to
any of the Indemnified Parties.
8.1(c). GWL&A 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 GWL&A 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 GWL&A of any such claim shall not relieve GWL&A
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,
except to the extent that GWL&A has been prejudiced by such failure to give
notice. In case any such action is brought against the Indemnified Parties,
GWL&A shall be entitled to participate, at its own expense, in the defense of
such action. GWL&A also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from GWL&A
to such party of GWL&A's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and GWL&A 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 GWL&A 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.
<PAGE>
8.2. Indemnification by the Adviser
8.2(a). The Adviser agrees to indemnify and hold harmless GWL&A and its
directors and officers and each person, if any, who controls GWL&A 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, expenses,
damages, liabilities (including amounts paid in settlement with the written
consent of the Adviser) or litigation (including reasonable legal and other
expenses) to which the Indemnified Parties may become subject under any statute
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 the Fund's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or SAI or sales
literature or other promotional material of the Fund prepared
by the Fund, the Distributor or the Adviser (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 writing to the
Adviser, the Distributor or the Fund by or on behalf of GWL&A
for use in the registration statement, prospectus or SAI for
the Fund or in sales literature or other promotional material
(or any amendment or supplement to any of the foregoing) or
otherwise for use in connection with the sale of the Contracts
or the 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, SAI or sales literature or
other promotional material for the Contracts not supplied by
the Adviser or persons under its control) or wrongful conduct
of the Fund, the Distributor or the Adviser or persons under
their control, with respect to the sale or distribution of the
Contracts or Fund shares; or
<PAGE>
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, SAI, or sales literature or other promotional
material covering the Contracts, or any amendment thereof or
supple ment 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 GWL&A by or on behalf
of the Adviser, the Distributor or the Fund; or
(iv) arise as a result of any failure by the Fund, the Distributor
or the Adviser 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 and other qualification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund, the
Distributor or the Adviser in this Agreement or arise out of
or result from any other material breach of this Agreement by
the Adviser, the Distributor or the Fund; or
(vi) arise out of or result from the incorrect or untimely
calculation or reporting by the Fund, the Distributor or the
Adviser of the daily net asset value per share or dividend or
capital gain distribution rate;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof. This indemnification is in addition to and apart from the
responsibilities and obligations of the Adviser specified in Article VI hereof.
8.2(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, expenses, 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 or duties under this Agreement or to
any of the Indemnified Parties.
<PAGE>
8.2(c). The 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, except to the extent that the Adviser
has been prejudiced by such failure to give notice. 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). GWL&A agrees to promptly 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 the
Account.
8.3. Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold harmless GWL&A and its
directors and officers and each person, if any, who controls GWL&A 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, expenses,
damages and 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 be required to pay or become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, expenses, damages, liabilities or expenses (or actions in
respect thereof) or settlements, are related to the operations of the Fund and:
<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 (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
and other qualification requirements specified in Article VI
of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, expenses, 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 or duties under this Agreement or to
any of the Indemnified Parties.
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 it from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on account
of this indemnifi cation provision, except to the extent that the Fund has been
prejudiced by such failure to give notice. 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 shall also 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). GWL&A each agrees to promptly notify the Fund of the
commencement of any litigation or proceeding against itself or any of its
respective officers or directors in connection with the Agreement, the issuance
or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
<PAGE>
8.4. Indemnification by the Distributor
8.4(a). The Distributor agrees to indemnify and hold harmless GWL&A and
its directors and officers and each person, if any, who controls GWL&A within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.4) against any and all losses, claims,
expenses, damages and liabilities (including amounts paid in settlement with the
written consent of the Distributor) 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 the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or SAI or sales
literature or other promotional material of the Fund prepared
by the Fund, Adviser or Distributor (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 writing to the
Adviser, the Distributor or Fund by or on behalf of GWL&A for
use in the registration statement or SAI or prospectus for the
Fund or in sales literature or other promotional material (or
any amendment or supplement to any of the foregoing) 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, SAI, sales literature or
other promotional material for the Contracts not supplied by
the Distributor or persons under its control) or wrongful
conduct of the Fund, the Distributor or Adviser or persons
under their control, with respect to the sale or distribution
of the Contracts or Fund shares; or
<PAGE>
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, SAI, sales literature or other promotional
material covering the Contracts, or any amendment thereof or
supple ment 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 GWL&A by or on behalf
of the Adviser, the Distributor or Fund; or
(iv) arise as a result of any failure by the Fund, Adviser or
Distributor 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 and other qualification requirements
specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund, Adviser or
Distributor in this Agreement or arise out of or result from
any other material breach of this Agreement by the Fund,
Adviser or Distributor; or
(vi) arise out of or result from the incorrect or untimely
calculation or reporting of the daily net asset value per
share or dividend or capital gain distribution rate;
as limited by and in accordance with the provisions of Sections 8.4(b) and
8.4(c) hereof. This indemnification is in addition to and apart from the
responsibilities and obligations of the Distributor specified in Article VI
hereof.
8.4(b). The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, expenses, 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 or such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
any of the Indemnified Parties.
<PAGE>
8.4(c) The Distributor 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 Distributor in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Distributor of
any such claim shall not relieve the Distributor from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision, except to the extent that the
Distributor has been prejudiced by such failure to give notice. In case any such
action is brought against the Indemnified Parties, the Distributor will be
entitled to participate, at its own expense, in the defense thereof. The
Distributor also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Distributor
to such party of the Distributor's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Distributor will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.4(d) GWL&A agrees to promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
<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 Colorado,
without regard to the Colorado Conflict of Laws provisions.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to, the Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
<PAGE>
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party, with or without cause, with
respect to some or all Portfolios, upon six (6) months advance
written notice delivered to the other parties; provided,
however, that such notice shall not be given earlier than six
(6) months following the date of this Agreement; or
(b) at the option of GWL&A by written notice to the other
parties with respect to any Portfolio based upon GWL&A's
determination that shares of such Portfolio are not reasonably
available to meet the requirements of the Contracts; or
(c) at the option of GWL&A by written notice to the other
parties 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
GWL&A; or
(d) at the option of the Fund, Distributor or Adviser in the
event that formal administrative proceedings are instituted
against GWL&A by the NASD, the SEC, the Insurance Commissioner
or like official of any state or any other regulatory body
regarding GWL&A's duties under this Agreement or related to
the sale of the Contracts, the operation of any Account, or
the purchase of the Fund shares, if, in each case, the Fund,
Distributor or Adviser, as the case may be, reasonably
determines in its sole judgment exercised in good faith, that
any such administrative proceedings will have a material
adverse effect upon the ability of GWL&A to perform its
obligations under this Agreement; or
(e) at the option of GWL&A in the event that formal
administrative proceedings are instituted against the Fund,
the Distributor or the Adviser by the NASD, the SEC, or any
state securities or insurance department or any other
regulatory body, if GWL&A reasonably 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 Fund, the Distributor or the Adviser to perform
their obligations under this Agreement; or
<PAGE>
(f) at the option of GWL&A by written notice to the Fund with
respect to any Portfolio if GWL&A reasonably believes that the
Portfolio will fail to meet the Sec tion 817(h)
diversification requirements or Subchapter M qualifications
specified in Article VI hereof; or
(g) at the option of either the Fund, the Distributor or the
Adviser, if (i) the Fund, Distributor or Adviser,
respectively, shall determine, in its sole judgment reasonably
exercised in good faith, that GWL&A 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 publicity will have a material adverse
impact on GWL&A's ability to perform its obligations under
this Agreement, (ii) the Fund, Distributor or Adviser notifies
GWL&A of that determination and its intent to terminate this
Agreement, and (iii) after considering the actions taken by
GWL&A and any other changes in circumstances since the giving
of such a notice, the deter mination of the Fund, Distributor
or Adviser 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
(h) at the option of either GWL&A, if (i) GWL&A shall
determine, in its sole judgment reasonably exercised in good
faith, that the Fund, Distributor or Adviser 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 publicity will have a material
adverse impact on the Fund's, Distributor's or Adviser's
ability to perform its obligations under this Agreement, (ii)
GWL&A notifies the Fund, Distributor or Adviser, as
appropriate, of that determination and its intent to terminate
this Agreement, and (iii) after considering the actions taken
by the Fund, Distributor or Adviser and any other changes in
circumstances since the giving of such a notice, the
determination of GWL&A 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
(i) at the option of any non-defaulting party hereto in the
event of a material breach of this Agreement by any party
hereto (the "defaulting party") other than as described in
10.1(a)-(j); provided, that the non-defaulting party gives
written notice thereof to the defaulting party, with copies of
such notice to all other non-defaulting parties, and if such
breach shall not have been remedied within thirty (30) days
after such written notice is given, then the non-defaulting
party giving such written notice may terminate this Agreement
by giving thirty (30) days written notice of termination to
the defaulting party.
<PAGE>
10.2. 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 of its intent to terminate, which notice
shall set forth the basis for the termination. Furthermore,
(a) in the event any termination is based upon the provisions of
Article VII, or the provisions of Section 10.1(a), 10.1(g) or 10.1(h)
of this Agreement, the prior written notice shall be given in advance
of the effective date of termination as required by those provisions
unless such notice period is shortened by mutual written agreement of
the parties; (b) in the event any termination is based upon the
provisions of Section 10.1(d), 10.1(e), 10.1(i) or 10.1(j) of this
Agreement, the prior written notice shall be given at least sixty (60)
days before the effective date of termination; and (c) in the event any
termination is based upon the provisions of Section 10.1(b), 10.1(c) or
10.1(f), the prior written notice shall be given in advance of the
effective date of termination, which date shall be determined by the
party sending the notice.
10.3. Effect of Termination. Notwithstanding any termination of this
Agreement, other than as a result of a failure by either the Fund or GWL&A to
meet Section 817(h) of the Code diversification requirements, the Fund, the
Distributor and the Adviser shall, at the option of GWL&A, continue to make
available additional shares of the Designated Portfolio(s) pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Designated
Portfolio(s), redeem investments in the Designated Portfolio(s) and/or invest in
the Designated Portfolio(s) upon the making of additional purchase payments
under the Existing Contracts. The parties agree that this Section 10.3 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.
10.4. Surviving Provisions. Notwithstanding any termination of this
Agreement, each party's obligations under Article VIII to indemnify other
parties shall survive and not be affected by any termination of this Agreement.
In addition, with respect to Existing Contracts, all provisions of this
Agreement shall also survive and not be affected by any termination of this
Agreement.
<PAGE>
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:
XYZ Fund
Attention:
If to GWL&A:
Great-West Life & Annuity Insurance Company
8515 East Orchard Road
Englewood, CO 80111
Attention: Vice President, Institutional Insurance
If to the Adviser:
XYZ Investment Adviser
Attention:
If to the Distributor:
XYZ Distributor
Attention:
<PAGE>
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 until such time as such information may come into the
public domain. Without limiting the foregoing, no party hereto shall disclose
any information that another party has designated as proprietary.
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 SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Colorado Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of GWL&A are being conducted in a manner consistent with the Colorado
Variable Annuity Regulations and any other applicable law or regulations.
12.6. Any controversy or claim arising out of or relating to this
Agreement, or breach thereof, shall be settled by arbitration in a forum jointly
selected by the relevant parties (but if applicable law requires some other
forum, then such other forum) in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, and judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
<PAGE>
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.
12.9. GWL&A is hereby expressly put on notice of the limitation of
liability as set forth in the Declarations of Trust of the Fund and agree that
the obligations assumed by the Fund, Distributor and the Adviser pursuant to
this Agreement shall be limited in any case to the Fund, Distributor and Adviser
and their respective assets and GWL&A shall not seek satisfaction of any such
obligation from the shareholders of the Fund, Distributor or the Adviser, the
Trustees, officers, employees or agents of the Fund, Distributor or Adviser, or
any of them.
12.10. The Fund, the Distributor and the Adviser agree that the
obligations assumed by GWL&A pursuant to this Agreement shall be limited in any
case to GWL&A and its assets and neither the Fund, Distributor nor Adviser shall
seek satisfaction of any such obligation from the shareholders of GWL&A, the
directors, officers, employees or agents of GWL&A, or any of them, except to the
extent permitted under this Agreement.
12.11. No provision of this Agreement may be deemed or construed to
modify or supersede any contractual rights, duties, or indemnifications, as
between the Adviser and the Fund, and the Distributor and the Fund.
<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.
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By its authorized officer,
By:______________________________
Title:
Date:
XYZ FUND
By its authorized officer,
By:______________________________
Title:
Date:
XYZ INVESTMENT ADVISER
By its authorized officer,
By:____________________________
Title:
Date:
XYZ DISTRIBUTOR
By its authorized officer,
By:____________________________
Title:
Date:
<PAGE>
SCHEDULE A
Contracts Form Numbers
<PAGE>
SCHEDULE B
Designated Portfolios
<PAGE>
SCHEDULE C
Reports per Section 6.6
With regard to the reports relating to the quarterly testing of
compliance with the requirements of Section 817(h) and Subchapter M under the
Internal Revenue Code (the "Code") and the regulations thereunder, the Fund
shall provide within twenty (20) Business Days of the close of the calendar
quarter a report to GWL&A in the Form D1 attached hereto and incorporated herein
by reference, regarding the status under such sections of the Code of the
Designated Portfolio(s), and if necessary, identification of any remedial action
to be taken to remedy non-compliance.
With regard to the reports relating to the year-end testing of
compliance with the requirements of Subchapter M of the Code, referred to
hereinafter as "RIC status," the Fund will provide the reports on the following
basis: (i) the last quarter's quarterly reports can be supplied within the
20-day period, and (ii) a year-end report will be provided 45 days after the end
of the calendar year. However, if a problem with regard to RIC status, as
defined below, is identified in the third quarter report, on a weekly basis,
starting the first week of December, additional interim reports will be provided
specially addressing the problems identified in the third quarter report. If any
interim report memorializes the cure of the problem, subsequent interim reports
will not be required.
A problem with regard to RIC status is defined as any violation of the
following standards, as referenced to the applicable sections of the Code:
(a) Less than ninety percent of gross income is derived from sources of
income specified in Section 851(b)(2);
(b) Thirty percent or greater gross income is derived from the sale or
disposition of assets specified in Section 851(b)(3);
(c) Less than fifty percent of the value of total assets consists of
assets specified in Section 851(b)(4)(A); and
(d) No more than twenty-five percent of the value of total assets is
invested in the securities of one issuer, as that requirement is set
forth in Section 851(b)(4)(B).
<PAGE>
FORM C1
CERTIFICATE OF COMPLIANCE
For the quarter ended:
I, , a duly authorized officer, director or agent of Fund hereby swear
and affirm that Fund is in compliance with all requirements of Section 817(h)
and Subchapter M of the Internal Revenue Code (the "Code") and the regulations
thereunder as required in the Fund Participation Agreement among Great-West Life
& Annuity Insurance Company, and other than the exceptions discussed below:
Exceptions Remedial Action
If no exception to report, please indicate "None."
Signed this day of , .
(Signature)
By:
(Type or Print Name and Title/Position)
<PAGE>
SCHEDULE D
EXPENSES
The Fund and/or the Distributor and/or Adviser, and GWL&A will coordinate the
functions and pay the costs of the completing these functions based upon an
allocation of costs in the tables below. Costs shall be allocated to reflect the
Fund's share of the total costs determined according to the number of pages of
the Fund's respective portions of the documents.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Party Responsible for Party Responsible
Item Function Coordination for Expense
Mutual Fund Prospectus Printing of combined GWL&A Fund, Distributor or
prospectuses Adviser, as applicable
Fund, Distributor or GWL&A Fund, Distributor or
Adviser shall supply Adviser, as
GWL&A with such applicable
numbers of the
Designated Portfolio(s)
prospectus(es) as
GWL&A shall
reasonably request
Distribution to New and GWL&A GWL&A
Inforce Clients
Distribution to GWL&A GWL&A
Prospective Clients
Product Prospectus Printing for Inforce GWL&A GWL&A
Clients
Printing for Prospective GWL&A GWL&A
Clients
Distribution to New and GWL&A GWL&A
Inforce Clients
Distribution to GWL&A GWL&A
Prospective Clients
Party Responsible for Party Responsible
Item Function Coordination for Expense
Mutual Fund Prospectus If Required by Fund, Fund, Distributor or Fund, Distributor or
Update & Distribution Distributor or Adviser Adviser Adviser, as applicable
If Required by GWL&A GWL&A GWL&A
Product Prospectus If Required by Fund, GWL&A Fund, Distributor or
Update & Distribution Distributor or Adviser Adviser
<PAGE>
Item Function Party Responsible for Party Responsible
Coordination for Expense
If Required by GWL&A GWL&A GWL&A
Mutual Fund SAI Printing Fund, Distributor or Fund, Distributor or
Adviser Adviser
Distribution GWL&A GWL&A
Product SAI Printing GWL&A GWL&A
Distribution GWL&A GWL&A
Item Function Party Responsible for Party Responsible
Coordination for Expense
Proxy Material for Printing if proxy required Fund, Distributor or Fund, Distributor or
Mutual Fund: by Law Adviser Adviser
Distribution (including GWL&A Fund, Distributor or
labor) if proxy required Adviser
by Law
Printing & distribution if GWL&A GWL&A
required by GWL&A
Item Function Party Responsible for Party Responsible
Coordination for Expense
Mutual Fund Annual & Printing of combined GWL&A Fund, Distributor or
Semi-Annual Report reports Adviser
Distribution GWL&A GWL&A
Other communication to If Required by the Fund, GWL&A Fund, Distributor or
New and Prospective Distributor or Adviser Adviser
clients
If Required by GWL&A GWL&A GWL&A
Item Function Party Responsible for Party Responsible
Coordination for Expense
Other communication to Distribution (including GWL&A Fund, Distributor or
inforce labor and printing) if Adviser
required by the Fund,
Distributor or Adviser
Distribution (including GWL&A GWL&A
labor and printing)if
required by GWL&A
<PAGE>
Item Function Party Responsible for Party Responsible
Coordination for Expense
Errors in Share Price Cost of error to GWL&A Fund or Adviser
calculation pursuant to participants
Section 1.10
Cost of administrative GWL&A Fund or Adviser
work to correct error
Operations of the Fund All operations and related Fund, Distributor or Fund or Adviser
expenses, including the Adviser
cost of registration and
qualification of shares,
taxes on the issuance or
transfer of shares, cost of
management of the
business affairs of the
Fund, and expenses paid
or assumed by the fund
pursuant to any Rule
12b-1 plan
Operations of the Federal registration of GWL&A GWL&A
Account units of separate account
(24f-2 fees)
</TABLE>
